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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ADVANCED COMMUNICATIONS GROUP, INC.
(Exact name of Registrant as specified in its charter)
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DELAWARE 76-0549396
(State or other jurisdiction (I.R.S. Employer
of Identification No.)
incorporation or organization)
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(PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER)
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)
MICHAEL A. PRUSS
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. LEONARD J. ESSIG, ESQ. HOWARD CHABNER, ESQ.
Blackwell Sanders Peper Martin LLP Lewis, Rice & Fingersh, L.C. Steinhart & Falconer LLP
720 Olive Street, Suite 2400 500 N. Broadway, Suite 2000 333 Market Street, 32nd Floor
St. Louis, Missouri 63101 St. Louis, Missouri 63102 San Francisco, California 94105
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
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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 this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, 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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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED SHARE PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $.0001........ 23,851,281(1) $11.50(2) $274,289,731.50(2) $72,412.49(3)
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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) The proposed maximum offering price per share and maximum aggregate offering
price are estimated for the sole purpose of calculating the amount of the
registration fee. The fee has been calculated in accordance with Rule
457(c) under the Securities Act of 1933. Accordingly, the maximum offering
price per share is based upon the average of the high and low sale prices of
the Common Stock as reported in The Wall Street Journal for the New York
Stock Exchange--Composite Transactions for February 4, 2000.
(3) In accordance with Rule 457(b) promulgated under the Securities Act of 1933,
as amended, the fee being paid with this filing is reduced by $32,730.95
which was paid pursuant to the Rule 14a-6(i) promulgated under the
Securities Exchange Act of 1934, as amended, in connection with WorldPages'
proxy statement for its Special Meeting of Stockholders to be held on
February 16, 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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PROSPECTUS
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
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SUBJECT TO COMPLETION DATED FEBRUARY 11, 2000.
WORLDPAGES.COM, INC.
23,851,281 SHARES OF COMMON STOCK
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These shares of our common stock are being offered by certain 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 sales. 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 $265,000.
Our stock is traded on the New York Stock Exchange under the symbol "WPZ."
On February 8, 2000, the closing sale price of our common stock as reported by
the New York Stock Exchange was $12.63 per share.
INVESTING IN WORLDPAGES COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON
PAGE 6.
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Neither the Securities Exchange Commission nor any state securities commission
has approved or disapproved of these securities or passed upon the adequacy or
accuracy of this Prospectus. Any representation to the contrary is a criminal
offense.
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UNDERWRITING PROCEEDS TO
DISCOUNTS AND SELLING
PRICE TO PUBLIC 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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PAGE
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PRELIMINARY NOTE............................................ 4
PROSPECTUS SUMMARY.......................................... 4
RISK FACTORS................................................ 6
USE OF PROCEEDS............................................. 14
PRICE RANGE OF COMMON STOCK AND DIVIDENDS................... 14
CAPITALIZATION.............................................. 15
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS........... 16
SELECTED HISTORICAL FINANCIAL INFORMATION OF ADVANCED....... 21
ADVANCED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS....................... 23
SELECTED HISTORICAL FINANCIAL INFORMATION OF YPTEL.......... 29
YPTEL MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS....................... 31
SELECTED HISTORICAL FINANCIAL INFORMATION OF WEB YP......... 36
WEB YP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS....................... 37
SELECTED HISTORICAL FINANCIAL INFORMATION OF BIG STUFF...... 38
BIG STUFF MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS....................... 39
BUSINESS.................................................... 41
MANAGEMENT OF WORLDPAGES.................................... 49
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 60
SELLING STOCKHOLDERS........................................ 62
PLAN OF DISTRIBUTION........................................ 65
DESCRIPTION OF WORLDPAGES CAPITAL STOCK..................... 66
LEGAL MATTERS............................................... 70
EXPERTS..................................................... 70
INDEX TO FINANCIAL STATEMENTS............................... F-1
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PRELIMINARY NOTE
The current name of the issuer is Advanced Communications Group, Inc. and
its stock is currently trading on the New York Stock Exchange under the symbol
"ADG." Advanced has entered into agreements to acquire YPtel, Web YP and Big
Stuff, and simultaneously with the closing of those acquisitions Advanced's name
will be changed to WorldPages.com, Inc., and its trading symbol on the New York
Stock Exchange will be changed to "WPZ."
This prospectus has been prepared as if Advanced has completed the folowing
actions:
- acquired YPtel Corporation, Web YP, Inc. and Big Stuff, Inc.;
- changed its name to WorldPages.com, Inc.; and
- its stock is trading on the New York Stock Exchange under the symbol
"WPZ."
Accordingly, in this prospectus Advanced is referred to as "WorldPages," with
the exception of the references to the historical financial statements under the
sections captioned "Capitalization," "Unaudited Pro Forma Combined Financial
Statements," "Selected Historical Financial Information of Advanced" and
"Advanced Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the financial statements of Advanced appearing on
pages F-1 - F-22. If the acquisitions of YPtel, Web YP and Big Stuff do not
occur, Advanced will not change its name to WorldPages.com, Inc. nor will its
stock be traded on the New York Stock Exchange under the symbol "WPZ" and the
registration statement of which this prospectus is a part will not become
effective.
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 telecommuications 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
extend it into internet directory services. WorldPages pursued this new strategy
by selling its telecommunications operations in November 1999 and acquiring
YPtel, Web YP and Big Stuff 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
page directories annually in 41 markets in Texas, Oklahoma, California,
Washington, Oregon, Utah and Arizona. WorldPages also designs and produces
websites for yellow and white page publishers 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.
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SHARES OF WORLDPAGES COMMON STOCK TO BE SOLD BY SELLING STOCKHOLDERS.
The selling stockholders individually identified under the caption Selling
Stockholders' offer for sale a total of 23,851,281 shares of common stock of
WorldPages. The selling stockholders obtained or will obtain the shares they are
selling pursuant to the exchange or conversion of securities, redemption or
exchange of indebtedness, or exercise of warrants or options in connection with
the acquisition by WorldPages of YPtel, Web YP and Big Stuff in February 2000.
THE OFFERING
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Shares offered by selling 23,851,281(1)
stockholders:
Total shares outstanding after the 44,237,541(2)
offering:
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 2,766,500 are issuable upon the exchange of
Class A Special Shares of ACG Exchange Company, a wholly owned subsidiary of
WorldPages, for WorldPages common stock on a one-for-one basis. An
additional 351,286 shares are issuable on the exercise of options or
warrants issued to former directors, officers, and certain employees of
YPtel and to two current and one former non-employee directors of
WorldPages. These securities must be converted into WorldPages common stock
before stock may be sold.
(2) Included in these shares are the 23,851,281 to be sold by the Selling
Stockholders.
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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 WILL BE
UNABLE TO IMPLEMENT ITS STRATEGIC PLAN.
WorldPages will need additional sources of financing in order to refinance
its existing indebtedness. Further, WorldPages will 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 is profitable, WorldPages
expects to generate losses in the 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 LOAD COULD SIGNIFICANTLY AND MATERIALLY AFFECT
WORLDPAGES' PLANS TO IMPLEMENT ITS NEW BUSINESS FOCUS, STRATEGY AND DIRECTIONS.
This large debt load 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 of 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
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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.
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 with WorldPages;
- WorldPages may lose key personnel; and
- WorldPages may not be able to retain key business relationships.
The expected benefits of the February 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.
WORLDPAGES RELIES HEAVILY ON ONE OR TWO KEY INDIVIDUALS TO CONDUCT DAY-TO-DAY
OPERATIONS.
The loss of any one of these individuals would make it difficult for the
remaining individuals to continue operating WorldPages. Further, the loss of a
key individual would make it difficult for WorldPages to maintain its banking
relationships, obtain the financing it will need to implement its plans and to
supply the investing public with timely financial information. Given WorldPages'
current financial condition and current state of affairs, including liquidity
issues, attracting, recruiting and retaining the caliber of individuals with the
breadth and depth of experience needed to operate WorldPages is extremely
difficult.
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.
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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 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.
WORLDPAGES MAY BE UNABLE TO INCLUDE THE VALUE OF CERTAIN SIGNIFICANT ASSETS IN
ITS BORROWING BASE FOR FINANCING PURPOSES WHICH MAY DECREASE THE AMOUNT OF MONEY
WORLDPAGES MAY BE ABLE TO BORROW.
A large portion of the value of the YPtel operating subsidiary will be
represented by YPtel, Inc. preferred shares held in the Canadian entity
structure. It may be difficult for WorldPages to borrow against the full value
of this asset because of concerns of a large Canadian tax liability connected to
these preferred shares. This tax liability would be incurred by YPtel, and
thereby also ACG Exchange Company and WorldPages, if such preferred shares are
sold, foreclosed or otherwise liquidated. In a lender foreclosure sale
situation, WorldPages may not receive any cash to pay the large tax liability.
WEB YP HAS A LIMITED OPERATING HISTORY.
WebYP, 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 $6.5 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.
8
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THE INTERNET BUSINESS MODEL IS EVOLVING AND UNPROVEN AND MAY NOT BE SUCCESSFUL,
IN WHICH CASE WORLDPAGES' STOCK PRICE MAY BE 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. 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,
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
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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.
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.
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WORLDPAGES MAY BECOME A TARGET OR AN ACQUIROR THAT COULD RESULT IN YOUR
INVESTMENT IN WORLDPAGES BEING CONVERTED INTO AN INVESTMENT IN ANOTHER COMPANY.
WorldPages has from time to time 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 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 will be experienced executives in the yellow
pages publishing and Internet directory industries, they will 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.
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 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 resource 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 by combining.
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 system 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.
11
<PAGE>
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 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
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.
12
<PAGE>
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 TURN OUT TO 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, including without limitation, certain statements under "Summary,"
"WorldPages Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business of WorldPages," "YPtel Management's Discussion
and Analysis of Financial Condition and Results of Operations," "Web YP
Management's Discussion and Analysis of Financial Condition and Results of
Operations," and "Big Stuff Management's Discussion and Analysis of Financial
Condition and Results of Operations" located elsewhere herein regarding
WorldPages', YPtel's, Web YP's and Big Stuff's financial conditions and business
strategies 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".
13
<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.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
WorldPages's common stock is traded on the New York Stock Exchange under the
symbol "WPZ".
Set forth below are the high and low closing sale prices of WorldPages
common stock as reported by the New York Stock Exchange for the periods
indicated.
<TABLE>
<CAPTION>
MARKET PRICE
------------------- DIVIDENDS
1998 HIGH LOW PER SHARE
---- -------- -------- ---------
<S> <C> <C> <C>
1st Quarter (from February 18, 1998)........................ $17.50 $12.69 $0.00
2nd Quarter................................................. 16.00 6.63 0.00
3rd Quarter................................................. 12.94 4.88 0.00
4th Quarter................................................. 7.19 3.00 0.00
<CAPTION>
MARKET PRICE
------------------- DIVIDENDS
1999 HIGH LOW PER SHARE
---- -------- -------- ---------
1st Quarter. .00 7 .94 3 $ 0.00
<S> <C> <C> <C>
2nd Quarter................................................. 13.00 4.75 0.00
3rd Quarter................................................. 9.50 6.63 0.00
4th Quarter................................................. 13.625 6.00 0.00
<CAPTION>
2000
----
1st Quarter (through January 31, 2000). .75 14 .38 10 0.00
<S> <C> <C> <C>
</TABLE>
No dividends have been paid on the common stock since WorldPages' inception.
The revolving credit facility of Great Western, a wholly owned subsidiary of
WorldPages, prohibits cash dividend payments and any new credit facility that
WorldPages may obtain for working capital requirements in the foreseeable future
may also place a prohibition or limitations on the payment of cash dividends.
Further, it is WorldPages' current intention to retain its earnings, if any,
to finance the change in its business focus, strategy and direction including
the expansion of its yellow pages publishing and internet directory business and
for general corporate purposes. Accordingly, WorldPages does not anticipate that
it will pay cash dividends for the foreseeable future.
Finally, it is unlikely that the WorldPages board will declare a dividend
during the time the Class A Special Shares issued by ACG Exchange Company, a
wholly owned subsidiary of WorldPages, in connection with the February
acquistions are owned by a party other than WorldPages or any of its
subsidiaries. Under the terms of the Support Agreement and the share provisions
by which the Class A Special Shares were created, if WorldPages wishes to
declare a cash 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. Declaring such dividends may make the
whole dividend transaction cost prohibitive to WorldPages.
WorldPages is not prohibited from declaring dividends on its common stock or
preferred stock payable in its capital stock, but the tax liability discussed
above with respect to cash dividends applies to stock dividends, as well. This
tax liability may make it unlikely that WorldPages will declare a stock dividend
either.
As of January 31, 2000, there were 180 owners of record of the common stock.
On that date, the closing price of the common stock on the NYSE was $12.00.
14
<PAGE>
CAPITALIZATION
The following table sets forth, as of December 31, 1999, the cash,
short-term debt and current maturities of long-term debt, and capitalization of
(i) Advanced on a historical basis and (ii) WorldPages on a pro forma combined
basis to give effect to the acquisitions of YPtel, Web YP and Big Stuff as if
they had occurred on December 31, 1999. This table should be read in conjunction
with the Unaudited Pro Forma Combined Financial Statements and the related notes
thereto included herein.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-----------------------
WORLDPAGES
PRO FORMA
ADVANCED CONSOLIDATED
-------- ------------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................... $ 1,315 $ 1,508
======== ========
Short-term debt and current maturities of long-term debt.... $ 24,000 $ 16,545
Long-term debt.............................................. -- 35,276
Stockholders' equity:
Common stock $0.0001 par value, 180,000,000 shares
authorized; 20,426,753 and 43,669,480 shares issued and
outstanding, respectively............................... 2 4
Additional paid-in capital................................ 149,438 309,944
Retained earnings (accumulated deficit)................... (77,768) (81,461)
-------- --------
Total stockholders' equity.............................. 71,672 228,487
-------- --------
Total debt and capitalization......................... $ 95,672 $280,308
======== ========
</TABLE>
15
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements have been
derived from the application of pro forma adjustments to the historical
financial statements of YPtel and its predecessor, Pacific Coast Publishing,
Inc., Web YP and Big Stuff and the financial statements of Advanced, which are
included in this prospectus. The unaudited pro forma combined financial
statements give effect to the acquisitions of YPtel, Web YP and Big Stuff as if
they had occurred on (1) December 31, 1999 for purposes of the unaudited pro
forma combined balance sheet and (2) January 1, 1999 for purposes of the
unaudited pro forma combined statements of operations for the year ended
December 31, 1999. The unaudited pro forma combined financial statements should
be read in conjunction with the financial statements of Advanced, YPtel, Web YP
and Big Stuff which are included in this prospectus. All historical financial
statements of Big Stuff contained in this prospectus have been prepared and
restated by WorldPages based on information supplied by Big Stuff. The initial
information supplied by Big Stuff did not conform to generally accepted
accounting principles.
The pro forma adjustments are described in the notes to the unaudited pro
forma combined financial statements and are based on available information and
assumptions that management believes are reasonable. The unaudited pro forma
combined financial statements do not purport to present the financial position
or results of operations of WorldPages had the acquisitions occurred on the
dates specified, nor are they necessarily indicative of the results of
operations that may be achieved in the future. The unaudited pro forma combined
financial statements do not reflect any adjustments for the benefits that
management expects to realize in connection with the acquisitions. No assurances
can be made as to the amount or timing of such benefits, if any, that may be
realized.
The acquisitions will be accounted for using the purchase method of
accounting. Under this method, tangible and identifiable intangible assets
acquired and liabilities assumed are recorded at their estimated fair values.
The excess of the purchase price, including estimated fees and expenses related
to the acquisitions, over the fair value of the assets acquired is classified
with intangible and other assets on the accompanying unaudited pro forma balance
sheet. The estimated fair values and useful lives of assets acquired and
liabilities assumed are based upon a preliminary valuation and are subject to
final valuation adjustments. Final allocation of the purchase price to the fair
value of the assets acquired could vary the related amortization period of the
excess of cost over the fair value of net assets acquired.
16
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
WORLDPAGES
ADVANCED YPTEL WEB YP BIG STUFF PRO FORMA PRO FORMA
HISTORICAL HISTORICAL HISTORICAL HISTORICAL ADJUSTMENTS COMBINED
---------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues............................ $49,987 $38,079 $ 851 $ 862 $ (813)(a) $ 88,966
------- ------- ------- ----- -------- --------
Operating costs:
Printing, distribution and
listings........................ 13,440 8,800 -- -- $ (813)(a) 21,427
Sales and marketing............... 11,464 7,622 3,857 833 23,776
General and administrative........ 20,529 14,595 1,271 432 36,827
Depreciation and amortization..... 4,695 2,536 98 206 6,952 (b) 14,487
------- ------- ------- ----- -------- --------
Total operating costs............... 50,128 33,553 5,226 1,471 6,139 96,517
------- ------- ------- ----- -------- --------
Operating margin.................... (141) 4,526 (4,375) (609) (6,952) (7,551)
Other income (expense):
Other income and expense, net..... 75 47 -- -- 122
Interest expense.................. (4,766) (3,702) (143) (90) 750 (c) (7,951)
------- ------- ------- ----- -------- --------
Income (loss) from continuing
operations before income taxes..... (4,832) 871 (4,518) (699) (6,202) (15,380)
Income tax expense (benefit)........ (1,465) 298 -- -- 285(d) (882)
------- ------- ------- ----- -------- --------
Net income (loss) from continuing
operations......................... $(3,367) $ 573 $(4,518) $(699) $ (6,487) $(14,498)
======= ======= ======= ===== ======== ========
Net income (loss) per share from
continuing operations.............. $ (.17) $ (.34)
======= ========
Weighted average shares
outstanding........................ 19,956 23,243 (e) 43,199
======= ======== ========
</TABLE>
- ------------------------
(a) Reflects the elimination of revenue and cost of sales for services provided
to Advanced by Big Stuff and Web YP.
(b) Reflects the amortization of goodwill resultant from the acquisitions over
periods ranging from
10 to 30 years, as follows:
<TABLE>
<CAPTION>
AMORTIZATION PERIOD
(IN THOUSANDS) ------------ --------
<S> <C> <C>
YPtel................................................... $3,123 30 years
Web YP.................................................. 2,809 10 years
Big Stuff............................................... 1,020 10 years
------
$6,952
======
</TABLE>
(c) Reflects the elimination of interest expense incurred on the $15.0 million
5% Subordinated Notes payable, which will be converted to common stock in
connection with the acquisitions.
(d) Reflects the incremental provision for federal and state income taxes at an
effective tax rate of 38% for the applicable pro forma adjustments.
(e) Reflects the issuance of 19,545,454 shares issued for the purchase of the
acquired companies; 2,840,909 shares issued for the conversion of the 5%
Subordinated Notes payable; and 856,364 shares issued in exchange for
cancellation of indebtedness of $4.7 million to stockholders of Web YP and
Big Stuff.
17
<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
WORLDPAGES
ADVANCED YPTEL WEB YP BIG STUFF PRO FORMA PRO FORMA
HISTORICAL HISTORICAL HISTORICAL HISTORICAL ADJUSTMENTS COMBINED
------------ ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..... $ 1,315 $ 59 $ 18 $ 116 $ $ 1,508
Accounts receivable, net...... 14,223 10,039 252 42 24,556
Deferred costs................ 4,482 10,259 -- -- 14,741
Prepaid expenses and other.... 174 1,964 635 241 3,014
-------- ------- ------ ------ -------- --------
Total current assets........ 20,194 22,321 905 399 43,819
-------- ------- ------ ------ -------- --------
Property, plant and equipment,
net............................ 1,377 657 192 566 2,792
Intangible assets, net.......... 75,413 39,749 -- 120 131,976 (a) 247,258
Deferred taxes.................. 6,504 -- -- -- 6,504
Other assets.................... 5,571 5,571
-------- ------- ------ ------ -------- --------
Total other assets.......... 88,865 40,406 192 686 131,976 262,125
-------- ------- ------ ------ -------- --------
Total assets................ $109,059 $62,727 $1,097 $1,085 $131,976 $305,944
======== ======= ====== ====== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
expenses.................... $ 9,447 $ 3,790 $ 159 $ 61 $ 6,000 (a) $ 18,832
(625)(b)
Short-term debt and current
maturities of long-term
debt........................ 24,000 7,208 -- 337 (15,000)(b) 16,545
Deferred revenue.............. -- 1,831 464 -- 2,295
Notes due to shareholders..... -- -- 3,653 1,900 (5,553)(a) --
Other current liabilities..... 3,940 -- 224 -- 4,164
-------- ------- ------ ------ -------- --------
Total current liabilities... 37,387 12,829 4,500 2,298 (15,178) 41,836
Long-term liabilities:
Long-term debt................ -- 35,276 -- -- 35,276
Deferred taxes................ -- 345 -- -- 345
-------- ------- ------ ------ -------- --------
Total liabilities........... 37,387 48,450 4,500 2,298 (15,178) 77,457
-------- ------- ------ ------ -------- --------
Stockholders' equity:
Common stock.................. 2 13,780 -- -- 2 (a) 4
(13,780)(c)
Additional paid-in capital.... 149,438 -- 2,783 1,523 156,200 (d) 309,944
Retained earnings (deficit)... (77,768) 497 (6,186) (2,736) (3,693)(b) (81,461)
8,425 (c)
-------- ------- ------ ------ -------- --------
Total stockholders'
equity.................... 71,672 14,277 (3,403) (1,213) 147,154 228,487
-------- ------- ------ ------ -------- --------
Total liabilities and
stockholders' equity...... $109,059 $62,727 $1,097 $1,085 $131,976 $305,944
======== ======= ====== ====== ======== ========
</TABLE>
- ------------------------
SEE NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET ON FOLLOWING PAGE
18
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(a) Records the purchase of YPtel, Web YP and Big Stuff for approximately
$147.2 million, composed of the following:
<TABLE>
<CAPTION>
SHARES AMOUNT
------------------------ --------------------------------- TOTAL
(IN THOUSANDS) STOCK COMMON STOCK TRANSACTION PURCHASE
COMMON STOCK OPTIONS STOCK OPTIONS COSTS PRICE
------------- -------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
YPtel................ 15,000,000(1) 351,281 $102,000 $1,964 $4,000 $107,964
Web YP............... 4,020,000(2) -- 27,336 -- 1,000 28,336
Big Stuff............ 1,454,545 -- 9,891 -- 1,000 10,891
---------- ------- -------- ------ ------ --------
20,474,545 351,281 $139,227 $1,964 $6,000 $147,191
========== ======= ======== ====== ====== ========
</TABLE>
For financial reporting purposes, the WorldPages common stock was valued at
$6.80 per share (the average closing price for the five days before and
after the announcement of the acquisitions). The stock options were valued
using the Black-Scholes option pricing model. Transaction costs consist
primarily of legal, accounting, tax and financial advisory costs associated
with the acquisitions.
The purchase price was preliminarily allocated to the fair value of the net
assets acquired as summarized below:
<TABLE>
<CAPTION>
YPTEL WEB YP BIG STUFF TOTAL
(IN THOUSANDS) -------- -------- --------- --------
<S> <C> <C> <C> <C>
Net working capital................... $ 9,785 $ 1,000 $ 112 $ 10,897
Property and equipment................ 652 213 339 1,204
Long-term debt........................ (35,786) -- -- (35,786)
Deferred taxes........................ (134) -- -- (134)
Intangible assets..................... 133,447 27,123 10,440 171,010
-------- ------- ------- --------
Total purchase price.............. $107,964 $28,336 $10,891 $147,191
======== ======= ======= ========
</TABLE>
----------------------------
(1) Included in the shares issued as consideration for YPtel are all shares
of WorldPages common stock expected to be issued either directly and or
indirectly through exchange of Class A Special Shares. The Class A
Special Shares may be issued in lieu of WorldPages common stock for
Canadian tax reasons but are exchangeable into a like number of
WorldPages common stock.
(2) Included in the shares issued as consideration for the Web YP
acquisition are 929,091 shares assumed to be issued in exchange for
estimated indebtedness in the aggregate principal amount of $5.1 million
which has been incurred to finance operations of Web YP and Big Stuff
until the transaction closes. According to the terms of the acquisition
agreements, up to $6.0 million of such indebtedness may be incurred by
Web YP and Big Stuff, which will be exchanged for WorldPages common stock
based on the agreed upon price of $5.50 per share. If the entire
$6.0 million were loaned, 1,090,909 shares of WorldPages common stock
would be issued.
(3) A detailed analysis of the identifiable intangibles has not been
completed. Accordingly, the intangible assets resulting from the
acquisitions are currently assumed to be unidentified intangibles. Upon
completion of the analysis of such identifiable intangibles, such as
customer lists and intellectual property, an allocation will be made and
the underlying amortization periods established. The effect of such
modification in the allocation of intangibles has not been determined at
this time.
19
<PAGE>
(b) Reflects the conversion of the $15.0 million 5% subordinated notes payable
and $625,000 accrued interest owed by Advanced into 2,840,909 shares of
common stock and the resultant loss from the conversion. For financial
reporting purposes the stock was valued at $6.80 per share and will result
in an extraordinary loss of $3.7 million as a loss on early extinguishment
of debt. This extraordinary loss is not reflected in the pro forma results
of operations.
(c) Records the elimination of YPtel, Web YP and Big Stuff's historical retained
earnings (deficit) and common stock.
(d) Records the net effect of the following adjustments on capital in excess of
par value:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Issuance of shares and stock options for acquisitions....... $141,188
Issuance of shares for 5% Subordinated Notes payable........ 19,318
Elimination of YPtel, Web YP and Big Stuff's historical
paid-in capital........................................... (4,306)
--------
$156,200
========
</TABLE>
20
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION OF ADVANCED
The following tables present selected historical financial information for
Advanced which should be read in conjunction with the historical financial
statements, and the related notes thereto, of Advanced, Advanced Management's
Discussion and Analysis of Financial Condition and Results of Operations and
other financial data included elsewhere in this prospectus. The selected
historical financial data of Advanced for each of the three fiscal years in the
period ended December 31, 1999, have been derived from its audited consolidated
financial statements included elsewhere in this prospectus. All adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of results of the unaudited historical interim periods have been
included. See "Advanced Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Index to Financial Statements."
Prior to February 1998, Advanced had not conducted any operations other than
those relating to its IPO and the acquisitions of Great Western and its
telecommunications operations. Consequently, the actual financial statements
included herein relate only to the parent company prior to February 18, 1998,
and do not include the results of Great Western until after February 18, 1998.
Pro forma operating information is presented for comparative purposes as if the
IPO and the acquisition of Great Western had occurred on January 1, 1998. The
pro forma financial information does not purport to represent Advanced's results
of operations that would have actually occurred if the IPO and the acquisition
of Great Western had in fact occurred on that date. Since the acquired companies
were not under common control or management, historical combined results of
operations may not be comparable to, or indicative of, future performance. The
pro forma consolidated statement of operations reflects the historical results
of operations of Great Western and was derived from Great Western's financial
statements.
21
<PAGE>
ADVANCED COMMUNICATIONS GROUP, INC.
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACTUAL PRO FORMA
-------------------------------------- -------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
-------------------------------------- -------------
1999 1998 1997 1998
----------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Statement of Operations Data:
Revenues............................................. $ 49,987 $ 38,090 $ -- $ 47,336
Expenses:
Printing, distribution and listings................ 13,440 8,670 -- 11,307
Sales and marketing................................ 11,464 8,976 -- 10,806
General and administrative......................... 20,529 16,689 2,071 19,249
Depreciation and amortization...................... 4,695 4,190 3 4,751
Stock-based compensation........................... -- 1,760 870 1,760
----------- ----------- ---------- -----------
Income (loss) from operations........................ (141) (2,195) (2,944) (537)
Other income (expense):
Interest expense................................... (4,766) (1,845) (256) (1,955)
Other.............................................. 75 177 -- 190
----------- ----------- ---------- -----------
Income (loss) from continuing operations before
income taxes....................................... (4,832) (3,863) (3,200) (2,302)
Income tax expense (benefit)......................... (1,465) (91) -- 670
----------- ----------- ---------- -----------
Net income (loss) from continuing operations......... (3,367) (3,772) (3,200) (2,972)
Loss from discontinued operations, net of tax benefit
of $4,007; $6,368; $0; and $6,226, respectively.... (7,378) (7,507) -- (7,704)
Loss on discontinued operations, net of tax benefit
of $8,145.......................................... (51,800) -- -- --
----------- ----------- ---------- -----------
Net loss............................................. $ (62,545) $ (11,279) $ (3,200) $ (10,676)
=========== =========== ========== ===========
Basic and diluted loss per share from:
Continuing operations.............................. $ (.17) $ (.20) $ (.39) $ (.15)
Discontinued operations............................ (.37) (.41) -- (.39)
Sale of discontinued operations.................... (2.60) -- -- --
----------- ----------- ---------- -----------
Net income (loss) per share........................ $ (3.14) $ (.61) $ (.39) $ (.54)
=========== =========== ========== ===========
Weighted average common shares outstanding........... 19,955,829 18,593,947 8,230,006 19,646,001
=========== =========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Balance Sheet Data:
Current assets............................................ $ 20,194 $ 34,431 $ --
Working capital (deficit)................................. (17,193) 9,453 (5,239)
Total assets.............................................. 109,059 187,622 2,695
Short-term borrowings..................................... 24,000 17,117 3,141
Long-term debt............................................ -- 17,233 --
Stockholders' equity (deficit)............................ 71,672 131,584 (2,544)
</TABLE>
22
<PAGE>
ADVANCED MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
GENERAL
The following table sets forth, for the periods presented, certain actual
and pro forma information relating to the continuing operations of Advanced,
expressed as a percentage of revenues, excluding prototype directories and
stock-based compensation expense:
<TABLE>
<CAPTION>
YEARS ENDED
------------------------------
PRO PRO
FORMA FORMA
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Directory revenues.......................................... 100.0% 100.0% 100.0%
Cost of services:
Printing, distribution and publishing..................... 21.7 23.5 23.4
Sales and marketing....................................... 21.8 22.8 24.1
General and administrative................................ 41.4 40.8 42.2
Depreciation and amortization............................. 9.7 10.1 10.3
------ ------ ------
Operating income from continuing operations................. 5.4% 2.8% 0%
====== ====== ======
</TABLE>
Prior to February 1998, Advanced had not conducted any operations other than
those relating to the IPO. Consequently, the actual financial statements
included herein relate only to the parent company prior to February 18, 1998,
but include the results of Great Western in continuing operations for the period
after February 18, 1998. Certain pro forma operating information is presented
for comparative purposes as if the IPO and the acquisition of Great Western had
occurred on January 1, 1998. The pro forma operating information does not
purport to represent the results of operations of Advanced that would have
actually occurred if the IPO and the acquisition of Great Western had in fact
occurred on the date stated above. Since Great Western and Advanced were not
under common control or management, historical combined results of operations
may not be comparable to, or indicative of, future performance.
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999, COMPARED TO THE
PRO FORMA RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998
Revenues from continuing operations for the year ended December 31, 1999,
increased 5.6% to $50.0 million from pro forma $47.3 million in 1998.
Approximately $.8 million of the increase is due to the introduction of a
prototype directory in the Austin, Texas market in the second quarter of 1999
and approximately $.6 million of the increase is due to the first sold year
publication of a directory in the North Channelview, Texas market. Excluding new
and prototype directories, revenues increased 3.0% to $48.6 million. The
increase in revenue from recurring directories is due to a combination of
increased advertising revenue from existing customers and incremental sales from
new customers.
Printing, distribution and listing costs for the year ended December 31,
1999, increased $2.1 million to $13.4 million from pro forma $11.3 million in
1998. The increase is due to $2.8 million of costs related to the Austin, Texas
prototype directory incurred during the second quarter of 1999. Excluding
prototype directories, printing, distribution, and listing costs decreased 5.0%
to $10.5 million. As a percent of sales, printing, distribution and listing
costs of recurring directories decreased to 21.7% of sales in 1999 from 23.5% in
1998. The decrease is due to negotiating lower costs from printers and outside
service providers for certain directories offset partially by higher costs on
certain other directories.
23
<PAGE>
Sales and marketing costs for the year ended December 31, 1999, increased to
$11.5 million from pro forma $10.8 million in 1998. The increase is principally
due to $.7 million of costs related to the Austin, Texas prototype directory.
Excluding prototype directories, sales and marketing costs were $10.6 million.
As a percent of sales, sales and marketing costs decreased to 21.8% of sales in
1999 from 22.8% in 1998. The decrease in the expense rate is due to lower
incentive compensation and trade expenses resulting from restructured incentive
compensation and trade programs.
General and administrative expenses increased $1.3 million, or 6.6%, to
$20.5 million for the year ended December 31, 1999, from pro forma
$19.2 million in 1998. The increase is partially due to $.4 million of expenses
related to the Austin, Texas prototype directory. Excluding prototype
directories, general and administrative expenses increased 4.5% to
$20.1 million. As a percentage of revenues, general and administrative expenses
were 41.4% of sales for the year ended December 31, 1999, and 40.8% of pro forma
sales in the year ended December 31, 1998. The increase in the expense rate is
due to increases in the bad debt reserve and salaries and wages, which is
partially offset by operating efficiencies.
Depreciation and amortization was approximately $4.7 million in the year
ended December 31, 1999, and $4.8 million in pro forma 1998. Depreciation and
amortization is principally amortization of goodwill and customer lists
resulting from the acquisition of Great Western.
Interest expense for the year ended December 31, 1999, was approximately
$4.8 million, an increase of $2.8 million from interest expense of pro forma
$2.0 million in 1998. The increase is due to higher debt from borrowings under
Great Western's revolving credit facility used to finance Advanced's operating
losses and growth in the discontinued telecommunications segment. No interest
expense has been allocated to discontinued operations.
Income tax benefit of $1.5 million was recognized for the year ended
December 31, 1999, compared to pro forma income tax expense of $.7 million in
1998. The decrease is due to lower taxable income in 1999 than in 1998.
Advanced's effective tax rate is substantially higher than statutory tax rates
principally because amortization of goodwill and customer lists is not
deductible for tax purposes.
Net loss from continuing operations was $3.4 million, or $.17 per share, for
the year ended December 31, 1999, compared to pro forma net loss from continuing
operations of $3.0 million, or $.15 per share in the comparable period of 1998.
The decrease in net loss was primarily due to the improved operating leverage in
printing, distribution and listings and an income tax benefit.
Earnings before interest, taxes, depreciation and amortization and
stock-based compensation (EBITDA) is a measure commonly used in the
communications industry and is presented to assist in understanding Advanced's
operating results. However, it is not intended to represent cash flow or results
of operations in accordance with generally accepted accounting principles. As a
result, EBITDA may not be comparable to the presentation provided by other
companies. EBITDA decreased to $4.6 million for the year ended December 31,
1999, from pro forma EBITDA of $6.0 million in the comparable period of 1998,
due to the previously mentioned Austin, Texas prototype directory. Excluding net
prototype costs of $3.1 million associated with the Austin, Texas directory and
the results of the first year sold publication in the North Channelview, Texas
market, EBITDA increased to $7.3 million for the year ended December 31, 1999,
an increase of 21.1%.
DISCONTINUED OPERATIONS
Net loss from discontinued operations was $28.3 million for the period from
January 1, 1999 to November 19,1999, compared to net loss from discontinued
operations of $13.9 million in the year ended 1998. Approximately $16.9 million
of these net losses were included in the estimated loss on sale and were charged
against the reserve established in the first quarter of 1999.
24
<PAGE>
Revenues from discontinued telecommunications services increased 28.8% to
$86.2 million in 1999 compared to $59.6 million in 1998. The increase in
telecommunications revenue is due to increased local service revenue as Advanced
implemented aggressive sales and marketing of local services in addition to
long-distance services. Advanced's local service revenues in 1999 were
$46.3 million compared to 1998 local service revenues of $19.1 million.
PRO FORMA RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998
COMPARED TO THE YEAR ENDED DECEMBER 31, 1997
Pro forma directory revenues for the year ended December 31, 1998 increased
9.5% to $47.3 million from $43.2 million in 1997. Advanced distributed
twenty-three directories in 1998 and twenty-four directories in 1997. Two
directories, which accounted for $.9 million of revenue in 1997, were
discontinued in 1998. This decrease in revenue was offset by $2.6 million of
revenue from another directory that was recognized in 1998 but not in 1997
because the timing of distribution resulted in Advanced recognizing no revenue
in 1997, pursuant to its revenue recognition policy. Advanced does not recognize
revenue from a directory until a directory is substantially delivered. Excluding
the impact of these nonrecurring directories, pro forma revenues from recurring
directories increased 5.7%.
Pro forma printing, distribution and listing costs increased $1.2 million,
or 11.9%, to $11.3 million from $10.1 million in 1997. The increase is due in
part to $.2 million of costs related to a prototype directory. As a percent of
sales, pro forma printing, distribution and listing costs, excluding prototype
directories, increased to 23.5% of sales in 1998 from 23.4% in 1997. The
increase is due to increased costs from printers and outside service providers.
Pro forma sales and marketing costs increased to $10.8 million from
$10.4 million in 1997. As a percent of sales, pro forma sales and marketing
costs decreased to 22.8% of sales in 1998 from 24.1% in 1997. The decrease is
due to higher pro forma directory revenues in 1998.
Pro forma general and administrative expenses for the year ended
December 31, 1998, increased to $19.2 million from $18.3 million in 1997. The
increase in gross dollars is due primarily to the direct costs associated with
the higher sales volume. As a percentage of total revenues, pro forma general
and administrative costs were 40.8% in 1998, and 42.2% in 1997. The decrease in
the expense rate in 1998 is due to economies of scale realized from the higher
sales volume.
Pro forma depreciation and amortization was approximately $4.8 million in
1998 and $4.5 million in 1997. Pro forma depreciation and amortization includes
approximately $4.2 million of amortization in both periods relating to
intangible assets resulting from the acquisition of Great Western.
Stock-based compensation expense of $1.8 million was recognized in the year
ended December 31, 1998, compared to $.9 million in 1997. This expense relates
to 300,000 stock options issued in December 1997. The options vested equally
over a three-month period from the date of the grant. These amounts represent
the total compensation expense based on the estimated fair market value of the
options on the date of the grant and the exercise price.
Pro forma interest expense was approximately $2.0 million in 1998 compared
to $.8 million in 1997. The increase in interest expense is due to borrowings
under Advanced's revolving credit agreement used for general corporate purposes
including financing the telecommunications operations and 1998 capital
expenditures.
Pro forma income tax expense was $.7 million in 1998 compared to
$1.0 million income tax expense in 1997. The decrease in income tax expense is
due to higher operating losses in 1998 than in 1997.
25
<PAGE>
Pro forma net loss from continuing operations was $3.0 million, or $.15 per
share, in 1998, compared to pro forma net loss of $2.6 million, or $.13 per
share, in 1997. The increase in net loss was primarily due to the aforementioned
increase in stock-based compensation expense.
Pro forma EBITDA was $6.0 million for the year ended December 31, 1998, an
increase from $4.5 million in 1997. The increase is primarily due to higher pro
forma directory revenues in 1998.
Advanced did not complete the acquisition of Great Western and the
telecommunications subsidiaries until February 18, 1998; therefore, actual
results include only the activity of Great Western from February 18, 1998 to
December 31, 1998. For the year ended December 31, 1998, actual loss from
operations was $2.2 million and net loss from continuing operations was
$3.8 million, or $.20 per share. Advanced had no operating revenues in 1997 and
was engaged principally in activities relating to the IPO.
LIQUIDITY AND CAPITAL RESOURCES
Advanced's working capital at December 31, 1999 was negative $17.2 million
and its ratio of current assets to current liabilities was .54. These amounts
include current maturities of long-term debt of $17.0 million and short-term
borrowings under Great Western's revolving credit facility of $7.0 million. In
connection with the planned acquisitions of YPtel, Web YP and Big Stuff,
$15.0 million of the current maturities due in February 2000 are expected to be
converted into approximately 2,840,909 shares of common stock. Further, Advanced
is expecting to refinance its existing revolving credit facility prior to its
expiration in May 2000. Excluding both the $15.0 million in notes which are
expected to be converted to equity and the $7.0 million credit facility which is
expected to be refinanced, Advanced's working capital at December 31, 1999, was
positive $4.6 million.
In anticipation of the proposed acquisition of YPtel, Web YP and Big Stuff,
and to provide working capital to finance the telecommunications subsidiaries
until their planned sale, on May 14, 1999, Great Western, the wholly-owned
yellow pages publishing subsidiary of Advanced, entered into a $40.0 million
revolving loan agreement with Bank of America National Trust and Savings
Association, now known as Bank of America, N.A. Great Western used a portion of
the new credit facility to retire Advanced's existing $25.0 million credit
facility. The balance of the new credit facility was, subject to various
restrictions, for the general working capital needs and other corporate purposes
of Advanced and Great Western and for the working capital needs of the
telecommunications operations prior to their contemplated sale. Interest on this
facility is LIBOR, adjusted by the Eurodollar reserve percentage, plus 2.75% or
Bank of America's prime or base rate plus .75%. The loan facility requires a
commitment fee of .5% on the unused balance and is subject to various
restrictions and the maintenance of certain financial ratios. The facility
expires on May 13, 2000. Advanced and its telecommunications subsidiaries
guaranteed Great Western's obligations with respect to the loan facility.
Advanced secured its guarantee by pledging to Bank of America substantially all
of its assets, including the capital stock of its telecommunications operations,
and the telecommunications operations secured their guarantees by pledging to
Bank of America substantially all of their respective assets.
On November 19, 1999, Advanced sold, in a stock sale, its four wholly-owned
subsidiaries which provided telecommunications services to Ionex
Telecommunications, Inc., formerly known as Compass Telecommunications, Inc.
Those four wholly-owned subsidiaries were Feist Long Distance, Inc., FirsTel,
Inc., Telecom Resources, Inc., and Valu-Line of Longview, Inc. In addition,
prior to the sale of the wholly-owned subsidiaries, Advanced transferred its
telecommunications operations related assets and liabilities to those
subsidiaries. Advanced received cash consideration in the amount of
$49.8 million less preliminary working capital, closing plant, property and
equipment and other adjustments, in the amount of $7.2 million, or approximately
$42.6 million.
The net sale proceeds from the sale of the telecommunications subsidiaries
were used to reduce the balance of the credit facility and to pay certain
outstanding liabilities of Advanced. In addition, the
26
<PAGE>
revolving loan agreement was amended by Great Western, Advanced and Bank of
America to reduce the credit facility to $15.0 million. At December 31, 1999,
Advanced had borrowed $7.0 million under this facility. The amended credit
facility is for the general working capital needs of Advanced and Great Western
and up to $2.0 million may be loaned to Web YP and Big Stuff.
Advanced's management believes that its cash flows from its yellow pages
business and the remaining cash available under its line of credit, as amended,
will be sufficient to fund its current operations. In order to close the
acquisition of YPtel, Web YP and Big Stuff, however, Advanced will need to
refinance its existing debt and that of YPtel. Additionally, Advanced will also
need capital to implement both its plans to acquire other yellow pages
publishers and to execute its Internet directory strategy.
REFINANCING
Advanced and each of its United States subsidiaries (guarantors) have
entered into a new senior credit facility to provide for an aggregate borrowing
availability to Advanced (which is guaranteed by the guarantors), of up to $60
million in the form of a revolving credit line with a fluctuating interest rate
based on either LIBOR plus a spread of from 1.5% to 3.5% or the prime rate of
the agent lender plus a spread of up to 1.25%, in each case dependent upon
Advanced's ratio of debt to earnings.
The obligations under the Senior Credit Facility is secured by substantially
all of the stock and assets of Advanced and the guarantors. The Senior Credit
Facility contains numerous restrictive financial and other covenants that are
usual and customary for transactions of this nature.
Negative covenants includes, among others, restrictions on indebtedness,
distributions, liens, sale/ leaseback transactions, guaranties, mergers,
dispositions of assets, acquisitions, investments, transactions with affiliates,
and changes in business lines. The senior credit facility will also require
Advanced to maintain certain minimum financial ratios, including an interest
coverage ratio, a fixed charge coverage ratio, a total leverage ratio and a
senior leverage ratio.
The senior credit facility contains usual and customary events of default
and provide remedies to the lenders in the event of default. The final maturity
of the Senior Credit Facility will be February 18, 2005.
Advanced also entered into an unsecured credit facility of $20 million in
the form of convertible debentures that are due and payable in full February
2006. The subordinated debentures bear interest at a rate per annum equal to
five percent (5%). Interest is payable semiannually in cash or by adding the
remaining accrued but unpaid interest to the principal balance.
The debentures will be convertible into shares of WorldPages' common stock
based upon a conversion price initially equal to 110% of the average closing
price of WorldPages' common stock for the ten trading days prior to closing. The
conversion price will be subject to being reset at the end of every six-month
period during the first two years of the term of the debentures to the average
of the market price for shares of common stock for the ten trading days
following the reset date. The holders of the debentures will also receive
certain warrants for the Company's common stock exercisable during the five-year
period following the issuance of the debentures at a purchase price equal to
130% of the initial closing price.
The junior credit facility contains numerous restrictive covenants that are
usual and customary for transactions of this nature and contain usual and
customary events of default providing remedies to the holders in the event of
default.
The proceeds of the loans will be used to refinance existing debt, to
provide working capital and to finance acquisitions and investments permitted
under the senior credit facility.
27
<PAGE>
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Advanced is exposed to minimal market risks based on its current holdings
and use of financial instruments. Advanced does not hold or issue any financial
instruments for trading, hedging or speculative purposes. Financial instruments
held for other than trading purposes do not impose a material market risk.
Advanced is exposed to interest rate risk, as additional financing is
periodically needed due to the operating losses and capital expenditures
associated with establishing and expanding Advanced's business. The interest
rate that Advanced will be able to obtain on debt financing will depend on
market conditions at that time, and may differ from the rates Advanced has
secured on its current debt. Additionally, Advanced is exposed to interest rate
risk on amounts borrowed against its credit facility as of December 31, 1999.
Advances against the facility periodically renew, at which point the borrowings
are subject to the then current market interest rates, which may differ from the
rates Advanced is currently paying on its borrowings. There is no cap on the
interest rate payable on Advanced's revolving credit facility. If the interest
rates on Advanced's revolving credit facility were to increase by 10% over
December 31, 1999 levels, Advanced's annual interest expense would increase by
approximately $380,000.
Advanced's business and operations are also exposed to market risks
resulting from changes in commodity prices for paper, Advanced's principal raw
material. Certain commodity grades of paper, including the grade Advanced uses
for its yellow pages directories, may be volatile. A 10% increase in the cost of
directory grade paper used by Advanced over December 31, 1999 levels, would
result in an increase in Advanced's annual operating costs of approximately
$476,000.
YEAR 2000
In the fourth quarter of 1999, Advanced completed its Year 2000 project.
Advanced experienced no material issues in the transition to January 1, 2000.
28
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION OF YPTEL
The following tables present selected historical financial information of
YPtel and YPtel's predecessor, Pacific Coast Publishing, Inc., which should be
read in conjunction with the historical financial statements, and the related
notes thereto, of YPtel and its predecessor's management's discussion and
analysis of financial condition and results of operations and other financial
data included elsewhere in this prospectus. The selected historical financial
data of Pacific Coast Publishing, Inc. for each of the three fiscal years in the
period ended October 31, 1998 have been derived from Pacific Coast Publishing,
Inc.'s audited consolidated financial statements included elsewhere in this
prospectus. The selected financial data for the year ended October 31, 1999, was
derived from the unaudited consolidated financial statements of YPtel and its
predecessor. All adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of results of the unaudited historical interim
periods have been included. See "YPtel Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Index to Financial
Statements."
YPtel does not recognize net revenues with respect to bookings or cash
receipts for any given directory or the costs directly related to sales,
production, printing and distribution of that directory until the month in which
it is printed and distributed. The sizes of directories distributed in a
particular market and the corresponding revenues recognized vary significantly
from quarter to quarter. Further, the actual production and distribution dates
of individual directories are not consistent and are subject to change and it is
possible that individual directories will not be produced during the same month
each year, which may result in significant monthly and quarterly fluctuation.
YPtel was incorporated in Canada on July 22, 1998. On November 1, 1998,
YPtel, through an indirect subsidiary, completed the acquisition of the assets
and liabilities of Pacific Coast Publishing, Inc., an independent yellow pages
directory business. The operating information of YPtel's predecessor is
presented for comparative purposes and does not purport to represent YPtel's
results of operations that would have actually occurred if the acquisition of
the assets and liabilities of Pacific Coast Publishing, Inc. had occurred prior
to the periods presented.
29
<PAGE>
YPTEL CORPORATION
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR
YPTEL ------------------------------------------------------
-------------- YEARS ENDED OCTOBER 31,
YEAR ENDED ------------------------------------------------------
OCT. 31, 1999 1998 1997 1996 1995 1994
-------------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue........................ $41,162 $33,165 $28,204 $24,550 $15,481 $14,322
------- ------- ------- ------- ------- -------
Printing, distribution and
listings..................... 9,482 8,001 6,644 6,985 4,027 3,660
Sales and marketing............ 8,421 7,301 5,700 5,613 3,265 3,353
General and administrative..... 11,903 8,454 7,585 6,051 4,533 4,005
Bad debt expense............... 2,779 2,067 1,728 1,836 758 802
Depreciation and
amortization................. 2,272 170 249 335 328 308
Terminated IPO Costs........... 363 -- -- -- -- --
Stockholder remuneration....... 0 1,646 1,718 1,834 1,765 1,612
------- ------- ------- ------- ------- -------
35,220 27,639 23,624 22,654 14,676 13,740
------- ------- ------- ------- ------- -------
Income from operations......... 5,942 5,526 4,580 1,896 805 582
Interest expense............... 3,930 100 308 375 197 116
Other expense (income), net.... (13) (339) (187) (191) (218) (142)
------- ------- ------- ------- ------- -------
Earnings before income taxes... 2,025 5,765 4,459 1,712 826 608
Provision for income taxes..... 816 86 54 266 298 217
------- ------- ------- ------- ------- -------
Net earnings................... $ 1,209 $ 5,679 $ 4,405 $ 1,446 $ 528 $ 391
======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
OCTOBER 31,
------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
--------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Current assets................... $22,082 $14,712 $12,343 $10,433 $ 8,978 $6,002
Working capital.................. 10,410 9,189 6,462 3,254 1,809 1,385
Total assets..................... 62,900 15,534 12,981 11,305 10,025 6,920
Short-term borrowings............ 5,324 95 586 2,488 2,328 170
Long-term debt................... 35,283 276 261 389 555 445
Stockholders' equity............. 14,989 9,735 6,840 3,737 2,300 1,858
</TABLE>
30
<PAGE>
YPTEL MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
YEAR ENDED OCTOBER 31, 1999 COMPARED TO THE YEAR ENDED OCTOBER 31, 1998
Revenues increased $8.0 million, or 24.1%, from $33.2 million for the year
ended October 31, 1998 to $41.2 million for the year ended October 31, 1999.
This increase primarily resulted from new revenues of $4.2 million related to
introduction of the Portland, Oregon directory; $1.4 million related to strong
growth in the second year Spokane, Washington and Beaverton, Oregon directories.
The remaining revenue increase was attributable to growth in revenues in the
remaining markets.
Printing, distribution and listing expenses increased by $1.5 million or
18.5% from $8.0 million for the year ended October 31, 1998 to $9.5 million for
the year ended October 31, 1999. The change was primarily due to printing and
distribution costs related to the new Portland, Oregon directory.
Sales and marketing expense increased by approximately $1.1 million or 15.1%
from $7.3 million for the year ended October 31, 1998 to $8.4 million for the
year ended October 31, 1999. This increase is generally attributable to new
sales in the first year Portland, Oregon directory and the commissions related
to higher national advertising sales. This increase is partially offset by
decreased commissions in the second year Spokane, Washington and Beaverton,
Oregon directories due to lower commissions on renewal sales than new sales.
General and administrative expenses increased $3.4 million or 40.0% from
$8.5 million for the year ended October 31, 1998 to $11.9 million for the year
ended October 31, 1999. The increase is due to a general increase in general and
administrative expenses associated with the infrastructure increases to support
the new Portland, Oregon directory and an increase in corporate costs due to
YPtel's new ownership.
The bad debt expense increased $0.7 million, or 33%, from $2.1 million for
the fiscal year ended October 31, 1998 to $2.8 million for the fiscal year ended
October 31, 1999. The increase is attributable to the general increase in
revenues as well as additional reserves taken due to a relaxing of some of the
credit terms for low credit risk customers.
Depreciation and amortization expense increased $2.1 million from
$0.2 million for the fiscal year ended October 31, 1998 to $2.3 million for the
fiscal year ended October 31, 1999. The increase is attributable to the
amortization of customer lists, non-compete covenants and goodwill that resulted
from the acquisition of the assets of Pacific Coast Publishing, Inc. by YPtel
Corporation, pursuant to purchase accounting.
Interest expense increased $3.8 million from $0.1 million for the year ended
October 31, 1998 to $3.9 million for the year ended October 31, 1999. The
increase is a direct result of the new debt facilities arranged by YPtel
Corporation, through its subsidiary Pacific Coast Publishing, Ltd., to fund the
acquisition of the assets of Pacific Coast Publishing, Inc.
Provision for income taxes increased $0.7 million from $0.1 million for the
year ended October 31, 1998 to $0.8 million for the year ended October 31, 1999.
The increase is a result of the fact that the predecessor corporation was an
'S' Corporation and for tax purposes Federal tax was being incurred at the
shareholder level, whereas YPtel Corporation's subsidiary, Pacific Coast
Publishing, Ltd., is a 'C' corporation which incurs tax at the corporate level.
The entire provision reflects a deferred tax provision for both federal and
state taxes.
31
<PAGE>
YEAR ENDED OCTOBER 31, 1998 COMPARED TO THE YEAR ENDED OCTOBER 31, 1997
Revenues increased by $5.0 million, or 17.6%, from $28.2 million for the
fiscal year ended October 31, 1997 to $33.2 million for the fiscal year ended
October 31, 1998. This increase primarily resulted from $2.2 million in revenues
related to the new Spokane, Washington directory, $1.4 million in revenues
related to the new Beaverton, Oregon directory and $0.2 million related to new
"community-type" directories in the Salt Lake City, Utah market, which have
since been discontinued. The remaining $1.2 million in revenue increase was
derived from $1.5 million of revenue increase in existing books, partially
offset by the revenue decrease associated with the discontinuation of the South
East Arizona directory, which accounted for $0.3 million in fiscal 1997.
Printing, distribution and listings expenses increased by $1.4 million, or
21.2%, from $6.6 million for the fiscal year ended October 31, 1997 to
$8.0 million for the fiscal year ended October 31, 1998. This increase was
primarily due to the addition of two new regional directories and two new
community directories during fiscal 1998, and was somewhat offset by the
elimination of the South East Arizona directory. As a percentage of revenues,
printing, distribution and listings expenses increased by 0.5%, from 23.6% in
fiscal 1997 to 24.1% in fiscal 1998. The relative increase reflected the high
ratio of printing, distribution and listings costs to revenues attributable to
the two new regional directories distributed in fiscal 1998, which historically
declines in the second year of operations.
Sales and marketing expenses increased by $1.6 million, or 28.0%, from
$5.7 million for the fiscal year ended October 31, 1997 to $7.3 million for the
fiscal year ended October 31, 1998. As a percentage of revenues, sales and
marketing expenses increased from 20.2% for the fiscal year ended October 31,
1997 to 22.0% for the fiscal year ended October 31, 1998. The increase related
to the relatively high commission rates associated with the new Spokane,
Washington and Beaverton, Oregon directories, which generated sales and
marketing expenses representing approximately 30% of those directories'
revenues.
General and administrative expenses increased by $0.9 million, or 11.8%,
from $7.6 million for the fiscal year ended October 31, 1997 to $8.5 million for
the fiscal year ended October 31, 1998. As a percentage of revenues, general and
administrative expenses decreased from 26.9% to 25.5% during the same period,
which reflected the economies of scale associated with the head office
production functions that were realized as YPtel further expanded its
operations.
YEAR ENDED OCTOBER 31, 1997 COMPARED TO THE YEAR ENDED OCTOBER 31, 1996
Revenues increased by $3.6 million, or 14.6%, from $24.6 million for the
fiscal year ended October 31, 1996 to $28.2 million for the fiscal year ended
October 31, 1997. Aside from two new community directories in the Salt Lake City
market, which generated nominal revenues, and which directories have since been
discontinued, YPtel did not produce any new directories in fiscal 1997. The
revenue increase primarily resulted from strong increases in the: Tacoma,
Washington; Vancouver, Washington; Salt Lake City, Utah; South King County,
Washington; and Tucson, Arizona directories, as well as from more modest
increases across all other directories.
Printing, distribution and listing expenses decreased by $0.4 million, or
5.7%, from $7.0 million for the fiscal year ended October 31, 1996 to
$6.6 million for the fiscal year ended October 31, 1997. As a percentage of
revenues, printing, distribution and listing expenses decreased by 4.9% from
28.5% in fiscal 1996 to 23.6% in fiscal 1997. Both the relative decrease and the
absolute dollar decrease was due primarily to:
- the overall decrease in the price of paper during fiscal 1997 from record
high levels experienced in fiscal 1996; and
- the first full year of operations under the printing contract with
Quebecor Printing.
32
<PAGE>
These factors were slightly offset by the introduction of the two Salt Lake City
community directories in fiscal 1997.
Sales and marketing expenses increased $0.1 million, or 1.8%, from
$5.6 million for the fiscal year ended October 31, 1996 to $5.7 million for the
fiscal year ended October 31, 1997. As a percentage of revenues, sales and
marketing expenses decreased 2.7% from 22.9% for the fiscal year ended
October 31, 1996 to 20.2% for the fiscal year ended October 31, 1997. The
relative decrease was related to the fact that the four directories that were
introduced in fiscal 1996 paid lower commission rates in 1997 than those
provided in the first year of the directories due to the fact that a majority of
those directories' second year sales were renewals.
General and administrative expenses increased $1.5 million, or 24.6%, from
$6.1 million for the fiscal year ended October 31, 1996 to $7.6 million for the
fiscal year ended October 31, 1997. As a percentage of revenues, general and
administrative expenses increased 2.3% during the same period from 24.6% to
26.9%. The majority of the absolute dollar increase in general and
administrative expenses related to:
- additional advertising expenditures of $0.3 million relating to radio,
television and other advertising expenditures which were intended to
create awareness for the brand and the directories; and
- additional wages, salaries and benefits of $1.0 million related to both
management and production in order to grow, support and manage a larger
organization and a higher volume of advertising.
LIQUIDITY AND CAPITAL RESOURCES
Effective November 1, 1998, YPtel, through its subsidiary, Pacific Coast
Publishing, Ltd., acquired the yellow pages publishing business of Pacific Coast
Publishing, Inc. for a $2.0 million promissory note and the issuance of its
voting Class A preferred shares, which shares were later redeemed for $47.8
million in cash. The promissory note accrues interest at the rate of 7%, is
payable on maturity, and is due October 31, 2001. The promissory note may be
extended at the option of YPtel to October 31, 2006, on certain terms and
conditions. The redemption of the Class A preferred shares of Pacific Coast
Publishing, Ltd. was financed by the following capital structure, which is
currently in place at Pacific Coast Publishing, Ltd.
SENIOR TERM A NOTES AND SENIOR TERM B NOTES
Under its Senior Term Note Purchase Agreement, Pacific Coast Publishing,
Ltd. has drawn down an aggregate of $25.5 million, of which $11 million
aggregate principal amount is in the form of Senior Term A Notes and $14.5
million aggregate principal amount is in the form of Series B Senior Term Notes,
in both cases issued to a syndicate of commercial lenders.
The Senior Term A Notes bear interest with reference to the prime commercial
rate plus 3.0% or the London Interbank Offered Rate at Pacific Coast Publishing,
Ltd.'s option, plus 2.0%. The Senior Term B Notes bear interest at prime plus
3.75% or at the London Interbank Offered Rate plus 2.75%. Currently, the Senior
Term A and B Notes bear interest with reference to the LIBOR at a combined
effective rate of approximately 8.5% per annum. To date, Pacific Coast
Publishing, Ltd. has made all payments under the Senior Notes when due.
REVOLVING CREDIT NOTES
The holders of the Senior A and B Term Notes have also provided a revolving
credit facility in favor of Pacific Coast Publishing, Ltd. under the terms of
its Revolving Credit Agreement in the amount of up to $8.5 million at a rate of
interest that reflects the prevailing prime rate or LIBOR, at
33
<PAGE>
Pacific Coast Publishing, Ltd.'s option, plus an applicable margin. Pacific
Coast Publishing, Ltd. is permitted to draw under the Revolving Credit Agreement
up to 85% of Pacific Coast Publishing, Ltd.'s eligible accounts receivable by
the issuance of revolving credit notes. The revolving credit notes are repayable
on demand. The Revolving Credit Agreement contains customary aging and
concentration exclusions for eligible accounts. At July 31, 1999, Pacific Coast
Publishing, Ltd. had borrowed $1.6 million under the Revolving Credit Agreement.
SUBORDINATED NOTES
Pursuant to its Subordinated Loan Agreement, Pacific Coast Publishing, Ltd.
has drawn down an aggregate of $11 million and issued $11 million in aggregate
principal amount of subordinated notes due May 1, 2006 to a syndicate of
commercial lenders. The Subordinated Loan Agreement contains provisions by which
the subordinated noteholders have subordinated their claims against Pacific
Coast Publishing, Ltd. under the subordinated notes to the claims of the holders
of the Senior Term A and B Notes and the Revolving Credit Notes.
The subordinated notes bear interest at 12% per annum, which is payable
semi-annually in arrears on May 1 and November 1 in each year during the term of
the subordinated notes. Subject to the restrictions in the Senior Term Note
Purchase Agreement, the subordinated notes may be repaid in whole or in part,
subject to a minimum principal prepayment of $100,000, in any multiple of
$100,000 at any time and from time to time without notice or bonus.
In conjunction with the issue of the Subordinated Notes, YPtel issued
warrants to the subordinated noteholders to acquire an aggregate of 1,841,000
shares of its Class C Special Shares at an exercise price of Cdn $0.01 per Class
C Special Share. Upon repayment of the Subordinated Notes, such shares will
convert into a number of YPtel common stock to be calculated based on a
predetermined formula as follows:
- If the Subordinated Notes are repaid after November 20, 1999, but before
May 20, 2000, the Subordinated Notes will be converted into that number of
common shares representing 8% in the aggregate of the issued and
outstanding common shares of YPtel Corporation;
- If the Subordinated Notes are repaid after May 20, 2000, but before
November 20, 2000, the Subordinated Notes will be converted into that
number of common shares representing 10% in the aggregate of the issued
and outstanding common shares of YPtel Corporation; and
- If the Subordinated Notes are repaid any time after November 20, 2000, the
Subordinated Notes will be converted into that number of common shares
representing 12% in the aggregate of the issued and outstanding common
shares of YPtel Corporation.
All of Pacific Coast Publishing, Ltd.'s debt facilities are to be refinanced
as a condition of closing of the YPtel Agreement.
STOCKHOLDERS' EQUITY
YPtel issued 13,549,300 common shares for net cash proceeds of $13.28
million, after deducting share issuance expenses of $0.3 million. The YPtel
common shares were purchased by a syndicate of investors through a fund managed
by Imperial Capital.
The warrants provided to the subordinated noteholders have a book value of
$500,000, which represents an allocation of the $11.0 million face value of the
subordinated note.
34
<PAGE>
INFORMATION REGARDING MARKET RISK
YPtel's business and operations are exposed to market risks, including risks
relating to changes in interest rates and commodity prices.
The interest rates on YPtel's Senior Notes and on its revolving credit
facility are floating and will fluctuate based on changes in the prevailing
prime rate or LIBOR. These interest rates change usually monthly or bi-monthly.
The interest rate on the Senior Notes, which is currently approximately 8.5%, is
not capped. To mitigate the risks related to fluctuation in interest rates,
YPtel has entered into an interest rate cap program with Dresdner Bank. This
program caps at 7.0% the base LIBOR rate on 50% of the principal amount of the
Senior Notes. The interest YPtel pays on the Senior Notes consists of the base
LIBOR rate, which is currently 5.9%, plus a variable margin. There is no cap on
the interest rate payable on YPtel's revolving credit facility. If the interest
rates on the Senior Notes were to change by 10% from April 30, 1999 levels,
YPtel's annual interest expense would change by approximately $211,000 with
respect to the Senior Notes and approximately $15,400 with respect to the
revolving credit facility.
YPtel does not use derivative financial instruments for hedging, speculative
or trading purposes. YPtel is dependent upon outside suppliers for all of its
raw material costs associated with publishing the printed yellow page
directories. YPtel's principal raw material is paper, which YPtel purchases
either through a broker or directly from its printer. YPtel does not purchase
paper directly from the paper mills. Certain commodity grades of paper,
including the directory-grade paper YPtel uses, have shown considerable price
volatility since 1989. For example, paper prices rose sharply in 1995, from
approximately $530 per ton on January 1, 1995 to approximately $930 per cwt on
December 31, 1995, an increase of 75%, and then fell by 14% to $800 per ton at
December 31, 1996. Paper prices continued to decrease in 1997, with most of
YPtel's purchases being between $700 per ton to $750 per ton. In 1998, prices
dropped further, with most YPtel purchases being in the range of $640 per ton to
$730 per ton. Prices to date in 1999 have been primarily in the range of $680
per ton to $700 per ton. YPtel does not enter into forward purchase contracts to
hedge its exposure to changes in the price of paper. A 10% increase in
directory-grade paper would result in an increase of approximately $361,500 in
YPtel's raw material costs, based upon the amount of paper YPtel purchased
during the year ended October 31, 1999.
YPtel's sales, expenditures, debt servicing and capital purchasing are
transacted in U.S. dollars, with an insignificant portion of expenses being
transacted in Canadian dollars. Accordingly, YPtel is not significantly exposed
to foreign currency risk.
35
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION OF WEB YP
The following tables present selected historical financial information for
Web YP which should be read in conjunction with the historical financial
statements, and the related notes thereto, of Web YP, Web YP Management's
Discussion and Analysis of Financial Condition and Results of Operations and
other financial data included elsewhere in this prospectus. Web YP was founded
as an operating company in January 1998. The selected historical financial data
of Web YP for the years ended December 31, 1999 and 1998 have been derived from
its audited financial statements included elsewhere in this prospectus. See "Web
YP Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Index to Financial Statements."
WEB YP, INC.
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Statement of Operations Data:
Revenues.................................................. $ 851 $ 384
Operating costs:
Selling and Internet expenses........................... 3,857 753
General and administrative expenses..................... 1,271 1,232
Depreciation and amortization........................... 98 51
------- -------
Loss from operations.................................... (4,375) (1,652)
Other income (expense):
Interest expense........................................ (143) --
------- -------
Loss before income taxes.................................. (4,518) (1,652)
Income tax expense (benefit).............................. -- --
------- -------
Net loss.................................................. $(4,518) $(1,652)
======= =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Balance Sheet Data:
Current assets............................................ $ 905 $ 307
Working capital........................................... (3,595) (176)
Total assets.............................................. 1,097 344
Notes payable to shareholders............................. 3,653 --
Stockholders' equity (deficit)............................ (3,403) (139)
</TABLE>
36
<PAGE>
WEB YP MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999 COMPARED TO THE YEAR ENDED DECEMBER 31, 1998
Revenue increased $467,000, or 122%, to $851,000 in 1999 from $384,000 in
1998. The increase is the result of the addition of new resellers to the sales
channel and increased penetration of sales to customers from existing resellers
since the first nine months of operations.
Selling and Internet expenses increased as a percentage of revenues to 453%
for the year ended December 31, 1999 from 196% in 1998. The increased percentage
is primarily due to increased advertising expense, development costs to improve
functionality of the website and costs associated with a new portal agreement.
General and administrative expenses decreased as a percentage of revenues to
149% during the year ended December 31, 1999 from 321% in 1998. The decreased
percentage is primarily due to decreases in costs typically incurred by start-up
companies, such as advertising and promotion, legal fees, office supplies, trade
shows and conventions, and travel and entertainment.
Web YP's net loss increased 173% to $4,518,000 during the year ended
December 31, 1999 from $1,652,000 in 1998.
LIQUIDITY AND CAPITAL RESOURCES
Web YP's primary funding requirements are to finance operating losses,
working capital and the continued growth of the business. This includes
primarily the development of strategic alliances with internet related
companies. Web YP's primary source of liquidity is capital contributions from
its stockholders. During the year ended December 31, 1999 and 1998, the Web YP
stockholders contributed $1,254,000 and $1,388,000 of additional capital.
Net cash used by operations during the year ended December 31, 1999 was
$5,001,000. This amount is primarily made up of cash used to fund net losses.
DISCLOSURES ABOUT MARKET RISK
Web YP is exposed to minimal market risks based on its business and use of
financial instruments. Web YP does not hold or issue any financial instruments
for trading, hedging or speculative purposes. Financial instruments held for
other than trading purposes do not impose a material market risk. Web YP may be
exposed to interest rate risk, as additional financing is periodically needed
due to the operating losses and capital expenditures associated with
establishing and expanding Web YP's business. The interest rate that Web YP will
be able to obtain on debt financing will depend on market conditions at that
time.
37
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION OF BIG STUFF
The following tables present selected historical financial information for
Big Stuff which should be read in conjunction with the historical financial
statements, and the related notes thereto, of Big Stuff, Big Stuff Management's
Discussion and Analysis of Financial Condition and Results of Operations and
other financial data included elsewhere in this prospectus. The selected
historical financial data of Big Stuff for each of the three fiscal years in the
period ended December 31, 1999, have been derived from its unaudited financial
statements included elsewhere in this prospectus. All historical and pro forma
financial statements of Big Stuff contained in this prospectus have been
prepared and restated by WorldPages based on information supplied by Big Stuff.
The information supplied by Big Stuff did not conform to generally accepted
accounting principles. See "Big Stuff Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Index to Financial
Statements."
BIG STUFF, INC.
