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FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) July 14, 1999
Advanced Communications Group, Inc.
- ----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 001-13875 76-0549396
- ---------------------------- ------------------------ -------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
390 S. Woodsmill Road, Suite 150, St. Louis, Missouri 63017
- ----------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (314) 205-8668
--------------
- ----------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
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ITEM 5. OTHER EVENTS.
Activities in Connection with Implementation of Change in Business
Focus, Strategy, and Direction
On July 14, 1999, Advanced Communications Group, Inc. completed
the first step in its previously announced plans to change its business
focus, strategy and direction to concentrate on creating an integrated
network of print and Internet directories to take advantage of the
convergence of these advertising mediums.
Advanced Communications began implementing the change on April 11,
1999, when it executed a letter of intent with respect to the
acquisition of the outstanding capital stock of YPtel Corporation, Web
YP, Inc. (d/b/a/ WorldPages.com and a web site production company, Big
Stuff, Inc. Effective June 3, 1999, Advanced Communications entered
into definitive agreements for the acquisition of these three companies.
In connection with the acquisitions and other related matters, Advanced
Communications anticipates that it will issue up to 16,704,544 shares of
its common stock, which amount could be increased based upon the date of
closing. Upon closing of these acquisitions, which is contingent upon
regulatory and shareholder approvals, Advanced Communications will be
re-named "WorldPages.com, Inc." and it anticipates that its stock will
continue to be traded on the New York Stock Exchange under a new symbol.
Advanced Communications completed this first step in the
implementation of the change by executing a definitive agreement to sell
its entire base of telecommunications operations for cash of $49.8
million to Compass Telecommunications, Inc. The consideration to be
received by Advanced Communications is subject to adjustment based on
the amount of working capital at closing and costs related to regulatory
approval. The sale is subject to shareholder and various regulatory
approvals, including those of the FCC and various state public service
commissions.
Advanced Communications is currently concentrating on the
activities required to obtain shareholder and regulatory approvals, as
well as the activities and documentation required to complete the
acquisitions of YPtel, Web YP and Big Stuff and the sale of the
telecommunications operations if and when stockholder and regulatory
approvals are received. Advanced Communications hopes to close the
acquisitions late in the third quarter or early in the fourth quarter of
1999 and expects to complete the sale of the telecommunications
operations by December 31, 1999.
Press Releases
Advanced Communications issued eight news releases since April 23,
1999 concerning the following subjects: (a) the change in the Company's
Board of Directors; (b) the announcement of the Company's first quarter
results; (c) the announcement of the engagement of NationsBanc Montgomery
Securities as a strategic advisor; (d) the Company's proposed reorganization
presenting the telecommunication subsidiaries as an attractive acquisition
candidate dated May 19, 1999; (e) the closing of financing with the Bank of
America Corporation; (f) the execution of definitive agreements among the
Company and WorldPages.com; (g) the anticipated presentation at the CIBC
World Markets Investor Conference and (h) the Company's signing a definitive
2
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agreement to sell the telecommunication subsidiaries.
These news releases are filed as Exhibits 99(a) -(h) hereto and
are incorporated into this Item 5 by reference as fully and as
completely as if set forth in their entirety in this Item 5.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS
(c) Exhibits
2 Plan of Acquisition, Reorganization,
Arrangement, Liquidation or Succession
(a) Stock Purchase Agreement made and entered
into as of July 14, 1999 by and among
Advanced Communications Group, Inc.,
Compass Telecommunications, Inc. Feist
Long Distance Service, Inc., FirsTel,
Inc., Telecom Resources, Inc. and Valu-
Line of Longview, Inc.
(b) YPtel Agreement made and entered into as
of June 3, 1999 by and among Advanced
Communications Group, Inc., YPtel
Corporation, the shareholders of YPtel
listed on Exhibit "A" attached thereto,
The J.L.R. Family Trust, The Paisley
Family Trust, Edward Truant, and Douglas
G. McIntyre, Cold Trust, Global Investment
Trust, Freezer Trust, Storage Trust,
Directory Trust and Publisher Trust and
Imperial Capital Limited
(c) Acquisition Agreement made and entered
into as of June 3, 1999 by and among
Advanced Communications Group, Inc. and
ACG Acquisition VI Corp., and Web YP,
Richard A. O'Neal and Richard L. Reid.
(d) Acquisition Agreement made and entered
into as of June 3, 1999 by and among
Advanced Communications Group, Inc., ACG
Acquisition VII Corp., and Big Stuff,
Inc., Richard A. O'Neal, and Richard L.
Reid.
99 Additional Exhibits
(a) Press Release issued by Advanced
Communications Group, Inc. dated April 23,
1999 announcing a change in the board of
directors.
(b) Press Release issued by Advanced
Communications Group, Inc. dated May 6,
1999 announcing first quarter results.
(c) Press Release issued by Advanced
Communications Group, Inc. dated May 14,
1999 announcing the engagement of NationsBanc
Montgomery Securities as a strategic advisor.
(d) Press Release issued by Advanced
Communications Group, Inc. dated May 19,
1999 announcing that its reorganization
presents its telecommunications
subsidiaries as an attractive acquisition
candidate.
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(e) Press Release issued by Advanced
Communications Group, Inc. dated May 20,
1999 announcing that the Company closed on
a $40 million bridge and working capital
line of credit with Bank of America
Corporation.
(f) Press Release issued by Advanced
Communications Group, Inc. dated June 3,
1999 announcing the execution of
definitive agreements to acquire the
outstanding stock of YPTel Corporation,
WebYP, Inc. and Big Stuff, Inc.
(g) Press Release issued by Advanced
Communications Group, Inc. dated June 15,
1999 announcing that the Company's
chairman and CEO, Richard A. O'Neal, will
present the Company's mission and vision
to investors attending the CIBC World
Markets Investor Conference.
(h) Press Release issued by Advanced
Communications Group, Inc. dated July 15,
1999 announcing that it signed a
definitive agreement to sell its
telecommunications subsidiaries to
Compass Telecommunications, Inc.
4
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
ADVANCED COMMUNICATIONS GROUP, INC.
By: /s/ Richard A. O'Neal
-----------------------------------
Richard A. O'Neal
Acting Chief Executive Officer
Date: July 29, 1999
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EXHIBIT INDEX
These Exhibits are numbered in accordance with the Exhibit Table
of Item 601 of Regulation S-K:
Exhibit No. Description
- ----------- -----------
1 Omitted - Inapplicable.
2 (a) Stock Purchase Agreement made and entered into as of July
14, 1999 by and among Advanced Communications Group, Inc.,
Compass Telecommunications, Inc. Feist Long Distance Service,
Inc., FirsTel, Inc., Telecom Resources, Inc. and Valu-Line of
Longview, Inc.
(b) YPtel Agreement made and entered into as of June 3, 1999 by
and among Advanced Communications Group, Inc., YPtel
Corporation, the shareholders of YPtel listed on Exhibit "A"
attached thereto, The J.L.R. Family Trust, The Paisley
Family Trust, Edward Truant, and Douglas G. McIntyre, Cold
Trust, Global Investment Trust, Freezer Trust, Storage
Trust, Directory Trust and Publisher Trust and Imperial
Capital Limited
(c) Acquisition Agreement made and entered into as of June 3,
1999 by and among Advanced Communications Group, Inc. and
ACG Acquisition VI Corp., and Web YP, Richard A. O'Neal and
Richard L. Reid.
(d) Acquisition Agreement made and entered into as of June 3,
1999 by and among Advanced Communications Group, Inc., ACG
Acquisition VII Corp., and Big Stuff, Inc., Richard A.
O'Neal, and Richard L. Reid.
4 Omitted - Inapplicable.
16 Omitted - Inapplicable.
17 Omitted - Inapplicable.
20 Omitted - Inapplicable.
23 Omitted - Inapplicable.
24 Omitted - Inapplicable.
27 Omitted - Inapplicable.
99 (a) Press Release issued by Advanced Communications Group, Inc.
dated April 23, 1999 announcing a change in the board of
directors.
(b) Press Release issued by Advanced Communications Group, Inc.
dated May 6, 1999 announcing first quarter results.
(c) Press Release issued by Advanced Communications Group, Inc.
dated May 14, 1999 announcing the engagement of NationsBanc
Montgomery Securities as a strategic advisor.
(d) Press Release issued by Advanced Communications Group, Inc.
dated May 19, 1999 announcing that its reorganization
presents its telecommunications subsidiaries as an
attractive acquisition candidate.
(e) Press Release issued by Advanced Communications Group, Inc.
dated May 20, 1999 announcing that the Company closed on a
$40 million bridge and working capital line of credit with
Bank of America Corporation.
(f) Press Release issued by Advanced Communications Group, Inc.
dated June 3, 1999 announcing the execution of definitive
agreements to acquire the outstanding stock of YPTel
Corporation, WebYP, Inc. and Big Stuff, Inc.
(g) Press Release issued by Advanced Communications Group, Inc.
dated June 15, 1999 announcing that the Company's chairman
and
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CEO, Richard A. O'Neal, will present the Company's mission
and vision to investors attending the CIBC World Markets
Investor Conference.
(h) Press Release issued by Advanced Communications Group, Inc.
dated July 15, 1999 announcing that it signed a definitive
agreement to sell its telecommunications subsidiaries to
Compass Telecommunications, Inc.
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STOCK PURCHASE AGREEMENT
AMONG
COMPASS TELECOMMUNICATIONS, INC.
ADVANCED COMMUNICATIONS GROUP, INC.,
FEIST LONG DISTANCE SERVICE, INC.,
FIRSTEL, INC.,
TELECOM RESOURCES, INC.
AND
VALU-LINE OF LONGVIEW, INC.
Dated as of July 14, 1999
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TABLE OF CONTENTS
ARTICLE I DEFINITIONS. . . . . . . . . . . . . . . . .1
1.1 Definitions . . . . . . . . . . . . . . . .1
-----------
ARTICLE II SALE AND PURCHASE OF SHARES. . . . . . . . .8
2.1 Sale and Purchase. . . . . . . . . . . . . .8
-----------------
2.2 Payment of Purchase Price. . . . . . . . . .8
-------------------------
2.3 Purchase Price Adjustment. . . . . . . . . .8
-------------------------
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER . 9
3.1 Due Incorporation. . . . . . . . . . . . . 9
-----------------
3.2 Due Authorization. . . . . . . . . . . . . 10
-----------------
3.3 Consents and Approvals; Authority Relative
------------------------------------------
to this Agreement. . . . . . . . . . . . . 10
-----------------
3.4 Capitalization.. . . . . . . . . . . . . . 11
---------------
3.5 Combined Management Report . . . . . . . . 12
--------------------------
3.6 No Adverse Effects or Changes. . . . . . . 12
-----------------------------
3.7 Properties . . . . . . . . . . . . . . . . 14
----------
3.8 Condition and Sufficiency of Assets. . . . 14
-----------------------------------
3.9 Computer System. . . . . . . . . . . . . . 15
---------------
3.10 Real Property. . . . . . . . . . . . . . . 15
-------------
3.11 Personal Property. . . . . . . . . . . . . 17
-----------------
3.12 Accounts Receivable and Advances . . . . . 17
--------------------------------
3.13 Intellectual Property. . . . . . . . . . . 17
---------------------
3.14 Contracts. . . . . . . . . . . . . . . . . 18
---------
3.15 Telecommunication Authorizations . . . . . 20
--------------------------------
3.16 Insurance. . . . . . . . . . . . . . . . . 20
---------
3.17 Employee Benefit Plans and Employment
-------------------------------------
Agreements . . . . . . . . . . . . . . . . 20
----------
3.18 Employment and Labor Matters . . . . . . . 23
----------------------------
3.19 Capital Improvements . . . . . . . . . . . 23
--------------------
3.20 Taxes. . . . . . . . . . . . . . . . . . . 24
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3.21 No Defaults or Violations. . . . . . . . . 25
-------------------------
3.22 Environmental Matters. . . . . . . . . . . 25
---------------------
3.23 Litigation . . . . . . . . . . . . . . . . 26
----------
3.24 Bank Accounts. . . . . . . . . . . . . . . 27
-------------
3.25 Customers and Suppliers. . . . . . . . . . 27
-----------------------
3.26 Claims Against Officers and Directors. . . 27
-------------------------------------
3.27 No Other Agreement . . . . . . . . . . . . 27
------------------
3.28 Brokers. . . . . . . . . . . . . . . . . . 27
-------
3.29 Accuracy of Statements . . . . . . . . . . 27
----------------------
3.30 Due Diligence Materials. . . . . . . . . . 28
-----------------------
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER. . 28
4.1 Due Incorporation. . . . . . . . . . . . . 28
-----------------
4.2 Due Authorization. . . . . . . . . . . . . 28
-----------------
4.3 Consents and Approvals; Authority Relative
------------------------------------------
to This Agreement. . . . . . . . . . . . . 28
--------------
4.4 Investment Intent. . . . . . . . . . . . . 29
-----------------
4.5 Foreign Carrier Affiliation. . . . . . . . 29
---------------------------
4.6 Buyer Capitalization . . . . . . . . . . . 29
--------------------
4.7 Accuracy of Statements . . . . . . . . . . 29
----------------------
ARTICLE V COVENANTS. . . . . . . . . . . . . . . . . 29
5.1 Implementing Agreement . . . . . . . . . . 29
----------------------
5.2 Seller Telecommunication Assets
-------------------------------
Conveyance . . . . . . . . . . . . . . . . 29
------------------------------------------
5.3 Telecommunication Subsidiary Assumption of
------------------------------------------
Liability. . . . . . . . . . . . . . . . . 29
---------
5.4 Access to Information and Facilities . . . 30
------------------------------------
5.5 Consents and Approvals.. . . . . . . . . . 30
----------------------
5.6 Resignation of Officers and Directors. . . 31
-------------------------------------
5.7 Use of Name. . . . . . . . . . . . . . . . 31
-----------
5.8 Preservation of Business . . . . . . . . . 31
------------------------
5.9 Supplemental Information . . . . . . . . . 34
------------------------
5.10 Exclusivity. . . . . . . . . . . . . . . . 34
-----------
5.11 Interim Financial Statements . . . . . . . 35
----------------------------
5.12 Tax Indemnity. . . . . . . . . . . . . . . 35
-------------
5.13 Inter-Company Agreemtns. . . . . . . . . . 36
---------------------------------
5.14 Excluded Liabilities . . . . . . . . . . . 36
--------------------
5.15 Tax Matters. . . . . . . . . . . . . . . . 36
-----------
5.16 338(h)(10) election. . . . . . . . . . . . 36
-------------------
5.17 Employment and Employee Benefit Matters. . 37
---------------------------------------
5.18 Buyer Capitalization . . . . . . . . . . . 38
--------------------
5.19 Sales Support Agreement. . . . . . . . . . 38
-----------------------
5.20 Advertising Agreement. . . . . . . . . . . 38
---------------------
5.21 Transitional Services Agreement. . . . . . 38
-------------------------------
5.22 Consulting Agreement . . . . . . . . . . . 38
--------------------
5.23 Telecommunication Services Agreement . . . 38
------------------------------------
5.24 Seller Reimbursements. . . . . . . . . . . 38
---------------------
5.25 Severance Payments.. . . . . . . . . . . . 39
------------------
5.26 Non-Competition. . . . . . . . . . . . . . 39
---------------
ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATIONS OF
BUYER. . . . . . . . . . . . . . . . . . . 40
6.1 Warranties True as of Both Present Date
---------------------------------------
and Closing Date . . . . . . . . . . . . . 40
----------------
6.2 Compliance with Agreements and Covenants . 40
----------------------------------------
6.3 Consents and Approvals . . . . . . . . . . 40
----------------------
6.4 Seller Telecommunication Assets
-------------------------------
Conveyance . . . . . . . . . . . . . . . . 40
----------
6.5 Expiration of HSR Waiting Period . . . . . 41
--------------------------------
6.6 Documents. . . . . . . . . . . . . . . . . 41
---------
6.7 Telecommunication Subsidiary Material
-------------------------------------
Adverse Change . . . . . . . . . . . . . . 41
--------------
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6.8 Actions or Proceedings . . . . . . . . . . 41
----------------------
6.9 Excluded Liabilities . . . . . . . . . . . 41
--------------------
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF
SELLER . . . . . . . . . . . . . . . . . . 41
7.1 Shareholder Approval . . . . . . . . . . . 41
--------------------
7.2 Warranties True as of Both Present Date
---------------------------------------
and Closing Date . . . . . . . . . . . . . 41
----------------
7.3 Compliance with Agreements and Covenants . 41
----------------------------------------
7.4 Expiration of HSR Waiting Period . . . . . 41
--------------------------------
7.5 Documents. . . . . . . . . . . . . . . . . 42
---------
7.6 Actions or Proceedings . . . . . . . . . . 42
----------------------
7.7 Employee Benefits. . . . . . . . . . . . . 42
-----------------
ARTICLE VIII CLOSING . . . . . . . . . . . . . . . . . 42
8.1 Closing. . . . . . . . . . . . . . . . . . 42
-------
8.2 Deliveries by Seller . . . . . . . . . . . 42
--------------------
8.3 Deliveries by Buyer. . . . . . . . . . . . 43
-------------------
ARTICLE IXX TERMINATION. . . . . . . . . . . . . . . . 44
9.1 Termination. . . . . . . . . . . . . . . . 44
-----------
9.2 Effect of Termination. . . . . . . . . . . 44
---------------------
ARTICLE X INDEMNIFICATION. . . . . . . . . . . . . . 45
10.1 Survival . . . . . . . . . . . . . . . . . 45
--------
10.2 Limits on Indemnification. . . . . . . . . 45
-------------------------
10.3 Indemnification by Seller. . . . . . . . . 45
-------------------------
10.4 Indemnification by Buyer . . . . . . . . . 46
------------------------
10.5 Claims . . . . . . . . . . . . . . . . . . 46
------
10.6 Notice of Third-Party Claims; Assumption
----------------------------------------
of Defense . . . . . . . . . . . . . . . . 47
----------
10.7 Settlement or Compromise . . . . . . . . . 47
------------------------
10.8 Failure of Indemnifying Person to Act. . . 48
-------------------------------------
10.9 Tax Character. . . . . . . . . . . . . . . 48
-------------
ARTICLE XI MISCELLANEOUS. . . . . . . . . . . . . . . 48
11.1 Expenses . . . . . . . . . . . . . . . . . 48
--------
11.2 Amendment. . . . . . . . . . . . . . . . . 48
---------
11.3 Notices. . . . . . . . . . . . . . . . . . 48
-------
11.4 Waivers. . . . . . . . . . . . . . . . . . 49
-------
11.5 Counterparts . . . . . . . . . . . . . . . 49
------------
11.6 Interpretation . . . . . . . . . . . . . . 49
--------------
11.7 Applicable Law . . . . . . . . . . . . . . 50
--------------
11.8 Assignment . . . . . . . . . . . . . . . . 50
----------
11.9 No Third-Party Beneficiaries . . . . . . . 50
----------------------------
11.10 Publicity. . . . . . . . . . . . . . . . . 50
---------
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11.11 Liquidated Damages . . . . . . . . . . . . 50
------------------
11.12 Effect of Investigation. . . . . . . . . . 51
-----------------------
11.13 Further Assurances . . . . . . . . . . . . 51
------------------
11.14 Severability . . . . . . . . . . . . . . . 51
------------
11.15 Remedies Cumulative. . . . . . . . . . . . 51
-------------------
11.16 Entire Understanding . . . . . . . . . . . 51
--------------------
11.17 Jurisdiction of Disputes; Waiver of Jury
----------------------------------------
Trial. . . . . . . . . . . . . . . . . . . 51
-----
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STOCK PURCHASE AGREEMENT
-------------------------
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of
July 14, 1999 among COMPASS TELECOMMUNICATIONS, Inc. a Delaware corporation
("Buyer"), and FEIST LONG DISTANCE SERVICE, INC., a Kansas corporation,
FIRSTEL, INC., a South Dakota corporation, TELECOM RESOURCES, INC., a Texas
corporation, VALU-LINE OF LONGVIEW, INC., a Texas corporation, and ADVANCED
COMMUNICATIONS GROUP, INC., a Delaware corporation (the "Seller").
P R E A M B L E:
WHEREAS, Buyer wishes to purchase from Seller and Seller wishes to
sell to Buyer all of the outstanding Telecommunication Subsidiary Shares
(as hereinafter defined) of the Telecommunication Subsidiaries (as
hereinafter defined) of the Seller; and
WHEREAS, the Board of Directors of Seller has (i) determined that
the sale of the Telecommunication Subsidiary Shares is fair to the
shareholders of Seller common stock and is in the best interests of such
shareholders and (ii) approved and adopted this Agreement and the
transactions contemplated hereby and recommended approval and adoption of
this Agreement by the shareholders of the Seller.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants, agreements and warranties herein contained, the parties agree as
follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. The following terms shall have the following
-----------
meanings for the purposes of this Agreement:
"Accumulated Depreciation" shall mean the aggregate amount shown as
such on the applicable combining balance sheet of the Telecommunication
Subsidiaries, determined in a manner consistent with Seller's past practice
in preparing the Combined Management Reports.
"Acquisition Proposal" means any inquiry offer, or proposal
regarding any of the following (other than the transactions contemplated by
this Agreement) and involving the Telecommunication Subsidiaries: Any
merger, reorganization, consolidation, share exchange, recapitalization,
business combination, liquidation, dissolution, or other similar
transaction involving, or, any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of, all or any significant portion of the
assets or ten percent (10%) or more of the Telecommunication Subsidiaries
Shares, in a single transaction or series of related transactions which
could reasonably be expected to interfere with the completion of the
transactions contemplated herein.
1
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"Advertising Agreement" shall mean that agreement to be negotiated
between the Parties and which will incorporate the principle terms
identified in Exhibit C.
---------
"Affiliate" means, with respect to any specified Person, (1) any
other Person which, directly or indirectly, owns or controls, is under
common ownership or control with, or is owned or controlled by, such
specified Person, (2) any other Person which is a director, officer or
partner or is, directly or indirectly, the beneficial owner of ten percent
(10%) or more of any class of its equity securities of the specified Person
or a Person described in clause (1) of this paragraph, (3) another Person
of which the specified Person is a director, officer or partner or is,
directly or indirectly, the beneficial owner of ten percent (10%) or more
of any class of equity securities, or (4) any relative or spouse of the
specified Person or any of the foregoing Persons.
"Business Day" means any day of the year other than (i) any Saturday
or Sunday or (ii) any other day on which commercial banks located in New
York City are generally closed for business.
"Buyer Confidential Information" means all confidential information
concerning Buyer or their Affiliates, excluding any information which
Seller can demonstrate (1) was previously known by Seller without any
obligation to hold it in confidence; (2) was received from a third party
free to disclose such information without restriction; (3) was
independently developed by Seller without the use of Buyer's Confidential
Information; (4) was approved for release by written authorization of
Buyer, but only to the extent of such authorization; (5) is required by law
or regulation to be disclosed, but only to the extent and for the purposes
of such required disclosure; (6) is disclosed in response to a valid order
of a court or other governmental body of the United States or any political
subdivision thereof, but only to the extent of and for the purposes of such
order, and only if Seller first notifies Buyer of the order to permit Buyer
to seek an appropriate protection order; or (7) is or becomes available to
the public through no breach of this Agreement.
"Closing" means the consummation of the transactions contemplated
herein.
"Closing Date" means the date on which the Closing occurs.
"Closing Date Current Assets" shall mean the current assets of the
Telecommunication Subsidiaries as set forth on the Closing Date Statement.
"Closing Date Current Liabilities" shall mean the current
liabilities of the Telecommunication Subsidiaries as set forth on the
Closing Date Statement.
"Closing Date Statement" shall mean a statement of the Closing Date
Current Assets, Closing Date Current Liabilities and Property, Plant and
Equipment and other assets and liabilities of the Telecommunication
Subsidiaries as of the Closing Date prepared in accordance with the
Principles and Procedures attached hereto as Exhibit G and in the form of
---------
Exhibit B hereto.
- ---------
"Code" shall mean the United States Internal Revenue Code of 1986,
as amended.
"Combined Management Reports" shall have the meaning set forth in
Section 3.5 hereof.
2
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"Commission" means those certain state utility regulatory
commissions and the FCC under whose respective authorities the Seller and
the Telecommunication Subsidiaries have received Telecommunication
Authorizations to offer telecommunication services.
"Computer System" means all computer hardware and software and
related materials used by the Telecommunication Subsidiaries in their
respective businesses.
"Consideration" has the meaning set forth in Section 2.2.
"Contract" means any contract, lease, commitment, understanding,
sales order, purchase order, agreement, indenture, mortgage, note, bond,
right, warrant, instrument, plan, permit or license, whether written or
oral, which is intended or purports to be binding and enforceable.
"Dollars" or numbers preceded by the symbol "$" means amounts in
United States Dollars.
"Environmental Law" shall mean any Law which relates to or otherwise
imposes liability or standards of conduct concerning discharges, emissions,
releases or threatened releases of noises, odors or any pollutants,
contaminants or hazardous or toxic wastes, substances or materials, whether
as matter or energy, into ambient air, water, or land, or otherwise
relating to the manufacture, processing, generation, distribution, use,
treatment, storage, disposal, cleanup, transport or handling of pollutants,
contaminants, or hazardous or toxic wastes, substances or materials,
including the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, the Superfund Amendments and
Reauthorization Act of 1986, as amended, the Resource Conservation and
Recovery Act of 1976, as amended, the Toxic Substances Control Act of 1976,
as amended, the Federal Water Pollution Control Act Amendments of 1972, the
Clean Water Act of 1977, any so-called "Superfund" or "Superlien Law"
including those already referred to in this definition as amended, and any
other Law of any Governmental Authority having a similar subject matter in
effect as of the Execution Date.
"Environmental Permit" shall mean any permit, license, approval,
consent or other authorization required by or pursuant to any applicable
Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" shall mean, with respect to any Person, each
corporation, trade or business that is, along with such Person, part of the
same controlled group of corporations, trades or businesses under common
control within the meaning of sections 414(b) or (c) of the Code.
"Execution Date" means (i) the date this Agreement is signed by the
parties hereto and (ii) for purposes of bringing down the representations
and warranties to the Closing Date, the Closing Date.
"FCC" means the Federal Communication Commission.
"Feist" means Feist Long Distance Service, Inc., a Kansas
corporation, sometimes referred to individually hereinafter as a
Telecommunication Subsidiary, and with each other Telecommunication
Subsidiary as the Telecommunication Subsidiaries.
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"FirsTel" means FirsTel Services, Inc, a South Dakota corporation,
sometimes referred to individually hereinafter as a Telecommunication
Subsidiary, and with each other Telecommunication Subsidiary as the
Telecommunication Subsidiaries.
"Governmental Authority" means the government of the United States
or any state or political subdivision thereof and any entity, body or
authority exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Hazardous Substance" means any material or substance which, as of
the Execution Date (i) constitutes a hazardous substance, toxic substance
or pollutant (as such terms are defined by or pursuant to any applicable
Environmental Law) or (ii) is regulated or controlled as a hazardous
substance, toxic substance, pollutant or other regulated or controlled
material, substance or matter pursuant to any applicable Environmental Law.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Indemnified Person" means the Person or Persons entitled to, or
claiming a right to, indemnification.
"Indemnifying Person" means the Person or Persons claimed by the
Indemnified Person to be obligated to provide indemnification.
"Intellectual Property" means any and all trademarks, trade names,
service marks, patents, copyrights (including any registrations,
applications, licenses or rights relating to any of the foregoing),
technology, trade secrets, inventions, know-how, designs, computer
programs, processes, formulas and all other intangible assets, properties
and rights. The "Telecommunication Subsidiary Intellectual Property" shall
mean any and all Intellectual Property used by the Telecommunication
Subsidiaries in the conduct of their businesses.
"Interim Financial Statements" shall mean any financial statements
made available to Buyer pursuant to Section 5.11.
"Law" means any law, statute, regulation, ordinance, rule, order,
decree, judgment, consent decree, settlement agreement, term or condition
made a part of any Telecommunication Authorization or governmental
requirement enacted, promulgated, entered into, agreed or imposed by any
Governmental Authority.
"Leased Property" means all real property and interests in real
property leased by the Telecommunication Subsidiaries.
"Lien" means any mortgage, lien (except for any lien for Taxes not
yet due and payable), charge, restriction, pledge, security interest,
option, lease or sublease, claim, right of any third party, easement,
encroachment or encumbrance.
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"Loss" or "Losses" means any and all liabilities, losses, costs,
claims, damages, penalties and expenses (including attorneys' fees and
expenses and costs of investigation and litigation). In the event any of
the foregoing are indemnifiable hereunder, the terms "Loss" and "Losses"
shall include any and all attorneys' fees and expenses and costs of
investigation and litigation incurred by the Indemnified Person in
enforcing such indemnity. No Loss shall be reduced by reason of tax
benefits allegedly enjoyed as a result of such Loss by any Indemnified
Party. Without limitation, "Loss" and "Losses" shall include fees and
disbursements of counsel incurred by any Indemnified Party in an action or
proceeding between the Indemnifying Party and the Indemnified Party or
between the Indemnified Party and any third party or otherwise.
"Owned Property" means all real property and interests in real
property owned in fee by the Telecommunication Subsidiaries.
"Person" means any individual, corporation, proprietorship, firm,
partnership, limited partnership, trust, association or other entity,
including a government or government department, agency or instrumentality.
"Property, Plant & Equipment" shall mean, as of any given time, the
aggregate book value of the Telecommunication Subsidiaries' plant, property
and equipment exclusive of Accumulated Depreciation and impairment
reserves, determined on a combined basis in a manner consistent with
Seller's past practices and to the presentation in the Combined Management
Report, Exhibit A, which amount as of May 31, 1999 was $38,447,188.
---------
"Preliminary Current Assets" shall mean the current assets of the
Telecommunication Subsidiaries as set forth in column h, the Pro Forma
Telecommunication column, of the Preliminary Statement.
"Preliminary Current Liabilities" shall mean the current liabilities
of the Telecommunication Subsidiaries as set forth in column h, the Pro
Forma Telecommunication column, of the Preliminary Statement.
"Preliminary Statement" as of the day immediately prior to the
Closing Date, shall mean the balance sheet/financial statements of Seller
and the Telecommunication Subsidiaries as of the most recently completed
month-end for which such financial statements are available (but in any
event as of a month-end no more than forty (40) days prior to such date),
prepared in a manner consistent with the Combined Management Report,
Section 3.5 hereof and the past practices of the Seller and the
Telecommunication Subsidiaries in the form of Exhibit B attached hereto.
---------
"Related Agreement" means any Contract which is or is to be entered
into at the Closing or otherwise pursuant to this Agreement, including,
without limitation, the Advertising Agreement, Transitional Services
Agreement, Consulting Agreement, the Bill of Sale, Assignment and
Assumption Agreement and the Sales Force Agreement. The Related Agreements
executed by a specified Person shall be referred to as "such Person's
Related Agreements," "its Related Agreements" or another similar
expression.
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"Seller Confidential Information" means all confidential information
concerning the Seller or its Affiliates, excluding any information which
Buyer can demonstrate (1) was previously known by Buyer without any
obligation to hold it in confidence; (2) was received from a third party
free to disclose such information without restriction; (3) was
independently developed by Buyer without the use of Seller's Confidential
Information; (4) was approved for release by written authorization of
Seller, but only to the extent of such authorization; (5) is required by
law or regulation to be disclosed, but only to the extent and for the
purposes of such required disclosure; (6) is disclosed in response to a
valid order of a court or other governmental body of the U.S. or any
political subdivision thereof, but only to the extent of and for the
purposes of such order, and only if Buyer first notifies Seller of the
order to permit Seller to seek an appropriate protection order; or (7) is
or becomes available to the public through no breach of this Agreement.
"Seller Telecommunication Assets" means, those (a) trade receivables
due from customers for services provided including billed and unbilled
amounts, (b) other receivables due from third parties relating to
telecommunication activities, (c) inventory of telecommunications equipment
and supplies, (d) prepayments and deposits for services or other purchases
relating to telecommunication operations, (e) Property Plant and Equipment
and other assets relating to the telecommunication operations, including
but not limited to the Kinnet IRU and the Feist Advertising Agreement, (f)
certain office equipment, (g) certain Telecommunications Authorizations and
(h) related reserves for doubtful accounts, depreciation and amortization,
in each case, as of the Closing Date.
"Seller Telecommunication Liabilities" means, those Liens, accrued
liabilities, trade payables, equipment leases, vehicle leases, sales office
and administrative office leases, capital leases, switch leases, and any
and all other obligations pursuant to a Contract to pay, provide security
for, guaranty, or otherwise be responsible for any sum, in each case,
arising out of, in any way connected with, or related to the operations of
each Telecommunication Subsidiary in each case, as of the Closing Date.
"Subsidiaries" means any Person 50.1% or more of the voting power of
which is controlled by another Person.
"Superior Proposal" means a bona fide Acquisition Proposal made by a
third Person that the Board of Directors of the Seller determines in its
good faith judgment to be more favorable to the Seller's shareholders than
the transaction contemplated herein, based upon the consideration to be
paid pursuant to the Acquisition Proposal being greater than the
Consideration by no less than ten percent (10%) and for which financing, to
the extent required, is then committed or which, in the good faith judgment
of the Board of Directors of the Seller is reasonably capable of being
obtained by such third Person.
"Tax Return" means any report, return or other information required
to be supplied to a Governmental Authority in connection with any Taxes.
"Taxes" means all taxes, charges, fees, duties, levies or other
assessments, including income, gross receipts, net proceeds, ad valorem,
turnover, real and personal property (tangible and intangible), sales, use,
franchise, excise, value added, stamp, leasing, lease, user, transfer,
fuel, excess profits, occupational, interest equalization, windfall
profits, severance, employee's income withholding, other
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withholding, unemployment and Social Security taxes, which are imposed by
any Governmental Authority, and such term shall include any interest,
penalties or additions to tax attributable thereto.
"Telecommunication Authorization" means all orders, approvals and
consents granted by any Governmental Authority, and registrations made with
any Governmental Authority, permitting the provision of local or long
distance or international telecommunication services.
"Telecommunication Business" shall mean the telecommunication
services that each of Seller and the Telecommunication Subsidiaries provide
as of the Closing Date or are authorized to provide pursuant to the
respective Telecommunication Authorizations that each has been granted.
"Telecommunication Subsidiaries" means Feist, FirsTel, TRI, and
Valu-Line and, as applicable, their Subsidiaries.
"Telecommunication Subsidiary" means Feist, FirsTel, TRI, or Valu-
Line individually and, as applicable, the respective Subsidiary of each.
"Telecommunication Subsidiary Material Adverse Change" means a
change in the business, assets, liabilities, cash flows, condition
(financial or otherwise) or prospects of any one or all of the
Telecommunications Subsidiaries which is materially adverse to the
Telecommunication Subsidiaries; provided, however, that for purposes of
determining whether there shall have been any such Telecommunication
Subsidiary Material Adverse Change, (i) any adverse change resulting from
or relating to general business or economic conditions shall be disregarded
and (ii) any adverse change resulting from or relating to conditions
generally affecting the industry in which the Telecommunications
Subsidiaries compete shall be disregarded.
"Telecommunication Subsidiary Material Adverse Effect" means an
effect on the business, assets, liabilities, cash flows, condition
(financial or otherwise) or prospects of any one or all of the
Telecommunication Subsidiaries which is materially adverse to the
Telecommunications Subsidiaries; provided, however, that for purposes of
determining whether there shall have been any such Telecommunication
Subsidiary Material Adverse Effect, (i) any adverse effect resulting from
or relating to general business or economic conditions shall be disregarded
and (ii) any adverse effect resulting from or relating to conditions
generally affecting the industry in which the Telecommunications
Subsidiaries compete shall be disregarded.
"Telecommunication Subsidiary Shares" means the (a) 10,000 shares of
Common Stock, no par value per share, of Feist, (the "Feist Common Stock"),
(b) 1,064.14 shares of common stock, $1.00 par value per share, of FirsTel,
(the "FirsTel Common Stock"), (c) 1,000 shares of common stock, $.001 par
value per share, of TRI, (the "TRI Common Stock"), and (d) 1,000 shares of
common stock, no par value per share of Valu-Line (the "Valu-Line Common
Stock"), all of which are held of record by Seller.
"TRI" means Telecom Resources, Inc., a Texas corporation sometimes
referred to individually hereinafter as a Telecommunication Subsidiary and
with each other Telecommunication Subsidiary as the Telecommunication
Subsidiaries.
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"Transaction Contingency Adjustment Factor" means, an amount that
shall be an adjustment to the Purchase Price and shall be calculated as
equal to the product of $15,000 multiplied by the number of
Telecommunication Authorization Consents, required for the consummation of
the transactions contemplated hereby or the ownership and operation by
Buyer of the Telecommunication Subsidiaries as identified on Schedule
---------
3.3(a), that are not identified as material on such schedule, for which
- ------
Buyer has determined it has not received written evidence (reasonably
satisfactory to Buyer).
"Transition Services Agreement" means that agreement, to be entered
into among Seller and Buyer in a form substantially similar to Exhibit D.
---------
"Transition Services Period" means the thirty (30) days after the
Closing Date, unless further extended by the mutual agreement of Seller and
Buyer.
"Valu-Line" means Valu-Line of Longview, Inc., a Texas corporation
sometimes referred to individually hereinafter as a Telecommunication
Subsidiary and with each other Telecommunication Subsidiary as the
Telecommunication Subsidiaries.
ARTICLE II.
SALE AND PURCHASE OF SHARES
2.1 Sale and Purchase. Seller hereby agrees to sell to Buyer the
-----------------
Telecommunication Subsidiary Shares, which the Telecommunication Subsidiary
Shares in the aggregate represent 100% of the issued and outstanding shares
of capital stock of the Telecommunication Subsidiaries, free and clear of
all Liens, and Buyer hereby agrees to purchase all such Telecommunication
Subsidiary Shares.
2.2 Payment of Purchase Price. In consideration for the
-------------------------
Telecommunication Subsidiary Shares, Buyer shall pay to Seller Forty-Nine
Million Eight Hundred Thousand and No/100s Dollars ($49,800,000.00) less
(a) an amount, if any, by which Preliminary Current Assets are less than
Preliminary Current Liabilities (the "Initial Adjustment Amount") and (b)
an amount, if any, that shall be calculated on or immediately prior to the
Closing Date upon a determination of the applicability of the transaction
contingency adjustment factor in an amount which is equal to, the
Transaction Contingency Adjustment Factor (together, the "Consideration"),
subject to subsequent adjustment as provided in Section 2.3. The
Consideration shall be paid to Seller by means of a certified check or by
wire transfer of immediately available funds to a bank account as
designated by Seller to Buyer no later than the third Business Day prior to
the Closing Date.
2.3 Purchase Price Adjustment.
-------------------------
(a) Within fourteen (14) Business Days after the Closing Date
Current Liabilities, Closing Date Current Assets, and Property, Plant &
Equipment are finally determined in accordance with this Section 2.3 and in
accordance with the form of column "h", the Pro Forma Telecommunication
column of Exhibit B, (x) (i) if Closing Date Current Assets are less than
---------
Closing Date Current Liabilities in an amount in excess of the Initial
Adjustment Amount, Seller shall pay to Buyer the amount of such excess or
(ii) if Closing Date Current Assets are less than the Closing Date Current
Liabilities in an amount less than the Initial Adjustment Amount, Buyer
shall pay to Seller the
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difference between the Initial Adjustment Amount and the result of Closing
Date Current Assets minus Closing Date Current Liabilities, and (y) Seller
shall pay to Buyer the amount, if any, of the decrease in Property, Plant &
Equipment (exclusive of Accumulated Depreciation and impairment reserves)
from May 31, 1999 to the Closing Date.
(b) In order to confirm the Closing Date Current Liabilities,
Closing Date Current Assets and Property, Plant & Equipment as of the
Closing Date, Buyer will cause the Closing Date Statement to be prepared in
a manner consistent with Exhibit B, using the categories set forth
---------
thereon in accordance with the Principles and Procedures set forth on
Exhibit G attached hereto, prepared as promptly as practicable after the
- ---------
Closing Date, but in any event within forty-five (45) days of the Closing
Date. The Closing Date Statement shall be attested to by
PriceWaterhouseCoopers, LLP, Buyer's independent public accountants. As
soon as practicable, but within sixty (60) days of receipt of the Closing
Date Statement, PriceWaterhouseCoopers, LLP will issue a preliminary
opinion on the Closing Date Statement.
Seller and its independent public accountants, Peat Marwick, shall
be entitled to review PriceWaterhouseCoopers, LLP's workpapers at the
completion of the Closing Date audit. PriceWaterhouseCoopers, LLP shall
make its Closing Date audit workpapers and its draft opinion with respect
thereto available to Seller and Peat Marwick as soon as practicable.
Within sixty (60) days after the receipt by Seller and Peat Marwick of the
Closing Date Statement and the last of PriceWaterhouseCoopers, LLP's
workpapers and its draft opinion, Seller and Peat Marwick may propose any
adjustments thereto which Seller deems to be reasonably appropriate.
PriceWaterhouseCoopers, LLP and Peat Marwick shall work together to
promptly resolve any proposed adjustments and, upon resolution of any such
adjustments, PriceWaterhouseCoopers, LLP shall issue a final opinion on the
Closing Date Statement.
In the event that any disagreement between PriceWaterhouseCoopers,
LLP and Peat Marwick is not resolved by agreement between Buyer and Seller
within thirty (30) days after the adjustments are proposed, Arthur
Andersen, LLP, independent public accountants (the "Referee"), will be
promptly engaged to render within thirty (30) days from the date of such
engagement an opinion regarding the issue or issues in dispute and such
opinion (absent manifest error) shall be binding on the parties hereto.
Buyer shall pay the fees and expenses of PriceWaterhouseCoopers, LLP
incurred in connection with this Section 2.3 and Seller shall pay the fees
and expenses of Peat Marwick. Buyer and Seller shall each pay one half of
the fees and expenses of the Referee.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer, as of the date of this
Agreement and as of the Closing Date (as if such representations and
warranties were remade on the Closing Date), as follows:
3.1 Due Incorporation. The Seller and each Telecommunication
-----------------
Subsidiary is duly organized, validly existing and in good standing under
the laws of its respective jurisdiction of organization, with
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all requisite corporate power and authority to own, lease and operate their
respective properties and to carry on their respective businesses as they
are now being owned, leased, operated and conducted. Except where the
failure to be so qualified would have a Telecommunication Subsidiary
Material Adverse Effect on the business or properties of the
Telecommunication Subsidiaries, each Telecommunication Subsidiary is
licensed or qualified to do business and is in good standing (where the
concept of "good standing" is applicable) as a foreign corporation in each
jurisdiction where the nature of the properties owned, leased or operated
by it and the business transacted by it require such licensing or
qualification. The jurisdictions in which the Telecommunication
Subsidiaries are incorporated and licensed or qualified to do business as a
foreign corporation are set forth on Schedule 3.1. True, correct and
------------
complete copies of the Certificates of Incorporation and Bylaws, as
amended, and all minutes of all meetings (or written consents in lieu of
meetings) of the Boards of Directors (and all committees thereof) and
stockholders of the Telecommunication Subsidiaries have been made available
to Buyer. Except as set forth on Schedule 3.1, all actions taken by the
------------
Board of Directors (and all committees thereof) and stockholders of the
Telecommunication Subsidiaries after February 18, 1998 are reflected in
such minutes and consents. Except as set forth on Schedule 3.1, none of
------------
the Telecommunication Subsidiaries has any direct or indirect subsidiaries,
either wholly or partially owned, and none of the Telecommunication
Subsidiaries hold any direct or indirect economic, voting or management
interest in any Person or directly or indirectly own any security issued by
any Person.
3.2 Due Authorization. The Seller and the Telecommunication
-----------------
Subsidiaries have full power and authority to enter into this Agreement and
each of them has full power and authority to enter into the Related
Agreements to which each is a party and to consummate the transactions
contemplated hereby and thereby. The Seller and the Telecommunication
Subsidiaries have duly and validly executed and delivered this Agreement
and each of them has duly and validly executed and delivered (or prior to
or at the Closing will duly and validly execute and deliver) their
respective Related Agreements. This Agreement constitutes legal, valid and
binding obligations of the Seller and the Telecommunication Subsidiaries
and each Related Agreement upon execution and delivery by the parties
signatory thereto will constitute legal, valid and binding obligations of
the signatories thereof, in each case, enforceable in accordance with their
respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganization or similar
laws in effect which affect the enforcement of creditors' rights generally
and by equitable limitations on the availability of specific remedies.
3.3 Consents and Approvals; Authority Relative to this Agreement.
------------------------------------------------------------
(a) Except as set forth on Schedule 3.3(a), no Telecommunication
---------------
Authorization, consent, permit, authorization or approval of, filing or
registration with, or cooperation from, any Governmental Authority or any
other Person not a party to this Agreement (individually and collectively a
"Consent") is necessary in connection with the execution, delivery and
performance by the Seller and the Telecommunication Subsidiaries of this
Agreement, the Related Agreements or the consummation of the transactions
contemplated hereby or thereby.
(b) Except as set forth on Schedule 3.3(b), the execution,
---------------
delivery and performance by the Seller and the Telecommunication
Subsidiaries of this Agreement and their respective Related Agreements does
not and will not, and the consummation of the transactions contemplated
hereby and
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thereby does not and will not, (i) violate any Law; (ii) violate or
conflict with, result in a breach or termination of, constitute a default
or give any third party any additional right (including a termination
right) under, permit cancellation of, result in the creation of any Lien
upon any of the assets or properties of the Seller or the Telecommunication
Subsidiaries under, or result in or constitute a circumstance which, with
or without notice or lapse of time or both, would constitute any of the
foregoing under, any Contract to which the Seller or any of the
Telecommunication Subsidiaries is a party or by which the Seller or any
Telecommunication Subsidiaries or any of their assets or properties are
bound; (iii) permit the acceleration of the maturity of any indebtedness of
any Seller or of the Telecommunication Subsidiaries or indebtedness secured
by their assets or properties; or (iv) violate or conflict with any
provision of any of the certificates of incorporation, charters, bylaws or
similar organizational instruments of each of the Seller or any of the
Telecommunication Subsidiaries, except in the case of clauses (i), (ii),
and/or (iii) above, as would not have a Telecommunication Subsidiary
Material Adverse Effect or a material adverse effect on the business,
operations, assets, liabilities, results of operations, cash flows,
condition (financial or otherwise) or prospects of the Seller.
3.4 Capitalization.
--------------
(a) The authorized capital stock of each of the Telecommunication
Subsidiaries consists of the shares of common stock, having the respective
par values per share, and number of shares of each of which are currently
issued and outstanding as set forth on Schedule 3.4. All of such
------------
Telecommunication Subsidiaries Shares (i) are validly issued, fully paid
and non-assessable and (ii) are, and when issued were, free of preemptive
rights. Seller owns, or as of the Closing will own, (legally and
beneficially) all of such Telecommunication Subsidiaries Shares, free and
clear of any and all Liens. Except as set forth in Schedule 3.4, there
------------
are no shares of capital stock of the Telecommunication Subsidiaries held
in the treasury of any Telecommunication Subsidiary and no shares of
capital stock of any Telecommunication Subsidiary are currently reserved
for issuance for any purpose or upon the occurrence of any event or
condition.
(b) Except as set forth in Schedule 3.4, there are no shares of
------------
capital stock or other securities (whether or not such securities have
voting rights) of the Telecommunication Subsidiaries issued or outstanding
or any subscriptions, options, warrants, calls, rights, convertible
securities or other agreements or commitments of any character obligating,
or obligating either or any of Seller, the Telecommunication Subsidiaries
or any of their Affiliates to issue, transfer or sell, or cause the
issuance, transfer or sale of, any shares of capital stock or other
securities (whether or not such securities have voting rights) of the
Telecommunication Subsidiaries. Except as set forth in Schedule 3.4,
------------
there are no outstanding contractual obligations of either Seller or any of
the Telecommunication Subsidiaries which relate to the purchase, sale,
issuance, repurchase, redemption, acquisition, transfer, disposition,
holding or voting of any shares of capital stock or other securities of the
Telecommunication Subsidiaries. Except (i) as set forth on Schedule 3.4
------------
and (ii) for Seller's rights as a holder of Telecommunication Subsidiary
Shares, no Person has any right to participate in, or receive any payment
based on any amount relating to, the revenue, income, value or net worth of
the Telecommunication Subsidiaries or any component or portion thereof, or
any increase or decrease in any of the foregoing.
(c) The assignments, endorsements, stock powers and other
instruments of transfer delivered by Seller to Buyer at the Closing will be
sufficient to transfer such Seller's entire interest, legal and beneficial,
in the Telecommunication Subsidiary Shares. Seller has, and on the Closing
Date will have,
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full power and authority to convey good title to all of the
Telecommunication Subsidiary Shares, and upon transfer to Buyer of the
certificates representing such Telecommunication Subsidiary Shares, Buyer
will receive good title to such Telecommunication Subsidiary Shares, free
and clear of all Liens.
3.5 Combined Management Reports. Attached hereto as Exhibit A
--------------------------- ---------
is a copy of the unaudited balance sheet and statement of income and
related reports of the Seller as of May 31, 1999 (collectively, the
"Combined Management Reports"). Except as set forth on Schedule 3.5,
- ----------------------------- ------------
the Combined Management Reports present fairly the financial position,
assets and liabilities of the Seller and the Telecommunication
Subsidiaries, as applicable, as of the dates thereof and the revenues,
expenses, and results of the operation of the Telecommunication
Subsidiaries and the Seller for the periods covered thereby and changes in
the financial position of the Telecommunication Subsidiaries and the Seller
with respect to the dates thereof and the periods covered thereby, in each
case in conformity with the past accounting practices of the Seller and the
Telecommunication Subsidiaries, as applicable, consistently applied during
such periods and in conformity with GAAP, except for the following
exceptions (i) the absence of any statements of retained earnings or cash
flows; (ii) the absence of notes to the Combined Management Reports; (iii)
the nature of the presentation of the combining statement of income and
combining balance sheet and other reports (such statements may not present
a complete statement as required by GAAP or may be supplemental information
not required by GAAP); (iv) no allocation has been made for shared
resources among different entities and divisions (v) the telecom operations
and related assets and liabilities have not been presented as discontinued
operations and assets held for sale; (vi) the discontinuance of deferring
line acquisition cost and amortizing previously deferred amounts; (vii) the
write-off of certain intangible assets, including but not limited to,
goodwill, customer lists and deferred line costs; and (viii) the
discontinuance of expense recognition relating to the above changes.
Except as set forth on Schedule 3.5 attached hereto or in the balance
------------
sheets and notes thereto included in the Combined Management Reports, there
are no liabilities, debts, claims or obligations (including "off-balance
sheet" liabilities, debts, claims or obligations), whether accrued,
absolute, contingent or otherwise, whether due or to become due, for which
the Seller or the Telecommunication Subsidiaries are or were liable which
could materially and adversely affect the business or operation of the
Seller or the Telecommunication Subsidiaries or any of the assets of the
Telecommunication Subsidiaries or any of the right of the Seller therein or
thereto.) Except as set forth on Schedules 3.5, 3.7, 3.11 or 5.14
-------------- ---- ---- ----
or in the "Total Telecom" column of the Combined Management Reports, none
of the Telecommunication Subsidiaries will have any indebtedness for
borrowed money to any third party or to any Affiliate. The Combined
Management Reports are in accordance with the books and records of the
Seller and each Telecommunication Subsidiary, as applicable, and do not
reflect any transactions which are not bona fide transactions and do not
contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements contained therein, in light
of the circumstances in which they were made, not misleading.
3.6 No Adverse Effects or Changes. Except as set forth
-----------------------------
on Schedule 3.6, since May 31, 1999 until the Execution Date, the
------------
Telecommunication Subsidiaries have conducted their respective businesses
and operations in all respects only in the ordinary course and consistent
with past practices. Without limiting the foregoing, except as set forth
on Schedule 3.6, since May 31, 1999 until the Execution Date, the
------------
Telecommunication Subsidiaries have not:
(a) suffered any Telecommunication Subsidiary Material Adverse
Change;
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(b) suffered any material damage, destruction or Loss to any of
its assets or properties (whether or not covered by insurance);
(c) incurred any obligation or entered into any Contract which
either (i) required a payment by any party in excess of, or a series of
payments which in the aggregate exceed, $50,000 or provides for the
delivery of goods or performance of services, or any combination thereof,
having a value in excess of $50,000, or (ii) has a term of, or requires the
performance of any obligations by any Telecommunication Subsidiary over a
period in excess of, six months and is not terminable within 90 (ninety)
days without payment of a termination fee or similar payment in excess of
$25,000;
(d) taken any action or entered into or authorized any Contract or
transaction other than in the ordinary course of business and consistent
with past practice, including, without limitation, the licensing of
products or software to third parties;
(e) sold, transferred, conveyed, assigned or otherwise disposed of
any of its assets or properties, except sales of inventory in the ordinary
course of business and consistent with past practice;
(f) waived, released or canceled any claims against third parties
for debts owing to it for amounts in excess of $25,000, or any rights which
have a value in excess of $25,000;
(g) made any material changes in its accounting systems, policies,
principles or practices;
(h) entered into, authorized or permitted any transaction with
Seller or any Affiliate of Seller;
(i) authorized for issuance, issued, sold, delivered or agreed or
committed to issue, sell or deliver (whether through the issuance or
granting of options, warrants, convertible or exchangeable securities,
commitments, subscriptions, rights to purchase or otherwise) any shares of
its capital stock or any other securities, or amended any of the terms of
any such securities;
(j) split, combined, or reclassified any shares of its capital
stock, declared, set aside or paid any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect
of its capital stock, or redeemed or otherwise acquired any of its
securities.
(k) made any borrowing, incurred any debt (other than trade
payables in the ordinary course of business and consistent with past
practice), or assumed, guaranteed, endorsed (except for the negotiation or
collection of negotiable instruments in transactions in the ordinary course
of business and consistent with past practice) or otherwise become liable
(whether directly, contingently or otherwise) for the obligations of any
other Person, or made any payment or repayment in respect of any
indebtedness (other than trade payables and accrued expenses in the
ordinary course of business and consistent with past practice);
(l) made any loans, advances or capital contributions to, or
investments in, any other Person;
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(m) entered into, adopted, amended or terminated any bonus, profit
sharing, compensation, termination, stock option, stock appreciation right,
restricted stock, performance unit, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreements,
trusts, plans, funds or other arrangements for the benefit or welfare of
any director, officer, consultant or employee, or increased in any manner
the compensation or fringe benefits of any director, officer, consultant or
employee or paid any benefit not required by any existing plan and
arrangement or entered into any contract, agreement, commitment or
arrangement to do any of the foregoing;
(n) except for capital expenditures contemplated by clause (o),
acquired, leased or encumbered any assets outside the ordinary course of
business or any assets which are material to the Telecommunication
Subsidiaries;
(o) authorized or made any capital expenditures which individually
or in the aggregate are in excess of $50,000;
(p) made any Tax election (other than routine elections made on
Tax Returns filed in the ordinary course of business consistent with past
practice that will not, in the aggregate have a Telecommunication
Subsidiary Material Adverse Effect on the taxable income or loss of the
Telecommunication Subsidiaries for any taxable year ending after the
Closing Date) or settled or compromised any federal, state, local or
foreign Tax liability, or waived or extended the statute of limitations in
respect of any such Taxes;
(q) paid any amount, performed any obligation or agreed to pay any
amount or perform any obligation, in settlement or compromise of any suits
or claims of liability against the Telecommunication Subsidiaries or any
of their respective directors, officers, employees or agents;
(r) terminated or materially modified, amended or otherwise
altered or changed any of the terms or provisions of any Contract, or paid
any amount in excess of $25,000 not required by Law or by any Contract;
(s) agreed, whether orally or in writing to do any of the
foregoing; or
(t) written up any accounts receivable or other asset previously
written down or written off.
3.7 Properties. Except as set forth on Schedule 3.7, the
---------- ------------
Telecommunication Subsidiaries have good and valid record title to, and are
the lawful owners of, all of the tangible and intangible assets, properties
and rights used in connection with their respective businesses and all of
the tangible and intangible assets, properties and rights reflected in the
Combined Management Reports or Schedule 3.10 or 3.11 (other than assets
------------- ----
leased under the leases set forth in Schedule 3.10 or 3.11 and assets
------------- ----
disposed of in the ordinary course of business since the date of the
Combined Management Reports), free and clear of any Lien.
3.8 Condition and Sufficiency of Assets. Except as set forth on
-----------------------------------
Schedule 3.8, all of the tangible assets and properties of the
- ------------
Telecommunication Subsidiaries with a value over $10,000, whether real or
personal, owned or leased, are free from defects other than such non-
material defects as do not interfere with the intended use thereof in the
conduct of normal operations. Immediately after the Closing, the
Telecommunication Subsidiaries shall own or have a right to use
14
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all the assets, properties, rights, know-how, key personnel, processes and
ability which are required for or currently used in connection with the
operation of their respective businesses as they are currently conducted.
Such assets, properties and rights, except for changes in the ordinary
course of business together with the Seller Telecommunications Assets, were
sufficient to produce the income of the Telecommunication Business for the
five (5) month period ended May 31, 1999 as shown on the Combined
Management Reports. Except as set forth on Schedule 3.8 or disclosed on
------------
the Combined Management Reports, the Telecommunication Subsidiaries have
not had any liabilities that are not directly related to, and that did not
arise directly out of, the business of the Telecommunication Subsidiaries.
3.9 Computer System. The Telecommunication Subsidiaries have
---------------
undertaken studies of the resources required to cause the Computer System
to be capable of appropriately processing dates beginning with the year
2000 ("Year 2000 Compliant"). Seller has no reason to believe, based upon
reasonable inquiry and opinions of appropriate employees of the
Telecommunication Subsidiaries that the Computer System cannot be made Year
2000 Compliant before December 31, 1999 for an expenditure of less than
Five Hundred Thousand and No/100 Dollars $500,000.00. The use of Computer
System by the Telecommunication Subsidiaries (including any software
modifications) has not resulted in the termination of any maintenance,
service or support agreement relating to any part of the Computer System or
any reduction in the services provided to the Telecommunication
Subsidiaries, warranties available to the Telecommunication Subsidiaries or
rights of the Telecommunication Subsidiaries thereunder which would have a
Telecommunication Subsidiary Material Adverse Effect.
3.10 Real Property.
-------------
(a) Schedule 3.10(a) sets forth a complete list of all real
----------------
property and interests in real property owned in fee by the
Telecommunication Subsidiaries (individually, an "Owned Property") and all
real property and interests in real property leased by the
Telecommunication Subsidiaries (individually, a "Leased Property") pursuant
to real property leases (the "Real Property Leases"). The
Telecommunication Subsidiaries have (i) good and insurable fee title to all
Owned Property and (ii) good and valid title to the leasehold estates in
all Leased Property (an Owned Property or Leased Property being sometimes
referred to herein, individually, as a "Telecommunication Subsidiary
Property" and, collectively, as "Telecommunication Subsidiary Properties"),
in each case free and clear of all Liens, except (i) such as are set forth
in Schedule 3.10(a), (ii) mechanics', carriers', workmen's, repairmen's
----------------
or other like Liens arising or incurred in the ordinary course of business
that individually or in the aggregate would not have a Telecommunication
Subsidiary Material Adverse Effect and (iii) other immaterial imperfections
of title or encumbrances, if any, which, individually or in the aggregate,
would not have a Telecommunication Subsidiary Material Adverse Effect. The
Telecommunication Subsidiary Properties constitute all of the land held or
used by the Telecommunication Subsidiaries in the conduct of their
businesses. Seller has made available to Buyer true, accurate and complete
copies of the Real Property Leases together with copies of all reports (if
any in the possession of Seller or the Telecommunication Subsidiaries as of
and after February 18, 1998) of any engineers, environmental consultants or
other consultants in its possession relating to the Telecommunication
Subsidiary Properties.
(b) The activities carried on in all buildings, plants,
facilities, installations, fixtures and other structures or improvements
included as part of, or located on any Telecommunication Subsidiary
15
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Property, and the buildings, plants, facilities, installations, fixtures
and other structures or improvements on such properties with respect to the
Owned Property, and to the knowledge of Seller and the Telecommunication
Subsidiaries with respect to the Leased Property, are not in violation of,
or in conflict with, any applicable zoning, environmental or health
regulations or ordinance or any other similar Law that individually or in
the aggregate would have a Telecommunication Subsidiary Material Adverse
Effect. Except as set forth on Schedule 3.10(b), and (a) to the knowledge
----------------
of Seller and the Telecommunication Subsidiaries, with respect to the Owned
Property since the purchase of the Owned Property and (b) to the knowledge
of Seller and the Telecommunication Subsidiaries with respect to the Leased
Property of each, no asbestos, asbestos-containing materials, PCB compounds
or other pollutants, contaminants or Hazardous Substances have been used
in, on, or are otherwise located on, any Telecommunication Subsidiary
Property.
(c) To the knowledge of Seller or the Telecommunication
Subsidiaries, none of the Telecommunication Subsidiary Properties relies on
or regularly makes use of access to the nearest public road or right-of-way
over land owned by others, except where such access is by means of one or
more valid recorded easements. To the knowledge of Seller or the
Telecommunication Subsidiaries, all covenants or other restrictions (if
any) to which any of the Telecommunication Subsidiary Properties is subject
are being in all respects properly performed and observed and none of the
Telecommunication Subsidiaries has received any notice of violation (or
claimed violation) thereof.
(d) Except as set forth on Schedule 3.10(d), there is no
----------------
pending, or to the knowledge of Seller or the Telecommunication
Subsidiaries threatened or proposed proceeding or governmental action to
modify the zoning classification of, or to condemn or take by the power of
eminent domain (or to purchase in lieu thereof), or to classify as a
landmark, or to impose special assessments on, or otherwise to take or
restrict in any way the right to use, develop or alter, all or any of the
Telecommunication Subsidiary Properties.
(e) Except as set forth on Schedule 3.10(e), all of the Real
----------------
Property Leases are in full force and effect, valid and enforceable in
accordance with their respective terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency, moratorium, reorganization
or similar laws in effect which affect the enforcement of creditors' rights
generally and by equitable limitations on the availability of specific
remedies. None of the Real Property Leases have been amended or modified
except as set forth on Schedule 3.10(e).
----------------
(f) The Telecommunication Subsidiaries have not received any
notice of any, and, to the knowledge of Seller or the Telecommunication
Subsidiaries, there exists no, dispute, claim, event of default or event
which constitutes or would constitute (with notice or lapse of time or
both) a default under any Real Property Lease. Except as disclosed in the
Combined Management Reports or as set forth on Schedule 3.10, all rent
-------------
and other amounts due and payable with respect to the Real Property Leases
have been paid through the date of this Agreement and all rent and other
amounts due and payable with respect to the Real Property Leases on or
prior to the Closing Date will have been paid prior to the Closing Date.
(g) Except as set forth on Schedule 3.10(g)(i), all lessors
-------------------
under the Real Property Leases have consented or prior to Closing will have
consented (where such consent is necessary) to the
16
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consummation of the transactions contemplated by this Agreement or the
Related Agreements without requiring modification in the rights or
obligations thereunder. Except as set forth on Schedule 3.10(g)(ii),
--------------------
none of the Real Property Leases are expected to expire or terminate during
the year following the Closing Date.
3.11 Personal Property. Approximately four hundred and seventy
-----------------
seven (477) desk and lap top computers owned by Seller and the
Telecommunication Subsidiaries are used in the Telecommunication Business.
Schedule 3.11 sets forth a true, accurate and complete list of all of the
- -------------
tangible personal property used by the Telecommunication Subsidiaries in
their businesses having a present book value of $20,000 or more, other than
items acquired by the Telecommunication Subsidiaries in the ordinary course
of business from the date hereof through the Closing Date. Schedule 3.11
-------------
also sets forth a true, accurate and complete list of all leases of
personal property binding upon the Telecommunication Subsidiaries or any of
their respective assets or properties. All of such tangible personal
property is presently utilized by the Telecommunication Subsidiaries in the
ordinary course of business. Seller has made available to Buyer true,
accurate and complete copies of all such personal property leases.
3.12 Accounts Receivable and Advances. Schedule 3.12(i) sets
-------------------------------- ----------------
forth a true, accurate and complete summary of aging schedule of all
accounts receivable of the Telecommunication Subsidiaries (the "Accounts
Receivable") as of May 31, 1999. Except as set forth on Schedule
--------
3.12(ii), each Account Receivable represents (a) a sale made in the
- --------
ordinary course of business and which arose pursuant to an enforceable
written or oral Contract for a bona fide sale of goods or for services
performed, and the Telecommunication Subsidiaries have performed all of
their obligations to produce the goods or perform the services to which
such Account Receivable relates except for prepaid services, and (b) except
as adequately reserved against in the balance sheet included in the
Combined Management Reports, amounts owed which are not more than one
hundred twenty (120) days past due and which are not subject to any claim
or reduction, counterclaim, set-off, recoupment or other claim for credit,
allowances or adjustments by the obligor owing such amount, and each of
which, together with each miscellaneous receivable to be included in the
Closing Date Statement, is collectible in full within one hundred twenty
(120) days of their origination. No advance is subject to any claim for
reduction, counterclaim, set-off, recoupment or other claim for credit,
allowances or adjustments by the obligor thereof, and, except as reserved
against in the Combined Management Reports, all advances are collectible in
full within one hundred twenty (120) days of their origination.
3.13 Intellectual Property. Schedule 3.13 sets forth a true,
--------------------- -------------
accurate and complete list of all of the Telecommunication Subsidiaries'
Intellectual Property. Except as set forth on Schedule 3.13:
-------------
(a) all of Telecommunication Subsidiaries' Intellectual Property
is owned by Telecommunication Subsidiaries free and clear of all Liens, and
is not subject to any license, royalty or other agreement, and the
Telecommunication Subsidiaries have not granted any license or agreed to
pay or receive any royalty in respect of any of Telecommunication
Subsidiaries' Intellectual Property;
17
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<PAGE>
(b) none of Telecommunication Subsidiaries' Intellectual Property
has been or is the subject of any pending or, to the knowledge of Seller or
the Telecommunication Subsidiaries, threatened litigation or claim of
infringement;
(c) to the knowledge of Seller or the Telecommunication
Subsidiaries, no license or royalty agreement to which any
Telecommunication Subsidiary is a party is in breach or default by any
party thereto or the subject of any notice of termination given or
threatened;
(d) the products and services produced and sold by the
Telecommunication Subsidiaries, any process, method, part, design, material
or other Intellectual Property they employ, and the marketing and use by
the Telecommunication Subsidiaries of any such product, service or
Intellectual Property, in each case to Seller's or the Telecommunication
Subsidiaries' knowledge do not infringe any Intellectual Property or
confidential or proprietary rights of another Person, and no
Telecommunication Subsidiary has received any notice contesting its right
to use any such Intellectual Property;
(e) the Telecommunication Subsidiaries own or possess adequate
rights in and to all Intellectual Property necessary to conduct their
respective businesses as presently conducted;
(f) to the knowledge of Seller and the Telecommunication
Subsidiaries, the Intellectual Property is valid and enforceable; and
(g) to the knowledge of Seller and the Telecommunication
Subsidiaries, no unauthorized third party is engaged in any activity which
infringes the Intellectual Property.
3.14 Contracts. Schedule 3.14(a), sets forth a true, accurate
--------- ----------------
and complete list of all Contracts and arrangements of the following types
to which either (i) any Telecommunication Subsidiary or (ii) Seller, (but
only to the extent comprising part of Seller's Telecommunication Business),
is a party or by which any of them is bound, or to which any of their
respective assets or properties is subject:
(a) any collective bargaining agreement;
(b) any Contract with any employee, officer or director of any
Telecommunication Subsidiary or any respective Affiliates of such
individuals or any Contract with Seller or any affiliate of Seller (other
than those set forth on Schedule 3.17 and Schedule 3.18);
------------- -------------
(c) any Contract with a sales representative, manufacturer's
representative, distributor, dealer, broker, sales agency, advertising
agency or other Person engaged in sales, distributing or promotional
activities, or any Contract to act as one of the foregoing on behalf of any
Person;
(d) any Contract which involves the future payment or receipt of
(i) cash (ii) other property, (iii) an unperformed commitment, or (iv)
goods or services, in each case having a value in excess of $25,000;
(e) any Contract or arrangement pursuant to which any
Telecommunication Subsidiary has made or will make loans or advances, or
has or will have incurred debts or become a guarantor or surety or pledged
its credit on or otherwise become responsible with respect to any
undertaking of
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another (except for the negotiation or collection of negotiable instruments
in transactions in the ordinary course of business);
(f) any indenture, credit agreement, loan agreement, note,
mortgage, security agreement, lease of personal property, loan commitment
or other Contract or arrangement relating to the borrowing of funds, an
extension of credit or financing;
(g) any Contract or arrangement involving a partnership, joint
venture or other cooperative undertaking;
(h) any Contract or arrangement involving any restrictions with
respect to the geographical area of operations or scope or type of business
of the Telecommunication Subsidiaries;
(i) any power of attorney or agency agreement or arrangement with
any Person pursuant to which such Person is granted the authority to act
for or on behalf of any Telecommunication Subsidiary, or any
Telecommunication Subsidiary is granted the authority to act for or on
behalf of any Person;
(j) any Contract relating to the Computer System;
(k) any Contract for which the full performance thereof may extend
beyond one hundred twenty (120) days from the Execution Date and is not
terminable within ninety (90) days without payment of a termination fee or
similar payment in excess of $25,000;
(l) any Contract not made in the ordinary course of business which
is to be performed in whole or in part at or after the Execution Date;
(m) any Contract, whether or not fully performed, relating to any
acquisition or disposition of any Telecommunication Subsidiary or any
predecessor in interest of any of them, or any acquisition or disposition
of any subsidiary, division, line of business, or real property; and
(n) any Contract, including without limitation, all interconnect
agreements not specified above that is material to any Telecommunication
Subsidiary.
Except as set forth on Schedule 3.14(b), Seller has made available
----------------
to Buyer true, accurate and complete copies of each document set forth
therein and a written description of each oral arrangement so listed.
Except as set forth on Schedule 3.14(c), all such Contracts to which
----------------
Seller or a Telecommunication Subsidiary is a party have been entered into
by it in the ordinary course of business and are on terms that are no less
favorable to Seller or the Telecommunication Subsidiary than the terms
which could be obtained from an unrelated third party and, if cancelled at
any time, would not have a Telecommunication Subsidiary Material Adverse
Effect. Seller and the Telecommunication Subsidiaries believe that, except
for the Contracts listed on Schedule 3.14(a), there are no other
----------------
Contracts to which a Telecommunication Subsidiary is a party. Seller has
made available to Buyer true, accurate and complete copies of each form
which has been used in the businesses of the Telecommunication Subsidiaries
and is in effect with respect to any third party as of the Execution Date.
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3.15 Telecommunication Authorizations. Schedule 3.15 sets forth
-------------------------------- -------------
a true, accurate and complete list of all Telecommunication Authorizations
held by the Telecommunication Subsidiaries and all Telecommunication
Authorizations held by Seller and to be conveyed to the Telecommunication
Subsidiaries pursuant to the terms hereof. All such Telecommunication
Authorizations are validly held and in full force and effect and, except as
set forth on Schedule 3.23 with respect to Feist in Oklahoma, are not
-------------
subject to any conditions outside the ordinary course. Except for the
Telecommunication Authorizations set forth on Schedule 3.3(a), there are
---------------
no Telecommunication Authorizations, whether federal, state, local or
foreign, which are necessary for the lawful operation of the businesses of
the Telecommunication Subsidiaries.
3.16 Insurance.
---------
(a) Seller has heretofore made available to Buyer a true, accurate
and complete copy of all policies of fire, liability, workmen's
compensation, title and other forms of insurance owned, held by or
applicable to the Telecommunication Subsidiaries (and their respective
businesses and assets) for all periods prior to the Closing Date. All such
policies are in full force and effect, all premiums with respect thereto
covering all periods up to and including the Closing Date have been paid,
and no notice of cancellation or termination has been received with respect
to any such policy. Such policies are sufficient for compliance with (i)
all requirements of Law and (ii) all Contracts to which each
Telecommunication Subsidiary is a party, and are valid, outstanding and
enforceable policies. Such insurance policies provide types and amounts of
insurance customarily obtained by businesses similar to the business of the
Telecommunication Subsidiaries. Except as set forth on Schedule 3.16,
-------------
none of the Telecommunication Subsidiaries have been refused any insurance
with respect to its assets or operations, and its coverage has not been
limited by any insurance carrier to which it has applied for any such
insurance or with which it has carried insurance, since February 18, 1998.
(b) Schedule 3.16 sets forth a true, accurate and complete list
--------------
of all pending claims which have been made by any Telecommunication
Subsidiary since February 18, 1998 under any workmen's compensation,
general liability, property or other insurance policy applicable to the
Telecommunication Subsidiaries or any of their respective properties.
Except as set forth on Schedule 3.16, there are no pending or, to the
-------------
knowledge of Seller or the Telecommunication Subsidiaries, threatened
claims under any insurance policy.
3.17 Employee Benefit Plans and Employment Agreements.
------------------------------------------------
(a) General. Except as set forth on Schedule 3.17, neither
------- -------------
any Telecommunication Subsidiary nor any ERISA Section 414(b), (c)
Affiliate of any Telecommunication Subsidiary is a party to or participates
in or has any liability or contingent liability with respect to:
(i) any "employee welfare benefit plan" or "employee pension
benefit plan" as those terms are respectively defined in
sections 3(1) and 3(2) of ERISA, including a "multi-
employer plan" (as defined in section 3(37) of ERISA),
(ii) any retirement or deferred compensation plan, incentive
compensation plan, stock plan, unemployment compensation
plan, vacation pay, severance pay, bonus or benefit
arrangement, insurance or hospitalization program or any
other fringe benefit arrangements for any current or
former employee,
20
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director, consultant or agent, whether pursuant to
contract, arrangement, custom or informal understanding,
which does not constitute an "employee benefit plan" (as
defined in section 3(3) of ERISA), or
(iii) any employment agreement to which any Telecommunication
Subsidiary is a party.
(b) Plan Documents and Reports. A true, accurate and complete
--------------------------
copy of each of the plans, arrangements, and agreements set forth on
Schedule 3.17 (collectively, the "Benefit Plans"), and all Contracts
- -------------- --------------
relating thereto, or to the funding thereof, including all trust
agreements, insurance contracts, administration contracts, investment
management agreements, subscription and participation agreements, and
record keeping agreements, each as in effect on the date hereof, has been
made available to Buyer. In the case of any Benefit Plan which is not in
written form, Buyer has been supplied with a true, accurate and complete
description of such Benefit Plan, as in effect on the date hereof. A true,
accurate and complete copy of the most recent annual report and all
schedules and attachments thereto, summary plan description, and Internal
Revenue Service determination letter with respect to each such Benefit
Plan, to the extent applicable, has been made available to Buyer, and there
have been no material changes in the financial condition of the respective
Benefit Plans from that stated in the annual reports and actuarial reports
supplied.
(c) Compliance With Laws; Liabilities. As to all Benefit Plans,
---------------------------------
except as set forth on Schedule 3.17:
-------------
(i) All Benefit Plans comply and have been administered in
form and in operation in all material respects with all
requirements of Law applicable thereto, and there has
been no notice issued by any Governmental Authority
questioning or challenging such compliance.
(ii) All Benefit Plans that are employee pension benefit
plans (as defined in section 3(2) of ERISA) comply in
form and in operation with all applicable requirements
of sections 401(a) and 501(a) of the Code; there have
been no amendments to such Benefit Plans which are not
the subject of a determination letter issued with
respect thereto by the Internal Revenue Service; and to
the knowledge of Seller and the Telecommunication
Subsidiaries no event has occurred which will or could
give rise to disqualification of any such Benefit Plan
under such sections or to a tax under section 511 of the
Code.
(iii) None of the assets of any Benefit Plan is invested in
employer securities or employer real estate.
(iv) There have been no nonexempt "prohibited transactions"
(as described in section 406 of ERISA or section 4975 of
the Code) with respect to any Benefit Plan, and neither
any Telecommunication Subsidiary nor any ERISA Affiliate
of any Telecommunication Subsidiary has otherwise
engaged in any nonexempt prohibited transaction.
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(v) There has been no act or omission which has given rise
to or to the knowledge of Seller and the
Telecommunications Subsidiaries may give rise to fines,
penalties, taxes, or related charges under sections
502(c), 502(i), 502(l) or 4071 of ERISA or Chapters 43,
47, or 68 of the Code for which either any
Telecommunication Subsidiary or any ERISA Affiliate of
any Telecommunication Subsidiary may be liable.
(vi) None of the payments for any Telecommunication
Subsidiary Employee contemplated by the Benefit Plans
would, in the aggregate, constitute excess parachute
payments as defined in section 280G of the Code (without
regard to subsection (b)(4) thereof).
(vii) There are no actions, suits, or claims (other than
routine claims for benefits) pending or to knowledge of
Seller and the Telecommunication Subsidiaries threatened
involving such Benefit Plans or the assets thereof, and
to the Seller's and the Telecommunication Subsidiaries'
knowledge no facts exist which could give rise to any
such actions, suits, or claims (other than routine
claims for benefits).
(viii) No Benefit Plan is subject to Title IV of ERISA and no
Telecommunication Subsidiary has any existing,
threatened contingent, assessed or unassessed liability
with respect to any plan that is or has been subject to
Title IV of ERISA.
(ix) Each Benefit Plan which constitutes a "group health
plan" (as defined in section 607(1) of ERISA or section
4980B(g)(2) of the Code), including any Benefit Plans of
current and former affiliates which must be taken into
account under section 4980B and 414(t) of the Code or
section 601 of ERISA, have been operated in compliance
with applicable law in all material respects, including
the group health plan continuation coverage requirements
of section 4980B of the Code and section 601 of ERISA to
the extent such requirements are applicable.
(x) The Seller does not receive services from any
individuals who are leased employees within the meaning
of Code Section 414(n) and to the knowledge of Seller
and the Telecommunication Subsidiaries, none of the
persons performing services for Seller, any
Telecommunication Subsidiary, or any ERISA Affiliate has
been improperly classified as an independent contractor
or a leased employee, or as being exempt from the
payment of wages for overtime, other than such improper
classifications which, in the aggregate, would not have
a Telecommunication Subsidiary Material Adverse Effect.
(xi) Neither any Telecommunication Subsidiary nor any ERISA
Affiliate of any Telecommunication Subsidiary has any
liability or contingent liability under any Benefit Plan
or otherwise for providing post-retirement medical or
life insurance benefits, other than statutory liability
for providing group health
22
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<PAGE>
plan continuation coverage under Part 6 of Title I of
ERISA and section 4980B (or any predecessor section
thereto) of the Code.
(xii) There has been no act or omission that would impair the
right or ability of any Telecommunication Subsidiary and
any ERISA Affiliate of any Telecommunication Subsidiary
unilaterally to amend or terminate any Benefit Plan.
(d) Multi-employer Plan. Neither any Telecommunication
-------------------
Subsidiary nor any ERISA Affiliate of any Telecommunication Subsidiary
contributes to or has any liability or contingent liability to any multi-
employer plan.
(e) Self-insured Medical Benefits Claims. As of July 2, 1999,
------------------------------------
there were $17,859.00 of incurred but unpaid claims under all self-insured
medical benefit programs of the Telecommunications Subsidiaries.
(f) Severance Payments. Seller is solely liable for all amounts
------------------
payable (in cash, stock or property) under the Advanced Communications
Group, Inc. 1997 Stock Awards Plan (including without limitation any awards
under such plans pursuant to the employment contracts), the Advanced
Communications Group, Inc. Employee Stock Purchase Plan and the 1999
Retention Program, except for amounts payable by employees or other
participants, and the Telecommunications Subsidiaries have no liability
actual, potential or contingent under any of the foregoing arrangements.
3.18 Employment and Labor Matters.
----------------------------
(a) Seller has made available to Buyer the name, title, and annual
compensation at the then current rate of the Telecommunication Subsidiary
employees employed as of May 15, 1999. Except as set forth on Schedule
--------
3.18, since February 18, 1998, the Telecommunication Subsidiaries have and
- ----
currently are conducting their respective businesses in full compliance
with all Laws relating to employment and employment practices, terms and
conditions of employment, wages and hours and nondiscrimination in
employment.
(b) Except as set forth on Schedule 3.18, since February 18,
-------------
1998 there has been no labor strike, dispute, slow-down, work stoppage or
other labor difficulty actually pending to the knowledge of Seller or
Telecommunication Subsidiaries threatened against or involving any of the
Telecommunication Subsidiaries and the relationships of the
Telecommunication Subsidiaries with their respective employees are good. No
grievance or arbitration proceeding arising out of or under any collective
bargaining agreement between any of the Telecommunication Subsidiaries and
their respective employees is pending and, to the knowledge of Seller, no
claim therefor has been asserted. None of the employees of any of the
Telecommunication Subsidiaries is covered by any collective bargaining
agreement, no collective bargaining agreement is currently being negotiated
and, to the knowledge of Seller, no attempt is currently being made or
since February 18, 1998 has been made to organize any employees of any of
the Telecommunication Subsidiary to form or enter a labor union.
3.19 Capital Improvements. Schedule 3.19 sets forth a true,
-------------------- -------------
accurate and complete list of all of the capital improvements or purchases
or other capital expenditures since May 31, 1999 to
23
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which the Telecommunication Subsidiaries have committed or for which they
have contracted and which in any event have not been completed prior to the
Execution Date and the cost and expense reasonably estimated to complete
such work and purchases.
3.20 Taxes.
-----
(a) All Tax Returns required to be filed by or with respect to the
Telecommunication Subsidiaries through the Closing Date with respect to all
Taxes imposed by the United States or any foreign country or by any state,
municipality, subdivision or instrumentality of the United States or of any
foreign country or by any other tax authority, have been or will be
accurately prepared, and have been or will be duly and timely filed, and
all Taxes (including Taxes withheld from employees' salaries and all other
withholding Taxes and obligations and all deposits required to be made by
or with respect to the Telecommunication Subsidiaries with respect to such
withholding Taxes or otherwise), interest, penalties, assessments and/or
deficiencies due with respect to any taxable period or partial taxable
period of the Telecommunication Subsidiaries ending on or before the
Closing Date have been or will be timely paid, or to the extent not due and
payable as of the Closing Date, adequate provision for the payment thereof
has been or will be made on the Combined Management Reports or the books of
account of the Telecommunication Subsidiaries.
(b) Except as set forth in Schedule 3.20 and as of the Execution
-------------
Date: (i) none of the Telecommunication Subsidiaries has ever been
audited by the IRS or other taxing authority; (ii) none of the
Telecommunication Subsidiaries has been a member of an affiliated group (as
defined in Section 1504(a) of the Code) or filed or been included in a
combined, consolidated or unitary income tax return other than the
affiliated group of which Seller is the parent; (iii) none of the
Telecommunication Subsidiaries are required to make any material adjustment
under Section 481(a) of the Code by reason of a change or proposed change
in accounting method or otherwise; (iv) no material issue has been raised
by any taxing authority with respect to any of the Telecommunication
Subsidiaries in any audit or examination which, by application of similar
principles, could reasonably be expected to result in a proposed material
adjustment to the liability for Taxes for any period not so examined; (v)
none of the Telecommunication Subsidiaries are liable for the Taxes of any
taxpayer other than the Telecommunication Subsidiaries for any taxable
period beginning before the Closing Date; (vi) none of the
Telecommunication Subsidiaries are obligated to make, and as a result of
any event connected with the transactions contemplated by this Agreement
will not become obligated to make, any "excess parachute payment" within
the meaning of Section 280G of the Code, determined without regard to
subsection (b)(4) thereof; (vii) none of the Telecommunication Subsidiaries
are a party to any safe harbor lease within the meaning of section
168(f)(8) of the Code, as in effect prior to amendment by the Tax Equity
and Fiscal Responsibility Act of 1982; (viii) none of the assets of any of
the Telecommunication Subsidiaries secures any debt the interest on which
is tax exempt under Section 103 of the Code; (ix) none of the
Telecommunication Subsidiaries have entered into a transaction which is
being accounted for as an installment obligation under Section 453 of the
Code, nor are the Telecommunication Subsidiaries a party to an interest
rate swap, currency swap or other similar transaction; (x) no items of
income attributable to transactions occurring on or before the close of the
last preceding taxable year of any of the Telecommunication Subsidiaries
will be required to be included in taxable income by any of the
Telecommunication Subsidiaries in a subsequent taxable year by reason of
any of the Telecommunication Subsidiaries reporting income on the cash
method of accounting, the completed contract method or the percentage of
completion-capitalized cost method; (xi) the Seller is not a
24
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"foreign person" as defined in Section 1445(f)(3) of the Code; and (xii)
none of the Telecommunication Subsidiaries intend to file state income Tax
returns in any state.
3.21 No Defaults or Violations. Except as set forth on Schedule 3.21:
------------------------- -------------
(a) None of the Telecommunication Subsidiaries has breached any
material provision of, nor is it in default under the terms of, any
Contract to which it is a party or under which it has any rights or by
which it is bound, and, to the knowledge of Seller or the Telecommunication
Subsidiaries, no other party to any such Contract has breached such
Contract or is in default thereunder.
(b) Except as set forth on Schedules 3.1, 3.18(a) and 3.23, the
-------------------------------
Telecommunication Subsidiaries, all of their respective assets (including
without limitation the Telecommunication Authorizations), and the Owned
Property, since its ownership by Valu-Line and, to the knowledge of the
Seller and the Telecommunication Subsidiaries, the Leased Property are in
compliance with, and no violation exists under, any and all Laws applicable
to the Telecommunication Subsidiaries and to such properties and assets.
(c) No notice from any Governmental Authority has been received by
any Telecommunication Subsidiary claiming any violation of any Law
(including any building, zoning or other ordinance) or requiring any work,
construction or expenditure.
