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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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WORLDPAGES.COM, INC.
(Exact name of Registrant as specified in its charter)
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DELAWARE 76-0549396
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
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390 SOUTH WOODS MILL ROAD, SUITE 260, ST. LOUIS, MISSOURI 63017
(314) 205-8668
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
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MICHAEL A. PRUSS
VICE PRESIDENT & CHIEF FINANCIAL OFFICER
390 SOUTH WOODS MILL ROAD, SUITE 260
ST. LOUIS, MISSOURI 63017
(314) 205-8668
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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COPIES TO:
CRAIG A. ADOOR, ESQ.
BLACKWELL SANDERS PEPER MARTIN LLP
720 OLIVE STREET, SUITE 2400
ST. LOUIS, MISSOURI 63101
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
FROM TIME TO TIME AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
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If the only securities being registered on this Form are to be offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with a dividend or
interest reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
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<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE(2)
<S> <C> <C> <C>
Common Stock $.0001 par value...... 12,123,589 $5.25 $63,648,842
<CAPTION>
AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED REGISTRATION FEE
<S> <C>
Common Stock $.0001 par value...... $16,803.30
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(1) All of the shares of Stock offered hereby are being sold for the accounts of
selling stockholders of the registrant. (See "Selling Stockholders" herein.)
(2) Estimated pursuant to Rule 457(c) solely for the purpose of calculating the
registration fee, based on the average of the high and low prices reported
on the New York Stock Exchange on April 17, 2000.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE>
PROSPECTUS
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
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Subject to Completion dated April 21, 2000
WORLDPAGES.COM, INC.
12,123,589 SHARES OF COMMON STOCK
($.0001 PAR VALUE)
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These shares of our common stock are being offered by the selling
stockholders identified in this prospectus. The selling stockholders may sell
these shares from time to time in brokers' transactions, negotiated
transactions, or otherwise at prices current at the time of sale. We will not
receive any proceeds from these sales.
All expenses of the registration of these shares (other than brokerage
commissions and transfer taxes, which will be paid by the selling stockholders)
will be paid by us. We estimate that the expenses will be $ .
Our stock is traded on the New York Stock Exchange under the symbol "WPZ."
On April 20, 2000, the closing sale price of our common stock as reported by the
New York Stock Exchange was $6.9375 per share.
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 3 OF THIS
PROSPECTUS BEFORE PURCHASING ANY OF THE SECURITIES OFFERED BY THIS PROSPECTUS.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OR PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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UNDERWRITING DISCOUNTS PROCEEDS TO SELLING
PRICE TO PUBLIC AND COMMISSIONS STOCKHOLDERS
<S> <C> <C> <C>
Per Share......................... See text above. See text above. See text above.
Total............................. See text above. See text above. See text above.
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The date of this prospectus is , 2000.
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TABLE OF CONTENTS
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WHERE YOU CAN FIND MORE INFORMATION......................... 1
PROSPECTUS SUMMARY.......................................... 2
RISK FACTORS................................................ 3
USE OF PROCEEDS............................................. 10
SELLING STOCKHOLDERS........................................ 10
PLAN OF DISTRIBUTION........................................ 11
LEGAL MATTERS............................................... 12
EXPERTS..................................................... 12
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ABOUT THIS PROSPECTUS
WorldPages was formerly incorporated under the name Advanced Communications
Group, Inc. and its stock was traded on the New York Stock Exchange under the
symbol "ADG." Shortly after Advanced acquired YPtel Corporation, Web YP, Inc.
and Big Stuff, Inc., it changed the name under the which it was incorporated to
WorldPages.com, Inc. On the date hereof, the symbol under which its common stock
is traded on the New York Stock Exchange is "WPZ."
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any reports, statements and
other information we file at the SEC's public reference room in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on the public reference room. Our SEC
filings are also available to the public from commercial document retrieval
services and over the Internet at the SEC's website at http://www.sec.gov.
The SEC allows us to incorporate by reference the information we file with
it, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is any
important part of this prospectus, and information that we file later with the
SEC will automatically update and supercede this information. We incorporate by
reference the documents listed below and any future filings we make with the SEC
under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934,
as amended, until the selling stockholders have sold all the shares:
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WORLDPAGES SEC FILINGS (FILE NO. 001-13875) PERIOD
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Annual Report on Form 10-K................... Year ended December 31, 1999
Current Reports on Form 8-K.................. Filed January 14, 1999, April 14, 1999, July 29,
1999, December 6, 1999, January 6, 2000, March 9,
2000 and April 21, 2000
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If you are a stockholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through us or the SEC.
Documents incorporated by reference are available from WorldPages without
charge, excluding all exhibits unless we have specifically incorporated an
exhibit by reference. Stockholders may obtain documents incorporated by
reference in this prospectus by requesting them in writing or by telephone from
WorldPages at the following address or telephone number:
WorldPages.com, Inc.--Investor Relations
390 South Woods Mill Road, Suite 260
St. Louis, Missouri 63017
(314) 205-8668
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and does not contain all of the information you
should consider before investing in WorldPages. You should read this entire
prospectus carefully.
WORLDPAGES
Beginning with its initial public offering in February 1998, WorldPages was
a yellow pages publisher and a telecommunications service provider operating a
local exchange carrier providing integrated telecommunications services. In
April 1999, as a result of its inability to adequately fund its
telecommunications operations, WorldPages determined to change its business
strategy to focus on its profitable yellow pages advertising segment and to
expand into internet directory services. WorldPages pursued this new strategy by
selling its telecommunications operations in November 1999 and acquiring YPtel
Corporation, Web YP, Inc. and Big Stuff, Inc. in February 2000. This February
acquisition increased WorldPages' yellow pages publishing business as well as
expanded its operations to include providing internet directory services.
WorldPages is one of the largest independent yellow pages publishers in the
United States. It publishes and distributes approximately 6.6 million yellow
pages directories annually in 42 markets in Texas, Oklahoma, California,
Washington, Oregon, Utah and Arizona. WorldPages also designs and produces
websites for businesses and operates a website designed to bring buyers and
sellers together.
WorldPages' headquarters are located at 390 South Woods Mill Road, Suite
260, St. Louis, Missouri. Its telephone number is (314) 205-8668.
SHARES OF WORLDPAGES COMMON STOCK TO BE SOLD BY SELLING STOCKHOLDERS
The selling stockholders individually identified under the caption "Selling
Stockholders" offer for sale 10,135,133, shares of common stock of WorldPages.
Three of the selling stockholders, Halifax Fund L.P., Elliot Associates L.P. and
Westgate International, L.P., obtained or will obtain the shares they are
selling pursuant to the conversion of subordinated debentures and the exercise
of related warrants. The remaining selling stockholders received their shares
either directly or indirectly in connection with the formation of WorldPages in
February 1998, or will receive shares upon exercise of options.
THE OFFERING
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Shares Offered by Selling Stockholders:...... 12,123,589(1)
Total Shares Outstanding after the
Offering:.................................. 51,158,038(2)
Use of Proceeds:............................. WorldPages will not receive any of the
proceeds from the sale of shares of
WorldPages common stock by the selling
stockholders.
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(1) Of these shares, approximately 6,920,497 are issuable upon the exercise of
options or warrants, or the conversion of convertible debentures. These
securities must be converted into WorldPages common stock before the stock
may be sold. Further, the convertible debentures being registered herein of
5,240,878 shares represent 200% of the shares currently issuable using the
current conversion price.
(2) Included in these shares are the 12,123,589 to be sold by the selling
stockholders, and 3,117,786 additional shares to be issued upon conversion
of convertible securities, options and warrants issued in connection with
WorldPages' acquisition of YPtel, Web YP and Big Stuff in February 2000.
These additional securities must be converted into WorldPages common stock
before the stock may be sold.
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RISK FACTORS
You should carefully consider the risks and uncertainties described below in
conjunction with the other information contained in this prospectus before
purchasing shares of our common stock.
IF WORLDPAGES IS UNABLE TO FIND ADDITIONAL SOURCES OF FINANCING, IT MAY BE
UNABLE TO IMPLEMENT ITS STRATEGIC PLAN.
WorldPages may need additional capital to implement both its plans to
acquire other yellow pages publishers and to implement its Internet directory
strategy.
WORLDPAGES MAY NOT BE ABLE TO ACHIEVE OR SUSTAIN PROFITABILITY.
Although WorldPages' print yellow pages businesses are profitable,
WorldPages expects to generate losses in its Internet operations while it
further develops that business. There can be no assurance that WorldPages will
be able to sufficiently increase its revenue base or achieve and sustain
profitability and generate sufficient cash flow to meet its working capital,
capital expenditure and debt service requirements. The inability to increase
revenue and generate sufficient cash flow may have a material adverse effect on
WorldPages.
WORLDPAGES' LARGE DEBT BALANCE COULD SIGNIFICANTLY AND MATERIALLY AFFECT
WORLDPAGES' PLANS TO IMPLEMENT ITS NEW BUSINESS FOCUS, STRATEGY AND DIRECTIONS.
This large debt balance could:
- limit the ability of WorldPages to obtain additional financing for its
working capital, capital expenditure and debt service requirements or
other purposes;
- require that a substantial portion of WorldPages' cash flow from
operations, if any, be dedicated to the payment of principal and interest
on its indebtedness;
- limit its flexibility in planning, or reacting to, changes in its
business;
- make WorldPages' debt load higher than some of its competitors, which may
place it at a competitive disadvantage;
- make it more difficult for WorldPages to meet its obligations; and
- make WorldPages more vulnerable to a downturn in its business or in the
markets in which it operates.
WORLDPAGES' STOCK PRICE HAS BEEN AND MAY CONTINUE TO BE VOLATILE AND INVESTORS
MAY LOSE A SIGNIFICANT PORTION OF THEIR VALUE IN THEIR INVESTMENT IN WORLDPAGES'
COMMON STOCK.
WorldPages' stock price could be subject to wide fluctuations in response to
factors such as the following:
- the addition or loss of affiliates or content providers;
- conditions or trends in the Internet and e-commerce industries; and
- changes in the market valuations of other Internet, online service or
software companies.
In addition, the market for Internet and technology company stocks has
experienced extreme price and volume fluctuations that have often been unrelated
or disproportionate to the operating performance of these companies. These broad
market and industry factors may materially and adversely affect WorldPages'
stock price, regardless of its operating performance. The trading prices of the
stocks of many technology companies are at or near historical highs and reflect
price-earnings ratios substantially above historical levels. These trading
prices and price-earnings ratios may not be sustained.
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EXPECTED BENEFITS OF THE ACQUISITIONS MAY NOT BE REALIZED WHICH MAY ADVERSELY
AFFECT EXPECTED EARNINGS AND THE MARKET PRICE OF WORLDPAGES' COMMON STOCK.
If WorldPages is not able to effectively integrate its technology,
operations and personnel in a timely and efficient manner, then the benefits of
acquiring YPtel, Web YP and Big Stuff will not be realized. In particular, if
the integration is not successful:
- WorldPages may not achieve the expected results from the acquisition of
YPtel, Web YP and Big Stuff;
- WorldPages may lose key personnel; and
- WorldPages may not be able to retain key business relationships.
The expected benefits of the February 2000 acquisitions may not be realized
to the extent and within the time frame expected by investors or financial
analysts and thus may adversely affect expected earnings and the market price of
WorldPages' common stock.
THE ARRANGEMENTS REQUIRED TO PERMIT THE STOCKHOLDERS OF YPTEL WHO ARE CANADIAN
RESIDENTS TO TRANSFER THEIR YPTEL STOCK TO WORLDPAGES ON A TAX-DEFERRED BASIS
COULD RESULT IN SUBSTANTIAL RESTRICTIONS ON WORLDPAGES' ABILITY TO EXECUTE
TRANSACTIONS THAT MIGHT OTHERWISE BE IN THE BEST INTERESTS OF WORLDPAGES' OTHER
STOCKHOLDERS.
As described below, the terms of the various agreements and certain
securities issued to stockholders of YPtel contain numerous restrictions.
THE EXCHANGEABLE SHARE STRUCTURE REPRESENTS A SIGNIFICANT RESTRICTION ON
WORLDPAGES' FUTURE ABILITY TO PAY CASH OR STOCK DIVIDENDS ON WORLDPAGES
COMMON STOCK.
Shareholders of YPtel were issued Class A special shares by ACG Exchange
Company, a wholly-owned Nova Scotia subsidiary of WorldPages, which are
exchangeable on a one-for-one basis for WorldPages' common stock. Under the
acquisition terms and the share provisions by which the Class A Special Shares
were created, if WorldPages wishes to issue either a cash dividend or a stock
dividend on shares of WorldPages common stock, it is required to cause ACG
Exchange Company to issue an economically equivalent dividend to the holders of
the Class A Special Shares. The negative Canadian tax consequences of that
dividend could have the effect of making the whole dividend transaction cost
prohibitive to WorldPages.
THE EXCHANGEABLE SHARE STRUCTURE REPRESENTS A SIGNIFICANT RESTRICTION ON
WORLDPAGES' FUTURE ABILITY TO ENGAGE IN A TRANSACTION INVOLVING THE SALE OF
ITS SHARES AND ASSETS. EVEN IF WORLDPAGES IS ABLE TO ENGAGE IN THE
TRANSACTIONS, THE COMPLICATED STRUCTURE OF THE CLASS A SPECIAL SHARES COULD
RESULT IN A POTENTIAL PURCHASER DECREASING THE AMOUNT PER WORLDPAGES SHARE
IT WOULD BE WILLING TO PAY FOR WORLDPAGES.
MERGERS. The terms of the acquisition of YPtel also restrict the ability of
WorldPages to engage in merger transactions with other companies unless the
WorldPages board of directors has used its best efforts to provide comparable
treatment between the holders of WorldPages common stock and the holders of
Class A Special Shares, taking into account the general tax effect of such
merger upon such holders, respectively, and economic equivalency.
A merger partner or acquirer willing to agree to continue the tax deferral
arrangement of the Class A Special Shares for the balance of the 5-year period
may offer a lower price or value for that reason. WorldPages believes that
potential acquirors or merger partners will be reluctant to agree to the
restrictions referenced above and the other restrictions contained in the
Exchange and Voting Trust Agreement, the Support Agreement and the Class A
Special Shares provisions.
- In a merger involving the exchange of other stock for WorldPages common
stock, if the merger partner or acquirer is unwilling to continue the tax
deferral arrangement provided by the ACG Exchange Company/Class A Special
Share structure, this could result in holders of Class A
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Special Shares being allocated a higher per share consideration than
holders of WorldPages common stock in the merger.
- If the merger consideration is all cash to both holders of WorldPages
common stock and holders of Class A Special Shares, however, the same per
share cash consideration will be applicable to both groups.
SPINOFFS. It may be impossible to structure a stock spin-off to
stockholders of WorldPages during the time the Class A Special Shares are
outstanding.
THE EXCHANGEABLE SHARE STRUCTURE COULD RESULT IN A SIGNIFICANT COST IN
OBTAINING CONSENTS FROM THE HOLDERS OF CLASS A SPECIAL SHARES.
Most of the restrictions noted above are not applicable if WorldPages is
able to obtain the consent of the requisite majority of holders of the Class A
Special Shares to the actions WorldPages desires to take, but in many cases
obtaining such consent may not be easy or itself may require costly payments and
the need for significant tax and legal advice to determine how or if the
transaction can be structured and the applicable tax consequences to the various
parties.
WEB YP HAS A LIMITED OPERATING HISTORY.
Web YP, WorldPages' Internet services subsidiary, has had a very limited
operating history, and has incurred net losses since inception of operations in
January 1998. At December 31, 1999, Web YP had an accumulated deficit of
approximately $6.2 million. WorldPages expects Web YP to incur significant
operating losses on a quarterly basis in the future. Therefore, WorldPages'
internet services business may never be profitable. WorldPages' prospects must
be considered in light of the risks, expenses and difficulties frequently
encountered by companies in their early stage of development, particularly
companies in new and rapidly evolving markets such as Internet services.
THE INTERNET BUSINESS MODEL IS EVOLVING AND UNPROVEN AND MAY NOT BE SUCCESSFUL,
IN WHICH CASE WORLDPAGES' STOCK PRICE MAY BECOME DEPRESSED.
WorldPages' Internet business strategy is to facilitate transactions through
advertising, website production and design, and e-commerce between buyers and
sellers worldwide by establishing a premier Internet yellow pages network that
is integrated with local print yellow pages directories. WorldPages' business
model is relatively new to the Internet, is unproven and is likely to continue
to evolve. Accordingly, WorldPages' business model may not be successful and
WorldPages may need to change it. WorldPages' ability to generate significant
advertising and e-commerce revenues by promoting its advertisers' business
through its yellow pages website will depend, in part, on its ability to attract
site traffic and provide its advertisers with the necessary tools to transact
commerce on the Internet. WorldPages intends to continue to develop its business
model as it explores opportunities internationally and in new and unproven areas
such as e-commerce and to provide content and e-commerce solutions for emerging
Internet applications. If WorldPages does not effectively execute its strategy,
WorldPages' business will suffer and may never achieve or sustain profitability.
IF THE COMMERCIAL USE OF THE INTERNET DOES NOT DEVELOP, OR IF THE INTERNET DOES
NOT DEVELOP AS AN EFFECTIVE AND MEASURABLE MEDIUM FOR ADVERTISING, WORLDPAGES'
BUSINESS WILL SUFFER.
Most advertising agencies and potential advertisers, particularly local
advertisers, have only limited experience advertising on the Internet and have
not devoted a significant portion of their advertising expenditures to Internet
advertising. As the Internet evolves, advertisers may find Internet advertising
to be a less effective means of promoting their products and services relative
to traditional methods of advertising and may not continue to allocate funds for
Internet advertising. Fluid and intense competition in the sale of advertising
on the Internet has led different vendors to quote a wide range of rates and to
offer a variety of pricing models for various advertising services. As a result,
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WorldPages may have difficulty projecting future advertising revenues and
predicting which pricing models advertisers will adopt. In addition, if a large
number of consumers use "filter" software programs that limit or remove
advertising from the Internet, advertisers may choose not to advertise on the
Internet.
TO THE EXTENT THAT THE PRINT YELLOW PAGES BUSINESS MAY NOT BE AS PROFITABLE AS
IT HAS BEEN HISTORICALLY, NET INCOME MAY BE ADVERSELY AFFECTED.
The print yellow pages business will be the platform for growth for
WorldPages. The expansion of business will depend upon the ability of management
to successfully implement its strategy. A substantial portion of historical
growth has resulted from the introduction of new directories. Although one of
the strategies for achieving its financial objectives is increasing the number
of its directories and the local markets which they serve, there can be no
assurance that historical success in establishing new directories will continue.
Management intends to continue to seek out opportunities for future expansion
through the acquisition of yellow pages businesses, but there can be no
assurance that WorldPages will be able to identify, negotiate and consummate
acquisitions on satisfactory terms, if at all. There is no assurance that new
acquisitions or new directories can be operated profitably or integrated
successfully into WorldPages' operations. Furthermore, start-ups and
acquisitions require substantial attention from and place substantial demands
upon senior management, which may divert attention from and adversely impact
their ability to manage existing businesses.
CHANGING TECHNOLOGY AND NEW PRODUCT DEVELOPMENT MAY CAUSE A REDUCTION IN THE USE
OF WORLDPAGES' PRODUCTS AND SERVICES. THIS WOULD NEGATIVELY IMPACT NET PROFITS
OR MAY RESULT IN LOSSES.
The yellow pages directory business is subject to changes arising from
developments in technology, including information distribution methods, and
users' technological preferences. As a result of these factors, WorldPages'
growth and future financial performance may depend upon its ability to develop
and market new products and services and create new distribution channels, while
enhancing existing products, services and distribution channels, in order to
accommodate the latest technological advances and user preferences. WorldPages
intends to use the Internet as a distribution channel for its products and
services and expects that, over the long-term, the use of the Internet will be
at least as important to the combined companies as print directories. The
increasing use of the Internet by consumers as a means to transact commerce may
result in new technologies being developed and services provided that could
compete with WorldPages' products and services. There can be no assurance that
WorldPages will be successful in any attempt to provide its services over the
Internet. A failure by WorldPages to anticipate or respond adequately to changes
in technology and user preferences, or an inability to finance the necessary
capital expenditures, could have a material adverse effect on WorldPages'
business, operating results and financial condition.
MANY OF WORLDPAGES' COMPETITORS HAVE GREATER FINANCIAL RESOURCES THAN
WORLDPAGES, WHICH MAY LIMIT WORLDPAGES' ABILITY TO COMPETE EFFECTIVELY FOR
ADVERTISING AND FUTURE ACQUISITIONS AND ADVERSELY AFFECT ITS NET INCOME.
The yellow pages directory industry is competitive. WorldPages competes with
large telephone utilities and to a lesser extent with independent yellow pages
publishers. There are over 225 independent yellow pages publishers operating in
competition with telephone utilities throughout the United States. Telephone
utility competitors are larger and have greater financial resources than
WorldPages. Other media in competition with yellow pages for local business and
professional advertising include newspapers, radio, television, billboards and
direct mail. There can be no assurance that WorldPages will be able to compete
effectively with these other firms for advertising or acquisitions in the
future.
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IF WORLDPAGES FAILS TO ENTER INTO AND MAINTAIN SATISFACTORY ARRANGEMENTS WITH
CONTENT PROVIDERS, WORLDPAGES' BUSINESS WILL SUFFER.
Web YP typically licenses content under short-term arrangements that do not
require royalties or other fees for the use of the content. However, Web YP may
enter into revenue-sharing arrangements with certain content providers, and it
pays certain content providers and web portals a one-time fee and/or a fee for
each query from Web users. WorldPages expects that, in the future, certain of
Web YP's content providers and web portals will likely demand a greater portion
of advertising revenues or will increase the fees that they charge for their
content.
THE PRINT AND INTERNET YELLOW PAGES INDUSTRIES ARE EXPERIENCING CONSOLIDATION,
WHICH COULD LIMIT ACCESS TO CONTENT, REDUCE ADVERTISING, REDUCE THE CUSTOMER
BASE OR HARM THE BUSINESS.
The print and Internet yellow pages industries have recently experienced
consolidation. This consolidation is expected to continue. Industry
consolidation could affect the combined companies in a number of ways,
including:
- companies from whom WorldPages intends to acquire content could be
acquired by one of their competitors and stop selling content to the
combined companies;
- WorldPages' customers could be acquired by one or more of their
competitors and stop buying advertising from the combined companies; and
- WorldPages' customers could merge with other customers, which could reduce
the size of the combined companies' customer base.
This consolidation in both the print and Internet industries could harm the
combined companies' business.
WORLDPAGES MAY BECOME A TARGET OR AN ACQUIROR THAT COULD RESULT IN YOUR
INVESTMENT IN WORLDPAGES BEING CONVERTED INTO AN INVESTMENT IN ANOTHER COMPANY.
From time to time, WorldPages has held discussions with potential strategic
investors who have expressed an interest in making an investment in, or in
acquiring WorldPages. WorldPages has no current agreements understandings or
commitments to be acquired by another company. However, given the dynamic nature
of the print and internet yellow pages industry, and the strategic alliances
which have occurred to date, WorldPages believes that with the acquisitions of
YPtel, Web YP and Big Stuff, it may be viewed as an attractive acquisition
candidate. Because of the way such acquisitions are often structured,
stockholders of WorldPages could find themselves being offered and potentially
having to accept stock of the acquiror in exchange for their shares of
WorldPages. Even in a strategic joint venture arrangement, stockholders of
WorldPages could find that the value of their investment in WorldPages may
depend on the operational ability of WorldPages' venture partner.
WORLDPAGES' SUCCESSFUL IMPLEMENTATION OF ITS NEW BUSINESS FOCUS, STRATEGY AND
DIRECTION MAY BE NEGATIVELY AFFECTED AS NEW MANAGEMENT DEVOTES TIME AND
ATTENTION TO LEARNING ABOUT WORLDPAGES AND AS IT ATTEMPTS TO INTEGRATE THE
COMBINED COMPANIES.
Much of the management of WorldPages is new to the company. Although this
new management personnel are experienced executives in the yellow pages
publishing and Internet directory industries, they have little employment
experience with and only a limited background knowledge of WorldPages. This
limited experience with the company could divert their attention from
implementing WorldPages' new business focus, strategy and direction as they
spend time learning about the company, and becoming acquainted with and learning
to work with the other new members of the management team as well as with
existing management. Also many of the employees are new to WorldPages and the
management team will have to become acquainted with and integrate the new
employees into the company.
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In addition to personnel changes, the attention of the new management team
may be diverted as it learns and tries to integrate the policies, procedures and
processes of the companies acquired in the February 2000 acquisitions. Each
company has its own accounting systems, information systems, credit policies,
billing policies, collection policies and other policies that management will
have to integrate to make the combined companies operate smoothly and
efficiently.
A less tangible, but not less important, issue will be integrating the
cultures of the combining companies, including the expectations and desires of
management and employees alike. Human resources policies and other policies
affecting the employees will have to be melded to help create a productive
working environment. The integration described in this paragraph and in the
immediately preceding one, if not implemented properly, could seriously and
adversely impact WorldPages' operations and its ability to realize the profit
potential from the February acquisition.
WORLDPAGES WILL BECOME INCREASINGLY RELIANT UPON INTERNALLY DEVELOPED SOFTWARE
AND SYSTEMS WHICH MAY CONTAIN ERRORS AND WHICH MUST BE EXPANDED AND UPGRADED.
WORLDPAGES' INABILITY TO CORRECT ANY ERRORS OR TO EXPAND OR UPGRADE ITS SOFTWARE
AND SYSTEMS COULD AFFECT ITS ABILITY TO COMPETE.
WorldPages must expand and upgrade its technology, transaction-processing
systems and network infrastructure if the volume of traffic on its website or
its affiliates' websites increases substantially. In addition, as WorldPages
expands into e-commerce, it may have to significantly modify its systems.
WorldPages could experience periodic temporary capacity constraints, which may
cause unanticipated systems disruptions, slower response times and lower levels
of customer service. WorldPages may be unable to accurately project the rate or
timing of increases, if any, in the use of its content services or to expand and
upgrade its systems and infrastructure to accommodate these increases in a
timely manner. Any inability to do so could harm WorldPages' business.
IF THE PERFORMANCE AND RELIABILITY OF THE INTERNET DIMINISH, WORLDPAGES COULD
LOSE ADVERTISING AND E-COMMERCE REVENUES.
WorldPages' success in its internet business will depend, in large part, on
other companies maintaining the Internet infrastructure. In particular, it will
rely on the ability of other companies to maintain a reliable network backbone
that provides adequate speed, data capacity and security and to develop products
that enable reliable Internet access and services. If the Internet continues to
experience significant growth in the number of users, frequency of use and
amount of data transmitted, the Internet infrastructure may be unable to support
the demands placed on it, and the Internet's performance or reliability may
suffer as a result of this continued growth. In addition, the Internet could
lose its commercial viability as a form of media due to delays in the
development or adoption of new standards and protocols to process increased
levels of Internet activity. Any such degradation of Internet performance or
reliability could cause advertisers to reduce their Internet expenditures. If
other companies do not develop the infrastructure or complementary products and
services necessary to establish and maintain the Internet as a viable commercial
medium, or if the Internet does not become a viable commercial medium or
platform for advertising, promotions and electronic commerce, the business of
WorldPages would suffer.
BREACHES IN THE SECURITY OF WORLDPAGES' NETWORK COULD DAMAGE ITS REPUTATION AND
SUBJECT IT TO LIABILITY AND BUSINESS LOSSES.
WorldPages' networks may be vulnerable to unauthorized access by hackers or
others, computer viruses and other disruptive problems. Someone who is able to
circumvent security measures could misappropriate WorldPages' proprietary
information or cause interruptions in its Internet operations which could harm
its business. WorldPages may need to expend significant capital or other
resources protecting against the threat of security breaches or alleviating
problems caused by breaches. Persons may be able to circumvent the measures that
WorldPages implements in the future. Eliminating computer viruses and
alleviating other security problems may require interruptions, delays or
cessation
8
<PAGE>
of service to users accessing web pages that deliver WorldPages' content
services, any of which would harm its business.
Users of online commerce services are highly concerned about the security of
transmissions over public networks. Concerns over security and the privacy of
users may inhibit the growth of the Internet and other online services
generally, and the web in particular, especially as a means of conducting
commercial transactions. Users could possibly circumvent the measures that
WorldPages takes to protect customer transaction data. To the extent that
WorldPages' activities involve the storage and transmission of proprietary
information, such as credit card numbers, security breaches could damage
WorldPages' reputation and expose it to a risk of loss or litigation and
possible liability. Any compromise of WorldPages' security could harm its
business.
WORLDPAGES MAY BE SUBJECT TO LIABILITY FOR INFORMATION CONTAINED IN ITS PRINT
AND INTERNET DIRECTORIES.
WorldPages obtains content from third parties. When it aggregates,
syndicates and distributes this content over the Internet, WorldPages may be
held liable for the information that is contained in that content. This could
subject WorldPages to legal claims for such things as defamation, negligence,
intellectual property infringement and product or service liability. Many of the
agreements by which WorldPages obtains content do not contain indemnity
provisions in its favor. Even if a given contract does contain indemnity
provisions, these provisions may not cover a particular claim. While WorldPages
carries general business insurance, this coverage may be inadequate in amount or
may not cover asserted claims. Even if an asserted claim is defeated, WorldPages
may incur substantial legal fees and expenses and diversion of management time
and attention.
In addition, individuals whose names appear in the WorldPages' yellow pages
and white pages directories have occasionally contacted WorldPages. These
individuals believed that their phone numbers and addresses were unlisted, and
WorldPages directories are not always updated to delete phone numbers or
addresses when they are changed from listed to unlisted. While WorldPages has
not received any claims from these individuals, it may receive claims in the
future. Any liability that WorldPages incurs as a result of content that it
receives from third parties could harm its financial results.
THIS PROSPECTUS STATEMENT CONTAINS FORWARD-LOOKING INFORMATION; ACTUAL RESULTS
MAY BE MATERIALLY AND ADVERSELY DIFFERENT THAN THE FORWARD-LOOKING INFORMATION.
Forward-looking statements in this prospectus include "forward-looking
statements" within the meaning of Section 27a of the Securities Act of 1933, as
amended, and Section 21e of the Securities Exchange Act of 1934, as amended. All
statements other than statements of historical facts included in this prospectus
may constitute forward-looking statements. In addition, forward-looking
terminology such as "may," "will," "expect," "intend," "estimate," "anticipate,"
"believe," or "continue" or the negative thereof or variations thereon or
similar terminology are intended to identify forward-looking statements.
Although WorldPages believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
expectations will prove to have been correct. Important factors that could cause
actual results to differ materially from WorldPages' expectations are disclosed
in this prospectus, including without limitation in conjunction with the
forward-looking statements included in this prospectus under "Risk Factors".
9
<PAGE>
USE OF PROCEEDS
WorldPages will not receive any of the proceeds from the sale of the shares
by the selling stockholders pursuant to this prospectus.
SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
selling stockholders:
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF NUMBER OF SHARES
SHARES OWNED SHARES TO BE TO BE OWNED
NAME PRIOR TO SALE SOLD AFTER SALE
- ---- ------------- ------------ ----------------
<S> <C> <C> <C>
Halifax Fund, L.P. .............................. 3,930,658(1) 3,930,658 0
c/o The Palladin Group L.P. 1,225,964(2) 1,225,964
195 Maplewood Ave.
Maplewood, New Jersey 07040
Elliot Associates, L.P. ......................... 655,110(1) 655,110 0
712 Fifth Avenue--36th Floor 204,327(2) 204,327
New York, NY 10019
Westgate International, L.P. .................... 655,110(1) 655,110 0
712 Fifth Avenue--36th Floor 204,327(2) 204,327
New York, NY 10019
Rod Cutsinger(3) ................................ 3,894,337(4) 3,894,337 0
5483 Tilbury 45,000(5) 45,000(5) 0
Houston, TX 77056
Sue Nan and Rod Cutsinger Foundation ............ 263,743 263,743
5483 Tilbury
Houston, TX 77056
Bradley Kirk Cutsinger 1985 Trust ............... 730,188(4) 730,188 0
5483 Tilbury
Houston, TX 77056
Jill Noel Cutsinger 1985 Trust .................. 243,396(4) 243,396 0
5483 Tilbury
Houston, TX 77056
Todd Feist(6) ................................... 321,428(7)(8) 71,428 250,000
10201 Peppertree
Wichita, KS 67226
TOTAL............................................ 12,373,589 12,123,589 250,000
</TABLE>
- ------------------------
(1) To be acquired pursuant to the conversion of WorldPages' 5% subordinated
convertible dentures issued February 23, 2000 and additional debentures that
may be issued under the terms of the Debenture Purchase Agreement.
Represents 200% of such number of shares that could presently be acquired,
assuming $30 million of outstanding debentures, as required by the
Registration Rights Agreement for the debentures.
(2) To be acquired pursuant to the exercise of warrants issued in connection
with the above 5% subordinated convertible debentures and additional
warrants that may be issued under the terms of the Debenture Purchase
Agreement. Represents 150% of such number of shares that could presently be
acquired, assuming $30 million of outstanding debentures, as required by the
Registration Rights Agreement for the debentures and warrants.
10
<PAGE>
(3) Founder of WorldPages. Director of WorldPages since November 1998, and from
its inception in September 1997 until May 1998. Chairman of the Board of
Directors and 80% equity interest owner of Consolidation Partners, LLC.
(4) Acquired as a member of Consolidation Partners, LLC, which acquired the
shares in connection with the formation of WorldPages in February 1998.
(5) Represents presently exercisable options to acquire 45,000 shares of common
stock.
(6) Regional Vice President of WorldPages and Director.
(7) Acquired in connection with the formation of WorldPages in February 1998.
(8) Includes 250,000 shares of common stock subject to stock options that are
immediately exercisable.