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Statement of Operations Data:
Revenues.................................................. $ 862 $1,648 $2,526
Operating costs:
Cost of services........................................ 833 1,049 1,857
Selling, general and administrative expenses............ 432 257 609
Depreciation and amortization........................... 206 301 149
------ ------ ------
Income (loss) from operations........................... (609) 41 (89)
Other income (expense):
Interest expense........................................ (90) (60) --
------ ------ ------
Income (loss) before income taxes......................... (699) (19) (89)
Income tax expense........................................ -- -- --
------ ------ ------
Net income (loss)..................................... $ (699) $ (19) $ (89)
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Balance Sheet Data:
Current assets............................................ $ 399 $277 $ 747
Working capital........................................... (1,899) 202 722
Total assets.............................................. 1,085 815 1,621
Short-term borrowings..................................... 337 43 --
Notes due to shareholders................................. 1,900 -- --
Stockholders' equity...................................... (1,213) 740 1,597
</TABLE>
38
<PAGE>
BIG STUFF MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999 COMPARED TO THE YEAR ENDED DECEMBER 31, 1998
Revenue decreased $786,000, or 47.7%, to $862,000 in 1999 from $1,648,000 in
1998. The decrease is primarily due to a shift in business focus from ad layout,
design and colorization services to the development of internet related
services, including website design.
Cost of services increased as a percentage of revenues to 96.6% during 1999
from 63.7% during 1998. The increased percentage is primarily due to an increase
in direct labor costs resulting from the addition of staff with Internet
expertise. The cost of direct materials decreased in relation to revenues. More
competitive pricing of ad-related services has also contributed to the increase.
General and administrative expenses increased as a percentage of revenues to
50.1% during 1999 from 15.6% during 1998. The increase in the expense rate is
primarily due to additional travel and entertainment costs necessary to promote
Internet related services.
Big Stuff's net loss increased to $699,000 in 1999 from $19,000 in 1998. As
a percentage of revenues, net loss increased to 81.1% in 1999 from 1.2% in 1998.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE YEAR ENDED DECEMBER 31, 1997
Revenue decreased $878,000, or 34.8%, to $1,648,000 in 1998 from $2,526,000
in 1997. The decrease is primarily due to a shift in business focus from ad
layout, design and colorization services to the development of Internet related
services, including website design as well as speculative advertising artwork
design services for independent yellow pages publishers. Also, demand has
decreased for colorization services as improvements in technology have allowed
some customers to perform the same functions internally without significant
investment.
Cost of services decreased as a percentage of revenues to 63.7% during 1998
from 73.5% during 1997. The decreased percentage is primarily due to a decrease
in direct labor costs resulting from staff reductions in anticipation of Big
Stuff's shift in business focus to Internet related services. The cost of direct
materials decreased in relation to revenues.
General and administrative expenses decreased as a percentage of revenues to
15.6% during 1998 from 24.1% during 1997. The decreased percentage is due
primarily to decreases in costs associated with the development of Big Stuff's
ad-related services such as training, advertising and promotion, and travel and
lodging, resulting from Big Stuff's decision to shift its focus to Internet
related activities.
Big Stuff's net loss decreased to $19,000 in 1998 from $89,000 in 1997. As a
percentage of revenues, net loss decreased to 1.2% in 1998 from 3.5% in 1997.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE YEAR ENDED DECEMBER 31, 1996
Revenue increased $215,000, or 9.3%, to $2,526,000 in 1997 from $2,311,000
in 1996. The increase is primarily due to an increased customer base. Also, Big
Stuff increased revenue by providing additional services, such as speculative
advertising artwork design, to existing customers and other independent yellow
pages publishers.
Cost of services increased as a percentage of revenues to 73.5% during 1998
from 49.3% during 1997. The increased percentage is primarily due to an increase
in direct labor costs resulting from the addition of staff necessary to service
a growing customer base and to provide additional services to existing
customers.
39
<PAGE>
General and administrative expenses increased as a percentage of revenues to
24.1% during 1997 from 8.2% during 1996. The increased percentage is due
primarily to increases in costs associated with the development of Big Stuff's
ad-related services such as training, advertising and promotion, and travel and
lodging, resulting from Big Stuff's increased customer base and new services.
Big Stuff's net loss was $89,000 in 1997 compared to net income of $860,000
in 1996.
LIQUIDITY AND CAPITAL RESOURCES
Big Stuff's primary funding requirements are to finance working capital and
capital expenditures for website design equipment. Its sources of liquidity are
cash from operations and capital contributions or loans from stockholders. At
December 31, 1999, working capital was $(1,899,000).
Net cash used by operating activities in 1999 was $247,000. Net cash used in
investing activities in 1999 was $354,000, principally for purchases of
equipment. Net cash provided by financing activities in 1999 was $716,000,
representing $1,970,000 of borrowings offset by $1,254,000 of distributions to
stockholders.
Net cash provided by operating activities in 1998 was $700,000. Net cash
used in financing activities in 1998 was $795,000, representing $393,000 of
capital contributions from stockholders offset by $1,188,000 of distributions to
stockholders.
DISCLOSURES ABOUT MARKET RISK
Big Stuff is exposed to minimal market risks based on its business and use
of financial instruments. Big Stuff does not hold or issue any financial
instruments for trading, hedging or speculative purposes. Financial instruments
held for other than trading purposes do not impose a material market risk. Big
Stuff may be exposed to interest rate risk, as additional financing is
periodically needed due to the operating losses and capital expenditures
associated with establishing and expanding Big Stuff's business. The interest
rate that Big Stuff will be able to obtain on debt financing will depend on
market conditions at that time.
40
<PAGE>
BUSINESS
WorldPages, through its subsidiaries, publishes and distributes yellow page
directories, designs and produces websites for yellow and white page publishers
and operates a website designed to bring buyers and sellers together to transact
business and related interests. WorldPages operates through its subsidiaries,
Great Western, YPtel, Web YP and Big Stuff.
GREAT WESTERN
Great Western is one of the ten largest independent yellow pages publishers
in the United States. It publishes and distributes approximately 3.8 million
yellow pages directories annually in 23 markets in Texas, Oklahoma and
California. Great Western, founded in 1984 and headquartered in Amarillo, Texas,
entered the Austin, Texas market in 1999. Great Western's revenues are derived
from advertising space sold in its directories which are produced and
distributed annually in each market. Great Western's annual revenues have
increased from $29.4 million in 1995 to $50.0 million in 1999. Great Western has
historically increased revenues by increasing the number and size of
advertisements in recurring directories and by introducing new directories in
new markets. Great Western has targeted new directories and markets that are
contiguous to its existing markets in order to utilize its established sales
infrastructure and Great Western Directories' brand name recognition. Great
Western also markets WorldPages, a yellow pages Internet directory website
service operated by Web YP, to its yellow pages customers in its target markets.
Great Western has found that this service provides an opportunity not only to
provide customers with web page design and support, but also to expand into web
based advertising and electronic commerce. Great Western will also consider
growth through acquisitions of other independent yellow pages publishers that
fit into its strategic plans. Great Western sells advertising to approximately
52,000 customers in its directories.
When Great Western expands into a new market, it typically seeks to attract
targeted customers by producing and publishing a complete directory in which it
gives away advertising space to customers which is referred to as a prototype
directory. After the advertisers have had an opportunity to experience the
reception of the new directory and the response to their advertisements in the
marketplace, Great Western will sell the advertising in the second and
subsequent years. Because of this strategy, it may have substantial expenses
relating to its first directory in a new market with no corresponding revenues.
In 1999, Great Western incurred net costs of $3.1 million related to the
prototype directory in the Austin, Texas market. WorldPages believes that this
strategy improves the success of launching a new directory and builds stronger
customer relationships and customer loyalty than it could otherwise achieve by
selling the advertising for a new directory.
At December 31, 1999, Great Western had 345 employees, of which 192 were in
the sales function. None of the employees belong to a union, and management
believes that its relations with its employees is good.
Great Western owns one office building in Amarillo, Texas. WorldPages leases
its corporate headquarters in St. Louis, Missouri. WorldPages and Great Western
lease various sales offices throughout Great Western's geographic territory.
YPTEL
YPtel, through Pacific Coast Publishing, Ltd., a wholly-owned subsidiary of
YPtel, Inc., which is a wholly-owned subsidiary of YPtel, produces 17
directories in four states under its "Regional Telephone Directory" brand. It is
a leading independent publisher in Washington, Oregon, Utah and Arizona. YPtel's
revenues are derived from the sale of advertising to over 30,000 small to medium
size local businesses.
41
<PAGE>
Pacific Coast Publishing, Inc., which operated this business prior to its
acquisition by YPtel on November 1, 1998, was established in 1984. Pacific Coast
Publishing, Inc.'s first independent yellow pages directory was published in
1985 in the Tacoma-Pierce County, Washington market and was a consolidated
directory for a market area with similar buying patterns which had been served
by two separate utility directories. Pacific Coast Publishing, Inc. initially
expanded its business within Washington and subsequently introduced directories
in Utah, Oregon and Arizona. In general, YPtel has continued the strategy
initiated by Pacific Coast Publishing, Inc. That strategy is to enter markets
being serviced by one telephone utility with little or no competition from
independent yellow pages publishers. YPtel then scopes the market differently
than the local telephone utility by providing one directory for areas that would
be covered by multiple telephone utility directories, offers advertising at
significantly lower prices to local businesses and offers features not included
in the telephone utility's directory, including color maps, coupons,
neighborhood and community guides, emergency listings and government listings.
For example, in the Salt Lake City market, YPtel produces one directory that
provides the same market coverage as four directories distributed by the local
telephone service provider, U S West Corporation. YPtel includes white
pages listings for local businesses and residences in its directories.
In 1998, YPtel produced 16 regional directories generating revenues of
$33.0 million with a total circulation of more than 2.4 million, as well as four
since-discontinued community directories in Salt Lake City, Utah, which had
generated 1998 revenues of $0.2 million. Of YPtel's 16 regional directories,
nine were in Washington, three were in Oregon, three were in Utah and one was in
Arizona. YPtel distributed its first directory in the Portland, Oregon market in
May 1999 with a circulation of approximately 400,000. YPtel has recently
commenced canvassing the Seattle, Washington market and plans to distribute its
first directory in that market with an anticipated circulation of approximately
750,000 in 2000.
Yellow pages marketing is a direct sales business which requires both
servicing of existing accounts and developing new customers. Repeat customers
comprise YPtel's core account base and a number of these customers have
advertised in YPtel's directories for many years. On average, since 1988,
accounts representing 82.7% of the prior year's local advertising revenues have
renewed their advertising program in the current edition of each directory.
YPtel employs two regional sales managers who, together with specific book
managers, are responsible for supervising the activities of YPtel's account
executives. Account executives generate all of YPtel's revenues and are
responsible for servicing existing advertising accounts and developing new
accounts within their assigned areas. Revenue is primarily derived from local
and regional advertisers. A smaller amount of revenue is derived from national
accounts.
The following table outlines certain sales and marketing statistics relating
to YPtel:
<TABLE>
<CAPTION>
1999 1998 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Number of Accounts................................ 31,852 29,065 26,210 25,095
Circulation....................................... 2,886,000 2,400,000 2,216,000 2,005,000
</TABLE>
YPtel enjoys copyright protection with respect to the compilation of each of
its directories. This copyright protection is registered when the directories
are produced. In addition, YPtel has registered trademark protection for "The
Only Book" in the United States and is in the process of registering trademark
protection for YPtel Corporation and the respective logo in the United States
and Canada. YPtel has registered the trade name "Regional Telephone Directory"
in the jurisdictions in which it operates. YPtel has also registered a number of
Internet domain names including: yptel.com, yptel.net, and yptel.org.
YPtel's day-to-day operations, including all order processing, art
production, credit and collections and management training functions, are
conducted at its 16,700 square foot leased facility in Tacoma,
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Washington. In addition to its corporate head office in Toronto, Ontario and its
Tacoma facility, YPtel operates 16 leased satellite sales offices throughout
Washington, Oregon, Utah and Arizona.
YPtel's production facilities currently produce 17 regional directories.
Management estimates that the facilities can increase production volume by two
to three times by adding additional shifts to the existing facilities. YPtel
contracts with third party vendors to print its directory and to distribute
directories to each business and residence in its market.
EMPLOYEES AND LABOR RELATIONS
As of December 31, 1999, YPtel had 373 employees, of which 191 are involved
in the sales function as account executives. In June 1998, union certification
was granted to sales personnel at three of YPtel's offices in Washington. YPtel
is currently negotiating a collective bargaining agreement with the
Communication Workers of America for these employees. Management believes that
relations with YPtel's employees are good.
COMPETITION
YPtel competes largely with telephone utilities and, to a lesser extent,
other independent yellow pages publishers. YPtel's largest competitors in its
markets are US West and GTE Corporation. There are no significant independent
publishers in YPtel's current markets.
Competitive local exchange carriers are telecommunications companies that
compete with local telephone utilities. Some competitive local exchange carriers
compete with YPtel by partnering with or acquiring independent publishers to
allow their existing sales force to market a more complete complement of
telecommunication services and to create or strengthen their brand name. One
such carrier, McLeod USA Publishing Company, has recently acquired independent
publishers within its service areas. YPtel believes that as competition to
provide local telephone service in the United States matures, the presence of
competitive local exchange carriers in the yellow pages directory business will
increase.
WEB YP AND BIG STUFF
Big Stuff designs and produces websites, which are marketed to Web YP's
network of yellow and white pages publishers. The websites are subsequently
hosted by Web YP. Web YP then features the customer in the WorldPages.com
directory and promotes the websites to many of the major search engines.
The mission of Web YP is to facilitate transactions between buyers and
sellers worldwide by establishing a premier Internet, print and telephony-based
yellow pages. To accomplish this objective, Web YP has established
WorldPages.com, a website intended to bring buyers and sellers together to
transact business. WorldPages.com intends to capitalize on the competitive
advantage of having its dedicated sales agents assisting their advertisers' move
into e-commerce and related web-hosted products.
Web YP, through its Worldpages.com website, hosts and promotes branded
websites and an on-line internet directory search engine for consumers and
business users. The WorldPages.com on-line search engine has the white and
yellow pages directory content at its core. Users can search for basic name,
address and telephone numbers for U.S. and Canadian white and yellow pages
listings, plus related content such as location mapping and driving directions.
The website also includes weather forecasts, directories of toll free numbers,
e-mail address directories, international directories, government information
directories and related yellow pages guidelines for categories including
restaurants, computers, attorneys, entertainment, travel and automotive. The
website also contains links to sites containing news, stock quotes, auctions and
newspaper style classified advertisements. PC MAGAZINE
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<PAGE>
named WorldPages.com one of the top 100 websites in January 1999. Web YP also
hosts more than 125,000 websites. Web YP also has established a series of
partnerships with independent yellow pages publishers to re-sell advertising
services to small and medium-sized businesses.
Web YP provides Internet advertising products and website hosting services
to small businesses and national advertisers. Web YP's services include domain
name registration and assisting its customers with branding their products and
services.
Big Stuff creates custom business websites for advertisers, including
graphics, animations, sound, video, web-based catalogues and brochures, and
electronic commerce capabilities. Big Stuff designed and built the website for
the Association of Directory Publishers which includes most independent print
yellow and white pages directory publishers in the United States. Big Stuff
produces websites for professional sports teams and for several chambers of
commerce. Earlier in 1999, the website produced by Big Stuff for the Amarillo
Rattlers of the World Professional Hockey League was recently named the best
hockey website by on-line hockey magazine IN THE CREASE.
Big Stuff also services traditional print yellow pages publishers through
its pre-press operations including coloring of print ads and designing full
color speculative advertisements for sales canvasses.
WorldPages' primary sales channel is through relationships with independent
print yellow pages publishers. The indirect sales force strategy leverages an
established sales force from these reseller publishers. Yellow pages publishers
have a proven ability to sell and have broader advertiser category coverage and
advertiser penetration compared with alternative sales channels such as
newspapers or magazines. Web YP has developed an extensive network of resellers
who publish directories that are distributed to homes and businesses.
STRATEGIC RELATIONSHIPS
In June 1999, Web YP entered into an agreement with Excite, Inc., a
wholly-owned subsidiary of At Home Corporation, to provide yellow pages
directories to Excite's users and for Web YP to maintain a co-branded website.
Excite's position as one of the leading internet search engines has increased
the amount of traffic on the WorldPages.com website. WorldPages' contract with
Excite expires by its terms in the near future. WorldPages is negotiating with
Excite regarding the contract and is hopeful that it will reach an agreement
with Excite to renew the contract.
In April 1999, Web YP announced a strategic alliance with Microsoft
Corporation designed to integrate the WorldPages.com directory into the
Microsoft Internet Explorer search capabilities. The directory is intended to
enable users of Microsoft Internet Explorer version 5.0, as well as older
versions 3.0 and 4.0, to access WorldPages.com to search for business, people
and government listings throughout the U.S. and around the world by clicking on
"yellow pages." The user is then able to choose WorldPages.com from among other
sites. The Microsoft alliance is not exclusive but allows users of Microsoft
Internet Explorer to have convenient access to the WorldPages.com website to
conduct searches.
Web YP and Big Stuff have expanded the WorldPages.com brand through these
strategic relationships, as well as some content and distribution deals that
have increased traffic to the website and provided WorldPages.com users a
broader range of content and services. Specifically, through an agreement with
Net2Phone, a user can place a telephone call over the Internet to any listed
phone number found in the Worldpages.com directory from their computer after
downloading Net2Phone's enabling software. No additional hardware is required.
Also in April 1999, Web YP became a member of SignalSoft's local.info-TM-
Content Alliance. This marked Web YP's entry into the wireless communications
arena. The content provider program combines SignalSoft's location-based
software with a range of localized information provided by the numerous alliance
members. These pre-packaged services allow cellular and PCS network operators to
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<PAGE>
provide a variety of local information services to their subscribers. It is
intended that as part of the Content Alliance, Web YP's will be able to offer
wireless subscribers access to an abundance of white and yellow pages listings,
e-mail addresses, maps, weather and news locally, regionally, nationally and
internationally.
Web YP and Big Stuff do not receive any revenues through these strategic
relationships; rather, these relationships are intended to build the
WorldPages.com brand and increase traffic to the website by linking the website
to high profile business partners like Microsoft, Excite and Net2Phone.
ASSET PURCHASE AND LICENSE AGREEMENT BETWEEN WEB YP AND WORLD PAGES, INC.
Web YP, as assignee of Fredrick Klein, is party to an Asset Purchase and
License Agreement dated as of September 19, 1997 with World Pages, Inc. ("WPI")
pursuant to which Web YP purchased certain tangible personal property,
contracts, the domain name "www.worldpages.com" and the seller's common law
rights to the trademarks "WorldPages," "Find the World Here!," and related logos
and marks. Pursuant to this agreement, Web YP licenses from WPI, under an
irrevocable, non-exclusive, perpetual, worldwide, fully-paid and royalty-free
license, the directory site software originally used for the development,
operation and maintenance of the WorldPages.com website. Web YP also licenses
graphical site elements of the website from WPI, on an exclusive basis, even as
to WPI. Web YP has all right, title and interest to all modifications and
derivative works it creates. Pursuant to this agreement, Web YP licenses back to
WPI the "buyer improvements," which means any enhancements, improvements, error
corrections or derivative works based upon or made using the directory site
software that were created by or for Web YP within one year of the closing date,
i.e., on or before September 18, 1998. WPI has all right, title and interest in
all modifications and derivative works it creates from the buyer improvements.
In September 1999, WPI requested a copy of the buyer improvements from Web
YP. Web YP has complied with this request. Web YP is not required to license to
WPI the derivatives and modifications of the directory site software developed
by Web YP after the one-year anniversary of the closing date, i.e. after
September 18, 1998. The directory site software used to develop, operate and
maintain the WorldPages.com website as it exists today was primarily developed
by Web YP after September 18, 1998. WPI has offered to sell Web YP the software
that Web YP currently licenses from WPI, and Web YP has declined. WPI has
indicated that it may seek to sell this software to a third party, including
competitors of Web YP.
Pursuant to the WPI agreement, Web YP acquired the seller's common law
rights to the trademark, WorldPages. Prior to the date of this agreement, the
seller had applied for registration of the trademark, WorldPages, with the U.S.
Patent and Trademark Office. Its application was rejected. In April 1999, Web YP
applied for registration of the service mark WorldPages with the U.S. Patent and
Trademark Office. On October 4, 1999 Web YP received notice of an office action
dated September 30, 1999 from the U.S. Patent and Trademark Office stating that,
while the examining attorney has found no similar registered mark which would
bar registration, Web YP's application might be barred because there is a
pending, previously filed application for a similar mark. Web YP has
subsequently discovered that the cited pending application has been abandoned
and has requested that the U.S. Patent and Trademark Office pass Web YP's
application to publication. There can be no assurance, however, that Web YP will
be issued the registration for the WorldPages mark. Web YP has recently applied
for registration of the WorldPages mark in Canada and the European Community.
As part of the WPI transaction, Web YP issued WPI a warrant to purchase 7.5%
of the common stock of Web YP, calculated on a fully diluted basis, for an
exercise price of $1,000. The warrant became exercisable as a result of the
acquisition of Web YP by WorldPages. Prior to the acquisition WPI expressed to
Web YP and Big Stuff its dissatisfaction with the terms of the acquisitions of
Web YP and Big Stuff by WorldPages. WPI has asserted that Mr. O'Neal's interests
as an executive officer,
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director and shareholder of WorldPages conflict with his interests with respect
to Web YP and Big Stuff, to the detriment of the rights of WPI as the holder of
a warrant to purchase common stock of Web YP. Web YP and Big Stuff informed WPI
of their belief that this transaction was in the best interests of all parties,
including the stockholders, warrant holders and optionees of Web YP, and that
Messrs. O'Neal and Reid fulfilled all duties they may have owned to Web YP and
its stockholders, warrant holders and optionees. WPI has stated that it might
take unspecified action with respect to these transactions, but, to the
knowledge of Web YP, Big Stuff Messrs. O'Neal and Reid and WorldPages, it has
not done so as of the date of this prospectus.
FACILITIES
Web YP is headquartered in San Francisco, California and conducts the
front-end executive functions associated with internet directory sales,
promotions and strategic relationships.
Big Stuff is headquartered in Amarillo, Texas and supports the
WorldPages.com print and online directories, and conducts the back-end functions
associated with the operation of the WorldPages.com website including all
aspects of website design and production.
EMPLOYEES AND LABOR RELATIONS
As of December 31, 1999, Web YP had 17 employees and Big Stuff had 31
employees. Of these, a combined total of 17 are involved in sales and marketing,
executive and administrative functions, and 31 are involved in website design
and production. None of Web YP's or Big Stuff's employees is represented by a
union. Management of each company believes that relations with their respective
employees are good.
DISCONTINUED BUSINESSES OF WORLDPAGES AND DISPOSAL OF TELECOMMUNICATIONS
OPERATIONS
WorldPages completed its initial public offering in February 1998, at which
time it acquired eight telecommunications service providers and a yellow pages
publisher. WorldPages established a regional competitive local exchange carrier
that provided integrated communications services to business and residential
customers located in the Midwestern region of the United States. WorldPages'
integrated communications services included local, long distance, Internet
access, cellular and enhanced voice and data services. WorldPages'
telecommunications operations focused primarily on small and medium size
businesses in Kansas, Minnesota, Nebraska, North Dakota, Oklahoma, South Dakota
and Texas. As of December 31, 1998, WorldPages had over 125,000 local access
lines in service and provided integrated communications services to over 60,000
customers.
Prior to the sale of its telecommunications services operations on November
19, 1999, WorldPages owned and operated telecommunications networks that
included six digital switches in Kansas, Oklahoma, South Dakota and Texas.
WorldPages' local exchange network architecture was designed to allow it or any
purchaser of WorldPages' telecommunications operations, to provide services to
customers within a targeted 350-mile radius of each switch location. WorldPages
selected a number of central office locations of the incumbent local exchange
carriers for interconnection with its local exchange switches through physical
collocation of its transmission electronics in the ILEC central offices and at
WorldPages' own interconnection locations, or points of presence. In areas in
which WorldPages' telecommunications operations did not have network equipment,
its telecommunications operations resold the communications services of
providers such as Southwestern Bell Telephone Company, U S West Communications,
Inc. and others.
Before restatement to reflect its telecommunications segment as discontinued
operations, WorldPages had pro forma revenues of $114.2 million and pro forma
earnings before interest, taxes, depreciation, amortization and stock-based
compensation of $.4 million for the year ended December 31, 1998. WorldPages'
telecommunications operations were operated primarily through four
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<PAGE>
subsidiaries. In addition, WorldPages employed assets in the telecommunications
business that it held directly.
WorldPages was required to abandon its plans when WorldPages found itself
unable to access the private equity or debt markets to fund its
telecommunications operating losses, working capital requirements and the
construction of its local switching network, a key component of its strategic
business plan. In April 1999, after considering the alternatives available to
it, WorldPages embarked on its strategy to reengineer itself into a yellow pages
publisher and Internet directory company and to divest itself of its
telecommunications operations.
In connection with the acquisitions and the sale of WorldPages'
telecommunications operations, certain officers, employee directors and
management of WorldPages have received various severance payments and incentive
compensation. The amount and timing of these payments were subject to the
persons achieving certain performance objectives and remaining in their
employment capacities for a specified time period. These compensation
arrangements were established to retain key individuals to ensure satisfactory
execution of the proposed acquisitions, the sale of the telecommunications
operations and their related transitions. Additionally, 35 other key managers
and key employees of WorldPages were granted retention packages in order to
ensure that adequate human resources remained available until such time that the
telecommunications operations were transitioned to Ionex Telecommunications.
Under the retention program, each individual received additional compensation
equivalent to their existing base salaries and wages for each day worked from
the commencement of the retention program in May 1999 through the date of their
release, provided that the individual performs their assigned responsibilities
through that date. The aggregate amount of these severance payments was
approximately $1.9 million. WorldPages is also contractually obligated to pay
$400,000 to Mr. Cragg and $370,000 to Mr. Zimmer pursuant to their employment
agreements. In addition, WorldPages paid $133,407 to Mr. Feist and $319,217 to
Mr. Thurman pursuant to their employment agreements as severance payments.
LEGAL PROCEEDINGS
DISPUTE WITH MCI WORLDCOM
In August 1996, one of WorldPages' subsidiaries, Valu-Line entered into a
written agreement with MCI Communications Corporation under which, for a fee,
MCI would provide access to Valu-Line so that Valu-Line could provide services
as a long distance carrier. After execution of the written agreement, service
failures by MCI occurred. To address the service failures and MCI relocation of
circuits serving Valu-Line, representatives of Valu-Line and MCI agreed upon a
reduced fee structure and revised network architecture in order to provide
restitution to Valu-Line and to address the service quality issues. The
resulting agreement reflecting the reduced fee structure was never set forth in
writing.
Both before and after WorldPages acquired Valu-Line, the payments made under
the Valu-Line contract with MCI were in accordance with the modified agreement.
In April-May 1999, after the acquisition of MCI by WorldCom, Inc., MCI WorldCom,
Inc., as the owner of the successor-in-interest to MCI, took the position that
WorldPages owed $2.9 million in delinquent amounts under the original written
contract, ignoring the modification to the contract between the parties. MCI
WorldCom has not taken any legal action against WorldPages or Valu-Line. If this
matter is not resolved through discussions, management's response to this claim
is to actively pursue WorldPages' rights and defenses in arbitration.
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LORETTA R. CROSS, CHAPTER 7 TRUSTEE FOR TOTAL NATIONAL TELECOMMUNICATIONS,
INC. V. LOU ZANT & TELECOM RESOURCES, INC.
Loretta R. Cross, Chapter 7 Trustee for Total National Telecommunications,
Inc., filed an Adversary Proceeding July 15, 1999 against Lou Zant and Telecom
Resources, Inc., in the United States Bankruptcy Court for the Southern District
of Texas. Telecom Resources is a wholly-owned subsidiary of WorldPages and is
one of the telecommunications operations to be sold to Ionex Telecommunications.
See "Sale of WorldPages' Telecommunications Operations to Ionex
Telecommunications." The trustee's complaint seeks recovery of $2.6 million from
Telecom Resources as a fraudulent conveyance under the Bankruptcy Code. The
complaint is based on an October 1, 1996 stock purchase agreement in which Total
World Telecommunications, Inc., the parent of Total National Telecommunications,
agreed to purchase all the stock of NETTouch Communications, Inc., from Telecom
Resources and Mr. Zant. The trustee's complaint alleges that Total National
Telecommunications provided the funds to Total World Telecommunications to
complete and close the stock purchase and that Total National Communications
never received any consideration for its funds. Telecom Resources intends to
vigorously defend the action.
As a telecommunications services provider, WorldPages and the subsidiaries
through which WorldPages offered telecommunications services were subject to
claims and lawsuits arising in the ordinary course of business and typical of
businesses operating in the telecommunications services industry. According to
the terms of the stock purchase agreement, as amended, between WorldPages and
Ionex Telecommunications, WorldPages has agreed to remain liable and to
indemnify Ionex Telecommunications for any losses, costs, and expenses arising
out of any of these claims or lawsuits which WorldPages either knew or should
have known existed prior to the closing of the sale of the telecommunications
subsidiaries. WorldPages is presently defending, investigating and resolving
several claims and lawsuits. WorldPages believes that its liability, if any,
under these claims and lawsuits, in the aggregate, is not material. For
additional information regarding the stock purchase agreement and the sale of
the telecommunications operations, see the section of this prospectus entitled
"Sale of WorldPages' Telecommunications Operations to Ionex Telecommunications."
In addition, as is the case with many companies, WorldPages faces exposure
to actual or potential claims and lawsuits involving its business and assets.
WorldPages is currently party to a number of lawsuits consisting of ordinary,
routine litigation incidental to the business of WorldPages. WorldPages believes
that any liabilities resulting from such claims should not have a material
adverse effect on WorldPages' financial position, liquidity or results of
operations.
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MANAGEMENT OF WORLDPAGES
The directors and executive officers of WorldPages, their ages, positions
with WorldPages and their business experience as of the closing of the
acquisitions of YPtel, Web YP and Big Stuff in February 2000 are set forth
below.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH WORLDPAGES AND PRIOR BUSINESS EXPERIENCE
- ---- --- ------------------------------------------------------
<S> <C> <C>
George Anderson 61 Director of WorldPages beginning February 2000; term expires
at annual meeting of stockholders in 2000. Director of YPtel
since November 1998; Managing director of Country Club Stock
LLC, a gold products promotion company, since 1995; prior
thereto, Mr. Anderson held various position with the NYNEX
Information Resources Co. since 1965, most recently as Vice
President of Sales and President of National Marketing
Services.
Rod K. Cutsinger 56 Founder of WorldPages; Director of WorldPages since
November 1998 and from its inception in September 1997
until May 1998; term expires at the annual meeting of
stockholders in 2000. Chairman of the Board of Directors.
Equity interest owner of CPFF and Consolidation Partners.
Since 1970, Mr. Cutsinger has been an investor in other
business.
Robert Flynn 66 Director of WorldPages beginning February 2000; term expires
at the annual meeting of stockholders in 2001. Director of
YPtel since November 1998. Retired. From 1996 to 1997,
Senior Advisor for CSC Index, a management consulting firm.
From June 1990 to December 1995, Chairman and Chief
Executive Officer of Nutrasweet Company. Director of
Northwestern University; STANTEC and Applied
Microbiology, Inc.
Wilmot Matthews 63 Director of WorldPages beginning Febuary 2000; term expires
at the annual meeting of stockholders in 2002. Chairman of
the Board of YPtel since November 1998. President of Marjad
Inc., a personal investment company. Director of Renaissance
Energy Ltd., Denbury Resources Inc. and Vice Chairman of the
Board of Nesbitt Burns Inc. from 1994 until 1996
David M. Mitchell 51 Director of WorldPages beginning February 1998; term expires
at the annual meeting of stockholders in 2001. Investor in
telephone businesses since 1982 when he founded National
Telephone Exchange which he sold, along with two other
telephone companies, to U.S. Long Distance in 1991. Former
co-owner of Valu-Line of Longview, Inc., one of WorldPages'
telecommunications subsidiaries, until it was acquired by
WorldPages in February 1998.
Richard O'Neal 58 Chairman and Chief Executive Officer of WorldPages beginning
November 9, 1998; term expires at the annual meeting of
stockholders in 2002 and director and President -- Directory
Services Group of WorldPages, since February 18, 1998;
founder of Great Western Directories in 1984 and which was
sold to WorldPages in 1998.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
NAME AGE POSITION WITH WORLDPAGES AND PRIOR BUSINESS EXPERIENCE
- ---- --- ------------------------------------------------------
<S> <C> <C>
Michael A. Pruss 34 Chief Financial Officer and Secretary of WorldPages since
October 1, 1999; Vice President of Advanced since
April 1998 and Controller of Advanced from April 1998 to
September 30, 1999. Corporate Controller for Falcon
Products, Inc. from January 1996 to April 1998. Various
position with Argosy Gaming Company from April 1993 to
January 1996, and most recently as Director of Financial
Reporting. Auditor with Arthur Andersen LLP from July 1987
to April 1993.
</TABLE>
RESTRUCTURING OF WORLDPAGES BOARD OF DIRECTORS AND APPOINTMENT OF DIRECTORS
Under the Amended and Restated YPtel Agreement, the Amended and Restated Web
YP, Inc. Agreement and the Amended and Restated Big Stuff, Inc. Agreement, the
parties agreed to restructure the board of directors of WorldPages immediately
following the closing of the acquisitions of YPtel, Web YP and Big Stuff. More
specifically, the agreements provided that three directors were to be chosen by
the board of directors of WorldPages prior to the acquisitions of YPtel, Web YP
and Big Stuff and three directors were to be chosen by Imperial Capital Limited,
a Canadian company that acted as custodian for certain of the YPtel
shareholders. When two experienced internet executives are identified, the
reconstituted WorldPages board would increase the size of the board and appoint
these two individuals to the WorldPages board.
The Restated Certificate of Incorporation of WorldPages provides for a
classified board divided into three classes whose terms expire at different
times. Therefore, the agreements provided for the following.
- one director to be chosen by WorldPages and one director to be chosen by
Imperial Capital would serve for three year terms
- one director to be chosen by WorldPages and one director to be chosen by
Imperial Capital would serve for two year terms
- one director to be chosen by WorldPages and one director to be chosen by
Imperial Capital would serve for a one year term.
The agreements further provided that the directors to be designated by the
WorldPages board prior to the acquisitions would be Rod K. Cutsinger, David M.
Mitchell and Richard O'Neal and the directors to be chosen by Imperial Capital
would be George Andrews, Wilmot Matthews and Robert Flynn.
Prior to the closing of the acquisition of YPtel, Web YP and WorldPages, the
members of the Worldpages board except for Messrs. Cutsinger, Mitchell and
O'Neal, resigned from the WorldPages board contingent upon the closings
occurring. This board appointed Messrs. Anderson, Flynn and Matthews as
replacements to serve out the remainder of the terms of the directors they were
replacing. Immediately after closing, the aforementioned resignations became
effective as did the appointment of the replacements for the resigned directors.
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The classes of the current WorldPages board and the members serving in those
classes are set forth below.
<TABLE>
<CAPTION>
<S> <C>
Term Expiring at the Annual Meeting Rod K. Cutsinger
of
Stockholders in 2000 George Anderson
Term Expiring at the Annual Meeting David M. Mitchell
of
Stockholders in 2001 Robert Flynn
Term Expiring at the Annual Meeting Richard O'Neal
of
Stockholders in 2002 Wilmot Matthews
</TABLE>
The Amended and Restated YPtel Agreement, the Amended and Restated Web YP
Agreement and the Amended and Restated Big Stuff Agreement provide that the
parties to them acknowledge that the agreements are not intended to, and do not,
except with regard to the initial WorldPages board following the acquisitions,
give any party a right to designate a certain individual or a certain number of
individuals as nominees to the board of directors of WorldPages.
In the agreement by which WorldPages acquired Valu-Line of Longview, Inc.,
one of WorldPages' telecommunications subsidiaries, in February 1998, WorldPages
agreed to place David M. Mitchell on the WorldPages board. The agreement also
obligated WorldPages' board to place Mr. Mitchell on its slate of nominees for
election by the WorldPages common stockholders prior to the expiration of his
then existing term, so long as Mr. Mitchell owns at least 100,000 shares of
common stock at the time of renomination. The WorldPages board last nominated
Mr. Mitchell and he was last elected to a three year term as a director at the
1998 Annual Meeting.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of WorldPages' common stock as of December 31, 1999, except
as noted below, by:
- each director of WorldPages, including the two nominees for election as
directors;
- each of WorldPages' executive officers and former executive officers named
in the Summary Compensation Table, and
- all directors and executive officers of WorldPages as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED(1)
-----------------------------------------------------------------------------------
AT DECEMBER 31, 1999 AFTER GIVING EFFECT TO THE TRANSACTIONS
---------------------------------------- ----------------------------------------
NUMBER OF SHARES PERCENT OF WORLDPAGES NUMBER OF SHARES PERCENT OF
OF WORLDPAGES COMMON STOCK OF WORLDPAGES WORLDPAGES
NAME COMMON STOCK OUTSTANDING COMMON STOCK COMMON STOCK(15)
- ---- ---------------- --------------------- ----------------- --------------------
<S> <C> <C> <C> <C>
George Anderson(2)....... 0 * 10,000 *
Robert F. Benton(3)...... 47,000(4) * 47,000 *
James F. Cragg........... 422,755(5) 2.0 422,755 1.0
Rod K. Cutsinger......... 5,166,664(6) 25.2 5,166,664 11.8
Todd J. Feist(3)......... 321,429(7) 1.6 321,429 *
Robert Flynn(2).......... 0 * 5,000 *
Wilmot Matthews(2)....... 0 * 269,108 *
David M. Mitchell........ 213,144(8) 1.0 213,144 *
Richard O'Neal........... 1,095,540(9) 5.2 5,308,419(14) 11.9
Michael A. Pruss......... 28,362(10) * 28,362 *
Fred L. Thurman(3)....... 318,745(11) 1.6 318,745 *
William H. Zimmer III.... 176,000(12) * 176,000 *
Executive officers and
directors as a group
(12 individuals)....... 7,789,639(13) 35.2 12,297,026(13) 26.9
</TABLE>
- ------------------------
* Percentage of shares beneficially owned is less than 1.0%.
(1) Beneficial ownership includes shares of WorldPages common stock subject to
options, warrants, rights, conversion privileges or similar obligations
exercisable within 60 days for purposes of computing the ownership
percentage of the person or group holding such options, warrants, rights,
privileges or other obligations. Except as noted, each stockholder has sole
voting and dispositive power with respect to all shares of WorldPages common
stock beneficially owned by such stockholder.
(2) Messrs. Anderson, Flynn and Matthews will become directors of WorldPages
upon the effectiveness of this registration statement. Upon the
effectiveness of this registration statement, Messrs. Anderson, Flynn and
Matthews will receive warrants to purchase 10,000; 5,000; and 30,000 shares
of common stock, respectively.
(3) Messrs. Benton, Feist and Thurman are current directors of WorldPages,
however, they will resign upon the effectiveness of this registration
statement.
(4) Includes 45,000 shares of common stock subject to stock options that are
immediately exercisable.
(5) Includes 337,500 shares of common stock subject to stock options that are
immediately exercisable.
(6) Includes 4,867,921 shares of common stock owned by Consolidation Partners
Founding Fund L.L.C., a limited liability company in which Mr. Cutsinger and
his wife beneficially own of record 80% of the interests. The remaining
interests are beneficially owned by trusts for the benefit of the
Mr. Cutsinger's two adult children over which Rod K. Cutsinger has sole
voting and dispositive power.
(7) Includes 250,000 shares of common stock subject to stock options that are
immediately exercisable.
(8) Includes 12,000 shares of common stock issuable upon exercise of a warrant
at $14.00 per share and 20,000 shares of common stock subject to stock
options that are currently exercisable.
(9) Includes warrants to purchase 658,040 shares of common stock. A trustee for
Mr. O'Neal's children owns 189,020 of these non-transferable, ten-year
warrants. Also includes 37,500 shares of common stock subject to stock
options that are immediately exercisable.
52
<PAGE>
(10) Includes 25,000 shares of common stock subject to stock options that are
immediately exercisable.
(11) Includes 13,512 shares of common stock issuable upon exercise of a warrant
at $14.00 per share and 39,498 shares of common stock issuable upon
conversion of a 10% convertible note issued by WorldPages, convertible at
$14.00 per share. Also includes 75,000 shares of common stock subject to
stock options that are immediately exercisable.
(12) Includes 150,000 shares of common stock subject to stock options that are
immediately exercisable.
(13) Includes 1,708,050 shares of common stock which such persons have the right
to acquire upon the exercise of options and warrants that are immediately
exercisable.
(14) Includes 4,212,879 additional shares that Mr. O'Neal will receive upon the
effectiveness of this registration statement as a result of his direct
ownership of companies to be acquired and as a result of indebtedness owed
to him by the Company. Also includes options and warrants described in
(9) above.
(15) The total shares outstanding after the Transactions include approximately
23,500,000 shares of WorldPages common stock that will be issued in
connection with the Transactions but does not include any options or
warrants issued in connection with the Transactions
The following table sets forth information regarding all persons known to
WorldPages to be the beneficial owner of more than five percent of the common
stock of WorldPages as of December 31, 1999.
<TABLE>
<CAPTION>
PERCENTAGE OF CLASS
NUMBER PERCENTAGE AFTER GIVING EFFECT
NAME AND ADDRESS OF SHARES OF CLASS TO THE TRANSACTIONS
- ---------------- --------- ---------- -------------------
<S> <C> <C> <C>
Rod K. Cutsinger......................... 5,166,664(1) 25.2% 11.8%
3355 West Alabama, Suite 580
Houston, Texas 77098
Consolidation Partners Founding Fund
L.L.C.................................... 4,867,921 24.5% 11.1%
3355 West Alabama, Suite 580
Houston, Texas 77098
FMR Corp.(2)............................. 1,341,400 6.6% 3.1%
82 Devonshire Street
Boston, Massachusetts 02109
</TABLE>
- ------------------------
(1) Includes 4,867,921 shares of common stock owned by Consolidation Partners
Founding Fund LLC, a limited liability company in which Mr. Rod K. Cutsinger
and his wife beneficially own of record 80% of the interests. The remaining
interests are beneficially owned by trusts for the benefit of the
Cutsingers' two adult children, over which Mr. Rod Cutsinger has sole voting
and dispositive power.
(2) The information in this footnote is provided pursuant to Schedule 13G dated
February 1, 1999 filed with the SEC by FMR Corp., Edward C. Johnson 3d,
Abigail P. Johnson and Fidelity Management and Research Company, a
wholly-owned subsidiary of FMR and an investment advisor registered under
Section 203 of the Investment Advisers Act of 1940. Fidelity Management
reports the beneficial ownership of the 1,341,400 shares of WorldPages
common stock as a result of acting as investment adviser to various
investment companies registered under Section 8 of the Investment Company
Act of 1940. The investment company which owns the 1,341,400 shares of
WorldPages common stock is Fidelity Capital Appreciation Fund.
The Schedule 13G reports that "Edward C. Johnson 3d, FMR Corp., through its
control of Fidelity and the funds each has sole power to dispose of the
1,341,400 shares owned by the Funds. Neither FMR nor Edward C. Johnson 3d,
Chairman of FMR Corp., has the sole power to vote or direct the voting of
the shares owned directly by the Fidelity Funds, which power resides with
the Funds' Boards of Trustees. Fidelity carries out the voting of the shares
under written guidelines established by the Funds' Boards of Trustees."
The Schedule 13G also reports that through the ownership of voting stock of
FMR and the execution of a voting trust agreement among the members of the
Johnson family who own FMR voting stock, those family members, including
Mr. Edward C. Johnson and Ms. Abigail P. Johnson who is a director of FMR,
may be deemed, under the Investment Company Act of 1940, to form a
controlling group with respect to FMR.
The business address of Fidelity Management, Fidelity Capital, Edward C.
Johnson and Abigail P. Johnson is 82 Devonshire Street, Boston,
Massachusetts 02109.
53
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------------
AWARDS PAYOUTS($)
ANNUAL COMPENSATION ----------------------- ----------
---------------------------------------------- (F) (G)
(E) RESTRICTED SECURITIES (H) (I)
(A) OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND (B) (C) (D) COMPENSATION AWARDS OPTIONS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($) ($) ($) ($) ($)
- -------------------------- -------- --------- -------- ------------ ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Richard O'Neal 1999 300,000 -0- -0- -0- -0- -0- -0-
Chairman, Chief 1998 300,000 -0- -0- -0- 225,000(1) -0- -0-
Executive Officer
and President
Michael A. Pruss(2) 1999 100,000 50,000 -0- -0- 50,000 -0- 2,250(7)
Vice President 1998 67,897 -0- -0- -0- 75,000(1) -0- 462(7)
Chief Financial Officer
James F. Cragg(3) 1999 199,038 -0- -0- 223,060 50,000 -0- -0-
Former President and 1998 175,000 87,500 -0- -0- 137,500(4) -0- 808(7)
Chief Operating 1997 -0- 100,000 -0- -0- 425,000(5) -0- -0-
Officer
William H. Zimmer III(6) 1999 185,415 -0- 28,600 117,400 50,000(4) -0- -0-
Former Executive Vice 1998 185,000 47,500 -0- -0- 175,000 -0- 427(7)
President and Chief 1997 -0- 50,000 -0- -0- 350,000(5) -0- -0-
Financial Officer
</TABLE>
- --------------------------
(1) Includes original stock option awards for 150,000 shares to Mr. O'Neal and
50,000 shares to Mr. Pruss which were cancelled and replaced with new
options in connection with WorldPages' repricing on December 13, 1998. The
replacement options for 75,000 shares to Mr. O'Neal and 25,000 shares to Mr.
Pruss are also included in the total 1998 option awards.
(2) Mr. Pruss was appointed Vice President, Chief Financial Officer, Secretary
and Treasurer effective October 1, 1999. Prior thereto he was Vice President
and Controller since April 1998.
(3) Mr. Cragg was promoted from executive vice president sales and marketing to
president and chief operating officer in November 1998 and subsequently
resigned from those positions and from the WorldPages board effective
June 30, 1999. The value of Mr. Cragg's restricted stock awards at
December 31, 1999, was $517,940.
(4) These options were awarded on December 13, 1998, to replace non-qualified
stock options to purchase twice as many shares originally granted to the
named executive officer.
(5) Stock option awards for 275,000 shares to Mr. Cragg and for 350,000 shares
to Mr. Zimmer granted in 1997 were cancelled and replaced by the options
described in footnote (4) above.
(6) Mr. Zimmer resigned from his position and from the WorldPages board
effective September 30, 1999. "Other Annual Compensation" for Mr. Zimmer in
1999 represents taxable reimbursement of relocation costs. The value of Mr.
Zimmer's restricted stock awards at December 31, 1999 was $272,600.
(7) "All Other Compensation" represents Company matching contributions under its
Employee Stock Purchase Plan and 401(k) Plan.
54
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information as to options grants in fiscal 1999
to the persons named in the Summary Compensation Table.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------- VALUE AT ASSUMED
(B) (C) ANNUAL RATES OF STOCK
NUMBER OF % OF TOTAL PRICE APPRECIATION FOR
SECURITIES OPTIONS (D) OPTION TERM(1)
UNDERLYING GRANTED TO EXERCISE OR (E) ----------------------
(A) OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION (F) (G)
NAME GRANTED # FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
---- ---------- ------------ ----------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Richard O'Neal............... -0- N/A N/A N/A N/A N/A
Michael A. Pruss............. 50,000 12.7 9.00 11/18/09 283,003 717,184
James F. Cragg............... 50,000 12.7 5.88 6/30/00 21,485 43,704
William H. Zimmer III........ 50,000 12.7 5.88 9/30/00 25,388 51,915
</TABLE>
- ------------------------
(1) The dollar amounts under these columns are the result of calculations at the
5% and 10% rates set by the SEC and therefore are not intended to forecast
future appreciation, if any, of the stock price of WorldPages. WorldPages
did not use an alternative formula for a grant date valuation, as WorldPages
is not aware of any formula that will determine with reasonable accuracy a
present value based on future unknown factors.
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR
VALUES
The following table provides information on the number and value of each
such executive's unexercised options to acquire WorldPages common stock at
December 31, 1999.
<TABLE>
<CAPTION>
(D)
NUMBER OF (E)
SECURITIES UNDERLYING VALUE OF
UNEXERCISED UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FY-END(#) AT FY-END($)(2)
(B) (C) --------------------- ------------------------
(A) SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($)(1) UNEXERCISABLE UNEXERCISABLE
---- --------------- -------------- --------------------- ------------------------
<S> <C> <C> <C> <C>
Richard O'Neal............ -- -- 18,750/56,250 171,188/513,563
Michael A. Pruss.......... -- -- 25,000/50,000 228,250/231,500
James F. Cragg............ -- -- 337,500/0 3,312,375/0
William H. Zimmer III..... 75,000 337,750 150,000/0 1,369,500/0
</TABLE>
- ------------------------------
(1) Calculated using the difference between the actual sales price of the
underlying shares and the exercise price.
(2) Based on the New York Stock Exchange consolidated trading closing price of
WorldPages common stock on December 31, 1999 of $13.63.
55
<PAGE>
EMPLOYMENT AGREEMENTS
Upon their employment with WorldPages in December 1997, Messrs. Cragg and
Zimmer entered into six year long employment agreements with WorldPages
providing for their employment at annual base salaries of $175,000 and $185,000,
respectively. The agreements provided for a bonus potential equal to 100% of
base salary for Mr. Cragg and 50% of base salary for Mr. Zimmer. The agreements
also provided for the annual grant of options to purchase up to 50,000 shares of
WorldPages common stock each at the current market price on the date of grant,
if certain targets set by the compensation committee were met.
Under the terms of their respective agreements, Messrs. Cragg and Zimmer
would be entitled to their base salaries for a period of two years if either
were to resign after a change in the ownership or management of WorldPages that
significantly altered their job responsibilities or compensation. Further, under
the terms of the 1997 Stock Awards Plan under which their options were granted,
their options would vest immediately upon their resignation following a change
of control or the termination of their employment other than "with cause" as
defined.
In November 1998, after the resignation of Mr. Anthony from his position as
president and chief executive officer, Mr. Cragg was appointed president and
chief operating officer and his salary was raised to $200,000 per year. In all
other respects, his employment contract remained the same.
When the WorldPages board decided to change its business focus, strategy and
direction, the compensation committee determined that the employment
arrangements of Messrs. Cragg and Zimmer would need to be revised. The
compensation committee recognized that while both might desire to resign given
the restructuring of WorldPages' operations, it was important to provide each of
them with an incentive to remain with the company at least in the short term.
The compensation committee and ultimately the board concluded that the efforts
of Messrs. Cragg and Zimmer would be required until an agreement for the
acquisition of YPtel had been executed and interim financing intended to provide
working capital sufficient until the closing of the acquisitions had been
obtained.
In late April 1999, both Messrs. Cragg and Zimmer executed severance
agreements related to the termination of their employment and their resignations
as directors of WorldPages. The agreements that each entered were similar and
provided that:
- their new employment terms would terminate on the later to occur of:
- June 30, 1999; or
- the signing of the agreement providing for the acquisition of YPtel
by WorldPages.
- the options each had received upon their initial employment with
WorldPages and the performance options which had been awarded to each
of them would vest upon the termination of their employment;
- each had received performance options to purchase 50,000 shares of
WorldPages common stock for 1998.
- upon execution of their respective letter agreements, each would
receive restricted common stock of WorldPages that would be forfeited
if:
- the individual did not remain with WorldPages and fulfill his
employment obligations through the end of the new term; or
- the individual did not sign a mutual release and settlement
agreement with WorldPages.
- Mr. Cragg was awarded 38,000 shares of restricted stock.
- Mr. Zimmer was awarded 20,000 shares of restricted stock.
56
<PAGE>
- the exercise period of their respective options would extend until one
year from the date of the termination of their respective employment,
but no shares purchased upon exercise could be sold within ninety days
of their respective terminations;
- each would receive two years' base salary from the date of their
respective termination of employment with WorldPages; and
- each would be entitled to a performance bonus for the 1999 fiscal year
as approved by WorldPages' board of directors, on a pro-rata basis
based on the effective date of their respective terminations of
employment.
Although the interim financing with the subsidiary of Bank of America
Corporation closed May 14, 1999 and the acquisition agreements were executed
effective June 3, 1999, Mr. Cragg remained with WorldPages through June 30,
1999, at which time he resigned as president, chief operating officer and as a
director of WorldPages. Mr. Zimmer remained with WorldPages through
September 30, 1999, at which time he resigned as executive vice president, chief
financial officer, secretary and treasurer and as a director of WorldPages.
Mr. Anthony G. Capers entered into a five-year employment agreement with
WorldPages on March 31, 1998, which was amended in December 1998, providing for
an annual base salary of $160,000. Under the terms of the agreement, Mr. Capers
was appointed to the position of senior vice president/business markets and was
eligible for a cash bonus of up to $50,000. The agreement also provided for the
grant of options to purchase up to 70,000 shares of WorldPages common stock at
the IPO price of $14.00 per share. The options had terms of ten years and were
to become exercisable in one-third increments on each anniversary of the date of
grant. The options were subsequently replaced with options to purchase 35,000
shares at an exercise price of $4.50 per share in December 1998.
After the announcement of the change in WorldPages' business focus, strategy
and direction in April 1999 and in connection with the contemplated resignation
of Mr. Cragg, WorldPages management determined that the services of Mr. Capers
would be essential to run WorldPages' telecommunications operations until they
could be sold. To retain Mr. Capers, management negotiated a letter agreement
amendment to Mr. Capers' employment agreement dated May 5, 1999, naming
Mr. Capers the president and chief operating officer, which became effective
June 30, 1999, the official termination date of Mr. Cragg. In accordance with
his employment agreement, as amended, Mr. Capers received a bonus of $250,000
upon the sale of WorldPages' telecommunications operations and received $100,000
as severance as called for in his employment agreement.
In addition, Messrs. O'Neal, Feist and Thurman have entered into three, five
and five-year employment agreements that provide for base salaries of $300,000,
$140,000 and $175,000, respectively, and a bonus potential ranging from 50% to
63% of base salary. If WorldPages terminates Mr. O'Neal's employment other than
for "cause", as defined in his agreement, or if Mr. O'Neal resigns under
circumstances that he reasonably believes were contrived by Great Western to
force his resignation, or after a change in control of WorldPages, Mr. O'Neal
shall be entitled to continue to receive his base salary until the scheduled
expiration date of his employment agreement.
In connection with the sale of FirsTel and Feist Long Distance, WorldPages
paid Messrs. Thurman and Feist $319,217 and $133,407, respectively, in
settlement of WorldPages' obligations to them under their respective employment
agreements.
On November 19, 1999, Mr. Michael A. Pruss entered into an employment
agreement with WorldPages to serve as WorldPages' Chief Financial Officer. The
agreement provides for a two-year term which may be renewed for successive
one-year periods upon the mutual agreement of Mr. Pruss and WorldPages. Under
the terms of the agreement, Mr. Pruss
- Is entitled to a base salary of $130,000 per year.
57
<PAGE>
- Was granted an option to purchase 50,000 shares of WorldPages common stock
exercisable at the closing price of WorldPages common stock on the date of
grant.
- Is eligible for a cash performance bonus of up to 50% of his base salary
and additional option grants to be awarded at the discretion of the
compensation committee of the WorldPages board of directors.
- Is entitled to reasonable relocation assistance if WorldPages should
change the location of its headquarters, provided that if Mr. Pruss
chooses not to relocate, he will provide transition services to
WorldPages for not less than ninety days from the date he informs
WorldPages that he does not wish to relocate.
Mr. Pruss' employment agreement further provides that if his employment is
terminated by WorldPages without cause or due to a "change of control" as
defined, he will be entitled to receive his base salary for a period of twelve
months following the date of his termination. Mr. Pruss' employment agreement
contains a provision prohibiting him from competing against WorldPages for a
period of one year after the termination of the agreement or his employment with
WorldPages, regardless of whether the termination of his employment is voluntary
or involuntary.
DIRECTOR COMPENSATION
Directors of WorldPages who are also employees receive no directors' fees
but are eligible to receive, and have received, grants of stock options under
WorldPages' 1997 Stock Awards Plan. Non-employee directors receive fees of
$1,000 for each board meeting in which they participate in person, and are
reimbursed for expenditures incurred in attending and returning from board
meetings.
Non-employee directors also receive options to purchase shares of WorldPages
common stock pursuant to the 1997 Nonqualified Stock Option Plan for
Non-Employee Directors. Non-employee directors elected or appointed to the board
will receive options to acquire 15,000 shares of WorldPages common stock on the
date of their initial election or appointment. Additional non-qualified stock
options to acquire 5,000 shares of WorldPages common stock will thereafter be
awarded to each director on the date of the Annual Meeting of Stockholders at
which he or she is reelected to serve an additional three-year term. In both
cases, the exercise price of the stock options granted is the fair market value
on the date of the grant.
Mr. Todd Feist, who was reelected to the board at the Special Meeting of
Stockholders on February 16, 2000, received options to purchase 5,000 shares of
WorldPages common stock with an exercise price equal to the closing price of
WorldPages common stock on that date in accordance with the terms of the
Non-Employee Director Plan.
As consideration for their efforts in negotiating the terms of the
acquisitions of YPtel, Web YP and Big Stuff, WorldPages awarded warrants to
purchase 30,000, shares of WorldPages common stock to two current non-employee
directors, Messrs. Benton, and Cutsinger and to a former non-employee director,
Mr. Marvin C. Moses. The warrants have a strike price of 6.96 per share.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Reginald Hollinger, a former managing director and group head of the
Telecommunications Investment Banking Group at PaineWebber Incorporated and a
former member of the Investment Banking Division's Management Committee, was
also a member of the board's compensation committee from February 1998 until his
resignation from the board effective April 30, 1999. PaineWebber is one of
WorldPages' investment banking firms and served as the lead manager in
WorldPages' IPO. Neither the board nor Mr. Hollinger, during the time he served
on the WorldPages board, believe these relationships affected in any manner his
ability to serve on, or fulfill his obligations to WorldPages and its
stockholders as a member of the compensation committee of the board. To date,
58
<PAGE>
WorldPages has incurred liabilities to PaineWebber of $1,828,000 for investment
banking services rendered to it in 1999, including $750,000 in connection with
the fairness opinion rendered to WorldPages in connection with the February
acquisition. Mr. Hollinger resigned from PaineWebber on April 30, 1999 to take a
position with another firm, at which time he also resigned from WorldPages'
board.
WorldPages' board of directors maintained a compensation committee during
the year ended December 31, 1999. However, due to the need to retain key
employees during 1999 as WorldPages changed its focus, strategy and direction,
the full board made many of the compensation decisions directly and approved
other recommendations regarding compensation which were made to it by the
compensation committee. Employees of WorldPages who were also directors and who
therefore participated in deliberations of the WorldPages board concerning
executive officer compensation are identified below.
- Richard O'Neal, WorldPages Chairman and Chief Executive Officer.
- James F. Cragg, a former director, president and chief operating officer
of WorldPages through June 30, 1999.
- William H. Zimmer, a former director and WorldPages' former chief
financial officer through September 30, 1999.
- Todd Feist, an executive officer of WorldPages until November 19, 1999 and
a member of WorldPages' board of directors through the acquisitions of
YPtel, Web YP and Big Stuff in February 2000.
- Fred Thurman, executive officer of WorldPages until November 19, 1999 and
a member of WorldPages' board of directors through the acquisitions of
YPtel, Web YP and Big Stuff in February 2000.
59
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Richard A. O'Neal is an officer, director and owner of 50% of the
outstanding voting securities of Big Stuff. During the fiscal year ended
December 31, 1998, WorldPages paid Big Stuff approximately $1.3 million for
yellow pages colorizing services. WorldPages believes that the amount paid to
Big Stuff for colorizing services is equivalent to amounts that it would have
paid an unrelated third party for similar services. Great Western and Big Stuff
have entered into a sales agreement pursuant to which Big Stuff expects to
continue to render the foregoing services to Great Western upon terms and
conditions that WorldPages considers reasonable under the circumstances. Big
Stuff has also agreed to give Great Western the exclusive right to market
WorldPages in its service areas.
WorldPages issued $8.4 million of 5% Subordinated Notes to Mr. O'Neal in
connection with its acquisition of Great Western. The interest incurred on the
5% Subordinated Notes held by Mr. O'Neal during the fiscal year ended
December 31, 1999 was $0.4 million. The principal and accrued interest were to
be redeemed for WorldPages common stock in February 2000 at a redemption price
of $5.50 per share. Based on a closing price of WorldPages common stock of
$12.63 on the date of redemption, Mr. O'Neal received stock having a market
value of $18,175,019 in redemption of $8.8 million amount of indebtedness owed
by WorldPages to O'Neal.
Until the IPO, WorldPages' activities had been financed through a loan from
Consolidation Partners Founding Fund. In February 1998, the $3.2 million balance
of the loan was paid. During 1998, WorldPages incurred interest expense of
$149,000 relating to the loan.
WorldPages and Mr. Rod K. Cutsinger, a director of WorldPages, are parties
to an agreement pursuant to which Mr. Cutsinger, among other things, has agreed
that he will not:
- acquire any voting securities of WorldPages other than WorldPages common
stock issuable as stock dividends or splits or upon exercise of his
options under the WorldPages Nonqualified Stock Option Plan for
Non-employee Directors;
- sponsor or participate in any proxy solicitations;
- enter into or form voting trusts, pooling agreements or groups;
- vote any of his shares of WorldPages common stock in opposition to the
recommendation of the disinterested members of the WorldPages board of
directors regarding the election or removal of directors and matters
relating to a possible change in control of WorldPages; or
- directly or indirectly assist, encourage or induce any person to bid or
acquire any class of securities that is entitled to vote for the election
of directors.
The agreement with Mr. Cutsinger expires if he resigns or is otherwise removed
from the board of directors of WorldPages.
The WorldPages board has effectively amended the agreement between
WorldPages and Mr. Cutsinger on a one-time basis only, to allow him to receive
warrants to purchase 30,000 shares of WorldPages common stock in compensation
for his efforts in negotiating the terms of the YPtel, Web YP and Big Stuff
acquisitions. In connection with the acquisition of YPtel, Web YP and Big Stuff,
WorldPages and Mr. Cutsinger executed an agreement terminating Mr. Cutsinger's
obligations under the agreement.
In the acquisition agreement by which WorldPages acquired Valu-Line, one of
WorldPages' telecommunications subsidiaries, WorldPages agreed to place
David M. Mitchell on the WorldPages board. The agreement also obligated
WorldPages' board to place Mr. Mitchell on its slate of nominees for election by
the WorldPages common stockholders prior to the expiration of his then existing
term, so long as Mr. Mitchell owns at least 100,000 shares of common stock at
the time of renomination. The
60
<PAGE>
WorldPages board last nominated Mr. Mitchell and he was last elected to a three
year term as a director at the 1998 Annual Meeting.
Through November 19, 1999, WorldPages had a strategic relationship with
Feist Publications, Inc., a publisher of yellow page directories in 15 markets
in Kansas, Texas and Oklahoma, through which WorldPages' telecommunications
sales force had access to Feist Publications' 29,000 yellow page advertisers.
Feist Publications agreed to provide WorldPages with access to its advertising
customers and to provide eight information pages in the front of its directories
with instructions on how to subscribe to WorldPages' services as well as free
advertising in each of Feist Publications' white pages directories that are
currently in publication. Feist Publications reserved the right to terminate
this agreement if WorldPages commenced the publication of a yellow pages
directory in any market served by Feist Publications. On November 19, pursuant
to the stock purchase agreement, as amended, this contract was assigned to Feist
Long Distance Service, Inc.
61
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
Selling Stockholders:
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF NUMBER OF SHARES OWNED
SHARES OWNED SHARES TO AFTER
NAME PRIOR TO SALE BE SOLD SALE(12)
- ---- --------------- --------- ------------
<S> <C> <C> <C>
Richard O'Neal(2)........................................ 888,700(1)(3) 888,700
1,663,788(4) 1,663,788 0
2,549,091(5) 2,549,091
Richard Reid(6).......................................... 145,455(6) 145,455 0
1,663,787(4) 1,663,787
WPI World Pages, Inc..................................... 231,813(4) 231,813 0
Lelani Bluner............................................ 18,466(4) 18,466 0
Nick Wilson.............................................. 6,155(4) 6,155 0
Elise Wilson............................................. 1,231(4) 1,231 0
Jack Austin.............................................. 64,630(4) 64,630 0
Rick Klein............................................... 338,537(4) 338,537 0
Jack Tracht.............................................. 107,716(4) 107,716 0
Kent Hinkson............................................. 49,242(4) 49,242 0
Rodney Weaver............................................ 61,552(4) 61,552 0
Robert Terek............................................. 61,552(4) 61,552 0
Timothy Dick............................................. 123,104(4) 123,104 0
Adam Ayala............................................... 30,776(4) 30,776 0
Bryan Reid............................................... 30,776(4) 30,776 0
Scott Reid............................................... 30,776(4) 30,776 0
Terry Frink.............................................. 30,776(4) 30,776 0
April Watkins............................................ 30,776(4) 30,776 0
Larry C. Baldwin......................................... 710,227(5) 710,227 0
Steve A. Sparks.......................................... 198,864(5) 198,864 0
Ronald R. Baldwin........................................ 198,864(5) 198,864 0
Ronnie Emanuel........................................... 142,045(5) 142,045 0
George Anderson(7)....................................... 10,000(8) 10,000 0
Robert Flynn(7).......................................... 5,000(6) 5,000 0
Wilmot Matthews(7)....................................... 30,000(8) 30,000 0
Nicholas Ross(9)......................................... 10,000(6) 10,000 0
Max Gotleib(10).......................................... 20,000(8) 20,000 0
ACG 1 Limited Partnership................................ 99,863(11) 99,863 0
ACG 2 Limited Partnership................................ 36,925(11) 36,925 0
ACG 3 Limited Partnership................................ 145,884(11) 145,884 0
ACG 4 Limited Partnership................................ 211,996(11) 211,996 0
ACG 5 Limited Partnership................................ 114,155(11) 114,155 0
ACG 6 Limited Partnership................................ 101,910(11) 101,910 0
ACG 7 Limited Partnership................................ 25,793(11) 25,793 0
ACG 8 Limited Partnership................................ 552,374(11) 552,374 0
ACG 9 Limited Partnership................................ 36,925(11) 36,925 0
ACG 10 Limited Partnership............................... 181,587(11) 181,587 0
ACG 11 Limited Partnership............................... 144,484(11) 144,484 0
ACG 12 Limited Partnership............................... 69,955(11) 69,955 0
ACG 13 Limited Partnership............................... 124,894(11) 124,894 0
ACG 14 Limited Partnership............................... 36,925(11) 36,925 0
</TABLE>
62
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF NUMBER OF SHARES OWNED
SHARES OWNED SHARES TO AFTER
NAME PRIOR TO SALE BE SOLD SALE(12)
- ---- --------------- --------- ------------
<S> <C> <C> <C>
ACG 15 Limited Partnership............................... 218,512(11) 218,512 0
ACG 16 Limited Partnership............................... 93,671(11) 93,671 0
ACG 17 Limited Partnership............................... 51,169(11) 51,169 0
ACG 18 Limited Partnership............................... 461,220(11) 461,220 0
ACG 19 Limited Partnership............................... 93,671(11) 93,671 0
ACG 20 Limited Partnership............................... 23,705(11) 23,705 0
ACG 21 Limited Partnership............................... 499,493(11) 499,493 0
ACG 22 Limited Partnership............................... 25,793(11) 25,793 0
ACG 23 Limited Partnership............................... 36,925(11) 36,925 0
ACG 24 Limited Partnership............................... 76,545(11) 76,545 0
ACG 25 Limited Partnership............................... 239,345(11) 239,395 0
ACG 26 Limited Partnership............................... 101,482(11) 101,482 0
ACG 27 Limited Partnership............................... 101,910(11) 101,910 0
ACG 28 Limited Partnership............................... 109,554(11) 109,554 0
ACG 29 Limited Partnership............................... 93,671(11) 93,671 0
ACG 30 Limited Partnership............................... 154,781(11) 154,781 0
ACG 31 Limited Partnership............................... 164,012(11) 164,012 0
ACG 32 Limited Partnership............................... 97,474(11) 97,474 0
ACG 33 Limited Partnership............................... 69,955(11) 69,955 0
ACG 34 Limited Partnership............................... 69,955(11) 69,955 0
ACG 35 Limited Partnership............................... 339,699(11) 339,699 0
ACG 36 Limited Partnership............................... 101,482(11) 101,482 0
ACG 37 Limited Partnership............................... 69,955(11) 69,955 0
ACG 38 Limited Partnership............................... 69,955(11) 69,955 0
ACG 39 Limited Partnership............................... 275,148(11) 275,148 0
ACG 40 Limited Partnership............................... 481,964(11) 481,964 0
ACG 41 Limited Partnership............................... 1,278,132(11) 1,278,132 0
ACG 42 Limited Partnership............................... 1,280,132(11) 1,280,132 0
BAR 1 Holdings Inc....................................... 892,585(11) 892,585 0
BAR 2 Holdings Inc....................................... 720,344(11) 720,344 0
BAR 3 Holdings Inc....................................... 785,569(11) 785,569 0
BAR 4 Holdings Inc....................................... 984,606(11) 984,606 0
BAR 5 Holdings Inc....................................... 912,165(11) 912,165 0
BAR 6 Holdings Inc....................................... 903,759(11) 903,759 0
BAR 7 Holdings Inc....................................... 18,971(11) 18,971 0
BAR 8 Holdings Inc....................................... 18,971(11) 18,971 0
BAR 9 Holdings Inc....................................... 1,200,000(11) 1,200,000 0
TOTAL
- --------------------------------------------------------- --------- --------- -------
</TABLE>
- ------------------------
(1) Acquired in connection with the acquisition of the operating companies in
February 1998.
(2) Chairman and Acting Chief Executive Officer of WorldPages since
November 9, 1998 and Director and President--Directory Services Group of
WorldPages, since February 18, 1998. Founder of WorldPages' subsidiary,
Great Western; Director and President of Great Western from 1984 to
present.
63
<PAGE>
(3) Includes warrants of purchase 469,020 shares of WorldPages Common Stock. A
trustee for Mr. O'Neal's children owns 189,020 of these warrants. Also
includes 18,758 shares of Common Stock subject to stock options that are
immediately exercisable.
(4) Acquired in connection with WorldPages' acquisition of Web YP and Big
Stuff. WPI has advised WorldPages that it intends to distribute its
WorldPages shares set forth on this table to its stockholders as a
dividend. Accordingly, this prospectus also covers the resale of such
WorldPages shares by those stockholders.
(5) Acquired in exchange for certain indebtedness of Big Stuff and WebYP and
the redemption of the 5% Subordinated Notes, issued by WorldPages.