3.22 Environmental Matters. Except as set forth on Schedule 3.22:
--------------------- -------------
(a) the business and operations of the Telecommunication
Subsidiaries are in full compliance with all applicable Environmental Laws,
and, to the knowledge of Seller, no condition exists or event has occurred
which, with or without notice or the passage of time or both, would
constitute a violation of, or give rise to any Lien under, any applicable
Environmental Law;
(b) the Telecommunication Subsidiaries are in possession of all
Environmental Permits required for the conduct or operation of their
respective businesses (or any part thereof), and are in full compliance
with all of the requirements and limitations included in such Environmental
Permits;
(c) Seller and Telecommunication Subsidiaries have not used or
stored any Hazardous Substances in, on, or at any of the properties or
facilities of the Telecommunication Subsidiaries under their control, and
Seller and the Telecommunication Subsidiaries have not contracted for the
use of Hazardous Substances in the construction or repair of, or any
alterations or additions to, any of the properties or facilities of the
Telecommunications Subsidiaries, except in each case for inventories of
substances set forth on Schedule 3.22 which are used or are to be used in
-------------
the ordinary course of business (which inventories have been stored and
used in accordance with all applicable Environmental Laws and Environmental
Permits); provided, however, that this representation shall be deemed
--------- -------
to be made with respect to properties and facilities constituting the
Leased Property only to the knowledge of Seller and the Telecommunication
Subsidiaries.
(d) none of Seller or the Telecommunication Subsidiaries has
received any notice from any Governmental Authority or any other Person
that any aspect of the business, operations or facilities of any
Telecommunication Subsidiary is in violation of any Environmental Law or
Environmental
25
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<PAGE>
Permit, or that any of them is responsible (or potentially responsible) for
the cleanup or remediation of any Hazardous Substance at any location;
(e) none of the Telecommunication Subsidiaries have deposited or
incorporated any Hazardous Substances into, on, beneath, or adjacent to any
property except as may be permitted by law;
(f) none of the Telecommunication Subsidiaries are the subject of
any pending or, to the knowledge of Seller or the Telecommunication
Subsidiaries, threatened litigation or proceedings in any forum, judicial
or administrative, involving a demand for damages, injunctive relief,
penalties, or other potential liability with respect to violations of any
applicable Environmental Law;
(g) the Telecommunication Subsidiaries have timely filed all
reports and notifications required to be filed with respect to all of their
properties and facilities and have generated and maintained all required
records and data under all applicable Environmental Laws; and
(h) to the knowledge of Seller and the Telecommunication
Subsidiaries, no condition has existed or event has occurred with respect
to any property that was at any time owned or leased, or any direct or
indirect subsidiary that was at any time owned, by any Telecommunication
Subsidiary, which property or subsidiary has been sold, transferred or
disposed or for which lease has terminated, that in any case could, with or
without notice, passage of time or both, give rise to any present or future
liability of any Telecommunications Subsidiary pursuant to any
Environmental Law.
3.23 Litigation.
----------
(a) Except as set forth on Schedule 3.23, there are no actions,
-------------
suits, arbitrations, regulatory proceedings or other litigation,
proceedings or governmental investigations pending or, to the knowledge of
Seller, threatened against any Telecommunication Subsidiary or any of their
respective officers, directors, employees, agents or stockholders thereof
in their capacity as such any of the properties or businesses of the
Telecommunication Subsidiaries, and Seller is not aware of any facts or
circumstances which may give rise to any of the foregoing. Except as set
forth on Schedule 3.23, all of the proceedings pending or known by Seller
-------------
to be threatened against any Telecommunication Subsidiary are covered by
insurance policies (or other indemnification agreements with third parties)
and are being defended by the insurers (or such third parties), subject to
such deductibles as are set forth on such Schedule. Except as set forth on
Schedule 3.23, no Telecommunication Subsidiary is subject to any order,
- -------------
judgement, decree, injunction, stipulation or consent order of or with any
court or other Governmental Authority. No Telecommunication Subsidiary has
entered into any agreement to settle or compromise any proceeding pending
or threatened against it which has involved any obligation other than the
payment of money or for which any Telecommunication Subsidiary has any
continuing obligation.
(b) There are no claims, actions, suits, proceedings or, to the
knowledge of Seller or the Telecommunication Subsidiaries, investigations
pending or threatened by or against Seller or any Telecommunication
Subsidiary with respect to this Agreement or the Related Agreements, or in
connection with the transactions contemplated hereby or thereby, and Seller
has no reason to believe there is a valid basis for any such claim, action,
suit, proceeding, or investigation.
26
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3.24 Bank Accounts. Schedule 3.24 sets forth a true, accurate
------------- -------------
and complete list of the names and locations of each bank or other
financial institution at which any of the Telecommunication Subsidiaries
have an account (giving the account numbers) or safe deposit box and the
names of all Persons authorized to draw thereon or have access thereto, and
the names of all Persons, if any, now holding powers of attorney or
comparable delegation of authority from any Telecommunication Subsidiary.
3.25 Customers and Suppliers.
-----------------------
(a) Schedule 3.25 sets forth the one hundred (100) largest
-------------
customers of each of the Telecommunication Subsidiaries, in terms of
balances due during the most recent completed month among which are
included the ten (10) largest customers of the Telecommunication
Subsidiaries, (collectively, the "Major Customers"); and
(b) Schedule 3.25 sets forth the fifty largest suppliers of the
-------------
Telecommunication Subsidiaries, in terms of purchases during the most
recently completed month (collectively, the "Major Suppliers").
From May 31, 1999 through the Execution Date, except as set forth on
Schedule 3.25, there has not been any Telecommunication Subsidiary
- -------------
Material Adverse Change in the business relationship, and there has been no
material dispute, between any Telecommunication Subsidiary and any Major
Customer or Major Supplier, and, to the knowledge of Seller, there are no
indications that any Major Customer or Major Supplier intends to reduce its
purchases from, or sales to, respectively, any Telecommunication
Subsidiary. To the knowledge of Seller and the Telecommunication
Subsidiaries, there have been no material changes to the lists contained on
Schedule 3.25 since the date as of which they speak.
- -------------
3.26 Claims Against Officers and Directors. Except as set forth
-------------------------------------
on Schedule 3.23, there are no pending or, to the knowledge of Seller or
-------------
the Telecommunication Subsidiaries, threatened claims against any director,
officer, employee or agent of any Telecommunication Subsidiary or any other
Person which could give rise to any claim for indemnification against any
Telecommunication Subsidiary.
3.27 No Other Agreement. Seller has no Contract or arrangement
------------------
with respect to the sale or other disposition of Telecommunication
Subsidiaries Shares, except as set forth in this Agreement.
3.28 Brokers. Neither Buyer nor any Affiliate of Buyer has or
-------
shall have any liability or otherwise suffer or incur any Loss as a result
of or in connection with any brokerage or finder's fee or other commission
of any Person retained by Seller or the Telecommunication Subsidiaries in
connection with any of the transactions contemplated by this Agreement.
3.29 Accuracy of Statements. Neither this Agreement nor any
----------------------
schedule, exhibit, statement, list, document, certificate or other
information furnished or to be furnished by or on behalf of Seller or the
Telecommunication Subsidiaries to Buyer or any representative or Affiliate
of Buyer in connection with this Agreement or any of the transactions
contemplated hereby contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact
27
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<PAGE>
necessary to make the statements contained herein or therein, in light of
the circumstances in which they are made, not misleading.
3.30 Due Diligence Materials. Except as set forth in
-----------------------
Schedule 3.30, Seller has made available to Buyer or its representatives,
- -------------
in accordance with the terms of Section 5.4, all documents of the character
and type reasonably requested by Buyer in connection with its "due
diligence" investigation of the Telecommunication Subsidiaries.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller, as of the date of this
Agreement and as of the Closing Date (as if such representations and
warranties were remade on the Closing Date), as follows:
4.1 Due Incorporation. Buyer is a corporation duly organized,
-----------------
validly existing and in good standing under the laws of the State of
Delaware, with all requisite power and authority to own, lease and operate
its properties and to carry on its business as they are now being owned,
leased, operated and conducted.
4.2 Due Authorization. Buyer has full power and authority to
-----------------
enter into this Agreement and the Related Agreements and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance by Buyer of this Agreement and Related Agreements have been
duly and validly approved by the board of directors of Buyer and no other
actions or proceedings on the part of Buyer are necessary to authorize this
Agreement, the Related Agreements and the transactions contemplated hereby
and thereby. Buyer has duly and validly executed and delivered this
Agreement and has duly and validly executed and delivered (or prior to or
at the Closing will duly and validly execute and deliver) the Related
Agreements. This Agreement and the Related Agreements constitute legal,
valid and binding obligations of Buyer, in each case enforceable in
accordance with their respective terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency, moratorium, reorganization
or similar laws in effect which affect the enforcement of creditors' rights
generally and by equitable limitations on the availability of specific
remedies.
4.3 Consents and Approvals; Authority Relative to This
--------------------------------------------------
Agreement.
- ---------
(a) Except as set forth on Schedule 4.3(a), no Consent is
---------------
necessary in connection with the execution, delivery and performance by
Buyer of this Agreement and the Related Agreements and the consummation of
the transactions contemplated hereby and thereby.
(b) Except as set forth on Schedule 4.3(b), the execution,
---------------
delivery and performance by Buyer of this Agreement and its Related
Agreements do not and will not, and the consummation of the transactions
contemplated hereby and thereby does not and will not, (i) violate any Law
applicable to Buyer or any of its properties or assets; or (ii) violate or
conflict with any provision of the certificate of incorporation, charter,
bylaws or similar organizational instruments of Buyer.
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4.4 Investment Intent. Buyer is acquiring the Telecommunication
-----------------
Subsidiary Shares for its own account and not with a view to their
distribution within the meaning of Section 2(11) of the Securities Act of
1933 and regulations and rules issued pursuant to that Act.
4.5 Foreign Carrier Affiliation. Buyer is not affiliated with a
---------------------------
foreign carrier that has been classified as a dominant carrier by the FCC
as those terms are defined in part 63 of the FCC's rules.
4.6 Buyer Capitalization. Buyer is capitalized in the amount of
--------------------
Seven Hundred Fifty Thousand and No/100s Dollars ($750,000.00) as
represented by a demand note or notes payable to Buyer.
4.7 Accuracy of Statements. Neither Article IV of this
---------------------- ----------
Agreement nor any schedule, exhibit, certificate or other information
furnished or to be furnished by or on behalf of Buyer or any of its
Affiliates to Seller or any representative or Affiliate of Seller in
connection with this Agreement or any of the transactions contemplated
hereby contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the
statements contained herein or therein, in light of the circumstances in
which they are made, not misleading
ARTICLE V.
COVENANTS
5.1 Implementing Agreement. Subject to the terms and conditions
----------------------
hereof, each party hereto shall take all action required of it to fulfill
its obligations under the terms of this Agreement and shall otherwise use
their best efforts to facilitate the consummation of the transactions
contemplated hereby. Seller agrees that unless this Agreement is terminated
in accordance with the provisions of Section 9.1, Seller will not sell the
Shares to any Person other than Buyer (or an Affiliate of Buyer) and will
not take any other action which would have the effect of preventing or
disabling Seller's performance of its obligations under this Agreement.
5.2 Seller Telecommunication Assets and Liabilities Conveyance
-----------------------------------------------------------
And Assumption. Prior to the Closing, Seller shall use its reasonable best
- ---------------
efforts to assign, transfer or convey the Seller Telecommunication Assets
(each one and all collectively referred to as "Conveyance") and shall
assign, transfer and convey the Seller Telecommunication Liabilities,
including, but not limited to those listed on Schedule 5.2, as may change
------------
in the ordinary course of business, to, in Seller's discretion after
consultation with Buyer, any one or all of the Telecommunication
Subsidiaries, respectively, pursuant to a Bill of Sale, Assignment and
Assumption Agreement in form reasonably acceptable to Buyer.
5.3 Telecommunication Subsidiary Assumption of Liability. Prior
----------------------------------------------------
to the Closing, the Telecommunication Subsidiaries shall assume those
Seller Telecommunication Liabilities assigned, transferred or conveyed to
each of them, jointly or severally, as determined in Seller's discretion
after consultation with Buyer, including, but not limited to those listed
on Schedule 5.2, as may change in the ordinary course of business.
------------
29
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5.4 Access to Information and Facilities.
------------------------------------
(a) From and after the date of this Agreement or such earlier time
as Buyer and Seller shall have mutually agreed through the Closing Date,
Seller shall, and shall cause the Telecommunication Subsidiaries to, give
Buyer and Buyer's representatives and advisors reasonable access during
normal business hours to all of the facilities, properties, books,
Contracts, commitments and records of Seller and the Telecommunication
Subsidiaries and shall make the officers and employees of Seller and the
Telecommunication Subsidiaries available to Buyer and its representatives
as Buyer and its representatives shall from time to time request. Buyer
and its representatives will be furnished with any and all information
concerning the Telecommunication Subsidiaries which Buyer or its
representatives reasonably request. Without limiting the foregoing, upon
reasonable notice to Seller, Seller shall, and shall cause the
Telecommunication Subsidiaries to, give Buyer and its representatives and
advisors reasonable access to all Company Properties during normal business
hours to perform, at Buyer's sole expense, such environmental and other
tests as Buyer or its representatives may reasonably determine (the "Buyer
Tests"). Buyer shall defend, indemnify and hold the Seller Indemnified
Parties harmless from any and all Losses, including damage to property and
injury, including death, to employees of Seller, Buyer or third parties, to
the extent attributable to actions taken by or on behalf of Buyer in taking
the Buyer Tests.
(b) Buyer will not, will cause its Affiliates not to, and will
instruct its and its Affiliates' agents and financing sources not to
disclose any Seller Confidential Information to any Person other than
Buyer's employees, agents and financing sources on a "need to know" basis
without the prior consent of the Seller, unless compelled to disclose any
such Seller Confidential Information by judicial or administrative process
or, in the opinion of Buyer's counsel by other requirements of law.
(c) Seller will not, will cause its Affiliates to not, and will
instruct its and its Affiliates' agents and financing sources to not
disclose any Buyer Confidential Information to any Person other than
Seller's or the Telecommunication Subsidiaries' employees, agents and
financing sources without the prior consent of Buyer, unless compelled to
disclose any such Buyer Confidential Information by judicial or
administrative process or, in the opinion of Seller's counsel, by other
requirements of law.
5.5 Consents and Approvals.
----------------------
(a) As soon as practicable after the execution of this Agreement,
Seller shall use its best efforts, and shall cause the Telecommunication
Subsidiaries to use their respective best efforts, to obtain all consents,
approvals, certificates and other documents required in connection with the
performance by any such parties of this Agreement and their respective
Related Agreements and the consummation of the transactions contemplated
hereby and thereby, including all consents and approvals by each party to
any of the Contracts referred to in Schedule 3.14. Seller shall, and
-------------
shall cause the Telecommunication Subsidiaries to, make all filings,
applications, statements and reports to all Governmental Authorities and
other Persons which are required to be made prior to the Closing Date by or
on behalf of Seller, the Telecommunication Subsidiaries or any of their
respective Affiliates pursuant to any applicable Law or Contract in
connection with this Agreement or any of their respective Related
Agreements and the transactions contemplated hereby and thereby, including
prompt filings under the HSR Act and expedited submission of all materials
required by any Governmental Authority in connection with such filings.
30
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<PAGE>
(b) As soon as practicable after execution of this Agreement Buyer
shall, where appropriate, cooperate with Seller and the Telecommunication
Subsidiaries in the making of and make all filings, applications,
statements and reports to all Governmental Authorities and other Persons
which are required to be made prior to the Closing Date by or on behalf of
Buyer or any of its Affiliates pursuant to any applicable Law or Consent in
connection with this Agreement or any Related Agreement and the
transactions contemplated hereby and thereby, including prompt filings
under the HSR Act and expedited submission of all materials required by any
Governmental Authority in connection with such filings.
(c) During the period beginning on the Closing Date and ending
sixty (60) days after the Closing Date, Buyer may not, without the consent
of Seller, and Seller may not, without the consent of the Buyer, withdraw
any pending application to any Governmental Authority for Consent to
approval of the transfer-of-control of the Telecommunication Subsidiary
holding any Telecommunication Authorization or the assignment of any
Telecommunication Authorization to the Buyer or a Telecommunication
Subsidiary, as the case may be, or terminate any Telecommunication
Authorization that is the subject of any such pending application for
Consent.
5.6 Resignation of Officers and Directors. Seller shall cause
-------------------------------------
each officer and member of the board of directors of Telecommunication
Subsidiaries, if so requested by Buyer, to tender his or her resignation
from such position effective as of the Closing. Seller hereby assumes all
liability for and shall make payment of all amounts payable arising out of
the resignation or removal of the officers and members of the board of
directors of the Telecommunication Subsidiaries called for in this Section
5.6
5.7 Use of Name. From and after the Closing Date, neither
-----------
Seller nor any of its Affiliates will directly or indirectly use in any
manner any trade name, trademark, service mark or logo used by the
Telecommunication Subsidiaries or any word or logo that is similar in sound
or appearance. Prior to Closing, Seller's Telecommunication Business
related trademarks listed on Schedule 5.7 shall be transferred to a
------------
Telecommunication Subsidiary to be mutually agreed upon by Seller and
Buyer.
5.8 Preservation of Business.
------------------------
(a) Until the Closing, Seller shall cause the Telecommunication
Subsidiaries to incur and pay expenses and otherwise operate only in the
usual, regular and ordinary course and in a manner consistent with past
practice, and Seller shall use commercially reasonable efforts to (i)
preserve intact the present business organization and personnel of the
Telecommunication Subsidiaries, (ii) preserve the good will and
advantageous relationships of the Telecommunication Subsidiaries with
customers, suppliers, independent contractors, employees and other Persons
material to the operation of their respective businesses, (iii) prevent any
event which could have a Telecommunication Subsidiary Material Adverse
Effect, and (iv) not permit any action or omission which would cause any of
the representations or warranties of Seller contained herein to become
inaccurate or any of the covenants of Seller to be breached.
(b) Without limiting the generality of clause (a), until the
----------
Closing, except as set forth on Schedule 5.8, or with the prior written
------------
consent of Buyer, Seller will not permit any Telecommunication Subsidiary
to:
31
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<PAGE>
(i) incur any obligation or enter into any Contract which either
(x) requires a payment by any party in excess of, or a series
of payments which in the aggregate exceed, $25,000 or provides
for the delivery of goods or performance of services, or any
combination thereof, having a value in excess of $25,000, or
(y) has a term of, or requires the performance of any
obligations by any Telecommunication Subsidiaries over a
period in excess of six months and is not terminable within
ninety (90) days without payment of a termination fee or
similar payment in excess of $25,000,
(ii) take any action, or enter into or authorize any Contract or
transaction, other than in the ordinary course of business and
consistent with past practice, including, without limitation,
the licensing of products or software to third parties.
(iii) do any act or omit to do any act, or permit any act or
omission to act, which would cause a material breach of any of
the Contracts set forth on Schedule 3.14 or any other
-------------
Contract or obligation the breach of which could have a
Telecommunication Subsidiary Material Adverse Effect,
(iv) sell, lease, abandon, transfer, convey, assign or otherwise
dispose of any of its assets or properties with a value in
excess of $25,000, except sales of inventory in the ordinary
course of business and consistent with past practice,
(v) suffer or permit the creation of any Lien over any of its
assets or properties other than in the ordinary course of
business and consistent with past practice,
(vi) waive, release or cancel any claims against third parties or
debts owing to it in excess of $25,000, or any rights which
have a value in excess of $25,000,
(vii) make any changes in its accounting systems, policies,
principles or practices,
(viii) enter into, authorize or permit any transaction with Seller or
any Affiliate of Seller,
(ix) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance
or granting of options, warrants, convertible or exchangeable
securities, commitments, subscriptions, rights to purchase or
otherwise) any shares of capital stock or any other securities
of any Telecommunication Subsidiary, or amend any of the terms
of any such capital stock or other securities,
(x) split, combine, or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination
thereof) in respect of its capital stock, or redeem or
otherwise acquire any capital stock or other securities of any
Telecommunication Subsidiary,
32
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<PAGE>
(xi) make any borrowing, incur any debt (other than trade payables
in the ordinary course of business and consistent with past
practice), or assume, guarantee, endorse (except for the
negotiation or collection of negotiable instruments in the
ordinary course of business and consistent with past practice)
or otherwise become liable (whether directly, contingently or
otherwise) for the obligations of any other Person, or make
any payment or repayment in respect of any indebtedness (other
than trade payables and accrued expenses in the ordinary
course of business and consistent with past practice),
(xii) make any loans, advances or capital contributions to, or
investments in, any other Person,
(xiii) enter into, adopt, amend or terminate any bonus, profit
sharing, compensation, termination, stock option, stock
appreciation right, restricted stock, performance unit, stock
equivalent, stock purchase agreement, pension, retirement,
deferred compensation, employment, severance or other employee
benefit agreements, trusts, plans, funds or other arrangements
for the benefit or welfare of any director, officer,
consultant or employee, or increase in any manner the
compensation or fringe benefits of any director, officer,
consultant or employee or pay any benefit not required by any
existing plan and arrangement or enter into any contract,
agreement, commitment or arrangement to do any of the
foregoing,
(xiv) enter into or amend any employment or severance agreement
which increases in any manner the salary, wages, bonus,
commission, or other compensation or benefits of any director
or officer of any Telecommunication Subsidiary,
(xv) increase in any manner the salary, wage, bonus, commission or
other compensation or benefits of any director or officer of
any Telecommunication Subsidiary,
(xvi) pay any benefit not required by any plan and arrangement as in
effect as of the date hereof (including, without limitation,
the granting of stock options, stock appreciation rights or
performance units),
(xvii) except for capital expenditures contemplated by clause (xviii),
--------------
acquire, lease or encumber any assets outside the ordinary
course of business or any assets which are material to any
Telecommunication Subsidiary,
(xviii) authorize or make any capital expenditures which individually
or in the aggregate are in excess of $50,000,
(xix) make any Tax election (other than routine elections made on
Tax Returns filed in the ordinary course of business
consistent with past practice that will not, in the aggregate,
have a Telecommunication Subsidiary Material Adverse Effect on
the taxable income or loss of the Telecommunication
Subsidiaries for any taxable year ending after the Closing
Date) or settle or
33
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compromise any federal, state, local or foreign income Tax
liability, or waive or extend the statute of limitations in
respect of any such Taxes,
(xx) pay any amount, perform any obligation or agree to pay any
amount or perform any obligation, in settlement or compromise
of any suits or claims of liability against any of the
Telecommunication Subsidiaries, or any of their respective
directors, officers, employees or agents,
(xxi) terminate, rescind, modify, amend or otherwise alter or change
any of the terms or provisions of any Contract, pay any amount
in excess of $25,000 not required by Law or by any Contract,
or reduce, discount, waive or forego any material payment or
right thereunder, or agree to any compromise or settlement
with respect thereto, or
(xxii) write up any accounts receivable or other asset previously
written down or written off.
(c) Without limiting the generality of clause (a), until the
Closing, except as set forth on Schedule 5.8, Seller shall cause the
------------
Telecommunication Subsidiaries to:
(i) maintain their respective books, accounts and records in the
usual, regular and ordinary manner, and on a basis consistent
with the respective Telecommunication Subsidiaries' past
practices,
(ii) continue to carry their respective existing insurance through
the Closing Date, and shall not allow any breach, default,
termination or cancellation of such insurance policies or
agreements to occur or exist, and
(iii) duly comply with all Laws applicable to their respective
businesses and operations.
5.9 Supplemental Information. From time to time prior to the
------------------------
Closing, Seller will promptly disclose in writing to Buyer any matter
hereafter arising which, if existing, occurring or known at the date of
this Agreement would have been required to be disclosed to Buyer or which
would render inaccurate any of the representations, warranties or
statements set forth in Article III hereof. No information provided to
-----------
Buyer pursuant to this Section shall be deemed to cure any breach of any
representation, warranty or covenant made in this Agreement or in any
Related Agreement.
5.10 Exclusivity. Until Closing or until this Agreement is
-----------
terminated in accordance with the provisions of Section 9.1, none of Seller
or any of the Telecommunication Subsidiaries or any of their respective
directors, officers, employees, representatives, agents or Affiliates
shall, directly or indirectly, solicit, initiate, encourage, respond
favourably to, permit or condone inquires or proposals from, or provide any
confidential information to, or participate in any discussions or
negotiations with, any Person (other than Buyer, its directors, officers,
employees, representatives and agents) concerning (a) any merger, sale of
assets not in the ordinary course of business, acquisition, business
combination, change of control or other similar transaction involving the
Telecommunication Subsidiaries, or (b) any purchase or other acquisition by
any Person of any of the Telecommunication Subsidiary Shares, or (c) any
sale or issuance by any Telecommunication
34
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Subsidiary of any shares of its capital stock. Until Closing or until this
Agreement is terminated in accordance with the provisions of Section 9.1,
Seller will promptly advise Buyer of, and communicate to Buyer the terms
and conditions of (and the identity of the Person making), any such inquiry
or proposal received.
5.11 Interim Financial Statements. Seller agrees to provide to
----------------------------
Buyer (a) as soon as practicable after the end of each calendar month
Interim Financial Statements, consisting of a balance sheet as of the end
of such month for each of the Telecommunication Subsidiaries and a
statement of operations of the Telecommunication Subsidiaries for that
month and for the portion of the year then ended and (b) as soon as
practicable after the end of each week prior to the Closing Date, the
weekly internal management financial and operational reports with respect
to the Telecommunication Subsidiaries prepared in accordance with past
practice.
5.12 Tax Indemnity.
-------------
(a) For purposes of this Agreement, "Tax Indemnification Period"
means the period (including all prior taxable years) or partial period
ending on or before the Closing Date. For any taxable year of the
Telecommunication Subsidiaries that does not end on, and would otherwise
extend beyond, the Closing Date, there shall be a deemed short taxable year
ending on and including such date and a second deemed short taxable year
beginning on and including the day after such date. The allocation on
returns of taxes measured by income between deemed short taxable years
shall be consistent with Federal income tax returns (adjusted to eliminate
the effects of the Election described in Section 5.16) and in all other
cases shall be pro rata except for items of income or loss arising from an
extraordinary event, which shall be reflected in the period in which such
event occurred.
(b) Seller agrees to indemnify the Buyer Indemnified Parties
against, and agrees to hold each of them harmless from, any and all Losses
incurred or suffered by them relating to or arising out of or in connection
with any and all Taxes that have become due and payable during, or which
have accrued with respect to the Telecommunication Subsidiaries for, any
period included in the Tax Indemnification Period that have not been paid
prior to the Closing Date, including (i) any Taxes imposed as a result of
each Election (as such term is described in Section 5.16 or reserved on
the Preliminary Statement and (ii) Taxes of a taxpayer other than the
Telecommunications Subsidiaries. Any Taxes attributable to the operations
of the Telecommunication Subsidiaries payable as a result of an audit of
any Tax Return filed for any taxable year falling with the Tax
Indemnification Period shall be deemed to have accrued in the period to
which such Taxes are attributable.
(c) Buyer agrees to indemnify the Seller Indemnified Parties
against, and agrees to hold each of them harmless from, any and all Losses
incurred or suffered by them relating to or arising out of or in connection
with any and all Taxes that have become due and payable during, or which
have accrued with respect to the Telecommunication Subsidiaries for, any
period after the Tax Indemnification Period. Any Taxes attributable to the
operations of the Telecommunication Subsidiaries payable as a result of an
audit of any Tax Return shall be deemed to have accrued in the period to
which such Taxes are attributable.
35
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5.13 Inter-company Agreements. Effective as of the Closing,
------------------------
without any cost to the Telecommunication Subsidiary, Seller shall cause
its Affiliates and the Telecommunication Subsidiaries to terminate,
rescind, cancel and render void and of no effect any and all Contracts
listed on Schedule 5.13 between the Telecommunication Subsidiaries on the
-------------
one hand and any Seller or any of its Affiliates (other than the
Telecommunication Subsidiaries) on the other hand; provided that this
--------
Section 5.13 shall not apply to liabilities reflected on the Closing Date
Statement or to this Agreement or any Related Agreement.
5.14 Excluded Liabilities. Prior to the Closing Date, Seller
--------------------
shall pay, discharge or assume, or provide the Telecommunication
Subsidiaries with sufficient funds to pay and discharge in full, all
indebtedness of the Telecommunication Subsidiaries for borrowed money,
except as set forth in Schedule 5.14.
-------------
5.15 Tax Matters. Seller and Buyer may reasonably request (the
-----------
"Requesting Party") from the other (the "Providing Party"), and the
Providing Party shall make available to the Requesting Party, at the
expense of the Requesting Party, such records as the Requesting Party may
reasonably need for the preparation of any Tax Returns or other similar
reports or forms required to be filed by the Requesting Party and such
records as Requesting Party may require for the defence of any audit,
examination, administrative appeal or litigation of any such Tax Return or
other similar report or form.
5.16 338(h)(10) election.
-------------------
(a) At the option of the Buyer, Seller and Buyer shall jointly
make the elections provided for by Sections 338(g) and 338(h)(10) of the
Code and Treasury Regulation Section 1.338(h)(10)-1 (and any comparable
election under state or local tax law) with respect to the purchase of the
Shares of any one or more Telecommunication Subsidiaries by Buyer (each, an
"Election"). At the Closing, Seller shall deliver Internal Revenue
--------
Service Form 8023 to Buyer, with Sections 3a through 8h and 11a through 11g
completed and signed by Seller for each Telecommunication Subsidiary with
respect to which an Election will be made, and, if Buyer determines after
the Closing to make an Election with respect to a Telecommunication
Subsidiary, Seller shall cooperate with Buyer, at Buyer's expense, in
preparing such items. Also, Seller and Buyer shall cooperate with each
other to take all actions necessary and appropriate (including filing such
additional forms, returns, elections, schedules and other documents) as may
be required to effect and preserve a timely Election in accordance with the
provisions of Treasury Regulation Section 1.338(h)(10)-1 (or any comparable
provisions of state or local tax law) or any successor provisions. Seller
and Buyer shall report the purchase by Buyer of the applicable
Telecommunication Subsidiary Shares pursuant to this Agreement consistent
with the Elections (and any comparable elections under state or local tax
laws) and shall take no position inconsistent therewith in any Tax Return,
any proceeding before any taxing authority or otherwise.
(b) In connection with the Elections, Buyer shall (i) determine
the "Modified Aggregate Deemed Sale Price" of the Stock of each
Telecommunication Subsidiary with respect to which an Election is made
(within the meaning of, and in accordance with, Treasury Regulation Section
1.338(h)(10)-1(f)) and (ii) determine the proper allocations (the
"Allocations") of the "Modified Aggregate Deemed Sale Price" of each
Telecommunication Subsidiary with respect to which an Election is made
among the assets of such Telecommunication Subsidiary (in accordance with
36
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<PAGE>
Section 338(b)(5) of the Code and the Treasury Regulations promulgated
thereunder). Seller and Buyer shall (x) be bound by such determinations
and such Allocations for purposes of determining any Taxes, (y) prepare and
file their Tax Returns on a basis consistent with such determinations and
such Allocations and (z) take no position inconsistent with such
determinations and Allocations on any applicable Tax Return. In the event
that any such Allocation is disputed by any taxing authority, the party
receiving notice of the dispute shall promptly notify the other party
hereto concerning resolution of the dispute. Any liability for Taxes
arising from the Elections shall be borne by Seller, including any Taxes
imposed on the Telecommunication Subsidiaries as a result of such Election.
5.17 Employment and Employee Benefit Matters
---------------------------------------
(a) As of the Closing Date Buyer shall have in place employee
benefits plans, policies, and procedures substantially similar to those
that are available to the employees of the Telecommunication Subsidiaries
that are listed on Schedule 3.17(a)(i), provided that this provision
-------------------
shall in no way limit Buyer's ability to amend or terminate any such plans.
(b) Within twenty (20) days after the Closing Date, Seller shall
cause all contributions on behalf of (i) all employees of the
Telecommunication Subsidiaries and (ii) those Seller employees who have
accepted an offer of employment with Buyer before the Closing Date
(collectively, the "Affected Employees") to be made to the Advanced
Communications Group, Inc. Retirement Savings Plan ("Seller's 401(k) Plan")
for payroll periods ending prior to the Closing Date. Effective as of the
Closing Date, Buyer shall establish a successor defined contribution plan
(as defined in section 3(34) of ERISA) with a cash or deferred arrangement
to Seller's 401(k) Plan, which plan shall be referred to as "Buyer's 401(k)
Plan". Buyer shall cause Buyer's 401(k) Plan to recognize the past service
of Affected Employees for purposes of eligibility and vesting to the extent
such service was recognized for such purposes under Seller's 401(k) Plan
immediately prior to the Closing Date. Effective as of the Closing Date,
Seller shall cause the trustees of Seller's 401(k) Plan to spin-off and to
transfer from Seller's 401(k) Plan to Buyer's 401(k) Plan the assets and
liabilities under Seller's 401(k) Plan attributable to Affected Employees
including any promissory notes evidencing participant loans outstanding
under the terms of Seller's 401(k) Plan to any Affected Employee. Buyer
shall cause Buyer's 401(k) Plan to accept such a transfer of assets and
liabilities under Seller's 401(k) Plan attributable to Affected Employers,
and to contain all provisions necessary to assure that the requirements of
section 411(d)(6) of the Code are satisfied upon the transfer of assets and
liabilities to Buyer's 401(k) Plan from Seller's 401(k) Plan. The transfer
of assets and liabilities from Seller's 401(k) Plan to Buyer's 401(k) Plan
shall comply in all respects with section 414(l) of the Code and Seller and
Buyer shall use their reasonable best efforts to accomplish the transfer of
assets and liabilities as described above, including the filing of any
necessary forms with any governmental agency.
(c) Seller shall retain sole liability and responsibility for
payment (and all expenses associated therewith) of all amounts (whether
cash, stock or other property) payable to employees of the
Telecommunications Subsidiaries under all plans sponsored by Advanced
Communications Group, Inc., including, but not limited to, the Advanced
Communications Group, Inc. Employee Stock Purchase Plan, the Advanced
Communication Group, Inc. 1997 Stock Awards Plan and the 1999 Retention
Program and under any awards of equity based compensation (including,
without limitation options on Seller's Stock) under any employment
agreement, and further shall indemnify
37
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<PAGE>
the Buyer for any claims against Buyer or the Telecommunications
Subsidiaries for any and all amounts due under any such program maintained
by Advanced Communications Group, Inc.
(d) Seller hereby assumes all liability for and shall make payment
of all amounts payable under any employment agreement between the
Telecommunication Subsidiaries and any employee thereof (including, but not
limited to the employment agreements between the Telecommunication
Subsidiaries and Todd J. Feist, Fred L. Thurman and W. Bradley Van Leur)
under any provisions in any such employment agreement relating to change in
ownership, management or employment responsibilities or compensation, or
change in control that are applicable in connection with the instant
transaction.
5.18 Buyer Capitalization. Buyer shall remain capitalized in an
--------------------
amount no less than Seven Hundred Fifty Thousand and No/100s Dollars
($750,000.00) through the Closing Date.
5.19 Directory Sales Agreement. Seller and Buyer agree to
-------------------------
negotiate in good faith, the terms of a Directory Sales Agreement, which
shall incorporate the principal terms identified in Exhibit F.
---------
5.20 Advertising Agreement. Seller, or its designee, and Buyer
---------------------
agree to negotiate in good faith the terms of an Advertising Agreement,
which shall incorporate the principle terms identified in Exhibit C
---------
attached hereto.
5.21 Transitional Services Agreement. Seller and Buyer shall
-------------------------------
execute a Transitional Services Agreement in a form substantially similar
to Exhibit D attached hereto.
---------
5.22 Consulting Agreement. Seller and Buyer shall execute a
--------------------
Consulting Agreement in a form substantially similar to Exhibit E
---------
attached hereto.
5.23 Telecommunication Services Agreement. On or after the
------------------------------------
Closing Date, hereof, Buyer shall have the option, to be exercised solely
at its discretion, to submit a commercially competitive bid to Seller for
the provision of telecommunications services to Seller. Seller shall
consider Buyer's bid in good faith and may, reject such bid (a) in favor of
a bid more advantageous to it in terms of price, service quality and range
of service, or (b) if Buyer's bid contains terms and conditions which are
not commercially reasonable.
5.24 Seller Reimbursements.
---------------------
(a) In the case of a Seller employee, who (i) does not accept
prior to the Closing Date an offer of employment from the Buyer, (ii)
receives, after the Closing Date and during the term of the Transitional
Services Agreement, an offer of employment with the Buyer and (iii) accepts
such offer of employment prior to the end of the tern of the Transitional
Services Agreement, Buyer shall reimburse Seller for 50% of the Retention
Benefits, as hereinafter defined, if any, paid by the Seller during the
term of the Transitional Services Agreement, provided that the amount paid
by Buyer to Seller for any such employee pursuant to this Section 5.24
shall not exceed 50% of the employee base pay actually paid to such
employee during the term of the Transitional Services Agreement.
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<PAGE>
"Retention Benefits" as used herein refers to amounts paid, over and above
the employee's regular compensation, for the period from the Closing Date
to the expiration of the term of the Transitional Services Agreement.
(b) Buyer agrees to reimburse Seller on the ninetieth day after
the Closing Date, Seven Thousand Five Hundred and No/100s Dollars
($7,500.00) for each Consent (i) referred to in Section 2.2 for which a
Telecommunication Authorization Adjustment has been made and (ii) which is
received within the sixty (60) days after the Closing Date.
5.25 Severance Payments. Seller, is solely liable for all amounts
-------------------
payable (in cash, stock or property) under the Advanced Communications
Group, Inc. 1997 Stock Awards Plan (including without limitation any awards
under such plans pursuant to the employment contracts), the Advanced
Communications Group, Inc. Employee Stock Purchase Plan and the 1999
Retention Program, except for amounts payable by employees or other
participants, and the Telecommunications Subsidiaries have no liability
actual, potential or contingent under any of the foregoing arrangements.
5.26 Non-Competition
---------------
(a) Except as Buyer may expressly agree in writing, Seller agrees
that for a period of three (3) years after the Closing Date (the "Non-
Competition Period"), Seller shall not, and shall not permit any of its
Affiliates, (except for officers, directors, and employees outside of their
capacity as such) to, directly or indirectly:
(i) engage in, control, advise, manage, or act as a
consultant to any business which, but only to the extent
it, conducts activities in the Territory (as hereinafter
defined) the same as those conducted by the
Telecommunications Subsidiaries as of the Closing Date;
(ii) solicit, divert or attempt to solicit or divert any
party who is, was, or was solicited to become, a
customer or supplier of the Telecommunication
Subsidiaries for Telecommunication Business at any time
prior to the Closing Date;
(iii) employ or solicit for employment any person who is
employed in a capacity providing Telecommunication
Business services to a Telecommunication Subsidiary;
For purposes of this Section, the phrase "directly or indirectly" shall
include acts or omissions as partner, joint venture, employer, agent,
consultant, or owner of any interest in, any Person. "Territory" shall
mean those geographic areas in which the Telecommunication Subsidiaries
have customers as of the Closing Date.
(b) In the event of actual breach of the provisions of this
Section, Buyer, in addition to any other remedies available to it for such
breach or threatened breach, including the recovery of damages, shall be
entitled to an injunction restraining Seller from such conduct.
39
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<PAGE>
(c) If at any time any of the provisions of this Section shall be
determined to be invalid or unenforceable by reason of being vague or
unreasonable as to duration, area, scope of activity or otherwise, then
this Section shall be considered divisible (with the other provisions to
remain in full force and effect) and the invalid or unenforceable
provisions shall become and be deemed to be immediately amended to include
only such time, area, scope of activity and other restrictions, as shall be
determined to be reasonable and enforceable by the court or other body
having jurisdiction over the matter, and Seller expressly agrees that this
Agreement, as so Amended, shall be valid and binding as though any invalid
or unenforceable provision had not been included herein.
(d) The parties hereto agree that any damage caused to Buyer by
reason of the breach by Seller or any of its Affiliates of this Section
5.25 would cause irreparable harm that could not be adequately compensated
for in monetary damages alone; therefore, each party agrees that, in
addition to any other remedies, at law or otherwise, the Buyer shall be
entitled to an injunction issued by a court of competent jurisdiction
restraining and enjoining any violation by Seller or any of its Affiliates
of this Section 5.25.
ARTICLE VI.
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligations of Buyer under Article II of this Agreement are
----------
subject to the satisfaction or waiver by Buyer of the following conditions
precedent on or before the Closing Date:
6.1 Warranties True as of Both Present Date and Closing Date.
--------------------------------------------------------
The representations and warranties of Seller contained herein and qualified
as to materiality shall have been accurate, true and correct, and those not
so qualified shall be true and correct in all material respects, in each
case, on and as of the date of this Agreement, and shall also be accurate,
true and correct to the same extent on and as of the Closing Date with the
same force and effect as though made by Seller on and as of the Closing
Date.
6.2 Compliance with Agreements and Covenants. Seller and the
----------------------------------------
Telecommunication Subsidiaries shall have performed and complied with all
of their respective covenants, obligations and agreements contained in this
Agreement to be performed and complied with by them on or prior to the
Closing Date.
6.3 Consents and Approvals. Buyer shall have received written
----------------------
evidence reasonably satisfactory to it that (a) all material Consents
including without limitation those indicated as such in Schedule 3.3(a)
---------------
required for the consummation of the transactions contemplated hereby or
the ownership and operation of Buyer of the Telecommunication Subsidiaries
have been received and (b) Seller's shareholders shall have voted in favor
of the sale of the transactions contemplated herein.
6.4 Seller Telecommunication Assets Conveyance. Seller shall
-------------------------------------------
have assigned, transferred or conveyed the Seller Telecommunication Assets
and the Seller Telecommunication Liabilities to any one or all of the
Telecommunication Subsidiaries.
40
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6.5 Expiration of HSR Waiting Period. The applicable waiting
--------------------------------
period under the HSR Act shall have expired or been earlier terminated
without action by the Justice Department or the Federal Trade Commission to
prevent consummation of the transactions contemplated by this Agreement.
6.6 Documents. Buyer shall have received all of the agreements,
---------
documents and items specified in Section 8.2.
6.7 Telecommunication Subsidiary Material Adverse Change. No
----------------------------------------------------
Telecommunication Subsidiary Adverse Change shall have occurred and no
event shall have occurred which is likely to have a Telecommunication
Subsidiary Material Adverse Effect.
6.8 Actions or Proceedings. No action or proceeding by any
----------------------
Governmental Authority or other Person shall have been instituted or to the
knowledge of Seller, threatened which would (a) result in significant
monetary damages, or (b) if successful, enjoin, restrain or prohibit any
provision of this Agreement or any of the Related Agreements or the
consummation of the transactions contemplated hereby.
6.9 Excluded Liabilities. Except as set forth in Schedules 5.2
-------------------- --------------
and 5.14, or in the "Total Telecom" column of the Combined Management
- --------
Report, the Telecommunication Subsidiaries shall have no indebtedness for
borrowed money to third parties or to Seller's Affiliates.
ARTICLE VII.
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligations of Seller under Article II of this Agreement are
----------
subject to the satisfaction or waiver by Seller of the following conditions
precedent on or before the Closing Date:
7.1 Shareholder Approval. In accordance with Seller's articles
---------------------
of incorporation, bylaws, or the laws of the state of its incorporation a
sufficient number of Seller's shareholders shall have voted in favor of the
sale of the Telecommunication Subsidiaries.
7.2 Warranties True as of Both Present Date and Closing Date.
--------------------------------------------------------
The representations and warranties of Buyer contained herein shall have
been accurate, true and correct in all material respects on and as of the
date of this Agreement, and shall also be accurate, true and correct on and
as of the Closing Date with the same force and effect as though made by
Buyer on and as of the Closing Date.
7.3 Compliance with Agreements and Covenants. Buyer shall have
----------------------------------------
performed and complied with all of its respective covenants, obligations
and agreements contained in this Agreement to be performed and complied
with by it on or prior to the Closing Date.
7.4 Expiration of HSR Waiting Period. The applicable waiting
--------------------------------
period under the HSR Act shall have expired or have been earlier terminated
without action by the Justice Department or the Federal Trade Commission to
prevent consummation of this Agreement.
41
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7.5 Documents. Seller shall have received all of the
---------
agreements, documents and items specified in Section 8.3.
7.6 Actions or Proceedings. No action or proceeding by any
----------------------
Governmental Authority or other Person shall have been instituted or
threatened which could enjoin, restrain or prohibit, or could result in
substantial damages in respect of, any provision of this Agreement or any
of the Related Agreements or the consummation of the transactions
contemplated hereby.
7.7 Employee Benefits. Seller shall have received written
-----------------
evidence reasonably satisfactory to Seller that as of the Closing
Date Buyer has established and in place (or will have on Closing
by operation of the transaction) employee benefits plans, policies,
and procedures substantially similar to those that are listed at
Schedule 3.17(i)(a) available to the Telecommunication Subsidiaries'
- -------------------
Employees.
ARTICLE VIII.
CLOSING
8.1 Closing. The Closing shall occur at the offices of
-------
Blackwell Sanders Peper Martin LLP at St. Louis, Missouri, at 9:00 a.m. on
the tenth Business Day after the conditions precedent to Closing specified
in Articles VI and VII shall have occurred or been waived (the "Closing
Date"). The Closing, and all transactions to occur at the Closing, shall
be deemed to have taken place at, and shall be effective as of, the close
of business on the Closing Date. No fewer than three (3) weeks prior to
the date Seller and Buyer anticipate the closing will occur, Seller and
Buyer shall confer about the same.
8.2 Deliveries by Seller. At the Closing, in addition to any
--------------------
other documents or agreements required under this Agreement, Seller shall
deliver to Buyer the following:
(a) Certificates evidencing all of the Telecommunication
Subsidiary Shares, which certificates shall be duly endorsed in blank or
accompanied by duly executed stock powers;
(b) The resignations of the persons listed in Schedule 8.2(b) as
---------------
directors and officers of the Telecommunication Subsidiaries;
(c) Except for those Liens specified on Schedule 8.2(c), a
----------------
written statement from each Person holding a Lien upon any of the assets of
the Telecommunication Subsidiaries, or upon any Telecommunication
Subsidiary Shares, confirming the repayment of the indebtedness secured
thereby and the release as of the Closing Date of (i) such Lien and
(ii) all obligations under any and all Contracts relating thereto;
(d) A certificate dated the Closing Date of Seller certifying as
to the compliance by Seller and the Telecommunication Subsidiaries as the
case may be, with Sections 6.1 and 6.2;
(e) The Certificates of Incorporation or similar instruments of
the Telecommunication Subsidiaries certified by the Secretary of State or
equivalent Person of the jurisdiction of incorporation
42
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<PAGE>
of the Telecommunication Subsidiaries, and Bylaws or similar instruments of
the Telecommunication Subsidiaries, certified by the Secretary of each of
the Telecommunication Subsidiaries;
(f) Certificates of Good Standing for the Telecommunication
Subsidiaries from each of the States of listed in Schedule 3.1 as those
------------
states in which the respective Telecommunication Subsidiaries are
authorized to do business as a foreign corporation.
(g) An opinion as to the matters set forth in Sections 3.1, 3.2,
3.3, 3.4, and 3.15, dated the Closing Date, of Blackwell Sanders Peper
Martin LLP, and/or Swidler Berlin, counsel for Seller and the
Telecommunication Subsidiaries, which opinion shall not be governed or
qualified by, or otherwise subject to, any treatise, written policy or
other document relating to legal opinions, including, without limitation,
the Legal Opinion Accord of the ABA Section of Business Law (1991);
(h) A certificate of the Secretaries of the Seller and the
Telecommunication Subsidiaries certifying resolutions of the Boards of
Directors of the Seller and the Telecommunication Subsidiaries approving
this Agreement, the Seller and Telecommunication Subsidiaries' respective
Related Agreements and the transactions contemplated hereby and thereby
(together with an incumbency and signature certificate regarding the
officer(s) signing on behalf of the Seller and each of the
Telecommunication Subsidiaries);
(i) Duly executed originals of each of the Related Agreements;
(j) A duly executed certificate of Seller in the form specified by
Treas.Reg. Section 1.1445-2(b)(2);
(k) Evidence, in form reasonably satisfactory to Buyer, that none
of the Telecommunication Subsidiaries have breached any material provision
of, nor is it in default under the terms of, any material Interconnect
Agreement listed on Schedule 8.2(k) and
---------------
(l) Evidence, in form reasonably satisfactory to Buyer, that all
material Consents have been obtained.
8.3 Deliveries by Buyer. At the Closing, Buyer shall deliver to
-------------------
Seller the following:
(a) The Consideration;
(b) A certificate, dated the Closing Date, of an executive officer
of Buyer, certifying as to compliance by Buyer as the case may be, with
Sections 7.2 and 7.3;
(c) Certificates of Buyer's secretary certifying resolutions of
the board of directors of parties approving this Agreement and its Related
Agreements and the transactions contemplated hereby and thereby (together
with an incumbency and signature certificate regarding the officer(s)
signing on behalf of Buyer);
(d) Evidence, in form reasonably satisfactory to Seller, that all
material Consents referred to in Schedule 4.3 have been obtained except
------------
for those the failure to have received has been waived by Seller; and
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(e) An opinion as to the matters set forth in Sections 4.1, 4.2
and 4.3, dated the Closing Date, of Mayer, Brown & Platt, counsel for
Buyer, substantially in the form of Schedule 8.3(e), which opinion shall
----------------
not be governed or qualified by, or otherwise subject to, any treatise,
written policy or other document relating to legal opinions, including,
without limitation, the Legal Opinion Accord of the ABA Section of Business
Law (1991).
ARTICLE IX.
TERMINATION
9.1 Termination. This Agreement may be terminated at any time
-----------
on or prior to the Closing Date:
(a) With the mutual consent of Seller and Buyer;
(b) By Seller or Buyer, if the Closing shall not have taken place
on or before February 28, 2000;
(c) By Buyer, if there shall have been a material breach of any
covenant, representation or warranty or other agreement of Seller or of the
Telecommunication Subsidiaries hereunder, and such breach shall not have
been remedied within fifteen (15) Business Days after receipt by Seller of
a notice in writing from Buyer specifying the breach and requesting such be
remedied;
(d) By Seller, if there shall have been a material breach of any
covenant, representation or warranty or other agreement of Buyer hereunder,
and such breach shall not have been remedied within fifteen (15) Business
Days after receipt by Buyer of notice in writing from Seller specifying the
breach and requesting such be remedied; or
(e) By Seller, if the Board of Directors of Seller shall have
determined to recommend an Acquisition Proposal to its stockholders after
determining that such Acquisition Proposal constitutes the Superior
Proposal, and Seller gives Buyer at least five (5) Business Days prior
notice of its intention to effect such termination pursuant to this section
9.1(e), and at the end of the five (5) Business Days notice period Seller
makes payment to Buyer in the amount equal to five percent (5%) of the
Consideration prior to any purchase price adjustment pursuant to Section
2.2 plus Buyer's expenses, supported by written evidence reasonably
satisfactory to Seller, which shall not exceed $450,000. The parties agree
that this is a reasonable sum as liquidated damages and not a penalty.
9.2 Effect of Termination. If this Agreement is terminated
---------------------
pursuant to Section 9.1, all obligations of the parties hereunder shall
terminate, except for the obligations set forth in Sections 5.4(b) and
11.1, which shall survive the termination of this Agreement, except that no
such termination shall relieve any party from liability for any prior
willful breach of this Agreement.
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ARTICLE X.
INDEMNIFICATION
10.1 Survival. Except as otherwise specified, the
--------
representations and warranties of Seller contained herein shall survive a
period expiring eighteen (18) months after the Closing Date, except that
(a) the representations and warranties contained in Sections 3.20 shall
survive until the close of business on the 90th day after the expiration of
the applicable statute of limitations with respect to Taxes attributable to
any period or partial period prior to the Closing Date, including any
extensions thereof, (b) the representations and warranties contained in
Sections 3.22 shall survive until the close of business on the 90th day
after the expiration of the applicable statute of limitations with respect
to applicable Environmental Laws, and (c) the representations and
warranties contained in Sections 3.2 and 3.4 shall survive forever. The
representations and warranties of Buyer contained herein shall survive the
Closing for a period expiring at the close of business on the date that is
eighteen (18) months after the Closing Date except that the representation
and warranty set forth in Section 4.2 hereof shall survive forever.
10.2 Limits on Indemnification. The parties hereto agree that
-------------------------
any indemnification payments to be made pursuant to this Agreement by
Seller on the one hand or Buyer on the other hand (except pursuant to
Section 10.3(a), with respect to the representations and warranties
contained in Sections 3.12, 3.20 and 3.22, or Sections 10.3(b), 10.3(c),
10.3(d), 10.3(f), and 10.3(k)) or 10.4(b)) shall be subject to the
requirement that no claim may be made until the aggregate amount of
indemnifiable Losses incurred by Seller on the one hand or Buyer on the
other hand exceeds $75,000.00, at which time such claim for indemnification
may be made for the aggregate amount of all indemnifiable Losses exceeding
$75,000.00. Seller's indemnification obligation under Section 10.3(c)
shall be limited in total to One Hundred Fifty Thousand and No/100s dollars
($150,000.00).
10.3 Indemnification by Seller. Seller agrees to indemnify Buyer,
-------------------------
and its Affiliates (including, after the Closing, the Telecommunication
Subsidiaries), and their respective officers, directors, employees, agents
and representatives (excluding, in any event, Seller), against, and agrees
to hold them harmless from, any and all Losses incurred or suffered by them
relating to or arising out of or in connection with any of the following;
provided, however, that such indemnification shall be the sole remedy for
Buyer for any and all such Losses:
(a) any breach of or any inaccuracy in any representation or
warranty made by Seller in this Agreement or any Related Agreement to which
Seller is a party, or any document delivered at the Closing. Buyer's claim
shall have been made in writing to Seller not later than the expiration of
the time periods set forth in Section 10.1; or
(b) failure by either Buyer or Seller to obtain any Consent from a
Commission granting Consent to this Agreement or the transaction
contemplated herein; or
(c) any fines imposed by the Commission of the state of Oklahoma
arising from settlement agreement entered into on or about April 8, 1999
between that Commission and Feist; or
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(d) arising out of the alleged failure to obtain timely Consent
from a Commission to the acquisition of TRI by Seller; or
(e) the misclassification of certain employees as "exempt
employees" as more fully described on Schedule 3.17(c) and 3.18(a); or
---------------- -------
(f) Hazardous Materials contained in batteries used prior to the
Closing Date in connection with telecommunications switches; or
(g) arising out of the ongoing investigation of the Attorney
General of the State of Kansas into slamming and violations of Kansas
consumer protection laws by Feist; or
(h) the failure of Seller or any Telecommunication Subsidiary to
make any required filing with the FCC; or
(i) arising out of the settlement agreement entered into on or
about June 23, 1999 between the Attorney General of the State of Minnesota
and FirsTel; or
(j) without limiting the generality of the foregoing, any other of
the matters set forth on Schedule 3.23 attached hereto; or
-------------
(k) any breach of or failure by Seller to perform any covenant or
obligation set out or contemplated in this Agreement or any Related
Agreement or any document delivered by it at the Closing.
10.4 Indemnification by Buyer. Buyer agrees to indemnify Seller
------------------------
and its Affiliates, and their respective officers, directors, employees,
agents and representatives, against, and agrees to hold it harmless from,
any and all Losses incurred or suffered by it relating to or arising out of
or in connection with any of the following:
(a) any breach of or any inaccuracy in any representation or
warranty made by Buyer in this Agreement or any Related Agreement to which
Buyer is a party, or any document delivered at Closing. Seller's Claim
shall have been made in writing to Buyer not later than the expiration of
the time periods set forth in Section 10.1; or
(b) any breach of or failure by Buyer to perform any covenant or
obligation set out or contemplated in this Agreement or any Related
Agreement or any document delivered at the Closing.
10.5 Claims. The provisions of this Section shall be subject to
------
Section 10.6. As soon as is reasonably practicable after becoming aware
of a claim for indemnification under this Agreement, the Indemnified Person
shall promptly give notice to the indemnifying person of such claim and the
amount the Indemnified Person will be entitled to receive hereunder from
the Indemnifying Person; provided that the failure of the Indemnified
Person to promptly give notice shall not relieve the Indemnifying Person of
its obligations except to the extent (if any) that the Indemnifying Person
shall have been prejudiced thereby. If the Indemnifying Person does not
object in writing to such indemnification claim within thirty (30) days of
receiving notice thereof, the Indemnified Person shall be entitled to
recover, on the thirty-fifth day after such notice was given, from the
Indemnifying Person the amount of such claim, and no later objection by the
Indemnifying Person shall be permitted; if the
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Indemnifying Person agrees that it has an indemnification obligation but
objects that it is obligated to pay only a lesser amount, the Indemnified
Person shall nevertheless be entitled to recover, on the thirty-fifth day
after such notice was given, from the Indemnifying Person the lesser
amount, without prejudice to the Indemnified Person's claim for the
difference. In addition to the amounts recoverable by the Indemnified
Person from the Indemnifying Person pursuant to the foregoing provisions,
the Indemnified Person shall also be entitled to recover from the
Indemnifying Person interest on such amounts at the rate of eight percent
(8%) from, and including, the thirty-fifth day after such notice of an
indemnification claim is given to, but not including, the date such
recovery is actually made by the Indemnified Person.
10.6 Notice of Third-Party Claims; Assumption of Defense. The
---------------------------------------------------
Indemnified Person shall give notice as promptly as is reasonably
practicable to the Indemnifying Person of the assertion of any claim, or
the commencement of any suit, action or proceeding, by any Person not a
party hereto in respect of which indemnity may be sought under this
Agreement; provided that the failure of the Indemnified Person to promptly
give notice shall not relieve the Indemnifying Person of its obligations
except to the extent (if any) that the Indemnifying Person shall have been
prejudiced thereby. The Indemnifying Person may, at its own expense,
(a) participate in the defense of any claim, suit, action or proceeding and
(b) upon notice to the Indemnified Person and the Indemnifying Person's
delivering to the Indemnified Person a written agreement that the
Indemnified Person is entitled to indemnification for all Losses arising
out of such claim, suit, action or proceeding and that the Indemnifying
Person shall be liable for the entire amount of any Loss, at any time
during the course of any such claim, suit, action or proceeding, assume the
defense thereof; provided, however, that (i) the Indemnifying Person's
counsel is reasonably satisfactory to the Indemnified Person, and (ii) the
Indemnifying Person shall thereafter consult with the Indemnified Person
upon the Indemnified Person's reasonable request for such consultation from
time to time with respect to such claim, suit, action or proceeding. If
the Indemnifying Person assumes such defense, the Indemnified Person shall
have the right (but not the duty) to participate in the defense thereof and
to employ counsel, at its own expense, separate from the counsel employed
by the Indemnifying Person. If, however, the Indemnified Person reasonably
determines in its judgment that representation by the Indemnifying Person's
counsel of both the Indemnifying Person and the Indemnified Person would
present such counsel with a conflict of interest, then such Indemnified
Person may employ separate counsel to represent or defend it in any such
claim, action, suit or proceeding and the Indemnifying Person shall pay the
fees and disbursements of such separate counsel. Whether or not the
Indemnifying Person chooses to defend or prosecute any such claim, suit,
action or proceeding, all of the parties hereto shall cooperate in the
defense or prosecution thereof.
10.7 Settlement or Compromise. Any settlement or compromise made
------------------------
or caused to be made by the Indemnified Person or the Indemnifying Person,
as the case may be, of any claim, suit, action or proceeding shall also be
binding upon the Indemnifying Person or the Indemnified Person, as the case
may be, in the same manner as if a final judgment or decree had been
entered by a court of competent jurisdiction in the amount of such
settlement or compromise; provided, however, that no obligation,
restriction or Loss shall be imposed on the Indemnified Person as a result
of such settlement without its prior written consent. The Indemnified
Person will give the Indemnifying Person at least thirty (30) days' notice
of any proposed settlement or compromise of any claim, suit, action or
proceeding it is defending, during which time the Indemnifying Person may
reject such proposed settlement or compromise; provided, however, that from
and after such rejection, the Indemnifying Person shall be
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obligated to assume the defense of and full and complete liability and
responsibility for such claim, suit, action or proceeding and any and all
Losses in connection therewith in excess of the amount of unindemnifiable
Losses which the Indemnified Person would have been obligated to pay under
the proposed settlement or compromise. Notwithstanding the foregoing,
Seller shall not enter into any settlement or compromise of any claim,
action or proceeding relating to Taxes imposed with respect to the
operations of the Telecommunication Subsidiaries which could effect taxable
period(s) of any Telecommunication Subsidiary after the Closing Date
without consulting Buyer.
10.8 Failure of Indemnifying Person to Act. In the event that
-------------------------------------
the Indemnifying Person does not elect to assume the defense of any claim,
suit, action or proceeding, then any failure of the Indemnified Person to
defend or to participate in the defense of any such claim, suit, action or
proceeding or to cause the same to be done, shall not relieve the
Indemnifying Person of its obligations hereunder.
10.9 Tax Character. Seller and Buyer agree that any payments
-------------
pursuant to this Article X will be treated for federal and state income
---------
tax purposes as adjustments to the purchase price of the Shares, and that
they will report such payments on all Tax Returns consistently with such
characterization.
ARTICLE XI.
MISCELLANEOUS
11.1 Expenses. Seller shall pay all expenses of Seller and the
--------
Telecommunication Subsidiaries (including attorneys' fees and expenses) and
Buyer shall pay all expenses of Buyer (including attorneys' fees and
expenses), in each case incurred in connection with this Agreement and the
transactions contemplated hereby. Buyer and Seller shall be responsible for
and pay one-half (1/2) of all sales, use, stamp, transfer, service,
recording, real estate and like taxes or fees, if any, imposed by any
Governmental Authority in connection with the transfer and assignment of
the Shares.
11.2 Amendment. This Agreement may be amended, modified or
---------
supplemented but only in writing signed by each of the parties hereto.
11.3 Notices. Any notice, request, instruction or other document
-------
to be given hereunder by a party hereto shall be in writing and shall be
deemed to have been given, (a) when received if given in person or by
courier or a courier service, (b) on the date of transmission if sent by
telex, facsimile or other wire transmission or (c) six (6) Business Days
after being deposited in the U.S. mail, certified or registered mail,
postage prepaid:
(a) If to Seller, addressed as follows:
Advanced Communications Group, Inc.
Mr. Michael A. Pruss
390 South Woodsmill Road
Chesterfield, MO 63017
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with a copy to:
Blackwell Sanders Peper Martin, LLP
Attn: Matthew W. Geekie
720 Olive Street, 24th Floor
St. Louis, MO 63101
Facsimile No.: (314) 345-6060
(b) If to Buyer, addressed as follows:
Compass Telecommunication, Inc.
8548 Colonial Drive
Littleton, Colorado 80124
Attention: Rick L. Weller
Facsimile No.: (303) 662-8574
with a copy to:
Mayer, Brown & Platt
190 S. LaSalle St.
Chicago, IL 60603
Attention: John R. Sagan
Facsimile No.: (312) 701-7711
or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided
11.4 Waivers. The failure of a party hereto at any time or times
-------
to require performance of any provision hereof shall in no manner affect
its right at a later time to enforce the same. No waiver by a party of any
condition or of any breach of any term, covenant, representation or
warranty contained in this Agreement shall be effective unless in writing,
and no waiver in any one or more instances shall be deemed to be a further
or continuing waiver of any such condition or breach in other instances or
a waiver of any other condition or breach of any other term, covenant,
representation or warranty.
11.5 Counterparts. This Agreement may be executed in one or more
------------
counterparts, and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed an original, but all of
which together shall constitute one and the same instrument.
11.6 Interpretation. The headings preceding the text of Articles
--------------
and Sections included in this Agreement and the headings to Schedules
attached to this Agreement are for convenience only and shall not be deemed
part of this Agreement or be given any effect in interpreting this
Agreement. The use of the masculine, feminine or neuter gender herein
shall not limit any provision of this Agreement.
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The use of the terms "including" or "include" shall in all cases herein
mean "including, without limitation" or "include, without limitation,"
respectively. Underscored references to Articles, Sections, Subsections or
Schedules shall refer to those portions of this Agreement. Consummation of
the transactions contemplated herein shall not be deemed a waiver of a
breach of or inaccuracy in any representation, warranty or covenant or of
any party's rights and remedies with regard thereto. No specific
representation, warranty or covenant contained herein shall limit the
generality or applicability of a more general representation, warranty or
covenant contained herein. A breach of or inaccuracy in any
representation, warranty or covenant shall not be affected by the fact that
any more general or less general representation, warranty or covenant was
not also breached or inaccurate.
11.7 Applicable Law. This Agreement shall be governed by and
--------------
construed and enforced in accordance with the internal laws of the State of
Delaware without giving effect to the principles of conflicts of law
thereof.
11.8 Assignment. This Agreement shall be binding upon and inure
----------
to the benefit of the parties hereto and their respective estates, heirs,
legal representatives, successors and assigns; provided, however, that no
assignment of any rights or obligations shall be made by any party hereto
without the written consent of each other party hereto, except that Buyer
may assign its rights to purchase all or any portion of the
Telecommunication Subsidiary Shares to one or more of its Affiliates
without the prior written consent of Seller; provided, further that no such
assignment shall (i) limit or affect the Buyer's obligations hereunder,
(ii) impair Seller's rights or remedies, or (iii) contravene or violate any
law applicable to or impede the transaction contemplated herein.
11.9 No Third-Party Beneficiaries. This Agreement is solely for
----------------------------
the benefit of the parties hereto and, to the extent provided herein, their
respective estates, heirs, successors, Affiliates, directors, officers,
employees, agents and representatives, and no provision of this Agreement
shall be deemed to confer upon other third parties any remedy, claim,
liability, reimbursement, cause of action or other right.
11.10 Publicity. Prior to the Closing Date, except as required by
---------
Law or the rules of any stock exchange, no public announcement or other
publicity regarding the transactions referred to herein shall be made by
Buyer, Seller, the Telecommunication Subsidiaries or any of their
respective Affiliates, officers, directors, employees, representatives or
agents, without the prior written agreement of Buyer and Seller, in any
case, as to form, content, timing and manner of distribution or
publication; provided, however, that nothing in this Section shall prevent
such parties from discussing such transactions with those Persons whose
approval, agreement or opinion, as the case may be, is required for
consummation of such particular transaction or transactions.
11.11 Liquidated Damages. If (a) all conditions precedent set forth
------------------
in Article VI have been met and (b) Buyer fails to close on the transactions
contemplated hereby, unless Buyer is entitled not to close pursuant to the
terms hereof, Seller may lawfully terminate this Agreement in accordance
with the notice and lapse of time requirements of Section 9.1(d), and if it
is so terminated, an aggregate of Seven Hundred Fifty Thousand and No/100
dollars ($750,000.00) shall be payable by Buyer to Seller, all as liquidated
damages to Seller, and such payments shall be the sole remedy of Seller and
the Telecommunication Subsidiaries for such failure by Buyer to close and
shall only be available as a remedy prior to the Closing.
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11.12 Effect of Investigation. Any due diligence review, audit or
-----------------------
other investigation or inquiry undertaken or performed by or on behalf of
Buyer shall not limit, qualify, modify or amend the representations,
warranties or covenants of, Seller made or undertaken pursuant to this
Agreement, irrespective of the knowledge and information received (or which
should have been received) therefrom by Buyer.
11.13 Further Assurances. Upon the reasonable request of Buyer
------------------
and at its expense, Seller will on and after the Closing Date execute and
deliver to Buyer such other documents, releases, assignments and other
instruments as may be required to effectuate completely the transfer and
assignment to Buyer of, and to vest fully in Buyer title to, the
Telecommunication Subsidiary Shares and the Seller Telecommunication
Assets, and to otherwise carry out the purposes of this Agreement.
11.14 Severability. If any provision of this Agreement shall be
-------------
held invalid, illegal or unenforceable, the validity, legality or
enforceability of the other provisions hereof shall not be affected
thereby, and there shall be deemed substituted for the provision at issue a
valid, legal and enforceable provision as similar as possible to the
provision at issue.
11.15 Remedies Cumulative. Unless otherwise specified, the
-------------------
remedies provided in this Agreement shall be cumulative and shall not
preclude the assertion or exercise of any other rights or remedies
available by law, in equity or otherwise.
11.16 Entire Understanding. This Agreement and the Related
--------------------
Agreements set forth the entire agreement and understanding of the parties
hereto and supersede any and all prior agreements, arrangements and
understandings among the parties.
11.17 Jurisdiction of Disputes; Waiver of Jury Trial. In the
----------------------------------------------
event any party to this Agreement commences any litigation, proceeding or
other legal action in connection with or relating to this Agreement, any
Related Agreement or any matters described or contemplated herein or
therein, with respect to any of the matters described or contemplated
herein or therein, the parties to this Agreement hereby (a) agree under all
circumstances absolutely and irrevocably to institute any litigation,
proceeding or other legal action in a court of competent jurisdiction
located within the city of Dallas, Texas, whether a state or federal court;
(b) agree that in the event of any such litigation, proceeding or action,
such parties will consent and submit to personal jurisdiction in any such
court described in clause (a) of this Section and to service of process
upon them in accordance with the rules and statutes governing service of
process (it being understood that nothing in this Section shall be deemed
to prevent any party from seeking to remove any action to a federal court
in Dallas, Texas; (c) agree to waive to the full extent permitted by law
any objection that they may now or hereafter have to the venue of any such
litigation, proceeding or action in any such court or that any such
litigation, proceeding or action was brought in an inconvenient forum;
(d) designate, appoint and direct CT Corporation System as its authorized
agent to receive on its behalf service of any and all process and documents
in any legal proceeding in the State of Texas; (e) agree to notify the
other parties to this Agreement immediately if such agent shall refuse to
act, or be prevented from acting, as agent and, in such event, promptly to
designate another agent in the city of Dallas, Texas, satisfactory to
Seller and Buyer, to serve in place of such agent and deliver to the other
parties written evidence of such substitute agent's acceptance of such
designation; (f) agree as an alternative method of service to service of
process in any legal proceeding by mailing of copies thereof to such party
at its address set
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forth herein for communications to such party; (g) agree that any service
made as provided herein shall be effective and binding service in every
respect; and (h) agree that nothing herein shall affect the rights of any
party to effect service of process in any other manner permitted by Law.
EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY DISPUTE IN
CONNECTION WITH OR RELATING TO THIS AGREEMENT, ANY RELATED AGREEMENT OR ANY
MATTERS DESCRIBED OR CONTEMPLATED HEREIN OR THEREIN, AND AGREE TO TAKE ANY
AND ALL ACTION NECESSARY OR APPROPRIATE TO EFFECT SUCH WAIVER.
[The Remainder Of This Page Is Blank Intentionally]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered as of the date first above written.
COMPASS TELECOMMUNICATIONS ADVANCED COMMUNICATIONS
GROUP, INC.
By:
----------------------------
Name:
--------------------------
Title: By:
------------------------- ----------------------------------------
Name: Richard A. O'Neal
Title: Chairman and Acting Chief Executive
Officer
FEIST LONG DISTANCE SERVICE, INC.
By:
----------------------------------------
Name: Richard A. O'Neal
Title: Chairman of the Board
FIRSTEL, INC.
By:
----------------------------------------
Name: Richard A. O'Neal
Title: Chairman of the Board
TELECOM RESOURCES, INC.
By:
----------------------------------------
Name: Richard A. O'Neal
Title: Chairman of the Board and President
VALU-LINE OF LONGVIEW, INC.
By:
----------------------------------------
Name: Richard A. O'Neal
Title: Chairman of the Board
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YPTEL AGREEMENT
This YPTEL AGREEMENT (THE "AGREEMENT") is made and entered into as
of June 3, 1999 by and among Advanced Communications Group, Inc., a
Delaware corporation ("PARENT"), YPtel Corporation, a corporation
incorporated under the laws of Canada (THE "COMPANY"), the shareholders
of the Company listed on the attached Exhibit "A", The J.L.R. Family
-----------
Trust, The Paisley Family Trust, Edward Truant, and Douglas G. McIntyre
(COLLECTIVELY, THE "ICL PRINCIPALS"), Cold Trust, Global Investment
Trust, Freezer Trust, Storage Trust, Directory Trust and Publisher Trust
("BARBADIAN TRUSTS") (the shareholders listed on Exhibit "A", the ICL
-----------
Principals and the Barbadian Trusts are collectively referred to herein
as the "SHAREHOLDERS") and Imperial Capital Limited, a corporation
incorporated under the laws of the Province of Ontario ("ICL"). The ICL
Principals are executing this Agreement solely for the purpose of making
the representations and warranties of the ICL Principals set forth in
Article II and for agreeing to the indemnification obligations of the
- ----------
ICL Principals set forth in Article IX, and for agreeing to the
----------
obligations of the ICL Principals set forth in Section 4.1 and the
-----------
other provisions of this Agreement. ICL is the attorney-in-fact
pursuant to certain powers of attorney (THE "POWERS OF ATTORNEY"),
pursuant to which all Shareholders other than the ICL Principals, and
the Barbadian Trusts have granted to ICL the right to vote and to
dispose of all of the Company Common Stock. ICL is executing this
Agreement as attorney-in-fact for the Shareholders other than the ICL
Principals and the Barbadian Trusts to bind such Shareholders to their
obligations set forth in this Agreement.
RECITALS
A. The Company is the beneficial owner, directly and
indirectly, and holder of record of all of the issued and outstanding
shares of the capital stock of YPtel, Inc. ("YPTI") and Pacific Coast
Publishing, Ltd. ("PCP") (COLLECTIVELY, THE "SUBSIDIARIES") and desires
to have itself and, indirectly, all of its assets, including the capital
stock of each of the Subsidiaries, acquired directly or indirectly by
Parent on the terms and subject to the conditions set forth in this
Agreement.
B. Parent desires to cause Newco II, an indirect subsidiary of
Parent, to be formed prior to the Closing, to acquire all of the issued
and outstanding capital stock of the Company and Parent desires to
acquire all of the outstanding common stock of YPTI, all on the terms
and subject to the conditions set forth in this Agreement.
C. The Boards of Directors of each of the Company and Parent
believe it is in the best interests of each company and their respective
stockholders and the Board of Directors of Parent has directed or will
direct that the Agreement be submitted to the shareholders of Parent
with the recommendation that the Agreement, including but not limited to
the issuance of shares of Parent Common Stock pursuant to the Exchange
and Voting Trust Agreement be approved by the Parent's stockholders.
D. The Shareholders own all of the issued and outstanding
Company capital stock and will at the time of Closing own all of the
outstanding Company Common Stock other than the shares of Company Common
Stock issued to the Subordinated Lenders upon exercise of the warrants
issued pursuant to the Subordinated Loan Agreement.
E. The parties intend that the Closing will occur concurrently
with or after (i) the closing of the acquisition by Parent or a direct
or indirect subsidiary of Parent of all of the outstanding capital stock
of Web YP, Inc. ("WEB") and Big Stuff, Inc. ("BIG STUFF") on terms
reasonably acceptable to the Company (WEB AND BIG STUFF ARE SOMETIMES
COLLECTIVELY REFERRED TO AS "WORLDPAGES") whether by merger, exchange or
otherwise (THE "WORLDPAGES ACQUISITION"); (ii) the pay-off of the
promissory notes
<PAGE>
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(COLLECTIVELY, THE "GREAT WESTERN NOTES") in the aggregate original
principal amount of Fifteen Million Dollars (U.S. $15,000,000) (plus
accrued but unpaid interest at the time of pay-off) from the Company to
Richard O'Neal and certain other former shareholders of Great Western
Directories, Inc. (COLLECTIVELY, THE "GREAT WESTERN SHAREHOLDERS") by
the issuance of Parent Common Stock to the Great Western Shareholders;
(iii) the execution and delivery by Parent and the Shareholders of the
Exchange and Voting Trust Agreement and the Support Agreement; (iv) the
Company Recapitalization; (v) the YPTI Recapitalization and purchase by
Parent from YPTI of all of the outstanding common stock of YPTI; and
(vi) the satisfaction of the other conditions to Closing set forth in
this Agreement.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
ARTICLE I - THE TRANSACTIONS
1.1 Transactions Prior to Closing. Immediately prior to
-----------------------------
Closing and subject to and upon the terms and conditions of the
Agreement:
(a) Recapitalization of the Parent. (i) The Parent
------------------------------
shall be recapitalized (THE "PARENT RECAPITALIZATION") so that
immediately after the Parent Recapitalization, the authorized capital
stock of the Parent shall consist of (A) the Parent Common Stock, (B)
the existing class of preferred shares of Parent (the "PARENT SERIES A
STOCK"), and (C) voting preferred shares having the rights, preferences
and designations set forth at a later date (THE "PARENT PREFERRED
STOCK"); and (ii) thereafter, Parent shall declare and pay a dividend of
the Contingent Rights I to the holders of record of shares of Parent
Common Stock on the Record Date ("CONTINGENT RIGHTS I DIVIDEND").
(b) Formation of Newco I and Newco II. Parent shall (i)
---------------------------------
form an unlimited liability company under the laws of Nova Scotia which
will be owned by Parent ("NEWCO I"); the authorized capital stock of
which shall consist of common stock ("NEWCO I COMMON STOCK") and
preferred shares ("NEWCO I PREFERRED STOCK") and (ii) form a limited
liability company under the laws of Nova Scotia ("NEWCO II"), the
authorized capital stock of which shall consist of (a) common stock
("NEWCO II COMMON STOCK"); (b) non-voting special shares having the
rights, preferences and designations set forth at a later date, the
holders of which shall have the right to exchange such shares on a one-
for-one basis into shares of Parent Common Stock (THE "CLASS A SPECIAL
SHARES") pursuant to the Exchange and Voting Trust Agreement and (c)
non-voting special shares having the rights, preferences and
designations set forth at a later date, the holders of which shall have
the right to receive Parent Common Stock pursuant to Section 5.10(c)
---------------
(THE "CLASS B SPECIAL SHARES") and the Exchange and Voting Trust
Agreement and (d) non-voting preferred shares (representing at least two
percent (2%) of the fair market value of Newco II) having the rights,
preferences and designations set forth at a later date (THE "CLASS C
PREFERRED SHARES"). Newco I Common Stock shall be issued to Parent, and
Newco II Common Stock shall be issued to Newco I, each in consideration
for the transfer of Parent Common Stock and Contingent Rights I
contemplated by Section 1.2(a) hereof, such that at all times all of
--------------
the issued and outstanding Newco I Common Stock shall be held by Parent
and all of the issued and outstanding Newco II Common Stock shall be
held by Newco I.
(c) Recapitalization of the Company. The Shareholders
-------------------------------
and the Company shall cause (i) the Company to be recapitalized (THE
"COMPANY RECAPITALIZATION") so that immediately after the Company
Recapitalization, the authorized capital stock of the Company shall
consist only of common stock (THE "COMPANY COMMON STOCK") and (ii)
thereafter, the exchange into Company Common stock of all outstanding
shares of Class A Preferred stock, Class B Stock, Class C stock and
Class D stock of the Company.
(d) Sale of Class C Preferred Shares. The Class C
---------------------------------
Preferred Shares shall be sold to Bank of America or another unrelated
third party for fair market value consideration in cash.
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(e) The YPTI Recapitalization. (a) The Company shall
-------------------------
cause YPTI to be recapitalized (THE "YPTI RECAPITALIZATION") by amending
YPTI's articles of incorporation to create a class of non-voting
cumulative preferred stock (THE "YPTI PREFERRED STOCK") (with an
aggregate redemption amount equal to the fair market value of YPTI less
the adjusted cost base of Company in YPTI and such the rights,
preferences and designations which will be set forth at a later date in
a certificate of designation (THE "YPTI CERTIFICATE OF PREFERRED STOCK
DESIGNATION") to be filed with the Secretary of State of the State of
Washington) and (b) thereafter, YPTI shall declare and pay to the
Company a dividend of the YPTI Preferred Stock.
1.2 Transactions at Closing. At the Closing, and subject to
-----------------------
and upon the terms and conditions of this Agreement:
(a) Transfer of Parent Stock. In consideration for the
------------------------
issuance of Newco I Common Stock to Parent and Newco II Common Stock to
Newco I (each as contemplated by Section 1.1(b) hereof). Parent shall
--------------
transfer and deliver to Newco I and Newco I shall transfer and deliver
to Newco II, respectively, that number of shares of Parent Common Stock
necessary to accomplish the exchange with certain Shareholders described
in Section 1.2(b).
--------------
(b) Exchange of Company Common Stock. (i) The
--------------------------------
Shareholders shall transfer and deliver to Newco II the Company Common
Stock free and clear of any and all liens, claims and encumbrances,
together with stock powers duly executed in blank by the Shareholders
that are executing this Agreement and by ICL on behalf of the
Shareholders (other than those that are executing this Agreement) with
signatures of ICL and the Shareholders who are executing this Agreement
guaranteed; (ii) Newco II shall transfer and deliver, at the election of
each Shareholder, either (A) one (1) share of Class A Special Shares and
one (1) share of Class B Special Shares or (B) one (1) share of Parent
Common Stock and one (1) Contingent Right II for each share of Company
Common stock exchanged under (i) above. The procedure for the exchange
of shares of Company Common Stock by each Shareholder and the number of
Class A Special Shares, Class B Special Shares, Parent Common Stock and
Contingent Rights II to be received by each Shareholder at the Closing
will be determined at a later date.
(c) Sale of Parent Preferred Stock. In exchange for
------------------------------
nominal cash consideration, Parent shall issue to the trustee (THE
"TRUSTEE") under the Voting and Exchange Trust Agreement (THE "TRUST
AGREEMENT"), one or more shares of Parent Preferred Stock that have the
rights, preferences and designations to be described at a later date.
(d) Sale of YPTI Common Stock. Parent shall purchase
--------------------------
from the Company, free and clear of any and all liens, claims and
encumbrances, all shares of YPTI Common Stock owned by the Company,
which shall constitute all of the outstanding shares of YPTI Common
Stock, for an aggregate purchase price equal to the adjusted cost base
of the shares of YPTI, which the parties hereto agree shall be equal to
the fair market value thereof (approximately $21,000,000 Canadian) (THE
"YPTI CONSIDERATION"), payable in cash or in exchange for a promissory
note, with terms as the parties may agree.
1.3 Closing. Unless this Agreement is earlier
-------
terminated pursuant to Article VIII, the closing of the transactions
------------
contemplated by this Agreement (THE "CLOSING") will take place as soon
as the conditions set forth in Article VII are satisfied or waived, at
-----------
the offices of Blackwell Sanders Peper Martin LLP, 720 Olive Street,
Suite 2400, St. Louis, Missouri 63101 anticipated to be August 3, 1999
and if such conditions are not satisfied by such date, the Closing shall
be postponed for seven (7) days and will continue to be postponed for
continuous seven (7) day periods until October 31, 1999, unless another
place or time is agreed to in writing by Parent and the Company. The
date upon which the Closing actually occurs is herein referred to as the
"CLOSING DATE." At the Closing: (a) the Company shall deliver to Parent
the various certificates, instruments and documents required to be
delivered by the Company pursuant to this Agreement; (b) Parent shall
deliver to the Company the various certificates, instruments and
documents required to be delivered by Parent pursuant to this Agreement;
(c) the Company shall
3
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provide to Parent evidence reasonably satisfactory to Parent that the
Company Recapitalization has been completed; (d) the Company shall
provide to Parent evidence reasonably satisfactory to Parent that the
YPTI Recapitalization has been completed and as a part thereof, YPTI has
distributed the YPTI Preferred Stock as a dividend to Company in
accordance with Section 1.1 (e); (e) the Shareholders shall transfer
----------------
their shares of Company Common Stock to Newco II in accordance with
Section 1.2(b)(i); (f) Newco II shall issue and deliver to the
- ------------------
Shareholders the Class A Special Shares and Class B Special Shares or
Parent Common Stock and Contingent Rights II in accordance with Section
-------
1.2(b)(ii); (g) Parent shall sell to the Trustee the Parent Preferred
- ----------
Stock in accordance with Section 1.2(c); (h) the Trustee shall pay to
--------------
Parent the consideration for the Parent Preferred Stock; (i) the Company
shall to sell to the Parent the YPTI Common Stock in accordance with
Section 1.2(d); (j) Parent shall pay to the Company the YPTI
- --------------
Consideration; and (k) an election statement, in a form agreed to, shall
be signed by the appropriate parties in accordance with the provisions
set forth in section 338 of the Code.
1.4 Parent Name Change and Directors.
--------------------------------
(a) Parent Name Change. Parent shall recommend, and
------------------
submit to its shareholders entitled to vote thereon, a resolution for
their approval to amend the Certificate of Incorporation of Parent. Such
resolution shall require Parent to change its name to "WorldPages.com,
Inc." or a variation thereof and take all reasonable measures to have
such name change become effective on the Closing Date.
(b) Directors. Immediately following the Closing Date,
---------
the Board of Directors of the Parent shall be restructured to be
composed of eight (8) members as follows: (i) one director chosen by
Parent and one director chosen by ICL to serve three year terms, (ii)
one director chosen by Parent and one director chosen by ICL and one
director to be agreed to by Parent, ICL and World Pages to serve two
year terms, and (iii) one director chosen by Parent and one director
chosen by ICL and one director to be agreed to by Parent, ICL and
WorldPages to serve one year terms. The directors to be nominated by
the Parent are currently anticipated to be Richard O'Neal, Robert Benton
and Marvin Moses. The directors to be nominated by ICL are currently
anticipated to be Wilmot Matthews, George Anderson and Robert Flynn.
The parties hereto expressly acknowledge and agree that this Section
-------
1.4(b) is not intended to, and does not, except with regard to the
- ------
initial Board of Directors of Parent referenced in this Section
-------
1.4(b), impose any requirement that the Board of Directors of Parent be
- ------
comprised of the individuals listed in this Section 1.4(b) or that any
--------------
Person has a right to designate a certain individual or a certain number
of individuals as nominees to the Board of Directors of Parent.