PLAN OF DISTRIBUTION
WorldPages is registering the common stock covered by this prospectus for
selling stockholders. As used in this prospectus, "selling stockholders"
includes the donees, pledgees, transferees or others who may later hold the
selling stockholders' interest. WorldPages will pay the costs, expenses and fees
in connection with registering the common stock, but the selling stockholders
will pay any brokerage commissions, discounts or other selling expenses
attributable to the sale of common stock.
The selling stockholders may sell the common stock from time to time in one
or more types of transactions (which may include block transactions), on the New
York Stock Exchange, or other exchange on which the common stock may be listed
for trading, in the over-the-counter market, through options, swaps or
derivatives, in negotiated transactions, through put or call options
transactions relating to the shares, through short sales of shares, or a
combination of such methods of sale, or in accordance with Rule 144 under the
Securities Act of 1933, as amended, rather than pursuant to this prospectus, or
any other manner permitted by law, at market prices prevailing at the time of
sale, at prices related to those prevailing market prices, fixed prices, which
may be changed, or at negotiated prices. Such transactions may or may not
involve brokers or dealers. The selling stockholders have advised WorldPages
that they have not entered into any agreements, understandings or arrangements
with any underwriters or broker-dealers regarding the sale of the shares, nor is
there an underwriter or coordinating broker acting in connection with the
proposed sale of shares by the selling stockholders.
The selling stockholders may effect such transactions by selling shares
directly to purchasers or to or through broker-dealers, which may act as agents
or principals. Such broker-dealers may receive compensation in the form of
discounts, concessions, or commissions from the selling stockholders and/or the
purchasers of shares for whom such broker-dealers may act as agents or to whom
they sell as principal, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions).
The selling stockholders and any broker-dealers that act in connection with
the sale of shares might be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act, and any commissions received by such
broker-dealers and any profit on the resale of the shares sold by them while
acting as principals might be deemed to be underwriting discounts or commissions
under the Securities Act. The selling stockholders may agree to indemnify any
agent, dealer or broker-dealer that participates in transactions involving sales
of the shares against certain liabilities, including liabilities arising under
the Securities Act.
Because selling stockholders may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, the selling stockholders will be
subject to the prospectus delivery requirements of the Securities Act.
WorldPages has informed the selling stockholders that the
11
<PAGE>
anti-manipulative provisions of Regulation M promulgated under the Exchange Act
may apply to their sales in the market.
The selling stockholders also may resell all or a portion of the shares in
open market transactions in reliance upon Rule 144 under the Securities Act,
provided they meet the criteria and conform to the requirements of such Rule.
LEGAL MATTERS
The validity of the shares of WorldPages common stock offered hereby has
been passed upon for WorldPages by Blackwell Sanders Peper Martin LLP, counsel
to WorldPages.
EXPERTS
The consolidated financial statements and schedule of WorldPages as of
December 31, 1999 and 1998, and for each of the years in the three-year period
ended December 31, 1999, have been incorporated by reference herein and in the
registration statement in reliance upon the report of KPMG LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing; and, with respect
to the financial statements of Web YP as of December 31, 1999 and 1998, and for
each of the years then ended, have been incorporated by reference herein and in
the registration statement in reliance upon the report of KPMG LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
The financial statements of Pacific Coast Publishing, Inc. as of
October 31, 1998 and 1997, and for each of the three years in the period ended
October 31, 1998, and the consolidated financial statements of YPtel Corporation
as of October 31, 1999, and for the year then ended, which are incorporated by
reference herein from our Current Report on Form 8-K/A dated April 21, 2000,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their reports incorporated by reference herein. Such financial statements are
incorporated herein by reference in reliance upon such reports given on the
authority of Ernst & Young LLP as experts in accounting and auditing.
12
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is an itemized statement of estimated expenses to be paid by
the registrant in connection with the issuance and sale of the common stock
being registered.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee
(Actual).................................................. $
Accounting fees and expenses................................ 10,000
Legal fees and expenses.....................................
Miscellaneous...............................................
------
Total....................................................... $
======
</TABLE>
All other expenses in connection with the issuance and sale of the common
stock being registered will be borne by the selling stockholders.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL") provides,
among other things, that a corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending, or
completed action, suit, or proceeding (other than an action by or in the right
of the corporation) by reason of the fact that the person is or was a director,
officer, agent, or employee of the corporation or is or was serving at the
corporation's request as a director, officer, agent or employee of another
corporation, partnership, joint venture, trust, or other enterprise, against any
and all expenses (including attorneys' fees), judgements, fines, and amounts
paid in settlement actually and reasonably incurred by the person in connection
with such action, suit, or proceeding. The power to indemnify applies only if
such person acted in good faith and in a manner he reasonably believed to be in
the best interest, or not opposed to the best interest, of the corporation, and
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
The power to indemnify applies to actions brought by or in the right of the
corporation as well, but only to the extent of defense expenses (including
attorneys' fees but excluding amounts paid in settlement) actually and
reasonably incurred and not to any satisfaction of a judgement or settlement of
the claim itself, and with the further limitation that in such actions no
indemnification shall be made in the event of any adjudication of liability to
the corporation, unless the court believes that in light of all the
circumstances indemnification should apply.
To the extent a present or former director or officer of the corporation is
successful on the merits or otherwise in defense of any action, suit, or
proceeding described in the preceding two paragraphs, such person is entitled,
pursuant to DGCL Section 145, to indemnification against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
therewith.
WorldPages' Restated Certificate of Incorporation provides that a director
of WorldPages shall not be personally liable to WorldPages or its stockholders
for monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to WorldPages or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL, or (iv) for any transaction from which the director derived an
improper personal benefit.
WorldPages' Restated Certificate of Incorporation also provides for
indemnification of WorldPages' directors and officers to the fullest extent
permitted by the DGCL, as the same exists or may hereafter be amended. Such
right to indemnification conferred in the Restated Certificate of Incorporation
shall
II-1
<PAGE>
be a contract right and shall include the right to be paid by WorldPages the
expenses incurred in defending any such proceeding in advance of its final
disposition; provided, however, that, if the DGCL requires, the payment of such
expenses incurred by a director or officer in his or her capacity as a director
or officer (and not in any other capacity in which service was or is rendered by
such person while a director or officer, including, without limitation, service
to an employee benefit plan) in advance of the final disposition of a
proceeding, shall be made only upon delivery to WorldPages of any undertaking,
by or on behalf of such director or officer, to repay all amounts so WorldPages
if it shall ultimately be determined that such director or officer is not
entitled to be indemnified under the Restated Certificate of Incorporation or
otherwise. WorldPages' Restated Certificate of Incorporation also provides that
WorldPages may, by action of the Board of Directors, provide indemnification to
employees and agents of WorldPages with the same scope and effect as the
foregoing indemnification of directors and officers.
The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred by the
Restated Certificate of Incorporation shall be exclusive of any other right
which any person may have or hereafter acquire under any statute, provision of
the Restated Certificate of Incorporation, WorldPages' by-laws, any agreement,
any vote of stockholders or disinterested directors of WorldPages or otherwise.
In addition to the provisions in its Restated Certificate of Incorporation,
WorldPages has taken such other steps as are reasonably necessary to effect its
indemnification policy. Included among such other steps is liability insurance
provided by WorldPages for its directors and officers for certain losses arising
from claims or charges made against them in their capacities as directors or
officers of WorldPages. WorldPages has also entered into indemnification
agreements with individual directors and officers. These agreements generally
provide such directors and officers with a contractual right of indemnification
to the full extent provided by applicable law and the charter documents of
WorldPages as in effect at the respective dates of such agreements.
WorldPages has placed in effect insurance which purports (a) to insure it
against certain costs of indemnification which may be incurred by it pursuant to
provisions in its Restated Certificate of Incorporation or otherwise, and
(b) to insure the officers and directors of WorldPages against certain
liabilities incurred by them in the discharge of their functions as officers and
directors except for liabilities arising from their own malfeasance.
II-2
<PAGE>
ITEM 16. EXHIBITS.
The following exhibits are filed herewith or incorporated herein by
reference. Documents designated by an asterisk (*) are to be filed by amendment.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- --------------------- ----------------------
<C> <S>
4.1 Convertible Debenture Purchase Agreement between Advanced
Communications Group, Inc., Halifax Fund, LP, Elliott
Associates, L.P. and Westgate International, L.P., dated
February 23, 2000
4.2 Registration Rights Agreement between Advanced
Communications Group, Inc. and each of the investor
signatories, dated as of February 23, 2000
4.3 5% Convertible Debenture due February 23, 2006
4.4 Common Stock Purchase Warrant dated February 23, 2000
4.5 Subordination Agreement among Bank of America, N.A., Halifax
Fund, L.P., the other participants in the convertible
debenture financing, and Advanced Communications
Group, Inc., dated as of February 23, 2000
5 Opinion of Blackwell Sanders Peper Martin LLP*
23(a) Consent of KPMG LLP (WorldPages.com, Inc.)
23(b) Consent of KPMG LLP (Web YP, Inc.)
23(c) Consent of Ernst & Young LLP
23(d) Consent of Blackwell Sanders Peper Martin LLP (contained in
Exhibit 5)
</TABLE>
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
II-3
<PAGE>
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) For purposes of determining any liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(5) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of St. Louis, State of Missouri, on April 21, 2000.
<TABLE>
<S> <C> <C>
WORLDPAGES.COM, INC.
By: /s/ MICHAEL A. PRUSS
----------------------------------------
Michael A. Pruss
VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below on this Registration Statement hereby constitutes and appoints Michael A.
Pruss, their true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for them and in their name, place and stead, in
any and all capacities (unless revoked in writing) to sign any and all
amendments to this Registration Statement to which this power of attorney is
attached, including any post-effective amendments as well as any related
registration statement (or amendment thereto) filed in reliance upon
Rule 462(b) under the Securities Act of 1933, as amended, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting to such attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in connection therewith,
as fully to all intents and purposes as they might and could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their substitute or substitutes, may lawfully do or cause to be
done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on April 21, 2000.
<TABLE>
<S> <C> <C>
By: /s/ RICHARD O'NEAL
-----------------------------------------------
Richard O'Neal
CHAIRMAN OF THE BOARD OF DIRECTORS AND CHIEF
EXECUTIVE OFFICER (PRINCIPAL EXECUTIVE OFFICER)
By: /s/ MICHAEL A. PRUSS
-----------------------------------------------
Michael A. Pruss
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
By: /s/ ROBERT FLYNN
-----------------------------------------------
Robert Flynn, DIRECTOR
</TABLE>
II-5
<PAGE>
<TABLE>
<S> <C> <C>
By:
-----------------------------------------------
Rod K. Cutsinger, DIRECTOR
By: /s/ GEORGE ANDERSON
-----------------------------------------------
George Anderson, DIRECTOR
By: /s/ DAVID M. MITCHELL
-----------------------------------------------
David M. Mitchell, DIRECTOR
By:
-----------------------------------------------
Wilmot Matthews, DIRECTOR
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- --------------------- ------------------------------------------------------------
<C> <S>
Documents designated by an asterisk (*) are to be filed by amendment.
4.1 Convertible Debenture Purchase Agreement between Advanced
Communications Group, Inc., Halifax Fund, LP, Elliott
Associates, L.P. and Westgate International, L.P., dated
February 23, 2000
4.2 Registration Rights Agreement between Advanced
Communications Group, Inc. and each of the investor
signatories, dated as of February 23, 2000
4.3 5% Convertible Debenture due February 23, 2006
4.4 Common Stock Purchase Warrant dated February 23, 2000
4.5 Subordination Agreement among Bank of America, N.A., Halifax
Fund, L.P., the other participants in the convertible
debenture financing, and Advanced Communications
Group, Inc., dated as of February 23, 2000
5 Opinion of Blackwell Sanders Peper Martin LLP*
23(a) Consent of KPMG LLP
23(b) Consent of KPMG LLP
23(c) Consent of Ernst & Young LLP
23(d) Consent of Blackwell Sanders Peper Martin LLP (contained in
Exhibit 5)
</TABLE>
<PAGE>
Exhibit 4.1
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT ("AGREEMENT") dated as of
February 23, 2000 between ADVANCED COMMUNICATIONS GROUP, INC. (whose name may
be changed to WorldPages.com, Inc.) a Delaware corporation (the "COMPANY"),
and each person or entity listed as an investor on SCHEDULE I attached to
this Agreement (each individually and "INVESTOR" and collectively the
"INVESTORS").
W I T N E S S E T H:
WHEREAS, the Company desires to sell and issue to the Investors, and
the Investors wish to purchase from the Company, 5% Convertible Debentures
due February 23, 2006 (the "DEBENTURES"), in the aggregate principal amount
of $20,000,000 at an aggregate price of $20,000,000, having the rights and
privileges set forth in the Debentures in the form of EXHIBIT 1.1A attached
hereto (the "INITIAL ISSUANCE"), on the terms and conditions set forth
herein; and
WHEREAS, the Debentures will be convertible into shares ("COMMON
SHARES") of common stock, par value $.0001 of the Company ("COMMON STOCK"),
pursuant to the terms of the Debentures, and the Investors will have
registration rights with respect to such Common Shares and the Warrant Shares
(as defined herein), pursuant to the terms of that certain Registration
Rights Agreement to be entered into between the Company and the Investors
substantially in the form of EXHIBIT 4.2(f) hereto ("REGISTRATION RIGHTS
AGREEMENT");
WHEREAS, to induce the Investors to purchase the Debentures, the
Company has agreed to issue to the Investors warrants exercisable for 572,350
of Common Stock in the form attached as EXHIBIT 1.1B (the "WARRANTS"; and,
together with the Debentures, the "SECURITIES");
WHEREAS, the Company may elect, and thereafter be required by the
Investors, to sell to the Investors additional Debentures (the "OPTION
DEBENTURES") in the aggregate principal amount of up to $5,000,000 and
$2,500,000, respectively, at an aggregate price of up to $5,000,000 and
$2,500,000, respectively, as further described herein;
WHEREAS, upon the issuance of the Option Debentures, the Company has
agreed to issue additional Warrants exercisable for shares of Common Stock
(the "OPTION WARRANTS," and together with the Option Debentures, the "OPTION
SECURITIES") as further described herein;
WHEREAS, in addition to the foregoing, the Investors may elect, in
each of their sole discretion, to purchase additional Debentures (the
"ADDITIONAL DEBENTURES" and, collectively with the Option Debentures, the
"SUBSEQUENT DEBENTURES" and, collectively with the Option Securities, the
"SUBSEQUENT SECURITIES") in the aggregate principal amount of $2,500,000 at
an aggregate price of $2,500,000, as further described herein.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1
PURCHASE AND SALE OF DEBENTURES AND WARRANTS, ETC.
Section 1.1 INITIAL ISSUANCE OF DEBENTURES AND WARRANTS.
(a) INITIAL ISSUANCE. Upon the following terms and conditions,
the Company shall issue and sell to each Investor severally, and each
Investor severally shall purchase from the Company, the outstanding principal
amount of Debentures and the number of Warrants indicated next to such
Investor's name on SCHEDULE I attached hereto.
(b) PURCHASE PRICE. The purchase price for the Debentures to be
acquired by each Investor (the "PURCHASE PRICE") shall be the Purchase Price
set forth next to such Investor's name on SCHEDULE I.
(c) THE CLOSING.
(i) The closing of the purchase and sale of the
Debentures and the Warrants (the "CLOSING") in the Initial
Issuance, shall take place at the offices of Kleinberg, Kaplan,
Wolff & Cohen, P.C. ("INVESTORS' COUNSEL") or at such other
place as is mutually agreeable, at 10:00 am., local time on the
later of the following: (x) the date on which the last to be
fulfilled or waived of the conditions set forth in Article 4
hereof and applicable to the Closing shall be fulfilled or
waived in accordance herewith, or (y) such other time and place
and/or on such other date as the Investors and the Company may
agree. The date on which the Closing occurs is referred to
herein as the "CLOSING DATE".
(ii) On the Closing Date, the Company shall deliver
to each Investor (x) certificates (with the number of and
outstanding principal amount of such certificates requested by
such Investor) representing the Debentures purchased hereunder
by such Investor at the Closing registered in the name of such
Investor or its nominee and (y) the Warrants registered in the
name of Investor or its nominee in such denominations as
reasonably requested by such Investor, and such Investor shall
deliver to the Company the Purchase Price for the Debentures
purchased by such Investor hereunder by wire transfer in
immediately available funds to an account designated in writing
by the Company. The delivery of payment by each Investor of the
Purchase Price applicable to it as set forth in this paragraph
shall constitute a payment delivered to the Company in
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satisfaction of such Investor's obligation to pay the Purchase
Price hereunder. In addition, each party shall deliver all
documents, instruments and writings required to be delivered by
such party pursuant to this Agreement at or prior to the
applicable Closing.
Section 1.2 OPTION SECURITIES.
(a) TERMS. Option Debentures and Option Warrants may be issued
pursuant to Sections 1.2(b) and 1.2(c) below. Once issued, the Option
Debentures and Option Warrants shall be subject to the same terms as the
Debentures and Warrants issued on the Closing Date and shall have the same
rights and privileges appurtenant thereto, except with respect to the
following: (i) the Closing Price applicable to the Option Debentures shall be
the average of the Market Price for Shares of Common Stock for the ten (10)
Trading Days prior to the Subsequent Closing Date (as defined herein) (the
"OPTION CLOSING PRICE"); (ii) the Conversion Price shall be equal to 110% of
the Option Closing Price; (iii) the Conversion Price shall Reset on the
6-month, 12-month, 18-month and 24-month anniversary of the Subsequent
Closing Date; (iv) the Purchase Price (as defined in the Warrants) of the
Option Warrants shall be equal to 130% of the Option Closing Price; (v) the
maturity date of the Option Debentures shall be the sixth anniversary of the
issuance of such Debentures; and (vi) the maturity date of the Option
Warrants shall be the fifth anniversary of the issuance of such Warrants. The
Option Securities issued pursuant to this Section 1.2 shall be issued
pursuant to documentation that is the same in all material respects to the
Debentures and Warrants other than changes necessary to conform the documents
to the distinctive terms of such Option Securities as set forth herein.
Except as otherwise indicated in this Section 1.2(a), undefined terms in this
Section 1.2 shall have the meaning set forth in the Debentures.
(b) THE COMPANY PUT OPTION.
(i) The Company may compel the Investors to
purchase (the "Company Put Option") Option Debentures up to a
total aggregate principal amount of $5,000,000 at a total
aggregate price of $5,000,000, upon written notice, for
immediately available funds, in accordance with the procedures
described below; provided that each Investor may only be
compelled to purchase a percentage of the total Option
Debentures subject to the Company Put Option equal to the
percentage such Investor purchased of the total principal
amount of the Debentures purchased pursuant to the Initial
Issuance. Upon the issuance of Option Debentures pursuant to
the exercise of the Company Put Option, the Company shall issue
to the Investors (pro rata in accordance with the percentages
of total Option Debentures each Investor shall have purchased)
Option Warrants for the purchase of ($1,500,000 DIVIDED BY the
Option Closing Price) plus 37,500 shares of Common Stock (such
number of shares to be subject to adjustment in a manner
consistent with the provisions adjusting the number of shares
issuable under the Warrant upon the occurrence of certain
events) per $5,000,000 principal amount of Option Debentures
issued to the Investors.
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(ii) The Company may exercise the Company Put
Option on only one occasion and only during the period
beginning on the 30th day after the Closing Date and
expiring on 120th day after the Closing Date (the "OPTION
PERIOD") by providing each Investor with at least 15
business days written notice (the "PUT OPTION NOTICE")
indicating that the Company is exercising its Company Put
Option, setting forth the pro rata amount that such
Investor is required to purchase (as determined in
accordance with Section 1.2(b)(i) above) and specifying the
date ("THE SUBSEQUENT CLOSING DATE") that the purchase is to
occur (the "SUBSEQUENT CLOSING"). The obligations of the
Investors to purchase Debentures hereunder shall be in all
respects several and not joint.
(iii) Notwithstanding anything herein to the
contrary, the right of the Company to exercise the Company Put
Option under this Section 1.2 shall be conditional upon the
following (unless waived by the respective Investor):
A. All the Company's representations and
warranties contained in this Agreement, the
Registration Rights Agreement, the Debentures
and the Warrants shall be true and correct in
all material respects as of the Closing Date,
the date of the Put Option Notice and the
Subsequent Closing Date (except for
representations and warranties as of an
earlier date, which shall be true and correct
in all material respects as of such date); and
all the Company's covenants contained in this
Agreement, the Registration Rights Agreement,
the Debentures and the Warrants shall have
been performed when and as required, all as
certified in writing by the chief financial
officer of the Company;
B. A Material Adverse Effect (as defined in
Section 2.1(a)) shall not have occurred as of
the date of the Put Option Notice and as of
the relevant Subsequent Closing Date with
respect to the business, operations,
properties or financial condition of the
Company or its subsidiaries;
C. No Event of Default (as defined in the
Debentures) shall have occurred, be likely to
occur or be threatened, as of the date of the
Put Option Notice and as of the relevant
Subsequent Closing Date;
D. The Company is listed on the Principal
Market and the closing bid price of a share of
Common Stock on the Principal Market (as
defined herein) on the date of the Put Option
Notice and the Subsequent Closing Date shall
be above $12.
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<PAGE>
E. There have been no breaches by the
Company as of the date of the Put Option
Notice and the Subsequent Closing Date that
have not been fully cured under this
Agreement, the Registration Rights Agreement,
the Debentures or the Warrants.
F. The obligation hereunder of each Investor
to acquire and pay for the Option Debentures
at the Subsequent Closing (unless otherwise
specified) shall be subject to the
satisfaction at or before the relevant
Subsequent Closing Date, of each of the
applicable conditions set forth in Section
4.2, except that all references to the Closing
or the Closing Date shall be deemed to refer
to such Subsequent Closing Date.
G. The Company has received the shareholder
approval required under Section 3.14.
(c) THE INVESTOR CALL OPTION.
(i) Only upon the receipt of a Company Put Notice
in accordance with Section 1.2(a) above, the Investors may
compel the Company to sell (the "INVESTOR CALL OPTION")
up to a total aggregate principal amount of $2,500,000 at
a total aggregate price of $2,500,000, upon written
notice, for immediately available funds, in accordance with
the procedures described below; PROVIDED that each Investor
shall only be entitled to purchase a percentage of the total
Option Debentures subject to the Investor Call Option equal
to the percentage such Investor purchased of the total
principal amount of the Debentures purchased pursuant
to the Initial Issuance. Notwithstanding the foregoing,
each Investor may assign its right to purchase Option
Debentures to any other Investor without the consent of
the Company or any other Investor. Upon the issuance of
Option Debentures pursuant to the exercise of the Investor
Call Option, the Company shall issue to the Investors (pro
rata in accordance with the percentages of total Option
Debentures each Investor shall have purchased) Option
Warrants for the purchase of (750,000 DIVIDED BY the Option
Closing Price) plus 18,750 shares of Common Stock (such number
of shares to be subject to adjustment in a manner consistent
with the provisions adjusting the number of shares issuable
under the Warrant upon the occurrence of certain events) per
$2,500,000 principal amount of Option Debentures issued to such
Investor.
(ii) Each Investor may exercise the Investor Call
Option on only one occasion and only during the period
commencing upon the receipt of a Company Put Notice and
expiring 30 days following the Option Period by providing the
Company with at least 15 business days written notice (the
"CALL OPTION NOTICE") indicating that such Investor is
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<PAGE>
exercising its Investor Call Option, setting forth the amount
that the Investor seeks to purchase (in accordance with Section
2(b)(i) above) and specifying the Subsequent Closing Date.
(iii) Notwithstanding anything herein to the
contrary, the right of the Investors to exercise the Investors
Call Option under this Section 1.2 shall be conditional upon
the following (unless waived by the Company):
A. All the Investors' representations and
warranties contained in this Agreement, the
Registration Rights Agreement, the Debentures
and the Warrants shall be true and correct in
all material respect as of the Closing Date,
the Call Option Notice date and the relevant
Subsequent Closing Date (except for
representations and warranties as of an
earlier date, which shall be true and correct
in all material respects as of such date); and
all the Investors' covenants contained in this
Agreement, the Registration Rights Agreement,
the Debentures and the Warrants shall have
been performed when and as required.
B. The obligation hereunder of the Company
to issue and sell the Option Debentures on the
Subsequent Closing Date (unless otherwise
specified) is subject to the satisfaction at
or before the relevant Subsequent Closing Date
of each of the applicable conditions set forth
in Section 4.1, except that all references to
the Closing or the Closing Date shall be
deemed to refer to the relevant Subsequent
Closing Date.
Section 1.3 ADDITIONAL DEBENTURES.
(a) TERMS. Additional Debentures may be issued pursuant to
Section 1.3(b) below. Once issued, the Additional Debentures shall be subject
to the same terms as the Debentures issued on the Closing Date and shall have
the same rights and privileges appurtenant thereto, except with respect to
the following: (i) the Conversion Price shall be equal to 110% of the initial
Closing Price as adjusted subsequent to the Closing Date other than pursuant
to a Reset pursuant to Section 5(c) of the Debentures; and (ii) the maturity
date of the Additional Debentures shall be the sixth anniversary of the
issuance of such Debentures. The Additional Debentures issued pursuant to
this Section 1.3 shall be issued pursuant to documentation that is the same
in all material respects to the Debentures other than changes necessary to
conform the documents to the distinctive terms of the Additional Debentures
as set forth herein.
(b) THE ADDITIONAL INVESTOR CALL OPTION. At any time prior to
the 270th day after the Closing Date, in addition to the Option Debentures
set forth in Section 1.2(b) above, the Investors, in each of their sole
discretion, may elect to purchase (the
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<PAGE>
"Additional Investor Call Option") additional Debentures ("Additional
Debentures") up to a total aggregate principal amount of $2,500,000 at a
total aggregate price of $2,500,000, otherwise in accordance with the
procedures set forth in Section 1.2(b)(i) - (iii) above.
Section 1.4 REFERENCES. All references to Debentures, Warrants
and Securities in this Agreement and the Registration Rights Agreement shall
include the Initial Debentures, Option Debentures, the Additional Debentures,
the Subsequent Debentures, the Initial Warrants, Option Warrants, the Option
Securities and the Subsequent Securities to the extent that such securities
have been issued.
Section 1.5 BOARD APPROVAL. As of the Closing Date, Sections 1.2,
1.3 and 1.4 above are subject to obtaining the requisite approval by the
Company's Board of Directors.
Section 1.6 SUBORDINATION AGREEMENT. The rights of the Investors
under this Agreement are subject to the terms of the Subordination Agreement
dated February 23, 2000, among the Senior Lenders (as defined therein) and,
among others, the Investors (the "SUBORDINATION AGREEMENT").
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
Section 2.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company hereby makes the following representations and warranties to each of
the Investors as of the date hereof and on the Closing Date:
(a) ORGANIZATION AND QUALIFICATION; MATERIAL ADVERSE EFFECT.
The Company is a corporation duly incorporated and existing in good standing
under the laws of the State of Delaware and has the requisite corporate power
to own its properties and to carry on its business as now being conducted.
The Company does not have any direct or indirect subsidiaries (defined as any
entity of which the Company owns, directly or indirectly, 50% or more of the
equity or voting power) other than the subsidiaries listed on SCHEDULE 2.1(a)
attached hereto. Except where specifically indicated to the contrary, all
references in this Agreement to subsidiaries shall be deemed to refer to all
direct and indirect subsidiaries of the Company. Each of the Company and its
subsidiaries is duly qualified as a foreign corporation to do business and is
in good standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary other
than those in which the failure so to qualify would not have a Material
Adverse Effect. "MATERIAL ADVERSE EFFECT" means any adverse effect on the
business, operations, properties or financial condition of the entity with
respect to which such term is used and which is (either alone or together
with all other adverse effects) material to such entity and other entities
controlling or controlled by such entity taken as a whole, and any material
adverse effect on the transactions contemplated under
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<PAGE>
this Agreement, the Registration Rights Agreement or any other agreement or
document contemplated hereby or thereby.
(b) AUTHORIZATION; ENFORCEMENT. (i) The Company has all
requisite corporate power and authority to enter into and perform this
Agreement, the Warrants and the Registration Rights Agreement and to issue
the Debentures and Warrants in accordance with the terms hereof and thereof,
(ii) the execution and delivery of this Agreement, the Warrants and the
Registration Rights Agreement by the Company and the consummation by it of
the transactions contemplated hereby and thereby, including the issuance of
the Debentures, the Common Shares and the Warrant Shares, have been duly
authorized by all necessary corporate action, and no further consent or
authorization of the Company or its Board of Directors (or any committee or
subcommittee thereof) or stockholders is required, (iii) this Agreement, the
Warrants, the Debentures and the Registration Rights Agreement have been duly
executed and delivered by the Company, and (iv) this Agreement, the Warrants,
the Debentures and the Registration Rights Agreement constitute valid and
binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of
creditors' rights and remedies or by other equitable principles of general
application.
(c) CAPITALIZATION. The authorized capital stock of the
Company consists of 180,000,000 shares of Common Stock and 20,000,000 shares
of preferred stock; as of December 31, 1999 there were 20,426,753 shares of
Common Stock and 0 shares of preferred stock issued and outstanding; and,
except as set forth on Schedule 2.1(c) and except for shares contemplated by
the YPtel Acquisition (as defined below), no shares of Common Stock and no
shares of preferred stock were reserved for issuance to persons other than
the Investors. All of the outstanding shares of the Company's Common Stock
and preferred stock have been validly issued and are fully paid and
nonassessable. No shares of capital stock are entitled to preemptive rights;
and there are as of December 31, 1999 outstanding options and outstanding
warrants for 3,806,523 shares of Common Stock (excluding the Warrants).
Except as set forth on Schedule 2.1(c), there are no other scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to,
or securities or rights exchangeable for or convertible into, any shares of
capital stock of the Company, or contracts, commitments, understandings, or
arrangements by which the Company is or may become bound to issue additional
shares of capital stock of the Company or options, warrants, scrip, rights to
subscribe to, or commitments to purchase or acquire, any shares, or
securities or rights convertible or exchangeable into shares, of capital
stock of the Company, except as may otherwise be set forth in the relevant
SEC Documents (as defined below) with respect to the Company's acquisition of
YPtel Corporation, Web YP, Inc. and Big Stuff, Inc. (the "YP COMPANIES") and
related transactions (collectively, the "YPtel Acquisition"). Attached hereto
as EXHIBIT 2.1(c)(i) is a true and correct copy of the Company's Certificate
of Incorporation (the "CHARTER"), as in effect on the date hereof, and
attached hereto as EXHIBIT 2.1(c)(ii) is a true and correct copy of the
Company's By-Laws, as in effect on the date hereof (the "BY-LAWS").
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<PAGE>
(d) ISSUANCE OF COMMON SHARES. The Common Shares and the
shares of Common Stock issuable upon the exercise of the Warrants (the
"WARRANT SHARES") are duly authorized and reserved for issuance and, upon
such conversion in accordance with the Debentures and/or exercise in
accordance with the Warrants such Common Shares and Warrant Shares will be
validly issued, fully paid and non-assessable, free and clear of any and all
liens, claims and encumbrances, and entitled to be traded on the ("NYSE") (or
the American Stock Exchange or the Nasdaq National Market System,
collectively with the NYSE, the "APPROVED MARKETS"), and the holders of such
Common Shares and Warrant Shares shall be entitled to all rights and
preferences accorded to a holder of Common Stock. The outstanding shares of
Common Stock are currently listed on the NYSE.
(e) NO CONFLICTS. The execution, delivery and performance of
this Agreement, the Registration Rights Agreement and the Warrants by the
Company and the consummation by the Company of the transactions contemplated
hereby and thereby and the issuance of the Debentures and the Warrants do not
and will not (i) result in a violation of the Company's Charter or By-Laws or
(ii) conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture, patent, patent license or instrument to which the
Company or any of its subsidiaries is a party (collectively, "COMPANY
AGREEMENTS"), or (iii) result in a violation of any federal, state, local or
foreign law, rule, regulation, order, judgment or decree (including Federal
and state securities laws and regulations) applicable to the Company or any
of its subsidiaries or by which any property or asset of the Company or any
of its subsidiaries is bound or affected, except (other than in the case of
clause (i) above) where such violation would not reasonably be expected to
have a Material Adverse Effect. The business of the Company and its direct
and indirect subsidiaries is being conducted in material compliance with (i)
its Charter and By-Laws, (ii) all Company Agreements and (iii) all applicable
laws, ordinances or regulations of any governmental entity, except (other
than in the case of clause (i) above) where such violation would not
reasonably be expected to have a Material Adverse Effect. Except for filings,
consents and approvals required under applicable state and federal securities
laws or the rules and regulations of the Approved Markets and covered by the
Registration Rights Agreement, the Company is not required under Federal,
state, local or foreign law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court
or governmental agency in order for it to execute, deliver or perform any of
its obligations under this Agreement, the Registration Rights Agreement, the
Debentures and the Warrants or issue and sell the Debentures in accordance
with the terms hereof and issue the Common Shares upon conversion thereof and
issue the Warrant Shares on exercise of the Warrants and for the registration
provisions provided in the Registration Rights Agreement.
(f) SEC DOCUMENTS; NO NON-PUBLIC INFORMATION; FINANCIAL
STATEMENTS. The Common Stock of the Company is registered pursuant to Section
12(b) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT")
and the Company and its subsidiaries have filed all reports, schedules,
forms, statements and other documents required to be filed by it with the
Securities and Exchange Commission
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<PAGE>
("SEC") pursuant to the reporting requirements of the Exchange Act, including
all such proxy information, solicitation statement and registration
statements, and any amendments thereto required to have been filed in
connection with the YPtel Acquisition (all of the foregoing including filings
incorporated by reference therein being referred to herein as the "SEC
DOCUMENTS"). The Company has delivered or made available to the Investors
true and complete copies of all SEC Documents filed with the SEC since
December 31, 1998. The Company has not directly or indirectly provided to the
Investors any material non-public information or any information which,
according to applicable law, rule or regulation, should have been disclosed
publicly by the Company but which has not been so disclosed. As of their
respective dates, the SEC Documents complied in all material respects with
the requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder and other federal, state and local laws, rules and
regulations applicable to such SEC Documents, and none of the SEC Documents
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The SEC Documents contain all material information concerning
the Company and its subsidiaries, and no event or circumstance has occurred
which would require the Company to disclose such event or circumstance in
order to make the statements in the SEC Documents not misleading on the date
hereof or on the Closing Date but which has not been so disclosed.