(6) Former shareholder of Web YP. Mr. Reid's shares were acquired in exchange
for certain indebtedness of Big Stuff and Web YP.
(7) Former director of YPtel: Director of WorldPages pursuant to the
acquisition of YPtel by WorldPages.
(8) To be issued upon exercise of warrants to be issued to replace warrants to
purchase common shares of YPtel.
(9) Former director of YPtel.
(10) Former officer of YPtel.
(11) Acquired Class A Special Shares of ACG Exchange Company, an indirect
wholly-owned Nova Scotia Subsidiary of WorldPages, in connection with the
February acquisitions. The Class A Special Shares are exchangeable on a
one-for-one basis for the shares of WorldPages Common Stock indicated.
(12) After the offering, Mr. O'Neal, who is WorldPages' Chairman of the Board
and Chief Executive Officer, will own 2.0% of WorldPages Common Stock. All
other Selling Stockholders will own less than 1% of WorldPages Common
Stock.
64
<PAGE>
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 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, 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, at market prices prevailing at the time of
sale, 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 conection 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 anti-manipulative
provisions of Regulation M promulgated under the Exchange Act may apply to their
sales in the market.
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.
65
<PAGE>
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
At the date of this Prospectus, the authorized capital stock of the
WorldPages is 200,000,000 shares, consisting of 180,000,000 shares of Common
Stock, par value $0.0001 per share, and 20,000,000 shares of Preferred Stock,
par value $0.0001 per share ("Preferred Stock").
COMMON STOCK. The holders of common stock are entitled to dividends in such
amounts and at such times as may be declared by the Board of Directors out of
funds legally available therefor. Holders of the common stock are entitled to
one vote per share for the election of directors and other corporate matters. In
the event of liquidation, dissolution or winding up of WorldPages, holders of
common stock would be entitled to share ratably in all assets of the available
for distribution to the holders of common stock. The common stock carries no
preemptive rights.
PREFERRED STOCK. WorldPages is authorized to issue from time to time,
without stockholder authorization, in one or more designated series, 20,000,000
shares of preferred stock with such dividend, redemption, conversion and
exchange provisions as are provided in the particular series. Except as by law
expressly provided, or except as may be provided by resolution of the WorldPages
Board, the preferred stock shall have no right or power to vote on any question
or in any proceeding or to be represented at, or to receive notice of, any
meeting of stockholders of WorldPages. The issuance of preferred stock, or the
perception that such an issuance might occur, could have the effect of delaying
or preventing a change in control of the Company.
The only class of preferred stock of WorldPages currently authorized is the
Class B Voting Preferred Stock. Only one share is issued and outstanding and it
has been issued to the trustee under the Voting and Exchange Trust Agreement.
Its primary purpose is to provide a mechanism for the holders of the Class A
Special Shares to vote their Class A Special Shares in the same amount and
manner as if they held WorldPages common stock.
Set forth below are the major characteristics of the Class B Voting
Preferred Stock.
- Except as otherwise required by law or WorldPages Restated Certificate of
Incorporation, as amended, the holder of the share of Class B Voting
Preferred Stock shall have a number of votes with respect to any matter,
proposition or question on which holders of WorldPages common stock are
entitled to vote, equal to the product of
(i) the number of shares of WorldPages common stock for which the
Class A Special Shares then issued and outstanding from time to
time and held by holders of such shares are exchangeable,
multiplied by
(ii) the number of votes to which a holder of one share of
WorldPages common stock is entitled with respect to such matter,
proposition or question.
- Except as otherwise required by law or the Restated Certificate of
Incorporation, as amended, the WorldPages common stock and the Class B
Voting Preferred Stock vote as a single class and, apart from the
differing number of votes attaching to the Class B Voting Preferred Stock
as described above, such voting rights are identical.
- The share of Class B Voting Preferred Stock ranks senior, as to
distribution of assets upon liquidation, to the shares of
WorldPages common stock.
- The Class B Voting Preferred Stock has an aggregate liquidation preference
of $1.00 before any distribution is made on the common stock or on any
other WorldPages stock ranking junior to the Class B Voting Preferred
Stock as to distribution of assets on liquidation, dissolution or winding
up. Under the Certificate of Designation under which the Class B Voting
Preferred Stock was created, neither the sale, conveyance, exchange or
transfer of all or substantially all of
66
<PAGE>
the property or assets of WorldPages, nor the consolidation or merger of
WorldPages with or into one or more other entities, shall be deemed to be
a liquidation, dissolution or winding-up of WorldPages.
- The share of Class B Voting Preferred Stock is senior to the common
stock as to liquidation.
- The holder of the Class B Voting Preferred Stock is not entitled to
receive any dividends on the share.
- The holder of the Class B Voting Preferred Stock has no rights to
convert the share into, or exchange it for shares of any other series
or class of capital stock of WorldPages.
- The share of Class B Voting Preferred Stock is not subject to
redemption except that when the Exchange and Voting Trust Agreement
terminates, the Class B Voting Preferred Stock will automatically be
redeemed by WorldPages for an amount equal to $1.00 due and payable
upon such redemption.
- The holder of the share of Class B Preferred Stock has no powers,
preferences, or relative, participating, optional or other special
rights, or qualifications, limitations or restrictions other than as
set forth in the Certificate of Designation by which it was created.
Although the Class A Special Shares are issued by ACG Exchange Company, an
indirect wholly-owned subsidiary of WorldPages, it is important that persons
considering an investment in WorldPages common stock understand the
characteristics of the Class A Special Shares inasmuch as they are the economic
equivalent of WorldPages common stock.
ACG Exchange Company is WorldPages' unlimited liability company subsidiary
formed under the laws of Nova Scotia to allow stockholder of YPtel who are
Canadian residents under the federal income tax laws to obtain their ownership
interests in WorldPages on a tax-deferred basis. The Class A Special Shares will
be exchangeable on a one-for-one basis for shares of WorldPages common stock.
Although the Class A Special Shares have no voting rights, the holders of the
Class A Special Shares are parties to a voting trust pursuant to which Montreal
Trust Company of Canada holds the one issued and outstanding share of Class B
Preferred Stock of WorldPages. This share of Class B Voting Preferred Stock has
the attributes set forth above. A holder of Class A Special Shares will have the
right to direct the voting trustee how to vote the Class B Preferred Stock to
the extent of the Class A Special Shares then owned by that holder. If no
instructions are received from a holder of Class A Special Shares, the trustee
will vote the Class A Special Shares in the same manner as are voted the
majority of the other Class A Special Shares.
POSSIBLE ANTI-TAKEOVER EFFECTS
GENERAL. Certain provisions of WorldPages' charter, as well as the
concentration of ownership of the common stock, and its ability to issue up to
20 million shares of "blank check" Preferred Stock, may have the effect of
discouraging a change in control of the WorldPages, including transactions in
which stockholders might receive a premium price for their Common Stock.
STATUTORY PROVISIONS. Section 203 ("Section 203") of the Delaware General
Corporation Law restricts certain transactions between a corporation organized
under Delaware law (or its majority-owned subsidiaries) and any person holding
15% or more of the corporation's outstanding voting stock, together with the
affiliates or associates of such person (an "Interested Stockholder").
Section 203 generally prohibits a publicly held Delaware corporation from
engaging in the following transactions with an Interested Stockholder, for a
period three years from the date the stockholder becomes an interested
Stockholder (unless certain conditions, described below, are met): (i) all
mergers or consolidations, (ii) sales, leases, exchanges or other transfers of
10% or more of the aggregate assets of
67
<PAGE>
the corporation, (iii) issuances or transfers by the corporation of any stock of
the corporation which would have the effect of increasing the Interested
Stockholder's proportionate share of the stock of any class or series of the
corporaiton, (iv) any other transaction which has the effect of increasing the
proportionate share of the stock of any class or series of the corporation which
is owned by the Interested Stockholder, and (v) receipt by the Interested
Stockholder of the benefit (except proportionately as a stockholder) of loans,
advances, guarantees, pledges or other financial benefits provided by the
corporation.
The three-year ban does not apply if either the proposed transaction or the
transaction by which the Interested Stockholder became an Interested Stockholder
is approved by the board of directors of the corporation prior to the date such
stockholder becomes an Interested Stockholder. Additionally, an Interested
Stockholder may avoid the statutory restriction if, upon the consummation of the
transaction whereby such stockholder becomes an Interested Stockholder, the
stockholder owns at least 85% of the outstanding voting stock of the corporation
without regard to those shares owned by the corporation's officers and directors
or certain employee stock plans. Business combinations are also permitted within
the three-year period if approved by the board of directors and authorized at an
annual or special meeting of stockholders, by the holders of at least 66 2/3% of
the outstanding voting stock not owned by the Interested Stockholder. In
addition, any transaction is exempt from the statutory ban if it is proposed at
a time when the corporation has proposed, and a majority of certain continuing
directors of the corporation have approved, a transaction with a party which is
not an Interested Stockholder of the corporation (or who becomes such with board
approval) if the proposed transaction involves (i) certain mergers or
consolidations involving the corporation, (ii) a sale or other transfer of over
50% of the aggregate assets of the corporation, or (iii) a tender or exchange
offer for 50% or more of the outstanding voting stock of the corporation.
Prior to the effective date of Section 203, a corporation, by action of its
board of directors, had the option of electing to exclude itself from the
coverage of Section 203. Since the effective date of such section, a corporation
may, at its option, exclude itself from the coverage of Section 203 by amending
its certificate of incorporation or bylaws by action of its stockholders to
exempt itself from coverage, provided that such charter or bylaw amendment shall
not become effective until 12 months after the date it is adopted. WorldPages
has not adopted such a charter or bylaw amendment.
CHARTER PROVISIONS. The Board is divided into three classes. Each class of
directors consists, as nearly as possible, of one-third of the total number of
directors constituting the entire Board. The Charter provides that, subject to
the rights of the holders of any series of Preferred Stock, the number of
directors may be fixed from time to time by resolution of the Board, but will
consist of not less than three nor more than 14 members. One class of director
is elected annually and serves for a three-year term. A director of the Company
may be removed only for cause and only upon the affirmative vote of the holders
of a majority of the outstanding capital stock entitled to vote at an election
of directors.
The Charter provides that WorldPages may, by action of its Board, provide
for a sinking fund for the purchase or redemption of shares of any series of
Preferred Stock and specify the terms and conditions governing the opertions of
any such fund.
A stockholder may nominate directors only if written notice is delivered to
the Company by such stockholder not less than 30 days nor more than 60 days
prior to the meeting or no later than ten days after the date of notice by the
Company of such meeting if such notice is given less than 90 days in advance of
the meeting. The Charter also provides that any newly created directorship
resulting from an increase in the number of directors or a vacancy on the Board
shall be filled by vote of a majority of the remaing directors then in office,
even though less than a quorum. The Charter also provides that special meetings
of the stockholders may only be called by the Chairman of the Board or the
Board, subject to the rights of the holders of any series of Prefered Stock, and
that the stockholders may not act by written consent. The Charter provides that
certain of these provisions of the Charter may not be
68
<PAGE>
amended without the approval of at least 80% of the voting power of all shares
of WorldPages entitled to vote generally in the election of the directors,
voting together as a single class.
The foregoing provisions of the Charter and of Section 203, together with
the ability of the Board to issue Preferred Stock without further stockholder
action, could delay or frustrate the removal of incumbent directors or the
assumption of control by the holder of a large block of common stock even if
such removal or assumption would be beneficial, in the short term, to
stockholders of the WorldPages. The provisions could also discourage or make
more difficult a merger, tender offer or proxy contest even if such event would
be favorable to the interests of stockholders.
LIMITATION ON DIRECTORS AND OFFICERS LIABILITY The Delaware General
Corporation Law authorizes corporations to limit or eliminate the personal
liability of directors to corporations and their stockholders for monetary
damages for breach of directors fiduciary duty of care. The duty of care
requires that, when acting on behalf of the corporation, directors must exercise
an informed business judgment based on all material information reasonably
available to them. Absent the limitations authorized by such legislation,
directors are accountable to corporations and their stockholders for monetary
damages for conduct constituting gross negligence in the exercise of their duty
of care. Although the Delaware General Corporation Law does not change
directors' duty of care, it enables corporations to limit available relief to
equitable remedies such as injunction or rescission. The Charter limits the
liability of the WorldPages' directors to the WorldPages or its stockholders (in
their capacity as directors but not in their capacity as officers) to the
fullest extent permitted by the Delaware General Corporation Law. Specifically,
directors of the WorldPages will not be personally liable for monetary damages
for breach of a director's fiduciary duty as a director, except for liability
(i) for any breach of the director's duty of loyalty to the 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 Delaware General Corporation Law or (iv) for any transaction from which the
director derived an improper personal benefit.
The inclusion of this provision in the Charter may have the effect of
reducing the likelihood of derivative litigation against directors and may
discourage or deter stockholders or management from bringing a lawsuit against
directors for breach of the duty of care, even though such an action, if
successful, might otherwise have benefited the WorldPages and its stockholders.
The Securities and Exchange Commission has taken the position that the
provision will have no effect on claims arising under the federal securities
laws.
69
<PAGE>
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 of Advanced as of December 31, 1999
and 1998, and for each of the years in the three-year period ended December 31,
1999, have been included herein and in the registration statement in reliance
upon the report of KPMG LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing; and, with respect to financial statements of Web YP as of
December 31, 1999 and 1998 and for each of the years ended December 31, 1999 and
1998, appearing elsewhere herein, and in reliance upon the report of KPMG LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
Ernst & Young LLP, independent auditors, have audited the financial
statements of Pacific Coast Publishing, Inc. at October 31, 1998 and 1997, and
for each of the three years in the period ended October 31, 1998, as set forth
in their report and have also audited the consolidated financial statements of
YPtel Corporation at October 31, 1999 and for the year then ended, as set forth
in their report. We have included the financial statements in the prospectus and
elsewhere in the registration statement in reliance on Ernst & Young LLP's
reports, given on their authority as experts in accounting and auditing.
70
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
ADVANCED COMMUNICATIONS GROUP, INC.
Independent Auditors' Report................................ F-2
Consolidated Statements of Operations....................... F-3
Consolidated Balance Sheets................................. F-4
Consolidated Statements of Changes in Stockholders'
Equity.................................................... F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-7
PACIFIC COAST PUBLISHING, INC.
Report of Independent Auditors.............................. F-19
Balance Sheets.............................................. F-20
Statements of Operations.................................... F-21
Statements of Stockholders' Equity.......................... F-22
Statements of Cash Flows.................................... F-23
Notes to Financial Statements............................... F-24
YPtel CORPORATION
Report of Independent Auditors.............................. F-30
Consolidated Balance Sheet.................................. F-31
Consolidated Statement of Income............................ F-32
Consolidated Statement of Changes in Shareholders' Equity... F-33
Consolidated Statement of Cash Flows........................ F-35
Notes to Consolidated Financial Statements.................. F-36
WEB YP, INC.
Independent Auditors' Report................................ F-46
Balance Sheets.............................................. F-47
Statements of Operations.................................... F-48
Statements of Stockholders' Deficit......................... F-49
Statements of Cash Flows.................................... F-50
Notes to Financial Statements............................... F-51
BIG STUFF, INC.
Unaudited Statements of Operations.......................... F-54
Unaudited Balance Sheets.................................... F-55
Unaudited Statements of Changes in Stockholders' Equity..... F-56
Unaudited Statements of Cash Flows.......................... F-57
Notes to Unaudited Financial Statements..................... F-58
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors of
Advanced Communications Group, Inc.:
We have audited the accompanying consolidated balance sheets of Advanced
Communications Group, Inc. and subsidiaries as of December 31, 1999 and 1998,
and the related consolidated statements of operations, changes in stockholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1999. In connection with our audits of the consolidated financial
statements, we also have audited the accompanying financial statement schedule.
These consolidated financial statements and financial statement schedule are the
responsibility of Advanced's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Advanced
Communications Group, Inc. and subsidiaries as of December 31, 1999 and 1998,
and the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 1999, in conformity with generally
accepted accounting principles. Also, in our opinion, the related 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
February 4, 2000
F-2
<PAGE>
ADVANCED COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- ----------
<S> <C> <C> <C>
Revenues............................................... $ 49,987 $ 38,090 $ --
Expenses:
Printing, distribution and listings.................. 13,440 8,670 --
Sales and marketing.................................. 11,464 8,976 --
General and administrative........................... 20,529 16,689 2,071
Depreciation and amortization........................ 4,695 4,190 3
Stock-based compensation............................. -- 1,760 870
----------- ----------- ----------
Income (loss) from operations.......................... (141) (2,195) (2,944)
Other income (expense):
Interest expense..................................... (4,766) (1,845) (256)
Other................................................ 75 177 --
----------- ----------- ----------
Income (loss) from continuing operations before
income taxes......................................... (4,832) (3,863) (3,200)
Income tax expense (benefit)........................... (1,465) (91) --
----------- ----------- ----------
Net income (loss) from continuing operations........... (3,367) (3,772) (3,200)
Loss from discontinued operations, net of tax benefit
of $4,007 and $6,368, respectively................... (7,378) (7,507) --
Loss on sale of discontinued operations, net of tax
benefit
of $8,145............................................ (51,800) -- --
----------- ----------- ----------
Net loss............................................. $ (62,545) $ (11,279) $ (3,200)
=========== =========== ==========
Basic and diluted income (loss) per share from:
Continuing operations................................ $ (.17) $ (.20) $ (.39)
Discontinued operations.............................. (.37) (.41) --
Sale of discontinued operations...................... (2.60) -- --
----------- ----------- ----------
Net income (loss) per share.......................... $ (3.14) $ (.61) $ (.39)
=========== =========== ==========
Weighted average common shares outstanding........... 19,955,829 18,593,947 8,230,006
=========== =========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
ADVANCED COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 1,315 $ 13,734
Accounts receivable (net of allowance of $4,246 in 1999
and
$4,014 in 1998)......................................... 14,223 13,317
Deferred costs............................................ 4,482 3,888
Prepaid expenses and other current assets................. 174 94
Deferred taxes............................................ -- 3,398
-------- --------
Total current assets.................................... 20,194 34,431
-------- --------
Property, plant and equipment, net.......................... 1,377 1,134
Intangible assets from business acquisitions, net........... 75,413 81,255
Deferred taxes.............................................. 6,504 --
Other assets, net........................................... 5,571 1,022
Net assets held for sale.................................. -- 69,780
-------- --------
Total other assets...................................... 88,865 153,191
-------- --------
Total assets............................................ $109,059 $187,622
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities.................. $ 9,447 $ 4,844
Short-term debt and current maturities of long-term
debt.................................................... 24,000 17,117
Other current liabilities................................. 3,940 3,017
-------- --------
Total current liabilities............................... 37,387 24,978
Long-term obligations:
Long-term debt............................................ -- 17,233
Deferred tax liabilities.................................. -- 13,827
-------- --------
Total liabilities....................................... 37,387 56,038
-------- --------
Commitments and contingencies.............................
Stockholders' equity:
Preferred stock, Series A Redeemable Convertible $.0001
par
value: 20,000,000 shares authorized; 0 and 142,857
shares issued
and outstanding; $2,000 liquidation preference.......... -- 1,122
Common stock, $.0001 par value: 180,000,000 shares
authorized;
20,426,753 and 19,859,262 shares issued and outstanding,
respectively............................................ 2 2
Additional paid-in capital................................ 149,438 146,611
Treasury stock; 0 and 234,141 common shares,
respectively............................................ -- (1,013)
Retained earnings (accumulated deficit)................... (77,768) (15,138)
-------- --------
Total stockholders' equity.............................. 71,672 131,584
-------- --------
Total liabilities and stockholders' equity.............. $109,059 $187,622
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
ADVANCED COMMUNICATIONS GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
RETAINED
COMMON STOCK ADDITIONAL EARNINGS TOTAL
----------------------- PREFERRED PAID-IN TREASURY (ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT STOCK CAPITAL STOCK DEFICIT) EQUITY
---------- ---------- --------- ---------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1996...................... 8,227,736 $ 1 $ -- $ 27 $ -- $ (659) $ (631)
Issuance of stock options
and warrants.............. -- -- -- 1,237 -- -- 1,237
Issuance of stock for
services performed........ 4,540 -- -- 50 -- -- 50
Net loss.................... -- -- -- -- -- (3,200) (3,200)
---------- ---------- ------- -------- ------- -------- --------
Balance, December 31,
1997...................... 8,232,276 $ 1 $ -- $ 1,314 $ -- $ (3,859) $ (2,544)
Issuance of stock options
and warrants.............. -- -- -- 5,862 -- -- 5,862
Issuance of preferred
stock..................... -- -- 1,122 -- -- -- 1,122
Initial public offering, net
of offering costs......... 8,000,000 1 -- 99,899 -- -- 99,900
Issuance of stock for
acquired companies........ 3,861,127 -- -- 39,536 -- -- 39,536
Acquisition of treasury
stock..................... (234,141) -- -- -- (1,013) -- (1,013)
Net loss.................... -- -- -- -- -- (11,279) (11,279)
---------- ---------- ------- -------- ------- -------- --------
Balance, December 31,
1998...................... 19,859,262 $ 2 $ 1,122 $146,611 $(1,013) $(15,138) $131,584
Stock option exercises...... 366,634 -- -- 1,705 785 (85) 2,405
Issuance of restricted
stock..................... 58,000 -- -- -- 228 -- 228
Conversion of preferred
stock..................... 142,857 -- (1,122) 1,122 -- -- --
Net loss.................... -- -- -- -- -- (62,545) (62,545)
---------- ---------- ------- -------- ------- -------- --------
Balance, December 31,
1999...................... 20,426,753 $ 2 $ -- $149,438 $ -- $(77,768) $ 71,672
========== ========== ======= ======== ======= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
ADVANCED COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(62,545) $(11,279) $(3,200)
Adjustments to reconcile net loss to net cash:
Depreciation and amortization........................... 4,695 4,190 3
Stock-based compensation expense........................ -- 1,760 870
Loss from discontinued operations, net.................. 7,378 7,507 --
Loss on sale of discontinued operations................. 51,800 -- --
Deferred tax provision.................................. (3,718) (6,459) --
Changes in operating assets and liabilities:
Decrease (increase) in:
Accounts receivable, net............................ (906) (184) 1
Deferred costs...................................... (594) 639 --
Prepaid expenses and other current assets........... (80) 581 --
Other assets, net................................... (3,161) 1,667 --
Increase (decrease) in:
Accounts payable and accrued liabilities............ 4,603 836 1,950
Other current liabilities........................... 923 706 --
-------- -------- -------
Net cash used in continuing operating activities.... (1,605) (36) (376)
Net cash used in discontinued operations............ (41,370) (8,812) --
-------- -------- -------
Net cash used in operating activities............... (42,975) (8,848) (376)
-------- -------- -------
Cash flows from investing activities:
Cash paid for businesses acquired, net of cash acquired... -- (83,256) --
Additions to property, plant and equipment, net........... (3,906) (16,738) --
Cash from sale of discontinued operations................. 43,127 10,000 --
-------- -------- -------
Net cash provided by (used in) investing
activities........................................ 39,221 (89,994) --
-------- -------- -------
Cash flows from financing activities:
Borrowings of long-term debt.............................. 52,883 17,000 2,566
Repayment of long-term debt............................... (62,338) (2,979) --
Increase in deferred offering costs....................... (780) (1,218) (2,223)
Proceeds from stock option exercises...................... 1,570 -- --
Proceeds from common stock issuance, net of offering
costs................................................... -- 99,900 --
Acquisition of treasury stock............................. -- (127) --
-------- -------- -------
Net cash provided by (used in) financing
activities........................................ (8,665) 112,576 343
-------- -------- -------
Net increase (decrease) in cash and cash
equivalents....................................... (12,419) 13,734 (33)
Cash and cash equivalents--beginning of year................ 13,734 -- 33
-------- -------- -------
Cash and cash equivalents--end of year...................... $ 1,315 $ 13,734 $ --
======== ======== =======
Supplemental cash flows information:
Cash paid for interest.................................... $ 3,038 $ 739 $ --
======== ======== =======
Cash paid for income taxes.................................. $ 43 $ -- $ --
======== ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
ADVANCED COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
1. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Advanced
Communications Group, Inc. and its wholly-owned subsidiaries (Advanced). All
significant intercompany transactions have been eliminated in consolidation.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities and
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Advanced was founded to provide a portfolio of telecommunications services
to business customers in service areas of Southwestern Bell and U S WEST and
publishes yellow pages directories in selected markets. Advanced completed its
initial public offering (IPO) on February 18, 1998. In connection with the IPO,
Advanced simultaneously acquired one yellow pages publisher and eight
telecommunications companies and a 49% interest in another company
(collectively, the Acquired Companies or the Acquisitions). Prior to
February 1998, Advanced had not conducted any operations other than those
relating to the IPO and the Acquisitions. Consequently, the financial statements
included herein relate only to the parent company prior to February 18, 1998,
but include the results of Great Western, the yellow pages publisher, for the
period February 18, 1998 to December 31, 1998 and for all later periods as
continuing operations. The telecommunications companies and the 49% interest in
another company are included in discontinued operations.
Great Western Directories is Advanced's only remaining operating subsidiary
at December 31, 1999. In November 1999, all of Advanced's telecommunications
subsidiaries were sold and are therefore presented as discontinued operations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS--Advanced considers cash in banks and
highly-liquid investments purchased with an original maturity of three months or
less to be cash and cash equivalents.
PROPERTY, PLANT AND EQUIPMENT--Property, plant and equipment are stated at
cost. Improvements are capitalized. Repair and maintenance costs are expensed as
incurred. The cost and related accumulated depreciation of assets retired or
disposed of and are removed from the accounts, and any gains or losses are
reflected in results of operations. Depreciation is computed using the
straight-line method over the respective useful lives of the assets. The
estimated useful lives of the assets are: buildings and improvements--40 years;
equipment--5 to 10 years; furniture and office equipment--3 to 5 years; and
leasehold improvements--shorter of life of lease or useful life of related
asset.
INTANGIBLE ASSETS FROM BUSINESS ACQUISITIONS--Intangible assets resulting
from the cost of businesses acquired exceeding the fair value of net assets
acquired consist principally of customer lists and goodwill. Customer lists and
goodwill are amortized on a straight-line basis over their estimated useful
lives of 10 years and 40 years, respectively. For the years ended December 31,
1999 and 1998, amortization expense relating to intangible assets was $4,532,000
and $4,402,000, respectively and accumulated amortization totaled $8,408,000 and
$3,876,000 at December 31, 1999 and 1998, respectively.
F-7
<PAGE>
ADVANCED COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
OTHER ASSETS, NET--Other assets consist of deferred debt issuance costs and
deferred acquisition costs. The costs incurred in connection with obtaining debt
facilities are deferred and amortized on a straight-line basis over the life of
the related debt instrument. Deferred acquisition costs consists of legal,
accounting and other costs related to acquisitions which are included in the
purchase price and allocated to assets acquired.
INCOME TAXES--Income taxes are recognized during the year based on all
events that have been recognized in the consolidated financial statements, with
deferred taxes being provided for differences between the book basis and tax
basis of assets and liabilities as measured by the enacted tax laws.
REVENUE RECOGNITION--Directory revenues are derived from the sale of
advertising space in telephone directories and are recognized on the date that
the directory is published and substantially delivered. If the estimate of total
directory costs exceeds advertising revenues for a specific region's telephone
directory, a provision is made for the entire amount of such estimated loss.
Directory costs are deferred until the date that the directory is published and
substantially delivered. Directory costs include all direct costs related to the
publishing of a telephone directory, such as publishing and distribution
expenses, commissions on sales, other selling expenses and estimated bad debt
expense. General and administrative costs are charged to expense as incurred.
Costs incurred with the expansion into new markets include all direct costs
related to the publishing of a first-year telephone directory (prototype
directory). Advertising space in prototype directories is generally provided to
advertisers at no cost; therefore, generally no advertising revenues are derived
from prototype directories. Because the future economic benefit of the direct
costs related to prototype directories cannot be determined, such direct costs
are charged to expense as incurred. Advanced recognized net expense of
approximately $3.1 million and $0.4 million in the years ended December 31, 1999
and 1998, respectively, relating to prototype directories.
STOCK-BASED COMPENSATION--Advanced has elected to follow the intrinsic value
method and has included in these financial statements pro forma disclosures of
net loss and net loss per share as if the fair value method of accounting had
been applied. No employee stock options or similar equity instruments were
issued by Advanced prior to January 1, 1997.
NET EARNINGS (LOSS) PER SHARE--Basic earnings per share (Basic EPS) is
determined by dividing income available to common stockholders by the weighted
average number of common shares outstanding during the period. Diluted earnings
per share (Diluted EPS) reflects the potential dilution that could occur if
securities and other contracts to issue common stock were exercised or converted
into common stock. In periods in which the inclusion of such securities or
contracts are anti-dilutive, the effect of such securities is not given
consideration. In calculating Diluted EPS for the year ended December 31, 1999,
1998, and 1997, options and warrants to purchase 3,806,523, 3,960,312, and
2,288,640, respectively, shares of common stock were outstanding during part of
the year but were not included in the computation of Diluted EPS due to their
anti-dilutive effect.
FAIR VALUE OF FINANCIAL INSTRUMENTS--Advanced's only financial instruments
are cash, short-term trade receivables and payables and notes payable.
Management believes the carrying amounts of the financial instruments classified
as current assets and liabilities approximate their fair values because of their
short-term nature. Management believes the carrying value of its notes payable
obligations approximate fair value.
F-8
<PAGE>
ADVANCED COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED
OF--Long-lived assets and certain identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future net cash flow expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceed the fair value of
the assets.
COMPREHENSIVE INCOME--For the years ended December 31, 1999, 1998, and 1997,
Advanced did not incur items to be reported in comprehensive income that were
not already included in the reported net earnings; therefore, comprehensive
income (loss) and net income (loss) were the same for these periods.
RECLASSIFICATIONS--Certain amounts presented in the 1998 consolidated
financials statements have been reclassified to conform with the 1999
presentation.
3. DISCONTINUED OPERATIONS
In April 1999, Advanced announced that it intended to divest its
telecommunications segment in connection with several strategic acquisitions. In
July 1999, Advanced and four of its wholly-owned subsidiaries, Feist Long
Distance Services, Inc., FirsTel, Inc., Telecom Resources, Inc. and Valu-Line of
Longview, Inc., entered into a stock purchase agreement with Ionex
Telecommunications, Inc. under which Advanced agreed to sell all of the capital
stock of those wholly-owned subsidiaries to Ionex Telecommunications for $49.8
million, subject to a dollar-for-dollar reduction to the extent current assets
are less than current liabilities at the time of closing and to the extent of
any decrease in property, plant and equipment from May 1, 1999 to the closing
date. The sale was completed on November 19, 1999 and Advanced received $42.6
million, representing the purchase price less a preliminary working capital
adjustment. The estimated remaining costs of the transaction are included in
other liabilities in the financial statements.
As a result of the divestiture, the results of all the telecommunications
segment from the date of the announcement are classified as discontinued
operations in the accompanying consolidated financial statements. Revenues from
the discontinued telecommunications segment were $86.2 million and $59.6 million
in 1999 and 1998, respectively. Net losses from the discontinued
telecommunications operations were $7.4 million, net of an income tax benefit of
$4.0 million in 1999, and $7.5 million, net of an income tax benefit of $6.4
million in 1998.
Advanced has recorded a loss on the sale of the discontinued
telecommunications operations of $51.8 million. The loss on the sale of the
discontinued operations includes operating losses incurred through the
completion of the sale, transaction costs, exit costs of leased facilities,
employee severance and termination costs, and proceeds from the sale. The loss
is recorded net of an income tax benefit of $8.1 million.
In connection with the IPO, Advanced purchased a 49% interest in KINNET, an
owner and operator of a fiber optic network in Kansas, for $18.0 million.
Advanced accounted for its investment in KINNET using the equity method. In
December 1998, Advanced sold its entire interest in KINNET back to the original
owner of KINNET for $10.0 million in cash, 225,000 shares of Advanced's common
F-9
<PAGE>
ADVANCED COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
3. DISCONTINUED OPERATIONS (CONTINUED)
stock, valued at $0.9 million, and the indefeasible right to use (IRU) certain
network facilities of KINNET valued at $7.0 million. The sale of the KINNET
stock resulted in a $2.4 million loss due to the tax effect associated with this
transaction. The loss on the sale of KINNET is also included in the loss on the
discontinued telecommunications operations. The net assets and liabilities of
the discontinued telecommunications operations are classified on the
accompanying consolidated balance sheet as net assets held for sale at
December 31, 1998.
4. ACQUISITIONS
In April 1999, Advanced's Board of Directors approved a letter of intent to
acquire all the outstanding stock of YPtel Corporation, Web YP, Inc. and Big
Stuff, Inc. for approximately 19.5 million newly issued shares of common stock.
The acquisitions are expected to be completed in February 2000. YPtel
Corporation is the parent of Pacific Coast Publishing, Ltd. a leading yellow
pages publisher located in Tacoma, Washington. Web YP maintains a website and
operates an Internet yellow pages network that is integrated with Big Stuff's
yellow pages services. In connection with the acquisitions, Advanced's Chairman
and CEO, Richard O'Neal and the other 5% Note holders have agreed to convert the
$15.0 million 5% Notes and accrued interest owed by Advanced into approximately
2,864,000 shares of common stock in support of Advanced's strategy. Advanced
will be re-named WorldPages.com, Inc.
In February 1998, Advanced completed its IPO. Concurrent with and as a
condition to the closing of the IPO, Advanced acquired all of the outstanding
capital stock of Great Western Directories, Inc., Valu-Line of Longview, Inc.,
Feist Long Distance Service, Inc., FirsTel, Inc. and Tele-Systems, Inc.,
substantially all of the assets of Long Distance Management II, Inc., Long
Distance Management of Kansas, Inc., The Switchboard of Oklahoma City, Inc., and
National Telecom, a proprietorship, and 49% of the outstanding capital stock of
KINNET (collectively the Acquisitions or the Acquired Companies). The
Acquisitions are accounted for using the purchase method of accounting.
The following table sets forth for accounting purposes the fair value of
consideration paid with respect to the acquisition of Great Western and the
assets acquired:
(IN THOUSANDS)
<TABLE>
<S> <C>
Consideration Paid for Acquired Companies:
Cash...................................................... $55,634
Common stock.............................................. 8,000
Notes payable............................................. 15,000
Options and warrants...................................... 3,125
-------
Total purchase price.................................... $81,759
=======
Assets Acquired:
Net working capital....................................... $ 6,160
Property and equipment.................................... 1,237
Customer lists............................................ 32,900
Goodwill.................................................. 50,921
Net deferred tax liability................................ (9,459)
-------
Total assets acquired................................... $81,759
=======
</TABLE>
F-10
<PAGE>
ADVANCED COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
4. ACQUISITIONS (CONTINUED)
In addition to the acquisition of Great Western, Advanced purchased the
other acquired companies for $62.6 million in cash, stock options and notes
payable. These acquisitions resulted in $47.0 million of goodwill, $14.9 million
of customer lists and $.7 million of net other assets which have been classified
as net assets held for sale at December 31, 1998.
The following pro forma information presents results of operations as if the
acquisition of Great Western had occurred at the beginning of the periods
presented. This pro forma information is based on historical information and
does not necessarily reflect the actual results that would have occurred nor is
it necessarily indicative of the future results of the combined companies.
<TABLE>
<CAPTION>
PRO FORMA INFORMATION (UNAUDITED, IN THOUSANDS) 1998 1997
- ----------------------------------------------- -------- --------
<S> <C> <C>
Total revenues from continuing operations................... $47,336 $43,247
Net loss from continuing operations......................... (2,972) (2,563)
Loss per share from continuing operations................... (.15) (.13)
</TABLE>
In November 1998, Advanced acquired all of the outstanding stock of Telecom
Resources, Inc. and affiliates (TRI) for 477,538 newly issued shares of common
stock valued at $1.6 million. TRI, based in Dallas, Texas, offers its customers
a web-based virtual office package that combines voice, fax and data into a
single interface. This acquisition is accounted for under the purchase method of
accounting. The excess of cost over the estimated fair value of assets acquired
and liabilities assumed was allocated to goodwill. Approximately $3.3 million
was allocated to goodwill and will be amortized over 15 years. The results of
operations and the pro forma results would not have been significantly different
if TRI had been acquired at the beginning of 1998. As described in Note 3, TRI
was sold with Advanced's telecom subsidiaries in November 1999.
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following at December 31,
1999 and 1998:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1999 1998
- -------------- -------- --------
<S> <C> <C>
Land and buildings.......................................... $ 544 $ 544
Leasehold improvements...................................... 387 388
Furniture and office equipment.............................. 1,883 1,443
------- -------
2,814 2,375
Less accumulated depreciation............................... (1,437) (1,241)
------- -------
$ 1,377 $ 1,134
======= =======
</TABLE>
F-11
<PAGE>
ADVANCED COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
7. LONG-TERM DEBT
The carrying amount of long-term debt, which approximates fair value,
consisted of the following at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1999 1998
- -------------- -------- --------
<S> <C> <C>
Borrowings under revolving line of credit, variable
interest, 9.25% and 8.25% at December 31, 1999 and 1998,
respectively.............................................. $ 7,000 $17,000
5% Notes payable due February 18, 2000, interest due
annually (related parties)................................ 15,000 15,000
10% Convertible Notes due February 18, 2000, interest due
annually (related parties)................................ 2,000 2,000
7% Note due annually through February 18, 2001, interest due
annually (related parties)................................ -- 350
------- -------
24,000 34,350
Less short-term borrowings and current maturities........... (24,000) (17,117)
------- -------
$ -- $17,233
======= =======
</TABLE>
The weighted average interest rates at December 31, 1999 and 1998 for
short-term borrowings were 6.7% and 8.2%, respectively.
On May 14, 1999, Advanced, through its wholly-owned yellow pages publishing
subsidiary, Great Western, entered into a $40.0 million revolving loan agreement
with Bank of America National Trust and Savings Association. Advanced used a
portion of the credit facility to refinance an existing $25.0 million credit
facility and to finance its discontinued telecommunications operations. In
connection with the closing of the sale of the telecommunications operations,
the revolving credit facility was amended to reduce the total available
borrowings to $15.0 million. The balance of the new credit facility is, subject
to various restrictions, for the general working capital needs and other
corporate purposes of Advanced and Great Western. Interest on the facility
varies at LIBOR (adjusted by the Eurodollar reserve percentage) plus 2.75% or at
the Bank of America's prime or base rate plus .75%. The facility requires a
commitment fee of .5% on the unused balance and is subject to various
restrictions and the maintenance of certain financial ratios. The facility
expires on May 13, 2000 and Advanced guaranteed the loan by pledging to Bank of
America substantially all of its assets.
In connection with the acquisitions of YPtel Corporation, Web YP, Inc. and
Big Stuff, Inc., (Note 4), Advanced intends to issue approximately 2,863,637
shares of Advanced's common stock in redemption of the $15.0 million 5% Notes
and accrued interest owed thereon. The 5% Notes are owed to the former
stockholders of Great Western, including Mr. Richard O'Neal, Advanced's Chairman
of the Board and Chief Executive Officer and four other individuals of Great
Western. The indebtedness was originally incurred in connection with Advanced's
acquisition of Great Western in February 1998.
The 5% Notes and 10% Convertible Notes may be prepaid at any time and are
subordinated to Advanced's senior debt as defined therein. The 10% Convertible
Notes are convertible into shares of Advanced's common stock at $14.00 per
share.
Until the IPO, Advanced's activities had been financed through a
Subordinated Promissory Note as amended (the Note), with Consolidated Partners
Founding Fund (CPFF), a related party, in the principal amount of $3,230,000 and
bearing an annual interest rate of 8%. The Note was due on the
F-12
<PAGE>
ADVANCED COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
7. LONG-TERM DEBT (CONTINUED)
earlier of December 31, 1998, or the consummation of the IPO. In connection with
the IPO in February 1998, the entire balance of the Note was repaid. During 1998
and 1997, Advanced incurred interest expense of $149,000 and $256,000,
respectively, related to the Note.
Included in short-term and long-term debt at December 31, 1999 and 1998,
respectively, are notes relating to the Acquisitions totaling $14,803,000 and
$15,393,000, respectively, which are due to current directors and members of
management. For the years ended December 31, 1999 and 1998, Advanced recognized
interest expense of $768,000 and $709,000, respectively, relating to these
notes.
8. INCOME TAXES
The provision for income tax expense (benefit) related to continuing
operations consisted of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1999 1998
- -------------- -------- --------
<S> <C> <C>
Current:.................................................... $ -- $ --
Federal................................................... -- --
------- -------
State..................................................... -- --
------- -------
Deferred:
Federal................................................... (1,230) (5,945)
State..................................................... (235) (514)
------- -------
(1,465) (6,459)
------- -------
Income tax expense (benefit)................................ $(1,465) $(6,459)
======= =======
</TABLE>
Significant components of deferred tax assets and liabilities at
December 31, 1999 and 1998 were:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1999 1998
- -------------- -------- --------
<S> <C> <C>
Deferred tax assets:
Property and equipment depreciation....................... $ 108 $ --
Reserves and accruals..................................... 172 1,273
Net operating loss carryforwards.......................... 16,555 1,222
-------- --------
16,835 2,495
-------- --------
Deferred tax liabilities:
Intangible assets......................................... (10,158) (16,144)
Deferred costs............................................ (1,701) --
Property and equipment depreciation....................... -- (319)
-------- --------
(11,859) (16,463)
-------- --------
Total net deferred tax asset (liability).................... 4,976 (13,968)
Net deferred tax liabilities included in Net Assets Held for
Sale...................................................... -- 3,490
-------- --------
Net deferred tax asset (liability).......................... $ 4,976 $(10,478)
======== ========
</TABLE>
F-13
<PAGE>
ADVANCED COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
8. INCOME TAXES (CONTINUED)
The benefit for income taxes reconciles to the amount computed by applying
the statutory federal tax rate of 34% as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1999 1998
- -------------- -------- --------
<S> <C> <C>
Computed expected tax benefit............................... $(1,643) $(6,031)
Non-deductible goodwill and intangibles..................... 317 332
State income tax benefit.................................... (155) (339)
Loss on sale of KINNET...................................... -- 816
Other....................................................... 16 (44)
Change in valuation allowance............................... -- (1,193)
------- -------
$(1,465) $(6,459)
======= =======
</TABLE>
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion, or all of the deferred tax
assets will be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the period in
which those temporary differences become deductible. Net operating loss
carryforwards of $3,139,000, $518,000 and $39,909,000 expire in 2012, 2018, and
2019, respectively. Management believes that Advanced will generate sufficient
taxable income to absorb all net operating loss carryforwards and deductible
temporary differences prior to their expiration.
9. STOCK OPTIONS AND WARRANTS
In connection with the Acquisitions and IPO, Advanced issued various common
stock warrants that allow the holder to purchase shares of common stock at
defined exercise prices. As of December 31, 1999 and 1998, 1,674,427 and
1,584,427 of such warrants were issued and outstanding, respectively.
Advanced has an employee incentive stock option plan which allows Advanced
to grant key employees incentive and non-qualified stock options to purchase up
to 3,500,000 shares of Advanced's common stock at not less than the market price
on the date of the grant. Options not exercised accumulate and are exercisable,
in whole or in part, in any subsequent period but not later than ten years from
the date of the grant.
Advanced also has a Non-Employee Director stock option plan, approved by the
stockholders, under which Advanced grants an option to purchase 15,000 shares of
common stock to each director who is neither an officer of Advanced nor
compensated under any employment or consulting arrangements (Non-Employee
Director) upon their initial appointment as director and an additional option to
purchase 5,000 shares upon each subsequent re-election to director. Under the
plan, the option exercise price is the fair market value of Advanced's common
stock on the date of the grant, and the options are exercisable, on a cumulative
basis, at 33 1/3% per year commencing on the first anniversary date of the
grant.
F-14
<PAGE>
ADVANCED COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
9. STOCK OPTIONS AND WARRANTS (CONTINUED)
A summary of the stock option and warrant transactions under the plans for
the years ended December 31, 1999 and 1998, is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------------------- --------------------- ---------------------
AVERAGE NUMBER OF AVERAGE NUMBER OF AVERAGE NUMBER OF
PRICE SHARES PRICE SHARES PRICE SHARES
-------- --------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Options and warrants outstanding at
beginning of year................ $6.96 3,960,312 $ 8.76 2,288,640 $ -- 0
Options and warrants granted....... $7.50 393,961 $ 9.89 4,116,172 $ 7.59 2,813,640
Options and warrants exercised..... $4.28 (366,634) $ -- -- $ 2.50 525,000
Options and warrants canceled...... $5.56 (181,116) $13.57 (2,444,500) $ -- 0
--------- ---------- ----------
Options and warrants outstanding at
end of year...................... $7.34 3,806,523 $ 6.96 3,960,312 $ 8.76 2,288,640
========= ========== ==========
Exercisable at end of year......... 3,110,826 1,580,377 107,561
========= ========== ==========
</TABLE>
Other information regarding stock options and warrants outstanding as of
December 31, 1999, is as follows:
<TABLE>
<CAPTION>
OPTIONS AND WARRANTS OUTSTANDING
----------------------------------------------- OPTIONS AND WARRANTS EXERCISABLE
REMAINING ---------------------------------
RANGE OF NUMBER OF CONTRACTUAL LIFE WEIGHTED AVERAGE NUMBER OF WEIGHTED AVERAGE
EXERCISE PRICE OPTIONS (YEARS) EXERCISE PRICE OPTIONS EXERCISE PRICE
- --------------------- --------- ---------------- ---------------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
$2.50-$4.19 630,593 7.6 $ 2.54 537,260 $ 2.52
$4.50-$4.50 1,037,000 1.9 $ 4.50 932,793 $ 4.50
$4.67-$6.61 879,714 6.8 $ 6.46 601,933 $ 6.40
$6.96-$10.50 279,461 6.6 $ 8.32 189,667 $ 7.86
$14.00-$14.00 979,755 5.2 $14.00 849,173 $14.00
--------- --- ------ --------- ------
$2.50-$14.00 3,806,523 5.2 $ 7.34 3,110,826 $ 7.32
========= === ====== ========= ======
</TABLE>
Advanced accounts for the option plans using the intrinsic value method.
Under such method, no compensation expense has been recognized relating to the
stock options. Pro forma net earnings and net earnings per common share in the
following table were prepared as if Advanced had accounted for its stock options
and warrants under the fair market value method.
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net loss from continuing operations--pro forma (in
thousands)................................................ $9,024 $6,059 $5,972
Net loss from continuing operations per share--pro forma.... .45 .33 .73
</TABLE>
For the pro forma disclosures, the fair value of each option and warrant
grant is estimated at the date of the grant using an option pricing model with
the following assumptions: no expected dividends, risk-free interest rates of
6.0%, price volatility of 50% and expected lives of four years.
On December 13, 1998, Advanced's Board of Directors approved the re-pricing
of approximately 2,125,000 options granted to key employees with a
weighted-average exercise price of $13.53. Under the
F-15
<PAGE>
ADVANCED COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
9. STOCK OPTIONS AND WARRANTS (CONTINUED)
terms of the re-pricing, holders of the affected options received one new option
for each two existing options. The new options have an exercise price of $4.50
per share, which represents the fair market value of Advanced's stock on
December 14, 1998.
In connection with the Acquisitions, Advanced issued warrants to purchase
756,078 shares of common stock at $6.61 per share and options to purchase
598,500 shares of common stock at $14.00 per share (the IPO price). The fair
value of these options and warrants was determined to be $4,101,000 on the date
of grant, and was recorded as a component of the purchase price of the
Acquisitions.
During December 1997, Advanced awarded two of its officers ten-year options
to purchase 300,000 shares of common stock at an exercise price of $2.50 per
share which vested in full at the end of three months. Additionally, in
May 1997, Advanced granted to one of its consultants a warrant for the purchase
of 7,561 shares of common stock at an exercise price of $2.65 per share. During
the year ended December 31, 1998 and 1997, Advanced recognized $1,760,000 and
$870,000, respectively, of compensation expense related to these options and
warrants.
10. BENEFIT PLANS
Advanced has a stock purchase plan whereby eligible employees may elect to
invest up to 10% of their salary and Advanced contributes an amount equal to 15%
of each participant's contribution. Advanced also has a 401(k) plan whereby
eligible employees may elect to contribute a portion of their salary and
Advanced contributes an amount equal to 50% of employee contributions up to 6%
of the employee's base salary. Advanced recognized expense of $482,000 in 1999;
$281,000 in 1998; and no expense in 1997 relating to these plans.
11. LEASES
Certain sales and administrative offices and equipment are leased. The
leases expire at various dates through 2003. Leases that expire are generally
renewed or replaced by similar leases depending on business needs. Rent expense
for operating leases in 1999, 1998, and 1997 was $2,153,000, $1,370,000 and
$48,000, respectively. At December 31, 1999, Advanced's future minimum rental
payments due under noncancelable operating leases were as follows: $473,000 in
2000; $359,000 in 2001; $206,000 in 2002; $88,000 in 2003; $25,000 in 2004; and
$0 thereafter.
12. PREFERRED STOCK
In connection with a strategic alliance with a utility company, which was
consummated with the IPO, Advanced issued 142,857 shares of Series A Redeemable
Convertible Preferred Stock (Preferred Stock) with an aggregate liquidation
preference of $2.0 million. The Preferred Stock was convertible into a like
number of shares of common stock eighteen months after the consummation of the
IPO. In August 1999, the preferred stock was converted by the holder into
142,857 shares of Advanced's common stock. The Preferred Stock did not pay
dividends and its holders were not entitled to vote in the election of
directors.
F-16
<PAGE>
ADVANCED COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
13. COMMITMENTS AND CONTINGENCIES
In August 1996, one of Advanced's subsidiaries, Valu-Line of
Longview, Inc., entered into a written agreement with MCI Communications
Corporation under which, for a fee, MCI would provide access to Valu-Line so
that Valu-Line could provide services as a long distance carrier. After
execution of the written agreement, service failures by MCI occurred. To address
the service failures and MCI relocation of circuits serving Valu-Line,
representatives of Valu-Line and MCI agreed upon a reduced fee structure and
revised network architecture in order to provide restitution to Valu-Line and to
address the service quality issues. The resulting agreement reflecting the
reduced fee structure was never set forth in writing. Both before and after
Advanced acquired Valu-Line, the payments made under the Valu-Line contract with
MCI were in accordance with the modified agreement. In April-May 1999, after the
acquisition of MCI by WorldCom, Inc., MCI WorldCom, Inc., as the owner of the
successor-in-interest to MCI, took the position that ACG owed $2.9 million in
delinquent amounts under the original written contract, ignoring the
modification to the contract between the parties. MCI WorldCom and Advanced have
agreed to settle this matter in arbitration. Management intends to actively
pursue Advanced's rights and defenses in arbitration.
In July 1999, Loretta R. Cross, Chapter 7 Trustee for Total National
Telecommunications, Inc., filed an Adversary Proceeding against Lou Zant and
TRI, in the United States Bankruptcy Court for the Southern District of Texas.
The trustee's complaint seeks recovery of $2.6 million from TRI as a fraudulent
conveyance under the Bankruptcy Code. The complaint is based on an October 1,
1996 stock purchase agreement in which Total World Telecommunications, Inc., the
parent of Total National Telecommunications, agreed to purchase all the stock of
NETTouch Communications, Inc., from TRI and Mr. Zant. The trustee's complaint
alleges that Total National Telecommunications provided the funds to Total World
Telecommunications to complete and close the stock purchase and that Total
National Communications never received any consideration for its funds. TRI
intends to vigorously defend the action.
Advanced is party to various legal actions, proceedings and claims arising
in the normal course of business. Some of the foregoing involve, or may involve,
claims for compensatory, punitive or other damages in material amounts.
Litigation is subject to many uncertainties, and it is possible that some of the
legal actions, proceedings and claims referred to above could be decided against
Advanced. Advanced's management believes that any resulting liability will not
materially affect Advanced's financial position, liquidity or results of
operations
14. REPORTABLE SEGMENTS
Advanced considers its directory operations as its only reportable segment.
The directory operations publish and distribute yellow pages directories in
various markets in Oklahoma, Texas and California. Prior to November 1999,
Advanced had reported its telecommunications operations as another segment. The
telecommunications operations provided local, long distance and other
telecommunications services to customers in service areas of Southwestern Bell
and U S West. The different telecommunications services were aggregated and
classified as one reportable segment because they were considered one segment in
assessing performance and allocation of resources. The telecommunications
segment was sold in November 1999 and has been presented as discontinued
operations in the accompanying consolidated financial statements.
The costs associated with Advanced's corporate overhead including, but not
limited to, executive salaries, salaries of shared administrative personnel and
the direct costs of company-wide programs,
F-17
<PAGE>
ADVANCED COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
14. REPORTABLE SEGMENTS (CONTINUED)
have been allocated to the directory operations segment based on management's
estimate of those costs expected to be continuing after the sale of the
telecommunications operations. The administrative costs that will not continue
after the sale of the telecommunications segment have been allocated to the
discontinued telecommunications operations.
15. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER TOTAL
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION) ----------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
1999
Revenues................................. $18,743 $ 14,481 $ 9,113 $ 7,650 $49,987
Operating income (loss).................. 3,391 (1,126) (537) (1,869) (141)
Net income (loss) from continuing
operations............................. 1,031 (1,250) (2,181) (967) (3,367)
Net loss from discontinued operations.... (7,378) -- -- -- (7,378)
Net loss on sale of discontinued
operations............................. (51,800) -- -- -- (51,800)
Total net loss........................... (58,147) (1,250) (2,181) (967) (62,545)
Net income (loss) per common share from
continuing operations.................. 0.05 (0.06) (0.11) (0.05) (0.17)
Net loss per common share from discontinued
operations............................. (0.37) -- -- -- (0.37)
Net loss per common share from sale of
discontinued operations................ (2.60) -- -- -- (2.60)
Total net loss per share................. (2.93) (0.06) (0.11) (0.05) (3.14)
Common shares used in per share
calculation............................ 19,859 19,859 19,968 20,134 19,956
<CAPTION>
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER TOTAL
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION) ----------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
1998
Revenues................................. $ 9,183 $ 12,809 $ 8,255 $ 7,843 $38,090
Operating income (loss).................. (761) 1,596 (891) (2,139) (2,195)
Net income (loss) from continuing
operations............................. (816) 501 (1,295) (2,162) (3,772)
Net loss from discontinued operations.... (308) (1,532) (2,396) (3,271) (7,507)
Total net loss........................... (1,124) (1,031) (3,691) (5,433) (11,279)
Net income (loss) per common share from
continuing operations.................. (0.05) 0.03 (0.07) (0.11) (0.20)
Net loss per common share from discontinued
operations............................. (0.03) (0.09) (0.12) (0.17) (0.41)
Total net loss per share................. (0.08) (0.06) (0.19) (0.28) (0.61)
Common shares used in per share
calculation............................ 15,269 19,616 19,616 19,822 18,594
</TABLE>
F-18
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Pacific Coast Publishing, Inc.
We have audited the accompanying balance sheets of Pacific Coast
Publishing, Inc. (Pacific Coast) as of October 31, 1998 and 1997, and the
related statements of operations, stockholders' equity, and cash flows for each
of the three years in the period ended October 31, 1998. These financial
statements are the responsibility of Pacific Coast's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Pacific Coast as of
October 31, 1998 and 1997, and the results of its operations and its cash flows
for each of the three years in the period ended October 31, 1998, in conformity
with accounting principles generally accepted in the United States.
ERNST & YOUNG LLP
Seattle, Washington
December 22, 1998
F-19
<PAGE>
PACIFIC COAST PUBLISHING, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
OCTOBER 31,
-------------------------
<S> <C> <C>
1998 1997
----------- -----------
CURRENT ASSETS
Cash and cash equivalents................................... $ 334,426 $ 17,922
Trade accounts receivable, net.............................. 6,275,722 4,999,533
Deferred costs.............................................. 7,271,961 6,892,487
Advances to employees....................................... 105,769 50,770
Prepaid expenses and other.................................. 723,851 332,685
----------- -----------
Total current assets........................................ 14,711,729 12,343,397
Property, plant and equipment, net.......................... 508,463 505,579
Other assets................................................ 313,950 132,381
----------- -----------
Total assets................................................ $15,534,142 $12,981,357
=========== ===========
CURRENT LIABILITIES
Current portion of debt..................................... $ 95,382 $ 585,828
Accounts payable and accrued expenses....................... 1,574,604 1,362,253
Deferred revenue............................................ 2,683,854 2,913,231
Commissions payable......................................... 1,169,261 1,019,448
----------- -----------
Total current liabilities................................... 5,523,101 5,880,760
----------- -----------
Debt, less current portion.................................. 276,224 260,600
----------- -----------
Commitments and contingencies (NOTE 5)
----------- -----------
Total liabilities........................................... 5,799,325 6,141,360
----------- -----------
STOCKHOLDERS' EQUITY
Common stock, $1 par value:
Authorized shares--50,000
Issued and outstanding shares--20,000..................... 20,000 20,000
Additional paid-in capital.................................. 119,269 119,269
Retained earnings........................................... 9,595,548 6,700,728
----------- -----------
Total stockholders' equity.................................. 9,734,817 6,839,997
----------- -----------
Total liabilities and stockholders' equity.................. $15,534,142 $12,981,357
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES.
F-20
<PAGE>
PACIFIC COAST PUBLISHING, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
---------------------------------------
<S> <C> <C> <C>
1998 1997 1996
----------- ----------- -----------
Revenue............................................... $33,165,398 $28,203,972 $24,550,563
Expenses:
Printing, distribution, and listings................ 8,001,467 6,644,443 6,985,299
Sales and marketing................................. 7,301,381 5,700,232 5,612,647
General and administrative.......................... 8,453,878 7,584,901 6,051,042
Provision for bad debts............................. 2,067,085 1,727,532 1,836,185
Depreciation and amortization....................... 170,124 249,245 334,918
Stockholder remuneration............................ 1,646,092 1,717,614 1,834,726
----------- ----------- -----------
Income from operations................................ 5,525,371 4,580,005 1,895,746
Interest (income) expense, net........................ (141,828) 94,625 247,211
Other (income) expense................................ (98,100) 26,113 (63,321)
----------- ----------- -----------
Earnings before income taxes.......................... 5,765,299 4,459,267 1,711,856
Provision for income taxes............................ 86,479 53,988 265,957
----------- ----------- -----------
Net income............................................ $ 5,678,820 $ 4,405,279 $ 1,445,899
=========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES.
F-21
<PAGE>
PACIFIC COAST PUBLISHING, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED OCTOBER 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL UNREALIZED
------------------- PAID-IN LOSS ON RETAINED
SHARES AMOUNT CAPITAL INVESTMENTS EARNINGS TOTAL
-------- -------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balances at October 31, 1995... 20,000 $20,000 $119,269 $(20,400) $ 2,181,550 $ 2,300,419
Net income................... -- -- -- -- 1,445,899 1,445,899
Change in unrealized loss on
investments................ -- -- -- (9,120) -- (9,120)
------ ------- -------- -------- ----------- -----------
Balances at October 31, 1996... 20,000 20,000 119,269 (29,520) 3,627,449 3,737,198
Net income................... -- -- -- -- 4,405,279 4,405,279
Cash dividends paid.......... -- -- -- -- (1,332,000) (1,332,000)
Change in unrealized loss on
investments................ -- -- -- 29,520 -- 29,520
------ ------- -------- -------- ----------- -----------
Balances at October 31, 1997... 20,000 20,000 119,269 0 6,700,728 6,839,997
Net income................... -- -- -- -- 5,678,820 5,678,820
Cash dividends paid.......... -- -- -- -- (2,784,000) (2,784,000)
------ ------- -------- -------- ----------- -----------
Balances at October 31, 1998... 20,000 $20,000 $119,269 $ 0 $ 9,595,548 $ 9,734,817
====== ======= ======== ======== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES.
F-22
<PAGE>
PACIFIC COAST PUBLISHING, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
------------------------------------------
<S> <C> <C> <C>
1998 1997 1996
------------ ------------ ------------
OPERATING ACTIVITIES
Cash received from customers........................ $ 32,154,531 $ 28,268,125 $ 23,373,735
Cash paid to suppliers and employees................ (28,307,682) (24,467,625) (22,820,826)
Investment income received.......................... 241,791 213,119 128,076
Interest paid....................................... (105,449) (333,989) (357,095)
Income taxes paid................................... (53,988) (176,756) (46,797)
------------ ------------ ------------
Net cash provided by operating activities........... 3,929,203 3,502,874 277,093
------------ ------------ ------------
INVESTING ACTIVITIES
Purchases of property, plant and equipment.......... (172,308) (100,876) (177,223)
Cash received on sale of property, plant and
equipment......................................... -- -- 500
Other activities.................................... (181,569) (21,728) (89,151)
------------ ------------ ------------
Net cash used in investing activities............... (353,877) (122,604) (265,874)
------------ ------------ ------------
FINANCING ACTIVITIES
Dividends to stockholders........................... (2,784,000) (1,332,000) --
Proceeds of debt borrowings......................... 125,134 240,736 197,536
Principal payments on debt.......................... (599,956) (2,271,084) (208,755)
------------ ------------ ------------
Net cash used in financing activities............... (3,258,822) (3,362,348) (11,219)
------------ ------------ ------------
Net increase in cash................................ 316,504 17,922 --
Cash at beginning of year........................... 17,922 -- --
------------ ------------ ------------
Cash at end of year................................. $ 334,426 $ 17,922 $ --
============ ============ ============
Reconciliations of net income to net cash provided
by operating activities:
Net income........................................ $ 5,678,820 $ 4,405,279 $ 1,445,899
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for doubtful accounts................. 2,067,085 1,727,532 1,836,185
(Gain) loss on disposal of property, plant and
equipment..................................... (699) 136,830 3,854
Depreciation and amortization................... 170,123 249,245 334,918
Increase in trade accounts receivable........... 3,343,274 2,492,926 3,212,581
Increase in prepaid and deferred costs, and
other assets.................................. (775,639) (1,126,807) (6,416)
Increase in accounts and commissions payable and
accrued expenses.............................. 362,164 225,813 171,409
Increase (decrease) in deferred revenue......... (229,377) 377,908 (296,175)
------------ ------------ ------------
Net cash provided by operating activities........... $ 3,929,203 $ 3,502,874 $ 277,093
============ ============ ============
</TABLE>
SEE ACCOMPANYING NOTES.
F-23
<PAGE>
PACIFIC COAST PUBLISHING, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998
1. NATURE OF BUSINESS
Pacific Coast Publishing, Inc. (Pacific Coast) is in the business of selling
yellow pages advertising and publishing and distributing telephone directories
in selected Arizona, Oregon, Utah, and Washington cities.
During 1998, Pacific Coast's stockholders entered into an agreement to sell
substantially all of the operating assets of Pacific Coast effective
November 1, 1998.
2. SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTS RECEIVABLE AND REVENUE RECOGNITION
Accounts receivable are reflected net of an allowance for doubtful accounts
as of October 31, 1998 and 1997 of $738,230 and $578,030, respectively.
Advertising revenue is recognized when directories containing the customers
advertising are distributed. Advertising revenue billed on directories that have
not been distributed is reported as deferred revenue.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost and is depreciated or
amortized using accelerated methods over the shorter of the lease term or the
estimated useful lives of the assets. Amortization of equipment under capital
leases is included in depreciation.
DEFERRED COSTS
Costs to produce, distribute, and market the directories are initially
capitalized and are expensed only when the directories are distributed in order
to match related expenses with advertising revenue. Costs include all direct
material and commission costs and indirect costs related to production, such as
indirect labor, depreciation, rent, utilities, office expenses and business
taxes, and the portion of the bad debt expense allocated to undistributed
directories. Capitalized production, distribution, and marketing costs of
directories not yet distributed are reported as deferred costs. Deferred costs
consist of the following:
<TABLE>
<CAPTION>
OCTOBER 31,
-----------------------
<S> <C> <C>
1998 1997
---------- ----------
Sales commissions.................................... $4,056,348 $3,798,699
Direct production costs.............................. 330,414 338,055
Indirect production costs............................ 2,885,199 2,755,733
---------- ----------
$7,271,961 $6,892,487
========== ==========
</TABLE>
ADVERTISING COSTS
Pacific Coast expenses advertising when the costs are incurred. Advertising
costs totaled $621,613 in 1998, $520,065 in 1997, and $244,740 in 1996.
F-24
<PAGE>
PACIFIC COAST PUBLISHING, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1998
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BARTER TRANSACTIONS
Pacific Coast barters yellow pages advertising in exchange for goods and
services. Sales are recognized at the fair market value of the advertising sold.
Services received are recorded at the same value as the sale. There is no gain
or loss recognized on these trades. Recognition of the revenues and expenses
from trades is the same as for monetary revenues and expenses. Barter
transactions represented 3.4%, 2.9%, and 2.6%, of advertising fees in 1998,
1997, and 1996, respectively.
CONCENTRATION OF CREDIT RISK
Approximately 50% of Pacific Coast's business relates to sales in the state
of Washington. Pacific Coast performs periodic credit evaluations of its
potential customers prior to acceptance and publication and requires deposits by
customers. Pacific Coast provides an allowance for doubtful accounts sufficient
to cover estimated credit losses. Credit losses have consistently been within
management's expectation.
Under a long-term contract that expires in February 2001, Pacific Coast
utilizes one outside vendor to print its yellow pages publications. As security
for payment of production amounts owed under the contract, the vendor has a lien
on all property owned by the vendor in Pacific Coast's possession, including
work-in-process and undelivered work. Production delays or failure by this
vendor to otherwise perform could significantly impact Pacific Coast's
operations.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain prior year balance sheet amounts and statement of operations amounts
have been reclassified to conform to the October 31, 1998 presentation.
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of:
<TABLE>
<CAPTION>
OCTOBER 31,
-----------------------
<S> <C> <C>
1998 1997
---------- ----------
Equipment............................................ $1,848,980 $1,724,150
Furniture and fixtures............................... 89,447 82,919
Vehicles............................................. 107,260 107,260
Leasehold improvements............................... 109,925 109,925
---------- ----------
2,155,612 2,024,254
Less amortization and accumulated depreciation....... 1,647,149 1,518,675
---------- ----------
$ 508,463 $ 505,579
========== ==========
</TABLE>
F-25
<PAGE>
PACIFIC COAST PUBLISHING, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1998
3. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Included in equipment are assets held under capital leases as of
October 31, 1998 and 1997 with a gross amount of $871,139 and $795,602,
respectively. Accumulated amortization as of October 31, 1998 and 1997 on the
capital lease assets totaled $715,247 and $683,286, respectively.
4. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
OCTOBER 31,
-------------------
<S> <C> <C>
1998 1997
-------- --------
Line of credit.............................................. $ -- $460,546
Note payable to bank in monthly installments of $1,076,
including interest at 9.25% at October 31, 1998. The note
matures in August 2000 and is collateralized by a
vehicle................................................... 21,688 32,059
Notes payable to equipment vendors in aggregate monthly
installments from $1,655 to $4,698, including interest at
9.00% at October 31, 1998. There is one note outstanding
at October 31, 1998, which matures August 2002............ 182,208 230,744
Capital lease obligations................................... 167,710 123,079
-------- --------
371,606 846,428
Less current portion........................................ 95,382 585,828
-------- --------
$276,224 $260,600
======== ========
</TABLE>
Pacific Coast's line of credit agreement with a bank was renewed during 1998
for a two-year period. Pacific Coast is permitted to borrow up to $7,000,000
under the line. Borrowings on the line bear interest at 8.375% as of
October 31, 1998, which is payable monthly. All outstanding principal and unpaid
interest is due at the line's maturity in April 2000, unless the line is
extended.
Borrowings on the line are collateralized by all accounts receivable of
Pacific Coast. In addition, Pacific Coast's stockholders have personally
guaranteed the repayment of the line. The line requires Pacific Coast to meet
certain restrictive covenants, including minimum cash flow coverage and debt to
net worth ratio requirements. As of October 31, 1998, Pacific Coast had
satisfied the covenant requirements.
Future maturities of debt as of October 31, 1998, including capital lease
obligations (see Note 5), are as follows:
<TABLE>
<CAPTION>
YEARS ENDING OCTOBER 31
- -----------------------
<S> <C>
1999........................................................ $ 95,382
2000........................................................ 117,964
2001........................................................ 71,339
2002........................................................ 60,718
2003........................................................ 26,203
--------
$371,606
========
</TABLE>
F-26
<PAGE>
PACIFIC COAST PUBLISHING, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1998
4. DEBT (CONTINUED)
Interest (income) expense, net, consists of the following:
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
---------------------------------
<S> <C> <C> <C>
1998 1997 1996
--------- --------- ---------
Interest and other investment income........ $(241,791) $(213,119) $(128,076)
Interest expense............................ 99,963 307,744 375,287
--------- --------- ---------
$(141,828) $ 94,625 $ 247,211
========= ========= =========
</TABLE>
5. COMMITMENTS AND CONTINGENCIES
Pacific Coast leases equipment and office space, including its corporate
office space, from a related party (see Note 7). Certain of the leases require
Pacific Coast to pay a portion of the operating costs associated with the leased
property. Future minimum lease payments under capital and operating leases as of
October 31, 1998 are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
YEARS ENDING OCTOBER 31, LEASES LEASES
- ------------------------ -------- ----------
<S> <C> <C>
1999.................................................. $ 62,996 $ 838,692
2000.................................................. 74,144 543,255
2001.................................................. 28,107 303,887
2002.................................................. 20,199 211,943
2003.................................................. 27,427 120,000
Thereafter............................................ -- 50,000
-------- ----------
212,873 $2,067,777
==========
Less amount representing interest payments............ 45,163
--------
167,710
Less current portion.................................. 42,336
--------
$125,374
========
</TABLE>
F-27
<PAGE>
PACIFIC COAST PUBLISHING, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1998
5. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Future lease payments for operating leases include maintenance contract
payments. Rent expense, exclusive of maintenance agreement payments, was
$820,531 in 1998, $746,445 in 1997, and $601,334 in 1996.
As of October 31, 1998, certain asserted legal actions are outstanding
against Pacific Coast, which have arisen in the normal course of business. While
no estimate of loss, if any, which may occur from the settlement of these
actions can be made, it is the opinion of management that the settlement of the
asserted actions will not have a material adverse impact on Pacific Coast's
financial position, operations, or cash flows.