1.5 Tax Deferred Exchange. From the date hereof through and
---------------------
including the Closing Date, neither the Company, nor the Subsidiaries,
nor any of the Shareholders nor any of their respective affiliates, nor
Parent, or any of Parent's subsidiaries or any of their respective
affiliates, shall (i) knowingly take any action, or knowingly fail to
take any action, that would jeopardize qualification of the transactions
contemplated by Section 1.2(b) of this Agreement (with respect to the
--------------
issuance of Class A Special Shares and Class B Special Shares to
residents of Canada holding such shares as capital property) as a tax
deferred transfer pursuant to Subsection 85[1] of Income Tax Act
[Canada] RSC 1985 [5th Supp.] c.1, as amended ("INCOME TAX ACT
[CANADA]"); provided a joint election is filed on a timely basis in
prescribed form; or (ii) enter into any contract, agreement, commitment
or arrangement with any such effect. ICL, on behalf of each
Shareholder, and Newco II agree to jointly elect that the proceeds of
the disposition of the Company Common Stock pursuant to this Agreement
shall be the Canadian dollar adjusted cost base of the transferred
shares of Company Common Stock, unless otherwise agreed to by the
transferring Shareholders. Class A Special Shares and Class B Special
Shares will be issued only to transferring Shareholders who are either
(a) resident in Canada for purposes of the Income Tax Act [Canada], or
(b) not resident in Canada for such purposes and not protected by any
applicable tax treaty from taxation under such Act in respect of any
gain realized on such exchange.
1.6 Taking of Necessary Action; Further Action. If, at any
------------------------------------------
time after the Closing Date, any further action is necessary or
desirable to carry out the purposes of this Agreement; including but not
limited to vesting Newco II with full right and title to and possession
of the Company Common Stock; vesting the Shareholders with full right
and title to and possession of the Class A Special Shares, Class B
4
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Special Shares or Parent Common Stock and Contingent Rights II, vesting
the Trustee with full right and title to and possession of the Parent
Preferred Stock; vesting Parent with full right and title to and
possession of the YPTI Common Stock; and vesting the Company with full
right and title to the YPTI Preferred Stock, subject to the requirements
of Section 6.11, the parties hereto will take, all such lawful and
------------
necessary and/or desirable action so long as such action is not
inconsistent with this Agreement.
1.7 Due Diligence Review.
--------------------
(a) At the time of execution of this Agreement, neither
Parent nor the Company has completed its due diligence investigation of
the other. Upon execution hereof, each of Parent and the Company shall
be entitled forthwith to complete its due diligence review of the books,
records and operations of the other (including the Parent Securities
Filings), provided, however, that any review conducted by Parent or
-------- --------
the Company pursuant to the provisions of this Section 1.7 shall be
-----------
completed within seven (7) business days after the date of this
Agreement (THE "DUE DILIGENCE PERIOD"). If as a result of such review,
either Parent or the Company finds in good faith that it is not in its
economic best interest to proceed with the Closing as contemplated
herein, it may, at or prior to the expiration of the Due Diligence
Period, terminate this Agreement by giving the other party written
notice of such termination in the manner provided in Section 11.1.
------------
Nothing in this Section 1.7 shall be construed to limit the right of
-----------
any party to continue its due diligence review through the Closing Date.
(b) If either party decides to terminate the Agreement
pursuant to the provisions of Section 1.7(a) hereof, neither party
--------------
shall have any further obligation to the other under this Agreement;
provided, however, that the terminating party shall be liable to the
- -------- -------
other party for the fee set forth in Section 8.2(b) or 8.2(c), as
------------------------
applicable, if either such terminating party subsequently enters into a
Parent Triggering Transaction or a Company Triggering Transaction, as
the case may be, that would otherwise require the payment of the fee
required by Section 8.2.
-----------
1.8 Aggregate Issuable Parent Common Stock. Exclusive of any
---------------------------------------
Parent Common Stock which the Shareholders may receive pursuant to
Section 5.10(c) hereof, the Shareholders, collectively, shall not have
- ---------------
the right to receive more than, nor shall the Parent be obligated to
issue more than, 7,545,454 shares of Parent Common Stock, in the
aggregate, whether directly or pursuant to conversion of Contingent
Rights II or Class B Special Shares.
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE ICL PRINCIPALS
The Company and the ICL Principals [unless otherwise noted]
severally and not jointly and severally as between the Company and the
ICL Principals and severally and not jointly and severely as between the
ICL Principals, represent and warrant to Parent as follows:
2.1 Organization and Good Standing. Company and each of the
------------------------------
Subsidiaries is a corporation duly organized and validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted. Company and each of the Subsidiaries is duly qualified or
licensed and in good standing to do business in each jurisdiction in which
the character of the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so duly qualified or licensed and
in good standing would not have a Company Material Adverse Effect.
Schedule 2.1 sets forth a complete and accurate list of the jurisdictions
- ------------
of incorporation or organization and qualification or license of Company
and the Subsidiaries. Company has heretofore delivered to Parent accurate
and complete copies of the Certificates or Articles of Incorporation and
Bylaws, or equivalent governing instruments, as currently in effect, of
Company and each of the Subsidiaries.
2.2 Capitalization. As of the date hereof, the authorized
--------------
capital stock of Company (THE "COMPANY STOCK") consists of an unlimited
number of Common Shares, an unlimited number of Class B
5
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<PAGE>
Shares, 1,841,000 Class C Shares, and an unlimited number of Class D
Shares. As of the date hereof, 13,500,000 shares of Common Stock, 100
Class B Shares, 100 Class D Shares, and no Class C Shares of Company Stock
are issued and outstanding. No other capital stock of Company is issued or
outstanding. All issued and outstanding shares of the Company Stock are
duly authorized, validly issued, fully paid and non-assessable and are
issued free of preemptive rights and in compliance with applicable
corporate and securities Laws. Except as set forth on Schedule 2.2
------------
attached hereto, as of the date of this Agreement there are no outstanding
rights, reservations of shares, subscriptions, warrants, puts, calls,
unsatisfied preemptive rights, options or other agreements of any kind
relating to any of the capital stock or any other security of Company, and
there is no authorized or outstanding security of any kind convertible into
or exchangeable for any such capital stock or other security. There are no
restrictions upon the transfer of or otherwise pertaining to the securities
(including, but not limited to, the ability to pay dividends thereon) or
retained earnings of Company and the Subsidiaries or the ownership thereof
other than those, if any, described on Schedule 2.2 attached hereto or
------------
those imposed generally by the Securities Act, the Securities Exchange Act,
applicable state or foreign securities Laws or applicable corporate Law.
2.3 Subsidiaries. Schedule 2.3(a) attached hereto sets forth
------------ ---------------
the name and percentages of any outstanding capital stock or other interest
held, directly or indirectly, by Company. Except as set forth on Schedule
--------
2.3(b) attached hereto, all of the capital stock and other interests so
- ------
held by Company are owned by it or a Subsidiary as indicated on said
Schedule 2.3(a), free and clear of any claim, lien, encumbrance, security
- ---------------
interest or agreement with respect thereto. All of the outstanding shares
of capital stock in each of the Subsidiaries are duly authorized, validly
issued, fully paid and non-assessable and were issued free of preemptive
rights and in compliance with applicable corporate and securities Laws.
Except as set forth on Schedule 2.3(c) attached hereto, there are no
---------------
irrevocable proxies, voting agreements or similar obligations with respect
to such capital stock of the Subsidiaries and no equity securities or other
interests of any of the Subsidiaries are or may become required to be
issued or purchased by reason of any options, warrants, rights to subscribe
to, puts, calls, reservation of shares or commitments of any character
whatsoever relating to, or securities or rights convertible into or
exchangeable for, shares of any capital stock of any Subsidiary, and there
are no contracts, commitments, understandings or arrangements by which any
Subsidiary is bound to issue additional shares of its capital stock, or
options, warrants or rights to purchase or acquire any additional shares of
its capital stock or securities convertible into or exchangeable for such
shares.
2.4 Authorization; Binding Agreement. Company, the ICL
--------------------------------
Principals, the Barbadian Trusts and ICL, as attorney-in-fact for the
Shareholders not signing this Agreement, have all requisite power and
authority to execute and deliver this Agreement and the Company Transaction
Agreements and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the other
agreements and documents referred to herein and to be executed in
connection herewith to which Company, the ICL Principals, the Barbadian
Trusts, ICL or any Shareholder is or will be a party or a signatory (THE
"COMPANY TRANSACTION AGREEMENTS") and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by
Company's Board of Directors, ICL's Board of Directors, and the trustees of
The J.L.R. Family Trust, The Paisley Family Trust and the Barbadian
Trusts and no other corporate or other proceedings on the part of Company,
any Subsidiary, the ICL Principals, ICL or any Shareholder are necessary to
authorize the execution and delivery of this Agreement and the Company
Transaction Agreements or to consummate the transactions contemplated
hereby or thereby, except for the concurrence of the Subordinated Lenders.
This Agreement has been duly and validly executed and delivered by Company,
the ICL Principals, the Barbadian Trusts and ICL, as attorney-in-fact for
the Shareholders not signing this Agreement, and constitutes, and upon
execution and delivery thereof as contemplated by this Agreement, the
Company Transaction Agreements will constitute, the legal, valid and
binding agreements of Company, the ICL Principals and the Shareholders,
enforceable against Company, the ICL Principals and the Shareholders in
accordance with its and their respective terms, except to the extent that
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by principles of equity regarding the
availability of remedies (COLLECTIVELY, THE "ENFORCEABILITY EXCEPTIONS").
The Powers of Attorney are in full force and effect and ICL has full
authority under the Powers of Attorney to execute this Agreement and the
Company Transaction Agreements as attorney-in-fact for the Shareholders not
signing this Agreement, to bind such Shareholders to the obligations of the
Shareholders set forth in this
6
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Agreement and the Company Transaction Agreements, and to transfer the
Company Common Shares to Newco II as contemplated by this Agreement.
2.5 Governmental Approvals. No consent, approval, waiver or
----------------------
authorization of, notice to or declaration or filing with ("CONSENT") any
nation or government, any state, province, or other political subdivision
thereof, any Person, authority or body exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government including, without limitation, any governmental or regulatory
authority, agency, department, board, commission or instrumentality, any
court, tribunal or arbitrator and any self-regulatory organization
("GOVERNMENTAL AUTHORITY") on the part of the Shareholders, ICL, the ICL
Principals, the Company or any of the Subsidiaries is required in
connection with the execution or delivery by the ICL Principals, ICL, as
attorney-in-fact for the Shareholders, or the Company of this Agreement and
the Company Transaction Agreements or the consummation by Company or the
Shareholders of the transactions contemplated hereby or thereby other than
(i) filings with the SEC and state and provincial securities laws
administrators and other filings required under the Canada Business
Corporations Act, (ii) those Consents from or with Governmental Authorities
set forth on Schedule 2.5 attached hereto, (iii) filings under the HSR
------------
Act, (iv) filings with the Committee on Foreign Investment in the United
States for a determination as to whether the transaction contemplated by
this Agreement is permitted under the Exon-Florio Amendment (Section 721)
to the Defense Production Act of 1950 (THE "EXON-FLORIO FILING"), (v)
filings under Investment Canada Act and the Competition Act, (vi) any
filings required by the U.S. Department of Commerce's reporting
requirements for foreign investment in the United States, and (vii) those
Consents that, if they were not obtained or made, do not or would not have
a Company Material Adverse Effect.
2.6 No Violations. The execution and delivery of this Agreement
-------------
and the Company Transaction Agreements, the consummation of the
transactions contemplated hereby and thereby and compliance by Company,
ICL, the ICL Principals and Shareholders with any of the provisions hereof
or thereof will not (i) conflict with or result in any breach of any
provision of the Certificate and/or Articles of Incorporation or Bylaws or
other governing instruments of Company or any of the Subsidiaries or of any
provision of the trust agreements of the Shareholders that are trusts, (ii)
except as set forth on Schedule 2.6 attached hereto, require any Consent
------------
under or result in a violation or breach of, or constitute (with or without
due notice or lapse of time or both) a default (or give rise to any right
of termination, cancellation or acceleration or augment the performance
required) under any of the terms, conditions or provisions of any Company
Material Contract or other obligation to which Shareholders, ICL, Company
or any Subsidiary is a party or by which any of them or any of their
properties or assets may be bound, (iii) result in the creation or
imposition of any lien or encumbrance of any kind upon any of the assets of
Company or any Subsidiary, or (iv) subject to obtaining the Consents from
Governmental Authorities referred to in Section 2.5 above contravene any
-----------
applicable provision of any constitution, treaty, statute, law, code, rule,
regulation, ordinance, policy or order of any Governmental Authority,
including without limitation those Governmental Authorities in the United
States and Canada, or other matters having the force of law including, but
not limited to, any orders, decisions, injunctions, judgments, awards and
decrees of or agreements with any court or other Governmental Authority
("LAW") currently in effect to which any Shareholder, ICL, Company or any
Subsidiary or its or any of their respective assets or properties are
subject, except in the case of clauses (ii), (iii) and (iv), above, for any
deviations from the foregoing which do not or would not have a Company
Material Adverse Effect.
2.7 Litigation. Except as set forth in Schedule 2.7 attached
---------- ------------
hereto, (i) the Company represents and warrants to Parent that there is no
action, cause of action, claim, demand, suit, proceeding, citation,
summons, subpoena, inquiry or investigation of any nature, civil, criminal,
regulatory or otherwise, in law or in equity, by or before any court,
tribunal, arbitrator, mediator or other Governmental Authority
("LITIGATION") pending or, to the knowledge of Company, threatened against
Company, any Subsidiary, or any officer, director, employee or agent
thereof, in his or her capacity as such, or as a fiduciary with respect to
any Benefit Plan of Company, or otherwise relating, in a manner that could
have a Company Material Adverse Effect, to Company, any Subsidiary, or the
securities of any of them, or any properties or rights of Company or any of
the Subsidiaries or that could prevent or delay the consummation of the
transactions contemplated by this Agreement; and (ii) the ICL Principals
represent and warrant to Parent that to the knowledge of the ICL Principals
there is no Litigation pending or threatened against Company, any
7
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Subsidiary, or any officer, director, employee or agent thereof, in his or
her capacity as such, or as a fiduciary with respect to any Benefit Plan of
Company, or otherwise relating, in a manner that could have a Company
Material Adverse Effect, to Company, any Subsidiary, or the securities of
any of them, or any properties or rights of Company or any of the
Subsidiaries or that could prevent or delay the consummation of the
transactions contemplated by this Agreement.
2.8 Absence of Certain Changes or Events. Except as set forth
------------------------------------
in Schedule 2.8 attached hereto, since November 1, 1998, through the date
------------
of this Agreement, to the knowledge of the ICL Principals, there has not
been any event, occurrence, fact, condition, change, development or effect
("EVENT") that could reasonably be expected to have a Company Material
Adverse Effect.
2.9 Finders and Investment Bankers. Neither Company nor any
------------------------------
Subsidiary nor any of its respective officers or directors has employed any
broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the transactions
contemplated hereby other than a fee of U.S. $265,000 payable to ICL by
Parent or any direct or indirect subsidiary of Parent immediately following
Closing. There are no other fees due from the Company or any Subsidiary to
ICL and upon Closing neither the Company nor any Subsidiary will have any
further obligations to ICL pursuant to any management agreement or other
similar agreement.
2.10 Contracts. Except as set forth in the PCP Acquisition
---------
Agreement or Schedule 2.10 attached hereto, the Company represents and
-------------
warrants to Parent, and the ICL Principals represent and warrant to the
Parent that to their knowledge, neither Company nor any Subsidiary is a
party or is subject to any Company Material Contract. Company has made
available to Parent true and accurate copies of the Company Material
Contracts.
2.11 Liabilities. From November 1, 1998, through the date of
-----------
this Agreement, except as expressly disclosed in Schedule 2.11 or
-------------
elsewhere is this Agreement or the Schedules attached hereto, to the
knowledge of ICL Principals, Company does not have any direct or indirect
indebtedness, liability, claim, loss, damage, deficiency, obligation or
responsibility, fixed or unfixed, choate or inchoate, liquidated or
unliquidated, secured or unsecured, accrued, absolute, contingent or
otherwise, whether or not of a kind required by Canadian generally accepted
accounting principles to be set forth in a financial statement other than
those incurred in the ordinary course of business or in an amount not in
excess of U.S. $50,000 individually or U.S. $100,000 in the aggregate.
Except as set forth on Schedule 2.11 attached hereto or elsewhere in this
-------------
Agreement or the Schedules, as of the date of this Agreement, Company does
not have any (i) obligations in respect of borrowed money, (ii) obligations
evidenced by bonds, debentures, notes or other similar instruments, (iii)
to the knowledge of ICL Principals, obligations which would be required by
generally accepted accounting principles to be classified as "capital
leases," (iv) to the knowledge of ICL Principals, obligations to pay the
deferred purchase price of property or services, except trade accounts
payable arising in the ordinary course of business and payable not more
than twelve (12) months from the date of incurrence, and (v) to the
knowledge of the ICL Principals any guaranties of any obligations of any
other Person.
2.12 Real Estate.
-----------
(a) Neither the Company nor any of the Subsidiaries owns any
real property.
(b) Schedule 2.12(b) attached hereto sets forth a true,
----------------
correct and complete schedule as of the date of this Agreement of all
leases, subleases, easements, rights-of-way, licenses or other agreements
entered into after the PCP Closing Date under which Company or any of the
Subsidiaries uses or occupies, or has the right to use or occupy, now or in
the future, any real property or improvements thereon (THE "COMPANY REAL
PROPERTY LEASES"). Except for the matters listed on said Schedule
--------
2.12(b), Company or a Subsidiary, as indicated thereon, to the knowledge
- -------
of the ICL Principals, holds the leasehold estate under or other interest
in each Company Real Property Lease and each lease for real property that
existed on the PCP Closing Date free and clear of all liens, encumbrances
and other rights of occupancy other than statutory landlords, or mechanics'
liens which have not been executed upon. All of the real property and
8
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improvements occupied by the Company or any Subsidiary under the Company
Real Property Leases and each lease for real property that existed on the
PCP Closing Date are used by the Company as office and graphic design space
only.
2.13 Corporate Records. The corporate record books of or
-----------------
relating to Company made available to Parent by Company contain accurate
and complete records of (i) all corporate actions of the stockholders and
directors (and committees thereof) of Company, (ii) the Certificate and/or
Articles of Incorporation, Bylaws and/or other governing instruments, as
amended, of Company, and (iii) the issuance and transfer of stock of
Company. Except as set forth on Schedule 2.13 attached hereto, Company
-------------
does not have any of its material records or information recorded, stored,
maintained or held off the premises of Company or at other than its
solicitors' offices.
2.14 Labor Matters. The Company has only two employees.
-------------
2.15 Tax. Neither the Company nor the ICL Principals know of
---
any fact or have knowingly taken any action that could be reasonably
expected to prevent the transfer of shares contemplated by Section
--------
1.2(b) of this Agreement (with respect to the issuance of Class A
- ------
Special Shares and Class B Special Shares to residents of Canada holding
such shares as capital property) from qualifying as a tax deferred
transfer pursuant to Subsection 85(1) of Income Tax Act [Canada];
provided a joint election is filed on a timely basis in prescribed form.
2.16 PCP Acquisition Agreement. Neither Company nor any of the
---------------------------
ICL Principals had any knowledge on the date of the closing (THE "PCP
CLOSING DATE") under the Asset Purchase Agreement by and among the
Company, Pacific Coast Publishing, Inc., a Washington corporation,
Leonard Langley ("LANGLEY") and Gary Calkins ("CALKINS") and Pacific
Coast Publishing, Ltd. (formerly PCP Acquisition Inc.), a Washington
corporation (THE "PCP ACQUISITION AGREEMENT") or has had at any time
after the PCP Closing Date or currently has any knowledge (i) that any
of the representations and warranties made by Pacific Coast Publishing,
Inc., Langley and Calkins (COLLECTIVELY, THE "PCP SELLERS") to the
Company and PCP were untrue, inaccurate or incomplete; (ii) that the PCP
Sellers, or any of them, would be unable to fully satisfy any of their
indemnification or other obligations set forth in the PCP Acquisition
Agreement; or (iii) of any Event that would result in a violation or
breach of, or constitute (with or without due notice of lapse of time or
both) a default by Company or any Subsidiary of any of their respective
obligations under the PCP Acquisition Agreement or any of the other
agreements entered into in connection with the acquisition of PCP ("THE
PCP TRANSACTION DOCUMENTS") or any other Event that would allow the PCP
Sellers, or any of them, to offset against or otherwise reduce their
respective indemnification obligations under the PCP Acquisition
Agreement. Company and the ICL Principals agree that they will give
prompt written notice to Parent if between the date of this Agreement
and the Closing Date they obtain knowledge of any fact that would make
the representations and warranties set forth in this Section 2.16
------------
untrue if they were made at that time. Neither the Company nor any of
the Subsidiaries have assigned, transferred or otherwise conveyed any of
their respective rights or entitlements under the PCP Acquisition
Agreement or the PCP Transaction Documents.
2.17 Knowledge. When a representation or warranty of the ICL
---------
Principals contained in Article II hereof is qualified (i) by the
----------
"knowledge" of such ICL Principals, or (ii) by a statement that the ICL
Principals "have no knowledge" of factual matters comprising the
representation or warranty, or (iii) by a statement that the ICL
Principals are "unaware" of factual matters comprising the
representation or warranty, or (iv) by words of similar import, such
"knowledge qualifiers" mean that each of the ICL Principals or their
respective representatives have affirmatively and actively made due
inquiry of Douglas G. McIntyre, John Woodall and Jay Cramer or any of
their respective replacements and that none of the ICL Principals have
learned of any information, fact or event that would make the
representation or warranty of the ICL Principal untrue, inaccurate,
incorrect or incomplete. Knowledge possessed by or otherwise obtained
by any one ICL Principal after due inquiry as provided herein with
respect to a representation or warranty qualified by "knowledge" shall
be deemed to be known by, or learned of by all of the ICL Principals.
9
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ARTICLE III - REPRESENTATIONS AND WARRANTIES
OF PARENT
Parent represents and warrants to the Company and the Shareholders
as follows:
3.1 Organization and Good Standing. Parent is a corporation
------------------------------
duly organized and validly existing under the laws of the State of Delaware
and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
Each of the Active Parent Subsidiaries is a corporation, duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation or organization and has all requisite corporate, power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted, except where the failure to be so duly
organized, validly existing and in good standing or to have such power and
authority would not have a Parent Material Adverse Effect. Parent and each
of the Active Parent Subsidiaries is duly qualified or licensed and in good
standing to do business in each jurisdiction in which the character of the
property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary, except
where the failure to be so duly qualified or licensed and in good standing
would not have a Parent Material Adverse Effect. Parent has heretofore
made available to Company accurate and complete copies of the Certificates
or Articles of Incorporation and Bylaws, or equivalent governing
instruments, as currently in effect, of Parent and each of the Active
Parent Subsidiaries.
3.2 Capitalization. As of the date hereof, the authorized
--------------
capital stock of Parent consists of 180,000,000 shares of common stock of
Parent, par value $0.0001 per share ("PARENT COMMON STOCK") and 20,000,000
shares of preferred stock, par value $0.0001 per share as to which 142,857
shares have been designated as Series A Redeemable Convertible Preferred
Stock. As of the opening of business on the date of this Agreement, (a)
19,917,262 shares of Parent Common Stock were issued and outstanding, (b)
142,857 shares of the Parent Series A Stock were issued and outstanding and
(c) 234,141 shares of Parent Common Stock held as treasury shares. No
other capital stock of Parent is issued or outstanding. All issued and
outstanding shares of the Parent Common Stock and Parent Preferred Stock
are duly authorized, validly issued, fully paid and non-assessable and were
issued free of preemptive rights and in compliance with applicable
corporate and securities Laws. Except as set forth on Schedule 3.2
------------
attached hereto, as of the date of this Agreement there are no outstanding
rights, reservations of shares, subscriptions, warrants, puts, calls,
unsatisfied preemptive rights, options or other agreements of any kind
relating to any of the capital stock or any other security of Parent, and
there is no authorized or outstanding security of any kind convertible into
or exchangeable for any such capital stock or other security. There are no
restrictions upon the transfer of or otherwise pertaining to the securities
(including, but not limited to, the ability to pay dividends thereon) or
retained earnings of Parent and the Active Parent Subsidiaries or the
ownership thereof other than those pursuant to the Parent Guaranty or the
Great Western Credit Agreement, or those imposed generally by the
Securities Act, the Securities Exchange Act, applicable state or foreign
securities Laws or applicable corporate Law.
3.3. Subsidiaries. Except as set forth on Schedule 3.3, all of
------------ ------------
the capital stock and other interests of the Active Parent Subsidiaries
held by Parent are owned by it or a Parent subsidiary, free and clear of
any claim, lien, encumbrance, security interest or agreement with respect
thereto. All of the outstanding shares of capital stock in each of the
Active Parent Subsidiaries held directly or indirectly by Parent are duly
authorized, validly issued, fully paid and non-assessable and were issued
free of preemptive rights and in compliance with applicable corporate and
securities Laws. Except as set forth on Schedule 3.3 attached hereto,
------------
there are no irrevocable proxies, voting agreements or similar
obligations with respect to such capital stock of the Active Parent
Subsidiaries and no equity securities or other interests of any of the
Active Parent Subsidiaries are or may become required to be issued or
purchased by reason of any obligations, options, warrants, rights to
subscribe to puts, calls, reservation of shares or commitments of any
character whatsoever relating to, or securities or rights convertible
into or exchangeable for, shares of any capital stock of any Active
Parent Subsidiary, and there are no contracts, commitments,
understandings or arrangements by which any Active Parent Subsidiary is
bound to issue additional shares of its capital stock, or options,
warrants or rights to purchase or acquire any additional shares of its
capital stock or securities convertible into or exchangeable for such
shares.
10
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3.4 Authorization; Binding Agreement. Parent has all requisite
--------------------------------
corporate power and authority to execute and deliver this Agreement and the
Parent Transaction Agreements and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
other agreements and documents referred to herein and to be executed in
connection herewith to which Parent is or will be a party or a signatory
(THE "PARENT TRANSACTION AGREEMENTS") and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by the Board of Directors of Parent and except for the approval
of the holders of the Parent Common Stock, no other corporate proceedings
on the part of Parent are necessary to consummate the transactions
contemplated hereby or thereby except for the concurrence of Bank of
America National Trust and Savings Association under the Great Western
Credit Agreement. This Agreement has been duly and validly executed and
delivered by Parent and constitutes, and upon execution and delivery
thereof as contemplated by this Agreement, the Parent Transaction
Agreements will constitute, the legal, valid and binding agreements of
Parent, enforceable against Parent in accordance with its and their
respective terms, subject to the Enforceability Exceptions.
3.5 Governmental Approvals. No Consent from or with any
----------------------
Governmental Authority on the part of Parent or any of the Active Parent
Subsidiaries, is required in connection with the execution or delivery by
Parent of this Agreement and the Parent Transaction Agreements or the
consummation by Parent of the transactions contemplated hereby or thereby
other than (i) filings with the SEC, state securities laws administrators
and the NYSE, (ii) those Consents from or with Governmental Authorities set
forth on Schedule 3.5 hereto, (iii) the Exon-Florio Filings, filings
------------
under the HSR Act, filings with the Ontario Securities Commission and those
required under the Canada Business Corporations Act, the Investment Canada
Act and the Competition Act, (iv) any filings required by the U.S.
Department of Commerce's reporting requirements for foreign investment in
the United States; and (v) those Consents that, if they were not obtained
or made, do not or would not have a Parent Material Adverse Effect.
3.6 No Violations. The execution and delivery of this Agreement
-------------
and the Parent Transaction Agreements, the consummation of the transactions
contemplated hereby and thereby and compliance by Parent with any of the
provisions hereof or thereof will not (i) conflict with or result in any
breach of any provision of the Certificate and/or Articles of Incorporation
or Bylaws or other governing instruments of Parent or any of the Active
Parent Subsidiaries, except as set forth on Schedule 3.6, (ii) require
------------
any Consent under or result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give
rise to any right of termination, cancellation or acceleration or augment
the performance required) under any of the terms, conditions or provisions
of any Parent Material Contract or other obligation to which Parent or any
Parent subsidiary, is a party or by which any of them or any of their
properties or assets may be bound, except for compliance with the
requirements under that certain Guaranty of Parent (THE "PARENT GUARANTY")
given pursuant to the Loan Agreement dated as of May 14, 1999 by and among
Great Western Directories, Inc., the Lenders signatories thereto, and Bank
of America National Trust and Savings Association as Administrative Agent
(THE "GREAT WESTERN CREDIT AGREEMENT"), (iii) result in the creation or
imposition of any lien or encumbrance of any kind upon any of the assets of
Parent or any Parent Subsidiary, or (iv) subject to obtaining the Consents
from Governmental Authorities referred to in Section 3.5 above,
-----------
contravene any Law currently in effect to which Parent or any Parent
subsidiary or its or any of their respective assets or properties are
subject, except in the case of clauses (ii), (iii) and (iv) above, for any
deviations from the foregoing which do not or would not have a Parent
Material Adverse Effect.
3.7 Securities Filings and Litigation. Parent has made
---------------------------------
available to Company true and complete copies of (i) its Annual Reports on
Form 10-K, as amended, for the years ended December 31, 1997 and 1998, as
filed with the SEC, (ii) its proxy statement relating to the meeting of
shareholders held on July 29, 1998, as filed with the SEC, and (iii) all
other reports, statements and registration statements and amendments
thereto (including, without limitation, Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K, as amended) filed by Parent with the SEC since
February 18, 1998. The reports and statements set forth in clauses (i)
through (iii), above, and those subsequently provided or required to be
provided pursuant to this section, are referred to collectively as the
"PARENT SECURITIES FILINGS." As of their respective dates, or as of the
date of the last amendment thereof, if amended after filing, none of the
Parent Securities Filings (including all schedules thereto and disclosure
documents incorporated by reference therein), contained or, as
11
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<PAGE>
to Parent Securities Filings subsequent to the date hereof, will contain
any untrue statement of a material fact or omitted or, as to Parent
Securities Filings subsequent to the date hereof, will omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading. Each of the Parent Securities Filings at the time of
filing or as of the date of the last amendment thereof, if amended after
filing, complied or, as to Parent Securities Filings subsequent to the date
hereof, will comply in all material respects with the Securities Exchange
Act or the Securities Act, as applicable. Except as set forth in Schedule
--------
3.7, there is no Litigation pending or, to the knowledge of Parent,
- ---
threatened against Parent or any Parent subsidiary, any officer, director,
employee or agent thereof, in his or her capacity as such, or as a
fiduciary with respect to any Benefit Plan of Parent, or otherwise
relating, in a manner that could have a Parent Material Adverse Effect, to
Parent, any Parent subsidiary or the securities of any of them, or any
properties or rights of Parent or any of the Parent subsidiaries that could
prevent or delay the consummation of the transactions contemplated by this
Agreement. No event has occurred as a consequence of which Parent would be
required to file a Current Report on Form 8-K pursuant to the requirements
of the Securities Exchange Act as to which such a report has not been
timely filed with the SEC. Any reports, statements and registration
statements and amendments thereof (including, without limitation, Reports
on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-
K, as amended) filed by Parent with the SEC after the date hereof shall be
provided to Company upon such filing.
3.8 Parent Financial Statements. The audited consolidated and
---------------------------
unaudited interim financial statements of Parent and the Parent
subsidiaries included in the Parent Securities Filings (THE "PARENT
FINANCIAL STATEMENTS") have been made available to Company. Except as
noted thereon, the Parent Financial Statements were prepared in accordance
with generally accepted accounting principles applicable to the business of
Parent and the Parent subsidiaries consistently applied in accordance with
past accounting practices and fairly present (including, but not limited
to, the inclusion of all adjustments with respect to interim periods which
are necessary to present fairly the financial condition and assets and
liabilities or the results of operations of Parent and the Parent
subsidiaries, subject to normal year-end adjustments in the ordinary course
with respect to certain items immaterial in amount or effect and the
exclusion of footnote disclosure in interim Parent Financial Statements)
the financial condition and assets and liabilities or the results of
operations of Parent and the Parent subsidiaries as of the dates and for
the periods indicated. Except as set forth in Schedule 3.8 or as
------------
reflected in the Parent Financial Statements, as of their respective dates,
neither Parent nor any Parent subsidiary had any debts, obligations,
guaranties of obligations of others or liabilities (contingent or
otherwise) that would be required in accordance with generally accepted
accounting principles to be disclosed in the Parent Financial Statements.
3.9 Absence of Certain Changes or Events. Except as set forth
------------------------------------
in the Parent Securities Filings made available by Parent to Company prior
to the date of this Agreement or in Schedule 3.9 attached hereto, since
------------
March 31, 1999, through the date of this Agreement, there has not been:
(i) any Event that could reasonably be expected to have a Parent Material
Adverse Effect; or (ii) any agreement by Parent to take any action that
would result in a breach of Section 6.7 below.
-----------
3.10 Compliance with Laws. The business of Parent and the Parent
--------------------
subsidiaries, has been operated in compliance with all Laws applicable
thereto, except for any instances of non-compliance which do not and would
not have a Parent Material Adverse Effect.
3.11 Permits. (i) Parent and the Parent subsidiaries have all
-------
permits, certificates, licenses, approvals, tariffs and other
authorizations required in connection with the operation of their business
(COLLECTIVELY, "PARENT PERMITS"), (ii) neither Parent nor any Parent
Subsidiary is in violation of any Parent Permit, and (iii) no proceedings
are pending or, to the knowledge of Parent, threatened, to revoke or limit
any Parent Permit, except, in the case of clause (i) or (ii) above, those
the absence or violation of which do not and would not have a Parent
Material Adverse Effect.
3.12 Finders and Investment Bankers. Neither Parent nor any of
------------------------------
its officers or directors has employed any broker or finder or otherwise
incurred any liability for any brokerage fees, commissions or finders' fees
in connection with the transactions contemplated hereby, except that
PaineWebber Incorporated
12
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has been engaged to deliver the fairness opinion required to be delivered
pursuant to Section 7.1(m) and NationsBanc Montgomery Securities, L.L.C.
--------------
has been engaged to assist in the sale(s) of the CLEC Operations and a copy
of the engagement letters and other related documents have been furnished
to the Company.
3.13 Contracts. Except as set forth in Schedule 3.13, neither
--------- -------------
Parent nor any Parent subsidiary is a party to any material note, bond,
mortgage, indenture, contract, lease, license, agreement, understanding,
instrument, bid or proposal ("PARENT MATERIAL CONTRACT"). Parent has made
available to Company true and accurate copies of the Parent Material
Contracts. All such Parent Material Contracts are valid and binding and
are in full force and effect and enforceable in accordance with their
respective terms, subject to the Enforceability Exceptions.
3.14 Corporate Records. The respective corporate record books of
-----------------
or relating to Parent and each of the Active Parent Subsidiaries made
available to Company by Parent contain accurate and complete records of (i)
all corporate actions of the respective shareholders and directors (and
committees thereof) of Parent and the Active Parent Subsidiaries, (ii) the
Certificate and/or Articles of Incorporation, Bylaws and/or other governing
instruments, as amended, of Parent and the Active Parent Subsidiaries, and
(iii) the issuance and transfer of stock of Parent and the Active Parent
Subsidiaries.
ARTICLE IV - ADDITIONAL COVENANTS OF THE COMPANY AND THE ICL PRINCIPALS
The Company and the ICL Principals severally and not jointly and
severally and not jointly and severally as between the Company and the
ICL Principals and severally as between the ICL Principals covenant and
agree as follows:
4.1 Notification of Certain Matters. The Company and the ICL
-------------------------------
Principals shall give prompt notice to Parent if any of the following occur
from the date of this Agreement through the Closing Date: (i) receipt of
any notice of, or other communication relating to, a default or Event
which, with notice or lapse of time or both, would become a default under
any Company Material Contract; (ii) receipt of any notice or other
communication from any third party alleging that the Consent of such third
party is or may be required in connection with the transactions
contemplated by this Agreement; (iii) receipt of any material notice or
other communication from any Governmental Authority in connection with the
transactions contemplated by this Agreement; (iv) receipt of any notice of
or other communication regarding or otherwise obtaining knowledge of an
Event which would have a Company Material Adverse Effect; (v) receipt of
any notice of or other communication regarding or otherwise obtaining
knowledge of the commencement or threat of any Litigation involving or
affecting any Shareholder that might adversely impact the transactions
contemplated by this Agreement, the Company or any Subsidiary, or any of
their respective properties or assets, or, to its knowledge, any employee,
agent, director or officer of the Company or any Subsidiary, in his or her
capacity as such or as a fiduciary under a Benefit Plan of the Company,
which, if pending on the date hereof, would have been required to have been
disclosed pursuant to Section 2.7, and (vi) receipt of any notice of or
-----------
other communication regarding or otherwise obtaining knowledge of any Event
that would cause a breach by the Company, a Subsidiary, or any Shareholder
of any provision of this Agreement or a Company Transaction Agreement,
including such a breach that would occur if such event had taken place on
or prior to the date of this Agreement.
4.2 Access and Information. Between the date of this Agreement
----------------------
and the Closing Date, the Company and the Subsidiaries, upon reasonable
notice, will give, and shall direct its accountants and legal counsel to
give, Parent, its lenders and their respective authorized representatives
(including, without limitation, financial advisors, accountants and legal
counsel) at all reasonable times access to all offices and other facilities
and to all contracts, agreements, commitments, books and records
(including, but not limited to, Tax returns) of or pertaining to the
Company and the Subsidiaries, will permit the foregoing to make such
inspections as they may require and will cause its officers promptly to
furnish Parent with (a) such financial and operating data and other
information with respect to the business and properties of the Company and
Subsidiaries as Parent may from time to time reasonably request including,
but not limited to, data and
13
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information required for inclusion in Parent's pending registration
statements and/or other Parent Securities Filings, and (b) a copy of each
material report, schedule and other document filed or received by the
Company or any Subsidiary pursuant to the requirements of applicable
securities Laws. The Company further agrees to permit an independent
accounting firm selected by Parent to either prepare or review the separate
company and consolidated corporate income tax returns and supporting
schedules for U.S., Canadian and state income tax purposes of the Company
and the Subsidiaries for fiscal year beginning November 1, 1998 and ending
on the earlier of October 31, 1999 or the date the Company is acquired,
provided that all of the costs and expenses of such services are paid by
the Parent. The foregoing access will be subject to government security
restrictions and restrictions contained in confidentiality agreements to
which the Company is subject and of which Parent has been advised prior to
the date of this Agreement; provided that the Company shall use its
reasonable best efforts to obtain waivers of such restrictions.
4.3 [Reserved.]
-----------
4.4 Reasonable Best Efforts. Subject to the terms and
-----------------------
conditions herein provided, the Company and ICL on behalf of the
Shareholders agree to use their reasonable best efforts to take, or cause
to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective as promptly
as practicable, but in any event, prior to the Closing, the transactions
contemplated by this Agreement and the Company Transaction Agreements
including, but not limited to (i) obtaining the Consent of others to this
Agreement, the Company Transaction Agreements and the transactions
contemplated hereby and thereby, (ii) the defending of any Litigation
against the Company, ICL, any Subsidiary, or any Shareholder challenging
this Agreement, the Transaction Agreements or the consummation of the
transactions contemplated hereby or thereby, (iii) obtaining all Consents
from Governmental Authorities required for the consummation of the
transactions contemplated hereby, (iv) timely making all necessary filings
under the HSR Act, and (v) timely making the Exon-Florio Filings and any
filings required under the Canada Business Corporations Act, and the
Investment Canada Act and by the U.S. Department of Commerce's reporting
requirements for foreign investments in the United States. Upon the terms
and subject to the conditions hereof, the Company and ICL on behalf of the
Shareholders agree to use their reasonable best efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all things
necessary to satisfy the other conditions of the Closing set forth herein.
The Company and ICL on behalf of the Shareholders will consult with counsel
for Parent as to, and will permit such counsel to participate in, at
Parent's expense, any Litigation referred to in clause (ii) above brought
against or involving the Company, any Subsidiary or any Shareholder.
4.5 Compliance. In consummating the transactions contemplated
----------
hereby, the Company and ICL on behalf of the Shareholders shall comply in
all material respects with the provisions of the Securities Exchange Act
and the Securities Act and shall comply, and/or cause the Subsidiaries to
comply or to be in compliance, in all material respects, with all other
applicable Laws.
4.6 Benefit Plans. Between the date of this Agreement and through
-------------
the Closing Date, no discretionary award or grant under any Benefit Plan of
the Company or a Subsidiary shall be made without the consent of Parent;
nor shall the Company or a Subsidiary take any action or permit any action
to be taken to accelerate the vesting of any warrants or options previously
granted pursuant to any such Benefit Plan. Neither the Company nor any
Subsidiary shall make any amendment to any Benefit Plan, any awards
thereunder or the terms of any security convertible into or exchangeable
for capital stock without the consent of Parent. Parent acknowledges the
granting of the options referred to in Section 6.1(v).
--------------
4.7 Tax Opinion Certification. Prior to the Closing Date, the
-------------------------
Company and the Shareholders shall provide tax counsel rendering an opinion
under Section 7.1(n) with a certificate concerning such factual matters
--------------
as such counsel identifies are relevant to its opinion.
4.8 [Reserved].
----------
4.9 Shareholders Agreement and Voting Trust Agreements. The
--------------------------------------------------
Company and ICL on behalf of the Shareholders shall cause all voting
trust agreements between the Shareholders, ICL and the
14
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Company and any powers of attorney or other agreements relating to the
voting or disposition of the capital stock of the Company (COLLECTIVELY,
"THE VOTING TRUST AGREEMENTS") and the Unanimous Shareholders Agreement
to be cancelled as of the Closing Date.
4.10 Transfer Restrictions. In addition to any other
---------------------
restrictions imposed by Law on the Shareholders' ability to transfer any
Parent Preferred Stock or Parent Common Stock received by the
Shareholders pursuant to this Agreement and the Exchange and Voting
Trust Agreement, each Shareholder agrees that such Shareholder will not
sell, transfer or otherwise dispose of any of the Class A Special
Shares, Class B Special Shares or Contingent Rights II received by such
Shareholder pursuant to this Agreement except pursuant to the laws of
descent and distribution or distributions from a trust to the
beneficiaries of such trust (provided that the distributee of such
shares by descent and distribution or from a trust shall remain subject
to the transfer restrictions set forth in this Section 4.10) and will
------------
not sell, transfer or otherwise dispose of the Parent Common Stock
received by such Shareholder pursuant to this Agreement or the Exchange
and Voting Trust Agreement for a period of six (6) months after the
Closing Date. For greater certainty, any Parent Common Stock received
pursuant to any of the exchanges contemplated in Article I and Parent
---------
Common Stock received on a conversion contemplated in Article I shall
---------
be freely transferable subject to the resale restrictions set forth in
this Section 4.10 and the Escrow Agreement and Rules 144 and 145 under
------------
the Securities Act. For purposes of this Section 4.10, a pledge of
------------
any shares subject to this Section 4.10 by a Shareholder to a
------------
financial institution as collateral security for loans arranged by such
Shareholder or for margining purposes shall not constitute a sale,
transfer, or other disposition of such shares so long as the financial
institution agrees not to foreclose thereon for a period of six (6)
months from the Closing Date and to be bound to the restrictions imposed
by this Section 4.10. Notwithstanding anything in this Section 4.10
------------ ------------
to the contrary, the restrictions on transfer imposed by this Section
-------
4.10 shall terminate, except with regard to the Contingent Rights II,
- ----
on the first to occur of any of the following events: (a) a take-over
bid (as such term is used in the Securities Exchange Act) is completed
for Parent; (b) Parent sells all, or substantially all, of its assets
either directly by the sale of shares of its subsidiaries or indirectly
by the sale of assets of its direct and indirect subsidiaries, or a
combination thereof (other than the CLEC Operations); or (c) Parent
ceases to have at least fifty-one percent (51%) of the aggregate votes
attaching to all of the issued and outstanding security of all classes
in the capital stock of its subsidiaries (except for the capital stock
of such subsidiaries comprising the CLEC Operations), including the
Company, WorldPages, or Great Western Directories, Inc., directly or
indirectly. The Shareholders acknowledge and agree that the following
legend will appear on all certificates representing Class A Special
Shares or Class B Special Shares received by the Shareholders pursuant
to this Agreement or the Exchange and Voting Trust Agreement:
EXCEPT AS PROVIDED IN SECTION 4.10 OF THE YPTEL AGREEMENT MADE AND
ENTERED INTO AS OF JUNE 3, 1999 BY AND AMONG THE CORPORATION, YPTEL
CORPORATION, THE SHAREHOLDERS OF YPTEL CORPORATION AND IMPERIAL CAPITAL
LIMITED (THE "YPTEL AGREEMENT"), THESE SECURITIES MAY NOT BE SOLD,
ASSIGNED, TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF
AND MAY ONLY BE ENCUMBERED OR PLEDGED IN ACCORDANCE WITH SECTION 4.10 OF
THE YPTEL AGREEMENT UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS
CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND AFTER
_________, 2000.
The Shareholders acknowledge and agree that the following legend
will appear on all certificates representing Parent Common Stock
received by the Shareholders pursuant to this Agreement or the Exchange
and Voting Trust Agreement:
EXCEPT AS PROVIDED IN SECTION 4.10 OF THE YPTEL AGREEMENT MADE AND
ENTERED INTO AS OF JUNE 3, 1999 BY AND AMONG THE CORPORATION, YPTEL
CORPORATION, THE SHAREHOLDERS OF YPTEL CORPORATION AND IMPERIAL CAPITAL
LIMITED (THE "YPTEL AGREEMENT"), THESE SECURITIES MAY NOT BE SOLD,
ASSIGNED, TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF
AND MAY ONLY BE ENCUMBERED OR PLEDGED IN ACCORDANCE WITH SECTION 4.10 OF
THE YPTEL AGREEMENT PRIOR TO __________, 2000, AND THE ISSUER SHALL NOT
BE REQUIRED TO
15
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GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, TRANSFER, ENCUMBRANCE,
PLEDGE, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO
___________, 2000 PURSUANT TO THE YPTEL AGREEMENT. UPON THE WRITTEN
REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE
THIS RESTRICTIVE LEGEND AFTER THE DATE SPECIFIED ABOVE.
The Shareholders who are "affiliates" of the Company within the
meaning of Rule 145 promulgated under the Securities Act acknowledge and
agree that the following additional legend will appear on all certificates
representing the Parent Common Stock received by such "affiliates" of the
Company pursuant to this Agreement or the Exchange and Voting Trust
Agreement:
IN ADDITION, THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE
ARE HELD SUBJECT TO ALL APPLICABLE PROVISIONS OF THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND THE RULES AND REGULATIONS
PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION ("SEC")
THEREUNDER. NO SALES, TRANSFERS OR OTHER DISPOSITION OF THESE SHARES
MAY BE MADE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OR UPON THE PRIOR DELIVERY TO ADVANCED COMMUNICATIONS
GROUP, INC ("ACG") OF AN OPINION FROM LEGAL COUNSEL SATISFACTORY TO ACG
AND IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO ACG AND ITS LEGAL
COUNSEL, STATING THAT SUCH SALE OR OTHER DISPOSITION IS BEING MADE
PURSUANT TO AND IN ACCORDANCE WITH THE REQUIREMENTS OF SEC RULES 144 AND
145 OR IS OTHERWISE EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT.
Anything to the contrary herein notwithstanding (but subject to the
restriction imposed on them pursuant to Rules 144 and 145 under the
Securities Act), Messrs. Jay Cramer and John Woodall are permitted to sell
that number of shares of Parent Common Stock received by them pursuant to
the transactions contemplated by this Agreement prior to the expiration of
the aforementioned six month period, to obtain the funds necessary to pay
taxes due as a result of the transactions contemplated by this Agreement,
but only to the extent that such taxes are required to be paid during the
six month period and such shares may not be sold earlier than one week
before the taxes are due and payable.
4.11 Subordinated Loan Agreement. The Company shall cause PCP
---------------------------
to satisfy all of its obligations under the Subordinated Loan Agreement
dated as of November 1, 1998 (THE "SUBORDINATED LOAN AGREEMENT") by and
among PCP (f/k/a PCP Acquisition, Inc.), the lenders which are parties
thereto (the "SUBORDINATED LENDERS") and Canterbury Mezzanine Capital,
L.P., as agent, including, without limitation, the repayment in full of
the Loans (as defined in the Subordinated Loan Agreement) and all
interest accrued thereon.
The Company shall use its reasonable best efforts to cause the
Subordinated Lenders to exercise the warrants evidenced by the Warrant
Certificates (as defined in the Subordinated Loan Agreement) and to
convert the Class B Shares issued to the Subordinated Lenders thereunder
into Company Common Stock.
4.12 Conduct of Business of Company and the Subsidiaries. The
---------------------------------------------------
Company covenants, represents and warrants that from the date of this
Agreement through the Closing Date, unless the Parent shall otherwise
expressly consent in writing, the Company shall, and the Company shall
cause each Subsidiary to, use its or their reasonable best efforts to
comply in all material respects with all Laws applicable to it or any of
its properties, assets or business and maintain in full force and effect
all authorizations and permits necessary for, or otherwise material to,
such business.
4.13 Affiliate Agreements. The Company and the ICL Principals
--------------------
shall use reasonable best efforts to ensure that each Person who is or may
be an "affiliate" of the Company within the meaning of Rule 145 promulgated
under the Securities Act shall enter into an affiliate agreement in a form
reasonably acceptable to Parent (THE "AFFILIATE AGREEMENTS").
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ARTICLE V - ADDITIONAL COVENANTS OF PARENT
Parent covenants and agrees as follows:
5.1 Conduct of Business of Parent and the Active Parent
----------------------------------------------------
Subsidiaries. Parent covenants, represents and warrants that from the
- ------------
date of this Agreement through the Closing Date, unless the Company shall
otherwise expressly consent in writing, Parent shall, and Parent shall
cause each Active Parent Subsidiary to, use its or their reasonable best
efforts to comply in all material respects with all Laws applicable to it
or any of its properties, assets or business and maintain in full force and
effect all the Parent Authorizations necessary for, or otherwise material
to, such business.
5.2 Notification of Certain Matters. Parent shall give prompt
-------------------------------
notice to the Company if any of the following occur from the date of this
Agreement through the Closing Date: (i) any notice of, or other
communication relating to, a default or Event which, with notice or lapse
of time or both, would become a default under any Parent Material Contract
which could have a Parent Material Adverse Effect; (ii) receipt of any
notice or other communication from any third party alleging that the
Consent of such third party is or may be required in connection with the
transactions contemplated by this Agreement; (iii) receipt of any material
notice or other communication from any regulatory authority (including, but
not limited to, the NYSE or any other securities exchange) in connection
with the transactions contemplated by this Agreement; (iv) receipt of any
notice of or other communication regarding or otherwise obtaining knowledge
of an Event which would have a Parent Material Adverse Effect; (v) receipt
of any notice of or other communication regarding or otherwise obtaining
knowledge of the commencement or threat of which Parent has knowledge of
any Litigation involving or affecting Parent or any Parent subsidiary or
any of their respective properties or assets, or, to its knowledge, any
employee, agent, director or officer, in his or her capacity as such, of
Parent or any Parent subsidiary which, if pending on the date hereof, would
have been required to have been disclosed pursuant to Section 3.7; and
-----------
(vi) receipt of any notice of or other communication regarding or otherwise
obtaining knowledge of any Event that could cause a breach by Parent of any
provision of this Agreement or a Parent Transaction Agreement, including
such a breach that could occur if such Event had taken place on or prior to
the date of this Agreement.
5.3 Access and Information. Between the date of this Agreement
----------------------
and the Closing Date, Parent will, upon reasonable notice, give the Company
and its authorized representatives (including, without limitation, its
financial advisors, accountants and legal counsel) at all reasonable times
access as reasonably requested to the offices and other facilities and to
all material contracts, agreements, commitments, books and records
(including, but not limited to, Tax returns) of or pertaining to Parent and
the Active Parent Subsidiaries, will permit the Company to make such
reasonable inspections as it may require and will cause its officers
promptly to furnish the Company with (a) such financial and operating data
and other information with respect to the business and properties of Parent
and the Active Parent Subsidiaries as the Company may from time to time
reasonably request, and (b) a copy of each material report, schedule and
other document filed or received by Parent or any Active Parent Subsidiary
pursuant to the requirements of applicable securities Laws, the NYSE or
other securities exchange, in each case as necessary in connection with the
transactions contemplated hereby. The foregoing access will be subject to
restrictions contained in Section 6.10 hereof.
------------
5.4 Compliance. In consummating the transactions contemplated
----------
hereby, Parent shall comply in all material respects with the provisions of
the Securities Exchange Act and the Securities Act and shall comply, and/or
cause the Active Parent Subsidiaries to comply or to be in compliance, in
all material respects, with all other applicable Laws.
5.5 SEC and Shareholder Filings. Parent shall send to the
---------------------------
Company a copy of all material public reports and materials as and when it
sends the same to its shareholders, the SEC, the NYSE or any other
securities commission or exchange.
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5.6 Tax Treatment. Prior to the Closing Date, Parent shall
-------------
provide tax counsel rendering an opinion under Subsection 7.1(n) with a
-----------------
certificate concerning such factual matters as such counsel identifies are
relevant to its opinion.
5.7 Reasonable Best Efforts. Subject to the terms and
-----------------------
conditions herein provided, Parent agrees to use its reasonable best
efforts to take, or cause to be taken, all actions, and to do, or cause to
be done, all things necessary, proper or advisable to consummate and make
effective as promptly as practicable, but in any event, prior to the
Closing, the transactions contemplated by this Agreement and the Parent
Transaction Agreements including, but not limited to (i) obtaining the
Consent of others to this Agreement, the Parent Transaction Agreements and
the transactions contemplated hereby and thereby, (ii) the defending of any
Litigation against the Parent or any Parent subsidiary, or any Shareholder
challenging this Agreement, the Parent Transaction Agreements or the
consummation of the transactions contemplated hereby or thereby, (iii)
obtaining all Consents from Governmental Authorities required for the
consummation of the transactions contemplated hereby, (iv) timely making
all necessary filings under the HSR Act, and (v) timely making the Exon-
Florio Filings and any filings required under the Canada Business
Corporations Act, the Investment Canada Act and by the U.S. Department of
Commerce's reporting requirements for foreign investments in the United
States. Upon the terms and subject to the conditions hereof, Parent agrees
to use its reasonable best efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary to satisfy the
other conditions of the Closing set forth herein. Parent will consult with
counsel for Company as to, and will permit such counsel to participate in,
at the Company's expense, any Litigation referred to in clause (ii) above
brought against or involving Parent or any Parent subsidiary.
5.8 Employee Benefit Plans. After the Closing Date, Parent
-----------------------
shall arrange for each employee participating in the Benefit Plan of the
Company and the Subsidiaries at such time to participate in any counterpart
Benefit Plans of Parent in accordance with the eligibility criteria
thereof, provided that (i) such participants shall receive full credit for
years of service with the Company or any of the Subsidiaries prior to the
transactions contemplated by this Agreement for all purposes for which such
service was recognized under the Benefit Plan of the Company and the
Subsidiaries including, but not limited to, recognition of service for
eligibility, vesting, and, to the extent not duplicative of benefits
received under such Benefit Plan of the Company and the Subsidiaries, the
amount of benefits, and (ii) such participants shall participate in the
Benefit Plans of Parent on terms no less favorable than those offered by
Parent to similarly situated employees of Parent. Notwithstanding the
foregoing, Parent may continue one or more of the Benefit Plans of the
Company and the Subsidiaries, in which case Parent shall have satisfied its
obligations hereunder with respect to the benefits so provided.
5.9 Expenses. If the transactions contemplated by this
--------
Agreement are consummated, all fees and expenses incurred in connection
with the transactions contemplated by this Agreement including, without
limitation, all legal, accounting, financial advisory, consulting fees,
a fee of U.S. $265,000 payable to ICL at Closing and the warrants
referred to in Section 7.1(g), and expenses relating to the
--------------
renegotiation of the Company's and the Subsidiaries' outstanding debt
and all other transaction fees and expenses (COLLECTIVELY, "TRANSACTION
EXPENSES") incurred by a party or its stockholders in connection with
the negotiation and effectuation of the terms and conditions of this
Agreement and the transactions contemplated hereby, shall be paid by
Parent or any direct or indirect subsidiary of Parent immediately after
Closing. If the transactions contemplated by this Agreement are not
consummated, all Transaction Expenses shall be the obligation of the
respective parties which incurred them.
5.10 Sale of CLEC Operations.
-----------------------
(a) Parent shall attempt to sell by the Anniversary Date
all of the shares of or otherwise dispose of the CLEC Operations. Any
such sale shall be for cash, assignment of indebtedness, or other
acceptable consideration as determined by (i) the Board of Directors of
Parent if before Closing or (ii) a committee of the Board of Directors
of Parent if after Closing. If acceptable non-cash consideration is
received, the Board of Directors or a committee of the Board of
Directors, as the case may be, in conjunction with the independent
certified public accountants of Parent, shall determine the fair market
value of the consideration received for the sale of the shares of or
other disposal of the CLEC Operations.
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(b) If the CLEC Sales Price received by Parent from the
sale(s) by Parent of CLEC Operations (i) prior to the Anniversary Date,
or (ii) within sixty (60) days after the Anniversary Date if, prior to
the Anniversary Date, Parent has entered into a definitive agreement for
the sale of a portion or all of the CLEC Operations (the applicable date
is hereinafter referred to as the "FINAL SALE DATE"), is greater than
Sixty Million Dollars (U.S. $60,000,000.00) (the amount by which the
CLEC Sales Price exceeds U.S. $60,000,000 is referred to hereinafter as
the "CLEC SALES PRICE INCREASE"), then each Eligible Parent Shareholder
shall have the right to receive, in the manner provided in the
certificate representing the Contingent Rights I, that number of shares
of Parent Common Stock determined by multiplying the total number of
Parent CLEC Shares by the Eligible Parent Shareholder's Proportionate
Share.
(c) If the CLEC Sales Price received by Parent from the
sale(s) by Parent of CLEC Operations prior to the Final Sale Date is
less than Forty Million Dollars (U.S. $40,000,000.00) (the amount by
which the CLEC Sales Price is less than U.S. $40,000,000 is referred to
hereinafter as the "CLEC SALES PRICE DECREASE"), then, the Eligible
Acquisition Shareholders, excluding, for purposes of this Section
5.10(c), Richard O'Neal, shall have the right to receive, in the manner
provided in the certificate of designation for the Class B Special
Shares and certificate representing the Contingent Rights II and in the
Exchange and Voting Trust Agreement, that number of shares of Parent
Common Stock determined by multiplying the total number of Acquisition
CLEC Shares by the Eligible Acquisition Shareholder's Proportionate
Share.
(d) For greater certainty any CLEC Operations that have
not been sold prior to the Final Sale Date shall be deemed to have no
value for purposes of determining the CLEC Sales Price Increase or CLEC
Sales Price Decrease.
(e) It is acknowledged and agreed that the number of
shares of Parent Common Stock which may be issued (i) to the Eligible
Parent Shareholders pursuant to Section 5.10(b) hereof, or (ii) to the
---------------
Eligible Acquisition Shareholders pursuant to Section 5.10(c) hereof
---------------
is to be calculated in conjunction with the number of shares of Parent
Common Stock which may be issued to Eligible Parent Shareholders as that
term is defined in the Big Stuff Agreement and the Web YP Agreement, or
which may be issued to Eligible Acquisition Shareholders, as that term
is defined in the Big Stuff Agreement and the Web YP Agreement. It is
the intent of the parties to this Agreement, the Web YP Agreement and
the Big Stuff Agreement that, if the closing of all such agreements
shall occur: (i) the number of shares of Parent Common Stock issuable
to the Eligible Parent Shareholders pursuant to Section 5.10(b) hereof
---------------
and the corresponding sections of the Web YP Agreement and the Big Stuff
Agreement (such sections, the "CLEC INCREASE SECTIONS") shall equal the
number of shares of Parent Common Stock calculated by reference to the
CLEC Increase Section of one such agreement only, not the number of
shares of Parent Common Stock calculated by reference to the CLEC
Increase Sections of all three such agreements; and (ii) the aggregate
number of shares (such aggregate number, the "SELLER SHARE NUMBER") of
Parent Common Stock issuable to the Eligible Acquisition Shareholders
pursuant to Section 5.10(c) hereof, to the Eligible Acquisition
---------------
Shareholders (as that term is defined in the Web YP Agreement) pursuant
to Section 5.11(c) of the Web YP Agreement, and to the Eligible
Acquisition Shareholders (as that term is defined in the Big Stuff
Agreement) pursuant to Section 5.11(c) of the Big Stuff Agreement (such
sections, the "CLEC DECREASE SECTIONS") shall be calculated as follows:
62.406014% of the Seller Share Number of shares of Parent Common Stock
are issuable pursuant to this Agreement; 25.56391% of the Seller Share
Number of shares of Parent Common Stock are issuable pursuant to the Web
YP Agreement; and 12.030075% of the Seller Share Number of shares of
Parent Common Stock are issuable pursuant to the Big Stuff Agreement.
5.11 Indemnification and Insurance.
-----------------------------
(a) Subject to Section 9.1(c), Parent shall cause the
--------------
Company, to the full extent required under the Company's Articles of
Incorporation or Bylaws in effect on the date of this Agreement, to
indemnify and hold harmless each present and former director, officer,
employee or agent
19
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of the Company and the Subsidiaries (COLLECTIVELY, THE "INDEMNIFIED
PARTIES") with respect to matters occurring through the Closing Date,
for a period of three (3) years after the Closing Date.
(b) For a period of three (3) years after the Closing Date
and to the extent available, Parent shall cause the Company to maintain
in effect directors' and officers' liability insurance covering those
Persons who are currently covered by the Company's directors and
officers' liability insurance policy on terms (including the amounts of
coverage and the amounts of deductibles, if any) that are no less
favorable to them in any material respect than the terms now applicable
to them under the Company's current insurance policies.
ARTICLE VI - ADDITIONAL COVENANTS OF THE PARENT, THE COMPANY
AND THE SHAREHOLDERS
6.1 Registration Rights and Stock Restriction Agreement.
---------------------------------------------------
(a) On or before the Closing Date, the Parent shall use its
reasonable best efforts to cause the following securities to be
registered with the SEC under the Securities Act:
(i) Parent Common Stock issuable upon exchange of the
Contingent Rights I;
(ii) Parent Common Stock issuable upon exchange of the
Contingent Rights II;
(iii) Parent Common Stock issuable upon exchange of the
Class A Special Shares; and
(iv) Parent Common stock issuable upon exchange of the
Class B Special Shares.
(b) The Parent shall use its reasonable best efforts to cause to
be registered with the appropriate Governmental Authorities under state
blue sky Laws and the Canadian and provincial securities laws and the
rules and regulations thereunder:
(i) Parent Common Stock issuable upon exchange of the
Class A Special Shares; and
(ii) Parent Common Stock issuable upon exchange of the
Class B Special Shares.
(c) The Parent shall cause Newco II to use its reasonable best
efforts to cause to be registered with the SEC:
(i) Class A Special Shares; and
(ii) Class B Special Shares.
(d) The Parent shall cause Newco II to use its reasonable best
efforts to cause to be registered with the appropriate Governmental
Authorities under state blue sky Laws and the Canadian and provincial
securities laws and the rules and regulations thereunder:
(i) Class A Special Shares; and
(ii) Class B Special Shares.
(e) Such Registration Statements shall state, if permitted on
the applicable Registration Statement form, that such Registration
Statement, also registers such indeterminate number of additional shares
of Parent Common Stock as may become issuable upon the exercise or
exchange, as the case may
20
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be, of the Contingent Rights I, the Contingent Rights II, the Class A
Special Shares and the Class B Special Shares to prevent dilution
resulting from stock splits, stock dividends or similar transactions.
(f) The Parent shall promptly prepare and file, and cause Newco
II to prepare and file with the appropriated Governmental Authorities,
such amendments (including post-effective amendments) and supplements to
the Registration Statements and the prospectus(es) used in connection
with the Registration Statement, as may be necessary to keep the
Registration Statements effective at all times during the periods the
Contingent Rights I, the Contingent Rights II, the Class A Special
Shares and the Class B Special Shares are exchangeable or convertible,
as the case may be. The Parent shall use its reasonable best efforts
and shall cause Newco II to use its reasonable best efforts, to cause
such amendment and/or new Registration Statements to become effective as
soon as practicable following the filing thereof.
(g) The Parent shall cause all Parent Common Stock issuable upon
the exchange and/or conversion of (i) the Contingent Rights I, (ii)
Contingent Rights II, (iii) Class A Special Shares, and (iv) Class B
Special Share to be listed on each securities exchange on which similar
securities issued by the Parent are then listed.
6.2 [Reserved].
----------
6.3 [Reserved].
----------
6.4 Legal Requirements. Subject to the terms and conditions
------------------
provided in this Agreement, each of the parties hereto shall use its
reasonable best efforts to take promptly, or cause to be taken, all
reasonable actions, and to do promptly, or cause to be done, all things
necessary, proper or advisable under applicable Laws to consummate and
make effective the transactions contemplated hereby to obtain all
necessary waivers, consents and approvals and to effect all necessary
registrations and filings and to remove any injunctions or other
impediments or delays, legal or otherwise, in order to consummate and
make effective the transactions contemplated by this Agreement for the
purpose of securing to the parties hereto the benefits contemplated by
this Agreement.
6.5 Exchange and Voting Trust Agreement. At the Closing,
-----------------------------------
Parent, the Company, Newco II, the ICL Principals, a trustee mutually
satisfactory to Parent and Company and ICL as attorney-in-fact for the
Shareholders (other than the ICL Principals and the Barbadian Trusts and
Jay Cramer and John Woodall) shall enter into a Exchange and Voting
Trust Agreement that is mutually agreeable to the Company and Parent as
to form and content and that sets forth the agreement of the parties
thereto with respect to the procedures for voting the Parent Preferred
Stock and the exchange of the Class A Special Shares and Class B Special
Shares and for Parent Common Stock (THE "EXCHANGE AND VOTING TRUST
AGREEMENT").
6.6 Public Announcements. All press releases and other
--------------------
disseminations of information to employees, customers or suppliers
relating to the transactions contemplated by this Agreement by any party
hereto shall require the prior approval of Parent and the Company,
provided Parent shall have the right to make such public announcements
without the approval of the other parties hereto should such disclosure
be required by Law or the policies or requirements of Canadian or United
States securities regulators, stock exchanges, or other relevant
entities in the opinion of Parent's legal counsel. Should such
disclosure be required, Parent agrees to provide the others with
reasonable advance notice of and a copy of the proposed disclosure.
6.7 Conduct of Business Prior to Closing Date. Except as
-----------------------------------------
expressly contemplated by this Agreement, during the period from the date
of this Agreement to the Closing Date, the Company shall conduct, and it
shall cause the Subsidiaries to conduct, its or their businesses in the
ordinary course and consistent with past practice, subject to the
limitations contained in this Agreement, and the Company shall, and it
shall cause the Subsidiaries to, use its or their reasonable best efforts
to preserve intact its business organization, to keep available the
services of its officers, agents and employees and to maintain satisfactory
21
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relationships with all Persons with whom it does business. Except as
expressly contemplated by this Agreement, and it being acknowledged and
agreed by each of the parties to this Agreement that Parent is in the
process of a substantial reduction in workforce, and, subject to Section
--------
5.10, Parent shall, and it shall cause the Active Parent Subsidiaries to,
- ----
use its or their reasonable best efforts to preserve intact its business
organization, consistent with the budget adopted by the Executive Committee
of the Board of Directors of Parent, to keep available the services of only
those officers, agents and employees whom Parent believes are required to
maintain satisfactory relationships with all Persons with whom it does
business. Without limiting the generality of the foregoing, and except as
otherwise expressly provided in this Agreement, after the date of this
Agreement and prior to the Closing Date, (i) neither the Company nor any
Subsidiary will, without the prior written consent of Parent; and (ii)
subject to Section 5.10, neither Parent nor any Active Parent Subsidiary
------------
will, without the prior written consent of the Company:
(a) except as provided for in this Agreement, amend or
propose to amend its Certificate or Articles of Incorporation or Bylaws (or
comparable governing instruments) in any material respect;
(b) except as set forth on Schedule 6.7(b)(i), with regard
------------------
to the Company or the Subsidiaries, or on Schedule 6.7(b)(ii), with
-------------------
regard to Parent or the Parent subsidiaries, authorize for issuance, issue,
grant, sell, pledge, dispose of or propose to issue, grant, sell, pledge or
dispose of any shares of, or any options, warrants, commitments,
subscriptions or rights of any kind to acquire or sell any shares of, the
capital stock or other securities of the Company or any Subsidiary, or of
Parent or any Parent subsidiary, including, but not limited to, any
securities convertible into or exchangeable for shares of stock of any
class of the Company or any Subsidiary, or of Parent or any Parent
subsidiary, as the case may be;
(c) except as provided for in this Agreement, split, combine
or reclassify any shares of its capital stock or declare, pay or set aside
any dividend or other distribution (whether in cash, stock or property or
any combination thereof) in respect of its capital stock, other than
dividends or distributions to the Company or a Subsidiary, or to Parent or
a Parent subsidiary, as the case may be, or redeem, purchase or otherwise
acquire or offer to acquire any shares of its capital stock or other
securities;
(d) (i) except for debt (including, but not limited to,
obligations in respect of capital leases) disclosed on the financial
statements of the Company delivered to Parent prior to the date of this
Agreement and changes thereto occurring in the ordinary course of business,
create, incur or assume any short-term debt, long-term debt or obligations
in respect of capital leases; (ii) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, indirectly, contingently or
otherwise) for the obligations of any Person, except for obligations
permitted by this Agreement of any subsidiary or Parent subsidiary, as the
case may be, in the ordinary course of business consistent with past
practice; (iii) make any capital expenditures or make any loans, advances
or capital contributions to, or investments in, any other Person (other
than customary advances to employees made in the ordinary course of
business consistent with past practice), provided the Company will continue
to make capital expenditures in accordance with its budget, maintain,
upgrade or expand its facilities and those of the Subsidiaries, as the case
may be, and otherwise operate in the ordinary course and consistent with
past practice; (iv) acquire the stock or assets of, or merge or consolidate
with, any other Person except the contemplated WorldPages Acquisition; or
(v) voluntarily incur any material liability or obligation (absolute,
accrued, contingent or otherwise), except in the ordinary course of
business;
(e) except in the ordinary course of business or as set
forth in Schedule 6.7(e) or as otherwise permitted by this Agreement,
---------------
sell, transfer, mortgage, pledge or otherwise dispose of, or encumber, or
agree to sell, transfer, mortgage, pledge or otherwise dispose of or
encumber, any material assets or properties, real, personal or mixed,
subject to Section 5.10, in the case of Parent and the Active Parent
------------
Subsidiaries;
(f) increase in any manner the compensation of any of its
officers, agents or employees other than any increases required pursuant to
their employment agreements in accordance with their terms in effect on the
date of this Agreement and increases in the ordinary course of business
consistent with past
22
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practice not in excess on an individual basis of the lesser of 10% of the
current compensation of such individual or U.S. $10,000 per annum;
(g) enter into, establish, amend, make non-routine or
material interpretations or determinations with respect to, or terminate
any employment, consulting, retention, change in control, collective
bargaining, bonus or other incentive compensation, profit sharing, health
or other welfare, stock option, stock purchase, restricted stock, or other
equity, pension, retirement, vacation, severance, deferred compensation or
other compensation or benefit plan, policy, agreement, trust, fund or
arrangement with, for or in respect of, any shareholder, officer, director,
other employee, agent, consultant or affiliate, other than actions
contemplated by this Agreement or in the ordinary course of business or
those agreements in connection with the WorldPages Acquisition.
(h) compromise, settle, grant any waiver or release relating
to or otherwise adjust any Litigation, except routine Litigation in the
ordinary course of business consistent with past practice, involving only a
payment not in excess of U.S. $50,000 individually or U.S. $100,000 when
aggregated with all such payments by the Company and the Subsidiaries
combined or Parent and the Active Parent Subsidiaries combined, as the case
may be;
(i) (i) with respect to the Company or the Shareholders,
take any action or omit to take any action, which action or omission would
result in a breach of any of the covenants, representations and warranties
of the Company or Shareholders set forth in this Agreement or which would
have a Company Material Adverse Effect and (ii) with respect to Parent,
take any action or omit to take any action, which action or omission
would result in a breach of any of the covenants, representations and
warranties of the Parent set forth in this Agreement or which would have
a Parent Adverse Effect;
(j) except in the ordinary course of business, enter into
any lease or other agreement, or amend any lease or other agreement, with
respect to real property;
(k) except in the ordinary course of business, enter into or
amend any agreement or transaction (i) pursuant to which the aggregate
financial obligation of the Company or a Subsidiary, or of Parent or a
Parent Subsidiary as the case may be, or the value of the services to be
provided could exceed U.S. $50,000, (ii) having a term of more than 12
months and pursuant to which the aggregate financial obligation of the
Company or a Subsidiary, or of Parent or a Parent Subsidiary as the case
may be, or the value of the services to be provided could exceed U.S.
$100,000 per year, or (iii) which is not terminable upon no more than 30
days' notice without penalty in excess of U.S. $50,000 individually or U.S.
$100,000 when aggregated with the penalties under all such agreements or
transactions;
(l) take any action with respect to the indemnification of
any Person;
(m) change any accounting practices or policies, except as
required by generally accepted accounting principles or Laws as agreed to
or requested by the Company's or Parent's auditors after consultation with
Parent's or the Company's auditors, as the case may be;
(n) except in the ordinary course of business, enter into,
amend, modify, terminate or waive any rights under any Company Material
Contract or Parent Material Contract;
(o) adopt a plan of liquidation, dissolution, exchange,
consolidation, share exchange, restructuring, recapitalization, or other
reorganization; provided, however, that Parent may adopt such a plan
-------- -------
and may cause the liquidation or dissolution of any Parent subsidiary if
Parent is unable to sell such Parent subsidiary (i) at a price which Parent
determines to be reasonable, and (ii) during a time period which Parent
determines to be reasonable; or
(p) resolve, agree, commit or arrange to do any of the
foregoing.
23
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Furthermore, the Company covenants, represents and warrants that
from and after the date hereof, unless Parent shall otherwise expressly
consent in writing, the Company shall, and the Company shall cause each
Subsidiary to, use its or their reasonable best efforts to:
(A) keep in full force and effect insurance comparable in
amount and scope of coverage to insurance now carried by it;
(B) pay all accounts payable and other obligations in the
ordinary course of business consistent with past practice and with
the provisions of this Agreement, except if the same are contested
in good faith, and, in the case of the failure to pay any material
accounts payable or other obligations which are contested in good
faith, only after consultation with Parent; and
(C) comply in all material respects with all Laws applicable
to it or any of its properties, assets or business and maintain in
full force and effect all Company Permits necessary for, or
otherwise material to, such business.
Furthermore, Parent covenants, represents and warrants that from and
after the date hereof, unless Company shall otherwise expressly consent in
writing, Parent shall, and Parent shall cause each Active Parent Subsidiary
to, use its or their reasonable best efforts to:
(1) keep in full force and effect insurance comparable in
amount and scope of coverage to insurance now carried by it;
(2) pay all accounts payable and other obligations
consistent with prudent cash management principles, except if the
same are contested in good faith, and, in the case of the failure to
pay any material accounts payable or other obligations which are
contested in good faith, only after consultation with Company; and
(3) comply in all material respects with all Laws applicable
to it or any of its properties, assets or business and maintain in
full force and effect all Parent Permits necessary for, or otherwise
material to, such business; provided, however, that the Company
-------- -------
and the Shareholders acknowledge and agree that Parent is attempting
to sell the CLEC Operations, and to the extent such CLEC Operations
are sold and, as a result, certain Laws or Parent Permits to which
Parent is subject as of the date hereof become unnecessary,
irrelevant or immaterial, Parent shall not be required to comply
with such Laws or maintain such Parent Permits.
6.8 No Solicitation of Acquisition Proposal. Neither the
---------------------------------------
Shareholders, the Company, Parent nor any of their respective affiliates
(including, without limitation, directors, officers, employees, agents,
representatives and shareholders or any affiliates or associates thereof)
("ASSOCIATES") shall, directly or indirectly, make, encourage, facilitate,
solicit, assist or initiate any inquiry or proposal, or provide any
information to or participate in any negotiations with, any Person (other
than the parties to this Agreement and their Associates) relating to any of
the following transactions ("EXTRAORDINARY TRANSACTIONS"): (i)
liquidation, dissolution, recapitalization, share exchange, business
combination, exchange or consolidation of the Company or a Subsidiary or
Parent or a Parent subsidiary, (ii) sale of a significant amount of assets
of the Company or a Subsidiary or Parent or a Parent subsidiary, (iii)
purchase or sale of shares of capital stock of the Company or a Subsidiary
or Parent or a Parent subsidiary, or (iv) any similar actions or
transactions involving the Company or a Subsidiary or Parent or a Parent
subsidiary (other than the transactions contemplated by this Agreement), or
agree to or consummate any Extraordinary Transaction. The parties hereto
shall immediately inform Parent and the Company of any inquiry, proposal,
or request for information or offer (including the terms thereof and the
Person making such inquiry, proposal, request or offer) which it may
receive in respect of an Extraordinary Transaction and provide Parent and
Company with a copy of any such written inquiries, proposals, requests for
information and offers, and thereafter keep Parent and Company fully
informed of the status and details thereof. The provisions of this
Section 6.8 shall not apply to the sale of the CLEC Operations by Parent
- -----------
or any Parent subsidiary as contemplated by Section 5.10 or to the
------------
WorldPages Acquisition.
24
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<PAGE>
6.9 [Reserved].
----------
6.10 Confidentiality. Unless (i) otherwise expressly provided
---------------
in this Agreement, (ii) required by Applicable Law or any listing agreement
with, or the rules and regulations of, any applicable securities exchange,
(iii) necessary to secure any required Consents as to which the other party
has been advised, or (iv) consented to in writing by Parent and the
Company, this Agreement and any information or documents furnished in
connection herewith shall be kept strictly confidential by the Company,
Parent and their respective officers, directors, employees and agents.
Prior to any disclosure pursuant to the preceding sentence, the party
intending to make such disclosure shall consult with the other party
regarding the nature and extent of the disclosure. Nothing contained
herein shall preclude disclosures to the extent necessary to comply with
accounting, SEC and other disclosure obligations imposed by applicable Law.
To the extent required by such disclosure obligations, Parent, after
consultation with the Company, may file with the SEC a Report on Form 8-K
pursuant to the Securities Exchange Act with respect to the Transactions
contemplated by this Agreement, which report may include, among other
things, financial statements and pro forma financial information with
respect to the other party. In connection with any filing with the SEC of
a registration statement or amendment thereto under the Securities Act,
Parent, after consultation with the Company, may include a prospectus
containing any information required to be included therein with respect to
the Transactions contemplated by this Agreement, including, but not limited
to, financial statements and pro forma financial information with respect
to the other party, and thereafter distribute said prospectus. Parent and
the Company shall cooperate with the other and provide such information and
documents as may be required in connection with any such filings. In the
event the Transactions contemplated by this Agreement are not consummated,
Parent and the Company shall return to the other all documents furnished by
the other and will hold in absolute confidence any information obtained
from the other party except to the extent (i) such party is required to
disclose such information by Law or such disclosure is necessary or
desirable in connection with the pursuit or defense of a claim, (ii) such
information was known by such party prior to such disclosure or was
thereafter developed or obtained by such party independent of such
disclosure, (iii) such party received such information on a non-
confidential basis from a source, other than the other party, which is not
known by such party to be bound by a confidentiality obligation with
respect thereto or (iv) such information becomes generally available to the
public or is otherwise no longer confidential. Prior to any disclosure of
information pursuant to the exception in clause (i) of the preceding
sentence, the party intending to disclose the same shall so notify the
party which provided the same in order that such party may seek a
protective order or other appropriate remedy should it choose to do so.
6.11 Tax Goals.
---------
(a) The Parent and the Company acknowledge and agree that
the ability of the transactions contemplated in Section 1.2(b), with
--------------
the exception of transactions referred to in Section 1.5 regarding
-----------
former Company shareholders protected from taxation by an applicable tax
treaty from taxation under the Income Tax Act [Canada] in respect of any
gain realized on such transactions hereof to constitute a tax deferred
exchange under Subsection 85[1] of Income Tax Act [Canada] (THE "COMPANY
TAX GOAL"), was essential to the Company's decision to execute the
Agreement.
(b) The Parent and the Company further acknowledge and
agree that the following was essential to the Parent's and the Company's
decision to execute the Agreement: (a) the reorganization of YPTI as a
first tier subsidiary of the Parent to allow Parent to meet the
requirements of Code section 1502 to file a consolidated US corporate
income tax return which shall include YPTI and its wholly owned
subsidiary, PCP; (b) the ability to prevent the various transactions
from being characterized as a "change of control" relating to Parent, as
that term is defined in Code section 382(g); (c) the transaction
described in Section 1.2(b) meeting the definition of a "qualified
--------------
stock purchase" under Code section 338(d)(3); and (d) the ability to
transfer the YPTI Common Stock to Parent, along with any proceeds from
the disposition of such YPTI Common Stock and the proceeds from the
issuance of Newco II Class C Preferred Shares in the US with no adverse
Canadian tax consequences. (COLLECTIVELY THE "PARENT TAX GOALS" AND
TOGETHER WITH THE COMPANY TAX GOALS, THE "TAX GOALS").
25
<PAGE>
<PAGE>
(c) If between signing the Agreement and the expiration of
the Due Diligence Period, either party determines that the structure of
the transaction as set forth in Article I hereof will result in the
---------
failure to realize any one or more of the Tax Goals, the Parent and the
Company agree to negotiate in good faith any changes to such structure
that may be required to realize all of the Tax Goals, provided, however,
that if no such structure can be devised that would not materially
adversely change the economics of the transaction, then either party may
terminate the Agreement by notice given pursuant to Section 11.1.
-------------
6.12 Capital Stock and Derivative Securities. In addition to
---------------------------------------
the capital stock of Parent to be issued pursuant to Article I of this
---------
Agreement, the Board of Directors of Parent shall have the right to grant
or issue (i) the options to acquire shares of Parent Common Stock pursuant
to the Parent's 1997 Stock Awards Plan which are listed on the attached
Schedule 6.7(b)(ii); (ii) restricted stock valued at, or warrants to
- -------------------
purchase up to 90,000 shares of Parent Common Stock at an exercise price
of, U.S. $6.96 per share to be issued to certain non-employee directors of
Parent who are responsible for negotiating this Agreement and the
WorldPages Acquisition; (iii) the shares of Parent Common Stock issuable
upon conversion at Closing of the Great Western Notes at a conversion price
of U.S. $5.50 per share; (iv) up to 1,818,182 shares of Parent Common Stock
issuable at U.S. $5.50 per share upon conversion of one or more notes which
may be issued to the current shareholders of Web and Big Stuff who may lend
up to Ten Million Dollars (U.S. $10,000,000.00) to Web or Big Stuff as
provided in the agreements by which Parent may acquire Web and Big Stuff;
and (v) the shares of Parent Common Stock to be issued upon exercise of
options or warrants to be granted at Closing to those persons and at such
exercise prices as listed in Schedule 6.7(b)(i).
------------------
ARTICLE VII - CONDITIONS TO CLOSING
7.1 Conditions to Obligations of Each Party to Closing. The
--------------------------------------------------
respective obligations of each party to this Agreement to consummate and
effect this Agreement and the transactions contemplated hereby shall be
subject to the satisfaction or waiver at or prior to the Closing Date of
the following conditions:
(a) No Injunctions or Restraints; Illegality. No
----------------------------------------
temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the transactions
contemplated by this Agreement shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking
any of the foregoing be pending; nor shall there be any action taken, or
any statute, rule, regulation or order enacted, entered, enforced or
deemed applicable to the transactions contemplated by this Agreement,
which makes the consummation of the transactions contemplated by this
Agreement illegal.
(b) Exchange and Voting Trust Agreement. The Exchange
-----------------------------------
and Voting Trust Agreement shall have been duly executed and delivered
by all parties thereto and shall be in full force and effect.
(c) [Reserved].
----------
(d) Government Approvals. All consents, other than
--------------------
consents the failure of which to be obtained, in the judgment of Parent,
would not have a Company Material Adverse Effect, of any domestic or
foreign Governmental Authority required for the consummation of the
transactions contemplated by this Agreement shall have been obtained by
Final Order.
(e) Related Transactions. The acquisition by Parent, or
--------------------
a direct or indirect Subsidiary of Parent, of Web and Big Stuff in a tax
free reorganization shall have been consummated and any registration
statement(s) required for the registration of Parent Common Stock issued
to Web and Big Stuff as consideration in connection with the acquisition
by Parent shall have been declared effective and no stop order
suspending the effectiveness of such registration statement(s) shall
have been issued and no proceeding for that purpose shall have been
initiated or threatened by the SEC; the Great Western Notes
26
<PAGE>
<PAGE>
shall have been satisfied by the issuance of Parent Common Stock to the
Great Western Shareholders; and the sale of the Class C Preferred
Shares, representing at least two percent (2%) of the fair market value
of Newco II after the transactions contemplated by this Agreement, to an
unrelated third party shall have been completed.
(f) Financing. Parent and the Active Parent
---------
Subsidiaries and the Company and the Subsidiaries shall have received
from their lenders (both in Canada and in the United States) an
extension of all of their and their subsidiaries' debt owing by them on
terms and conditions satisfactory to Parent and the Company or all such
debts shall be refinanced on terms satisfactory to Parent and the
Company or any consents and approvals required from such lenders is
received.
(g) Warrant Agreement. A warrant agreement for the
-----------------
purchase of 150,000 shares of Parent Common Stock at an exercise price
of U.S. $6.96 for a period of ten (10) years from the Closing Date in a
form satisfactory to the parties thereto shall have been executed and
delivered by Parent to the ICL Principals (other than Douglas G.
McIntyre) listed in such warrant agreement.
(h) Shareholder Approval. All necessary approvals of the
--------------------
Shareholders and the shareholders of Parent in connection with the
transactions contemplated by this Agreement shall have been obtained.
(i) Required Consents. Any required Consents of any
-----------------
Person to the transactions contemplated by this Agreement shall have been
obtained on terms and conditions reasonably acceptable to Parent and the
Company and be in full force and effect, except for those the failure of
which to obtain, in the reasonable judgment of Parent and Company, would
not have a Company Material Adverse Effect or Parent Material Adverse
Effect.