(g) FINANCIAL STATEMENTS. The financial statements of the
Company and its subsidiaries and the YP Companies included in the SEC
Documents comply as to form and substance in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC or other applicable rules and regulations with respect thereto. Such
financial statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis during
the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto or (ii) in the case of unaudited
interim statements, to the extent they may not include footnotes or may be
condensed or summary statements) and fairly present in all material respects
the financial position of the Company and its subsidiaries as of the dates
thereof and the results of operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments). The audited financial statements of each of the Company and its
subsidiaries for the fiscal year ending December 31, 1999, the audited
financial statements of YPtel Corporation for the fiscal year ending October
31, 1999 and the unaudited financial statements of Big Stuff, Inc. for the
fiscal year ending December 31, 1999 have been prepared in accordance with
United States generally accepted accounting principles applied on a
consistent basis during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto or (ii) in the
case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements) and fairly present in
all material respects the financial position of the Company and its
subsidiaries, and each of the YP Companies, as the case may be, as of the
dates thereof and the results of operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal year-end
audit adjustments).
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(h) PRINCIPAL EXCHANGE/MARKET. The principal market on which
the Common Stock is currently traded is the NYSE.
(i) NO MATERIAL ADVERSE CHANGE. Since December 31, 1999, no
Material Adverse Effect has occurred or exists, and no event or circumstance
has occurred that with notice or the passage of time or both is reasonably
likely to result in a Material Adverse Effect with respect to the Company or
its subsidiaries.
(j) NO UNDISCLOSED LIABILITIES. The Company and its
subsidiaries have no liabilities or obligations not disclosed in the
Pre-Agreement SEC Documents (as defined below), other than those liabilities
incurred in the ordinary course of the Company's or its subsidiaries'
respective businesses since December 31, 1999, which liabilities,
individually or in the aggregate, do not or would not have a Material Adverse
Effect on the Company or its direct or indirect subsidiaries.
(k) NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. To the best
knowledge of the Company, no material event or circumstance has occurred or
exists with respect to the Company or its direct or indirect subsidiaries or
their respective businesses, properties, prospects, operations or financial
condition, which, under applicable law, rule or regulation, requires public
disclosure or announcement by the Company but which has not been so publicly
announced or disclosed.
(l) NO GENERAL SOLICITATION. Neither the Company, nor any of
its affiliates, or, to its knowledge, any person acting on its or their
behalf has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D under the Securities Act of 1933, as
amended (the "ACT")) in connection with the offer or sale of the Debentures
or Common Shares.
(m) NO INTEGRATED OFFERING. Neither the Company, nor any of
its affiliates, nor to its knowledge any person acting on its or their behalf
has, directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that would
require registration of the Debentures, the Warrants or the Common Shares or
Warrant Shares under the Act.
The Issuance of the Debentures, Warrants, Common Shares, or Warrant
Shares to the Investors will not be integrated with any other issuance of the
Company's securities (past, current or future) which requires stockholder
approval under the rules of the NYSE.
(n) FORM S-3. The Company is eligible to file the Registration
Statement (as defined in the Registration Rights Agreement) on Form S-3 under
the Act and rules promulgated thereunder, and Form S-3 is permitted to be
used for the transactions contemplated hereby under the Act and rules
promulgated thereunder.
(o) INTELLECTUAL PROPERTY. The Company and/or its wholly-owned
subsidiaries owns or has licenses to use certain patents, copyrights and
trademarks ("INTELLECTUAL PROPERTY") associated with its business. The
Company and its subsidiaries have all intellectual property rights which are
needed to conduct the business
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of the Company and its subsidiaries as it is now being conducted or as
proposed to be conducted as disclosed in the SEC Documents. The Company and
its subsidiaries have no reason to believe that the material intellectual
property rights which it owns are invalid or unenforceable or that the use of
such intellectual property by the Company or its subsidiaries infringes upon
or conflicts with any right of any third party, and neither the Company nor
any of its subsidiaries has received notice of any such infringement or
conflict, which individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect. The Company and its subsidiaries
have no knowledge of any infringement of its intellectual property by any
third party.
(p) POISON PILL PROVISIONS. Neither Company nor its
wholly-owned subsidiaries have a stockholder rights plan. None of the
acquisition of Debentures, Warrants, Common Shares or Warrant Shares nor the
deemed beneficial ownership of shares of Common Stock prior to, or the
acquisition of such shares pursuant to, the conversion of Debentures or the
exercise of the Warrants will in any event under any circumstance trigger the
poison pill provisions of any other or subsequently adopted plan or
agreement, or a substantially similar occurrence under any successor or
similar plan.
(q) NO LITIGATION. Except as set forth in the Pre-Agreement
SEC Documents (as defined in Section 2.2(c) (i) below), no litigation or
claim (including those for unpaid taxes) against the Company or any of its
subsidiaries is pending or, to the Company's knowledge, threatened, and no
other event has occurred, which if determined adversely could reasonably be
expected to have a Material Adverse Effect on the Company or could reasonably
be expected to materially and adversely effect the transactions contemplated
hereby. There is no legal proceeding described in the Pre-Agreement SEC
Documents that could reasonably be expected to have a Material Adverse Effect
on the Company.
(r) BROKERS. The Company has taken no action which would give
rise to any claim by any person for brokerage commissions, finder's fees or
similar payments by the Company or any Investor relating to this Agreement or
the transactions contemplated hereby, except for amounts owing to Granite
Financial Group, which amounts shall be paid by the Investors, pursuant to a
separate agreement.
(s) ACKNOWLEDGEMENT OF DILUTION. The number of shares of
Common Stock constituting Common Shares or Warrant Shares may increase
substantially in certain circumstances, including the circumstance where the
trading price of the Common Stock declines. The Company acknowledges that its
obligation to issue Common Shares upon conversion of Debentures and Warrant
Shares upon exercise of the Warrants is absolute and unconditional,
regardless of the dilution that such issuance may have on other shareholders
of the Company.
(t) OTHER INVESTORS. Except as set forth on Schedule 2.1(t),
there are no outstanding securities issued by the Company that are entitled
to registration rights under the Act. Except as set forth on Schedule 2.1(t),
there are no outstanding securities issued by the Company that are directly
or indirectly convertible into, exercisable into, or exchangeable for, shares
of Common Stock of the Company, or that have anti-dilution or
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similar rights that would be affected by the issuance of the Debentures, the
Common Shares, the Warrants or the Warrant Shares.
(u) CERTAIN TRANSACTIONS. Except as disclosed in the
Pre-Agreement SEC Documents or as set forth on Schedule 2.1(u), none of the
officers, directors, or key employees of the Company is presently a party to
any transaction with the Company or any of its subsidiaries (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or
otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any corporation, partnership,
trust or other entity in which any officer, director, or any such employee
has a substantial interest or is an officer, director, trustee or partner.
(v) PERMITS; COMPLIANCE. The Company and each of its
subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its properties and
to carry on its business as it is now being conducted (collectively, the
"COMPANY PERMITS"), except where failure to possess such Company Permits
would not have a Material Adverse Effect on the Company and there is no
action pending or, to the knowledge of the Company, threatened regarding
suspension or cancellation of any of the Company Permits except for such
Company Permits the failure of which to possess, or the cancellation or
suspension of which, would not, individually or in the aggregate, have a
Material Adverse Effect on the Company. To the best of its knowledge, neither
the Company nor any of its subsidiaries is in material conflict with, or in
material default or material violation of, any of the Company Permits. Since
December 31, 1998, neither the Company nor any of its subsidiaries has
received any notification with respect to possible material conflicts,
material defaults or material violations of applicable laws.
(w) INSURANCE. The Company and each of its subsidiaries are
insured by insurers of recognized financial responsibility against such
losses and risks and in such amounts as management of the Company believes to
be prudent and customary in the businesses in which the Company and its
direct and indirect subsidiaries are engaged. Except as set forth in Schedule
2.1(w), neither the Company nor any such subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as
may be necessary to continue its business without a significant increase in
cost.
(x) INTERNAL ACCOUNTING CONTROLS. The Company and each of its
subsidiaries maintain a system of internal accounting controls sufficient, in
the judgment of the Company's management, to provide reasonable assurance
that (i) transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
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compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(y) ENVIRONMENTAL MATTERS. Except as otherwise disclosed in
the Pre-Agreement SEC Documents, the Company and each of its subsidiaries is
in compliance in all respects with all applicable state and federal
environmental laws except where any such non-compliance would not reasonably
be expected to have a Material Adverse Effect on the Company and no event or
condition has occurred that may interfere with the compliance by the Company
or any of its subsidiaries with any environmental law or that may give rise
to any liability under any environmental law that, individually or in the
aggregate, would have a Material Adverse Effect.
(z) SOLVENCY.
(i) Based on the financial condition of the
Company as of the Closing Date, the Company's fair saleable
value of its assets exceeds the amount that will be required to
be paid on or in respect of the Company's existing debts and
other liabilities (including known contingent liabilities) as
they mature.
(ii) Based on the financial condition of the
Company as of the Closing Date, the Company's assets do not
constitute unreasonably small capital to carry out its business
as now conducted and as proposed to be conducted including the
Company's capital needs taking into account the particular
capital requirements of the business conducted by the Company,
and projected capital requirements and capital availability
thereof.
(iii) The Company does not intend to incur debts
beyond its ability to pay such debts as they mature (taking
into account the timing and amounts of cash to be payable on or
in respect of its debt). Based on the financial condition of
the Company as of the Closing Date, the current cash flow of
the Company, together with the proceeds the Company would
receive, were it to liquidate all of its assets, after taking
into account all anticipated uses of the cash, would be
sufficient to pay all amounts on or in respect of its debt when
such amounts are required to be paid.
(iv) Neither the Company nor any of its
subsidiaries is subject to any bankruptcy, insolvency or
similar proceeding.
(aa) TAXES. All federal, state, city and other tax returns,
reports and declarations required to be filed or extended by or on behalf of
the Company and each of its subsidiaries have been filed or extended and all
such filed returns are complete and accurate and disclose all taxes (whether
based upon income, operations, purchases, sales, payroll, licenses,
compensation, business, capital, properties or assets or otherwise) required
to be paid in the periods covered thereby. All taxes required to be withheld
by or on behalf of the Company or any such subsidiary in connection with
amounts paid or owing to any employees, independent contractor, creditor or
other party have been
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withheld, and such withheld taxes have either been duly and timely paid to
the proper governmental authorities or set aside in accounts for such
purposes.
(bb) TITLE TO PROPERTIES; ENCUMBRANCES. SCHEDULE 2.1(bb)
contains a complete and accurate list of all material real property,
leaseholds, or other interests therein owned by the Company and its
subsidiaries. Each of the Company and its subsidiaries owns (with good and
marketable title in the case of real property) all the properties and assets
(whether real, personal, or mixed and whether tangible or intangible
("Company Property")) that it purports to own. All material Company Property
is free and clear of all encumbrances and are not, in the case of real
property, subject to any rights of way, building use restrictions,
exceptions, variances, reservations or limitations of any nature, except,
with respect to all such properties and assets, (a) mortgages, liens or
security interests shown on SCHEDULE 2.1(bb) as securing specified
liabilities or obligations, with respect to which no default (or event that,
with notice or lapse of time or both, would constitute a default) exists, (b)
liens for current taxes not yet due, and (c) with respect to real property,
(i) minor imperfections of title, if any, none of which is substantial in
amount, materially detracts from the value or impairs the use of the property
subject thereto, or impairs the operations of the Company or any of its
subsidiaries, and (ii) zoning laws and other land use restrictions
(including, but not limited to, easements of records) that do not impair the
present or anticipated use of the property subject thereto. All buildings,
plans, and structures owned by the Company or any of its subsidiaries lie
wholly within the boundaries of the real property owned by the Company or
such subsidiaries, and do not encroach upon the property of, or otherwise
conflict with the property rights of, any other person.
(cc) NO RELIANCE ON INVESTORS. The Company acknowledges and
agrees that each Investor is acting solely in the capacity of an arm's length
purchaser with respect to this Agreement and the Registration Rights
Agreement and the performance under the Debentures and the Warrants and the
transactions contemplated hereby and thereby. The Company further
acknowledges that no Investor is acting as a financial advisor or fiduciary
of the Company (or in any similar capacity) with respect to this Agreement
and the Registration Rights Agreement and the performance under the
Debentures and the Warrants and the transactions contemplated hereby and
thereby. The Company further represents to the Investor that the Company's
decision to enter into this Agreement and the Registration Rights Agreement
and the performance under the Debentures and the Warrants has been based
solely on the independent evaluation by the Company and its representatives.
(dd) INTENTIONALLY LEFT BLANK.
(ee) GUARANTIES OF SUBSIDIARIES. The subsidiaries listed on
Schedule 4.2(k) hereto represent all of the Company's subsidiaries which have
delivered a guaranty to the Senior Lenders in connection with the Senior Debt
(as defined in Section 3.12).
(ff) INTENTIONALLY LEFT BLANK.
Section 2.2 REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each
of the Investors, severally (as to itself) and not jointly hereby makes the
following
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representations and warranties to the Company as of the date hereof
and on the Closing Date:
(a) ORGANIZATION AND QUALIFICATION. Each of the Investors is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and is duly qualified to do business and in
good standing in each jurisdiction in which the nature of the business
conducted by it makes such qualification necessary except where the failure
to be so qualified or in good standing would not reasonably be expected to
have a Material Adverse Effect on such Investor.
(b) AUTHORIZATION; ENFORCEMENT. (i) Such Investor has the
requisite power and authority to enter into and perform this Agreement and
the Registration Rights Agreement and to purchase the Debentures and to
acquire the Warrants being sold to it hereunder, (ii) the execution and
delivery of this Agreement and the Registration Rights Agreement by such
Investor and the consummation by it of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate or
partnership action, and (iii) this Agreement and the Registration Rights
Agreement constitute valid and binding obligations of such Investor
enforceable against such Investor in accordance with their terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of creditors' rights and remedies or by
other equitable principles of general application.
(c) NO CONFLICTS. The execution, delivery and performance of
this Agreement and the Registration Rights Agreement and the performance
under the Debentures and Warrants and the consummation by such Investor of
the transactions contemplated hereby and thereby do not and will not (i)
result in a violation of such Investor's organizational documents, or (ii)
conflict with any agreement, indenture or instrument to which such Investor
is a party, or (iii) result in a material violation of any law, rule, or
regulation, or any order, judgment or decree of any court or governmental
agency applicable to such Investor. Such Investor is not required to obtain
any consent or authorization of any governmental agency in order for it to
perform its obligations under this Agreement, the Registration Rights
Agreement, the Warrants or the Debentures.
(d) INVESTMENT REPRESENTATIONS.
(i) INFORMATION. The Company has furnished such
Investor with its Registration Statement on Form S-1 dated
February 11, 2000, its Proxy Statement dated January 24, 2000,
its annual report on Form 10-K for its fiscal year ended
December 31, 1998 (the "FISCAL YEAR END"), its quarterly
reports on Form 10-Q for the fiscal quarters ended March 31,
1999, June 30, 1999 and September 30, 1999, and all other
reports or documents filed by the Company pursuant to Section
13(a) or 15(d) of the Exchange Act prior to the Closing Date
(the "PRE-AGREEMENT SEC DOCUMENTS").
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(ii) ACCESS TO OTHER INFORMATION. Such Investor
acknowledges that the Company has made available to such
Investor the opportunity to examine such additional documents
from the Company and to ask questions of, and receive full
answers from, the Company concerning, among other things, the
Company, its financial condition, its management, its prior
activities and any other information which such Investor
considers relevant or appropriate in connection with entering
into this Agreement.
(iii) RISKS OF INVESTMENT. Such Investor
acknowledges that the Securities and the Common Shares and
Warrant Shares issuable upon conversion and/or exercise of
the Securities have not been registered under the Act. Such
Investor is familiar with the provisions of Rule 144 and
understands that in the event all of the applicable
requirements of Rule 144 are not satisfied, registration
under the Act or some other exemption from the registration
requirements of the Act will be required in order to
dispose of the Securities and the Common Shares and
Warrant Shares issuable upon conversion and/or exercise of
the Securities, and that such Investor may be required to
hold its Securities and the Common Shares and Warrant
Shares issuable upon conversion and/or exercise of the
Securities received under this Agreement for a significant
period of time prior to reselling them, subject to the
Company successfully registering the Common Shares and
Warrant Shares pursuant to the Registration Rights
Agreement. Such Investor is capable of assessing the risks of
an investment in the Securities and is fully aware of the
economic risks thereof. Such Investor acknowledges that the
Company's operating results have in the past and may in the
current period and in future periods not meet the
expectations of securities analysts and that failure to
meet such expectations would be likely to have a material
adverse effect on the trading price and salability of the
Common Shares and Warrant Shares.
(iv) INVESTMENT REPRESENTATION. Such Investor is
purchasing the Debentures and the Warrants for its own account
and not with a view to distribution in violation of any
securities laws. Such Investor has no present intention to sell
the Debentures, Warrants, Common Shares, or Warrant Shares in
violation of federal or state securities laws and such Investor
has no present arrangement (whether or not legally binding) to
sell the Debentures, Warrants, Common Shares or Warrant Shares
to or through any person or entity; PROVIDED, however, that by
making the representations herein, such Investor does not
agree to hold the Debentures, Warrants, Common Shares or
Warrant Shares for any minimum or other specific term and
reserves the right to dispose of the Debentures, Warrants,
Common Shares or Warrant Shares at any time in accordance with
federal and state securities laws applicable to such
disposition.
(v) RESTRICTED SECURITIES. It acknowledges and
understands that the terms of issuance have not been reviewed
by the SEC or by any state
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securities authorities and that the Securities have been issued
in reliance on the certain exemptions for non-public offerings
under the Act, which exemptions depend upon, among other
things, the representations made and information furnished by
such Investor, including the bona fide nature of such
Investor's investment intent as expressed above.
(vi) ACCURACY OF INFORMATION. All information that
such Investor provides to the Company hereunder is correct and
complete as of the date set forth above.
(vii) ABILITY TO BEAR ECONOMIC RISK. It is an
"accredited" investor as defined in Rule 501 of Regulation D,
as amended, under the Act, and that it (i) is able to bear the
economic risk of its investment in the Debentures, (ii) is able
to hold the Debentures for an indefinite period of time, (iii)
can afford a complete loss of its investment in the Debentures
and (iv) has adequate means of providing for its current needs.
(viii) NO PUBLIC SOLICITATION. At no time was such
Investor presented with or solicited by any general mailing,
leaflet, public promotional meeting, newspaper or magazine
article, radio or television advertisement, or any other form
of general advertising or general solicitation in connection
with the issuance.
(ix) RELIANCE BY THE COMPANY. Such Investor
understands that the Debentures and Warrant are being offered
and sold in reliance on a transactional exemptions from the
registration requirements of federal and state securities laws
and that the Company is relying upon the truth and accuracy of
the representations, warranties, agreements, acknowledgments
and understandings of such Investor set forth herein in order
to determine the applicability of such exemptions and the
suitability of such Investor to acquire the Debentures and
Warrants.
(x) INTENTIONALLY LEFT BLANK.
(e) BROKERS. Such Investor has taken no action which would give
rise to any claim by any person for brokerage commissions, finder's fees or
similar payments by the Company relating to this Agreement or the
transactions contemplated hereby, except for amounts owing to Granite
Financial Group, which amounts shall be paid by the Investors, pursuant to a
separate agreement.
(f) NO HEDGING OR SHORT SELLING. Other than as set forth in the
following sentence, during the period sixty (60) days prior to the date of
this Agreement, the Investor has not engaged in any short sales or hedging of
any kind with respect to the Common Stock in anticipation of this Agreement.
However, the Company has been advised orally that an Investor has engaged in
short sales.
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ARTICLE 3
COVENANTS
Section 3.1 REGISTRATION AND LISTING; EFFECTIVE REGISTRATION. For
so long as the Debentures and Warrants are outstanding, the Company will
cause the Common Stock issuable upon the exercise of the Securities to
continue at all times to be registered under Section 12(b) or Section 12(g)
of the Exchange Act, will comply in all respects with its reporting and
filing obligations under the Exchange Act, and will not take any action or
file any document (whether or not permitted by the Exchange Act or the rules
thereunder) to terminate or suspend such reporting and filing obligations.
Until such time as no Debentures or Warrants are outstanding, the Company
shall continue the listing or trading of the Common Stock on the NYSE or one
of the other Approved Markets and comply in all respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the
Approved Market on which the Common Stock is listed. The Company shall cause
the Common Stock to be listed on the NYSE no later than the registration of
the Common Stock under the Act, and at all times shall continue such
listing(s) on one of the Approved Markets. As used herein and in the
Registration Rights Agreement, the Debenture and the Warrants, the term
"EFFECTIVE REGISTRATION" shall mean that all registration obligations of the
Company pursuant to the Registration Rights Agreement and this Agreement have
been satisfied, such registration is not subject to any suspension or stop
order, the prospectus for the Common Stock issuable upon conversion and/or
exercise of the Securities is current and deliverable and such shares of
Common Stock are listed for trading on one of the Approved Markets and such
trading has not been suspended for any reason, none of the Company or any
direct or indirect subsidiary of the Company is subject to any bankruptcy,
insolvency or similar proceeding, and no Interfering Event (as defined in
Section 2(b) of the Registration Rights Agreement) exists.
Section 3.2 DEBENTURES ON CONVERSION AND WARRANTS ON EXERCISE.
(a) Upon any conversion by an Investor (or then holder of
Debentures) of the Debentures pursuant to the terms thereof, the Company
shall issue and deliver to such Investor (or holder) within three (3) Trading
Days (as such term is defined in the Debenture) of the Conversion Date (as
defined in the Debenture), a new certificate or certificates for the
principal amount of Debentures which such Investor (or holder) has not yet
elected to convert but which is evidenced in part by the certificate(s)
submitted to the Company in connection with such conversion (with the number
of and denomination of such new certificate(s) designated by such Investor or
holder).
(b) Upon any partial exercise by an Investor (or then holder
of the Warrants) of the Warrants, the Company shall issue and deliver to such
Investor (or holder) within three (3) days of the date on which such Warrants
are exercised, a new Warrant or Warrants representing the number of adjusted
Warrant Shares, in accordance with the terms of Section 2 of the Warrants.
Section 3.3 REPLACEMENT DEBENTURES AND WARRANTS.
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(a) The certificate(s) representing the Debentures held by any
Investor (or then holder) may be exchanged by such Investor (or such holder)
at any time and from time to time for certificates with different
denominations representing an equal aggregate number of Debentures, as
requested by such Investor (or such holder) upon surrendering the same. No
service charge will be made for such registration or transfer or exchange.
(b) The Warrants will be exchangeable at the option of the
Investor (or then holder of the Warrants) at the office of the Company for
other Warrants of different denominations entitling the holder thereof to
purchase in the aggregate the same number of Warrant Shares as are
purchasable under such Warrants. No service charge will be made for such
transfer or exchange.
Section 3.4 EXPENSES. The Company shall pay in immediately
available funds, at the Closing and promptly upon receipt of any further
invoices relating to same, all reasonable due diligence fees and expenses and
reasonable attorneys' fees and expenses of the Investors' Counsel, incurred
by the Investors in connection with the preparation, negotiation, execution
and delivery of this Agreement, the Registration Rights Agreement, the
Debentures, the Warrants and the related agreements and documents and the
transactions contemplated hereunder and thereunder; provided, however, that
the Company shall not be obligated to pay fees and expenses in excess of
$100,000 unless the Investors have obtained the prior written approval of the
Company with respect to any such excess. At Closing, the Company shall pay
the amount estimated to be due for such fees and expenses (which may include
fees and expenses estimated to be incurred for completion of the transaction
including post-closing matters). In the event such amount is ultimately less
than the actual fees and expenses, the Company shall promptly pay such
deficiency upon receipt of an invoice regarding same. In the event such
amount is ultimately greater than the actual fees and expenses, such excess
shall promptly be returned to the Company. In the event that the Company
issues Subsequent Securities pursuant to the exercise of the Company Put
Option, the Investor Call Option or the Additional Investor Call Option, the
Company shall pay in immediately available funds all of the reasonable fees
and expenses of Investors' counsel related to such issuance in accordance
with all of the same terms and conditions in this paragraph relating to the
issuance of the Securities in the issuance; provided, however, that the
Company shall not be obligated to pay fees and expenses in excess of an
additional $25,000 per $5,000,000 principal amount of Subsequent Debentures
issued to the Investors unless the Investors have obtained prior written
approval of the Company with respect to any such excess.
Section 3.5 SECURITIES COMPLIANCE. The Company shall notify the
SEC and the NYSE, in accordance with their requirements, of the transactions
contemplated by this Agreement, the Debenture, the Registration Rights
Agreement and the Warrants, and shall take all other necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation, for the legal and valid issuance of the Debentures hereunder, the
Common Shares issuable upon conversion thereof, the Warrants and the Warrant
Shares issuable upon exercise of the Warrants.
Section 3.6 DIVIDENDS OR DISTRIBUTIONS; PURCHASES OF EQUITY
SECURITIES. Except as set forth in Schedule 3.6, so long as any Debentures or
Warrants remain outstanding, the
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Company agrees that it shall not (a) declare or pay any dividends or make any
distributions to any holder or holders of Common Stock (other than dividends
payable in Common Stock), or (b) purchase or otherwise acquire for value,
directly or indirectly, any shares of Common Stock or other equity security
of the Company; provided that the Company may purchase or acquire shares of
Common Stock so long as the Company (i) purchases or acquires such shares on
the open market or pursuant to a tender offer directed to all of the
Company's shareholders and (ii) does not utilize the proceeds of the
issuances of the Debentures for such purpose.
Section 3.7 NOTICES. The Company agrees to provide all holders of
Debentures and Warrants with copies of all notices and information, including
without limitation notices and proxy statements in connection with any
meetings, that are provided to the holders of shares of Common Stock,
contemporaneously with the delivery of such notices or information to such
Common Stock holders.
Section 3.8 USE OF PROCEEDS. The Company agrees that the proceeds
received by the Company from the sale of the Debentures hereunder shall be
used for working capital purposes and repayment of Senior Indebtedness.
Section 3.9 NOTIFICATION OF ADDITIONAL FINANCINGS; ADJUSTMENTS.
(a) Until the twelve (12) month anniversary of the Closing
Date the Company shall provide reasonable advance notice to the Investors of
its intentions to pursue any transaction, the purpose of which is to provide
capital to the Company, in consideration of which the Company will sell or
otherwise issue or deliver or dispose of any share of Common Stock or other
equity securities or any securities which are convertible into or
exchangeable for shares of its Common Stock or other equity securities or any
convertible or exchangeable security, or any warrants or other rights to
subscribe for or to purchase or any options for the purchase of share of
Common Stock or other equity securities (such transactions are referred to as
"Applicable Financing Transactions") the Company agrees to use reasonable
efforts to provide the Investors with the opportunity to provide the
financing in such Applicable Financing Transactions.
(b) If at any time prior to the close of business on the 180th
day after the Closing Date, the Company issues Common Stock (or securities or
rights exercisable or exchangeable for, or convertible into, Common Stock
("Derivative Securities") in a private placement at a discount from (or in an
Investor's sole judgment on terms more favorable to the purchaser thereof
than) the terms specified in Section 5(c) of the Debentures other than shares
issued (i) to any Investor or an affiliate thereof in any future transaction
or (ii) in connection with a strategic investment (including, but not limited
to, an acquisition) that was not essentially a capital raising transaction on
behalf of the Company or (iii) to retain or attract potential non-affiliated
employees, then the Debentures held by such Investor will automatically (at
such Investor's request) be adjusted to provide for such discount or lower or
more favorable Conversion Price, as applicable, provided, however, that the
Investor
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agrees to promptly advise the Company in writing following receipt of written
notice from the Company of the terms and conditions of any proposed issuance
of Company Common Stock that the Investor considers such issuance either
would or would not be on terms more favorable to the purchaser thereof.
Section 3.10 RESERVATION OF STOCK ISSUABLE UPON CONVERSION AND
UPON EXERCISE OF THE WARRANTS. The Company shall at all times reserve and
keep available out of its authorized but unissued shares of Common Stock,
solely for the purpose of effecting the conversion of the Debentures and the
exercise of the Warrants, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
Debentures and the full exercise of the Warrants and if at any time the
number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all the then outstanding Debentures
and the full exercise of the Warrants, the Company will take such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose, including without limitation engaging
in best efforts to obtain the requisite shareholder approval. Without in any
way limiting the foregoing, the Company agrees to reserve and at all times
keep available solely for purposes of conversion of Debentures and the
exercise of the Warrants such number of authorized but unissued shares of
Common Stock that is at least equal to 200% of the aggregate shares issuable
upon conversion of Debentures, and 200% of the aggregate shares issuable on
exercise of Warrants, which number may be reduced by the number of Common
Shares or Warrant Shares actually delivered pursuant to conversion of
Debentures or exercise of the Warrants and shall be appropriately adjusted
for any stock split, reverse split, stock dividend or reclassification of the
Common Stock. If the Company falls below the reserves specified in the
immediately preceding sentence and does not cure such non-compliance within
30 days of its start, then the Investors will be entitled to the discount
adjustments specified in Section 2(b)(i) of the Registration Rights
Agreement. If at any time the number of authorized but unissued shares of
Common Stock is not sufficient to effect the conversion of all the then
outstanding Debentures or the full exercise of the Warrants, the Investors
shall be entitled to, INTER ALIA, the premium price redemption rights
provided in the Registration Rights Agreement.
Section 3.11 BEST EFFORTS. The parties shall use their best
efforts to satisfy timely each of the conditions described in Article 4 of
this Agreement.
Section 3.12 NO SENIOR INDEBTEDNESS; LIMITATIONS ON ISSUANCE OF
EQUITY.
(a) So long as any Debentures remain outstanding, the Company
agrees that neither the Company nor any subsidiary of the Company shall
create, incur, assume, guarantee, secure or in any manner become liable in
respect of any indebtedness, unless subordinated to the Debentures in all
respects ("Subordinated Debt"), except for (i) trade payables incurred in the
ordinary course of business consistent with past practices (ii) capitalized
lease obligations (to the extent permitted in the Loan Agreement which, in
the aggregate at any point in time, shall not exceed $2 million dollars and
(iii) a senior credit facility with the Senior Lender (the "Senior Debt")
which, in the aggregate, shall not exceed $60 million dollars at any given
time (x) unless such excess does not result in the Senior Leverage Ratio (as
defined in the Loan Agreement) being greater than 5 to 1, and
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<PAGE>
(y) provided that, in no event, shall the Senior Debt exceed $120 million
dollars. If Senior Debt exceeds $60 million, then within ten (10) business
days of the close of any fiscal quarter, the Company shall provide the
Investors with a written statement of its CFO certifying that the Senior
Leverage Ratio of Senior Debt at the close of such quarter for such quarter
is less than 5 to 1. A failure to provide such certificate shall result in a
default under this Agreement and the Debentures.
(b) The Debentures shall be subordinate to the Senior Debt
pursuant to the Subordination Agreement. Any Subordinated Debt shall be
subordinate to the Debentures pursuant to a separate agreement to be entered
into between the potential holders of such Subordinated Debt and the
Investors in a form reasonably satisfactory to the Investors.
(c) The Company shall not contribute or transfer its assets to
any of its subsidiaries, other than a subsidiary that has delivered its
guarantee to the Investor in form and substance satisfactory to the Investors.
(d) Neither the Company nor any subsidiary shall encumber any
of its or their assets, except for Permitted Liens as described in Schedule
3.12(d).
Section 3.13 FORM D; BLUE SKY LAWS. The Company agrees to file a
Form D with respect to the Debentures, Warrants, Common Shares and Warrant
Shares, as required under Regulation D and to provide a copy thereof to each
Investor promptly after such filing. The Company shall, on or before each
Closing Date, take such action as the Company shall have reasonably
determined is necessary to qualify the Debentures, Warrants, Common Shares
and Warrant Shares for sale to the Investors at the Closing pursuant to this
Agreement under applicable securities or "blue sky" laws of the states of the
United States (or to obtain an exemption from such qualification), and shall
provide evidence of any such action so taken to each Investor on or prior to
the Closing Date.