6. INCOME TAXES
Beginning with the year ended October 31, 1996, Pacific Coast elected S
corporation status for federal income tax reporting purposes. As a result,
Pacific Coast is generally not subject to federal income tax, and the
stockholders separately report their respective pro rata shares of Pacific
Coast's income, deductions, and losses on their personal income tax returns.
Pacific Coast remains subject to various state income taxes.
The provision for income taxes consists of:
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
------------------------------
<S> <C> <C> <C>
1998 1997 1996
------- -------- --------
Federal income taxes at statutory rates........ $ -- $ -- $ --
Internal Revenue Service audit assessment for
prior years.................................. -- -- 154,702
Various state income taxes payable............. 86,479 53,988 18,213
------- -------- --------
Current portion................................ 86,479 53,988 172,915
Deferred taxes................................. -- -- 93,042
------- -------- --------
$86,479 $ 53,988 $265,957
======= ======== ========
</TABLE>
Deferred taxes arose principally due to current temporary timing differences
related to the allowance for doubtful accounts and vacation accruals.
7. RELATED-PARTY TRANSACTIONS
Pacific Coast leases corporate office space in a building that is owned by a
corporation whose sole stockholders are Pacific Coast's two stockholders. Rents
paid to the related corporation were $412,688 in 1998, $402,144 in 1997, and
$382,289 in 1996. Pacific Coast, as well as the stockholders, is a guarantor for
a bank loan to the related corporation. As of October 31, 1998, the outstanding
balance on the guaranteed bank loan was $118,236.
F-28
<PAGE>
PACIFIC COAST PUBLISHING, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1998
7. RELATED-PARTY TRANSACTIONS (CONTINUED)
Total stockholder remuneration was as follows:
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
------------------------------------
<S> <C> <C> <C>
1998 1997 1996
---------- ---------- ----------
Salaries................................. $1,560,000 $1,600,000 $1,800,000
Bonuses.................................. 86,092 117,614 34,726
---------- ---------- ----------
$1,646,092 $1,717,614 $1,834,726
========== ========== ==========
</TABLE>
8. 401(K) PLAN
Pacific Coast has a 401(k) plan that covers substantially all employees
meeting certain requirements. Company contributions to the Plan are
discretionary and are determined by the Board of Directors. Contributions
totaled $134,000 in 1998, $112,000 in 1997, and $88,100 in 1996.
F-29
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
YPtel Corporation
We have audited the accompanying consolidated balance sheet of YPtel
Corporation ("YPtel") as at October 31, 1999, and the related consolidated
statements of income, shareholders' equity, and cash flows for the year then
ended. These financial statements are the responsibility of YPtel's management.
Our responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of YPtel as at
October 31, 1999, and the results of its operations and its cash flows for the
year then ended in conformity with accounting principles generally accepted in
the United States.
Ernst & Young LLP
Toronto, Canada,
January 31, 2000.
F-30
<PAGE>
YPTEL CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE DATA)
OCTOBER 31, 1999
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash...................................................... $ 81
Trade accounts receivable, net............................ 11,736
Recoverable income taxes.................................. 547
Deferred production expenses.............................. 7,585
Reimbursable merger costs................................. 641
Advances to employees..................................... 83
Prepaid expenses and other................................ 1,409
-------
Total current assets........................................ 22,082
Property and equipment, net................................. 658
Intangible assets, net...................................... 38,492
Deferred financing costs, net............................... 1,668
-------
Total assets................................................ $62,900
=======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Borrowings on revolving credit facility................... $ 2,983
Current portion of long-term debt......................... 2,341
Accounts payable and accrued expenses..................... 2,906
Interest payable.......................................... 836
Deferred revenue.......................................... 1,333
Commissions payable....................................... 1,273
-------
Total current liabilities................................... 11,672
Long-term debt, less current portion........................ 35,283
Long-term interest payable.................................. 140
Deferred income taxes....................................... 816
-------
47,911
-------
Commitments and contingencies (NOTES 6, 7, AND 8)
Shareholder's equity:
Authorized:
Unlimited common shares
Issued:
13,549,300 common shares................................ 13,280
Warrants................................................ 500
Retained earnings......................................... 1,209
-------
Total shareholders' equity.................................. 14,989
-------
Total liabilities and shareholders' equity.................. $62,900
=======
</TABLE>
See accompanying notes.
F-31
<PAGE>
YPTEL CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS OF U.S. DOLLARS)
YEAR ENDED OCTOBER 31, 1999
<TABLE>
<S> <C>
Revenue..................................................... $41,162
-------
Expenses:
Printing, distribution, and listings...................... 9,482
Sales and marketing....................................... 8,421
General and administrative................................ 11,903
Bad debts expense......................................... 2,779
Depreciation and amortization............................. 2,272
Terminated IPO costs...................................... 363
-------
35,220
-------
Income from operations...................................... 5,942
Other income (expense):
Interest, net............................................. (3,930)
Other..................................................... 13
-------
(3,917)
-------
Income before income taxes.................................. 2,025
Provision for income taxes.................................. 816
-------
Net income.................................................. $ 1,209
=======
</TABLE>
See accompanying notes
F-32
<PAGE>
YPTEL CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE DATA)
YEAR ENDED OCTOBER 31, 1999
<TABLE>
<CAPTION>
COMMON SHARES
--------------------- RETAINED
SHARES AMOUNT WARRANTS EARNINGS TOTAL
---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance at November 1, 1998.................. 1 -- -- -- --
Net income................................... -- -- -- $1,209 $ 1,209
Issuance of common shares, net of issuance
costs of $280.............................. 13,549,299 $13,280 -- -- 13,280
Issuance of warrants......................... -- -- $500 -- 500
---------- ------- ---- ------ -------
Balance at October 31, 1999.................. 13,549,300 $13,280 $500 $1,209 $14,989
========== ======= ==== ====== =======
</TABLE>
See accompanying notes
F-33
<PAGE>
YPTEL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS OF U.S. DOLLARS)
YEAR ENDED OCTOBER 31, 1999
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 1,209
Adjustments to reconcile net income to net cash used in
operating activities
Bad debts expense......................................... 2,779
Depreciation and amortization............................. 2,272
Amortization of deferred financing costs.................. 335
Accretion of debt discount................................ 64
Deferred income taxes..................................... 816
Changes in operating assets and liabilities:
Increase in trade accounts receivable................... (8,288)
Increase in recoverable income taxes.................... (547)
Increase in deferred production and prepaid expenses,
advances to employees
and other assets...................................... (925)
Increase in reimbursable merger costs................... (641)
Increase in accounts, interest, and commissions payable
and accrued expenses................................... 1,777
Decrease in deferred revenue............................ (1,351)
--------
Net cash used in operating activities....................... (2,500)
--------
INVESTING ACTIVITIES
Acquisition of the net assets of Pacific Coast Publishing,
Inc., net of cash acquired................................ (11,029)
Purchases of property and equipment......................... (339)
--------
Net cash used in investing activities....................... (11,368)
--------
FINANCING ACTIVITIES
Proceeds from revolving credit facility borrowings.......... 2,983
Principal payments on long-term debt........................ (811)
Deferred financing costs.................................... (2,003)
Net proceeds from issuance of common shares and warrants.... 13,780
--------
Net cash provided by financing activities................... 13,949
--------
Net increase in cash........................................ 81
Cash, beginning of year..................................... --
--------
Cash, end of year........................................... $ 81
========
</TABLE>
See accompanying notes.
F-34
<PAGE>
YPTEL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS)
YEAR ENDED OCTOBER 31, 1999
<TABLE>
<S> <C>
SUPPLEMENTAL INFORMATION
Interest paid............................................... $ 3,599
-------
Income taxes paid........................................... $ 547
-------
NONCASH ACTIVITIES
In connection with the acquisition of the
net assets of Pacific Coast Publishing, Inc.,
YPtel acquired assets with a fair value
of and assumed liabilities as follows:
Assets acquired......................................... $55,415
Liabilities assumed..................................... 44,371
-------
Net assets acquired......................................... $11,044
=======
Issuance of debt in connection with the acquisition
of the net assets of Pacific Coast Publishing, Inc........ $36,500
-------
Equipment acquired pursuant to capital lease obligations.... $ 42
-------
Net prepaid assets acquired through barter transactions..... $ 333
-------
</TABLE>
See accompanying notes.
F-35
<PAGE>
YPTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1999
1. NATURE OF BUSINESS
YPtel Corporation (YPtel) was incorporated on July 22, 1998 under the laws
of Canada. YPtel's wholly owned subsidiary, YPtel, Inc. and its wholly owned
subsidiary, Pacific Coast Publishing, Ltd. (PCPL), were incorporated under the
laws of the state of Washington on October 1, 1998 and September 1, 1998,
respectively. All of the companies had nominal assets and operations until
November 1, 1998.
Effective November 1, 1998, YPtel acquired substantially all of the assets
and liabilities of the yellow pages publishing business of Pacific Coast
Publishing, Inc. (PCPI) (see Note 3). PCPI sold yellow page advertising and
published and distributed telephone directories in selected cities located in
the states of Arizona, Oregon, Utah, and Washington. YPtel, through PCPL, has
continued this business in the same four states since the acquisition of PCPI.
Effective October 26, 1999, YPtel's Board of Directors approved an agreement
to effect the acquisitions of YPtel, Web YP, Inc. and Big Stuff, Inc. by
Advanced Communications Group, Inc. ("ACG") in exchange for shares of ACG. ACG
is in a business similar to YPtel. The completion of the transactions is subject
to satisfactory refinancing of ACG, shareholder approvals, and regulatory
approvals. The transactions are expected to be completed during the first
quarter of calendar year 2000, at which time the name of ACG is to be changed to
WorldPages.com, Inc.
2. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying financial statements include the accounts of YPtel and its
wholly-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
ACCOUNTS RECEIVABLE AND REVENUE RECOGNITION
Accounts receivable are reflected net of an allowance for doubtful accounts
(of $1.7 million as of October 31, 1999).
Advertising revenue is recognized when directories containing the customers'
advertising are distributed. Advertising revenue billed on directories that have
not been distributed, but for which a deposit has been received, is shown as
deferred revenue.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost and is depreciated or amortized
using accelerated methods over the shorter of the lease term or the estimated
useful lives of the assets. Amortization of equipment under capital leases is
included in depreciation.
F-36
<PAGE>
YPTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1999
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEFERRED PRODUCTION EXPENSES
Deferred production expenses include costs to produce, distribute, and
market directories. Deferred costs are expensed when the directories are
distributed. Deferred production expenses consist of the following at
October 31, 1999 (in thousands):
<TABLE>
<S> <C>
Sales commissions........................................... $4,123
Direct production costs..................................... 104
Indirect production costs................................... 3,358
------
7,585
======
</TABLE>
INTANGIBLE ASSETS
Intangible assets consist of customer lists, a covenant not to compete, and
goodwill. Customer lists, the covenant not to compete, and goodwill are
amortized on a straight-line basis over their estimated useful lives of 10, 5,
and 30 years, respectively.
Long-lived assets, including intangibles, are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to future net cash
flows expected to be generated by the asset. If such assets are considered to be
impaired, the impairment loss to be recognized is measured by the amount by
which the carrying amount of the assets exceed the fair value of the assets.
DEFERRED FINANCING COSTS
Financing costs, totaling approximately $2 million, have been deferred and
are being amortized to interest expense over the respective debt terms, using
the straight-line method, which approximates the interest method. Accumulated
amortization on deferred financing costs totaled $335,000 at October 31, 1999.
ADVERTISING COSTS
Advertising is expensed when the costs are incurred. Advertising costs
totalled $398,000 in 1999.
INCOME TAXES
Income taxes are provided for using the liability method. Deferred tax
assets and liabilities are determined based on differences between the financial
reporting and tax bases of assets and liabilities and are measured using tax
rates that will be in effect when the differences are expected to reverse.
BARTER TRANSACTIONS
Certain yellow page advertising is bartered in exchange for goods and
services. These barter transactions are recognized at the estimated fair value
of the advertising sold in accordance with
F-37
<PAGE>
YPTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1999
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial Accounting Standards Board (FASB) Statement of Financial Accounting
Standards (SFAS) No. 29, "Accounting for Non-monetary Transactions".
Barter transactions represented 2.4% of advertising revenue in 1999. Amounts
for goods or services due from customers are recorded in prepaid expenses and
other. These amounts totalled $988,000 at October 31, 1999. No allowance for
doubtful accounts has been established against these accounts in either year as
management considers the related amounts to be fully realizable in all material
respects.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments include cash, trade receivables, accounts payable, and
long-term debt. The carrying amounts of the financial instruments classified as
current assets and liabilities approximate their fair values because of their
short-term nature. The fair value of long-term debt, which is estimated using
discounted cash flow analyses based on current incremental borrowing rates,
approximates the carrying amounts of the related debt issues.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 98-1, "Accounting for the Costs of
Computer Software Development or Obtained for Internal Use". SOP 98-1 requires
the capitalization of certain costs incurred in connection with developing or
obtaining internal-use software, and is effective for financial statements for
fiscal years beginning after December 15, 1998, with adoption required on a
prospective basis. There was no material effect on YPtel's consolidated
financial position, results of operations, or cash flows upon the adoption of
SOP 98-1.
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-Up Activities". SOP 98-5 provides guidance on the financial reporting of
start-up costs and organization costs, and is effective for fiscal years
beginning after December 15, 1998. SOP 98-5 requires retroactive adoption and
provides for costs of start-up activities and organization costs to be expensed
as incurred. There was no material effect on YPtel's consolidated financial
position, results of operations, or cash flows upon the adoption of SOP 98-5.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which is required to be adopted in years
beginning, after June 15, 1999. YPtel will adopt SFAS No. 133 effective
November 1, 2000. SFAS No. 133 requires YPtel to recognize its interest rate
swap on the balance sheet at fair value. Management has not yet determined the
effect of the adoption of SFAS No. 133 on YPtel's future financial statements.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
F-38
<PAGE>
YPTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1999
3. BUSINESS ACQUISITION
Effective November 1, 1998, YPtel acquired substantially all of the assets
and assumed substantially all of the liabilities of PCPI for approximately
$50 million. YPtel financed the acquisition through the issuance of a
$2 million note payable, and shares of its Class A preferred stock which were
later redeemed for approximately $48 million. The redemption price was funded
from $13.2 million in common share equity, $11.0 million in Senior Term Notes
and $14.5 million in Subordinated Notes. YPtel accounted for the acquisition
using the purchase method of accounting, with the operations of PCPI included in
its operations from the date of acquisition.
4. INTANGIBLE ASSETS
Intangible assets at October 31, 1999, consist of the following (in
thousands):
<TABLE>
<S> <C>
Covenant not to compete..................................... $ 1,000
Customer lists.............................................. 9,000
Goodwill.................................................... 30,612
-------
40,612
Less amortization........................................... (2,120)
-------
$38,492
=======
</TABLE>
5. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at October 31, 1999 (in
thousands):
<TABLE>
<S> <C>
Equipment................................................... $ 569
Furniture and fixtures...................................... 120
Vehicles.................................................... 13
Leasehold improvements...................................... 108
-----
810
Less amortization........................................... (152)
-----
$ 658
=====
</TABLE>
Included in equipment are assets held under capital leases at October 31,
1999 with a cost of $198,000 and accumulated amortization of $52,000.
Depreciation and amortization expense on property and equipment totaled
$152,000 in 1999.
6. REVOLVING CREDIT FACILITY
The holders of the senior term notes (see Note 7) provided an $8.5 million
revolving credit facility to PCPL under the terms of a Revolving Credit
Agreement that expires in October 2003. PCPL is permitted to draw under the
Revolving Credit Agreement up to 85% of eligible accounts receivable by the
issuance of revolving credit notes. The revolving credit notes are repayable on
demand. At October 31, 1999, PCPL had borrowed $2.8 million under the Revolving
Credit Agreement. Interest on
F-39
<PAGE>
YPTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1999
6. REVOLVING CREDIT FACILITY (CONTINUED)
outstanding revolving credit notes is due monthly at the prime rate plus an
additional interest percentage ranging from 1.25% to 2.25%, or at the London
Interbank Offered Rate (LIBOR) plus an additional interest percentage ranging
from 2.25% to 3.25%. At October 31, 1999, the revolving credit notes bore
interest at 9.75%. In addition, PCPL is required to pay on a quarterly basis a
commitment fee on the unused portion of the revolving credit facility that
ranges from 0.37% to 0.625%.
The Revolving Credit Agreement requires PCPL to meet certain financial
ratios and covenants. As of October 31, 1999, management believes that all
covenant and ratio requirements have been satisfied.
7. LONG-TERM DEBT
Long-term debt consists of the following at October 31, 1999 (in thousands):
<TABLE>
<S> <C>
Senior term notes........................................... $24,750
Subordinated notes (net of unamortized debt discount of
$436)..................................................... 10,564
PCPI shareholders note...................................... 2,000
Other....................................................... 310
-------
37,624
Less current portion........................................ (2,341)
-------
$35,283
=======
</TABLE>
SENIOR TERM NOTES
Under its Senior Term Note Purchase Agreement, PCPL issued an aggregate of
$25.5 million of senior term notes, of which $11 million is in the form of
Senior Term A Notes and $14.5 million is in the form of Senior Term B Notes. In
both cases, the senior term notes were issued to a syndicate of commercial
lenders.
The Senior Term A Notes bear interest, at PCPL's option, at the prime rate
plus an additional interest percentage ranging from 1.50% to 2.50%, or at LIBOR
plus an additional interest percentage ranging from 2.50% to 3.50%. The Senior
Term B Notes bear interest, at PCPL's option, at the prime rate plus an
additional interest percentage ranging from 2.25% to 3.25%, or at LIBOR plus an
additional interest percentage ranging from 3.25% to 4.25%. The additional prime
rate and LIBOR interest percentages are recomputed each fiscal quarter, based on
the ratio of senior debt to cash flow as defined in the Senior Term Note
Purchase Agreement. At October 31, 1999, the Senior Term A and B Notes bore
LIBOR interest at 8.245% and 8.995%, respectively. Interest on the senior term
notes is due quarterly for the prime rate portion and at the end of each
contract for the LIBOR portion.
The Senior Term A and B Notes are due in October 2003 and 2005,
respectively. Principal payments on the Senior Term A and B Notes are due
quarterly and range in the aggregate from $250,000 in 1999 to $1,938,000 in
2005.
F-40
<PAGE>
YPTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1999
7. LONG-TERM DEBT (CONTINUED)
SUBORDINATES NOTES
Pursuant to a Subordinated Loan Agreement, PCPL issued to a commercial
lender an aggregate of $11 million face value of subordinated notes due in
May 2006 at a discounted amount of $10.5 million. The Subordinated Loan
Agreement contains provisions by which the subordinated noteholders have
subordinated their claims against PCPL to the claims of the holders of the
senior term and revolving credit notes.
The subordinated notes bear interest at 12% per annum, payable semi-annually
on May 1 and November 1. Subject to the restrictions in the Senior Term Note
Purchase Agreement, the subordinated notes may be repaid in whole or in part
(subject to a minimum principal prepayment of $100,000) in a multiple of
$100,000 at any time and from time to time without notice or bonus.
In connection with the issue of the Subordinated Notes, warrants with a
carrying amount of $500,000 were issued to the lender. The warrants entitle the
lender to purchase an aggregate of 1,841,000 Class C shares at a price of $0.01
per share on or before the earlier of (i) November 1, 2008 and (ii) the date
which is six years following the date on which the Subordinated Notes are
repaid. The warrants are to be exercised as part of the transaction with ACG.
PCPI SHAREHOLDERS NOTE
The $2 million promissory note payable to the former PCPI shareholders is
due in October 2001 and bears interest at 7% per annum. Both principal and
interest are payable upon maturity. At October 31, 1999, interest payable
totaled $140,000. This note may be extended at the option of YPtel to
October 2006, according to certain terms and conditions.
OTHER MATTERS
Substantially all assets of PCPL are provided as collateral under the
various debt agreements. In addition, the various debt agreements require PCPL
to meet certain financial ratios and covenants, including a minimum net worth of
not less than $11.5 million at October 31, 1999. As of October 31, 1999,
management believes that all covenant and ratio requirements have been
satisfied.
Future maturities of debt as of October 31, 1999, excluding unamortized debt
discount, are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
- ---------------------
<S> <C>
2000..................................................... $ 2,341
2001..................................................... 4,584
2002..................................................... 3,076
2003..................................................... 4,522
2004..................................................... 4,758
Thereafter............................................... 18,779
-------
$38,060
=======
</TABLE>
F-41
<PAGE>
YPTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1999
7. LONG-TERM DEBT (CONTINUED)
Interest income (expense) consists of the following (in thousands):
<TABLE>
<S> <C>
Interest and other investment income........................ $ 291
Interest expense............................................ (4,221)
-------
$(3,930)
=======
</TABLE>
All of PCPL's debt facilities are to be refinanced as a condition of closing
of the transactions with ACG.
8. COMMITMENTS AND CONTINGENCIES
LEASES
YPtel leases equipment and office space. Certain of the leases require YPtel
to pay a portion of the operating costs associated with the leased property and
contain renewal and rent escalation clauses. Future minimum lease payments under
leases as of October 31, 1999 are as follows (in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
YEAR ENDING OCTOBER 31 LEASES LEASES
- ---------------------- -------- ---------
<S> <C> <C>
2000...................................................... $ 67 $1,192
2001...................................................... 51 1,077
2002...................................................... 44 908
2003...................................................... 31 766
2004...................................................... 10 248
------- ------
203 $4,191
======
Less amount representing interest payments................ (61)
-------
142
Less current portion...................................... (45)
-------
$ 97
=======
</TABLE>
Future lease payments for operating leases include maintenance contract
payments. Rent expense, pursuant to operating leases, exclusive of maintenance
agreement payments, was $1,192,000 in 1999.
LABOR RELATIONS
Union certification has been granted to sales personnel at three of PCPL's
offices in Washington. PCPL is currently negotiating a collective bargaining
agreement with the Communication Workers of America for these employees, who
comprise approximately 11% of PCPL's total workforce.
F-42
<PAGE>
YPTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1999
9. INCOME TAXES
The provision for income tax expense consists of the following (in
thousands):
<TABLE>
<S> <C>
Current..................................................... $
Federal................................................... --
State..................................................... --
-----
Deferred
Federal................................................... 706
State..................................................... 110
-----
816
-----
$ 816
=====
</TABLE>
The provision for income taxes differs from the amount of tax determined by
applying the federal statutory rate for the following reasons (dollars in
thousands):
<TABLE>
<CAPTION>
AMOUNT PERCENTAGE
-------- ----------
<S> <C> <C>
Tax provision at federal statutory rate................... $687 34%
Permanent differences..................................... 37 2
State income taxes........................................ 110 5
Other, net................................................ $(18) (1)
---- --
$816 40%
==== ==
</TABLE>
Significant components of deferred taxes at October 31, 1999 are as follows
(in thousands):
<TABLE>
<S> <C>
Deferred tax assets:
Bad debt allowance........................................ $ (116)
Accrued salaries.......................................... (90)
Net operating loss carryforward........................... (339)
-------
(545)
-------
Deferred tax liabilities:
Intangible amortization................................... 220
Sales commissions......................................... 1,141
-------
1,361
-------
$ 816
=======
</TABLE>
At October 31, 1999, PCPL had a net operating loss carryforward for federal
income tax purposes of approximately $900,000, which begins to expire in 2014.
Pursuant to applicable regulations in effect under the Internal Revenue Code,
PCPL's use of the net operating loss incurred may be limited during the
carryforward period due to ownership changes now being contemplated with the ACG
transactions. To the extent that any single-year loss is not utilized to the
full extent due to the limitation, the unused
F-43
<PAGE>
YPTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1999
9. INCOME TAXES (CONTINUED)
loss is carried over to subsequent years until the earlier of its utilization or
the expiration of the relevant carryforward period.
10. TRANSACTIONS RELATED TO ACG
The cost of YPtel's terminated initial public offering (IPO), which totaled
$363,000, are reflected separately in operating expense. The IPO was terminated
in favour of pursuing a transaction with ACG.
Costs associated with the ACG transactions, totaling $641,000 have been
capitalized and reflected in the accompanying balance sheet as "Reimbursable
merger costs." Upon closing of the ACG transactions, all costs incurred in
connection therewith will be reimbursed by ACG. YPtel's management believes that
the transactions with ACG will be consummated. If the transactions are not
consummated, the costs will be charged against YPtel's operations in the period
the transactions are terminated.
11. 401(K) PLAN
PCPL has continued the sponsorship of PCPI's 401(k) plan that covers
substantially all employees meeting certain eligibility requirements. PCPL's
contributions to the 401(k) plan continue to be discretionary. PCPL's
contributions totaled $135,000 in 1999.
12. CREDIT RISK
Approximately 50% of YPtel's business relates to PCPL's sales in the state
of Washington. PCPL performs periodic credit evaluations of its existing
potential customers prior to acceptance and publication and requires deposits by
customers. PCPL has established an allowance for doubtful accounts to compensate
for exposure risk. Credit losses have consistently been within management's
expectations.
Under a long-term contract that expires in February 2001, PCPL utilized
Quebecor Printing to print its yellow pages publications. As security for
payment of production amounts owed under the contract, Quebecor Printing has a
lien on PCPL's work-in-process and undelivered work. Production delays or
failure by this vendor to otherwise perform could significantly impact PCPL's
operations.
The interest rates on PCPL's senior notes and on its revolving credit
facility are floating and will fluctuate based on changes in the prevailing
prime rate or LIBOR. These interest rates change usually monthly or bi-monthly.
The interest rate on the senior notes, which is currently approximately 8.5%, is
not capped. To mitigate the risks related to fluctuation in interest rates, PCPL
has entered into an interest rate cap program with Dresdner Bank. This program
caps at 7.0%, the base LIBOR rate on 50% of the principal amount of the senior
notes. The interest PCPL pays on the senior notes consists of the base LIBOR
rate, which is currently 5.3%, plus a variable margin. There is no cap on the
interest rate payable on PCPL's revolving credit facility. The interest
differential to be paid or received is recognized over the life of the agreement
as an adjustment to interest expenses. PCPL is exposed to credit loss in the
event of nonperformance by the counterparty to the interest rate swap agreement,
but it does not anticipate nonperformance by the counterparty. At October 31,
1999, the notional amount under the interest rate swap agreement was
$13 million.
F-44
<PAGE>
YPTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1999
12. CREDIT RISK (CONTINUED)
YPtel does not use derivative financial instruments for hedging,
speculative, or trading purposes. PCPL is dependent upon outside suppliers for
all of its raw material costs associated with publishing the printed yellow
pages directories. PCPL's principal raw material is paper, which PCPL purchases
either through a broker or directly from its printer. PCPL does not purchase
paper directly from the paper mills. Certain commodity grades of paper,
including the directory-grade paper PCPL uses, have shown considerable price
volatility.
PCPL's sales, expenditures, debt servicing, and capital purchasing are
transacted in U.S. dollars, with an insignificant portion of expenses being
transacted in Canadian dollars. Accordingly, PCPL is not significantly exposed
to foreign currency risk.
F-45
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Web YP, Inc.
We have audited the accompanying 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. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Web YP, Inc. as of
December 31, 1999 and 1998, and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
KPMG LLP
February 4, 2000
Houston, Texas
F-46
<PAGE>
WEB YP, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 17,800 $ 107,260
Accounts receivable (net of allowance of $19,376 in 1999
and $0 in 1998)......................................... 251,813 142,473
Prepaid expenses and other current assets................. 635,555 57,292
----------- -----------
Total current assets.................................... 905,168 307,025
Furniture and office equipment, net of accumulated
depreciation of $68,736 and $3,870, respectively.......... $ 192,314 $ 36,934
----------- -----------
Total assets............................................ $ 1,097,482 $ 343,959
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities.................. $ 158,660 $ 15,256
Deferred revenues......................................... 464,592 467,713
Due to related parties.................................... 224,344 --
Notes payable to shareholders............................. 3,653,325 --
----------- -----------
Total current liabilities................................... 4,500,921 482,969
----------- -----------
Commitments and contingencies
Stockholders' deficit:
Common stock, no par value: 10,000 shares authorized;
6,086 shares issued and outstanding..................... -- --
Additional paid-in capital................................ 2,782,834 1,528,850
Accumulated deficit....................................... (6,186,273) (1,667,860)
----------- -----------
Total stockholders' deficit............................. (3,403,439) (139,010)
----------- -----------
Total liabilities and stockholders' deficit............. $ 1,097,482 $ 343,959
=========== ===========
</TABLE>
See accompanying notes to financial statements.
F-47
<PAGE>
WEB YP, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1999 1998
----------- ------------
<S> <C> <C>
Revenues.................................................... $ 850,818 $ 383,678
Operating costs:
Selling and Internet expenses............................. 3,856,570 753,202
Selling, general and administrative expenses.............. 1,271,137 1,231,799
Depreciation and amortization............................. 98,199 50,870
----------- ------------
Loss from operations...................................... (4,375,088) (1,652,193)
Other income (expense):
Interest expense.......................................... 143,325 --
----------- ------------
Loss before income taxes.................................... (4,518,413) (1,652,193)
Income tax expense (benefit)................................ -- --
----------- ------------
Net loss.................................................... $(4,518,413) $ (1,652,193)
=========== ============
Basic and diluted loss per share............................ $ (742.43) $ (271.47)
=========== ============
Weighted average common shares outstanding.................. 6,086 6,086
=========== ============
</TABLE>
See accompanying notes to financial statements.
F-48
<PAGE>
WEB YP, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------------- PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT DEFICIT
-------- -------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1997............... 6,086 $ -- $ 141,000 $ (15,667) $ 125,333
Net loss................................. -- -- -- (1,652,193) (1,652,193)
Capital contributions.................... -- -- 1,387,850 -- 1,387,850
----- ---- ---------- ----------- -----------
Balance, December 31, 1998............... 6,086 $ -- $1,528,850 $(1,667,860) $ (139,010)
Net loss................................. -- -- -- (4,518,413) (4,518,413)
Capital contributions.................... -- -- 1,253,984 -- 1,253,984
----- ---- ---------- ----------- -----------
Balance, December 31, 1999............... 6,086 $ -- $2,782,834 $(6,186,273) $(3,403,439)
===== ==== ========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-49
<PAGE>
WEB YP, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(4,518,413) $(1,652,193)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization........................... 98,199 50,870
Changes in operating assets and liabilities:
Decrease (increase) in:
Accounts receivable, net............................ (109,340) (142,473)
Prepaid expenses and other current assets........... (611,596) (1,736)
Increase (decrease) in:
Accounts payable and accrued liabilities............ 143,404 15,256
Deferred revenues................................... (3,121) 467,713
----------- -----------
Net cash used in operating activities............... (5,000,867) (1,262,563)
----------- -----------
Cash flows from investing activities:
Additions to furniture and office equipment............... (220,246) (18,027)
----------- -----------
Net cash used in investing activities............... (220,246) (18,027)
----------- -----------
Cash flows from financing activities:
Capital contributions..................................... 1,253,984 1,387,850
Proceeds from notes payable to shareholders............... 3,653,325 --
Increase in due to related parties........................ 224,344 --
----------- -----------
Net cash provided by financing activities........... 5,131,653 1,387,850
----------- -----------
Net increase (decrease) in cash and
cash equivalents.................................. $ (89,460) $ 107,260
Cash and cash equivalents--beginning of year................ 107,260 --
----------- -----------
Cash and cash equivalents--end of year...................... $ 17,800 $ 107,260
=========== ===========
Supplemental cash flows information:
Cash paid for interest.................................... $ -- $ --
=========== ===========
Cash paid for income taxes................................ $ -- $ --
=========== ===========
</TABLE>
See accompanying notes to financial statements.
F-50
<PAGE>
WEB YP, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999 AND 1998
1. BASIS OF PRESENTATION
Web YP, Inc. (Web YP) is a California-based company founded in September
1997. Operations at Web YP began in 1998. Web YP's business consists of the
publishing of on-line yellow pages and white pages directories and the hosting
of web sites.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS--Web YP considers cash in banks and highly-liquid
investments purchased with an original maturity of three months or less to be
cash and cash equivalents.
FURNITURE AND OFFICE EQUIPMENT--Furniture and office equipment are stated at
cost. Improvements are capitalized. Repair and maintenance costs are expensed as
incurred. The cost and related accumulated depreciation of assets retired or
disposed of are removed from the accounts, and any gains or losses are reflected
in results of operations. Depreciation is computed using accelerated methods
over the respective useful lives of the assets ranging from 3 to 7 years.
INCOME TAXES--Web YP has elected to be taxed under the provisions of
Subchapter S of the Internal Revenue Code. Accordingly, no provision for federal
income taxes has been provided for by Web YP, as the stockholders of Web YP have
included the income or loss on their respective income tax returns.
REVENUE RECOGNITION--Revenues are recognized ratably over the time period
that the services are provided, generally, twelve months. Deferred revenues
consist of amounts received in advance of the services being provided.
NET EARNINGS (LOSS) PER SHARE--Basic earnings per share (Basic EPS) is
determined by dividing income available to common stockholders by the weighted
average number of common shares outstanding during the period. Diluted earnings
per share (Diluted EPS) reflects the potential dilution that could occur if
securities and other contracts to issue common stock were exercised or converted
into common stock. In periods in which the inclusion of such securities or
contracts are anti-dilutive, the effect of such securities is not given
consideration. Options and warrants to purchase 4,318 and 3,914 shares of common
stock were excluded from the calculation of Diluted EPS at December 31, 1999 and
1998, respectively, due to their antidilutive effect.
FAIR VALUE OF FINANCIAL INSTRUMENTS--Web YP's only financial instruments are
cash, short-term trade receivables and payables, prepaid expenses, notes payable
and capital lease obligations. Management believes the carrying amounts of the
financial instruments classified as current assets and liabilities approximate
their fair values because of their short-term nature. Management believes the
carrying value of its notes payable and capital lease obligations approximate
fair value as their interest rates approximate market rates.
IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED
OF--Long-lived assets and certain identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances
F-51
<PAGE>
WEB YP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999 AND 1998
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the
carrying amount of an asset to future net cash flow expected to be generated by
the asset. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the assets
exceed the fair value of the assets.
COMPREHENSIVE INCOME--For the years ended December 31, 1999 and 1998,
Web YP did not incur items to be reported in comprehensive income that were not
already included in the reported net earnings; therefore, comprehensive income
(loss) and net income (loss) were the same for these periods.
3. RELATED-PARTY TRANSACTIONS
Transactions with related parties include certain web site design services
with stockholders and entities in which they have an interest. Services provided
to these related parties for the years ended December 31, 1999 and 1998 were
approximately $330,000 and $323,000, respectively. Amounts receivable from
related parties at December 31, 1999 and 1998 were approximately $86,000 and
$10,000, respectively. In addition, Web YP utilizes employees of Big Stuff, Inc.
(an entity related to Web YP by common ownership) for various operating purposes
with the related employee costs being allocated to Web YP. For the years ended
December 31, 1999 and 1998, the employee costs allocated to Web YP were
approximately $224,000 and $181,000, respectively. Due to related parties of
$224,000 on December 31, 1999 relates to expense allocations from Big Stuff,
Inc. for overhead and labor.
4. STOCK OPTIONS AND WARRANTS
In connection with its formation, Web YP issued various stock options and
warrants that allow the holders to purchase shares of common stock at defined
exercise prices. At the time of their issuance, management estimated that the
options and warrants had no fair market value based on the Company's estimate of
the fair market value of its common stock, which was $1.33 per share. As of
December 31, 1999 and 1998, 3,914 of such options and warrants were issued and
outstanding. Of the issued and outstanding options and warrants, 3,568 are
exercisable at $50.00 per share and 750 are exercisable at $1.33 per share.
In November 1999, Web YP granted options to purchase 404 shares of common
stock to certain employees of Web YP at an exercise price of $50.00 per share.
Management determined the fair value of Web YP's common stock to approximate
$1,634 per share on the date of grant based on the valuation of Web YP in the
pending sale to Advanced Communications Group, Inc. ("Advanced") (see note 9).
Compensation expense equivalent to the difference between the fair value of
Web YP's common stock on the date the options vest and the exercise price of the
options will be recorded by Web YP on the vesting date.
All of the options and warrants granted have a contractual life of 10 years
from grant date and are only exercisable in the event of a significant change in
management control or an initial public offering of Web YP. The per share
weighted-average value of stock options and warrants granted to employees during
1997 was determined to be $0.00 using the Black-Scholes model.
F-52
<PAGE>
WEB YP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999 AND 1998
5. LEASES
Certain sales and administrative offices and equipment are leased. The
leases expire at various dates through 2001. Leases that expire are generally
renewed or replaced by similar leases depending on business needs. Rent expense
for operating leases for the year ended December 31, 1999 and 1998 was
approximately $75,000 and $133,000.
At December 31, 1999, Web YP's future minimum rental payments due under
noncancelable leases are $136,000 in 2000, $40,000 in 2001 and $5,000 in 2002.
6. PREPAID PORTAL ROYALTIES AND ADVERTISING AGREEMENT
At December 31, 1999, prepaid expenses and other current assets consist
primarily of an agreement entered into by Web YP with a third party portal
website whereby Web YP will serve as the online yellow pages directory services
provider for a period of nine months. This amount has been classified as prepaid
expenses and other current assets on the accompanying December 31, 1999 balance
sheet, and is being amortized over a period of nine months.
7. NOTES PAYABLE TO SHAREHOLDERS
As of December 31, 1999, the shareholders of Web YP had advanced $3,510,000
to Web YP. The loans bear interest at 7% per annum and accrued interest at
December 31, 1999 is $143,325.
8. COMMITMENTS AND CONTINGENCIES
Web YP is party to various legal actions, proceedings and claims arising in
the normal course of business. Some of the foregoing involve, or may involve,
claims for compensatory, punitive or other damages in material amounts.
Litigation is subject to many uncertainties, and it is possible that some of the
legal actions, proceedings and claims referred to above could be decided against
Web YP. Web YP's management believes that any resulting liability will not
materially affect Web YP's financial position, liquidity or results of
operations.
9. SUBSEQUENT EVENT
Web YP and its stockholders have entered into an agreement with Advanced to
sell all of the issued and outstanding common stock of Web YP in exchange for
shares of common stock of Advanced.
F-53
<PAGE>
BIG STUFF, INC.
UNAUDITED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1999 1998 1997
--------- ---------- ----------
<S> <C> <C> <C>
Revenues.................................................. $ 862,355 $1,647,688 $2,526,190
Operating costs:
Cost of services........................................ 833,265 1,049,296 1,856,737
Selling, general and administrative expenses............ 432,043 256,698 608,786
Depreciation and amortization........................... 206,259 300,200 149,828
--------- ---------- ----------
Income (loss) from operations........................... (609,212) 41,494 (89,161)
Other income (expense):
Interest expense........................................ (89,992) (60,162) --
--------- ---------- ----------
Income (loss) before income taxes......................... (699,204) (18,668) (89,161)
Income tax expense........................................ -- -- --
--------- ---------- ----------
Net income (loss)..................................... $(699,204) $ (18,668) $ (89,161)
========= ========== ==========
Basic and diluted income (loss) per share................. $ (199.77) $ (5.33) $ (74.30)
========= ========== ==========
Weighted average common shares outstanding................ 3,500 3,500 1,200
========= ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-54
<PAGE>
BIG STUFF, INC.
UNAUDITED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1999 1998
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 115,977 $ 670
Accounts receivable....................................... 41,696 184,485
Inventory................................................. 16,980 21,618
Due from related party.................................... 224,344 --
Prepaid expenses and other current assets................. -- 70,203
---------- ----------
Total current assets.................................... 398,997 276,976
Property, plant and equipment, net.......................... 565,938 409,090
Intangible assets, net...................................... 119,665 128,999
---------- ----------
Total assets............................................ $1,084,600 $ 815,065
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities.................. $ 60,504 $ 31,741
Line of credit............................................ 337,256 43,298
Due to stockholders....................................... 1,900,000 --
---------- ----------
Total current liabilities............................... 2,297,760 75,039
---------- ----------
Total liabilities....................................... 2,297,760 75,039
---------- ----------
Commitments and contingencies
Stockholders' equity:
Common stock, no par value: 10,000 shares authorized;
3,500 shares
issued and outstanding.................................. -- --
Additional paid-in capital................................ 1,522,969 1,522,969
Retained earnings (accumulated deficit)................... (2,736,129) (782,943)
---------- ----------
Total stockholders' equity.............................. (1,213,160) 740,026
---------- ----------
Total liabilities and stockholders' equity.............. $1,084,600 $ 815,065
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-55
<PAGE>
BIG STUFF, INC.
UNAUDITED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
RETAINED
COMMON STOCK ADDITIONAL EARNINGS TOTAL
------------------- PAID-IN (ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT) EQUITY (DEFICIT)
-------- -------- ---------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996............. 1,200 $ -- $ 572,969 $ 1,082,736 $ 1,655,705
Net loss............................... -- -- -- (89,161) (89,161)
Capital contributions.................. -- -- 600,000 -- 600,000
Distributions to stockholders.......... -- -- -- (570,000) (570,000)
----- ---- ---------- ----------- -----------
Balance, December 31, 1997............. 1,200 $ -- $1,172,969 $ 423,575 $ 1,596,544
Net loss............................... -- -- -- (18,668) (18,668)
Capital contributions.................. 2,300 -- 350,000 -- 350,000
Distributions to stockholders.......... -- -- -- (1,187,850) (1,187,850)
----- ---- ---------- ----------- -----------
Balance, December 31, 1998............. 3,500 $ -- $1,522,969 $ (782,943) $ 740,026
Net loss............................... -- -- -- (699,204) (699,204)
Distributions to stockholders.......... -- -- -- (1,253,982) (1,253,982)
----- ---- ---------- ----------- -----------
Balance, December 31, 1999............. 3,500 $ -- $1,522,969 $(2,736,129) $(1,213,160)
===== ==== ========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-56
<PAGE>
BIG STUFF, INC.
UNAUDITED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1999 1998 1997
--------------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss........................................ $ (699,204) $ (18,668) $ (89,161)
Adjustments to reconcile net loss to net cash:
Depreciation and amortization................. 206,259 300,200 149,828
Gain on sale of fixed assets.................. -- 35,980 --
Changes in operating assets and liabilities:
Decrease (increase) in:
Accounts receivable, net.................. 142,789 255,323 358,006
Prepaid expenses and other current
assets.................................. 70,203 118,547 (188,750)
Inventory................................. 4,638 2,245 15,937
Increase (decrease) in:
Accounts payable and accrued
liabilities............................. 28,763 6,892 19,171
----------- ----------- -----------
Net cash provided by (used in) operating
activities.............................. (246,552) 700,519 265,031
----------- ----------- -----------
Cash flows from investing activities:
Additions to property, plant and equipment,
net........................................... (353,773) -- (668,360)
Cost of business acquired....................... -- -- (140,000)
----------- ----------- -----------
Net cash used in investing activities..... (353,773) -- (808,360)
----------- ----------- -----------
Cash flows from financing activities:
Dividends....................................... (1,253,982) (1,187,850) (570,000)
Borrowings from stockholders.................... 1,675,656 -- --
Borrowings from line of credit.................. 293,958 43,298 --
Capital contributions........................... -- 350,000 600,000
----------- ----------- -----------
Net cash provided by (used in) financing
activities.............................. 715,632 (794,552) 30,000
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents............................. 115,307 (94,033) (513,329)
Cash and cash equivalents--beginning of year...... 670 94,703 608,032
----------- ----------- -----------
Cash and cash equivalents--end of year............ $ 115,977 $ 670 $ 94,703
=========== =========== ===========
Supplemental cash flows information:
Cash paid for interest.......................... $ 89,992 $ 60,162 $ --
=========== =========== ===========
Cash paid for income taxes...................... $ -- $ -- $ --
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-57
<PAGE>
BIG STUFF, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
1. BASIS OF PRESENTATION
Big Stuff, Inc. (Big Stuff) is a Texas-based company established in 1995.
Big Stuff was founded to provide computer services, including web site and ad
design, and ad colorization services for independent telephone directory
publishers.
The accompanying financial information has been prepared without audit. The
financial statements include the accounts of Big Stuff, Inc. The financial
statements are based on information supplied by Big Stuff and restated by
Advanced in order to conform to generally accepted accounting principles.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS--Big Stuff considers cash in banks and
highly-liquid investments purchased with an original maturity of three months or
less to be cash and cash equivalents.
PROPERTY, PLANT AND EQUIPMENT--Property, plant and equipment are stated at
cost. Improvements are capitalized. Repair and maintenance costs are expensed as
incurred. The cost and related accumulated depreciation of assets retired or
disposed of are removed from the accounts, and any gains or losses are reflected
in results of operations. Depreciation is computed using accelerated methods
over the respective useful lives of the assets ranging from 3 to 7 years.
INCOME TAXES--Big Stuff has elected to be taxed under the provisions of
Subchapter S of the Internal Revenue Code. Accordingly, no provision for federal
income taxes has been provided for by Big Stuff, as the stockholders of Big
Stuff have included the income or loss on their respective income tax returns.
REVENUE RECOGNITION--Revenues are recognized as services are provided.
NET EARNINGS (LOSS) PER SHARE--Basic earnings per share (Basic EPS) is
determined by dividing income available to common stockholders by the weighted
average number of common shares outstanding during the period.
FAIR VALUE OF FINANCIAL INSTRUMENTS--Big Stuff's only financial instruments
are cash, short-term trade receivables and payables, notes payable and capital
lease obligations. Management believes the carrying amounts of the financial
instruments classified as current assets and liabilities approximate their fair
values because of their short-term nature. Management believes the carrying
value of its notes payable and capital lease obligations approximate fair value.
IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED
OF--Long-lived assets and certain identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future net cash flow expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceed the fair value of
the assets.
F-58
<PAGE>
BIG STUFF, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
COMPREHENSIVE INCOME--For the years ended December 31, 1999, 1998 and 1997,
Big Stuff did not incur items to be reported in comprehensive income that were
not already included in the reported net earnings; therefore, comprehensive
income (loss) and net income (loss) were the same for these periods.
3. RELATED-PARTY TRANSACTIONS
Transactions with related parties include certain web site design services
with stockholders and entities in which they have an interest. Services provided
to these related parties for the year ended December 31, 1999, 1998 and 1997
were approximately $483,000, $443,000, and $696,000, respectively. Amounts
receivable from related parties at December 31, 1999 and 1998 were approximately
$10,000 and $40,000, respectively.
To finance operations of Big Stuff the shareholders of Big Stuff loaned
$1,900,000 to Big Stuff in 1999.
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following at December 31,
1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
(IN THOUSANDS)
Land and buildings.......................................... $ -- $ --
Leasehold improvements...................................... 2 2
Furniture and office equipment.............................. 1,518 1,164
------ ------
1,520 1,166
Less accumulated depreciation............................... (954) (757)
------ ------
$ 566 $ 409
====== ======
</TABLE>
5. LEASES
Certain sales and administrative offices and equipment are leased. The
leases expire at various dates through 2000. Leases that expire are generally
renewed or replaced by similar leases depending on business needs. Rent expense
for operating leases in 1999, 1998 and 1997 was approximately $60,000, $168,000
and $35,000, respectively.
At December 31, 1999, Big Stuff's future minimum rental payments due under
noncancelable leases were $48,000 in 2000.
F-59
<PAGE>
BIG STUFF, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
6. COMMITMENTS AND CONTINGENCIES
Big Stuff is party to various legal actions, proceedings and claims arising
in the normal course of business. Some of the foregoing involve, or may involve,
claims for compensatory, punitive or other damages in material amounts.
Litigation is subject to many uncertainties, and it is possible that some of the
legal actions, proceedings and claims referred to above could be decided against
Big Stuff. Big Stuff's management believes that any resulting liability will not
materially affect Big Stuff's financial position, liquidity or results of
operations.
7. SUBSEQUENT EVENT
Big Stuff and its stockholders have entered into an agreement with Advanced
Communications Group, Inc. (Advanced) to sell all of the issued and outstanding
common stock of Big Stuff in exchange for shares of common stock of Advanced.
F-60
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses payable by Advanced in
connection with the sale of the securities being registered. ALL AMOUNTS ARE
ESTIMATES EXCEPT FOR THE SEC REGISTRATION FEE.
<TABLE>
<CAPTION>
<S> <C>
SEC registration fee........................................ $ 32,731
NYSE supplemental listing fee............................... 71,232
Printing expenses........................................... 85,000
Legal fees and expenses..................................... 30,000
Accounting fees and expenses................................ 30,000
Transfer Agent's, Exchange Agent's and Registrar's fees..... 10,000
Miscellaneous............................................... 6,037
TOTAL....................................................... $265,000
</TABLE>
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
DELAWARE GENERAL CORPORATION LAW
Section 145(a) of the Delaware General Corporation Law provides 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, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the corporation) by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe such person's conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of NOLO CONTENDERE or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which such person reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that such
person's conduct was unlawful. Section 145(b) of the Delaware General
Corporation Law states 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 or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection with the defense or settlement of such action or suit
if such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the corporation and
except that no indemnification shall be made in respect to any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
II-1
<PAGE>
Section 145(c) of the Delaware General Corporation Law provides that to the
extent that a present or former director or officer of a corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subsections (a) and (b) of Section 145, or in defense
of any claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection therewith. Section 145(d) of the Delaware General
Corporation Law states that any indemnification under subsections (a) and (b) of
Section 145 (unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
present or former director, officer, employee or agent is proper in the
circumstances because such person has met the applicable standard of conduct set
forth in subsections (a) and (b). Such determination shall be made with respect
to a person who is a director or officer at the time of such determination (1)
by a majority vote of the directors who are not parties, to such action, suit or
proceeding, even though less than a quorum or (2) by a committee of such
directors designated by a majority of such directors, even though less than a
quorum or (3) if there are no such directors, or if such directors so direct, by
independent legal counsel in a written opinion, or (4) by the stockholders.
Section 145(e) of the Delaware General Corporation Law provides that expenses
(including attorneys' fees) incurred by an officer or director in defending any
civil, criminal, administrative or investigative action, suit or proceeding may
be paid by the corporation in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount if it shall ultimately be determined
that such person is not entitled to be indemnified by the corporation as
authorized in Section 145. Such expenses (including attorneys' fees) incurred by
former directors and officers or other employees and agents may be so paid upon
such terms and conditions, if any, as the corporation deems appropriate.
Section 145(f) of the Delaware General Corporation Law states that the
indemnification and advancement of expenses provided by, or granted pursuant to,
the other subsections of Section 145 shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in such person's official capacity and
as to action in another capacity while holding such office. Section 145(g) of
the Delaware General Corporation Law provides that a corporation shall have the
power to purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against such person and incurred by such person
in any such capacity, or arising out of such person's status as such, whether or
not the corporation would have the power to indemnify such person against such
liability under the provisions of Section 145. Section 145(j) of the Delaware
General Corporation Law states that the indemnification and advancement of
expenses provided by, or granted pursuant to, Section 145 shall, unless
otherwise provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent, and shall inure to the
benefit of the heirs, executors and administrators of such a person.
CERTIFICATE OF INCORPORATION
The Restated Certificate of Incorporation of Advanced provides that a
director of Advanced shall not be personally liable to Advanced 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
Advanced 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 Delaware General Corporation Law or (iv) for any transaction
from which the director derived an improper personal benefit. Any repeal or
modification of such provision of the Restated Certificate of Incorporation by
the stockholders of Advanced shall be prospective only, and shall not adversely
affect any limitation on the personal liability of a director of Advanced
existing at the time of such repeal or modification.
II-2
<PAGE>
Advanced's Restated Certificate of Incorporation also provides that each
person who was or is made a party or is threatened to be made a party to or is
involved in any action in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she, or a person of whom he or she is the legal
representative, is or was a director or officer of Advanced or, while a director
or officer of Advanced, is or was serving at the request of Advanced as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged action
in an official capacity as a director, officer, employee or agent or in any
other capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by Advanced to the fullest extent authorized by
the Delaware General Corporation Law, as the same exists or may hereafter be
amended, against all expense, liability and loss (including attorneys' fees,
judgments, fines, amounts paid or to be paid in settlement, and excise taxes or
penalties arising under the Employee Retirement Income Security Act of 1974)
reasonably incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director or
officer and shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that, except as provided herein, Advanced
shall indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the Board of Directors. The right to
indemnification conferred in the Restated Certificate of Incorporation shall be
a contract right and shall include the right to be paid by Advanced the expenses
incurred in defending any such proceeding in advance of its final disposition;
provided, however, that, if the Delaware General Corporation Law 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
Advanced of an undertaking, by or on behalf of such Director or officer, to
repay all amounts so advanced 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. Advanced may, by action of the Board
of Directors, provide indemnification to employees and agents of Advanced with
the same scope and effect as the foregoing indemnification of directors and
officers. If a claim under the foregoing is not paid in full by Advanced within
30 days after a written claim has been received by Advanced, the claimant may at
any time thereafter bring suit against Advanced to recover the unpaid amount of
the claim and, if successful in whole or in part, the claimant shall be entitled
to be paid also the expense of prosecuting such claim. It shall be a defense to
any such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition where
the required undertaking, if any is required, has been tendered to Advanced)
that the claimant has not met the standards of conduct which make it permissible
under the Delaware General Corporation Law for Advanced to indemnify the
claimant for the amount claimed but the burden of proving such defense shall be
on Advanced. Neither the failure of Advanced (including its Board of Directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he or she has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by Advanced (including its Board of Directors, independent legal
counsel, or its Stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that the claimant has not met the applicable standard of conduct. 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 not be exclusive of any other right which any person may
have or hereafter acquire under any statute, provision of the Restated
Certificate of Incorporation, Advanced's By-Laws, any agreement, any vote of
stockholders or disinterested Directors of Advanced or otherwise. Advanced may
maintain insurance, at its expense, to protect itself and any director, officer,
employee or agent of
II-3
<PAGE>
Advanced or another corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether or not Advanced
would have the power to indemnify such person against such expense, liability or
loss under the Delaware General Corporation Law.
No amendment, alteration or repeal of, nor the adoption of any provision
inconsistent with, any of the foregoing provisions of Advanced's Restated
Certificate of Incorporation, which shall in any manner increase the actual or
potential liability of any director of Advanced shall apply to or have any
effect on the liability or alleged liability of any such director for or with
respect to actions or omissions of such director occurring prior to such
amendment, alteration, repeal or adoption. Notwithstanding that a lesser
percentage may be permitted from time to time by applicable law, none of the
foregoing provisions of Advanced's Restated Certificate of Incorporation may be
altered, amended or repealed in any respect, nor may any provision inconsistent
therewith be adopted, unless such alteration, amendment, repeal or adoption is
approved by the affirmative vote of the holders of at least 80 percent of the
combined voting power of the then outstanding shares of voting stock, voting
together as a single class.
INDEMNIFICATION AGREEMENTS
Advanced has entered into Indemnification Agreements with each of its
directors. The Indemnification Agreements generally are to the same effect as
the charter provisions described above. Under Section 5.11 of the YPtel
Agreement and subject to the indemnification obligations set forth in Section
9.1(c) of the YPtel Agreement, Advanced is required, for a period of three years
after the closing date under the YPtel Agreement, to cause YPtel, to the full
extent required under YPtel's Articles of Incorporation or Bylaws in effect on
the date of the YPtel Agreement, to indemnify and hold harmless each present and
former director, officer, employee or agent of YPtel and its subsidiaries with
respect to matters occurring through the closing date. For a period of three
years after the closing date and to the extent available, Advanced is required
to cause YPtel to maintain in effect directors' and officers' liability
insurance covering those persons who on the date of the YPtel Agreement were
covered by YPtel's directors' and officers' liability insurance policy on terms
that are no less favorable to them in any material respect than the terms now
applicable to them under YPtel's current insurance policies.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On September 17, 1996, the Company's predecessor ("Predecessor") issued and
sold shares of Common Stock, $.00001 par value ("Predecessor Stock"), to the
following parties in the amounts and for the consideration indicated. These
sales were exempt from registration under Section 4(2) of the Securities Act:
CPFF--7,560,781 shares for a consideration of $1,000; Rod K. Cutsinger--378,039
shares for a consideration of $10,000; Bradley K. Cutsinger--47,255 shares for a
consideration of $1,250; Don Chessher--98,290 (subsequently reduced to 62,093)
shares for a consideration of $2,600; Jeffrey L. Corl--94,510 shares for a
consideration of $2,500 (subsequently reduced to 11,341 shares, for a
consideration of $300); Frank Bango--94,510 shares for a consideration of
$2,500; Louis A. Waters--94,510 shares for a consideration of $2,500
(subsequently reduced to 7,561 shares for a consideration of $1,000); Ronald
Shapss--11,341 shares for a consideration of $300; G. Edward Powell--7,561
shares for a consideration of $200; Fentress Bracewell--1,890 shares for a
consideration of $50; Jackson Hines--1,890 shares for a consideration of $50;
Rod Crosby--1,890 shares for a consideration of $50; and Ron Ormand--1,890
shares for a consideration of $50.
On September 19,1996 the Predecessor issued and sold to CPFF an 8%
promissory note, as amended, due upon the first to occur of the effectiveness of
registration statement relating to the Company's initial underwritten public
offering or December 31, 1998, in a transaction exempt from registration under
Section 4(2) of the Securities Act, no public offering being involved.
II-4
<PAGE>
In October 1996, the Predecessor agreed to issue non-transferable five-year
warrants to purchase an aggregate of 16,256 shares of Common Stock at the
initial public offering price per share to the following eight persons for
consulting services rendered in transactions exempt from registration under
Section 4(2) of the Securities Act, no public offering being involved:
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME SUBJECT TO WARRANTS
- ---- -------------------
<S> <C>
Ronald Shapps...................................... 9,451
Rod L. Crosby, Jr.................................. 1,890
Ron Ormond......................................... 567
Jim Neebling....................................... 567
Howard Kra......................................... 567
Julius Binetti..................................... 1,323
Julius DeVito...................................... 1,323
Errol Cvern........................................ 567
</TABLE>
On November 7, 1996, the Predecessor issued and sold 37,804 shares of
Predecessor Stock to G. Edward Powell for a consideration of $5,000 in a
transaction exempt from registration under Section 4(2) of the Securities Act,
no public offering being involved.
On January 3, 1997, the Predecessor issued and sold 1,890 shares of
Predecessor Stock to Beverly A. Aden for a consideration of $250 in a
transaction exempt from registration under Section 4(2) of the Securities Act,
no public offering being involved.
On May 2, 1997, the Predecessor issued to Joseph C. Cook, for services
rendered as a consultant, a ten year warrant to purchase 7,561 shares of
Predecessor Stock at a price of $2.65 per share in a transaction exempt from
registration under Section 4(2) of the Securities Act, no public offering being
involved.
On June 12, 1997, in connection with the execution of a related employment
agreement, the Predecessor granted Todd J. Feist a non-transferrable five year
option to purchase 250,000 shares of Predecessor Stock. This transaction was
completed without registration under the Securities Act in reliance upon the
exemption provided by Section 4(2) thereof, no public offering being involved.
These options were issued in exchange for a comparable number of options issued
in mid 1997 by the Predecessor.
On June 16, 1997, the Predecessor issued to the stockholders of Great
Western Directories, Inc. non-transferable, ten-year warrants to purchase
756,078 shares of Predecessor Stock. This transaction was completed without
registration under the Securities Act in reliance upon the exemption afforded by
Section 4(2) of the Securities Act, no public offering being involved.
Pursuant to agreements entered into in May, July and July of 1997,
respectively, the Predecessor issued to Valerie A. Caser, Malcolm F. McNeill and
William McCaughey 849 shares of Common Stock, 1,692 shares of Common Stock, and
warrants to purchase 7,561 shares of Common Stock at a price of $6.61 per share,
respectively, in lieu of compensation for consulting services in transactions
exempt from registration under Section 4(2) of the Securities Act, no public
offering being involved.
On December 29, 1997, the Company issued ten-year warrants to purchase
66,157 shares and 132,314 shares of Common Stock at a price of $2.50 per share
to Brad K. Cutsinger and G. Edward Powell, respectively, in transactions exempt
from registration under the Securities Act, no public offering being involved.
The warrants were issued to Messrs. Cutsinger and Powell in exchange for
employee stock options having the same economic terms.
Pursuant to the Acquisition Agreements filed as Exhibits 2.1 through 2.10
and substantially concurrently with the consummation of the Offering, the
Company has agreed to issue an aggregate of 3,392,644 shares of Common Stock,
$17.4 million in promissory notes, $2.0 million in convertible subordinated
notes and 637,135 warrants or options to purchase Common Stock to the
stockholders of
II-5
<PAGE>
Great Western, Valu-Line, Feist Long Distance, FirsTel, Tele-Systems and KINNET.
These transactions will be completed without registration under the Securities
Act in reliance upon the exemption provided by Section 4(2) thereof, no public
offering being involved.
On October 9, 1997, the Company issued to its parent, Advanced
Communications Corp., 1,000 Shares of Common Stock for the consideration of
$1,000. Concurrently with the consummation of the Offering, Advanced
Communications Corp. will be merged with a subsidiary of the Company, will
become a subsidiary of the Company, and the stockholders of Advanced
Communications Corp. will receive one share of Common Stock of the Company for
each share of common stock they hold in Advanced Communications Corp. These
transactions will be completed without registration under the Securities Act in
reliance upon the exemption provided by Section 4(2) thereof, no public offering
being involved.
On January 15, 1998, the Company agreed to issue 142,857 shares of Series A
Redeemable Convertible Preferred Stock to Northwestern Growth Corporation in
connection with the negotiation of a strategic alliance. This transaction was
completed without registration under the Securities Act in reliance upon the
exemption provided by Section 4(2) thereof, no public offering being involved.
On October 26, 1999, WorldPages entered into The Amended and Restated YPtel
Agreement, the Amended and Restated Web YP Agreement, the Amended and Restated
Big Stuff Agreement. On June 3, 1999, WorldPages entered into the note
redemption agreements. Collectively, these agreements provided for the issuance
of up to 23,851,281 shares of WorldPages common stock. Of this amount,
19,545,454 shares were issued or were reserved for issuance as acquisition
consideration for the acquisitions by WorldPages of YPtel Corporation, Web YP,
Inc. and Big Stuff, Inc. Approximately 2,863,637 shares were issued upon the
redemption of the 5% Subordinated Notes and up to 1,090,909 shares were issued
in exchange for the cancellation of up to $6.0 million in principal amount of
indebtedness of Web YP and Big Stuff. Additionally, the Amended and Restated
YPtel Agreement calls for the issuance of 351,281 shares of common stock
issuable upon the exercise of warrants and options granted to officers,
directors and employees of YPtel and to three current and former non-employee
directors of WorldPages.
<TABLE>
<CAPTION>
SECURITIES TO IDENTITY OF PERSONS OR ENTITIES TO
BE ISSUED PURPOSE OF ISSUANCE WHOM SECURITIES ARE TO BE ISSUED
- ------------- ------------------------------- ------------------------------------------
<C> <S> <C>
15,000,000 Shares of Advanced common stock Some of these shares will be issued to
Shares of to be issued in connection with YPtel stockholders directly. At the option
Advanced the acquisition of YPtel, of YPtel stockholders who are Canadian
Common Stock having an agreed upon value of residents under the Canadian federal
$5.50 per share income tax laws, other shares may be
issued to such stockholders upon exchange
of Class A Special Shares of ACG Exchange
Company.
3,090,909 Shares of Advanced common stock Richard O'Neal and Dick Reid, who are the
Shares of to be issued in connection with current shareholders of Web YP, and those
Advanced the acquisition of Web YP, persons and entities who hold options and
Common Stock having an agreed upon value of warrants to purchase common stock of Web
$5.50 per share YP who exercise their options and warrants
prior to closing. If all of the Web YP
optionees and warrant holders exercise
their options and warrants prior to the
acquisition of Web YP by Advanced, each of
Messrs. O'Neal and Reid will receive
approximately 940,564 shares or
approximately 3.9% of the 23,851,281
shares of Advanced common stock to be
issued.
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SECURITIES TO IDENTITY OF PERSONS OR ENTITIES TO
BE ISSUED PURPOSE OF ISSUANCE WHOM SECURITIES ARE TO BE ISSUED
- ------------- ------------------------------- ------------------------------------------
<C> <S> <C>
1,454,545 Shares of Advanced common stock Richard O'Neal and Dick Reid, the
Shares of to be issued in connection with shareholders of Big Stuff, will each
Advanced the acquisition of Big Stuff, receive approximately 727,273 shares or
Common Stock having an agreed upon value of approximately 3.1% of the 23,851,281
$5.50 per share shares of Advanced common stock to be
issued
2,863,637 Shares Of Advanced common Richard O'Neal and four other former
Shares of stock, having an agreed upon stockholders of Great Western who received
Advanced value of $5.50 per share, to be notes as partial consideration for their
Common Stock issued in redemption of shares of Great Western. If the closing
principal and interest on occurs February 15, 2000, the percentage
indebtedness owed by Advanced of indebtedness owed to Mr. O'Neal will be
redeemed for 1,603,636 or approximately
6.7% of the shares of Advanced common
stock to be issued.
1,090,909 Shares of Advanced common stock Based on the indebtedness of Web YP and
Shares of to be issued in exchange for Big Stuff as of the date of this proxy
Advanced the cancellation of statement, and assuming the remainder of
Common Stock indebtedness owed by Web YP and the loans up to $6.0 million are made by
Big Stuff, having an agreed Mr. O'Neal, at closing, the indebtedness
upon value of $5.50 per share (including the principal amount loaned and
to be loaned by Mr. O'Neal) would be
exchanged for 945,455 shares or 4.0% of
Advanced common stock to be issued
75,000 Replace warrants to purchase Wilmot Matthews(1)--30,000; Nicholas J.
Warrants to YPtel common shares granted to Ross(1)--10,000; George Anderson(1)--
Purchase current directors and a current 10,000; Max Gotlieb(1)--20,000; Robert
Advanced officer of YPtel Flynn(1)--5,000
Common Stock
186,281 Replace director and employee Douglas McIntyre(1)(2)--103,781; John
Options to stock options to purchase YPtel Woodall(2)--40,000; Jay Cramer(2)--15,000;
Purchase common shares Wes Rice(2)--15,000; Don
Advanced Russell(2)--12,500
Common Stock
90,000 Compensation to two current and Robert F. Benton(3)--30,000; Rod K.
Warrants to one former non-employee Cutsinger(3)--30,000; Marvin C. Moses(3)--
Purchase directors of Advanced for 30,000
Advanced negotiating the YPtel, Web YP
Common Stock and Big Stuff acquisition
agreements
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
SECURITIES TO IDENTITY OF PERSONS OR ENTITIES TO
BE ISSUED PURPOSE OF ISSUANCE WHOM SECURITIES ARE TO BE ISSUED
- ------------- ------------------------------- ------------------------------------------
<C> <S> <C>
351,281 Shares of Advanced common stock
Shares of issuable upon exercise of the
Advanced above options and warrants
Common Stock which replaced warrants to
purchase common shares granted
to the directors, officers and
employees of YPtel and two
current and one former
non-employee directors of
Advanced, all of whom are
identified in the three rows
immediately above, with
reference to footnotes (1), (2)
and (3)
1 Share of Share issued to provide YPtel Trustee under the Exchange and Voting
Advanced stockholders who are Canadian Trust Agreement.
Class B residents under the Canadian
Preferred federal income tax laws holding
Stock Class A Special Shares the
right to vote their indirect
holdings in Advanced
ACG Exchange Allow YPtel stockholders who YPtel stockholders who are resident under
Company are residents under the the Canadian federal income tax laws and
Class A Canadian federal income tax who seek tax deferral
Special laws to defer taxes on exchange
Shares of their shares of YPtel common
stock.
Advanced Shares of Advanced common stock YPtel stockholders who are residents under
Common Stock having an agreed upon value of the Canadian federal income tax laws and
$5.50 per share issuable upon who take Class A Special Shares of ACG
exchange of Class A Special Exchange Company for tax deferral purposes
Shares of ACG Exchange Company and who subsequently exchange them for
(See above) Advanced common stock.
ACG Holding Allow Advanced to own ACG Advanced
Company(4) Holding Company
Common Shares
ACG Exchange Allow ACG Holding Company(5) to ACG Holding Company
Company own ACG Exchange Company
Common Shares
</TABLE>
- ------------------------
(1) These individuals are directors or officers of YPtel.
(2) These individuals are employees of YPtel.
(3) Messrs. Benton and Cutsinger are non-employee directors of Advanced.
Mr. Moses is a former non-employee director of Advanced.
(4) ACG Holding Company is Advanced's direct, wholly-owned unlimited liability
company subsidiary formed under the laws of Nova Scotia to hold the shares
of ACG Exchange Company, ACG Holding Company's direct, wholly-owned
unlimited liability company subsidiary formed under the laws of Nova Scotia
to issue the Class A Special Shares.
II-8
<PAGE>
(5) For tax reasons, ACG Holding Company will own 99% of ACG Exchange Company
and 1 + USA V Acquisition Corp., a wholly-owned subsidiary of Advanced, will
own the remaining 1% of ACG Exchange Company.
All of the securities listed in the table above were issued in transactions
exempt from registration under Section 4(2) of the Securities Act of 1933, as
amended, no public offering being involved.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits--See Exhibit Index on Page II-13 hereof.
(b) Financial Statement Schedules--See Schedule II "Valuation and Qualifying
Accounts" on Page II-19. All other schedules have been omitted because they are
not required under the related instructions, are inapplicable, or the
information is included in the consolidated financial statements.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of Advanced
pursuant to the provisions described in Item 15, or otherwise, Advanced has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than payment by Advanced of expenses incurred or
paid by a director, officer or controlling person of Advanced 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,
Advanced 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 Securities Act and will be governed by the final adjudication
of such issue.
The undersigned registrant hereby undertakes that: (i) for purposes of
determining any liability under the Securities Act of 1933, the information
omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 439A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this registration statement as of the time it was
declared effective, (ii) for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus 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.
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;
(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;
(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
II-9
<PAGE>
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.
The undersigned registrant hereby undertakes that:
(i) For purposes of determining any liability under the Securities Act
of 1933, the information omitted form the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A
and contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this registration statement as of the
time it was declared effective.
(ii) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus 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.
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
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 February 8, 2000.
ADVANCED COMMUNICATION GROUP, INC.