(j) HSR Act, Exon-Florio Filings and Investment Canada
--------------------------------------------------
Act. A determination that the transactions contemplated by this Agreement
- ---
are permitted shall have been received from the Committee on Foreign
Investment in connection with the Exon-Florio Filings and any waiting
period applicable to the transactions contemplated by this Agreement
under the HSR Act and the Investment Canada Act shall have expired or
earlier termination thereof shall have been granted and no action shall
have been instituted by either the United States Department of Justice or
the United States Federal Trade Commission or appropriate Canadian
Governmental Authorities to prevent the consummation of the transactions
contemplated by this Agreement or to modify or amend such transactions in
any material manner, or if any such action shall have been instituted, it
shall have been withdrawn or a final judgment shall have been entered
against such Department or Commission or Canadian Governmental Authority,
as the case may be.
(k) Registration Statement. The Registration Statement(s)
----------------------
shall have been declared effective and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by the
SEC.
(l) Blue Sky. Parent shall have received all state
--------
securities Law authorizations necessary to consummate the transactions
contemplated hereby.
(m) Fairness Opinion. Parent's Board of Directors shall
----------------
have received from its financial advisors, PaineWebber Incorporated, a
written opinion addressed to it for inclusion in the Prospectus/Proxy
Statement to the effect that the consideration to be paid, in the
aggregate, by the Parent in the transactions contemplated by this
Agreement, the Web YP Agreement, the Big Stuff Agreement and the agreement
relating to the redemption of the Great Western Notes is fair to Parent
from a financial point of view. The opinion is being given as of this
date.
(n) Tax Opinion. Parent and the Company shall have received
an opinion from Cassels Brock & Blackwell based on customary
representations contained in certificates of Parent, and the Company, to
the effect that, if the transactions contemplated by Section 1.2(b) of
--------------
this Agreement are consummated in accordance with the provisions of this
Agreement, the Shareholders who do not immediately exchange the
27
<PAGE>
<PAGE>
Company Common Stock owned by them for Parent Common Stock pursuant to this
Agreement and who are residents of Canada and hold shares as capital
property will be able to treat the transactions contemplated by this
Agreement as a tax deferred transfer pursuant to Subsection 85.1 utilizing
the provisions of Subsection 85[1] of the Income Tax Act [Canada] provided
that such Shareholders and Newco II timely make all joint elections.
(o) Contingent Rights I Dividend. Parent shall have
----------------------------
declared and paid the Contingent Rights I Dividend.
(p) NYSE Listing Approval. Parent shall have received
---------------------
from the NYSE approval for listing with the NYSE of the Parent Common
Stock to be issued pursuant to this Agreement, the Web YP Agreement and
the Big Stuff Agreement.
(q) Escrow Agreement. The Escrow Agreement described in
----------------
Section 9.1(b) shall have been duly executed and delivered by all
- --------------
parties thereto and shall be in full force and effect.
(r) ICL Fee. ICL shall have received assurances that
-------
they will receive the fee of U.S. $265,000 described in Section 2.9.
-----------
(s) Support Agreement. The Support Agreement shall have
been duly executed and delivered by all parties thereto and shall be in
full force and effect.
7.2 Additional Conditions to Obligations of Shareholders and
---------------------------------------------------------
Company. The obligations of the Company to consummate and effect this
- -------
Agreement and the transactions contemplated hereby shall be subject to
the satisfaction at or prior to the Closing Date of each of the
following conditions, any of which may be waived, in writing,
exclusively by the Company:
(a) Representations, Warranties and Covenants.
-----------------------------------------
(i) The representations and warranties of Parent in
this Agreement that are modified by materiality or Parent Material
Adverse Effect ("PARENT MODIFIED REPRESENTATION") shall be true
and correct in all respects and those that are not so modified
("PARENT NONMODIFIED REPRESENTATION") shall be true and correct in
all material respects on the date hereof and, except for changes
not prohibited by this Agreement, as of the Closing Date as if
made at the Closing Date. Furthermore, none of the
representations or warranties of Parent contained in this
agreement, disregarding any qualifications therein or in this
Section 7.2(a) regarding Materiality or Parent Material Adverse
--------------
Effect, shall be untrue or incorrect to the extent that such
untrue or incorrect representations or warranties, when taken
together as a whole, have had or would have a Parent Material
Adverse Effect; and
(ii) Parent shall have performed and complied with
all of the covenants and agreements in all material respects and
satisfied in all material respects all of the conditions required
by this Agreement to be performed or complied with or satisfied by
Parent at or prior to the Closing Date. Notwithstanding anything
in this Agreement to the contrary, the parties hereto acknowledge
and agree that the consummation of the transactions contemplated
by this Agreement and subsequent disposition of the CLEC
Operations constitutes a significant change from the plans and
strategies described in the 1998 10-K such that the
representations and warranties of Parent that reference the 1998
10-K will not be true and correct as of the Closing Date as they
relate to the plans and strategies of the business of Parent at
Closing.
(b) Certificate of Parent and Other Deliveries. The
------------------------------------------
Company shall have been provided, with (i) a certificate executed on
behalf of Parent by an Officer to the effect that, as of the Closing
Date, all representations and warranties made by Parent under this
Agreement are true and complete except as set forth in Section 7.2(a);
--------------
and all covenants, obligations and conditions of this Agreement to be
performed by Parent on or before such date have been so performed; (ii)
a certificate of
28
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<PAGE>
good standing from the Secretary of State of the State of Delaware that
Parent is a validly existing corporation; (iii) duly adopted resolutions
of the Board of Directors of Parent approving the execution, delivery
and performance of this Agreement and the Company Transaction Agreements
to which it is a party and the instruments contemplated hereby and
thereby, certified by its Secretary or Assistant Secretary; and (iv)
such other documents and instruments as the Company may reasonably
request.
(c) Legal Opinion. The Company and the Shareholders
-------------
shall have received a legal opinion as to U.S. law issues from Blackwell
Sanders Peper Martin LLP, legal counsel to Parent (and if requested by
the Company from Canadian legal counsel for Parent as to Canadian law
issues), in a form reasonably acceptable to the Company and its legal
counsel that addresses matters typically covered in legal opinions in
transactions similar to the transactions contemplated by this Agreement,
including without limitation, the authority of Parent to enter into this
Agreement and the Parent Transaction Agreements and consummate the
transactions contemplated hereby and thereby and that the Parent Common
Stock issued to the Shareholders pursuant to this Agreement or upon
exchange of the Class A Special Shares, Class B Special Shares, or
Contingent Rights II shall, subject to the satisfaction of the
restrictions contained in Securities Act Rules 144 and 145 or any
successor regulations thereto, be freely tradable.
(d) [Reserved]
(e) Outstanding Parent Stock. Not more than the number
------------------------
of shares of Parent as reflected in the 1998 10-K shall be outstanding
on a fully diluted basis, except as permitted by Section 6.12.
------------
(f) No Material Adverse Change. There shall not have
--------------------------
occurred after the date hereof any Event that has or reasonably could be
expected to have a Parent Material Adverse Effect.
(g) Litigation. There shall be no action, suit, claim
----------
or proceeding of any nature pending, or overtly threatened, against
Parent or the Company, their respective properties or any of their
officers or directors, arising out of, or in any way connected with, the
Transactions contemplated by this Agreement or the other transactions
contemplated by the terms of this Agreement which individually or in the
aggregate may cause a Material Adverse Effect.
(h) Stock Options. The stock options referred to in
-------------
Section 6.12(v) shall have been granted by the Parent.
- ---------------
7.3 Additional Conditions to the Obligations of Parent. The
--------------------------------------------------
obligations of Parent to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at
or prior to the Closing Date of each of the following conditions, any of
which may be waived, in writing, exclusively by Parent:
(a) Representations, Warranties and Covenants.
-----------------------------------------
(i) The Company Modified Representations shall be true
and correct in all respects, and the Company Nonmodified
Representations shall be true and correct in all material respects,
on the date hereof and, except for changes not prohibited by this
Agreement, as of the Closing Date as if made at the Closing Date.
Furthermore, none of the representations or warranties of the
Company or Shareholders contained in this Agreement, disregarding
any qualifications therein or in this Section 7.3(a) regarding
--------------
materiality or Company Material Adverse Effect, shall be untrue or
incorrect to the extent that such untrue or incorrect
representations or warranties, when taken together as a whole, have
had or would have a Company Material Adverse Effect; and
(ii) The Company and Shareholders shall have performed
and complied with all the covenants and agreements in all material
respects and satisfied in all material respects all the
29
<PAGE>
<PAGE>
conditions required by this Agreement to be performed or complied
with or satisfied by the Company and Shareholders at or prior to the
Closing Date.
(b) Certificate of the Company and Other Deliveries.
-----------------------------------------------
Parent shall have been provided with (i) a certificate executed on
behalf of the Company by its Chief Executive Officer to the effect that,
as of the Closing Date all representations and warranties made by the
Company in this Agreement are true and correct; and all covenants,
obligations and conditions of this Agreement to be performed by the
Company and ICL on behalf of the Shareholders on or before such date
have been so performed; (ii) a certificate of good standing from the
proper authority in the jurisdictions in which the Company and the
Subsidiaries are incorporated or qualified to do business stating that
each is a validly existing corporation in good standing; (iii) duly
adopted resolutions of the Board of Directors of the Company approving
the execution, delivery and performance of this Agreement and the Parent
Transaction Agreements to which the Company is a party and the
instruments contemplated hereby and thereby, certified by the Secretary
or Assistant Secretary of the Company; (iv) a true and complete copy of
the Articles or Certificate of Incorporation or comparable governing
instruments, as amended, of the Company and each of the Subsidiaries
certified by the Secretary of State of the state of incorporation or
comparable authority in other jurisdictions, and a true and complete
copy of the Bylaws or comparable governing instruments, as amended, of
Parent and each of the Subsidiaries certified by the Secretary thereof;
(v) the duly executed Resignations on terms and conditions reasonably
acceptable to Parent; and (vi) such other documents and instruments as
Parent reasonably may request.
(c) Legal Opinion. Parent shall have received (i) a
-------------
legal opinion as to Canadian law issues from Cassels Brock & Blackwell,
legal counsel to the Company, (and if requested by Parent from U.S.
legal counsel for the Company as to U.S. law issues) in a form
reasonably acceptable to Parent and its legal counsel that addresses
matters typically covered in legal opinions in transactions similar to
the transactions contemplated by this Agreement, including without
limitation, the authority of all of the Shareholders, the Company and
ICL to enter into this Agreement and consummate the transactions
contemplated hereby and, if required by Parent, that the shares of
Company Common Stock to be transferred to Newco II are subject to the
Powers of Attorney; and (ii) an opinion from Barbadian legal counsel
that the trustees of the Barbadian Trusts have the authority to execute
this Agreement on behalf of the Barbadian Trusts and that the Barbadian
Trusts have the authority to enter into this Agreement and the Company
Transaction Agreements and consummate the transactions contemplated
hereby and thereby and to hold the Parent Common Stock that will be
issued to the Barbadian Trusts pursuant to this Agreement.
(d) KPMG Opinion. Parent shall have received an opinion
------------
from KPMG LLP, its independent certified public accountants, that upon
completion of the reorganization described in Sections 1.1(a), 1.2(c)
------------------------
and 1.2(d) hereof, Parent can properly file a consolidated income Tax
- ----------
return on behalf of a consolidated group which would include Parent,
YPTI and the Subsidiaries and that the YPTI transactions can be
accomplished as a tax free reorganization under the Code.
(e) Litigation. There shall be no action, suit, claim
----------
or proceeding of any nature pending, or overtly threatened, against
Parent or the Company, their respective properties or any of their
officers or directors, arising out of, or in any way connected with, the
transactions contemplated by this Agreement or the other transactions
contemplated by the terms of this Agreement which individually or in the
aggregate may cause a Parent Material Adverse Effect or a Company
Material Adverse Effect.
(f) No Material Adverse Change. There shall have not
--------------------------
occurred after the date hereof any Event that has or reasonably could be
expected to have a Company Material Adverse Effect.
(g) YPTI Transactions. Parent shall have received
-----------------
evidence from the Company reasonably satisfactory to Parent that the YPTI
Reclassification has been completed and Parent shall have completed the
purchase of the YPTI Common Stock in accordance with Section 1.2(d).
--------------
30
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<PAGE>
(h) Subordinated Loan Agreement and Unanimous Shareholders
------------------------------------------------------
Agreement. PCP shall have satisfied all of its obligations under the
- ---------
Subordinated Loan Agreement including, without limitation, the repayment
in full of the Loans (as defined in the Subordinated Loan Agreement) and
all interest accrued thereon. The Subordinated Lenders shall have
exercised the warrants evidenced by the Warrant Certificates (as defined
in the Subordinated Loan Agreement) and the Class B Shares issued to the
Subordinated Lenders thereunder shall have been converted into Company
Common Stock. The Subordinated Loan Agreement shall be terminated, no
party thereto shall have any remaining or continuing rights or
obligations thereunder, and all Liens (as defined in the Subordinated
Loan Agreement) granted thereunder shall have been released. The
Unanimous Shareholders Agreement shall be terminated and no party
thereto shall have any continuing rights or obligations thereunder.
(i) ICL Agreements. All management and other agreements
--------------
between ICL and the Company shall have been terminated and no party
thereto shall have any continuing rights or obligations thereunder.
(j) Affiliate Agreements. Prior to the Closing Date,
--------------------
Parent shall have received the duly executed Affiliate Agreements.
ARTICLE VIII - TERMINATION AND ABANDONMENT
8.1 Termination. This Agreement may be terminated and the
-----------
transactions contemplated hereby may be abandoned at any time prior to the
Closing Date only as follows:
(a) by mutual written consent of Company and Parent, duly
authorized by the Board of Directors of each;
(b) by the Company or Parent if the Closing shall not have
occurred on or before October 31, 1999 (or such other date as may be agreed
to by Company and Parent); provided, that, no party may terminate this
-------- ----
Agreement under this Section 8.1(b) if such party's breach of this
--------------
Agreement has caused or resulted in the failure of the Closing to occur on
or before such date;
(c) by the Company if (i) there are any breaches of any
Parent Modified Representation or any material breaches of any Parent
Nonmodified Representation, or (ii) Parent has breached or failed to
perform, notwithstanding satisfaction or due waiver of all conditions
thereto, any of its material covenants or agreements contained herein as to
which notice specifying such breach or failure has been given to Parent
promptly after the discovery thereof and Parent has failed to cure or
otherwise resolve the same to the reasonable satisfaction of the Company
within thirty (30) days after receipt of such notice;
(d) by Parent if (i) there are any breaches of any Company
Modified Representations or any material breaches of any Company
Nonmodified Representations, or (ii) Company has breached or failed to
perform, notwithstanding satisfaction or due waiver of all conditions
thereto, any of its material covenants or agreements contained herein as to
which notice specifying such breach or failure has been given to Company
promptly after the discovery thereof and Company has failed to cure or
otherwise resolve the same to the reasonable satisfaction of the Parent
within thirty (30) days after receipt of such notice;
(e) by Company or Parent if a court of competent
jurisdiction or other Governmental Authority shall have issued an order,
decree or ruling or taken any other action permanently restraining,
enjoining or otherwise prohibiting this Agreement or any of the
transactions contemplated by this Agreement and such order, decree, ruling
or other action shall have become final and nonappealable;
(f)(i) by the Company if the stockholders of Parent fail to
approve the issuance of the Parent Common Stock pursuant to this Agreement
or the other transactions contemplated or otherwise referenced herein, as
applicable, at the meeting duly convened therefor;
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(f)(ii) by Parent if the stockholders of Parent fail to
approve the issuance of the Parent Common Stock pursuant to this Agreement
or the other transactions contemplated or otherwise referenced herein, as
applicable, at the meeting duly convened therefor;
(g) by Parent, if Company or its Board of Directors breaches
any provision of Section 6.8;
-----------
(h) by the Company, if Parent or its Board of Directors
breaches any provision of Section 6.8;
-----------
(i) by the Parent or the Company upon the occurrence of the
events described in Sections 1.7 or 6.11; or
--------------------
(j) Anything to the contrary herein notwithstanding, the
termination fee set forth in Section 8.2 shall not be payable in the
-----------
following circumstances: (a) by the Company or any Subsidiary upon the
completion of an initial public offering of securities, or (b) the
acquisition of other yellow pages publishers (directly or indirectly) or
(c) the sale by the Parent of the shares of the CLEC Operations or the
assets thereof.
The party desiring to terminate this Agreement pursuant to the
preceding clauses (b), (c), (d), (e), (f)(i), (f)(ii), (g), (h) or (i)
shall give written notice of such termination to the other party in
accordance with Section 11.1, below.
------------
8.2 Termination Fees and Rights. In recognition of the
---------------------------
considerable time and expense that the parties have expended and will
expend in entering into this Agreement, and pursuing the other transactions
contemplated hereby, the following fees shall be payable and right to
terminate shall accrue in the event of termination of this Agreement:
(a) To the extent that this Agreement is terminated solely
pursuant to Section 8.1(a), 8.1(b) or 8.1(e) and neither a Company
--------------------------------
Triggering Transaction nor Parent Triggering Transaction has occurred prior
to the date of such termination , no termination fees are payable to any
party and this Agreement shall become void and of no effect with no
liability on the part of any party hereto (or any of its directors,
officers, employees, agents, or representatives); provided, that no such
termination shall relieve any party hereto from any liability under
Section 8.3, 9.1 or 9.7 or for any breach of this Agreement.
- -----------------------
(b) If this Agreement is terminated by the Company pursuant
to Section 8.1(c), 8.1(f)(i), 8.1(h) or 8.1(i), Parent shall promptly pay
-------------------------------------------
a termination fee to Company in an amount equal to U.S. $1,560,150 and to
WorldPages in an amount equal to U.S. $939,850, inclusive of expenses by
wire transfer of immediately available funds if Parent consummates a Parent
Triggering Transaction within six (6) months of the date of such
termination, provided that if WorldPages is a party to the Parent
--------
Triggering Transaction, then all of the $2,500,000 payable as a termination
fee hereunder shall be paid to the Company and no fee shall be paid to
WorldPages.
(c) If this Agreement is terminated by Parent pursuant to
Section 8.1(d) or 8.1(g) or 8.1(i), Company shall promptly pay a
- -----------------------------------
termination fee to Parent in an amount equal to U.S. $2,025,000 and to
WorldPages in an amount equal to U.S. $475,000 by wire transfer of
immediately available funds if Company consummates a Company Triggering
Transaction within six (6) months of the date of such termination,
provided that if WorldPages is a party to the Company Triggering
- --------
Transaction, then all of the $2,500,000 payable as a termination fee
hereunder shall be paid to Parent and no fee shall be paid to WorldPages.
(d) If this Agreement is terminated by the Company or by
Parent pursuant to Section 8.1(f)(i) or 8.1(f)(ii), respectively, no
-------------------------------
termination fee shall be payable by Company even if Company consummates a
Company Triggering Transaction.
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(e) If a termination fee is payable by a party pursuant to
this Agreement and a termination fee is payable by the same party pursuant
to the Web YP Agreement and the Big Stuff Agreement, then the parties agree
that notwithstanding anything herein or therein to the contrary, there
shall be no "doubling" of such termination fee and that a maximum of
$2,500,000 shall be paid by any party required to pay a termination fee,
whether payable hereunder or pursuant to the Web YP Agreement or the Big
Stuff Agreement.
8.3 Procedure Upon Termination. In the event of termination
--------------------------
pursuant to this Article VIII, the transactions contemplated by this
------------
Agreement shall be abandoned without further action by the Company or
Parent, provided that the agreements contained in Sections 8.2, 8.3, 9.1
----------------------
and 9.7 hereof shall remain in full force and effect. If this Agreement
- -------
is terminated as provided herein, each party shall use its reasonable best
efforts to redeliver all documents, work papers and other material
(including any copies thereof) of any other party relating to the
transactions contemplated hereby, whether obtained before or after the
execution hereof, to the party furnishing the same.
ARTICLE IX - SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; INDEMNIFICATION
9.1 Indemnification by the ICL Principals.
-------------------------------------
(a) Subject to the limitation contained in the last
sentence of this Section 9.1(a), if the Closing has occurred, subject
--------------
to the terms and conditions of this Article IX, the ICL Principals
----------
shall indemnify Parent, and its officers, directors, agents and
representatives (THE "INDEMNITEES"), from and in respect of, and hold
the Indemnitees harmless against, any and all damages, fines, penalties,
losses, liabilities, judgments, and deficiencies (including without
limitation amounts paid in settlement and interest and reasonable legal
and accounting fees), but which amount shall be offset or reduced by the
amount of any insurance proceeds received by Parent in respect of any of
the foregoing, incurred or suffered by any of the Indemnitees
("DAMAGES") resulting from, relating to or in connection with any
misrepresentation or breach of warranty of the ICL Principals or for
any other matters referred to elsewhere in this Agreement.
Notwithstanding anything to the contrary contained in this Agreement,
the sole remedy under this indemnity provided by the ICL Principals or
for any other matters referred to elsewhere in this Agreement is
recourse to the shares escrowed under the Escrow Agreement whatever
their value, while in escrow, and no other liability whatsoever shall
accrue to any of the ICL Principals or Shareholders.
(b) At Closing, (i) the ICL Principals and the Parent
shall execute an escrow agreement (THE "ESCROW AGREEMENT") with an
escrow agent (THE "ESCROW AGENT") both of which as shall be reasonably
acceptable to the Parent and the Representative and (ii) the ICL
Principals shall deposit all of their Class A Special Shares and the
Class B Special Shares, except as set forth on Schedule 9.1(b) hereto,
---------------
with the Escrow Agent to be used as payment for any of the
indemnification obligation of the ICL Principals pursuant hereto.
(c) The ICL Principals acknowledge that their
indemnification obligations hereunder are solely in their capacity as
former shareholders of the Company, and, accordingly, the
indemnification obligations in this Article IX shall not entitle any
----------
ICL Principal who was or is a current or former officer, director or
employee of the Company to any indemnification from the Company or the
Parent pursuant to the organizational or governing documents of the
Company or the Parent.
9.2 Method of Asserting Claims.
--------------------------
(a) Prior to the expiration of six (6) months from the
Closing Date, each Indemnitee shall give written notice (THE "CLAIM
NOTICE") to the Representative, as agent for the ICL Principals, of any
and all claims or events known to it which gives rise or may give rise
to a claim for indemnification hereunder by the Indemnitee against the
ICL Principals (AN "INDEMNIFIABLE CLAIM"). The Claim Notice shall
specify the nature and estimated amount of such Damages (THE "CLAIMED
AMOUNT"). In the case of
33
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<PAGE>
any claim for indemnification hereunder arising out of a claim, action,
suit or proceeding brought by any Person who is not a party to this
Agreement (A "THIRD-PARTY CLAIM"), prior to expiration of six (6) months
from the Closing Date, the Indemnitee also shall give the
Representative, as agent for the ICL Principals, copies of any written
claims, process or legal pleadings with respect to such Third-Party
Claim.
(b) Within forty-five (45) days after delivery of a Claim
Notice, the Representative shall notify the Parent and the Escrow Agent
in writing of his objections, if any, to the Claim. Payments from the
Escrow Account shall be made, and disputes shall be resolved, as set
forth in the Escrow Agreement.
9.3 Third Party Claims.
------------------
(a) Except as otherwise provided in paragraph (c) below,
the Representative, as agent for the ICL Principals, may elect to
compromise or defend, subject to the limitations contained in the last
sentence of Section 9.1(a), at the ICL Principals' own expense and by
--------------
the ICL Principals' own counsel reasonably satisfactory to the
Indemnitee, any Third-Party Claim; provided that (i) the Representative
provides the Indemnitee with reasonable evidence that the ICL Principals
will have the financial resources to defend against such claim and
fulfill their indemnification obligations hereunder; and (ii) the giving
of a Defense Notice (as defined below) by the Representative shall
constitute an acknowledgment by the ICL Principals of their obligation
to indemnify the Indemnitee with respect to such Third-Party Claim in
accordance with the terms of this Article IX. If the Representative,
----------
as agent for the ICL Principals, elects to compromise or defend a Third-
Party Claim, the Representative shall, within thirty (30) days of its
receipt of the notice provided pursuant to Section 9.2(a) hereof (or
--------------
sooner, if the nature of such Third-Party Claim so requires), notify the
related Indemnitee of its intent to do so (A "DEFENSE NOTICE"), and such
Indemnitee shall reasonably cooperate in the compromise of, or defense
against, such Third-Party Claim. Subject to the limitations contained
in the last sentence of Section 9.1(a), the ICL Principals shall be
-----------------
responsible for the payment of such Indemnitee's actual reasonable out-
of-pocket expenses (including reasonable legal and accounting fees)
incurred in connection with such cooperation, and such expenses shall
constitute Damages incurred or suffered by Parent within the meaning of
Section 9.1(a) hereof. After notice from the Representative, as agent
- --------------
for the ICL Principals, to an Indemnitee of its election to assume the
defense of a Third-Party Claim, the ICL Principals shall not be liable
to such Indemnitee under this Article IX for any legal expenses
----------
subsequently incurred by such Indemnitee in connection with the defense
thereof. If the Representative, as agent for the ICL Principals, elects
not to compromise or defend against a Third-Party Claim, or fails to
notify an Indemnitee of its election as provided in this Section 9.3,
-----------
such Indemnitee may pay, compromise or defend such Third-Party Claim on
behalf of and for the account and risk of the ICL Principals (and any
amount paid or expenses incurred in connection therewith shall
constitute Damages (within the meaning of Section 9.1(a) hereof)
--------------
incurred or suffered by Parent, subject to the limitations contained in
the last sentence of Section 9.1(a)). The Representative may not
---------------
consent to entry of any judgment or enter into any settlement without
the written consent of each related Indemnitee (which consent shall not
be unreasonably withheld), unless such judgment or settlement provides
solely for money damages or other money payments for which such
Indemnitee is entitled to indemnification hereunder and includes as an
unconditional term thereof the giving by the claimant or plaintiff to
such Indemnitee of a release from all liability in respect of such
Third-Party Claim.
(b) [Reserved].
(c) If there is a reasonable likelihood that a Third-Party
Claim may have a material adverse effect on an Indemnitee, other than as
a result of money damages or other money payments for which such
Indemnitee is entitled to indemnification hereunder, such Indemnitee
will have the right, after consultation with the Representative, and at
the cost and expense of the ICL Principals (which costs and expenses,
other than legal and accounting fees, shall constitute Damages (within
the meaning of Section 9.1(a) hereof) to the extent provided therein,
--------------
subject to the limitations contained in the last sentence of Section
-------
9.1(a), to defend such Third-Party Claim.
- ------
34
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9.4 Survival. The representations and warranties of the
--------
Company set forth in this Agreement shall survive the Closing and shall
continue for six (6) months following the Closing Date. The
representation and warranties shall not be affected by any examination
made for or on behalf of Parent or the knowledge of any of Parent's
officers, directors, stockholders, employees or agents, except that the
representations and warranties are qualified by the matters disclosed in
the schedules to the representations and warranties of the Company and
the ICL Principals and Parent agrees that Parent has knowledge of such
matters. Notwithstanding anything to the contrary herein, if a claim
for indemnification is made before the expiration of the periods of
survival set forth above in this Section 9.4, then (notwithstanding
-----------
the expiration of such time period) the representation or warranty
applicable to such claim shall survive until, but only for purposes of,
the resolution of such claim and the Escrow Agreement shall provide that
the number of shares of stock in the escrow having a value equal to
three times the Claimed Amount shall remain in escrow until such claim
is resolved and the balance of such shares shall be released from escrow
six (6) months from the Closing Date.
9.5 Limitations.
-----------
(a) Subject to the limitations contained in the last
sentence of Section 9.1(a), the ICL Principals shall not be liable
--------------
under this Article IX unless and until the aggregate amount of Damages
----------
incurred or suffered by Indemnitees exceeds U.S. $100,000. For purposes
of the preceding sentence, no independent claims of less than U.S.
$10,000 may be made; provided however, that all claims arising out of a
common set of facts shall be aggregated for purposes of determining
whether the U.S. $10,000 threshold has been met.
(b) No claim for indemnification pursuant to Section 9.1
-----------
shall be made unless asserted by a written notice given to the
Representative on or before six (6) months from the Closing Date. For
greater certainty, no Claim Notice may be given after six (6) months
from the Closing Date.
9.6 The Representative.
------------------
(a) The Company and the ICL Principals hereby authorize,
direct and appoint any two of the three of Stephen D. Lister, Jeffrey L.
Rosenthal and Edward Truant to act as the sole and exclusive agents,
attorneys-in-fact and representatives of the ICL Principals
(COLLECTIVELY, THE "REPRESENTATIVE"), and authorizes and directs the
Representative to (i) take any and all actions (including without
limitation executing and delivering any documents, subject to the
limitations contained in the last sentence of Section 9.1(a),
--------------
incurring any costs and expenses for the account of the ICL Principals
(which will constitute Damages incurred or suffered by Parent within the
meaning of Section 9.1(a) hereof) and making any and all
--------------
determinations) which may be required or permitted by this Agreement to
be taken by the ICL Principals or the Representative, (ii) exercise such
other rights, power and authority as are authorized, delegated and
granted to the Representative hereunder in connection with the
transactions contemplated hereby and (iii) exercise such rights, power
and authority as are incidental to the foregoing. Any such actions
taken, exercises of rights, power or authority, and any decision or
determination made by the Representative consistent therewith, shall be
absolutely and irrevocably binding on each Indemnitor as if such
Indemnitor personally had taken such action, exercised such rights,
power or authority or made such decision or determination in such
Indemnitor's individual capacity. Notwithstanding any other provision
of this Agreement, if the Closing occurs, then with respect to the
matters covered by Article IX, (i) each of the ICL Principals
----------
irrevocably relinquishes such ICL Principal's right to act independently
and other than through the Representative, except with respect to the
removal of the Representative or appointment of a successor
Representative as provided in Section 9.6(b) below, and (ii) no ICL
--------------
Principals shall have any right under this Agreement or otherwise to
institute any suit, action or proceeding against the Company or Parent
with respect to any such matter, any such right being irrevocably and
exclusively delegated to the Representative. The Representative hereby
acknowledges and accepts the foregoing authorization and appointment and
agrees to serve as the Representative in accordance with this Agreement.
35
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(b) The Representative shall serve as Representative until
his resignation, removal from office, incapacity or death; provided,
however, that the Representative shall not have the right to resign (A)
without prior written notice to the ICL Principals and (B) until a
successor thereto is elected by the ICL Principals and notification is
given to Parent. The Representative may be removed at any time, and a
successor representative may be appointed, pursuant to written action by
ICL Principals. Any successor to the Representative shall, for purposes
of this Agreement, be deemed to be, from the time of the appointment
thereof in accordance with the terms hereof, the Representative, and
from and after such time, the term "REPRESENTATIVE" as used herein and
therein shall be deemed to refer to such successor. No appointment of a
successor shall be effective unless such successor agrees in writing to
be bound by the terms of this Agreement.
(c) The Representative shall be permitted to retain
counsel, consultants and other advisors.
(d) The provisions of this Section 9.6 shall in no way
-----------
impose any obligations on Parent. In particular, notwithstanding any
notice received by Parent to the contrary (except any notice of the
appointment of a successor Representative approved by Parent in
accordance with paragraph (b) of this Section 9.6), Parent (i) shall
-----------
be fully protected in relying upon and shall be entitled to rely upon,
shall have no liability to the ICL Principals with respect to, and shall
be indemnified by the ICL Principals subject to the limitations
contained in the last sentence of Section 9.1(a) from and against all
--------------
liability arising out of (any such indemnifiable amounts constituting
Damages within the meaning of Section 9.1(a) hereof) actions,
--------------
decisions and determinations of the Representative and (ii) shall be
entitled to assume that all actions, decisions and determinations of the
Representative are fully authorized by the ICL Principals.
(e) The Representative shall not be liable to the ICL
Principals for the performance of any act or the failure to act so long
as he acted or failed to act in good faith in what he reasonably
believed to be the scope of his authority and for a purpose which he
reasonably believed to be in the best interests of the ICL Principals.
9.7 Indemnification by the Parent.
-----------------------------
(a) Indemnity. If the Closing has occurred, subject to
---------
the terms and conditions of this Section 9.7, Parent shall indemnify
-----------
the ICL Principals from and in respect of all, and hold the ICL
Principals harmless against, any and all damages, fines, penalties,
losses, liabilities, judgments and deficiencies (including without
limitation amounts paid in settlement and interest and reasonable legal
and accounting fees ) ("ICL PRINCIPAL DAMAGES") resulting from, relating
to or in connection with any misrepresentation or breach of warranty of
the Parent contained in this Agreement or for any other matters referred
to elsewhere in this Agreement.
(b) Survival. The representations and warranties of
--------
Parent set forth in this Agreement shall survive the Closing and shall
continue until six (6) months after Closing Date. The representations
and warranties shall not be affected by any examination made for or on
behalf of the Company or ICL Principals or the knowledge of any of the
Company's officers, directors, stockholders, employees or agents, except
that the representations and warranties are qualified by the matters
disclosed in the schedules to the representations and warranties of the
Parent, and the Company agrees that the Company has knowledge of such
matters. Notwithstanding anything to the contrary herein, if a claim
for indemnification is made before the expiration of the periods of
survival set forth above in this Section 9.7, then (notwithstanding
-----------
the expiration of such time period) the representation or warranty
applicable to such claim shall survive until, but only for purposes of,
the resolution of such claim.
(c) Limitations. Parent shall not be liable under this
-----------
Section 9.7 unless and until the aggregate amount of ICL Principal
- -----------
Damages incurred or suffered by the ICL Principals exceeds U.S.
$100,000. Furthermore, the liability of Parent under this Section 9.7
-----------
shall not exceed the fair market value of all of the Class A Special
Shares and Class B Special Shares originally placed in escrow by the
36
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ICL Principals determined as of the date the claim for indemnification
is fully resolved either by agreement of the parties or the entry by a
court of competent jurisdiction of a final nonappealable judgment or
order. No claim for indemnification pursuant to Section 9.7 shall be
-----------
made unless asserted by a written notice given to Parent on or before
six (6) months from the Closing Date. For greater certainty, no notice
of a claim for indemnification may be given after six (6) months from
the Closing Date.
ARTICLE X - AMENDMENT AND WAIVER
10.1 Amendment. Except as is otherwise required by Applicable
---------
Law, this Agreement may be amended by the parties hereto at any time by
execution of an instrument in writing signed on behalf of each of the
parties hereto.
10.2 Extension; Waiver. At any time prior to the Closing Date,
-----------------
Parent, on the one hand, and the Company, ICL on behalf of the
Shareholders and ICL Principals, on the other, may, to the extent
legally allowed, (i) extend the time for the performance of any of the
obligations of the other party hereto, (ii) waive any inaccuracies in
the representations and warranties made by such other party contained
herein or in any document delivered pursuant hereto, and (iii) waive
compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth
in an instrument in writing signed on behalf of such party.
ARTICLE XI - GENERAL PROVISIONS
11.1 Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed given if delivered personally or
by commercial delivery service, or mailed by registered or certified
mail (return receipt requested) or sent via facsimile (with
acknowledgment of complete transmission) to the parties at the following
addresses (or at such other address for a party as shall be specified by
like notice):
(a) if to Parent, to:
Advanced Communications Group, Inc.
390 South Woods Mill Road, Suite 150
St. Louis, Missouri
USA 63017
Attn: Mr. Richard O'Neal
Facsimile: (314) 205-8141
with a copy to:
Blackwell Sanders Peper Martin LLP
720 Olive Street, Suite 2400
St. Louis, Missouri
USA 63101-4834
Attn: Mr. Craig Adoor
Facsimile: (314) 345-6060
(b) if to the Company and Shareholders, to:
Imperial Capital Ltd.
1 First Canadian Place, Suite 5102
Toronto, Ontario
Canada M5X 1E3
Attn: Managing Partner
Facsimile: (416) 362-8660
37
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<PAGE>
with a copy to:
Cassels Brock & Blackwell
Scotia Plaza - Suite 2100
40 King Street West
Toronto, Ontario
Canada M5H 3C2
Attn: Mr. Maxwell Gotlieb
Facsimile: (416) 360-8877
11.2 Interpretation. The words "include," "includes" and
--------------
"including" when used herein shall be deemed in each case to be followed
by the words "without limitation." The table of contents and headings
contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
All Exhibits and Schedules to this Agreement are hereby incorporated in
and made a part of this Agreement as if set forth in full herein.
References herein to "dollars", "Dollars", "U.S. $" and "$" shall be
deemed, in each case, to mean U.S. dollars, unless expressly stated
otherwise herein.
11.3 Counterparts. This Agreement may be executed in one or
------------
more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have
been signed by each of the parties and delivered to the other party, it
being understood that all parties need not sign the same counterpart.
One or more of the parties hereto may sign this Agreement and deliver
this Agreement by facsimile transmission. The parties hereto agree that
a facsimile of a signature shall be deemed an original signature.
11.4 Entire Agreement; Assignment. This Agreement including,
----------------------------
but not limited to, the Recitals hereto, the Schedules and Exhibits
hereto, and the documents and instruments and other agreements among the
parties hereto referenced herein: (i) constitute the entire agreement
among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and
oral, among the parties with respect to the subject matter hereof
including, but not limited to, the Letter of Intent dated April 11, 1999
by and among Parent, the Company, Web, Big Stuff and O'Neal and the
Confidentiality Agreement dated April 11, 1999 by and among Parent, the
Company, Web, Big Stuff and O'Neal; (ii) are not intended to confer upon
any other Person any rights or remedies hereunder except that the
Representative shall have the express rights articulated in Article
-------
IX; and (iii) shall not be assigned by operation of law or otherwise
- --
except as otherwise specifically provided, except that Parent may assign
its rights and delegate its obligations hereunder to its affiliates,
provided Parent shall remain liable hereunder.
11.5 Severability. In the event that any provision of this
------------
Agreement or the application thereof, becomes or is declared by a court
of competent jurisdiction to be illegal, void or unenforceable, the
remainder of this Agreement will continue in full force and effect and
the application of such provision to other Persons or circumstances will
be interpreted so as reasonably to effect the intent of the parties
hereto so long as consideration of the Agreement is not materially
affected for any party hereof. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable
provision.
11.6 Other Remedies. Subject to the limitations contained in
--------------
this Agreement, including without limitation those contained in the last
sentence of Section 9.1(a), any and all remedies herein expressly
---------------
conferred upon a party will be deemed cumulative with and not exclusive
of any other remedy conferred hereby, or by law or equity upon such
party, and the exercise by a party of any one remedy will not preclude
the exercise of any other remedy.
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11.7 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware,
regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof. Each of the parties hereto
irrevocably consents to the exclusive jurisdiction and venue of any
court within the State of Delaware, in connection with any matter based
upon or arising out of this Agreement or the matters contemplated
herein, agrees that process may be served upon them in any manner
authorized by the laws of the State of Delaware for such Persons and
waives and covenants not to assert or plead any objection which they
might otherwise have to such jurisdiction, venue and such process.
11.8 Rules of Construction. The parties hereto agree that they
---------------------
have been represented by counsel during the negotiation and execution of
this Agreement and, therefore, waive the application of any law,
regulation, holding or rule of construction providing that ambiguities
in an agreement or other document will be construed against the party
drafting such agreement or document.
11.9 Limitation of Liability of Trustee. The parties hereto
----------------------------------
agree that none of the trustees of any trust referred to in this
Agreement has any personal liability or obligations in respect of the
obligations of the trust under this Agreement and that the sole recourse
against the trust and the trustees pursuant to this Agreement shall be
solely against the shares of the ICL Principals held pursuant to the
Escrow Agreement. For greater certainty, the term trust includes the
trustees and where any reference is made herein to an act to be
performed by or on behalf of the trust, such reference shall be
construed and applied for all purposes as if it referred to an act to be
performed by or on behalf of the trustees, each in his representative
capacity as trustee of the trust, and where any reference is made hereto
to an act to be performed by or for or on behalf of any of the trustees,
such reference shall be construed and applied for all purposes as if it
referred to an act to be performed by or for or on behalf of each of the
trustees in his capacity as a trustee.
ARTICLE XII - DEFINITIONS
12.1 Definitions.
-----------
"Acquisition CLEC Shares" means the quotient of the CLEC Sales
Price Decrease divided by U.S. $5.50.
"Active Parent Subsidiaries" means Feist; Firstel; Value; Great
Western Directories, Inc.; Telecom Resources, Inc.; the Switchboard of
Oklahoma City, Inc.; Long Distance Management of Kansas, Inc.; Long
Distance Management II, Inc.; and National Telecom, a proprietorship.
"Affiliate Agreements" shall have the meaning set forth in
Section 4.13.
- ------------
"Agreement" shall have the meaning set forth in the preamble
hereto.
"Aggregate Acquisition Shares" means the sum of the aggregate
number of Class B Special Shares and Contingent Rights II outstanding as
of the Closing Date.
"Anniversary Date" shall mean the first anniversary of the Closing
Date.
"Associates" shall have the meaning set forth in Section 6.8.
-----------
"Barbadian Trusts" means collectively, Cold Trust, Global
Investment Trust, Freezer Trust, Storage Trust, Directory Trust and
Publisher Trust.
"Benefit Plan" shall mean (i) an employee benefit plan as defined
in Section 3(3) of ERISA, even if, because of some other provision of
ERISA, such plan is not subject to any other provision of ERISA, such
plan is not subject to any or all of ERISA's provisions, and (ii)
whether or not described in the preceding clause, (a) any pension,
profit sharing, stock bonus, deferred or supplemental compensation,
39
<PAGE>
<PAGE>
retirement, thrift, stock purchase or stock purchase or stock option
plan, or any other compensation, welfare, insurance, medical,
hospitalization, fringe benefit or retirement plan, program, policy,
course of conduct, understanding or arrangement of any kind whatsoever,
whether formal or informal, oral or written, providing for benefits for
or the welfare of any or all of the current or former employees or
agents of the employer or their beneficiaries or dependents, (b) Multi-
employer Plan, or (c) a multiple employer plan as defined in Section 413
of the Code or in any other applicable Law.
"Big Stuff" shall have the meaning set forth in Recital E hereto.
"Big Stuff Agreement" shall mean that certain Acquisition
Agreement dated as of June 3, 1999 by and among Parent, ACG Acquisition
VII Corp., Big Stuff, Richard O'Neal and Dick Reid.
"Claim Notice" shall have the meaning set forth in Section
-------
9.2(a).
- ------
"Claimed Amount" shall have the meaning set forth in Section
-------
9.2(a).
- ------
"Class A Special Shares" shall have the meaning set forth in
Section 1.1(b).
- --------------
"Class B Special Shares" shall have the meaning set forth in
Section 1.1(b).
- --------------
"CLEC Operations" shall mean Feist, Firstel, Valu, and such other
non-yellow pages operating subsidiaries or operations of Parent as shall
be determined by the Board of Directors of Parent.
"CLEC Sales Price" shall mean the aggregate consideration received
by Parent from the sale(s) of the CLEC Operations, reduced by warranty
claims and paying or reserving against the taxes payable by Parent or a
subsidiary of Parent directly attributable to the sale(s) of the CLEC
Operations. For greater certainty and explanation, but not limitation,
the consideration received by Parent shall not be reduced by any fee
paid to NationsBanc Montgomery Securities, L.L.C. in connection with the
sale(s) of the CLEC Operations or to PaineWebber Incorporated.
"CLEC Sales Price Decrease" shall have the meaning set forth in
Section 5.10(c) hereof.
- ---------------
"CLEC Sales Price Increase" shall have the meaning set forth in
Section 5.10(b) hereof.
- ---------------
"Closing" shall mean the closing of the transactions contemplated
by this Agreement.
"Closing Date" shall mean the date upon which the Closing actually
occurs.
"Code" shall mean the Internal Revenue Code of 1986, as amended
and the Treasury regulations thereunder.
"Company" shall have the meaning set forth in the preamble hereto.
"Company Common Stock" shall have the meaning set forth in
Section 1.1(c).
- --------------
"Company Material Adverse Effect" shall mean a material adverse
effect on (i) the business, assets, condition (financial or otherwise),
properties, liabilities or the results of operations of Company and the
Subsidiaries taken as a whole, (ii) the ability of Company to perform its
obligations set forth in this Agreement and the Company Transaction
Agreements (as herein defined), or (iii) the ability to timely consummate
the transactions contemplated by this Agreement and the Company Transaction
Agreements.
"Company Material Contract" shall mean a material note, bond,
mortgage, indenture, contract, lease, license, agreement, understanding,
instrument, bid or proposal to which Company or any Subsidiary is a party
and which is with an affiliate of Company or of a Subsidiary, if the
financial obligation of Company or a Subsidiary thereunder or applicable to
the assets or properties of Company or a Subsidiary could exceed
40
<PAGE>
<PAGE>
U.S. $50,000 after the Closing Date or if it provides for recurring monthly
revenues to Company or a Subsidiary in excess of U.S. $100,000 or includes
any exclusivity or non-competition restrictions applicable to Company or a
Subsidiary.
"Company Modified Representations" shall mean the representations
and warranties of the Company and the ICL Principals contained in this
Agreement that are modified by materiality or Company Material Adverse
Effect.
"Company Nonmodified Representations" shall mean the
representations and warranties of the Company and Shareholders contained
in this Agreement that are not modified by materiality or Company
Material Adverse Effect.
"Company Permits" shall mean all permits, certificates, licenses,
approvals, and other authorization required in connection with the
operation of the business of the Company and the Subsidiaries.
"Company Real Property Leases" shall have the meaning set forth in
Section 2.12(b).
- ---------------
"Company Tax Goal" shall have the meaning set forth in Section
-------
6.11(a).
- -------
"Company Transaction Agreements" shall have the meaning set forth
in Section 2.4.
-----------
"Company Triggering Transaction" means any transaction by way of a
purchase or sale of shares or assets, a merger a reverse take-over or other
business combination involving the Company or any Subsidiary or any
subsidiary of the Company formed, organized or acquired directly or
indirectly by the Company on or after the date hereof, (i) with Web or Big
Stuff, or (ii) which results in the sale of the yellow pages publishing
business of the Company or any Subsidiary, or (iii) with another Person or
entity which derives the majority of their revenues from a business other
than the yellow pages publishing business.
"Consent" shall have the meaning set forth in Section 2.5.
-----------
"Contingent Rights I" shall mean, collectively, the rights to
receive Parent Common Stock pursuant to Section 5.10(b) hereof, which
---------------
rights shall be represented by certificates, the form of which shall be
designated at a later date, and which shall be non-transferable, except
by operation of law.
"Contingent Rights II" shall mean, collectively, the rights to
receive Parent Common Stock pursuant to Section 5.10(c) hereof, which
---------------
rights shall be represented by certificates, the form of which shall be
designated at a later date, and which shall be non-transferable, except
by operation of law.
"Damages" shall have the meaning set forth in Section 9.1(a).
--------------
"Defense Notice" shall have the meaning set forth in Section
-------
9.3(a).
- ------
"Due Diligence Period" shall have the meaning set forth in
Section 1.7(a).
- --------------
"Eligible Acquisition Shareholders" shall mean the holders of
Class B Special Shares and the holders of the Contingent Rights II on
the Closing Date, immediately after giving effect to the Closing.
"Eligible Acquisition Shareholder's Proportionate Share" means,
for any Eligible Acquisition Shareholder, the quotient of the number of
Class B Special Shares and Contingent Rights II owned by such Eligible
Acquisition Shareholder on the Closing Date, immediately after giving
effect to the Closing, divided by the Aggregate Acquisition Shares.
"Eligible Parent Shareholders" shall mean the holders of
Contingent Rights I on the Closing Date, immediately after giving effect
to the Closing.
41
<PAGE>
<PAGE>
"Eligible Parent Shareholder's Proportionate Share" means, for any
Eligible Parent Shareholder, the quotient of (i) the number of
Contingent Rights I owned by such Eligible Parent Shareholder on the
Closing Date, immediately after giving effect to the Closing, divided by
(ii) the aggregate number of outstanding Contingent Rights I.
"Enforceability Exceptions" shall have the meaning set forth in
Section 2.4.
- -----------
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, together with all regulations thereunder.
"Escrow Agent" shall have the meaning set forth in Section
-------
9.1(b).
- ------
"Escrow Agreement" shall have the meaning set forth in Section
-------
9.1(b).
- ------
"Event" shall have the meaning set forth in Section 2.8.
-----------
"Exchange and Voting Trust Agreement" shall have the meaning set
forth in Section 6.5.
-----------
"Exon-Florio Filing" shall have the meaning set forth in Section 2.5.
-----------
"Extraordinary Transactions" shall have the meaning set forth in
Section 6.8.
- -----------
"Feist" shall mean Feist Long Distance Service, Inc.
"Final Order," with respect to any Consent of a Governmental
Authority, shall mean an action by the appropriate Governmental Authority
as to which: (i) no request for stay by such Governmental Authority of the
action is pending, no such stay is in effect, and, if any deadline for
filing any such request is designated by statute or regulation, it has
passed; (ii) no petition for rehearing or reconsideration of the action is
pending before such Governmental Authority, and no appeal or comparable
administrative remedy is pending before such Governmental Authority, and
the time for filing any such petition, appeal or administrative remedy has
passed; (iii) such Governmental Authority does not have the action under
reconsideration on its own motion and the time for such reconsideration has
passed; and (iv) no appeal to a court, or request for stay by a court, of
the Governmental Authority action is pending or in effect, and if any
deadline for filing any such appeal or request is designated by statute or
rule, it has passed.
"Final Sale Date" shall have the meaning set forth in Section 5.10(b).
---------------
"Firstel" shall mean Firstel, Inc.
"Governmental Authority" shall have the meaning set forth in
Section 2.5.
- -----------
"Great Western Credit Agreement" shall have the meaning set forth
in Section 3.6.
-----------
"Great Western Shareholders" shall have the meaning set forth in
Recital E.
- ---------
"Great Western Notes" shall have the meaning set forth in Recital E.
---------
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations promulgated
thereunder.
"ICL" shall have the meaning set forth in the preamble hereto.
"ICL Principal Damages" shall have the meaning set forth in
Section 9.7(a).
- --------------
42
<PAGE>
<PAGE>
"Income Tax Act [Canada]" shall have the meaning set forth in
Section 1.5.
- -----------
"Indemnifiable Claim" shall have the meaning set forth in Section
-------
9.2(a).
- ------
"Indemnitees" shall have the meaning set forth in Section 9.2(a).
--------------
"Law" shall have the meaning set forth in Section 2.6.
-----------
"Litigation" shall have the meaning set forth in Section 2.7.
-----------
"Multi-employer Plan" shall mean a multi-employer plan as defined
in Section 3(37) of ERISA or in any other applicable Law.
"Newco I Common Stock" shall have the meaning set forth in
Section 1.1(b).
- --------------
"Newco I Preferred Stock" shall have the meaning set forth in
Section 1.1(b).
- --------------
"Newco II Common Stock" shall have the meaning set forth in
Section 1.1(b).
- --------------
"NYSE" shall mean the New York Stock Exchange, Inc.
"Parent CLEC Shares" means the quotient of the CLEC Sales Price
Increase divided by U.S. $5.50.
"Parent Common Stock" shall have the meaning set forth in Section
-------
3.2.
- ---
"Parent Financial Statements" shall have the meaning set forth in
Section 3.8.
- -----------
"Parent Guaranty" shall have the meaning set forth in Section 3.6.
-----------
"Parent Material Adverse Effect" shall mean a material adverse
effect on (i) the business, assets, condition (financial or otherwise),
properties, liabilities or the results of operations of Parent and the
Active Parent Subsidiaries taken as a whole, (ii) the ability of Parent
to perform its obligations set forth in this Agreement and the Parent
Transaction Agreements, or (iii) the ability of Parent to timely
consummate the transactions contemplated by this Agreement and the
Parent Transaction Agreements.
"Parent Material Contract" shall have the meaning set forth in
Section 3.13.
- ------------
"Parent Modified Representation" shall have the meaning set forth
in Section 7.2(a)(i).
-----------------
"Parent Nonmodified Representation" shall have the meaning set
forth in Section 7.2(a)(i).
-----------------
"Parent Permits" shall have the meaning set forth in Section 3.11.
------------
"Parent Preferred Stock" shall have the meaning set forth in
Section 1.1(a).
- --------------
"Parent Recapitalization" shall have the meaning set forth in
Section 1.1(a).
- --------------
"Parent Securities Filings" shall have the meaning set forth in
Section 3.7.
- -----------
"Parent Series A Stock" shall have the meaning set forth in
Section 3.2.
- -----------
"Parent Tax Goals" shall have the meaning set forth in Section
--------
6.11(b).
- -------
<PAGE>
"Parent Transaction Agreements" shall have the meaning set forth
in Section 3.4.
-----------
43
<PAGE>
<PAGE>
"Parent Triggering Transaction" means any transaction by way of a
purchase or sale of shares or assets, a merger, a reverse take-over or
other business combination involving the Parent or any Parent Subsidiary or
any subsidiary of the Parent formed, organized or acquired directly or
indirectly by the Parent on or after the date hereof with (i) Web or Big
Stuff, or (ii) which results in the sale of the yellow pages publishing
business of the Parent or Great Western Directories, Inc., or (iii) with
another Person or entity which derives the majority of their revenues from
a business other than the yellow pages publishing business.
"PCP Acquisition Agreement" shall have the meaning set forth in
Section 2.16.
- ------------
"PCP Closing Date" shall have the meaning set forth in Section 2.16.
------------
"Person" shall mean and include an individual, corporation,
partnership, association, trust or other entity or organization,
including a Governmental Authority.
"Record Date" shall mean the date set by Parent as the record date.
"Registration Statements" shall have the meaning set forth in
Section 6.1(b).
- --------------
"Representative" shall have the meaning set forth in Section 9.6(a).
--------------
"SEC" shall mean the U.S. Securities and Exchange Commission.
"Securities Exchange Act" shall mean the United States Securities
Exchange Act of 1934, as amended, and all rules and regulations
promulgated thereunder.
"Securities Act" shall mean the United States Securities Act of
1933, as amended, and all rules and regulations promulgated thereunder.
"Subordinated Lenders" shall have the meaning set forth in
Section 4.11.
- ------------
"Subordinated Loan Agreement" shall have the meaning set forth in
Section 4.11.
- ------------
"Support Agreement" means the Support Agreement to be entered into
at the Closing between Parent, Newco II and the Shareholders who are
holders of Class A Special Shares.
"Tax Goals" shall have the meaning set forth in Section 6.11(b).
---------------
"Third-Party Claim" shall have the meaning set forth in Section 9.2(a).
--------------
"Transaction Expenses" shall have the meaning set forth in
Section 5.9.
- -----------
"Unanimous Shareholders Agreement" shall mean the Unanimous
Shareholders Agreement dated as of the 1st day of November, 1998 among
Imperial Capital Limited, a corporation incorporated under the laws of
Ontario, the J.L.R. Family Trust, an inter vivos trust duly formed and
organized the laws of Ontario, the Paisley Family Trust, an inter vivos
trust duly formed and organized under the laws of Ontario, Cold Trust,
Global Investment Trust, Freezer Trust, Storage Trust, Directory Trust
and Publisher Trust, inter vivos trusts duly formed and organized under
the laws of Barbados, Canterbury Mezzanine Capital, L.P. and Canterbury
Detroit Partners, L.P., limited partnerships formed under the laws of
Delaware, and YPtel Corporation, a corporation incorporated under the
laws of Canada, as amended to date.
"Valu" shall mean, collectively, Valu-line of Louisiana, Inc. and
Valu-line of Longview, Inc.
"Web" shall have the meaning set forth in Recital E hereof.
44
<PAGE>
<PAGE>
"Web YP Agreement" shall mean that certain Acquisition Agreement
dated as of June 3, 1999 by and among Parent, ACG Acquisition VI Corp.,
Web, Richard O'Neal and Dick Reid.
"Worldpages" shall have the meaning set forth in Recital E hereof.
"YPTI Certificate of Preferred Stock Designation" shall have the
meaning set forth in Section 1.1(e).
--------------
"YPTI Consideration" shall have the meaning set forth in Section
-------
1.2(d).
- ------
"YPTI Preferred Stock" shall have the meaning set forth in
Section 1.1(e).
- --------------
"YPTI Recapitalization" shall have the meaning set forth in
Section 1.1(e).
- --------------
[SIGNATURES ON FOLLOWING PAGES]
45
<PAGE>
<PAGE>
[Signature pages to the YPTel Agreement]
IN WITNESS WHEREOF, Parent,, the Company, the Shareholders, the
ICL Principals and ICL have caused this Agreement to be signed by their
duly authorized respective officers, if appropriate, all as of the date
first written above.
ADVANCED COMMUNICATIONS GROUP, INC.
By:
---------------------------------------------
James F. Cragg
Title: President and Chief Operations Officer
YPTEL CORPORATION
By:
---------------------------------------------
Douglas G. McIntyre
Title: President and Chief Executive Officer
SHAREHOLDERS OF YPTEL CORPORATION
By: Imperial Capital Limited as attorney-in-fact
By:
---------------------------------------------
Title:
------------------------------------------
THE J.L.R. FAMILY TRUST, by its trustees
By:
---------------------------------------------
Jeffrey L. Rosenthal, as trustee and with no
personal liability
---------------------------------------------
Maxwell Gotlieb, as trustee and with no
personal liability
THE PAISLEY FAMILY TRUST
By:
---------------------------------------------
Stephen D. Lister, as trustee and with no
personal liability
---------------------------------------------
Maxwell Gotlieb, as trustee and with no
personal liability
------------------------------------------------
Edward Truant
------------------------------------------------
Douglas G. McIntyre
<PAGE>
<PAGE>
COLD TRUST
By:
---------------------------------------------
, as trustee and with
no personal liability
---------------------------------------------
, as trustee and with
no personal liability
GLOBAL INVESTMENT TRUST
By:
---------------------------------------------
, as trustee and with
no personal liability
---------------------------------------------
, as trustee and with
no personal liability
FREEZER TRUST
By:
---------------------------------------------
, as trustee and with
no personal liability
---------------------------------------------
, as trustee and with
no personal liability
STORAGE TRUST
By:
---------------------------------------------
, as trustee and with
no personal liability
---------------------------------------------
, as trustee and with
no personal liability
<PAGE>
<PAGE>
DIRECTORY TRUST
By:
---------------------------------------------
, as trustee and with
no personal liability
---------------------------------------------
, as trustee and with
no personal liability
PUBLISHER TRUST
By:
---------------------------------------------
, as trustee and with
no personal liability
---------------------------------------------
, as trustee and with
no personal liability
IMPERIAL CAPITAL LIMITED, a corporation
incorporated under the law of the Providence of
Ontario
By:
---------------------------------------------
Title:
------------------------------------------
<PAGE>
<PAGE>
[YPtel Acquisition Agreement]
The terms and provisions of Sections 5.11 and 8.2 of this
---------------------
Agreement are hereby acknowledged and agreed to by each of Web YP, Inc.,
Richard L. Reid (as a Web shareholder), Richard O'Neal (as a Web
shareholder), Big Stuff, Inc., Richard L. Reid (as a Big Stuff
shareholder) and Richard O'Neal (as a Big Stuff shareholder).
WEB YP, INC.
By:
---------------------------------------------
Title:
------------------------------------------------
RICHARD L. REID (as a Web shareholder)
------------------------------------------------
RICHARD O'NEAL (as a Web shareholder)
BIG STUFF, INC.
By:
---------------------------------------------
Title:
------------------------------------------------
RICHARD L. REID (as a Big Stuff shareholder)
------------------------------------------------
RICHARD O'NEAL (as a Big Stuff shareholder)
<PAGE>
<PAGE>
EXHIBIT "A"
LIST OF SHAREHOLDERS
--------------------
<PAGE>
<PAGE>
ARTICLE I - THE TRANSACTIONS 2
1.1 Transactions Prior to Closing: Corporate 2
----------------------------------------
1.2 Transactions Simultaneous with Closing 3
--------------------------------------
1.3 Closing 3
-------
1.4 Parent Name Change and Directors 4
--------------------------------
1.5 Tax Deferred Exchange 4
---------------------
1.6 Taking of Necessary Action; Further Action 4
------------------------------------------
1.7 Due Diligence Review 5
--------------------
1.8 Aggregate Issuable Parent Common Stock. 5
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE ICL PRINCIPALS 5
2.1 Organization and Good Standing 5
------------------------------
2.2 Capitalization 5
--------------
2.3 Subsidiaries 6
------------
2.4 Authorization; Binding Agreement 6
--------------------------------
2.5 Governmental Approvals 7
----------------------
2.6 No Violations 7
-------------
2.7 Litigation 7
----------
2.8 Absence of Certain Changes or Events 8
------------------------------------
2.9 Finders and Investment Bankers 8
------------------------------
2.10 Contracts 8
---------
2.11 Liabilities 8
-----------
2.12 Real Estate 8
-----------
2.13 Corporate Records 9
-----------------
2.14 Labor Matters 9
-------------
2.15 Tax 9
---
2.16 PCP Acquisition Agreement 9
-------------------------
2.17 Knowledge 9
---------
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF PARENT 10
3.1 Organization and Good Standing 10
------------------------------
3.2 Capitalization 10
--------------
3.3. Subsidiaries 10
------------
3.4 Authorization; Binding Agreement 11
--------------------------------
3.5 Governmental Approvals 11
----------------------
3.6 No Violations 11
-------------
3.7 Securities Filings and Litigation 11
---------------------------------
3.8 Parent Financial Statements 12
---------------------------
3.9 Absence of Certain Changes or Events 12
------------------------------------
3.10 Compliance with Laws 12
--------------------
3.11 Permits 12
-------
3.12 Finders and Investment Bankers 12
------------------------------
3.13 Contracts 13
---------
3.14 Corporate Records 13
-----------------
ARTICLE IV - ADDITIONAL COVENANTS OF THE COMPANY AND
THE ICL PRINCIPALS 13
4.1 Notification of Certain Matters 13
-------------------------------
4.2 Access and Information 13
----------------------
4.3 [Reserved] 14
----------
4.4 Reasonable Best Efforts 14
-----------------------
4.5 Compliance 14
----------
<PAGE>
<PAGE>
4.6 Benefit Plans 14
-------------
4.7 Tax Opinion Certification 14
-------------------------
4.8 Reserved 14
--------
4.9 Shareholders Agreement and Voting Trust Agreements 14
--------------------------------------------------
4.10 Transfer Restrictions 15
---------------------
4.11 Subordinated Loan Agreement 16
---------------------------
4.12 Conduct of Business of Parent and the Parent
--------------------------------------------
Subsidiaries 16
------------
4.13 Affiliate Agreements 16
--------------------
ARTICLE V - ADDITIONAL COVENANTS OF PARENT 17
5.1 Conduct of Business of Parent and the Parent
--------------------------------------------
Subsidiaries 17
------------
5.2 Notification of Certain Matters 17
-------------------------------
5.3 Access and Information 17
----------------------
5.4 Compliance 17
----------
5.5 SEC and Shareholder Filings 17
---------------------------
5.6 Tax Treatment 18
-------------
5.7 Reasonable Best Efforts 18
-----------------------
5.8 Employee Benefit Plans 18
----------------------
5.9 Expenses 18
--------
5.10 Sale of CLEC Operations 18
-----------------------
5.11 Indemnification and Insurance 19
-----------------------------
ARTICLE VI - ADDITIONAL COVENANTS OF THE PARENT, THE
COMPANY AND THE SHAREHOLDERS 20
6.1 Registration Rights and Stock Restriction
-----------------------------------------
Agreement 20
---------
6.2 [Reserved] 21
----------
6.3 [Reserved] 21
----------
6.4 Legal Requirements 21
------------------
6.5 Exchange and Voting Trust Agreement 21
6.6 Public Announcements 21
--------------------
6.7 Conduct of Business Prior to Closing Date 21
-----------------------------------------
6.8 No Solicitation of Acquisition Proposal 24
---------------------------------------
6.9 [Reserved] 25
----------
6.10 Confidentiality 25
---------------
6.11 Tax Goals 25
---------
6.12 Capital Stock and Derivative Securities 26
---------------------------------------
ARTICLE VII - CONDITIONS TO CLOSING 26
7.1 Conditions to Obligations of Each Party to Closing 26
--------------------------------------------------
7.2 Additional Conditions to Obligations of
---------------------------------------
Shareholders and Company 28
------------------------
7.3 Additional Conditions to the Obligations of Parent 29
--------------------------------------------------
ARTICLE VIII- TERMINATION AND ABANDONMENT 31
8.1 Termination 31
-----------
8.2 Termination Fees and Rights 32
---------------------------
8.3 Procedure Upon Termination 33
--------------------------
<PAGE>
ARTICLE IX - SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION 33
9.1 Indemnification by the ICL Principals 33
-------------------------------------
9.2 Method of Asserting Claims 33
--------------------------
9.3 Third Party Claims 34
------------------
9.4 Survival 35
--------
9.5 Limitations 35
-----------
9.6 The Representative 35
------------------
9.7 Indemnification by the Parent 36
-----------------------------
<PAGE>
<PAGE>
ARTICLE X - AMENDMENT AND WAIVER 37
10.1 Amendment 37
---------
10.2 Extension; Waiver 37
-----------------
ARTICLE XI - GENERAL PROVISIONS 37
11.1 Notices 37
-------
11.2 Interpretation 38
--------------
11.3 Counterparts 38
------------
11.4 Entire Agreement; Assignment 38
----------------------------
11.5 Severability 38
------------
11.6 Other Remedies 38
--------------
11.7 Governing Law 39
-------------
11.8 Rules of Construction 39
---------------------
11.9 Limitation on Liability of Trustee 39
----------------------------------
ARTICLE XII - DEFINITIONS 39
12.1 Definitions 39
-----------
EXHIBIT LIST
------------
Exhibit A List of Shareholders
SCHEDULE LIST
-------------
Schedule 2.1 List of the jurisdictions of incorporation or
organization and qualification or license of Company
and the Subsidiaries
Schedule 2.2 Transfer restrictions
Schedule 2.3(a) Outstanding capital stock or other interest held by
Company
Schedule 2.3(b) Restrictions on outstanding capital stock
Schedule 2.3(c) List of irrevocable proxies, voting agreements or
similar obligations with respect to capital stock
Schedule 2.5 Governmental Authorities
Schedule 2.6 Required consents
Schedule 2.7 Litigation
Schedule 2.8 List of changes or events
Schedule 2.10 Contracts
Schedule 2.11 Liabilities
Schedule 2.12(b) Company Real Property Leases
Schedule 2.13 Corporate Records
Schedule 3.2 Capitalization
Schedule 3.3 Subsidiaries
Schedule 3.5 Governmental Approvals
Schedule 3.7 Parent Litigation
Schedule 3.8 Parent Financial Statements
Schedule 3.9 Changes or Events
Schedule 3.13 Contracts
Schedule 6.7(b)(i) Company Options
Schedule 6.7(b)(ii) Parent Options
Schedule 6.7(e) Sale or Encumbrances
Schedule 9.1(b) Shares Not Included as Payment for Indemnification
Obligation of IPL Principals
<PAGE>
WEB YP AGREEMENT
This ACQUISITION AGREEMENT (the "AGREEMENT") is made and entered
into as of this 3rd day of June, 1999, by and among Advanced
Communications Group, Inc., a Delaware corporation ("PARENT") and ACG
Acquisition VI Corp., a Delaware corporation and a wholly-owned
subsidiary of Parent ("ACQUISITION SUBSIDIARY"), on the one hand and Web
YP, Inc., a Texas corporation ("WEB"), Richard O'Neal, a resident of the
State of Texas ("O'NEAL"), and Richard L. Reid, a resident of the State
of Texas ("REID") (O'Neal and Reid are together referred to herein as
the "WEB SHAREHOLDERS"), on the other.
RECITALS
A. Parent desires to acquire, and Web and the Web Shareholders
desire Parent to acquire, all of the outstanding common stock of Web, on
the terms and subject to the conditions set forth in this Agreement.
B. In furtherance of such acquisition, the respective Boards of
Directors of Parent, Acquisition Subsidiary and Web have approved the
merger (the "MERGER") of Acquisition Subsidiary with and into Web in
accordance with the laws of the States of Texas and Delaware, all on the
terms and conditions set forth in this Agreement.
C. The Boards of Directors of each of Web, Acquisition
Subsidiary and Parent believe it is in the best interests of each
company and their respective stockholders and the Board of Directors of
Parent has directed or will direct that the Agreement be submitted to
the shareholders of Parent with the recommendation that the Agreement,
including, but not limited to, the issuance of shares of Parent Common
Stock pursuant to this Agreement, be approved by the Parent's
stockholders and the Boards of Directors of Web and Acquisition
Subsidiary have directed or will direct that the Merger be submitted to
their respective shareholders in accordance with the Corporation Laws.
D. The Web Shareholders own all outstanding shares of Web
Common Stock, believe that the Merger and the transactions contemplated
by this Agreement are in their best interests and desire to enter into
this Agreement.
E. The parties intend that the Closing will occur prior to or
concurrently with (i) the closing of the acquisition by Parent or a
direct or indirect subsidiary of Parent of all of the outstanding
capital stock of YPtel Corporation, a corporation incorporated under the
laws of Canada (the "COMPANY") pursuant to that certain Acquisition
Agreement, a form of which has been provided by Parent to Web (the
"COMPANY ACQUISITION AGREEMENT"), dated as of June 3, 1999, among the
Parent, the Company, the shareholders of the Company (the "COMPANY
SHAREHOLDERS"), the J.L.R. Family Trust, the Paisley Family Trust,
Edward Truant, Douglas G. McIntyre, Imperial Capital Limited, a
corporation organized under the laws of the Province of Ontario ("ICL"),
Cold Trust, Global Investment Trust, Freezer Trust, Storage Trust,
Directory Trust and Publisher Trust; (ii) the closing of the acquisition
by Parent or a subsidiary of Parent of all of the outstanding capital
stock of Big Stuff, Inc. ("BIG STUFF") (Web and Big Stuff are sometimes
collectively referred to as "WORLDPAGES") whether by merger, exchange or
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otherwise; (iii) the pay-off of the promissory notes (collectively, the
"GREAT WESTERN NOTES") in the aggregate original principal amount of
Fifteen Million Dollars ($15,000,000.00) (plus accrued but unpaid
interest at the time of pay-off) from the Company to O'Neal and certain
other former shareholders of Great Western Directories, Inc.
(collectively, the "GREAT WESTERN SHAREHOLDERS") by the issuance of
Parent Common Stock to the Great Western Shareholders; and (iv) the
satisfaction of the other conditions to closing set forth in this
Agreement, the Company Acquisition Agreement and the Big Stuff
Acquisition Agreement.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
ARTICLE I - TERMS OF THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions
----------
of this Agreement, the Merger shall be consummated in accordance with the
Texas General Corporation Law (the "TEXAS CORPORATION LAW") and the
Delaware General Corporation Law (together with the Texas Corporation Law,
the "CORPORATION LAWS"). At the Effective Time, upon the terms and subject
to the conditions of this Agreement, Acquisition Subsidiary shall be merged
with and into Web in accordance with the Corporation Laws and the separate
existence of Acquisition Subsidiary shall thereupon cease, and Web, as the
surviving corporation in the Merger (the "SURVIVING CORPORATION"), shall
continue its corporate existence under the laws of the State of Texas as a
subsidiary of Parent and under the corporate name "Web YP, Inc." The
Certificate of Incorporation of Web shall be the certificate of
incorporation of the Surviving Corporation. The parties shall prepare and
execute a certificate of merger in a form to be agreed to by the parties
hereto, acting reasonably (the "CERTIFICATE OF MERGER"), in order to comply
in all respects with the requirements of the Corporation Laws and with the
provisions of this Agreement.
1.2 Effective Time. The Merger shall become effective as of
--------------
the time of the filing of the Certificate of Merger with the Secretary
of State of the State of Texas and the Secretary of State of the State
of Delaware in accordance with the applicable provisions of the
Corporation Laws or at such later time as may be specified in the
Certificate of Merger. The Certificate of Merger shall be filed, and
the closing of the Merger (the "CLOSING") shall occur, as soon as
practicable after all of the conditions set forth in this Agreement have
been satisfied or waived by the party or parties entitled to the benefit
of the same. The Closing shall occur at the offices of Blackwell
Sanders Peper Martin LLP, 720 Olive Street, Suite 2400, St. Louis,
Missouri 63101, unless another place or time is agreed to in writing by
Parent and Web. The time when the Merger shall become effective is
herein referred to as the "EFFECTIVE TIME" and the date on which the
Effective Time occurs is herein referred to as the "CLOSING DATE."
1.3 Merger Consideration. Subject to the provisions of this
--------------------
Agreement and any applicable backup or other withholding requirements,
each of the issued and outstanding shares ("WEB SHARES") of common
stock, no par value per share, of Web ("WEB COMMON STOCK") as of the
Effective Time shall be converted into the right to receive, and there
shall be paid and issued as hereinafter provided, in exchange for the
Web Shares, 309.0909 shares (the "EXCHANGE RATIO") of Parent Common
Stock, par value $.0001 per share ("PARENT COMMON STOCK"), plus cash in
lieu of any fractional share as hereinafter provided (the "MERGER
CONSIDERATION"). The Exchange Ratio is calculated based on the
assumption that all outstanding options and warrants
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to purchase Web Common Stock will be exercised effective on or before
the Closing Date. If any of such options or warrants are not so
exercised, the Exchange Ratio shall be increased to reflect the actual
number of shares of Web Common Stock issued and outstanding as of the
Closing Date; provided, however, that Parent shall have no
-------- -------
obligation with respect to any such unexercised options and warrants.
No fractional shares of Parent Common Stock shall be issued
pursuant to the Merger nor will any fractional share interest involved
entitle the holder thereof to vote, to receive dividends or to exercise
any other rights as a shareholder of Parent. In lieu thereof, any
Person who would otherwise be entitled to a fractional share of Parent
Common Stock pursuant to the provisions hereof shall receive an amount
in cash equal to the value of such fractional share. The value of such
fractional share for purposes hereof shall be the product of such
fraction multiplied by Five and 50/100 Dollars ($5.50).
Each share of Web Common Stock held in the treasury of Web or by a
wholly-owned subsidiary of Web shall be cancelled as of the Effective
Time and no Merger Consideration shall be payable with respect thereto.
From and after the Effective Time, there shall be no further transfers
on the stock transfer books of Web of any of the Web Shares outstanding
prior to the Effective Time.
Subject to the provisions of this Agreement, at the Effective
Time, all the shares of Acquisition Subsidiary common stock outstanding
immediately prior to the Merger shall be converted, by virtue of the
Merger and without any action on the part of the holder thereof, into
one share of the common stock of the Surviving Corporation (the
"SURVIVING CORPORATION COMMON STOCK"), which one share of the Surviving
Corporation Common Stock shall constitute all of the issued and
outstanding capital stock of the Surviving Corporation.
1.4 Stockholders' Rights upon Merger. Upon consummation of
--------------------------------
the Merger, the Certificates shall cease to represent any rights with
respect thereto, and, subject to applicable Law (as hereinafter defined)
and this Agreement, the Certificates shall only represent the right to
receive the Merger Consideration including the amount of cash, if any,
payable in lieu of fractional shares of Parent Common Stock into which
the Web Shares have been converted pursuant to this Agreement.
1.5 Surrender and Exchange of Shares. At the Effective Time,
--------------------------------
each holder of a Web Share shall surrender and deliver the Certificates
and transmittal letter (the "LETTER OF TRANSMITTAL") to Continental
Stock Transfer and Trust Company. Upon such surrender and delivery, the
holder shall receive a certificate representing the number of whole
shares of Parent Common Stock into which such holder's Web Shares have
been converted pursuant to this Agreement plus the amount of cash
payable in lieu of any fractional share. Until so surrendered and
exchanged, each outstanding Certificate after the Effective Time shall
be deemed for all purposes to evidence the right to receive that number
of whole shares of Parent Common Stock into which the Web Shares have
been converted pursuant to this Agreement, plus the amount of cash
payable in lieu of any fractional share; provided, however, that no
-------- -------
dividends or other distributions, if any, in respect of the shares of
Parent Common Stock, declared after the Effective Time and payable to
holders of record after the Effective Time, shall be paid to the holders
of any unsurrendered Certificates until such Certificates and Letters of
Transmittal are surrendered and delivered as provided herein. Subject
to applicable Law, after the surrender and exchange of the Certificates,
the record holders thereof will be entitled to receive any such
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dividends or other distributions without interest thereon, which
theretofore have become payable with respect to the number of shares of
Parent Common Stock for which such Certificates were exchangeable.
Holders of any unsurrendered Certificates shall not be entitled to vote
Parent Common Stock until such Certificates are exchanged pursuant to
this Agreement.
1.6 Directors. Immediately following the Closing Date, the
---------
Board of Directors of the Parent shall be restructured to be composed of
eight (8) members as follows: (i) one director chosen by Parent and one
director chosen by ICL to serve three (3) year terms; (ii) one director
chosen by Parent and one director chosen by ICL and one director to be
agreed to by Parent, ICL and WorldPages to serve two (2) year terms; and
(iii) one director chosen by Parent and one director chosen by ICL and
one director to be agreed to by Parent, ICL and WorldPages to serve one
(1) year terms. The directors to be nominated by the Parent are
currently anticipated to be Richard O'Neal, Robert Benton and Marvin
Moses. The directors to be nominated by ICL are currently anticipated
to be Wilmot Matthews, George Anderson and Robert Flynn. The parties
hereto expressly acknowledge and agree that this Section 1.6 is not
-----------
intended to, and does not, except with regard to the initial Board of
Directors of Parent referenced in this Section 1.6, impose any
-----------
requirement that the Board of Directors of Parent be comprised of the
individuals listed in this Section 1.6 or that any Person has a right
-----------
to designate a certain individual or a certain number of individuals as
nominees to the Board of Directors of Parent.
1.7 Bylaws. At and after the Effective Time, the Bylaws of
------
Acquisition Subsidiary in effect at the Effective Time shall be the
Bylaws of the Surviving Corporation (subject to any subsequent
amendment).
1.8 Other Effects of Merger. The Merger shall have all
-----------------------
further effects as specified in the applicable provisions of the
Corporation Laws.
1.9 Tax-Free Reorganization. The parties intend that the
-----------------------
Merger qualify as a tax-free reorganization pursuant to Section 368 of
the Code. The parties hereto hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368(a)
of the Treasury regulations.
1.10 Convertible Note. At any time between the date hereof and
----------------
Closing, O'Neal and Reid may continue to lend up to Ten Million Dollars
($10,000,000) to Web or Big Stuff pursuant to a "CONVERTIBLE NOTE",
described below. The Convertible Note includes amounts lent by O'Neal
and Reid to Web or Big Stuff since January 1, 1999. The Convertible
Note will provide additional working capital required by Web or Big
Stuff (i) to consummate the contemplated contractual arrangements with
Excite and to fulfill its obligations thereunder, (ii) to pay for
extraordinary capital expenditures approved in advance by a
disinterested majority of the Board of Directors of the Parent,
including consummation of contractual arrangements with other entities
similar to those with Excite, or (iii) for working capital purposes,
including for ordinary capital expenditures. The conversion feature of
the Convertible Note shall provide that the principal amount of the
Convertible Note, but not the accrued but unpaid interest, shall be
convertible into Parent common stock at any time on or after Closing at
a conversion price of $5.50 per share. If the acquisition of WorldPages
contemplated by this Agreement and the Big Stuff Acquisition Agreement
shall not be consummated, the conversion feature shall not be operable,
and Parent shall have no obligations under the Convertible Note. The
parties agree that notwithstanding anything herein or in the Big Stuff
Acquisition Agreement to the contrary, there shall be no "doubling" of the
amount which may be lent by O'Neal and Reid to Web or Big Stuff
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and that an aggregate maximum amount of $10,000,000 may be lent by O'Neal
and Reid to Web and Big Stuff, collectively.
1.11 Due Diligence Review.
--------------------
(a) At the time of execution of this Agreement, neither
Parent nor Web has received from the other any Disclosure Schedules
which are to become part of this Agreement and neither Parent nor Web
has conducted its due diligence investigation of the other. Within
twenty-one (21) days after the date of this Agreement (the "SCHEDULE
PERIOD"), each of Parent and Web shall deliver to the other any
Disclosure Schedules which it is required or may desire to provide
hereunder. Upon execution hereof, each of Parent and Web shall be
entitled forthwith to commence its due diligence review of the books,
records and operations of the other (including the Parent Securities
Filings), provided, however, that any review conducted by Parent or
-------- --------
Web pursuant to the provisions of this Section 1.11 shall be completed
------------
within thirty (30) days from the date of this Agreement or within nine
(9) days of receipt of all Disclosure Schedules from the other party,
whichever shall be the longer period. If as a result of such review,
either Parent or Web finds in good faith that it is not in its economic
best interest to proceed with the Closing as contemplated herein, it
may, at or prior to the expiration of said due diligence review period
(as extended by failure of a party to provide its Disclosure Schedules
on a timely basis), terminate this Agreement without penalty by giving
the other party written notice of such termination in the manner
provided in Section 11.1. Nothing in this Section 1.11 shall be
------------ ------------
construed to limit the right of any party to continue its due diligence
review through the Closing Date.
(b) If either party decides to terminate the Agreement
pursuant to the provisions of Section 1.11(a) hereof, neither party
---------------
shall have any further obligation to the other under this Agreement;
provided, however, that the terminating party shall be liable to the
- -------- -------
other party for the fee set forth in Section 8.2(b) or 8.2(c), as
------------------------
applicable, if such terminating party subsequently enters into a Parent
Triggering Transaction or a Web Triggering Transaction, as the case may
be, that would require the payment of the fee required by Section 8.2.
-----------
1.12 Additional Actions. If, at any time after the Effective
------------------
Time, the Surviving Corporation shall consider or be advised that any
deeds, bills of sale, assignments, assurances or any other actions or
things are necessary or desirable to vest, perfect or confirm or record
or otherwise in the Surviving Corporation its right, title or interest
in, to or under any of the rights, properties or assets of Acquisition
Subsidiary or Web or otherwise to carry out this Agreement, the officers
and directors of the Surviving Corporation shall be authorized to
execute and deliver, in the name and on behalf of Acquisition Subsidiary
or Web, all such deeds, bills of sale, assignments and assurances and to
take and do, in the name and on behalf of Acquisition Subsidiary or Web,
all such other actions and things as may be necessary or desirable to
vest, perfect or confirm any and all right, title and interest in, to
and under such rights, properties or assets in the Surviving Corporation
or otherwise to carry out this Agreement.
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF WEB AND THE WEB
SHAREHOLDERS
Web on behalf of itself and the Web Shareholders, jointly and
severally represent and warrant to and covenant with Parent as follows:
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2.1 Organization and Good Standing. Web is a corporation duly
------------------------------
organized and validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization and has all requisite
corporate power and authority to own, lease and operate its properties and
to carry on its business as now being conducted. Web is duly qualified or
licensed and in good standing to do business in each jurisdiction in which
the character of the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so duly qualified or licensed and
in good standing would not have a Web Material Adverse Effect. Schedule
--------
2.1 to be provided during the Schedule Period sets forth a complete and
- ---
accurate list of the jurisdictions of incorporation or organization and
qualification or license of Web. Web has heretofore delivered, or will
deliver during the Schedule Period, to Parent accurate and complete copies
of the Certificates or Articles of Incorporation and Bylaws, or equivalent
governing instruments, as currently in effect, of Web.
2.2 Capitalization. As of the date hereof, the authorized
--------------
capital stock of Web (the "WEB STOCK") consists of 10,000 shares of common
stock. As of the date hereof, (a) 6,086 shares of Web Stock were issued
and outstanding, and (b) 3,914 shares of Web Stock were issuable upon
exercise of outstanding warrants and options (after giving effect to the
acceleration of vesting to be triggered by the transactions contemplated by
this Agreement). No other capital stock of Web is issued or outstanding.
All issued and outstanding shares of the Web Stock are duly authorized,
validly issued, fully paid and non-assessable and were issued free of
preemptive rights and in compliance with applicable corporate and
securities Laws. Except as set forth on Schedule 2.2 to be provided
------------
during the Schedule Period, as of the date of this Agreement there are no
outstanding rights, reservations of shares, subscriptions, warrants, puts,
calls, unsatisfied preemptive rights, options or other agreements of any
kind relating to any of the capital stock or any other security of Web, and
there is no authorized or outstanding security of any kind convertible into
or exchangeable for any such capital stock or other security. There are no
restrictions upon the transfer of or otherwise pertaining to the securities
(including, but not limited to, the ability to pay dividends thereon) or
retained earnings of Web or the ownership thereof other than those, if any,
described on Schedule 2.2 or those imposed generally by the Securities
------------
Act, the Securities Exchange Act, applicable state or foreign securities
Laws or applicable corporate Law.
2.3 Subsidiaries. Web does not and will not, from the date of
------------
this Agreement until the Closing Date, hold, directly or indirectly, any
capital stock or other interest in any Person.
2.4 Authorization; Binding Agreement. Web and the Web
--------------------------------
Shareholders have all requisite power and authority to execute and deliver
this Agreement and the Web Transaction Agreements and to consummate the
transactions contemplated hereby and thereby. The execution and delivery
of this Agreement and the other agreements and documents referred to herein
and to be executed in connection herewith to which Web or any Web
Shareholder is or will be a party or a signatory (the "WEB TRANSACTION
AGREEMENTS") and the consummation of the transactions contemplated hereby
and thereby including, but not limited to the Merger, have been or will be
duly and validly authorized by Web's Board of Directors and no other
corporate or other proceedings on the part of Web or any Web Shareholder
are necessary to authorize the execution and delivery of this Agreement and
the Web Transaction Agreements or to consummate the transactions
contemplated hereby or thereby (other than the adoption of this Agreement
by the Web Shareholders in accordance with the Texas Corporation Law and
the Articles of Incorporation and Bylaws of Web). This Agreement has been
duly and validly executed and delivered by Web and the Web Shareholders and
constitutes, and upon execution and delivery thereof as contemplated by
this Agreement, the Web Transaction Agreements will constitute, the legal,
valid and binding
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agreements of Web and the Web Shareholders, enforceable against Web and the
Web Shareholders in accordance with its and their respective terms, except
to the extent that enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and by principles of equity
regarding the availability of remedies (collectively, the "ENFORCEABILITY
EXCEPTIONS").