Section 3.14 DELISTING; BEST EFFORTS. The Investors shall, in the
aggregate, be entitled to convert Debentures into a total of 8,785,351 Common
Shares (20% of the Common Stock issued and outstanding on the date hereof,
which number shall be subject to readjustment for any stock split, stock
dividend or reclassification of the Common Stock) (the "20% Cap"). Each
Investor shall be entitled to convert that amount of its Debentures into such
total number of Common Shares equal to such Investor's Pro Rata Share (as
defined below) of the 20% Cap. An Investor's "Pro Rata Share" shall mean that
total number of Common Shares equal to such Investor's Purchase Price divided
by the aggregate Purchase Price. Once an Investor has received its total Pro
Rata Share upon conversion of its Debentures, it may request that the Company
redeem its remaining Debentures at a price equal to the greater of (a) the
cash value that the Investor would receive upon conversion of the Debenture
at the Conversion Price and subsequent sale of the Common Shares received
thereupon at the Market Price for Shares of Common Stock in existence on such
date and (b) 130% of the Outstanding Principal Amount (as defined in the
Debentures) plus accrued but unpaid interest and default payments in effect
at that time. In the event that the Investor is prevented from exercising its
redemption rights hereunder by reason of the Subordination Agreement, then
the Investor shall have the
23
<PAGE>
right to require the Company to pay a default payment at the Default Payment
Rate (as defined in the Debentures) on the Debenture Amount (as defined in
the Debentures) for the Debentures held by such Investor for each 30-day
period that the Investor is prevented from exercising such redemption rights
and that the Company fails to obtain the requisite shareholder approval set
forth below. If an Investor has converted all of its Debentures, but has not
depleted the total number of Pro Rata Shares allocated to it, its remaining
Pro Rata Shares shall be reallocated amongst the Investors still holding
Debentures on a pro rata basis. The restrictions set forth in this Section
3.14 shall cease to apply if (a) the Company obtains written shareholder
approval to issue Common Shares in excess of the 20% Cap pursuant to NYSE
Rule 312.03(c) or (b) the Company provides the Investors with irrevocable
written notice, based upon the advice of its counsel, that any such issuance
of Common Shares upon conversion of the Debentures is not subject to the 20%
Cap pursuant to NYSE Rule 312.03(c). The Company will use its best efforts
promptly to obtain either the shareholder approval or the irrevocable notice
described in the preceding sentence and to provide the Investors with a copy
of same: without limiting the foregoing, the Company shall call a
shareholders meeting by no later than May 31, 2000 in which the Company will
solicit the aforementioned shareholder approval, will solicit proxies in
favor of issuing Common Shares in excess of the 20% Cap and will use its best
efforts to have all affiliates of the Company which own or control shares of
Common Stock to vote their shares in favor of such resolution.
Section 3.15 BOARD APPROVAL. The Company shall use its best efforts
to obtain the approval of the Company's Board of Directors referred to in
Section 1.5 above within 30 days of the Closing Date. The Company shall
notify the Investors immediately upon their receipt of such Board approval or
rejection.
Section 3.16 PRESS RELEASE. Immediately following the Closing, the
Company shall issue a press release. Investors shall have the opportunity to
review such press release prior to its issuance. No press release shall name
the Investors except as shall be required by law. If the Company fails to
issue a press release within 1 business day of the Closing, the Investors may
issue a press release covering the Closing and complying with any legal
requirement applicable to the Investors.
Section 3.17 TRADING. For so long as any of the Debentures or
Warrants are outstanding, such Investor shall not make any short sales or
hedges with respect to the Common Stock with the intention of reducing the
price of the Common Stock to such Investor's benefit. Notwithstanding the
foregoing the Company acknowledges that there is no presumption that sales
(including short sales) are with the intent of reducing the price of Common
Stock even if such price of Common Stock drops during the period that such
sales are taking place.
Section 3.18 GUARANTIES OF SUBSIDIARIES. In the event that, in the
future, any Company subsidiary not listed on Schedule 4.2(k) delivers a
guaranty to the Senior Lender in connection with the Senior Debt, then all
such subsidiaries shall deliver a guarantee to the Investors in the form of
Exhibit 4.2(k) or, at the option of the Investors, such other form that is
used in connection with the Senior Debt.
24
<PAGE>
Section 3.19 ADDITIONAL COVENANTS. Notwithstanding anything to the
contrary in this Agreement, the Debentures, the Warrants or the Registration
Rights Agreement, none of the Company, ACG Holding Company, ACG Exchange
Company or any of the Yptel Shareholders listed on Schedule 3.19 shall be
precluded from performing their obligations or exercising their rights in
respect of: (a) at any time (including on the liquidation of the Company),
the exchanging of Class A Special Shares of ACG Exchange Company ("ACG Ex")
for Common Shares of the Company, (b) the making or receiving of
distributions (by way of dividends or otherwise, in cash, shares or
otherwise) on Class A Special Shares of ACG Ex owned by the Yptel
Shareholders in substance and like manner as those distributions made to
shareholders of Common Shares of the Company, on liquidation or otherwise,
(c) the reserving of sufficient shares of Common Stock of the Company to
enable the exchange of shares contemplated in sub-paragraph (a) above, and
(d) the ensuring that upon the occurrence of any stock splits, subdivisions,
combination of shares, conversions, exchanges, distributions or other such
event in respect of the shares of the Company which (based on an exchange of
one Class A Special Share of ACG Ex for one Common Share of the Company as at
the date hereof) would dilute or adversely affect the economic equivalence of
such an exchange, the corresponding adjustments are made to ensure there is
no such dilution or adverse effect upon the holders of Class A Special Shares
of ACG Ex. For the purposes of this Section 3.19, undefined terms shall have
the meaning set forth in the Support Agreement among the Company, ACG Holding
Company, ACG Exchange Company, Certain Shareholders listed in Schedule A
therein, and YPTel/ACG Pledge Corporation, dated February 14, 2000.
ARTICLE 4
CONDITIONS TO CLOSINGS
Section 4.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY
TO SELL THE DEBENTURES. The obligation hereunder of the Company to issue
and/or sell the Debentures to the Investors at the Closing (unless otherwise
specified) is subject to the satisfaction, at or before the Closing, of each
of the applicable conditions set forth below. These conditions are for the
Company's sole benefit and may be waived by the Company at any time in its
sole discretion.
(a) ACCURACY OF THE INVESTORS' REPRESENTATIONS AND WARRANTIES.
The representations and warranties of each Investor will be true and correct
in all material respects as of the date when made and as of the Closing Date
as though made at that time (except for representations and warranties as of
an earlier date, which will be true and correct in all material respects as
of such date).
(b) PERFORMANCE BY THE INVESTORS. Each Investor shall have
performed all agreements and satisfied all conditions required to be
performed or satisfied by such Investor at or prior to the Closing.
25
<PAGE>
(c) NO INJUNCTION. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Registration Rights Agreement or the
Debentures or the Warrants.
(d) PURCHASE PRICE. The Company shall have received the
aggregate Purchase Price from the Investors.
Section 4.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE INVESTORS
TO PURCHASE THE DEBENTURES. The obligation hereunder of each Investor to
acquire and pay for the Debentures at the Closing (unless otherwise
specified) is subject to the satisfaction, at or before the Closing, of each
of the applicable conditions set forth below. These conditions are for each
Investor's benefit and may be waived by each Investor at any time in its sole
discretion.
(a) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company shall be true and correct
in all material respects as of the date when made and as of the Closing Date
as though made at that time (except for representations and warranties as of
an earlier date, which shall be true and correct in all material respects as
of such date).
(b) PERFORMANCE BY THE COMPANY. The Company shall have
performed all agreements and satisfied all conditions required to be
performed or satisfied by the Company at or prior to the Closing.
(c) NO INJUNCTION. No statute, rule, regulation, executive,
judicial or administrative order, decree, ruling or injunction shall have
been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction which prohibits the consummation of any
of the transactions contemplated by this Agreement or the Registration Rights
Agreement or the Debenture or the Warrants.
(d) YPTEL ACQUISITION. The shareholders of the Company shall
have approved the YPtel Acquisition and other resolutions presented to the
shareholders for their vote thereon at the meeting to be held on February 16,
2000 or any adjournment thereof and the YPtel Acquisition shall have closed
on terms substantially similar to those set forth in the SEC Documents. Each
of the YP Companies and Pacific Coast Publishing, Ltd. are wholly-owned,
indirect or direct, subsidiaries of the Company.
(e) OPINION OF COUNSEL. At the Closing, the Investors shall
have received an opinion of the independent counsel of the Company, Haynes
and Boone, LLP, in the form attached hereto as EXHIBIT 4.2(e) and such other
opinions, certificates and documents as the Investors or their counsel shall
reasonably require incident to the Closing.
(f) REGISTRATION RIGHTS AGREEMENT. The Company and the
Investors shall have executed and delivered the Registration Rights Agreement
in the form and substance of EXHIBIT 4.2(f) attached hereto.
26
<PAGE>
(g) ADVERSE CHANGES. Except as otherwise disclosed in the
Pre-Agreement SEC Documents, since December 31, 1999, no event which had or
is likely to have, in the reasonable judgment of the Investors, a Material
Adverse Effect on the Company or any of its direct or indirect subsidiaries
shall have occurred.
(h) OFFICER'S CERTIFICATE. The Company shall have delivered to
the Investors a certificate in form and substance of EXHIBIT 4.2(h) attached
hereto, executed by an officer of the Company, certifying as to satisfaction
of closing conditions, incumbency of signing officers, and the true, correct
and complete nature of the Charter, By-Laws, good standing and authorizing
resolutions of the Company.
(i) DEBENTURES AND WARRANTS. The Investors shall have received
certificates representing the Debentures and Warrants in the form and
substance of EXHIBIT 1.1A and EXHIBIT 1.1B hereto.
(j) DUE DILIGENCE. Each Investor shall have completed its
financial, accounting, operational and legal due diligence in a manner
satisfactory to such Investor in its sole discretion.
(k) GUARANTIES OF SUBSIDIARIES. The Investors shall have
received a Guarantee in the form of EXHIBIT 4.2(k) by each of the Company's
subsidiaries listed on SCHEDULE 4.2(k), guaranteeing the Company's
obligations under the Debenture, the Registration Rights Agreement and the
Agreement.
ARTICLE 5
LEGEND AND STOCK
The Company will issue one or more certificates representing the
Debentures and the Warrants in the name of the Investor and in such
denominations to be specified by the Investor prior to (or from time to time
subsequent to) Closing. Each certificate representing the Debentures and the
Warrants and any shares of Common Stock issued upon conversion or exercise
thereof initially shall be stamped or otherwise imprinted with a legend
substantially in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE TRANSFERRED,
ASSIGNED, SOLD OR OFFERED FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAW OR AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE
REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED
BECAUSE OF AN APPLICABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
The Company agrees to reissue Debentures and Warrants without the
legend set forth above at such time as (i) the holder thereof is permitted to
dispose of such Debentures and/or Warrants and Common Stock issuable upon
conversion or exercise
27
<PAGE>
thereof pursuant to Rule 144 under the Act, or (ii) such Debentures and/or
Warrants are sold to a purchaser or purchasers who (in the opinion of counsel
to the seller or such purchaser(s), in form and substance reasonably
satisfactory to the Company and its counsel) are able to dispose of such
shares publicly pursuant to an Effective Registration or exemption.
Prior to the Registration Statement (as defined in the Registration
Rights Agreement) being declared effective, any Common Shares issued pursuant
to conversion of Debentures or Warrant Shares issued upon exercise of the
Warrants shall bear a legend in the same form as the legend indicated above.
Upon such Registration Statement becoming effective, the Company agrees to
promptly, but no later than three (3) business days thereafter, issue new
certificates representing such Common Shares and Warrant Shares without such
legend. Except as provided in Section 2(f) of the Registration Rights
Agreement, any Common Shares issued pursuant to conversion of Debentures or
Warrant Shares issued upon exercise of the Warrants after the Registration
Statement has become effective shall be free and clear of any legends,
transfer restrictions and stop orders. Notwithstanding the removal of such
legend, each Investor agrees to sell the Common Shares and Warrant Shares
represented by the new certificates in accordance with the applicable
prospectus delivery requirements (if copies of a current prospectus are
provided to such Investor by the Company) or in accordance with an exception
from the registration requirements of the Act.
Nothing herein shall limit the right of any holder to pledge these
securities pursuant to a bona fide margin account or lending arrangement.
ARTICLE 6
MISCELLANEOUS
Section 6.1 STAMP TAXES. The Company shall pay all stamp and other
taxes and duties levied in connection with the issuance of the Debentures and
Warrants pursuant hereto, the Common Shares issued upon conversion thereof,
and the Warrant Shares issued upon exercise of the Warrants.
Section 6.2 SPECIFIC PERFORMANCE; CONSENT TO JURISDICTION; JURY
TRIAL.
(a) The Company and the Investors acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent or cure breaches of the
provisions of this Agreement and to enforce specifically the terms and
provisions hereof, this being in addition to any other remedy to which any of
them may be entitled by law or equity.
(b) THE COMPANY AND EACH OF THE INVESTORS (I) HEREBY
IRREVOCABLY SUBMITS TO THE NON EXCLUSIVE JURISDICTION OF THE UNITED STATES
DISTRICT COURT, THE NEW YORK STATE COURTS AND OTHER COURTS OF THE UNITED
STATES SITTING IN NEW
28
<PAGE>
YORK COUNTY, NEW YORK FOR THE PURPOSES OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT AND (II) HEREBY WAIVES, AND
AGREES NOT TO ASSERT IN ANY SUCH SUIT ACTION OR PROCEEDING, ANY CLAIM THAT IT
IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT, THAT THE SUIT,
ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF
THE SUIT, ACTION OR PROCEEDING IS IMPROPER. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, THE COMPANY AND EACH OF THE INVESTORS CONSENTS TO PROCESS
BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF
TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT
AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF
PROCESS AND NOTICE THEREOF. NOTHING IN THIS PARAGRAPH SHALL AFFECT OR LIMIT
ANY RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.
(c) THE COMPANY AND EACH INVESTOR HEREBY WAIVES ALL RIGHTS TO
A TRIAL BY JURY.
Section 6.3 ENTIRE AGREEMENT; AMENDMENT. This Agreement, together
with the Registration Rights Agreement, the Warrants, the Debentures and the
agreements and documents executed in connection herewith and therewith,
contains the entire understanding of the parties with respect to the matters
covered hereby and thereby and, except as specifically set forth herein or
therein, neither the Company nor any Investor makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision
of this Agreement may be waived or amended other than by a written instrument
signed by the party against whom enforcement of any such amendment or waiver
is sought.
Section 6.4 NOTICES. Any notice or other communication required or
permitted to be given hereunder shall be in writing by mail, facsimile or
personal delivery and shall be effective upon actual receipt of such notice.
The addresses for such communications shall be:
29
<PAGE>
to the Company:
Advanced Communications Group, Inc.
390 S. Woods Mill Road, Suite 150
St. Louis, MO 63017
Attention: Michael A. Pruss
Facsimile: (314) 469-3539
with copies to:
Haynes and Boone, LLP
901 Main Street
Suite 3100
Dallas, Texas 75202
Attention: Paul H. Amiel, Esq.
Facsimile: (214) 200-0555
to the Investors:
To each Investor at the address and/or fax
number set forth on SCHEDULE I of this
Agreement.
with copies to:
Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue, 18th Floor
New York, New York 10176
Attention: Stephen M. Schultz, Esq.
Facsimile: (212) 986-8866
Any party hereto may from time to time change its address for notices by
giving at least 10 days' written notice of such changed address to the other
parties hereto.
Section 6.5 INDEMNITY. Each party shall indemnify each other party
against any loss, cost or damages (including reasonable attorney's fees but
excluding consequential damages) incurred as a result of such parties' breach
of any representation, warranty, covenant or agreement in this Agreement; or
incurred as a result of the enforcement of this indemnity.
Section 6.6 WAIVERS. No waiver by any party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission
of any party to exercise any right hereunder in any manner impair the
exercise of any such right accruing to it thereafter.
30
<PAGE>
Section 6.7 HEADINGS. The headings herein are for convenience
only, do not constitute a part of this Agreement and shall not be deemed to
limit or affect any of the provisions hereof.
Section 6.8 SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns. The parties hereto may
amend this Agreement without notice to or the consent of any third party. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of all Investors (which consent may be
withheld for any reason in their sole discretion), except that the Company
may assign this Agreement in connection with the sale of all or substantially
all of its assets provided that the Company is not released from any of its
obligations hereunder, such assignee assumes all obligations of the Company
hereunder, and appropriate adjustment of the provisions contained in this
Agreement, the Registration Rights Agreement, the Debentures and the Warrants
is made, in form and substance satisfactory to the Investors, to place the
Investors in the same position as they would have been but for such
assignment, in accordance with the terms of the Debentures and the Warrants.
No Investor may assign this Agreement (in whole or in part) or any rights or
obligations hereunder without the consent of the Company (which shall not be
unreasonably withheld), except that an Investor may assign its rights
hereunder in connection with an assignment of Securities.
Section 6.9 NO THIRD PARTY BENEFICIARIES. This Agreement is
intended for the benefit of the parties hereto and their respective permitted
successors and assigns and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.
Section 6.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS EXECUTED AND TO BE PERFORMED ENTIRELY WITHIN SUCH
STATE.
Section 6.11 SURVIVAL. The representations and warranties and
the agreements and covenants of the Company and each Investor contained
herein shall survive the Closing.
Section 6.12 EXECUTION. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same
agreement, it being understood that all parties need not sign the same
counterpart.
Section 6.13 PUBLICITY. The Company agrees that it will not
disclose, and will not include in any public announcement, the name of any
Investor without the express written agreement of such Investor, unless and
until such disclosure is required by law or applicable regulation, and then
only to the extent of such requirement. The Company agrees that it will
deliver a copy of any public announcement regarding the matters covered by
this Agreement or any agreement and document executed herewith to each
Investor and any public announcement including the name of an Investor to
such Investor, reasonably in advance of the release of such announcements.
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<PAGE>
Section 6.14 SEVERABILITY. The parties acknowledge and agree that
the Investors are not agents, affiliates or partners of each other, that all
representations, warranties, covenants and agreements of the Investor
hereunder are several and not joint, that no Investor shall have any
responsibility or liability for the representations, warrants, agreements,
acts or omissions of any other Investor, and that any rights granted to
"Investors" hereunder shall be enforceable by each Investor hereunder.
Section 6.15 LIKE TREATMENT OF HOLDERS; REDEMPTION. Neither the
Company nor any of its affiliates shall, directly or indirectly, pay or cause
to be paid any consideration (immediate or contingent), whether by way of
interest, fee, payment for the redemption or conversion of Debentures or
exercise of the Warrants, or otherwise, to any holder of Debentures or
Warrants, for or as an inducement to, or in connection with the solicitation
of, any consent, waiver or amendment of any terms or provisions of the
Debenture or this Agreement or the Registration Rights Agreement or the
Warrants, unless such consideration is required to be paid to all holders of
Debentures and Warrants bound by such consent, waiver or amendment whether or
not such holders so consent, waive or agree to amend and whether or not such
holders tender their Debentures or Warrants for redemption, conversion or
exercise. The Company shall not, directly or indirectly, redeem any
Debentures unless such offer of redemption is made pro rata to all holders of
Debentures on identical terms.
Section 6.16 NO STRICT CONSTRUCTION. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied
against any party.
SIGNATURE PAGE FOLLOWS
32
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
COMPANY:
ADVANCED COMMUNICATIONS
GROUP, INC.
By: /s/ Michael A. Pruss
--------------------------
Name:
Title:
INVESTORS:
HALIFAX FUND, L.P.
By: THE PALLADIN GROUP, L.P.
Attorney-in-Fact
By: /s/ Steven W. Weiner
--------------------------
Name: Steven W. Weiner
Title: Managing Director
ELLIOTT ASSOCIATES, L.P.
By: /s/ Paul Singer
--------------------------
Name: Paul Singer
Title:
WESTGATE INTERNATIONAL, L.P.
By: MARTLEY INTERNATIONAL, INC.
Attorney-in-Fact
By: /s/ Paul Singer
--------------------------
Name: Paul Singer
Title:
SIGNATURE PAGE TO ADVANCED COMMUNICATIONS GROUP, INC.
DEBENTURE PURCHASE AGREEMENT
33
<PAGE>
EXHIBITS AND SCHEDULES
Schedule I List of Investors
Exhibit 1.1A Form of Debenture
Exhibit 1.1B Form of Warrant
Schedule 2.1(a) List of Subsidiaries
Schedule 2.1(c) Capitalization
Schedule 2.1(c) Certain Transactions
Exhibit 2.1(c)(i) Certificate of Incorporation of the Company
Exhibit 2.1(c)(ii) By-Laws of the Company
Schedule 2.1(w) Insurance
Schedule 2.1(bb) Real Property
Schedule 3.6 Dividends or Distributions
Schedule 3.12(d) Permitted Liens
Schedule 3.19 Yptel Shareholders
Exhibit 4.2(e) Opinion of Company Counsel
Exhibit 4.2(f) Registration Rights Agreement
Schedule 4.2(h) Officer's Certificate
Schedule 4.2(k) Subsidiaries Providing Guaranties
Exhibit 4.2(k) Form of Guaranty
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
OUTSTANDING NUMBER
PRINCIPAL AMOUNT OF
INVESTOR OF WARRANTS PURCHASE PRICE
DEBENTURES
---------------- -------- --------------
<S> <C> <C> <C>
HALIFAX FUND, LP $15,000,000 429,262 $15,000,000
c/o The Palladin Group, L.P.
Investment Manager
195 Maplewood Avenue
Maplewood, New Jersey 07040
Attn: Robert Chender
Tax I.D. No.:
Facsimile: (973) 313-6491
ELLIOTT ASSOCIATES, L.P. $ 2,500,000 71,544 $ 2,500,000
712 Fifth Avenue - 36th Floor
New York, NY 10019
Attn: Brett Cohen
Tax I.D. No. _______________
Facsimile: (212) 974-2092
WESTGATE INTERNATIONAL, L.P. $ 2,500,000 71,544 $ 2,500,000
c/o Stonington Management Corporation
712 Fifth Avenue - 36th Floor
New York, NY 10019
Attn: Brett Cohen
Tax I.D. No. ________________
Facsimile: (212) 974-2092
</TABLE>
<PAGE>
Exhibit 4.2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is entered into as
of February 23, 2000 between ADVANCED COMMUNICATIONS GROUP, INC., a Delaware
corporation with offices at 390 S. Woods Mill Road, Suite 150, St. Louis, MO
63017 (the "Company") and each of the entities listed under "Investors" on
the signature page hereto (each an "Investor" and collectively the
"Investors"), each with offices at the address listed under such Investor's
name on Schedule I hereto.
W I T N E S S E T H:
WHEREAS, pursuant to that certain Convertible Debenture Purchase
Agreement by and between the Company and the Investors (the "Purchase
Agreement"), the Company has agreed to sell and issue to the Investors, and
the Investors have agreed to purchase from the Company, an aggregate of $20
million principal amount of the Company's 5% Convertible Debentures Due
February 23, 2006 (the "Initial Debentures" and, together with the Subsequent
Debentures (as defined below), the "Debentures") on the terms and conditions
set forth therein;
WHEREAS, pursuant to Purchase Agreement, in addition to the
foregoing, the Investors may elect and/or be required (by the Company) to
purchase from the Company, an aggregate of $10 million principal amount of
additional debentures (the "Subsequent Debentures");
WHEREAS, the Purchase Agreement contemplates that the Debentures
will be convertible into shares (the "Common Shares") of common stock, par
value $.0001, of the Company ("Common Stock") pursuant to the terms and
conditions set forth in the Debentures;
WHEREAS, pursuant to the terms of, and in partial consideration for,
the Investors' agreement to enter into the Purchase Agreement, the Company
has agreed (i) to issue warrants exercisable for 572,350 shares of Common
Stock of the Company (the "Initial Warrants") in connection with the issuance
of the Initial Debentures (shares of Common Stock issuable under the Initial
Warrants and the Option Warrants (as defined below) are referred to herein as
the "Warrant Shares") and (ii) upon the issuance of Subsequent Debentures, to
issue additional warrants as set forth in the Purchase Agreement ("Option
Warrants" and, together with the Initial Warrants, the "Warrants") to provide
the Investors with certain registration rights with respect to the Common
Shares and Warrant Shares and certain other rights and remedies with respect
to the Debentures as set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in the
Purchase Agreement and this Agreement, the Company and the Investors agrees
as follows:
<PAGE>
1. CERTAIN DEFINITIONS; SUBORDINATION.
(a) CERTAIN DEFINITIONS. Capitalized terms used herein and
not otherwise defined shall have the meaning ascribed thereto in the Purchase
Agreement, the Warrants or the Debentures. As used in this Agreement, the
following terms shall have the following respective meanings:
"CLOSING" and "CLOSING DATE" shall have the meanings ascribed to such
terms in the Purchase Agreement.
"CONVERSION PRICE" shall have meaning ascribed to such term in
Section 5(c) of the Debenture.
"COMMISSION" or "SEC" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the
Securities Act.
"COMPANY NOTICE" shall have the meaning set forth in Section
2(b)(i)(B).
"DEFAULT PAYMENT RATE" shall have the meaning set forth in Section
2(b)(i)(B).
"DEFAULT PERIOD" shall have the meaning set forth in Section 2(b)(i).
"DEBENTURE AMOUNT" shall have the meaning set forth in Section
2(b)(i)(B).
"HOLDER" and "HOLDERS" shall mean the Investor or the Investors,
respectively, and any transferee of the Debentures, Warrants, Warrant Shares
or Common Shares or Registrable Securities which have not been sold to the
public to whom the registration rights conferred by this Agreement have been
transferred in compliance with this Agreement.
"INTERFERING EVENTS" shall have the meaning set forth in Section 2(b).
"MARKET PRICE FOR SHARES OF COMMON STOCK" shall have the meaning
ascribed to such term in the Debentures.
"OUTSTANDING PRINCIPAL AMOUNT" shall have the meaning ascribed to such
term in the Debentures.
"POTENTIAL MATERIAL EVENT" means any of the following: (a) the
possession by the Company of material information not ripe for disclosure in
a registration statement, as reasonably determined in good faith by the Chief
Executive Officer or the Board of Directors of the Company that disclosure of
such information in a Registration Statement would be materially detrimental
to the business and affairs of the Company; and (b) any material engagement
or activity by the Company which would, in the reasonable good faith
determination of the Chief Executive Officer or the Board of Directors of the
Company, be materially adversely affected by disclosure in a registration
statement at such time, which reasonable determination shall be accompanied
by a reasonable good
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faith determination by the Chief Executive Officer or the Board of Directors
of the Company that the applicable Registration Statement would be materially
misleading absent the inclusion of such information.
"PREMIUM REDEMPTION PRICE" shall have the meaning set forth in
Section 2(b)(i)(B).
"PUT NOTICE" shall have the meaning set forth in Section 2(b)(i)(B).
"REGISTRABLE SECURITIES" shall mean: (i) the Common Shares and
Warrant Shares issued or issuable to each Holder or its permitted transferee
or designee upon conversion of the Debentures (including, without limitation,
the Subsequent Debentures) or exercise of the Warrants (including, without
limitation, the Option Warrants), as applicable, or upon any stock split,
stock dividend, recapitalization or similar event with respect to such Common
Shares or Warrant Shares; (ii) any securities issued or issuable to each
Holder upon the conversion, exercise or exchange of any Debentures, Warrants,
Warrant Shares, or Common Shares; and (iii) any other security of the Company
issued as a dividend or other distribution with respect to, conversion or
exchange of, or in replacement of, Registrable Securities.
The terms "REGISTER", "REGISTERED" and "REGISTRATION" shall refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"REGISTRATION EXPENSES" shall mean all expenses to be incurred by
the Company in connection with each Holder's registration rights under this
Agreement, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company, "Blue
Sky" fees and expenses, reasonable fees and disbursements of counsel to
Holders (using a single counsel selected by a majority in interest of the
Holders) for a "due diligence" examination of the Company and review of the
Registration Statement and related documents (up to a maximum of $100,000
less the amount of Investor legal expenses previously paid by the Company
under Section 3.4 of the Purchase Agreement), and the expense of any special
audits incident to or required by any such registration (but excluding the
compensation of regular employees of the Company, which shall be paid in any
event by the Company).
"REGISTRATION STATEMENT" shall have the meaning set forth in Section
2(a) herein.
"REGULATION D" shall mean Regulation D as promulgated pursuant to
the Securities Act, and as subsequently amended.
"SECURITIES ACT" or "ACT" shall mean the Securities Act of 1933, as
amended.
"SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities and all fees and
disbursements of counsel for Holders not included within "Registration
Expenses".
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"SUBORDINATION AGREEMENT" shall have the meaning set forth in
Section 1(b) herein.
(b) SUBORDINATION. The rights of the Holders under this
Agreement are subject to the terms of the Subordination Agreement dated
February 23, 2000, among the Senior Lenders (as defined therein) and, among
others, the Investors (the "Subordination Agreement").
2. REGISTRATION REQUIREMENTS. The Company shall use its best efforts to
effect the registration of the Registrable Securities (including without
limitation the execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable "Blue Sky" or other state
securities laws and appropriate compliance with applicable regulations issued
under the Securities Act) as would permit or facilitate the sale or
distribution of all the Registrable Securities in the manner (including
manner of sale) and in all U.S. jurisdictions. Such best efforts by the
Company shall include the following:
(a) The Company shall, as expeditiously as reasonably
possible after the Closing Date:
(i) But in any event within 60 days thereafter, prepare
and file a registration statement with the Commission
pursuant to Rule 415 under the Securities Act on Form S-3
under the Securities Act (or in the event that the Company
is ineligible to use such form, such other form as the
Company is eligible to use under the Securities Act) covering
the Registrable Securities (such registration statement,
including any amendments or supplements thereto and
prospectuses contained therein, is referred to herein as the
"Registration Statement"), which Registration Statement, to
the extent allowable under the Securities Act and the rules
promulgated thereunder (including Rule 416), shall state that
such Registration Statement also covers such number of
additional shares of Common Stock as may become issuable to
prevent dilution resulting from stock splits, stock dividends
or similar events. The number of shares of Common Stock
initially included in such Registration Statement shall be no
less than the sum of (A) two times the sum of the number of
Common Shares that are as of the date of this Agreement
issuable upon conversion of the Debentures (assuming, for
purposes of this calculation, that 10,000,000 principal
amount of the Subsequent Debentures were issued and
outstanding) plus (B) one and one-half times the number of
Warrant Shares issuable upon exercise of the Warrants
(assuming, for purposes of this calculation, that the Option
Warrants were issued and outstanding) in each case without
regard to any limitation on the Investor's ability to convert
the Debentures or Warrants. Thereafter, the Company shall use
its best efforts to cause such Registration Statement to be
declared effective as soon as practicable, and in any event
prior to 120 days following the Closing Date. The Company
shall provide Holders and their legal counsel
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<PAGE>
reasonable opportunity to review any such Registration
Statement or amendment or supplement thereto prior to
filing.
(ii) Prepare and file with the SEC such amendments
and supplements to such Registration Statement and the
prospectus used in connection with such Registration
Statement as may be necessary to comply with the provisions
of the Act with respect to the disposition of all securities
covered by such Registration Statement in accordance with the
intended methods of disposition by the seller thereof as set
forth in the Registration Statement and notify the Holders of
the filing and effectiveness of such Registration Statement
and any amendments or supplements.
(iii) Furnish to each Holder such numbers of copies of
a current prospectus conforming with the requirements of the
Act, copies of the Registration Statement, any amendment or
supplement thereto and any documents incorporated by
reference therein and such other documents as such Holder may
reasonably require in order to facilitate the disposition of
Registrable Securities owned by such Holder.
(iv) Use its best efforts to register and qualify the
securities covered by such Registration Statement under such
other securities or "Blue Sky" laws of all U.S.
jurisdictions; provided that the Company shall not be
required in connection therewith or as a condition thereto to
qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(v) Notify each Holder immediately of the happening
of any event as a result of which the prospectus (including
any supplements thereto or thereof and any information
incorporated or deemed to be incorporated by reference
therein) included in such Registration Statement, as then in
effect, includes an untrue statement of material fact or
omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in
light of the circumstances then existing, and, pursuant to
Section 2(f), use its best efforts to promptly update and/or
correct such prospectus.
(vi) Notify each Holder immediately of the issuance
by the Commission or any state securities commission or
agency of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings
for that purpose. The Company shall use its best efforts to
prevent the issuance of any stop order and, if any stop order
is issued, to obtain the lifting thereof at the earliest
possible time.
(vii) Permit a single firm of counsel, designated as
Holders' counsel by the Holders of a majority of the
Registrable Securities included in the Registration
Statement, to review the Registration Statement and all
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<PAGE>
amendments and supplements thereto within a reasonable period
of time prior to each filing, and shall not file any document
in a form to which such counsel reasonably objects.
(viii) Use its best efforts to list the Registrable
Securities covered by such Registration Statement with all
securities exchange(s) and/or markets on which the Common
Stock is then listed and prepare and file any required
filings with the National Association of Securities Dealers,
Inc. or any exchange or market where the Common Stock is
then traded.
(ix) If applicable, take all steps necessary to
enable Holders to avail themselves of the prospectus
delivery mechanism set forth in Rule 153 (or successor
thereto) under the Act.
(b) Set forth below in this Section 2(b) are (I) events
that may arise that the Investors consider will interfere with the full
enjoyment of their rights under the Debentures, the Purchase Agreement and
this Agreement (the "Interfering Events"), and (II) certain remedies
applicable in each of these events.
Paragraphs (i) through (iv) of this Section 2(b) describe the
Interfering Events, provide a remedy to the Investors if an
Interfering Event occurs and provide that the Investors may
require that the Company redeem outstanding Debentures at a
specified price if certain Interfering Events are not timely
cured.
Paragraph (vi) provides, INTER ALIA, that if cash payments
required as the remedy in the case of certain of the
Interfering Events are not paid when due, the Company may be
required by the Investors to redeem outstanding Debentures at
a specified price.
Paragraph (viii) provides, INTER ALIA, that the Investors
have the right to specific performance.
The preceding paragraphs in this Section 2(b) are meant to serve only
as an introduction to this Section 2(b), are for convenience only, and are not
to be considered in applying, construing or interpreting this Section 2(b).
(i) DELAY IN EFFECTIVENESS OF REGISTRATION STATEMENT.
(A) In the event that the Registration Statement
has not been declared effective within 120 days from the
Closing Date, then the Conversion Price shall be reduced by
1% during and after the 30-day period (the "Default Period")
from and after the 120th day following the Closing Date
during any part of which such Registration Statement is not
effective, and such Conversion Price shall be further reduced
by additional 1.5% amounts during and after each Default
Period thereafter. For example, if the Registration Statement
does not become effective until 150
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<PAGE>
days from the Closing Date, the Conversion Price from and
after day 121 from the Closing Date shall be multiplied by
99%. If the Registration Statement is not effective until
the 180th day after the Closing Date, the Conversion Price
from and after day 151 from the Closing Date shall be
multiplied by 97.5%. In each case, the Conversion Price
shall be subject to further adjustment as set forth in the
Debentures and the Purchase Agreement; provided, that once
the Registration Statement first becomes effective, there
can be no further adjustment to the Conversion Price under
this Section 2(b)(i).