By: /s/ MICHAEL A. PRUSS
Name: Michael A. Pruss
Title: VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER
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 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 and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE DATE
--------- ----
<S> <C>
/S/ RICHARD O'NEAL
-------------------------------------- February 8, 2000
Richard O'Neal
CHAIRMAN OF THE BOARD OF DIRECTORS, AND
ACTING CHIEF EXECUTIVE OFFICER
(PRINCIPAL EXECUTIVE OFFICER)
/S/ MICHAEL A. PRUSS
-------------------------------------- February 8, 2000
Michael A. Pruss
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
</TABLE>
II-11
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE DATE
--------- ----
<S> <C>
/S/ ROBERT F. BENTON
-------------------------------------- February 8, 2000
Robert F. Benton
DIRECTOR
/S/ ROD K. CUTSINGER
-------------------------------------- February 8, 2000
Rod K. Cutsinger
DIRECTOR
/S/ TODD J. FEIST
-------------------------------------- February 8, 2000
Todd J. Feist
DIRECTOR
/S/ DAVID M. MITCHELL
-------------------------------------- February 8, 2000
David M. Mitchell
DIRECTOR
/S/ FRED L. THURMAN
-------------------------------------- February 8, 2000
Fred L. Thurman
DIRECTOR
</TABLE>
II-12
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTIONS
- --------------------- ------------
<S> <C>
1. Omitted--inapplicable.
2.1 Amended and Restated YPtel Agreement dated as of
October 26, 1999, by and among Advanced Communications
Group, Inc., YPtel Corporation, the shareholders of YPtel
Corporation listed on Exhibit "A" to the Amended and
Restated YPtel Agreement, The J.L.R. Family Trust, The
Paisley Family Trust, Edward Truant, Douglas G. McIntyre,
Stephen D. Lister, Jeffrey L. Rosenthal, Cold Trust, Global
Investment Trust, Freezer Trust, Storage Trust, Directory
Trust, Publisher Trust, and Imperial Capital Limited,
incorporated hereby by reference to Exhibit 2(b) of
Advanced's Current Report on Form 8-K, dated December 6,
1999.
2.2 Amended and Restated Acquisition Agreement dated as of
October 26, 1999, by and among Advanced Communications
Group, Inc., ACG Acquisition VI Corp., Web YP, Inc., Richard
O'Neal and Richard L. Reid, incorporated herein by reference
to Exhibit 2(c) of Advanced's Current Report on Form 8-K,
dated December 6, 1999, and filed with the Securities and
Exchange Commission on December 6, 1999.
2.3 Amended and Restated Acquisition Agreement dated as of
October 26, 1999, by and among Advanced Communications
Group, Inc., ACG Acquisition VII Corp., Big Stuff, Inc.,
Richard O'Neal and Richard L. Reid, incorporated herein by
reference to Exhibit 2(d) of Advanced's Current Report on
Form 8-K, dated December 6, 1999, and filed with the
Securities and Exchange Commission on December 6, 1999.
2.4 Stock Purchase Agreement by and among Advanced
Communications Group, Inc., Ionex Telecommunications Group,
Inc. (formerly known as Compass Telecommunications, Inc.),
Feist Long Distance Services, Inc., FirsTel, Inc., Telecom
Resources, Inc., and Valu-Line of Longview, Inc., dated
July 14, 1999, incorporated herein by reference to
Exhibit 2 to Advanced's Current Report on Form 8-K dated
July 14, 1999 and filed with the Securities and Exchange
Commission on July 29, 1999.
2.5 First Amendment dated November 19, 1999 to the Stock
Purchase Agreement by and among Advanced Communications
Group, Inc., Ionex Telecommunications, Inc. (formerly known
as Compass Telecommunications, Inc.), Feist Long Distance
Services, Inc., FirsTel, Inc., Telecom Resources, Inc., and
Valu-Line of Longview, Inc., dated July 14, 1998,
incorporated herein by reference to Exhibit 2(a) to
Advanced's Current Report on Form 8-K dated November 19,
1999, and filed with the Securities and Exchange Commission
on December 6, 1999.
3(i)(a) Restated Certificate of Incorporation, as amended,
incorporated herein by reference to Advanced's Registration
Statement on Form S-1 as filed with the Securities and
Exchange Commission on October 10, 1997.
3(i)(b) Form of Amendment to Restated Certificate of Incorporation
to change name to "WorldPages.com, Inc." filed herewith.
3(i)(c) Form of Certificate of Designation of Series B Special
Voting Preferred Stock, filed herewith.
3(ii) Restated Bylaws of Advanced, incorporated by reference to
Advanced's Report on Form 10-K dated as of March 31, 1999,
and filed with the Securities and Exchange Commission on
March 31, 1999, for the year ended December 31, 1998.
4.1 Form of certificate representing Advanced Common Stock,
filed herewith.
</TABLE>
II-13
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTIONS
- --------------------- ------------
<S> <C>
4(i)(a) Loan Agreement among Great Western Directories, Inc., and
Bank of America National Trust and Savings Association, as
Administrative Agent for the Lenders, dated May 14, 1999,
incorporated herein by reference to Exhibit 10.49 of
Advanced's Quarterly Report on Form 10-Q dated November 14,
1999, and filed with the Securities and Exchange Commission
on November 15, 1999.
4(i)(b) First Amendment to Loan Agreement among Great Western
Directories, Inc., and Bank of America, N.A. (f/k/a Bank of
America National Trust and Savings Association), as
Administrative Agent for the Lenders, dated October 21,
1999, filed herewith.
4(i)(c) Second Amendment to Loan Agreement among Great Western
Directories, Inc., and Bank of America, N.A., as a Lender
and Administrative Agent, dated November 19, 1999, filed
herewith.
4(i)(d) Security Agreement among Great Western Directories, Inc.,
and Bank of America National Trust and Savings Association,
as Administrative Agent for the Lenders, dated May 14, 1999,
incorporated herein by reference to Exhibit 10.49 of
Advanced's Quarterly Report on Form 10-Q dated November 14,
1999, and filed with the Securities and Exchange Commission
on November 15, 1999.
4(i)(e) Guarantee Agreement among Great Western Directories, Inc.,
and Bank of America National Trust and Savings Association,
as Administrative Agent for the Lenders, dated May 14, 1999,
incorporated herein by reference to Exhibit 10.49 of
Advanced's Quarterly Report on Form 10-Q dated November 14,
1999, and filed with the Securities and Exchange Commission
on November 15, 1999.
4(i)(f) First Amendment to Parent Guaranty among Advanced and Bank
of America, N.A., as a Lender and as Administrative Agent,
dated November 19, 1999, filed herewith.
4(i)(g) Pledge Agreement among Great Western Directories, Inc., and
Bank of America National Trust and Savings Association, as
Administrative Agent for the Lenders, dated May 14, 1999,
incorporated herein by reference to Exhibit 10.49 of
Advanced's Quarterly Report on Form 10-Q dated November 14,
1999, and filed with the Securities and Exchange Commission
on November 15, 1999.
4(i)(h) First Amendment to Parent Pledge Agreement among Great
Western Directories, Inc., and Bank of America National
Trust and Savings Association, as Administrative Agent for
the Lenders, dated June 30, 1999, filed herewith.
4(i)(j) Form of Exchange and Voting Trust Agreement among Advanced,
ACG Holding Company, ACG Exchange Inc., certain YPtel
shareholders, The J.L.R. Family Trust and The Paisley Family
Trust, filed herewith.
5.1 Opinion of Blackwell Sanders Peper Martin LLP, filed
herewith.
8. Omitted--inapplicable.
9. Omitted--inapplicable.
10.1 Advanced's 1997 Stock Awards Plan, incorporated herein by
reference to Advanced's Registration Statement on Form S-1
as filed with the Securities and Exchange Commission on
October 10, 1997.
10.2 Form of Non-Qualified Stock Option Agreement, incorporated
herein by reference to Advanced's Registration Statement on
Amendment No. 2 to Form S-1 as filed with the Securities and
Exchange Commission on January 16, 1998.
</TABLE>
II-14
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTIONS
- --------------------- ------------
<S> <C>
10.3 Non-Qualified Stock Option Plan for Non-Employee Directors,
incorporated herein by reference to Advanced's Registration
Statement on Form S-1 as filed with the Securities and
Exchange Commission on October 10, 1997.
10.4 Employment Agreement between Advanced and Richard P.
Anthony, incorporated herein by reference to Advanced's
Registration Statement on Amendment No. 1 to Form S-1 as
filed with the Securities and Exchange Commission on
December 29, 1997.
10.5 Form of Employment Agreement between Great Western
Directors, Inc. and Richard O'Neal (see Annex V to
Exhibit 2.1), incorporated herein by reference to Advanced's
Registration Statement on Form S-1 as filed with the
Securities and Exchange Commission on October 10, 1997.
10.6 Employment Agreement between Advanced and William H. Zimmer
III, incorporated herein by reference to Advanced's
Registration Statement on Amendment No. 1 to Form S-1 as
filed with the Securities and Exchange Commission on
December 29, 1997.
10.7 Termination Agreement between Advanced and William H.
Zimmer III, dated April 27, 1999, filed herewith.
10.8 Employment Agreement between Advanced and James F. Cragg,
incorporated herein by reference to Advanced's Registration
Statement on Amendment No. 1 to Form S-1 as filed with the
Securities and Exchange Commission on December 29, 1997.
10.9 Termination Agreement between Advanced and James F. Cragg,
dated April 27, 1999, filed herewith.
10.10 Employment Agreement between Advanced and Anthony Capers,
dated March 31, 1998, filed herewith.
10.11 Modification of Employment Agreement between Advanced and
Anthony Capers, dated December 6, 1998, filed herewith.
10.12 Second Modification of Employment Agreement between Advanced
and Anthony G. Capers, dated May 5, 1999, filed herewith.
10.13 Employment Agreement between Advanced and Michael A. Pruss,
dated November 19, 1999, filed herewith.
10.14 Form of Standstill Agreement dated as of February 18, 1998,
between Advanced and Rod K. Cutsinger, incorporated herein
by reference to Advanced's Registration Statement on
Amendment No. 1 to Form S-1 as filed with the Securities and
Exchange Commission on December 29, 1997.
10.15 Form of Non-Competition Agreement dated as of February 18,
1998 between Advanced and Rod K. Cutsinger, incorporated
herein by reference to Advanced's Registration Statement on
Amendment No. 1 to Form S-1 as filed with the Securities and
Exchange Commission on December 29, 1997.
10.16 Form of Indemnification Agreement entered into between
Advanced and certain of its executive officers and
directors, incorporated herein by reference to Advanced's
Registration Statement on Amendment No. 1 to Form S-1 as
filed with the Securities and Exchange Commission on
December 29, 1997.
10.17 Form of Series A Warrant issued to shareholders of Great
Western Directories, Inc., incorporated herein by reference
to Advanced's Registration Statement on Form S-1 as filed
with the Securities and Exchange Commission on October 10,
1997.
</TABLE>
II-15
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTIONS
- --------------------- ------------
<S> <C>
10.18 Form of Series B Warrant issued to shareholders of Great
Western Directories, Inc., incorporated herein by reference
to Advanced's Registration Statement on Form S-1 as filed
with the Securities and Exchange Commission on October 10,
1997.
10.19 Form of Series C Warrant issued to shareholders of Great
Western Directories, Inc., incorporated herein by reference
to Advanced's Registration Statement on Form S-1 as filed
with the Securities and Exchange Commission on October 10,
1997.
10.20 Form of Series D Warrant issued to shareholders of Great
Western Directories, Inc. (see Annex IV to Exhibit 2.1),
incorporated herein by reference to Advanced's Registration
Statement on Form S-1 as filed with the Securities and
Exchange Commission on October 10, 1997.
10.21 Form of Series E Warrant issued to certain shareholders of
Tele-Systems, Inc., incorporated herein by reference to
Advanced's Registration Statement on Amendment No. 1 to
Form S-1 as filed with the Securities and Exchange
Commission on December 29, 1997.
10.22 Form of Series F Warrant issued to certain shareholders of
Tele-Systems, Inc., incorporated herein by reference to
Advanced's Registration Statement on Amendment No. 1 to
Form S-1 as filed with the Securities and Exchange
Commission on December 29, 1997.
10.23 Form of Series G Warrant issued to certain shareholders of
Tele-Systems, Inc. (see Annex IV to Exhibit 2.4),
incorporated herein by reference to Advanced's Registration
Statement on Amendment No. 1 to Form S-1 as filed with the
Securities and Exchange Commission on December 29, 1997.
10.24 Form of Series H Warrant issued to Daniel W. and Cheryl A.
Peters (see Annex IV to Exhibit 2.9), incorporated herein by
reference to Advanced's Registration Statement on Amendment
No. 1 to Form S-1 as filed with the Securities and Exchange
Commission on December 29, 1997.
10.25 Form of Series I Warrant issued to Daniel W. and Cheryl A.
Peters (see Annex V to Exhibit 2.9), incorporated herein by
reference to Advanced's Registration Statement on Amendment
No. 1 to Form S-1 as filed with the Securities and Exchange
Commission on December 29, 1997.
10.26 Form of Series K Warrant issued to certain consultants,
incorporated herein by reference to Advanced's Registration
Statement on Amendment No. 1 to Form S-1 as filed with the
Securities and Exchange Commission on December 29, 1997.
10.27 Form of Series L Warrant issued to G. Edward Powell and Brad
K. Cutsinger, incorporated herein by reference to Advanced's
Registration Statement on Amendment No. 1 to Form S-1 as
filed with the Securities and Exchange Commission on
December 29, 1997.
10.28 Form of Series M Warrant issued to William McCaughey,
incorporated herein by reference to Advanced's Registration
Statement on Amendment No. 3 to Form S-1 as filed with the
Securities and Exchange Commission on February 12, 1998.
10.29 Form of Series N Warrant issued to Robert F. Benton, filed
herewith.
10.30 Form of Series N Warrant issued to Rod K. Cutsinger, filed
herewith.
10.31 Form of Series N Warrant issued to Marvin C. Moses, filed
herewith.
10.32 Form of Series P Warrant issued to Wilmot Matthews, filed
herewith.
10.33 Form of Series P Warrant issued to Nicholas J. Ross, filed
herewith.
10.34 Form of Series P Warrant issued to George Anderson, filed
herewith.
10.35 Form of Series P Warrant issued to Maxwell Gotlieb, filed
herewith.
</TABLE>
II-16
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTIONS
- --------------------- ------------
<S> <C>
10.36 Form of Series P Warrant issued to Robert Flynn, filed
herewith.
10.37 Warrant issued to Joseph C. Cook, incorporated herein by
reference to Advanced's Registration Statement on Amendment
No. 1 to Form S-1 as filed with the Securities and Exchange
Commission on December 29, 1997.
10.38 Form of 5% Subordinated Note issued to shareholders of Great
Western Directories, Inc. (see Annex III to Exhibit 2.1),
incorporated herein by reference to Advanced's Registration
Statement on Form S-1 as filed with the Securities and
Exchange Commission on October 10, 1997.
10.39 Note Redemption Agreement dated June 3, 1999, by and between
Advanced Communications Group, Inc. and Larry Baldwin, filed
herewith.
10.40 Note Redemption Agreement dated June 3, 1999, by and between
Advanced Communications Group, Inc. and Ron Baldwin, filed
herewith.
10.41 Note Redemption Agreement dated June 3, 1999, by and between
Advanced Communications Group, Inc. and Ronnie Emmanuel,
filed herewith.
10.42 Note Redemption Agreement dated June 3, 1999, by and between
Advanced Communications Group, Inc. and Richard O'Neal,
filed herewith.
10.43 Note Redemption Agreement dated June 3, 1999, by and between
Advanced Communications Group, Inc. and Steve Sparks, filed
herewith.
10.44 Form of 10% Convertible Subordinated Note issued to
shareholders of FirsTel, Inc. (see Annex III to
Exhibit 2.4), incorporated herein by reference to Advanced's
Registration Statement on Form S-1 as filed with the
Securities and Exchange Commission on October 10, 1997.
10.45 Sales Agreement Terms and Conditions dated July 16, 1997,
between Big Stuff, Inc. and Great Western Directors, Inc.,
incorporated herein by reference to Advanced's Registration
Statement on Amendment No. 1 to Form S-1 as filed with the
Securities and Exchange Commission on December 29, 1997.
10.46 Supplemental Letter dated December 22, 1997, from Big Stuff,
Inc. to Great Western Directories, Inc. regarding exclusive
marketing rights to Worldpages in certain areas,
incorporated herein by reference to Advanced's Registration
Statement on Amendment No. 1 to Form S-1 as filed with the
Securities and Exchange Commission on December 29, 1997.
10.47 Asset Purchase Agreement made and entered into as of
September 3, 1997, by and between RAFT, L.L.C., PAM Oil,
Inc., Scott D. Scofield, William Pederson and FirsTel, Inc.,
incorporated herein by reference to Advanced's Registration
Statement on Amendment No. 1 to Form S-1 as filed with the
Securities and Exchange Commission on December 29, 1997.
10.48 Form of Stockholders' Agreement among KIN Network, Inc. and
its Stockholders, incorporated herein by reference to
Advanced's Registration Statement on Amendment No. 1 to
Form S-1 as filed with the Securities and Exchange
Commission on December 29, 1997.
10.49 Letter Agreement dated January 15, 1998, among Advanced
Communications Group, Inc., Northwestern Public Service
Company and Northwestern Growth Corporation, incorporated
herein by reference to Advanced's Registration Statement on
Amendment No. 2 to Form S-1 as filed with the Securities
and Exchange Commission on January 16, 1998.
10.50 Form of Stock Option and Put Agreement issued to Mark Beall,
incorporated herein by reference to Advanced's Registration
Statement on Amendment No. 3 to Form S-1 as filed with the
Securities and Exchange Commission on February 12, 1998.
</TABLE>
II-17
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTIONS
- --------------------- ------------
<S> <C>
10.52 Severance Agreement and Full General Release made and
entered into as of December 16, 1998, by and between
Advanced and IONEX Telecommunications, Inc. f/k/a Compass
Telecommunications, Inc., filed herewith.
10.53 Consulting Agreement made and entered into as of July 14,
1999, by and between advanced and IONEX Telecommunications,
Inc. f/k/a Compass Telecommunications, Inc., filed herewith.
10.54 Directory Sales Agreement made and entered into as of
November 19, 1999, by and between Advanced and IONEX
Telecommunications, Inc. f/k/a Compass Telecommunications,
Inc., filed herewith.
10.55 Transitional Services Agreement made and entered into as of
November 19, 1999, by and between advanced and IONEX
Telecommunications, Inc. f/k/a Compass Telecommunications,
Inc., filed herewith.
10.56 Advertising Agreement made and entered into as of
November 19, 1999, by and between advanced and IONEX
Telecommunications, Inc. f/k/a Compass Telecommunications,
Inc., filed herewith.
11. Omitted--inapplicable.
12. Omitted--inapplicable.
13. Omitted--inapplicable.
15. Omitted--inapplicable.
16. Omitted--inapplicable.
17. Omitted--inapplicable.
18. Omitted--inapplicable.
19. Omitted--inapplicable.
20. Omitted--inapplicable.
21. List of subsidiaries of Advanced, filed herewith.
23.1 Consent of KPMG LLP, filed herewith.
23.2 Consent of Ernst & Young LLP, filed herewith.
23.3 Consent of Blackwell Sanders Peper Martin LLP, filed
herewith, see Exhibit 5.1.
23.4 Consent of KPMG LLP, filed herewith.
23.5 Consent of Blackwell Sanders Peper Martin LLP, contained in
Exhibit 5.1 hereof.
24. Omitted--inapplicable.
27. Financial Data Schedule filed with the Securities and
Exchange Commission in EDGAR version only.
99.3 Form of Support Agreement among Advanced, ACG Holding
Company, ACG Exchange Inc., certain YPtel shareholders, The
J.L.R. Family Trust and The Paisley Family Trust, filed
herewith.
99.4 Consent of George Anderson dated February 1, 2000, filed
herewith.
99.5 Consent of Robert Flynn dated February 1, 2000, filed
herewith.
99.6 Consent of Wilmot Matthews dated February 1, 2000, filed
herewith.
</TABLE>
II-18
<PAGE>
ADVANCED COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO DEDUCTIONS BALANCE AT
BEGINNING COSTS AND FROM BEGINNING
OF PERIOD EXPENSES RESERVES OF PERIOD
(In thousands) ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts and
anticipated returns:
Year ended December 31, 1999...................... $4,014 $4,246 $4,014(A) $4,246
====== ====== ====== ======
Year ended December 31, 1998...................... $ -- $3,156 $ 858(A) $4,014
====== ====== ====== ======
Year ended December 31, 1997...................... $ -- $ -- $ --(A) $ --
====== ====== ====== ======
</TABLE>
- ------------------------
(A) Accounts charged off less recoveries and returns.
II-19
<PAGE>
EXHIBIT 3(i)(b)
CERTIFICATE OF AMENDMENT OF THE
RESTATED CERTIFICATE OF INCORPORATION OF
ADVANCED COMMUNICATIONS GROUP, INC.
Advanced Communications Group, Inc., a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the "Corporation"),
DOES HEREBY CERTIFY THAT:
I. The proposed amendment to the Corporation's Restated
Certificate of Incorporation set forth below was duly adopted in accordance with
the provisions of Section 242 of the General Corporation Law of the State of
Delaware.
II. ARTICLE I is amended to read in its entirety as follows:
ARTICLE I
The name of the Corporation is: WorldPages.com, Inc.
IN WITNESS WHEREOF, we have hereunto set out our hands and seals as
President and Secretary, respectively, of the Corporation this _______ day of
____________, 2000, and we hereby affirm that the foregoing Certificate of
Amendment of the Restated Certificate of Incorporation is our act and deed and
the act and deed of the Corporation and that the facts stated therein are true.
---------------------------------
Richard A. O'Neal, President
ATTEST:
- -----------------------------------------------
Michael A. Pruss, Secretary
<PAGE>
CERTIFICATE OF DESIGNATIONS OF
CLASS B VOTING PREFERRED STOCK OF
ADVANCED COMMUNICATIONS GROUP, INC.
PURSUANT TO SECTION 151 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE
Advanced Communications Group, Inc. (the "Corporation"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, in accordance with the provisions of Section 151 of the General
Corporation Law of the State of Delaware, as amended, does HEREBY CERTIFY
that the following resolution has been duly adopted by the Board of Directors
of the Corporation:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation by the provisions of
the Restated Certificate of Incorporation of the Corporation, as amended
(the "Certificate of Incorporation"), there hereby is created, out of
the 20,000,000 shares of Preferred Stock, par value $0.0001 per share,
of the Corporation authorized in Article IV of the Certificate of
Incorporation (the "Preferred Stock"), a series of Preferred Stock of
the Corporation, to be designated "Class B Voting Preferred Stock,"
consisting of one (1) share, which series shall have the following
voting powers, designations, preferences and relative, participating,
optional and other rights, and the following qualifications, limitations
and restrictions (in addition to the powers, designations, preferences
and relative, participant, optional and other rights, and the
qualifications, limitations and restrictions set forth in the
Certificate of Incorporation which are applicable to the Preferred
Stock):
SECTION 1. DESIGNATION AND SIZE OF ISSUE, RANKING.
(A) The designation of the series of Preferred Stock shall be
"Class B Voting Preferred Stock" (the "Class B Stock"), and the number
of shares constituting the Class B Stock shall be one (1) share.
(B) The share of Class B Stock which at any time has been redeemed
or otherwise reacquired by the Corporation shall, after such redemption
or other acquisition, resume the status of authorized and unissued
shares of Preferred Stock, without designation as to series until such
share is once more designated as part of a particular series by the
Board of Directors.
(C) The share of Class B Stock shall rank senior, as to distribution
of assets upon liquidation, to the shares of Common Stock, par value
$0.0001 per share, of the Corporation, (the "Common Stock"), and junior
to any future series of Preferred Stock or shares of preference stock of
the Corporation (the "Preference Stock") issued by the Corporation after
the effectiveness of this Certificate of Designations that by its terms
ranks senior to the Class B Stock.
SECTION 2.VOTING RIGHTS OF CLASS B STOCK.
(A) GENERAL. Except as otherwise required by law or the
Certificate of Incorporation, the holder of record of the share of Class
B Stock shall have a number of votes with respect to any matter,
proposition or question on which holders of Common Stock are entitled to
vote, consent or otherwise act, equal to the product of (i) the number
of shares of Common Stock for which the Exchangeable Shares then issued
and outstanding from time to time and held by Holders are exchangeable,
multiplied by (ii) the number of votes to which a holder of one share of
Common Stock is entitled with respect to such matter, proposition or
question. For the purposes hereof, (x) "Exchangeable Shares" means the
Class A Special Shares of ACG Exchange Company, a Nova Scotia unlimited
liability company ("ACG Exchange Company"), (y) "Holders" means the
registered holders from time to time of Exchangeable Shares, other than
<PAGE>
Exchangeable Shares beneficially owned by the Corporation or its
Subsidiaries, and (z) "Subsidiary" in relation to any person, means any
body corporate, partnership, joint venture, association or other entity
of which more than 50% of the total voting power of shares of stock or
units of ownership or beneficial interest entitled to vote in the
election of directors (or members of a comparable governing body) is
owned or controlled, directly or indirectly, by such person.
(B) COMMON STOCK AND CLASS B STOCK IDENTICAL IN VOTING. Except as
otherwise required by law or the Certificate of Incorporation, in
respect of all matters concerning the voting of shares of capital stock
of the Corporation, the Common Stock (and any other class or series of
capital stock of the Corporation entitled to vote generally with the
Common Stock) and the Class B Stock shall vote as a single class and,
apart from the differing number of votes attaching to the Class B Stock
as set forth in Section 2(A) above, such voting rights shall be
identical in all respects.
SECTION 3. LIQUIDATION. In the event of any liquidation,
dissolution or winding-up of the Corporation, and subject to any prior
rights of holders of shares of any other series of Preferred Stock or of
any series of Preference Stock, if the Class B Stock is then outstanding
the holder thereof shall be entitled to receive, out of the assets of
the Corporation available for distribution to its stockholders, an
amount equal to $1.00 before any distribution is made on the Common
Stock or on any other stock of the Corporation ranking junior to the
Class B Stock as to distribution of assets on liquidation, dissolution
or winding-up. After payment of the full amount of the above
liquidation preference of the outstanding share of Class B Stock, the
holder of the share of Class B Stock shall not be entitled to any
further participation in any distribution of assets of the Corporation.
For the purposes of this Section 3, neither the sale, conveyance,
exchange or transfer (for cash, shares of stock, securities or other
consideration ) of all or substantially all of the property or assets of
the Corporation, nor the consolidation or merger of the Corporation with
or into one or more other entities, shall be deemed to be a liquidation,
dissolution or winding-up of the Corporation.
SECTION 4. DIVIDENDS. The holder of the Class B Stock shall not be
entitled to receive any dividends, whether payable in cash, in property
or in shares of capital stock of the Corporation.
SECTION 5. CLASS B STOCK.
(A)Pursuant to the terms of that certain Amended and Restated YPtel
Agreement dated as of October 26, 1999 (the "YPtel Agreement"), between
the Corporation, YPtel Corporation ("YPtel"), the shareholders of YPtel
listed on Exhibit "A" to the YPtel Agreement, Edward Truant, Douglas G.
McIntyre, Jeffrey L. Rosenthal, Stephen D. Lister, The J.L.R. Family
Trust and The Paisley Family Trust (collectively the "ICL Principals"),
Cold Trust, Global Investment Trust, Freezer Trust, Storage Trust,
Directory Trust and Publisher Trust (collectively the "Barbadian
Trusts") (the shareholders listed on Exhibit "A" to the YPtel Agreement,
the ICL Principals and the Barbadian Trusts are collectively referred to
as the "Shareholders"), and Imperial Capital Limited ("ICL"), one share
of Class B Stock is being issued to the Trustee (as hereinafter defined)
under the Exchange and Voting Trust Agreement made as of ___________,
2000 among the Corporation, ACG Holding Company, a Nova Scotia unlimited
liability company, ACG Exchange Company, a Nova Scotia unlimited
liability company, 1 + USA V Acquisition Corp., certain holders of YPtel
shares as set out on Schedule A thereto, The J.L.R. Family Trust, The
Paisley Family Trust and a trust company as trustee (the "Trustee"), as
may be amended from time to time.
(B) The holder of the share of Class B Stock is entitled to
exercise the voting rights attendant thereto in such manner as specified
in the Exchange and Voting Trust Agreement.
<PAGE>
(C) At such time as the term of the Exchange and Voting Trust
Agreement shall end, being the earlier of the date when (i) no
outstanding Exchangeable Shares are held by a Holder, (ii) such
Agreement is terminated by mutual agreement as provided therein or (iii)
_________, 2005, the Class B Stock shall be redeemed in accordance with
Section 7 hereof.
SECTION 6. CONVERSION OR EXCHANGE. The holder of the share of
Class B Stock shall not have any rights hereunder to convert such share
into, or exchange such share for, shares of any other series or class of
capital stock of the Corporation.
SECTION 7. REDEMPTION. The share of Class B Stock shall not be
subject to redemption, except that at such time as the term of the
Exchange and Voting Trust Agreement shall end, the Class B Stock shall
automatically be redeemed by the Corporation for an amount equal to
$1.00 due and payable upon such redemption.
SECTION 8. OTHER RIGHTS. The share of Class B Stock shall not have
any powers, preferences or relative, participating, optional or other
special rights, or qualifications, limitations or restrictions other
than as set forth herein.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to
be signed and attested this ____ day of _____________, 2000.
ADVANCED COMMUNICATIONS GROUP, INC.
By:
----------------------------------
Name:
Title:
<PAGE>
COMMON STOCK INCORPORATED UNDER THE LAWS
PAR VALUE $0.0001 OF THE STATE OF DELAWARE
<TABLE>
<CAPTION>
<S> <C> <C> <C>
[ACG LOGO] THIS CERTIFICATE IS TRANSFERABLE IN CUSIP 981922 10 7
NEW YORK, NY AND JERSEY CITY, NJ CUSIP 007310 10 6
SEE REVERSE FOR CERTAIN DEFINITIONS [CORPORATE SEAL]
</TABLE>
ADVANCED COMMUNICATIONS GROUP, INC.
THIS CERTIFIES THAT
SPECIMEN
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF
Advanced Communications Group, Inc. transferable on the books of the
Corporation in person or by duly authorized attorney upon receipt of this
Certificate properly endorsed. This Certificate is not valid unless
countersigned by the Transfer Agent and registered by the Registrar.
In Witness Whereof, said Corporation authorized this Certificate to be
signed in facsimile by its duly authorized officers and its Corporate Seal
to be affixed in facsimile.
Dated COUNTER SIGNED AND REGISTERED
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
TRANSFER AGENT
AND REGISTRAR
SIGNATURE SIGNATURE BY [SPECIMEN]
CHAIRMAN AND CHIEF EXECUTIVE OFFICER TREASURER AUTHORIZED SIGNATURE
<PAGE>
[ACG LOGO]
Pursuant to Section 151(F) of the Delaware General Corporation Law, the
Corporation will furnish without charge to each stockholder who so requests
the powers, designations, preferences, and relative participating, optional
or other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or
rights. Such request may be made to the Corporation or the Transfer Agent.
The following abbreviations, when used in the description on the face of the
certificate, shall be continued as though they were written out and according
to applicable laws or regulations.
TEN COM -- as tenants in common UNIF GIFT MIN ACT --______ Custodian_____
(Cust) (Minor)
TEN ENT -- as tenants by the entireties under Uniform Gifts to Minors Act
JT TEN -- as joint tenants with right _____ _______ _______ ________
of survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the above list
For value received, ______________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE [SPECIMEN]
- ---------------------------------------
|
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Shares of the stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
- ---------------------------------------------------------------------- Attorney
to transfer the said stock on the books of the within-named Corporation with
full power of substitution in the premises.
Dated
---------------------
X
-----------------------------------
NOTICE (SIGNATURE)
THE SIGNATURE(S) TO THIS
ASSIGNMENT MUST CORRESPOND WITH THE
NAME(S) AS WRITTEN UPON THE FACE OF
THE CERTIFICATE IN EVERY PARTICULAR
WITHOUT ALTERATION OR ENLARGEMENT
OR ANY CHANGE WHATEVER.
X
-----------------------------------
(SIGNATURE)
-----------------------------------
THE SIGNATURES SHOULD BE GUARANTEED
BY AN ELIGIBLE GUARANTOR INSTITUTION,
STOCKBROKERS SAVINGS AND LOAN
ASSOCIATION AND CREDIT UNION WITH
[ILLEGIBLE] IN AN APPROVED SIGNATURE
MEDALLION PROGRAM PURSUANT TO S.E.C.
RULE [ILLEGIBLE]
-----------------------------------
SIGNATURE(S) GUARANTEED BY:
<PAGE>
EXHIBIT 4(i)(b)
FIRST AMENDMENT TO LOAN AGREEMENT
THIS FIRST AMENDMENT TO LOAN AGREEMENT (the "AMENDMENT"), dated as of
the 21st day of October, 1999, by and among GREAT WESTERN DIRECTORIES, INC., a
Texas corporation (the "BORROWER"), and BANK OF AMERICA, N.A. (F/K/A BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION), as a Lender and as
Administrative Agent;
W I T N E S S E T H:
WHEREAS, the Borrower, the Lender and the Administrative Agent are
parties to that certain Loan Agreement dated as of May 14, 1999 (as heretofore
amended, modified, supplemented and restated, the "LOAN AGREEMENT"); and
WHEREAS, the Borrower has requested, and the Lender has agreed, subject
to the conditions and on the terms set forth in this Amendment, to make certain
amendments to the Loan Agreement, as provided in this Amendment;
NOW, THEREFORE, in consideration of the premises set forth above, the
covenants and agreements set forth in this Amendment, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree that all capitalized terms used in
this Amendment shall have the meanings ascribed thereto in the Loan Agreement,
and further hereby agree as follows:
1. AMENDMENT TO ARTICLE 1. Article 1 of the Loan Agreement,
DEFINITIONS, is hereby amended by deleting the existing definitions of "CLEC NET
PROCEEDS" and "EBITDA" in their entirety and substituting in lieu thereof the
following:
"'CLEC NET PROCEEDS' shall mean, with respect to any sale,
lease, transfer or other disposition of all or any part of the CLEC
Business by the Parent or any of its Subsidiaries, the difference
between (1) the difference between (a) the aggregate amount of cash
received by the Parent or any of its Subsidiaries for such assets
(including, without limitation, any payments received for
non-competition covenants, consulting or management fees in connection
with such sale, and any portion of the amount received evidenced by a
promissory note or other evidence of Indebtedness issued by the
purchaser), MINUS (b) the sum of (i) amounts reserved, if any, for
taxes payable with respect to any such sale (after application
(assuming application first to such reserves) of any available losses,
credits or other offsets), (ii) reasonable and customary transaction
costs properly attributable to such transaction and payable by the
Parent or any of its Subsidiaries (other than to an Affiliate) in
connection with such sale, lease, transfer or
- 1 -
<PAGE>
other disposition of assets, including, without limitation,
commissions and severance and other payments to employees due to
termination of employment in an aggregate amount not to exceed
$1,500,000.00, and (iii) until actually received by the Parent or
any of its Subsidiaries, any portion of the amount received held in
escrow or evidenced by a promissory note or other evidence of
Indebtedness issued by a purchaser or non-compete, consulting or
management agreement or covenant or otherwise for which compensation
is paid over time, MINUS (2) amounts permitted to be paid pursuant
to that certain Letter Agreement dated as of October 14, 1999 by the
Lender in favor of Saville Systems, Inc., which amounts may not
exceed $2,336,797.00 in the aggregate. Upon receipt by the Parent or
any of its Subsidiaries of (A) amounts referred to in item (b)(iii)
of the preceding sentence, or (B) if there shall occur any reduction
in the tax reserves referred to in item (b)(i) of the preceding
sentence resulting in a payment to the Parent or its Subsidiaries,
such amounts shall then be deemed to be CLEC Net Proceeds.'"
"'EBITDA' shall mean, with respect to the Borrower and its
Subsidiaries, on a consolidated basis, the sum of (a) Net Income for
any period (after eliminating any extraordinary gains and losses),
PLUS, (b) to the extent deducted in determining such Net Income, the
sum of (i) depreciation and amortization, (ii) Interest Expense, (iii)
income taxes paid and (iv) all other non-cash items, in each case, for
such period, PLUS, (c) for each period ending on or prior to the
earlier to occur of (i) June 30, 2000 and (ii) the Maturity Date,
$3,000,000.00."
2. AMENDMENT TO ARTICLE 6. Section 6.4 of the Loan Agreement,
COPIES OF OTHER REPORTS, is hereby amended by adding new subsection (e) as
follows:
"(e) Within fifteen (15) days after the last day of each
calendar month, a report setting forth EBITDA (for the twelve (12)
consecutive calendar month period ending on such date), which report
shall (i) be certified by the chief financial officer of the Borrower
to have been prepared in accordance with GAAP and (ii) include
calculations demonstrating the Borrower's compliance with Sections 7.8,
7.9 and 7.14 hereof."
3. AMENDMENTS TO ARTICLE 7.
(a) AMENDMENT TO SECTION 7.6. Section 7.6 of the Loan Agreement,
INVESTMENTS AND ACQUISITIONS, is hereby amended by deleting the existing
subsection (b) thereof in its entirety and substituting in lieu thereof the
following:
"(b) so long as no Default then exists or would be caused
thereby and the Borrower has demonstrated pro forma compliance with
Sections 7.8 and 7.9 hereof, the Borrower may make loans (i) to the
Parent (A) to retire the CIBC Facility and, (B) in an aggregate amount
not to exceed $3,000,000.00, for working capital needs and other
corporate purposes of the Parent, and (ii) to any Affiliate Guarantor
for working capital needs and other corporate purposes of such
Affiliate Guarantor in
-2-
<PAGE>
connection with the operation of the CLEC Business in an
aggregate amount not to exceed $2,500,000.00 per calendar month
(which amount shall be exclusive of payments made to satisfy the
obligation of the Parent to Northern Telecom in connection with the
purchase of certain switch equipment which amount shall not exceed
$3,000,000.00) or $15,000,000.00 prior to the Maturity Date, in each
case, so long as (x) each such loan is evidenced by a promissory
note made by such Person in favor of the Borrower in form and
substance satisfactory to the Administrative Agent and (y) each such
promissory note is assigned as Collateral and delivered to the
Administrative Agent."
(b) AMENDMENT TO SECTION 7.8. Section 7.8 of the Loan Agreement,
LEVERAGE RATIO, is hereby amended by deleting such section in its entirety and
substituting in lieu thereof the following:
"Section 7.8 LEVERAGE RATIO. (a) As of the end of any
calendar quarter, and (b) at the time of any Advance hereunder (after
giving effect to such Advance), the Borrower shall not permit its
Leverage Ratio to exceed 5.00 to 1.00."
(c) Article 7 of the Loan Agreement, NEGATIVE COVENANTS, is hereby
further amended by adding new Section 7.14, MINIMUM EDITDA, as follows:
"Section 7.14 MINIMUM EBITDA. (a) As of the end of any
calendar month, and (b) at the time of any Advance hereunder (after
giving effect to such Advance), the Borrower shall not permit its
EBITDA (for the twelve (12) consecutive calendar month period ending on
the month end being tested in the case of Section 7.14(a) hereof, or on
the most recently completed calendar month end in the case of Section
7.14(b) hereof) to be less than $8,000,000.00."
4. AMENDMENTS TO ARTICLE 8. Section 8.1 of the Loan Agreement,
EVENTS OF DEFAULT, is further hereby amended by (i) deleting the word "or" after
the semicolon at the end of the existing subsection (q) thereof, (ii) adding a
semicolon and the word "or", respectively, after the word "assets" at the end of
the existing subsection (r) thereof, and (iii) adding new subsection (s) thereto
as follows:
"(s) The Borrower shall fail to sell, transfer or
otherwise dispose of the CLEC Business on or prior to November 30,
1999."
5. NO OTHER AMENDMENT OR CONSENT. Except for the amendments set
forth above, the text of the Loan Agreement and all other Loan Documents shall
remain unchanged and in full force and effect. No waiver or consent by the
Administrative Agent or the Lenders under the Loan Agreement or any other Loan
Document is granted or intended except as expressly set forth herein, and the
Administrative Agent and the Lenders expressly reserve the right to require
strict compliance in all other respects (whether or not in connection with any
Requests for Advance). Except as set forth herein, the amendments
-3-
<PAGE>
agreed to herein shall not constitute a modification of the Loan Agreement or
any of the other Loan Documents, or a course of dealing with the
Administrative Agent and the Lenders at variance with the Loan Agreement or
any of the other Loan Documents, such as to require further notice by the
Administrative Agent or the Lenders to require strict compliance with the
terms of the Loan Agreement and the other Loan Documents in the future.
6. LOAN DOCUMENTS. This Amendment shall be deemed to be a Loan
Document for all purposes under the Loan Agreement and the other Loan Documents.
7. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
separate counterparts shall together constitute but one and the same instrument.
8. GOVERNING LAW. This Amendment shall be construed in accordance
with and governed by the laws of the State of California.
9. SEVERABILITY. Any provision of this Amendment which is
prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof in that jurisdiction or affecting the validity or enforceability of such
provision in any other jurisdiction.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment and
Consent or caused it to be executed by their duly authorized officers, all as of
the day and year first above written.
BORROWERS: GREAT WESTERN DIRECTORIES, INC.
By: //RICHARD A. O'NEAL//
-----------------------------------------
Name: Richard A. O'Neal
Title: President
ADMINISTRATIVE AGENT
AND LENDERS: BANK OF AMERICA, N.A., as Administrative Agent
and as Lender
By: //George V. Hausler//
------------------------------------------
Name: George V. Hausler
Title: Vice President
GREAT WESTERN DIRECTORIES, INC.
FIRST AMENDMENT TO LOAN AGREEMENT
Signature Page
<PAGE>
SECOND AMENDMENT TO LOAN AGREEMENT
THIS SECOND AMENDMENT TO LOAN AGREEMENT (the "AMENDMENT"), dated as of
the 19th day of November, 1999, by and among GREAT WESTERN DIRECTORIES, INC., a
Texas corporation (the "BORROWER"), and BANK OF AMERICA, N.A., as a Lender and
as Administrative Agent;
W I T N E S S E T H:
WHEREAS, the Borrower, the Lender and the Administrative Agent are
parties to that certain Loan Agreement dated as of May 14, 1999, as amended by
that certain First Amendment to Loan Agreement dated as of October 21, 1999 (the
"LOAN AGREEMENT"); and
WHEREAS, the Borrower has requested, and the Lender has agreed, subject
to the conditions and on the terms set forth in this Amendment, to make certain
amendments to the Loan Agreement, as provided in this Amendment;
NOW, THEREFORE, in consideration of the premises set forth above, the
covenants and agreements set forth in this Amendment, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree that all capitalized terms used in
this Amendment and not otherwise defined herein shall have the meanings ascribed
thereto in the Loan Agreement, and further hereby agree as follows:
1. AMENDMENT TO ARTICLE 1.
(a) Article 1 of the Loan Agreement, DEFINITIONS, is hereby
amended by deleting the existing definitions of "COMMITMENT," "COMMITMENT
RATIOS," "EBITDA," "LEVERAGE RATIO," "NON-MATERIAL SUBSIDIARIES" and "YP TEL
ENTITIES" in their entirety and substituting in lieu thereof the following new
definitions in appropriate alphabetical order:
"'COMMITMENT' shall mean the several obligations of the
Lenders to fund their respective portion of the Loans to the Borrower
in accordance with their respective Commitment Ratios in an aggregate
principal amount as of the Agreement Date not to exceed Fifteen Million
and No/100 Dollars ($15,000,000.00) pursuant to the terms hereof, as
such obligations may be reduced from time to time pursuant to the terms
hereof."
"'COMMITMENT RATIOS' shall mean the percentages in which the
Lenders are severally bound to fund their respective portion of
Advances to the Borrower under the
<PAGE>
Commitment, which percentages are set forth below (together with dollar
amounts) as of the effective date of the Second Amendment:
<TABLE>
<CAPTION>
Approximate Dollar
Lender Percentage Commitment
------ ------------- -------------
<S> <C> <C>
Bank of America, N.A. 100.00% $15,000,000.00
============= ==============
100.00% $15,000,000.00"
</TABLE>
"'CONSOLIDATED EBITDA' shall mean, with respect to the Parent,
the Borrower and the Borrower's Subsidiaries, on a consolidated basis,
the sum of (a) Net Income from continuing operations for any period
(after eliminating any extraordinary gains and losses), PLUS, (b) to
the extent deducted in determining such Net Income, the sum of (i)
depreciation and amortization, (ii) Interest Expense, (iii) income
taxes paid and (iv) all other non-cash items, in each case, for such
period, PLUS, (c) for each period ending on or prior to the earlier to
occur of (i) June 30, 2000 and (ii) the Maturity Date, $3,000,000.00."
"'LEVERAGE RATIO' shall mean, as of any date, the ratio of (a)
Total Debt to (b) Consolidated EBITDA for the twelve (12) calendar
month period ending on such date, or if such date is not the last day
of a calendar month, as of the most recently completed calendar month."
"'NON-MATERIAL SUBSIDIARIES' shall mean, collectively, (a)
each Subsidiary of the Parent (other than the Borrower and its
Subsidiaries) which (1) is set forth on SCHEDULE 2 attached hereto, (2)
the Administrative Agent designates in writing as not material or (3)
has less than $200,000.00 of assets in the aggregate, and (b) the YP
Tel Entities; and 'NON-MATERIAL SUBSIDIARY' shall mean any one of the
foregoing."
"'YP TEL ENTITIES' shall mean, collectively, (a) YP Tel
Corporation, a Canadian corporation, (b) Big Stuff, Inc., a Texas
corporation, (c) Web YP, Inc., a Texas corporation, (d) any
Subsidiaries of the foregoing Persons and (e) any direct or indirect
Subsidiary of the Parent formed solely in connection with the
acquisition of, or merger or consolidation with or into, YP Tel
Corporation, Big Stuff, Inc. and/or Web YP, Inc."
(b) Article 1 of the Loan Agreement, DEFINITIONS, is further
hereby amended by deleting subsection (c) of the existing definition of "CHANGE
OF CONTROL" in its entirety and substituting in lieu thereof the following new
subsection (c):
"(c) The failure of the Parent to own all of the voting
and economic Capital Stock of the Borrower and its Subsidiaries;"
- 2 -
<PAGE>
(c) Article 1 of the Loan Agreement, DEFINITIONS, is further
hereby amended by (i) deleting the period at the end of subsection (d) of the
existing definition of "CHANGE OF CONTROL" and substituting in lieu thereof
"; and" and (ii) by inserting the following new subsection (e):
"(e) The YP Tel Entities, or any of them, shall (i) own
or acquire any Capital Stock of the Parent or any of its Subsidiaries or (ii)
consolidate or merge with or into or otherwise acquire or be acquired by the
Parent or any of its Subsidiaries, in any event, other than on terms and
conditions substantially as set forth in that certain (A) Amended and
Restated YP Tel Agreement dated as of October 26, 1999 by and among the
Parent, YP Tel Corporation, a Canadian corporation, the Shareholders (as
defined therein) and Imperial Capital Limited, an Ontario Corporation, (B)
Amended and Restated Web YP Agreement dated as of October 26, 1999 by and
among the Parent, ACG Acquisition VI Corp., a Delaware corporation, Web YP,
Inc., a Texas corporation, and Richard O'Neal and Richard L. Reid, each a
resident of the State of Texas, and (C) Amended and Restated Big Stuff
Agreement dated as of October 26, 1999 by and among the Parent, ACG
Acquisition VII Corp., a Delaware corporation, Big Stuff, Inc., a Texas
corporation, and Richard O'Neal and Richard L. Reid, each a resident of the
State of Texas."
(d) Article 1 of the Loan Agreement, DEFINITIONS, is further
hereby amended by adding the following new definition of "SECOND AMENDMENT"
thereto in appropriate alphabetical order:
"SECOND AMENDMENT" shall mean that certain Second Amendment
to Loan Agreement dated as of November 19, 1999 by and among the
Borrower, the Administrative Agent and the Lender."
(e) Article 1 of the Loan Agreement, DEFINITIONS, is further
hereby amended by deleting the existing definition of "CLEC NET PROCEEDS" in
its entirety.
2. AMENDMENT TO ARTICLE 3. Section 3.2 of the Loan Agreement,
CONDITIONS PRECEDENT TO EACH ADVANCE, is hereby amended by deleting the
existing subsection (e) thereof in its entirety and substituting in lieu
thereof the following new subsection (e):
"(e) No event or other change shall have occurred, and no
condition shall exist, which, in the reasonable judgment of the
Required Lenders, has had or could reasonably be expected to have (a)
any materially adverse effect upon the business, assets, liabilities,
financial condition, results of operations or properties of the Parent
or the Affiliate Guarantors, taken as a whole or (b) a materially
adverse effect upon the binding nature, validity, or enforceability of
the Loan Documents to which such Person is a party; in either case,
whether resulting from any single act, omission, situation, status,
event or undertaking; or taken together with other such acts,
omissions, situations, statuses, events or undertakings; and"
3. AMENDMENT TO ARTICLE 4. Section 4.1 of the Loan Agreement,
REPRESENTATIONS AND WARRANTIES, is hereby amended by deleting such subsection
(r) thereof,
- 3 -
<PAGE>
AGREEMENTS WITH AFFILIATES, in its entirety and substituting in
lieu thereof the following new (r):
"(r) AGREEMENTS WITH AFFILIATES. Except for agreements or
arrangements with Affiliates (i) wherein (A) the Borrower or one or
more of its Subsidiaries provides services to such Affiliates or such
Affiliates provide services to the Borrower or one or more of its
Subsidiaries or (B) the Parent provides general management and
operating services to the Borrower and its Subsidiaries, in each case,
for not in excess of fair consideration, (ii) in connection with loans
permitted under Section 7.6(b) hereof, (iii) in connection with the
acquisition of, or consolidation or merger with or into, the YP Tel
Entities, or (iv) which are set forth on SCHEDULE 4 attached hereto,
neither the Borrower nor any of its Subsidiaries has (a) any written
agreements or binding arrangements of any kind with any Affiliate or
(b) any management or consulting agreements of any kind with any
Affiliate."
4. AMENDMENT TO ARTICLE 5. Section 5.10 of the Loan Agreement,
USE OF PROCEEDS, is hereby amended by deleting such section in its entirety and
substituting in lieu thereof the following new Section 5.10:
"Section 5.10 USE OF PROCEEDS. The Borrower will, and will
cause its Subsidiaries to, use the aggregate proceeds of all Advances
under the Loans directly or indirectly (a) to make loans, subject to
Section 7.6(b)(i) hereof, to Web YP, Inc. and/or Big Stuff, Inc. for
their respective working capital needs (excluding Investments pursuant
to internet portal carriage or co-branded area agreements or other
similar agreements entered into after the effective date of the Second
Amendment) in an amount not to exceed $2,000,000.00, (b) to make loans,
subject to Subject to 7.6(b)(ii) hereof, to the Parent for working
capital needs of the Parent (including, without limitation, the fees
and expenses incurred in connection with the sale of the CLEC Business
or the acquisition of, or merger or consolidation with or into, the YP
Tel Entities, but expressly excluding any loans to, investments in or
other distributions to any Person that is not an Affiliate Guarantor),
and (c) for working capital needs and other corporate purposes of the
Borrower and its Subsidiaries (including, without limitation, the fees
and expenses incurred in connection with the sale of the CLEC Business)
which do not otherwise conflict with this Section 5.10."
5. AMENDMENTS TO ARTICLE 7.
(a) Section 7.6 of the Loan Agreement, INVESTMENTS AND
ACQUISITIONS, is hereby amended by deleting subsection (b) thereof in its
entirety and substituting in lieu thereof the following new subsection (b):
"(b) so long as no Default then exists or would be caused
thereby and the Borrower has demonstrated pro forma compliance with
Sections 7.8 and 7.14 hereof, the Borrower may make loans to (i) Web
YP, Inc. and/or Big Stuff, Inc. for their
- 4 -
<PAGE>
respective working capital needs (excluding Investments pursuant to
internet portal carriage or co-branded area agreements or other similar
agreements entered into after the effective date of the Second
Amendment) in an aggregate amount not to exceed $2,000,000.00 during
the term hereof and (ii) the Parent for working capital needs of the
Parent (including, without limitation, the fees and expenses incurred
in connection with the sale of the CLEC Business or the acquisition of,
or merger or consolidation with or into, the YP Tel Entities, but
expressly excluding any loans to, investments in or other distributions
to any Person that is not an Affiliate Guarantor), in each case,
PROVIDED that (A) each such loan is evidenced by a promissory note made
by the Parent or Web YP, Inc. and/or Big Stuff, Inc., as applicable, in
favor of the Borrower, which note shall be substantially in the form of
EXHIBIT A attached to the Second Amendment and (B) each such promissory
note is assigned as Collateral and delivered to the Administrative
Agent."
(b) Section 7.7 of the Loan Agreement, RESTRICTED PAYMENTS, is
hereby amended by deleting such section in its entirety and substituting in lieu
thereof the following new Section 7.7:
"Section 7.7 RESTRICTED PAYMENTS. The Borrower shall
not, and shall not permit any of its Subsidiaries to, directly or
indirectly declare or make any Restricted Payment; PROVIDED, HOWEVER,
that any of the Borrower's Subsidiaries may make Restricted Payments to
the Borrower or to a wholly-owned Subsidiary of the Borrower."
(c) Section 7.8 of the Loan Agreement, LEVERAGE RATIO, is hereby
amended by deleting such section in its entirety and substituting in lieu
thereof the following new Section 7.8:
"Section 7.8 LEVERAGE RATIO. (a) As of the end of any
calendar quarter, and (b) at the time of any Advance hereunder (after
giving effect to such Advance), the Borrower shall not permit its
Leverage Ratio to exceed 2.50 to 1.00."
(d) Section 7.9 of the Loan Agreement, INTEREST COVERAGE RATIO, is
hereby amended by deleting such section in its entirety and substituting in lieu
thereof the following new Section 7.9:
"Section 7.9 [INTENTIONALLY OMITTED]"
(e) Section 7.14 of the Loan Agreement, MINIMUM CONSOLIDATED
EDITDA, is hereby amended by deleting such section in its entirety and
substituting in lieu thereof the following new Section 7.14:
"Section 7.14 MINIMUM CONSOLIDATED EBITDA. As of the end
of any calendar month, the Borrower shall not permit its Consolidated
EBITDA (for the
- 5 -
<PAGE>
twelve (12) consecutive calendar month period ending on the month end
being tested) to be less than $6,000,000.00."
6. AMENDMENTS TO ARTICLE 8. Section 8.1 of the Loan Agreement,
EVENTS OF DEFAULT, is further hereby amended by deleting subsections (n), (o),
(p) (q) and (r) thereof in their entirety and substituting in lieu thereof the
following new subsections (n), (o), (p), (q) and (r):
"(n) [INTENTIONALLY OMITTED];
(o) [INTENTIONALLY OMITTED];
(p) [INTENTIONALLY OMITTED];
(q) [INTENTIONALLY OMITTED]; or
(r) [INTENTIONALLY OMITTED]."
7. NO OTHER AMENDMENT OR CONSENT. Except for the amendments
set forth above, the text of the Loan Agreement and all other Loan Documents
shall remain unchanged and in full force and effect. No waiver or consent by
the Administrative Agent or the Lender under the Loan Agreement or any other
Loan Document is granted or intended except as expressly set forth herein,
and the Administrative Agent and the Lender expressly reserve the right to
require strict compliance in all other respects (whether or not in connection
with any Requests for Advance). Except as set forth herein, the amendments
agreed to herein shall not constitute a modification of the Loan Agreement or
any of the other Loan Documents, or a course of dealing with the
Administrative Agent and the Lender at variance with the Loan Agreement or
any of the other Loan Documents, such as to require further notice by the
Administrative Agent or the Lender to require strict compliance with the
terms of the Loan Agreement and the other Loan Documents in the future.
8. CONDITIONS PRECEDENT TO EFFECTIVENESS OF AMENDMENT. The
effectiveness of this Amendment is subject to:
(a) the execution and delivery of this Amendment by
the Borrower, the Administrative Agent and the Lender;
(b) all of the representations and warranties of the
Borrower under Section 9 hereof, which are made as of the date hereof, being
true and correct in all material respects; and
(c) receipt by the Administrative Agent of the
Pre-Saville CLEC Net Proceeds (as defined in that certain consent dated as of
even date herewith by and between the Borrower, the Administrative Agent and
the Lender).
- 6 -
<PAGE>
9. REPRESENTATIONS AND WARRANTIES. The Borrower hereby
represents and warrants that each representation and warranty set forth in
Article 4 of the Loan Agreement (other than those relating to the Agreement
Date or a specific prior date) is true and correct as of the date hereof in
all material respects.
10. LOAN DOCUMENTS. This Amendment shall be deemed to be a Loan
Document for all purposes under the Loan Agreement and the other Loan
Documents.
11. COUNTERPARTS. This Amendment may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all
such separate counterparts shall together constitute but one and the same
instrument.
12. GOVERNING LAW. This Amendment shall be construed in
accordance with and governed by the laws of the State of California.
13. SEVERABILITY. Any provision of this Amendment which is
prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof in that jurisdiction or affecting the validity or enforceability of
such provision in any other jurisdiction.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment or
caused it to be executed by their duly authorized officers, all as of the day
and year first above written.
BORROWER: GREAT WESTERN DIRECTORIES, INC.
By: //Richard A. O'Neal//
---------------------------------------
Name: Richard A. O'Neal
Title: President
ADMINISTRATIVE AGENT
AND LENDER: BANK OF AMERICA, N.A., as Administrative
Agent and as Lender
By: //George V. Hausler//
---------------------------------------
Name: George V. Hausler
Title: Vice President
<PAGE>
EXHIBIT A
TO SECOND AMENDMENT TO LOAN AGREEMENT
FORM OF PROMISSORY NOTE
- ---------------, ------ $----------------
FOR VALUE RECEIVED, [___________________], a [______________]
corporation (the "COMPANY") promises to pay to the order of GREAT WESTERN
DIRECTORIES, INC., a Texas corporation, (hereinafter "GREAT WESTERN", and
together with any holder hereof, the "HOLDERS") at 2400 Lakeview Drive,
Amarillo, Texas 79109 (or at such other place as the Holders may designate in
writing to the undersigned) on demand the principal amount of
_______________________________ DOLLARS ($______________), or so much thereof as
has been advanced from time to time and remains outstanding hereunder.
The principal amount of this Promissory Note shall be due and payable
upon demand of the Holders.
The undersigned shall pay interest on the principal amount outstanding
hereunder from time to time at the Base Rate as defined in that certain Loan
Agreement dated as of May 14, 1999, as amended by that certain First Amendment
to Loan Agreement dated as of October 21, 1999 and that certain Second Amendment
to Loan Agreement dated as of November 19, 1999 (as amended, modified, restated
and supplemented from time to time, the "LOAN AGREEMENT") among Great Western,
the Administrative Agent and the Lender (each as defined in the Loan Agreement).
Interest hereunder shall accrue and be due and payable at such time as the
principal amount of this Promissory Note shall be due.
Any payment of principal or, to the extent permitted by law, interest
which is not timely made shall bear interest at a per annum rate equal to the
interest rate for overdue Advances provided in the Loan Agreement.
It is contemplated that the principal sum evidenced by this Promissory
Note may be reduced from time to time and that, subject to the terms of the Loan
Agreement, additional advances may be made from time to time. Such additional
advances shall be evidenced by this Promissory Note and subject to its terms;
PROVIDED, HOWEVER, that the principal amount evidenced by this Promissory Note
shall not exceed the principal amount shown above.
In no event shall the amount of interest due or payable hereunder
exceed the maximum rate of interest allowed by applicable law, and in the event
any such payment is inadvertently paid by the undersigned or inadvertently
received by the Holders, then such excess sum shall be credited as a payment of
principal, unless the undersigned shall notify the Holders, in writing,
<PAGE>
that the undersigned elects to have such excess sum returned to it forthwith.
It is the express intent hereof that the undersigned not pay and the Holders
not receive, directly or indirectly, in any manner whatsoever, interest in
excess of that which may be lawfully paid by the undersigned under applicable
law.
All parties now or hereafter liable with respect to this Promissory
Note, whether the undersigned, any guarantor, endorser or any other person or
entity, hereby expressly waive presentation, demand of payment, protest, notice
of demand of payment, protest and notice of nonpayment, or any other notice of
any kind with respect hereto.
No delay or failure on the part of the Holders in the exercise of any
right or remedy hereunder, under any loan agreement or security agreement, or at
law or in equity, shall operate as a waiver thereof, and no single or partial
exercise by the Holders of any right or remedy hereunder, under any loan
agreement or security agreement, or at law or in equity shall preclude or stop
another or further exercise thereof or the exercise of any other right or
remedy.
Principal and interest on this Promissory Note shall be payable and
paid in lawful money of the United States of America.
Time is of the essence of this Promissory Note and, in case this
Promissory Note is collected by law or through an attorney at law, or under
advice therefrom, the undersigned agrees to pay all costs of collection,
including, without limitation, reasonable attorneys' fees.
The provisions of this Promissory Note shall be construed and
interpreted and all rights and obligations of the parties hereunder determined
in accordance with the laws of the State of California applicable to contracts
made and to be performed in the State of California.
Whenever possible, each provision of this Promissory Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Promissory Note shall be prohibited by or invalid
under such law, such provision shall be ineffective to the extent of such
provision or invalidity, without invalidating the remainder of such provision or
the remaining provisions of this Promissory Note.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
- 2 -
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Promissory Note to
be executed and delivered by and through its duly authorized representatives, as
of the day and year first above written.
[------------------------]
By:_________________________________
Name: ___________________________
Title:___________________________
Pay to the order of Bank of America, N.A., as Administrative Agent
and Lender, with recourse,
----------, ----.
GREAT WESTERN DIRECTORIES, INC., a Texas
corporation
By:_________________________________
Name:____________________________
Title:___________________________
- 3 -
<PAGE>
EXHIBIT 4(i)(f)
FIRST AMENDMENT TO PARENT GUARANTY
THIS FIRST AMENDMENT TO PARENT GUARANTY (the "AMENDMENT"), dated as of
the 19th day of November, 1999, by and among ADVANCED COMMUNICATIONS GROUP,
INC., a Delaware corporation (the "GUARANTOR"), and BANK OF AMERICA, N.A., as a
Lender and as Administrative Agent;
W I T N E S S E T H:
WHEREAS, the Great Western Directories, a Texas corporation and a
wholly-owned Subsidiary of the Guarantor (the "BORROWER"), the Lender and the
Administrative Agent are parties to that certain Loan Agreement dated as of May
14, 1999, as amended by that certain First Amendment to Loan Agreement dated as
of October 21, 1999 and that certain Second Amendment to Loan Agreement dated as
of November 19, 1999 (the "LOAN AGREEMENT"); and
WHEREAS, the Guarantor was required to execute and deliver the Parent
Guaranty pursuant to the terms of the Loan Agreement; and
WHEREAS, the Guarantor has requested, and the Lender has agreed,
subject to the conditions and on the terms set forth in this Amendment, to make
certain amendments to the Parent Guaranty, as provided in this Amendment;
NOW, THEREFORE, in consideration of the premises set forth above, the
covenants and agreements set forth in this Amendment, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree that all capitalized terms used in
this Amendment and not otherwise defined herein shall have the meanings ascribed
thereto in the Parent Guaranty, and further hereby agree as follows:
1. AMENDMENT TO SECTION 5. Section 5 of the Parent Guaranty,
COVENANTS, is hereby amended by deleting the existing subsections (f), (g), (i),
(j), (n), (o) and (q) thereof in their entirety and substituting in lieu thereof
the following new subsections (f), (g), (i), (j), (n), (o) and (q) in
appropriate order:
"(f) Within ninety (90) days immediately following (i) the
purchase by the Guarantor or any Affiliate Guarantor of any interests
in any new Subsidiary or (ii) the formation of any new Subsidiary by
the Guarantor or any Affiliate Guarantor, the Guarantor will, and will
cause each Affiliate Guarantor, as appropriate, to provide to the
Administrative Agent, for itself and on behalf of the Lenders, with
respect to each such new Subsidiary of such Person, a duly executed (A)
Affiliate Guaranty, (B) Affiliate Security Agreement, together with
appropriate Uniform Commercial Code financing
- 1 -
<PAGE>
statements, (C) Affiliate Pledge Agreement, together with
appropriate stock certificates and undated stock powers executed in
blank, and (D) loan certificate, substantially in the form of
EXHIBIT O attached to the Loan Agreement, together with appropriate
attachments thereto, each of which shall constitute both a Security
Document and a Loan Document for purposes of the Loan Agreement and
this Agreement."
"(g) The Guarantor will use the aggregate proceeds of any
loan received from the Borrower or the Borrower's Subsidiaries pursuant
to Sections 7.6 (b) of the Loan Agreement, directly or indirectly for
working capital needs of the Guarantor (including, without limitation,
the fees and expenses incurred in connection with the sale of the CLEC
Business or the acquisition of, or merger or consolidation with or
into, the YP Tel Entities, but expressly excluding any loans to,
investments in or other distributions to any Person that is not an
Affiliate Guarantor)."
"(i) [INTENTIONALLY OMMITTED]."
"(j) [INTENTIONALLY OMMITTED]."
"(n) The Guarantor shall not, and shall not permit any
Affiliate Guarantor to, at any time sell, transfer, lease, abandon or
otherwise dispose of any assets."
"(o) The Parent shall not, and shall not permit any
Affiliate Guarantor to, at any time liquidate or dissolve itself (or
suffer any liquidation or dissolution) or otherwise wind up, or enter
into any merger, other than (i) a merger or consolidation among the
Guarantor and one or more of Affiliate Guarantors, PROVIDED the
Guarantor is the surviving corporation, (ii) a merger between or among
two or more Affiliate Guarantors, (iii) in connection with an
Acquisition permitted hereunder effected by a merger in which the
Guarantor or, in a merger in which the Guarantor is not a party, an
Affiliate Guarantor is the surviving corporation or the surviving
corporation becomes an Affiliate Guarantor, (iv) in connection with the
acquisition of or merger or consolidation with one or more of the YP
Tel Entities by the Guarantor or (v) the dissolution of any
Non-Material Subsidiary."
"(q) The Guarantor shall not, and shall not permit any
Affiliate Guarantor to, directly or indirectly make any loan or
advance, or otherwise acquire for consideration evidences of
Indebtedness, capital stock or other securities of any Person or other
assets or property (other than assets or property in the ordinary
course of business), or make any Acquisition or Investment, except
that:
(i) the Guarantor and the Affiliate Guarantors
may, directly or through a brokerage account, (A) purchase
marketable, direct obligations of the United States of
America, its agencies and instrumentalities maturing within
three hundred sixty-five (365) days of the date of purchase,
(B) purchase commercial paper, money-market funds and business
savings accounts issued by corporations,
- 2 -
<PAGE>
each of which shall have a combined net worth of at least
$100,000,000.00 and each of which conducts a substantial
part of its business in the United States of America,
maturing within two hundred seventy (270) days from the
date of the original issue thereof, and rated "P-2" or
better by Moody's Investors Service, Inc. or "A-2" or
better by Standard and Poor's Ratings Group, a division of
McGraw-Hill, Inc., and (C) purchase repurchase agreements,
bankers' acceptances, and domestic and Eurodollar
certificates of deposit maturing within three hundred
sixty-five (365) days of the date of purchase which are
issued by, or time deposits maintained with, a United
States national or state bank the deposits of which are
insured by the Federal Deposit Insurance Corporation or the
Federal Savings and Loan Insurance Corporation and having
capital, surplus and undivided profits totaling more than
$100,000,000.00 and rated "A" or better by Moody's
Investors Service, Inc. or Standard and Poor's Ratings
Group, a division of McGraw-Hill, Inc.; and
(ii) so long as no Default or Event of Default
then exists or would be caused thereby, the Guarantor or any
Affiliate Guarantor may acquire any or all of the YP Tel
Entities."
2. NO OTHER AMENDMENT OR CONSENT. Except for the amendments set
forth above, the text of the Parent Guaranty and all other Loan Documents shall
remain unchanged and in full force and effect. No waiver or consent by the
Administrative Agent or the Lender under the Parent Guaranty or any other Loan
Document is granted or intended except as expressly set forth herein, and the
Administrative Agent and the Lenders expressly reserve the right to require
strict compliance in all other respects (whether or not in connection with any
Requests for Advance). Except as set forth herein, the amendments agreed to
herein shall not constitute a modification of the Parent Guaranty or any of the
other Loan Documents, or a course of dealing with the Administrative Agent and
the Lenders at variance with the Parent Guaranty or any of the other Loan
Documents, such as to require further notice by the Administrative Agent or the
Lender to require strict compliance with the terms of the Parent Guaranty and
the other Loan Documents in the future.
3. CONDITIONS PRECEDENT TO EFFECTIVENESS OF AMENDMENT. The
effectiveness of this Amendment is subject to:
(a) the execution and delivery of this Amendment by the
Borrower, the Administrative Agent and the Lender;
(b) all of the representations and warranties of the
Parent under Section 4 hereof, which are made as of the date hereof, being true
and correct in all material respects; and
- 3 -
<PAGE>
(c) receipt by the Administrative Agent of the
Pre-Saville CLEC Net Proceeds (as defined in that certain consent dated as of
the even date herewith by and between the Borrower, the Administrative Agent and
the Lender).
4. REPRESENTATIONS AND WARRANTIES. The Parent hereby represents
and warrants that each representation and warranty set forth in Article 4 of the
Parent Guaranty (other than those relating to the Agreement Date or a specific
prior date) is true and correct as of the date hereof in all material respects.
5. LOAN DOCUMENTS. This Amendment shall be deemed to be a Loan
Document for all purposes under the Parent Guaranty and the other Loan
Documents.
6. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
separate counterparts shall together constitute but one and the same instrument.
7. GOVERNING LAW. This Amendment shall be construed in accordance
with and governed by the laws of the State of California.
8. SEVERABILITY. Any provision of this Amendment which is
prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof in that jurisdiction or affecting the validity or enforceability of such
provision in any other jurisdiction.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
- 4 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment or
caused it to be executed by their duly authorized officers, all as of the day
and year first above written.
PARENT: ADVANCED COMMUNICATIONS GROUP, INC.