2.5 Governmental Approvals. No consent, approval, waiver or
----------------------
authorization of, notice to or declaration or filing with ("CONSENT") any
Governmental Authority on the part of Web or any of the Web Shareholders is
required in connection with the execution or delivery by Web or the Web
Shareholders of this Agreement and the Web Transaction Agreements or the
consummation by Web or the Web Shareholders of the transactions
contemplated hereby or thereby other than (i) the filing of the Certificate
of Merger with the Secretary of State of the States of Texas and Delaware;
(ii) filings with the SEC and state securities laws administrators, (iii)
Consents from or with Governmental Authorities set forth on Schedule 2.5
------------
to be provided during the Schedule Period, (iv) filings under the HSR Act,
and (v) those Consents that, if they were not obtained or made, do not or
would not have a Web Material Adverse Effect.
2.6 No Violations. The execution and delivery of this Agreement
-------------
and the Web Transaction Agreements, the consummation of the transactions
contemplated hereby and thereby and compliance by Web and the Web
Shareholders with any of the provisions hereof or thereof will not (i)
conflict with or result in any breach of any provision of the Certificate
and/or Articles of Incorporation or Bylaws or other governing instruments
of Web, (ii) except as set forth on Schedule 2.6 to be provided during
------------
the Schedule Period, require any Consent under or result in a violation or
breach of, or constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, cancellation or
acceleration or augment the performance required) under any of the terms,
conditions or provisions of any Web Material Contract or other obligation
to which Web or any Web Shareholder is a party or by which any of them or
any of their properties or assets may be bound, (iii) result in the
creation or imposition of any lien or encumbrance of any kind upon any of
the assets of Web or (iv) subject to obtaining the Consents from
Governmental Authorities referred to in Section 2.5 above, contravene any
-----------
Law currently in effect to which Web or any Web Shareholder or its or any
of its respective assets or properties are subject, except in the case of
clauses (ii), (iii) and (iv) above, for any deviations from the foregoing
which do not or would not have a Web Material Adverse Effect.
2.7 Litigation. Except as set forth in Schedule 2.7 to be
---------- ------------
provided during the Schedule Period, there is no action, cause of action,
claim, demand, suit, proceeding, citation, summons, subpoena, inquiry or
investigation of any nature, civil, criminal, regulatory or otherwise, in
law or in equity, by or before any court, tribunal, arbitrator, mediator or
other Governmental Authority ("LITIGATION") pending or, to the knowledge of
the Web Shareholders or Web, threatened against Web or any officer,
director, employee or agent thereof, in his or her capacity as such, or as
a fiduciary with respect to any Benefit Plan of Web, or otherwise relating,
in a manner that could have a Web Material Adverse Effect, to Web or the
securities of Web, or any properties or rights of Web or that could prevent
or delay the consummation of the transactions contemplated by this
Agreement.
2.8 Web Financial Statements. The unaudited interim financial
-----------------------
statements of Web as of and for the fiscal year ended December 31, 1998,
and as of and for the three months ended March 31, 1999 (the "WEB FINANCIAL
STATEMENTS") have been or will be, during the Schedule Period, provided to
Parent. Except as noted thereon, the Web Financial Statements were or, as
to those
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Web Financial Statements provided or required to be provided subsequent to
the date hereof pursuant to this section, will be prepared in accordance
with generally accepted accounting principles applicable to the business of
Web consistently applied in accordance with past accounting practices and
fairly present (including, but not limited to, the inclusion of all
adjustments with respect to interim periods which are necessary to present
fairly the financial condition and assets and liabilities or the results of
operations of Web except as may be indicated therein or in the notes
thereto, subject to normal year-end adjustment in the ordinary course with
respect to certain items immaterial in amount or effect and the exclusion
of footnote disclosure in interim Web Financial Statements) the financial
condition and assets and liabilities or the results of operations of Web as
of the dates and for the periods indicated. Except as reflected in the Web
Financial Statements, as of their respective dates, Web did not have any
debts, obligations, guaranties of obligations of others or liabilities
(contingent or otherwise) that would be required in accordance with
generally accepted accounting principles to be disclosed in the Web
Financial Statements. Any financial statements prepared with respect to
Web subsequent to the date hereof promptly shall be provided to Parent and
shall constitute Web Financial Statements for purposes hereof.
2.9 Absence of Certain Changes or Events. Except as set forth
------------------------------------
in Schedule 2.9 to be provided during the Schedule Period, since March
------------
31, 1999, through the date of this Agreement, there has not been: (i) any
Event that could reasonably be expected to have a Web Material Adverse
Effect; (ii) any declaration, payment or setting aside for payment of any
dividend (except to the Web Shareholders, but only if the entire amount of
such dividend is paid to Big Stuff as a capital contribution) or other
distribution or any redemption, purchase or other acquisition of any shares
of capital stock or securities of Web; (iii) any return of any capital or
other distribution of assets to stockholders of Web (except to Web or a
subsidiary wholly owned by Web); (iv) other than in the ordinary course of
business any investment of a capital nature by Web by the purchase of any
property or assets except to the extent such investment is in the ordinary
course of business and is individually or in the aggregate, not in excess
of $75,000; (v) any acquisition (by merger, consolidation, acquisition of
stock or assets or otherwise) of any Person or business; (vi) any sale,
disposition, pledge, mortgage or other transfer of assets or properties of
Web other than in the ordinary course of business consistent with past
practice; (vii) any action or agreement or undertaking by Web to take any
action that, if taken or done on or after the date hereof, would result in
a breach of Section 6.6 below; (viii) any employment, severance or
-----------
consulting agreement entered into by Web with any stockholder, officer,
director, agent, employee or consultant of Web or any amendment or
modification to, or termination of, any current employment, severance or
consulting agreement to which Web is a party or by which it is bound; (ix)
any forgiveness, cancellation, compromise, settlement, waiver or release of
any debts, claims, rights or Litigation, in each case in excess,
individually or in the aggregate, of $25,000; (x) any agreement,
authorization or commitment to take, whether in writing or otherwise, any
action which, if taken prior to the date hereof, would have made any
representation or warranty of Web in this Agreement untrue or incorrect in
any material respect; (xi) any failure by Web to conduct its business in
the ordinary course consistent with past practice, it being understood,
however, that Web has accelerated and intensified its business activities
since March 31, 1999, including a payment in the amount of $3,500,000 to be
made to Excite.
2.10 Compliance with Laws. The business of Web has been operated
--------------------
in compliance with all Laws applicable thereto, except for any instances of
non-compliance which do not and would not have a Web Material Adverse
Effect.
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2.11 Permits. (i) Web has all permits, certificates, licenses,
-------
approvals, and other authorizations required in connection with the
operation of its business (collectively, "WEB PERMITS"), (ii) Web is not in
violation of any Web Permit, and (iii) no proceedings are pending or, to
the knowledge of Web, threatened, to revoke or limit any Web Permit,
except, in the case of clause (i) or (ii) above, those the absence or
violation of which do not and would not have a Web Material Adverse Effect.
2.12 Finders and Investment Bankers. Neither Web nor any of its
------------------------------
officers or directors has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated hereby.
2.13 Contracts. Except as set forth in Schedule 2.13 to be
--------- -------------
provided during the Schedule Period, Web is not a party or subject to any
material note, bond, mortgage, indenture, contract, lease, license,
agreement, understanding, instrument, bid or proposal ("WEB MATERIAL
CONTRACT"). For purposes of this Section 2.13, a note, bond, mortgage,
------------
indenture, contract, lease, license, agreement, understanding, instrument,
bid or proposal shall be considered a Web Material Contract (a) if it is
with an affiliate of Web, (b) if the financial obligation of Web thereunder
or, if applicable, to the assets or properties of Web could exceed $25,000
after the Closing Date, or (c) if it provides for any exclusivity or non-
competition restrictions applicable to Web. Web has made available, or
will make available during the Schedule Period, to Parent true and accurate
copies of the Web Material Contracts. All such Web Material Contracts are
valid and binding and are in full force and effect and enforceable in
accordance with their respective terms, subject to the Enforceability
Exceptions. Any and all transactions between or involving Web and an
affiliate thereof were entered into in the ordinary course of business and
are upon fair and reasonable terms not materially less favorable than Web
could obtain or become entitled to in an arm's-length transaction with a
Person that is not an affiliate. Except as set forth in Schedule 2.5 to
------------
be provided during the Schedule Period, (i) no Consent of any Person is
needed in order that each such Web Material Contract shall continue in full
force and effect in accordance with its terms without penalty, acceleration
or rights of early termination by reason of the consummation of the
transactions contemplated by this Agreement, and (ii) Web is not in
material violation or breach of or default under any such Web Material
Contract, nor to Web's knowledge is any other party to any such Web
Material Contract in material violation or breach of or default under any
such Web Material Contract.
2.14 Employee Benefit Plans. Except as set forth in Schedule
----------------------- --------
2.14 to be provided during the Schedule Period, there are no Benefit Plans
- ----
(as defined below) maintained or contributed to by Web under which Web
could incur any liability. A "BENEFIT PLAN" shall mean (i) an employee
benefit plan as defined in Section 3(3) of the ERISA, even if, because of
some other provision of ERISA, such plan is not subject to any or all of
ERISA's provisions, and (ii) whether or not described in the preceding
clause, (a) any pension, profit sharing, stock bonus, deferred or
supplemental compensation, retirement, thrift, stock purchase or stock
option plan, or any other compensation, welfare, insurance, medical,
hospitalization, fringe benefit or retirement plan, program, policy, course
of conduct, understanding or arrangement of any kind whatsoever, whether
formal or informal, oral or written, providing for benefits for or the
welfare of any or all of the current or former employees or agents of the
employer or their beneficiaries or dependents, (b) a multi-employer plan as
defined in Section 3(37) of ERISA (a "MULTI-EMPLOYER PLAN") or in any other
applicable Law, or (c) a multiple employer plan as defined in Section 413
of the Code or in any other applicable Law.
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With respect to each Benefit Plan (where applicable): Web has made,
or will make within the Schedule Period, available to Parent complete and
accurate copies of (i) all plan and trust texts and agreements, insurance
contracts and other funding arrangements; (ii) annual reports on the Form
5500 series for the last three (3) years; (iii) financial statements and/or
annual and periodic accountings of plan assets for the last three (3)
years; (iv) the most recent determination letter received from the IRS; (v)
actuarial valuations for the last three (3) years; and (vi) the most recent
summary plan description as defined in ERISA.
No Web Benefit Plan is a defined benefit pension plan subject to
Title IV of ERISA or Section 412 of the Code. Each of the Web Benefit
Plans has been maintained in compliance with its terms and all applicable
Law, except where the failure to do so would not result in a Web Material
Adverse Effect or a Surviving Corporation Material Adverse Effect. Web
does not contribute to, and does not have any outstanding liability with
respect to, any Multi-employer Plan.
Except as set forth in Schedule 2.14, the consummation of the
-------------
Merger will not, either alone or in conjunction with another Event: (i)
entitle any individual to severance pay, or (ii) accelerate the time of
payment or vesting of benefits or increase the amount of compensation due
to any individual.
2.15 Taxes and Returns.
-----------------
(a) Except as disclosed in Schedule 2.15 to be provided
-------------
during the Schedule Period, Web has timely filed, or caused to be timely
filed, all federal, state, local and foreign income, gross receipts, sales,
use, property, production, payroll, franchise, withholding, employment,
social security, license, excise, transfer, gains, and other tax returns or
reports required to be filed by it, and has paid, collected or withheld, or
caused to be paid, collected or withheld, all taxes and governmental
charges, assessments and contributions of any nature whatsoever including,
but not limited to, any related penalties, interest and liabilities (any of
the foregoing being referred to herein as a "TAX"), required to be paid,
collected or withheld, other than such Taxes for which adequate reserves in
the Web Financial Statements have been established or which are being
contested in good faith and have been disclosed in writing to Parent prior
to the date of this Agreement. Except as set forth in Schedule 2.15,
-------------
there are no claims or assessments pending against Web for any alleged
deficiency in any Tax, and Web does not know of any threatened Tax claims
or assessments against Web (other than those for which adequate reserves in
the Web Financial Statements have been established or which are being
contested in good faith and have been disclosed in writing to Parent prior
to the date of this Agreement). Except as set forth in Schedule 2.15,
-------------
Web has not made an election under Section 338 of the Code and has not
taken any action that would result in any Tax liability of Web as a result
of a deemed election within the meaning of Section 338 of the Code. Except
as set forth in Schedule 2.15, Web does not have any waivers or
-------------
extensions of any applicable statute of limitations to assess any Taxes.
Except as set forth in Schedule 2.15, there are no outstanding requests
-------------
by Web for any extension of time within which to file any return or within
which to pay any Taxes shown to be due on any return. Web (i) has elected
to be treated as, and from the date of such election until the date hereof
has met, and currently meets, the eligibility requirements for treatment
as, an "S" corporation under the Code; and (ii) as of the date hereof, has
no subsidiaries for Tax purposes.
(b) A listing of all Tax sharing agreements or similar
arrangements with respect to or involving Web is set forth in Schedule 2.15.
-------------
10
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(c) Except as set forth in Schedule 2.15, Web has not made
-------------
or become obligated to make, or will, as a result of the transactions
contemplated by this Agreement, make or become obligated to make, any
"excess parachute payment" as defined in Section 280G of the Code (without
regard to subsection (b)(4) thereof).
(d) Web has disclosed on its federal income tax returns all
positions taken therein that could give rise to a substantial
understatement of federal income tax liability within the meaning of
Section 6662(d) of the Code.
(e) There are no liens for Taxes on the assets of Web
except for statutory liens for current Taxes not yet due and payable.
(f) All elections with respect to Taxes affecting Web are
set forth in Schedule 2.15 or, with respect to elections made on or
-------------
before December 31, 1996, are reflected in the Tax returns of Web filed and
provided to Parent prior to the date of this Agreement, or to be provided
to Parent during the Schedule Period. Web has not: (i) made and will not
make a deemed dividend election under Treas. Reg. Section 1.1502-32(f)(2)
or a consent dividend election under Section 565 of the Code; (ii)
consented at any time under Section 341(f)(l) of the Code to have the
provisions of Section 341(f)(2) of the Code apply to any disposition of the
assets of Web; (iii) agreed, and is not required, to make any adjustment
under Section 481(a) of the Code by reason of a change in accounting method
or otherwise; (iv) made an express election, and is not required, to treat
any asset of Web as owned by another Person for federal income Tax purposes
or as tax-exempt bond financed property or tax-exempt use property within
the meaning of Section 168 of the Code; (v) made any of the foregoing
elections and is not required to apply any of the foregoing rules under any
comparable state, foreign or local income Tax provision.
(g) Except as set forth in Schedule 2.15, Web is not a
-------------
partner or member in any joint venture, partnership, limited liability
company or other arrangement or contract that is or could be treated as a
partnership for federal income Tax purposes.
(h) Except as set forth in Schedule 2.15, Web is not a
-------------
party to or otherwise subject to any arrangement having the effect of or
giving rise to the recognition of a deduction or loss before the Closing
Date, and a corresponding recognition of taxable income or gain after the
Closing Date, or any other arrangement that would have the effect of or
give rise to the recognition of taxable income or gain by Web after the
Closing Date without the receipt of or entitlement to a corresponding
amount of cash.
2.16 Liabilities. From March 31, 1999, through the date of this
-----------
Agreement, except as expressly disclosed in Schedule 2.16 to be delivered
-------------
during the Schedule Period or in the Web Financial Statements, Web does not
have any direct or indirect indebtedness, liability, claim, loss, damage,
deficiency, obligation or responsibility, fixed or unfixed, choate or
inchoate, liquidated or unliquidated, secured or unsecured, accrued,
absolute, contingent or otherwise, whether or not of a kind required by
generally accepted accounting principles to be set forth in a financial
statement, other than those incurred in the ordinary course of business or
in an amount not in excess of $25,000 individually or $100,000 in the
aggregate. Except as set forth on Schedule 2.16 or in the Web Financial
-------------
Statements, as of the date of this Agreement, Web does not have any (i)
obligations in respect of borrowed money, (ii) obligations evidenced by
bonds, debentures, notes or other similar instruments, (iii) obligations
which would be required by generally accepted accounting principles
11
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to be classified as "capital leases," (iv) obligations to pay the deferred
purchase price of property or services, except trade accounts payable
arising in the ordinary course of business and payable not more than twelve
(12) months from the date of incurrence, and (v) any guaranties of any
obligations of any other Person.
2.17 Environmental Matters. As of the date of this Agreement,
---------------------
(i) except where the failure to so comply will not have a Web Material
Adverse Effect, Web is in compliance with all applicable Environmental Laws
(as hereinafter defined), (ii) there is no civil, criminal or
administrative judgment, action, suit, demand, claim, hearing, notice of
violation, investigation, proceeding, notice or demand letter pending or,
to the knowledge of Web, threatened against Web or any of its properties
pursuant to Environmental Laws, and (iii) except as set forth on Schedule
--------
2.17 to be provided during the Schedule Period, there are no past or
- ----
present Events which reasonably may be expected to prevent compliance with,
or which have given rise to or which reasonably may be expected to give
rise to liability on the part of Web under Environmental Laws, except for
those which would not reasonably be expected to give rise to a Web Material
Adverse Effect. As used herein the term "ENVIRONMENTAL LAWS" shall mean
Laws relating to pollution, waste control, the generation, presence or
disposal of asbestos, hazardous or toxic wastes or substances, the
protection of the environment, environmental activity or public health and
safety.
2.18 Intellectual Property; Fictitious Names. For purposes of
---------------------------------------
this Agreement, "INTELLECTUAL PROPERTY" shall mean all patents, trademarks,
service marks, trade names, copyrights, franchises and similar rights of or
used by Web, all applications for any of the foregoing and all permits,
grants and licenses or other rights running to or from Web relating to any
of the foregoing. Except as set forth on Schedule 2.18 to be delivered
-------------
during the Schedule Period, (i) Web owns, or is licensed to, or otherwise
has, the full and exclusive right to use all Intellectual Property
currently used or proposed to be used in its business, (ii) the rights of
Web in the Intellectual Property are, subject to the rights of any licensor
thereof, free and clear of any liens or other encumbrances and restrictions
and Web has not received, as of the date of this Agreement, notice of any
charge or claim of any Person relating to such Intellectual Property or any
process or confidential information of Web ("IP CLAIM NOTICE") and does not
know of any basis for any such charge or claim, and (iii) Web and its
corporate predecessors, if any, have not conducted business at any time
during the period beginning five (5) years prior to the date hereof under
any corporate, trade or fictitious names other than their current corporate
names. Web shall promptly notify Parent of any IP Claim Notice received by
Web after the date of this Agreement.
2.19 Real Estate.
-----------
(a) Web owns no real property.
(b) Schedule 2.19(b) sets forth, or will set forth when
----------------
provided during the Schedule Period, a true, correct and complete schedule
as of the date of this Agreement of all material leases, subleases,
easements, rights-of-way, licenses or other agreements under which Web uses
or occupies, or has the right to use or occupy, now or in the future, any
real property or improvements thereon (the "WEB REAL PROPERTY LEASES").
Except for the matters listed on said Schedule 2.19(b), Web holds the
----------------
leasehold estate under or other interest in each Web Real Property Lease
free and clear of all liens, encumbrances and other rights of occupancy
other than statutory landlords or mechanics' liens which have not been
executed upon.
12
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2.20 Corporate Records. The corporate record books of or
-----------------
relating to Web made available, or to be made available during the Schedule
Period, to Parent by Web contain accurate and complete records of (i) all
corporate actions of the stockholders and directors (and committees
thereof) of Web, (ii) the Certificate and/or Articles of Incorporation,
Bylaws and/or other governing instruments, as amended, of Web, and (iii)
the issuance and transfer of stock of Web. Except as set forth on
Schedule 2.20 to be provided during the Schedule Period, Web does not
- -------------
have any of its material records or information recorded, stored,
maintained or held off the premises of Web.
2.21 Title to and Condition of Personal Property. Web has good
-------------------------------------------
and marketable title to, or a valid leasehold interest in, all material
items of any personal property reflected in the Web Financial Statements
dated March 31, 1999, or currently used in the operation of their business,
and such property or leasehold interests are free and clear of all liens,
claims, charges, security interests, options, or other title defects or
encumbrances, except for property disposed of in the ordinary course since
the date thereof consistent with the provisions of Section 2.9 above, and
-----------
such exceptions to title and liens, claims, charges, security interests,
options, title defects or encumbrances which do not and would not have a
Web Material Adverse Effect. As of the date of this Agreement, all such
personal property is in good operating condition and repair (ordinary wear
and tear excepted), is suitable for the use to which the same is
customarily put by Web, is free from material defects and is of a quality
and quantity presently usable in the ordinary course of the operation of
the business of Web, except where such failure would not have a Web
Material Adverse Effect.
2.22 No Adverse Actions. Except as set forth on Schedule 2.22
------------------ -------------
to be provided during the Schedule Period, there is no existing, pending
or, to the knowledge of Web, threatened termination, cancellation,
limitation, modification or change in the business relationship of Web,
with any supplier, customer or other Person except as are immaterial
individually and in the aggregate and are in the ordinary course of
business. None of Web, or, to the knowledge of Web or any Web Shareholder,
any director, officer, agent, employee or other Person acting on behalf of
Web or any Web Shareholder has used any corporate funds for unlawful
contributions, payments, gifts, entertainment or other unlawful expenses
relating to political activity, or made any direct or indirect unlawful
payments to governmental or regulatory officials or others.
2.23 Labor Matters. Except as may be set forth on Schedule
------------- --------
2.13 or 2.23, each of which is to be provided during the Schedule
- ---- ----
Period, Web does not have any obligations, contingent or otherwise, under
any employment, severance or consulting agreement, collective bargaining
agreement or other contract with a labor union or other labor or employee
group. To the knowledge of Web, as of the date of this Agreement, there
are no efforts presently being made or threatened by or on behalf of any
labor union with respect to the unionizing of employees of Web. As of the
date of this Agreement, there is no claim by an employee, an employee
group, a labor union or other labor group or a Governmental Authority
against Web pending or, to the knowledge of the Web, threatened before the
National Labor Relations Board or any other court or tribunal respecting
employment and employment practices, terms and conditions of employment,
termination of employment or the compliance to any legislation concerning
labor matters, including, without limiting the generality of what precedes,
labor relations, occupational health and safety, minimum labor standards,
industrial accidents and occupational diseases; there is no labor strike,
dispute, slowdown or stoppage pending or, to the knowledge of Web,
threatened against or involving Web; no representation question exists
respecting the employees of Web; no grievance or internal or informal
complaint exists, no arbitration proceeding arising out of or under any
collective bargaining agreement is pending and no claim therefor has been
asserted. As of the date of this
13
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Agreement, there has not been any material adverse change in relations with
employees or agents of Web as a result of any announcement of the
transactions contemplated by this Agreement. Web shall promptly notify
Parent upon knowledge by Web of the occurrence after the date hereof of any
matter referenced in this Section 2.23.
------------
2.24 Insurance. Web has obtained and maintains in full force and
---------
effect insurance with responsible and reputable insurance companies or
associations in such amounts, on such terms and covering such risks,
including fire and other risks insured against by extended coverage, public
liability insurance and insurance against claims for personal injury or
death or property damage occurring in connection with the activities of Web
or any properties owned, occupied or controlled by it, as is customary and
prudent. Since January 1, 1997, Web has not received notice of default
under, or intended cancellation or nonrenewal of, any policies of
insurance, and Web has not been refused any insurance for coverage by an
insurance carrier to which it has applied for insurance.
2.25 Disclosure. All information and documents provided prior to
----------
the date of this Agreement, and all information and documents subsequently
provided, to Parent or its representatives or lenders by or on behalf of
Web in connection with the transactions contemplated by this Agreement are
or contain, or will be or will contain as to subsequently provided
information or documents, true, accurate and complete information in all
material respects with respect to the subject matter thereof and are, or
will be as to subsequently provided information or documents, reasonably
responsive to any specific request made by or on behalf of Parent or its
representatives or lenders.
2.26 Tax. Neither Web nor the Web Shareholders know of any fact
---
or have taken any action, in each case with respect to Web or the Web
Shareholders, that could be reasonably expected to prevent the
transaction contemplated hereby from qualifying as a tax-free
reorganization pursuant to Section 368 of the Code.
2.27 Year 2000 Compliance. Except as set forth in Schedule
-------------------- --------
2.27 to be provided during the Schedule Period, Web has taken all
- ----
commercially reasonable and prudent measures designed to make all
material aspects of Web's operations Year 2000 Compliant, to the extent
within Web's control. As used in this section, "YEAR 2000 COMPLIANT"
shall mean that any and all computer hardware including but not limited
to mainframe computers, personal computers, servers and related
equipment), computer software, programming languages, code, electronic
applications and systems (including but not limited to LANs, WANs,
inter/intranet systems and client/server systems), programs, files,
databases, chips, microprocessors and any and all electronic or
mechanical functionalities in any way used in connection with, relied
upon or relating to a specified subject matter (e.g., a business,
product or service) accurately and completely process (in the manner
intended, including but not limited to calculating, comparing and
sequencing) on a timely basis any and all data which are in any way
dependent upon usage of calendar dates, including but not limited to
dates on or after January 1, 2000, or time.
ARTICLE III - REPRESENTATIONS AND WARRANTIES
OF PARENT
Parent represents and warrants to and covenants with Web as
follows:
3.1 Organization and Good Standing. Parent is a corporation
------------------------------
duly organized and validly existing under the laws of the State of Delaware
and has all requisite corporate power and authority
14
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to own, lease and operate its properties and to carry on its business as
now being conducted. Each of the Active Parent Subsidiaries is a
corporation, duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization and has
all requisite corporate, power and authority to own, lease and operate its
properties and to carry on its business as now being conducted, except
where the failure to be so duly organized, validly existing and in good
standing or to have such power and authority would not have a Parent
Material Adverse Effect. Parent and each of the Active Parent Subsidiaries
is duly qualified or licensed and in good standing to do business in each
jurisdiction in which the character of the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except where the failure to be so
duly qualified or licensed and in good standing would not have a Parent
Material Adverse Effect. Schedule 3.1, to be provided during the
------------
Schedule Period, sets forth a complete and accurate list of the
jurisdictions of incorporation or organization and qualification or license
of Parent and the Active Parent Subsidiaries. Parent has heretofore made
available, or will make available during the Schedule Period, to Web
accurate and complete copies of the Certificates or Articles of
Incorporation and Bylaws, or equivalent governing instruments, as currently
in effect, of Parent and each of the Active Parent Subsidiaries.
3.2 Capitalization. As of the date hereof, the authorized
--------------
capital stock of Parent consists of 180,000,000 shares of Parent Common
Stock and 20,000,000 shares of preferred stock, par value $0.0001 per share
as to which 142,857 shares have been designated as Series A Redeemable
Convertible Preferred Stock ("PARENT SERIES A STOCK"). As of the opening
of business on the date of this Agreement, (a) 19,917,262 shares of Parent
Common Stock were issued and outstanding, not including 234,141 shares of
Parent Common Stock which are treasury shares, and (b) 142,857 shares of
the Parent Series A Stock were issued and outstanding. No other capital
stock of Parent is issued or outstanding. All issued and outstanding
shares of the Parent Common Stock and Parent Series A Stock are duly
authorized, validly issued, fully paid and non-assessable and were issued
free of preemptive rights and in compliance with applicable corporate and
securities Laws. Except as set forth in the Parent Securities Filings or
on Schedule 3.2 to be provided during the Schedule Period, as of the date
------------
of this Agreement there are no outstanding rights, reservations of shares,
subscriptions, warrants, puts, calls, unsatisfied preemptive rights,
options or other agreements of any kind relating to any of the capital
stock or any other security of Parent, and there is no authorized or
outstanding security of any kind convertible into or exchangeable for any
such capital stock or other security. There are no restrictions upon the
transfer of or otherwise pertaining to the securities (including, but not
limited to, the ability to pay dividends thereon) or retained earnings of
Parent and the Active Parent Subsidiaries or the ownership thereof other
than those pursuant to the Parent Guaranty or the Great Western Credit
Agreement or those imposed generally by the Securities Act, the Securities
Exchange Act, applicable state or foreign securities Laws or applicable
corporate Law.
3.3 Subsidiaries. Except as set forth on Schedule 3.3 to be
------------ ------------
provided during the Schedule Period, all of the capital stock and other
interests of the Active Parent Subsidiaries held by Parent are owned by it
or a Parent subsidiary, free and clear of any claim, lien, encumbrance,
security interest or agreement with respect thereto. All of the
outstanding shares of capital stock in each of the Active Parent
Subsidiaries held directly or indirectly by Parent are duly authorized,
validly issued, fully paid and non-assessable and were issued free of
preemptive rights and in compliance with applicable corporate and
securities Laws.
3.4 Authorization; Binding Agreement. Parent and Acquisition
--------------------------------
Subsidiary have all requisite corporate power and authority to execute and
deliver this Agreement and the Parent Transaction
15
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Agreements and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the other
agreements and documents referred to herein and to be executed in
connection herewith to which Parent or Acquisition Subsidiary is or will be
a party or a signatory (the "PARENT TRANSACTION AGREEMENTS") and the
consummation of the transactions contemplated hereby and thereby have been
duly and validly authorized by the respective Boards of Directors of Parent
and Acquisition Subsidiary, as appropriate, and except for the approval of
the holders of the Parent Common Stock, no other corporate proceedings on
the part of Parent or Acquisition Subsidiary are necessary to authorize
the execution and delivery of this Agreement and the Parent Transaction
Agreements or to consummate the transactions contemplated hereby or
thereby. This Agreement has been duly and validly executed and delivered
by each of Parent and Acquisition Subsidiary and constitutes, and upon
execution and delivery thereof as contemplated by this Agreement, the
Parent Transaction Agreements will constitute, the legal, valid and binding
agreements of Parent and Acquisition Subsidiary, enforceable against each
of Parent and Acquisition Subsidiary in accordance with its and their
respective terms, subject to the Enforceability Exceptions.
3.5 Governmental Approvals. No Consent from or with any
----------------------
Governmental Authority on the part of Parent or any of the Active Parent
Subsidiaries, is required in connection with the execution or delivery by
Parent and Acquisition Subsidiary of this Agreement and the Parent
Transaction Agreements or the consummation by Parent and Acquisition
Subsidiary of the transactions contemplated hereby or thereby other than
(i) filings with the SEC, state securities laws administrators and the
NYSE, (ii) Consents from or with Governmental Authorities, (iii) filings
under the HSR Act, and (iv) those Consents that, if they were not obtained
or made, do not or would not have a Parent Material Adverse Effect.
3.6 No Violations. The execution and delivery of this Agreement
-------------
and the Parent Transaction Agreements, the consummation of the transactions
contemplated hereby and thereby and compliance by Parent and Acquisition
Subsidiary with any of the provisions hereof or thereof will not (i)
conflict with or result in any breach of any provision of the Certificate
and/or Articles of Incorporation or Bylaws or other governing instruments
of Parent or any of the Active Parent Subsidiaries, except as set forth on
Schedule 3.6 to be provided during the Schedule Period, (ii) except for
- ------------
compliance with the requirements under the Parent Guaranty, require any
Consent under or result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration or augment the
performance required) under any of the terms, conditions or provisions of
any Parent Material Contract or other obligation to which Parent or any
Active Parent Subsidiary, is a party or by which any of them or any of
their properties or assets may be bound, (iii) result in the creation or
imposition of any lien or encumbrance of any kind upon any of the assets of
Parent or any Parent Subsidiary, or (iv) subject to obtaining the Consents
from Governmental Authorities referred to in Section 3.5 above,
-----------
contravene any Law currently in effect to which Parent or any Active Parent
Subsidiary or its or any of their respective assets or properties are
subject, except in the case of clauses (ii), (iii) and (iv) above, for any
deviations from the foregoing which do not or would not have a Parent
Material Adverse Effect.
3.7 Securities Filings and Litigation.
---------------------------------
(a) Parent has made available, or will make available during
the Schedule Period, to Web true and complete copies of (i) its Annual
Reports on Form 10-K, as amended, for the years ended December 31, 1997 and
1998, as filed with the SEC, (ii) its proxy statement relating
16
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to the meeting of shareholders held on July 29, 1998, as filed with the
SEC, and (iii) all other reports, statements and registration statements
and amendments thereto (including, without limitation, Quarterly Reports on
Form 10-Q and Current Reports on Form 8-K, as amended) filed by Parent with
the SEC since February 18, 1998. The reports and statements set forth in
clauses (i) through (iii) above, and those subsequently provided or
required to be provided pursuant to this section, are referred to
collectively as the "PARENT SECURITIES FILINGS." As of their respective
dates, or as of the date of the last amendment thereof, if amended after
filing, none of the Parent Securities Filings (including all schedules
thereto and disclosure documents incorporated by reference therein),
contained or, as to Parent Securities Filings subsequent to the date
hereof, will contain any untrue statement of a material fact or omitted or,
as to Parent Securities Filings subsequent to the date hereof, will omit to
state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. Each of the Parent Securities Filings at the time of
filing or as of the date of the last amendment thereof, if amended after
filing, complied or, as to Parent Securities Filings subsequent to the date
hereof, will comply in all material respects with the Securities Exchange
Act or the Securities Act, as applicable.
(b) Except as set forth on Schedule 3.7(b) to be provided
---------------
during the Schedule Period, there is no Litigation pending or, to the
knowledge of Parent, threatened against Parent or any Active Parent
Subsidiary, any officer, director, employee or agent thereof, in his or her
capacity as such, or as a fiduciary with respect to any Benefit Plan of
Parent, or otherwise relating, in a manner that could have a Parent
Material Adverse Effect, to Parent, any Active Parent Subsidiary or the
securities of any of them, or any properties or rights of Parent or any of
the Active Parent Subsidiaries, which is required to be described in any
Parent Securities Filing that is not so described. No event has occurred
as a consequence of which Parent would be required to file a Current Report
on Form 8-K pursuant to the requirements of the Securities Exchange Act as
to which such a report has not been timely filed with the SEC. Any
reports, statements and registration statements and amendments thereof
(including, without limitation, Reports on Form 10-K, Quarterly Reports on
Form 10-Q and Current Reports on Form 8-K, as amended) filed by Parent with
the SEC after the date hereof shall be provided to Web upon such filing.
3.8 Parent Financial Statements. The audited consolidated and
---------------------------
unaudited interim financial statements of Parent and the Active Parent
Subsidiaries included in the Parent Securities Filings (the "PARENT
FINANCIAL STATEMENTS") have been or will be, during the Schedule Period,
made available to Web. Except as noted thereon, the Parent Financial
Statements were prepared in accordance with generally accepted accounting
principles applicable to the business of Parent and the Active Parent
Subsidiaries consistently applied in accordance with past accounting
practices and fairly present (including, but not limited to, the inclusion
of all adjustments with respect to interim periods which are necessary to
present fairly the financial condition and assets and liabilities or the
results of operations of Parent and the Active Parent Subsidiaries, subject
to normal year-end adjustments in the ordinary course with respect to
certain items immaterial in amount or effect and the exclusion of footnote
disclosure in interim Parent Financial Statements) the financial condition
and assets and liabilities or the results of operations of Parent and the
Active Parent Subsidiaries as of the dates and for the periods indicated.
Except as set forth in Schedule 3.8 to be provided during the Schedule
------------
Period or as reflected in the Parent Financial Statements, as of their
respective dates, neither Parent nor any Active Parent Subsidiary had any
debts, obligations, guaranties of obligations of others or liabilities
(contingent or otherwise) that would be required in accordance with
generally accepted accounting principles to be disclosed in the Parent
Financial Statements.
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3.9 Absence of Certain Changes or Events. Except as set forth
------------------------------------
in the Parent Securities Filings made available by Parent to Web prior to
the date of this Agreement or in Schedule 3.9 to be provided during the
------------
Schedule Period, since March 31, 1999 through the date of this Agreement,
there has not been: (i) any Event that could reasonably be expected to
have a Parent Material Adverse Effect; or (ii) any agreement by Parent or
Active Parent Subsidiary to take any action that would result in a breach
of Section 6.6 below.
-----------
3.10 Compliance with Laws. The business of Parent and the Active
--------------------
Parent Subsidiaries, has been operated in compliance with all Laws
applicable thereto, except for any instances of non-compliance which do not
and would not have a Parent Material Adverse Effect.
3.11 Permits. (i) Parent and the Active Parent Subsidiaries have
-------
all permits, certificates, licenses, approvals, tariffs and other
authorizations required in connection with the operation of their business
(collectively, "PARENT PERMITS"), (ii) neither Parent nor any Active Parent
Subsidiary is in violation of any Parent Permit, and (iii) no proceedings
are pending or, to the knowledge of Parent, threatened, to revoke or limit
any Parent Permit, except, in the case of clause (i) or (ii) above, those
the absence or violation of which do not and would not have a Parent
Material Adverse Effect.
3.12 Finders and Investment Bankers. Neither Parent nor any of
------------------------------
its officers or directors has employed any broker or finder or otherwise
incurred any liability for any brokerage fees, commissions or finders' fees
in connection with the transactions contemplated hereby except that
PaineWebber Incorporated has been engaged to deliver the fairness opinion
required to be delivered pursuant to Section 7.1(l) and NationsBanc
--------------
Montgomery Securities, L.L.C. has been engaged to assist in the sale(s) of
the CLEC Operations and a copy of the engagement letters and other related
documents have been furnished to Web. Web will not be liable for any
brokerage fees, commissions, investment banking fees or other amounts to
PaineWebber Incorporated or NationsBanc Montgomery Securities, L.L.C. in
connection with this Agreement, the Company Acquisition Agreement, the Big
Stuff Acquisition Agreement or any transactions contemplated herein or
therein.
3.13 Contracts. Except as set forth in Schedule 3.13 to be
--------- -------------
provided during the Schedule Period, neither Parent nor any Active Parent
Subsidiary is a party to any material note, bond, mortgage, indenture,
contract, lease, license, agreement, understanding, instrument, bid or
proposal ("PARENT MATERIAL CONTRACT") required to be described in or filed
as an exhibit to any Parent Securities Filing that is not described in or
filed as required by the Securities Act or the Securities Exchange Act, as
the case may be. Parent has made, or will make during the Schedule Period,
available to Web true and accurate copies of the Parent Material Contracts.
All such Parent Material Contracts are valid and binding and are in full
force and effect and enforceable in accordance with their respective terms,
subject to the Enforceability Exceptions.
3.14 Corporate Records. The respective corporate record books of
-----------------
or relating to Parent and each of the Active Parent Subsidiaries made
available to Web by Parent contain accurate and complete records of (i) all
corporate actions of the respective shareholders and directors (and
committees thereof) of Parent and the Active Parent Subsidiaries, (ii) the
Certificate and/or Articles of Incorporation, Bylaws and/or other governing
instruments, as amended, of Parent and the Active Parent Subsidiaries, and
(iii) the issuance and transfer of stock of Parent and the Active Parent
Subsidiaries.
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3.15 Tax. Parent does not know of any fact and has not
---
taken any action that could be reasonably expected to prevent the
transaction contemplated hereby from qualifying as a tax-free
reorganization pursuant to Section 368 of the Code.
3.16 Disclosure. All information and documents provided prior
----------
to the date of this Agreement and all information and documents
subsequently provided, to Web and the Web Shareholders, or its or their
respective representatives or lenders by or on behalf of Parent in
connection with the transactions contemplated by this Agreement are or
contain, or will be or will contain as to subsequently provided
information or documents, true, accurate and complete information in all
material respects with respect to the subject matter thereof and are, or
will be as to subsequently provided information or documents, reasonably
responsive to any specific request made by or on behalf of Web and the
Web Shareholders or its or their representatives or lenders.
ARTICLE IV - ADDITIONAL COVENANTS OF WEB
AND THE WEB SHAREHOLDERS
Web and the Web Shareholders covenant and agree as follows:
4.1 Notification of Certain Matters. Web and the Web
-------------------------------
Shareholders shall give prompt notice to Parent if any of the following
occur from the date of this Agreement through the Closing Date: (i)
receipt of any notice of, or other communication relating to, a default or
Event which, with notice or lapse of time or both, would become a default
under any Web Material Contract; (ii) receipt of any notice or other
communication from any third party alleging that the Consent of such third
party is or may be required in connection with the transactions
contemplated by this Agreement; (iii) receipt of any material notice or
other communication from any Governmental Authority in connection with the
transactions contemplated by this Agreement; (iv) the occurrence of an
Event which would have a Web Material Adverse Effect; (v) the commencement
or threat of any Litigation involving or affecting any Web Shareholder, Web
or any of its or their respective properties or assets, or, to its
knowledge, any employee, agent, director or officer of Web, in his or her
capacity as such or as a fiduciary under a Benefit Plan of Web, which, if
pending on the date hereof, would have been required to have been disclosed
in this Agreement or which relates to the consummation of the transactions
contemplated by this Agreement, including the Merger, or the Web
Transaction Agreements or any material development in connection with any
Litigation disclosed by Web or any Web Shareholder in or pursuant to this
Agreement; and (vi) the occurrence of any event that would cause a breach
by Web or any Web Shareholder of any provision of this Agreement or a Web
Transaction Agreement, including such a breach that would occur if such
event had taken place on or prior to the date of this Agreement.
4.2 Access and Information. Between the date of this Agreement
----------------------
and the Closing Date, Web, upon reasonable notice, will give, and shall
direct its accountants and legal counsel to give, Parent, its lenders and
their respective authorized representatives (including, without limitation,
financial advisors, accountants and legal counsel) at all reasonable times
access to all offices and other facilities and to all contracts,
agreements, commitments, books and records (including, but not limited to,
Tax returns) of or pertaining to Web, will permit the foregoing to make
such inspections as they may require and will cause its officers promptly
to furnish Parent with (a) such financial and operating data and other
information with respect to the business and properties of Web as Parent
may from time to time reasonably request including, but not limited to,
data and information
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required for inclusion in Parent's pending registration statements and/or
other Parent Securities Filings, and (b) a copy of each material report,
schedule and other document filed or received by Web pursuant to the
requirements of applicable securities Laws. The foregoing access will be
subject to restrictions contained in Section 6.9 hereof.
-----------
4.3 Web Shareholder Approval. As soon as practicable, Web will,
------------------------
if required, take all steps necessary to duly call, give notice of, convene
and hold a meeting of the Web Shareholders for the purpose of adopting this
Agreement and for such other purposes as may be necessary or desirable in
connection with effectuating the transactions contemplated hereby. The
Board of Directors of Web (i) unless otherwise required under the fiduciary
duties of the directors of Web, as determined by such directors in good
faith upon advice of legal counsel, will recommend to the Web Shareholders
that they adopt this Agreement and approve the transactions contemplated
hereby, and (ii) will use its reasonable best efforts to obtain any
necessary adoption and approval by the Web Shareholders of this Agreement
and the transactions contemplated hereby including, without limitation,
voting the Web Shares held for such adoption and approval.
4.4 Reasonable Best Efforts. Subject to the terms and
-----------------------
conditions herein provided, Web and the Web Shareholders agree to use their
reasonable best efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, all things necessary, proper or advisable to
consummate and make effective as promptly as practicable, but in any event,
prior to the Closing, the Merger and the other transactions contemplated by
this Agreement and the Web Transaction Agreements including, but not
limited to (i) obtaining the Consent of others to this Agreement, the Web
Transaction Agreements and the transactions contemplated hereby and
thereby, (ii) the defending of any Litigation against Web, or involving any
Web Shareholder challenging this Agreement, the Web Transaction Agreements
or the consummation of the transactions contemplated hereby or thereby,
excluding any Litigation caused by or relating to Parent or any Active
Parent Subsidiary, (iii) obtaining all Consents from Governmental
Authorities required for the consummation of the exchange and the
transactions contemplated hereby, and (iv) timely making all necessary
filings under the HSR Act. Upon the terms and subject to the conditions
hereof, Web and the Web Shareholders agree to use their reasonable best
efforts to take, or cause to be taken, all actions and to do, or cause to
be done, all things necessary to satisfy the other conditions of the
Closing set forth herein. Web and the Web Shareholders will consult with
counsel for Parent as to, and will permit such counsel to participate in,
at Parent's expense, any Litigation referred to in clause (ii) above
brought against or involving Web or any Web Shareholder.
4.5 Compliance. In consummating the Merger and the transactions
----------
contemplated hereby, Web and the Web Shareholders shall comply in all
material respects with the provisions of the Securities Exchange Act and
the Securities Act and shall comply, in all material respects, with all
other applicable Laws.
4.6 Benefit Plans. Between the date of this Agreement and
-------------
through the Closing Date, no discretionary award or grant under any Benefit
Plan of Web shall be made without the consent of Parent. Web shall not
make any amendment to any Benefit Plan, any awards thereunder or the terms
of any security convertible into or exchangeable for capital stock without
the consent of Parent.
4.7 Tax Opinion Certification. Web and the Web Shareholders
-------------------------
shall use their best efforts to cause the Merger to qualify, and will not
take any action which to their knowledge could reasonably be expected to
prevent the Merger from qualifying, as a reorganization under Section
20
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368 of the Code. Prior to the Effective Time, Web and the Web Shareholders
shall provide tax counsel rendering an opinion under Section 7.1(m) with
--------------
a certificate concerning such factual matters as such counsel reasonably
requests in connection with its opinion.
4.8 Affiliate Agreements. Web shall use its reasonable business
--------------------
efforts to ensure that each Person who is or may be an "affiliate" of Web
within the meaning of Rule 145 promulgated under the Securities Act shall
enter into an agreement in a form agreed to by the parties hereto, acting
reasonably (collectively, the "AFFILIATE AGREEMENTS").
4.9 Transfer Restrictions. (a) In addition to any other
---------------------
restrictions imposed by Law on the ability of any Web Shareholder to
transfer any Contingent Rights II or Parent Common Stock received by
such Web Shareholder pursuant to this Agreement, each Web Shareholder
agrees that such Web Shareholder will not sell, transfer or otherwise
dispose of any of the Parent Common Stock received by such Web
Shareholder pursuant to this Agreement for a period of six (6) months
after the Closing Date; provided, however, that this restriction
-------- -------
shall not apply to the Parent Common Stock received by the Web
Shareholders pursuant to the conversion of the Convertible Note (the
"CONVERSION STOCK"). For purposes of this Section 4.9, a pledge of
-----------
any shares subject to this Section 4.9 by a Web Shareholder to a
-----------
financial institution as collateral security for loans arranged by such
Shareholder shall not constitute a sale, transfer, or other disposition
of such shares so long as the financial institution agrees to be bound
to the restrictions imposed by this Section 4.9. Notwithstanding
-----------
anything in this Section 4.9 to the contrary, the restrictions on
-----------
transfer imposed by this Section 4.9 shall terminate, except with
-----------
regard to the Contingent Rights II, on the first to occur of any of the
following events: (i) a take-over bid (as such term is used in the
Securities Exchange Act) is completed for Parent; (ii) Parent sells all,
or substantially all, of its assets either directly by the sale of
shares of its subsidiaries or indirectly by the sale of assets of its
direct and indirect subsidiaries, or a combination thereof (other than
the CLEC Operations); and (iii) Parent ceases to have at least fifty-one
percent (51%) of the aggregate votes attaching to all of the issued and
outstanding security of all classes in the capital stock of its
subsidiaries (except for the capital stock of such subsidiaries
comprising the CLEC Operations) including the Company, WorldPages, or
Great Western Directories, Inc., directly or indirectly.
The Web Shareholders acknowledge and agree that the following
legend will appear on all certificates representing Parent Common Stock
received by the Web Shareholders pursuant to this Agreement (except the
Conversion Stock):
EXCEPT AS PROVIDED IN SECTION 4.9 OF THE WEB YP
AGREEMENT MADE AND ENTERED INTO AS OF JUNE 3, 1999 BY AND
AMONG THE CORPORATION, ACG ACQUISITION VI CORP., WEB YP AND
THE SHAREHOLDERS OF WEB YP (THE "WEB YP AGREEMENT"), THESE
SECURITIES MAY NOT BE SOLD, ASSIGNED, TRANSFERRED,
DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF AND MAY ONLY
BE ENCUMBERED OR PLEDGED IN ACCORDANCE WITH SECTION 4.9 OF
THE WEB YP AGREEMENT.
The Web Shareholders who are "affiliates" of Web within the
meaning of Rule 145 promulgated under the Securities Act acknowledge and
agree that the following additional
21
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legend will appear on all certificates representing the Parent Common
Stock received by such "affiliates" of Web pursuant to this Agreement:
IN ADDITION, THE SHARES OF STOCK REPRESENTED BY
THIS CERTIFICATE ARE HELD SUBJECT TO ALL APPLICABLE
PROVISIONS OF THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND THE RULES AND REGULATIONS
PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION
("SEC") THEREUNDER. NO SALES, TRANSFERS OR OTHER
DISPOSITION OF THESE SHARES MAY BE MADE EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OR UPON THE PRIOR DELIVERY TO
ADVANCED COMMUNICATIONS GROUP, INC. ("ACG") OF AN
OPINION FROM LEGAL COUNSEL SATISFACTORY TO ACG AND IN
FORM AND SUBSTANCE SATISFACTORY TO ACG AND ITS LEGAL
COUNSEL, STATING THAT SUCH SALE OR OTHER DISPOSITION
IS BEING MADE PURSUANT TO AND IN ACCORDANCE WITH THE
REQUIREMENTS OF SEC RULES 144 AND 145 OR IS OTHERWISE
EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT.
(b) Notwithstanding the foregoing, (i) certificates representing
shares of Parent Common Stock issued to Persons who are not "affiliates"
(as defined in Rules 144 and 145 under the Securities Act) of Parent shall
contain the first legend set forth in Section 4.9(a), but shall not
--------------
contain the second legend set forth in Section 4.9(a); and (ii) Parent
--------------
shall instruct its transfer agent to remove the second legend set forth in
Section 4.9(a) for those sales of Parent Common Stock by "affiliates" (as
- --------------
defined in Securities Act Rules 144 and 145) of Parent and Web made
pursuant to Securities Act Rules 144 and 145.
ARTICLE V
ADDITIONAL COVENANTS OF PARENT
Parent covenants and agrees as follows:
5.1 Conduct of Business of Parent and the Active Parent
---------------------------------------------------
Subsidiaries. Parent covenants, represents and warrants that from the
- ------------
date of this Agreement through the Closing Date, unless Web shall otherwise
expressly consent in writing, Parent shall, and Parent shall cause each
Active Parent Subsidiary to, use its or their reasonable best efforts to
comply in all material respects with all Laws applicable to it or any of
its properties, assets or business and maintain in full force and effect
all the Parent Authorizations necessary for, or otherwise material to, such
business.
5.2 Notification of Certain Matters. Parent shall give prompt
-------------------------------
notice to Web if any of the following occur from the date of this Agreement
through the Closing Date: (i) any notice of, or other communication
relating to, a default or Event which, with notice or lapse of time or
both, would become a default under any Parent Material Contract which could
have a Parent Material Adverse Effect; (ii) receipt of any notice or other
communication from any third party alleging that the Consent of such third
party is or may be required in connection with the transactions
contemplated by this Agreement; (iii) receipt of any material notice or
other communication from any regulatory authority (including, but not
limited to, the NYSE or any other securities exchange)
22
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in connection with the transactions contemplated by this Agreement; (iv)
the occurrence of an Event which could have a Parent Material Adverse
Effect; (v) the commencement or threat of any Litigation involving or
affecting Parent or any Active Parent Subsidiary or any of their respective
properties or assets, or, to its knowledge, any employee, agent, director
or officer, in his or her capacity as such, of Parent or any Active Parent
Subsidiary which, if pending on the date hereof, would have been required
to have been disclosed in this Agreement or which relates to the
consummation of the Merger or any material development in connection with
any Litigation disclosed by Parent in or pursuant to this Agreement or the
Parent Securities Filings; and (vi) any Event that could cause a breach by
Parent of any provision of this Agreement or any Parent Transaction
Agreement, including such a breach that could occur if such Event had taken
place on or prior to the date of this Agreement.
5.3 Access and Information. Between the date of this Agreement
----------------------
and the Closing Date, Parent will, upon reasonable notice, give, and direct
its legal counsel and accountants to give, Web and its authorized
representatives (including, without limitation, its financial advisors,
accountants and legal counsel) at all reasonable times access as reasonably
requested to the offices and other facilities and to all material
contracts, agreements, commitments, books and records (including, but not
limited to, Tax returns) of or pertaining to Parent and the Active Parent
Subsidiaries, will permit Web to make such reasonable inspections as it may
require and will cause its officers promptly to furnish Web with (a) such
financial and operating data and other information with respect to the
business and properties of Parent and the Active Parent Subsidiaries as Web
may from time to time reasonably request, and (b) a copy of each material
report, schedule and other document filed or received by Parent or any
Active Parent Subsidiary pursuant to the requirements of applicable
securities Laws, the NYSE or other securities exchange, in each case as
necessary in connection with the transactions contemplated hereby. The
foregoing access will be subject to the restrictions contained in Section
-------
6.9 hereof.
- ---
5.4 Compliance. In consummating the Merger and the transactions
----------
contemplated hereby, Parent shall comply in all material respects with the
provisions of the Securities Exchange Act and the Securities Act and shall
comply, and/or cause the Active Parent Subsidiaries to comply or to be in
compliance, in all material respects, with all other applicable Laws.
5.5 SEC and Shareholder Filings. Parent shall send to Web a
---------------------------
copy of all material public reports and materials as and when it sends the
same to its shareholders, the SEC, the NYSE or any other securities
commission or exchange.
5.6 Tax Treatment. Parent and Acquisition Subsidiary shall use
-------------
their best efforts to cause the Merger to qualify, and will not take any
action which to its knowledge could reasonably be expected to prevent the
Merger from qualifying, as a reorganization under Section 368 of the Code.
Prior to the Effective Time, Parent shall provide tax counsel rendering an
opinion under Section 7.1(m) with a certificate concerning such factual
--------------
matters as such counsel identifies are relevant to its opinion.
5.7 Employment and Employee Benefit Plans. At or before the
--------------------------------------
Closing Date, Parent shall, after consultation with Web, offer employment
to the employees of Web, effective as of the Closing Date, upon terms and
conditions reasonably acceptable to the Web employees and to Parent. After
the Closing Date, Parent shall arrange for each employee participating in
any of the Benefit Plans of Web at such time to participate in any
counterpart Benefit Plans of Parent in accordance with the eligibility
criteria thereof, provided that (i) such participants shall receive full
23
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credit for years of service with Web prior to the Merger for all purposes
for which such service was recognized under the Benefit Plan of Web
including, but not limited to, recognition of service for eligibility,
vesting, and, to the extent not duplicative of benefits received under such
Benefit Plan of Web, the amount of benefits, and (ii) such participants
shall participate in the Benefit Plans of Parent on terms no less favorable
than those offered by Parent to similarly situated employees of Parent.
Notwithstanding the foregoing, Parent may continue one or more of the
Benefit Plans of Web, in which case Parent shall have satisfied its
obligations hereunder with respect to the benefits so provided.
5.8 Tax Opinion Certification. Parent shall use its best
-------------------------
efforts to cause the Merger to qualify, and will not take any action which
to their knowledge could reasonably be expected to prevent the Merger from
qualifying, as a reorganization under Section 368 of the Code. Prior to
the Effective Time, Parent shall provide tax counsel rendering an opinion
under Section 7.1(m) hereof with a certificate concerning such factual
--------------
matters as such counsel reasonably requests in connection with its opinion.
5.9 Expenses. If the transactions contemplated by this
--------
Agreement are consummated, all fees and expenses incurred in connection
with the transactions contemplated by this Agreement including, without
limitation, all legal, accounting, financial advisory, consulting fees,
(collectively, the "TRANSACTION EXPENSES") incurred by a party or its
stockholders in connection with the negotiation and effectuation of the
terms and conditions of this Agreement and the transactions contemplated
hereby, shall be the obligation of Parent or any direct or indirect
subsidiary of Parent after Closing. If the Merger is not consummated,
all Transaction Expenses shall be the obligation of the respective
parties which incurred them.
5.10 Parent Shareholder Approval. As soon as practicable,
---------------------------
Parent will, if required, take all steps necessary to duly call, give
notice of, convene and hold a meeting of the Parent shareholders for the
purpose of adopting this Agreement and for such other purposes as may be
necessary or desirable in connection with effectuating the transactions
contemplated hereby. The Board of Directors of Parent (i) unless
otherwise required under the fiduciary duties of the directors of
Parent, as determined by such directors in good faith and upon advice of
legal counsel, will recommend to the Parent shareholders that they adopt
this Agreement and approve the transactions contemplated hereby, and
(ii) will use its reasonable best efforts to obtain any necessary
adoption and approval by the Parent shareholders of this Agreement and
the transactions contemplated hereby.
5.11 Sale of CLEC Operations.
-----------------------
(a) Parent shall attempt to sell by the Anniversary Date all of
the shares of or otherwise dispose of the CLEC Operations. Any such
sale shall be for cash, assignment of indebtedness, or other acceptable
consideration as determined by (i) the Board of Directors of Parent if
before Closing, or (ii) a committee of the Board of Directors of Parent
if after Closing. If acceptable non-cash consideration is received, the
Board of Directors or a committee of the Board of Directors, as the case
may be, in conjunction with the independent certified public accountants
of Parent, shall determine the fair market value of the consideration
received for the sale of the shares of or other disposal of the CLEC
Operations.
24
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(b) If the CLEC Sales Price received by Parent from the sales(s)
by Parent of CLEC Operations (i) prior to the Anniversary Date, or (ii)
within sixty (60) days after the Anniversary Date if, prior to the
Anniversary Date, Parent has entered into a definitive agreement for the
sale of a portion or all of the CLEC Operations (the applicable date is
hereinafter referred to as the "FINAL SALE DATE"), is greater than Sixty
Million Dollars ($60,000,000) (the amount by which the CLEC Sales Price
exceeds $60,000,000 is referred to hereinafter as the "CLEC SALES PRICE
INCREASE"), then each Eligible Parent Shareholder shall have the right
to receive, in the manner provided in the certificate representing the
Contingent Rights I, that number of shares of Parent Common Stock
determined by multiplying the total number of Parent CLEC Shares by the
Eligible Parent Shareholder's Proportionate Share.
(c) If the CLEC Sales Price received by Parent from the sale(s)
by Parent of CLEC Operations on or prior to the Final Sale Date is less
than Forty Million Dollars ($40,000,000) (the amount by which the CLEC
Sales Price is less than $40,000,000 is referred to hereinafter as the
"CLEC SALES PRICE DECREASE"), then each Eligible Acquisition
Shareholder, excluding, for purposes of this Section 5.11(c), O'Neal,
---------------
shall have the right to receive, in the manner provided in the
certificate representing the Contingent Rights II, that number of shares
of Parent Common Stock determined by multiplying the total number of
Acquisition CLEC Shares by such Eligible Acquisition Shareholder's
Proportionate Share.
(d) For greater certainty, any CLEC Operations that have not
been sold prior to the Final Sale Date shall be deemed to have no value
for purposes of determining the CLEC Sales Price Increase or the CLEC
Sales Price Decrease.
(e) It is acknowledged and agreed that the number of shares of
Parent Common Stock which may be issued (i) to the Eligible Parent
Shareholders pursuant to Section 5.11(b) hereof, or (ii) to the
---------------
Eligible Acquisition Shareholders pursuant to Section 5.11(c) hereof
---------------
is to be calculated in conjunction with the number of shares of Parent
Common Stock which may be issued to Eligible Parent Shareholders (as
that term is defined in the Company Acquisition Agreement and the Big
Stuff Acquisition Agreement), or which may be issued to Eligible
Acquisition Shareholders (as that term is defined in the Company
Acquisition Agreement and the Big Stuff Acquisition Agreement),
respectively. It is the intent of the parties to this Agreement, the
Company Acquisition Agreement and the Big Stuff Acquisition Agreement
that, if the closing of all such agreements shall occur: (i) the number
of shares of Parent Common Stock issuable to the Eligible Parent
Shareholders pursuant to Section 5.11(b) hereof and the corresponding
---------------
sections of the Company Acquisition Agreement and the Big Stuff
Acquisition Agreement (such sections, the "CLEC INCREASE SECTIONS")
shall equal the number of shares of Parent Common Stock calculated by
reference to the CLEC Increase Section of one such agreement only, not
the number of shares of Parent Common Stock calculated by reference to
the CLEC Increase Sections of all three such agreements; and (ii) the
aggregate number of shares (such aggregate number, the "SELLER SHARE
NUMBER") of Parent Common Stock issuable to the Eligible Acquisition
Shareholders pursuant to Section 5.11(c) hereof, to the Eligible
---------------
Acquisition Shareholders (as that term is defined in the Company
Acquisition Agreement) pursuant to Section 5.10(c) of the Company
Acquisition Agreement, and to the Eligible Acquisition Shareholders (as
that term is defined in the Big Stuff Acquisition Agreement) pursuant to
Section 5.11(c) of the Big Stuff Acquisition Agreement (such sections,
the "CLEC DECREASE SECTIONS") shall be calculated as follows:
62.406014% of the Seller Share Number of shares of Parent
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Common Stock are issuable pursuant to the Company Acquisition Agreement;
25.56391% of the Seller Share Number of shares of Parent Common Stock
are issuable pursuant to this Agreement; and 12.030075% of the Seller
Share Number of shares of Parent Common Stock are issuable pursuant to
the Big Stuff Acquisition Agreement.
ARTICLE VI - ADDITIONAL COVENANTS OF THE PARENT, WEB
AND THE WEB SHAREHOLDERS
6.1 Registration Rights and Stock Restriction Agreement.
---------------------------------------------------
(a) On or before the Closing Date, the Parent shall use its
reasonable best efforts to cause the following securities to be registered
with the SEC under the Securities Act:
(i) Parent Common Stock to be received by Web
Shareholders upon conversion of Web Common Stock, as described in
Section 1.3 hereof;
-----------
(ii) Parent Common Stock issuable upon exchange of
Contingent Rights II; and
(iii) Parent Common Stock to be received by Web
Shareholders upon conversion of the Convertible Note described in
Section 1.10 hereof.
------------
(b) The Parent shall hold the meeting of the shareholders
of Parent to consider and to vote upon the approval of the Agreement
including the issuance of Parent Common Stock to the Web Shareholders
and to the shareholders of the Company and of Big Stuff, and Parent and
Web will cooperate in the preparation of one or more registration
statements (such registration statements, together with any and all
amendments and supplements thereto, being hereinafter referred to as the
"REGISTRATION STATEMENTS"), which will include the preparation of one or
more proxy statements of the Parent satisfying all requirements of
applicable state securities Laws, the Securities Act and the Securities
Exchange Act.
(c) Web will furnish Parent with such information concerning
Web as is necessary in order to cause the Registration Statements and any
proxy statements, insofar as they relate to Web, to comply with applicable
Law. None of the information relating to Web supplied by Web for inclusion
in the Registration Statements or any proxy statements will be false or
misleading with respect to any material fact or will omit to state any
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are
made, not misleading. Web agrees promptly to advise Parent if, at any time
prior to the meeting of the shareholders of the Parent referenced herein,
any information provided by it in the Registration Statements or any proxy
statement is or becomes incorrect or incomplete in any material respect and
to provide Parent with the information needed to correct such inaccuracy or
omission. Web will furnish Parent with such supplemental information as may
be necessary in order to cause the Registration Statements or the proxy
statements, insofar as it relates to Web, to comply with applicable Law
after the mailing thereof to the Web Shareholders.
(d) Web and Parent agree to cooperate in making any
preliminary filings of Registration Statements and the Parent proxy
statement with the SEC as promptly as practicable, on a confidential basis
pursuant to Rule 14a-6(e)(2) under the Securities Exchange Act.
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(e) Parent will file the Registration Statements and the
Parent proxy statements with the SEC and appropriate materials with
applicable state securities agencies and will use all reasonable best
efforts to cause the Registration Statements and the Parent proxy
statements to become effective under the Securities Act and all such
state filed materials to comply with applicable state securities Laws.
Web authorizes Parent to utilize in the Registration Statements and in
all such state filed materials, the information concerning Web provided
to Parent in connection with, or contained in, the Registration
Statements. Parent promptly will advise Web when the Registration
Statements have become effective and of any supplements or amendments
thereto, and Parent will furnish Web with copies of all such documents.
Parent shall file any and all amendments, supplements and related
filings to such Registration Statements (and state filed materials) as
may be required. Web shall not distribute any written material that
might constitute a "prospectus" relating to this Agreement or any of the
transactions contemplated by this Agreement within the meaning of the
Securities Act or any other applicable securities Law without the prior
written consent of Parent.
6.2 Employment Agreements. At or before the Closing Date,
---------------------
Parent will enter into Employment and Non-Competition Agreements, in
forms agreed to by Parent and Web, acting reasonably, with certain
individuals, the identities of whom shall be agreed upon by Parent and
Web, acting reasonably.
6.3 Consents. Each of Parent and Web shall promptly apply for
--------
or otherwise seek, and use its best efforts to obtain, all consents and
approvals required to be obtained by it for the consummation of the
Merger.
6.4 Legal Requirements. Subject to the terms and conditions
------------------
provided in this Agreement, each of the parties hereto shall use its
reasonable best efforts to take promptly, or cause to be taken, all
reasonable actions, and to do promptly, or cause to be done, all things
necessary, proper or advisable under applicable Laws to consummate and
make effective the transactions contemplated hereby to obtain all
necessary waivers, consents and approvals and to effect all necessary
registrations and filings and to remove any injunctions or other
impediments or delays, legal or otherwise, in order to consummate and
make effective the transactions contemplated by this Agreement for the
purpose of securing to the parties hereto the benefits contemplated by
this Agreement.
6.5 Public Announcements. All press releases and other
--------------------
disseminations of information to employees, customers or suppliers
relating to the Merger or the transactions contemplated by this
Agreement or the Company Acquisition Agreement by any party hereto shall
require the prior approval of Parent and Web, provided Parent shall have
the right to make such public announcements without the approval of the
other parties hereto should such disclosure be required by Law or the
policies or requirements of United States securities regulators, stock
exchanges, or other relevant entities in the opinion of Parent's legal
counsel. Should such disclosure be required, Parent agrees to provide
the others with reasonable advance notice of and a copy of, and to
consult with the others regarding, the proposed disclosure.
6.6 Conduct of Business Prior to Closing Date. Except as
-----------------------------------------
expressly contemplated by this Agreement, during the period from the date
of this Agreement to the Closing Date, Web shall conduct its business in
the ordinary course and consistent with past practice, subject to the
limitations contained in this Agreement, and Web shall use its reasonable
business efforts to preserve intact its business organization, to keep
available the services of its officers, agents and
27
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employees and to maintain satisfactory relationships with all Persons with
whom it does business. Except as expressly contemplated by this Agreement,
and it being acknowledged and agreed by each of the parties to this
Agreement that Parent is in the process of a substantial reduction in
workforce, and, subject to Section 5.11, Parent shall, and it shall cause
------------
the Active Parent Subsidiaries to, use its or their reasonable business
efforts to preserve intact its business organization, consistent with the
budget adopted by the Executive Committee of the Board of Directors of
Parent, to keep available the services of only those officers, agents and
employees whom Parent believes are required to maintain satisfactory
relationships with all Persons with whom it does business. Without
limiting the generality of the foregoing, and except as otherwise expressly
provided in this Agreement, after the date of this Agreement and prior to
the Closing Date, (i) Web will not, without the prior written consent of
Parent (which consent shall not be unreasonably withheld or delayed); and
(ii) subject to Section 5.11, neither Parent nor any Active Parent
------------
Subsidiary will, without the prior written consent of Web (which consent
shall not be unreasonably withheld or delayed):
(a) except as provided for in this Agreement, the Company
Acquisition Agreement or the Big Stuff Acquisition Agreement, amend or
propose to amend its Certificate or Articles of Incorporation or Bylaws (or
comparable governing instruments) in any material respect;
(b) except as set forth on Schedule 6.6(b)(i) to be
------------------
provided during the Schedule Period, with regard to Web, or Parent Common
Stock to be issued pursuant to those options or warrants listed on
Schedule 6.6(b)(ii) to be provided during the Schedule Period or in
- -------------------
Section 6.10, with regard to Parent or the Active Parent Subsidiaries,
- ------------
authorize for issuance, issue, grant, sell, pledge, dispose of or propose
to issue, grant, sell, pledge or dispose of any shares of, or any options,
warrants, commitments, subscriptions or rights of any kind to acquire or
sell any shares of, the capital stock or other securities of Web, or of
Parent or any Active Parent Subsidiary, as the case may be, including, but
not limited to, any securities convertible into or exchangeable for shares
of stock of any class of Web, or of Parent or any Active Parent Subsidiary,
as the case may be; provided, however, that Web may issue capital stock
-------- -------
pursuant to the exercise of options and warrants outstanding on the date of
this Agreement;
(c) except as provided for in this Agreement, the Company
Acquisition Agreement or the Big Stuff Acquisition Agreement, split,
combine or reclassify any shares of its capital stock or declare, pay or
set aside any dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of its capital stock, other
than dividends or distributions to the Web Shareholders (but only if the
entire amount of such dividend is paid to Big Stuff as a capital
contribution), or to Parent or a Parent subsidiary, as the case may be, or
redeem, purchase or otherwise acquire or offer to acquire any shares of its
capital stock or other securities; provided, however, that Web may
-------- -------
make a dividend or distribution to the Web Shareholders in the amount of
cash or other consideration received by Web on or before the Closing
Date from the exercise of options and warrants to purchase Web Common
Stock;
(d) (i) except for debt (including, but not limited to,
obligations in respect of capital leases, but excluding obligations under
the Convertible Note) not in excess of $50,000 in the aggregate for all
Persons combined, create, incur or assume any short-term debt (excluding
trade payables incurred in the ordinary course of business), long-term debt
or obligations in respect of capital leases; (ii) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
indirectly, contingently or otherwise) for the obligations of any Person,
except for obligations permitted by this Agreement of any Active Parent
Subsidiary, in the ordinary course of
28
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business consistent with past practice; (iii) make any capital expenditures
or make any loans, advances or capital contributions to, or investments in,
any other Person (other than customary advances to employees made in the
ordinary course of business consistent with past practice), provided Web
will continue to make capital expenditures, maintain, upgrade and expand
its facilities, and otherwise operate in the ordinary course and consistent
with past practice; (iv) acquire the stock or assets of, or merge or
consolidate with, any other Person or business except the contemplated
merger with Big Stuff; or (v) voluntarily incur any material liability or
obligation (absolute, accrued, contingent or otherwise);
(e) subject to Section 5.11 hereof, sell, transfer,
------------
mortgage, pledge or otherwise dispose of, or encumber, or agree to sell,
transfer, mortgage, pledge or otherwise dispose of or encumber, any
material assets or properties, real, personal or mixed, except in the
ordinary course of business, in the case of Parent and the Active Parent
Subsidiaries;
(f) increase in any manner the compensation of any of its
officers, agents or employees other than any increases required pursuant to
their employment agreements in accordance with their terms in effect on the
date of this Agreement and increases in the ordinary course of business
consistent with past practice not in excess on an individual basis of the
lesser of 10% of the current compensation of such individual or $10,000 per
annum;
(g) enter into, establish, amend, make non-routine or
material interpretations or determinations with respect to, or terminate
any employment, consulting, retention, change in control, collective
bargaining, bonus or other incentive compensation, profit sharing, health
or other welfare, stock option, stock purchase, restricted stock, or other
equity, pension, retirement, vacation, severance, deferred compensation or
other compensation or benefit plan, policy, agreement, trust, fund or
arrangement with, for or in respect of, any shareholder, officer, director,
other employee, agent, consultant or affiliate, other than actions
contemplated by this Agreement, the Company Acquisition Agreement and the
Big Stuff Acquisition Agreement;
(h) make any elections with respect to Taxes that are
inconsistent with the prior elections reflected in the Financial Statements
as of and to the period ended December 31, 1998;
(i) except with regard to Saville, compromise, settle, grant
any waiver or release relating to or otherwise adjust any Litigation,
except routine Litigation in the ordinary course of business consistent
with past practice, involving only a payment not in excess of $50,000
individually or $100,000 when aggregated with all such payments by Web or
by Parent and the Active Parent Subsidiaries combined, as the case may be;
(j) take any action or omit to take any action, which action
or omission would result in a breach of any of the covenants,
representations and warranties of Web, the Web Shareholders or Parent or
the Active Parent Subsidiaries set forth in this Agreement or would have a
Web Material Adverse Effect, with regard to Web and the Web Shareholders,
or a Parent Material Adverse Effect, with regard to Parent and the Active
Parent Subsidiaries;
(k) except in the ordinary course of business enter into any
lease or other agreement, or amend any lease or other agreement, with
respect to real property;
(l) enter into or amend any agreement or transaction (i)
pursuant to which the aggregate financial obligation of Web, or of Parent
or an Active Parent Subsidiary, as the case may
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<PAGE>
be, or the value of the services to be provided could exceed $50,000, (ii)
having a term of more than twelve (12) months and pursuant to which the
aggregate financial obligation of Web, or of Parent or an Active Parent
Subsidiary, as the case may be, or the value of the services to be provided
could exceed $100,000 per year, or (iii) which is not terminable by Web or
Parent or the Active Parent Subsidiaries, as the case may be, upon no more
than thirty (30) days' notice without penalty in excess of $50,000
individually or $100,000 when aggregated with the penalties under all such
agreements or transactions;
(m) take any action with respect to the indemnification of
any Person;
(n) change any accounting practices or policies, except as
required by generally accepted accounting principles or Laws or as agreed
to or requested by Web's or Parent's auditors after consultation with
Parent's or Web's auditors, as the case may be; provided, however, that
-------- -------
notice and a description of any change pursuant to this Section 6.6(n)
--------------
shall be provided promptly after such change is effected to Web or Parent,
as the case may be;
(o) except in the ordinary course of business, enter into,
amend, modify, terminate or waive any rights under any contract which would
result in a Web Material Adverse Effect, with respect to Web, or a Parent
Material Adverse Effect, with respect to Parent;
(p) adopt a plan of liquidation, dissolution, merger,
consolidation, share exchange, restructuring, recapitalization, or other
reorganization; provided, however, that Parent may adopt such a plan
-------- -------
and may cause the liquidation or dissolution of any Parent subsidiary if
Parent is unable to sell such Parent subsidiary (i) at a price which Parent
determines to be reasonable, and (ii) during a time period which Parent
determines to be reasonable; provided, further, however, that if
-------- ------- -------
Parent adopts such a plan or causes such liquidation or dissolution, Parent
promptly shall provide to Web notice of such adoption, liquidation or
dissolution, as the case may be; or
(q) resolve, agree, commit or arrange to do any of the
foregoing.
Notwithstanding anything in this Section 6.6 to the contrary, it
-----------
is understood that Web has been accelerating and intensifying its
business activities since March 31, 1999 and will continue to do so.
Accordingly, (x) "ordinary course of business" and "consistent with past
practice", as used in this Section 6.6 with respect to Web, shall be
-----------
interpreted to include such acceleration and intensification; and (y) in
considering requests for consent from Web, Parent shall take into
account such acceleration and intensification.
Furthermore, Parent covenants, represents and warrants that from
and after the date hereof, unless Web shall otherwise expressly consent
in writing, Parent shall use its reasonable business efforts to:
(1) keep in full force and effect insurance comparable in
amount and scope of coverage to insurance now carried by it;
(2) pay all accounts payable and other obligations, to the
extent permitted by Parent's cash flow and consistent with prudent
cash management strategies, and consistent with the provisions of
this Agreement, except if the same are contested in good
30
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<PAGE>
faith, and, in the case of the failure to pay any material
accounts payable or other obligations which are contested in good
faith, only after consultation with Web; and
(3) comply in all material respects with all Laws
applicable to it or any of its properties, assets or business and
maintain in full force and effect all Parent Permits necessary
for, or otherwise material to, such business; provided,
--------
however, that Web acknowledges and agrees that Parent is
-------
attempting to sell its CLEC Operations, and to the extent such
CLEC Operations are sold and, as a result, certain Laws or Parent
Permits to which Parent is subject as of the date hereof become
unnecessary, irrelevant or immaterial, Parent shall not be
required to comply with such Laws or maintain such Parent Permits.
Furthermore, Web covenants, represents and warrants that from and
after the date hereof, unless Parent shall otherwise expressly consent in
writing, Web shall use its or their reasonable business efforts to:
(1) keep in full force and effect insurance comparable in
amount and scope of coverage to insurance now carried by it;
(2) pay all accounts payable and other obligations, when
they become due and payable, in the ordinary course of business
consistent with past practice and with the provisions of this
Agreement, except if the same are contested in good faith, and, in
the case of the failure to pay any material accounts payable or
other obligations which are contested in good faith, only after
consultation with Parent; and
(3) comply in all material respects with all Laws applicable
to it or any of its properties, assets or business and maintain in
full force and effect all Web Permits necessary for, or otherwise
material to, such business.
6.7 No Solicitation of Acquisition Proposal. Neither the Web
---------------------------------------
Shareholders, Web, Parent nor any of their Associates shall, directly or
indirectly, make, encourage, facilitate, solicit, assist or initiate any
inquiry or proposal, or provide any information to or participate in any
negotiations with, any Person or group other than the parties to this
Agreement and their Associates relating to any of the following
transactions ("EXTRAORDINARY TRANSACTIONS"): (i) liquidation, dissolution,
recapitalization, share exchange, business combination, merger or
consolidation of Web or Parent or an Active Parent Subsidiary, (ii) sale of
a significant amount of assets of Web or Parent or an Active Parent
Subsidiary, (iii) purchase or sale of shares of capital stock of Web or
Parent or an Active Parent Subsidiary, or (iv) any similar actions or
transactions involving Web or Parent or an Active Parent Subsidiary (other
than the Merger and the transactions contemplated by this Agreement, the
Company Acquisition Agreement and the Big Stuff Acquisition Agreement), or
agree to or consummate any Extraordinary Transaction. Each of Parent and
Web shall immediately inform the other party of any inquiry, proposal, or
request for information or offer (including the terms thereof and the
Person making such inquiry, proposal, request or offer) which it may
receive in respect of an Extraordinary Transaction and provide Parent and
Web with a copy of any such written inquiries, proposals, requests for
information and offers, and thereafter keep Parent and Web fully informed
of the status and details thereof. The provisions of this Section 6.7
-----------
shall not apply to the sale of the CLEC Operations by Parent or any Active
Parent Subsidiary as contemplated by Section 5.11 hereof or to the
------------
WorldPages Acquisition.
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6.8 Resignations. Web shall use its reasonable business efforts
------------
to cause the officers and/or directors of Web as Parent may request to
voluntarily resign their positions as such effective as of the Closing
Date. The instruments effecting such resignations are herein referred to
as the "RESIGNATIONS."
6.9 Confidentiality. Unless (i) otherwise expressly provided
---------------
in this Agreement, (ii) required by applicable Law or any listing agreement
with, or the rules and regulations of, any applicable securities exchange,
(iii) necessary to secure any required Consents as to which the other party
has been advised, or (iv) consented to in writing by Parent and Web, this
Agreement and any information or documents furnished in connection herewith
shall be kept strictly confidential by Web, Parent and their respective
officers, directors, employees and agents. Prior to any disclosure
pursuant to the preceding sentence, the party intending to make such
disclosure shall consult with the other party regarding the nature and
extent of the disclosure. Nothing contained herein shall preclude
disclosures to the extent necessary to comply with accounting, SEC and
other disclosure obligations imposed by applicable Law. To the extent
required by such disclosure obligations, Parent, after consultation with
Web, may file with the SEC a Report on Form 8-K pursuant to the Securities
Exchange Act with respect to the Merger, which report may include, among
other things, financial statements and pro forma financial information with
respect to the other party. In connection with any filing with the SEC of
a registration statement or amendment thereto under the Securities Act,
Parent, after consultation with Web, may include a prospectus containing
any information required to be included therein with respect to the Merger,
including, but not limited to, financial statements and pro forma financial
information with respect to the other party, and thereafter distribute said
prospectus. Parent and Web shall cooperate with the other and provide such
information and documents as may be required in connection with any such
filings. In the event the Merger is not consummated, Parent and Web shall
return to the other all documents furnished by the other and will hold in
absolute confidence any information obtained from the other party except to
the extent (i) such party is required to disclose such information by Law
or such disclosure is required by discovery, subpoena or other similar
legal process in a proceeding involving a third Person, (ii) such party
received such information on a non-confidential basis from a source, other
than the other party, which is not known by such party to be bound by a
confidentiality obligation with respect thereto, or (iii) such information
becomes generally available to the public or is otherwise no longer
confidential. Prior to any disclosure of information pursuant to the
exception in clause (i) of the preceding sentence, the party intending to
disclose the same shall so notify, in writing, the party which provided the
same in order that such party may seek a protective order or other
appropriate remedy should it choose to do so.
6.10 Options; Stock Issuances. The Board of Directors of
------------------------
Parent shall have the right to grant or issue, as the case may be, (i)
restricted stock or options to acquire shares of Parent Common Stock
pursuant to the Parent's 1997 Stock Awards Plan, provided that no more than
the number of shares authorized under the 1997 Stock Awards Plan have been
issued; (ii) warrants to purchase up to 90,000 shares of Parent Common
Stock to be issued to certain non-employee directors of Parent who are
responsible for negotiating this Agreement at an exercise price of $6.96
per share, the Company Acquisition Agreement and the Big Stuff Acquisition
Agreement; (iii) the shares of Parent Common Stock issuable upon conversion
at Closing of the Great Western Notes at a conversion price of $5.50 per
share; (iv) up to 1,818,182 shares of Parent Common Stock issuable upon
conversion of one or more notes which may be issued to the Web Shareholders
who may lend up to Ten Million Dollars ($10,000,000.00) to Web or Big Stuff
as provided in this Agreement, at a conversion price of $5.50 per share;
(v) shares of Parent Common Stock to be issued upon exercise of options or
warrants to be granted at Closing to those Persons designated by Company;
(vi) those
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shares of Parent Common Stock issuable upon exercise of previously granted
options; (vii) derivative securities to purchase shares of Parent Common
Stock issuable to certain Web Shareholders in connection with the sale of
the CLEC Operations, as provided in Section 5.11 hereof; (viii)
------------
derivative securities to purchase shares of Parent Common Stock issuable to
certain Company Shareholders in connection with the sale of the CLEC
Operations; and (ix) derivative securities to purchase shares of Parent
Common Stock issuable to certain Big Stuff shareholders in connection with
the sale of the CLEC Operations.
ARTICLE VII - CONDITIONS TO CLOSING
7.1 Conditions to Obligations of Each Party to Closing. The
--------------------------------------------------
respective obligations of each party to consummate this Agreement and
effect the Merger shall be subject to the satisfaction or waiver at or
prior to the Closing Date of the following conditions:
(a) No Injunctions or Restraints; Illegality. No
----------------------------------------
temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Merger shall
be in effect, nor shall any proceeding brought by an administrative
agency or commission or other governmental authority or instrumentality,
domestic or foreign, seeking any of the foregoing be pending; nor shall
there be any action taken, or any statute, rule, regulation or order
enacted, entered, enforced or deemed applicable to the Merger, which
makes the consummation of the Merger illegal.
(b) Other Agreements. The Company Acquisition Agreement
----------------
and the Big Stuff Acquisition Agreement and all documents related to the
Company Acquisition Agreement and the Big Stuff Acquisition Agreement
shall have been duly executed and delivered by all parties thereto and
shall be in full force and effect.
(c) Employment and Non-Competition Agreements. The
-----------------------------------------
Employment and Non-Competition Agreements described in Section 6.2
-----------
hereof shall have been duly executed and delivered by all parties
thereto and shall be in full force and effect.
(d) Government Approvals. Except for those Consents the
--------------------
failure of which to be obtained, (i) in the reasonable judgment of
Parent, would not have a Parent Material Adverse Effect or a Web
Material Adverse Effect, and (ii) in the reasonable judgment of Web,
would not have a Web Material Adverse Effect or a Parent Material
Adverse Effect, all Consents of any domestic or foreign Governmental
Authority required for the consummation of the Merger shall have been
obtained by Final Order.
(e) Related Transactions. (i) The acquisition by
--------------------
Parent, or a direct or indirect subsidiary of Parent, of Web and Big
Stuff in a tax-free reorganization shall have been consummated prior to
or simultaneously with the acquisition of the Company and any
registration statement(s) required for the registration of Parent Common
Stock issued to the Web Shareholders, the Company shareholders and the
shareholders of Big Stuff as consideration in connection with the
acquisition of Web, the Company and Big Stuff by Parent shall have been
declared effective, (ii) no stop order suspending the effectiveness of
such registration statement(s) shall have been issued and no proceeding
for that purpose shall have been initiated or threatened by the SEC or
any other Governmental Authority, and (iii) the Great Western
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<PAGE>
Notes shall have been satisfied by the issuance of Parent Common Stock
to the Great Western Shareholders.
(f) Financing. Parent and Web shall have received from
---------
their lenders an extension of all of their and their subsidiaries' debt
owing by them on terms and conditions satisfactory to Parent and Web or
all such debts shall be refinanced on terms satisfactory to Parent and
Web or any consents and approvals required from such lenders is
received.
(g) Shareholder Approval. All necessary approvals of
--------------------
the Web Shareholders and the shareholders of Parent in connection with
the Merger shall have been obtained.
(h) Required Consents. Any required Consents of any
-----------------
Person to the Merger or the transactions contemplated by this Agreement
shall have been obtained on terms and conditions reasonably acceptable to
Parent and Web and be in full force and effect, except for those the
failure of which to obtain, in the reasonable judgment of Parent and Web,
would not have a Parent Material Adverse Effect or a Web Material Adverse
Effect.
(i) HRS Act. Any waiting period applicable to the Merger
-------
under the HRS Act shall have expired or earlier termination thereof shall
have been granted and no action shall have been instituted by either the
United States Department of Justice or the Federal Trade Commission to
prevent the consummation of the transactions contemplated by this Agreement
or to modify or amend such transactions in any material manner, or if any
such action shall have been instituted, it shall have been withdrawn or a
final judgment shall have been entered against such Department or
Commission, as the case may be.
(j) Registration Statement. The Registration Statement(s)
----------------------
shall have been declared effective and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by the
SEC.