(B) If the Registration Statement has not been
declared effective within 180 days after the Closing Date
and provided that such Holder is not able to freely sell
the Registrable Securities pursuant to Rule 144(k) of the
Act, then each Holder may, in its sole discretion, put to
the Company in writing (the "Put Notice") the two options
set forth below, of which the Company must select one by
providing the Holder with written notice (the "Company
Notice") of its selection within 3 business days of its
receipt of the Put Notice.
OPTION ONE: The Company shall redeem the
Debentures, Common Shares and/or Warrant Shares (in whole or
in part, as selected by the Holder in the Put Notice) at the
Premium Redemption Price (as defined below) on a date
specified by the Holder in the Put Notice, which shall be at
least 5 business days from the date thereof (the "Redemption
Date"). The "Premium Redemption Price" shall be equal to (A)
as to the Debentures, the greater of (x) 120% of the
Outstanding Principal Amount of the Debentures plus any
accrued but unpaid or unrecognized interest or default
payments and (y) the value that the Holder would be entitled
to receive upon conversion of the Debenture at the Conversion
Price then in existence, without reference to Section 12
thereof, and the subsequent sale of the Common Shares
received thereby at the Market Price for Shares of Common
Stock then in existence and (B) as to the Common Shares
and/or Warrant Shares, 120% of the dollar amount which is
the product of (x) the number of shares so to be redeemed
pursuant to this paragraph, and (y) the Market Price for
Shares of Common Stock at the time such shares were
received pursuant to conversion of Debentures or exercise
of the Warrants. Nothing herein shall be construed as
precluding the Holder from exercising its conversion rights
under the Debenture unless the Company redeems the Debenture
and pays the Premium Redemption Price in full pursuant to
this Option One. Default payments shall no longer accrue on
Debentures after such Debentures have been redeemed by the
Company pursuant hereto. If the Company fails to pay the
Premium Redemption Price in full on the Redemption Date in
immediately available funds, in addition to any other rights
or remedies it may have, (i) the Holder shall have the right
to require the Company to repurchase the Debentures, Common
Shares
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<PAGE>
and/or Warrant Shares (in whole or in part, as selected by
Holder) at a price equal to 110% of the Premium Redemption
Price; and (ii) the Company shall pay in cash to each Holder
the default payment set forth in Option Two below for each
30-day period (or portion thereof) that the Company fails to
pay 110% of the Premium Redemption Price, except that such 3%
default payment shall not be subject to the 18% cap, set
forth in Option Two. In the event that the Company selects
Option One but the Holder is prevented from exercising its
redemption rights by reason of the Subordination Agreement,
then the Company shall be deemed to have selected Option Two
for all purposes hereunder.
OPTION TWO: The Company shall pay a cash default
payment at a rate (the "Default Payment Rate") equal to three
(3 %) of the sum of (x) the Outstanding Principal Amount of,
(y) the accrued but unpaid interest on, and (z) the accrued
but unpaid or unrecognized default payments on the Debentures
(the "Debenture Amount") held by such Holder for each 30-day
period (or portion thereof) that the Registration Statement
has not been declared effective until the Registration
Statement has been declared effective, which such 3% default
payment shall not exceed, in the aggregate, 18% of the
Debenture Amount in any 365-day period. Such default payments
shall be made in accordance with Section 2(b)(v) and (vi)
hereof.
If the Company fails to provide the Holder with the
Company Notice within 3 business days of its receipt of the
Put Notice, then the Company will be deemed to have selected
OPTION TWO.
(ii) NO LISTING; PREMIUM PRICE REDEMPTION FOR
DELISTING OF CLASS OF SHARES.
(A) In the event that the Company fails,
refuses or is unable to cause the Registrable Securities
covered by the Registration Statement to be listed with
the Approved Market and each other securities exchange and
market on which the Common Stock is then traded at all
times during the period ("Listing Period") commencing the
earlier of the effective date of the Registration Statement
or the 120th day following the Closing Date, and continuing
thereafter for so long as the Debentures are outstanding,
then the Company shall pay in cash to each Holder a default
payment at the Default Payment Rate on the Debenture Amount
for the Debentures held by such Holder for each 30-day period
(or portion thereof) during the Listing Period from and after
such failure, refusal or inability to so list the Registrable
Securities until the Registrable Securities are so listed,
which such 3% default payment shall not exceed, in the
aggregate, 18% of the Debenture in any 365-day period. Such
default payments shall be made in accordance with Section
2(b)(v) and (vi) hereof.
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<PAGE>
(B) In the event that shares of Common Stock
of the Company are delisted from the Approved Market at any
time following the Closing Date and remain delisted for
5 consecutive business days, then at the option of each
Holder and to the extent such Holder so elects, the Company
shall on 2 business days notice either (1) pay in cash to
such Holder a default payment at the Default Payment Rate on
the Debenture Amount for the Debentures held by such Holder
for each 30-day period that the shares are delisted or (2)
redeem the Debentures and/or Common Shares and/or Warrant
Shares held by such Holder, in whole or in part, at a
redemption price equal to the Premium Redemption Price
(as defined above); PROVIDED, however, that such Holder may
revoke such request at any time prior to receipt of payment
of such default payments or Premium Redemption Price, as the
case may be. Default payments shall no longer accrue on
Debentures after such Debentures have been redeemed by the
Company pursuant to the foregoing provision.
(iii) BLACKOUT PERIODS. In the event any Holder is
unable to sell Registrable Securities under the Registration
Statement for more than (A) ten (10) consecutive days or (B)
thirty (30) days in any calendar year ("Suspension Grace
Period"), as may be extended pursuant to the following
sentence, including without limitation by reason of a
suspension of trading of the Common Stock on the Approved
Market, any suspension or stop order with respect to the
Registration Statement or the fact that an event has
occurred as a result of which the prospectus (including any
supplements thereto) included in such Registration Statement
then in effect includes an untrue statement of material fact
or omits to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading in light of the circumstances then existing, or
the number of shares of Common Stock covered by the
Registration Statement is insufficient at such time to make
such sales, then the Company shall pay in cash to each Holder
a default payment at the Default Payment Rate of the
Debenture Amount for the Debentures held by such Holder for
each 30-day period (or portion thereof) from and after the
expiration of the Suspension Grace Period which such 3%
default payment shall not exceed, in the aggregate, 18% of
the Debenture in any 365-day period; provided, however, that
under the following circumstances not more than once in any
12 month period the Suspension Grace Period may be extended
for up to 30 days or if earlier the date upon which the
circumstances giving rise to such extension ceases to exist:
(A) the Company has filed or proposes to file a Registration
Statement with respect to any of its securities to be
distributed in a firm commitment underwritten public offering
that results in gross aggregate cash proceeds to the Company
of not less than 30 million dollars and it is advised by its
lead or managing underwriter that an offering by a Holder of
Registrable Securities would materially adversely affect the
distribution of such securities, or (B) the fulfillment of
such obligations would require the
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Company to prepare financial statements under the Act that
would not otherwise be required to be prepared by the Company
in order to comply with its obligations under the Exchange
Act. In the event that the Suspension Grace Period has been
extended as provided above, the Company shall deliver a
certificate in writing, signed by an officer of the Company,
to each Holder, which shall state that the Suspension Grace
Period hereunder has been extended in accordance with this
Section 3(b)(iii). Alternatively, a Holder shall have the
right but not the obligation to have the Company redeem its
Debentures and Common Shares and Warrant Shares at the price
and on the terms set forth in Section 2(b)(ii)(B) above.
(iv) CONVERSION DEFICIENCY; PREMIUM PRICE REDEMPTION
FOR CONVERSION DEFICIENCY. To the extent that Section 3.14 of
the Purchase Agreement does not apply, in the event that the
Company does not have a sufficient number of Common Shares
available to satisfy the Company's obligations to any Holder
upon receipt of a Conversion Notice (as defined in the
Debenture) or is otherwise unable or unwilling to issue such
Common Shares (including without limitation by reason of the
limit described in Section 10 below) in accordance with the
terms of the Debenture for any reason after receipt of a
Conversion Notice, then:
(A) The Company shall pay in cash to each
Holder a default payment at the Default Payment Rate on the
Debenture Amount for the Debentures held by such Holder for
each 30-day period (or portion thereof) that the Company
fails or refuses to issue Common Shares in accordance with
the Debenture terms which such 3% default payment shall not
exceed, in the aggregate, 18% of the Debenture in any 365-day
period; and
(B) At any time five days after the
commencement of the running of the first 30-day period
described above in clause (A) of this paragraph (iv), at
the request of any Holder pursuant to a redemption notice,
the Company promptly (1) shall purchase from such Holder, at
a purchase price equal to the Premium Redemption Price, the
Debenture Amount of Debentures equal to such Holder's pro
rata share of the "Deficiency" (as such term is defined
below), if the failure to issue Common Shares results from
the lack of a sufficient number thereof and (2) shall
purchase all (or such portion as such Holder may elect) of
such Holder's Debentures at such Premium Redemption Price if
the failure to issue Common Shares results from any other
cause. The "Deficiency" shall be equal to the Debenture
Amount of Debentures that would not be able to be converted
for Common Shares, due to an insufficient number of Common
Shares available, if all the outstanding Debentures were
submitted for conversion at the Conversion Price set forth
in the Debentures as of the date such Deficiency is
determined. Any request by
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a Holder pursuant to this paragraph (iv)(B) shall be
revocable by that Holder at any time prior to its receipt
of the Premium Redemption Price.
(v) DEFAULT PAYMENT TERMS; STATUS OF UNPAID
DEFAULT PAYMENTS. All default payments (which payments
shall be pro rata on a per diem basis for any period of
less than 30 days) required to be made in connection with
the above provisions shall be paid in cash at any time upon
demand, and whether or not a demand is made, by the tenth
(10th) day of each calendar month for each partial or full
30-day period occurring prior to that date. Until paid as
required in this Agreement, default payments shall be
deemed added to, and a part of, the Outstanding Principal
Amount of a Holder's Debentures.
(vi) PREMIUM PRICE REDEMPTION FOR CASH PAYMENT
DEFAULTS. In the event that the Company fails or refuses to
pay any default payment or honor any discount provided for
in the foregoing paragraphs (i) through (iv) when due, at
any Holder's request and option the Company shall purchase
all or a portion of the Debentures, Common Shares and/or
Warrant Shares held by such Holder (with default payments
accruing through the date of such purchase), within five
(5) days of such request, at a purchase price equal to the
Premium Redemption Price (as defined above); PROVIDED that
such Holder may revoke such request at any time prior to
receipt of such payment of such purchase price. Until such
time as the Company purchases such Debentures at the
request of such Holder pursuant to the preceding sentence,
at any Holder's request and option the Company shall as to
such Holder pay such amount by adding and including the
amount of such default payment to the Outstanding Principal
Amount of a Holder's Debentures.
Notwithstanding anything contained herein to the contrary,
the Company shall be obligated to redeem Common Shares or
Warrant Shares only from available funds in accordance with
Section 160 of Delaware General Corporation Law, as may be
amended from time to time.
(vii) CUMULATIVE REMEDIES. Each default payment
triggered by an Interfering Event provided for in the
foregoing paragraphs (ii) through (iv) shall be in addition
to each other default payment triggered by another
Interfering Event; PROVIDED, however, that in no event
shall the Company be obligated to pay to any Holder default
payments in an aggregate amount greater than the Default
Payment Rate of the Outstanding Principal Amount of the
Debentures held by such Holder for any 30-day period (or
portion thereof). The default payments and mandatory
redemptions provided for above are in addition to and not
in lieu or limitation of any other rights the Holders may
have at law, in equity or under the terms of the
Debentures, the Purchase Agreement, the Warrants or this
Agreement, including without limitation the right to
specific
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performance. Each Holder shall be entitled to specific
performance of any and all obligations of the Company in
connection with the registration rights of the Holders
hereunder.
(viii) CERTAIN ACKNOWLEDGMENTS. The Company
acknowledges that any failure, refusal or inability by the
Company described in the foregoing paragraphs (i) through
(iv) and paragraph (vi) will cause the Holders to suffer
damages in an amount that will be difficult to ascertain,
including without limitation damages resulting from the
loss of liquidity in the Registrable Securities and the
additional investment risk in holding the Registrable
Securities. Accordingly, the parties agree that it is
appropriate to include in this Agreement the foregoing
provisions for default payments, discounts and mandatory
redemptions in order to compensate the Holders for such
damages. The parties acknowledge and agree that the default
payments, discounts and mandatory redemptions set forth
above represent the parties' good faith effort to quantify
such damages and, as such, agree that the form and amount
of such default payments, discounts and mandatory
redemptions are reasonable and will not constitute a
penalty. The parties agree that the provisions of this
clause (viii) consist of certain acknowledgments and
agreements concerning the remedies of the Holders set forth
in clauses (i) through (iv) and paragraph (vi) of this
paragraph; nothing in this clause (viii) imposes any
additional default payments, discounts and mandatory
redemptions for violations under this Agreement.
(c) If the Holder(s) intend to distribute the
Registrable Securities by means of an underwriting, the Holder(s) shall so
advise the Company. Any such underwriting may only be administered by
investment bankers reasonably satisfactory to the Company. The Company shall
only be obligated to permit one underwritten offering, which offering shall
be determined by a majority-in-interest of the Holders.
(d) The Company shall enter into such customary
agreements for secondary offerings (including a customary underwriting
agreement with the underwriter or underwriters, if any) and take all such
other reasonable actions reasonably requested by the Holders in connection
therewith in order to expedite or facilitate the disposition of such
Registrable Securities. In the event that the offering in which the
Registrable Securities are to be sold is deemed to be an underwritten
offering or an Investor selling Registrable Securities is deemed to be an
underwriter, the Company shall:
(i) make such representations and warranties to
the Holders and the underwriter or underwriters, if any, in
form, substance and scope as are customarily made by
issuers to underwriters in secondary offerings;
(ii) cause to be delivered to the sellers of
Registrable Securities and the underwriter or underwriters,
if any, opinions of independent counsel to the Company, on
and dated as of the effective day (or in the
12
<PAGE>
case of an underwritten offering, dated the date of
delivery of any Registrable Securities sold pursuant
thereto) of the Registration Statement, and within ninety
(90) days following the end of each fiscal year thereafter,
which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the Holders and the
underwriter(s), if any, and their counsel and covering,
without limitation, such matters as the due authorization
and issuance of the securities being registered and
compliance with securities laws by the Company in
connection with the authorization, issuance and
registration thereof and other matters that are customarily
given to underwriters in underwritten offerings, addressed
to the Holders and each underwriter, if any.
(iii) cause to be delivered, immediately prior to
the effectiveness of the Registration Statement (and, in
the case of an underwritten offering, at the time of
delivery of any Registrable Securities sold pursuant
thereto), and at the beginning of each fiscal year
following a year during which the Company's independent
certified public accountants shall have reviewed any of the
Company's books or records, a "comfort" letter from the
Company's independent certified public accountants
addressed to the Holders and each underwriter, if any,
stating that such accountants are independent public
accountants within the meaning of the Securities Act and
the applicable published rules and regulations thereunder,
and otherwise in customary form and covering such financial
and accounting matters as are customarily covered by
letters of the independent certified public accountants
delivered in connection with secondary offerings; such
accountants shall have undertaken in each such letter to
update the same during each such fiscal year in which such
books or records are being reviewed so that each such
letter shall remain current, correct and complete
throughout such fiscal year; and each such letter and
update thereof, if any, shall be reasonably satisfactory to
the Holders.
(iv) if an underwriting agreement is entered
into, the same shall include customary indemnification and
contribution provisions to and from the underwriters and
procedures for secondary underwritten offerings;
(v) deliver such documents and certificates as
may be reasonably requested by the Holders of the
Registrable Securities being sold or the managing
underwriter or underwriters, if any, to evidence compliance
with clause (i) above and with any customary conditions
contained in the underwriting agreement, if any; and
(vi) deliver to the Holders on the effective day
(or in the case of an underwritten offering, dated the date
of delivery of any Registrable Securities sold pursuant
thereto) of the Registration Statement, and at the
beginning of each fiscal quarter thereafter, a certificate
in form and
13
<PAGE>
substance as shall be reasonably satisfactory to the
Holders, executed by an executive officer of the Company
and to the effect that all the representations and
warranties of the Company contained in the Purchase
Agreement are still true and correct except as disclosed in
such certificate; the Company shall, as to each such
certificate delivered at the beginning of each fiscal
quarter, update or cause to be updated each such
certificate during such quarter so that it shall remain
current, complete and correct throughout such quarter; and
such updates received by the Holders during such quarter,
if any, shall have been reasonably satisfactory to the
Holders.
(e) The Company shall make available for inspection by
the Holders, representative(s) of all the Holders together, any underwriter
participating in any disposition pursuant to a Registration Statement, and
any attorney or accountant retained by any Holder or underwriter, all
financial and other records customary for purposes of the Holders' due
diligence examination of the Company and review of any Registration
Statement, all SEC Documents (as defined in the Purchase Agreement) filed
subsequent to the Closing, pertinent corporate documents and properties of
the Company, and cause the Company's officers, directors and employees to
supply all information reasonably requested by any such representative,
underwriter, attorney or accountant in connection with such Registration
Statement, provided that such parties agree to keep such information
confidential.
(f) Subject to Section 2(b)(iii) above, if at any time
or from time to time after the effective date of the Registration Statement,
the Company has delivered to the Holders a notice under Section 2(a)(v) or
has notified the Holders in writing of the existence of a Potential Material
Event, the Holders shall not offer or sell any Registrable Securities or
engage in any other transaction involving or relating to Registrable
Securities, from the time of the giving of the notice until the Holders
receive written notice from the Company that use of the prospectus may be
resumed. The Company will use its best efforts to cause such suspension to
terminate at the earliest possible date.
(g) The Company shall file a Registration Statement
with respect to any newly authorized and/or reserved shares within ten (10)
business days of any shareholders meeting authorizing or reserving same and
shall use its best efforts to cause such Registration Statement to become
effective within seventy-five (75) days of such shareholders meeting. If the
Holders become entitled, pursuant to an event described in clause (iii) of
the definition of Registrable Securities, to receive any securities in
respect of Registrable Securities that were already included in a
Registration Statement, subsequent to the date such Registration Statement is
declared effective, and the Company is unable under the securities laws to
add such securities to the then effective Registration Statement, the Company
shall promptly file, in accordance with the procedures set forth herein, an
additional Registration Statement with respect to such newly Registrable
Securities. The Company shall use its best efforts to (i) cause any such
additional Registration Statement, when filed, to become effective under the
Securities Act, and (ii) keep such additional Registration Statement
effective during the period described in Section 5 below. All of the
registration rights and remedies under this
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<PAGE>
Agreement shall apply to the registration of such newly reserved shares and
such new Registrable Securities, including without limitation the provisions
providing for default payments contained herein.
3. EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance with
registration pursuant to this Agreement shall be borne by the Company, and
all Selling Expenses of a Holder shall be borne by such Holder.
4. REGISTRATION ON FORM S-3; OTHER FORMS. The Company shall use
its best efforts to qualify for registration on Form S-3 or any comparable or
successor form or forms, or in the event that the Company is ineligible to
use such form, such form as the Company is eligible to use under the
Securities Act.
5. REGISTRATION PERIOD. In the case of the registration effected
by the Company pursuant to this Agreement, the Company will use its best
efforts to keep such registration effective until the later to occur of (i)
sales are permitted of all Registrable Securities without registration under
Rule 144(k) or (ii) such time as there are no longer any Warrants outstanding.
6. INDEMNIFICATION.
(a) THE COMPANY INDEMNITY. The Company will indemnify each
Holder, each of its officers, directors and partners, and each person
controlling each Holder, within the meaning of Section 15 of the Securities
Act and the rules and regulations thereunder with respect to which
registration, qualification or compliance has been effected pursuant to this
Agreement, and each underwriter, if any, and each person who controls, within
the meaning of Section 15 of the Securities Act and the rules and regulations
thereunder, any underwriter, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained
in any prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or any
violation by the Company of the Securities Act or any state securities law or
in either case, any rule or regulation thereunder applicable to the Company
and relating to action or inaction required of the Company in connection with
any such registration, qualification or compliance, and will reimburse each
Holder, each of its officers, directors and partners, and each person
controlling such Holder, each such underwriter and each person who controls
any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in
any such case to a Holder to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by such
Holder or the underwriter (if any) therefor and stated to be specifically for
use therein.
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<PAGE>
The indemnity agreement contained in this Section 6(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the Company
(which consent will not be unreasonably withheld).
(b) HOLDER INDEMNITY. Each Holder will, severally and not
jointly, if Registrable Securities held by it are included in the securities
as to which such registration, qualification or compliance is being effected,
indemnify the Company, each of its directors, officers, partners, and each
underwriter, if any, of the Company's securities covered by such a
registration statement, each person who controls the Company or such
underwriter within the meaning of Section 15 of the Securities Act and the
rules and regulations thereunder, each other Holder (if any), and each of
their officers, directors and partners, and each person controlling such
other Holder(s), against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any such
registration statement, prospectus, offering circular or other document, or
any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statement therein not
misleading, and will reimburse the Company and such other Holder(s) and their
directors, officers and partners, underwriters or control persons for any
legal or any other expenses reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information
furnished to the Company by such Holder and stated to be specifically for use
therein, and provided that the maximum amount for which such Holder shall be
liable under this indemnity shall not exceed the net proceeds received by
such Holder from the sale of the Registrable Securities. The indemnity
agreement contained in this Section 6(b) shall not apply to amounts paid in
settlement of any such claims, losses, damages or liabilities if such
settlement is effected without the consent of such Holder (which consent
shall not be unreasonably withheld).
(c) PROCEDURE. Each party entitled to indemnification under
this Section 6 (the "Indemnified Party") shall give notice to the party
required to provide indemnification (the "Indemnifying Party") promptly after
such Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party to assume
the defense of any such claim in any litigation resulting therefrom, provided
that counsel for the Indemnifying Party, who shall conduct the defense of
such claim or any litigation resulting therefrom, shall be approved by the
Indemnified Party (whose approval shall not be unreasonably withheld), and
the Indemnified Party may participate in such defense at such party's
expense, and provided further that the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Article except to the extent that the Indemnifying
Party is materially and adversely affected by such failure to provide notice.
No Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
16
<PAGE>
judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably
request in writing and as shall be reasonably required in connection with the
defense of such claim and litigation resulting therefrom.
7. CONTRIBUTION. If the indemnification provided for in Section 6
herein is unavailable to the Indemnified Parties in respect of any losses,
claims, damages or liabilities referred to herein (other than by reason of
the exceptions provided therein), then each such Indemnifying Party, in lieu
of indemnifying each of such Indemnified Parties, shall contribute to the
amount paid or payable by each such Indemnified Party as a result of such
losses, claims, damages or liabilities as between the Company on the one hand
and any Holder on the other, in such proportion as is appropriate to reflect
the relative fault of the Company and of such Holder in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative fault of the Company on the one hand and of any Holder on the other
shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the
Company or by such Holder.
In no event shall the obligation of any Indemnifying Party to
contribute under this Section 7 exceed the amount that such Indemnifying
Party would have been obligated to pay by way of indemnification if the
indemnification provided for under Section 6(a) or 6(b) hereof had been
available under the circumstances.
The Company and the Holders agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by PRO
RATA allocation (even if the Holders or the underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraphs. The amount paid or payable by an Indemnified Party as a
result of the losses, claims, damages and liabilities referred to in the
immediately preceding paragraphs shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred
by such Indemnified Party in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of this section, no
Holder or underwriter shall be required to contribute any amount in excess of
the amount by which (i) in the case of any Holder, the net proceeds received
by such Holder from the sale of Registrable Securities or (ii) in the case of
an underwriter, the total price at which the Registrable Securities purchased
by it and distributed to the public were offered to the public exceeds, in
any such case, the amount of any damages that such Holder or underwriter has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
17
<PAGE>
8. SURVIVAL. The indemnity and contribution agreements contained
in Sections 6 and 7 and the representations and warranties of the Company
referred to in Section 2(d)(i) shall remain operative and in full force and
effect regardless of (i) any termination of this Agreement or the Purchase
Agreement or any underwriting agreement, (ii) any investigation made by or on
behalf of any Indemnified Party or by or on behalf of the Company, and (iii)
the consummation of the sale or successive resales of the Registrable
Securities.
9. INFORMATION BY HOLDERS. Each Holder shall reasonably promptly
furnish to the Company such information regarding such Holder and the
distribution and/or sale proposed by such Holder as the Company may
reasonably request in writing and as shall be reasonably required in
connection with any registration, qualification or compliance referred to in
this Agreement. The intended method or methods of disposition and/or sale
(Plan of Distribution) of such securities as so provided by such Investor
shall be included without alteration in the Registration Statement covering
the Registrable Securities and shall not be changed without written consent
of such Holder, except that such Holder may not require an intended method of
disposition which violates applicable securities law.
10. NYSE LIMIT ON STOCK ISSUANCES. Section 3.14 of the Purchase
Agreement shall govern limits imposed by NYSE rules on the conversion of
Debentures or the exercise of Warrants.
11. REPLACEMENT CERTIFICATES. The certificate(s) representing the
Common Shares or Warrant Shares held by the Investor (or then Holder) may be
exchanged by the Investor (or such Holder) at any time and from time to time
for certificates with different denominations representing an equal aggregate
number of Common Shares or Warrant Shares, as reasonably requested by the
Investor (or such Holder) upon surrendering the same. No service charge will
be made for such registration or transfer or exchange.
12. TRANSFER OR ASSIGNMENT. Except as otherwise provided herein,
this Agreement shall be binding upon and inure to the benefit of the parties
and their successors and permitted assigns. The rights granted to the
Investors by the Company under this Agreement to cause the Company to
register Registrable Securities may be transferred or assigned (in whole or
in part) to a transferee or assignee of Debentures or Warrants, and all other
rights granted to the Investors by the Company hereunder may be transferred
or assigned to any transferee or assignee of any Debentures or Warrants;
provided in each case that the Company must be given written notice by the
such Investor at the time of or within a reasonable time after said transfer
or assignment, stating the name and address of said transferee or assignee
and identifying the securities with respect to which such registration rights
are being transferred or assigned; and provided further that the transferee
or assignee of such rights agrees in writing to be bound by the provisions of
this Agreement.
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<PAGE>
13. MISCELLANEOUS.
(a) REMEDIES. The Company and the Investors acknowledge and
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof, this being in addition to any other remedy to
which any of them may be entitled by law or equity.
(b) JURISDICTION. The Company and each of the Investors (i)
hereby irrevocably submits to the exclusive jurisdiction of the United States
District Court, the New York State courts and other courts of the United
States sitting in New York County, New York for the purposes of any suit,
action or proceeding arising out of or relating to this Agreement and (ii)
hereby waives, and agrees not to assert in any such suit action or
proceeding, any claim that it is not personally subject to the jurisdiction
of such court, that the suit, action or proceeding is brought in an
inconvenient forum or that the venue of the suit, action or proceeding is
improper. The Company and each of the Investors consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to
such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing in this paragraph shall affect or limit
any right to serve process in any other manner permitted by law.
(c) NOTICES. Any notice or other communication required or
permitted to be given hereunder shall be in writing by facsimile, mail or
personal delivery and shall be effective upon actual receipt of such notice.
The addresses for such communications shall be:
to the Company:
Advanced Communications Group, Inc.
390 S. Woods Mill Road, Suite 150
St. Louis, MO 63017
Facsimile: (314) 469-3539
Attention: Michael Pruss
to the Investors:
To each Investor at the address and/or fax number set
forth on Schedule I of this Agreement
19
<PAGE>
with copies to:
Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue
New York, New York 10176
Facsimile: (212) 986-8866
Attention: Stephen M. Schultz, Esq.
Any party hereto may from time to time change its address for
notices by giving at least 10 days' written notice of such changed address to
the other parties hereto.
(d) INDEMNITY. Each party shall indemnify each other party
against any loss, cost or damages (including reasonable attorney's fees)
incurred as a result of such parties' breach of any representation, warranty,
covenant or agreement in this Agreement.
(e) WAIVERS. No waiver by any party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission
of any party to exercise any right hereunder in any manner impair the
exercise of any such right accruing to it thereafter. The representations and
warranties and the agreements and covenants of the Company and each Investor
contained herein shall survive the Closing.
(f) EXECUTION. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, it
being understood that all parties need not sign the same counterpart.
(g) PUBLICITY. The Company agrees that it will not disclose,
and will not include in any public announcement, the name of any Investor
without its express written approval, unless and until such disclosure is
required by law or applicable regulation, and then only to the extent of such
requirement. The Company agrees to deliver a copy of any public announcement
regarding the matters covered by this Agreement or any agreement or document
executed herewith to each Investor and any public announcement including the
name of an Investor to such Investor, prior to the publication of such
announcements.
(h) ENTIRE AGREEMENT. This Agreement, together with the
Purchase Agreement, the Debentures, the Warrants and the agreements and
documents contemplated hereby and thereby, contains the entire understanding
and agreement of the parties, and may not be modified or terminated except by
a written agreement signed by both parties.
(i) GOVERNING LAW. This Agreement and the validity and
performance of the terms hereof shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York
applicable to contracts executed and to be performed entirely in such State.
20
<PAGE>
(j) SEVERABILITY. The parties acknowledge and agree that the
Investors are not agents, affiliates or partners of each other, that all
representations, warranties, covenants and agreements of the Investors
hereunder are several and not joint, that no Investor shall have any
responsibility or liability for the representations, warrants, agreements,
acts or omissions of any other Investor, and that any rights granted to
"Investors" hereunder shall be enforceable by each Investor hereunder.
(k) JURY TRIAL. EACH PARTY HERETO WAIVES THE RIGHT TO A
TRIAL BY JURY.
(l) TITLES. The titles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting
this Agreement.
SIGNATURE PAGE FOLLOWS
21
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
ADVANCED COMMUNICATIONS GROUP, INC.
By: /s/ Michael A. Pruss
--------------------------------
Name: Michael A. Pruss
Title: Vice President
INVESTORS:
HALIFAX FUND, L.P.
By: /s/ Steven W. Weiner
----------------------------------
Name: Steven W. Weiner
Title: Managing Director
ELLIOTT ASSOCIATES, L.P.
By: /s/ Paul Singer
----------------------------------
Name: Paul Singer
Title:
WESTGATE INTERNATIONAL, L.P.
By: Martley International, Inc.,
Attorney-in-Fact
By: /s/ Paul Singer
----------------------------------
Name: Paul Singer
Title:
Signature page to Advanced Communications Group, Inc. Registration
Rights Agreement
22
<PAGE>
Exhibit 4.3
This Security Has Not Been Registered Under The Securities Act Of 1933,
As Amended, Or Any State Securities Laws. It May Not Be Transferred, Assigned,
Sold Or Offered for Sale Except Pursuant To An Effective Registration Statement
Under Said Act And Any Applicable State Securities Law Or An Opinion Of Counsel,
In Form And Substance Reasonably Acceptable To The Company, That Registration Is
Not Required Because Of An Applicable Exemption From Such Registration
Requirements.
The Rights Of The Holder Of This Debenture Are Subject To The Terms Of
A Subordination Agreement, Dated February 23, 2000, Among The Senior Lenders (As
Defined Therein) And, Among Others, The Holder Of This Debenture (the
"Subordination Agreement").
<TABLE>
<CAPTION>
<S> <C>
NO. 1 $15,000,000
DATED: FEBRUARY 23, 2000
</TABLE>
ADVANCED COMMUNICATIONS GROUP, INC.
5% CONVERTIBLE DEBENTURE DUE FEBRUARY 23, 2006
THIS DEBENTURE ("Debenture") is one of a duly authorized issue of
Debentures of ADVANCED COMMUNICATIONS GROUP, INC. (the "Company"), a corporation
duly organized and existing under the laws of the State of Delaware, designated
as the Company's 5% Convertible Debentures Due February 23, 2006, in an
aggregate principal amount of Twenty Million U.S. Dollars (U.S. $20,000,000)
(the "Debenture").
FOR VALUE RECEIVED, the Company promises to pay to Halifax Fund, L.P.
the initial holder hereof, or its order (including successors-in-interest, the
"Holder"), the principal sum of FIFTEEN MILLION U.S. DOLLARS (U.S. $15,000,000)
on February 23, 2006 (the "Maturity Date") and to pay interest on the principal
sum outstanding under this Debenture ("Outstanding Principal Amount"), at the
rate of 5% per annum, compounded semi-annually, payable in arrears on the first
day of January and July of each year (each an "Interest Payment Date"), with the
first such payment due on July 1, 2000. Interest shall accrue daily commencing
on the date hereof and shall continue until payment in full of all amounts due
under this Debenture. The interest so payable will be paid to the person in
whose name this Debenture is registered on the records of the Company regarding
registration and transfers of the Debenture (the "Debenture Register").
Capitalized terms used herein and not otherwise defined shall have the meanings
set forth in the Convertible Debenture Purchase Agreement dated as of February
23, 2000 between the Company and the Holder (the "Purchase Agreement") or the
Registration Rights Agreement dated as of February 23, 2000 between the Company
and the Holder (the "Registration Rights Agreement").