By: //Michael A. Pruss//
---------------------------------------
Name: Michael A. Pruss
Title: Vice President and CFO
ADMINISTRATIVE AGENT
AND LENDER: BANK OF AMERICA, N.A., as Administrative
Agent and as Lender
By: //George V. Hausler//
---------------------------------------
Name: George V. Hausler
Title: Vice President
ADVANCED COMMUNICATIONS GROUP, INC.
FIRST AMENDMENT TO PARENT GUARANTY
Signature Page
<PAGE>
EXHIBIT 4(i)(h)
FIRST AMENDMENT
TO
PARENT PLEDGE AGREEMENT
THIS FIRST AMENDMENT TO PARENT PLEDGE AGREEMENT (this "AMENDMENT") is
made and entered into this 30th day of June, 1999 by and between ADVANCED
COMMUNICATIONS GROUP, INC., a Delaware corporation (the "PLEDGOR"), and BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as administrative agent (the
"ADMINISTRATIVE AGENT") for itself and on behalf of the Lenders (as defined in
the Loan Agreement defined below).
W I T N E S S E T H:
WHEREAS, pursuant to that certain Loan Agreement dated as of May 14,
1999 (as amended, modified, supplemented or restated from time to time, the
"LOAN AGREEMENT") among Great Western Directories, Inc. (the "BORROWER"), the
Lenders and the Administrative Agent, the Pledgor and the Administrative Agent
entered into that certain Parent Pledge Agreement dated as of May 14, 1999 (the
"PARENT PLEDGE AGREEMENT"); and
WHEREAS, the Parent and the Administrative Agent, for itself and on
behalf of the Lenders, wish to amend the Parent Pledge Agreement to revise
Schedule 1 attached thereto;
NOW, THEREFORE, for and in consideration of the above premises and the
mutual covenants and agreements contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree that all capitalized terms used herein without definition
shall have the meanings ascribed to such terms in the Loan Agreement and further
agree as follows:
1. AMENDMENT TO SCHEDULE 1. Schedule 1 to the Parent Pledge
Agreement, Description of Ownership Interests Owned by Pledgor, is hereby
amended by deleting the existing Schedule 1 in its entirety and by substituting
SCHEDULE 1 (AMENDED) attached hereto in lieu thereof.
2. NO OTHER AMENDMENT OR WAIVER. Except for the amendment set
forth above, the text of the Parent Pledge Agreement shall remain unchanged and
in full force and effect. No waiver by the Administrative Agent under the Parent
Pledge Agreement is granted or intended, except as expressly set forth herein,
and the Administrative Agent, for itself and on behalf of the Lenders, expressly
reserves the right to require strict compliance in all other respects (whether
or not in connection with any Requests for Advance). Except as set forth herein,
the amendment agreed to herein shall not constitute a modification of the Parent
Pledge Agreement or any of the other Loan Documents, or a course of dealing with
the Administrative Agent and the Lenders at
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variance with the Loan Agreement, the Parent Pledge Agreement or any of the
other Loan Documents, such as to require further notice by the Administrative
Agent and the Lenders to require strict compliance with the terms of the Loan
Agreement, the Parent Pledge Agreement and the other Loan Documents in the
future.
3. REPRESENTATIONS AND WARRANTIES. The Borrower hereby
represents and warrants in favor of the Administrative Agent and each Lender
that the representations and warranties contained in Section 4.1 of the Loan
Agreement, in the Parent Pledge Agreement and in the other Loan Documents
remain true and correct as of the date hereof, both before and after giving
effect to this Amendment, except to the extent previously fulfilled in
accordance with the terms of the Loan Agreement, the Parent Pledge Agreement
or such other Loan Document, as applicable, or to the extent relating
specifically to the Agreement Date. No Default now exists or will be caused
hereby.
4. CONDITION PRECEDENT. The effectiveness of this Amendment is
subject to the receipt by the Administrative Agent of counterparts hereof
executed by the Administrative Agent and the Borrower and of all documents,
instruments, consents or items which the Administrative Agent shall deem
appropriate in connection herewith.
5. LOAN DOCUMENTS. This document shall be deemed to be a Loan
Document for all purposes under the Loan Agreement and the other Loan
Documents.
6. COUNTERPARTS. This Amendment may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all
such separate counterparts shall together constitute but one and the same
instrument.
7. GOVERNING LAW. This Amendment shall be construed in
accordance with and governed by the laws of the State of California.
9. SEVERABILITY. Any provision of this Amendment which is
prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof in that jurisdiction or affecting the validity or enforceability of
such provision in any other jurisdiction.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned have hereunto set their hands by
and through their duly authorized signatories, as of the day and year first
above written.
PLEDGOR: ADVANCED COMMUNICATIONS GROUP, INC.
By: //William H. Zimmer, III//
-----------------------------------------
Name: William H. Zimmer, III
Title: Authorized Signatory
ADMINISTRATIVE AGENT: BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Administrative Agent
By: //George V. Hausler//
-----------------------------------------
Name: George V. Hausler
Title: Vice President
GREAT WESTERN DIRECTORIES, INC.
FIRST AMENDMENT TO PARENT PLEDGE AGREEMENT
Signature Page
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SCHEDULE 1 (AMENDED)
DESCRIPTION OF OWNERSHIP INTERESTS OWNED BY PLEDGOR
100% of capital stock of each of:
Great Western Directories, Inc.;
FirsTel, Inc.;
Feist Long Distance Service, Inc.;
Valu-Line of Longview, Inc.
and
Telecom Resources, Inc.
<PAGE>
EXHIBIT 4(i)(j)
FORM OF EXCHANGE AND VOTING TRUST AGREEMENT
AMONG
ADVANCED COMMUNICATIONS GROUP, INC.
AND
ACG HOLDING COMPANY
AND
ACG EXCHANGE [COMPANY]
AND
CERTAIN HOLDERS OF YPTEL CORPORATION SHARES
AS LISTED ON SCHEDULE A
AND
THE J. L. R. FAMILY TRUST AND THE PAISLEY FAMILY TRUST
AND
________________________________ AS TRUSTEE
___ , 2000
<PAGE>
INDEX
ARTICLE 1 DEFINITIONS AND INTERPRETATION...............................2
1.1 DEFINITIONS......................................................2
1.2 INTERPRETATION NOT AFFECTED BY HEADINGS, ETC.....................6
1.3 NUMBER, GENDER, ETC..............................................6
1.4 DATE FOR ANY ACTION..............................................6
ARTICLE 2 PURPOSE OF AGREEMENT.........................................6
ARTICLE 3 VOTING SHARE.................................................6
3.1 ISSUANCE AND OWNERSHIP OF THE VOTING SHARE.......................6
3.2 LEGENDED SHARE CERTIFICATES......................................7
3.3 SAFE KEEPING OF CERTIFICATE......................................7
ARTICLE 4 EXERCISE OF VOTING RIGHTS....................................7
4.1 VOTING RIGHTS....................................................7
4.2 VOTING RIGHTS (CONTINUED)........................................8
4.3 NUMBER OF VOTES..................................................8
4.4 MAILINGS TO SHAREHOLDERS.........................................8
4.5 COPIES OF STOCKHOLDER INFORMATION...............................10
4.6 OTHER MATERIALS.................................................10
4.7 LIST OF PERSONS ENTITLED TO VOTE................................10
4.8 ENTITLEMENT TO DIRECT VOTES.....................................11
4.9 VOTING BY TRUSTEE, AND ATTENDANCE OF TRUSTEE REPRESENTATIVE,
AT MEETING ...................................................11
4.10 DISTRIBUTION OF WRITTEN MATERIALS..............................12
4.11 TERMINATION OF VOTING RIGHTS...................................12
ARTICLE 5 EXCHANGE RIGHT, EXCHANGE PUT RIGHT AND AUTOMATIC
EXCHANGE RIGHT ....................................................12
5.1 GRANT AND OWNERSHIP OF THE EXCHANGE PUT RIGHT AND
EXCHANGE RIGHT ...............................................12
5.2 GRANT AND OWNERSHIP OF THE AUTOMATIC EXCHANGE RIGHT.............13
5.3 LEGENDED SHARE CERTIFICATES.....................................13
5.4 GENERAL EXERCISE OF EXCHANGE PUT RIGHT, THE EXCHANGE RIGHT AND
THE AUTOMATIC EXCHANGE RIGHT..................................13
5.5 PURCHASE PRICE..................................................13
5.6 EXERCISE INSTRUCTIONS FOR EXCHANGE PUT RIGHT AND EXCHANGE RIGHT.14
5.7 DELIVERY OF EXCHANGEABLE SHARE CONSIDERATION; EFFECT OF
EXERCISE .....................................................15
5.8 EXERCISE OF EXCHANGE RIGHT SUBSEQUENT TO RETRACTION.............16
5.9 STAMP OR OTHER TRANSFER TAXES...................................17
5.10 NOTICE OF INSOLVENCY EVENT.....................................17
5.11 QUALIFICATION OF PARENT COMMON STOCK...........................17
5.12 PARENT COMMON STOCK............................................18
5.13 AUTOMATIC EXCHANGE ON LIQUIDATION OF PARENT....................18
5.14 WITHHOLDING RIGHTS.............................................20
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ARTICLE 6 CERTAIN RIGHTS AND OBLIGATIONS OF NEWCO I TO ACQUIRE
EXCHANGEABLE SHARES.......................................20
6.1 NEWCO I LIQUIDATION CALL RIGHT..................................20
6.2 NEWCO I REDEMPTION CALL RIGHT...................................22
6.3 NEWCO I RETRACTION CALL RIGHT...................................23
ARTICLE 7 MISCELLANEOUS...............................................24
7.1 RESTRICTIONS ON ISSUANCE OF PARENT SPECIAL VOTING STOCK.........24
7.2 TRANSFER AGENT..................................................25
7.3 RESTRICTIONS ON TRANSFER OF CLASS A SPECIAL SHARES..............25
7.4 NON-REGISTRATION OF EXCHANGEABLE SHARES.........................26
7.5 OVERRIDING RIGHT AND OBLIGATION.................................26
ARTICLE 8 CONCERNING THE TRUSTEE......................................27
8.1 POWERS AND DUTIES OF THE TRUSTEE................................27
8.2 NO CONFLICT OF INTEREST.........................................27
8.3 DEALINGS WITH TRANSFER AGENTS, REGISTRARS, ETC..................28
8.4 BOOKS AND RECORDS...............................................28
8.5 INCOME TAX RETURNS AND REPORTS..................................28
8.6 INDEMNIFICATION PRIOR TO CERTAIN ACTIONS BY TRUSTEE.............29
8.7 ACTIONS BY HOLDERS..............................................29
8.8 RELIANCE UPON DECLARATIONS......................................29
8.9 EVIDENCE AND AUTHORITY TO TRUSTEE...............................29
8.10 EXPERTS, ADVISERS AND AGENTS...................................30
8.11 INVESTMENT OF MONEYS HELD BY TRUSTEE...........................31
8.12 TRUSTEE NOT REQUIRED TO GIVE SECURITY..........................31
8.13 TRUSTEE NOT BOUND TO ACT ON REQUEST............................31
8.14 AUTHORITY TO CARRY ON BUSINESS.................................31
8.15 CONFLICTING CLAIMS.............................................32
8.16 MISCELLANEOUS TRUSTEE PROVISIONS...............................32
8.17 ACCEPTANCE OF TRUST............................................33
ARTICLE 9 COMPENSATION................................................33
ARTICLE 10 INDEMNIFICATION AND LIMITATION OF LIABILITY................33
10.1 INDEMNIFICATION OF THE TRUSTEE.................................33
10.2 LIMITATION OF LIABILITY........................................34
ARTICLE 11 CHANGE OF TRUSTEE..........................................34
11.1 RESIGNATION....................................................34
11.2 REMOVAL........................................................35
11.3 SUCCESSOR TRUSTEE..............................................35
11.4 NOTICE OF SUCCESSOR TRUSTEE....................................35
ARTICLE 12 PARENT SUCCESSORS..........................................35
12.1 CERTAIN REQUIREMENTS IN RESPECT OF COMBINATION, ETC............35
12.2 VESTING OF POWERS IN PARENT SUCCESSOR..........................36
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12.3 SUBSIDIARIES...................................................36
ARTICLE 13 AMENDMENTS AND SUPPLEMENTAL AGREEMENTS.....................37
13.1 AMENDMENTS, MODIFICATIONS, ETC.................................37
13.2 MINISTERIAL AMENDMENTS.........................................37
13.3 MEETING TO CONSIDER AMENDMENTS.................................37
13.4 CHANGES IN CAPITAL OF PARENT OR NEWCO II.......................38
13.5 EXECUTION OF SUPPLEMENTAL AGREEMENTS...........................38
ARTICLE 14 TERMINATION AND AUTOMATIC REDEMPTION.......................39
14.1 PROVISIONS FOR AUTOMATIC REDEMPTION............................39
14.2 TERM...........................................................39
14.3 SURVIVAL OF CERTAIN PROVISIONS.................................39
ARTICLE 15 GENERAL....................................................39
15.1 SEVERABILITY...................................................39
15.2 ENUREMENT......................................................39
15.3 NOTICES TO PARTIES.............................................40
15.4 NOTICE TO NEWCO II, NEWCO I, AND PARENT........................43
15.5 NOTICE TO HOLDERS..............................................44
15.6 COUNTERPARTS...................................................44
15.7 CONSTRUCTION...................................................44
15.8 JURISDICTION...................................................44
15.9 ATTORNMENT.....................................................44
15.10 EFFECTIVENESS OF AGREEMENT....................................44
<PAGE>
EXCHANGE AND VOTING TRUST AGREEMENT
THIS EXCHANGE AND VOTING TRUST AGREEMENT is entered into as of __, 1999,
by and among Advanced Communications Group, Inc., a corporation existing
under laws of Delaware ("PARENT"), ACG Holding Company, a Nova Scotia
unlimited liability company and a wholly owned subsidiary of Parent ("NEWCO
I"), ACG Exchange [COMPANY], a Nova Scotia unlimited liability company and a
subsidiary of Newco I ("NEWCO II"), certain holders of YPtel Corporation
shares as set out in Schedule A hereto, The J.L.R. Family Trust, The Paisley
Family Trust and ________________________________, a trust company
incorporated under the laws of Canada ("TRUSTEE").
WHEREAS, pursuant to an Agreement dated as of the 3rd day of June,
1999, as amended and restated October _______, 1999 (as the same may be
further amended from time to time, the "YPTEL AGREEMENT"), by and among
Parent, YPtel Corporation, a corporation incorporated under the laws of
Canada (to be continued under the laws of Nova Scotia) (THE "COMPANY"), the
shareholders of the Company listed on Exhibit A attached thereto, Cold Trust,
Global Investment Trust, Freezer Trust, Storage Trust, Directory Trust and
Publisher Trust (collectively the "BARBADIAN TRUSTS"), The J.L.R. Family
Trust, The Paisley Family Trust, Edward Truant, and Douglas G. McIntyre
(COLLECTIVELY, THE "ICL PRINCIPALS") and Imperial Capital Limited, a
corporation incorporated under the laws of Ontario ("ICL"), the parties
agreed that on the Closing Date (as defined in the YPtel Agreement) the
parties hereto would execute and deliver the within Exchange and Voting Trust
Agreement;
WHEREAS, pursuant to the YPtel Agreement, the shareholders of the
Company who are parties hereto will exchange certain of the issued and
outstanding common shares of the Company owned by them for all the initially
issued and outstanding Class A Special Shares of Newco II;
WHEREAS, Appendix A to the Articles of Association of Newco II, as
amended, sets forth, INTER ALIA, the rights, privileges, restrictions and
conditions attaching to the Class A Special Shares of Newco II (as the same
may be amended from time to time, the "EXCHANGEABLE SHARE PROVISIONS");
WHEREAS, Parent is to provide voting rights in Parent to each holder
(other than Parent or any Subsidiary of Parent) from time to time of
Exchangeable Shares, such voting rights to be equivalent to the voting rights
per share of Parent Common Stock for which such Exchangeable Shares are
exchangeable;
WHEREAS, Parent, Newco I and Newco II are to grant to and in favor of
the holders (other than Parent or any Subsidiary of Parent) from time to time
of Exchangeable Shares certain rights, in the circumstances set forth herein,
to require Parent and/or Newco I and/or Newco II to purchase from each such
holder all or any part of the Exchangeable Shares held by the holder;
<PAGE>
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WHEREAS, the parties desire to make appropriate provision and to
establish a procedure whereby voting rights in Parent shall be exercisable by
holders (other than Parent or any Subsidiary of Parent) from time to time of
Exchangeable Shares by and through the Trustee, which will hold legal title
to one share of Class B Preferred Stock of Parent, par value US$0.0001 (the
"PARENT SPECIAL VOTING STOCK") to which voting rights attach for the benefit
of such holders; and
WHEREAS, these recitals and any statements of fact in this Agreement are
made by Parent, Newco I, Newco II and the Holders and not by the Trustee.
NOW, THEREFORE, in consideration of the respective covenants and
agreements provided in this Agreement and for other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged),
the parties agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS. In this Agreement, the following terms shall have
the following meanings:
"ACG CONTROL TRANSACTION" means the completion of a Proposed Sale as
provided in Section 2.8 of the Support Agreement.
"AGGREGATE EQUIVALENT VOTING AMOUNT" means, with respect to any matter,
proposition or question on which holders of Parent Common Stock are entitled
to vote, consent or otherwise act, the product of (a) the number of shares of
Parent Common Stock for which Exchangeable Shares then issued and outstanding
and held by Holders (as hereinafter defined) are exchangeable multiplied by
(b) the number of votes to which a holder of one share of Parent Common Stock
is entitled with respect to such matter, proposition or question.
"AGREEMENT" means the within agreement, as the same may be amended from
time to time.
"APPLICABLE LAWS" has the meaning provided in Section 5.11 hereof.
"ARTICLES OF ASSOCIATION" means the Articles of Association of Newco II
as amended from time to time.
"AUTOMATIC EXCHANGE RIGHT" means the benefit of the obligation of
Parent and Newco I to effect the automatic exchange of shares of Parent
Common Stock for Exchangeable Shares pursuant to Section 5.13 hereof.
"AUTOMATIC REDEMPTION DATE" has the meaning provided in the
Exchangeable Share Provisions.
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"BOARD OF DIRECTORS" means the board of directors of Newco II.
"BUSINESS DAY" has the meaning provided in the Exchangeable Share
Provisions;
"CLASS A SPECIAL SHARES" means the Class A Special Shares of Newco II.
"CLEC OPERATIONS" has the meaning provided in the YPtel Agreement.
"CLOSING DATE" has the meaning provided in the YPtel Agreement.
"EXCHANGE PUT DATE" has the meaning set forth in Section 5.7 hereof.
"EXCHANGE PUT RIGHT" has the meaning provided in Section 8.1(a) of the
Exchangeable Share Provisions.
"EXCHANGE RIGHT" has the meaning provided in Section 5.1 hereof.
"EXCHANGEABLE SHARE CONSIDERATION" has the meaning provided in the
Exchangeable Share Provisions.
"EXCHANGEABLE SHARE PROVISIONS" has the meaning provided in the
recitals hereto, as such Appendix A may be amended from time to time.
"EXCHANGEABLE SHARES" means the Class A Special Shares.
"HOLDER EQUIVALENT VOTE AMOUNT" means, with respect to any matter,
proposition or question on which holders of Parent Common Stock are entitled
to vote, consent or otherwise act, the product of (a) the number of shares of
Parent Common Stock for which Exchangeable Shares then issued and outstanding
and held by a Holder are exchangeable, multiplied by (b) the number of votes
to which a holder of one share of Parent Common Stock is entitled with
respect to such matter, proposition or question.
"HOLDER VOTES" has the meaning provided in Section 4.3 hereof.
"HOLDERS" means the registered holders from time to time of
Exchangeable Shares, other than Exchangeable Shares beneficially owned by
Parent or its Subsidiaries.
"INSOLVENCY EVENT" means the institution by Newco II of any proceeding
to be adjudicated a bankrupt or insolvent or to be dissolved or wound-up, or
the consent of Newco II to the institution of bankruptcy, insolvency,
dissolution or winding-up proceedings against it, or the filing of a
petition, answer or consent seeking dissolution or winding-up under any
bankruptcy, insolvency or analogous laws, including without limitation the
Companies Creditors' Arrangement Act (Canada) and the Bankruptcy and
Insolvency Act (Canada), and the failure by
<PAGE>
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Newco II to contest in good faith any such proceedings commenced in respect
of Newco II within 30 days of becoming aware thereof, or the consent by Newco
II to the filing of any such petition or to the appointment of a receiver, or
the making by Newco II of a general assignment for the benefit of creditors,
or the admission in writing by Newco II of its inability to pay its debts
generally as they become due, or Newco II not being permitted, pursuant to
liquidity or solvency requirements of applicable law, to redeem any Retracted
Shares pursuant to Section 6.6 of the Exchangeable Share Provisions unless
Newco I shall have exercised its Retraction Call Right.
"LIQUIDATION CALL PURCHASE PRICE" has the meaning set forth in Section
6.1 hereof.
"LIQUIDATION CALL RIGHT" has the meaning provided in Section 6.1 hereof.
"LIQUIDATION EVENT" has the meaning provided in Subsection 5.13(b)
hereof.
"LIQUIDATION EVENT EFFECTIVE TIME" has the meaning provided in
Subsection 5.13(c) hereof.
"LIST" has the meaning provided in Section 4.7 hereof.
"MINIMUM NUMBER" means the lesser of (a) the number of Exchangeable
Shares which are exchangeable for 1,000 shares of Parent Common Stock or more
(b) all Exchangeable Shares then registered in the name of the applicable
Holder if exchangeable for less than 1,000 shares of Parent Common Stock.
"NEWCO I RETRACTION CALL NOTICE" has the meaning provided in Section
6.3 hereof.
"OFFICER'S CERTIFICATE" means, with respect to Parent, a certificate
signed by the Chief Executive Officer or Chief Financial Officer of Parent
and with respect to Newco I or Newco II, a certificate signed by the
President or Treasurer of Newco I or Newco II, as applicable.
"PARENT COMMON STOCK" means a share of common stock of Parent, par
value US$0.0001.
"PARENT CONSENT" has the meaning provided in Section 4.3 hereof.
"PARENT MEETING" has the meaning provided in Section 4.3 hereof.
"PARENT SPECIAL VOTING STOCK" has the meaning provided in the
recitals hereto.
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"PARENT SUCCESSOR" has the meaning provided in subsection 12.1(a)
hereof.
"PERSON" includes an individual, body corporate, partnership, company,
unincorporated syndicate or organization, trust, trustee, executor,
administrator and other legal representative.
"PROPOSED SALE" has the meaning provided in Section 2.8 of the Support
Agreement.
"PURCHASE PRICE" has the meaning provided in Section 6.3 hereof.
"REDEMPTION CALL PURCHASE PRICE" has the meaning provided in Section
6.2 hereof.
"REDEMPTION CALL RIGHT" has the meaning provided in Section 6.2 hereof.
"REDEMPTION DATE" shall have the meaning provided in the Exchangeable
Share Provisions.
"RETRACTED SHARES" has the meaning provided in Section 6.1 of the
Exchangeable Share Provisions and Section 5.8 hereof.
"RETRACTION CALL RIGHT" has the meaning provided in Section 6.1 of the
Exchangeable Share Provisions and Section 6.3 hereof.
"RETRACTION DATE" shall have the meaning provided in Section 6.1 of the
Exchangeable Share Provisions.
"RETRACTION REQUEST" has the meaning provided in Section 6.1 of the
Exchangeable Share Provisions.
"SUBSIDIARY" has the meaning provided in the Exchangeable Share
Provisions.
"SUPPORT AGREEMENT" means that certain Support Agreement made as of
even date hereof by and between Parent, Newco I, Newco II, and the Company
shareholders party thereto, as such Support Agreement may be amended from
time to time.
"TRANSFER AGENT" means the duly appointed registrar and transfer agent
for the time being of the Class A Special Shares.
"TRANSFER AGENT OFFICE" means the office of the Transfer Agent that may
be specified from time to time by the Transfer Agent in connection with
presentation or surrender of certificates of Exchangeable Shares by holders
thereof and for other purposes.
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"TRUST" means the trust created by this Agreement with respect to the
Trust Estate.
"TRUST ESTATE" means the Voting Share.
"TRUSTEE" means ________________________________ and, subject to the
provisions of Article 11 hereof, includes any successor trustee or permitted
assigns.
"VOTING RIGHTS" means the voting rights attached to the Voting Share.
"VOTING SHARE" means the one share of Parent Special Voting Stock
issued by Parent to and deposited with the Trustee, which entitles the holder
of record to a number of votes at meetings of holders of Parent Common Stock
equal to the Aggregate Equivalent Voting Amount.
1.2 INTERPRETATION NOT AFFECTED BY HEADINGS, ETC. The division of
this Agreement into articles, sections and paragraphs and the insertion of
headings are for convenience of reference only and shall not affect the
construction or interpretation of this Agreement. Unless otherwise indicated,
all references to an "Article" or "Section" followed by a number and/or a
letter refer to the specified Article or Section of this Agreement. The terms
"this Agreement", "hereof", "herein" and "hereunder" and similar expressions
refer to this Agreement and not to any particular Article, Section or other
portion hereof and include any agreement or instrument supplementary or
ancillary hereto.
1.3 NUMBER, GENDER, ETC. Words importing the singular number only
shall include the plural and vice versa. Words importing the use of any
gender shall include all genders.
1.4 DATE FOR ANY ACTION. If any date on which any action is required
to be taken under this Agreement is not a Business Day, such action shall be
required to be taken on the next succeeding Business Day.
ARTICLE 2
PURPOSE OF AGREEMENT
2.1 PURPOSE. The purpose of this Agreement is (i) to create the Trust
for the benefit of the Holders with respect to the Voting Share; and (ii) to
provide certain rights to the Holders of Exchangeable Shares, Newco I and
Parent, as herein provided.
ARTICLE 3
VOTING SHARE
3.1 ISSUANCE AND OWNERSHIP OF THE VOTING SHARE. Parent hereby issues
to and deposits with the Trustee, the Voting Share to be hereafter held of
record by the Trustee as trustee for and on behalf of, and for the use and
benefit
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of, the Holders and in accordance with the provisions of this Agreement.
Parent hereby acknowledges receipt from the Trustee as trustee for and on
behalf of the Holders of good and valuable consideration (and the adequacy
thereof) for the issuance of the Voting Share by Parent to the Trustee.
During the term of the Trust and subject to the terms and conditions of this
Agreement, the Trustee shall possess and be vested with full legal ownership
of the Voting Share and shall be entitled to exercise the voting rights and
all of the other rights and powers of an owner with respect to the Voting
Share, provided that the Trustee shall:
(a) hold the Voting Share and the legal title thereto as trustee solely
for the use and benefit of the Holders in accordance with the
provisions of this Agreement; and
(b) except as specifically authorized by this Agreement, have no power
or authority to sell, transfer, vote or otherwise deal in or with
the Voting Share, and the Voting Share shall not be used or disposed
of by the Trustee for any purpose other than the purposes for which
this Trust is created pursuant to this Agreement.
3.2 LEGENDED SHARE CERTIFICATES. Newco II will cause each certificate
representing Exchangeable Shares to bear an appropriate legend notifying the
Holders of their right to instruct the Trustee with respect to the exercise of
the Voting Rights with respect to the Exchangeable Shares held by the Holders.
3.3 SAFE KEEPING OF CERTIFICATE. The certificate representing the Voting
Share shall at all times be held in safekeeping by the Trustee.
ARTICLE 4
EXERCISE OF VOTING RIGHTS
4.1 VOTING RIGHTS. The Trustee, as the holder of record of the Voting
Share, shall be entitled to all of the Voting Rights, including the right to
consent to or to vote in person or by proxy the Voting Share, on any matter,
question or proposition whatsoever that may properly come before the
stockholders of Parent at a Parent Meeting or in connection with a Parent
Consent. The Voting Rights shall be and remain vested in and exercised by the
Trustee. Subject to Section 8.15 hereof:
(a) the Trustee shall exercise the Voting Rights only on the basis of
instructions received pursuant to this Article 4 from Holders
entitled to instruct the Trustee as to the voting thereof at the
time at which a Parent Consent is sought or a Parent Meeting is
held; and
(b) to the extent that no instructions are received from a Holder with
respect to the Voting Rights to which such Holder is entitled, the
Trustee shall not exercise or permit the exercise of such Holder's
Voting Rights.
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4.2 VOTING RIGHTS (CONTINUED). The holder of the Voting Share is
entitled to vote with the holders of Parent Common Stock as a single class in
accordance with the terms of the Parent Special Voting Stock. When the holder
of the Voting Share is entitled to vote as a separate class in accordance
with the terms of the Parent Special Voting Stock, the Holders may instruct
the Trustee as to the exercise of the votes attached to the Voting Share in
such class or series vote. The Trustee acknowledges that, in accordance with
the terms of the Parent Special Voting Stock, the holder of the Voting Share
and the holders of shares of Parent Common Stock shall vote or consent (or
withhold consent) as a single class in respect of each matter, question or
proposition to be voted on at a Parent Meeting or with respect to which
consent is sought in connection with a Parent Consent, it being further
acknowledged that, in certain circumstances, the holder of the Voting Share
shall, in addition, have a further vote as a separate class or series in
respect of any particular matter, question or proposition.
4.3 NUMBER OF VOTES. With respect to all meetings of stockholders of
Parent at which holders of shares of Parent Common Stock are entitled to vote
(a "PARENT MEETING") and with respect to all written consents sought by
Parent from its stockholders including the holders of shares of Parent Common
Stock (a "PARENT CONSENT"), each Holder shall be entitled to instruct the
Trustee to cast and exercise, in the manner instructed, a number of votes
equal to the Holder Equivalent Vote Amount with respect to the Exchangeable
Shares owned of record by such Holder on the record date established by
Parent or by applicable law for such Parent Meeting or Parent Consent, as the
case may be, (the "HOLDER VOTES") in respect of each matter, question or
proposition to be voted on at such Parent Meeting or with respect to which
consent is sought in connection with such Parent Consent.
4.4 MAILINGS TO SHAREHOLDERS. With respect to each Parent Meeting and
Parent Consent, the Trustee will mail or cause to be mailed (or otherwise
communicate in the same manner as Parent utilizes in communications to
holders of Parent Common Stock) to each of the Holders named in the List on
the same day as the initial mailing or notice (or other communication) with
respect thereto is commenced or given by Parent to its stockholders:
(a) a copy of such notice, together with any related materials to be
provided to stockholders of Parent;
(b) a statement that such Holder is entitled to instruct the Trustee as
to the exercise of the Holder Votes with respect to such Parent
Meeting or Parent Consent, as the case may be, or pursuant to
Section 4.8 hereof, to attend such Parent Meeting and to exercise
personally the Holder Votes thereat;
(c) a statement as to the manner in which such instructions may be given
to the Trustee, including an express indication that instructions
may be given to the Trustee to give:
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(i) a proxy to such Holder or his designee to exercise personally
the Holder Votes; or
(ii) a proxy to a designated agent or other representative of the
management of Parent to exercise such Holder Votes;
(d) a statement that if no such instructions are received from the
Holder, the Holder Votes to which such Holder is entitled are to be
voted in the same manner as the majority of the other Holder Votes
are voted;
(e) a form of direction whereby the Holder may so direct and instruct
the Trustee as contemplated herein; and
(f) a statement of the time and date by which such instructions must be
received by the Trustee in order to be binding upon it, which in the
case of a Parent Meeting shall not be earlier than the close of
business on the second Business Day prior to such meeting, and the
method for revoking or amending such instructions.
The materials referred to above are to be provided by Parent to the
Trustee, but to the extent feasible, draft forms of items (b) through (f)
shall be submitted to Trustee in advance for review and comment by the
Trustee.
For the purpose of determining Holder Votes to which a Holder is
entitled in respect of any such Parent Meeting or Parent Consent, the number
of Exchangeable Shares owned of record by the Holder shall be determined at
the close of business on the record date established by Parent or by
applicable law for purposes of determining stockholders entitled to vote at
such Parent Meeting or to give written consent in connection with such Parent
Consent. Parent will notify the Trustee of any decision of the board of
directors of Parent with respect to the calling of any such Parent Meeting or
the seeking of any such Parent Consent and shall provide all necessary
information and materials to the Trustee in each case promptly and in any
event in sufficient time to enable the Trustee to perform its obligations
contemplated by this Section 4.4.
4.5 COPIES OF STOCKHOLDER INFORMATION. Parent will deliver to the
Trustee copies of all proxy materials, (including notices of Parent Meetings,
but excluding proxies to vote shares of Parent Common Stock), information
statements, reports (including without limitation all interim and annual
financial statements) and other written communications that are to be
distributed from time to time to holders of Parent Common Stock in sufficient
quantities and in sufficient time so as to enable the Trustee to send those
materials to each Holder at or about the same time as such materials are sent to
holders of Parent Common Stock. The Trustee will mail or otherwise send to each
Holder, at the expense of Parent, copies of all such materials (and all
materials specifically directed to the Holders or to the Trustee for the benefit
of the Holders by Parent)
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received by the Trustee from Parent at or about the same time as such
materials are first sent to holders of Parent Common Stock. The Trustee will
also make available for inspection by any Holder at the Trustee's principal
trust office in the City of Toronto all proxy materials, information
statements, reports and other written communications that are:
(a) received by the Trustee as the registered holder of the Parent
Special Voting Stock and made available by Parent generally to
holders of Parent Common Stock; or
(b) specifically directed to the Holders or to the Trustee for the
benefit of the Holders by Parent.
4.6 OTHER MATERIALS. As soon as practicable after receipt by Parent
or any stockholder of Parent (if such receipt is known by Parent) of any
material sent or given generally to the holders of Parent Common Stock by or
on behalf of a third party, including without limitation dissident proxy and
information circulars (and related information and material) and tender and
exchange offer circulars (and related information and material), Parent shall
obtain and deliver to the Trustee copies thereof in sufficient quantities so
as to enable the Trustee to forward such material (unless the same has been
provided directly to Holders by such third party) to each Holder as soon as
possible thereafter. As soon as practicable after receipt thereof, the
Trustee will mail or otherwise send to each Holder, at the expense of Parent,
copies of all such materials received by the Trustee from Parent. The Trustee
will also make copies of all such materials available for inspection by any
Holder at the Trustee's principal trust office in the City of Toronto.
4.7 LIST OF PERSONS ENTITLED TO VOTE. Newco II shall, (a) prior to
each annual and special Parent Meeting or the seeking of any Parent Consent
and (b) forthwith upon each request made at any time by the Trustee in
writing, prepare or cause to be prepared a list (a "LIST") of the names and
addresses of the Holders arranged in alphabetical order and showing the
number of Exchangeable Shares held of record by each such Holder, in each
case at the close of business on the date specified by the Trustee in such
request or, in the case of a List prepared in connection with a Parent
Meeting or a Parent Consent, at the close of business on the record date
established by Parent or pursuant to applicable law for determining the
holders of Parent Common Stock entitled to receive notice of and/or to vote
at such Parent Meeting or to give consent in connection with such Parent
Consent. Each such List shall be delivered to the Trustee promptly after
receipt by Newco II of such request or the record date for such meeting or
seeking of consent, as the case may be, and in any event within sufficient
time as to enable the Trustee to perform its obligations under this
Agreement. Parent agrees to give Newco II written notice (with a copy to the
Trustee) of the calling of any Parent Meeting or the seeking of any Parent
Consent, together with the record dates therefor, sufficiently prior to the
date of the calling of such meeting or seeking of such consent so as to
enable Newco II
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to perform its obligations under this Section 4.7. Newco II shall cause the
Transfer Agent to prepare and deliver the List as contemplated hereunder and
to deliver copies thereof to Newco I, Parent and Trustee upon their request.
Parent agrees to provide a copy of the most current List prepared upon
request of a Holder of Exchangeable Shares from time to time.
4.8 ENTITLEMENT TO DIRECT VOTES. Any Holder named in a List prepared
in connection with any Parent Meeting or any Parent Consent will be entitled
(a) to instruct the Trustee in the manner described in Section 4.4 hereof
with respect to the exercise of the Holder Votes to which such Holder is
entitled or (b) to attend such meeting and personally to exercise thereat (or
to exercise with respect to any written consent), as the proxy of the
Trustee, the Holder Votes to which such Holder is entitled.
4.9 VOTING BY TRUSTEE, AND ATTENDANCE OF TRUSTEE REPRESENTATIVE, AT
MEETING.
(a) In connection with each Parent Meeting and Parent Consent, the
Trustee shall exercise, either in person or by proxy, in accordance with the
instructions received from a Holder pursuant to Section 4.4 hereof, the
Holder Votes as to which such Holder is entitled to direct the vote (or any
lesser number thereof as may be set forth in the instructions); provided,
however, that such written instructions are received by the Trustee from the
Holder prior to the time and date fixed by the Trustee for receipt of such
instructions in the notice given by the Trustee to the Holder pursuant to
Section 4.4 hereof.
(b) The Trustee shall cause a representative who is empowered by it
to sign and deliver, on behalf of the Trustee, proxies for Voting Rights to
attend each Parent Meeting. Upon submission by a Holder (or its designee) of
identification satisfactory to the Trustee's representative, and at the
Holder's request, such representative shall sign and deliver to such Holder
(or its designee) a proxy to exercise personally the Holder Votes as to which
such Holder is otherwise entitled hereunder to direct the vote, if such
Holder either:
(i) has not previously given the Trustee instructions pursuant to
Section 4.4 hereof in respect of such meeting, or
(ii) submits to the Trustee's representative written revocation of
any such previous instructions.
At such meeting, the Holder exercising such Holder Votes shall have the
same rights as the Trustee to speak at the meeting in respect of any matter,
question or proposition, to vote by way of ballot at the meeting in respect
of any matter, question or proposition, and to vote at such meeting by way of
a show of hands in respect of any matter, question or proposition. The
Trustee shall be reimbursed by Parent for any reasonable expenses incurred in
the course of attending or causing a representative to attend each Parent
Meeting.
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4.10 DISTRIBUTION OF WRITTEN MATERIALS. Any written materials to be
distributed by the Trustee to the Holders pursuant to this Agreement shall be
sent by mail (or otherwise communicated in the same manner as Parent utilizes
in communications to holders of Parent Common Stock, subject to the Trustee
being advised in writing of such method of communication and its ability to
provide such method) to each Holder at its address as shown on the books of
Newco II. Newco II (and Parent) shall provide or cause to be provided to the
Trustee for this purpose, on a timely basis and without charge or other
expense:
(a) a current List; and
(b) at the request of the Trustee, mailing labels to enable the Trustee
to carry out its duties under this Agreement.
4.11 TERMINATION OF VOTING RIGHTS. Except as otherwise provided herein
or in the Exchangeable Share Provisions, all of the rights of a Holder with
respect to the Holder Votes exercisable in respect of the Exchangeable Shares
held by such Holder, including the right to instruct the Trustee as to the
voting of or to vote personally such Holder Votes, shall be deemed to be
surrendered by the Holder and such Holder Votes and the Voting Rights
represented thereby shall cease immediately upon delivery of the Exchangeable
Share Consideration deliverable in exchange therefor by Parent, Newco I or
Newco II, upon the exercise by the Holder of the Exchange Put Right or the
Exchange Right or the occurrence of the automatic exchange of Exchangeable
Shares for shares of Parent Common Stock, as specified in Article 5 hereof,
or upon the retraction or redemption of Exchangeable Shares pursuant to
Article 6 or Article 7 of the Exchangeable Share Provisions, or upon the
effective date of the liquidation, dissolution or winding-up of Newco II or
any other distribution of the assets of Newco II among its shareholders for
the purpose of winding up its affairs pursuant to Article 5 of the
Exchangeable Share Provisions or upon the purchase of Exchangeable Shares
from the holder thereof by Newco I pursuant to the exercise by Newco I of the
Retraction Call Right, the Redemption Call Right or the Liquidation Call
Right.
ARTICLE 5
EXCHANGE RIGHT, EXCHANGE PUT RIGHT AND AUTOMATIC EXCHANGE RIGHT
5.1 GRANT AND OWNERSHIP OF THE EXCHANGE PUT RIGHT AND EXCHANGE RIGHT.
Parent and Newco I hereby jointly and severally grant to each Holder:
(a) the Exchange Put Right; and
(b) the right (the "EXCHANGE RIGHT") upon the occurrence and during the
continuance of an Insolvency Event, to require Newco I (and upon
default by Newco I, Parent) to purchase from such Holder all
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or any part comprising at least the Minimum Number of the
Exchangeable Shares held by such Holder;
all in accordance with the provisions of this Agreement and the Exchangeable
Share Provisions, as the case may be. Each of Parent and Newco I hereby
acknowledges receipt from the Holders of good and valuable consideration (and
the adequacy thereof) for the grant of the Exchange Put Right and the
Exchange Right to the Holders. Subject to the terms and conditions of this
Agreement, the Holders shall be entitled to exercise all of the rights and
powers of an owner with respect to the Exchange Put Right and the Exchange
Right.
5.2 GRANT AND OWNERSHIP OF THE AUTOMATIC EXCHANGE RIGHT. Parent and
Newco I hereby jointly and severally grant to the Holders the Automatic
Exchange Right in accordance with the provisions of this Agreement. Each of
Parent and Newco I hereby acknowledges receipt from the Holders of good and
valuable consideration (and the adequacy thereof) for the grant of the
Automatic Exchange Right by Parent and Newco I to the Holders. Subject to the
terms and conditions of this Agreement, the Holders shall be entitled to
exercise all of the rights and powers of an owner with respect to the
Automatic Exchange Right.
5.3 LEGENDED SHARE CERTIFICATES. Newco II will cause each certificate
representing Exchangeable Shares to bear an appropriate legend notifying the
Holders of:
(a) their right with respect to the exercise of the Exchange Put Right
and the Exchange Right in respect of the Exchangeable Shares held by
a Holder, and
(b) the Automatic Exchange Right.
5.4 GENERAL EXERCISE OF EXCHANGE PUT RIGHT, THE EXCHANGE RIGHT AND
THE AUTOMATIC EXCHANGE RIGHT. The Exchange Put Right, the Exchange Right and
the Automatic Exchange Right shall be and remain vested in the Holders.
5.5 PURCHASE PRICE. The purchase price payable by Parent or Newco I
for each Exchangeable Share to be purchased by Parent or Newco I (a) under
the Exchange Put Right, (b) under the Exchange Right or (c) under the
Automatic Exchange Right, shall be consideration equal to the Exchangeable
Share Consideration. The applicable Exchangeable Share Consideration for each
such Exchangeable Share so purchased may be satisfied by Parent issuing and
Parent or Newco I delivering or causing to be delivered to the relevant
Holder, the applicable Exchangeable Share Consideration (less any amounts
withheld pursuant to Section 5.14 hereof). A purchase pursuant to the
Exchange Put Right, the Exchange Right or the Automatic Exchange Right may be
made by either Parent or Newco I, as may be determined by Parent and Newco I
in their discretion, but unless a Holder is otherwise advised by Parent or
Newco I at any
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time, a Holder may assume the purchase will be made by Newco I and Parent
will cause the completion of such purchase by Newco I and delivery of the
Exchange Share Consideration. If Newco I fails to complete a purchase as
aforesaid or Parent is unable to cause Newco I to so complete, Parent shall
deliver such Exchangeable Share Consideration to complete such purchase
within the time period required pursuant to Section 5.7 hereof.
5.6 EXERCISE INSTRUCTIONS FOR EXCHANGE PUT RIGHT AND EXCHANGE RIGHT.
Subject to the terms and conditions provided in Article 8 of the Exchangeable
Share Provisions with respect to the Exchange Put Right and subject to the
terms and conditions set forth herein with respect to the Exchange Put Right
and the Exchange Right, a Holder shall be entitled (a) to exercise the
Exchange Put Right at any time and (b) upon the occurrence and during the
continuance of an Insolvency Event, to exercise the Exchange Right, in either
case with respect to all or any part comprising at least the Minimum Number
of the Exchangeable Shares registered in the name of such Holder on the books
of Newco II. To cause the exercise of the Exchange Right or the Exchange Put
Right, the Holder shall present and surrender to Transfer Agent at the
Transfer Agent Office the certificates representing the Exchangeable Shares
which such Holder desires Parent or Newco I to purchase, duly endorsed in
blank (or as may be otherwise specified by the Transfer Agent), and
accompanied by such other documents and instruments as may be required to
effect a transfer of Exchangeable Shares under the Act and the Articles of
Association of Newco II and such other documents and instruments as are
required hereunder or as Transfer Agent may reasonably request together with:
(a) a duly completed form of notice of exercise of the Exchange Right or
Exchange Put Right, as applicable, in the form of Schedule B
attached hereto, stating:
(i) that the Holder thereby exercises the Exchange Right or
Exchange Put Right, as applicable, so as to require Parent or
Newco I to purchase from the Holder the number of Exchangeable
Shares specified therein, provided such number shall be at
least the Minimum Number,
(ii) that such Holder has good title to and owns all such
Exchangeable Shares to be acquired by Parent free and clear of
all liens, claims, encumbrances, security interests and
adverse claims or interests,
(iii) the names in which the certificates representing Parent Common
Stock issuable in connection with the exercise of the Exchange
Right are to be issued, and
(iv) the names and addresses of the persons to whom the
Exchangeable Share Consideration should be delivered; and
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(b) payment (or evidence reasonably satisfactory to Parent of payment)
of the taxes (if any) payable as contemplated by Section 5.9 of this
Agreement or a statement by such Holder that no such taxes are
payable.
Such notice shall be irrevocable unless revoked (as to exercise of the
Exchange Put Right) by the Holder pursuant to Section 5.7(c) below or unless
the applicable purchase is not completed in accordance herewith and shall
constitute the Holder's authorization to Newco I and Parent, as the case may
be, to effect the exchange on behalf of the Holder. The surrender by the
Holder of Exchangeable Shares hereunder shall constitute the representation,
warranty and covenant of the Holder that the Exchangeable Shares so purchased
are sold free and clear of any lien, encumbrance, security interest or
adverse claim or interest. If only a part of the Exchangeable Shares
represented by any certificate or certificates delivered to Parent are to be
purchased by Parent under the Exchange Right or Exchange Put Right, a new
certificate for the balance of such Exchangeable Shares shall be issued and
promptly delivered to the Holder at the expense of Newco II.
5.7 DELIVERY OF EXCHANGEABLE SHARE CONSIDERATION; EFFECT OF EXERCISE.
(a) The receipt by the Transfer Agent at the Transfer Agent Office
(which shall be deemed receipt by Parent and Newco I) of the certificates
duly endorsed for transfer representing the Exchangeable Shares which the
Holder desires Parent or Newco I to purchase under the Exchange Put Right or
the Exchange Right, together with such other documents and instruments of
transfer, if any, and a duly completed form of notice of exercise of the
Exchange Put Right or the Exchange Right (and payment of taxes, if any,
payable as contemplated by Section 5.9 hereof) (the date of such receipt in
the case of the Exchange Put Right sometimes being referred to as the
"EXCHANGE PUT DATE"), shall constitute exercise of the Exchange Put Right or
the Exchange Right, as applicable, by the Holder of such Exchangeable Shares.
Parent or Newco I, as applicable, shall within [FIVE (5)/THREE (3)] Business
Days after such receipt deliver or cause to be delivered to the Holder of
such Exchangeable Shares (or to such other persons, if any, properly
designated by such Holder), the Exchangeable Share Consideration deliverable
in connection with the exercise of the Exchange Put Right or the Exchange
Right (less any amounts withheld pursuant to Section 5.14 hereof); provided,
however, that no such delivery shall be made unless and until the Holder
requesting the same shall have paid (or provided evidence satisfactory to the
Transfer Agent of the payment of) the taxes (if any) payable as contemplated
by Section 5.9 of this Agreement. Parent will cause Newco I to deliver the
Exchangeable Share Consideration in accordance with this Section 5.7(a) or
will deliver it itself.
(b) Unless a Holder exercises its right to revoke pursuant to Section
5.7(c) with respect to the Exchange Put Right, immediately upon the notice of
the
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exercise of the Exchange Put Right or the Exchange Right as provided in this
Section 5.7(a), the closing of the transaction of purchase and sale
contemplated by the Exchange Put Right or the Exchange Right shall be deemed
to have occurred and Parent and/or Newco I, as applicable, shall be required
to take all action necessary to permit it to occur, including delivery to the
Holder of the relevant Exchangeable Share Consideration, no later than the
close of business on the fifth Business Day following the receipt of the
certificates and other documents as aforesaid. The Holder of such
Exchangeable Shares shall then be deemed to have transferred to Parent or
Newco I, as applicable, all of its right, title and interest in and to such
Exchangeable Shares, shall cease to be a holder of such Exchangeable Shares
and shall not be entitled to exercise any of the rights of a holder or Holder
in respect thereof when such Exchangeable Share Consideration is delivered by
Parent or Newco I to the Holder, and until such time the rights of the Holder
shall remain unaffected. Concurrently with such Holder ceasing to be a holder
of Exchangeable Shares, the Holder shall be considered and deemed for all
purposes to be the holder of the shares of Parent Common Stock delivered to
it pursuant to the Exchange Put Right or the Exchange Right. For greater
certainty, until the Exchangeable Share Consideration is delivered to the
Holder, the Holder shall be deemed to still be a holder of the sold
Exchangeable Shares for purposes of voting rights with respect thereto under
this Agreement.
(c) A Holder may, by notice in writing given by the Holder to the
Transfer Agent before the close of business on the [THIRD] Business Day
following the Exchange Put Date, provided no such notice by Holder shall be
effective if given to the Transfer Agent after the Exchangeable Share
Consideration has been sent to such Holder, withdraw such Holder's notice of
exercise of the Exchange Put Right in which event such exercise of the
Exchange Put Right shall be null and void, and for greater certainty, the
offer constituted by the notice exercising the Exchange Put Right to sell the
applicable Exchangeable Shares shall be deemed to be revoked. A Holder
revoking its notice of exercise of Exchange Put Right shall be obligated to
reimburse Parent or Newco I for any actual costs incurred (including any
charges of the Transfer Agent) in connection with such Holder's exercise of
the Exchange Put Right prior to Transfer Agent's receipt of notice of the
applicable withdrawal.
5.8 EXERCISE OF EXCHANGE RIGHT SUBSEQUENT TO RETRACTION. In the event
that a Holder has exercised its right under Article 6 of the Exchangeable
Share Provisions to require Newco II to redeem all or any part comprising at
least the Minimum Number of the Exchangeable Shares held by the Holder (the
"RETRACTED SHARES") and is notified by Newco II pursuant to Section 6.6 of
the Exchangeable Share Provisions that Newco II will not be permitted as a
result of liquidity or solvency requirements of applicable law to redeem all
such Retracted Shares, subject to receipt by the Holders of written notice to
that effect from Newco II and that the Holder has not revoked the Retraction
Request delivered by the Holder to Newco II pursuant to Section 6.7 of the
Exchangeable Share Provisions, the Retraction Request will constitute and
will be deemed to
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constitute notice from the Holder to Parent and Newco I with respect to the
exercise of the Exchange Right with respect to those Retracted Shares which
Newco II is unable to redeem. In any such event, Newco II hereby agrees
immediately to notify the Holder of such prohibition against Newco II's
redeeming all of the Retracted Shares and immediately to forward or cause to
be forwarded to the Holder all relevant materials delivered by the Holder to
Newco II (including without limitation a copy of the Retraction Request
delivered pursuant to Section 6.1 of the Exchangeable Share Provisions) in
connection with such proposed redemption of the Retracted Shares, and the
Holder and Newco I and/or Parent will thereupon exercise the Exchange Right
with respect to the Retracted Shares which Newco II is not permitted to
redeem.
5.9 STAMP OR OTHER TRANSFER TAXES. Upon any sale of Exchangeable
Shares to Parent or Newco I pursuant to the Exchange Put Right or the
Exchange Right or any sale of Exchangeable Shares to Parent or Newco I
pursuant to the Automatic Exchange Right, the share certificate or
certificates representing Parent Common Stock to be delivered in connection
with the payment of the total purchase price therefor shall be issued in the
name of the Holder of the Exchangeable Shares so sold or in such names as
such Holder may otherwise direct in writing without charge to the holder of
the Exchangeable Shares so sold, provided, however, that such Holder:
(a) shall pay (and Parent and Newco I shall not be required to pay) any
documentary, stamp, transfer or other taxes that may be payable in
respect of any transfer involved in the issuance or delivery of such
shares to a person other than such Holder, or
(b) shall have established to the reasonable satisfaction of Parent or
Newco I, as applicable, that such taxes, if any, have been paid or
Holder shall have provided a statement that no such taxes are
payable.
Such determination of taxes payable (or not) shall be made within the period
during which the Exchangeable Share Consideration is required to be delivered.
5.10 NOTICE OF INSOLVENCY EVENT. As soon as practicable following the
occurrence of an Insolvency Event or any event which with the giving of
notice or the passage of time or both would be an Insolvency Event, Newco II
shall give written notice thereof to the Holders. As soon as practicable
after receiving notice from Newco II of the occurrence of an Insolvency
Event, Newco II will mail to each Holder at the expense of Newco II (or
Parent if necessary) a notice of such Insolvency Event, which notice shall
contain a brief statement of the right of the Holders with respect to the
Exchange Right.
5.11 QUALIFICATION OF PARENT COMMON STOCK. Parent covenants that if
any shares of Parent Common Stock to be issued and delivered pursuant to the
Exchange Put Right, the Exchange Right, the Automatic Exchange Right or
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otherwise pursuant to this Agreement or under the Exchangeable Share
Provisions require registration or qualification with or approval of or the
filing of any document including any prospectus or similar document, the
taking of any proceeding with or the obtaining of any order, ruling or
consent from any governmental or regulatory authority under any Canadian or
United States federal, provincial or state law or regulation or pursuant to
the rules and regulations of any regulatory authority, or the fulfillment of
any other legal requirement (collectively, the "APPLICABLE LAWS") before such
shares may be issued and delivered by Parent, Newco I or Newco II to the
initial holder thereof or in order that such shares of Parent Common Stock
may be freely traded thereafter, Parent will in good faith expeditiously take
all such actions and do all such things as are necessary to cause such shares
of Parent Common Stock to be and remain duly registered, qualified or
approved. Parent will in good faith take all actions and do all things as are
necessary under Applicable Laws at the relevant time to cause the shares of
Parent Common Stock to be issued and delivered pursuant to the Exchange Put
Right, the Exchange Right, the Automatic Exchange Right or otherwise pursuant
to this Agreement or under the Exchangeable Share Provisions to be freely
tradeable thereafter. Parent and Newco II, as the case may be, will in good
faith expeditiously take all such actions and do all such things as are
necessary to cause all shares of Parent Common Stock to be delivered pursuant
to the Exchange Put Right, the Exchange Right, the Automatic Exchange Right
or otherwise pursuant to this Agreement or under the Exchangeable Share
Provisions to be listed, quoted or posted for trading on all stock exchanges
and quotation systems on which outstanding shares of Parent Common Stock are
listed, quoted or posted for trading at such time. Parent covenants that on
or before the Closing Date in the YPTel Agreement, Parent shall have caused
to be duly registered, qualified or approved all such shares of Parent Common
Stock hereafter required to be issued and delivered in connection with
exchanges pursuant to the Exchange Put Right, the Exchange Right, the
Automatic Exchange Right or the Exchangeable Share Provisions.
5.12 PARENT COMMON STOCK. Parent hereby represents, warrants and
covenants that the Parent Common Stock issuable and deliverable as described
herein will be duly authorized and validly issued as fully paid and
non-assessable.
5.13 AUTOMATIC EXCHANGE ON LIQUIDATION OF PARENT.
(a) Parent will give the Holders written notice of each of the following
events at the time set forth below:
(i) in the event of any determination by the board of directors of
Parent to institute voluntary liquidation, dissolution or
winding-up proceedings with respect to Parent or to effect any
other distribution of assets of Parent among its stockholders
for the purpose of winding up its affairs at the
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same time as notice is sent by Parent to holders of its
shares, which shall in any event be at least 30 days prior
to the proposed effective date of such liquidation,
dissolution, winding-up or other distribution; and
(ii) as soon as practicable following the earlier of:
receipt by Parent of notice of, or Parent's otherwise becoming aware of, any
threatened or instituted claim, suit, petition or other proceedings with
respect to the involuntary liquidation, dissolution or winding-up of Parent
or to effect any other distribution of assets of Parent among its
stockholders for the purpose of winding up its affairs, in each case where
Parent has failed to contest in good faith any such proceeding commenced in
respect of Parent within 30 days of becoming aware thereof.
(b) Immediately following or together with the notice by Parent to
Holders of any event (a "LIQUIDATION EVENT") contemplated by Section
5.13(a)(i) or 5.13(a)(ii) above, Parent shall provide Holders with details
concerning the automatic exchange of Exchangeable Shares for shares of Parent
Common Stock provided for in Section 5.13(c) hereof (the "AUTOMATIC EXCHANGE
RIGHT").
(c) In order that the Holders will be able to participate on a pro
rata basis with the holders of Parent Common Stock in the distribution of
assets of Parent in connection with a Liquidation Event, immediately prior to
the effective time (the "LIQUIDATION EVENT EFFECTIVE TIME") of a Liquidation
Event, all of the then outstanding Exchangeable Shares shall be automatically
exchanged for shares of Parent Common Stock without any action of Holders
being required. To effect such automatic exchange, Parent shall then be
deemed to have purchased each Exchangeable Share outstanding immediately
prior to the Liquidation Event Effective Time and held by Holders, and each
Holder shall then be deemed to have sold the Exchangeable Shares held by it
at such time, for a purchase price per share equal to the Exchangeable Share
Consideration.
(d) The closing of the transaction of purchase and sale contemplated
by Section 5.13(c) above shall be deemed to have occurred immediately prior
to the Liquidation Event Effective Time, and each Holder of Exchangeable
Shares shall be deemed to have transferred to Parent all of the Holder's
right, title and interest in and to such Exchangeable Shares and shall cease
to be a holder of such Exchangeable Shares, and Parent shall deliver to the
Holder the Exchangeable Share Consideration deliverable upon the automatic
exchange of Exchangeable Shares (less any amounts withheld pursuant to
Section 5.14 hereof). Concurrently with such Holder's ceasing to be a holder
of Exchangeable Shares, the Holder shall be considered and deemed for all
purposes to be the holder of the shares of Parent Common Stock delivered to
it pursuant to the automatic exchange of Exchangeable Shares for Parent
Common Stock, and the certificates held by the Holder previously representing
the Exchangeable Shares
<PAGE>
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exchanged by the Holder with Parent pursuant to such automatic exchange shall
thereafter be deemed to represent the shares of Parent Common Stock delivered
to the Holder pursuant to such automatic exchange. Upon the request of a
Holder and the surrender by the Holder of Exchangeable Share certificates
deemed to represent shares of Parent Common Stock, duly endorsed in blank and
accompanied by such instruments of transfer as Parent may reasonably require,
Parent shall deliver or cause to be delivered to the Holder, at the expense
of Parent, certificates representing the shares of Parent Common Stock of
which the Holder is the holder. Notwithstanding the foregoing, until each
Holder is actually entered on the register of holders of Parent Common Stock,
such Holder shall be deemed to still be a holder of the transferred
Exchangeable Shares for purposes of all voting rights with respect thereto
under this Agreement.
5.14 WITHHOLDING RIGHTS. Parent or Newco I, as applicable, shall be
entitled to deduct and withhold from any consideration otherwise payable
under this Agreement to any holder of Exchangeable Shares or Parent Common
Stock such amounts as Parent or Newco I, as applicable, is required to deduct
and withhold with respect to such payment under the Income Tax Act (Canada),
the United States Internal Revenue Code of 1986 or any provision of
provincial, state, local or foreign tax law, in each case as amended or
succeeded. Such determination of the requirement to withhold shall be made
within the period during which the Exchangeable Share Consideration is
required to be delivered. To the extent that amounts are so withheld, such
withheld amounts shall be treated for all purposes as having been paid to the
holder of the shares in respect of which such deduction and withholding was
made, provided that such withheld amounts are actually remitted to the
appropriate taxing authority and details are provided to such holder. To the
extent that the amount so required to be deducted or withheld from any
payment to a Holder exceeds the cash portion of the consideration otherwise
payable to the Holder, Parent or Newco I, as applicable, is hereby authorized
to sell or otherwise dispose only of such portion of the consideration as is
necessary to provide sufficient funds to Parent or Newco I, as applicable, to
enable it to comply with such withholding requirement, and Parent or Newco I,
as applicable, shall notify the Holder thereof and remit to such Holder any
unapplied balance of the net proceeds of such sale, if any.
ARTICLE 6
CERTAIN RIGHTS AND OBLIGATIONS OF NEWCO I
TO ACQUIRE EXCHANGEABLE SHARES
6.1 NEWCO I LIQUIDATION CALL RIGHT.
(a) Newco I shall have the overriding right (the "LIQUIDATION CALL
RIGHT"), in the event of and notwithstanding the proposed liquidation,
dissolution or winding-up of Newco II as referred to in Article 5 of the
Exchangeable Share Provisions, to purchase from all but not less than all of
the Holders of Exchangeable Shares on the Liquidation Date (as defined in
Section 5.1 of the
<PAGE>
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Exchangeable Share Provisions) all but not less than all of the Exchangeable
Shares held by such Holders on payment by Newco I to each holder of the
Exchangeable Share Consideration (the "LIQUIDATION CALL PURCHASE PRICE"). In
the event of the exercise of the Liquidation Call Right by Newco I, each
Holder shall be obligated to sell all the Exchangeable Shares held by the
Holder to Newco I on the Liquidation Date upon transfer and payment by Newco
I to the Holder of the Liquidation Call Purchase Price.
(b) To exercise the Liquidation Call Right, Newco I must notify the
Transfer Agent in writing, as agent for the holders of Exchangeable Shares,
of Newco I's intention to exercise such right at least ten (10) Business Days
before the Liquidation Date. Newco I shall also notify the Transfer Agent
accordingly if it does not intend to exercise the Liquidation Call Right.
Newco I or Newco II shall cause the Transfer Agent to notify the Holders of
Exchangeable Shares as to whether or not Newco I has exercised the
Liquidation Call Right forthwith after the expiry of the date by which the
same may be exercised by Newco I. If Newco I exercises the Liquidation Call
Right, on the Liquidation Date Newco I will purchase and the Holders will
sell all of the Exchangeable Shares then outstanding for the Exchangeable
Share Consideration.
(c) For purposes of completing the purchase of the Exchangeable
Shares pursuant to the Liquidation Call Right, Newco I shall deposit with the
Transfer Agent, on or before the Liquidation Date, the Exchangeable Share
Consideration representing the total Liquidation Call Purchase Price.
Provided that such Exchangeable Share Consideration has been so deposited
with the Transfer Agent, on and after the Liquidation Date the right of each
Holder of Exchangeable Shares will be limited to receiving such Holder's
proportionate part of the total Liquidation Call Purchase Price payable by
Newco I without interest upon presentation and surrender by the Holder of
certificates representing the Exchangeable Shares held by such Holder and the
Holder shall on and after the Liquidation Date be considered and deemed for
all purposes to be the holder of ACG Common Stock delivered to it. Upon
surrender to the Transfer Agent at the Transfer Agent Office of a certificate
or certificates representing Exchangeable Shares, together with such other
documents and instruments as may reasonably be required to effect a transfer
of Exchangeable Shares or as the Transfer Agent may reasonably require
[AS SET OUT IN SCHEDULE C HERETO, TO BE COMPLETED PRIOR TO THE CLOSING DATE],
the Holder of such surrendered certificate or certificates shall be entitled
to receive in exchange therefor, and Newco I (or the Transfer Agent in behalf
of Newco I) shall deliver to such Holder, the Exchangeable Share
Consideration to which the Holder is entitled. If Newco I does not exercise
the Liquidation Call Right in the manner described above, on the Liquidation
Date the Holders of the Exchangeable Shares will be entitled to receive in
exchange therefor the Liquidation Consideration otherwise payable in
connection with the liquidation, dissolution or winding-up of Newco II
pursuant to Article 5 of the Exchangeable Share Provisions. Notwithstanding
the foregoing, until such Exchangeable Share Consideration is delivered to
the Holder or the Transfer Agent for such Holder, the Holder shall be deemed
to still be a Holder of
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Exchangeable Shares for purposes of all voting rights with respect thereto
under this Agreement.
(d) Notwithstanding anything to the contrary, Newco I and Parent
acknowledge and agree that prior to the Redemption Date or the Automatic
Redemption Date, no voluntary liquidation, dissolution or winding up of Newco
II shall be effected without the approval of the Holders of the Exchangeable
Shares given in accordance with Article 10 of the Exchangeable Share
Provisions.
6.2 NEWCO I REDEMPTION CALL RIGHT
(a) Newco I shall have the overriding right (the "REDEMPTION CALL
RIGHT") in the case of and notwithstanding the proposed redemption or
automatic redemption of the Exchangeable Shares by Newco II pursuant to
Article 7 of the Exchangeable Share Provisions, to purchase from all but not
less than all of the Holders of Exchangeable Shares on the Automatic
Redemption Date or the Redemption Date, as applicable, all but not less than
all of the Exchangeable Shares held by each such Holder on payment by Newco I
to each Holder of the Exchangeable Share Consideration (the "REDEMPTION CALL
PURCHASE PRICE"). In the event of the exercise of the Redemption Call Right
by Newco I, each Holder shall be obligated to sell all the Exchangeable
Shares held by such Holder to Newco I on the Automatic Redemption Date or
Redemption Date, as applicable, upon transfer and payment by Newco I to the
Holder of the Redemption Call Purchase Price.
(b) To exercise the Redemption Call Right, Newco I must notify the
Transfer Agent in writing, as agent for the Holders of Exchangeable Shares,
of Newco I's intention to exercise such right not later than five Business
Days after the date by which Newco II is required to give notice of the
Automatic Redemption Date or Redemption Date, or possible redemption, as
applicable. If Newco I exercises the Redemption Call Right, then on the
Automatic Redemption Date or the Redemption Date, as applicable, Newco I will
purchase and the Holders will sell all of the Exchangeable Shares then
outstanding for the Exchangeable Share Consideration. In the case of any
notice given in connection with a possible Automatic Redemption Date, such
notice by Newco I will be given contingently and will be withdrawn if the
contingency does not occur. Notwithstanding the foregoing, the failure of
Newco II to give timely notice of a Redemption Date or the failure of Newco I
to give timely notice of its exercise of the Redemption Call Right shall not
prevent the exercise by Newco I of the Redemption Call Right, but the holders
of Exchangeable Shares shall nevertheless be entitled to notice of redemption
pursuant to Section 7.2 of the Exchangeable Share provisions at least 30 days
before the Redemption Date, and if such is delayed, the Redemption Date shall
be similarly delayed.
(c) For the purposes of completing the purchase of the Exchangeable
Shares pursuant to the Redemption Call Right, Newco I shall deposit with the
Transfer Agent, on or before the Automatic Redemption Date or the Redemption
<PAGE>
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Date, as applicable, the Exchangeable Share Consideration representing the
total Redemption Call Purchase Price. Provided that such Exchangeable Share
Consideration has been so deposited with the Transfer Agent, on and after the
Automatic Redemption Date or the Redemption Date, as applicable, the rights
of each Holder of Exchangeable Shares will be limited to receiving such
Holder's proportionate part of the total Redemption Call Purchase Price
payable by Newco I without interest upon presentation and surrender by the
Holder of certificates representing the Exchangeable Shares held by such
Holder, and the Holder shall on and after the Automatic Redemption Date or
the Redemption Date, as applicable, be considered and deemed for all purposes
to be the holder of the ACG Common Stock delivered to such Holder. Upon
surrender to the Transfer Agent at the Transfer Agent Office of a certificate
or certificates representing Exchangeable Shares, together with such other
documents and instruments as may be required to effect a transfer of
Exchangeable Shares or as the Transfer Agent may reasonably require, the
Holder of such surrendered certificate or certificates shall be entitled to
receive in exchange therefor, and Newco I (or the Transfer Agent on behalf of
Newco I) shall deliver to such Holder, the Exchangeable Share Consideration
to which the Holder is entitled. If Newco I does not exercise the Redemption
Call Right in the manner described above on the Automatic Redemption Date or
the Redemption Date, as applicable, the Holders of the Exchangeable Shares
will be entitled to receive in exchange therefor the Exchangeable Share
Consideration otherwise payable by Newco II in connection with the redemption
of the Exchangeable Shares pursuant to Article 7 of the Exchangeable Share
Provisions. Notwithstanding the foregoing, until such Exchangeable Share
Consideration is delivered to the Holder or the Transfer Agent for such
Holder, the Holder shall be deemed to still be a Holder of Exchangeable
Shares for purposes of all voting rights with respect thereto under this
Agreement.
6.3 NEWCO I RETRACTION CALL RIGHT.
(a) Newco I shall have the overriding right (the "RETRACTION CALL
RIGHT"), in the event of a Retraction Request by a Holder under Article 6 of
the Exchangeable Share Provisions and in lieu of a redemption by Newco II of
the Retracted Shares under Article 6 of the Exchangeable Share Provisions, to
purchase all but not less than all of the Retracted Shares directly from the
Holder of Exchangeable Shares, and such Retraction Request shall be deemed to
be a revocable offer by the Holder to sell the Retracted Shares in accordance
with the terms and conditions of this Section 6.3
(b) To exercise the Retraction Call Right, Newco I shall notify Newco
II (directly or through the Transfer Agent) of its determination to do so
(the "NEWCO I RETRACTION CALL NOTICE") within four Business Days of the date
Newco II (directly or through the Transfer Agent) received the Retraction
Request and related documents in proper form. If Newco I does not so notify
Newco II within four Business Days, Newco II (directly or through the
Transfer Agent) will notify the Holder as soon as possible thereafter that
Newco I will not exercise the
<PAGE>
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Retraction Call Right. If such notice is given to the Holder by Newco II,
Newco I shall be deemed not to have exercised its Retraction Call Right. If
Newco I delivers the Newco I Retraction Call Notice within such four Business
Days, and provided that the Retraction Request is not revoked by the Holder
in the manner specified in Section 6.7 of the Exchangeable Share Provisions,
the Retraction Request shall thereupon be considered only to be an offer by
the Holder to sell the Retracted Shares to Newco I in accordance with the
Retraction Call Right. In such event, Newco II shall not redeem the Retracted
Shares and Newco I shall purchase from such Holder and such Holder shall sell
to Newco I on the Retraction Date, the Retracted Shares for a purchase price
(the "PURCHASE PRICE") equal to the Exchangeable Share Consideration.