(k) Blue Sky. Parent shall have received all state
--------
Securities Law authorizations necessary to consummate the transactions
contemplated hereby.
(l) Fairness Opinion. Parent's Board of Directors shall
----------------
have received from its financial advisors, PaineWebber Incorporated, a
written opinion addressed to it for inclusion in the Prospectus/Proxy
Statement to the effect that the consideration to be paid, in the
aggregate, by the Parent in the transactions contemplated by this
Agreement, the Company Acquisition Agreement, the Big Stuff Acquisition
Agreement and the agreement relating to the redemption of the Great
Western Notes is fair to Parent from a financial point of view. The
opinion is being given as of this date.
(m) Tax Opinion. Parent shall have received an opinion
-----------
from Blackwell Sanders Peper Martin LLP based on customary representations
contained in certificates of Parent, to the effect that, if the Merger is
consummated in accordance with the provisions of this Agreement, the Merger
will qualify as a tax-free reorganization within the meaning of the Code.
(n) Contingent Rights I Dividend. Parent shall have
----------------------------
declared and paid the Contingent Rights I dividend.
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(o) NYSE Listing Approval. Parent shall have received
---------------------
from the NYSE approval for listing with the NYSE of the Parent Common
Stock to be issued pursuant to this Agreement, the Company Acquisition
Agreement and the Big Stuff Acquisition Agreement.
(p) Escrow Agreement. The Escrow Agreement described in
----------------
Section 9.1(b) shall have been duly executed and delivered by all
parties thereto and shall be in full force and effect.
7.2 Additional Conditions to Obligations of Web Shareholders
--------------------------------------------------------
and Web. The obligations of the Web Shareholders and Web to consummate
- -------
and effect this Agreement and the transactions contemplated hereby shall
be subject to the satisfaction at or prior to the Closing Date of each
of the following conditions, any of which may be waived, in writing,
exclusively by Web:
(a) Representations, Warranties and Covenants.
-----------------------------------------
(i) The representations and warranties of Parent in
this Agreement that are modified by materiality or Parent Material
Adverse Effect ("PARENT MODIFIED REPRESENTATION") shall be true
and correct in all respects and those that are not so modified
("PARENT NONMODIFIED REPRESENTATION") shall be true and correct in
all material respects on the date hereof and, except for changes
not prohibited by this Agreement, as of the Closing Date as if
made at the Closing Date. Furthermore, none of the
representations or warranties of Parent contained in this
agreement, disregarding any qualifications therein or in this
Section 7.2(a) regarding materiality or Parent Material Adverse
--------------
Effect, shall be untrue or incorrect to the extent that such
untrue or incorrect representations or warranties, when taken
together as a whole, have had or would have a Parent Material
Adverse Effect; and
(ii) Parent shall have performed and complied with
all of the covenants and agreements in all material respects and
satisfied in all material respects all of the conditions required
by this Agreement to be performed or complied with or satisfied by
Parent at or prior to the Closing Date. Notwithstanding anything
in this Agreement to the contrary, the parties hereto acknowledge
and agree that the consummation of the transactions contemplated
by this Agreement and the subsequent disposition of the CLEC
Operations constitutes a significant change from the plans and
strategies described in the 1998 10-K such that the
representations and warranties of Parent that reference the 1998
10-K will not be true and correct as of the Closing Date as they
relate to the plans and strategies of the business of Parent at
the Closing Date.
(b) Certificate of Parent and Other Deliveries. Web
------------------------------------------
shall have been provided, with (i) a certificate executed on behalf of
Parent by an Officer to the effect that, as of the Closing Date, all
representations and warranties made by Parent under this Agreement are
true and complete except as qualified by Section 7.2(a)(i) hereof; and
-----------------
all covenants, obligations and conditions of this Agreement to be
performed by Parent on or before such date have been so performed; (ii)
a certificate of good standing from the Secretary of State of the State
of Delaware that Parent is a validly existing corporation; (iii) duly
adopted resolutions of the Board of Directors of Parent approving the
execution, delivery and performance of this Agreement and the Parent
Transaction Agreements to which it is a party and the instruments
contemplated hereby
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<PAGE>
and thereby, certified by its Secretary or Assistant Secretary; and (iv)
such other documents and instruments as Web may reasonably request.
(c) Shareholder Approval. Web shall have received from
--------------------
Parent's transfer agent a certificate indicating that a sufficient
number of Parent's shareholders voted to approve the Merger such that
the Merger was deemed approved by the Parent shareholders.
(d) Legal Opinion. Web shall have received a legal
-------------
opinion of Blackwell Sanders Peper Martin LLP, legal counsel to Parent,
in a form to be agreed upon by the parties hereto, acting reasonably.
(e) No Material Adverse Change. There shall not have
--------------------------
occurred after the date hereof any Event that has or reasonably could be
expected to have a Parent Material Adverse Effect.
(f) Litigation. There shall be no action, suit, claim or
----------
proceeding of any nature pending, or overtly threatened, against Parent,
its properties or any of its officers or directors, arising out of, or in
any way connected with, the Merger or the other transactions contemplated
by the terms of this Agreement which individually or in the aggregate may
cause a Parent Material Adverse Effect.
7.3 Additional Conditions to the Obligations of Parent. The
--------------------------------------------------
obligations of Parent to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at
or prior to the Closing Date of each of the following conditions, any of
which may be waived, in writing, exclusively by Parent:
(a) Representations, Warranties and Covenants.
-----------------------------------------
(i) The representations and warranties of Web and the
Web Shareholders contained in this Agreement that are modified by
materiality or Web Material Adverse Effect ("WEB MODIFIED
REPRESENTATION") shall be true and correct in all respects, and
those that are not so modified ("WEB NONMODIFIED REPRESENTATION")
shall be true and correct in all material respects, on the date
hereof and, except for changes not prohibited by this Agreement, as
of the Closing Date as if made at the Closing Date. Furthermore,
none of the representations or warranties of Web or the Web
Shareholders contained in this Agreement, disregarding any
qualifications therein or in this Section 7.3(a) regarding
--------------
materiality or Web Material Adverse Effect, shall be untrue or
incorrect to the extent that such untrue or incorrect
representations or warranties, when taken together as a whole, have
had or would have a Web Material Adverse Effect; and
(ii) Web and the Web Shareholders shall have performed
and complied with all the covenants and agreements in all material
respects and satisfied in all material respects all the conditions
required by this Agreement to be performed or complied with or
satisfied by Web and the Web Shareholders at or prior to the Closing
Date.
(b) Certificate of Web and Other Deliveries. Parent
---------------------------------------
shall have been provided with (i) a certificate executed on behalf of
Web by its Chief Executive Officer to the effect that, as of the
Effective Time all representations and warranties made by Web in this
Agreement are true and correct, except as qualified by Section
-------
7.3(a)(i) hereof, and all covenants, obligations and conditions of this
- ---------
Agreement to be performed by Web and the Web Shareholders on or
36
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before such date have been so performed; (ii) a certificate of good
standing from the proper authority in the jurisdictions in which Web is
incorporated or qualified to do business stating that each is a validly
existing corporation in good standing; (iii) duly adopted resolutions of
the Web Board of Directors and Web Shareholders approving the execution,
delivery and performance of this Agreement and the Web Transaction
Agreements to which Web is a party and the instruments contemplated
hereby and thereby, certified by the Secretary or Assistant Secretary of
Web; (iv) a true and complete copy of the Articles or Certificate of
Incorporation or comparable governing instruments, as amended, of Web
certified by the Secretary of State of the state of incorporation or
comparable authority in other jurisdictions, and a true and complete
copy of the Bylaws or comparable governing instruments, as amended, of
Web certified by the Secretary thereof; (v) the duly executed
Resignations on terms and conditions reasonably acceptable to Parent;
and (vi) such other documents and instruments as Parent reasonably may
request.
(c) Legal Opinion. Parent shall have received a legal
-------------
opinion from Steinhart & Falconer LLP, legal counsel to Web, in a form
to be agreed upon by the parties hereto, acting reasonably.
(d) Litigation. There shall be no action, suit, claim
----------
or proceeding of any nature pending, or overtly threatened, against Web,
its respective properties or any of its officers or directors, arising
out of, or in any way connected with, the Merger or the other
transactions contemplated by the terms of this Agreement which
individually or in the aggregate may cause a Web Material Adverse
Effect.
(e) No Material Adverse Change. There shall have not
--------------------------
occurred after the date hereof any Event that has or reasonably could be
expected to have a Web Material Adverse Effect.
(f) Affiliate Agreements. At least thirty (30) days
--------------------
prior to the Effective Time, Parent shall have received the duly
executed Affiliate Agreements.
ARTICLE VIII - TERMINATION AND ABANDONMENT
8.1 Termination. This Agreement may be terminated and the
-----------
Merger contemplated hereby may be abandoned at any time prior to the
Closing Date only as follows, whether before or after approval by the Web
Shareholders:
(a) by mutual written consent of Web and Parent, duly
authorized by the Board of Directors of each;
(b) by Web or Parent if the Closing shall not have occurred
on or before October 31, 1999 (or such other date as may be agreed to by
Web and Parent); provided, that, no party may terminate this Agreement
-------- ----
under this Section 8.1(b) if such party's breach of this Agreement has
--------------
caused or resulted in the failure of the Closing to occur on or before such
date;
(c) by Web if (i) there are any breaches of any Parent
Modified Representation or any material breaches of any Parent Nonmodified
Representation, or (ii) Parent has breached or failed to perform,
notwithstanding satisfaction or due waiver of all conditions thereto, any
of its material covenants or agreements contained herein as to which notice
specifying such breach or
37
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failure has been given to Parent promptly after the discovery thereof and
Parent has failed to cure or otherwise resolve the same to the reasonable
satisfaction of Web within thirty (30) days after receipt of such notice;
(d) by Parent if (i) there are any breaches of any Web
Modified Representations or any material breaches of any Web Nonmodified
Representations, or (ii) Web has breached or failed to perform,
notwithstanding satisfaction or due waiver of all conditions thereto, any
of its material covenants or agreements contained herein as to which notice
specifying such breach or failure has been given to Web promptly after the
discovery thereof and Web has failed to cure or otherwise resolve the same
to the reasonable satisfaction of Parent within thirty (30) days after
receipt of such notice;
(e) by Web or Parent if a court of competent jurisdiction or
other Governmental Authority shall have issued an order, decree or ruling
or taken any other action permanently restraining, enjoining or otherwise
prohibiting the Merger, the Company Acquisition Agreement or any of the
transactions contemplated by this Agreement or such other agreements and
such order, decree, ruling or other action shall have become final and
nonappealable;
(f)(i) by Web if the stockholders of Parent fail to
approve and adopt the Merger or the issuance of the Parent Common Stock
pursuant to this Agreement or the other transactions contemplated or
otherwise referenced herein or therein, as applicable, at the meeting
duly convened therefor;
(f)(ii) by Parent if the stockholders of Parent fail to
approve and adopt the Merger pursuant to this Agreement or the other
transactions contemplated or otherwise referenced herein or therein, as
applicable;
(g) by Parent, if Web or its Board of Directors breaches any
provision of Section 6.7;
-----------
(h) by Web, if Parent or its Board of Directors breaches any
provision of Section 6.7; or
-----------
(i) by Parent or Web upon the occurrence of the events
described in Section 1.11.
------------
The party desiring to terminate this Agreement pursuant to the
preceding clauses (b), (c), (d), (e), (f)(i), (f)(ii), (g), (h) or (i)
shall give written notice of such termination to the other party in
accordance with Section 11.1 below.
------------
8.2 Termination Fees and Rights. In recognition of the
---------------------------
considerable time and expense that the parties have expended and will
expend in entering into this Agreement, and pursuing the Merger and the
other transactions contemplated hereby, the following fees shall be payable
in the event of termination of this Agreement:
(a) To the extent that this Agreement is terminated solely
pursuant to Section 8.1(a), (b), or (e), and neither a Web Triggering
---------------------------
Transaction nor Parent Triggering Transaction has occurred prior to the
date of termination, no termination fees are payable to any party and this
38
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Agreement shall become void and of no effect with no liability on the part
of any party hereto (or any of its directors, officers, employees, agents,
or representatives); provided, that no such termination shall relieve any
party hereto from any liability under Section 6.9 or for any breach of
-----------
this Agreement.
(b) If this Agreement is terminated by Web pursuant to
Section 8.1(c), (f)(i) or (h) or by Parent pursuant to Section 8.1(i),
- ----------------------------- --------------
Parent shall promptly pay a termination fee to the Company in an amount
equal to $1,560,150 and to WorldPages, collectively, in an amount equal to
$939,850, inclusive of expenses, by wire transfer of immediately available
funds if Parent consummates a Parent Triggering Transaction within six (6)
months following the date of such termination, provided that if
--------
WorldPages is a party to the Parent Triggering Transaction, then all of the
$2,500,000 payable as a termination fee hereunder shall be paid to the
Company and no fee shall be paid to WorldPages.
(c) If this Agreement is terminated by Parent pursuant to
Section 8.1(d) or (g) or by Web pursuant to Section 8.1(i), Web and Big
- --------------------- --------------
Stuff, jointly and not severally, shall promptly pay a termination fee to
Parent in an amount equal to $1,810,631 and to the Company in an amount
equal to $689,369, inclusive of expenses, by wire transfer of immediately
available funds if Web consummates a Web Triggering Transaction within six
(6) months following the date of such termination, provided that if
--------
Parent is a party to the Web Triggering Transaction, then all of the
$2,500,000 payable as a termination fee hereunder shall be paid to the
Company.
(d) If this Agreement is terminated by Web or by Parent
pursuant to Section 8.1(f)(i) or 8.1(f)(ii), respectively, no termination
-------------------------------
fee shall be payable by Web even if Web consummates or a Web Triggering
Transaction.
(e) If a termination fee is payable by a party pursuant to
this Agreement and a termination fee is payable by the same party pursuant
to the Company Acquisition Agreement and the Big Stuff Acquisition
Agreement, then the parties agree that notwithstanding anything herein or
therein to the contrary, there shall be no "doubling" of such termination
fee and that a maximum of $2,500,000 shall be paid by any party required to
pay a termination fee, whether payable hereunder or pursuant to the Company
Acquisition Agreement or the Big Stuff Acquisition Agreement.
8.3 Procedure Upon Termination. In the event of termination
--------------------------
pursuant to this Article VIII, the Merger shall be abandoned without
------------
further action by Web or Parent, provided that the agreements contained in
Sections 8.2, 8.3, 9.1, 9.7 and 6.9 hereof shall remain in full force and
- -----------------------------------
effect. If this Agreement is terminated as provided herein, each party
shall use its reasonable best efforts to redeliver all documents, work
papers and other material (including any copies thereof) of any other party
relating to the transactions contemplated hereby, whether obtained before
or after the execution hereof, to the party furnishing the same. Nothing
contained in this Agreement shall relieve any party from any liability for
any inaccuracy, misrepresentation or breach of this Agreement prior to
termination.
39
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ARTICLE IX - SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; INDEMNIFICATION
9.1 Indemnification by the Web Shareholders.
(a) If the Closing has occurred, subject to the terms and
conditions of this Article IX, the Web Shareholders shall indemnify
----------
Parent, and its officers, directors, agents and representatives (THE
"INDEMNITEES"), from and in respect of, and hold the Indemnitees
harmless against, any and all damages, fines, penalties, losses,
liabilities, excise and other taxes, judgments, and deficiencies
(including without limitation amounts paid in settlement and interest
and reasonable out-of-pocket legal and accounting fees), but which
amount shall be offset or reduced by the amount of any insurance
proceeds received by Parent in respect of any of the foregoing, incurred
or suffered by any of the Indemnitees ("DAMAGES") resulting from,
relating to or in connection with any misrepresentation or breach of
warranty of the Web Shareholders contained in this Agreement.
(b) At Closing, (i) the Web Shareholders and the Parent
shall execute an escrow agreement (THE "ESCROW AGREEMENT") with an
escrow agent (THE "ESCROW AGENT") both of which as shall be reasonably
acceptable to the Parent and the Representative and (ii) the Web
Shareholders shall deposit Parent Common Stock with an aggregate value
equal to Eight Hundred Fifty Thousand Dollars ($850,000) with the Escrow
Agent to be used as payment for any of the indemnification obligations
of the Web Shareholders pursuant hereto. For purposes of calculating
the value of the Parent Common Stock deposited with the Escrow Agent,
one share of Parent Common Stock shall be deemed to have a value of
$5.50.
(c) The Web Shareholders acknowledge that their
indemnification obligations hereunder are solely in their capacity as
former shareholders of Web, and, accordingly, the indemnification
obligations in this Article IX shall not entitle any Web Shareholder
----------
who was or is a current or former officer, director or employee of Web
to any indemnification from Web pursuant to the organizational or
governing documents of Web.
9.2 Method of Asserting Claims.
--------------------------
(a) Prior to the date (THE "REPORT DATE") that is thirty
(30) days after the completion of Parent's audit report by Parent's
independent auditors for the fiscal year ended December 31, 1999, each
Indemnitee shall give written notice (THE "CLAIM NOTICE") to the
Representative, as agent for the Web Shareholders, of any and all claims
or events known to it which gives rise to a claim for indemnification
hereunder by the Indemnitee against the Web Shareholders (AN
"INDEMNIFIABLE CLAIM"). The Claim Notice shall specify the nature and
estimated amount of such claimed Damages (THE "CLAIMED AMOUNT"). In the
case of any claim for indemnification hereunder arising out of a claim,
action, suit or proceeding brought by any Person who is not a party to
this Agreement (A "THIRD-PARTY CLAIM"), prior to the Report Date, the
Indemnitee also shall give the Representative, as agent for the Web
Shareholders, copies of any written claims, process or legal pleadings
with respect to such Third-Party Claim.
(b) Within forty-five (45) days after delivery of a Claim
Notice, the Representative shall notify the Parent and the Escrow Agent
in writing of his objections, if any, to the Claim. Payments from the
Escrow Account shall be made, and disputes shall be resolved, as set
forth in the Escrow Agreement.
40
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<PAGE>
9.3 Third Party Claims.
------------------
(a) Except as otherwise provided in paragraph (c) below,
the Representative, as agent for the Web Shareholders, may elect to
compromise or defend, at the Web Shareholders' own expense and by the
Web Shareholders' own counsel reasonably satisfactory to the Indemnitee,
any Third-Party Claim; provided that (i) the Representative provides the
Indemnitee with reasonable evidence that the Web Shareholders will have
the financial resources to defend against such claim and fulfill their
indemnification obligations hereunder; and (ii) the giving of a Defense
Notice (as defined below) by the Representative shall constitute an
acknowledgment by the Web Shareholders of their obligation to indemnify
the Indemnitee with respect to such Third-Party Claim in accordance with
the terms of this Article IX. If the Representative, as agent for the
----------
Web Shareholders, elects to compromise or defend a Third-Party Claim,
the Representative shall, within thirty (30) days of its receipt of the
notice provided pursuant to Section 9.2(a) hereof (or sooner, if the
--------------
nature of such Third-Party Claim so requires), notify the related
Indemnitee of its intent to do so (A "DEFENSE NOTICE"), and such
Indemnitee shall reasonably cooperate in the compromise of, or defense
against, such Third-Party Claim. The Web Shareholders shall be
responsible for the payment of such Indemnitee's actual out-of-pocket
expenses (other than legal and accounting fees) incurred in connection
with such cooperation, and such expenses shall constitute Damages
incurred or suffered by Parent within the meaning of Section 9.1(a)
--------------
hereof. After notice from the Representative, as agent for the Web
Shareholders, to an Indemnitee of its election to assume the defense of
a Third-Party Claim, the Web Shareholders shall not be liable to such
Indemnitee under this Article IX for any legal expenses subsequently
----------
incurred by such Indemnitee in connection with the defense thereof. If
the Representative, as agent for the Web Shareholders, elects not to
compromise or defend against a Third-Party Claim, or fails to notify an
Indemnitee of its election as provided in this Section 9.3, such
-----------
Indemnitee may pay, compromise or defend such Third-Party Claim on
behalf of and for the account and risk of the Web Shareholders (and any
amount paid or expenses incurred in connection therewith shall
constitute Damages incurred or suffered by Parent within the meaning of
Section 9.1(a) hereof). The Representative may not consent to entry
- --------------
of any judgment or enter into any settlement without the written consent
of each related Indemnitee (which consent shall not be unreasonably
withheld), unless such judgment or settlement provides solely for money
damages or other money payments for which such Indemnitee is entitled to
indemnification hereunder and includes as an unconditional term thereof
the giving by the claimant or plaintiff to such Indemnitee of a release
from all liability in respect of such Third-Party Claim.
(b) In respect of any claim, action, suit or proceeding
brought by a taxing authority in respect of Taxes for which the Web
Shareholders may be required to indemnify the Parent (A "TAX CLAIM"),
the Representative, as agent for the Web Shareholders, shall have the
sole right to control any Tax Claim, provided, however, that the
Representative shall provide the Indemnitee with copies of all
correspondence with any taxing authority in connection with any such Tax
Claim and shall keep the Indemnitee reasonably informed of all progress
with such taxing authority, and provided further that the Representative
shall consult with the Indemnitee in good faith in contesting any
proposed adjustment and shall consider any reasonable advice from the
Indemnitee concerning such Tax Claim so long as the Representative, as
agent for the Web Shareholders, shall (subject to the immediately
following sentence) ultimately be entitled to control any such Tax Claim
concerning any indemnity obligation of the Web Shareholders. The
Representative shall not be entitled to compromise or settle any Tax
liability of the Company for
41
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<PAGE>
any pre-Closing Period that would have the effect of materially
decreasing the Company's deductions for credits or materially increasing
the Company's taxable income for any taxable year or period subsequent
to the pre-Closing Period without the prior written consent of Parent,
which consent shall not be unreasonably withheld. Parent will cooperate
fully with Representative in defending any Tax Claim.
(c) If there is a reasonable likelihood that a Third-Party
Claim may have a material adverse effect on an Indemnitee, other than as
a result of money damages or other money payments for which such
Indemnitee is entitled to indemnification hereunder, such Indemnitee
will have the right, after consultation with the Representative, and at
the cost and expense of the Web Shareholders (which costs and expenses,
other than legal and accounting fees, shall constitute Damages within
the meaning of Section 9.1(a) hereof to the extent provided therein),
--------------
to defend such Third-Party Claim. If the Third-Party Claim involves a
third party with whom Parent has a significant on-going or prospective
relationship, the Indemnitee will have the right, after consultation
with the Representative, and at the cost and expense of the Web
Shareholders (which costs and expenses, other than legal and accounting
fees, shall constitute Damages within the meaning of Section 9.1(a)
--------------
hereof to the extent provided therein), to defend such Third-Party
Claim; provided that the Web Shareholders shall not be obligated to pay
Damages to the extent it is determined (by agreement between the
Representative and Indemnitees or by arbitration or court judgment) that
the Third-Party Claim was settled on terms that were not fair and
reasonable to the Indemnitors.
9.4 Survival. The representations and warranties of Web set
--------
forth in this Agreement shall survive the Closing and shall continue
until the Report Date. The representation and warranties shall not be
affected by any examination made for or on behalf of Parent or the
knowledge of any of Parent's officers, directors, stockholders,
employees or agents, except that the representations and warranties are
qualified by the matters disclosed in the Disclosure Schedules to the
representations and warranties of Web and the Web Shareholders contained
in Article II hereof and Parent agrees that Parent has knowledge of
----------
such matters. Notwithstanding anything to the contrary herein, if a
claim for indemnification is made before the expiration of the periods
of survival set forth above in this Section 9.4, then (notwithstanding
-----------
the expiration of such time period) the representation or warranty
applicable to such claim shall survive until, but only for purposes of,
the resolution of such claim.
9.5 Limitations.
-----------
(a) The Web Shareholders shall not be liable under this
Article IX unless and until the aggregate amount of Damages incurred
- ----------
or suffered by Indemnitees exceeds $100,000, (at which point the Web
Shareholders shall become liable for the entire amount of such Damages
in excess of $75,000). For purposes of the preceding sentence, no
independent claims of less than $1,000 may be made; provided however,
that all claims arising out of a common set of facts shall be aggregated
for purposes of determining whether the $1,000 threshold has been met.
(b) The Web Shareholders' liability under this Article IX
----------
shall not exceed $850,000. At their option, the Web Shareholders
may elect to pay an Indemnifiable Claim in cash rather than by transfer
or sale of the escrowed Parent Common Stock.
(c) No claim for indemnification pursuant to Section 9.1
-----------
shall be made unless asserted by a written notice given to the
Representative on or before the Report Date.
42
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9.6 The Representative.
------------------
(a) Web and the Web Shareholders hereby authorize, direct
and appoint Reid to act as sole and exclusive agent, attorney-in-fact
and representative of the Web Shareholders (THE "REPRESENTATIVE"), and
authorizes and directs the Representative to (i) take any and all
actions (including without limitation executing and delivering any
documents, incurring any costs and expenses for the account of the Web
Shareholders (which will constitute Damages incurred or suffered by
Parent within the meaning of Section 9.1(a) hereof) and making any and
--------------
all determinations) which may be required or permitted by this Agreement
to be taken by the Web Shareholders or the Representative, (ii) exercise
such other rights, power and authority as are authorized, delegated and
granted to the Representative hereunder in connection with the
transactions contemplated hereby and (iii) exercise such rights, power
and authority as are incidental to the foregoing. Any such actions
taken, exercises of rights, power or authority, and any decision or
determination made by the Representative consistent therewith, shall be
absolutely and irrevocably binding on each indemnifying party as if such
indemnifying party personally had taken such action, exercised such
rights, power or authority or made such decision or determination in
such indemnifying party's individual capacity. Notwithstanding any
other provision of this Agreement, if the Closing occurs, then with
respect to the matters covered by Article IX, (i) each of the Web
----------
Shareholders irrevocably relinquishes such Web Shareholder's right to
act independently and other than through the Representative, except with
respect to the removal of the Representative or appointment of a
successor Representative as provided in Section 9.6(b) below, and (ii)
--------------
no Web Shareholders shall have any right under this Agreement or
otherwise to institute any suit, action or proceeding against Web or
Parent with respect to any such matter, any such right being irrevocably
and exclusively delegated to the Representative. The Representative
hereby acknowledges and accepts the foregoing authorization and
appointment and agrees to serve as the Representative in accordance with
this Agreement.
(b) The Representative shall serve as Representative until
his resignation, removal from office, incapacity or death; provided,
however, that the Representative shall not have the right to resign
without (i) prior written notice to the Web Shareholders, and (ii)
picking a successor reasonably satisfactory to Parent to serve until a
successor thereto is elected by the Web Shareholders. The
Representative may be removed at any time, and a successor
representative, reasonably satisfactory to Parent, may be appointed,
pursuant to written action by Web Shareholders. Any successor to the
Representative shall, for purposes of this Agreement, be deemed to be,
from the time of the appointment thereof in accordance with the terms
hereof, the Representative, and from and after such time, the term
"REPRESENTATIVE" as used herein and therein shall be deemed to refer to
such successor. No appointment of a successor shall be effective unless
such successor agrees in writing to be bound by the terms of this
Agreement.
(c) The Representative shall be permitted to retain
counsel, consultants and other advisors and shall promptly notify Parent
after retaining any such Person.
(d) The provisions of this Section 9.6 shall in no way
-----------
impose any obligations on Parent (other than those set forth in
paragraph (c) above). In particular, notwithstanding any notice
received by Parent to the contrary (except any notice of the appointment
of a successor Representative approved by Parent in accordance with
paragraph (b) of this Section 9.6), Parent shall be entitled to assume
-----------
that all actions, decisions and determinations of the Representative are
fully authorized by the Web Shareholders.
43
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(e) The Representative shall not be liable to the Web
Shareholders for the performance of any act or the failure to act so
long as he acted or failed to act in good faith in what he reasonably
believed to be the scope of his authority and for a purpose which he
reasonably believed to be in the best interests of the Web Shareholders.
9.7 Indemnification by the Parent.
-----------------------------
(a) Indemnity. If the Closing has occurred, subject to
---------
the terms and conditions of this Section 9.7, Parent shall indemnify
-----------
the Web Shareholders from and in respect of all, and hold the Web
Shareholders harmless against, any and all damages, fines, penalties,
losses, liabilities, judgments and deficiencies (including without
limitation amounts paid in settlement and interest) ("WEB SHAREHOLDER
DAMAGES") resulting from, relating to or in connection with any
misrepresentation or breach of warranty of the Parent contained in this
Agreement.
(b) Survival. The representations and warranties of
--------
Parent set forth in this Agreement shall survive the Closing and shall
continue until the Report Date. The representations and warranties
shall not be affected by any examination made for or on behalf of Web or
Web Shareholders or the knowledge of any of the Web's officers,
directors, stockholders, employees or agents, except that the
representations and warranties are qualified by the matters disclosed in
the Disclosure Schedules to the representations and warranties of the
Parent contained in Article III hereof, and Web agrees that Web has
-----------
knowledge of such matters. Notwithstanding anything to the contrary
herein, if a claim for indemnification is made before the expiration of
the periods of survival set forth above in this Section 9.7, then
-----------
(notwithstanding the expiration of such time period) the representation
or warranty applicable to such claim shall survive until, but only for
purposes of, the resolution of such claim.
(c) Limitations. Parent shall not be liable under this
-----------
Section 9.7 unless and until the aggregate amount of Web Shareholder
- -----------
Damages incurred or suffered by the Web Shareholders exceeds $100,000
(at which point Parent shall become liable for the entire amount of Web
Shareholder Damages in excess of $75,000). Furthermore, the liability
of Parent under this Section 9.7 shall be $850,000.. No claim for
-----------
indemnification pursuant to Section 9.7 shall be made unless asserted
-----------
by a written notice given to Parent on or before the Report Date.
ARTICLE X - AMENDMENT AND WAIVER
10.1 Amendment. Except as is otherwise required by applicable
---------
Law, this Agreement may be amended by the parties hereto at any time
only by execution of an instrument in writing signed on behalf of each
of the parties hereto.
10.2 Extension; Waiver. At any time prior to the Effective
-----------------
Time, Parent and Acquisition Subsidiary, on the one hand, and Web and
the Web Shareholders, on the other, may, to the extent legally allowed,
(i) extend the time for the performance of any of the obligations of the
other party hereto, (ii) waive any inaccuracies in the representations
and warranties made by such other party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any
of the agreements or conditions for the benefit of such party contained
44
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herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE XI - GENERAL PROVISIONS
11.1 Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed given if delivered personally or
by commercial delivery service, or mailed by registered or certified
mail (return receipt requested) or sent via facsimile (with
acknowledgment of complete receipt) to the parties at the following
addresses (or at such other address for a party as shall be specified by
like notice):
(a) if to Parent, to:
Advanced Communications Group, Inc.
390 South Woods Mill Road, Suite 150
St. Louis, Missouri 63017
Attn: Mr. Richard O'Neal
Facsimile: (314) 205-8141
with a copy to:
Blackwell Sanders Peper Martin LLP
720 Olive Street, Suite 2400
St. Louis, Missouri 63101-4834
Attn: Mr. Craig Adoor
Facsimile: (314) 345-6060
(b) if to Web and Web Shareholders, to:
Web YP, Inc.
4515 South Georgia, Suite 118
Amarillo, Texas 79102
Attn: Mr. Richard L. Reid
Facsimile: (806) 354-2974
with a copy to:
Steinhart & Falconer
333 Market Street
32nd Floor
San Francisco, California 94105-2150
Attn: Mr. Robb A. Scott
Facsimile: (415) 442-0856
11.2 Interpretation. The words "INCLUDE," "INCLUDES" and
--------------
"INCLUDING" when used herein shall be deemed in each case to be followed
by the words "without limitation". The table
45
<PAGE>
<PAGE>
of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. All Disclosure Schedules to this
Agreement constitute, or will constitute when delivered during the
Schedule Period, a part of this Agreement as if set forth in full herein
and are, or will be when delivered during the Schedule Period,
incorporated herein.
11.3 Counterparts. This Agreement may be executed in one or
------------
more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have
been signed by each of the parties and delivered to the other parties,
it being understood that all parties need not sign the same counterpart.
11.4 Entire Agreement; Assignment. This Agreement (including,
----------------------------
but not limited to, the Recitals hereto), the Disclosure Schedules
hereto, and the documents and instruments and other agreements among the
parties hereto referenced herein: (i) constitute the entire agreement
among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and
oral, among the parties with respect to the subject matter hereof
including, but not limited to, the Letter of Intent dated April 11, 1999
by and among the Parent, the Company, Web, Big Stuff and O'Neal and the
Confidentiality Agreement dated April 11, 1999 by and among Parent, the
Company, Web, Big Stuff and O'Neal; (ii) are not intended to confer upon
any other Person any rights or remedies hereunder except that the
Representative shall have the express rights articulated in Article
-------
IX; and (iii) shall not be assigned by operation of law or otherwise,
- --
except that Parent may assign its rights and delegate its obligations
hereunder to its affiliates, provided that Parent shall remain liable
hereunder.
11.5 Severability. In the event that any provision of this
------------
Agreement or the application thereof, becomes or is declared by a court
of competent jurisdiction to be illegal, void or unenforceable, the
remainder of this Agreement will continue in full force and effect and
the application of such provision to other Persons or circumstances will
be interpreted so as reasonably to effect the intent of the parties
hereto so long as consideration of the Agreement is not materially
affected for any party hereof. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable
provision.
11.6 Other Remedies. Except as otherwise provided herein, any
--------------
and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any
one remedy will not preclude the exercise of any other remedy.
11.7 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware,
regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof. Each of the parties hereto
irrevocably consents to the exclusive jurisdiction and venue of any
court within the State of California, City and County of San Francisco,
in connection with any matter based upon or arising out of this
Agreement or the matters contemplated herein, agrees that process may be
served upon them in any manner authorized by the laws of the State of
California, City and County of San Francisco for such Persons and waives
and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction, venue and such process.
46
<PAGE>
<PAGE>
11.8 Rules of Construction. The parties hereto agree that they
---------------------
have been represented by counsel during the negotiation and execution of
this Agreement and, therefore, waive the application of any law,
regulation, holding or rule of construction providing that ambiguities
in an agreement or other document will be construed against the party
drafting such agreement or document.
ARTICLE XII - DEFINITIONS
12.1 Definitions.
-----------
"Acquisition CLEC Shares" means the quotient of the CLEC Sales
Price Decrease divided by $5.50.
"Acquisition Subsidiary" shall have the meaning ascribed to it in
the preamble hereto.
"Active Parent Subsidiaries" shall mean Feist; Firstel; Value;
Great Western Directories, Inc.; Telecom Resources, Inc.; the
Switchboard of Oklahoma City, Inc.; Long Distance Management of Kansas,
Inc.; Long Distance Management II, Inc.; and National Telecom, a
proprietorship.
"Affiliate Agreements" shall have the meaning set forth in
Section 4.8 hereof.
- -----------
"Aggregate Acquisition Shares" means the sum of the aggregate
number of Class B Special Shares and Contingent Rights II outstanding as
of the Closing Date immediately after giving effect to the Closing.
"Agreement" shall have the meaning ascribed to it in the preamble
hereto.
"Anniversary Date" shall mean the first anniversary of the Closing
Date.
"Associates" shall mean affiliates of any Person (including,
without limitation, directors, officers, employees, agents, representatives
and shareholders or any affiliates or associates thereof).
"Benefit Plan" shall have the meaning ascribed to such term in
Section 2.14 hereof.
- ------------
"Big Stuff" shall have the meaning ascribed to such term in
Recital E hereto.
"Big Stuff Acquisition Agreement" shall mean that certain
Acquisition Agreement dated as of June 3, 1999, among the Parent, ACG
Acquisition VII Corp., Big Stuff and the Big Stuff shareholders.
"Certificate of Merger" shall have the meaning ascribed to such
term in Section 1.1 hereof.
-----------
"Certificates" shall mean the certificates which, prior to the
Merger, represented the Web Shares, and shall include a certificate
issued upon due execution and delivery of an affidavit of loss and a
bond, if required by Parent, in the event that a Web Shareholder is
unable to produce
47
<PAGE>
<PAGE>
and deliver, at the Closing, the original certificate which prior to the
Merger, represented any Web Shares.
"Claim Notice" shall have the meaning ascribed to such term in
Section 9.2(a) hereof.
"Claimed Amount" shall have the meaning ascribed to such term in
Section 9.2(a) hereof.
- --------------
"Class A Special Shares" shall have the meaning set forth in the
Company Acquisition Agreement.
"Class B Special Shares" shall have the meaning set forth in the
Company Acquisition Agreement.
"CLEC Operations" shall mean Feist, Firstel, Valu, and such other
non-yellow pages operating subsidiaries or operations of Parent as shall
be determined by the Board of Directors of Parent.
"CLEC Sales Price" shall mean the aggregate consideration received
by Parent from the sale(s) of the CLEC Operations, reduced by warranty
claims and paying or reserving against the taxes payable by Parent or a
subsidiary of Parent directly attributable to the sale(s) of the CLEC
Operations. For greater certainty and explanation, but not limitation,
the consideration received by Parent shall not be reduced by any fee
paid to NationsBanc Montgomery Securities, L.L.C. in connection with the
sale(s) of the CLEC Operations or to PaineWebber Incorporated.
"CLEC Sales Price Decrease" shall have the meaning ascribed to
such term in Section 5.11(c) hereof.
---------------
"CLEC Sales Price Increase" shall have the meaning ascribed to
such term in Section 5.11(b) hereof.
---------------
"Closing" shall mean the closing of the Merger.
"Closing Date" shall mean the date on which the Closing actually
occurs.
"Code" shall mean the Internal Revenue Code of 1986, as amended,
and the Treasury regulations thereunder.
"Company" shall have the meaning set forth in Recital E hereto.
"Company Acquisition Agreement" shall have the meaning set forth
in Recital E hereto.
"Company Shareholders" shall have the meaning set forth in Recital
E hereto.
"Consent" shall have the meaning ascribed to such term in Section
-------
2.5 hereof.
- ---
"Contingent Rights I" shall mean, collectively, the rights to
receive Parent Common Stock pursuant to Section 5.11(b) hereof, which
---------------
rights shall be represented by certificates, the form of which shall be
designated at a later date (and shall be acceptable to the parties
hereto, acting reasonably), and which shall be non-transferable, except
by operation of law.
48
<PAGE>
<PAGE>
"Contingent Rights II" shall mean, collectively, the rights to
receive Parent Common Stock pursuant to Section 5.11(c) hereof, which
---------------
rights shall be represented by certificates, the form of which shall be
designated at a later date (and shall be acceptable to the parties
hereto, acting reasonably), and which shall be non-transferable, except
by operation of law.
"Conversion Stock" shall have the meaning ascribed to such term in
Section 4.9 hereof.
- -----------
"Convertible Note" shall have the meaning ascribed to such term
Section 1.10 hereof.
- ------------
"Corporation Laws" shall have the meaning ascribed to such term in
Section 1.1 hereof.
- -----------
"Damages" shall have the meaning ascribed to such term in Section
--------
9.1(a) hereof.
- ------
"Defense Notice" shall have the meaning ascribed to such term in
Section 9.3(a) hereof.
- --------------
"Disclosure Schedules" shall mean, collectively, that information
required to be delivered by Web to Parent, and by Parent to Web,
pursuant to this Agreement.
"Effective Time" shall have the meaning ascribed to such term in
Section 1.2 hereof.
- -----------
"Eligible Acquisition Shareholders" shall mean the holders of
Class B Special Shares and the holders of the Contingent Rights II on
the Closing Date, immediately after giving effect to the Closing.
"Eligible Acquisition Shareholder's Proportionate Share" means,
for any Eligible Acquisition Shareholder, the quotient of (a) the sum of
the number of Class B Special Shares and Contingent Rights II owned by
such Eligible Acquisition Shareholder on the Closing Date, immediately
after giving effect to the Closing, divided by (b) the number of
Aggregate Acquisition Shares.
"Eligible Parent Shareholders" shall mean the holders of
Contingent Rights I on the Closing Date, immediately after giving effect
to the Closing.
"Eligible Parent Shareholder's Proportionate Share" shall mean,
for any Eligible Parent Shareholder, the quotient of (i) the number of
Contingent Rights I owned by such Eligible Parent Shareholder on the
Closing Date, immediately after giving effect to the Closing, divided by
(ii) the aggregate number of outstanding Contingent Rights I.
"Enforceability Exceptions" shall have the meaning ascribed to
such term in Section 2.4 hereof.
-----------
"Environmental Laws" shall have the meaning ascribed to such term
in Section 2.17 hereof.
------------
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, together with all regulations thereunder.
"Escrow Agent" shall have the meaning ascribed to such term in
Section 9.1(b) hereof.
- --------------
49
<PAGE>
<PAGE>
"Escrow Agreement" shall have the meaning ascribed to such term in
Section 9.1(b) hereof.
- --------------
"Event" shall mean any event, occurrence, fact, condition, change,
development or effect.
"Exchange Ratio" shall have the meaning ascribed to such term in
Section 1.3 hereof.
- -----------
"Extraordinary Transactions" shall have the meaning ascribed to
such term in Section 6.7 hereof.
-----------
"Feist" shall mean Feist Long Distance Service, Inc.
"Final Order", with respect to any Consent of a Governmental
Authority, shall mean an action by the appropriate Governmental Authority
as to which: (i) no request for stay by such Governmental Authority of the
action is pending, no such stay is in effect, and, if any deadline for
filing any such request is designated by statute or regulation, it has
passed; (ii) no petition for rehearing or reconsideration of the action is
pending before such Governmental Authority, and no appeal or comparable
administrative remedy is pending before such Governmental Authority, and
the time for filing any such petition, appeal or administrative remedy has
passed; (iii) such Governmental Authority does not have the action under
reconsideration on its own motion and the time for such reconsideration has
passed; and (iv) no appeal to a court, or request for stay by a court, of
the Governmental Authority action is pending or in effect, and if any
deadline for filing any such appeal or request is designated by statute or
rule, it has passed.
"Final Sale Date" shall have the meaning set forth in Section
-------
5.11(b).
- -------
"Firstel" shall mean Firstel, Inc.
"Governmental Authority" shall mean a nation or government, any
state or other political subdivision thereof, any Person, authority or body
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government including, without limitation, any
governmental or regulatory authority, agency, department, board, commission
or instrumentality, any court, tribunal or arbitrator and any self-
regulatory organization.
"Great Western Credit Agreement" shall mean the Loan Agreement
dated as of May 14, 1999, by and among Great Western Directories, Inc., the
lenders signatories thereto, and Bank of America National Trust and Savings
Association as Administrative Agent.
"Great Western Notes" shall have the meaning ascribed to such term
in Recital E hereto.
"Great Western Shareholders" shall have the meaning ascribed to
such term in Recital E hereto.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations promulgated
thereunder.
"ICL" shall have the meaning ascribed to such term in Recital E
hereto.
50
<PAGE>
<PAGE>
"Indemnifiable Claim" shall have the meaning ascribed to such term
in Section 9.2(a) hereof.
--------------
"Indemnitees" shall have the meaning ascribed to such term in
Section 9.1(a) hereof.
- --------------
"Intellectual Property" shall have the meaning ascribed to such
term in Section 2.18 hereof.
------------
"IP Claim Notice" shall have the meaning ascribed to such term in
Section 2.18 hereof.
- -------------
"IRS" shall mean the United States Internal Revenue Service, or
any successor thereto.
"Law" shall mean applicable provision of any constitution, treaty,
statute, law, code, rule, regulation, ordinance, policy or order of any
Governmental Authority or other matters having the force of law including,
but not limited to, any orders, decisions, injunctions, judgments, awards
and decrees of or agreements with any court or other Governmental
Authority.
"Letter of Transmittal" shall have the meaning ascribed to such
term in Section 1.5 hereof.
-----------
"Litigation" shall have the meaning ascribed to such term in
Section 2.7 hereof.
- -----------
"Merger" shall have the meaning ascribed to such term in Recital B
hereto.
"Merger Consideration" shall have the meaning ascribed to such
term in Section 1.3 hereof.
-----------
"Multi-employer Plan" shall have the meaning ascribed to such term
in Section 2.14 hereof.
------------
"NYSE" shall mean the New York Stock Exchange, Inc.
"O'Neal" shall have the meaning ascribed to such term in the
preamble hereto.
"Parent" shall have the meaning ascribed to such term in the
Preamble hereto.
"Parent CLEC Shares" shall mean the quotient of the CLEC Sales
Price Increase divided by $5.50.
"Parent Common Stock" shall have the meaning ascribed to such term
in Section 1.3 hereof.
-----------
"Parent Financial Statements" shall have the meaning ascribed to
such term in Section 3.8 hereof.
-----------
"Parent Guaranty" shall mean that certain Guaranty of Parent given
pursuant to the Great Western Credit Agreement.
51
<PAGE>
<PAGE>
"Parent Material Adverse Effect" shall mean a material adverse
effect on (i) the business, assets, condition (financial or otherwise),
properties, liabilities or the results of operations of Parent and the
Active Parent Subsidiaries taken as a whole, (ii) the ability of Parent to
perform its obligations set forth in this Agreement and the Parent
Transaction Agreements, or (iii) the ability of Parent to timely consummate
the transactions contemplated by this Agreement and the Parent Transaction
Agreements.
"Parent Material Contract" shall have the meaning ascribed to such
term in Section 3.13 hereof.
------------
"Parent Modified Representations" shall have the meaning ascribed
to such term in Section 7.2(a)(i) hereof.
-----------------
"Parent Nonmodified Representation" shall have the meaning
ascribed to such term in Section 7.2(a)(i) hereof.
-----------------
"Parent Permits" shall have the meaning ascribed to such term in
Section 3.11 hereof.
- ------------
"Parent Securities Filings" shall have the meaning ascribed to
such term in Section 3.7 hereof.
-----------
"Parent Series A Stock " shall have the meaning ascribed to such
term in Section 3.2 hereof.
-----------
"Parent Transaction Agreements" shall have the meaning ascribed to
such term in Section 3.4 hereof.
-----------
"Parent Triggering Transaction" shall mean any transaction by way
of a purchase or sale of shares or assets, a merger, a reverse take-over or
other business combination involving the Parent or any Parent Subsidiary or
any subsidiary of the Parent formed, organized or acquired directly or
indirectly by the Parent on or after the date hereof with (i) the Company,
or (ii) which results in the sale of the yellow pages publishing business
of the Parent or Great Western Directories, Inc., or (iii) with another
Person or entity which derives the majority of their revenues from a
business other than the yellow pages publishing business.
"Person" shall mean and include an individual, corporation,
partnership, association, trust or other entity or organization,
including a Governmental Authority.
"Registration Statements" shall have the meaning ascribed to such
term in Section 6.1(b) hereof.
--------------
"Reid" shall have the meaning ascribed to such term in the
preamble hereto.
"Report Date" shall have the meaning ascribed to such term in
Section 9.2(a) hereof.
- --------------
"Representative" shall have the meaning ascribed to such term in
Section 9.6 hereof.
- -----------
"Resignations" shall have the meaning ascribed to such term in
Section 6.8 hereof.
- -----------
52
<PAGE>
<PAGE>
"Schedule Period" shall have the meaning ascribed to such term in
Section 1.11(a) hereof.
- ---------------
"SEC" shall mean the U.S. Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and all rules and regulations promulgated thereunder.
"Securities Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended, and all rules and regulations promulgated
thereunder.
"Surviving Corporation" shall have the meaning ascribed to such
term in Section 1.1 hereof.
-----------
"Surviving Corporation Common Stock" shall have the meaning
ascribed to such term in Section 1.3 hereof.
-----------
"Surviving Corporation Material Adverse Effect" shall mean a
material adverse effect on (i) the business, assets, condition (financial
or otherwise), properties, liabilities or the results of operations of the
Surviving Corporation, or (ii) the ability to timely consummate the
transactions contemplated by this Agreement.
"Tax" shall have the meaning ascribed to such term in Section
-------
2.15(a) hereof.
- -------
"Tax Claim" shall have the meaning ascribed to such term in
Section 9.3(b) hereof.
- --------------
"Third-Party Claim" shall have the meaning ascribed to such term
in Section 9.2(a) hereof.
--------------
"Transaction Expenses" shall have the meaning ascribed to such
term in Section 5.9 hereof.
-----------
"Valu" shall mean, collectively, Valu-line of Louisiana, Inc. and
Valu-line of Longview, Inc.
"Web" shall have the meaning ascribed to such term in the preamble
hereto.
"Web Common Stock" shall have the meaning ascribed to such term in
Section 1.3 hereof.
- -----------
"Web Financial Statements" shall have the meaning ascribed to such
term in Section 2.8 hereof.
-----------
"Web Material Adverse Effect" shall mean a material adverse effect
on (i) the business, assets, condition (financial or otherwise),
properties, liabilities or the results of operations of Web taken as a
whole, (ii) the ability of Web to perform its obligations set forth in this
Agreement and the Web Transaction Agreements, or (iii) the ability of Web
or the Web Shareholders to timely consummate the transactions contemplated
by this Agreement and the Web Transaction Agreements.
53
<PAGE>
<PAGE>
"Web Material Contract" shall have the meaning ascribed to such
term in Section 2.13 hereof.
------------
"Web Modified Representations" shall have the meaning ascribed to
such term in Section 7.3(a)(i) hereof.
-----------------
"Web Nonmodified Representations" shall have the meaning ascribed
to such term in Section 7.3(a)(i) hereof.
-----------------
"Web Permits" shall have the meaning ascribed to such term in
Section 2.11 hereof.
- ------------
"Web Real Property Leases" shall have the meaning ascribed to such
term in Section 2.19(b) hereof.
---------------
"Web Shares" shall have the meaning ascribed to such term in
Section 1.3 hereof.
- -----------
"Web Shareholders" shall have the meaning ascribed to such term in
the preamble hereto.
"Web Shareholder Damages" shall have the meaning ascribed to such
term in Section 9.7(a) hereof.
--------------
"Web Stock" shall have the meaning set forth in Section 2.2
-----------
hereof.
"Web Transaction Agreements" shall have the meaning ascribed to
such term in Section 2.4 hereof.
-----------
"Web Triggering Transaction" means any transaction by way of a
purchase or sale of shares or assets, a merger, a reverse take-over or
other business combination involving Web or any subsidiary of Web formed,
organized or acquired directly or indirectly by Web on or after the date
hereof, of Web's core business or in the sale of all or substantially all
of Web's assets.
"WorldPages" shall have the meaning ascribed to such term in
Recital E hereto.
"WorldPages Acquisition" shall mean the acquisition by Parent or a
direct or indirect subsidiary of Parent of all of the outstanding
capital stock of Web and Big Stuff on terms reasonably acceptable to the
Company, whether by merger, exchange or otherwise.
"Year 2000 Compliant" shall have the meaning ascribed to such term
in Section 2.27 hereof.
------------
[Signatures on following page]
54
<PAGE>
<PAGE>
[Signature pages to the WEB YP Agreement]
IN WITNESS WHEREOF, Parent, the Acquisition Subsidiary, Web and
the Web Shareholders have caused this Agreement to be signed by their
duly authorized respective officers, all as of the date first written
above.
ADVANCED COMMUNICATIONS GROUP, INC.
By:
---------------------------------
James F. Cragg
Title: President and Chief
Operations Officer
ACG ACQUISITION VI CORP.
By:
---------------------------------
James F. Cragg
Title: President
WEB YP, INC.
By:
---------------------------------
Title:
---------------------------------
RICHARD O'NEAL
---------------------------------
DICK REID
<PAGE>
<PAGE>
[WEB YP Acquisition Agreement]
The terms and provisions of Sections 5.11 and 8.2 of this
Agreement are hereby acknowledged and agreed to by Big Stuff, Richard L.
Reid (as a Big Stuff shareholder), Richard O'Neal (as a Big Stuff
shareholder), the Company, the shareholders of the Company, The J.L.R.
Family Trust, The Paisley Family Trust, Edward Truant, Douglas G.
McIntyre, Cold Trust, Global Investment Trust, Freezer Trust, Storage
Trust, Directory Trust, Publisher Trust and Imperial Capital Limited.
BIG STUFF, INC.
By:
---------------------------------------------
Title:
------------------------------------------------
RICHARD L. REID
------------------------------------------------
RICHARD O'NEAL
YPTEL CORPORATION
By:
---------------------------------------------
Title:
SHAREHOLDERS OF YPTEL CORPORATION
By: Imperial Capital Limited as attorney-in-fact
By:
---------------------------------------------
Title:
<PAGE>
<PAGE>
THE J.L.R. FAMILY TRUST, by its trustees
By:
---------------------------------------------
Jeffrey L. Rosenthal, as trustee and with no
personal liability
---------------------------------------------
Maxwell Gotlieb, as trustee and with no
personal liability
THE PAISLEY FAMILY TRUST
By:
---------------------------------------------
Stephen D. Lister, as trustee and with no
personal liability
---------------------------------------------
Maxwell Gotlieb, as trustee and with no
personal liability
---------------------------------------------
Edward Truant
---------------------------------------------
Douglas G. McIntyre
COLD TRUST
By:
------------------------------------------
, as trustee and with
no personal liability
---------------------------------------------
, as trustee and with
no personal liability
<PAGE>
<PAGE>
GLOBAL INVESTMENT TRUST
By:
------------------------------------------
, as trustee and with
no personal liability
---------------------------------------------
, as trustee and with
no personal liability
FREEZER TRUST
By:
------------------------------------------
, as trustee and with
no personal liability
---------------------------------------------
, as trustee and with
no personal liability
STORAGE TRUST
By:
------------------------------------------
, as trustee and with
no personal liability
---------------------------------------------
, as trustee and with
no personal liability
DIRECTORY TRUST
By:
------------------------------------------
, as trustee and with
no personal liability
---------------------------------------------
, as trustee and with
no personal liability
<PAGE>
<PAGE>
PUBLISHER TRUST
By:
------------------------------------------
, as trustee and with
no personal liability
---------------------------------------------
, as trustee and with
no personal liability
IMPERIAL CAPITAL LIMITED, a corporation
incorporated under the law of
the Providence of Ontario
By:
------------------------------------------
Title:
---------------------------------------
<PAGE>
<PAGE>
ARTICLE I - TERMS OF THE MERGER 2
1.1 The Merger 2
----------
1.2 Effective Time 2
--------------
1.3 Merger Consideration 2
--------------------
1.4 Stockholders' Right upon Merger 3
-------------------------------
1.5 Surrender and Exchange of Shares 3
--------------------------------
1.6 Directors 4
---------
1.7 Bylaws 4
------
1.8 Other Effects of Merger 4
-----------------------
1.9 Tax-Free Reorganization 4
-----------------------
1.10 Convertible Note 4
----------------
1.11 Due Diligence Review 5
--------------------
1.12 Additional Actions 5
------------------
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF
WEB AND THE WEB SHAREHOLDERS 5
2.1 Organization and Good Standing 6
2.2 Capitalization 6
--------------
2.3 Subsidiaries 6
------------
2.4 Authorization; Binding Agreement 6
--------------------------------
2.5 Governmental Approvals 7
----------------------
2.6 No Violations 7
-------------
2.7 Litigation 7
----------
2.8 Web Financial Statements 7
------------------------
2.9 Absence of Certain Changes or Events 8
------------------------------------
2.10 Compliance with Laws 8
--------------------
2.11 Permits 9
-------
2.12 Finders and Investment Bankers 9
------------------------------
2.13 Contracts 9
---------
2.14 Employee Benefit Plans 9
----------------------
2.15 Taxes and Returns 10
-----------------
2.16 Liabilities 11
-----------
2.17 Environmental Matters 12
---------------------
2.18 Intellectual Property; Fictitious Names 12
---------------------------------------
2.19 Real Estate 12
-----------
<PAGE>
<PAGE>
2.20 Corporate Records 13
-----------------
2.21 Title to and Condition of Personal 13
----------------------------------
Property
--------
2.22 No Adverse Actions 13
------------------
2.23 Labor Matters 13
-------------
2.24 Insurance 14
---------
2.25 Disclosure 14
----------
2.26 Tax 14
---
2.27 Year 2000 Compliance 14
--------------------
ARTICLE III - REPRESENTATIONS AND WARRANTIES
OF PARENT 14
3.1 Organization and Good Standing 14
------------------------------
3.2 Capitalization 15
--------------
3.3. Subsidiaries 15
------------
3.4 Authorization; Binding Agreement 15
--------------------------------
3.5 Governmental Approvals 16
----------------------
3.6 No Violations 16
-------------
3.7 Securities Filings and Litigation 16
---------------------------------
3.8 Parent Financial Statements 17
---------------------------
3.9 Absence of Certain Changes or Events 18
------------------------------------
3.10 Compliance with Laws 18
--------------------
3.11 Permits 18
-------
3.12 Finders and Investment Bankers 18
------------------------------
3.13 Contracts 18
---------
3.14 Corporate Records 18
-----------------
3.15 Tax 19
---
3.16 Disclosure 19
----------
ARTICLE IV - ADDITIONAL COVENANTS OF WEB AND THE
WEB SHAREHOLDERS 19
4.1 Notification of Certain Matters 19
-------------------------------
4.2 Access and Information 19
----------------------
4.3 Web Shareholder Approval 20
------------------------
4.4 Reasonable Best Efforts 20
-----------------------
4.5 Compliance 20
----------
<PAGE>
<PAGE>
4.6 Benefit Plans 20
-------------
4.7 Tax Opinion Certification 20
-------------------------
4.8 Affiliate Agreements 21
--------------------
4.9 Transfer Restrictions 21
---------------------
ARTICLE V - ADDITIONAL COVENANTS OF PARENT 22
5.1 Conduct of Business of Parent and the
-------------------------------------
Active Parent Subsidiaries 22
--------------------------
5.2 Notification of Certain Matters 22
-------------------------------
5.3 Access and Information 23
----------------------
5.4 Compliance 23
----------
5.5 SEC and Shareholder Filings 23
---------------------------
5.6 Tax Treatment 23
-------------
5.7 Employment and Employee Benefit Plans 23
----------------------
5.8 Tax Opinion Certification 24
-------------------------
5.9 Expenses 24
--------
5.10 Parent Shareholder Approval 24
---------------------------
5.11 Sale of CLEC Operations 24
-----------------------
ARTICLE VI - ADDITIONAL COVENANTS OF THE PARENT,
WEB AND THE WEB SHAREHOLDERS 26
6.1 Registration Rights and Stock Restriction 26
-----------------------------------------
Agreement
---------
6.2 Employment Agreements 27
---------------------
6.3 Consents 27
--------
6.4 Legal Requirements 27
------------------
6.5 Public Announcements 27
--------------------
6.6 Conduct of Business Prior to Closing Date 27
-----------------------------------------
6.7 No Solicitation of Acquisition Proposal 31
---------------------------------------
6.8 Resignations 32
------------
6.9 Confidentiality 32
---------------
6.10 Options; Stock Issuances 32
------------------------
ARTICLE VII - CONDITIONS TO CLOSING 33
7.1 Conditions to Obligations of Each Party to 33
------------------------------------------
Closing
-------
7.2 Additional Conditions to Obligations of
-----------------------------------------
Web Shareholders and Web 35
------------------------
7.3 Additional Conditions to the Obligations 36
----------------------------------------
of Parent
---------
ARTICLE VIII- TERMINATION AND ABANDONMENT 37
8.1 Termination 37
-----------
8.2 Termination Fees and Rights 38
---------------------------
<PAGE>
<PAGE>
8.3 Procedure Upon Termination 39
--------------------------
ARTICLE IX - SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; INDEMNIFICATION 40
9.1 Indemnification by the Web Shareholders 40
---------------------------------------
9.2 Method of Asserting Claims 40
--------------------------
9.3 Third Party Claims 41
------------------
9.4 Survival 42
--------
9.5 Limitations 42
-----------
9.6 The Representative 43
------------------
9.7 Indemnification by the Parent 44
-----------------------------
ARTICLE X - AMENDMENT AND WAIVER 44
10.1 Amendment 44
---------
10.2 Extension; Waiver 44
-----------------
ARTICLE XI - GENERAL PROVISIONS 45
11.1 Notices 45
-------
11.2 Interpretation 45
--------------
11.3 Counterparts 46
------------
11.4 Entire Agreement; Assignment 46
----------------------------
11.5 Severability 46
------------
11.6 Other Remedies 46
--------------
11.7 Governing Law 46
-------------
11.8 Rules of Construction 47
---------------------
ARTICLE XII - DEFINITIONS 47
12.1 Definitions 47
-----------
<PAGE>
<PAGE>
SCHEDULES
Schedule 2.1 Jurisdictions of Incorporation and Qualification
Schedule 2.2 Capitalization
Schedule 2.5 Governmental Approvals
Schedule 2.6 No Violations
Schedule 2.7 Litigation
Schedule 2.9 Absence of Certain Changes or Events
Schedule 2.13 Contracts
Schedule 2.14 Employee Benefit Plans
Schedule 2.15 Taxes
Schedule 2.16 Liabilities
Schedule 2.17 Environmental Matters
Schedule 2.18 Intellectual Property
Schedule 2.19(b) Real Estate - Leased
Schedule 2.20 Corporate Records
Schedule 2.22 No Adverse Actions
Schedule 2.23 Labor Matters
Schedule 2.27 Year 2000 Compliance
Schedule 3.1 Parent Jurisdictions of Incorporation and
Qualification
Schedule 3.2 Parent Securities Filings
Schedule 3.3 Parent Subsidiaries
Schedule 3.7(b) Parent Litigation
Schedule 3.8 Parent Liabilities
Schedule 3.9 Absence of Certain Changes or Events
Schedule 3.13 Parent Contracts
Schedule 6.6(b)(i) Web Securities Issuances, Etc.
Schedule 6.6(b)(ii) Parent Securities Issuances, Etc.
<PAGE>
BIG STUFF AGREEMENT
This ACQUISITION AGREEMENT (the "AGREEMENT") is made and entered
into as of this 3rd day of June, 1999, by and among Advanced
Communications Group, Inc., a Delaware corporation ("PARENT") and ACG
Acquisition VII Corp., a Delaware corporation and a wholly-owned
subsidiary of Parent ("ACQUISITION SUBSIDIARY"), on the one hand and Big
Stuff, Inc., a Texas corporation ("BIG STUFF"), Richard O'Neal, a
resident of the State of Texas ("O'NEAL"), and Richard L. Reid, a
resident of the State of Texas ("REID") (O'Neal and Reid are together
referred to herein as the "BIG STUFF SHAREHOLDERS"), on the other.
RECITALS
A. Parent desires to acquire, and Big Stuff and the Big Stuff
Shareholders desire Parent to acquire, all of the outstanding common
stock of Big Stuff, on the terms and subject to the conditions set forth
in this Agreement.
B. In furtherance of such acquisition, the respective Boards of
Directors of Parent, Acquisition Subsidiary and Big Stuff have approved
the merger (the "MERGER") of Acquisition Subsidiary with and into Big
Stuff in accordance with the laws of the States of Texas and Delaware,
all on the terms and conditions set forth in this Agreement.
C. The Boards of Directors of each of Big Stuff, Acquisition
Subsidiary and Parent believe it is in the best interests of each
company and their respective stockholders and the Board of Directors of
Parent has directed or will direct that the Agreement be submitted to
the shareholders of Parent with the recommendation that the Agreement,
including, but not limited to, the issuance of shares of Parent Common
Stock pursuant to this Agreement, be approved by the Parent's
stockholders and the Boards of Directors of Big Stuff and Acquisition
Subsidiary have directed or will direct that the Merger be submitted to
their respective shareholders in accordance with the Corporation Laws.
D. The Big Stuff Shareholders own all outstanding shares of Big
Stuff Common Stock, believe that the Merger and the transactions
contemplated by this Agreement are in their best interests and desire to
enter into this Agreement.
E. The parties intend that the Closing will occur prior to or
concurrently with (i) the closing of the acquisition by Parent or a
direct or indirect subsidiary of Parent of all of the outstanding
capital stock of YPtel Corporation, a corporation incorporated under the
laws of Canada (the "COMPANY") pursuant to that certain Acquisition
Agreement, a form of which has been provided by Parent to Big Stuff (the
"COMPANY ACQUISITION AGREEMENT"), dated as of June 3, 1999, among the
Parent, the Company, the shareholders of the Company (the "COMPANY
SHAREHOLDERS"), the J.L.R. Family Trust, the Paisley Family Trust,
Edward Truant, Douglas G. McIntyre, Imperial Capital Limited, a
corporation organized under the laws of the Province of Ontario ("ICL"),
Cold Trust, Global Investment Trust, Freezer Trust, Storage Trust,
Directory Trust and Publisher Trust; (ii) the closing of the acquisition
by Parent or a subsidiary of Parent of all of the outstanding capital
stock of Web YP Inc. ("WEB") (Big Stuff and Web are sometimes
collectively referred to as "WORLDPAGES") whether by merger, exchange or
otherwise; (iii) the
<PAGE>
<PAGE>
pay-off of the promissory notes (collectively, the "GREAT WESTERN
NOTES") in the aggregate original principal amount of Fifteen Million
Dollars ($15,000,000) (plus accrued but unpaid interest at the time of
pay-off) from the Company to O'Neal and certain other former
shareholders of Great Western Directories, Inc. (collectively, the
"GREAT WESTERN SHAREHOLDERS") by the issuance of Parent Common Stock to
the Great Western Shareholders; and (iv) the satisfaction of the other
conditions to closing set forth in this Agreement, the Company
Acquisition Agreement and the WebYP Acquisition Agreement.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
ARTICLE I - TERMS OF THE MERGER
1.1 The Merger. Upon the terms and subject to the
----------
conditions of this Agreement, the Merger shall be consummated in accordance
with the Texas General Corporation Law (the "TEXAS CORPORATION LAW") and
the Delaware General Corporation Law (together with the Texas Corporation
Law, the "CORPORATION LAWS"). At the Effective Time, upon the terms and
subject to the conditions of this Agreement, Acquisition Subsidiary shall
be merged with and into Big Stuff in accordance with the Corporation Laws
and the separate existence of Acquisition Subsidiary shall thereupon cease,
and Big Stuff, as the surviving corporation in the Merger (the "SURVIVING
CORPORATION"), shall continue its corporate existence under the laws of the
State of Texas as a subsidiary of Parent and under the corporate name "Big
Stuff, Inc." The Certificate of Incorporation of Big Stuff shall be the
certificate of incorporation of the Surviving Corporation. The parties
shall prepare and execute a certificate of merger in a form to be agreed to
by the parties hereto, acting reasonably (the "CERTIFICATE OF MERGER"), in
order to comply in all respects with the requirements of the Corporation
Laws and with the provisions of this Agreement.
1.2 Effective Time. The Merger shall become effective
--------------
as of the time of the filing of the Certificate of Merger with the
Secretary of State of the State of Texas and the Secretary of State of
the State of Delaware in accordance with the applicable provisions of
the Corporation Laws or at such later time as may be specified in the
Certificate of Merger. The Certificate of Merger shall be filed, and
the closing of the Merger (the "CLOSING") shall occur, as soon as
practicable after all of the conditions set forth in this Agreement have
been satisfied or waived by the party or parties entitled to the benefit
of the same. The Closing shall occur at the offices of Blackwell
Sanders Peper Martin LLP, 720 Olive Street, Suite 2400, St. Louis,
Missouri 63101, unless another place or time is agreed to in writing by
Parent and Big Stuff. The time when the Merger shall become effective
is herein referred to as the "EFFECTIVE TIME" and the date on which the
Effective Time occurs is herein referred to as the "CLOSING DATE."
1.3 Merger Consideration. Subject to the provisions of
--------------------
this Agreement and any applicable backup or other withholding requirements,
each of the issued and outstanding shares ("BIG STUFF SHARES") of common
stock, no par value per share, of Big Stuff ("BIG STUFF COMMON STOCK") as
of the Effective Time shall be converted into the right to receive, and
there shall be paid and issued as hereinafter provided, in exchange for the
Big Stuff Shares, 415.584 shares (the "EXCHANGE RATIO") of Parent Common
Stock, par value $.0001 per share ("PARENT COMMON STOCK"), plus cash in
lieu of any fractional share as hereinafter provided (the "MERGER
CONSIDERATION").
2
<PAGE>
<PAGE>
No fractional shares of Parent Common Stock shall be issued
pursuant to the Merger nor will any fractional share interest involved
entitle the holder thereof to vote, to receive dividends or to exercise any
other rights as a shareholder of Parent. In lieu thereof, any Person who
would otherwise be entitled to a fractional share of Parent Common Stock
pursuant to the provisions hereof shall receive an amount in cash equal to
the value of such fractional share. The value of such fractional share for
purposes hereof shall be the product of such fraction multiplied by Five
and 50/100 Dollars ($5.50).
Each share of Big Stuff Common Stock held in the treasury of Big
Stuff or by a wholly-owned subsidiary of Big Stuff shall be cancelled as of
the Effective Time and no Merger Consideration shall be payable with
respect thereto. From and after the Effective Time, there shall be no
further transfers on the stock transfer books of Web of any of the Web
Shares outstanding prior to the Effective Time.
Subject to the provisions of this Agreement, at the Effective
Time, all the shares of Acquisition Subsidiary common stock outstanding
immediately prior to the Merger shall be converted, by virtue of the Merger
and without any action on the part of the holder thereof, into one share of
the common stock of the Surviving Corporation (the "SURVIVING CORPORATION
COMMON STOCK"), which one share of the Surviving Corporation Common Stock
shall constitute all of the issued and outstanding capital stock of the
Surviving Corporation.
1.4 Stockholders' Rights upon Merger. Upon consummation
--------------------------------
of the Merger, the Certificates shall cease to represent any rights with
respect thereto, and, subject to applicable Law (as hereinafter defined)
and this Agreement, the Certificates shall only represent the right to
receive the Merger Consideration including the amount of cash, if any,
payable in lieu of fractional shares of Parent Common Stock into which the
Big Stuff Shares have been converted pursuant to this Agreement.
1.5 Surrender and Exchange of Shares. At the Effective
--------------------------------
Time, each holder of a Big Stuff Share shall surrender and deliver the
Certificates and transmittal letter (the "LETTER OF TRANSMITTAL") to
Continental Stock Transfer and Trust Company. Upon such surrender and
delivery, the holder shall receive a certificate representing the number of
whole shares of Parent Common Stock into which such holder's Big Stuff
Shares have been converted pursuant to this Agreement plus the amount of
cash payable in lieu of any fractional share. Until so surrendered and
exchanged, each outstanding Certificate after the Effective Time shall be
deemed for all purposes to evidence the right to receive that number of
whole shares of Parent Common Stock into which the Big Stuff Shares have
been converted pursuant to this Agreement, plus the amount of cash payable
in lieu of any fractional share; provided, however, that no dividends
-------- -------
or other distributions, if any, in respect of the shares of Parent Common
Stock, declared after the Effective Time and payable to holders of record
after the Effective Time, shall be paid to the holders of any unsurrendered
Certificates until such Certificates and Letters of Transmittal are
surrendered and delivered as provided herein. Subject to applicable Law,
after the surrender and exchange of the Certificates, the record holders
thereof will be entitled to receive any such dividends or other
distributions without interest thereon, which theretofore have become
payable with respect to the number of shares of Parent Common Stock for
which such Certificates were exchangeable. Holders of any unsurrendered
Certificates shall not be entitled to vote Parent Common Stock until such
Certificates are exchanged pursuant to this Agreement.
1.6 Directors. Immediately following the Closing Date,
---------
the Board of Directors of the
3
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<PAGE>
Parent shall be restructured to be composed of eight (8) members as
follows: (i) one director chosen by Parent and one director chosen by ICL
to serve three (3) year terms; (ii) one director chosen by Parent and one
director chosen by ICL and one director to be agreed to by Parent, ICL and
WorldPages to serve two (2) year terms; and (iii) one director chosen by
Parent and one director chosen by ICL and one director to be agreed to by
Parent, ICL and WorldPages to serve one (1) year terms. The directors to
be nominated by the Parent are currently anticipated to be Richard O'Neal,
Robert Benton and Marvin Moses. The directors to be nominated by ICL are
currently anticipated to be Wilmot Matthews, George Anderson and Robert
Flynn. The parties hereto expressly acknowledge and agree that this
Section 1.6 is not intended to, and does not, except with regard to the
- -----------
initial Board of Directors of Parent referenced in this Section 1.6,
-----------
impose any requirement that the Board of Directors of Parent be comprised
of the individuals listed in this Section 1.6 or that any Person has a
-----------
right to designate a certain individual or a certain number of individuals
as nominees to the Board of Directors of Parent.
1.7 Bylaws. At and after the Effective Time, the Bylaws
------
of Acquisition Subsidiary in effect at the Effective Time shall be the
Bylaws of the Surviving Corporation (subject to any subsequent amendment).
1.8 Other Effects of Merger. The Merger shall have all
-----------------------
further effects as specified in the applicable provisions of the
Corporation Laws.
1.9 Tax-Free Reorganization. The parties intend that the
-----------------------
Merger qualify as a tax-free reorganization pursuant to Section 368 of the
Code. The parties hereto hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368(a) of
the Treasury regulations.
1.10 Convertible Note. At any time between the date hereof
----------------
and Closing, O'Neal and Reid may continue to lend up to Ten Million Dollars
($10,000,000) to Web or Big Stuff pursuant to a "CONVERTIBLE NOTE",
described below. The Convertible Note includes amounts lent by O'Neal and
Reid to Web or Big Stuff since January 1, 1999. The Convertible Note will
provide additional working capital required by Web or Big Stuff (i) to
consummate the contemplated contractual arrangements with Excite and to
fulfill its obligations thereunder, (ii) to pay for extraordinary capital
expenditures approved in advance by a disinterested majority of the Board
of Directors of the Parent, including consummation of contractual
arrangements with other entities similar to those with Excite, or (iii) for
working capital purposes, including for ordinary capital expenditures. The
conversion feature of the Convertible Note shall provide that the principal
amount of the Convertible Note, but not the accrued but unpaid interest,
shall be convertible into Parent common stock at any time on or after
Closing at a conversion price of $5.50 per share. If the acquisition of
WorldPages contemplated by this Agreement and the Web Acquisition Agreement
shall not be consummated, the conversion feature shall not be operable, and
Parent shall have no obligations under the Convertible Note. The parties
agree that notwithstanding anything herein or in the Web Acquisition
Agreement to the contrary, there shall be no "doubling" of the amount which
may be lent by O'Neal and Reid to Web or Big Stuff and that an aggregate
maximum amount of $10,000,000 may be lent by O'Neal and Reid to Web and Big
Stuff, collectively.
1.11 Due Diligence Review.
--------------------
(a) At the time of execution of this Agreement,
neither Parent nor Big Stuff
4
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<PAGE>
has received from the other any Disclosure Schedules which are to become
part of this Agreement and neither Parent nor Big Stuff has conducted its
due diligence investigation of the other. Within twenty-one (21) days
after the date of this Agreement (the "SCHEDULE PERIOD"), each of Parent
and Big Stuff shall deliver to the other any Disclosure Schedules which it
is required or may desire to provide hereunder. Upon execution hereof,
each of Parent and Big Stuff shall be entitled forthwith to commence its
due diligence review of the books, records and operations of the other
(including the Parent Securities Filings), provided, however, that any
-------- -------
review conducted by Parent or Big Stuff pursuant to the provisions of this
Section 1.11 shall be completed within thirty (30) days from the date of
- ------------
this Agreement or within nine (9) days of receipt of all Disclosure
Schedules from the other party, whichever shall be the longer period. If
as a result of such review, either Parent or Big Stuff finds in good faith
that it is not in its economic best interest to proceed with the Closing as
contemplated herein, it may, at or prior to the expiration of said due
diligence review period (as extended by failure of a party to provide its
Disclosure Schedules on a timely basis), terminate this Agreement without
penalty by giving the other party written notice of such termination in the
manner provided in Section 11.1. Nothing in this Section 1.11 shall be
------------ ------------
construed to limit the right of any party to continue its due diligence
review through the Closing Date.
(b) If either party decides to terminate the Agreement
pursuant to the provisions of Section 1.11(a) hereof, neither party shall
---------------
have any further obligation to the other under this Agreement; provided,
--------
however, that the terminating party shall be liable to the other party
- -------
for the fee set forth in Section 8.2(b) or 8.2(c), as applicable, if such
------------------------
terminating party subsequently enters into a Parent Triggering Transaction
or a Big Stuff Triggering Transaction, as the case may be, that would
require the payment of the fee required by Section 8.2.
-----------
1.12 Additional Actions. If, at any time after the Effective
------------------
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm or record or otherwise
in the Surviving Corporation its right, title or interest in, to or under
any of the rights, properties or assets of Acquisition Subsidiary or
Big Stuff or otherwise to carry out this Agreement, the officers and
directors of the Surviving Corporation shall be authorized to execute and
deliver, in the name and on behalf of Acquisition Subsidiary or Big Stuff,
all such deeds, bills of sale, assignments and assurances and to take and
do, in the name and on behalf of Acquisition Subsidiary or Big Stuff, all
such other actions and things as may be necessary or desirable to vest,
perfect or confirm any and all right, title and interest in, to and under
such rights, properties or assets in the Surviving Corporation or otherwise
to carry out this Agreement.
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF BIG STUFF AND THE
BIG STUFF SHAREHOLDERS
Big Stuff on behalf of itself and the Big Stuff Shareholders,
jointly and severally represent and warrant to and covenant with Parent as
follows:
2.1 Organization and Good Standing. Big Stuff is a corporation
------------------------------
duly organized and validly existing and in good standing under the laws of
the jurisdiction of its incorporation or organization and has all requisite
corporate power and authority to own, lease and operate its properties and
to carry on its business as now being conducted. Big Stuff is duly
qualified or licensed and in good standing to do business in each
jurisdiction in which the character of the property owned, leased or
operated by it or the nature of the business conducted by it makes such
5
<PAGE>
<PAGE>
qualification or licensing necessary, except where the failure to be so
duly qualified or licensed and in good standing would not have a Big Stuff
Material Adverse Effect. Schedule 2.1 to be provided during the Schedule
------------
Period sets forth a complete and accurate list of the jurisdictions of
incorporation or organization and qualification or license of Big Stuff.
Big Stuff has heretofore delivered, or will deliver during the Schedule
Period, to Parent accurate and complete copies of the Certificates or
Articles of Incorporation and Bylaws, or equivalent governing instruments,
as currently in effect, of Big Stuff.
2.2 Capitalization. As of the date hereof, the authorized
--------------
capital stock of Big Stuff (the "BIG STUFF STOCK") consists of 10,000
shares of common stock. As of the date hereof, (a) 3,500 shares of Big
Stuff Stock were issued and outstanding, and (b) no options or warrants to
purchase any shares of Big Stuff capital stock were issued or outstanding.
No other capital stock of Big Stuff is issued or outstanding. All issued
and outstanding shares of the Big Stuff Stock are duly authorized, validly
issued, fully paid and non-assessable and were issued free of preemptive
rights and in compliance with applicable corporate and securities Laws.
Except as set forth on Schedule 2.2 to be provided during the Schedule
------------
Period, as of the date of this Agreement there are no outstanding rights,
reservations of shares, subscriptions, warrants, puts, calls, unsatisfied
preemptive rights, options or other agreements of any kind relating to any
of the capital stock or any other security of Big Stuff, and there is no
authorized or outstanding security of any kind convertible into or
exchangeable for any such capital stock or other security. There are no
restrictions upon the transfer of or otherwise pertaining to the securities
(including, but not limited to, the ability to pay dividends thereon) or
retained earnings of Big Stuff or the ownership thereof other than those,
if any, to be described on Schedule 2.2 and provided during the Schedule
------------
Period or those imposed generally by the Securities Act, the Securities
Exchange Act, applicable state or foreign securities Laws or applicable
corporate Law.
2.3 Subsidiaries. Big Stuff does not and will not, from the
------------
date of this Agreement until the Closing Date, hold, directly or
indirectly, any capital stock or other interest in any Person.
2.4 Authorization; Binding Agreement. Big Stuff and the Big
--------------------------------
Stuff Shareholders have all requisite power and authority to execute and
deliver this Agreement and the Big Stuff Transaction Agreements and to
consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the other agreements and
documents referred to herein and to be executed in connection herewith
to which Big Stuff or any Big Stuff Shareholder is or will be a party or
a signatory (the "BIG STUFF TRANSACTION AGREEMENTS") and the
consummation of the transactions contemplated hereby and thereby
including, but not limited to the Merger, have been or will be duly and
validly authorized by Big Stuff's Board of Directors and no other
corporate or other proceedings on the part of Big Stuff or any Big Stuff
Shareholder are necessary to authorize the execution and delivery of
this Agreement and the Big Stuff Transaction Agreements or to consummate
the transactions contemplated hereby or thereby (other than the adoption
of this Agreement by the Big Stuff Shareholders in accordance with the
Texas Corporation Law and the Articles of Incorporation and Bylaws of
Big Stuff). This Agreement has been duly and validly executed and
delivered by Big Stuff and the Big Stuff Shareholders and constitutes,
and upon execution and delivery thereof as contemplated by this
Agreement, the Big Stuff Transaction Agreements will constitute, the
legal, valid and binding agreements of Big Stuff and the Big Stuff
Shareholders, enforceable against Big Stuff and the Big Stuff
Shareholders in accordance with its and their respective terms, except
to the extent that enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws affecting
the enforcement of creditors' rights generally and by principles of
equity regarding the availability of remedies
6
<PAGE>
<PAGE>
(collectively, the "ENFORCEABILITY EXCEPTIONS").
2.5 Governmental Approvals. No consent, approval, waiver or
----------------------
authorization of, notice to or declaration or filing with ("CONSENT")
any Governmental Authority on the part of Big Stuff or any of the Big
Stuff Shareholders is required in connection with the execution or
delivery by Big Stuff or the Big Stuff Shareholders of this Agreement
and the Big Stuff Transaction Agreements or the consummation by Big
Stuff or the Big Stuff Shareholders of the transactions contemplated
hereby or thereby other than (i) the filing of the Certificate of Merger
with the Secretary of State of the States of Texas and Delaware; (ii)
filings with the SEC and state securities laws administrators, (iii)
Consents from or with Governmental Authorities set forth on Schedule
--------
2.5 to be provided during the Schedule Period, (iv) filings under the
- ---
HSR Act, and (v) those Consents that, if they were not obtained or made,
do not or would not have a Big Stuff Material Adverse Effect.
2.6 No Violations. The execution and delivery of this
-------------
Agreement and the Big Stuff Transaction Agreements, the consummation of
the transactions contemplated hereby and thereby and compliance by Big
Stuff and the Big Stuff Shareholders with any of the provisions hereof
or thereof will not (i) conflict with or result in any breach of any
provision of the Certificate and/or Articles of Incorporation or Bylaws
or other governing instruments of Big Stuff, (ii) except as set forth on
Schedule 2.6 to be provided during the Schedule Period, require any
- ------------
Consent under or result in a violation or breach of, or constitute (with
or without due notice or lapse of time or both) a default (or give rise
to any right of termination, cancellation or acceleration or augment the
performance required) under any of the terms, conditions or provisions
of any Big Stuff Material Contract or other obligation to which Big
Stuff or any Big Stuff Shareholder is a party or by which any of them or
any of their properties or assets may be bound, (iii) result in the
creation or imposition of any lien or encumbrance of any kind upon any
of the assets of Big Stuff or (iv) subject to obtaining the Consents
from Governmental Authorities referred to in Section 2.5 above,
-----------
contravene any Law currently in effect to which Big Stuff or any Big
Stuff Shareholder or its or any of its respective assets or properties
are subject, except in the case of clauses (ii), (iii) and (iv) above,
for any deviations from the foregoing which do not or would not have a
Big Stuff Material Adverse Effect.
2.7 Litigation. Except as set forth in Schedule 2.7 to be
---------- ------------
provided during the Schedule Period, there is no action, cause of
action, claim, demand, suit, proceeding, citation, summons, subpoena,
inquiry or investigation of any nature, civil, criminal, regulatory or
otherwise, in law or in equity, by or before any court, tribunal,
arbitrator, mediator or other Governmental Authority ("LITIGATION")
pending or, to the knowledge of the Big Stuff Shareholders or Big Stuff,
threatened against Big Stuff or any officer, director, employee or agent
thereof, in his or her capacity as such, or as a fiduciary with respect
to any Benefit Plan of Big Stuff, or otherwise relating, in a manner
that could have a Big Stuff Material Adverse Effect, to Big Stuff or the
securities of Big Stuff, or any properties or rights of Big Stuff or
that could prevent or delay the consummation of the transactions
contemplated by this Agreement.
2.8 Big Stuff Financial Statements. The unaudited interim
------------------------------
financial statements of Big Stuff as of and for the fiscal year ended
December 31, 1998, and as of and for the three months ended March 31,
1999 (the "BIG STUFF FINANCIAL STATEMENTS") have been or will be, during
the Schedule Period, provided to Parent. Except as noted thereon, the
Big Stuff Financial Statements were or, as to those Big Stuff Financial
Statements provided or required to be provided subsequent to the date
hereof pursuant to this section, will be prepared in accordance with
generally accepted accounting principles applicable to the business of
Big Stuff consistently applied in accordance with
7
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<PAGE>
past accounting practices and fairly present (including, but not limited
to, the inclusion of all adjustments with respect to interim periods
which are necessary to present fairly the financial condition and assets
and liabilities or the results of operations of Big Stuff except as may
be indicated therein or in the notes thereto, subject to normal year-end
adjustment in the ordinary course with respect to certain items
immaterial in amount or effect and the exclusion of footnote disclosure
in interim Big Stuff Financial Statements) the financial condition and
assets and liabilities or the results of operations of Big Stuff as of
the dates and for the periods indicated. Except as reflected in the Big
Stuff Financial Statements, as of their respective dates, Big Stuff did
not have any debts, obligations, guaranties of obligations of others or
liabilities (contingent or otherwise) that would be required in
accordance with generally accepted accounting principles to be disclosed
in the Big Stuff Financial Statements. Any financial statements
prepared with respect to Big Stuff subsequent to the date hereof
promptly shall be provided to Parent and shall constitute Big Stuff
Financial Statements for purposes hereof.