<PAGE>
The principal of, interest on, and default payments (defined below) in
respect of this Debenture are payable in such coin or currency of the United
States as of the time of payment is legal tender for payment of public and
private debts, at the address last appearing on the Debenture Register of the
Company as designated in writing by the Holder hereof from time to time;
PROVIDED, HOWEVER, that, in lieu of paying such interest in coin or currency,
the Company may, at its option (provided (i) no Interfering Event (as defined in
the Registration Rights Agreement) then exists and (ii) it gives at least
fifteen (15) business days notice prior to an Interest Payment Date), pay
interest on this Debenture for any Interest Payment Date by adding the amount
thereof to the Outstanding Principal Amount due under this Debenture ("PIK
Interest"), pursuant to an irrevocable statement in the form of EXHIBIT 2 hereto
("PIK Statement") delivered at least fifteen (15) business days prior to the
Interest Payment Date on which the Company plans to pay such PIK Interest and
effective for such Interest Payment Date only. If neither the cash interest due
hereunder is paid when due, nor the PIK Statement delivered, to the Holder as
provided above, the Company shall no longer have the right to choose the PIK
Interest option on that Interest Payment Date or any future Interest Payment
Dates and the Holder may elect either cash interest or PIK Interest hereunder at
its option. Any PIK Interest when so added to the Outstanding Principal Amount
due under this Debenture shall, for all purposes of this Debenture, be deemed to
be part of the principal indebtedness evidenced by this Debenture including,
without limitation, for purposes of determining interest payable hereunder after
the applicable Interest Payment Date for which such PIK Statement is delivered
by the Company and amounts convertible into Common Shares hereunder after the
applicable Interest Payment Date for which such PIK Statement is delivered by
the Company.
The Company will pay any principal due and all accrued and unpaid
interest due upon this Debenture to the person that is the Holder of this
Debenture on the records of the Company as of the applicable Interest Payment
Date and addressed to such Holder at the last address appearing on the Debenture
Register.
The Outstanding Principal Amount and interest due hereunder shall bear
interest, from and after the day following the occurrence and during the
continuance of an Event of Default hereunder, at the rate equal to the lower of
the Citibank Prime Rate per annum plus six (6%) percent or the highest rate
permitted by law; PROVIDED that the interest rate of this Debenture shall not be
reduced below 5% as a result of this provision. The Holder shall have the option
to receive such interest as PIK Interest or cash interest and shall exercise its
option by delivering to the Company a statement in a form substantially similar
to the PIK Statement which shall be effective until the Holder delivers an
additional statement to the contrary. If the Holder elects to receive the
interest in cash, it shall be payable on demand.
Additional cash payments (referred to as "default payments") may be
required pursuant to the Registration Rights Agreement if there occurs an
"Interfering Event" (as defined therein), or pursuant to the Purchase Agreement
under the terms set forth in Section 3.14 therein. Such default payments, if not
paid in cash when due, may be treated by the Holder in its sole discretion as
being added to the Outstanding Principal Amount due under this Debenture.
2
<PAGE>
Subject to applicable law, any interest otherwise payable that is not
paid for any applicable period because it would exceed the highest rate
permitted by law shall become payable whenever the payment thereof, together
with other interest due for any such subsequent period, would not exceed such
highest legal rate.
The Holder of this Debenture is entitled to certain rights and remedies
pursuant to the Purchase Agreement and Registration Rights Agreement, including
without limitation provisions requiring mandatory redemption of the Debenture.
This Debenture does not provide voting rights to the Holder.
This Debenture is subject to the following additional provisions:
1. DENOMINATION. The Debentures are exchangeable for an equal
aggregate principal amount of Debentures of different denominations, as
requested by the Holder surrendering the same. No service charge will be made
for such registration or transfer or exchange.
2. TRANSFERS. This Debenture may be transferred or exchanged in the
United States only in compliance with the Securities Act of 1933, as amended
(the "Act") and applicable state securities laws, or applicable exemptions
therefrom. Prior to due presentment for transfer of this Debenture, the
Company may treat the person in whose name this Debenture is duly registered
on the Company's Debenture Register as the owner hereof for the purpose of
receiving payment as herein provided, whether or not this Debenture is
overdue.
3. DEFINITIONS. For purposes hereof the following definitions
shall apply:
"CHANGE IN CONTROL TRANSACTION" shall mean the occurrence of (x)
any consolidation or merger of the Company with or into any other corporation
or other entity or person (whether or not the Company is the surviving
corporation), or any other corporate reorganization or transaction or series
of related transactions in which in excess of 50% of the Company's voting
power is transferred through a merger, consolidation, tender offer or similar
transaction, or (y) any person (as defined in Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), together with its
affiliates and associates (as such terms are defined in Rule 405 under the
Act), beneficially owns or is deemed to beneficially own (as described in
Rule 13d-3 under the Exchange Act without regard to the 60-day exercise
period) in excess of 50% of the Company's voting power, or (z) Richard O'Neal
shall fail, for any reason, to (i) be a member of the Board of Directors of
the Company, or any successor of the Company, or (ii) be the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of seventy percent or more of the Common Stock of the Company so
owned by him on the Closing Date. Notwithstanding the foregoing, the
acquisition of control by one or Permitted Holders shall not constitute a
Change in Control Transaction, without prejudice to the Holder's rights under
this Debenture or the Purchase Agreement or the Registration Rights Agreement.
"CLOSING DATE" shall mean the date of original issuance of this
Debenture.
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"CLOSING PRICE" shall mean $14.2063
"COMMON STOCK" shall mean the common stock, par value $0.0001, of
the Company.
"CONVERSION NOTICE" shall have the meaning set forth in Section
5(d).
"CONVERSION PRICE" shall have the meaning set forth in Section
5(c).
"CONVERSION RATE" shall have the meaning set forth in Section
5(b).
"HOLDER CONVERSION DATE" shall have the meaning set forth in
Section 5(d).
"MARKET PRICE FOR SHARES OF COMMON STOCK" shall mean the price of
one share of Common Stock determined as follows:
(i) If the Common Stock is listed on NYSE, the closing
bid price on such Exchange on the date of valuation;
(ii) If the Common Stock is listed on the NASDAQ
National Market System or the American Stock Exchange, the closing bid price
on such exchange on the date of valuation;
(iii) If neither (i) nor (ii) apply but the Common Stock
is quoted in the over-the-counter market, another recognized exchange, on the
pink sheets or bulletin board, the lesser of (A) the lowest sales price on
the date of valuation or (B) the mean between the last reported "bid" and
"asked" prices thereof on the date of valuation; and
(iv) If neither clause (i), (ii) or (iii) above
applies, the market value as determined by a nationally recognized investment
banking firm or other nationally recognized financial advisor retained by the
Company for such purpose, taking into consideration, among other factors, the
earnings history, book value and prospects for the Company, and the prices at
which shares of Common Stock recently have been traded. Such determination
shall be conclusive and binding on all persons.
"PERMITTED HOLDERS" shall have the meaning set forth in the
definition of "Permitted Holders" set forth in Article 1 of the Loan
Agreement between Advanced Communications Group, Inc. and, among others, Bank
of America, N.A., without regard to any amendments thereto; provided,
however, that each of the Consolidation Partners Founding Fund, LLC,
Consolidation Partners, L.P. shall only be deemed a Permitted Holder under
this Agreement if such entities or persons are wholly owned by Richard O'Neal
and/or Rod Cutsinger and the only shareholders of the Acquired Companies (as
defined in the Loan Document) which shall be deemed a Permitted Holder are
Richard O'Neal and Rod Cutsinger, except that such entities and their owners
or such
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shareholders that are set forth on Schedule 1 hereto shall also be deemed
Permitted Holders.
"REDEMPTION NOTICE" shall have the meaning set forth in
Section 6(a).
"REDEMPTION PRICE" shall have the meaning set forth in
Section 6(a).
"RESET" SHALL HAVE THE MEANING SET FORTH IN SECTION 5(c).
"RESET PRICING PERIOD" SHALL HAVE THE MEANING SET FORTH IN
SECTION 5(c).
"RESTRICTED OWNERSHIP PERCENTAGE" shall have the meaning set
forth in Section 12.
"TRADING DAY" shall mean a day on which the Common Stock is
traded on the NYSE or principal exchange on which the Common Stock has been
listed (or any similar organization or agency succeeding such market or
exchange's functions of reporting prices).
4. CHANGE IN CONTROL, ETC. If at any time there occurs any
Change in Control Transaction, Holder shall be entitled, at its sole option,
to have the Company redeem this Debenture in whole or in part at a redemption
price equal to 110% of the Outstanding Principal Amount of this Debenture
plus all accrued but unpaid interest and penalties on this Debenture. Such
Holder shall be entitled to make such election at any time after commencement
and up to 10 days after the effective date of the Change in Control
Transaction. For purposes of this Section 4, the commencement date shall be
the day upon which the Change in Control Transaction was publicly announced.
5. CONVERSION AT THE OPTION OF THE HOLDER. The Holder of this
Debenture shall have the following conversion rights.
(a) HOLDER'S RIGHT TO CONVERT. This Debenture shall be
convertible at any time, in whole or in part, at the option of the Holder
hereof, into fully paid, validly issued and nonassessable shares of Common
Stock. If this Debenture is converted in part, the remaining portion of this
Debenture not so converted shall remain entitled to the conversion rights
provided herein.
(b) CONVERSION PRICE FOR HOLDER CONVERTED SHARES. The
Outstanding Principal Amount of this Debenture that is converted into shares
of Common Stock at the option of the Holder shall be convertible into the
number of shares of Common Stock which results from application of the
following formula:
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P + I + D
------------------------------
Conversion Price
P= Outstanding Principal Amount of this Debenture submitted for
conversion as of the Holder Conversion Date
I= accrued but unpaid interest (not previously added to principal)
on P as of the Holder Conversion Date
D= default payments (not previously added to principal) on P as of
the Holder Conversion Date
The number of shares of Common Stock into which each $1,000
principal amount of this Debenture hereto may be converted pursuant to this
paragraph hereof is hereafter referred to as the "Conversion Rate."
(c) CONVERSION PRICE. Subject to adjustments pursuant to
Section 7, this Debenture will have an initial conversion price equal to
$15.6269 (such price, as Reset (as defined below) and as adjusted in
accordance with Section 7 of this Debenture Section 3.9 of the Purchase
Agreement and Section 2(b)(i) of the Registration Rights Agreement, shall be
referred to herein as the "Conversion Price").
On August 23, 2000, February 23, 2001, August 23, 2001 and
February 23, 2002, only if the average of the Market Price for Shares of
Common Stock for the ten (10) Trading Days following such respective date
(the "Reset Pricing Period") is lower than the current Conversion Price, the
Conversion Price shall reset ("Reset") to 100% of such average (subject to
further adjustment in each case). The Conversion Price shall not be increased
as a result of a Reset. The Market Price for Shares of Common Stock shall be
appropriately adjusted for stock splits, reverse splits, stock dividends and
other dilutive events that occur during the Reset Pricing Period.
In addition to the foregoing and in addition to any other
rights or remedies which may be available to the Holder hereunder, under the
Purchase Agreement and/or the Registration Rights Agreement, if at any time
(i) by reason of the Subordination Agreement, the Holder is prevented from
exercising its redemption rights or receiving any cash payment due to the
Holder hereunder, under the Purchase Agreement or the Registration Rights
Agreement and/or (ii) the Company fails for any reason to repurchase the
Debenture (or portion thereof, as applicable) or make any cash payment in
accordance with the terms of this Debenture, the Purchase Agreement or the
Registration Rights Agreement, then the Conversion Price shall be subject to
further adjustment so that it shall thereafter be equal to the lesser of (x)
the lowest Market Price for Shares of Common Stock during any of the five (5)
days prior to the date that the Holder submits a Conversion Notice (as
defined below) to the Company and (y) the Conversion Price otherwise
applicable at such time, subject to further adjustment in each case.
Provided, however, that at no such time shall the additional shares issuable
as a result of this Section 5(c) result in more than 400,000 shares (as
adjusted for stock splits, reverse splits, stock dividends and other dilutive
events) that would otherwise be issuable based on the then existing
Conversion Price.
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(d) MECHANICS OF CONVERSION. In order to convert this
Debenture (in whole or in part) into full shares of Common Stock, the Holder
(i) shall give written notice in the form of EXHIBIT 1 hereto (the
"Conversion Notice") by facsimile to the Company at such office that the
Holder elects to convert the principal amount (plus accrued but unpaid
interest and default payments) specified therein, which such notice and
election shall be revocable by the Holder at any time prior to its receipt of
the Common Stock upon conversion, and (ii) as soon as practicable after such
notice, shall surrender this Debenture, duly endorsed, by either overnight
courier or 2-day courier, to the principal office of the Company; PROVIDED,
HOWEVER, that the Company shall not be obligated to issue certificates
evidencing the shares of the Common Stock issuable upon such conversion
unless either the Debenture evidencing the principal amount is delivered to
the Company as provided above, or the Holder notifies the Company that such
Debenture(s) have been lost, stolen or destroyed and promptly executes an
agreement reasonably satisfactory to the Company to indemnify the Company
from any loss incurred by it in connection with such lost, stolen or
destroyed Debentures. If a Holder is converting less than the maximum number
of shares it may convert under its Debenture, the Company shall reissue the
Debenture with the appropriate remaining principal amount as soon as
practicable after the Company shall have received the Holder's surrendered
Debenture.
The Company shall issue and deliver within three business day
of the delivery to the Company of such Conversion Notice, to such Holder of
Debenture(s) at the address of the Holder, or to its designee, a certificate
or certificates for the number of shares of Common Stock to which the Holder
shall be entitled as aforesaid, together with a calculation of the Conversion
Rate and a Debenture or Debentures for the principal amount of Debentures not
submitted for conversion. The date on which the Conversion Notice is given
(the "Holder Conversion Date") shall be deemed to be the date the Company
received by facsimile the Conversion Notice, and the person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such
shares of Common Stock on such date.
In lieu of delivering physical certificates representing the
Common Shares issuable upon conversion of Debentures or the Warrant Shares
(as defined in the Purchase Agreement) deliverable upon exercise of Warrants
(as defined in the Purchase Agreement), provided the Company's transfer agent
is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer ("FAST") program, upon request of the holder, the Company
shall use its best efforts to cause its transfer agent to electronically
transmit the Common Shares and Warrant Shares issuable upon conversion or
exercise to the Holder, by crediting the account of Holder's prime broker
with DTC through its Deposit Withdrawal Agent Commission ("DWAC") system. The
time periods for delivery described above shall apply to the electronic
transmittals through the DWAC system. The parties agree to coordinate with
DTC to accomplish this objective. The conversions pursuant to Sections 5
shall be deemed to have been made immediately prior to the close of business
on the Holder Conversion Date. The person or persons entitled to receive the
Common Shares issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such Common Shares at the close of
business on the Holder Conversion Date.
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<PAGE>
6. OPTION TO REDEEM.
(a) At least five Trading Days prior to the commencement of
a Reset Pricing Period, the Company may state its intention to redeem all,
but not less than all, of the Debentures (all or none) for a cash price equal
to the applicable "Redemption Price" (as defined below) by providing an
irrevocable, written notice (the "Redemption Notice") to the Holder. The
Redemption Notice shall indicate that the Company seeks to redeem the
Debenture and shall set the date for the Company's redemption of the
Debenture, which date shall be within 20 Trading Days of the closing of the
Reset Pricing Period. The "Redemption Price" shall be equal to (i) if the
Redemption Notice is given to the Holder prior to the first anniversary of
the issuance of this Debenture, 110% of the Outstanding Principal Amount to
be redeemed plus all accrued and unpaid interest and (ii) if the Redemption
Notice is given to the Holder subsequent to such first anniversary, 115% of
the Outstanding Principal Amount to be repurchased plus all accrued but
unpaid interest.
(b) A Redemption Notice shall only be effective in the event
that (i) the relevant Reset results in the Conversion Price being less than
50% of the Closing Price and (ii) the provisions of Section 6.15 of the
Purchase Agreement have been satisfied. If the Conversion Price is less than
50% of the Closing Price and said provisions have been satisfied, the
redemption shall occur on the date set forth in the Redemption Notice (the
"Redemption Date") at the offices of Holder's counsel. If the Company fails
to pay the Redemption Price in full on the Redemption Date in immediately
available funds, (i) the Company shall lose its right to redeem any Debenture
in accordance with this Section 6(b) and (ii) in addition to any other rights
or remedies it may have, the Holder shall have the right to require the
Company to repurchase the Debenture (or any portion thereof, as selected by
the Holder) at a price equal to 110% of the Redemption Price pursuant to a
written notice to the Company.
(c) If the relevant Reset does not result in the Conversion
Price being less than 50% of the Closing Price, the Redemption Notice shall
be deemed withdrawn.
7. STOCK SPLITS; DIVIDENDS; ADJUSTMENTS; REORGANIZATIONS.
(a) If the Company, at any time while the Debentures are
outstanding, shall (i) pay a stock dividend or otherwise make a distribution
or distributions on any equity securities (including investments or
securities convertible into or exchangeable for such equity securities) in
shares of Common Stock, (ii) subdivide the outstanding shares of Common Stock
into a larger number of shares, (iii) combine outstanding shares of Common
Stock into a smaller number of shares, the Conversion Price shall be
multiplied by a fraction of which the numerator shall be the number of shares
of Common Stock outstanding before such event and of which the denominator
shall be the number of shares of Common Stock outstanding after such event.
Any adjustment made pursuant to this Section 7(a) shall become effective
immediately after the record date for the determination of shareholders
entitled to receive such dividend or distribution and shall become effective
immediately after the effective date in the case of an issuance, a
subdivision or a combination.
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<PAGE>
(b) INTENTIONALLY LEFT BLANK.
(c) If the Company, at any time while the Debentures are
outstanding, shall distribute to all holders of Shares of Common Stock
evidences of its indebtedness or assets or rights or warrants to subscribe
for or purchase any security (excluding those referred to in Section 7(b)
above) then the Holder shall participate in such distribution on a PRO RATA
basis with the holders of shares of Common Stock entitled to receive such
dividend, distribution, issuance, subdivision or combination as if the Holder
held that number of shares of Common Stock that the Holder would have been
entitled to receive hereunder upon conversion of the Debenture (without
regard to Section 12) immediately prior to the record date fixed for
determination of shareholders entitled to receive such dividend, at the
Conversion Price then in existence.
(d) In the event that at any time or from time to time after
the Closing Date, the Common Stock issuable upon the conversion of the
Debentures is changed into the same or a different number of shares of any
class or classes of stock, whether by merger, consolidation,
recapitalization, reclassification or otherwise (other than a subdivision or
combination of shares or stock dividend or reorganization provided for
elsewhere in this Section 7), then and as a condition to each such event
provision shall be made in a manner reasonably acceptable to the Holders of
Debentures so that each Holder of Debentures shall have the right thereafter
to convert such Debenture into the kind of stock receivable upon such
recapitalization, reclassification or other change by holders of shares of
Common Stock, all subject to further adjustment as provided herein. In such
event, the formulae set forth herein for conversion and redemption shall be
equitably adjusted to reflect such change in number of shares or, if shares
of a new class of stock are issued, to reflect the market price of the class
or classes of stock (applying the same factors used in determining the
Conversion Price) issued in connection with the above described transaction.
(e) Whenever any element of the Conversion Price is adjusted
pursuant to Section 7, the Company shall promptly mail to each Holder of the
Debentures, a notice setting forth the Conversion Price after such adjustment
and setting forth a brief statement of the facts requiring such adjustment.
(f) In the event of any taking by the Company of a record date
of the holders of any class of securities for the purpose of determining the
holders thereof who are entitled to receive any dividend or other
distribution, any security or right convertible or exchangeable into or
entitling the holder thereof to receive additional shares of Common Stock, or
any right to subscribe for, purchase or otherwise acquire any shares of stock
of any class or any other securities or property, or to receive any other
right, the Company shall deliver to each Holder of Debentures at least 20
days prior to the date specified therein, a notice specifying the date on
which any such record is to be taken for the purpose of such dividend,
distribution, security or right and the amount and character of such
dividend, distribution, security or right.
8. FRACTIONAL SHARES. No fractional shares of Common Stock or
scrip representing fractional shares of Common Stock shall be issuable
hereunder. The
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number of shares of Common Stock that are issuable upon any conversion shall
be rounded up to the nearest whole share.
9. RESERVATION OF STOCK ISSUABLE UPON CONVERSION.
(a) RESERVATION REQUIREMENT. The Company covenants that it will
at all times reserve and keep available out of its authorized and unissued
Common Stock solely for the purpose of issuance upon conversion of the
Debentures as herein provided, free from preemptive rights or any other
present or contingent purchase rights of persons other than the Holders of
the Debentures, 200% of the maximum number of shares of Common Stock as shall
be issuable (taking into account the adjustments and restrictions of Sections
5 and 7 hereof) upon the conversion of all of the Debentures pursuant hereto.
The Company covenants that all shares of Common Stock that shall be so
issuable shall upon issue, be duly and validly authorized, issued and fully
paid and nonassessable. Without in any way limiting the foregoing, so long as
any Debentures remain outstanding the Company agrees to reserve and at all
times keep available solely for purposes of conversion of Debentures such
number of authorized but unissued shares of Common Stock that is set forth in
the Purchase Agreement.
(b) DEFICIENCY. If the Company does not have a sufficient
number of shares of Common Stock available to satisfy the Company's
obligations to a Holder of Debentures upon receipt of a Conversion Notice or
is otherwise unable to issue such shares of Common Stock in accordance with
the terms of this Agreement such Holder shall be entitled to the rights and
remedies set forth in the Registration Rights Agreement.
10. NO REISSUANCE OF THE DEBENTURE. No Debentures acquired by the
Company by reason of redemption, purchase, exchange or otherwise shall be
reissued, and all such Debentures shall be retired.
11. NO IMPAIRMENT. The Company shall not intentionally take any
action which would impair the rights and privileges of the Debentures set
forth herein or the Holders thereof.
12. LIMITATIONS ON HOLDER'S RIGHT TO CONVERT.
(a) Notwithstanding anything to the contrary contained herein,
no Debenture may be converted to the extent that, after giving effect to
shares of Common Stock to be issued pursuant to a Conversion Notice, the
total number of shares of Common Stock deemed beneficially owned by such
Holder (other than by virtue of the ownership of Debentures or ownership of
other securities that have limitations on a Holder's rights to exchange,
convert or exercise similar to those limitations set forth herein), together
with all shares of Common Stock deemed beneficially owned by the holder's
"affiliates" (as defined in Rule 144 of the Act) that would be aggregated for
purposes of determining whether a group under Section 13(d) of the Securities
Exchange Act of 1934, as amended, exists (an "aggregation party"), would
exceed 9.9% (the "Restricted Ownership Percentage") of the total issued and
outstanding shares of the Company's Common Stock; PROVIDED that (w) each
holder shall have the right at any time and from time to time to reduce its
Restricted Ownership Percentage immediately upon
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notice to the Company, (x) each Holder shall have the right at any time and
from time to time, to increase its Restricted Ownership Percentage and
otherwise waive in whole or in part the restrictions of this Section 12(a)
upon 61 days' prior notice to the Company or immediately in the event of the
announcement of a pending or proposed Change in Control Transaction, (y) each
holder can make subsequent adjustments pursuant to (w) or (x) any number of
times from time to time (which adjustment shall be effective immediately if
it results in a decrease in the percentage or shall be effective upon 61
days' prior written notice or immediately in the event of the announcement of
a pending or proposed Change in Control Transaction if it results in an
increase in the percentage) and (z) each Holder may eliminate or reinstate
this limitation at any time and from time to time (which elimination will be
effective upon 61 days' prior notice and which reinstatement will be
effective immediately). Without limiting the foregoing, in the event of the
announcement of a pending or proposed Change in Control Transaction, any
Holder may reinstate immediately (in whole or in part) the requirement that
any increase in its Restricted Ownership Percentage be subject to 61 days'
prior written notice, notwithstanding such Change in Control Transaction,
without imposing such requirement on, or otherwise changing such Holder's
rights with respect to, any other Change in Control Transaction. For this
purpose, any material modification of the terms of a Change in Control
Transaction will be deemed to result in a new Change in Control Transaction.
The term "deemed beneficially owned" as used in this Debenture shall exclude
shares that might otherwise be deemed beneficially owned by reason of the
convertibility of the Debentures. The Company shall provide all Holders with
the earlier of (i) 20 days' prior written notice of any such Change in
Control Transaction, to the extent the Company has prior knowledge of a
Change in Control Transaction; or (ii) notice on the day immediately
following the Company's learning of any such transaction, but only after, in
the case of (i) and (ii), such Change in Control Transaction has been
publicly disclosed.
(b) Each time (a "Covenant Time") the Holder makes a
Triggering Acquisition (as defined below) of shares of Common Stock (the
"Triggering Shares"), the Holder will be deemed to covenant that it will not,
during the balance of the day on which such Triggering Acquisition occurs,
and during the 61-day period beginning immediately after that day, acquire
additional shares of Common Stock pursuant to rights-to-acquire existing at
that Covenant Time, if the aggregate amount of such additional shares so
acquired (without reducing that amount by any dispositions) would exceed (x)
the Restricted Ownership Percentage of the number of shares of Common Stock
outstanding at that Covenant Time (including the Triggering Shares) minus (y)
the number of shares of Common Stock actually owned by the Holder at that
Covenant Time (regardless of how or when acquired, and including the
Triggering Shares). A "Triggering Acquisition" means the giving of a
Conversion Notice or any other acquisition of Common Stock by the Holder or
an aggregation party; PROVIDED, HOWEVER, that with respect to the giving of
such Conversion Notice, if the associated issuance of shares of Common Stock
does not occur, such event shall cease to be a Triggering Acquisition and the
related covenant under this paragraph shall terminate. At each Covenant Time,
the Holder shall be deemed to waive any right it would otherwise have to
acquire Common Shares to the extent that such acquisition would violate any
covenant given by the Holder under this paragraph. For the avoidance of doubt:
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(i) The covenant to be given pursuant to this Section 12(b)
will be given at every Covenant Time and shall be calculated based on the
circumstances then in effect. The making of a covenant at one Covenant Time
shall not terminate or modify any prior covenants.
(ii) The Holder may therefore from time to time be subject
to multiple such covenants, each one having been made at a different Covenant
Time, and some possibly being more restrictive than others. The Holder must
comply with all such covenants then in effect.
13. OBLIGATIONS ABSOLUTE. No provision of this Debenture , the
Purchase Agreement or the Registration Rights Agreement shall alter or impair
the obligation of the Company, which is absolute and unconditional, to pay
the principal of, and interest and default payments on, this Debenture or to
issue shares of Common Stock in response to a Conversion Notice at the time,
place and rate, and in the manner, herein prescribed.
14. WAIVERS OF DEMAND, ETC. The Company hereby expressly and
irrevocably waives demand and presentment for payment, notice of nonpayment,
protest, notice of protest, notice of dishonor, notice of acceleration or
intent to accelerate, bringing of suit and diligence in taking any action to
collect amounts called for hereunder and will be directly and primarily
liable for the payment of all sums owing and to be owing hereon, regardless
of and without any notice, diligence, act or omission as or with respect to
the collection of any amount called for hereunder.
15. REPLACEMENT DEBENTURE. In the event that any Holder
notifies the Company that its Debenture(s) have been lost, stolen or
destroyed, replacement Debenture(s) identical in all respects to the original
Debenture(s) (except for registration number and Outstanding Principal
Amount, if different than that shown on the original Debenture(s)), shall be
issued to the Holder, provided that the Holder executes and delivers to the
Company an agreement reasonably satisfactory to the Company to indemnify the
Company from any loss incurred by it in connection with such Debenture.
16. PAYMENT OF EXPENSES; ISSUE TAXES. The Company agrees to
pay all debts and expenses, including attorneys' fees, which may be incurred
by the Holder in enforcing the provisions of this Debenture and/or collecting
any amount due under this Debenture, the Purchase Agreement, any Warrant or
the Registration Rights Agreement. The Company shall pay any and all issue
and other taxes (excluding any income, franchise or similar taxes) that maybe
payable in respect of any issue or delivery of shares of Common Stock on
conversion of any Debenture pursuant hereto.
17. DEFAULTS. If one or more of the following described
"Events of Default" shall occur:
(a) The Company shall default in the payment of (i) interest
on this Debenture or any other Debenture issued pursuant
to the Purchase Agreement (subject to the Company's
option to pay PIK Interest), and such default shall
continue for five (5) business days after the
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due thereof, or (ii) the principal of this Debenture or any
other Debenture issued pursuant to the Purchase Agreement;
or
(b) Any of the representations or warranties made by the Company
herein, in the Purchase Agreement, the Registration
Rights Agreement, any Warrant or in any certificate or
financial or other statements heretofore or hereafter
furnished by or on behalf of the Company in connection
with the execution and delivery of this Debenture or such
other documents shall be false or misleading in any
material respect at the time made and written notice of
such breach shall have been given to the Company by the
Holders of at least 25% of the aggregate Outstanding
Principal Amount of the Debentures then outstanding; or
(c) The Company shall fail to materially perform or observe
any covenant or agreement in the Purchase Agreement or
the Registration Rights Agreement, or any other covenant,
term, provision, condition, agreement or obligation of
the Company under this Debenture and such failure shall
continue uncured for a period of ten (10) business days
after notice of such failure from the Holders of at least
25% of the Aggregate Outstanding Principal Amount of
Debentures then outstanding; or
(d) The Company shall (1) become insolvent; (2) admit in writing
its inability to pay its debts generally as they mature;
(3) make an assignment for the benefit of creditors or
commence proceedings for its dissolution; or (4) apply
for or consent to the appointment of a trustee,
liquidator or receiver for it or for a substantial part
of its property or business; or
(e) A trustee, liquidator or receiver shall be appointed for the
Company or for a substantial part of its property or
business without its consent and shall not be discharged
within forty-five (45) days after such appointment; or
(f) Any governmental agency or any court of competent
jurisdiction at the instance of any governmental agency
shall assume custody or control of the whole or any
substantial portion of the properties or assets of the
Company and shall not be dismissed within forty-five (45)
days thereafter; or
(g) The Company shall sell or otherwise transfer all or
substantially all of its assets; or
(h) Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings, or relief under any
bankruptcy law or any law for the relief of debt shall be
instituted by or against the Company and, if instituted
against the Company shall not be
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dismissed within forty-five (45) days after such
institution, or the Company shall by any action or answer
approve of, consent to, or acquiesce in any such proceedings
or admit to any material allegations of, or default in
answering a petition filed in any such proceeding; or
(i) the Senior Lenders shall have accelerated the Senior Debt
(as defined in the Purchase Agreement); or
(j) The Company shall be in default of any other of its
indebtedness exceeding $1,000,000, or any other event
shall have occurred, and as a result thereof the holders
thereof shall have accelerated or shall have the right
(upon the giving of notice, the passage of time, or both)
to accelerate such indebtedness; or
(k) A "going private" transaction under Rule 13e-3 promulgated
pursuant to the Exchange Act shall have been announced; or
(l) A tender offer by the Company under Rule 13e-4 promulgated
pursuant to the Exchange Act shall have been announced;
THEN, or at any time thereafter, and in each and every such case,
unless such Event of Default shall have been waived in writing by the Holder
(which waiver shall not be deemed to be a waiver of any subsequent default) at
the option of the Holder and in the Holder's sole discretion, the Holder may
consider the Debenture immediately due and payable, without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived,
anything herein or in any other instruments contained to the contrary
notwithstanding, and the Holder may immediately, and without expiration of any
period of grace, enforce any and all of the Holder's rights and remedies
provided herein or any other rights or remedies afforded by law. In such event,
the Debenture shall be redeemed at the greater of (i) a redemption price per
Debenture equal to 110% of the Outstanding Principal Amount of the Debenture,
plus accrued but unpaid interest and default payments on the Debenture and (ii)
the cash value that the Holder would be entitled to receive upon conversion of
the Debenture at the Conversion Price in existence on such date, without regard
to Section 12, and the subsequent sale of the Common Stock at the Market Price
for Shares of Common Stock then existing.
18. SAVINGS CLAUSE. In case any provision of this Debenture is held
by a court of competent jurisdiction to be excessive in scope or otherwise
invalid or unenforceable, such provision shall be adjusted rather than voided,
if possible, so that it is enforceable to the maximum extent possible, and the
validity and enforceability of the remaining provisions of this Debenture will
not in any way be affected or impaired thereby, and such provision shall remain
effective in all other jurisdictions.
19. ENTIRE AGREEMENT. This Debenture and the agreements referred to
in this Debenture constitute the full and entire understanding and agreement
between the Company and the Holder with respect to the subject hereof. Neither
this Debenture nor
14
<PAGE>
any term hereof may be amended, waived, discharged or terminated other than
by a written instrument signed by the Company and the Holder.
20. ASSIGNMENT, ETC. The Holder (but not the Company) may without
notice, transfer or assign this Debenture or any interest herein and may
mortgage, encumber or transfer any of its rights or interest in and to this
Debenture or any part hereof and, without limitation, each assignee, transferee
and mortgagee (which may include any affiliate of the Holder) shall have the
right to transfer or assign its interest. Each such assignee, transferee and
mortgagee shall have all of the rights of the Holder under this Debenture. The
Company agrees that, subject to compliance with the Purchase Agreement, after
receipt by the Company of written notice of assignment from the Holder or from
the Holder's assignee, all principal, interest and other amounts which are then
and thereafter become due under this Debenture shall be paid to such assignee at
the place of payment designated in such notice. This Debenture shall be binding
upon the Company and its successors and affiliates and shall inure to the
benefit of the Holder and its successors and assigns.
21. NO WAIVER. No failure on the part of the Holder to exercise,
and no delay in exercising any right, remedy or power hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise by the Holder
of any right, remedy or power hereunder preclude any other or future exercise
of any other right, remedy or power. Each and every right, remedy or power
hereby granted to the Holder or allowed it by law or other agreement shall be
cumulative and not exclusive of any other, and may be exercised by the Holder
from time to time.
22. CERTIFICATE. The Company shall, upon the written request at any
time of any Holder of Debentures, furnish or cause to be furnished to such
Holder a certificate prepared by the chief financial officer of Company
setting forth any adjustments or readjustments of the Conversion Price
pursuant to this Debenture and any right of the Holder to receive additional
shares of Common Stock or any other equity or debt security pursuant to
Section 7.