(c) For the purposes of completing a purchase pursuant to the
Retraction Call Right, Newco I shall deposit with the Transfer Agent, on or
before the Retraction Date the Exchangeable Share Consideration representing
the total Purchase Price. Provided that such Exchangeable Share Consideration
has been so deposited with the Transfer Agent, the closing of the purchase
and sale of the Retracted Shares pursuant to the Retraction Call Right shall
be deemed to have occurred as at the close of business on the Retraction Date
and, for greater certainty, no redemption by Newco II of such Retracted
Shares shall take place on the Retraction Date. Newco I shall deliver or
cause the Transfer Agent to deliver to such Holder, at the address of the
Holder recorded in the securities register of Newco II for the Exchangeable
Shares or at the address specified in the Holder's Retraction Request or by
holding for pick up by the Holder at the Transfer Agent Office, the
Exchangeable Share Consideration representing the total Purchase Price (less
any tax permitted or required to be deducted or withheld therefrom by Newco
I), and such delivery of such Exchangeable Share Consideration to the
Transfer Agent shall be deemed to be payment of and shall satisfy and
discharge all liability for the total Purchase Price except as to any cheque
included therein which is not paid on due presentation.
(d) A Holder may withdraw its Retraction Request and revoke its offer
to sell pursuant to the provisions of Section 6.7 of the Exchangeable Share
Provisions. The rights of a Holder with respect to Retracted Shares from and
after the Retraction Date shall be limited as provided in Section 6.6 of the
Exchangeable Share Provisions.
ARTICLE 7
MISCELLANEOUS
7.1 RESTRICTIONS ON ISSUANCE OF PARENT SPECIAL VOTING STOCK. During
the term of this Agreement, Parent will not, without the consent of the
Holders at the relevant time of the Exchangeable Shares given in accordance
with Article 10 of the Exchangeable Share Provisions, issue any shares of
Parent Special Voting Stock in addition to the Voting Share.
<PAGE>
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7.2 TRANSFER AGENT. Parent, Newco I and Newco II covenant that there
shall at all times be a Transfer Agent with authority to carry out the
functions of the Transfer Agent as contemplated by the Exchangeable Share
Provisions and this Agreement. The Transfer Agent shall either be (i) a
recognized transfer agent or trust company, or (ii) a law firm with an office
in Halifax, Nova Scotia. All costs of such Transfer Agent and all costs
incurred in connection with the Exchangeable Shares shall be borne by Newco
II, except as Newco I or Parent may otherwise agree or except as expressly
provided herein to the contrary, but if Newco II fails to pay or is unable to
pay such costs when due, Newco I shall pay such costs when due, and if Newco
I fails to pay or is unable to pay such costs when due, Parent shall pay such
costs when due. [NOTE: WHEN TRANSFER AGENT ARRANGEMENTS HAVE BEEN FINALIZED,
APPLICABLE PERIODS FOR DELIVERIES AND EXCHANGES WILL BE REVIEWED.]
7.3 RESTRICTIONS ON TRANSFER OF CLASS A SPECIAL SHARES.
(a) In addition to any other restrictions imposed by Applicable Law
on a Holder's ability to transfer any Class A Special Shares, each Holder of
any Class A Special Shares agrees that such Holder will not sell, transfer or
otherwise dispose of any of the Class A Special Shares received by such
Holder pursuant to the YPtel Agreement or otherwise, except:
(i) pursuant to the laws of descent and distribution;
(ii) as a distribution from a trust to the beneficiaries of such
trust; or
(iii) as a transfer from a Holder to a Person not at arms length
from the transferor or to a trust for the benefit of Persons
not at arms length from the transferor,
provided that the distributee of such shares by descent and distribution or
from a trust shall remain subject to these transfer restrictions and that in
the case of a transfer to a Person not at arms length from the transferor,
such Person shall execute and deliver an agreement acknowledging that such
Person is bound by and subject to these transfer restrictions. For purposes
of this Section 7.3, a pledge of Exchangeable Shares by a Holder to a
financial institution as collateral security for loans arranged by such
Holder or for margining purposes shall not constitute a sale, transfer, or
other disposition of such shares so long as the financial institution agrees
to be bound to the restrictions imposed by this Section.
(b) For purposes of this Section 7.3, an exchange, redemption,
retraction, or purchase of Exchangeable Shares under the Exchangeable Share
Provisions or under this Agreement resulting in a Holder of Exchangeable
Shares becoming the holder of Parent Common Stock shall not be prohibited by
the restriction in Section 7.3(a).
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(c) Except as provided in this Section 7.3 or with respect to
restrictions imposed by Applicable Law on a Holder's ability to transfer any
Class A Special Shares, the sales, transfers, pledges or other dispositions
permitted by this Section 7.3 shall not be subject to any requirements of
consent on the part of Parent, Newco II, Newco I, their boards of directors
or anyone under their direct or indirect control [notwithstanding anything to
the contrary in any Articles of Association or bylaws of any of them].
[ANY PRIVATE COMPANY/SECURITIES ISSUES SO AS NOT TO BE A "REPORTING COMPANY".]
(d) Unless the terms of this Section are set out in or endorsed on
the certificate representing the Class A Special Shares, an appropriate
legend referencing this Section shall be included on such certificates.
(e) At the option of the ICL Principals who are directly or
indirectly Holders of Class A Special Shares, such Holders may satisfy their
indemnification obligations under Section 9.5(c) of the YPTel Agreement by
transferring to Parent or as Parent may direct (to Newco I) Class A Special
Shares valued pursuant to said Section 9.5(c).
7.4 NON-REGISTRATION OF EXCHANGEABLE SHARES. The Holders of Class A
Special Shares acknowledge and agree with Newco II and Parent that it is not
presently contemplated that the Class A Special Shares will be registered
with the U.S. Securities and Exchange Commission or with any governmental
authorities under state blue sky laws or the Canadian and provincial
securities laws and the rules and regulations thereunder, and neither Parent
nor Newco I or Newco II have any contractual obligation to cause any such
shares to be so registered, provided such registration is not required to
permit the exchanges contemplated by Article 5 above or to allow the
Exchangeable Shares to be transferred as contemplated by Section 7.3 hereof.
7.5 OVERRIDING RIGHT AND OBLIGATION. If Newco I exercises the
Liquidation Call Right, Redemption Call Right or Retraction Call Right and
for any reason does not complete the applicable purchase of Exchangeable
Shares and deliver the applicable Exchangeable Share Consideration, Parent
shall promptly complete the applicable purchase of Exchangeable Shares and
deliver the applicable Exchangeable Share Consideration. Nothing contained
herein shall limit the right of a Holder to exercise the Exchange Put Right
directly with Parent if Newco I or Newco II does not carry out its respective
obligations under the Exchangeable Share Provisions or this Agreement to
complete a redemption, retraction, liquidation or purchase of Exchangeable
Shares in accordance with the terms and provisions hereof or of the
Exchangeable Share Provisions.
7.6 NO AUDIT. Parent, Newco I, Newco II and the Holders of
Exchangeable Shares agree and consent that the financial statements of Newco
I and Newco II shall not be required to be audited.
<PAGE>
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ARTICLE 8
CONCERNING THE TRUSTEE
8.1 POWERS AND DUTIES OF THE TRUSTEE. The rights, powers and
authorities of the Trustee under this Agreement, in its capacity as trustee
of the Trust, shall include:
(a) receipt and deposit of the Voting Share from Parent as trustee for
and on behalf of the Holders in accordance with the provisions of
this Agreement;
(b) granting proxies and distributing materials to Holders as provided
in this Agreement;
(c) voting the Holder Votes in accordance with the provisions of this
Agreement;
(d) holding title to the Trust Estate;
(e) taking action at the direction of a Holder or Holders to enforce the
obligations of Parent with respect to the Voting Share under this
Agreement; and
(f) taking such other actions and doing such other things as are
specifically provided with respect to the Trustee in this Agreement.
In the exercise of such rights, powers and authorities the Trustee
shall have (and is granted) such incidental and additional rights, powers and
authority not in conflict with any of the provisions of this Agreement as the
Trustee, acting in good faith and in the reasonable exercise of its
discretion, may deem necessary, appropriate or desirable to effect the
purpose of the Trust. Any exercise of such discretionary rights, powers and
authorities by the Trustee shall be final, conclusive and binding upon all
persons. The Trustee in exercising its rights, powers, duties and authorities
hereunder shall act honestly and in good faith with a view to the best
interests of the Holders and shall exercise the care, diligence and skill
that a reasonably prudent trustee would exercise in comparable circumstances.
8.2 NO CONFLICT OF INTEREST. The Trustee represents to Parent and the
Holders that at the date of execution and delivery of this Agreement there
exists no material conflict of interest in the role of the Trustee as a
fiduciary hereunder and the role of the Trustee in any other capacity. The
Trustee shall within 60 days after it becomes aware that such a material
conflict of interest exists, either eliminate such material conflict of
interest or resign in the manner and with the effect specified in Article 11
hereof. If, notwithstanding the foregoing provisions of this Section 8.2, the
Trustee has such a material conflict of interest, the validity and
enforceability of this Agreement shall not be affected in any manner
whatsoever by reason only of the existence of such material conflict of
<PAGE>
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interest. If the Trustee contravenes the foregoing provisions of this Section
8.2, any interested party may apply to the Superior Court of Justice
(Ontario) for an order that the Trustee be replaced as trustee hereunder. An
appointment of the Trustee as Transfer Agent for Newco II or transfer agent
for Newco I shall not be deemed to constitute a material conflict of interest
hereunder.
8.3 DEALINGS WITH TRANSFER AGENTS, REGISTRARS, ETC. Parent, Newco II
and the Holders irrevocably authorize the Trustee, from time to time, to:
(a) consult, communicate and otherwise deal with the respective
registrars and transfer agents, and with any subsequent registrar or
transfer agent, of the Exchangeable Shares and the Parent Common
Stock; and
(b) requisition, from time to time, from any such registrar or transfer
agent any information readily available from the records maintained
by it which the Trustee may reasonably require for the discharge of
its duties and responsibilities under this Agreement.
Parent and Newco II irrevocably authorize their respective registrars and
transfer agents to comply with any such requests.
8.4 BOOKS AND RECORDS. The Trustee shall keep available for
inspection by Parent and the Holders at the Trustee's principal trust office
in Toronto, Ontario, correct and complete books and records relating to the
Trustee's actions under this Agreement, including without limitation, all
information relating to mailings and instructions to and from Holders and all
transactions pursuant to the Voting Rights. On or before March 31, 2000, and
on or before March 31 in every year thereafter, so long as the Voting Share
is on deposit with the Trustee, the Trustee shall transmit to Parent and the
Holders a brief report, dated as of the preceding December 31, with respect
to:
(a) property comprising the Trust Estate as of that date; and
(b) all other actions taken by the Trustee in the performance of its
duties under this Agreement which it had not previously reported.
8.5 INCOME TAX RETURNS AND REPORTS. The Trustee shall to the extent
necessary, and if so advised by Parent or Newco II, prepare and file on
behalf of the Trust appropriate United States and Canadian income tax returns
and any other returns or reports relating to the Parent Special Voting Stock
or the Trust Estate as may be required by applicable law or pursuant to the
rules and regulations of any securities exchange or other trading system
through which the Parent Common Stock are traded. The Trustee may retain such
experts as it may consider necessary in preparing such returns. If requested
by the Trustee, Parent shall retain such expert for purposes of providing
such advice and assistance.
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8.6 INDEMNIFICATION PRIOR TO CERTAIN ACTIONS BY TRUSTEE. The Trustee
shall exercise any or all of the rights, duties, powers or authorities vested
in it by this Agreement at the request, order or direction of any Holder upon
such Holder's furnishing to the Trustee reasonable funding, security and
indemnity against the costs, expenses and liabilities which may be incurred
by the Trustee therein or thereby; provided that no Holder shall be obligated
to furnish to the Trustee any such funding, security or indemnity in
connection with the exercise by the Trustee of any of its rights, duties,
powers and authorities with respect to the Voting Share pursuant to Article 4
hereof, subject to Section 8.15 hereof or its obligations under this
Agreement. None of the provisions contained in this Agreement shall require
the Trustee to expend or risk its own funds or otherwise incur financial
liability in the exercise of any of its rights, powers, duties or authorities
unless funded, given security and indemnified as aforesaid.
8.7 ACTIONS BY HOLDERS. With respect to Articles 3, 4, 8, 9, 10, and
11 and Sections 2.1(i)and 7.1 hereof, no Holder shall have the right to
institute any action, suit or proceeding or to exercise any other remedy
authorized by this Agreement for the purpose of enforcing any of its rights
or for the execution of any trust or power hereunder unless the Holder has
requested the Trustee to take or institute such action, suit or proceeding
and furnished the Trustee with the funding, security and indemnity referred
to in Section 8.6 hereof and the Trustee shall have failed to act within a
reasonable time thereafter. In such case, but not otherwise, the Holder shall
be entitled to take proceedings in any court of competent jurisdiction such
as the Trustee might have taken; it being understood and intended that no one
or more Holders shall have any right in any manner whatsoever to affect,
disturb or prejudice the rights hereby created by any such action, or to
enforce any right hereunder or under the Voting Rights, except subject to the
conditions and in the manner herein provided, and that all powers and trusts
hereunder shall be exercised and all proceedings at law shall be instituted,
had and maintained by the Trustee, except only as herein provided, and in any
event for the equal benefit of all Holders. All costs so incurred by the
Holders in enforcing their rights hereunder shall be paid by the Parent if
the Holders are generally successful in such controversy.
8.8 RELIANCE UPON DECLARATIONS. The Trustee shall not be considered
to be in contravention of any of its rights, powers, duties and authorities
hereunder if, when required, it acts and relies in good faith upon lists,
mailing labels, notices, statutory declarations, certificates, opinions,
reports or other papers or documents furnished pursuant to the provisions
hereof or required by the Trustee to be furnished to it in the exercise of
its rights, powers, duties and authorities hereunder, and such lists, mailing
labels, notices, statutory declarations, certificates, opinions, reports or
other papers or documents comply with the provisions of Section 8.9 hereof,
if applicable, and with any other applicable provisions of this Agreement.
8.9 EVIDENCE AND AUTHORITY TO TRUSTEE. Parent shall furnish to the
Trustee evidence of compliance with the conditions provided for in this
<PAGE>
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Agreement relating to any action or step required or permitted to be taken by
it or the Trustee under this Agreement or as a result of any obligation
imposed under this Agreement, including, without limitation, in respect of
the Voting Right and the taking of any other action to be taken by the
Trustee at the request of or on the application of Parent or any Holder
forthwith if and when:
(a) such evidence is required by any other section of this Agreement to
be furnished to the Trustee in accordance with the terms of this
Section 8.9; or
(b) the Trustee, in the exercise of its rights, powers, duties and
authorities as Trustee under this Agreement, gives Parent written
notice requiring it to furnish such evidence in relation to any
particular action or obligation specified in such notice.
Such evidence may consist of a report or opinion of any solicitor or
other expert or any other person whose qualifications give authority to a
statement made by such person, provided that if such report or opinion is
furnished by a director, officer or employee of Parent, it shall be in the
form of an Officer's Certificate or a statutory declaration.
Each statutory declaration, Officer's Certificate, opinion or report
furnished to the Trustee as evidence of compliance with a condition provided
for in this Agreement shall include a statement by the person giving the
evidence:
(a) declaring that such person has read and understands the provisions
of this Agreement relating to the condition in question;
(b) describing the nature and scope of the examination or investigation
upon which such person based the statutory declaration, Officer's
Certificate, opinion or report; and
(c) declaring that such person has made such examination or
investigation as such person believes is necessary to enable such
person to make the statements or give the opinions contained or
expressed therein.
8.10 EXPERTS, ADVISERS AND AGENTS. The Trustee may:
(a) in relation to these presents act and rely on the opinion or advice
of or information obtained from or prepared by any solicitor or
other expert, whether retained by the Trustee or by Parent or
otherwise, and may employ such assistants as may be necessary to the
proper determination and discharge of its powers and duties and
determination of its rights hereunder and may pay proper and
reasonable compensation for all such legal and other advice or
assistance as aforesaid; and
<PAGE>
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(b) employ such agents and other assistants as it may reasonably require
for the proper determination and discharge of its powers and duties
hereunder, and may pay reasonable remuneration for all services
performed for it (and shall be entitled to receive reasonable
remuneration for all services performed by it) in the discharge of
the trusts hereof and compensation for all disbursements, costs and
expenses made or incurred by it in the determination and discharge
of its duties hereunder and in the management of the Trust.
8.11 INVESTMENT OF MONEYS HELD BY TRUSTEE. Unless otherwise provided
in this Agreement, any moneys held by or on behalf of the Trustee which under
the terms of this Agreement may or ought to be invested or which may be on
deposit with the Trustee or which may be in the hands of the Trustee, may be
invested and reinvested in the name or under the control of the Trustee in
securities in which, under the laws of the Province of Ontario, trustees are
authorized to invest trust moneys; provided that such securities are stated
to mature within two years after their purchase by the Trustee, and the
Trustee shall so invest such moneys on the written direction of Parent.
Pending the investment of any moneys as hereinbefore provided, such moneys
may be deposited in the name of the Trustee in any chartered bank in Canada
or, with the consent of Parent, in the deposit department of the Trustee or
any other trust company authorized to accept deposits under the laws of
Canada or any province thereof at the rate of interest then current on
similar deposits.
8.12 TRUSTEE NOT REQUIRED TO GIVE SECURITY. The Trustee shall not be
required to give any bond or security in respect of the execution of the
trusts, rights, duties, powers and authorities of this Agreement or otherwise
in respect of the premises.
8.13 TRUSTEE NOT BOUND TO ACT ON REQUEST. Except as otherwise
specifically provided in this Agreement, the Trustee shall not be bound to
act in accordance with any direction or request of Parent or of the directors
thereof until a duly authenticated copy of the instrument or resolution
containing such direction or request shall have been delivered to the
Trustee, and the Trustee shall be empowered to act and rely upon any such
copy purporting to be authenticated and believed by the Trustee to be genuine.
8.14 AUTHORITY TO CARRY ON BUSINESS. The Trustee represents to Parent
and the Holders that at the date of execution and delivery by it of this
Agreement it is authorized to carry on the business of a trust company in the
Province of Ontario but if, notwithstanding the provisions of this Section
8.14, it ceases to be so authorized to carry on business, the validity and
enforceability of this Agreement shall not be affected in any manner
whatsoever by reason only of such event; provided, however, the Trustee shall
within 60 days after ceasing to be authorized to carry on the business of a
trust company in the Province of
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Ontario, either become so authorized or resign in the manner and with the
effect specified in Article 11 hereof.
8.15 CONFLICTING CLAIMS. If conflicting claims or demands are made or
asserted with respect to the Parent Special Voting Stock or the Voting
Rights, the Trustee shall be entitled, at its sole discretion, to refuse to
recognize or to comply with any such claim or demand. In so refusing, the
Trustee may elect not to exercise any Voting Rights subject to such
conflicting claims or demands and, in so doing, the Trustee shall not be or
become liable to any person on account of such election or its failure or
refusal to comply with any such conflicting claims or demands. The Trustee
shall be entitled to continue to refrain from acting and to refuse to act
until:
(a) the rights of all adverse claimants with respect to the Voting
Rights subject to such conflicting claims or demands or with respect
to the Parent Special Voting Stock have been adjudicated by a final
judgment of a court of competent jurisdiction; or
(b) all differences with respect to the Voting Rights subject to such
conflicting claims or demands or with respect to the Parent Special
Voting Stock have been conclusively settled by a valid written
agreement binding on all such adverse claimants, and the Trustee
shall have been furnished with an executed copy of such agreement.
If the Trustee elects to recognize any claim or comply with any demand
made by any such adverse claimant, it may in its discretion require such
claimant to furnish such surety bond or other security satisfactory to the
Trustee as it shall deem appropriate fully to indemnity it as between all
conflicting claims or demands.
8.16 MISCELLANEOUS TRUSTEE PROVISIONS.
(a) The Trustee shall incur no liability with respect to the delivery
or non-delivery of any materials described in Article 4, whether delivered by
hand, mail or any other means;
(b) The Trustee in its personal or any other capacity, may buy, lend
upon and deal in securities of Parent and generally may contract and enter
into financial transactions with Parent without being liable to account for
any profit made thereby;
(c) The Trustee shall not be bound to give any notice or do or take
any act, action or proceeding by virtue of the powers conferred on it hereby
unless and until it shall be specifically required to do so under the terms
hereof; nor shall the Trustee be required to take any notice of, or to take
any act, action or proceeding as a result of, any default or breach of any
provisions hereunder unless and until notified in writing of such default or
breach, which notice shall
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distinctly specify the default or breach desired to be brought to the
attention of the Trustee and in the absence of such notice the Trustee may
for all purposes of this Agreement conclusively assume that no default or
breach has been made in the observance or performance of any of the
representations, warranties, covenants, agreements or conditions contained
herein; and
(d) The Trustee shall not be obligated to disburse any funds beyond
those which have been deposited with it and which remain in the Trust at the
time of any requirement that the Trustee disburse such funds.
8.17 ACCEPTANCE OF TRUST. The Trustee hereby accepts the Trust created
and provided for by and in this Agreement and agrees to perform the same upon
the terms and conditions herein set forth and to hold all rights, privileges
and benefits conferred hereby and by law in trust for the various persons who
shall from time to time be Holders, subject to all the terms and conditions
herein set forth.
ARTICLE 9
COMPENSATION
9.1 Parent and Newco II agree to pay to the Trustee reasonable
compensation for all of the services rendered by it under this Agreement and
will reimburse the Trustee for all reasonable expenses (including taxes other
than taxes based on the net income of the Trustee) and disbursements,
including the fees and expenses of experts, advisers and agents retained
pursuant to Section 8.10 and including the cost and expense of any suit or
litigation of any character and any proceedings before any governmental
agency, reasonably incurred by the Trustee in connection with its rights and
duties under this Agreement; provided that Parent and Newco II shall have no
obligation to reimburse the Trustee for any expenses or disbursements paid,
incurred or suffered by the Trustee in any suit or litigation in which the
Trustee is determined to have acted fraudulently or in bad faith or with
negligence, recklessness or willful misconduct.
ARTICLE 10
INDEMNIFICATION AND LIMITATION OF LIABILITY
10.1 INDEMNIFICATION OF THE TRUSTEE. Parent, Newco I and Newco II
agree to indemnify and hold harmless the Trustee and each of its directors,
officers and agents appointed and acting in accordance with this Agreement
(collectively, the "INDEMNIFIED PARTIES") against all claims, losses,
damages, costs, penalties, fines and reasonable expenses (including
reasonable expenses of the Trustee's legal counsel) which, without fraud,
negligence, recklessness, willful misconduct or bad faith on the part of such
Indemnified Party, may be paid, incurred or suffered by the Indemnified Party
by reason of or as a result of the Trustee's acceptance or administration of
the Trust, its compliance with its duties set forth in this Agreement, or any
written or oral instructions delivered to the Trustee by Parent pursuant
hereto. In no case shall Parent, Newco I or Newco II
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be liable under this indemnity for any claim against any of the Indemnified
Parties unless Parent, Newco I and Newco II shall be notified by the Trustee
of the written assertion of a claim or of any action commenced against the
Indemnified Parties, promptly after any of the Indemnified Parties shall have
received any such written assertion of a claim or shall have been served with
a summons or other first legal process giving information as to the nature
and basis of the claim. Subject to clause (ii) below, Parent, Newco I and
Newco II shall be entitled to participate at their own expense in the defense
and, if Parent, Newco I or Newco II so elects at any time after receipt of
such notice, it may assume the defense of any suit brought to enforce any
such claim. The Trustee shall have the right to employ separate counsel in
any such suit and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of the Trustee unless: (i)
the employment of such counsel has been authorized by Parent, Newco I or
Newco II; or (ii) the named parties to any such suit include both the Trustee
and Parent, Newco I or Newco II and the Trustee shall have been advised by
counsel acceptable to Parent, Newco I or Newco II that there may be one or
more legal defenses available to the Trustee that are different from or in
addition to those available to Parent, Newco I or Newco II and that, in the
judgement of such counsel, would present a conflict of interest were a joint
representation to be undertaken (in which case Parent, Newco I and Newco II
shall not have the right to assume the defense of such suit on behalf of the
Trustee, but shall be liable to pay the reasonable fees and expenses of
counsel for the Trustee); or (iii) Parent, Newco I and/or Newco II shall not
have retained legal counsel on behalf of the Trustee within a reasonable
amount of time after the Trustee has given them notice of a written assertion
of a claim or action against any indemnified party. Such indemnification
shall survive the resignation and removal of the Trustee and termination of
the Agreement.
10.2 LIMITATION OF LIABILITY. The Trustee shall not be held liable for
any loss which may occur by reason of depreciation of the value of any part
of the Trust Estate or any loss incurred on any investment of funds pursuant
to this Agreement, except to the extent that such loss is attributable to the
fraud, negligence, recklessness, willful misconduct or bad faith on the part
of the Trustee.
ARTICLE 11
CHANGE OF TRUSTEE
11.1 RESIGNATION. The Trustee, or any trustee hereafter appointed, may
at any time resign by giving written notice of such resignation to Parent
specifying the date on which it desires to resign, provided that such notice
shall never be given less than 60 days before such desired resignation date
unless Parent otherwise agrees and provided further that such resignation
shall not take effect until the date of the appointment of a successor
trustee and the acceptance of such appointment by the successor trustee. Upon
receiving such notice of resignation, Parent shall promptly appoint a
successor trustee by written instrument in duplicate, one copy of which shall
be delivered to the resigning
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trustee and one copy to the successor trustee. Failing acceptance by a
successor trustee, a successor trustee may be appointed by an order of the
Superior Court of Justice (Ontario) upon application of one or more of the
parties hereto.
11.2 REMOVAL. The Trustee, or any trustee hereafter appointed, may be
removed with or without cause, at any time on not less than 30 days' prior
notice by written instrument executed by Parent, in duplicate, one copy of
which shall be delivered to the trustee so removed and one copy to the
successor trustee, provided that, in connection with such removal, provision
is made for a replacement trustee similar to that contemplated in Section
11.1.
11.3 SUCCESSOR TRUSTEE. Any successor trustee appointed as provided
under this Agreement shall execute, acknowledge and deliver to Parent and to
its predecessor trustee an instrument accepting such appointment. Thereupon
the resignation or removal of the predecessor trustee shall become effective
and such successor trustee, without any further act, deed or conveyance,
shall become vested with all the rights, powers, duties and obligations of
its predecessor under this Agreement, with like effect as if originally named
as trustee in this Agreement. However, on the written request of Parent or of
the successor trustee, the trustee ceasing to act shall, upon payment of any
amounts then due it pursuant to the provisions of this Agreement, execute and
deliver an instrument transferring to such successor trustee all the rights
and powers of the trustee so ceasing to act. Upon the request of any such
successor trustee, Parent, and such predecessor trustee shall execute any and
all instruments in writing for more fully and certainly vesting in and
confirming to such successor trustee all such rights and powers.
11.4 NOTICE OF SUCCESSOR TRUSTEE. Upon acceptance of appointment by a
successor trustee as provided herein, Parent shall cause to be mailed notice
of the succession of such trustee hereunder to each Holder specified in a
List. If Parent shall fail to cause such notice to be mailed within 10 days
after acceptance of appointment by the successor trustee, the successor
trustee shall cause such notice to be mailed at the expense of Parent.
ARTICLE 12
PARENT SUCCESSORS
12.1 CERTAIN REQUIREMENTS IN RESPECT OF COMBINATION, ETC. Except as
otherwise permitted pursuant to Section 2.8 of the Support Agreement, Parent
shall not enter into any transaction (whether by way of reconstruction,
reorganization, consolidation, merger, transfer, sale, lease or otherwise)
whereby all or substantially all of its undertaking, property and assets
would become the property of any other Person or, in the case of a merger, of
the continuing corporation resulting therefrom, but may do so if:
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(a) such other Person or continuing corporation (the "PARENT
SUCCESSOR"), by operation of law, becomes, without more, bound by
the terms and provisions of this Agreement or, if not so bound,
executes, prior to or contemporaneously with the consummation of
such transaction an Agreement supplemental hereto and such other
instruments (if any) as are approved by the Holders in accordance
with Article 10 of the Exchangeable Share Provisions and in the
opinion of legal counsel to the Holders (at the cost of Parent) are
necessary or advisable to evidence the agreement of such Parent
Successor to observe and perform all the covenants and obligations
of Parent under this Agreement, the Support Agreement and the
Exchangeable Share Provisions and to be bound by the covenants of
Newco I and Newco II under this Agreement, the Support Agreement and
the Exchangeable Share Provisions; and
(b) such transaction shall, to the satisfaction of the Trustee, be upon
such terms which substantially preserve and do not impair in any
material respect any of the rights, duties, powers and authorities
of the Trustee hereunder; or
(c) the Parent Successor enters into amendments or other agreements
supplemental hereto as are approved by the Holders in accordance
with Article 10 of the Exchangeable Share Provisions.
12.2 VESTING OF POWERS IN PARENT SUCCESSOR. Whenever the conditions of
Section 12.1 hereof have been duly observed and performed, the Trustee, if
required by Section 12.1 hereof, and the Parent Successor shall execute and
deliver the supplemental agreement provided for in Article 13 hereof, and
thereupon the Parent Successor shall possess and from time to time may
exercise each and every right and power of Parent under this Agreement in the
name of Parent or otherwise and any act or proceeding by any provision of
this Agreement required to be done or performed by the board of directors of
Parent or any officers of Parent may be done and performed with like force
and effect by the directors or officers of such Parent Successor.
12.3 SUBSIDIARIES. Nothing herein shall be construed as preventing the
amalgamation or merger of any Subsidiary of Parent with or into Parent or the
voluntary winding-up, liquidation or dissolution of any Subsidiary of Parent
other than Newco I and Newco II provided that all of the assets of such
subsidiary are transferred to Parent or another subsidiary of Parent and that
such transactions do not adversely impact upon the Holders of Exchangeable
Shares; any such transactions are expressly permitted by this Article 12.
<PAGE>
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ARTICLE 13
AMENDMENTS AND SUPPLEMENTAL AGREEMENTS
13.1 AMENDMENTS, MODIFICATIONS, ETC. Subject to Section 13.4 hereof
and Section 2.8 of the Support Agreement, this Agreement may not be amended
or modified except by an agreement in writing executed by Newco I, Newco II,
Parent and the Trustee and approved by the Holders in accordance with Article
10 of the Exchangeable Share Provisions.
13.2 MINISTERIAL AMENDMENTS. Notwithstanding the provisions of Section
13.1 hereof, Newco I, Newco II, Parent and Trustee may in writing, at any
time and from time to time, without the approval of the Holders but on
reasonable notice to them with sufficient details provided, amend or modify
this Agreement for the purposes of:
(a) adding to the covenants of any or all of the parties hereto for the
protection of the Holders or the Trustee hereunder;
(b) making such amendments or modifications not inconsistent with this
Agreement as may be necessary or desirable with respect to matters
or questions which, in the opinion of the board of directors of each
of Parent, Newco I or Newco II with respect to all matters and in
the opinion of the Trustee and its counsel relating to the Trust
Estate only, having in mind the best interests of the Holders as a
whole, it may be in good faith expedient to make, provided that such
boards of directors with respect to all matters and the Trustee
relating to the Trust Estate only, shall be of the good faith
opinion that such amendments and modifications will not be
prejudicial to the interests of the Holders as a whole; or
(c) making such changes or corrections which, on the written advice of
counsel to Newco I, Newco II, or Parent, and if relating to the
Trust Estate on the advice of Trustee and/or its counsel, are
required for the purpose of curing or correcting any ambiguity or
defect or inconsistent provision or clerical omission or mistake or
manifest error; provided that the Trustee and its counsel relating
to the Trust Estate only, and the board of directors of each of the
Newco I, Newco II and Parent and their counsel with respect to all
matters shall be of the good faith opinion that such changes or
corrections will not be prejudicial to the interests of the Holders
as a whole.
13.3 MEETING TO CONSIDER AMENDMENTS. Newco II at the request of
Parent, Newco I, any ten Holders, or such number of Holders holding at least
fifteen percent (15%) of the Exchangeable Shares then outstanding, shall call
a meeting or meetings of the Holders for the purpose of considering any
proposed amendment or modification requiring approval pursuant hereto. Any
such meeting or meetings shall be called and held in accordance with the
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Exchangeable Share Provisions and, to the extent applicable, the Articles of
Association of Newco II and all applicable laws. An approval of Holders may
be obtained by written consents in lieu of a meeting, as provided in Article
10 of the Exchangeable Share Provisions.
13.4 CHANGES IN CAPITAL OF PARENT OR NEWCO II. Subject to Section 14.1
hereof and Section 2.8 of the Support Agreement, at all times after the
occurrence of any event effected pursuant to Section 2.7 or Section 2.8 of
the Support Agreement, as a result of which either Parent Common Stock or the
Exchangeable Shares or both are in any way changed, to the extent reasonably
practicable in the circumstances, this Agreement shall forthwith be amended
and modified as necessary in order that it shall apply with full force and
effect, mutatis mutandis, to all new securities into which Parent Common
Stock or the Exchangeable Shares or both are so changed, and Newco I, Newco
II, Parent and Trustee shall execute and deliver a supplemental agreement
giving effect to and evidencing such necessary amendments and modifications.
13.5 EXECUTION OF SUPPLEMENTAL AGREEMENTS. From time to time Parent
(when authorized by a resolution of its Board of Directors), Newco I (when
authorized by a resolution of its board of directors), Newco II (when
authorized by a resolution of its board of directors), and the Trustee may,
subject to the provisions of these presents, and they shall, when so directed
by these presents, execute and deliver by their proper officers, agreements
or other instruments supplemental hereto, which thereafter shall form part
hereof, for any one or more of the following purposes:
(a) evidencing the succession of any Parent Successor to Parent and the
covenants of and obligations assumed by each such Parent Successor
in accordance with the provisions of Article 12 and the successor of
any successor trustee in accordance with the provisions of Article
11;
(b) making any additions to, deletions from or alterations of the
provisions of this Agreement or the Voting Rights, the Exchange Put
Right, the Exchange Right, the Automatic Exchange Right, the
Liquidation Call Right, the Redemption Call Right or the Retraction
Call Right which the boards of directors of Parent, Newco I and
Newco II in good faith are of the opinion and based upon written
advice from counsel, will not be prejudicial to the interests of the
Holders as a whole or are necessary or advisable in order to
incorporate, reflect or comply with any legislation the provisions
of which apply to Parent, Newco I or Newco II, the Holders, the
Trustee or this Agreement; and
(c) for any other purposes not inconsistent with the provisions of this
Agreement, including, without limitation, to make or evidence any
amendment or modification to this Agreement as contemplated
<PAGE>
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hereby, provided that if the Holders have not approved the
applicable amendment or modification, the Trustee and its counsel
relating to the Trust Estate only and the boards of directors of
Parent, Newco I and Newco II in good faith and upon written
advice of counsel are of the opinion that the rights of the
Trustee and Holders will not be prejudiced thereby.
ARTICLE 14
TERMINATION AND AUTOMATIC REDEMPTION
14.1 PROVISIONS FOR AUTOMATIC REDEMPTION. Notwithstanding any
limitation contained in Article 12 or elsewhere in this Agreement, the
Support Agreement or the Exchangeable Share Provisions, if the terms for an
Automatic Redemption Date are applicable in connection with an ACG Control
Transaction, then in lieu of amending this Agreement or entering into a
supplemental agreement in connection with the ACG Control Transaction, Parent
may cause Newco II to redeem or Newco I to purchase all the Exchangeable
Shares of Holder pursuant to the provisions for automatic redemption in
Article 7 of the Exchangeable Share Provisions and Article 6 of this
Agreement.
14.2 TERM. This Agreement shall continue until the earliest to occur
of the following events:
(a) no outstanding Exchangeable Shares are held by a Holder,
(b) each of Newco I, Newco II and Parent elects in writing to terminate
this Agreement and such termination is approved by the Holders in
accordance with Article 10 of the Exchangeable Share Provisions; and
(c) five (5) years and sixty (60) days after the date of this Agreement.
14.3 SURVIVAL OF CERTAIN PROVISIONS. The provisions of Articles 9 and
10 hereof shall survive any such termination of this Agreement.
ARTICLE 15
GENERAL
15.1 SEVERABILITY. If any provision of this Agreement is held to be
invalid, illegal or unenforceable, the validity, legality or enforceability
of the remainder of this Agreement shall not in any way be affected or
impaired thereby, and the Agreement shall be carried out as nearly as
possible in accordance with its original terms and conditions.
15.2 ENUREMENT. This Agreement shall be binding upon and enure to the
benefit of the parties hereto, the Holders and their respective successors
and permitted assigns. Certain of the Company shareholders party to this
Agreement are contemplated to become Holders hereunder when the Class A
Special
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Shares are issued on the Closing Date while the other such shareholders may
transfer their Company shares to corporations or limited partnerships who
will become Holders hereunder on the Closing Date. Upon any such party or
transferee becoming a Holder hereunder, such party or transferee will be
party to this Agreement in its capacity as a Holder. Any such transferee
becoming a Holder or any other transferee hereafter becoming a Holder shall
be substituted for its transferor under this Agreement upon the date of such
transfer, and the transferor shall be released from any obligations or
liability thereafter arising under this Agreement.
15.3 NOTICES TO PARTIES. All notices and other communications between
the parties hereunder which affect all Holders shall be in writing and shall
be deemed to have been given if delivered to the parties or by confirmed
telecopy to the parties at the following addresses (or at such other address
for such party as shall be specified in like notice):
TO PARENT, NEWCO I
OR NEWCO II: c/o 390 South Woods Mill Road
Suite 150
St. Louis, Missouri
U.S.A. 63017
Attention: the President
Facsimile No.: (314) 205-8141
WITH COPIES TO:
Blackwell Sanders Peper Martin, LLP
720 Olive Street
Suite 2400
St. Louis, Missouri
U.S.A. 63101-4834
Attention: Craig Adoor
FACSIMILE NO: (314) 345-6060
AND
Pouliot Mercure
CIBC Tower
31st floor
1155 Rene Levesque Blvd. West
Montreal, Quebec
H3B 3S6
Attention: Joel Silcoff
FACSIMILE NO: (514) 875-4308
AND
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Imperial Capital Limited
1 First Canadian Place
P.O. Box 438
Suite 5102
Toronto ON M5X 1E3
Attention: Managing Partner
FACSIMILE NO.: (416) 362-8660
AND
Cassels, Brock & Blackwell
Scotia Plaza, Suite 2100
40 King Street West
Toronto, Ontario M5H 3C2
CANADA
Attention: Maxwell Gotlieb
FACSIMILE NO: (416) 360-8877
TO THE HOLDERS:
At their respective addresses
appearing on the records of
the Transfer Agent
WITH COPIES TO:
Imperial Capital Limited
1 First Canadian Place
P.O. Box 438
Suite 5102
Toronto ON M5X 1E3
Attention: Managing Partner
FACSIMILE NO.: (416) 362-8660
AND:
Cassels, Brock & Blackwell
Scotia Plaza, Suite 2100
40 King Street West
Toronto, Ontario M5H 3C2
CANADA
Attention: Maxwell Gotlieb
FACSIMILE NO: (416) 360-8877
<PAGE>
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TO THE TRUSTEE:
[Montreal Trust Company of Canada
Corporate Services Division
151 Front St. West, Suite 605
Toronto, Ontario M5J 2N1
CANADA
Attention: Manager
FACSIMILE NO: (416) 981-9777]
WITH COPIES TO:
Blackwell Sanders Peper Martin, LLP
720 Olive Street
Suite 2400
St. Louis, Missouri
U.S.A. 63101-4834
Attention: Craig Adoor
FACSIMILE NO: (314) 345-6060
AND
Pouliot Mercure
CIBC Tower
31st floor
1155 Rene Levesque Blvd. West
Montreal, Quebec
H3B 3S6
Attention: Joel Silcoff
FACSIMILE NO: (514) 875-4308
AND
Cassels, Brock & Blackwell
Scotia Plaza, Suite 2100
40 King Street West
Toronto, Ontario M5H 3C2
CANADA
Attention: Maxwell Gotlieb
FACSIMILE NO: (416) 360-8877
Any notice or other communication given personally or by overnight or
expedited delivery service shall be deemed to have been given and received
upon delivery thereof, and if given by telecopy shall be deemed to have been
given and received on the date of receipt thereof unless such day is not a
Business Day in which case it shall be deemed to have been given and received
upon the immediately following Business Day. Save and except any notice
actually received earlier (in which case the notice shall be deemed given on
the Business Day received), any notice given by certified or registered mail
shall be deemed to
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have been given and received on the fifth Business Day following the date of
mailing, and any notice period providing for notice to be given by twenty
(20) or more days before a specified date or event may be calculated as if
the date of mailing were the date of giving notice. This Section shall not
affect the manner of Trustee providing communications to Holders as set forth
in Article 4 or the manner of Trustee and Parent communicating with each
other to carry out the provisions of Article 4. Notices covered by Section
15.4 are not covered by this Section.
15.4 NOTICE TO NEWCO II, NEWCO I, AND PARENT.
(a) Except as otherwise herein provided, any notice and other
communications to be given to Newco II, Newco I, or Parent by a Holder of
Exchangeable Shares shall be in writing and shall be valid and effective if
given by mail (postage prepaid) or by confirmed telecopy or by delivery:
(i) if in connection with a redemption, exchange, purchase or
retraction of Exchangeable Shares or exercise of any right
with respect thereto, addressed to Newco II, Newco I or
Parent, as the case may be, c/o the Transfer Agent at the
Transfer Agent Office;
(ii) otherwise to the applicable entity at the address from time to
time specified for such entity in Section 15.3 above, provided
copies of such notice need not be sent to the parties above
shown as to receive copies in Section 15.3 unless such notice
affects all Holders.
(b) Notwithstanding any requirement for written notice in this
Agreement, any notices provided herein to be given as between or among Newco
I, Newco II, Parent and Transfer Agent may be given by telephone, by fax or
otherwise in an informal manner as such entities may agree among themselves
from time to time and such notices may be subject to standing orders. For
example, Newco I may advise the Transfer Agent and Newco II that upon any
Retraction Request, Newco I desires to exercise the Retraction Call Right, in
which event the Newco I Retraction Call Notice shall be deemed properly given
to Newco II upon any Retraction Request received by the Transfer Agent until
Newco I rescinds or otherwise modifies such standing order.
(c) Section 13.6 of the Exchangeable Share Provisions shall be
applicable hereto in the same manner as if set forth herein (dealing with
notice of change in the identity of the Transfer Agent or change in the
Transfer Agent Office). Any requirement for written notice hereunder may also
be waived by the parties directly affected by a particular notice, including
the applicable Holder, and any period for giving a notice or otherwise taking
an action may be extended with the consent of all affected parties, including
the applicable Holder.
<PAGE>
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15.5 NOTICE TO HOLDERS. Any and all notices to be given and any
documents to be sent to any Holders may be given or sent to the address of
such Holder shown on the records of the Transfer Agent in any manner
permitted by the Exchangeable Share Provisions and shall be deemed to be
received (if given or sent in such manner) at the time specified in such
Exchangeable Share Provisions, the provisions of which Exchangeable Share
Provisions shall apply mutatis mutandis to notices or documents as aforesaid
sent to such Holders.
15.6 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which taken together
shall constitute one and the same instrument. One or more of the parties may
sign this Agreement and deliver this Agreement by facsimile transmission. The
parties agree that a facsimile of a signature shall be deemed an original
signature.
15.7 CONSTRUCTION. The parties hereto, except the Trustee, agree that
they have been represented by counsel during the negotiation and execution of
this Agreement and, therefore, waive the application of any law, regulation,
holding or rule of construction providing that ambiguities in an agreement or
other document will be construed against the party drafting such agreement or
document.
15.8 JURISDICTION. Except to the extent that the Delaware and Nova
Scotia corporate laws under which the Parent, Newco I and Newco II are,
respectively, organized govern the determination of particular corporate
issues under this Agreement, this Agreement shall be construed and enforced
in accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein.
15.9 ATTORNMENT. Each of the parties hereto, on behalf of such party
and such party's heirs, personal representative, successors and permitted
assigns, agrees that any action or proceeding arising out of or relating to
this Agreement may be instituted in the courts of Ontario, waives any
objection which it may have now or hereafter to the venue of any such action
or proceeding, irrevocably submits to the jurisdiction of such courts in any
such action or proceeding, and agrees to be bound by any judgment of such
courts and agrees not to seek, and hereby waives, any review of the merits of
any such judgment by the courts of any other jurisdiction.
15.10 EFFECTIVENESS OF AGREEMENT. This Agreement is being entered into
in anticipation of the "Closing" under the YPtel Agreement and the related
issuance of Class A Special Shares to certain of the Company shareholders in
exchange for some of their Company shares. This Agreement shall not become
effective until the Class A Special Shares are so issued, and if not so
issued within sixty (60) days after the date of this Agreement but on or
before March 1, 2000 in any event, this Agreement shall be null and void.
<PAGE>
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15.11 TIME OF THE ESSENCE. Time shall be of the essence of this
Agreement and every party thereof.
IN WITNESS WHEREOF, the parties hereby have caused this Exchange and
Voting Trust Agreement to be duly executed as of the date first above written.
ADVANCED COMMUNICATIONS GROUP, INC.
By: ____________________________________________
ACG HOLDING COMPANY
By: ____________________________________________
ACG EXCHANGE [COMPANY]
By: ____________________________________________
CERTAIN YPTEL CORPORATION STOCKHOLDERS, (See
Schedule A), by their attorney, Imperial Capital
Limited
By: ____________________________________________
THE J.L.R. FAMILY TRUST
Per:
________________________________________________
Jeffrey L. Rosenthal - as trustee with no
personal liability and liability being limited
to trust assets
Per:
________________________________________________
Maxwell Gotlieb - as trustee with no personal
liability and liability being limited to trust
assets
<PAGE>
- 46 -
THE PAISLEY FAMILY TRUST
Per:
________________________________________________
Stephen D. Lister - as trustee with no personal
liability and liability being limited to trust
assets
Per:
________________________________________________
Maxwell Gotlieb - as trustee with no personal
liability and liability being limited to trust
assets
_____________________________________, as Trustee
Per:____________________________________________
Per:____________________________________________
<PAGE>
- 47 -
SCHEDULE A
CERTAIN HOLDERS OF SHARES OF YPTEL CORPORATION
<PAGE>
- 48 -
SCHEDULE B
NOTICE OF EXCHANGE RIGHT
<PAGE>
- 49 -
NOTICE OF EXCHANGE PUT RIGHT
<PAGE>
- 50 -
SCHEDULE C
[ADDITIONAL DOCUMENTS/INSTRUMENTS - SECTION 5.10(c)]
<PAGE>
720 OLIVE STREET SUITE 2400 ST. LOUIS, MO 63101
TEL: (314) 345-6000 FAX: (314) 345-6060
WEBSITE: www.bspmlaw.com
CRAIG A. ADOOR FAX: (314) 345-6507
DIRECT: (314) 345-6407 E-MAIL: [email protected]
February 9, 2000
Advanced Communications Group, Inc.
390 South Woods Mill Road, Suite 260
St. Louis, Missouri 63017
RE: Registration Statement on Form S-1
Ladies and Gentlemen:
We have acted as counsel to Advanced Communications Group, Inc. (the
"COMPANY") in connection with the Registration Statement on Form S-1 (the
"REGISTRATION STATEMENT") filed by the Company under the Securities Act of
1933, as amended (the "ACT"), relating to the resale by the selling
stockholders identified therein of 23,851,281 shares of the Company's common
stock, $.0001 par value per share (the "SHARES").
Of the Shares: (A) up to 15,000,000 shares are to be sold by the former
stockholders of YPtel Corporation ("YPTEL") who will have originally acquired
these shares from the Company in connection with the acquisition of YPtel by
the Company; (B) up to 3,090,909 shares are to be sold by the former
stockholders of Web YP ("WEB YP") who will have originally acquired these
shares from the Company in connection with the acquisition of Web YP by the
Company; (C) up to 1,454,545 shares are to be sold by the former stockholders
of Big Stuff, Inc. ("BIG STUFF") who will have originally acquired theses
shares from the Company in connection with the acquisition of Big Stuff by
the Company; (D) up to 1,090,909 shares are to be sold by Richard A. O'Neal
("O'NEAL") and Richard L. Reid ("REID") who will have originally acquired
these shares from the Company upon conversion of loans (the "CONVERTIBLE
NOTES") made to Web YP and/or Big Stuff prior to the closing of the
acquisitions of Web YP and Big Stuff by the Company; (E) up to 2,863,637
shares are to be sold by the former stockholders of Great Western
Directories, Inc., a subsidiary of the Company, who will have originally
acquired these shares from the Company in consideration for the redemption of
promissory notes on which the Company is the borrower (the "GREAT WESTERN
NOTES"); (F) up to 261,281 shares are to be sold by officers, directors and
certain employees of YPtel who will have originally acquired these shares
upon the exercise of options and warrants to purchase common stock of the
Company to be granted to them in replacement of options and warrants to
purchase common stock of YPtel; and (G) 90,000 shares are to be sold by two
current non-employee directors of the Company and one former non-employee
director of the Company who will have originally acquired these shares upon
the
<PAGE>
February 9, 2000
Page 2
exercise of warrants to be granted to them in consideration of their
negotiation of the acquisitions of YPtel, Web YP and Big Stuff by the Company.
The Shares are to be issued to the selling stockholders in connection
with the transactions contemplated by: (i) the Amended and Restated Agreement
dated as of October 26, 1999 by and among the Company, YPtel, the
stockholders of YPtel listed on EXHIBIT A attached thereto, Edward Truant,
Douglas G. McIntyre, Jeffrey L. Rosenthal, Stephen D. Lister, The J.L.R.
Family Trust and The Paisley Family Trust, Cold Trust, Global Investment
Trust, Freezer Trust, Storage Trust, Directory Trust, Publisher Trust and
Imperial Capital (the "AMENDED AND RESTATED YPTEL AGREEMENT"); (ii) the
Amended and Restated Acquisition Agreement dated as of October 26, 1999 by
and among the Company, Web YP, ACG Acquisition VI Corp., a Delaware
corporation and a wholly-owned subsidiary of the Company, O'Neal and Reid
(the "AMENDED AND RESTATED WEB YP AGREEMENT"); (iii) the Amended and Restated
Acquisition Agreement dated as of October 26, 1999 by and among the Company,
Big Stuff, ACG Acquisition VII Corp., a Delaware corporation and a
wholly-owned subsidiary of the Company, O'Neal and Reid (the "AMENDED AND
RESTATED BIG STUFF AGREEMENT"); (iv) the Note Redemption Agreement entered
into by and between the Company and O'Neal dated June 3, 1999 (the "O'NEAL
REDEMPTION AGREEMENT"); (v) the Note Redemption Agreement entered into by and
between the Company and Larry Baldwin dated June 3, 1999 (the "L. BALDWIN
REDEMPTION AGREEMENT"); (vi) the Note Redemption Agreement entered into by
and between the Company and Ron Baldwin dated June 3, 1999 (the "R. BALDWIN
REDEMPTION AGREEMENT"); (vii) the Note Redemption Agreement entered into by
and between the Company and Steve Sparks dated June 3, 1999 (the "SPARKS
REDEMPTION AGREEMENT"); (viii) the Note Redemption Agreement entered into by
and between the Company and Ronnie Emmanuel dated June 3, 1999 (the "EMMANUEL
REDEMPTION AGREEMENT"), (ix) the Series N Warrant to be issued by the Company
to Robert F. Benton (Warrant No. N-1 (the "BENTON WARRANT")); (x) the Series
N Warrant to be issued by the Company to Rod Cutsinger (Warrant No. N-2 (the
"CUTSINGER WARRANT")); (xi) the Series N Warrant to be issued by the Company
to Marvin C. Moses (Warrant No. N-3 (the "MOSES WARRANT")); (xii) the Series
P Warrant to be issued by the Company to Wilmot Matthews (Warrant No. P-1
(the "MATTHEWS WARRANT")); (xiii) the Series P Warrant to be issued by the
Company to Nicholas J. Ross (Warrant No. P-2 (the "ROSS WARRANT")); (xiv) the
Series P Warrant to be issued by the Company to George Anderson (Warrant No.
P-3 (the "ANDERSON WARRANT")); (xv) the Series P Warrant to be issued by the
Company to Maxwell Gotlieb (Warrant No. P-4 (the "GOTLIEB WARRANT")); (xvi)
the Series P Warrant to be issued by the Company to Robert Flynn (Warrant No.
P-5 (the "FLYNN WARRANT")); (xvii) the Nonqualified Stock Option Agreement to
be entered into by and among the Company and Douglas McIntyre (the "MCINTYRE
OPTION AGREEMENT"); (xviii) the Nonqualified Stock Option Agreement to be
entered into by and among the Company and John Woodall (the "WOODALL OPTION
AGREEMENT"); (xix) the Nonqualified Stock Option Agreement to be entered into
by and among the Company and Jay Cramer (the "CRAMER OPTION AGREEMENT"); (xx)
the Nonqualified Stock Option Agreement to be entered into by and among the
Company and Wes Rice (the "RICE OPTION AGREEMENT"); and (xxi) the
Nonqualified Stock Option Agreement to be entered into by and among the
Company and Don Russell (the "RUSSELL OPTION AGREEMENT").
<PAGE>
February 9, 2000
Page 3
The O'Neal Redemption Agreement, the L. Baldwin Redemption Agreement, the
R. Baldwin Redemption Agreement, the Sparks Redemption Agreement and the
Emmanuel Redemption Agreement are referred to collectively hereinafter as the
"REDEMPTION AGREEMENTS." The Benton Warrant, the Cutsinger Warrant and the
Moses Warrant are referred to collectively hereinafter as the "SERIES N
WARRANTS." The Matthews Warrant, the Ross Warrant, the Anderson Warrant, the
Gotlieb Warrant and the Flynn Warrant are referred to collectively
hereinafter as the "SERIES P WARRANTS." The options evidenced by the McIntyre
Option Agreement, the Woodall Option Agreement, the Cramer Option Agreement,
the Rice Option Agreement and the Russell Option Agreement are referred to
collectively hereinafter as the "EMPLOYEE OPTIONS."
As counsel, we have reviewed: (i) the Amended and Restated YPtel
Agreement; (ii) the Amended and Restated Web YP Agreement; (iii) the Amended
and Restated Big Stuff Agreement; (iv) an unexecuted draft of the Exchange
and Voting Trust Agreement to be entered into by and among the Company, ACG
Holding Company, ACG Exchange Company, certain holders of YPtel Corporation
shares as listed on Schedule A thereto, the J.L.R. Family Trust, the Paisley
Family Trust and Montreal Bank and Trust Company of Canada, as Trustee (the
"EXCHANGE AND VOTING TRUST AGREEMENT"); (v) the Redemption Agreements; (vi)
unexecuted drafts of the Series N Warrants; (vii) unexecuted drafts of the
Series P Warrants; (viii) unexecuted drafts of the Employee Options; (ix) the
Restated Certificate of Incorporation, as amended, of the Company, certified
by the Secretary of State of Delaware (the "DELAWARE SECRETARY") on October
___, as further certified by the Secretary of the Company (the "RESTATED
CERTIFICATE"); (x) the Bylaws, as amended, of the Company certified by the
Secretary of the Company; and (xi) a copy of the unanimous written consent
resolutions of the Board of Directors of the Company dated as of December 8,
1999 certified by the Secretary of the Company.
Where questions of fact material to the opinions hereinafter expressed
were not independently established, we have relied upon statements of
officials of the Company. We have assumed (i) that the Exchange and Voting
Trust Agreement and each of the documents representing the Series P Warrants
and the Series N Warrants and the Employee Options to be executed at the
closing of the acquisitions of YPtel, Web YP and Big Stuff will substantially
conform to the unexecuted drafts submitted to us, and (ii) the genuineness of
all signatures and the authenticity of all items submitted to us as originals
and the conformity with the originals of all items submitted to us as copies.
Based solely on the foregoing, we are of the opinion that the Shares have
been duly authorized and, if the requisite stockholder approval for the
issuance of the Shares is received and the Exchange and Voting Trust
Agreement and each of the documents representing the Series P Warrants, the
Series N Warrants and the Employee Options are fully and completely executed,
then when issued thereafter pursuant to the terms of: (i) the Amended and
Restated YPtel Agreement; (ii) the Amended and Restated Web YP Agreement;
(iii) the Amended and Restated Big Stuff Agreement; (iv) the Exchange and
Voting Trust Agreement; (v) the
<PAGE>
February 9, 2000
Page 4
Redemption Agreements; (vi) the Series N Warrants; (vii) the Series P
Warrants; and (viii) the Option Agreements, the Shares will be validly
issued, fully paid and nonassessable.
We understand that this opinion is to be used in connection with the
Registration Statement. We consent to the filing of this opinion as an
exhibit to the Registration Statement and to the reference to our Firm
wherever it appears in the Registration Statement, including the Prospectus
constituting a part thereof.
BLACKWELL SANDERS PEPER MARTIN LLP
CAA
<PAGE>
Exhibit 10.7
[LOGO]
April 27, 1999
William H. Zimmer III
Advanced Communications Group, Inc.
390 S. Woodsmill Road, Suite 150
Chesterfield, MO 63017
Dear Mr. Zimmer:
You are currently employed by Advanced Communications Group, Inc.
("Company") under the terms of an Amended and Restated Employment Agreement
by and between the Company and William H. Zimmer III ("you" or "your") dated
December 12, 1997 (the "Agreement"). The Company is currently involved in a
restructuring which involve negotiations with YPTel Corporation. As a result,
the Company and you have discussed your resignation as an officer and
director of the Company and have reached an agreement that you resign your
employment with the Company, including your position as a director of the
Company, subject to the terms of the Agreement and the following additional
terms and conditions:
1. The term of your employment shall terminate on the later of
(i) June 30, 1999, or (ii) the signing of a definitive agreement
with YPTel Corporation and the closing of interim financing (in
either the case the "Term"), and you shall remain employed by the
Company and fulfill the obligations of your employment until the end
of the Term.
2. All Signing Bonus and Performance Options (as defined in the
Agreement) ("Options") shall vest upon termination of your
employment with the Company.
3. Upon execution of this Letter Agreement, you shall be issued 20,000
shares of common stock of the Company (the "Restricted Shares"). If
you do not (i) remain employed by the Company and fulfill the
obligations of your employment until the end of the Term, or (ii)
execute a release as provided in Paragraph No. 5 below, you shall
forfeit the Restricted Shares to the Company. The Restricted Shares
shall not be resold, exchanged or transferred by you for a period of
ninety days following the termination of your employment.
4. If you (i) remain employed by the Company and fulfill the
obligations of your employment until the end of the Term, and (ii)
execute a release as provided in Paragraph No. 5 below, then:
ATTACHMENT C
<PAGE>
a. The exercise period for the Options ("Exercise Period") shall
extend to the date one year following the effective date of
your termination of employment with the Company and no shares
purchased under the Options may be sold, exchanged or
transferred by you during the ninety day period immediately
following the date of your termination.
b. The Company will continue to pay your Base Salary (as defined
in the Agreement) for a period of two years from the date of
the termination of your employment; and
c. You shall be entitled to a performance bonus for the calendar
year 1999, as approved by the Board of Directors of the
Company, on a pro-rata basis based upon the effective date of
your termination of employment with Company.
5. Effective upon the termination of your employment, the Company and
you shall execute a mutual release and settlement agreement
releasing each party from any and all claims by each party against
the other.
If you agree to terms provided above pertaining to the termination of
your employment with the Company, please acknowledge your agreement by
signing and returning this letter to the Company.
________________________________
Richard A. O'Neal, Chairman and
Chief Executive Officer
ACKNOWLEDGED AND AGREED:
/s/ William H. Zimmer III
- ---------------------------------
William H. Zimmer III
Director, Executive Vice President-Finance & Administration,
Chief Financial Officer, Secretary and Treasurer
Date: 4/27/99
------------
<PAGE>
Exhibit 10.9
[LOGO]
April 27, 1999
James F. Cragg
Advanced Communications Group, Inc.
390 S. Woodsmill Road, Suite 150
Chesterfield, MO 63017
Dear Mr. Cragg:
You are currently employed by Advanced Communications Group, Inc.
("Company") under the terms of an Employment Agreement between the Company
and James F. Cragg ("you" or "your"), dated December 1997 (the "Agreement").
The Company is currently involved in a restructuring which involve
negotiations with YPTel Corporation. As a result, the Company and you have
discussed your resignation as an officer and director of the Company and have
reached an agreement that you resign your employment with the Company,
including your position as a director of the Company, subject to the
following terms:
1. The term of your employment shall terminate on the later of
(i) June 30, 1999, or (ii) the signing of a definitive agreement with
YPTel Corporation and the closing of interim financing (in either the
case the "Term"), and you shall remain employed by the Company and
fulfill the obligations of your employment until the end of the Term.
2. All Signing Bonus and Performance Options (as defined in the
Agreement) ("Options") shall vest upon termination of your
employment with the Company.
3. Upon execution of this Letter Agreement, you shall be issued 38,000
shares of common stock of the Company (the "Restricted Shares"). If
you do not (i) remain employed by the Company and fulfill the
obligations of your employment until the end of the Term, or (ii)
execute a release as provided in Paragraph No. 5 below, you shall
forfeit the Restricted Shares to the Company. The Restricted Shares
shall not be resold, exchanged or transferred by you for a period of
twenty days following the termination of your employment.
4. If you (i) remain employed by the Company and fulfill the
obligations of your employment until the end of the Term, and (ii)
execute a release as provided in Paragraph No. 5 below, then:
<PAGE>
a. The exercise period for the Options ("Exercise Period") shall
extend to the date one year following the effective date of
your termination of employment with the Company and no shares
purchased under the Options may be sold, exchanged or
transferred by you during the ninety day period immediately
following the date of your termination.
b. The Company will continue to pay your Base Salary (as defined
in the Agreement) for a period of two years from the date of
the termination of your employment; and
c. You shall be entitled to a performance bonus for the calendar
year 1999, as approved by the Board of Directors of the
Company, on a pro-rata basis based upon the effective date of
your termination of employment with Company.
6. Effective upon the termination of your employment, the Company and
you shall execute a mutual release and settlement agreement
releasing each party from any and all claims by each party against
the other.
If you agree to terms provided above pertaining to the termination of
your employment with the Company, please acknowledge your agreement by
signing and returning this letter to the Company.
---------------------------------
Richard A. O'Neal, Chairman and
Chief Executive Officer
ACKNOWLEDGED AND AGREED:
/s/ James F. Cragg
- ---------------------------
James F. Cragg
Director, President and Chief Operating Officer
Date: 4/27/99
--------
<PAGE>
Exhibit 10.10
ADVANCED COMMUNICATIONS GROUP, INC.
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into on March 31,
1998, ANTHONY CAPERS, ("Employee") and Advanced Communications Group, Inc.,
(ACG) a Delaware corporation ("Company") (collectively referred to as the
"Parties"). The Company and Employee agree as follows:
1. EMPLOYMENT
In consideration of the mutual covenants and agreements contained in this
Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are acknowledged by Employee and the Company, the
Company employs Employee, and Employee accepts employment subject to the
terms and conditions of this Agreement. Unless the context otherwise clearly
requires, all references to ACG in this Agreement shall include ACG, the
Company and ACG's other subsidiaries.
2. TERM
This Agreement shall commence and become effective on the date hereof and end
on the fifth anniversary of the date hereof. Such term of employment may be
renewed for successive periods of one year thereafter upon the mutual
agreement of the Parties.
3. COMPENSATION AND OTHER BENEFITS
3.1 As compensation for his services to the Company under this Agreement,
the Company shall pay to Employee during the term of this Agreement
a base salary ("Base Salary") of $135,000 (ONE-HUNDRED THIRTY-FIVE
THOUSAND DOLLARS) per annum, payable in equal semi-monthly
installments, subject only to such payroll and withholding
deductions as may be required by law and other deductions applied
generally to employees of the Company for any employee benefit plans.
3.2 Employee shall be eligible to receive a potential cash bonus of
$35,000 (THIRTY-FIVE THOUSAND DOLLARS) to be based upon his
performance and a payment schedule as determined by the
Compensation Committee of the Board of Directors ("Compensation
Committee") of ACG. Employee agrees that the decision as to
whether to award a Bonus and the percentage amount thereof will be
made by the Compensation Committee and will be based upon the
criteria they set.
<PAGE>
3.3 Employee will be entitled to two weeks of paid vacation annually
during the term of this Agreement.
3.4 Employee will be awarded 70,000 stock options to acquire common
stock in Advanced Communications Group, Inc. at an exercise price
equal to the initial public offering price per share. The options
shall have a term of ten years and shall become exercisable in
33 1/3% increments on each anniversary date of Employee's employment
hereunder. Accordingly, the options shall become fully vested three
years from the date of grant. The options shall, except as provided
herein, be subject to such terms and conditions as may be prescribed
by the Compensation Committee.
3.5 Employee shall receive benefits commensurate with his level of
employment under any health plan of ACG.
4. DUTIES AND EXTENT OF SERVICE
Employee shall serve as VICE PRESIDENT /BUSINESS MARKETS of Advanced
Communications Group, Inc. Employee agrees to perform the duties incidental
to his positions, as determined from time to time by the Chief Executive
Officer and Executive Vice President of Sales & Marketing of Advanced
Communications Group, Inc. Employee shall devote such time, attention, and
energy to the business of ACG as are required to perform his duties and
responsibilities hereunder and shall not during the term of this Agreement be
engaged, directly or indirectly, in any other business activity if pursued
for gain, profit, or other pecuniary advantage without the prior written
consent of the Chief Executive Officer of Advanced Communications Group, Inc.
In any event, after the date hereof, Employee shall not take any action
inconsistent with Employee's relationship and responsibilities as an employee
of the Company and Advanced Communications Group, Inc., or take any action
which is intended, or may be reasonably expected, to harm the reputation,
business, prospects, or operations of ACG.
5. PROTECTION OF CONFIDENTIAL INFORMATION AND EMPLOYEE NON-COMPETITION
5.1 Employee recognizes and acknowledges that he will have access to
certain confidential information and trade secrets of ACG
("Confidential Information"). Such Confidential Information
includes, but is not limited to: customer names; contracts;
products purchased by customers; production
-2-
<PAGE>
capabilities and processes; customer account and credit data;
referral sources; computer programs and software; names and
information relating to potential acquisition candidates;
financing sources and other business relationships; information
relating to confidential or secret designs, processes, formulae,
plans, devices, or materials of ACG's business and marketing plans,
confidential information and trade secrets relating to the
distribution and marketing of ACG's products and services; patents
pending; confidential characteristics of ACG's products and services;
customer comments; troubleshooting requirements; product and service
development; market development; manuals written by ACG; management,
accounting, and reporting systems, procedures, and programs; off net
contracts, leases, marketing agreements, sales employee compensation
information, plans, and programs; marketing and financial analysis,
plans, research, programs, and related information and data; forms,
agreements, and legal documents; regulatory and supervisory reports;
correspondence; statements; corporate books and records; and other
similar information.
5.2 Employee acknowledges and agrees that this Confidential Information
constitutes valuable, special, and unique property of ACG.
5.3 Employee will not, at any time during or after the term of this
Agreement or his employment with ACG, disclose any Confidential
Information to any person, firm, corporation, association, or other
entity for any reason or purpose.
5.4 The foregoing restrictions shall not apply to: (a) any information
in Employee's possession before its disclosure to Employee by ACG;
or (b) information that is or shall lawfully be published or become
part of the general knowledge through no act or omission of
Employee. The Confidential Information disclosed to Employee under
this Agreement is not within the foregoing exceptions merely
because such information is embraced by more general information
in the public domain or in Employee's possession; or merely because
portions thereof are in the public domain or in Employee's possession.
5.5 To protect the confidentiality of the Confidential Information,
Employee further agrees that while employed by ACG and for a period
of one year
-3-
<PAGE>
immediately after the termination of this Agreement or his
employment with ACG, regardless of whether such termination of
employment is voluntary or involuntary, he will not, for himself, or
on behalf of any other person, firm, partnership, company, or
corporation (i) generally compete in any manner whatsoever with ACG
or solicit, accept, divert, or take away from ACG the business of any
person, company, or business; (ii) directly or indirectly induce or
attempt to influence any employee, officer, director, consultant,
agent, vendor or other entity related to ACG to terminate his or her
employment or association in any manner whatsoever with ACG; or
(iii) engage in any commercial or technical activity involving the
development, formulation, manufacture, production, distribution,
marketing or sale of any product and services that ACG designs,
produces, manufactures, distributes, markets or sells during the
term of this Agreement or Employee's employment with ACG. The
prescribed territory in which Employee shall not compete with ACG as
outlined in this Paragraph 5.5 shall consist of all of those areas
of the United States in which ACG is doing business at the time
of Employee's termination of employment.
5.6 Employee understands and acknowledges that due to the unique nature
of the products and services provided by ACG and the need for sales
personnel to have a relatively high degree of technical knowledge
concerning these products and services, employment by ACG for sales,
including the special training, knowledge, and confidential
information that will be acquired in the course of such employment,
will give Employee distinct and substantial advantages for potential
sales activities concerning such products and services. Employee
further understands and acknowledges that: because of the definition
of products and services covered by this Agreement, the highly
specialized nature of those products and services, the limited size
and number of business entities in the business of developing and/or
selling those products and services, and the much more numerous
opportunities for Employee to work in his trade with respect to
products and services not covered by this Agreement, the limitations
as to time and geographic area contained in Paragraph 5.5 are
reasonable and are not unduly onerous on Employee. Employee
therefore agrees that the limitations as to time, geographic area,
and scope of activity contained in Paragraph 5.5 do not impose a
greater restraint than is necessary to protect the Confidential
Information, goodwill, and other business interests of ACG. Employee
also
-4-
<PAGE>
agrees that in light of the facts acknowledged above, the
substantial investment of ACG in developing its business and
providing special training to Employee, and the certain and
substantial harm that ACG would suffer if Employee were to engage in
any of the activities described in Paragraph 5.5, ACG's need for the
protection afforded by Paragraph 5.5 is greater than any hardship
Employee might experience by complying with its terms. Employee also
agrees that, if any provision of the covenant set forth in Paragraph
5.5 is found to be invalid in part or whole, ACG may elect, but
shall not be required, to have such provision reformed, whether as
to time, geographic area, scope of activity, or otherwise, as and
to the extent required for its validity under applicable law, and,
as so reformed, such provisions shall be enforceable.