2.9 Absence of Certain Changes or Events. Except as set forth
------------------------------------
in Schedule 2.9 to be provided during the Schedule Period, since March
------------
31, 1999, through the date of this Agreement, there has not been: (i)
any Event that could reasonably be expected to have a Big Stuff Material
Adverse Effect; (ii) any declaration, payment or setting aside for
payment of any dividend (except to Big Stuff Shareholders, but only if
the entire amount of such dividend is paid to Web as a capital
contribution) or other distribution or any redemption, purchase or other
acquisition of any shares of capital stock or securities of Big Stuff;
(iii) any return of any capital or other distribution of assets to
stockholders of Big Stuff (except to Big Stuff or a subsidiary wholly
owned by Big Stuff); (iv) other than in the ordinary course of business
any investment of a capital nature by Big Stuff by the purchase of any
property or assets except to the extent such investment is in the
ordinary course of business and is individually or in the aggregate, not
in excess of $75,000; (v) any acquisition (by merger, consolidation,
acquisition of stock or assets or otherwise) of any Person or business;
(vi) any sale, disposition, pledge, mortgage or other transfer of assets
or properties of Big Stuff other than in the ordinary course of business
consistent with past practice; (vii) any action or agreement or
undertaking by Big Stuff to take any action that, if taken or done on or
after the date hereof, would result in a breach of Section 6.6 below;
-----------
(viii) any employment, severance or consulting agreement entered into by
Big Stuff with any stockholder, officer, director, agent, employee or
consultant of Big Stuff or any amendment or modification to, or
termination of, any current employment, severance or consulting
agreement to which Big Stuff is a party or by which it is bound; (ix)
any forgiveness, cancellation, compromise, settlement, waiver or release
of any debts, claims, rights or Litigation, in each case in excess,
individually or in the aggregate, of $25,000; (x) any agreement,
authorization or commitment to take, whether in writing or otherwise,
any action which, if taken prior to the date hereof, would have made any
representation or warranty of Big Stuff in this Agreement untrue or
incorrect in any material respect; (xi) any failure by Big Stuff to
conduct its business in the ordinary course consistent with past
practice, it being understood, however, that Big Stuff has accelerated
and intensified its business activities since March 31, 1999.
2.10 Compliance with Laws. The business of Big Stuff has been
--------------------
operated in compliance with all Laws applicable thereto, except for any
instances of non-compliance which do not and would not have a Big Stuff
Material Adverse Effect.
2.11 Permits. (i) Big Stuff has all permits, certificates,
-------
licenses, approvals, and other authorizations required in connection
with the operation of its business (collectively, "BIG STUFF PERMITS"),
(ii) Big Stuff is not in violation of any Big Stuff Permit, and (iii) no
proceedings are pending or, to the knowledge of Big Stuff, threatened,
to revoke or limit any Big Stuff Permit,
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except, in the case of clause (i) or (ii) above, those the absence or
violation of which do not and would not have a Big Stuff Material
Adverse Effect.
2.12 Finders and Investment Bankers. Neither Big Stuff nor any
------------------------------
of its officers or directors has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated hereby.
2.13 Contracts. Except as set forth in Schedule 2.13 to be
--------- -------------
provided during the Schedule Period, Big Stuff is not a party or subject to
any material note, bond, mortgage, indenture, contract, lease, license,
agreement, understanding, instrument, bid or proposal ("BIG STUFF MATERIAL
CONTRACT"). For purposes of this Section 2.13, a note, bond, mortgage,
------------
indenture, contract, lease, license, agreement, understanding, instrument,
bid or proposal shall be considered a Big Stuff Material Contract (a) if it
is with an affiliate of Big Stuff, (b) if the financial obligation of Big
Stuff thereunder or, if applicable, to the assets or properties of Big
Stuff could exceed $25,000 after the Closing Date, or (c) if it provides
for any exclusivity or non-competition restrictions applicable to Big
Stuff. Big Stuff has made available, or will make available during the
Schedule Period, to Parent true and accurate copies of the Big Stuff
Material Contracts. All such Big Stuff Material Contracts are valid and
binding and are in full force and effect and enforceable in accordance with
their respective terms, subject to the Enforceability Exceptions. Any and
all transactions between or involving Big Stuff and an affiliate thereof
were entered into in the ordinary course of business and are upon fair and
reasonable terms not materially less favorable than Big Stuff could obtain
or become entitled to in an arm's-length transaction with a Person that is
not an affiliate. Except as set forth in Schedule 2.5 to be provided
------------
during the Schedule Period, (i) no Consent of any Person is needed in order
that each such Big Stuff Material Contract shall continue in full force and
effect in accordance with its terms without penalty, acceleration or rights
of early termination by reason of the consummation of the transactions
contemplated by this Agreement, and (ii) Big Stuff is not in material
violation or breach of or default under any such Big Stuff Material
Contract, nor to Big Stuff's knowledge is any other party to any such Big
Stuff Material Contract in material violation or breach of or default under
any such Big Stuff Material Contract.
2.14 Employee Benefit Plans. Except as set forth in Schedule 2.14
----------------------- -------------
to be provided during the Schedule Period, there are no Benefit Plans
(as defined below) maintained or contributed to by Big Stuff under which
Big Stuff could incur any liability. A "BENEFIT PLAN" shall mean (i) an
employee benefit plan as defined in Section 3(3) of the ERISA, even if,
because of some other provision of ERISA, such plan is not subject to any
or all of ERISA's provisions, and (ii) whether or not described in the
preceding clause, (a) any pension, profit sharing, stock bonus, deferred or
supplemental compensation, retirement, thrift, stock purchase or stock
option plan, or any other compensation, welfare, insurance, medical,
hospitalization, fringe benefit or retirement plan, program, policy, course
of conduct, understanding or arrangement of any kind whatsoever, whether
formal or informal, oral or written, providing for benefits for or the
welfare of any or all of the current or former employees or agents of the
employer or their beneficiaries or dependents, (b) a multi-employer plan as
defined in Section 3(37) of ERISA (a "MULTI-EMPLOYER PLAN") or in any other
applicable Law, or (c) a multiple employer plan as defined in Section 413
of the Code or in any other applicable Law.
With respect to each Benefit Plan (where applicable): Web has made,
or will make within the Schedule Period, available to Parent complete and
accurate copies of (i) all plan and trust texts and agreements, insurance
contracts and other funding arrangements; (ii) annual reports on the Form
5500 series for the last three (3) years; (iii) financial statements and/or
annual and periodic
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accountings of plan assets for the last three (3) years; (iv) the most
recent determination letter received from the IRS; (v) actuarial valuations
for the last three (3) years; and (vi) the most recent summary plan
description as defined in ERISA.
No Big Stuff Benefit Plan is a defined benefit pension plan subject
to Title IV of ERISA or Section 412 of the Code. Each of the Big Stuff
Benefit Plans has been maintained in compliance with its terms and all
applicable Law, except where the failure to do so would not result in a Big
Stuff Material Adverse Effect or a Surviving Corporation Material Adverse
Effect. Big Stuff does not contribute to, and does not have any
outstanding liability with respect to, any Multi-employer Plan.
Except as set forth in Schedule 2.14 to be provided during the
-------------
Schedule Period, the consummation of the Merger will not, either alone or
in conjunction with another Event: (i) entitle any individual to severance
pay, or (ii) accelerate the time of payment or vesting of benefits or
increase the amount of compensation due to any individual.
2.15 Taxes and Returns.
-----------------
(a) Except as disclosed in Schedule 2.15 to be provided
-------------
during the Schedule Period, Big Stuff has timely filed, or caused to be
timely filed, all federal, state, local and foreign income, gross receipts,
sales, use, property, production, payroll, franchise, withholding,
employment, social security, license, excise, transfer, gains, and other
tax returns or reports required to be filed by it, and has paid, collected
or withheld, or caused to be paid, collected or withheld, all taxes and
governmental charges, assessments and contributions of any nature
whatsoever including, but not limited to, any related penalties, interest
and liabilities (any of the foregoing being referred to herein as a "TAX"),
required to be paid, collected or withheld, other than such Taxes for which
adequate reserves in the Big Stuff Financial Statements have been
established or which are being contested in good faith and have been
disclosed in writing to Parent prior to the date of this Agreement. Except
as set forth in Schedule 2.15 to be provided during the Schedule Period,
-------------
there are no claims or assessments pending against Big Stuff for any
alleged deficiency in any Tax, and Big Stuff does not know of any
threatened Tax claims or assessments against Big Stuff (other than those
for which adequate reserves in the Big Stuff Financial Statements have been
established or which are being contested in good faith and have been
disclosed in writing to Parent prior to the date of this Agreement).
Except as set forth in Schedule 2.15 to be provided during the Schedule
-------------
Period, Big Stuff has not made an election under Section 338 of the Code
and has not taken any action that would result in any Tax liability of Big
Stuff as a result of a deemed election within the meaning of Section 338 of
the Code. Except as set forth in Schedule 2.15 to be provided during the
-------------
Schedule Period, Big Stuff does not have any waivers or extensions of any
applicable statute of limitations to assess any Taxes. Except as set forth
in Schedule 2.15 to be provided during the Schedule Period, there are no
-------------
outstanding requests by Big Stuff for any extension of time within which to
file any return or within which to pay any Taxes shown to be due on any
return. Big Stuff (i) has elected to be treated as, and from the date of
such election until the date hereof has met, and currently meets, the
eligibility requirements for treatment as, an "S" corporation under the
Code; and (ii) as of the date hereof, has no subsidiaries for Tax purposes.
(b) A listing of all Tax sharing agreements or similar
arrangements with respect to or involving Big Stuff will be set forth in
Schedule 2.15 to be provided during the Schedule Period.
- -------------
10
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(c) Except as set forth in Schedule 2.15 to be provided
-------------
during the Schedule Period, Big Stuff has not made or become obligated to
make, or will, as a result of the transactions contemplated by this
Agreement, make or become obligated to make, any "excess parachute payment"
as defined in Section 280G of the Code (without regard to subsection (b)(4)
thereof).
(d) Big Stuff has disclosed on its federal income tax
returns all positions taken therein that could give rise to a substantial
understatement of federal income tax liability within the meaning of
Section 6662(d) of the Code.
(e) There are no liens for Taxes on the assets of Big Stuff
except for statutory liens for current Taxes not yet due and payable.
(f) All elections with respect to Taxes affecting Big Stuff
will be set forth in Schedule 2.15 to be provided during the Schedule
-------------
Period or, with respect to elections made on or before December 31, 1996,
are reflected in the Tax returns of Big Stuff filed and provided to Parent
prior to the date of this Agreement, or to be provided to Parent during the
Schedule Period. Big Stuff has not: (i) made and will not make a deemed
dividend election under Treas. Reg. Section 1.1502-32(f)(2) or a consent
dividend election under Section 565 of the Code; (ii) consented at any time
under Section 341(f)(l) of the Code to have the provisions of Section
341(f)(2) of the Code apply to any disposition of the assets of Big Stuff;
(iii) agreed, and is not required, to make any adjustment under Section
481(a) of the Code by reason of a change in accounting method or otherwise;
(iv) made an express election, and is not required, to treat any asset of
Big Stuff as owned by another Person for federal income Tax purposes or as
tax-exempt bond financed property or tax-exempt use property within the
meaning of Section 168 of the Code; (v) made any of the foregoing elections
and is not required to apply any of the foregoing rules under any
comparable state, foreign or local income Tax provision.
(g) Except as set forth in Schedule 2.15 to be provided
-------------
during the Schedule Period, Big Stuff is not a partner or member in any
joint venture, partnership, limited liability company or other arrangement
or contract that is or could be treated as a partnership for federal income
Tax purposes.
(h) Except as set forth in Schedule 2.15 to be provided
-------------
during the Schedule Period, big Stuff is not a party to or otherwise
subject to any arrangement having the effect of or giving rise to the
recognition of a deduction or loss before the Closing Date, and a
corresponding recognition of taxable income or gain after the Closing Date,
or any other arrangement that would have the effect of or give rise to the
recognition of taxable income or gain by Big Stuff after the Closing Date
without the receipt of or entitlement to a corresponding amount of cash.
2.16 Liabilities. From March 31, 1999, through the date of this
-----------
Agreement, except as expressly disclosed in Schedule 2.16 to be provided
-------------
during the Schedule Period or in the Big Stuff Financial Statements, Big
Stuff does not have any direct or indirect indebtedness, liability, claim,
loss, damage, deficiency, obligation or responsibility, fixed or unfixed,
choate or inchoate, liquidated or unliquidated, secured or unsecured,
accrued, absolute, contingent or otherwise, whether or not of a kind
required by generally accepted accounting principles to be set forth in a
financial statement, other than those incurred in the ordinary course of
business or in an amount not in excess of $25,000 individually or $100,000
in the aggregate. Except as set forth on Schedule 2.16 to be provided
-------------
during the Schedule Period or in the Big Stuff Financial Statements, as of
the date of this Agreement, Big Stuff does not have any (i) obligations in
respect of borrowed money,
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(ii) obligations evidenced by bonds, debentures, notes or other similar
instruments, (iii) obligations which would be required by generally
accepted accounting principles to be classified as "capital leases," (iv)
obligations to pay the deferred purchase price of property or services,
except trade accounts payable arising in the ordinary course of business
and payable not more than twelve (12) months from the date of incurrence,
and (v) any guaranties of any obligations of any other Person.
2.17 Environmental Matters. As of the date of this Agreement,
---------------------
(i) except where the failure to so comply will not have a Big Stuff
Material Adverse Effect, Big Stuff is in compliance with all applicable
Environmental Laws (as hereinafter defined), (ii) there is no civil,
criminal or administrative judgment, action, suit, demand, claim, hearing,
notice of violation, investigation, proceeding, notice or demand letter
pending or, to the knowledge of Big Stuff, threatened against Big Stuff or
any of its properties pursuant to Environmental Laws, and (iii) except as
set forth on Schedule 2.17 to be provided during the Schedule Period,
-------------
there are no past or present Events which reasonably may be expected to
prevent compliance with, or which have given rise to or which reasonably
may be expected to give rise to liability on the part of Big Stuff under
Environmental Laws, except for those which would not reasonably be expected
to give rise to a Big Stuff Material Adverse Effect. As used herein the
term "ENVIRONMENTAL LAWS" shall mean Laws relating to pollution, waste
control, the generation, presence or disposal of asbestos, hazardous or
toxic wastes or substances, the protection of the environment,
environmental activity or public health and safety.
2.18 Intellectual Property; Fictitious Names. For purposes of
---------------------------------------
this Agreement, "INTELLECTUAL PROPERTY" shall mean all patents, trademarks,
service marks, trade names, copyrights, franchises and similar rights of or
used by Big Stuff, all applications for any of the foregoing and all
permits, grants and licenses or other rights running to or from Big Stuff
relating to any of the foregoing. Except as set forth on Schedule 2.18
-------------
to be provided during the Schedule Period, (i) Big Stuff owns, or is
licensed to, or otherwise has, the full and exclusive right to use all
Intellectual Property currently used or proposed to be used in its
business, (ii) the rights of Big Stuff in the Intellectual Property are,
subject to the rights of any licensor thereof, free and clear of any liens
or other encumbrances and restrictions and Big Stuff has not received, as
of the date of this Agreement, notice of any charge or claim of any Person
relating to such Intellectual Property or any process or confidential
information of Big Stuff ("IP CLAIM NOTICE") and does not know of any basis
for any such charge or claim, and (iii) Big Stuff and its corporate
predecessors, if any, have not conducted business at any time during the
period beginning five (5) years prior to the date hereof under any
corporate, trade or fictitious names other than their current corporate
names. Big Stuff shall promptly notify Parent of any IP Claim Notice
received by Big Stuff after the date of this Agreement.
2.19 Real Estate.
-----------
(a) Big Stuff owns no real property.
(b) Schedule 2.19(b) sets forth, or will set forth when
----------------
provided during the Schedule Period, a true, correct and complete schedule
as of the date of this Agreement of all material leases, subleases,
easements, rights-of-way, licenses or other agreements under which Big
Stuff uses or occupies, or has the right to use or occupy, now or in the
future, any real property or improvements thereon (the "BIG STUFF REAL
PROPERTY LEASES"). Except for the matters listed on said Schedule 2.19(b)
----------------
to be provided during the Schedule Period, Big Stuff holds the leasehold
estate under or other interest in each Big Stuff Real Property Lease free
and clear of all liens, encumbrances and other rights of occupancy other
than statutory landlords or mechanics' liens
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which have not been executed upon.
2.20 Corporate Records. The corporate record books of or
-----------------
relating to Big Stuff made available, or to be made available during the
Schedule Period, to Parent by Big Stuff contain accurate and complete
records of (i) all corporate actions of the stockholders and directors (and
committees thereof) of Big Stuff, (ii) the Certificate and/or Articles of
Incorporation, Bylaws and/or other governing instruments, as amended, of
Big Stuff, and (iii) the issuance and transfer of stock of Big Stuff.
Except as set forth on Schedule 2.20 to be provided during the Schedule
-------------
Period, Big Stuff does not have any of its material records or information
recorded, stored, maintained or held off the premises of Big Stuff.
2.21 Title to and Condition of Personal Property. Big Stuff has
-------------------------------------------
good and marketable title to, or a valid leasehold interest in, all
material items of any personal property reflected in the Big Stuff
Financial Statements dated March 31, 1999, or currently used in the
operation of their business, and such property or leasehold interests are
free and clear of all liens, claims, charges, security interests, options,
or other title defects or encumbrances, except for property disposed of in
the ordinary course since the date thereof consistent with the provisions
of Section 2.9 above, and such exceptions to title and liens, claims,
-----------
charges, security interests, options, title defects or encumbrances which
do not and would not have a Big Stuff Material Adverse Effect. As of the
date of this Agreement, all such personal property is in good operating
condition and repair (ordinary wear and tear excepted), is suitable for the
use to which the same is customarily put by Big Stuff, is free from
material defects and is of a quality and quantity presently usable in the
ordinary course of the operation of the business of Big Stuff, except where
such failure would not have a Big Stuff Material Adverse Effect.
2.22 No Adverse Actions. Except as set forth on Schedule 2.22
------------------ -------------
to be provided during the Schedule Period, there is no existing, pending
or, to the knowledge of Big Stuff, threatened termination, cancellation,
limitation, modification or change in the business relationship of Big
Stuff, with any supplier, customer or other Person except as are immaterial
individually and in the aggregate and are in the ordinary course of
business. None of Big Stuff, or, to the knowledge of Big Stuff or any Big
Stuff Shareholder, any director, officer, agent, employee or other Person
acting on behalf of Big Stuff or any Big Stuff Shareholder has used any
corporate funds for unlawful contributions, payments, gifts, entertainment
or other unlawful expenses relating to political activity, or made any
direct or indirect unlawful payments to governmental or regulatory
officials or others.
2.23 Labor Matters. Except as may be set forth on Schedule
------------- ---------
2.13 or 2.23 to be provided during the Schedule Period, each of which is
- ---- ----
to be provided during the Schedule Period, Big Stuff does not have any
obligations, contingent or otherwise, under any employment, severance or
consulting agreement, collective bargaining agreement or other contract
with a labor union or other labor or employee group. To the knowledge of
Big Stuff, as of the date of this Agreement, there are no efforts presently
being made or threatened by or on behalf of any labor union with respect to
the unionizing of employees of Big Stuff. As of the date of this
Agreement, there is no claim by an employee, an employee group, a labor
union or other labor group or a Governmental Authority against Big Stuff
pending or, to the knowledge of the Big Stuff, threatened before the
National Labor Relations Board or any other court or tribunal respecting
employment and employment practices, terms and conditions of employment,
termination of employment or the compliance to any legislation concerning
labor matters, including, without limiting the generality of what precedes,
labor relations, occupational health and safety, minimum labor standards,
industrial accidents and occupational diseases; there is no labor strike,
dispute, slowdown or stoppage pending
13
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or, to the knowledge of Big Stuff, threatened against or involving Big
Stuff; no representation question exists respecting the employees of Big
Stuff; no grievance or internal or informal complaint exists, no
arbitration proceeding arising out of or under any collective bargaining
agreement is pending and no claim therefor has been asserted. As of the
date of this Agreement, there has not been any material adverse change in
relations with employees or agents of Big Stuff as a result of any
announcement of the transactions contemplated by this Agreement. Big Stuff
shall promptly notify Parent upon knowledge by Big Stuff of the occurrence
after the date hereof of any matter referenced in this Section 2.23.
------------
2.24 Insurance. Big Stuff has obtained and maintains in full
---------
force and effect insurance with responsible and reputable insurance
companies or associations in such amounts, on such terms and covering such
risks, including fire and other risks insured against by extended coverage,
public liability insurance and insurance against claims for personal injury
or death or property damage occurring in connection with the activities of
Big Stuff or any properties owned, occupied or controlled by it, as is
customary and prudent. Since January 1, 1997, Big Stuff has not received
notice of default under, or intended cancellation or nonrenewal of, any
policies of insurance, and Big Stuff has not been refused any insurance for
coverage by an insurance carrier to which it has applied for insurance.
2.25 Disclosure. All information and documents provided prior to
----------
the date of this Agreement, and all information and documents subsequently
provided, to Parent or its representatives or lenders by or on behalf of
Big Stuff in connection with the transactions contemplated by this
Agreement are or contain, or will be or will contain as to subsequently
provided information or documents, true, accurate and complete information
in all material respects with respect to the subject matter thereof and
are, or will be as to subsequently provided information or documents,
reasonably responsive to any specific request made by or on behalf of
Parent or its representatives or lenders.
2.26 Tax. Neither Big Stuff nor the Big Stuff Shareholders know
---
of any fact or have taken any action, in each case with respect to Big
Stuff or the Big Stuff Shareholders, that could be reasonably expected
to prevent the transaction contemplated hereby from qualifying as a tax-
free reorganization pursuant to Section 368 of the Code.
2.27 Year 2000 Compliance. Except as set forth in Schedule 2.27
-------------------- -------------
to be provided during the Schedule Period, Big Stuff has taken all
commercially reasonable and prudent measures designed to make all
material aspects of Big Stuff's operations Year 2000 Compliant, to the
extent within Big Stuff's control. As used in this section, "YEAR 2000
COMPLIANT" shall mean that any and all computer hardware including but
not limited to mainframe computers, personal computers, servers and
related equipment), computer software, programming languages, code,
electronic applications and systems (including but not limited to LANs,
WANs, inter/intranet systems and client/server systems), programs,
files, databases, chips, microprocessors and any and all electronic or
mechanical functionalities in any way used in connection with, relied
upon or relating to a specified subject matter (e.g., a business,
product or service) accurately and completely process (in the manner
intended, including but not limited to calculating, comparing and
sequencing) on a timely basis any and all data which are in any way
dependent upon usage of calendar dates, including but not limited to
dates on or after January 1, 2000, or time.
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ARTICLE III - REPRESENTATIONS AND WARRANTIES
OF PARENT
Parent represents and warrants to and covenants with Big Stuff as
follows:
3.1 Organization and Good Standing. Parent is a corporation
------------------------------
duly organized and validly existing under the laws of the State of Delaware
and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
Each of the Active Parent Subsidiaries is a corporation, duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation or organization and has all requisite corporate, power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted, except where the failure to be so duly
organized, validly existing and in good standing or to have such power and
authority would not have a Parent Material Adverse Effect. Parent and each
of the Active Parent Subsidiaries is duly qualified or licensed and in good
standing to do business in each jurisdiction in which the character of the
property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary, except
where the failure to be so duly qualified or licensed and in good standing
would not have a Parent Material Adverse Effect. Schedule 3.1, to be
------------
provided during the Schedule Period, sets forth a complete and accurate
list of the jurisdictions of incorporation or organization and
qualification or license of Parent and the Active Parent Subsidiaries.
Parent has heretofore made available, or will make available during the
Schedule Period, to Big Stuff accurate and complete copies of the
Certificates or Articles of Incorporation and Bylaws, or equivalent
governing instruments, as currently in effect, of Parent and each of the
Active Parent Subsidiaries.
3.2 Capitalization. As of the date hereof, the authorized
--------------
capital stock of Parent consists of 180,000,000 shares of Parent Common
Stock and 20,000,000 shares of preferred stock, par value $0.0001 per share
as to which 142,857 shares have been designated as Series A Redeemable
Convertible Preferred Stock ("PARENT SERIES A STOCK"). As of the opening
of business on the date of this Agreement, (a) 19,917,262 shares of Parent
Common Stock were issued and outstanding, not including 234,141 shares of
Parent Common Stock which are treasury shares, and (b) 142,857 shares of
the Parent Series A Stock were issued and outstanding. No other capital
stock of Parent is issued or outstanding. All issued and outstanding
shares of the Parent Common Stock and Parent Series A Stock are duly
authorized, validly issued, fully paid and non-assessable and were issued
free of preemptive rights and in compliance with applicable corporate and
securities Laws. Except as set forth in the Parent Securities Filings or
on Schedule 3.2 to be provided during the Schedule Period, as of the date
------------
of this Agreement there are no outstanding rights, reservations of shares,
subscriptions, warrants, puts, calls, unsatisfied preemptive rights,
options or other agreements of any kind relating to any of the capital
stock or any other security of Parent, and there is no authorized or
outstanding security of any kind convertible into or exchangeable for any
such capital stock or other security. There are no restrictions upon the
transfer of or otherwise pertaining to the securities (including, but not
limited to, the ability to pay dividends thereon) or retained earnings of
Parent and the Active Parent Subsidiaries or the ownership thereof other
than those pursuant to the Parent Guaranty or the Great Western Credit
Agreement or those imposed generally by the Securities Act, the Securities
Exchange Act, applicable state or foreign securities Laws or applicable
corporate Law.
3.3. Subsidiaries. Except as set forth on Schedule 3.3 to be
------------ -------------
provided during the Schedule Period, all of the capital stock and other
interests of the Active Parent Subsidiaries held by Parent are owned by it
or a Parent subsidiary, free and clear of any claim, lien, encumbrance,
security
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interest or agreement with respect thereto. All of the outstanding shares
of capital stock in each of the Active Parent Subsidiaries held directly or
indirectly by Parent are duly authorized, validly issued, fully paid and
non-assessable and were issued free of preemptive rights and in compliance
with applicable corporate and securities Laws.
3.4 Authorization; Binding Agreement. Parent and Acquisition
--------------------------------
Subsidiary have all requisite corporate power and authority to execute and
deliver this Agreement and the Parent Transaction Agreements and to
consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement and the other agreements and documents
referred to herein and to be executed in connection herewith to which
Parent or Acquisition Subsidiary is or will be a party or a signatory (the
"PARENT TRANSACTION AGREEMENTS") and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by
the respective Boards of Directors of Parent and Acquisition Subsidiary, as
appropriate, and except for the approval of the holders of the Parent
Common Stock, no other corporate proceedings on the part of Parent or
Acquisition Subsidiary are necessary to authorize the execution and
delivery of this Agreement and the Parent Transaction Agreements or to
consummate the transactions contemplated hereby or thereby. This Agreement
has been duly and validly executed and delivered by each of Parent and
Acquisition Subsidiary and constitutes, and upon execution and delivery
thereof as contemplated by this Agreement, the Parent Transaction
Agreements will constitute, the legal, valid and binding agreements of
Parent and Acquisition Subsidiary, enforceable against each of Parent and
Acquisition Subsidiary in accordance with its and their respective terms,
subject to the Enforceability Exceptions.
3.5 Governmental Approvals. No Consent from or with any
----------------------
Governmental Authority on the part of Parent or any of the Active Parent
Subsidiaries, is required in connection with the execution or delivery by
Parent and Acquisition Subsidiary of this Agreement and the Parent
Transaction Agreements or the consummation by Parent and Acquisition
Subsidiary of the transactions contemplated hereby or thereby other than
(i) filings with the SEC, state securities laws administrators and the
NYSE, (ii) Consents from or with Governmental Authorities, (iii) filings
under the HSR Act, and (iv) those Consents that, if they were not obtained
or made, do not or would not have a Parent Material Adverse Effect.
3.6 No Violations. The execution and delivery of this Agreement
-------------
and the Parent Transaction Agreements, the consummation of the transactions
contemplated hereby and thereby and compliance by Parent and Acquisition
Subsidiary with any of the provisions hereof or thereof will not (i)
conflict with or result in any breach of any provision of the Certificate
and/or Articles of Incorporation or Bylaws or other governing instruments
of Parent or any of the Active Parent Subsidiaries, except as set forth on
Schedule 3.6 to be provided during the Schedule Period, (ii) except for
- ------------
compliance with the requirements under the Parent Guaranty, require any
Consent under or result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration or augment the
performance required) under any of the terms, conditions or provisions of
any Parent Material Contract or other obligation to which Parent or any
Active Parent Subsidiary, is a party or by which any of them or any of
their properties or assets may be bound, (iii) result in the creation or
imposition of any lien or encumbrance of any kind upon any of the assets of
Parent or any Parent Subsidiary, or (iv) subject to obtaining the Consents
from Governmental Authorities referred to in Section 3.5 above,
-----------
contravene any Law currently in effect to which Parent or any Active Parent
Subsidiary or its or any of their respective assets or properties are
subject, except in the case of clauses (ii), (iii) and (iv) above, for any
deviations from the foregoing which do not or would not
16
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have a Parent Material Adverse Effect.
3.7 Securities Filings and Litigation.
---------------------------------
(a) Parent has made available, or will make available during
the Schedule Period, to Big Stuff, true and complete copies of (i) its
Annual Reports on Form 10-K, as amended, for the years ended December 31,
1997 and 1998, as filed with the SEC, (ii) its proxy statement relating to
the meeting of shareholders held on July 29, 1998, as filed with the SEC,
and (iii) all other reports, statements and registration statements and
amendments thereto (including, without limitation, Quarterly Reports on
Form 10-Q and Current Reports on Form 8-K, as amended) filed by Parent with
the SEC since February 18, 1998. The reports and statements set forth in
clauses (i) through (iii) above, and those subsequently provided or
required to be provided pursuant to this section, are referred to
collectively as the "PARENT SECURITIES FILINGS." As of their respective
dates, or as of the date of the last amendment thereof, if amended after
filing, none of the Parent Securities Filings (including all schedules
thereto and disclosure documents incorporated by reference therein),
contained or, as to Parent Securities Filings subsequent to the date
hereof, will contain any untrue statement of a material fact or omitted or,
as to Parent Securities Filings subsequent to the date hereof, will omit to
state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. Each of the Parent Securities Filings at the time of
filing or as of the date of the last amendment thereof, if amended after
filing, complied or, as to Parent Securities Filings subsequent to the date
hereof, will comply in all material respects with the Securities Exchange
Act or the Securities Act, as applicable.
(b) Except as set forth on Schedule 3.7(b) to be provided
---------------
during the Schedule Period, there is no Litigation pending or, to the
knowledge of Parent, threatened against Parent or any Active Parent
Subsidiary, any officer, director, employee or agent thereof, in his or her
capacity as such, or as a fiduciary with respect to any Benefit Plan of
Parent, or otherwise relating, in a manner that could have a Parent
Material Adverse Effect, to Parent, any Active Parent Subsidiary or the
securities of any of them, or any properties or rights of Parent or any of
the Active Parent Subsidiaries, which is required to be described in any
Parent Securities Filing that is not so described. No event has occurred
as a consequence of which Parent would be required to file a Current Report
on Form 8-K pursuant to the requirements of the Securities Exchange Act as
to which such a report has not been timely filed with the SEC. Any
reports, statements and registration statements and amendments thereof
(including, without limitation, Reports on Form 10-K, Quarterly Reports on
Form 10-Q and Current Reports on Form 8-K, as amended) filed by Parent with
the SEC after the date hereof shall be provided to Big Stuff upon such
filing.
3.8 Parent Financial Statements. The audited consolidated and
---------------------------
unaudited interim financial statements of Parent and the Active Parent
Subsidiaries included in the Parent Securities Filings (the "PARENT
FINANCIAL STATEMENTS") have been or will be, during the Schedule Period,
made available to Big Stuff. Except as noted thereon, the Parent Financial
Statements were prepared in accordance with generally accepted accounting
principles applicable to the business of Parent and the Active Parent
Subsidiaries consistently applied in accordance with past accounting
practices and fairly present (including, but not limited to, the inclusion
of all adjustments with respect to interim periods which are necessary to
present fairly the financial condition and assets and liabilities or the
results of operations of Parent and the Active Parent Subsidiaries,
subject to normal year-end adjustments in the ordinary course with respect
to certain items immaterial in amount or effect and the exclusion of
footnote disclosure in interim Parent Financial Statements) the financial
condition and assets and liabilities or the results of operations of
Parent and the Active
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Parent Subsidiaries as of the dates and for the periods indicated.
Except as set forth in Schedule 3.8 to be provided during the Schedule
------------
Period or as reflected in the Parent Financial Statements, as of their
respective dates, neither Parent nor any Active Parent Subsidiary had
any debts, obligations, guaranties of obligations of others or
liabilities (contingent or otherwise) that would be required in
accordance with generally accepted accounting principles to be disclosed
in the Parent Financial Statements.
3.9 Absence of Certain Changes or Events. Except as set forth
------------------------------------
in the Parent Securities Filings made available by Parent to Big Stuff
prior to the date of this Agreement or in Schedule 3.9 to be provided
------------
during the Schedule Period, since March 31, 1999 through the date of this
Agreement, there has not been: (i) any Event that could reasonably be
expected to have a Parent Material Adverse Effect; or (ii) any agreement by
Parent or Active Parent Subsidiary to take any action that would result in
a breach of Section 6.6 below.
-----------
3.10 Compliance with Laws. The business of Parent and the Active
--------------------
Parent Subsidiaries, has been operated in compliance with all Laws
applicable thereto, except for any instances of non-compliance which do not
and would not have a Parent Material Adverse Effect.
3.11 Permits. (i) Parent and the Active Parent Subsidiaries have
-------
all permits, certificates, licenses, approvals, tariffs and other
authorizations required in connection with the operation of their business
(collectively, "PARENT PERMITS"), (ii) neither Parent nor any Active Parent
Subsidiary is in violation of any Parent Permit, and (iii) no proceedings
are pending or, to the knowledge of Parent, threatened, to revoke or limit
any Parent Permit, except, in the case of clause (i) or (ii) above, those
the absence or violation of which do not and would not have a Parent
Material Adverse Effect.
3.12 Finders and Investment Bankers. Neither Parent nor any of
------------------------------
its officers or directors has employed any broker or finder or otherwise
incurred any liability for any brokerage fees, commissions or finders' fees
in connection with the transactions contemplated hereby except that
PaineWebber Incorporated has been engaged to deliver the fairness opinion
required to be delivered pursuant to Section 7.1(l) and NationsBanc
--------------
Montgomery Securities, L.L.C. has been engaged to assist in the sale(s) of
the CLEC Operations and a copy of the engagement letters and other related
documents have been furnished to Big Stuff. Big Stuff will not be liable
for any brokerage fees, commissions, investment banking fees or other
amounts to PaineWebber Incorporated or NationsBanc Montgomery Securities,
L.L.C. in connection with this Agreement, the Company Acquisition
Agreement, the Web Acquisition Agreement or any transactions contemplated
herein or therein.
3.13 Contracts. Except as set forth in Schedule 3.13 to be
--------- -------------
provided during the Schedule Period, neither Parent nor any Active Parent
Subsidiary is a party to any material note, bond, mortgage, indenture,
contract, lease, license, agreement, understanding, instrument, bid or
proposal ("PARENT MATERIAL CONTRACT") required to be described in or filed
as an exhibit to any Parent Securities Filing that is not described in or
filed as required by the Securities Act or the Securities Exchange Act, as
the case may be. Parent has made, or will make during the Schedule Period,
available to Big Stuff true and accurate copies of the Parent Material
Contracts. All such Parent Material Contracts are valid and binding and
are in full force and effect and enforceable in accordance with their
respective terms, subject to the Enforceability Exceptions.
3.14 Corporate Records. The respective corporate record books of
-----------------
or relating to Parent and each of the Active Parent Subsidiaries made
available to Big Stuff by Parent contain accurate
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and complete records of (i) all corporate actions of the respective
shareholders and directors (and committees thereof) of Parent and the
Active Parent Subsidiaries, (ii) the Certificate and/or Articles of
Incorporation, Bylaws and/or other governing instruments, as amended, of
Parent and the Active Parent Subsidiaries, and (iii) the issuance and
transfer of stock of Parent and the Active Parent Subsidiaries.
3.15 Tax. Parent does not know of any fact and has not taken
---
any action that could be reasonably expected to prevent the transaction
contemplated hereby from qualifying as a tax-free reorganization
pursuant to Section 368 of the Code.
3.16 Disclosure. All information and documents provided prior
----------
to the date of this Agreement and all information and documents
subsequently provided, to Big Stuff and the Big Stuff Shareholders, or
its or their respective representatives or lenders by or on behalf of
Parent in connection with the transactions contemplated by this
Agreement are or contain, or will be or will contain as to subsequently
provided information or documents, true, accurate and complete
information in all material respects with respect to the subject matter
thereof and are, or will be as to subsequently provided information or
documents, reasonably responsive to any specific request made by or on
behalf of Big Stuff and the Big Stuff Shareholders or its or their
representatives or lenders.
ARTICLE IV - ADDITIONAL COVENANTS OF BIG STUFF
AND THE BIG STUFF SHAREHOLDERS
Big Stuff and the Big Stuff Shareholders covenant and agree as
follows:
4.1 Notification of Certain Matters. Big Stuff and the Big Stuff
-------------------------------
Shareholders shall give prompt notice to Parent if any of the following
occur from the date of this Agreement through the Closing Date: (i)
receipt of any notice of, or other communication relating to, a default or
Event which, with notice or lapse of time or both, would become a default
under any Big Stuff Material Contract; (ii) receipt of any notice or other
communication from any third party alleging that the Consent of such third
party is or may be required in connection with the transactions
contemplated by this Agreement; (iii) receipt of any material notice or
other communication from any Governmental Authority in connection with the
transactions contemplated by this Agreement; (iv) the occurrence of an
Event which would have a Big Stuff Material Adverse Effect; (v) the
commencement or threat of any Litigation involving or affecting any Big
Stuff Shareholder, Big Stuff or any of its or their respective properties
or assets, or, to its knowledge, any employee, agent, director or officer
of Big Stuff, in his or her capacity as such or as a fiduciary under a
Benefit Plan of Big Stuff, which, if pending on the date hereof, would have
been required to have been disclosed in this Agreement or which relates to
the consummation of the transactions contemplated by this Agreement,
including the Merger, or the Big Stuff Transaction Agreements or any
material development in connection with any Litigation disclosed by Big
Stuff or any Big Stuff Shareholder in or pursuant to this Agreement; and
(vi) the occurrence of any event that would cause a breach by Big Stuff or
any Big Stuff Shareholder of any provision of this Agreement or a Big Stuff
Transaction Agreement, including such a breach that would occur if such
event had taken place on or prior to the date of this Agreement.
4.2 Access and Information. Between the date of this Agreement
----------------------
and the Closing Date, Big Stuff, upon reasonable notice, will give, and
shall direct its accountants and legal counsel to
19
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give, Parent, its lenders and their respective authorized representatives
(including, without limitation, financial advisors, accountants and legal
counsel) at all reasonable times access to all offices and other facilities
and to all contracts, agreements, commitments, books and records
(including, but not limited to, Tax returns) of or pertaining to Big Stuff,
will permit the foregoing to make such inspections as they may require and
will cause its officers promptly to furnish Parent with (a) such financial
and operating data and other information with respect to the business and
properties of Big Stuff as Parent may from time to time reasonably request
including, but not limited to, data and information required for inclusion
in Parent's pending registration statements and/or other Parent Securities
Filings, and (b) a copy of each material report, schedule and other
document filed or received by Big Stuff pursuant to the requirements of
applicable securities Laws. The foregoing access will be subject to
restrictions contained in Section 6.9 hereof.
-----------
4.3 Big Stuff Shareholder Approval. As soon as practicable, Big
------------------------------
Stuff will, if required, take all steps necessary to duly call, give notice
of, convene and hold a meeting of the Big Stuff Shareholders for the
purpose of adopting this Agreement and for such other purposes as may be
necessary or desirable in connection with effectuating the transactions
contemplated hereby. The Board of Directors of Big Stuff (i) unless
otherwise required under the fiduciary duties of the directors of Big
Stuff, as determined by such directors in good faith upon advice of legal
counsel, will recommend to the Big Stuff Shareholders that they adopt this
Agreement and approve the transactions contemplated hereby, and (ii) will
use its reasonable best efforts to obtain any necessary adoption and
approval by the Big Stuff Shareholders of this Agreement and the
transactions contemplated hereby including, without limitation, voting the
Big Stuff Shares held for such adoption and approval.
4.4 Reasonable Best Efforts. Subject to the terms and
-----------------------
conditions herein provided, Big Stuff and the Big Stuff Shareholders agree
to use their reasonable best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective as promptly as practicable, but
in any event, prior to the Closing, the Merger and the other transactions
contemplated by this Agreement and the Big Stuff Transaction Agreements
including, but not limited to (i) obtaining the Consent of others to this
Agreement, the Big Stuff Transaction Agreements and the transactions
contemplated hereby and thereby, (ii) the defending of any Litigation
against Big Stuff, or involving any Big Stuff Shareholder challenging this
Agreement, the Big Stuff Transaction Agreements or the consummation of the
transactions contemplated hereby or thereby, excluding any Litigation
caused by or relating to Parent or any Active Parent Subsidiary, (iii)
obtaining all Consents from Governmental Authorities required for the
consummation of the exchange and the transactions contemplated hereby, and
(iv) timely making all necessary filings under the HSR Act. Upon the terms
and subject to the conditions hereof, Big Stuff and the Big Stuff
Shareholders agree to use their reasonable best efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all things
necessary to satisfy the other conditions of the Closing set forth herein.
Big Stuff and the Big Stuff Shareholders will consult with counsel for
Parent as to, and will permit such counsel to participate in, at Parent's
expense, any Litigation referred to in clause (ii) above brought against or
involving Big Stuff or any Big Stuff Shareholder.
4.5 Compliance. In consummating the Merger and the transactions
----------
contemplated hereby, Big Stuff and the Big Stuff Shareholders shall comply
in all material respects with the provisions of the Securities Exchange Act
and the Securities Act and shall comply, in all material respects, with all
other applicable Laws.
20
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4.6 Benefit Plans. Between the date of this Agreement and
-------------
through the Closing Date, no discretionary award or grant under any Benefit
Plan of Big Stuff shall be made without the consent of Parent. Big Stuff
shall not make any amendment to any Benefit Plan, any awards thereunder or
the terms of any security convertible into or exchangeable for capital
stock without the consent of Parent.
4.7 Tax Opinion Certification. Big Stuff and the Big Stuff
-------------------------
Shareholders shall use their best efforts to cause the Merger to qualify,
and will not take any action which to their knowledge could reasonably be
expected to prevent the Merger from qualifying, as a reorganization under
Section 368 of the Code. Prior to the Effective Time, Big Stuff and the
Big Stuff Shareholders shall provide tax counsel rendering an opinion under
Section 7.1(m) with a certificate concerning such factual matters as such
- --------------
counsel reasonably requests in connection with its opinion.
4.8 Affiliate Agreements. Big Stuff shall use its reasonable
--------------------
business efforts to ensure that each Person who is or may be an "affiliate"
of Big Stuff within the meaning of Rule 145 promulgated under the
Securities Act shall enter into an agreement in a form agreed to by the
parties hereto, acting reasonably (collectively, the "AFFILIATE
AGREEMENTS").
4.9 Transfer Restrictions. (a) In addition to any other
---------------------
restrictions imposed by Law on the ability of any Big Stuff Shareholder
to transfer any Contingent Rights II or Parent Common Stock received by
such Big Stuff Shareholder pursuant to this Agreement, each Big Stuff
Shareholder agrees that such Big Stuff Shareholder will not sell,
transfer or otherwise dispose of any of the Parent Common Stock received
by such Web Shareholder pursuant to this Agreement for a period of six
(6) months after the Closing Date; provided, however, that this
-------- -------
restriction shall not apply to the Parent Common Stock received by the
Big Stuff Shareholders pursuant to the conversion of the Convertible
Note (the "Conversion Stock"). For purposes of this Section 4.9, a
-----------
pledge of any shares subject to this Section 4.9 by a Big Stuff
-----------
Shareholder to a financial institution as collateral security for loans
arranged by such Shareholder shall not constitute a sale, transfer, or
other disposition of such shares so long as the financial institution
agrees to be bound to the restrictions imposed by this Section 4.9.
-----------
Notwithstanding anything in this Section 4.9 to the contrary, the
-----------
restrictions on transfer imposed by this Section 4.9 shall terminate,
-----------
except with regard to the Contingent Rights II, on the first to occur of
any of the following events: (i) a take-over bid (as such term is used
in the Securities Exchange Act) is completed for Parent; (ii) Parent
sells all, or substantially all, of its assets either directly by the
sale of shares of its subsidiaries or indirectly by the sale of assets
of its direct and indirect subsidiaries, or a combination thereof (other
than the CLEC Operations); and (iii) Parent ceases to have at least
fifty-one percent (51%) of the aggregate votes attaching to all of the
issued and outstanding security of all classes in the capital stock of
its subsidiaries (except for the capital stock of such subsidiaries
comprising the CLEC Operations) including the Company, WorldPages, or
Great Western Directories, Inc., directly or indirectly.
The Big Stuff Shareholders acknowledge and agree that the
following legend will appear on all certificates representing Parent
Common Stock received by the Big Stuff Shareholders pursuant to this
Agreement (except the Conversion Stock):
EXCEPT AS PROVIDED IN SECTION 4.9 OF THE BIG STUFF
AGREEMENT MADE AND ENTERED INTO AS OF JUNE 3, 1999 BY AND
AMONG THE CORPORATION, ACG ACQUISITION VII CORP., BIG STUFF
AND THE SHAREHOLDERS OF BIG STUFF (THE "BIG
21
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STUFF AGREEMENT"), THESE SECURITIES MAY NOT BE SOLD,
ASSIGNED, TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE
DISPOSED OF AND MAY ONLY BE ENCUMBERED OR PLEDGED IN
ACCORDANCE WITH SECTION 4.9 OF THE BIG STUFF AGREEMENT.
The Big Stuff Shareholders who are "affiliates" of Big Stuff
within the meaning of Rule 145 promulgated under the Securities Act
acknowledge and agree that the following additional legend will appear
on all certificates representing the Parent Common Stock received by
such "affiliates" of Big Stuff pursuant to this Agreement:
IN ADDITION, THE SHARES OF STOCK REPRESENTED BY THIS
CERTIFICATE ARE HELD SUBJECT TO ALL APPLICABLE PROVISIONS OF
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND THE RULES AND REGULATIONS PROMULGATED BY THE
SECURITIES AND EXCHANGE COMMISSION ("SEC") THEREUNDER. NO
SALES, TRANSFERS OR OTHER DISPOSITION OF THESE SHARES MAY BE
MADE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR UPON THE PRIOR DELIVERY TO
ADVANCED COMMUNICATIONS GROUP, INC. ("ACG") OF AN OPINION
FROM LEGAL COUNSEL SATISFACTORY TO ACG AND IN FORM AND
SUBSTANCE SATISFACTORY TO ACG AND ITS LEGAL COUNSEL, STATING
THAT SUCH SALE OR OTHER DISPOSITION IS BEING MADE PURSUANT
TO AND IN ACCORDANCE WITH THE REQUIREMENTS OF SEC RULES 144
AND 145 OR IS OTHERWISE EXEMPT FROM REGISTRATION UNDER THE
SECURITIES ACT.
(b) Notwithstanding the foregoing, (i) certificates representing
shares of Parent Common Stock issued to Persons who are not "affiliates"
(as defined in Rules 144 and 145 under the Securities Act) of Parent shall
contain the first legend set forth in Section 4.9(a), but shall not
--------------
contain the second legend set forth in Section 4.9(a); and (ii) Parent
--------------
shall instruct its transfer agent to remove the second legend set forth in
Section 4.9(a) for those sales of Parent Common Stock by "affiliates" (as
- --------------
defined in Securities Act Rules 144 and 145) of Parent and Big Stuff made
pursuant to Securities Act Rules 144 and 145.
ARTICLE V
ADDITIONAL COVENANTS OF PARENT
Parent covenants and agrees as follows:
5.1 Conduct of Business of Parent and the Active Parent
----------------------------------------------------
Subsidiaries. Parent covenants, represents and warrants that from the
- ------------
date of this Agreement through the Closing Date, unless Big Stuff shall
otherwise expressly consent in writing, Parent shall, and Parent shall
cause each Active Parent Subsidiary to, use its or their reasonable best
efforts to comply in all material respects with all Laws applicable to it
or any of its properties, assets or business and maintain in full force and
effect all the Parent Authorizations necessary for, or otherwise material
to, such business.
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5.2 Notification of Certain Matters. Parent shall give prompt
-------------------------------
notice to Big Stuff if any of the following occur from the date of this
Agreement through the Closing Date: (i) any notice of, or other
communication relating to, a default or Event which, with notice or lapse
of time or both, would become a default under any Parent Material Contract
which could have a Parent Material Adverse Effect; (ii) receipt of any
notice or other communication from any third party alleging that the
Consent of such third party is or may be required in connection with the
transactions contemplated by this Agreement; (iii) receipt of any material
notice or other communication from any regulatory authority (including, but
not limited to, the NYSE or any other securities exchange) in connection
with the transactions contemplated by this Agreement; (iv) the occurrence
of an Event which could have a Parent Material Adverse Effect; (v) the
commencement or threat of any Litigation involving or affecting Parent or
any Active Parent Subsidiary or any of their respective properties or
assets, or, to its knowledge, any employee, agent, director or officer, in
his or her capacity as such, of Parent or any Active Parent Subsidiary
which, if pending on the date hereof, would have been required to have been
disclosed in this Agreement or which relates to the consummation of the
Merger or any material development in connection with any Litigation
disclosed by Parent in or pursuant to this Agreement or the Parent
Securities Filings; and (vi) any Event that could cause a breach by Parent
of any provision of this Agreement or any Parent Transaction Agreement,
including such a breach that could occur if such Event had taken place on
or prior to the date of this Agreement.
5.3 Access and Information. Between the date of this Agreement
----------------------
and the Closing Date, Parent will, upon reasonable notice, give, and direct
its legal counsel and accountants to give, Big Stuff and its authorized
representatives (including, without limitation, its financial advisors,
accountants and legal counsel) at all reasonable times access as reasonably
requested to the offices and other facilities and to all material
contracts, agreements, commitments, books and records (including, but not
limited to, Tax returns) of or pertaining to Parent and the Active Parent
Subsidiaries, will permit Big Stuff to make such reasonable inspections as
it may require and will cause its officers promptly to furnish Big Stuff
with (a) such financial and operating data and other information with
respect to the business and properties of Parent and the Active Parent
Subsidiaries as Big Stuff may from time to time reasonably request, and (b)
a copy of each material report, schedule and other document filed or
received by Parent or any Active Parent Subsidiary pursuant to the
requirements of applicable securities Laws, the NYSE or other securities
exchange, in each case as necessary in connection with the transactions
contemplated hereby. The foregoing access will be subject to the
restrictions contained in Section 6.9 hereof.
-----------
5.4 Compliance. In consummating the Merger and the transactions
----------
contemplated hereby, Parent shall comply in all material respects with the
provisions of the Securities Exchange Act and the Securities Act and shall
comply, and/or cause the Active Parent Subsidiaries to comply or to be in
compliance, in all material respects, with all other applicable Laws.
5.5 SEC and Shareholder Filings. Parent shall send to Big Stuff
---------------------------
a copy of all material public reports and materials as and when it sends
the same to its shareholders, the SEC, the NYSE or any other securities
commission or exchange.
5.6 Tax Treatment. Parent and Acquisition Subsidiary shall use
-------------
their best efforts to cause the Merger to qualify, and will not take any
action which to its knowledge could reasonably be expected to prevent the
Merger from qualifying, as a reorganization under Section 368 of the Code.
Prior to the Effective Time, Parent shall provide tax counsel rendering an
opinion under
23
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Section 7.1(m) with a certificate concerning such factual matters as such
- --------------
counsel identifies are relevant to its opinion.
5.7 Employment and Employee Benefit Plans. At or before the
--------------------------------------
Closing Date, Parent shall, after consultation with Big Stuff, offer
employment to the employees of Big Stuff, effective as of the Closing Date,
upon terms and conditions reasonably acceptable to the Big Stuff employees
and to Parent. After the Closing Date, Parent shall arrange for each
employee participating in any of the Benefit Plans of Big Stuff at such
time to participate in any counterpart Benefit Plans of Parent in
accordance with the eligibility criteria thereof, provided that (i) such
participants shall receive full credit for years of service with Big Stuff
prior to the Merger for all purposes for which such service was recognized
under the Benefit Plan of Big Stuff including, but not limited to,
recognition of service for eligibility, vesting, and, to the extent not
duplicative of benefits received under such Benefit Plan of Web, the amount
of benefits, and (ii) such participants shall participate in the Benefit
Plans of Parent on terms no less favorable than those offered by Parent to
similarly situated employees of Parent. Notwithstanding the foregoing,
Parent may continue one or more of the Benefit Plans of Big Stuff, in which
case Parent shall have satisfied its obligations hereunder with respect to
the benefits so provided.
5.8 Tax Opinion Certification. Parent shall use its best
-------------------------
efforts to cause the Merger to qualify, and will not take any action which
to their knowledge could reasonably be expected to prevent the Merger from
qualifying, as a reorganization under Section 368 of the Code. Prior to
the Effective Time, Parent shall provide tax counsel rendering an opinion
under Section 7.1(m) hereof with a certificate concerning such factual
--------------
matters as such counsel reasonably requests in connection with its opinion.
5.9 Expenses. If the transactions contemplated by this
--------
Agreement are consummated, all fees and expenses incurred in connection
with the transactions contemplated by this Agreement including, without
limitation, all legal, accounting, financial advisory, consulting fees,
(collectively, the "TRANSACTION EXPENSES") incurred by a party or its
stockholders in connection with the negotiation and effectuation of the
terms and conditions of this Agreement and the transactions contemplated
hereby, shall be the obligation of Parent or any direct or indirect
subsidiary of Parent after Closing. If the Merger is not consummated,
all Transaction Expenses shall be the obligation of the respective
parties which incurred them.
5.10 Parent Shareholder Approval. As soon as practicable,
---------------------------
Parent will, if required, take all steps necessary to duly call, give
notice of, convene and hold a meeting of the Parent shareholders for the
purpose of adopting this Agreement and for such other purposes as may be
necessary or desirable in connection with effectuating the transactions
contemplated hereby. The Board of Directors of Parent (i) unless
otherwise required under the fiduciary duties of the directors of
Parent, as determined by such directors in good faith and upon advice of
legal counsel, will recommend to the Parent shareholders that they adopt
this Agreement and approve the transactions contemplated hereby, and
(ii) will use its reasonable best efforts to obtain any necessary
adoption and approval by the Parent shareholders of this Agreement and
the transactions contemplated hereby.
5.11 Sale of CLEC Operations.
-----------------------
(a) Parent shall attempt to sell by the Anniversary Date all of
the shares of or otherwise dispose of the CLEC Operations. Any such
sale shall be for cash, assignment of
24
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indebtedness, or other acceptable consideration as determined by (i) the
Board of Directors of Parent if before Closing, or (ii) a committee of
the Board of Directors of Parent if after Closing. If acceptable non-
cash consideration is received, the Board of Directors or a committee of
the Board of Directors, as the case may be, in conjunction with the
independent certified public accountants of Parent, shall determine the
fair market value of the consideration received for the sale of the
shares of or other disposal of the CLEC Operations.
(b) If the CLEC Sales Price received by Parent from the sales(s)
by Parent of CLEC Operations (i) prior to the Anniversary Date, or (ii)
within sixty (60) days after the Anniversary Date, if, prior to the
Anniversary Date, Parent has entered into a definitive agreement for the
sale of a portion or all of the CLEC Operations (the applicable date is
hereinafter referred to as the "FINAL SALE DATE"), is greater than Sixty
Million Dollars ($60,000,000) (the amount by which the CLEC Sales Price
exceeds $60,000,000 is referred to hereinafter as the "CLEC SALES PRICE
INCREASE"), then each Eligible Parent Shareholder shall have the right
to receive, in the manner provided in the certificate representing the
Contingent Rights I, that number of shares of Parent Common Stock
determined by multiplying the total number of Parent CLEC Shares by the
Eligible Parent Shareholder's Proportionate Share.
(c) If the CLEC Sales Price received by Parent from the sale(s)
by Parent of CLEC Operations on or prior to the Final Sale Date is less
than Forty Million Dollars ($40,000,000) (the amount by which the CLEC
Sales Price is less than $40,000,000 is referred to hereinafter as the
"CLEC SALES PRICE DECREASE"), then each Eligible Acquisition
Shareholder, excluding, for purposes of this Section 5.11(c), O'Neal,
---------------
shall have the right to receive, in the manner provided in the
certificate representing the Contingent Rights II, that number of shares
of Parent Common Stock determined by multiplying the total number of
Acquisition CLEC Shares by such Eligible Acquisition Shareholder's
Proportionate Share.
(d) For greater certainty, any CLEC Operations that have not
been sold prior to the Final Sale Date shall be deemed to have no value
for purposes of determining the CLEC Sales Price Increase or the CLEC
Sales Price Decrease.
(e) It is acknowledged and agreed that the number of shares of
Parent Common Stock which may be issued (i) to the Eligible Parent
Shareholders pursuant to Section 5.11(b) hereof, or (ii) to the
---------------
Eligible Acquisition Shareholders pursuant to Section 5.11(c) hereof
---------------
is to be calculated in conjunction with the number of shares of Parent
Common Stock which may be issued to Eligible Parent Shareholders (as
that term is defined in the Company Acquisition Agreement and the Web
Acquisition Agreement), or which may be issued to Eligible Acquisition
Shareholders (as that term is defined in the Company Acquisition
Agreement and the Web Acquisition Agreement), respectively. It is the
intent of the parties to this Agreement, the Company Acquisition
Agreement and the Web Acquisition Agreement that, if the closing of all
such agreements shall occur: (i) the number of shares of Parent Common
Stock issuable to the Eligible Parent Shareholders pursuant to Section
-------
5.11(b) hereof and the corresponding sections of the Company Acquisition
- -------
Agreement and the Web Acquisition Agreement (such sections, the "CLEC
INCREASE SECTIONS") shall equal the number of shares of Parent Common
Stock calculated by reference to the CLEC Increase Section of one
such agreement only, not the number of shares of Parent Common Stock
calculated by reference to the CLEC Increase Sections of all three such
agreements; and (ii) the aggregate number of shares (such aggregate
number, the "SELLER SHARE NUMBER") of Parent Common Stock issuable to
the Eligible Acquisition Shareholders pursuant to Section 5.11(c)
---------------
hereof, to the Eligible Acquisition
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Shareholders (as that term is defined in the Company Acquisition
Agreement) pursuant to Section 5.10(c) of the Company Acquisition
Agreement, and to the Eligible Acquisition Shareholders (as that term is
defined in the Web Acquisition Agreement) pursuant to Section 5.11(c) of
the Web Acquisition Agreement (such sections, the "CLEC DECREASE
SECTIONS") shall be calculated as follows: 62.406014% of the Seller
Share Number of shares of Parent Common Stock are issuable pursuant to
the Company Acquisition Agreement; 25.56391% of the Seller Share Number
of shares of Parent Common Stock are issuable pursuant to the Web
Acquisition Agreement; and 12.030075% of the Seller Share Number of
shares of Parent Common Stock are issuable pursuant to this Agreement.
ARTICLE VI - ADDITIONAL COVENANTS OF THE PARENT, BIG STUFF
AND THE BIG STUFF SHAREHOLDERS
6.1 Registration Rights and Stock Restriction Agreement.
---------------------------------------------------
(a) On or before the Closing Date, the Parent shall use its
reasonable best efforts to cause the following securities to be registered
with the SEC under the Securities Act:
(i) Parent Common Stock to be received by Big Stuff
Shareholders upon conversion of Big Stuff Common Stock, as described
in Section 1.3 hereof;
-----------
(ii) Parent Common Stock issuable upon exchange of the
Contingent Rights II; and
(iii) Parent Common Stock to be received by the shareholders
of Web upon conversion of the Convertible Note described in Section
-------
1.10 hereof.
----
(b) The Parent shall hold the meeting of the shareholders of
Parent to consider and to vote upon the approval of the Agreement including
the issuance of Parent Common Stock to the Big Stuff Shareholders and to
the shareholders of the Company and of Web, and Parent and Big Stuff will
cooperate in the preparation of one or more registration statements (such
registration statements, together with any and all amendments and
supplements thereto, being hereinafter referred to as the "REGISTRATION
STATEMENTS"), which will include the preparation of one or more proxy
statements of the Parent satisfying all requirements of applicable state
securities Laws, the Securities Act and the Securities Exchange Act.
(c) Big Stuff will furnish Parent with such information
concerning Big Stuff as is necessary in order to cause the Registration
Statements and any proxy statements, insofar as they relate to Big Stuff,
to comply with applicable Law. None of the information relating to Big
Stuff supplied by Big Stuff for inclusion in the Registration Statements or
any proxy statements will be false or misleading with respect to any
material fact or will omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. Big Stuff
agrees promptly to advise Parent if, at any time prior to the meeting of
the shareholders of the Parent referenced herein, any information provided
by it in the Registration Statements or any proxy statement is or becomes
incorrect or incomplete in any material respect and to provide Parent with
the information needed to correct such inaccuracy or omission. Big Stuff
will furnish Parent with such supplemental information as may be necessary
in order to cause the Registration Statements or the proxy statements,
insofar as it relates to Big Stuff, to comply with applicable Law after the
mailing thereof
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to the Big Stuff Shareholders.
(d) Big Stuff and Parent agree to cooperate in making any
preliminary filings of Registration Statements and the Parent proxy
statement with the SEC as promptly as practicable, on a confidential basis
pursuant to Rule 14a-6(e)(2) under the Securities Exchange Act.
(e) Parent will file the Registration Statements and the
Parent proxy statements with the SEC and appropriate materials with
applicable state securities agencies and will use all reasonable best
efforts to cause the Registration Statements and the Parent proxy
statements to become effective under the Securities Act and all such
state filed materials to comply with applicable state securities Laws.
Big Stuff authorizes Parent to utilize in the Registration Statements
and in all such state filed materials, the information concerning Big
Stuff provided to Parent in connection with, or contained in, the
Registration Statements. Parent promptly will advise Big Stuff when the
Registration Statements have become effective and of any supplements or
amendments thereto, and Parent will furnish Big Stuff with copies of all
such documents. Parent shall file any and all amendments, supplements
and related filings to such Registration Statements (and state filed
materials) as may be required. Big Stuff shall not distribute any
written material that might constitute a "prospectus" relating to this
Agreement or any of the transactions contemplated by this Agreement
within the meaning of the Securities Act or any other applicable
securities Law without the prior written consent of Parent.
6.2 Employment Agreements. At or before the Closing Date,
---------------------
Parent will enter into Employment and Non-Competition Agreements, in
forms agreed to by Parent and Big Stuff, acting reasonably, with certain
individuals, the identities of whom shall be agreed upon by Parent and
Big Stuff, acting reasonably.
6.3 Consents. Each of Parent and Big Stuff shall promptly
--------
apply for or otherwise seek, and use its best efforts to obtain, all
consents and approvals required to be obtained by it for the
consummation of the Merger.
6.4 Legal Requirements. Subject to the terms and conditions
------------------
provided in this Agreement, each of the parties hereto shall use its
reasonable best efforts to take promptly, or cause to be taken, all
reasonable actions, and to do promptly, or cause to be done, all things
necessary, proper or advisable under applicable Laws to consummate and
make effective the transactions contemplated hereby to obtain all
necessary waivers, consents and approvals and to effect all necessary
registrations and filings and to remove any injunctions or other
impediments or delays, legal or otherwise, in order to consummate and
make effective the transactions contemplated by this Agreement for the
purpose of securing to the parties hereto the benefits contemplated by
this Agreement.
6.5 Public Announcements. All press releases and other
--------------------
disseminations of information to employees, customers or suppliers
relating to the Merger or the transactions contemplated by this
Agreement or the Company Acquisition Agreement by any party hereto shall
require the prior approval of Parent and Big Stuff, provided Parent
shall have the right to make such public announcements without the
approval of the other parties hereto should such disclosure be required
by Law or the policies or requirements of United States securities
regulators, stock exchanges, or other relevant entities in the opinion
of Parent's legal counsel. Should such disclosure be required, Parent
agrees to provide the others with reasonable advance notice of and a
copy of, and to consult with the others regarding, the proposed
disclosure.
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6.6 Conduct of Business Prior to Closing Date. Except as
-----------------------------------------
expressly contemplated by this Agreement, during the period from the date
of this Agreement to the Closing Date, Big Stuff shall conduct its business
in the ordinary course and consistent with past practice, subject to the
limitations contained in this Agreement, and Big Stuff shall use its
reasonable business efforts to preserve intact its business organization,
to keep available the services of its officers, agents and employees and to
maintain satisfactory relationships with all Persons with whom it does
business. Except as expressly contemplated by this Agreement, and it being
acknowledged and agreed by each of the parties to this Agreement that
Parent is in the process of a substantial reduction in workforce, and,
subject to Section 5.11, Parent shall, and it shall cause the Active
------------
Parent Subsidiaries to, use its or their reasonable business efforts to
preserve intact its business organization, consistent with the budget
adopted by the Executive Committee of the Board of Directors of Parent, to
keep available the services of only those officers, agents and employees
whom Parent believes are required to maintain satisfactory relationships
with all Persons with whom it does business. Without limiting the
generality of the foregoing, and except as otherwise expressly provided in
this Agreement, after the date of this Agreement and prior to the Closing
Date, (i) Big Stuff will not, without the prior written consent of Parent
(which consent shall not be unreasonably withheld or delayed); and (ii)
subject to Section 5.11, neither Parent nor any Active Parent Subsidiary
------------
will, without the prior written consent of Big Stuff (which consent shall
not be unreasonably withheld or delayed):
(a) except as provided for in this Agreement, the Company
Acquisition Agreement or the Web Acquisition Agreement, amend or propose to
amend its Certificate or Articles of Incorporation or Bylaws (or comparable
governing instruments) in any material respect;
(b) except as set forth on Schedule 6.6(b)(i) to be
------------------
provided during the Schedule Period, with regard to Web, or Parent Common
Stock to be issued pursuant to those options or warrants listed on
Schedule 6.6(b)(ii) to be provided during the Schedule Period or in
- -------------------
Section 6.10, with regard to Parent or the Active Parent Subsidiaries,
- ------------
authorize for issuance, issue, grant, sell, pledge, dispose of or propose
to issue, grant, sell, pledge or dispose of any shares of, or any options,
warrants, commitments, subscriptions or rights of any kind to acquire or
sell any shares of, the capital stock or other securities of Big Stuff, or
of Parent or any Active Parent Subsidiary, as the case may be, including,
but not limited to, any securities convertible into or exchangeable for
shares of stock of any class of Big Stuff, or of Parent or any Active
Parent Subsidiary, as the case may be; provided, however, that Big
-------- -------
Stuff may issue capital stock pursuant to the exercise of options and
warrants outstanding on the date of this Agreement;
(c) except as provided for in this Agreement, the Company
Acquisition Agreement or the Web Acquisition Agreement, split, combine or
reclassify any shares of its capital stock or declare, pay or set aside any
dividend or other distribution (whether in cash, stock or property or any
combination thereof) in respect of its capital stock, other than dividends
or distributions to Big Stuff Shareholders (but only if the entire amount
of such dividend is paid to Web as a capital contribution), or to Parent or
a Parent subsidiary, as the case may be, or redeem, purchase or otherwise
acquire or offer to acquire any shares of its capital stock or other
securities;
(d) (i) except for debt (including, but not limited to,
obligations in respect of capital leases, but excluding obligations under
the Convertible Note) not in excess of $50,000 in the aggregate for all
Persons combined, create, incur or assume any short-term debt (excluding
trade payables incurred in the ordinary course of business), long-term debt
or obligations in respect of
28
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capital leases; (ii) assume, guarantee, endorse or otherwise become liable
or responsible (whether directly, indirectly, contingently or otherwise)
for the obligations of any Person, except for obligations permitted by this
Agreement of any Active Parent Subsidiary, in the ordinary course of
business consistent with past practice; (iii) make any capital expenditures
or make any loans, advances or capital contributions to, or investments in,
any other Person (other than customary advances to employees made in the
ordinary course of business consistent with past practice), provided Big
Stuff will continue to make capital expenditures, maintain, upgrade and
expand its facilities, and otherwise operate in the ordinary course and
consistent with past practice; (iv) acquire the stock or assets of, or
merge or consolidate with, any other Person or business except the
contemplated merger with Web; or (v) voluntarily incur any material
liability or obligation (absolute, accrued, contingent or otherwise);
(e) subject to Section 5.11 hereof, sell, transfer,
------------
mortgage, pledge or otherwise dispose of, or encumber, or agree to sell,
transfer, mortgage, pledge or otherwise dispose of or encumber, any
material assets or properties, real, personal or mixed, except in the
ordinary course of business, in the case of Parent and the Active Parent
Subsidiaries;
(f) increase in any manner the compensation of any of its
officers, agents or employees other than any increases required pursuant to
their employment agreements in accordance with their terms in effect on the
date of this Agreement and increases in the ordinary course of business
consistent with past practice not in excess on an individual basis of the
lesser of 10% of the current compensation of such individual or $10,000 per
annum;
(g) enter into, establish, amend, make non-routine or
material interpretations or determinations with respect to, or terminate
any employment, consulting, retention, change in control, collective
bargaining, bonus or other incentive compensation, profit sharing, health
or other welfare, stock option, stock purchase, restricted stock, or other
equity, pension, retirement, vacation, severance, deferred compensation or
other compensation or benefit plan, policy, agreement, trust, fund or
arrangement with, for or in respect of, any shareholder, officer, director,
other employee, agent, consultant or affiliate, other than actions
contemplated by this Agreement, the Company Acquisition Agreement and the
Web Acquisition Agreement;
(h) make any elections with respect to Taxes that are
inconsistent with the prior elections reflected in the Financial Statements
as of and to the period ended December 31, 1998;
(i) except with regard to Saville, compromise, settle, grant
any waiver or release relating to or otherwise adjust any Litigation,
except routine Litigation in the ordinary course of business consistent
with past practice, involving only a payment not in excess of $50,000
individually or $100,000 when aggregated with all such payments by Big
Stuff or by Parent and the Active Parent Subsidiaries combined, as the case
may be;
(j) take any action or omit to take any action, which action
or omission would result in a breach of any of the covenants,
representations and warranties of Big Stuff, the Big Stuff Shareholders or
Parent or the Active Parent Subsidiaries set forth in this Agreement or
would have a Big Stuff Material Adverse Effect, with regard to Big Stuff
and the Big Stuff Shareholders, or a Parent Material Adverse Effect, with
regard to Parent and the Active Parent Subsidiaries;
(k) except in the ordinary course of business enter into any
lease or other agreement, or amend any lease or other agreement, with
respect to real property;
29
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<PAGE>
(l) enter into or amend any agreement or transaction (i)
pursuant to which the aggregate financial obligation of Big Stuff, or of
Parent or an Active Parent Subsidiary, as the case may be, or the value of
the services to be provided could exceed $50,000, (ii) having a term of
more than twelve (12) months and pursuant to which the aggregate financial
obligation of Big Stuff, or of Parent or an Active Parent Subsidiary, as
the case may be, or the value of the services to be provided could exceed
$100,000 per year, or (iii) which is not terminable by Big Stuff or Parent
or the Active Parent Subsidiaries, as the case may be, upon no more than
thirty (30) days' notice without penalty in excess of $50,000 individually
or $100,000 when aggregated with the penalties under all such agreements or
transactions;
(m) take any action with respect to the indemnification of
any Person;
(n) change any accounting practices or policies, except as
required by generally accepted accounting principles or Laws or as agreed
to or requested by Big Stuff's or Parent's auditors after consultation with
Parent's or Big Stuff's auditors, as the case may be; provided,
--------
however, that notice and a description of any change pursuant to this
- -------
Section 6.6(n) shall be provided promptly after such change is effected
- --------------
to Big Stuff or Parent, as the case may be;
(o) except in the ordinary course of business, enter into,
amend, modify, terminate or waive any rights under any contract which would
result in a Big Stuff Material Adverse Effect, with respect to Big Stuff,
or a Parent Material Adverse Effect, with respect to Parent;
(p) adopt a plan of liquidation, dissolution, merger,
consolidation, share exchange, restructuring, recapitalization, or other
reorganization; provided, however, that Parent may adopt such a plan
-------- -------
and may cause the liquidation or dissolution of any Parent subsidiary if
Parent is unable to sell such Parent subsidiary (i) at a price which Parent
determines to be reasonable, and (ii) during a time period which Parent
determines to be reasonable; provided, further, however, that if
-------- ------- -------
Parent adopts such a plan or causes such liquidation or dissolution, Parent
promptly shall provide to Big Stuff notice of such adoption, liquidation or
dissolution, as the case may be; or
(q) resolve, agree, commit or arrange to do any of the
foregoing.
Notwithstanding anything in this Section 6.6 to the contrary, it
-----------
is understood that Big Stuff has been accelerating and intensifying its
business activities since March 31, 1999 and will continue to do so.
Accordingly, (x) "ordinary course of business" and "consistent with past
practice", as used in this Section 6.6 with respect to Big Stuff,
-----------
shall be interpreted to include such acceleration and intensification;
and (y) in considering requests for consent from Big Stuff, Parent shall
take into account such acceleration and intensification.
Furthermore, Parent covenants, represents and warrants that from
and after the date hereof, unless Big Stuff shall otherwise expressly
consent in writing, Parent shall use its reasonable business efforts to:
(1) keep in full force and effect insurance comparable in amount
and scope of coverage to insurance now carried by it;
(2) pay all accounts payable and other obligations, to the
extent permitted by Parent's
30
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<PAGE>
cash flow and consistent with prudent cash management strategies, and
consistent with the provisions of this Agreement, except if the same are
contested in good faith, and, in the case of the failure to pay any
material accounts payable or other obligations which are contested in
good faith, only after consultation with Big Stuff; and
(3) comply in all material respects with all Laws applicable to
it or any of its properties, assets or business and maintain in full
force and effect all Parent Permits necessary for, or otherwise material
to, such business; provided, however, that Big Stuff acknowledges
-------- -------
and agrees that Parent is attempting to sell its CLEC Operations, and to
the extent such CLEC Operations are sold and, as a result, certain Laws
or Parent Permits to which Parent is subject as of the date hereof
become unnecessary, irrelevant or immaterial, Parent shall not be
required to comply with such Laws or maintain such Parent Permits.
Furthermore, Big Stuff covenants, represents and warrants that from
and after the date hereof, unless Parent shall otherwise expressly consent
in writing, Big Stuff shall use its or their reasonable business efforts
to:
(1) keep in full force and effect insurance comparable in
amount and scope of coverage to insurance now carried by it;
(2) pay all accounts payable and other obligations, when
they become due and payable, in the ordinary course of business
consistent with past practice and with the provisions of this
Agreement, except if the same are contested in good faith, and, in
the case of the failure to pay any material accounts payable or
other obligations which are contested in good faith, only after
consultation with Parent; and
(3) comply in all material respects with all Laws applicable
to it or any of its properties, assets or business and maintain in
full force and effect all Big Stuff Permits necessary for, or
otherwise material to, such business.
6.7 No Solicitation of Acquisition Proposal. Neither the Big
---------------------------------------
Stuff Shareholders, Big Stuff, Parent nor any of their Associates shall,
directly or indirectly, make, encourage, facilitate, solicit, assist or
initiate any inquiry or proposal, or provide any information to or
participate in any negotiations with, any Person or group other than the
parties to this Agreement and their Associates relating to any of the
following transactions ("EXTRAORDINARY TRANSACTIONS"): (i) liquidation,
dissolution, recapitalization, share exchange, business combination, merger
or consolidation of Big Stuff or Parent or an Active Parent Subsidiary,
(ii) sale of a significant amount of assets of Big Stuff or Parent or an
Active Parent Subsidiary, (iii) purchase or sale of shares of capital stock
of Big Stuff or Parent or an Active Parent Subsidiary, or (iv) any similar
actions or transactions involving Big Stuff or Parent or an Active Parent
Subsidiary (other than the Merger and the transactions contemplated by this
Agreement, the Company Acquisition Agreement and the Web Acquisition
Agreement), or agree to or consummate any Extraordinary Transaction. Each
of Parent and Big Stuff shall immediately inform the other party of any
inquiry, proposal, or request for information or offer (including the terms
thereof and the Person making such inquiry, proposal, request or offer)
which it may receive in respect of an Extraordinary Transaction and provide
Parent and Big Stuff with a copy of any such written inquiries, proposals,
requests for information and offers, and thereafter keep Parent and Big
Stuff fully informed of the status and details thereof. The provisions of
this Section 6.7 shall not apply to the sale of the CLEC Operations by
-----------
Parent or any Active Parent Subsidiary as contemplated by Section 5.11
------------
hereof or to the WorldPages Acquisition.
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6.8 Resignations. Big Stuff shall use its reasonable business
------------
efforts to cause the officers and/or directors of Big Stuff as Parent may
request to voluntarily resign their positions as such effective as of the
Closing Date. The instruments effecting such resignations are herein
referred to as the "RESIGNATIONS."
6.9 Confidentiality. Unless (i) otherwise expressly provided
---------------
in this Agreement, (ii) required by applicable Law or any listing agreement
with, or the rules and regulations of, any applicable securities exchange,
(iii) necessary to secure any required Consents as to which the other party
has been advised, or (iv) consented to in writing by Parent and Big Stuff,
this Agreement and any information or documents furnished in connection
herewith shall be kept strictly confidential by Big Stuff, Parent and their
respective officers, directors, employees and agents. Prior to any
disclosure pursuant to the preceding sentence, the party intending to make
such disclosure shall consult with the other party regarding the nature and
extent of the disclosure. Nothing contained herein shall preclude
disclosures to the extent necessary to comply with accounting, SEC and
other disclosure obligations imposed by applicable Law. To the extent
required by such disclosure obligations, Parent, after consultation with
Big Stuff, may file with the SEC a Report on Form 8-K pursuant to the
Securities Exchange Act with respect to the Merger, which report may
include, among other things, financial statements and pro forma financial
information with respect to the other party. In connection with any filing
with the SEC of a registration statement or amendment thereto under the
Securities Act, Parent, after consultation with Big Stuff, may include a
prospectus containing any information required to be included therein with
respect to the Merger, including, but not limited to, financial statements
and pro forma financial information with respect to the other party, and
thereafter distribute said prospectus. Parent and Big Stuff shall
cooperate with the other and provide such information and documents as may
be required in connection with any such filings. In the event the Merger
is not consummated, Parent and Big Stuff shall return to the other all
documents furnished by the other and will hold in absolute confidence any
information obtained from the other party except to the extent (i) such
party is required to disclose such information by Law or such disclosure is
required by discovery, subpoena or other similar legal process in a
proceeding involving a third Person, (ii) such party received such
information on a non-confidential basis from a source, other than the other
party, which is not known by such party to be bound by a confidentiality
obligation with respect thereto, or (iii) such information becomes
generally available to the public or is otherwise no longer confidential.
Prior to any disclosure of information pursuant to the exception in clause
(i) of the preceding sentence, the party intending to disclose the same
shall so notify, in writing, the party which provided the same in order
that such party may seek a protective order or other appropriate remedy
should it choose to do so.
6.10 Options; Stock Issuances. The Board of Directors of Parent
------------------------
shall have the right to grant or issue , as the case may be, (i) restricted
stock or options to acquire shares of Parent Common Stock pursuant to the
Parent's 1997 Stock Awards Plan, provided that no more than the number of
shares authorized under the 1997 Stock Awards Plan have been issued; (ii)
warrants to purchase up to 90,000 shares of Parent Common Stock to be
issued to certain non-employee directors of Parent who are responsible for
negotiating this Agreement at an exercise price of $6.96 per share, the
Company Acquisition Agreement and the Web Acquisition Agreement; (iii) the
shares of Parent Common Stock issuable upon conversion at Closing of the
Great Western Notes at a conversion price of $5.50 per share; (iv) up to
1,818,182 shares of Parent Common Stock issuable upon conversion of one or
more notes which may be issued to the Web shareholders who may lend up to
Ten Million Dollars ($10,000,000.00) to Big Stuff or Web as provided in
this Agreement, at a conversion price of $5.50 per share; (v) shares of
Parent Common Stock to be issued upon exercise
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of options or warrants to be granted at Closing to those Persons designated
by Company; (vi) those shares of Parent Common Stock issuable upon exercise
of previously granted options; (vii) derivative securities to purchase
shares of Parent Common Stock issuable to certain Big Stuff Shareholders in
connection with the sale of the CLEC Operations, as provided in Section
-------
5.11 hereof; (viii) derivative securities to purchase shares of Parent
- ----
Common Stock issuable to certain Company Shareholders in connection with
the sale of the CLEC Operations; and (ix) derivative securities to purchase
shares of Parent Common Stock issuable to certain Web shareholders in
connection with the sale of the CLEC Operations.
ARTICLE VII - CONDITIONS TO CLOSING
7.1 Conditions to Obligations of Each Party to Closing. The
--------------------------------------------------
respective obligations of each party to consummate this Agreement and
effect the Merger shall be subject to the satisfaction or waiver at or
prior to the Closing Date of the following conditions:
(a) No Injunctions or Restraints; Illegality. No
----------------------------------------
temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Merger shall
be in effect, nor shall any proceeding brought by an administrative
agency or commission or other governmental authority or instrumentality,
domestic or foreign, seeking any of the foregoing be pending; nor shall
there be any action taken, or any statute, rule, regulation or order
enacted, entered, enforced or deemed applicable to the Merger, which
makes the consummation of the Merger illegal.
(b) Other Agreements. The Company Acquisition Agreement
----------------
and the Web Acquisition Agreement and all documents related to the
Company Acquisition Agreement and the Web Acquisition Agreement shall
have been duly executed and delivered by all parties thereto and shall
be in full force and effect.
(c) Employment and Non-Competition Agreements. The
-----------------------------------------
Employment and Non-Competition Agreements described in Section 6.2
-----------
hereof shall have been duly executed and delivered by all parties
thereto and shall be in full force and effect.
(d) Government Approvals. Except for those Consents the
--------------------
failure of which to be obtained, (i) in the reasonable judgment of
Parent, would not have a Parent Material Adverse Effect or a Big Stuff
Material Adverse Effect, and (ii) in the reasonable judgment of Big
Stuff, would not have a Big Stuff Material Adverse Effect or a Parent
Material Adverse Effect, all Consents of any domestic or foreign
Governmental Authority required for the consummation of the Merger shall
have been obtained by Final Order.
(e) Related Transactions. (i) The acquisition by
--------------------
Parent, or a direct or indirect subsidiary of Parent, of Big Stuff and
Web in a tax-free reorganization shall have been consummated prior to or
simultaneously with the acquisition of the Company and any registration
statement(s) required for the registration of Parent Common Stock issued
to the Big Stuff Shareholders, the Company shareholders and the
shareholders of Web as consideration in connection with the acquisition
of Big Stuff, the Company and Web by Parent shall have been declared
effective, (ii) and no stop order suspending the effectiveness of such
registration statement(s) shall have been issued and no proceeding for
that purpose shall have been initiated
33
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<PAGE>
or threatened by the SEC or any other Governmental Authority, and (iii)
the Great Western Notes shall have been satisfied by the issuance of
Parent Common Stock to the Great Western Shareholders.
(f) Financing. Parent and Big Stuff shall have received
---------
from their lenders an extension of all of their and their subsidiaries'
debt owing by them on terms and conditions satisfactory to Parent and
Big Stuff or all such debts shall be refinanced on terms satisfactory to
Parent and Big Stuff or any consents and approvals required from such
lenders is received.
(g) Shareholder Approval. All necessary approvals of
--------------------
the Big Stuff Shareholders and the shareholders of Parent in connection
with the Merger shall have been obtained.
(h) Required Consents. Any required Consents of any
-----------------
Person to the Merger or the transactions contemplated by this Agreement
shall have been obtained on terms and conditions reasonably acceptable to
Parent and Big Stuff and be in full force and effect, except for those the
failure of which to obtain, in the reasonable judgment of Parent and Big
Stuff, would not have a Parent Material Adverse Effect or a Big Stuff
Material Adverse Effect.
(i) HSR Act. Any waiting period applicable to the Merger
-------
under the HSR Act shall have expired or earlier termination thereof shall
have been granted and no action shall have been instituted by either the
United States Department of Justice or the Federal Trade Commission to
prevent the consummation of the transactions contemplated by this Agreement
or to modify or amend such transactions in any material manner, or if any
such action shall have been instituted, it shall have been withdrawn or a
final judgment shall have been entered against such Department or
Commission, as the case may be.
(j) Registration Statement. The Registration Statement(s)
----------------------
shall have been declared effective and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by the
SEC.
(k) Blue Sky. Parent shall have received all state
--------
securities Law authorizations necessary to consummate the transactions
contemplated hereby.
(l) Fairness Opinion. Parent's Board of Directors shall
----------------
have received from its financial advisors, PaineWebber Incorporated, a
written opinion addressed to it for inclusion in the Prospectus/Proxy
Statement to the effect that the consideration to be paid, in the
aggregate, by the Parent in the transactions contemplated by this
Agreement, the Company Acquisition Agreement, the Web Acquisition
Agreement and the agreement relating to the redemption of the Great
Western Notes is fair to Parent from a financial point of view. The
opinion is being given as of this date.
(m) Tax Opinion. Parent shall have received an opinion
-----------
from Blackwell Sanders Peper Martin LLP based on customary representations
contained in certificates of Parent, to the effect that, if the Merger is
consummated in accordance with the provisions of this Agreement, the Merger
will qualify as a tax-free reorganization within the meaning of the Code.
(n) Contingent Rights I. Parent shall have declared and
-------------------
paid the Contingent
34
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<PAGE>
Rights I dividend.
(o) NYSE Listing Approval. Parent shall have received
---------------------
from the NYSE approval for listing with the NYSE of the Parent Common
Stock to be issued pursuant to this Agreement, the Company Acquisition
Agreement and the Web Acquisition Agreement.