23. NOTICES. The Company shall distribute to the Holders of
Debentures copies of all notices, materials, annual and quarterly reports,
proxy statements, information statements and any other documents distributed
generally to the holders of shares of Common Stock of the Company, at such
times and by such method as such documents are distributed to such holders of
such Common Stock, but shall not directly or indirectly provide material
non-public information to the Holder without such Holder's prior written
consent.
24. SPECIFIC ENFORCEMENT. The Company agrees that irreparable
damage would occur in the event that any of the provisions of this Debenture
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the Holders of Debentures shall be
entitled to swift specific performance, injunctive relief or other equitable
remedies to prevent or cure breaches of the provisions of this Debenture and
to enforce specifically the terms and provisions hereof, this being
15
<PAGE>
in addition to any other remedy to which any of them may be entitled under
agreement, at law or in equity.
25. MISCELLANEOUS. Unless otherwise provided herein, any notice or
other communication to a party hereunder shall be sufficiently given if in
writing and personally delivered, facsimiled or mailed to said party by
certified mail, return receipt requested, at its address set forth herein or
such other address as either may designate for itself in such notice to the
other and communications shall be deemed to have been received when delivered
personally or, if sent by mail or facsimile, then when actually received by
the party to whom it is addressed. Whenever the sense of this Debenture
requires, words in the singular shall be deemed to include the plural and
words in the plural shall be deemed to include the singular. Paragraph
headings are for convenience only and shall not affect the meaning of this
document.
26. GOVERNING LAW; CONSENT TO JURISDICTION. This Debenture shall be
governed by and construed and enforced in accordance with the laws of the
State of New York applicable to contracts to be executed and performed
entirely within such state. The Company (i) hereby irrevocably submits to the
exclusive jurisdiction of the state and federal court located in New York
County, New York for the purposes of any suit, action or proceeding arising
out of or related to this Debenture and (ii) hereby waives, and agrees not to
assert in any such suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of such court, that the suit, action
or proceeding is brought in an inconvenient forum or that the venue of the
suit, action or proceeding is improper. The Company consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to
such party as provided herein and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing in this
paragraph shall affect or limit any right to serve process in any other
manner permitted by law.
SIGNATURE PAGE FOLLOWS
16
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
ADVANCED COMMUNICATIONS GROUP, INC.
By: /s/ Michael A. Pruss
----------------------------------------
Name: Michael A. Pruss
Title: Vice President
Signature page to 5% Convertible Debenture of ADVANCED COMMUNICATIONS
GROUP, INC.
17
<PAGE>
EXHIBIT 1
(To be Executed by Registered Holder
in order to Convert Debenture)
CONVERSION NOTICE
FOR
5% CONVERTIBLE DEBENTURE DUE FEBRUARY 23, 2006
The undersigned, as Holder of the 5% Convertible Debenture Due February
23, 2006 of ADVANCED COMMUNICATIONS GROUP, INC. (the "Company"), in the
outstanding principal amount of U.S. $_____________ (the "Debenture"), hereby
irrevocably elects to convert that portion of the outstanding principal amount
of the Debenture shown on the next page into shares of Common Stock, $0.0001 par
value per share (the "Common Stock"), of the Company according to the conditions
of the Debenture, as of the date written below. The undersigned hereby requests
that share certificates for the Common Stock to be issued to the undersigned
pursuant to this Conversion Notice be issued in the name of, and delivered to,
the undersigned or its designee as indicated below. If shares are to be issued
in the name of a person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto. No fee will be charged to the
Holder for any conversion, except for transfer taxes, if any.
Conversion Information: NAME OF HOLDER:
------------------------------
By:
------------------------------------------
Print Name:
Print Title:
Print Address of Holder:
------------------------------------------
------------------------------------------
Issue Common Stock to:
--------------------
at:
---------------------------------------
Electronically transmit and credit Common
Stock to:
at:
-------------- -----------------------
------------------------------------------
Date of Conversion
------------------------------------------
Applicable Conversion Rate
THE COMPUTATION OF THE NUMBER OF COMMON SHARES TO
BE RECEIVED IS SET FORTH ON THE ATTACHED PAGE
<PAGE>
PAGE 2 TO CONVERSION NOTICE FOR:
-----------------------------------------------
(NAME OF HOLDER)
COMPUTATION OF NUMBER OF COMMON SHARES TO BE RECEIVED
<TABLE>
<CAPTION>
<S> <C>
A. Outstanding Principal Amount converted: $
----------
B. Accrued, unpaid interest on Outstanding Principal Amount converted: $
----------
C. Default payments due Holder on Outstanding Principal Amount converted: $
----------
-------------
TOTAL DOLLAR AMOUNT CONVERTED (TOTAL OF A + B + C) $
----------
=============
$
EXCHANGE PRICE ----------
Number of Shares of Common Stock = Total dollar amount converted = $
----------------------------- ----------
Conversion Price $
NUMBER OF SHARES OF COMMON STOCK =
-------------------------------
</TABLE>
If the conversion is not being settled by DTC, please issue and deliver _____
certificate(s) for shares of Common Stock in the following amount(s):
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Please issue and deliver _____ new Debenture(s) in the following amounts:
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
2
<PAGE>
EXHIBIT 2
PIK STATEMENT
Date:______________
To: [NAME OF HOLDER OF DEBENTURE] ("Holder")
RE: 5% CONVERTIBLE DEBENTURE DUE FEBRUARY 23, 2006 ("DEBENTURE") OF ADVANCED
COMMUNICATIONS GROUP, INC. (THE "COMPANY"), IN THE FACE PRINCIPAL AMOUNT OF
US$_____________.
In lieu of paying interest on the above-referenced Debenture in
coin or currency, the Company hereby elects to pay interest on the Debenture,
for the Interest Payment Date indicated below, by having the amount of such
interest added to the Outstanding Principal Amount due under the Debenture.
The Company hereby certifies to the Holder, its successors and assigns that
the Outstanding Principal Amount due under the Debenture after delivery of
this PIK Statement equals the amount indicated below. Capitalized terms used
in this PIK Statement and not otherwise defined shall have the meaning
ascribed thereto in the Debenture.
Interest Payment Date: _____________
<TABLE>
<CAPTION>
<S> <C>
Outstanding Principal Amount prior
to issuance of this PIK Statement: US$_____________
PIK Interest: US$_____________
Outstanding Principal Amount after
issuance of this PIK Statement: US$_____________
</TABLE>
IN WITNESS WHEREOF, this PIK Statement has been duly executed
and delivered on the date first written above.
ADVANCED COMMUNICATIONS GROUP, INC.
By:
---------------------------------
Name:
Title:
<PAGE>
SCHEDULE I
None
<PAGE>
Exhibit 4.4
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. IT MAY NOT BE TRANSFERRED, ASSIGNED,
SOLD OR OFFERED FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN
OPINION OF COUNSEL, IN FORM AND SUBSTANCE REASONABLY ACCEPTABLE TO THE
COMPANY, THAT REGISTRATION IS NOT REQUIRED BECAUSE OF AN APPLICABLE EXEMPTION
FROM SUCH REGISTRATION REQUIREMENTS.
-------------------
February 23, 2000
ADVANCED COMMUNICATIONS GROUP, INC.
-------------------
Common Stock Purchase Warrant
Advanced Communications Group, Inc., a Delaware corporation (the
"COMPANY"), hereby certifies that for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Halifax Fund, L.P.
having an address at c/o The Palladin Group, L.P., 195 Maplewood Avenue,
Maplewood, NJ 07040 ("PURCHASER") or any other Warrant Holder is entitled, on
the terms and conditions set forth below, to purchase from the Company at any
time beginning on the date hereof and ending on the fifth anniversary of the
Closing Date, 429,262 fully paid and nonassessable shares of Common Stock,
par value $0.0001, of the Company (the "COMMON STOCK"), at a purchase price
per share of Common Stock equal to $18.4681, (the "PURCHASE PRICE"), as the
same may be adjusted pursuant to Section 5 herein.
1. DEFINITIONS.
(a) The term "AGREEMENT" shall mean the Convertible Debenture
Purchase Agreement dated as of February 23, 2000, between the Company and the
Investors signatory thereto.
(b) The term "DEBENTURE" shall mean any of the Company's 5%
Convertible Debentures Due February 23, 2006.
(c) The term "EFFECTIVE REGISTRATION" shall have the meaning
specified in the Agreement.
(d) The term "CLOSING DATE" shall mean February 23, 2000.
<PAGE>
(e) The term "REGISTRATION RIGHTS AGREEMENT" shall mean the
Registration Rights Agreement, dated as of February 23, 2000, between the
Company and the Investor signatory thereto.
(f) The term "WARRANT HOLDER" shall mean the Purchaser or any
assignee of all or any portion of this Warrant.
(g) The term "WARRANT SHARES" shall mean the shares of Common Stock
or other securities issuable upon exercise of this Warrant.
Capitalized terms used but not defined in this Warrant shall have the
meanings specified in the Agreement or the Debentures.
2. EXERCISE OF WARRANT.
This Warrant may be exercised by the Warrant Holder, in whole or in
part, at any time and from time to time by either of the following methods:
(a) The Warrant Holder may surrender this Warrant, together with the
form of subscription at the end hereof duly executed by Warrant Holder
("SUBSCRIPTION NOTICE"), at the offices of the Company or any transfer agent
for the Common Stock; or
(b) The Warrant Holder may also exercise this Warrant, in whole or
in part, in a "cashless" or "net-issue" exercise by delivering to the offices
of the Company or any transfer agent for the Common Stock this Warrant,
together with a Subscription Notice specifying the number of Warrant Shares
to be delivered to such Warrant Holder ("DELIVERABLE SHARES") and the number
of Warrant Shares with respect to which this Warrant is being surrendered in
payment of the aggregate Purchase Price for the Deliverable Shares
("SURRENDERED SHARES"); PROVIDED that the Purchase Price multiplied by the
number of Deliverable Shares shall not exceed the value of the Surrendered
Shares. For the purposes of this provision, each Warrant Share as to which
this Warrant is surrendered will be attributed a value equal to the fair
market value (as defined below) of the Warrant Share minus the Purchase Price
of the Warrant Share.
In the event that the Warrant is not exercised in full, the number of
Warrant Shares shall be reduced by the number of such Warrant Shares for
which this Warrant is exercised and/or surrendered, and the Company, at its
expense, shall within three (3) Trading Days (as defined below) issue and
deliver to or upon the order of Warrant Holder a new Warrant of like tenor in
the name of Warrant Holder or as Warrant Holder (upon payment by Warrant
Holder of any applicable transfer taxes) may request, reflecting such
adjusted Warrant Shares.
3. DELIVERY OF STOCK CERTIFICATES.
(a) Subject to the terms and conditions of this Warrant, as soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within three (3) Trading Days thereafter, the Company shall transmit
the certificates of the Warrant Shares (together with any other stock or
other securities or property to which
2
<PAGE>
Warrant Holder is entitled upon exercise) by messenger or overnight delivery
service to reach the address designated by such holder within three (3)
Trading Days after the receipt of the Subscription Notice ("T+3"). If such
certificates are not received by the Warrant Holder within T+3, then the
Warrant Holder will be entitled to revoke and withdraw its exercise of its
Warrant at any time prior to its receipt of those certificates.
In lieu of delivering physical certificates representing the Warrant
Shares deliverable upon exercise of Warrants, provided the Company's transfer
agent is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer ("FAST") program, upon request of the Warrant Holder, the
Company shall use its best efforts to cause its transfer agent to
electronically transmit the Warrant Shares issuable upon exercise to the
Warrant Holder, by crediting the account of Warrant Holder's prime broker
with DTC through its Deposit Withdrawal Agent Commission ("DWAC") system. The
time periods for delivery described above shall apply to the electronic
transmittals through the DWAC system. The parties agree to coordinate with
DTC to accomplish this objective. The exchange pursuant to Section 3 shall be
deemed to have been made immediately prior to the close of business on the
date of the Subscription Notice. The person or persons entitled to receive
the Warrant Shares issuable upon such exercise shall be treated for all
purposes as the record holder or holders of such Warrant Shares at the close
of business on the date of the Subscription Notice.
The term Trading Day means (x) if the Common Stock is listed on the New
York Stock Exchange or the American Stock Exchange, a day on which there is
trading on such stock exchange, (y) if the Common Stock is not listed on
either of such stock exchanges but sale prices of the Common Stock are
reported on an automated quotation system, a day on which trading is reported
on the principal automated quotation system on which sales of the Common
Stock are reported, or (z) if the foregoing provisions are inapplicable, a
day on which quotations are reported by National Quotation Bureau
Incorporated.
(b) This Warrant may not be exercised as to fractional shares of Common
Stock. In the event that the exercise of this Warrant, in full or in part,
would result in the issuance of any fractional share of Common Stock, then in
such event the Warrant Holder shall be entitled to cash equal to the fair
market value of such fractional share. For purposes of this Warrant, "FAIR
MARKET VALUE" shall equal the closing trading price of the Common Stock on
the Approved Market which is the principal trading exchange or market for the
Common Stock (the "PRINCIPAL MARKET") on the date of determination or, if the
Common Stock is not listed or admitted to trading on any Approved Market, the
average of the closing bid and asked prices on the over-the-counter market as
furnished by any New York Stock Exchange member firm reasonably selected from
time to time by the Company for that purpose and reasonably acceptable to the
Warrant Holder, or, if the Common Stock is not listed or admitted to trading
on any Approved Market or traded over-the-counter and the average price
cannot be determined a contemplated above, the fair market value of the
Common Stock shall be as reasonably determined in good faith by the Company's
Board of Directors with the concurrence of the Warrant Holder.
3
<PAGE>
4. (A) REPRESENTATIONS AND COVENANTS OF THE COMPANY.
(a) The Warrant Shares, when issued in accordance with the terms
hereof, will be duly authorized and, when paid for or issued in accordance
with the terms hereof, shall be validly issued, fully paid and
non-assessable. The Company has authorized and reserved for issuance to
Warrant Holder the requisite number of shares of Common Stock to be issued
pursuant to this Warrant.
(b) The Company shall at all times reserve and keep available,
solely for issuance and delivery as Warrant Shares hereunder, 200% of such
number of shares of Common Stock as shall from time to time be issuable
hereunder.
(c) With a view to making available to the Warrant Holder the
benefits of Rule 144 promulgated under the Act and any other rule or
regulation of the Securities and Exchange Commission ("SEC") that may at any
time permit Warrant Holder to sell securities of the Company to the public
without registration, the Company agrees to use its best efforts to:
(i) make and keep public information available, as those terms
are understood and defined in Rule 144, at all times;
(ii) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"); and
(iii) furnish to any Warrant Holder forthwith upon request a
written statement by the Company that it has complied with the
reporting requirements of Rule 144 and of the Act and the Exchange
Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed by the Company
as may be reasonably requested to permit any such Warrant Holder to
take advantage of any rule or regulation of the SEC permitting the
selling of any such securities without registration.
(B) REPRESENTATIONS AND COVENANTS OF THE PURCHASER.
The Purchaser shall not transfer, sell, pledge, encumber or
otherwise dispose of this Warrant or the Warrant Shares, unless such resale
is pursuant to an effective registration statement under the Act or pursuant
to an opinion of counsel in form and substance reasonably acceptable to the
Company that registration is not required because of an applicable exemption
from such registration requirements.
5. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES. The number of and
kind of securities purchasable upon exercise of this Warrant and the Purchase
Price shall be subject to adjustment from time to time as follows:
(a) Subdivisions, Combinations and other Issuances. If the Company
shall at any time after the date hereof but prior to the expiration of this
Warrant subdivide
4
<PAGE>
its outstanding securities as to which purchase rights under this Warrant
exist, or combine its outstanding securities as to which purchase rights
under this Warrant exist, the number of Warrant Shares as to which this
Warrant is exercisable as of the date of such subdivision or combination
shall forthwith be proportionately increased in the case of a subdivision, or
proportionately decreased in the case of a combination. Appropriate
proportional adjustments (decrease in the case of subdivision, increase in
the case of combination) shall also be made to the Purchase Price payable per
share, so that the aggregate Purchase Price payable for the total number of
Warrant Shares purchasable under this Warrant as of such date shall remain
the same as it would have been before such subdivision or combination.
(b) STOCK DIVIDEND. If at any time after the date hereof the Company
declares a dividend or other distribution on Common Stock payable in Common
Stock or other securities or rights convertible into or exchangeable for
Common Stock ("COMMON STOCK EQUIVALENTS") without payment of any
consideration by holders of Common Stock for the additional shares of Common
Stock or the Common Stock Equivalents (including the additional shares of
Common Stock issuable upon exercise or conversion thereof), then the number
of shares of Common Stock for which this Warrant may be exercised shall be
increased as of the record date (or the date of such dividend distribution if
no record date is set) for determining which holders of Common Stock shall be
entitled to receive such dividends, in proportion to the increase in the
number of outstanding shares (and shares of Common Stock issuable upon
conversion of all such securities convertible into Common Stock) of Common
Stock as a result of such dividend, and the Purchase Price shall be
proportionately reduced so that the aggregate Purchase Price for all the
Warrant Shares issuable hereunder immediately after the record date (or on
the date of such distribution, if applicable) for such dividend shall equal
the aggregate Purchase Price so payable immediately before such record date
(or on the date of such distribution, if applicable).
(c) OTHER DISTRIBUTIONS. To the extent that Section 5(b) does not
apply, if at any time after the date hereof the Company distributes to
holders of its Common Stock, other than as part of its dissolution,
liquidation the winding up of its affairs, any shares of its capital stock,
any evidence of indebtedness or any of its assets (other than Common Stock),
then the number of Warrant Shares for which this Warrant is exercisable shall
be increased to equal: (i) the number of Warrant Shares for which this
Warrant is exercisable immediately prior to such event, (ii) multiplied by a
fraction, (A) the numerator of which shall be the fair market value per share
of Common Stock on the record date for the dividend or distribution, and (B)
the denominator of which shall be the fair market value price per share of
Common Stock on the record date for the dividend or distribution minus the
amount allocable to one share of Common Stock of the value (as jointly
determined in good faith by the Board of Directors of the Company and the
Warrant Holder) of any and all such evidences of indebtedness, shares of
capital stock, other securities or property, so distributed. The Purchase
Price shall be reduced to equal: (i) the Purchase Price in effect immediately
before the occurrence of any event (ii) multiplied by a fraction, (A) the
numerator of which is the number of Warrant Shares for which this Warrant is
exercisable immediately before the adjustment, and (B) the
5
<PAGE>
denominator of which is the number of Warrant Shares for which this Warrant
is exercisable immediately after the adjustment.
(d) MERGER, ETC. If at any time after the date hereof there shall be
a merger or consolidation of the Company with or into or a transfer of all or
substantially all of the assets of the Company to another entity, then the
Warrant Holder shall be entitled to receive upon or after such transfer,
merger or consolidation becoming effective, and upon payment of the Purchase
Price then in effect, the number of shares or other securities or property of
the Company or of the successor corporation resulting from such merger or
consolidation, which would have been received by Warrant Holder for the
shares of stock subject to this Warrant had this Warrant been exercised just
prior to such transfer, merger or consolidation becoming effective or to the
applicable record date thereof, as the case may be. The Company will not
merge or consolidate with or into any other corporation, or sell or otherwise
transfer its property, assets and business substantially as an entirety to
another corporation, unless the corporation resulting from such merger or
consolidation (if not the Company), or such transferee corporation, as the
case may be, shall expressly assume, by supplemental agreement reasonably
satisfactory in form and substance to the Warrant Holder, the due and
punctual performance and observance of each and every covenant and condition
of this Warrant to be performed and observed by the Company.
(e) RECLASSIFICATION, ETC. If at any time after the date hereof
there shall be a reorganization or reclassification of the securities as to
which purchase rights under this Warrant exist into the same or a different
number of securities of any other class or classes, then the Warrant Holder
shall thereafter be entitled to receive upon exercise of this Warrant, during
the period specified herein and upon payment of the Purchase Price then in
effect, the number of shares or other securities or property resulting from
such reorganization or reclassification, which would have been received by
the Warrant Holder for the shares of stock subject to this Warrant had this
Warrant at such time been exercised.
(f) Intentionally left blank.
6. NO IMPAIRMENT. The Company will not, by amendment of its Certificate
of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms of this Warrant, but will at all times in good faith assist in
the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the Warrant
Holder against impairment. Without limiting the generality of the foregoing,
the Company (a) will not increase the par value of any Warrant Shares above
the amount payable therefor on such exercise, and (b) will take all such
action as may be reasonably necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable Warrant
Shares on the exercise of this Warrant.
7. NOTICE OF ADJUSTMENTS. Whenever the Purchase Price or number of
Shares purchasable hereunder shall be adjusted pursuant to Section 5 hereof,
the
6
<PAGE>
Company shall execute and deliver to the Warrant Holder a certificate setting
forth, in reasonable detail, the event requiring the adjustment, the amount
of the adjustment, the method by which such adjustment was calculated and the
Purchase Price and number of shares purchasable hereunder after giving effect
to such adjustment, and shall cause a copy of such certificate to be mailed
(by first class mail, postage prepaid) to the Warrant Holder.
8. RIGHTS AS STOCKHOLDER. Prior to exercise of this Warrant, the Warrant
Holder shall not be entitled to any rights as a stockholder of the Company
with respect to the Warrant Shares, including (without limitation) the right
to vote such shares, receive dividends or other distributions thereon or be
notified of stockholder meetings. However, in the event of any taking by the
Company of a record of the holders of any class of securities for the purpose
of determining the holders thereof who are entitled to receive any dividend
(other than a cash dividend) or other distribution, any right to subscribe
for, purchase or otherwise acquire any shares of stock of any class or any
other securities or property, or to receive any other right, the Company
shall mail to each Warrant Holder, at least 10 Trading Days prior to the date
specified therein, a notice specifying the date on which any such record is
to be taken for the purpose of such dividend, distribution or right, and the
amount and character of such dividend, distribution or right.
9. LIMITATION ON EXERCISE.
(a) Notwithstanding anything to the contrary contained herein, this
Warrant may not be exercised by the Warrant Holder to the extent that, after
giving effect to Warrant Shares to be issued pursuant to a Subscription
Notice, the total number of shares of Common Stock deemed beneficially owned
by such holder (other than by virtue of ownership of this Warrant, or
ownership of other securities that have limitations on the holder's rights to
convert or exercise similar to the limitations set forth herein), together
with all shares of Common Stock deemed beneficially owned by the holder's
"affiliates" (as defined in Rule 144 of the Act) that would be aggregated for
purposes of determining whether a group under Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT") exists (an "AGGREGATION
PARTY"), would exceed 9.9% (the "RESTRICTED OWNERSHIP PERCENTAGE") of the
total issued and outstanding shares of the Company's Common Stock; PROVIDED
that (w) the Warrant Holder shall have the right at any time and from time to
time to reduce its Restricted Ownership Percentage immediately upon notice to
the Company or in the event of a Change in Control Transaction, (x) the
Warrant Holder shall have the right at any time and from time to time to
increase its Restricted Ownership Percentage or otherwise waive in whole or
in part the restrictions of this Section 9 upon 61 days' prior notice to the
Company or immediately in the event of a Change in Control Transaction, (y)
the Warrant Holder can make subsequent adjustments pursuant to (w) or (x) any
number of times from time to time (which adjustment shall be effective
immediately if it results in a decrease in the Restricted Ownership
Percentage or shall be effective upon 61 days' prior written notice or
immediately in the event of a Change in Control Transaction if it results in
an increase in the Restricted Ownership Percentage) and (z) the Warrant
Holder may eliminate or reinstate this limitation at any time and from time
to time (which elimination will be effective upon 61 days' prior notice and
which reinstatement will be effective
7
<PAGE>
immediately). Without limiting the foregoing, in the event of a Change in
Control Transaction, the Warrant Holder may reinstate immediately (in whole
or in part) the requirement that any increase in its Restricted Ownership
Percentage be subject to 61 days' prior written notice, notwithstanding such
Change in Control Transaction, without imposing such requirement on, or
otherwise changing the Warrant Holder's rights with respect to, any other
Change in Control Transaction. For this purpose, any material modification of
the terms of a Change in Control Transaction will be deemed to create a new
Change in Control Transaction. The term "DEEMED BENEFICIALLY OWNED" as used
in this Warrant shall exclude shares that might otherwise be deemed
beneficially owned by reason of the exercisability of the Warrants. A "CHANGE
IN CONTROL TRANSACTION" shall have the same meaning set forth in the
Debentures.
(b) Each time (a "COVENANT TIME") the Warrant Holder makes a
Triggering Acquisition (as defined below) of shares of Common Stock (the
"TRIGGERING SHARES"), the Warrant Holder will be deemed to covenant that it
will not, during the balance of the day on which such Triggering Acquisition
occurs, and during the 61-day period beginning immediately after that day,
acquire additional shares of Common Stock pursuant to rights-to-acquire
existing at that Covenant Time, if the aggregate amount of such additional
shares so acquired (without reducing that amount by any dispositions) would
exceed (x) the Restricted Ownership Percentage of the number of shares of
Common Stock outstanding at that Covenant Time (including the Triggering
Shares) minus (y) the number of shares of Common Stock actually owned by the
Warrant Holder at that Covenant Time (regardless of how or when acquired, and
including the Triggering Shares). A "TRIGGERING ACQUISITION" means the giving
of a Subscription Notice or any other acquisition of Common Stock by the
Warrant Holder or an aggregation party; provided, however, that with respect
to the giving of such Subscription Notice, if the associated issuance of
shares of Common Stock does not occur, such event shall cease to be a
Triggering Acquisition and the related covenant under this paragraph shall
terminate. At each Covenant Time, the Warrant Holder shall be deemed to waive
any right it would otherwise have to acquire Common Shares to the extent that
such acquisition would violate any covenant given by the Warrant Holder under
this paragraph. For the avoidance of doubt:
(i) The covenant to be given pursuant to this paragraph will be
given at every Covenant Time and shall be calculated based on the
circumstances then in effect. The making of a covenant at one Covenant
Time shall not terminate or modify any prior covenants.
(ii) The Warrant Holder may therefore from time to time be
subject to multiple such covenants, each one having been made at a
different Covenant Time, and some possibly being more restrictive
than others. The Warrant Holder must comply with all such covenants
then in effect.
(c) The delivery of a Subscription Notice by the Warrant Holder
shall be deemed a representation by the Warrant Holder that it is in
compliance with this Section 9.
8
<PAGE>
10. REPLACEMENT OF WARRANT. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of such Warrant, the Company at its
expense promptly will execute and deliver, in lieu thereof a new Warrant of
like tenor.
11. SPECIFIC PERFORMANCE; CONSENT TO JURISDICTION; CHOICE OF LAW.
(a) The Company and the Warrant Holder acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of
this Warrant were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall he
entitled to an injunction or injunctions to prevent or cure breaches of the
provisions of this Warrant and to enforce specifically the terms and
provisions hereof, this being in addition to any other remedy to which either
of them may be entitled by law or equity.
(b) Each of the Company and the Warrant Holder (i) hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts located in New York County, New York for the purposes of any suit,
action or proceeding arising out of or relating to this warrant and (ii)
hereby waives, and agrees not to assert in any such suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction
of such court, that the suit, action or proceeding is brought in an
inconvenient forum or that the venue of the suit, action or proceeding is
improper. Each of the Company and the Warrant Holder consents to process
being served in any such suit, action or proceeding by mailing a copy thereof
to such party at the address in effect for notices to it under this Warrant
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing in this paragraph shall affect or limit
any right to serve process in any other manner permitted by applicable law.
(c) The Company and the Warrant Holder irrevocably waive their right
to trial by jury.
(d) This Warrant shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York applicable to
contracts executed and to be performed entirely within such State.
12. ENTIRE AGREEMENT; AMENDMENTS. This Warrant, the Exhibits hereto and
the provisions contained in the Agreement or the Registration Rights
Agreement or the Debentures contain the entire understanding of the parties
with respect to the matters covered hereby and thereby and, except as
specifically set forth herein and therein, neither the Company nor the
Warrant Holder makes any representation, warranty, covenant or undertaking
with respect to such matters. No provision of this Agreement may be waived or
amended other than by a written instrument signed by the party against whom
enforcement of any such amendment or waiver is sought.
9
<PAGE>
13. NOTICES. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be effective (a) upon hand
delivery or delivery by telex (with correct answer back received), telecopy
or facsimile at the address or number designated below (if delivered on a
business day during normal business hours where such notice is to be
received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice
is to be received) or (b) on the second business day following the date of
mailing by express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be:
to the Company:
Advanced Communications Group, Inc.
390 Woods Mill Road, Suite 150
St. Louis, MO 63017
Attention: Michael Pruss
Facsimile: (314) 469-3539
with copies to:
Haynes and Boone, LLP
901 Main Street, Suite 3100
Dallas, Texas 75202
Attention: Paul H. Amiel, Esq.
Facsimile: (214) 200-0555
10
<PAGE>
to the Warrant Holder:
Halifax Fund, L.P.
c/o The Palladin Group, L.P.
Investment Manager
195 Maplewood Avenue
Maplewood, NJ 07040
Attention: Robert Chender
Facsimile: (201) 973-313-6491
with copies to:
Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue, 18th Floor
New York, New York 10176
Attention: Stephen M. Schultz, Esq.
Facsimile: (212) 986-8866
Either party hereto may from time to time change its address for notices
under this Section 13 by giving at least 10 days' prior written notice of
such changed address to the other party hereto.
14. MISCELLANEOUS. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by
the party against which enforcement of such change, waiver, discharge or
termination is sought. The headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect any of the terms
hereof. The invalidity or unenforceability of any provision hereof shall in
no way affect the validity or enforceability of any other provision.
15. ASSIGNMENT. Subject to Section 4(B),this Warrant may be transferred
or assigned, in whole or in part, at any time and from time to time by the
then Warrant Holder by submitting this Warrant to the Company together with a
duly executed Assignment in substantially the form and substance of the Form
of Assignment which accompanies this Warrant and, upon the Company's receipt
hereof, and in any event, within three (3) business days thereafter, the
Company shall issue a Warrant to the Warrant Holder to evidence that portion
of this Warrant, if any, as shall not have been so transferred or assigned.
[SIGNATURE PAGE FOLLOWS]
11
<PAGE>
Dated: February 23, 2000
ADVANCED COMMUNICATIONS GROUP, INC.
By: /s/ Michael A. Pruss
-----------------------
Name: Michael A. Pruss
Title: Vice President
[CORPORATE SEAL]
Attest:
By: /s/ Michael A. Pruss
--------------------
Michael A. Pruss
Secretary
(SIGNATURE PAGE OF ADVANCED COMMUNICATIONS GROUP, INC. COMMON STOCK PURCHASE
WARRANT)
12
<PAGE>
(SUBSCRIPTION NOTICE)
FORM OF WARRANT EXERCISE
(TO BE SIGNED ONLY ON EXERCISE OF WARRANT)
TO: ADVANCED COMMUNICATIONS GROUP, INC.
ATTN: SECRETARY
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant:
___(A) for, and to purchase thereunder, ____ shares of Common Stock of
Advanced Communications Group, Inc., a Delaware corporation (the
"Common Stock"), and herewith, or by wire transfer, makes payment
of $______________ therefor; or
___(B) in a "cashless" or "net-issue exercise" for, and to purchase
thereunder, ____ shares of Common Stock, and herewith makes payment
therefor with ____ Surrendered Warrant Shares.
The undersigned requests that the certificates for such shares be issued in
the name of, and
___(A) delivered to_______________, whose address is _________________; or
___ (B) electronically transmitted and credited to the account of_________,
undersigned's prime
broker (Account No._____________) with Depository Trust Company
through its Deposit Withdrawal Agent Commission system.
Dated:
----------------- -------------------------------------
(Signature must conform to name of
holder as specified on the face of the
Warrant)
-------------------------------------
(Address)
Tax Identification Number:
-----------
13
<PAGE>
------------------
FORM OF ASSIGNMENT
(TO BE SIGNED ONLY ON TRANSFER OF WARRANT)
For value received, the undersigned hereby sells, assigns, and transfers unto
___________the right represented by the within Warrant to purchase____________
shares of Common Stock of ADVANCED COMMUNICATIONS GROUP, INC., a Delaware
corporation, to which the within Warrant relates, and appoints________________
_____________ Attorney to transfer such right on the books of ADVANCED
COMMUNICATIONS GROUP, INC., a Nevada corporation, with full power of
substitution of premises.
Dated:
--------------------- ----------------------------------------
(Signature must conform to name of
holder as specified on the face of the
Warrant)
----------------------------------------
(Address)
Signed in the presence of:
- -------------------------------
14
<PAGE>
Exhibit 4.5
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (this "Agreement") is made as of
February 23, 2000, among BANK OF AMERICA, N.A., a national banking association
(together with its successors and assigns, the "Senior Lender"), Halifax Fund,
L.P., a Cayman Islands limited partnership ("Halifax"), the other participants
in the convertible debenture financing set forth on Schedule A hereto
(together with Halifax, the "Subordinated Lenders") and ADVANCED
COMMUNICATIONS GROUP, INC., a Delaware corporation ("ACG"), Great Western
Directories, Inc., a Texas corporation ("Great Western"), 1+USA V Acquisition
Corp., a Delaware corporation ("1+USA"), Big Stuff, Inc., a Texas corporation
("Big Stuff"), Pacific Coast Publishing Ltd., a Washington corporation
("Pacific Coast"), YPtel, Inc. a Washington corporation ("YPtel, Inc.") and
Web YP, Inc., a Texas corporation ("Web YP;" collectively, ACG, Great Western,
1+USA, Big Stuff, Pacific Coast, YPtel, Inc. and Web YP, the "Borrowers," and
each, individually, a "Borrower").
BACKGROUND
As an inducement for the Senior Lender to provide a credit facility in
favor of the Borrowers, each Subordinated Lender has agreed to enter into this
subordination agreement to provide for the subordination of the Subordinated
Indebtedness held by it to the Senior Indebtedness by the Senior Lender, all on
the terms and conditions herein set forth.
AGREEMENTS
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. DEFINITIONS; RULES OF CONSTRUCTION.