(p) Escrow Agreement. The Escrow Agreement described in
----------------
Section 9.1(b) shall have been duly executed and delivered by all
parties thereto and shall be in full force and effect.
7.2 Additional Conditions to Obligations of Big Stuff
-------------------------------------------------
Shareholders and Big Stuff. The obligations of the Big Stuff
- --------------------------
Shareholders and Big Stuff to consummate and effect this Agreement and
the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by Big
Stuff:
(a) Representations, Warranties and Covenants.
-----------------------------------------
(i) The representations and warranties of Parent in
this Agreement that are modified by materiality or Parent Material
Adverse Effect ("PARENT MODIFIED REPRESENTATION") shall be true
and correct in all respects and those that are not so modified
("PARENT NONMODIFIED REPRESENTATION") shall be true and correct in
all material respects on the date hereof and, except for changes
not prohibited by this Agreement, as of the Closing Date as if
made at the Closing Date. Furthermore, none of the
representations or warranties of Parent contained in this
agreement, disregarding any qualifications therein or in this
Section 7.2(a) regarding materiality or Parent Material Adverse
--------------
Effect, shall be untrue or incorrect to the extent that such
untrue or incorrect representations or warranties, when taken
together as a whole, have had or would have a Parent Material
Adverse Effect; and
(ii) Parent shall have performed and complied with
all of the covenants and agreements in all material respects and
satisfied in all material respects all of the conditions required
by this Agreement to be performed or complied with or satisfied by
Parent at or prior to the Closing Date. Notwithstanding anything
in this Agreement to the contrary, the parties hereto acknowledge
and agree that the consummation of the transactions contemplated
by this Agreement and the subsequent disposition of the CLEC
Operations constitutes a significant change from the plans and
strategies described in the 1998 10-K such that the
representations and warranties of Parent that reference the 1998
10-K will not be true and correct as of the Closing Date as they
relate to the plans and strategies of the business of Parent at
the Closing Date.
(b) Certificate of Parent and Other Deliveries. Big
------------------------------------------
Stuff shall have been provided, with (i) a certificate executed on
behalf of Parent by an Officer to the effect that, as of the Closing
Date, all representations and warranties made by Parent under this
Agreement are true and complete except as qualified by Section
-------
7.2(a)(i) hereof; and all covenants, obligations and conditions of this
- ---------
Agreement to be performed by Parent on or before such date have been so
performed; (ii) a certificate of good standing from the Secretary of
State of the State of Delaware that Parent is a validly existing
corporation; (iii) duly adopted resolutions of the Board of Directors of
Parent approving the execution, delivery and performance of this
Agreement and the
35
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<PAGE>
Parent Transaction Agreements to which it is a party and the instruments
contemplated hereby and thereby, certified by its Secretary or Assistant
Secretary; and (iv) such other documents and instruments as Big Stuff
may reasonably request.
(c) Shareholder Approval. Big Stuff shall have received
--------------------
from Parent's transfer agent a certificate indicating that a sufficient
number of Parent's shareholders voted to approve the Merger such that
the Merger was deemed approved by the Parent shareholders.
(d) Legal Opinion. Big Stuff shall have received a legal
-------------
opinion of Blackwell Sanders Peper Martin LLP, legal counsel to Parent,
in a form to be agreed upon by the parties hereto, acting reasonably.
(e) No Material Adverse Change. There shall not have
--------------------------
occurred after the date hereof any Event that has or reasonably could be
expected to have a Parent Material Adverse Effect.
(f) Litigation. There shall be no action, suit, claim or
----------
proceeding of any nature pending, or overtly threatened, against Parent,
its properties or any of its officers or directors, arising out of, or in
any way connected with, the Merger or the other transactions contemplated
by the terms of this Agreement which individually or in the aggregate may
cause a Parent Material Adverse Effect.
7.3 Additional Conditions to the Obligations of Parent. The
--------------------------------------------------
obligations of Parent to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at
or prior to the Closing Date of each of the following conditions, any of
which may be waived, in writing, exclusively by Parent:
(a) Representations, Warranties and Covenants.
-----------------------------------------
(i) The representations and warranties of Big Stuff
and the Big Stuff Shareholders contained in this Agreement that are
modified by materiality or Big Stuff Material Adverse Effect ("BIG
STUFF MODIFIED REPRESENTATION") shall be true and correct in all
respects, and those that are not so modified ("BIG STUFF NONMODIFIED
REPRESENTATION") shall be true and correct in all material respects,
on the date hereof and, except for changes not prohibited by this
Agreement, as of the Closing Date as if made at the Closing Date.
Furthermore, none of the representations or warranties of Big Stuff
or the Big Stuff Shareholders contained in this Agreement,
disregarding any qualifications therein or in this Section 7.3(a)
--------------
regarding materiality or Big Stuff Material Adverse Effect, shall be
untrue or incorrect to the extent that such untrue or incorrect
representations or warranties, when taken together as a whole, have
had or would have a Big Stuff Material Adverse Effect; and
(ii) Big Stuff and the Big Stuff Shareholders shall
have performed and complied with all the covenants and agreements in
all material respects and satisfied in all material respects all the
conditions required by this Agreement to be performed or complied
with or satisfied by Big Stuff and the Big Stuff Shareholders at or
prior to the Closing Date.
(b) Certificate of Big Stuff and Other Deliveries.
---------------------------------------------
Parent shall have been provided with (i) a certificate executed on
behalf of Big Stuff by its Chief Executive Officer to the effect that,
as of the Effective Time all representations and warranties made by Big
Stuff in
36
<PAGE>
<PAGE>
this Agreement are true and correct, except as qualified by Section
-------
7.3(a)(i) hereof, and all covenants, obligations and conditions of this
- ---------
Agreement to be performed by Big Stuff and the Big Stuff Shareholders on
or before such date have been so performed; (ii) a certificate of good
standing from the proper authority in the jurisdictions in which Big
Stuff is incorporated or qualified to do business stating that each is a
validly existing corporation in good standing; (iii) duly adopted
resolutions of the Big Stuff Board of Directors and Big Stuff
Shareholders approving the execution, delivery and performance of this
Agreement and the Big Stuff Transaction Agreements to which Big Stuff is
a party and the instruments contemplated hereby and thereby, certified
by the Secretary or Assistant Secretary of Big Stuff; (iv) a true and
complete copy of the Articles or Certificate of Incorporation or
comparable governing instruments, as amended, of Big Stuff certified by
the Secretary of State of the state of incorporation or comparable
authority in other jurisdictions, and a true and complete copy of the
Bylaws or comparable governing instruments, as amended, of Big Stuff
certified by the Secretary thereof; (v) the duly executed Resignations
on terms and conditions reasonably acceptable to Parent; and (vi) such
other documents and instruments as Parent reasonably may request.
(c) Legal Opinion. Parent shall have received a legal
-------------
opinion from Steinhart & Falconer LLP, legal counsel to Big Stuff, in a
form to be agreed upon by the parties hereto, acting reasonably.
(d) Litigation. There shall be no action, suit, claim
----------
or proceeding of any nature pending, or overtly threatened, against Big
Stuff, its respective properties or any of its officers or directors,
arising out of, or in any way connected with, the Merger or the other
transactions contemplated by the terms of this Agreement which
individually or in the aggregate may cause a Big Stuff Material Adverse
Effect.
(e) No Material Adverse Change. There shall have not
--------------------------
occurred after the date hereof any Event that has or reasonably could be
expected to have a Big Stuff Material Adverse Effect.
(f) Affiliate Agreements. At least thirty (30) days
--------------------
prior to the Effective Time, Parent shall have received the duly
executed Affiliate Agreements.
ARTICLE VIII - TERMINATION AND ABANDONMENT
8.1 Termination. This Agreement may be terminated and the
-----------
Merger contemplated hereby may be abandoned at any time prior to the
Closing Date only as follows, whether before or after approval by the Big
Stuff Shareholders:
(a) by mutual written consent of Big Stuff and Parent, duly
authorized by the Board of Directors of each;
(b) by Big Stuff or Parent if the Closing shall not have
occurred on or before October 31, 1999 (or such other date as may be agreed
to by Big Stuff and Parent); provided, that, no party may terminate
-------- ----
this Agreement under this Section 8.1(b) if such party's breach of this
--------------
Agreement has caused or resulted in the failure of the Closing to occur on
or before such date;
37
<PAGE>
<PAGE>
(c) by Big Stuff if (i) there are any breaches of any Parent
Modified Representation or any material breaches of any Parent Nonmodified
Representation, or (ii) Parent has breached or failed to perform,
notwithstanding satisfaction or due waiver of all conditions thereto, any
of its material covenants or agreements contained herein as to which notice
specifying such breach or failure has been given to Parent promptly after
the discovery thereof and Parent has failed to cure or otherwise resolve
the same to the reasonable satisfaction of Big Stuff within thirty (30)
days after receipt of such notice;
(d) by Parent if (i) there are any breaches of any Big Stuff
Modified Representations or any material breaches of any Big Stuff
Nonmodified Representations, or (ii) Big Stuff has breached or failed to
perform, notwithstanding satisfaction or due waiver of all conditions
thereto, any of its material covenants or agreements contained herein as to
which notice specifying such breach or failure has been given to Big Stuff
promptly after the discovery thereof and Big Stuff has failed to cure or
otherwise resolve the same to the reasonable satisfaction of Parent within
thirty (30) days after receipt of such notice;
(e) by Big Stuff or Parent if a court of competent
jurisdiction or other Governmental Authority shall have issued an order,
decree or ruling or taken any other action permanently restraining,
enjoining or otherwise prohibiting the Merger, the Company Acquisition
Agreement or any of the transactions contemplated by this Agreement or such
other agreements and such order, decree, ruling or other action shall have
become final and nonappealable;
(f)(i) by Big Stuff if the stockholders of Parent fail to
approve and adopt the Merger or the issuance of the Parent Common Stock
pursuant to this Agreement or the other transactions contemplated or
otherwise referenced herein or therein, as applicable, at the meeting duly
convened therefor;
(f)(ii) by Parent if the stockholders of Parent fail to
approve and adopt the Merger pursuant to this Agreement or the other
transactions contemplated or otherwise referenced herein or therein, as
applicable;
(g) by Parent, if Big Stuff or its Board of Directors
breaches any provision of Section 6.7;
-----------
(h) by Big Stuff, if Parent or its Board of Directors
breaches any provision of Section 6.7; or
-----------
(i) by Parent or Big Stuff upon the occurrence of the events
described in Section 1.11.
------------
The party desiring to terminate this Agreement pursuant to the
preceding clauses (b), (c), (d), (e), (f)(i), (f)(ii), (g), (h) or (i)
shall give written notice of such termination to the other party in
accordance with Section 11.1 below.
------------
8.2 Termination Fees and Rights. In recognition of the
---------------------------
considerable time and expense that the parties have expended and will
expend in entering into this Agreement, and pursuing the Merger and the
other transactions contemplated hereby, the following fees shall be payable
in the event of termination of this Agreement:
38
<PAGE>
<PAGE>
(a) To the extent that this Agreement is terminated solely
pursuant to Section 8.1(a), (b) or (e), and neither a Big Stuff
--------------------------
Triggering Transaction nor Parent Triggering Transaction has occurred prior
to the date of termination, no termination fees are payable to any party
and this Agreement shall become void and of no effect with no liability on
the part of any party hereto (or any of its directors, officers, employees,
agents, or representatives); provided, that no such termination shall
relieve any party hereto from any liability under Section 6.9 or for any
-----------
breach of this Agreement.
(b) If this Agreement is terminated by Big Stuff pursuant to
Section 8.1(c), (f)(i) or (h) or by Parent pursuant to Section 8.1(i),
- ----------------------------- --------------
Parent shall promptly pay a termination fee to the Company in an amount
equal to $1,560,150 and to WorldPages, collectively, in an amount equal to
$939,850, inclusive of expenses, by wire transfer of immediately available
funds if Parent consummates a Parent Triggering Transaction within six (6)
months following the date of such termination, provided that if
--------
WorldPages is a party to the Parent Triggering Transaction, then all of the
$2,500,000 payable as a termination fee hereunder shall be paid to the
Company and no fee shall be paid to WorldPages.
(c) If this Agreement is terminated by Parent pursuant to
Section 8.1(d) or (g) or by Big Stuff pursuant to Section 8.1(i), Big
- --------------------- --------------
Stuff and Web, jointly and not severally, shall promptly pay a termination
fee to Parent in an amount equal to $1,810,631 and to the Company in an
amount equal to $689,369, inclusive of expenses, by wire transfer of
immediately available funds if Big Stuff consummates a Big Stuff Triggering
Transaction within six (6) months following the date of such termination,
provided that if Parent is a party to the Big Stuff Triggering
- --------
Transaction, then all of the $2,500,000 payable as a termination fee
hereunder shall be paid to the Company.
(d) If this Agreement is terminated by Big Stuff or by
Parent pursuant to Section 8.1(f)(i) or (f)(ii), respectively, no
----------------------------
termination fee shall be payable by Big Stuff even if Big Stuff consummates
a Big Stuff Triggering Transaction.
(e) If a termination fee is payable by a party pursuant to
this Agreement and a termination fee is payable by the same party pursuant
to the Company Acquisition Agreement and the Web Acquisition Agreement,
then the parties agree that notwithstanding anything herein or therein to
the contrary, there shall be no "doubling" of such termination fee and that
a maximum of $2,500,000 shall be paid by any party required to pay a
termination fee, whether payable hereunder or pursuant to the Company
Acquisition Agreement or the Web Acquisition Agreement.
8.3 Procedure Upon Termination. In the event of termination
--------------------------
pursuant to this Article VIII, the Merger shall be abandoned without
------------
further action by Big Stuff or Parent, provided that the agreements
contained in Sections 8.2, 8.3, 9.1, 9.7 and 6.9 hereof shall remain in
-----------------------------------
full force and effect. If this Agreement is terminated as provided herein,
each party shall use its reasonable best efforts to redeliver all
documents, work papers and other material (including any copies thereof) of
any other party relating to the transactions contemplated hereby, whether
obtained before or after the execution hereof, to the party furnishing the
same. Nothing contained in this Agreement shall relieve any party from any
liability for any inaccuracy, misrepresentation or breach of this Agreement
prior to termination.
39
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<PAGE>
ARTICLE IX - SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; INDEMNIFICATION
9.1 Indemnification by the Big Stuff Shareholders.
---------------------------------------------
(a) If the Closing has occurred, subject to the terms and
conditions of this Article IX, the Big Stuff Shareholders shall
----------
indemnify Parent, and its officers, directors, agents and
representatives (THE "INDEMNITEES"), from and in respect of, and hold
the Indemnitees harmless against, any and all damages, fines, penalties,
losses, liabilities, excise and other taxes, judgments, and deficiencies
(including without limitation amounts paid in settlement and interest
and reasonable out-of-pocket legal and accounting fees), but which
amount shall be offset or reduced by the amount of any insurance
proceeds received by Parent in respect of any of the foregoing, incurred
or suffered by any of the Indemnitees ("DAMAGES") resulting from,
relating to or in connection with any misrepresentation or breach of
warranty of the Big Stuff Shareholders contained in this Agreement.
(b) At Closing, (i) the Big Stuff Shareholders and the
Parent shall execute an escrow agreement (THE "ESCROW AGREEMENT") with
an escrow agent (THE "ESCROW AGENT") both of which as shall be
reasonably acceptable to the Parent and the Representative and (ii) the
Big Stuff Shareholders shall deposit Parent Common Stock with an
aggregate value equal to Four Hundred Thousand Dollars ($400,000) with
the Escrow Agent to be used as payment for any of the indemnification
obligations of the Big Stuff Shareholders pursuant hereto. For purposes
of calculating the value of the Parent Common Stock deposited with the
Escrow Agent, one share of Parent Common Stock shall be deemed to have a
value of $5.50.
(c) The Big Stuff Shareholders acknowledge that their
indemnification obligations hereunder are solely in their capacity as
former shareholders of Big Stuff, and, accordingly, the indemnification
obligations in this Article IX shall not entitle any Big Stuff
----------
Shareholder who was or is a current or former officer, director or
employee of Big Stuff to any indemnification from Web pursuant to the
organizational or governing documents of Big Stuff.
9.2 Method of Asserting Claims.
--------------------------
(a) Prior to the date (the "Report Date") that is thirty
(30) days after the completion of Parent's audit report by Parent's
independent auditors for the fiscal year ended December 31, 1999, each
Indemnitee shall give written notice (THE "CLAIM NOTICE") to the
Representative, as agent for the Big Stuff Shareholders, of any and all
claims or events known to it which gives rise to a claim for
indemnification hereunder by the Indemnitee against the Big Stuff
Shareholders (AN "INDEMNIFIABLE CLAIM"). The Claim Notice shall specify
the nature and estimated amount of such claimed Damages (THE "CLAIMED
AMOUNT"). In the case of any claim for indemnification hereunder
arising out of a claim, action, suit or proceeding brought by any Person
who is not a party to this Agreement (A "THIRD-PARTY CLAIM"), prior to
the Report Date, the Indemnitee also shall give the Representative, as
agent for the Big Stuff Shareholders, copies of any written claims,
process or legal pleadings with respect to such Third-Party Claim.
(b) Within forty-five (45) days after delivery of a Claim
Notice, the Representative shall notify the Parent and the Escrow Agent
in writing of his objections, if any, to the Claim. Payments from the
Escrow Account shall be made, and disputes shall be resolved, as set
forth in the Escrow Agreement.
40
<PAGE>
<PAGE>
9.3 Third Party Claims.
------------------
(a) Except as otherwise provided in paragraph (c) below,
the Representative, as agent for the Big Stuff Shareholders, may elect
to compromise or defend, at the Big Stuff Shareholders' own expense and
by the Big Stuff Shareholders' own counsel reasonably satisfactory to
the Indemnitee, any Third-Party Claim; provided that (i) the
Representative provides the Indemnitee with reasonable evidence that the
Big Stuff Shareholders will have the financial resources to defend
against such claim and fulfill their indemnification obligations
hereunder; and (ii) the giving of a Defense Notice (as defined below) by
the Representative shall constitute an acknowledgment by the Big Stuff
Shareholders of their obligation to indemnify the Indemnitee with
respect to such Third-Party Claim in accordance with the terms of this
Article IX. If the Representative, as agent for the Big Stuff
- ----------
Shareholders, elects to compromise or defend a Third-Party Claim, the
Representative shall, within thirty (30) days of its receipt of the
notice provided pursuant to Section 9.2(a) hereof (or sooner, if the
--------------
nature of such Third-Party Claim so requires), notify the related
Indemnitee of its intent to do so (A "DEFENSE NOTICE"), and such
Indemnitee shall reasonably cooperate in the compromise of, or defense
against, such Third-Party Claim. The Big Stuff Shareholders shall be
responsible for the payment of such Indemnitee's actual out-of-pocket
expenses (other than legal and accounting fees) incurred in connection
with such cooperation, and such expenses shall constitute Damages
incurred or suffered by Parent within the meaning of Section 9.1(a)
--------------
hereof. After notice from the Representative, as agent for the Big
Stuff Shareholders, to an Indemnitee of its election to assume the
defense of a Third-Party Claim, the Big Stuff Shareholders shall not be
liable to such Indemnitee under this Article IX for any legal expenses
----------
subsequently incurred by such Indemnitee in connection with the defense
thereof. If the Representative, as agent for the Big Stuff
Shareholders, elects not to compromise or defend against a Third-Party
Claim, or fails to notify an Indemnitee of its election as provided in
this Section 9.3, such Indemnitee may pay, compromise or defend such
-----------
Third-Party Claim on behalf of and for the account and risk of the Big
Stuff Shareholders (and any amount paid or expenses incurred in
connection therewith shall constitute Damages incurred or suffered by
Parent within the meaning of Section 9.1(a) hereof). The
--------------
Representative may not consent to entry of any judgment or enter into
any settlement without the written consent of each related Indemnitee
(which consent shall not be unreasonably withheld), unless such judgment
or settlement provides solely for money damages or other money payments
for which such Indemnitee is entitled to indemnification hereunder and
includes as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnitee of a release from all liability in respect
of such Third-Party Claim.
(b) In respect of any claim, action, suit or proceeding
brought by a taxing authority in respect of Taxes for which the Big
Stuff Shareholders may be required to indemnify the Parent (A "TAX
CLAIM"), the Representative, as agent for the Big Stuff Shareholders,
shall have the sole right to control any Tax Claim, provided, however,
that the Representative shall provide the Indemnitee with copies of all
correspondence with any taxing authority in connection with any such Tax
Claim and shall keep the Indemnitee reasonably informed of all progress
with such taxing authority, and provided further that the Representative
shall consult with the Indemnitee in good faith in contesting any
proposed adjustment and shall consider any reasonable advice from the
Indemnitee concerning such Tax Claim so long as the Representative, as
agent for the Big Stuff Shareholders, shall (subject to the immediately
following sentence) ultimately be entitled to control any such Tax Claim
concerning any indemnity obligation of the Big Stuff Shareholders. The
Representative shall not be entitled to compromise or settle any Tax
41
<PAGE>
<PAGE>
liability of the Company for any pre-Closing Period that would have the
effect of materially decreasing the Company's deductions for credits or
materially increasing the Company's taxable income for any taxable year
or period subsequent to the pre-Closing Period without the prior written
consent of Parent, which consent shall not be unreasonably withheld.
Parent will cooperate fully with Representative in defending any Tax
Claim.
(c) If there is a reasonable likelihood that a Third-Party
Claim may have a material adverse effect on an Indemnitee, other than as
a result of money damages or other money payments for which such
Indemnitee is entitled to indemnification hereunder, such Indemnitee
will have the right, after consultation with the Representative, and at
the cost and expense of the Big Stuff Shareholders (which costs and
expenses, other than legal and accounting fees, shall constitute Damages
within the meaning of Section 9.1(a) hereof to the extent provided
--------------
therein), to defend such Third-Party Claim. If the Third-Party Claim
involves a third party with whom Parent has a significant on-going or
prospective relationship, the Indemnitee will have the right, after
consultation with the Representative, and at the cost and expense of the
Big Stuff Shareholders (which costs and expenses, other than legal and
accounting fees, shall constitute Damages within the meaning of Section
-------
9.1(a) hereof to the extent provided therein), to defend such Third-
- ------
Party Claim; provided that the Big Stuff Shareholders shall not be
obligated to pay Damages to the extent it is determined (by agreement
between the Representative and Indemnitees or by arbitration or court
judgment) that the Third-Party Claim was settled on terms that were not
fair and reasonable to the Indemnitors.
9.4 Survival. The representations and warranties of Big Stuff
--------
set forth in this Agreement shall survive the Closing and shall continue
until the Report Date. The representation and warranties shall not be
affected by any examination made for or on behalf of Parent or the
knowledge of any of Parent's officers, directors, stockholders,
employees or agents, except that the representations and warranties are
qualified by the matters disclosed in the Disclosure Schedules to the
representations and warranties of Big Stuff and the Big Stuff
Shareholders contained in Article II hereof and Parent agrees that
----------
Parent has knowledge of such matters. Notwithstanding anything to the
contrary herein, if a claim for indemnification is made before the
expiration of the periods of survival set forth above in this Section
-------
9.4, then (notwithstanding the expiration of such time period) the
- ---
representation or warranty applicable to such claim shall survive until,
but only for purposes of, the resolution of such claim.
9.5 Limitations.
-----------
(a) The Big Stuff Shareholders shall not be liable under
this Article IX unless and until the aggregate amount of Damages
----------
incurred or suffered by Indemnitees exceeds $100,000, (at which point
the Big Stuff Shareholders shall become liable for the entire amount of
such Damages in excess of $75,000). For purposes of the preceding
sentence, no independent claims of less than $1,000 may be made;
provided however, that all claims arising out of a common set of facts
shall be aggregated for purposes of determining whether the $1,000
threshold has been met.
(b) The Big Stuff Shareholders' liability under this
Article IX shall not exceed $400,000. At their option, the Big Stuff
- ----------
Shareholders may elect to pay an Indemnifiable Claim in cash rather than
by transfer or sale of the escrowed Parent Common Stock.
(c) No claim for indemnification pursuant to Section 9.1
-----------
shall be made unless
42
<PAGE>
<PAGE>
asserted by a written notice given to the Representative on or before
the Report Date.
9.6 The Representative.
------------------
(a) Big Stuff and the Big Stuff Shareholders hereby
authorize, direct and appoint Reid to act as sole and exclusive agent,
attorney-in-fact and representative of the Big Stuff Shareholders (THE
"REPRESENTATIVE"), and authorizes and directs the Representative to (i)
take any and all actions (including without limitation executing and
delivering any documents, incurring any costs and expenses for the
account of the Big Stuff Shareholders (which will constitute Damages
incurred or suffered by Parent within the meaning of Section 9.1(a)
--------------
hereof) and making any and all determinations) which may be required or
permitted by this Agreement to be taken by the Big Stuff Shareholders or
the Representative, (ii) exercise such other rights, power and authority
as are authorized, delegated and granted to the Representative hereunder
in connection with the transactions contemplated hereby and (iii)
exercise such rights, power and authority as are incidental to the
foregoing. Any such actions taken, exercises of rights, power or
authority, and any decision or determination made by the Representative
consistent therewith, shall be absolutely and irrevocably binding on
each indemnifying party as if such indemnifying party personally had
taken such action, exercised such rights, power or authority or made
such decision or determination in such indemnifying party's individual
capacity. Notwithstanding any other provision of this Agreement, if the
Closing occurs, then with respect to the matters covered by Article IX,
----------
(i) each of the Big Stuff Shareholders irrevocably relinquishes
such Big Stuff Shareholder's right to act independently and other than
through the Representative, except with respect to the removal of the
Representative or appointment of a successor Representative as provided
in Section 9.6(b) below, and (ii) no Big Stuff Shareholders shall have
--------------
any right under this Agreement or otherwise to institute any suit,
action or proceeding against Big Stuff or Parent with respect to any
such matter, any such right being irrevocably and exclusively delegated
to the Representative. The Representative hereby acknowledges and
accepts the foregoing authorization and appointment and agrees to serve
as the Representative in accordance with this Agreement.
(b) The Representative shall serve as Representative until
his resignation, removal from office, incapacity or death; provided,
however, that the Representative shall not have the right to resign
without (i) prior written notice to the Big Stuff Shareholders, and
(ii) picking a successor reasonably satisfactory to Parent to serve
until a successor thereto is elected by the Big Stuff Shareholders.
The Representative may be removed at any time, and a successor
representative, reasonably satisfactory to Parent, may be appointed,
pursuant to written action by Big Stuff Shareholders. Any successor to
the Representative shall, for purposes of this Agreement, be deemed to
be, from the time of the appointment thereof in accordance with the
terms hereof, the Representative, and from and after such time, the term
"REPRESENTATIVE" as used herein and therein shall be deemed to refer to
such successor. No appointment of a successor shall be effective unless
such successor agrees in writing to be bound by the terms of this
Agreement.
(c) The Representative shall be permitted to retain
counsel, consultants and other advisors and shall promptly notify Parent
after retaining any such Person.
(d) The provisions of this Section 9.6 shall in no way
-----------
impose any obligations on Parent (other than those set forth in
paragraph (c) above). In particular, notwithstanding any notice
received by Parent to the contrary (except any notice of the appointment
of a successor
43
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<PAGE>
Representative approved by Parent in accordance with paragraph (b) of
this Section 9.6), Parent shall be entitled to assume that all
-----------
actions, decisions and determinations of the Representative are fully
authorized by the Big Stuff Shareholders.
(e) The Representative shall not be liable to the Big
Stuff Shareholders for the performance of any act or the failure to act
so long as he acted or failed to act in good faith in what he reasonably
believed to be the scope of his authority and for a purpose which he
reasonably believed to be in the best interests of the Big Stuff
Shareholders.
9.7 Indemnification by the Parent.
-----------------------------
(a) Indemnity. If the Closing has occurred, subject to
---------
the terms and conditions of this Section 9.7, Parent shall indemnify
-----------
the Big Stuff Shareholders from and in respect of all, and hold the Big
Stuff Shareholders harmless against, any and all damages, fines,
penalties, losses, liabilities, judgments and deficiencies (including
without limitation amounts paid in settlement and interest) ("BIG STUFF
SHAREHOLDER DAMAGES") resulting from, relating to or in connection with
any misrepresentation or breach of warranty of the Parent contained in
this Agreement.
(b) Survival. The representations and warranties of
--------
Parent set forth in this Agreement shall survive the Closing and shall
continue until the Report Date. The representations and warranties
shall not be affected by any examination made for or on behalf of Big
Stuff or Big Stuff Shareholders or the knowledge of any of Big Stuff's
officers, directors, stockholders, employees or agents, except that the
representations and warranties are qualified by the matters disclosed in
the Disclosure Schedules to the representations and warranties of the
Parent contained in Article III hereof, and Big Stuff agrees that Big
-----------
Stuff has knowledge of such matters. Notwithstanding anything to the
contrary herein, if a claim for indemnification is made before the
expiration of the periods of survival set forth above in this Section
-------
9.7, then (notwithstanding the expiration of such time period) the
- ---
representation or warranty applicable to such claim shall survive until,
but only for purposes of, the resolution of such claim.
(c) Limitations. Parent shall not be liable under this
-----------
Section 9.7 unless and until the aggregate amount of Big Stuff
- -----------
Shareholder Damages incurred or suffered by the Big Stuff Shareholders
exceeds $100,000 (at which point Parent shall become liable for the
entire amount of Big Stuff Shareholder Damages in excess of $75,000).
Furthermore, the liability of Parent under this Section 9.7 shall be
-----------
limited to $400,000. No claim for indemnification pursuant to Section
-------
9.7 shall be made unless asserted by a written notice given to Parent
- ---
on or before the Report Date.
ARTICLE X - AMENDMENT AND WAIVER
10.1 Amendment. Except as is otherwise required by applicable
---------
Law, this Agreement may be amended by the parties hereto at any time
only by execution of an instrument in writing signed on behalf of each
of the parties hereto.
10.2 Extension; Waiver. At any time prior to the Effective
-----------------
Time, Parent and Acquisition Subsidiary, on the one hand, and Big Stuff
and the Big Stuff Shareholders, on the other, may, to the extent legally
allowed, (i) extend the time for the performance of any of the
obligations of the other party hereto, (ii) waive any inaccuracies in
the representations and
44
<PAGE>
<PAGE>
warranties made by such other party contained herein or in any document
delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein.
Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
ARTICLE XI - GENERAL PROVISIONS
11.1 Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed given if delivered personally or
by commercial delivery service, or mailed by registered or certified
mail (return receipt requested) or sent via facsimile (with
acknowledgment of complete receipt) to the parties at the following
addresses (or at such other address for a party as shall be specified by
like notice):
(a) if to Parent, to:
Advanced Communications Group, Inc.
390 South Woods Mill Road, Suite 150
St. Louis, Missouri 63017
Attn: Mr. Richard O'Neal
Facsimile: (314) 205-8141
with a copy to:
Blackwell Sanders Peper Martin LLP
720 Olive Street, Suite 2400
St. Louis, Missouri 63101-4834
Attn: Mr. Craig Adoor
Facsimile: (314) 345-6060
(b) if to Big Stuff and Big Stuff Shareholders, to:
Big Stuff, Inc.
4515 South Georgia, Suite 118
Amarillo, Texas 79102
Attn: Mr. Richard L. Reid
Facsimile: (806) 354-2974
with a copy to:
Steinhart & Falconer
333 Market Street
32nd Floor
San Francisco, California 94105-2150
Attn: Mr. Robb A. Scott
Facsimile: (415) 442-0856
11.2 Interpretation. The words "INCLUDE," "INCLUDES" and
--------------
"INCLUDING" when used
45
<PAGE>
<PAGE>
herein shall be deemed in each case to be followed by the words "without
limitation". The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. All Disclosure
Schedules to this Agreement constitute, or will constitute when
delivered during the Schedule Period, a part of this Agreement as if set
forth in full herein and are, or will be when delivered during the
Schedule Period, incorporated herein.
11.3 Counterparts. This Agreement may be executed in one or
------------
more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have
been signed by each of the parties and delivered to the other parties,
it being understood that all parties need not sign the same counterpart.
11.4 Entire Agreement; Assignment. This Agreement (including,
----------------------------
but not limited to, the Recitals hereto), the Disclosure Schedules
hereto, and the documents and instruments and other agreements among the
parties hereto referenced herein: (i) constitute the entire agreement
among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and
oral, among the parties with respect to the subject matter hereof
including, but not limited to, the Letter of Intent dated April 11, 1999
by and among the Parent, the Company, Web, Big Stuff and O'Neal and the
Confidentiality Agreement dated April 11, 1999 by and among Parent, the
Company, Web, Big Stuff and O'Neal; (ii) are not intended to confer upon
any other Person any rights or remedies hereunder except that the
Representative shall have the express rights articulated in Article
-------
IX; and (iii) shall not be assigned by operation of law or otherwise,
- --
except that Parent may assign its rights and delegate its obligations
hereunder to its affiliates, provided that Parent shall remain liable
hereunder.
11.5 Severability. In the event that any provision of this
------------
Agreement or the application thereof, becomes or is declared by a court
of competent jurisdiction to be illegal, void or unenforceable, the
remainder of this Agreement will continue in full force and effect and
the application of such provision to other Persons or circumstances will
be interpreted so as reasonably to effect the intent of the parties
hereto so long as consideration of the Agreement is not materially
affected for any party hereof. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable
provision.
11.6 Other Remedies. Except as otherwise provided herein, any
--------------
and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any
one remedy will not preclude the exercise of any other remedy.
11.7 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware,
regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof. Each of the parties hereto
irrevocably consents to the exclusive jurisdiction and venue of any
court within the State of California, City and County of San Francisco,
in connection with any matter based upon or arising out of this
Agreement or the matters contemplated herein, agrees that process may be
served upon them in any manner authorized by the laws of the State of
California, City and County of San Francisco for such Persons and waives
and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction, venue and such process.
46
<PAGE>
<PAGE>
11.8 Rules of Construction. The parties hereto agree that they
---------------------
have been represented by counsel during the negotiation and execution of
this Agreement and, therefore, waive the application of any law,
regulation, holding or rule of construction providing that ambiguities
in an agreement or other document will be construed against the party
drafting such agreement or document.
ARTICLE XII - DEFINITIONS
12.1 Definitions.
-----------
"Acquisition CLEC Shares" means the quotient of the CLEC Sales
Price Decrease divided by $5.50.
"Acquisition Subsidiary" shall have the meaning ascribed to it in
the preamble hereto.
"Active Parent Subsidiaries" shall mean Feist; Firstel; Value;
Great Western Directories, Inc.; Telecom Resources, Inc.; the
Switchboard of Oklahoma City, Inc.; Long Distance Management of Kansas,
Inc.; Long Distance Management II, Inc.; and National Telecom, a
proprietorship.
"Affiliate Agreements" shall have the meaning set forth in
Section 4.8 hereof.
- -----------
"Aggregate Acquisition Shares" means the sum of the aggregate
number of Class B Special Shares and Contingent Rights II outstanding as
of the Closing Date, immediately after giving effect to the Closing.
"Agreement" shall have the meaning ascribed to it in the preamble
hereto.
"Anniversary Date" shall mean the first anniversary of the Closing
Date.
"Associates" shall mean affiliates of any Person (including,
without limitation, directors, officers, employees, agents, representatives
and shareholders or any affiliates or associates thereof).
"Benefit Plan" shall have the meaning ascribed to such term in
Section 2.14 hereof.
- ------------
"Big Stuff" shall have the meaning ascribed to such term in the
preamble hereto.
"Big Stuff Common Stock" shall have the meaning ascribed to such
term in Section 1.3 hereof.
-----------
"Big Stuff Financial Statements" shall have the meaning ascribed
to such term in Section 2.8 hereof.
-----------
"Big Stuff Material Adverse Effect" shall mean a material adverse
effect on (i) the business, assets, condition (financial or otherwise),
properties, liabilities or the results of operations of Big Stuff taken as
a whole, (ii) the ability of Big Stuff to perform its obligations set forth
in this Agreement and the Big Stuff Transaction Agreements, or (iii) the
ability of Big Stuff or the Big Stuff Shareholders to timely consummate the
transactions contemplated by this Agreement and the
47
<PAGE>
<PAGE>
Big Stuff Transaction Agreements.
"Big Stuff Material Contract" shall have the meaning ascribed to
such term in Section 2.13 hereof.
------------
"Big Stuff Modified Representations" shall have the meaning
ascribed to such term in Section 7.3(a)(i).
-----------------
"Big Stuff Nonmodified Representations" shall have the meaning
ascribed to such term in Section 7.3(a)(i).
-----------------
"Big Stuff Permits" shall have the meaning ascribed to such term
in Section 2.11 hereof.
------------
"Big Stuff Real Property Leases" shall have the meaning ascribed
to such term in Section 2.19(b) hereof.
---------------
"Big Stuff Shareholder Damages" shall have the meaning ascribed to
such term in Section 9.7(a) hereof.
--------------
"Big Stuff Shareholders" shall have the meaning ascribed to such
term in the preamble hereto.
"Big Stuff Shares" shall have the meaning ascribed to such term in
Section 1.3 hereof.
- -----------
"Big Stuff Stock" shall have the meaning set forth in Section
-------
2.2 hereof.
- ---
"Big Stuff Transaction Agreements" shall have the meaning ascribed
to such term in Section 2.4 hereof.
-----------
"Big Stuff Triggering Transaction" means any transaction by way of
a purchase or sale of shares or assets, a merger, a reverse take-over or
other business combination involving Big Stuff or any subsidiary of Big
Stuff formed, organized or acquired directly or indirectly by Big Stuff on
or after the date hereof of Web's core business or in the sale of all or
substantially all of Web's assets.
"Certificate of Merger" shall have the meaning ascribed to such
term in Section 1.1 hereof.
-----------
"Certificates" shall mean the certificates which, prior to the
Merger, represented the Big Stuff Shares, and shall include a
certificate issued upon due execution and delivery of an affidavit of
loss and a bond, if required by Parent, in the event that a Big Stuff
Shareholder is unable to produce and deliver, at the Closing, the
original certificate which prior to the Merger, represented any Big
Stuff Shares.
"Claim Notice" shall have the meaning ascribed to such term in
Section 9.2(a) hereof.
- --------------
"Claimed Amount" shall have the meaning ascribed to such term in
Section 9.2(a) hereof.
- --------------
"Class A Special Shares" shall have the meaning ascribed to such
term in the Company Acquisition Agreement.
48
<PAGE>
<PAGE>
"Class B Special Shares" shall have the meaning ascribed to such
term in the Company Acquisition Agreement.
"CLEC Operations" shall mean Feist, Firstel, Valu, and such other
non-yellow pages operating subsidiaries or operations of Parent as shall
be determined by the Board of Directors of Parent.
"CLEC Sales Price Decrease" shall have the meaning ascribed to
such term in Section 5.11(c) hereof.
---------------
"CLEC Sales Price Increase" shall have the meaning ascribed to
such term in Section 5.11(b) hereof.
---------------
"CLEC Sales Price" shall mean the aggregate consideration received
by Parent from the sale(s) of the CLEC Operations, reduced by warranty
claims and paying or reserving against the taxes payable by Parent or a
subsidiary of Parent directly attributable to the sale(s) of the CLEC
Operations. For greater certainty and explanation, but not limitation,
the consideration received by Parent shall not be reduced by any fee
paid to NationsBanc Montgomery Securities, L.L.C. in connection with the
sale(s) of the CLEC Operations or to PaineWebber Incorporated.
"Closing" shall mean the closing of the Merger.
"Closing Date" shall mean the date on which the Closing actually
occurs.
"Code" shall mean the Internal Revenue Code of 1986, as amended,
and the Treasury regulations thereunder.
"Company" shall have the meaning set forth in Recital E hereto.
"Company Acquisition Agreement" shall have the meaning set forth
in Recital E hereto.
"Company Shareholders" shall have the meaning set forth in Recital
E hereto.
"Consent" shall have the meaning ascribed to such term in Section
-------
2.5 hereof.
- ---
"Contingent Rights I" shall mean, collectively, the rights to
receive Parent Common Stock pursuant to Section 5.11(b) hereof, which
---------------
rights shall be represented by certificates, the form of which shall be
designated at a later date (and shall be acceptable to the parties
hereto, acting reasonably), and which shall be non-transferable, except
by operation of law.
"Contingent Rights II" shall mean, collectively, the rights to
receive Parent Common Stock pursuant to Section 5.11(c) hereof, which
---------------
rights shall be represented by certificates, the form of which shall be
designated at a later date (and shall be acceptable to the parties
hereto, acting reasonably), and which shall be non-transferable, except
by operation of law.
"Conversion Stock" shall have the meaning ascribed to such term in
Section 4.9 hereof.
- -----------
"Convertible Note" shall have the meaning ascribed to such term in
Section 1.10 hereof.
- ------------
49
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<PAGE>
"Corporation Laws" shall have the meaning ascribed to such term in
Section 1.1 hereof.
- -----------
"Damages" shall have the meaning ascribed to such term in Section
-------
9.1(a) hereof.
- ------
"Defense Notice" shall have the meaning ascribed to such term in
Section 9.3(a) hereof.
- --------------
"Disclosure Schedules" shall mean, collectively, that information
required to be delivered by Big Stuff to Parent, and by Parent to Big
Stuff, pursuant to this Agreement.
"Effective Time" shall have the meaning ascribed to such term in
Section 1.2 hereof.
- -----------
"Eligible Acquisition Shareholder's Proportionate Share" means,
for any Eligible Acquisition Shareholder, the quotient of (a) the sum of
the number of Class B Special Shares and Contingent Rights II owned by
such Eligible Acquisition Shareholder on the Closing Date, immediately
after giving effect to the Closing, divided by (b) the number of
Aggregate Acquisition Shares.
"Eligible Acquisition Shareholders" shall mean the holders of
Class B Special Shares and the holders of Contingent Rights II on the
Closing Date, immediately after giving effect to the Closing.
"Eligible Parent Shareholder's Proportionate Share" shall mean,
for any Eligible Parent Shareholder, the quotient of (i) the number of
Contingent Rights I owned by such Eligible Parent Shareholder on the
Closing Date, immediately after giving effect to the Closing, divided by
(ii) the aggregate number of outstanding Contingent Rights I.
"Eligible Parent Shareholders" shall mean the holders of
Contingent Rights I on the Closing Date, immediately after giving effect
to the Closing.
"Enforceability Exceptions" shall have the meaning ascribed to
such term in Section 2.4 hereof.
-----------
"Environmental Laws" shall have the meaning ascribed to such term
in Section 2.17 hereof.
------------
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, together with all regulations thereunder.
"Escrow Agent" shall have the meaning ascribed to such term in
Section 9.1(b) hereof.
- --------------
"Escrow Agreement" shall have the meaning ascribed to such term in
Section 9.1(b) hereof.
- --------------
"Event" shall mean any event, occurrence, fact, condition, change,
development or effect.
"Exchange Ratio" shall have the meaning ascribed to such term in
Section 1.3 hereof.
- -----------
"Extraordinary Transactions" shall have the meaning ascribed to
such term in Section 6.7
-----------
50
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<PAGE>
hereof.
"Feist" shall mean Feist Long Distance Service, Inc.
"Final Order", with respect to any Consent of a Governmental
Authority, shall mean an action by the appropriate Governmental Authority
as to which: (i) no request for stay by such Governmental Authority of the
action is pending, no such stay is in effect, and, if any deadline for
filing any such request is designated by statute or regulation, it has
passed; (ii) no petition for rehearing or reconsideration of the action is
pending before such Governmental Authority, and no appeal or comparable
administrative remedy is pending before such Governmental Authority, and
the time for filing any such petition, appeal or administrative remedy has
passed; (iii) such Governmental Authority does not have the action under
reconsideration on its own motion and the time for such reconsideration has
passed; and (iv) no appeal to a court, or request for stay by a court, of
the Governmental Authority action is pending or in effect, and if any
deadline for filing any such appeal or request is designated by statute or
rule, it has passed.
"Final Sale Date" shall have the meaning set forth in Section 5.11(b).
---------------
"Firstel" shall mean Firstel, Inc.
"Governmental Authority" shall mean a nation or government, any
state or other political subdivision thereof, any Person, authority or body
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government including, without limitation, any
governmental or regulatory authority, agency, department, board, commission
or instrumentality, any court, tribunal or arbitrator and any self-
regulatory organization.
"Great Western Credit Agreement" shall mean the Loan Agreement
dated as of May 14, 1999, by and among Great Western Directories, Inc., the
lenders signatories thereto, and Bank of America National Trust and Savings
Association as Administrative Agent.
"Great Western Notes" shall have the meaning ascribed to such term
in Recital E hereto.
"Great Western Shareholders" shall have the meaning ascribed to
such term in Recital E hereto.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations promulgated
thereunder.
"ICL" shall have the meaning ascribed to such term in Recital E
hereto.
"Indemnifiable Claim" shall have the meaning ascribed to such term
in Section 9.2(a) hereof.
--------------
"Indemnitees" shall have the meaning ascribed to such term in
Section 9.1(a) hereof.
- --------------
"Intellectual Property" shall have the meaning ascribed to such
term in Section 2.18 hereof.
------------
"IP Claim Notice" shall have the meaning ascribed to such term in
Section 2.18 hereof.
- ------------
51
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<PAGE>
"IRS" shall mean the United States Internal Revenue Service, or
any successor thereto.
"Law" shall mean applicable provision of any constitution, treaty,
statute, law, code, rule, regulation, ordinance, policy or order of any
Governmental Authority or other matters having the force of law including,
but not limited to, any orders, decisions, injunctions, judgments, awards
and decrees of or agreements with any court or other Governmental
Authority.
"Letter of Transmittal" shall have the meaning ascribed to such
term in Section 1.5 hereof.
-----------
"Litigation" shall have the meaning ascribed to such term in
Section 2.7 hereof.
- -----------
"Merger" shall have the meaning ascribed to such term in Recital B
hereto.
"Merger Consideration" shall have the meaning ascribed to such
term in Section 1.3 hereof.
-----------
"Multi-employer Plan" shall have the meaning ascribed to such term
in Section 2.14 hereof.
------------
"NYSE" shall mean the New York Stock Exchange, Inc.
"O'Neal" shall have the meaning ascribed to such term in the
preamble hereto.
"Parent" shall have the meaning ascribed to such term in the
Preamble hereto.
"Parent CLEC Shares" shall mean the quotient of the CLEC Sales
Price Increase divided by $5.50.
"Parent Common Stock" shall have the meaning ascribed to such term
in Section 1.3 hereof.
-----------
"Parent Financial Statements" shall have the meaning ascribed to
such term in Section 3.8 hereof.
-----------
"Parent Guaranty" shall mean that certain Guaranty of Parent given
pursuant to the Great Western Credit Agreement.
"Parent Material Adverse Effect" shall mean a material adverse
effect on (i) the business, assets, condition (financial or otherwise),
properties, liabilities or the results of operations of Parent and the
Active Parent Subsidiaries taken as a whole, (ii) the ability of Parent to
perform its obligations set forth in this Agreement and the Parent
Transaction Agreements, or (iii) the ability of Parent to timely consummate
the transactions contemplated by this Agreement and the Parent Transaction
Agreements.
"Parent Material Contract" shall have the meaning ascribed to such
term in Section 3.13 hereof.
------------
52
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<PAGE>
"Parent Modified Representations" shall have the meaning ascribed
to such term in Section 7.2(a)(i) hereof.
-----------------
"Parent Nonmodified Representation" shall have the meaning
ascribed to such term in Section 7.2(a)(i) hereof.
-----------------
"Parent Permits" shall have the meaning ascribed to such term in
Section 3.11 hereof.
- ------------
"Parent Securities Filings" shall have the meaning ascribed to
such term in Section 3.7 hereof.
-----------
"Parent Series A Stock " shall have the meaning ascribed to such
term in Section 3.2 hereof.
-----------
"Parent Transaction Agreements" shall have the meaning ascribed to
such term in Section 3.4 hereof.
-----------
"Parent Triggering Transaction" shall mean any transaction by way
of a purchase or sale of shares or assets, a merger, a reverse take-over or
other business combination involving the Parent or any Parent Subsidiary or
any subsidiary of the Parent formed, organized or acquired directly or
indirectly by the Parent on or after the date hereof with (i) the Company,
or (ii) which results in the sale of the yellow pages publishing business
of the Parent or Great Western Directories, Inc., or (iii) with another
Person or entity which derives the majority of their revenues from a
business other than the yellow pages publishing business.
"Person" shall mean and include an individual, corporation,
partnership, association, trust or other entity or organization,
including a Governmental Authority.
"Registration Statements" shall have the meaning ascribed to such
term in Section 6.1(b) hereof.
--------------
"Reid" shall have the meaning ascribed to such term in the
preamble hereto.
"Report Date" shall have the meaning ascribed to such term in
Section 9.2(a) hereof.
- --------------
"Representative" shall have the meaning ascribed to such term in
Section 9.6 hereof.
- -----------
"Resignations" shall have the meaning ascribed to such term in
Section 6.8 hereof.
- -----------
"Schedule Period" shall have the meaning ascribed to such term in
Section 1.11(a) hereof.
- ---------------
"SEC" shall mean the U.S. Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and all rules and regulations promulgated thereunder.
"Securities Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended, and all rules and regulations promulgated
thereunder.
53
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<PAGE>
"Surviving Corporation" shall have the meaning ascribed to such
term in Section 1.1 hereof.
-----------
"Surviving Corporation Common Stock" shall have the meaning
ascribed to such term in Section 1.3 hereof.
-----------
"Surviving Corporation Material Adverse Effect" shall mean a
material adverse effect on (i) the business, assets, condition (financial
or otherwise), properties, liabilities or the results of operations of the
Surviving Corporation, or (ii) the ability to timely consummate the
transactions contemplated by this Agreement.
"Tax" shall have the meaning ascribed to such term in Section
-------
2.15(a) hereof.
- -------
"Tax Claim" shall have the meaning ascribed to such term in
Section 9.3(b) hereof.
- --------------
"Texas Corporation Law" shall have the meaning ascribed to such
term in Section 1.1 hereof.
-----------
"Third-Party Claim" shall have the meaning ascribed to such term
in Section 9.2(a) hereof.
--------------
"Transaction Expenses" shall have the meaning ascribed to such
term in Section 5.9 hereof.
-----------
"Valu" shall mean, collectively, Valu-line of Louisiana, Inc. and
Valu-line of Longview, Inc.
"Web" shall have the meaning ascribed to such term in the Recital
E hereto.
"Web Acquisition Agreement" shall mean that certain Acquisition
Agreement dated as of June 3, 1999, among the Parent, ACG Acquisition VI
Corp., Web and the Web shareholders.
"WorldPages" shall have the meaning ascribed to such term in
Recital E hereto.
"WorldPages Acquisition" shall mean the acquisition by Parent or a
direct or indirect subsidiary of Parent of all of the outstanding
capital stock of Big Stuff and Web on terms reasonably acceptable to the
Company, whether by merger, exchange or otherwise.
"Year 2000 Compliant" shall have the meaning ascribed to such term
in Section 2.27 hereof.
------------
[Signatures on following page]
54
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<PAGE>
[Signature pages to the Big Stuff Agreement]
IN WITNESS WHEREOF, Parent, the Acquisition Subsidiary, Big Stuff
and the Big Stuff Shareholders have caused this Agreement to be signed
by their duly authorized respective officers, all as of the date first
written above.
ADVANCED COMMUNICATIONS GROUP, INC.
By:
----------------------------------------------
James F. Cragg
Title: President and Chief Operations Officer
ACG ACQUISITION VII CORP.
By:
----------------------------------------------
James F. Cragg
Title: President
BIG STUFF, INC.
By:
----------------------------------------------
Title:
----------------------------------------------
RICHARD O'NEAL
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DICK REID
<PAGE>
<PAGE>
[Big Stuff Acquisition Agreement]
The terms and provisions of Sections 5.11 and 8.2 of this
Agreement are hereby acknowledged and agreed to by Web, Richard L. Reid
(as a Web shareholder), Richard O'Neal (as a Big shareholder), the
Company, the shareholders of the Company, The J.L.R. Family Trust, The
Paisley Family Trust, Edward Truant, Douglas G. McIntyre, Cold Trust,
Global Investment Trust, Freezer Trust, Storage Trust, Directory Trust,
Publisher and Imperial Capital Limited.
WEB YP, INC.
By:
-------------------------------------------
----------------------------------------------
RICHARD L. REID
----------------------------------------------
RICHARD O'NEAL
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YPTEL CORPORATION
By:
-------------------------------------------
Title:
SHAREHOLDERS OF YPTEL CORPORATION
By: Imperial Capital Limited as
attorney-in-fact
By:
-------------------------------------------
Title:
<PAGE>
<PAGE>
THE J.L.R. FAMILY TRUST, by its trustees
By:
-------------------------------------------
Jeffrey L. Rosenthal, as trustee and with
no personal liability
-------------------------------------------
Maxwell Gotlieb, as trustee and with no
personal liability
THE PAISLEY FAMILY TRUST
By:
-------------------------------------------
Stephen D. Lister, as trustee and with no
personal liability
-------------------------------------------
Maxwell Gotlieb, as trustee and with no
personal liability
-------------------------------------------
Edward Truant
-------------------------------------------
Douglas G. McIntyre
COLD TRUST
By:
----------------------------------------
, as trustee and with
no personal liability
-------------------------------------------
, as trustee and with
no personal liability
<PAGE>
<PAGE>
GLOBAL INVESTMENT TRUST
By:
-------------------------------------------
, as trustee and with
no personal liability
----------------------------------------------
, as trustee and with
no personal liability
FREEZER TRUST
By:
-------------------------------------------
, as trustee and with
no personal liability
----------------------------------------------
, as trustee and with
no personal liability
STORAGE TRUST
By:
-------------------------------------------
, as trustee and with
no personal liability
----------------------------------------------
, as trustee and with
no personal liability
DIRECTORY TRUST
By:
-------------------------------------------
, as trustee and with
no personal liability
----------------------------------------------
, as trustee and with
no personal liability
<PAGE>
<PAGE>
PUBLISHER TRUST
By:
-------------------------------------------
, as trustee and with
no personal liability
-------------------------------------------
, as trustee and with
no personal liability
IMPERIAL CAPITAL LIMITED, a corporation
incorporated under the law of the Providence of
Ontario
By:
-------------------------------------------
Title:
----------------------------------------
<PAGE>
<PAGE>
ARTICLE I - TERMS OF THE MERGER 2
1.1 The Merger 2
1.2 Effective Time 2
1.3 Merger Consideration 2
1.4 Stockholders' Right upon Merger 3
1.5 Surrender and Exchange of Shares 3
1.6 Directors 4
1.7 Bylaws 4
1.8 Other Effects of Merger 4
1.9 Tax-Free Reorganization 4
1.10 Convertible Note 4
1.11 Due Diligence Review 4
1.12 Additional Actions 5
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF
BIG STUFF AND THE BIG STUFF
SHAREHOLDERS 5
2.1 Organization and Good Standing 5
2.2 Capitalization 6
2.3 Subsidiaries 6
2.4 Authorization; Binding Agreement 6
2.5 Governmental Approvals 7
2.6 No Violations 7
2.7 Litigation 7
2.8 Big Stuff Financial Statements 7
2.9 Absence of Certain Changes or Events 8
2.10 Compliance with Laws 8
2.11 Permits 8
2.12 Finders and Investment Bankers 9
2.13 Contracts 9
2.14 Employee Benefit Plans 9
2.15 Taxes and Returns 10
2.16 Liabilities 11
2.17 Environmental Matters 12
2.18 Intellectual Property; Fictitious Names 12
2.19 Real Estate 12
2.20 Corporate Records 13
2.21 Title to and Condition of Personal
Property 13
2.22 No Adverse Actions 13
2.23 Labor Matters 13
2.24 Insurance 14
2.25 Disclosure 14
2.26 Tax 14
2.27 Year 2000 Compliance 14
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF
PARENT 15
3.1 Organization and Good Standing 15
3.2 Capitalization 15
3.3. Subsidiaries 15
3.4 Authorization; Binding Agreement 16
3.5 Governmental Approvals 16
3.6 No Violations 16
3.7 Securities Filings and Litigation 17
<PAGE>
<PAGE>
3.8 Parent Financial Statements 17
3.9 Absence of Certain Changes or Events 18
3.10 Compliance with Laws 18
3.11 Permits 18
3.12 Finders and Investment Bankers 18
3.13 Contracts 18
3.14 Corporate Records 18
3.15 Tax 19
3.16 Disclosure 19
ARTICLE IV - ADDITIONAL COVENANTS OF BIG STUFF
AND THE BIG STUFF SHAREHOLDERS 19
4.1 Notification of Certain Matters 19
4.2 Access and Information 19
4.3 Big Stuff Shareholder Approval 20
4.4 Reasonable Best Efforts 20
4.5 Compliance 20
4.6 Benefit Plans 21
4.7 Tax Opinion Certification 21
4.8 Affiliate Agreements 21
4.9 Transfer Restrictions 21
ARTICLE V - ADDITIONAL COVENANTS OF PARENT 22
5.1 Conduct of Business of Active Parent
and the Parent Subsidiaries 22
5.2 Notification of Certain Matters 23
5.3 Access and Information 23
5.4 Compliance 23
5.5 SEC and Shareholder Filings 23
5.6 Tax Treatment 23
5.7 Employment and Employee Benefit Plans 24
5.8 Tax Opinion Certification 24
5.9 Expenses 24
5.10 Parent Shareholder Approval 24
5.11 Sale of CLEC Operations 24
ARTICLE VI - ADDITIONAL COVENANTS OF THE PARENT,
BIG STUFF AND THE BIG STUFF
SHAREHOLDERS 26
6.1 Registration Rights and Stock
Restriction Agreement 26
6.2 Employment Agreements 27
6.3 Consents 27
6.4 Legal Requirements 27
6.5 Public Announcements 27
6.6 Conduct of Business Prior to Closing
Date 28
6.7 No Solicitation of Acquisition Proposal 31
6.8 Resignations 32
6.9 Confidentiality 32
6.10 Options; Stock Issuances 32
ARTICLE VII - CONDITIONS TO CLOSING 33
7.1 Conditions to Obligations of Each Party
to Closing 33
7.2 Additional Conditions to Obligations of
Big Stuff Shareholders and Big Stuff 35
7.3 Additional Conditions to the
Obligations of Parent 36
ARTICLE VIII- TERMINATION AND ABANDONMENT 37
8.1 Termination 37
8.2 Termination Fees and Rights 38
8.3 Procedure Upon Termination 39
<PAGE>
<PAGE>
ARTICLE IX - SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; INDEMNIFICATION 40
9.1 Indemnification by the Big Stuff
Shareholders 40
9.2 Method of Asserting Claims 40
9.3 Third Party Claims 41
9.4 Survival 42
9.5 Limitations 42
9.6 The Representative 43
9.7 Indemnification by the Parent 44
ARTICLE X - AMENDMENT AND WAIVER 44
10.1 Amendment 44
10.2 Extension; Waiver 44
ARTICLE XI - GENERAL PROVISIONS 45
11.1 Notices 45
11.2 Interpretation 45
11.3 Counterparts 46
11.4 Entire Agreement; Assignment 46
11.5 Severability 46
11.6 Other Remedies 46
11.7 Governing Law 46
11.8 Rules of Construction 47
ARTICLE XII - DEFINITIONS 47
12.1 Definitions 47
<PAGE>
<PAGE>
SCHEDULES
Schedule 2.1 Jurisdictions of Incorporation and Qualification
Schedule 2.2 Capitalization
Schedule 2.5 Governmental Approvals
Schedule 2.6 No Violations
Schedule 2.7 Litigation
Schedule 2.9 Absence of Certain Changes or Events
Schedule 2.13 Contracts
Schedule 2.14 Employee Benefit Plans
Schedule 2.15 Taxes
Schedule 2.16 Liabilities
Schedule 2.17 Environmental Matters
Schedule 2.18 Intellectual Property
Schedule 2.19(b) Real Estate - Leased
Schedule 2.20 Corporate Records
Schedule 2.22 No Adverse Actions
Schedule 2.23 Labor Matters
Schedule 2.27 Year 2000 Compliance
Schedule 3.1 Parent Jurisdictions of Incorporation and Qualification
Schedule 3.2 Parent Securities Filings
Schedule 3.3 Parent Subsidiaries
Schedule 3.7(b) Parent Litigation
Schedule 3.8 Parent Liabilities
Schedule 3.9 Absence of Certain Changes or Events
Schedule 3.13 Parent Contracts
Schedule 6.6(b)(i) Web Securities Issuances, Etc.
Schedule 6.6(b)(ii) Parent Securities Issuances, Etc.
<PAGE>
Friday April 23, 1999
COMPANY PRESS RELEASE
CHANGE ON ADVANCED COMMUNICATIONS' BOARD
NECESSITATED BY MEMBER'S CAREER CHANGE
HOLLINGER LEAVES PAINEWEBBER TO JOIN CHASE
ST. LOUIS (April 23, 1999) Advanced Communications Group, Inc. (ACG,
listed NYSE: ADG) today announced the resignation of Reginald J.
Hollinger from its board of directors effective immediately. Mr.
Hollinger, an investment banker and communications industry specialist
and formerly Managing Director at PaineWebber Group, Inc. (NYSE: PWJ),
has joined The Chase Manhattan Corporation as a Managing Director in the
Global Media & Telecommunications Group. In his new capacity, Mr.
Hollinger is prohibited from serving on a company's board of directors.
Reginald Hollinger stated, "I am very excited to be joining the Chase
team and express my continued support for the management and board of
ACG as they execute their strategy of becoming one of North America's
leading independent print and Internet directory companies. I believe
that ACG's planned transformation into WorldPages.com is a major
positive for shareholders." Richard O'Neal, Chairman & CEO, stated, "ACG
expresses its debt of gratitude for the leadership that Reg provided as
a member of our board. We all wish him the very best in his new
endeavors."
Background
On April 12, 1999, ACG announced that it approved a letter of intent to
acquire the outstanding stock of YPtel Corporation, WebYP, Inc. (d/b/a
WorldPages.com) and the web site production arm of Web YP,
Inc./WorldPages.com, Big Stuff, Inc. The corporation will be re-named
Worldpages.com and its stock will continue to be traded on the NYSE
under a new symbol to be released upon completion of the transaction
during the third calendar quarter. Its completion is subject to
negotiating definitive documentation, shareholder approval and
regulatory approvals. The company is evaluating its strategic options in
the telephone business, including the possible sale of those operations.
Several interim financing alternatives are also being evaluated.
By combining the yellow page customers of YPtel Corporation and ACG, the
new operation will be vertically integrated with both Internet and print
directories in 41 markets in 7 states. Both companies introduced yellow
page directories in two new markets in 1998. ACG entered the Austin, TX
market and Pacific Coast Publishing (YPtel Corporation) introduced a new
directory in Portland, OR. Network expansion will be accelerated through
the strategic partnerships that now exist between 85 independent yellow
page companies and WorldPages.com that provide market coverage
throughout America. The combined publishing and e-commerce revenue and
EBITDA of the merging companies totaled approximately $83 million and
$15 million, respectively, for 1998.
PC Magazine has ranked Worldpages as one of the top 100 web sites, and,
- -----------
The Wall Street Journal has recognized Worldpages as one of the top 100
most useful web sites. Worldpages also has working relationships with
many industry leaders such as Microsoft,
<PAGE>
<PAGE>
Netscape, Packard Bell and Sony/ETAK, which position WorldPages.com to
become one of the premier facilitators of local e-commerce.
The Company also announced that it would reorganize its board of
directors and senior management team upon the consummation of the
transaction. The new team will include the following key members:
Chairman & CEO, Richard O'Neal; President & COO, Douglas G. McIntyre;
Chief Financial Officer, Edward Truant. In addition, John A. Woodall
will continue in his key management role at Pacific Coast Publishing, as
will Rick Klein and Dick Reid in their leadership positions with
Worldpages. An eight-member board of directors will be composed of three
nominees from each of the current boards. Current nominees include
Wilmot L. Matthews, Chairman of YPtel, Robert E. Flynn, and George D.
Anderson also from YPtel and Richard O'Neal, Robert F. Benton and Marvin
C. Moses from ACG.
For more information concerning the companies, please visit
www.worldpages.com and www.acginc.net.
- ------------------ --------------
<PAGE>
Thursday May 6, 1999
COMPANY PRESS RELEASE
ADVANCED COMMUNICATIONS ANNOUNCES FIRST QUARTER FINANCIAL RESULTS
EBITDA AND EARNINGS GROWTH FROM CONTINUING OPERATIONS
ST. LOUIS (May 6, 1999) - Advanced Communications Group, Inc. (ACG,
listed NYSE: ADG) today announced its operating results for the quarter
ended March 31, 1999. On April 12, 1999, ACG announced its intent to
acquire the outstanding stock of YPtel Corporation, WebYP, Inc. (d/b/a
WorldPages.com) and a related company, Big Stuff, Inc. The corporation
will be re-named WorldPages.com and its stock will continue to be traded
on the NYSE under a new symbol to be released upon completion of the
transaction. WorldPages.com will vertically integrate its Internet
directory, recognized as a leader by both PC Magazine and The Wall
-----------
Street Journal, with the profitable print yellow pages operations of ACG
(Great Western Directories) and YPtel (Pacific Coast Publishing) to
create a worldwide leader in Internet and print yellow pages
directories.
Accordingly, ACG's financial statements reflect the results from the
telecom business as discontinued operations. The operations of Great
Western Directories, Inc. comprise the majority of the company's
continuing operations currently. During first quarter, 1999, yellow
pages publishing revenue of $18.7 million rose 1.7 percent from the
year-ago quarter on a pro forma basis; i.e., as if the company's initial
public offering (IPO) had been completed on January 1, 1998 as opposed
to the actual IPO date of February 18, 1998. Earnings before interest,
taxes, depreciation and amortization (EBITDA) from continuing operations
of $4.5 million rose 18.4 percent from $3.8 million in the year-ago
quarter on a pro forma basis. EBITDA margin of 23.9 percent improved
from 20.5 percent in the pro forma year ago quarter. Earnings per share
from continuing operations of $0.05 rose six-fold from a loss of $0.01
in the year ago quarter on a pro forma basis.
Net loss from discontinued operations was $6.2 million, or $0.31 per
share during first quarter, 1999. ACG also recognized a charge to
earnings to establish a loss reserve for the sale of the telecom
business of $51.8 million, or $2.61 per share during first quarter 1999.
Net loss was $57.0 million, or $2.87 per share during first quarter
1999.
Discontinued Operations
Telecom revenue for the first quarter ended March 31, 1999, was $24.2
million representing increases of 15.3 percent and 75.7 percent over the
preceding quarter and year ago quarter on a pro forma basis,
respectively. Telecom revenue grew as a result of both a growing base of
local access lines and rising minutes of use on ACG's switch-based long
distance network. That is, local access lines rose from 125,000 to
138,000 during the first quarter, 1999 and grew by 411.1 percent from
27,000 lines at March 31, 1998. In addition, long distance minutes of
use rose 6.7 percent from 87.9 million in the preceding quarter to 93.8
million during the first quarter and rose 11.0 percent over the pro
forma year ago quarter. This growth in long distance traffic is
partially a result of the Nortel Networks DMS-500* switch that was
installed in Wichita, KS and began carrying long distance traffic during
March 1999.
Additionally, local service revenue was $12.3 million representing
increases of 29.1 percent and 469.8 percent over the preceding quarter
and pro forma year ago quarter,
<PAGE>
<PAGE>
respectively. Local revenue (excluding long distance) per access line
remained virtually unchanged relative to the preceding quarter at
approximately $31 per line. Switch-based long distance revenue was $10.2
million representing an increase of 1.7 percent over the preceding
quarter. This compares to $10.8 million in long distance revenue in the
year ago quarter on a pro forma basis.
Finally, the company sold and installed 44,000 and 27,000 new access
lines, respectively, during the first quarter, 1999. Installation
backlog rose modestly from 6,000 to 9,000 access lines during the
quarter. Access line churn was 3.5 percent during the quarter
representing an improvement of 7.4 percent over the preceding quarter's
churn of 3.8 percent.
WorldPages.com
Richard O'Neal, Chairman & CEO, stated, "First quarter results for both
the telecom business and directory business were solid. Our announced
intention to focus on our yellow pages business--both print and on the
Internet opens a world of possibilities for our future. We're excited
about becoming WorldPages.com. We have healthy demand for our product
and believe consumers and investors will benefit as we execute our
strategy."
The mission of WorldPages.com will be to facilitate transactions between
buyers and sellers worldwide by establishing the world's premier
Internet yellow pages network that is integrated with wholly owned local
print yellow page directories. To accomplish this, WorldPages.com plans
to:
* establish WorldPages.com as a top "Branded" site for e-commerce
* expand its wholly owned print directory network
* leverage the close relationship it has with approximately 60,000
business customers
* brand each of its print directories with the WorldPages.com name
* capitalize on the competitive advantage of having a direct sales force
of over 400 agents to help the company's 60,000 customers move into e-
commerce.
The pro forma financial information does not purport to represent the
financial position or results of operations of Advanced Communications
that would have actually occurred if the initial public offering and the
concurrent acquisitions had in fact occurred on January 1, 1998.
Additionally, the pro forma financial information is not necessarily
representative of the financial position or results of operations of
Advanced Communications for any future period. Since the acquired
companies were not under common control or management, historical
combined results of operations may not be comparable to, or indicative
of future performance.
Please consult www.acginc.net and www.worldpages.com for more
-------------- ------------------
information concerning the companies.
*DMS-500 is a trademark of Northern Telecom.
<PAGE>
Friday May 14, 1999
COMPANY PRESS RELEASE
ADVANCED COMMUNICATIONS ENGAGES NATIONSBANC MONTGOMERY
SECURITIES AS STRATEGIC ADVISOR
ST. LOUIS (May 14, 1999) Advanced Communications Group, Inc. (ACG,
listed NYSE: ADG) today announced that it has engaged NationsBanc
Montgomery Securities, a subsidiary of Bank of America Corporation
(NYSE: BAC), as investment advisor in connection with the sale of its
competitive local exchange telephone (CLEC) and switch-based long-
distance operations.
The divestiture of the telecom business is part of the strategic
corporate redirection announced on April 12, 1999, in which ACG stated
its plan to change the corporate name to WorldPages.com. In the same
announcement, ACG articulated its plan to expand its yellow pages
directories in both print and Internet forms by acquiring the
outstanding stock of YPtel Corporation (d/b/a Pacific Coast Publishing),
WebYP, Inc. (d/b/a WorldPages.com) and a web site production & graphics
company, Big Stuff, Inc.
Richard O'Neal, Chairman and Chief Executive Officer, commented,
"Engaging NationsBanc Montgomery Securities as advisor clearly
facilitates ACG's stated objective to become WorldPages.com and expand
its presence in print yellow pages and e-commerce. The business plan of
WorldPages.com includes the aggressive capture of Internet advertising
market share in this industry that analysts estimate will be $5 billion
by next year. Negotiations surrounding the WorldPages.com definitive
agreement are progressing smoothly, and, we believe we will close the
related transaction during the third calendar quarter."
Today, about 85 percent of revenues earned by print directories come
from local businesses of which 80 percent plan to use the Internet
according to recent research. As a result, WorldPages.com and its
existing sales force of 400 representatives are uniquely positioned to
help hometown business people achieve their goals.
In the future, WorldPages.com will provide branded directories to 5.2
million users in 41 markets in the U.S. and leverage its existing
affiliations with over 80 independent print directories. In addition,
through WorldPages.com, customers will have direct access to 112 million
U.S and Canadian white and yellow pages listings, 9 million e-mail
addresses, 30 million URLs and links to over 200 directories worldwide.
Both PC Magazine and The Wall Street Journal recognized WorldPages.com
-----------
recently as a leading web site.
For more information, please visit www.acginc.net and find the world at
www.worldpages.com. --------------
- ------------------
<PAGE>
Friday May 19, 1999
COMPANY PRESS RELEASE
Reorganization Presents Advanced Communications
as Attractive Acquisition Candidate
ST. LOUIS (May 19, 1999) -- Advanced Communications Group, Inc. (ACG,
listed NYSE: ADG) today announced a program designed to move operational
leadership closer to the regional customer base in anticipation of the
sale of its telephone operations.
Moving business functions back to the regional operating subsidiaries
will eliminate corporate positions that most likely will be provided by
the acquiring company. The 40 member staff of the St. Louis headquarters
will be the first affected as previously centralized functions are
incorporated into the regional operations located in SD, KS; and TX.
Within sixty days only those performing corporate functions that can not
be decentralized will remain in St. Louis.
"While a number of alternatives continue to be evaluated, we have
concluded that the best interests of our stockholders would be served by
restructuring at this time. While downsizing may occur across the
company, customers will not notice any change," says Jim Cragg,
president and COO, "most of our customers think their telephone service
is provided by companies that carry our regional names." ACG does
business in 15 states under the names of Feist Long Distance, Firstel
and Valu-Line.
The company believes these actions will place the CLEC unit in the best
possible light as an acquisition candidate. The program is intended to
protect the customer base and customer service while staff resources are
being directed at priority functions. "Any new owner will benefit from a
lean organization to drive future operations," said Cragg.
Background
On April 12, 1999, ACG announced its intent to acquire the outstanding
stock of YPtel Corporation, WebYP, Inc. (d/b/a WorldPages.com) and a
related company, Big Stuff, Inc. The corporation will be re-named
WorldPages.com and its stock will continue to be traded on the NYSE
under a new symbol. WorldPages.com intends to vertically integrate its
Internet directory, recognized as a leader by both PC Magazine and The
-----------
Wall Street Journal, with the profitable print yellow pages operations
of ACG (Great Western Directories) and YPtel (Pacific Coast Publishing).
In the future, WorldPages.com intends to provide branded directories to
5.2 million users in 41 markets in the U.S. and leverage its existing
affiliations with over 80 independent print directories. In addition,
through WorldPages.com, customers will have direct access to 112 million
U.S and Canadian white and yellow pages listings, 9 million e-mail
addresses, 30 million URLs and links to over 200 directories worldwide.
<PAGE>
Friday May 20, 1999
COMPANY PRESS RELEASE
Advanced Communications And Bank Of America Close Financing
ST. LOUIS (May 20, 1999) Advanced Communications Group, Inc. (ACG,
listed NYSE: ADG) closed on the $40 million bridge and working capital
line of credit from Bank of America Corporation (NYSE: BAC), which it
announced previously. This comes on the heels of ACG's recent engagement
of Banc of America Securities, LLC (a subsidiary of Bank of America
Corporation and formerly named NationsBanc Montgomery Securities) as
strategic advisor in connection with the intended sale of its switch-
based long distance and competitive local exchange telephone (CLEC)
businesses.
The financing is part of the strategic corporate redirection announced
April 12, 1999. ACG plans to expand its yellow pages directories in both
print and Internet forms and divest its switch-based long distance
telephone and CLEC businesses. After obtaining appropriate shareholder
and regulatory approvals, the corporation will be re-named
WorldPages.com and its stock will continue to trade on the NYSE under a
new symbol. ACG expects to close on the related acquisitions of YPtel
Corporation (d/b/a Pacific Coast Publishing), an independent print
directories leader in the western U.S., Big Stuff, Inc., a web site
design & graphics company, and Web YP, Inc. (d/b/a WorldPages.com), an
Internet directory, during 3Q99.
WorldPages.com had approximately 700 employees and revenue of over $83
million on a pro forma basis for calendar 1998, assuming the
acquisitions occurred on January 1, 1998. In the future, WorldPages.com
plans to provide branded directories to 5.2 million users in 41 markets
in the U.S. and leverage its existing affiliations with over 80
independent print directories. In addition, WorldPages.com plans to
provide customers access to 112 million U.S and Canadian white and
yellow pages listings, 9 million e-mail addresses, 30 million URLs and
links to over 200 directories worldwide.
Please visit www.acginc.net and find the world at www.worldpages.com
-------------- ------------------
<PAGE>
Thursday June 3, 1999
COMPANY PRESS RELEASE
ADVANCED COMMUNICATIONS EXECUTES DEFINITIVE AGREEMENTS
TO BECOME WORLDPAGES.COM
ST. LOUIS (June 3, 1999) Advanced Communications Group, Inc. (ACG,
listed NYSE: ADG) today announced the execution of definitive agreements
to acquire the outstanding stock of YPtel Corporation, WebYP, Inc.
(d/b/a WorldPages.com) and a web site production company, Big Stuff,
Inc. Upon closing, ACG will be re-named WorldPages.com and its stock
will continue to be traded on the NYSE under a new symbol. The
transaction's closing is subject to shareholder and regulatory approvals
and is expected to be completed during the third calendar quarter.
Commenting on the agreement, Richard O'Neal, chairman and chief
executive officer of ACG said, "It is with great pleasure and excitement
that we announce the completion of this milestone event in becoming
WorldPages.com. The market has responded very favorably to our plan to
establish the world's premier Internet yellow pages network, which will
be fully integrated with the highly-profitable local print yellow page
directories."
The new company, WorldPages.com, had approximately $84.9 million in
revenue and $13.4 million in earnings before interest, taxes,
depreciation and amortization (EBITDA) for the twelve months ended March
31, 1999, on a pro forma basis excluding ACG's telecom operations and
assuming the acquisitions occurred on April 1, 1998. The companies to be
acquired had pro forma revenue and EBITDA during the same period of
$37.2 million and $6.6 million, respectively. Included in these amounts
were the combined revenue and EBITDA of Big Stuff, Inc. and
WorldPages.com of $2.4 million and a loss of $0.7 million, respectively.
ACG expects to issue approximately 12.5 million common shares as
consideration for the acquisitions, subject to adjustments based on
capital contributions made by existing shareowners of the companies to
be acquired during the period preceding the closing and the amount
received from the sale of ACG's telecom operations. In addition, certain
noteholders of ACG, including ACG's chairman and CEO, plan to convert a
$15 million note from the company to approximately 2.8 million shares of
ACG common stock. As a result, the company expects the diluted shares
outstanding to be approximately 39 million at closing.
WorldPages.com will serve a market poised for growth at the intersection
of Internet & yellow pages advertising and e-commerce. Mecklermedia
projects that 57 percent of all U.S. businesses plan to participate in
e-commerce by next year. With over 87 million Americans online,
according to NUA Interactive, the Internet has already become a multi-
billion dollar advertising and retail e-commerce vehicle. The research
findings of Forrester and SIMBA suggest that Internet advertising will
grow to about $20 billion by 2003 with worldwide e-commerce totaling
over $3.2 trillion, which is about 5% of projected world trade. "It is
our view that WorldPages.com is uniquely positioned to take advantage of
these trends," added O'Neal.
<PAGE>
<PAGE>
The mission of WorldPages.com is to facilitate transactions through
advertising, web site production & design and e-commerce between buyers
and sellers worldwide by establishing the world's premier Internet
yellow pages network that is integrated with local print yellow page
directories. WorldPages.com plans to accomplish this mission and
capitalize on the market opportunity through several strategies
including:
* establishing WorldPages.com as an international brand, in part by
branding the front covers of millions of yellow pages print directories,
which are distributed annually;
* leveraging the large direct sales force of over 400 in-house
representatives and hundreds of additional salespeople from the over 80
independent yellow pages companies with which Worldpages.com has sales
agreements to sell Internet advertising and web site production services
to both prospective customers and its own 80,000 existing print
directories advertisers;
* developing additional partnerships with major Internet portals and
software & hardware companies;
* developing further content partnerships;
* establishing the web factory for centralized site design, production &
maintenance, which currently hosts over 120,000 web sites;
* expanding WorldPages.com's presence internationally; and
* growing the print directories business to provide the capital
necessary to expand the Internet publishing and e-commerce customer
bases.
WorldPages.com continues to win recognition and awards as one of the
world's top web sites. During May 1999, Windows Magazine named
----------------
WorldPages.com one of the 101 best business web sites, and, in January
1999, PC Magazine ranked WorldPages.com as one of the top 100 web
-----------
sites. In addition, WorldPages.com has working relationships with many
industry leaders such as Microsoft, Packard Bell and Sony/ETAK. Through
WorldPages.com, customers have direct access to over 115 million U.S.
and Canadian white and yellow page listings, 9 million e-mail addresses,
30 million URLs, and links to over 300 directories worldwide.
Richard O'Neal Chairman and Chief Executive Officer, stated,
"WorldPages.com has a talented and experienced group of professionals
joining me on the executive team. Our key members include: Rick Klein,
currently president & COO of WorldPages.com; Douglas McIntyre, the
president & CEO of YPtel; Dick Reid, currently both president of Big
Stuff, Inc. & CEO of WorldPages.com; and Ed Truant, currently the CFO of
YPtel. We share a common vision of extraordinary growth for
WorldPages.com."
The incoming board of directors for WorldPages.com is composed of eight
members including three nominees from the current boards of ACG and
YPtel. Current nominees include Wilmot L. Matthews, Robert E. Flynn, and
George D. Anderson from YPtel and Richard O'Neal, Robert F. Benton and
Marvin C. Moses from ACG. WorldPages.com is seeking to fill its
remaining board seats with successful senior executives from Internet
and e-commerce businesses.
Please visit www.acginc.net and find the world at www.worldpages.com.
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<PAGE>
TUESDAY JUNE 15, 6:59 AM EASTERN TIME
Company Press Release
Advanced Communications Presents WorldPages.com Vision at CIBC World
Markets Investor Conference
ST. LOUIS--(BUSINESS WIRE)--June 15 1999--Richard O'Neal, chairman and
CEO of Advanced Communications Group(ACG)(NYSE: ADG - news) and
WorldPages.com, which recently agreed to be acquired by ACG, will
present the company's mission and vision to investors attending the CIBC
World Markets Investor Conference - ``The Communications Food Chain,''
June 16, 1999, in New York City.
This will be the first opportunity for many investors to engage in a
conversation concerning the new business entity, WorldPages.com. The
definitive agreement linking WorldPages.com, Big Stuff, Inc., YPtel
Corporation, and Advanced Communications Group, Inc (NYSE: ADG - news)
was signed June 3, 1999. Completion of the acquisition is anticipated in
the third calendar quarter of this year after shareholder and regulatory
approvals are received.
During the conference, O'Neal will share the vision that will lead the
company as significant changes are completed. As part of this change,
ACG will divest its telecommunications operations and concentrate on
developing its profitable yellow page print and Internet directory
operations.
``The keystones of the business strategy are built around an impressive
list of accomplishments in every segment needed to be successful,'' says
O'Neal. ``We start with a base of profitable print yellow page
directories serving 41 markets in 7 states and an internal sales force
of 400. We add reseller agreements with over 85 independent yellow page
publishers and an additional 1,100 sales people serving hundreds of
additional markets. This provides a sales force of over 1,500 ''feet on
the street`` selling both print and Internet - e-commerce products. And
because we are building on an existing operation, all the sales expenses
are already factored into the profit picture,'' adds O'Neal.
As it stands, WorldPages.com has already been recognized as one of the
101 best web sites by PC Magazine, Windows Magazine and The Wall Street
Journal. O'Neal points out that, ``By placing emphasis on this site, we
intend to make it the premier Internet yellow pages network that serves
local, national and international needs.''
Other key strategies will include branding all print directories with
the WorldPages.com name, strengthening the relationships that currently
exist between the yellow page sales force and their customers, partner
with local businesses as they enter the world of e-commerce by
advertising on the Internet, partner with leading internet portals and
tech companies, add additional content, expand a web factory, enlarge
international presence and grow the number of print directories.
WorldPage services are featured by Microsoft (NASDAQ:MSFT - news),
NEC/Packard-Bell (NYSE:NIPNY - news), Compaq (NYSE:CPQ - news), the ETAK
division of Sony (NYSE:SNE - news), TMP Worldwide (NASDAQ:TMPW - news),
ZDNet (NASDAQ:ZD - news), and Lycos (NASDAQ:LCOS - news). Among the
company's sales partnerships are NDC (National Directory Company),
Advanced Communications Group (NYSE:ADG - news) Pacific Coast
Publishing's Regional Telephone Directories, and Haines Publishing, Inc.
Web YP, Inc. is based in San Francisco, California with production
facilities in Amarillo, Texas.
Statements made in this news release that state the company's or
management's intentions, hopes, beliefs, expectations or predictions of
the future are forward-looking statements. These statements are not
guarantees of future performance. It is important to note that the
company's actual results could differ materially from those projected in
such forward-looking statements. Additional information concerning
factors that can affect performance are contained from time-to-time in
the Company's SEC filings, including but not limited to Form 10-K for
the year ended December 31, 1998. Copies of this document can be
obtained by contacting the company or the SEC.
<PAGE>
Thursday July 15, 1999
COMPANY PRESS RELEASE
ADVANCED COMMUNICATIONS SIGNS DEFINITIVE AGREEMENT TO SELL
ITS TELECOM OPERATIONS
ST. LOUIS (July 15, 1999) Advanced Communications Group, Inc. (ACG,
listed NYSE: ADG) today announced the execution of a definitive
agreement to sell its entire base of telecommunications operations for
cash of $49.8 million to Compass Telecommunications, Inc. The
consideration is subject to adjustment based on the amount of working
capital at closing. The transaction is subject to shareholder and
various regulatory approvals, including those of the FCC and various
state public service commissions.
Compass Telecommunications, Inc., led by a management team with
considerable telecommunications industry investment and operating
experience, intends to capitalize the business to enable significant
expansion of its products, services and scope of operations. Tony Capers
of ACG will head the management of the telecommunications services
operations until the transaction closes, which management expects by
December 31, 1999.
Richard O'Neal, ACG Chairman and CEO added, "This divestiture is
consistent with our previously announced change in strategic focus,
which resulted in the decision to sell our telecom operations and expand
the yellow pages business as WorldPages.com. The new enterprise will
focus on creating a world-class, integrated network of print and
Internet directories to take advantage of the convergence of these
advertising mediums."
Pursuant to the execution of definitive agreements announced on June 3,
1999, ACG plans to acquire the outstanding stock of YPtel Corporation,
WebYP, Inc. (d/b/a WorldPages.com) and a web site production company,
Big Stuff, Inc. Upon closing, regulatory and shareholder approvals, ACG
will be re-named "WorldPages.com" and its stock will continue to be
traded on the New York Stock Exchange under a new symbol.
Please visit www.acginc.net and find the world at www.worldpages.com
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