1.1 GENERAL TERMS. For purposes of this Agreement, the following
terms shall have the following respective meanings:
"ACG" has the meaning set forth in the first paragraph
hereof.
"AGREEMENT" has the meaning set forth in the first paragraph
hereof.
"HALIFAX" has the meaning set forth in the first paragraph
hereof.
"BANKRUPTCY EVENT" has the meaning set forth in Section
2.2(c) hereof.
"BIG STUFF" has the meaning set forth in the first
paragraph hereof.
"BLOCKING PERIOD TERMINATION DATE" has the meaning set forth
in Section 2.2(a) hereof.
<PAGE>
"BORROWER" has the meaning set forth in the first paragraph
hereof.
"COLLATERAL OBLIGORS" has the meaning set forth in Section
2.3 hereof.
"CREDIT AGREEMENT" means the Credit Agreement, dated as of
the date hereof, by and between the ACG and Senior Lender, as amended,
supplemented, extended, modified, renewed, restated or replaced from time to
time, and including any agreement entered into in substitution therefor.
"DEFAULT NOTICE" has the meaning set forth in Section 2.2(a)
hereof.
"DISTRIBUTION" means any payment, whether in cash,
securities or any other property, or security for any such payment except for:
(i) payments of interest on Subordinated Indebtedness which are made in kind or
in shares of capital stock of ACG or any successor; (ii) payments at the
Default Payment Rate made under the terms of the Subordinated Loan Agreement or
the Registration Rights Agreement (as defined in the Subordinated Loan
Agreement) which are made in-kind or in shares of capital stock of ACG or any
successor; or (iii) any shares of capital stock of ACG or any successor issued
upon conversion of the Debentures or Subsequent Debentures (each as defined in
the Subordinated Loan Agreement) or exercise of Warrants or Option Warrants
(each as defined in the Subordinated Loan Agreement).
"DISTRIBUTION BLOCKING PERIOD" has the meaning set forth in
Section 2.2(a) hereof.
"GREAT WESTERN" has the meaning set forth in the first
paragraph hereof.
"HOLDER OF SUBORDINATED INDEBTEDNESS" or "SUBORDINATED
LENDER" means Halifax and any other Person at any time or in any manner
acquiring any right to or interest in any of the Subordinated Indebtedness.
"LIEN" means any pledge, assignment, hypothecation,
mortgage, deed of trust, security interest, deposit arrangement, option,
conditional sale or title retaining contract, sale and lease back transaction,
financing statement filing, intellectual property transfer or assignment
filing, lessor's or lessee's interest under any lease, subordination of any
claim or right, or any other type of lien, charge, assignment, encumbrance,
preferential arrangement or other claim or right.
"PERSON" means an individual, a partnership, a corporation
(including a business trust), a joint stock company, a trust, an unincorporated
association, a joint venture, a limited liability company, a limited liability
partnership or other entity, or a government or any agency, instrumentality or
political subdivision thereof.
"SENIOR LEVERAGE RATIO" has the meaning set forth in the
Credit Agreement.
"SENIOR INDEBTEDNESS" means
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<PAGE>
(a) principal arising out of the Credit Agreement, and any
subsidiary guarantees thereof, under the Credit Agreement, in an aggregate
amount not exceeding sixty million dollars ($60,000,000), as reduced from time
to time by the aggregate amount of principal repayments made by the Borrowers;
provided that such principal may exceed sixty million dollars ($60,000,000) but
in any event shall not exceed one hundred and twenty million dollars
($120,000,000) if, at the time such principal in excess of sixty million
dollars ($60,000,000) is incurred, ACG's Senior Leverage Ratio is no greater
than 5 to 1 and further provided that the maturity of such principal shall not
be extended by more than six months from the maturity in effect on the date
hereof. The Senior Leverage Ratio shall be calculated and distributed by ACG in
the manner provided in the Subordinated Loan Agreement.
(b) interest on the aforementioned principal amount for
which provision is made in the Credit Agreement as in effect on the date hereof
and as may be increased in the future if such increases are reasonable under
the circumstances;
(c) commitment fees, facility fees, and all other fees, all
expenses and costs, and all indemnity, reimbursement and other obligations of
the Borrowers to the Senior Lender, all as provided in the Credit Agreement as
in effect on the date hereof and as may be increased in the future if such
increases are reasonable under the circumstances; and
(d) any refinancing of the foregoing (subject to the
limitations in paragraph (a) above) by a bank or financial institution and
which refinancing consists only of debt which is not convertible or
exchangeable for capital stock and which does not include any warrants or other
linkage to the appreciation in the value of capital stock.
Senior Indebtedness shall include all interest and fees and other amounts
accruing in accordance with the provisions of the foregoing sentence after
commencement of any case, proceeding or other action relating to the bankruptcy,
insolvency or reorganization of any of the Borrowers. Senior Indebtedness shall
continue to constitute Senior Indebtedness, notwithstanding the fact that such
Senior Indebtedness or any claim for such Senior Indebtedness is subordinated,
avoided or disallowed under the federal Bankruptcy Code or other applicable law.
"SENIOR LENDER" has the meaning set forth in the preamble to
this Agreement.
"SENIOR LENDING AGREEMENTS" means, collectively, the Loan
Documents, as defined in the Credit Agreement.
"SUBORDINATED INDEBTEDNESS" means all indebtedness,
obligations and liabilities of any kind owing by the Borrowers or any other
Person obligated under the Senior Indebtedness to Subordinated Lender from time
to time, including, without limitation, all such indebtedness, obligations and
liabilities under or pursuant to any of the Subordinated Lending Agreements,
including, without limitation, all principal, interest accruing thereon,
charges, expenses, fees and other sums chargeable to the Borrowers or any such
other Person under or pursuant to any of the Subordinated Lending Agreements,
including any Subsequent Debentures (as defined in the Subordinated Loan
Agreement) and reimbursement, indemnity or other obligations due and payable to
Subordinated Lender and including the obligations under the
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<PAGE>
Subsidiary Guarantees (as defined in the Subordinated Loan Agreement); but
excluding the right to receive capital stock upon conversion of Debentures or
exercise of Warrants.
"SUBORDINATED LENDING AGREEMENTS" shall mean, collectively,
the Subordinated Loan Agreement, the Registration Rights Agreement (as defined
in the Subordinated Loan Agreement), the Debentures (as defined in the
Subordinated Loan Agreement), any debenture or debentures or promissory note or
notes issued in exchange therefor or replacement thereof, the Warrant (as
defined in the Subordinated Loan Agreement), and all other agreements,
instruments and documents from time to time entered into by the Borrowers or
any other Person evidencing or securing the Subordinated Indebtedness, as all
of the foregoing may be amended, modified, supplemented, extended, renewed,
restated or replaced from time to time.
"SUBORDINATED LOAN AGREEMENT" shall mean the Convertible
Debenture Purchase Agreement, of even date herewith, between the Borrowers and
Subordinated Lenders, as amended, modified, supplemented, extended, renewed,
restated or replaced from time to time, and including any agreement entered
into in substitution thereof.
"WEB YP" has the meaning set forth in the first paragraph
hereof.
1.2 OTHER TERMS. Capitalized terms not otherwise defined herein shall
have the meanings given to them in the Credit Agreement or, if not defined
therein, in the Subordinated Loan Agreement.
1.3 RULES OF CONSTRUCTION. The rule of EJUSDEM GENERIS shall not be
applicable herein to limit a general statement that is followed by or referable
to an enumeration of specific matters to matters similar to the matters
specifically mentioned. Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) "or" is not exclusive;
(c) provisions apply to successive events and transactions;
(d) "herein," "hereof," "hereto," "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular article, section or other subdivision unless otherwise so provided;
(e) the word "person" means any natural person, partnership,
corporation, nation, state, government, union, association, agency, tribunal,
board, bureau and any other form of business or legal entity;
(f) all words or terms used in this Agreement, regardless of
the number or gender in which they are used, include any other number and any
other gender; and
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<PAGE>
(g) all financial terms used herein and not capitalized or
otherwise defined have the meaning accorded to them under US generally accepted
accounting principles, consistently applied ("GAAP").
2. COVENANTS. The Borrowers and each Holder of Subordinated Indebtedness
hereby covenant that, until the Senior Indebtedness has been paid in full and
satisfied in cash and the Credit Agreement has been irrevocably terminated (all
in accordance with the terms of the Credit Agreement and the other Senior
Lending Agreements), each shall comply with such of the following provisions as
are applicable to it:
2.1 TRANSFERS. Each Holder of Subordinated Indebtedness covenants that
any transferee from it of any Subordinated Indebtedness shall, prior to
acquiring such interest, execute and deliver a counterpart of this
Subordination Agreement to each other party hereto.
2.2 SUBORDINATED INDEBTEDNESS SUBORDINATION PROVISIONS. To induce
Senior Lender to enter into the Credit Agreement and to make and continue to
make from time to time loans and advances thereunder, notwithstanding any other
provision of the Subordinated Indebtedness or the Subordinated Lending
Agreements to the contrary, all obligations of the Borrowers to the
Subordinated Lenders under the Subordinated Lending Agreements (excluding the
right to receive capital stock upon conversion of Debentures or Subsequent
Debentures or upon exercise of Warrants or Option Warrants) are and shall be
expressly junior and subordinated in right of payment to all amounts due and
owing upon all Senior Indebtedness from time to time. Specifically, but not by
way of limitation:
(a) PAYMENTS.
(i) No Borrower shall make any Distribution on the
Subordinated Indebtedness until such time as
the Senior Indebtedness shall have been paid in
full in cash.
(ii) Notwithstanding the provisions of clause (i),
above, but subject to the provisions of clause
(iii), below, so long as no Default shall have
occurred under the Senior Lending Agreements and
no Default Notice (as defined below) shall have
been received by the Borrowers and the
Subordinated Lenders, the Borrowers may pay, and
the Holders of Subordinated Indebtedness may
receive, (a) the regularly scheduled payment(s)
of principal on the Subordinated Indebtedness
when due on the sixth anniversary of the date
hereof, the regularly scheduled semi-annual
payments of interest on the Subordinated
Indebtedness, and the fees and expenses due under
the Subordinated Lending Agreements, all in
accordance with the terms of the Subordinated
Lending Agreements and (b) up to two monthly cash
payments per calendar year at the Default Payment
Rate made under the terms of the Subordinated
Loan Agreement or the Registration Rights
Agreement; provided that such
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<PAGE>
monthly cash payments do not exceed an amount
equal to 3% of the outstanding Debentures and
Subsequent Debentures on such date per month.
(iii) Following the occurrence and during the
continuance of a Default (other than a Payment
Default (as defined below)) under the Senior
Lending Agreements, and upon and after receipt by
the Borrowers and the Subordinated Lenders of
written notice of such Default from the Senior
Lender (such notice, a "Covenant Default
Notice"), no Borrower shall make, and no Holder
of Subordinated Indebtedness shall be entitled to
receive or retain, any Distribution in respect of
the Subordinated Indebtedness. Notwithstanding
the provisions of the preceding sentence, the
Borrowers may resume making, and the Holders of
Subordinated Indebtedness shall be entitled to
receive and retain, any regularly scheduled
principal or interest payment, and the monthly
payments referred to in paragraph(ii) above which
may become due and payable or shall have become
due and payable on a non-accelerated basis
(including, without limitation, any missed
payments) on the date (the "Blocking Period
Termination Date") of the earliest to occur of
(A) the date on which all such Defaults specified
in the Covenant Default Notice shall have been
cured or waived, (B) payment in full in cash of
all Senior Indebtedness has been made, and (C)
the expiration of a period of one hundred and
eighty (180) days from delivery of the Covenant
Default Notice; provided, that in the event of a
Default with respect to the payment, when due, of
any Senior Indebtedness (a "Payment Default"),
then the provisions of Section 2.2(d) below shall
apply. The period between the date of any
Covenant Default Notice and the Blocking Period
Termination Date relating to such Default Notice
is referred to herein as a "Distribution Blocking
Period."
(b) LIMITATION ON ACCELERATION. During the continuation of the
shorter of: a Distribution Blocking Period or one hundred and eighty (180) days
from the delivery of a Covenant Default Notice or a Payment Default Notice, no
Holder of Subordinated Indebtedness shall be entitled to accelerate the
maturity of the Subordinated Indebtedness, exercise any remedies with respect
to the Subordinated Indebtedness, or commence any action or proceeding to
recover any amounts due or to become due with respect to the Subordinated
Indebtedness, PROVIDED, HOWEVER, that, subject to Section 2.3, the foregoing
limitation on acceleration or exercise of any remedies shall not be applicable
following (i) the occurrence of an Bankruptcy Event (as to which Section 2.2(c)
shall apply), or (ii) the final maturity or acceleration of all Senior
Indebtedness. Notwithstanding the foregoing, a Holder of Subordinated
Indebtedness shall be entitled to accelerate the maturity of Subordinated
Indebtedness if the maturity of the
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<PAGE>
Senior Indebtedness has been previously accelerated. This paragraph shall not
affect a Holder's right to enforce its right to have its Debentures or
Subsequent Debentures converted or its Warrants or Option Warrants exercised,
and in each case to have capital stock issued with respect to such conversion
or exercise.
(c) PRIOR PAYMENT OF SENIOR INDEBTEDNESS IN BANKRUPTCY, ETC. In
the event of any insolvency or bankruptcy proceedings relative to any Borrower
or its property, or any receivership, liquidation, reorganization or other
similar proceedings in connection therewith, or, in the event of any
proceedings for voluntary liquidation, dissolution or other winding up of any
Borrower or distribution or marshaling of its assets or any composition with
its creditors, whether or not involving insolvency or bankruptcy, or if any
Borrower shall cease its operations, call a meeting of its creditors or no
longer do business as a going concern (each individually or collectively, a
"Bankruptcy Event") then all Senior Indebtedness shall be paid in full in cash
and the Credit Agreement irrevocably terminated before any Distribution shall
be made on account of any Subordinated Indebtedness. Any such Distribution
which would, but for the provisions hereof, be payable or deliverable in
respect of the Subordinated Indebtedness shall be paid or delivered directly to
the Senior Lender or its representatives, in the proportions in which they hold
the Senior Indebtedness, until all amounts owing upon the Senior Indebtedness
shall have been paid in full in cash and the Credit Agreement has been
irrevocably terminated. Notwithstanding anything to the contrary herein,
including, without limitation, the provisions of the foregoing sentences of
this paragraph (c), Holders of Subordinated Indebtedness may receive (and shall
be entitled to retain) securities which are subordinate to (at least to the
extent that the Subordinated Indebtedness is subordinate to the Senior
Indebtedness pursuant to the terms hereof) the payment of all Senior
Indebtedness.
(d) ACCELERATION OR PAYMENT DEFAULT UNDER SENIOR INDEBTEDNESS.
Notwithstanding anything in this Agreement to the contrary, including, without
limitation, Section 2.2(a), in the event that there is any Payment Default, and
upon and after receipt by the Borrowers and the Subordinated Lenders of a
written notice of such Payment Default from the Senior Lender (such notice, a
"Payment Default Notice") then no Distribution shall thereafter be made on
account of the Subordinated Indebtedness until all Senior Indebtedness has been
paid in full in cash.
(e) POWER OF ATTORNEY. To enable the Senior Lender to assert and
enforce its rights hereunder in any proceeding referred to in Section 2.2(c) or
upon the happening of any Bankruptcy Event, if any Holder of Subordinated
Indebtedness does not act in a timely fashion, Senior Lender or any person whom
it may designate is hereby irrevocably appointed attorney in fact for such
Holder of Subordinated Indebtedness, with full power (i) to act in the place
and stead of such Holder of Subordinated Indebtedness to make, present and file
such proofs of claim against the Borrowers on account of all or any part of the
Subordinated Indebtedness as Senior Lender may deem advisable and (ii) to
receive and collect any and all cash dividends or other cash payments made
thereon and to apply the same on account of the Senior Indebtedness. The
Subordinated Lender will execute and deliver to the Senior Lender such
instruments as may be required by the Senior Lender to enforce any and all
Subordinated Indebtedness, to effectuate the aforesaid power of attorney and to
effect collection of any and all dividends or other payments which may be made
at any time on account thereof, and each Holder of Subordinated Indebtedness
hereby irrevocably appoints the Senior Lender as the lawful attorney and agent
of
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such Holder of Subordinated Indebtedness to execute financing statements and
financing statement amendments and similar instruments and documents on behalf
of such Holder of the Subordinated Indebtedness and hereby further authorizes
the Senior Lender to file such financing statements and financing statement
amendments and similar instruments and documents in any appropriate public
office.
(f) KNOWLEDGE; DELIVERY OF DEFAULT NOTICE. No Holder of
Subordinated Indebtedness shall at any time be charged with knowledge of any of
the events described in Section 2.2(a) hereof or on such account be prohibited
from receiving or retaining any payment of monies or from taking any action
regarding acceleration or the exercise of remedies, unless and until such
Holder of Subordinated Indebtedness has received a Default Notice. Each Default
Notice shall be deemed to be properly given by Senior Lender to the Holders of
Subordinated Indebtedness if such Default Notice is delivered in accordance
with Section 10.3 hereof; PROVIDED, HOWEVER, that each and every additional or
subsequent Holder of Subordinated Indebtedness shall deliver written notice to
Senior Lender of its name and address and the other information set forth under
Section 10.3. Prior to delivery of such notice each such additional and
subsequent Holder of Subordinated Indebtedness shall be deemed to receive any
Default Notice at the time any other Holder of Subordinated Indebtedness
receives such Default Notice.
(g) PAYMENTS HELD IN TRUST. Should any Distribution in respect of
the Subordinated Indebtedness or the proceeds thereof be collected or received
by any Holder of Subordinated Indebtedness or any Affiliate (as such term is
defined in Rule 405 of Regulation C adopted by the Securities and Exchange
Commission pursuant to the Securities Act of 1933) of any such Holder of
Subordinated Indebtedness at a time when the Holders of Subordinated
Indebtedness are not permitted, pursuant to the terms hereof, to receive such
Distribution or proceeds thereof, then each Holder of Subordinated Indebtedness
will forthwith deliver, or cause to be delivered, the same to the Senior Lender
in precisely the form held by such Holder of Subordinated Indebtedness (plus
any necessary endorsements) and, until so delivered, the same shall be held in
trust by each Holder of Subordinated Indebtedness, or any such Affiliate, as
the property of the Senior Lender and shall not be commingled with other
property of such Holder of Subordinated Indebtedness or any such Affiliate.
(h) SUBROGATION. Subject to the prior payment in full in cash of
the Senior Indebtedness, to the extent that Senior Lender has received any
Distribution on the Senior Indebtedness which, but for this Agreement, would
have been applied to the Subordinated Indebtedness, the Subordinated Lender
shall be subrogated to the then or thereafter existing rights of the Senior
Lender including, without limitation, the right to receive any Distribution
made on the Senior Indebtedness until the principal of, interest on and other
charges due under the Subordinated Indebtedness have been indefeasibly paid in
full; and, for the purposes of such subrogation, no Distribution to the Senior
Lender to which the Subordinated Lender would be entitled except for the
provisions of this Agreement, and no delivery to the Senior Lender by the
Subordinated Lender pursuant to Section 2.2(g) hereof, shall, as between the
Borrowers, their creditors (other than the Senior Lender) and the Subordinated
Lender, be deemed to be a Distribution by the Borrowers to or on account of
Senior Indebtedness, it being understood that the provisions hereof are and are
intended solely for the purpose of defining the relative rights of the
Subordinated Lender, on the one hand, and the Senior Lender, on the other hand.
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<PAGE>
(i) LIMITATION ON DISTRIBUTION BLOCKING PERIODS. No holder of
Senior Indebtedness shall initiate a Distribution Blocking Period until at
least one hundred eighty (180) days have elapsed between the Blocking Period
Termination Date for the most recent Distribution Blocking Period and the
initiation of a new Distribution Blocking Period unless the initiation of the
new Distribution Blocking Period is based on the occurrence of an Event of
Default (other than a Payment Default or one arising solely from any Borrower's
failure to make a payment or fulfill another obligation prohibited by this
Agreement) arising after the initiation of the first Distribution Blocking
Period. Notwithstanding anything in this Agreement to the contrary, no one or
more Distribution Blocking Periods shall be effective for more than one hundred
eighty (180) days in any period of three hundred sixty (360) consecutive days;
provided that the foregoing limitation shall not apply to any blocking of
Distributions on Subordinated Indebtedness arising out of a Payment Default.
2.3 LIENS. Subordinated Indebtedness may not be secured by Liens on
any assets of the Borrowers without the prior written consent of the Senior
Lender.
2A. PUT RIGHTS. Notwithstanding anything to the contrary, the Holder of
Subordinated Indebtedness hereby covenants and agrees that , for so long as any
Senior Indebtedness remains outstanding, such Holder shall not exercise or give
notice of nay exercise of any of its Redemption Rights (as hereinafter defined).
The Holder of Subordinated Indebtedness acknowledges that the Senior Lender may
not have an adequate remedy at law for such breach of the foregoing covenant,
and accordingly agrees that the Senior Lender shall be entitled to enforce said
covenant through injunctive relief or a decree of specific performance. The
Holder of Subordinated Indebtedness further agrees that, for so long as any
Senior Indebtedness remains outstanding, the Borrowers shall not be obligated to
recognize or comply with any demand or request by the Holder of Subordinated
Indebtedness to exercise its Redemption Rights. For purposes of this paragraph,
the term "Redemption Rights" shall mean the rights to cause the Borrowers to
purchase or redeem the Debentures held by the holder of Subordinated
Indebtedness pursuant to: (a) Sections 3.10 and 3.14 of the Subordinated Loan
Agreement; and (b) Section 2(b) of the Registration Rights Agreement.
2B. CONVERSION OF DEBENTURES; EXERCISE OF WARRANTS. Notwithstanding
anything to the contrary, the Holder of Subordinated Indebtedness shall be
entitled to convert its Debentures and Subsequent Debentures (each as defined in
the Subordinated Loan Agreement) and exercise its Warrants or Option Warrants
(each as defined in the Subordinated Loan Agreement) into capital stock of ACG
or any successor, and to sue for the enforcement of such rights.
3. SCOPE OF SUBORDINATION. The provisions of this Agreement are
solely to define the relative rights of the Holders of Subordinated Indebtedness
and the Senior Lender. Nothing in this Agreement shall impair, as between the
Borrowers and the Holders of Subordinated Indebtedness, the unconditional and
absolute obligation of the Borrowers to punctually pay the principal, interest
and any other amounts and obligations owing under the Subordinated Lending
Agreements in accordance with the terms thereof, subject to the rights of the
Senior Lender under this Agreement.
4. OTHER INDEBTEDNESS TO THE SENIOR LENDER. If the Borrowers should
incur any Indebtedness to the Senior Lender that does not constitute Senior
Indebtedness, such
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<PAGE>
Indebtedness shall rank pari passu with the Subordinated Indebtedness. To the
extent permitted under applicable law, any net proceeds received by the Senior
Lender from the disposition of Collateral that remain after first paying in
full all of the Senior Indebtedness shall be shared between the Senior Lender
and the Subordinated Lender pro rata on the basis of the principal amounts then
due and owing to the Senior Lender in respect of such Indebtedness other than
Senior Indebtedness and to the Subordinated Lender in respect of the
Subordinated Debt.
5. APPLICATION OF ASSETS BY SENIOR LENDER. All of the property and
assets which shall be collected or received by any holder of Senior Indebtedness
upon the terms of this Agreement, and all of the proceeds of all realizations
upon the same which shall be effected by any holder of Senior Indebtedness,
shall be applied by such holder of Senior Indebtedness toward the payment and
satisfaction of the Senior Indebtedness in accordance with the terms of the
Credit Agreement.
6. PROVISIONS OF DEBENTURES. The Borrowers and the Subordinated
Lender shall cause each Debenture issued or to be issued from time to time
pursuant to the Subordinated Lending Agreements to contain a provision to the
following effect:
"This Debenture is subject to the Subordination Agreement, dated as
of February 23, 2000, among the Borrowers, the Holder and Bank of
America, N.A., under which this Debenture and the Borrowers'
obligations hereunder are subordinated in the manner set forth
therein to the prior payment of certain obligations to the holders of
Senior Indebtedness as defined therein and all collateral security
therefor."
Proof of compliance with the foregoing shall be promptly given to Senior Lender.
7. ADDITIONAL AGREEMENTS. In the event that the Senior Indebtedness
is refinanced in full with another bank, subject to the provisions contained in
the definition of "Senior Indebtedness" above, each Holder of Subordinated
Indebtedness agrees at the request of such refinancing party to enter into a
subordination agreement in favor of such refinancing party on terms
substantially the same as this Subordination Agreement.
8. NOTICE OF DEFAULT AND CERTAIN EVENTS. The Senior Lender and the
Holders of Subordinated Indebtedness shall undertake in good faith to notify the
other of the occurrence of any of the following, as applicable:
(a) the acceleration of any Senior Indebtedness by the
Senior Lender or of any Subordinated Indebtedness by any Holder of Subordinated
Indebtedness;
(b) the payment in full by the Borrowers (whether as a
result of refinancing or otherwise) of all Senior Indebtedness or the
termination of the Credit Agreement; and
(c) the taking of, or the intention to take, any
extraordinary actions by the Senior Lender with respect to the collateral
securing any Liens of the Senior Lender; provided that in such event, the
Subordinated Lenders' counsel, rather than Subordinated Lender, shall be
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<PAGE>
notified PROVIDED that the failure of any party to give any such notice shall
not affect the subordination of the Subordinated Indebtedness as provided in
this Subordination Agreement or the other rights of the parties hereto.
9. REPRESENTATIONS. Each party hereto represents and warrants to the
other party that (a) the execution, delivery and performance of this Agreement
are within its powers have been duly authorized and are not in contravention of
law or of the terms of its charter documents or of any law, order, judgment,
decree, contract or undertaking to which it is a party or by which it or any of
its properties is bound or affected, and (b) this Agreement constitutes the
legal, valid and binding obligation of it, enforceable against it in accordance
with its terms. Senior Lender represents and warrants to the Borrowers and
Subordinated Lenders that it has not heretofore assigned or transferred, or
given any subordination in respect of, any of its Liens subject to the terms of
this Agreement. Each of the Subordinated Lenders and the Borrowers represents
and warrants to Senior Lender that the Subordinated Indebtedness is not secured
by any Liens as of the date hereof.
10. MISCELLANEOUS
10.1 SURVIVAL OF RIGHTS. The right of Senior Lender to enforce
the provisions of this Agreement shall not be prejudiced or impaired by any act
or omitted act of Senior Lender, the Borrowers or any other Person, including
forbearance, waiver, consent, compromise, amendment, extension, renewal, or
taking or release of security in respect of any Senior Indebtedness or
noncompliance by the Borrowers or any other Person with such provisions,
regardless of the actual or imputed knowledge of Senior Lender.
10.2 RECEIPT OF AGREEMENTS. Subordinated Lender hereby
acknowledges that it has delivered to Senior Lender, and Senior Lender hereby
acknowledges it has received, a correct and complete copy of the Subordinated
Lending Agreements as in effect on the date hereof. Senior Lender hereby
acknowledges that it has delivered to Subordinated Lender, and Subordinated
Lender hereby acknowledges it has received, a correct and complete a copy of
the Senior Lending Agreements as in effect on the date hereof.
10.3 NOTICES. Any notice or other communication required or
permitted pursuant to this Agreement shall be deemed given (a) when personally
delivered to any officer of the party to whom it is addressed, (b) on the
earlier of actual receipt thereof or ten (10) days following posting thereof by
certified or registered mail, postage prepaid, (c) upon actual receipt thereof
when sent by a recognized overnight delivery service or (d) upon actual receipt
thereof when sent by telecopier to the number set forth below with electronic
confirmation of receipt, in each case addressed to each party at its address
set forth below or at such other address as has been furnished in writing by a
party to the other by like notice:
If to Senior Lender: Bank of America, N.A.
555 S. Flower Street
Unit 3283, 11th Floor
Los Angeles, California 90071
Attention: George Hausler
Telephone: (213) 228-6126
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<PAGE>
Telecopier: (213) 892-0266
With a copy to : Powell, Goldstein, Frazer and Murphy
191 Peachtree Street, NE
16th Floor
Atlanta, Georgia 30303
Attention: Doug Gosden
Telephone: (404) 572-6820
Telecopier: (404) 572-6999
If to Subordinated Lenders: Halifax Fund, L.P.
c/o the Palladin Group, LP
195 Maplewood Avenue
Maplewood, New Jersey 07040
Attn: Steve Weiner
Telephone: (973) 313-6400
Telecopier: (973) 313- 6494
With a copy to
Elliott Associates, L.P.
712 Fifth Avenue, 36th Floor
New York, New York 10019
Attn: Brett Cohen
Telephone: (212) 974-6000
Telecopier: (212) 974-2092
Westgate International, L.P.
c/o Stonington Management Corporation
712 Fifth Avenue, 36th Floor
New York, New York 10019
Attn: Brett Cohen
Telephone: (212) 974-6000
Telecopier: (21) 974-2092
Kleinberg, Kaplan, Wolff & Cohen
551 Fifth Avenue
New York, New York 10176
Attention: Stephen Schultz
Telephone: (212) 986-6000
Telecopier: (212) 986-8866
If to Borrowers: Advanced Communications Group, Inc.
390 South Woodsmill Rd
St. Louis, MO 63017
Attention: Michael Pruss
Telephone: (314) 205-1463
Telecopier: (314) 469-3539
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<PAGE>
With a copy to:
Haynes and Boone, LLP
901 Main Street
3100 NationsBank Plaza
Dallas, Texas 75202
Attention: Paul Amiel
Telephone: (214) 651-5605
Telecopier: (214) 651-5940
10.4 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York applicable to contracts
made and to be wholly performed within such jurisdiction by residents of such
jurisdiction.
10.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one in the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
10.6 AMENDMENTS, SUCCESSORS AND ASSIGNS. No provision of this
Agreement may be modified or waived except by an instrument or instruments in
writing signed by the Senior Lender, the Subordinated Lender and the Borrowers.
This Agreement shall bind the parties hereto and their respective successors and
assigns, and shall inure to the benefit of their respective successors and
assigns.
10.7 THIS AGREEMENT CONTROLS. The subordination and related
provisions contained in this Agreement are in addition to and supplement all
debt subordination and other provisions contained in the Subordinated Lending
Agreements and any other instruments or agreements evidencing or relating to the
Subordinated Indebtedness in favor of or for the benefit of the Senior Lender;
PROVIDED that, in the event of any conflict between this Agreement and the
Subordinated Lending Agreements or such other instruments and agreements, the
terms of this Agreement shall control.
[The rest of this page intentionally left blank.]
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<PAGE>
WITNESS the due execution of this Agreement as of the day and year
first above written.
BANK OF AMERICA, N.A.
By: /s/
----------------------------
Name:
Title:
HALIFAX FUND, LP
By: /s/ Steve W. Weiner
----------------------------
ELLIOTT ASSOCIATES, L.P.
By: /s/ Paul Singer
----------------------------
Paul Singer
WESTGATE INTERNATIONAL, L.P.
By: MARTLEY INTERNATIONAL, INC.
ATTORNEY-IN-FACT
By: /s/ Paul Singer
-----------------------------
Paul Singer
ADVANCED COMMUNICATIONS GROUP, INC.
By: /s/ Michael A. Pruss
----------------------------------
Name:
Title:
GREAT WESTERN DIRECTORIES, INC.
By: /s/ Michael A. Pruss
----------------------------------
Name:
Title:
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<PAGE>
1+USA V ACQUISITION CORP.
By: /s/ Michael A. Pruss
----------------------------------
Name:
Title:
BIG STUFF, INC.
By: /s/ Michael A. Pruss
----------------------------------
Name:
Title:
PACIFIC COAST PUBLISHING LTD.
By: /s/ Michael A. Pruss
----------------------------------
Name:
Title:
YPTEL, INC.
By: /s/ Michael A. Pruss
----------------------------------
Name:
Title:
WEB YP, INC.
By: /s/ Michael A. Pruss
----------------------------------
Name:
Title:
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<PAGE>
SCHEDULE A
SUBORDINATED LENDERS
Halifax Fund, L.P.
Elliott Associates, L.P.
Westgate International, L.P.
<PAGE>
Exhibit 23(a)
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
WorldPages.com, Inc.:
We consent to the use of our reports incorporated by reference herein and to
the reference to our firm under the heading "Experts" in the registration
statement and related prospectus. The audits referred to in our reports dated
February 4, 2000, included the related financial statement schedule as of
December 31, 1999, and for each of the years in the three-year period ended
December 31, 1999, incorporated by reference in the registration statement.
This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement schedule based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
KPMG LLP
St. Louis, Missouri
April 20, 2000
<PAGE>
Exhibit 23(b)
The Board of Directors
WorldPages.com, Inc.:
We consent to the incorporation by reference in this Registration Statement on
Form S-3 and related prospectus of WorldPages.com, Inc of our report dated
February 4, 2000, relating to the balance sheets of Web YP, Inc. as of December
31, 1999 and 1998 and the related statements of operations, stockholders'
deficit and cash flows for the years then ended and to the reference to our firm
under the heading "Experts" in the registration statement.
/s/ KPMG LLP
St. Louis, Missouri
April 20, 2000
<PAGE>
Exhibit 23(c)
CONSENT OF ERNST & YOUNG, LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of WorldPages.com,
Inc. for the registration of 12,123,589 shares of its common stock, and to
the use of our report dated December 22, 1998, with respect to the financial
statements of Pacific Coast Publishing, Inc., and to the use of our report
dated January 31, 2000, with respect to the consolidated financial statements
of YPtel Corporation, which are incorporated by reference into the
Registration and related Prospectus from the Current Report on Form 8-K/A of
WorldPages.com, Inc., dated April 21, 2000, filed with the Securities and
Exchange Commission.
/s/ Ernst & Young LLP
April 20, 2000
Seattle, Washington