5.7 Employee acknowledges that a violation or attempted violation on his
part of any provision in this Paragraph 5 will cause irreparable
damage to ACG. Accordingly, in the event of a breach or threatened
breach by Employee of the provisions of this Paragraph 5, Employee
agrees that ACG shall be entitled as a matter of right to an
injunction, out of any court of competent jurisdiction, restraining
any violation or further violation of such agreements by Employee or
his agents, without showing any evidence of actual monetary loss
resulting from such breach, including, but not limited to, restraining
Employee from using or disclosing, in whole or in part, such
Confidential Information or trade secrets; rendering any services to
any person, firm, corporation, or other entity to whom any of such
information may have been disclosed or is threatened to be disclosed;
and/or violating the non-competition provision. Nothing herein shall
be construed as prohibiting ACG from pursuing any other remedies
available to it for such breach or threatened breach, including the
recovery of damages and attorney's fees from Employee.
-5-
<PAGE>
6. TERMINATION OF EMPLOYMENT
6.1 Employee's employment under this Agreement shall terminate on the
occurrence of any of the following events:
(a) END OF TERM: If the term of employment under the Agreement or
any term of renewal ends.
(b) DEATH OR DISABILITY OF EMPLOYEE: If Employee dies or becomes
disabled such that he no longer is reasonably able to perform
his duties as contemplated by this Agreement, the Company shall
pay to Employee, or to the estate of Employee if he dies, that
part of his Base Salary which would otherwise be payable to
Employee through the end of the month in which his death or
disability occurs, after giving effect to accrued sick leave
benefits and accrued vacation time, if any. In the event of
death of the employee, the estate of the employee shall have
the right to exercise all options in which the employee was
vested at the time of this death, until the expiration of those
options under the terms of the option award. Upon such payment,
as well as applicable insurance benefits, if any, all
obligations of ACG to the Employee or his estate shall be fully
satisfied, and this Agreement shall terminate.
(c) RESIGNATION OF EMPLOYEE: If Employee resigns prior to the end
of the term of this Agreement, this Agreement shall terminate
immediately, and the Company shall pay to Employee that part
of his Base Salary which would otherwise be payable to Employee
through the effective date of his resignation. Upon such
payment, all obligations in any manner whatsoever of ACG to
Employee shall be fully satisfied.
(d) CHANGE IN OWNERSHIP, MANAGEMENT, OR EMPLOYEE'S
RESPONSIBILITIES: If there is a change in the ownership or
management of the Company, and either of these changes
significantly alters Employee's job responsibilities or
compensation, Employee may resign from his positions within 60
days of such a change. If Employee resigns pursuant to this
paragraph, the Company will continue to provide Employee with
his monthly compensation for a period of one year after the
initial date of any such change. Employee is not entitled to
-6-
<PAGE>
receive any Bonus if he resigns as provided in this paragraph.
For the period after Employee's resignation during which
Employee will be paid. Employee will not have any authority to
act on behalf of ACG.
(e) TERMINATION BY THE COMPANY "WITH CAUSE." If Employee (i)
violates any provision of this Agreement; (ii) fails to perform
the services required of him pursuant to this Agreement; (iii)
commits acts of fraud or dishonesty against ACG; (iv) is
convicted of a crime other than a routine traffic violation;
and/or (v) violates any policies of ACG as outlined in any ACG
policy handbook, the Company may terminate the employment of
Employee with cause. If Employee is terminated "with cause,"
Employee shall not be entitled to receive any further salary
or benefits under this Agreement other than payment for
that part of Employee's compensation that would otherwise be
payable to Employee through the last date of his employment
with ACG. Upon such payment, all obligations of ACG to Employee
shall be fully satisfied, and this Agreement will terminate.
Employee shall not be entitled to receive any Bonus or accrued
vacation pay if his termination is "with cause."
(f) TERMINATION BY THE COMPANY WITHOUT CAUSE. In the event the
Company terminates Employee's employment for any reason other
than as described in (e) above, Employee shall be entitled to
that part of the Base Salary and benefits payable to Employee
through the last date of his employment and the Base Salary
shall continue thereafter for a period of six (6) months from
termination.
6.2 Termination of this Agreement shall not relieve Employee of any
continuing obligations expressly provided in this Agreement,
including, without limitation, those set forth in Paragraphs 5.1
through 5.6.
7. RETURN OF ACG PROPERTY
7.1 All data, drawings, documents, contracts, computerized data,
information printouts, and tapes, tape recordings, documents,
data, accounting records, personnel files, computer terminals,
equipment, and other records and written material prepared or
compiled by Employee or furnished to Employee while in the
employ of ACG shall be the sole and exclusive property of ACG,
-7-
<PAGE>
and none of such data, drawings or other records and written
material, or copies thereof, shall be retained by Employee upon
termination of his employment. This ACG property shall not be
removed from ACG premises without ACG's prior written consent.
7.2 Upon termination of this Agreement or whenever requested by ACG,
Employee immediately shall deliver to ACG all of the ACG property
or any of ACG's documents in Employee's possession or under
Employee's control, including, but not limited to, all documents
or data, Confidential Information, accounting records, computer
terminals, data, discs, printouts and tapes, accounting machines,
and all office furniture and fixtures, supplies, equipment and other
personal property placed in the office of ACG. No copies of any such
data shall be retained by Employee.
8. NOTICES
Any notice required or permitted to be given under this Agreement shall be in
writing and addressed to Employee at 14199 CROCUS WAY, ROSEMONT, MN, 55068
Attn: ANTHONY CAPERS, and to the Company, c/o JAMES F. CRAGG, 390 WOODS MILL
ROAD, CHESTERFIELD, MO 63017, or to such other address as either party shall
designate by written notice to the other. Notices may be sent by messenger or
by registered or certified mail, postage prepaid, addressed to the party or
parties to be notified, with return receipt requested. Notices sent by
messenger shall be deemed received upon their actual receipt of the party to
whom they are directed. Notices sent by registered or certified mail shall be
deemed received on the third day following their deposit with the United
States Postal Service.
9. ARBITRATION
Exclusive jurisdiction with respect to any dispute, controversy, or claim
brought by Employee concerning the subject matter contained in this
Agreement, including, but not limited to, Employee's employment, termination
from, and/or affiliation with ACG, shall be settled by arbitration in St.
Louis, MO, in accordance with the Employment Dispute Resolution Rules of the
American Arbitration Association, and judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction. In reaching his
or her decision, the arbitrator shall have no authority to change or modify
any provision of this Agreement. Any and all changes that may be made for the
cost of the arbitration and the fees and
-8-
<PAGE>
expenses of the arbitrator shall be borne equally by the parties; attorneys'
fees and witness expenses shall be borne by the party incurring them.
Jurisdiction with respect to any dispute, controversy, or claim brought by
ACG, concerning any subject matter contained in this Agreement shall rest in
state or federal courts sitting in the State of Missouri. In addition, ACG,
at its election, may submit any dispute to arbitration in accord with the
procedures set forth in this section.
10. MISCELLANEOUS
10.1 The rights and obligations of ACG under this Agreement shall inure
to the benefit of and shall be binding upon the successors and
assigns of ACG. This Agreement shall be binding upon the Employee
and his agents, heirs, executors, administrators and legal
representatives. The rights and obligations of Employee hereunder
shall not be assignable by Employee.
10.2 This Agreement shall be governed by and construed in accordance
with the laws of the State of Missouri.
10.3 This Agreement may be executed in multiple counterparts, each of
which shall be deemed an original and all of which shall constitute
one instrument.
10.4 This Agreement contains the entire agreement of the parties
pertaining to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations and discussions, whether
oral or written, and there are no other warranties, representations,
covenants or agreements among ACG, the Company, and the Employee in
connection with the subject matter hereof.
10.5 The waiver by ACG of a breach of any provision of this Agreement by
Employee shall not operate or be construed as a waiver by ACG of
any subsequent breach by Employee.
10.6 If a court of competent jurisdiction shall adjudge to be invalid
any clause, sentence, subparagraph, paragraph or section of this
Agreement, such judgment or decree shall not affect, impair,
invalidate, or nullify the remainder of this Agreement, but the
effect thereof shall be confined to the
-9-
<PAGE>
clause, sentence, subparagraph, paragraph, or section so adjudged
to be invalid.
The parties have executed this Agreement to be effective as of the day
and year first above written.
"COMPANY" "EMPLOYEE"
ADVANCE COMMUNICATIONS GROUP, INC.
/s/ Jim Cragg /s/ Anthony G. Capers
- ----------------------------- -------------------------------
Jim Cragg Date 03/31/98 Anthony Capers Date 04/01/98
Executive Vice President
<PAGE>
Exhibit 10.11
[LOGO]
December 6, 1998
Mr. Anthony Capers
14199 Crocus Way
Rosemont, MN 55068
Re: Modification of Employment Agreement
Dear Tony:
I am writing to confirm the modifications to your existing Employment
Agreement with ACG, dated March 31, 1998. We have agreed to make the
following changes:
- DUTIES. Effective December 6, 1998, your title will be changed to
Senior Vice President - Business Markets.
- COMPENSATION. Your annual compensation will increase to $160,000 per
year, payable in equal installments on ACG's customary pay dates.
- BONUS. You will be eligible for a bonus of up to $50,000 on the same
terms as set forth in your existing Employment Agreement.
- OPTIONS. As you know, your options have already been modified in
accordance with a prior agreement.
Unless otherwise modified in writing, all other terms in your original
Employment Agreement are intended to remain in effect. To accept these
changes, please sign in the space provided below, and return the original of
this letter to me. Thank you for your cooperation, and we appreciate the
contributions you make to ACG.
Sincerely,
/s/ James F. Cragg
-----------------------------------
James F. Cragg
President and Chief Operating Officer
ACCEPTED AND AGREED TO:
/s/ Anthony G. Capers
- ------------------------
Anthony Capers
Dated: 12/6/98
------------------
<PAGE>
Exhibit 10.12
[LOGO]
May 5, 1999
Mr. Anthony G. Capers
14199 Crocus Way
Rosemont, MN 55068
RE: Second Modification of Employment Agreement
Dear Tony:
I am writing to confirm additional modifications to your Employment
Agreement with ACG. More specifically, our new arrangement will modify both
your existing Employment Agreement with ACG, dated March 31, 1998, as well as
that certain letter agreement dated December 6, 1998, which expressly modifies
the original Employment Agreement. We have agreed to make the following
changes:
- DUTIES. Effective the later of (i) June 30, 1999, or (ii) the signing
of a definitive agreement with YPTel Corporation and the closing of
interim financing (the "Effective Date"), your title will be changed
to President and Chief Operating Officer.
- COMPENSATION. Your annual compensation will increase to a base salary
of $200,000 per year, payable in equal installments on ACG's
customary pay dates.
- BONUS. You will receive a prorated portion (calculated in proportion
from January 1, 1999 until the Effective Date) of the $50,000 bonus
referenced in your December agreement. You will also be eligible for
a prorated (with the Effective Date as the date of measurement for
the bonus year) bonus of $175,000 per year on the same terms set
forth in your current Employment Agreement. Upon the earlier of the
sale or cessation of operations of the CLEC, you will receive a
$250,000 bonus.
Unless otherwise modified in writing, all other terms in your original
Employment Agreement are intended to remain in effect. To accept these
changes, please sign in the space provided below and return the original of
this letter to me. Thank you for your cooperation, and we appreciate the
contributions you make to ACG.
Sincerely,
/s/ Richard A. O'Neal
-------------------------------------------
Richard A. O'Neal
Chairman and Chief Executive Officer
ACCEPTED AND AGREED TO:
/s/ Anthony G. Capers
- -----------------------------
Anthony G. Capers 5/7/99
<PAGE>
EXHIBIT 10.13
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into on November 19,
1999, by and between Michael A. Pruss ("Employee") and Advanced Communications
Group, Inc., a Delaware corporation ("Company") (sometimes collectively referred
to as the "Parties"). The Company and Employee agree as follows:
1. EMPLOYMENT.
In consideration of the mutual covenants and agreements contained in this
Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are acknowledged by Employee and the Company, the Company
employs Employee, and Employee accepts employment subject to the terms and
conditions of this Agreement.
2. TERM.
This Agreement shall commence and become effective on the date hereof and end on
the second anniversary of the date hereof, subject to the termination provisions
set forth below. Such terms of employment may be renewed for successive periods
of one year thereafter upon the mutual agreement of the Parties. Provided,
however, that Employee and Company shall have the right to terminate this
Agreement by giving the other party thirty (30) days written notice of its
intent to terminate this Agreement within the scheduled expiration of any one
year term.
3. COMPENSATION AND OTHER BENEFITS.
3.1 As compensation for rendering service to the Company under this
Agreement, the Company shall pay to Employee during the term of this
Agreement a base salary ("Base Salary") of $ 130,000 per annum,
payable in equal bi-weekly installments, subject only to such
payroll and withholding deductions as may be required by law and
other deductions applied generally to employees of the Company for
any employee benefit plans.
3.1.a Employee shall also be entitled to receive 50,000 options to
purchase shares of the Company's common stock. The shares are to be
issued at an exercise price equal to the fair market value of the
Company's stock on the date of this agreement. Further, employee
will be eligible to receive additional options to purchase shares of
common stock based on his performance at the sole discretion of the
compensation committee of the board of directors.
3.2 Employee shall be eligible to receive a potential cash bonus up to
50% of Employee's Base Salary ("Bonus") to be based upon performance
and a payment schedule as determined by the Compensation Committee
of the Board of Directors ("Compensation Committee") of Company.
Employee agrees that the decision as to whether to award a Bonus and
the percentage amount thereof will
<PAGE>
be made by the Compensation and will be based solely upon the
criteria they set.
3.3 Employee will be entitled to three (3) weeks of paid vacation
annually during the term of this Agreement.
3.4 If Employee agrees to relocate to the new headquarters of the
Company. The Company will provide reasonable relocation assistance
under policy terms to be communicated at a later date. If Employee
does not relocate to the new headquarters of the Company, Employee
agrees to provide transition services to the Company for not less
than ninety days from the date he advises of his decision not to
relocate.
3.5 Employee shall receive benefits commensurate with the level of
employment under any health plan of the Company.
4. Duties and Extent of Service.
Employee shall serve as Chief Financial Officer of the Company. Employee agrees
to perform the duties incidental to this position, as determined from time to
time by the Chief Executive Officer of the Company. Employee shall devote such
time, attention, and energy to the business of the Company as are required to
perform the duties and responsibilities hereunder and shall not during the term
of this Agreement be engaged, directly or indirectly, in any other business
activity if pursued for gain, profit, or other pecuniary advantage without the
prior written consent of the Chief Executive Officer of the Company. In any
event, after the date hereof, Employee shall not take any action inconsistent
with Employee's relationship and responsibilities as an employee of the Company,
or take any action which is intended, or may be reasonably expected, to harm the
reputation, business, prospects, or operations of the Company.
5. Protection of Confidential Information and Employee Non-Competition.
5.1 Employee recognizes and acknowledges that he will have access to
certain confidential information and trade secrets of the Company
("Confidential Information"). Such Confidential Information
includes, but is not limited to: customer names; contracts; products
purchased by customers; production capabilities and processes;
customer account and credit data; referral sources; computer
programs and software; names and information relating to potential
acquisition candidates; financing sources and other business
relationships; information relating to confidential or secret
designs, processes, formulae, plans, devices, or materials of the
Company's business and marketing plans, confidential information and
trade secrets relating to the distribution and marketing of the
Company's products and services; patents pending; confidential
characteristics of the Company's products and services; customer
comments; troubleshooting requirements; product and service
development; market development; manuals written by the Company,
management, accounting and reporting systems, procedures and
programs; off net contracts; leases, marketing agreements, sales
<PAGE>
employee compensation information, plans, and programs; marketing
and financial analysis, plans, research, programs, and related
information and data; forms, agreements, and legal documents;
regulatory and supervisory reports; correspondence; statements;
corporate books and records; and other similar information.
5.2 Employee acknowledges and agrees that this Confidential Information
constitutes valuable, special, and/or unique property of the
Company.
5.3 Employee will not, at any time during or after the term of this
Agreement or his employment with the Company, use or disclose any
Confidential Information to any person, firm, corporation,
association, or other entity for any reason or purpose.
5.4 The Confidential Information disclosed to Employee under this
Agreement may include information that may be contained in more
general information in the public domain or in Employee's
possession. The information does not lose its status as proprietary
merely because portions thereof are in the public domain or in
Employee's possession.
5.5 To protect the confidentiality of the Confidential Information,
Employee further agrees that while employed by the Company and for a
period of one year immediately after the termination of the
Agreement or his employment with the Company, regardless of whether
such termination of employment is voluntary of involuntary, he will
not, for himself, or on behalf of any other person, firm,
partnership, company, or corporation, either directly or indirectly
(i) solicit, accept, divert, or take away from the Company the
business of any person, company, or business who was a customer of
the Company during the term of this Agreement or to whom the Company
had made an outstanding proposal at the time of the termination of
this Agreement or Employee's employment with the Company; (ii)
induce or attempt to influence any employee, officer, director,
consultant, agent, vendor or other entity related to the Company to
terminate his or her employment or association in any manner
whatsoever with the Company; or (iii) engage in any commercial or
technical activity involving the development, formulation,
manufacture, production, distribution, marketing or sale of any
product or services that the Company designs, produces,
manufactures, distributes, markets or sells during the term of this
Agreement or Employee's employment with the Company. The prescribed
territory in which Employee shall not compete with the Company as
outlined in this Paragraph 5.5 shall consist of all of those areas
of the United States in which the Company is doing business at the
time of Employee's termination of employment.
5.6 Employee acknowledges that a violation or attempted violation on his
part of any provision in this Paragraph 5 will cause irreparable
damage to the Company. Accordingly, in the event of a breach or
threatened breach by Employee of the provisions of this Paragraph 5,
Employee agrees that, notwithstanding
<PAGE>
paragraph 9 of this Agreement, the Company shall be entitled as a
matter of right to an injunction, from any court of competent
jurisdiction, restraining any violation or further violation of
such agreements by Employee or his agents, without showing any
evidence of actual monetary loss resulting from such breach,
including, but not limited to, restraining Employee from using or
disclosing, in whole or in part, such Confidential Information or
trade secrets; rendering any services to any person, firm,
corporation, or other entity to whom any of such information
may have been disclosed or is threatened to be disclosed; and/or
violating the non-competition provision. Nothing herein shall be
construed as prohibiting the Company from pursuing any other
remedies available to it for such breach or threatened breach,
including the recovery of damages and attorneys' fees from Employee.
6. Termination of Employee.
6.1 Employee's employment under this Agreement shall terminate on the
occurrence of any of the following events:
(a) END OF TERM: If the term of employment under the Agreement or
any term of renewal ends.
(b) DEATH OR DISABILITY OF EMPLOYEE: If Employee dies or
becomes disabled such that he no longer is reasonably able
to perform his duties as contemplated by this Agreement,
the Company shall pay to Employee, or the estate of
Employee if he dies, that part of his Base Salary which
would otherwise be payable to Employee through the end of
the month in which his death or disability occurs, after
giving effect to accrued sick leave benefits and accrued
vacation time, if any. In the event of death of the
employee, the estate of the employee shall have the right
to exercise all options in which the employee was vested at
the time of his death until the expiration of those option
under the terms of the option award. Upon such payment, as
well as applicable insurance benefits, if any, all
obligations of the Company to the Employee or his estate
shall be fully satisfied, and this Agreement shall
terminate.
(c) RESIGNATION OF EMPLOYEE: If Employee resigns prior to the
end of the term of this Agreement, this Agreement shall
terminate immediately, and the Company shall pay to
Employee that part of his Base Salary which would otherwise
be payable to Employee through the effective date of his
resignation. Upon such payment, all obligations in any
manner whatsoever of the Company to Employee shall be fully
satisfied.
(d) CHANGE IN OWNERSHIP, MANAGEMENT, OR EMPLOYEE'S
RESPONSIBILITIES: If there is a substantial change in the
ownership or management of the Company, and either of these
changes significantly alters Employee's job responsibilities
or compensation, Employee may resign from his positions
<PAGE>
within 60 days of such a change. If Employee resigns pursuant
to this paragraph, the Company will continue to provide
Employee with his monthly compensation for a period of
twelve (12) months after the initial date of any such change.
For the period after Employee's resignation during which
Employee will be paid, Employee will not have any authority
to act on behalf of the Company.
(e) TERMINATION BY THE COMPANY "WITH CAUSE." If Employee (i)
violates any provision of this Agreement; (ii) fails to
perform the services required of him pursuant to this
Agreement; (iii) commits acts of fraud or dishonesty
against the Company; (iv) is convicted of or pleads guilty
to a crime other than a routine traffic violation; (v)
violates any policies of the Company as outlined in any
Company policy handbook; (vi) fails to perform at the level
expected by the Company; and/or (vii) commits an act or
omission that is deemed by the Company to cast doubt upon
the Employee's fitness for the position with the Company,
the Company may terminate the employment of Employee with
cause. If Employee is terminated "with cause," Employee
shall not be entitled to receive any further salary or
benefits under this Agreement other than payment for that
part of Employee's compensation that would otherwise be
payable to Employee through the last date of his employment
with the Company. Upon such payment, all obligations of
the Company to Employee shall be fully satisfied, and this
Agreement will terminate. Employee shall not be entitled
to receive any Bonus or accrued vacation pay if his
termination is "with cause."
(f) TERMINATION BY THE COMPANY WITHOUT CAUSE. In the event the
Company terminates Employee's employment for any reason other
than as described in (e) above, Employee shall be entitled to
that part of the Base Salary and benefits payable to Employee
through the last date of his employment and the Base Salary
shall continue thereafter for a period of twelve months from
termination.
6.2 Termination of this Agreement shall not relieve Employee of any
continuing obligations expressly provided in this Agreement,
including, without limitation, those set forth in Paragraphs 5.1
through 5.6.
7. RETURN OF COMPANY PROPERTY.
7.1 All data, drawings, documents, contracts, computerized data,
information printouts, and tapes, tape recordings, documents, data,
accounting records, personnel files, computer terminals, equipment,
and other records and written material prepared or compiled by
Employee or furnished to Employee while in the employ of the Company
shall be the sole and exclusive property of the Company, and none of
such data, drawings or other records and written material, or copies
thereof, shall be retained by Employee upon termination of his
<PAGE>
Employment. This Company property shall not be removed from the
Company premises without the Company's prior written consent.
7.2 Upon termination of this Agreement or whenever requested by the
Company, Employee immediately shall deliver to the Company all of
the Company property or any of the Company's documents in Employee's
possession or under Employee's control, including, but not limited
to, all documents or data, Confidential Information, accounting
records, computer terminals, data, discs, printouts and tapes,
accounting machines, and all office furniture and fixtures,
supplies, equipment, and other property placed in the office of the
Company. No copies of any such data shall be retained by Employee.
8. NOTICES.
Any notice required or permitted to be given under this Agreement shall be in
writing and addressed to Employee at 2215 Polo Parc Ct., St. Louis, Missouri
63146, Attn: Michael A. Pruss, and to the Company, c/o Richard O'Neal, 2400
Lakeview, Suite 109, Amarillo TX 79109, or to such other address as either party
shall designate by written notice to the other. Notices may be sent by messenger
or by registered or certified mail, postage prepaid, addressed to the party or
parties to be notified, with return receipt requested. Notices sent by messenger
shall be deemed received upon their actual receipt of the party to whom they are
directed. Notices sent by registered or certified mail shall be deemed received
on the third day following their deposit with the United States Postal Service.
9. ARBITRATION.
Exclusive jurisdiction with respect to any dispute, controversy, or claim
brought by Employee concerning the subject matter contained in this Agreement,
including, but not limited to, Employee's employment, termination from, and/or
affiliation with the Company, shall be settled by arbitration in Texas, in
accordance with the Employment Dispute Resolution Rules of the American
Arbitration Association, and judgment upon the award rendered by the arbitrator
may be entered in any court having jurisdiction. In reaching his or her
decision, the arbitrator shall have no authority to change or modify any
provision of this Agreement. Any and all charges that may be made for the cost
of the arbitration and the fees and expenses of the arbitrator shall be borne
equally by the parties; attorneys' fees and witness expenses shall be borne by
the party incurring them.
Jurisdiction with respect to any dispute, controversy, or claim brought by the
Company, concerning any subject matter contained in this Agreement, including,
but not limited to, the right to seek injunctive relief pursuant to paragraph
5.7, shall rest in state or federal courts sitting in the State of Texas. In
addition, the Company, at its election, may submit any dispute to arbitration in
accord with the procedures set forth in this section.
10. MISCELLANEOUS.
<PAGE>
10.1 The rights and obligations of the Company under this Agreement shall
inure to the benefit of and shall be binding upon the successors and
assigns of the Company. This Agreement shall be binding upon the
Employee and his agents, heirs, executors, administrators and legal
representatives. The rights and obligations of Employee hereunder
shall not be assignable by Employee.
10.2 This Agreement shall be governed by and construed in accordance with
the laws of the State of Texas.
10.3 This Agreement may be executed in multiple counterparts, each of
which shall be deemed an original and all of which shall constitute
one instrument.
10.4 This Agreement contains the entire agreement of the parties
pertaining to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations and discussions, whether
oral or written, and there are no other warranties, representations,
covenants or agreements among the Company, and the Employee in
connection with the subject matter hereof.
10.5 Employee hereby represents and warrants that he (a) has had an
opportunity to review this Agreement and ask the Company questions
about the Agreement, and (b) understands the meaning and effect of
each Section of this Agreement.
10.6 The waiver by the Company of a breach of any provision of this
Agreement by Employee shall not operate or be construed as a waiver
by the Company of any subsequent breach by Employee.
10.7 Use of the masculine pronoun in this Agreement is intended to
include the feminine as well.
10.8 The Employee represents and warrants that he is not a party to or
bound by any covenant or agreement which in any manner restrains or
restricts the activities of the Employee or his ability to enter
into this Agreement.
10.9 If a court of competent jurisdiction shall adjudge to be invalid any
clause, sentence, subparagraph, paragraph or section of this
Agreement, such judgment or decree shall not affect, impair,
invalidate, or nullify the remainder of this Agreement, but the
effect thereof shall be confined to the clause, sentence,
subparagraph, paragraph, or section so adjudged to be invalid.
The parties have executed this Agreement to be effective as of the day and
year first above written.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION.
"COMPANY" "EMPLOYEE"
<PAGE>
ADVANCE COMMUNICATIONS GROUP, INC.
By:
______________________________________ _____________________________
Michael A. Pruss
Its:
______________________________________
<PAGE>
Exhibit 10.29
ADVANCED COMMUNICATIONS GROUP, INC.
FORM OF SERIES N WARRANT
Total Number of Series N Warrants: 90,000 Warrant No. N-1
Number of Series N Warrants represented
by this Warrant Certificate: 30,000
This Warrant Certificate certifies that, for value received,
Robert F. Benton
is the registered holder of the number of Warrants set forth above. Each Warrant
entitles Holder, at any time or from time to time on or before the Expiration
Date, to purchase from the Company one fully paid and nonassessable share of
Common Stock at the Exercise Price, subject to adjustment as provided herein.
"COMMON STOCK" means the Common Stock, $.0001 par value per share, of the
Company, or such other class of securities as shall then represent the common
equity of the Company.
"COMPANY" means Advanced Communications Group, Inc., a Delaware
corporation.
"ELECTION TO EXERCISE" means the Election to Exercise on page 7 hereof.
"EXERCISE PRICE" means $6.96, subject to adjustment as provided in Section
3 hereof.
"EXPIRATION DATE" means 5:00 p.m. (St. Louis time) on the tenth anniversary
of the Grant Date, or, if earlier, the first anniversary of the Holder's date of
death.
"FAIR MARKET VALUE" means, on any given date, the closing price of the
shares of Common Stock, as reported on the New York Stock Exchange for such date
or such national securities exchange as may be designated by the Board or, if
Common Stock was not traded on such date, on the next preceding day on which
Common Stock was traded.
"FAMILY MEMBER" has the meaning ascribed to it in the General
Instructions to Form S-8 under the Securities Act of 1933, as the same may be
amended from time to time. For the sake of clarity, as of the date of this
Warrant Certificate, "Family Member" means any child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, former spouse, sibling, niece,
nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, including adoptive relationships, any
person sharing the employee's household (other than a tenant or employee), a
trust in which these persons have more than fifty percent of the beneficial
interests, a foundation in which these persons (or the employee) control the
management of assets, and any other entity in which these persons (or the
employee) own more than fifty percent of the voting interests.
<PAGE>
"GRANT DATE" means June 3, 1999.
"HOLDER" means the registered holder identified above of the number of
Warrants represented by this Warrant Certificate or any Permitted Transferee, to
the extent applicable.
"PERMITTED TRANSFEREE" means a Family Member who has acquired these
Warrants directly from the registered holder identified above through a gift or
a domestic relations order.
"SHAREHOLDER APPROVAL DATE" means ___________, 2000.
"WARRANTS" means the Series N Warrants represented by this Warrant
Certificate.
1. EXERCISE OF WARRANTS.
(a) Subject to Section 1(c) hereof, the Warrants evidenced by this
Warrant Certificate may be exercised in whole or in part at any time on or after
the Shareholder Approval Date and before the Expiration Date by presentation and
surrender at the office of the Company specified herein of (i) this Warrant
Certificate with the Election to Exercise duly completed and executed, and (ii)
payment of the Exercise Price as then in effect, by bank draft or cashier's
check, for the number of Warrants being exercised. If Holder at any time
exercises less than all the Warrants evidenced by this Warrant Certificate, the
number of Warrants represented by this Warrant Certificate shall be reduced to
the number of Warrants equal to the number of Warrants originally represented by
this Warrant Certificate less the cumulative number of Warrants previously
exercised.
(b) To the extent that the Warrants evidenced by this Warrant
Certificate have not been exercised at or prior to the Expiration Date, such
Warrants shall expire and the rights of Holder shall become void and of no
effect.
(c) In its discretion, the Company may permit the Holder to exercise
an Warrant through a "cashless exercise" procedure involving a broker or dealer
approved by the Company, provided that the Holder has delivered an irrevocable
notice of exercise (the "NOTICE") to the broker or dealer and such broker or
dealer agrees: (i) to sell immediately the number of shares of Common Stock
specified in the Notice to be acquired upon exercise of the Warrant in the
ordinary course of its business, (ii) to pay promptly to the Company the
aggregate exercise price (plus the amount necessary to satisfy any applicable
tax liability), and (iii) to pay to the Holder the balance of the proceeds of
the sale of such shares over the amount determined under clause (ii) of this
sentence, less applicable commissions and fees; PROVIDED, HOWEVER, that the
Company may modify the provisions of this sentence to the extent necessary to
conform the exercise of the Warrant to Regulation T under the Exchange Act. The
manner in which the Exercise Price may be paid may be subject to certain
conditions specified by the Company. No fractional shares (or cash in lieu
thereof) shall be issued upon exercise of a Warrant and the number of shares
that may be purchased upon exercise shall be rounded to the nearest number of
whole shares.
2
<PAGE>
(d) PAYMENT ALTERNATIVES FOR SECTION 16 PERSONS.
(i) Persons subject to Section 16 of the Exchange Act shall have
the unfettered right (but not the obligation) to pay the Exercise Price in
full in shares of Common Stock with a Fair Market Value (determined as of
the date of exercise of such Warrant and, where such shares are withheld
(as described in Section 1(d)(ii) below), net of the applicable Exercise
Price) at least equal to such full payment.
(ii) Common Stock used to pay the Exercise Price may be shares
that are already owned by the Holder who is subject to Section 16 of the
Exchange Act, or such Holder shall have the right but not the obligation to
direct the Company to withhold shares of Common Stock that would otherwise
have been received by such Holder upon exercise of the Warrant. It is the
intent of this Section 1(d) that the transactions described in this Section
1(d) qualify for the exemption from short-swing profit liability under
Section 16 of the Exchange Act pursuant to the "disposition to the issuer"
exemption set forth at Rule 16b-3(e) promulgated under Section 16 of the
Exchange Act.
2. RESTRICTIONS ON TRANSFER. The Warrants evidenced by this Warrant
Certificate shall not be assignable or otherwise transferable by Holder
otherwise than (i) to a Permitted Transferee; (ii) by Holder's will; or (iii)
by the laws of descent and distribution. During the lifetime of Holder, the
Warrants shall be exercisable only by Holder; after Holder's death, the
Warrants shall be exercisable only by the personal representative of Holder's
estate. Compliance with this provision is the responsibility of the Holder.
No transfer to heirs or legatees of Holder shall be effective to bind the
Company unless the Company shall have been furnished with written notice
thereof and a copy of such evidence as the Board may deem necessary to
establish the validity of the transfer and the acceptance by the transferee
or transferees of the terms and conditions hereof.
3. ANTIDILUTION ADJUSTMENTS. The number of shares of Common Stock
purchasable on the exercise of the Warrants evidenced by this Warrant
Certificate, and the Exercise Price, shall be subject to adjustment from time to
time upon the happening of certain events, as follows:
(a) MERGERS, CONSOLIDATIONS AND RECLASSIFICATIONS. In case of any
reclassification or change of outstanding securities issuable upon exercise of
the Warrants evidenced by this Warrant Certificate at any time (other than a
change in par value, or from par value to no par value, or from no par value to
par value or as a result of a subdivision or combination to which paragraph (b)
of this Section 3 applies), or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with another
corporation in which the Company is the surviving corporation and which does not
result in any reclassification or change other than a change in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination to which paragraph (b) of this Section 3
applies in the securities issuable upon exercise of this Warrant), Holder shall
have, and the Company, or such successor corporation or other entity, shall
covenant in the constituent documents effecting any of the foregoing
transactions that Holder does have, the right to obtain upon the exercise of the
Warrants evidenced by this Warrant Certificate, in lieu of each share of Common
Stock, other securities, money or other property theretofore issuable upon
exercise of a Warrant, the kind and amount of shares of stock, other securities,
money or other property receivable upon such reclassification, change,
consolidation or merger by a holder of
3
<PAGE>
the shares of Common Stock, other securities, money or other property
issuable upon exercise of a Warrant if the Warrants evidenced by this Warrant
Certificate had been exercised immediately prior to such reclassification,
change, consolidation or merger. The constituent documents effecting any such
reclassification, change, consolidation or merger shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided in paragraph (a) of this Section 3. The provisions of
paragraph (a) of this Section 3 shall similarly apply to successive
reclassifications, changes, consolidations or mergers.
(b) SUBDIVISIONS AND COMBINATIONS. If the Company shall subdivide its
shares of Common Stock into a greater number of shares (or pay to any holders of
securities of the Company a dividend payable in, or make any other distribution
of, Common Stock), the Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced, and the number of shares of Common
Stock purchasable upon exercise of the Warrants evidenced by this Warrant
Certificate shall be proportionately increased, as at the effective date of such
subdivision, dividend or distribution or if the Company shall take a record of
holders of its Common Stock for such purpose, as at such record date, whichever
is earlier. If the Company shall combine its shares of Common Stock into a
smaller number of shares, the Exercise Price in effect immediately prior to such
combination shall be proportionately increased, and the number of shares of
Common Stock purchasable upon exercise of the Warrants evidenced by this Warrant
Certificate shall be proportionately reduced, as at the effective date of such
combination, or if the Company shall take a record of holders of its Common
Stock for purposes of such combination, as at such record date, whichever is
earlier.
(c) CALCULATION OF EXERCISE PRICE. The Exercise Price in effect from
time to time shall be calculated to four decimal places and rounded to the
nearest thousandth.
4. ADJUSTMENT TO EXERCISE PRICE. Whenever the Exercise Price is required
to be adjusted as provided in Section 3, the Company shall forthwith compute the
adjusted Exercise Price and shall maintain a record setting forth such adjusted
Exercise Price and showing in reasonable detail the facts upon which such
adjustment is based.
5. NOTICES TO HOLDER. In the event:
(a) of the conveyance or sale of all or substantially all of the
assets of the Company, or of any reclassification or change of the Common Stock
or other securities issuable upon exercise of the Warrants (other than a change
in par value, or from par value to no par value, or from no par value to par
value or as a result of a subdivision or combination), or a tender offer or
exchange offer for all shares of Common Stock (or other securities issuable upon
the exercise of the Warrants); or
(b) the Company shall declare any dividend (or any other
distribution) on the Common Stock, other than regular cash dividends; or
4
<PAGE>
(c) the Company shall authorize the granting to the holders of
Common Stock of rights or warrants to subscribe for or purchase any shares of
any class or series of capital stock; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
the Company shall cause to be sent to Holder, at least 30 days prior to
the applicable record date hereinafter specified, or promptly in the case of
events for which there is no record date, a written notice stating (x) the
date for the determination of the holders of record of shares of Common Stock
(or other securities issuable upon the exercise of the Warrants) entitled to
receive any such dividends or other distribution, (y) the initial expiration
date set forth in any tender offer or exchange offer for shares of Common
Stock (or other securities issuable upon the exercise of the Warrants), or
(z) the date on which any such consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up is expected to become effective or
consummated, and the date as of which it is expected that holders of record
of shares of Common Stock (or other securities issuable upon the exercise of
the Warrants) shall be entitled to exchange such shares for securities or
other property, if any, deliverable upon such reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation or
winding up. Failure to give such notice or any defect therein shall not
affect the legality or validity of any distribution, right, option, warrant,
issuance, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up, or the vote upon any action.
6. COMPLIANCE WITH LAWS. Upon the acquisition of any shares pursuant
to the exercise of the Warrants, Holder (or Holder's estate if applicable)
will enter into such written representations, warranties and agreements as
the Company may reasonably request in order to comply with applicable
securities laws. Notwithstanding any of the other provisions hereof, Holder
agrees that he will not exercise the Warrants, and that the Company will not
be obligated to issue any shares pursuant to this Warrant Certificate, if the
exercise of the Warrants or the issuance of such shares of Common Stock would
constitute a violation by Holder or by the Company of any provision of any
law or regulation of any governmental authority.
7. COVENANTS OF THE COMPANY. The Company covenants and agrees that:
(a) Until the Expiration Date, the Company shall at all times
reserve and keep available, free from preemptive rights, out of the aggregate
of its authorized but unissued Common Stock (and other securities), for the
purpose of enabling it to satisfy any obligation to issue shares of Common
Stock (and other securities) upon the exercise of the Warrants evidenced by
this Warrant Certificate, the number of shares of Common Stock (and other
securities) issuable upon the exercise of such Warrants.
(b) All Common Stock (and other securities) which may be issued
upon exercise of the Warrants evidenced by this Warrant Certificate shall
upon issuance be validly issued, fully paid, non-assessable and free from all
taxes, liens and charges with respect to the issuance thereof.
5
<PAGE>
8. WITHHOLDING OF TAX. The Company may make such provisions as it may
deem appropriate for the withholding of any taxes which it determines is
required in connection with the Warrants.
9. NO RIGHTS AS STOCKHOLDER. Holder shall not, by virtue of holding such
Warrants, be entitled to any rights of a stockholder of the Company either at
law or in equity, and the rights of Holder are limited to those expressed
herein.
10. RESOLUTION OF DISPUTES. Holder agrees, for and on behalf of Holder
and Holder's heirs, personal representatives and successors, that the resolution
of any dispute or disagreement which may arise hereunder shall be determined by
the Board in its sole discretion and judgment, and that any such determination
and any interpretation by the Board of the terms of this Warrant Certificate
shall be final and shall be binding and conclusive, for all purposes, upon the
Company, Holder and Holder's heirs, personal representatives and successors.
11. NOTICES. All notices provided for hereunder shall be in writing and
may be given by registered or certified mail, return receipt requested, telex,
telegram, telecopier, air courier guaranteeing overnight delivery of personal
delivery, if to Holder at the following address:
Robert F. Benton
350 B Gulf of Mexico Dr., Unit 236
Longboat Key, FL 34228
and, if to the Company:
Advanced Communications Group, Inc.
390 South Woods Mill Road, Suite 260
St. Louis, Missouri 63017
Attention: Secretary
Telecopier: (314) 469-3539
12. GOVERNING LAW. This Warrant Certificate shall be governed by and
construed in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be executed this ____ day of _____________, 2000 by its Chairman of the Board
and Chief Executive Officer, thereunto duly authorized.
ADVANCED COMMUNICATIONS GROUP, INC.
By:
------------------------------------------
Richard O'Neal, Chairman of the Board and
Chief Executive Officer
6
<PAGE>
ELECTION TO EXERCISE
[To be executed on exercise of the Warrants evidenced by this Warrant
Certificate]
TO: Advanced Communications Group, Inc.
The undersigned, the holder of the Warrants evidenced by the attached
Warrant Certificate, hereby irrevocably elects to exercise _______ Warrants,
and herewith makes payment of______________________($_______) representing
the aggregate Exercise Price thereof, and requests that the certificate
representing the securities issuable hereunder be issued in the name of
______________________________________ and delivered to
______________________, whose address is _____________________________________.
Dated: ___________ --------------------------------------------
-------------------------------------------
Signature(s) of Registered Holder(s)
NOTE: THE ABOVE SIGNATURE(S) MUST CORRESPOND WITH THE NAME AS WRITTEN ON THE
FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER.
7
<PAGE>
Exhibit 10.30
ADVANCED COMMUNICATIONS GROUP, INC.
FORM OF SERIES N WARRANT
Total Number of Series N Warrants: 90,000 Warrant No. N-2
Number of Series N Warrants represented
by this Warrant Certificate: 30,000
This Warrant Certificate certifies that, for value received,
Rod K. Cutsinger
is the registered holder of the number of Warrants set forth above. Each Warrant
entitles Holder, at any time or from time to time on or before the Expiration
Date, to purchase from the Company one fully paid and nonassessable share of
Common Stock at the Exercise Price, subject to adjustment as provided herein.
"COMMON STOCK" means the Common Stock, $.0001 par value per share, of the
Company, or such other class of securities as shall then represent the common
equity of the Company.
"COMPANY" means Advanced Communications Group, Inc., a Delaware
corporation.
"ELECTION TO EXERCISE" means the Election to Exercise on page 7 hereof.
"EXERCISE PRICE" means $6.96, subject to adjustment as provided in Section
3 hereof.
"EXPIRATION DATE" means 5:00 p.m. (St. Louis time) on the tenth anniversary
of the Grant Date, or, if earlier, the first anniversary of the Holder's date of
death.
"FAIR MARKET VALUE" means, on any given date, the closing price of the
shares of Common Stock, as reported on the New York Stock Exchange for such
date or such national securities exchange as may be designated by the Board
or, if Common Stock was not traded on such date, on the next preceding day on
which Common Stock was traded.
"FAMILY MEMBER" has the meaning ascribed to it in the General
Instructions to Form S-8 under the Securities Act of 1933, as the same may be
amended from time to time. For the sake of clarity, as of the date of this
Warrant Certificate, "Family Member" means any child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, former spouse, sibling, niece,
nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, including adoptive relationships, any
person sharing the employee's household (other than a tenant or employee), a
trust in which these persons have more than fifty percent of the beneficial
interests, a foundation in which these persons (or the employee) control the
management of assets, and any other entity in which these persons (or the
employee) own more than fifty percent of the voting interests.
1
<PAGE>
"GRANT DATE" means June 3, 1999.
"HOLDER" means the registered holder identified above of the number of
Warrants represented by this Warrant Certificate or any Permitted Transferee, to
the extent applicable.
"PERMITTED TRANSFEREE" means a Family Member who has acquired these
Warrants directly from the registered holder identified above through a gift or
a domestic relations order.
"SHAREHOLDER APPROVAL DATE" means ___________, 2000.
"WARRANTS" means the Series N Warrants represented by this Warrant
Certificate.
1. EXERCISE OF WARRANTS.
(a) Subject to Section 1(c) hereof, the Warrants evidenced by this
Warrant Certificate may be exercised in whole or in part at any time on or after
the Shareholder Approval Date and before the Expiration Date by presentation and
surrender at the office of the Company specified herein of (i) this Warrant
Certificate with the Election to Exercise duly completed and executed, and (ii)
payment of the Exercise Price as then in effect, by bank draft or cashier's
check, for the number of Warrants being exercised. If Holder at any time
exercises less than all the Warrants evidenced by this Warrant Certificate, the
number of Warrants represented by this Warrant Certificate shall be reduced to
the number of Warrants equal to the number of Warrants originally represented by
this Warrant Certificate less the cumulative number of Warrants previously
exercised.
(b) To the extent that the Warrants evidenced by this Warrant
Certificate have not been exercised at or prior to the Expiration Date, such
Warrants shall expire and the rights of Holder shall become void and of no
effect.
(c) In its discretion, the Company may permit the Holder to exercise
an Warrant through a "cashless exercise" procedure involving a broker or dealer
approved by the Company, provided that the Holder has delivered an irrevocable
notice of exercise (the "NOTICE") to the broker or dealer and such broker or
dealer agrees: (i) to sell immediately the number of shares of Common Stock
specified in the Notice to be acquired upon exercise of the Warrant in the
ordinary course of its business, (ii) to pay promptly to the Company the
aggregate exercise price (plus the amount necessary to satisfy any applicable
tax liability), and (iii) to pay to the Holder the balance of the proceeds of
the sale of such shares over the amount determined under clause (ii) of this
sentence, less applicable commissions and fees; PROVIDED, HOWEVER, that the
Company may modify the provisions of this sentence to the extent necessary to
conform the exercise of the Warrant to Regulation T under the Exchange Act. The
manner in which the Exercise Price may be paid may be subject to certain
conditions specified by the Company. No fractional shares (or cash in lieu
thereof) shall be issued upon exercise of a Warrant and the number of shares
that may be purchased upon exercise shall be rounded to the nearest number of
whole shares.
2
<PAGE>
(d) PAYMENT ALTERNATIVES FOR SECTION 16 PERSONS.
(i) Persons subject to Section 16 of the Exchange Act shall have
the unfettered right (but not the obligation) to pay the Exercise Price in
full in shares of Common Stock with a Fair Market Value (determined as of
the date of exercise of such Warrant and, where such shares are withheld
(as described in Section 1(d)(ii) below), net of the applicable Exercise
Price) at least equal to such full payment.
(ii) Common Stock used to pay the Exercise Price may be shares
that are already owned by the Holder who is subject to Section 16 of the
Exchange Act, or such Holder shall have the right but not the obligation to
direct the Company to withhold shares of Common Stock that would otherwise
have been received by such Holder upon exercise of the Warrant. It is the
intent of this Section 1(d) that the transactions described in this Section
1(d) qualify for the exemption from short-swing profit liability under
Section 16 of the Exchange Act pursuant to the "disposition to the issuer"
exemption set forth at Rule 16b-3(e) promulgated under Section 16 of the
Exchange Act.
2. RESTRICTIONS ON TRANSFER. The Warrants evidenced by this Warrant
Certificate shall not be assignable or otherwise transferable by Holder
otherwise than (i) to a Permitted Transferee; (ii) by Holder's will; or (iii) by
the laws of descent and distribution. During the lifetime of Holder, the
Warrants shall be exercisable only by Holder; after Holder's death, the Warrants
shall be exercisable only by the personal representative of Holder's estate.
Compliance with this provision is the responsibility of the Holder. No transfer
to heirs or legatees of Holder shall be effective to bind the Company unless the
Company shall have been furnished with written notice thereof and a copy of such
evidence as the Board may deem necessary to establish the validity of the
transfer and the acceptance by the transferee or transferees of the terms and
conditions hereof.
3. ANTIDILUTION ADJUSTMENTS. The number of shares of Common Stock
purchasable on the exercise of the Warrants evidenced by this Warrant
Certificate, and the Exercise Price, shall be subject to adjustment from time to
time upon the happening of certain events, as follows:
(a) MERGERS, CONSOLIDATIONS AND RECLASSIFICATIONS. In case of any
reclassification or change of outstanding securities issuable upon exercise of
the Warrants evidenced by this Warrant Certificate at any time (other than a
change in par value, or from par value to no par value, or from no par value to
par value or as a result of a subdivision or combination to which paragraph (b)
of this Section 3 applies), or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with another
corporation in which the Company is the surviving corporation and which does not
result in any reclassification or change other than a change in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination to which paragraph (b) of this Section 3
applies in the securities issuable upon exercise of this Warrant), Holder shall
have, and the Company, or such successor corporation or other entity, shall
covenant in the constituent documents effecting any of the foregoing
transactions that Holder does have, the right to obtain upon the exercise of the
Warrants evidenced by this Warrant Certificate, in lieu of each share of Common
Stock, other securities, money or other property theretofore issuable upon
exercise of a Warrant, the kind and amount of shares of stock, other securities,
money or other property receivable upon such reclassification, change,
consolidation or merger by a holder of the shares of Common Stock, other
securities, money or other property issuable upon exercise of
3
<PAGE>
a Warrant if the Warrants evidenced by this Warrant Certificate had been
exercised immediately prior to such reclassification, change, consolidation
or merger. The constituent documents effecting any such reclassification,
change, consolidation or merger shall provide for adjustments which shall be
as nearly equivalent as may be practicable to the adjustments provided in
paragraph (a) of this Section 3. The provisions of paragraph (a) of this
Section 3 shall similarly apply to successive reclasifications, changes,
consolidations or mergers.
(b) SUBDIVISIONS AND COMBINATIONS. If the Company shall subdivide
its shares of Common Stock into a greater number of shares (or pay to any
holders of securities of the Company a dividend payable in, or make any other
distribution of, Common Stock), the Exercise Price in effect immediately prior
to such subdivision shall be proportionately reduced, and the number of shares
of Common Stock purchasable upon exercise of the Warrants evidenced by this
Warrant Certificate shall be proportionately increased, as at the effective date
of such subdivision, dividend or distribution or if the Company shall take a
record of holders of its Common Stock for such purpose, as at such record date,
whichever is earlier. If the Company shall combine its shares of Common Stock
into a smaller number of shares, the Exercise Price in effect immediately prior
to such combination shall be proportionately increased, and the number of shares
of Common Stock purchasable upon exercise of the Warrants evidenced by this
Warrant Certificate shall be proportionately reduced, as at the effective date
of such combination, or if the Company shall take a record of holders of its
Common Stock for purposes of such combination, as at such record date, whichever
is earlier.
(c) CALCULATION OF EXERCISE PRICE. The Exercise Price in effect from
time to time shall be calculated to four decimal places and rounded to the
nearest thousandth.
4. ADJUSTMENT TO EXERCISE PRICE. Whenever the Exercise Price is required
to be adjusted as provided in Section 3, the Company shall forthwith compute the
adjusted Exercise Price and shall maintain a record setting forth such adjusted
Exercise Price and showing in reasonable detail the facts upon which such
adjustment is based.
5. NOTICES TO HOLDER. In the event:
(a) of the conveyance or sale of all or substantially all of the
assets of the Company, or of any reclassification or change of the Common Stock
or other securities issuable upon exercise of the Warrants (other than a change
in par value, or from par value to no par value, or from no par value to par
value or as a result of a subdivision or combination), or a tender offer or
exchange offer for all shares of Common Stock (or other securities issuable upon
the exercise of the Warrants); or
(b) the Company shall declare any dividend (or any other
distribution) on the Common Stock, other than regular cash dividends; or
(c) the Company shall authorize the granting to the holders of Common
Stock of rights or warrants to subscribe for or purchase any shares of any class
or series of capital stock; or
4
<PAGE>
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
the Company shall cause to be sent to Holder, at least 30 days prior to the
applicable record date hereinafter specified, or promptly in the case of events
for which there is no record date, a written notice stating (x) the date for the
determination of the holders of record of shares of Common Stock (or other
securities issuable upon the exercise of the Warrants) entitled to receive any
such dividends or other distribution, (y) the initial expiration date set forth
in any tender offer or exchange offer for shares of Common Stock (or other
securities issuable upon the exercise of the Warrants), or (z) the date on which
any such consolidation, merger, conveyance, transfer, dissolution, liquidation
or winding up is expected to become effective or consummated, and the date as of
which it is expected that holders of record of shares of Common Stock (or other
securities issuable upon the exercise of the Warrants) shall be entitled to
exchange such shares for securities or other property, if any, deliverable upon
such reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up. Failure to give such notice or any defect therein
shall not affect the legality or validity of any distribution, right, option,
warrant, issuance, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up, or the vote upon any action.
6. COMPLIANCE WITH LAWS. Upon the acquisition of any shares pursuant to
the exercise of the Warrants, Holder (or Holder's estate if applicable) will
enter into such written representations, warranties and agreements as the
Company may reasonably request in order to comply with applicable securities
laws. Notwithstanding any of the other provisions hereof, Holder agrees that he
will not exercise the Warrants, and that the Company will not be obligated to
issue any shares pursuant to this Warrant Certificate, if the exercise of the
Warrants or the issuance of such shares of Common Stock would constitute a
violation by Holder or by the Company of any provision of any law or regulation
of any governmental authority.
7. COVENANTS OF THE COMPANY. The Company covenants and agrees that:
(a) Until the Expiration Date, the Company shall at all times reserve
and keep available, free from preemptive rights, out of the aggregate of its
authorized but unissued Common Stock (and other securities), for the purpose of
enabling it to satisfy any obligation to issue shares of Common Stock (and other
securities) upon the exercise of the Warrants evidenced by this Warrant
Certificate, the number of shares of Common Stock (and other securities)
issuable upon the exercise of such Warrants.
(b) All Common Stock (and other securities) which may be issued upon
exercise of the Warrants evidenced by this Warrant Certificate shall upon
issuance be validly issued, fully paid, non-assessable and free from all taxes,
liens and charges with respect to the issuance thereof.
8. WITHHOLDING OF TAX. The Company may make such provisions as it may
deem appropriate for the withholding of any taxes which it determines is
required in connection with the Warrants.
5
<PAGE>
9. NO RIGHTS AS STOCKHOLDER. Holder shall not, by virtue of holding such
Warrants, be entitled to any rights of a stockholder of the Company either at
law or in equity, and the rights of Holder are limited to those expressed
herein.
10. RESOLUTION OF DISPUTES. Holder agrees, for and on behalf of Holder
and Holder's heirs, personal representatives and successors, that the resolution
of any dispute or disagreement which may arise hereunder shall be determined by
the Board in its sole discretion and judgment, and that any such determination
and any interpretation by the Board of the terms of this Warrant Certificate
shall be final and shall be binding and conclusive, for all purposes, upon the
Company, Holder and Holder's heirs, personal representatives and successors.
11. NOTICES. All notices provided for hereunder shall be in writing and
may be given by registered or certified mail, return receipt requested, telex,
telegram, telecopier, air courier guaranteeing overnight delivery of personal
delivery, if to Holder at the following address:
Rod K. Cutsinger
4 Briarwood Ct.
Houston, TX 77019
and, if to the Company:
Advanced Communications Group, Inc.
390 South Woods Mill Road, Suite 260
St. Louis, Missouri 63017
Attention: Chairman and Chief Executive Officer
Telecopier: (314) 530-9432
12. GOVERNING LAW. This Warrant Certificate shall be governed by and
construed in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
executed this ___ day of ___________, 2000 by its Chairman of the Board and
Chief Executive Officer, thereunto duly authorized.
ADVANCED COMMUNICATIONS GROUP, INC.
By:
-------------------------------------------
Richard O'Neal, Chairman of the Board and
Chief Executive Officer
6
<PAGE>
ELECTION TO EXERCISE
[To be executed on exercise of the Warrants evidenced by this
Warrant Certificate]
TO: Advanced Communications Group, Inc.
The undersigned, the holder of the Warrants evidenced by the attached
Warrant Certificate, hereby irrevocably elects to exercise _________ Warrants,
and herewith makes payment of_____________________ ($_________) representing
the aggregate Exercise Price thereof, and requests that the certificate
representing the securities issuable hereunder be issued in the name of
______________________________________ and delivered to_________________
______________________________________, whose address is __________________
____________________________________________________________.
Dated:
_____________________________
_____________________________________
Signature(s) of Registered Holder(s)
NOTE: THE ABOVE SIGNATURE(S) MUST CORRESPOND WITH THE NAME AS WRITTEN ON THE
FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER.
7
<PAGE>
Exhibit 10.31
ADVANCED COMMUNICATIONS GROUP, INC.
FORM OF SERIES N WARRANT
Total Number of Series N Warrants: 90,000 Warrant No. N-3
Number of Series N Warrants represented
by this Warrant Certificate: 30,000
This Warrant Certificate certifies that, for value received,
Marvin C. Moses
is the registered holder of the number of Warrants set forth above. Each Warrant
entitles Holder, at any time or from time to time on or before the Expiration
Date, to purchase from the Company one fully paid and nonassessable share of
Common Stock at the Exercise Price, subject to adjustment as provided herein.
"COMMON STOCK" means the Common Stock, $.0001 par value per share, of the
Company, or such other class of securities as shall then represent the common
equity of the Company.
"COMPANY" means Advanced Communications Group, Inc., a Delaware
corporation.
"ELECTION TO EXERCISE" means the Election to Exercise on page 7 hereof.
"EXERCISE PRICE" means $6.96, subject to adjustment as provided in Section
3 hereof.
"EXPIRATION DATE" means 5:00 p.m. (St. Louis time) on the tenth anniversary
of the Grant Date, or, if earlier, the first anniversary of the Holder's date of
death.
"FAIR MARKET VALUE" means, on any given date, the closing price of the
shares of Common Stock, as reported on the New York Stock Exchange for such date
or such national securities exchange as may be designated by the Board or, if
Common Stock was not traded on such date, on the next preceding day on which
Common Stock was traded.
"FAMILY MEMBER" has the meaning ascribed to it in the General
Instructions to Form S-8 under the Securities Act of 1933, as the same may be
amended from time to time. For the sake of clarity, as of the date of this
Warrant Certificate, "Family Member" means any child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, former spouse, sibling, niece,
nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, including adoptive relationships, any
person sharing the employee's household (other than a tenant or employee), a
trust in which these persons have more than fifty percent of the beneficial
interests, a foundation in which these persons (or the employee) control the
management of assets, and any other entity in which these persons (or the
employee) own more than fifty percent of the voting interests.
<PAGE>
"GRANT DATE" means June 3, 1999.
"HOLDER" means the registered holder identified above of the number of
Warrants represented by this Warrant Certificate or any Permitted Transferee,
to the extent applicable.
"PERMITTED TRANSFEREE" means a Family Member who has acquired these
Warrants directly from the registered holder identified above through a gift
or a domestic relations order.
"SHAREHOLDER APPROVAL DATE" means __________, 2000.
"WARRANTS" means the Series N Warrants represented by this Warrant
Certificate.
1. EXERCISE OF WARRANTS.
(a) Subject to Section 1(c) hereof, the Warrants evidenced by this
Warrant Certificate may be exercised in whole or in part at any time on or
after the Shareholder Approval Date and before the Expiration Date by
presentation and surrender at the office of the Company specified herein of
(i) this Warrant Certificate with the Election to Exercise duly completed and
executed, and (ii) payment of the Exercise Price as then in effect, by bank
draft or cashier's check, for the number of Warrants being exercised. If
Holder at any time exercises less than all the Warrants evidenced by this
Warrant Certificate, the number of Warrants represented by this Warrant
Certificate shall be reduced to the number of Warrants equal to the number of
Warrants originally represented by this Warrant Certificate less the
cumulative number of Warrants previously exercised.
(b) To the extent that the Warrants evidenced by this Warrant
Certificate have not been exercised at or prior to the Expiration Date, such
Warrants shall expire and the rights of Holder shall become void and of no
effect.
(c) In its discretion, the Company may permit the Holder to
exercise an Warrant through a "cashless exercise" procedure involving a
broker or dealer approved by the Company, provided that the Holder has
delivered an irrevocable notice of exercise (the "NOTICE") to the broker or
dealer and such broker or dealer agrees: (i) to sell immediately the number
of shares of Common Stock specified in the Notice to be acquired upon
exercise of the Warrant in the ordinary course of its business, (ii) to pay
promptly to the Company the aggregate exercise price (plus the amount
necessary to satisfy any applicable tax liability), and (iii) to pay to the
Holder the balance of the proceeds of the sale of such shares over the amount
determined under clause (ii) of this sentence, less applicable commissions
and fees; PROVIDED, HOWEVER, that the Company may modify the provisions of
this sentence to the extent necessary to conform the exercise of the Warrant
to Regulation T under the Exchange Act. The manner in which the Exercise
Price may be paid may be subject to certain conditions specified by the
Company. No fractional shares (or cash in lieu thereof) shall be issued upon
exercise of a Warrant and the number of shares that may be purchased upon
exercise shall be rounded to the nearest number of whole shares.
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<PAGE>
(d) PAYMENT ALTERNATIVES FOR SECTION 16 PERSONS.
(i) Persons subject to Section 16 of the Exchange Act shall have
the unfettered right (but not the obligation) to pay the Exercise Price in
full in shares of Common Stock with a Fair Market Value (determined as of
the date of exercise of such Warrant and, where such shares are withheld
(as described in Section 1(d)(ii) below), net of the applicable Exercise
Price) at least equal to such full payment.
(ii) Common Stock used to pay the Exercise Price may be shares
that are already owned by the Holder who is subject to Section 16 of the
Exchange Act, or such Holder shall have the right but not the obligation to
direct the Company to withhold shares of Common Stock that would otherwise
have been received by such Holder upon exercise of the Warrant. It is the
intent of this Section 1(d) that the transactions described in this Section
1(d) qualify for the exemption from short-swing profit liability under
Section 16 of the Exchange Act pursuant to the "disposition to the issuer"
exemption set forth at Rule 16b-3(e) promulgated under Section 16 of the
Exchange Act.
2. RESTRICTIONS ON TRANSFER. The Warrants evidenced by this Warrant
Certificate shall not be assignable or otherwise transferable by Holder
otherwise than (i) to a Permitted Transferee; (ii) by Holder's will; or (iii)
by the laws of descent and distribution. During the lifetime of Holder, the
Warrants shall be exercisable only by Holder; after Holder's death, the
Warrants shall be exercisable only by the personal representative of Holder's
estate. Compliance with this provision is the responsibility of the Holder.
No transfer to heirs or legatees of Holder shall be effective to bind the
Company unless the Company shall have been furnished with written notice
thereof and a copy of such evidence as the Board may deem necessary to
establish the validity of the transfer and the acceptance by the transferee
or transferees of the terms and conditions hereof.
3. ANTIDILUTION ADJUSTMENTS. The number of shares of Common Stock
purchasable on the exercise of the Warrants evidenced by this Warrant
Certificate, and the Exercise Price, shall be subject to adjustment from time
to time upon the happening of certain events, as follows:
(a) MERGERS, CONSOLIDATIONS AND RECLASSIFICATIONS. In case of any
reclassification or change of outstanding securities issuable upon exercise
of the Warrants evidenced by this Warrant Certificate at any time (other than
a change in par value, or from par value to no par value, or from no par
value to par value or as a result of a subdivision or combination to which
paragraph (b) of this Section 3 applies), or in case of any consolidation or
merger of the Company with or into another corporation (other than a merger
with another corporation in which the Company is the surviving corporation
and which does not result in any reclassification or change other than a
change in par value, or from par value to no par value, or from no par value
to par value, or as a result of a subdivision or combination to which
paragraph (b) of this Section 3 applies in the securities issuable upon
exercise of this Warrant), Holder shall have, and the Company, or such
successor corporation or other entity, shall covenant in the constituent
documents effecting any of the foregoing transactions that Holder does have,
the right to obtain upon the exercise of the Warrants evidenced by this
Warrant Certificate, in lieu of each share of Common Stock, other securities,
money or other property theretofore issuable upon exercise of a Warrant, the
kind and amount of shares of stock, other securities, money or other property
receivable upon such reclassification, change, consolidation or merger by a
holder of
3
<PAGE>
the shares of Common Stock, other securities, money or other property
issuable upon exercise of a Warrant if the Warrants evidenced by this Warrant
Certificate had been exercised immediately prior to such reclassification,
change, consolidation or merger. The constituent documents effecting any
such reclassification, change, consolidation or merger shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided in paragraph (a) of this Section 3. The provisions of
paragraph (a) of this Section 3 shall similarly apply to successive
reclssifications, changes, consolidations or mergers.
(b) SUBDIVISIONS AND COMBINATIONS. If the Company shall subdivide
its shares of Common Stock into a greater number of shares (or pay to any
holders of securities of the Company a dividend payable in, or make any other
distribution of, Common Stock), the Exercise Price in effect immediately prior
to such subdivision shall be proportionately reduced, and the number of shares
of Common Stock purchasable upon exercise of the Warrants evidenced by this
Warrant Certificate shall be proportionately increased, as at the effective date
of such subdivision, dividend or distribution or if the Company shall take a
record of holders of its Common Stock for such purpose, as at such record date,
whichever is earlier. If the Company shall combine its shares of Common Stock
into a smaller number of shares, the Exercise Price in effect immediately prior
to such combination shall be proportionately increased, and the number of shares
of Common Stock purchasable upon exercise of the Warrants evidenced by this
Warrant Certificate shall be proportionately reduced, as at the effective date
of such combination, or if the Company shall take a record of holders of its
Common Stock for purposes of such combination, as at such record date, whichever
is earlier.
(c) CALCULATION OF EXERCISE PRICE. The Exercise Price in effect from
time to time shall be calculated to four decimal places and rounded to the
nearest thousandth.
4. ADJUSTMENT TO EXERCISE PRICE. Whenever the Exercise Price is required
to be adjusted as provided in Section 3, the Company shall forthwith compute the
adjusted Exercise Price and shall maintain a record setting forth such adjusted
Exercise Price and showing in reasonable detail the facts upon which such
adjustment is based.
5. NOTICES TO HOLDER. In the event:
(a) of the conveyance or sale of all or substantially all of the
assets of the Company, or of any reclassification or change of the Common Stock
or other securities issuable upon exercise of the Warrants (other than a change
in par value, or from par value to no par value, or from no par value to par
value or as a result of a subdivision or combination), or a tender offer or
exchange offer for all shares of Common Stock (or other securities issuable upon
the exercise of the Warrants); or
(b) the Company shall declare any dividend (or any other
distribution) on the Common Stock, other than regular cash dividends; or
(c) the Company shall authorize the granting to the holders of Common
Stock of rights or warrants to subscribe for or purchase any shares of any class
or series of capital stock; or
4
<PAGE>
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
the Company shall cause to be sent to Holder, at least 30 days prior to
the applicable record date hereinafter specified, or promptly in the case of
events for which there is no record date, a written notice stating (x) the
date for the determination of the holders of record of shares of Common Stock
(or other securities issuable upon the exercise of the Warrants) entitled to
receive any such dividends or other distribution, (y) the initial expiration
date set forth in any tender offer or exchange offer for shares of Common
Stock (or other securities issuable upon the exercise of the Warrants), or
(z) the date on which any such consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up is expected to become effective or
consummated, and the date as of which it is expected that holders of record
of shares of Common Stock (or other securities issuable upon the exercise of
the Warrants) shall be entitled to exchange such shares for securities or
other property, if any, deliverable upon such reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation or
winding up. Failure to give such notice or any defect therein shall not
affect the legality or validity of any distribution, right, option, warrant,
issuance, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up, or the vote upon any action.
6. COMPLIANCE WITH LAWS. Upon the acquisition of any shares pursuant
to the exercise of the Warrants, Holder (or Holder's estate if applicable)
will enter into such written representations, warranties and agreements as
the Company may reasonably request in order to comply with applicable
securities laws. Notwithstanding any of the other provisions hereof, Holder
agrees that he will not exercise the Warrants, and that the Company will not
be obligated to issue any shares pursuant to this Warrant Certificate, if the
exercise of the Warrants or the issuance of such shares of Common Stock would
constitute a violation by Holder or by the Company of any provision of any
law or regulation of any governmental authority.
7. COVENANTS OF THE COMPANY. The Company covenants and agrees that:
(a) Until the Expiration Date, the Company shall at all times
reserve and keep available, free from preemptive rights, out of the aggregate
of its authorized but unissued Common Stock (and other securities), for the
purpose of enabling it to satisfy any obligation to issue shares of Common
Stock (and other securities) upon the exercise of the Warrants evidenced by
this Warrant Certificate, the number of shares of Common Stock (and other
securities) issuable upon the exercise of such Warrants.
(b) All Common Stock (and other securities) which may be issued
upon exercise of the Warrants evidenced by this Warrant Certificate shall
upon issuance be validly issued, fully paid, non-assessable and free from all
taxes, liens and charges with respect to the issuance thereof.
8. WITHHOLDING OF TAX. The Company may make such provisions as it may
deem appropriate for the withholding of any taxes which it determines is
required in connection with the Warrants.
5
<PAGE>
9. NO RIGHTS AS STOCKHOLDER. Holder shall not, by virtue of holding
such Warrants, be entitled to any rights of a stockholder of the Company
either at law or in equity, and the rights of Holder are limited to those
expressed herein.
10. RESOLUTION OF DISPUTES. Holder agrees, for and on behalf of Holder
and Holder's heirs, personal representatives and successors, that the
resolution of any dispute or disagreement which may arise hereunder shall be
determined by the Board in its sole discretion and judgment, and that any
such determination and any interpretation by the Board of the terms of this
Warrant Certificate shall be final and shall be binding and conclusive, for
all purposes, upon the Company, Holder and Holder's heirs, personal
representatives and successors.
11. NOTICES. All notices provided for hereunder shall be in writing
and may be given by registered or certified mail, return receipt requested,
telex, telegram, telecopier, air courier guaranteeing overnight delivery of
personal delivery, if to Holder at the following address:
Marvin C. Moses
2942 Chestnut Run Dr.
Bloomfield Hills, MI 48302
and, if to the Company:
Advanced Communications Group, Inc.
390 South Woods Mill Road, Suite 260
St. Louis, Missouri 63017
Attention: Secretary
Telecopier: (314) 469-3539
12. GOVERNING LAW. This Warrant Certificate shall be governed by and
construed in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
executed this ____ day of __________, 2000 by its Chairman of the Board and
Chief Executive Officer, thereunto duly authorized.
ADVANCED COMMUNICATIONS GROUP, INC.
By:
-------------------------------------------
Richard O'Neal, Chairman of the Board and
Chief Executive Officer
6
<PAGE>
ELECTION TO EXERCISE
[To be executed on exercise of the Warrants evidenced by this
Warrant Certificate]
TO: Advanced Communications Group, Inc.
The undersigned, the holder of the Warrants evidenced by the attached
Warrant Certificate, hereby irrevocably elects to exercise _________ Warrants,
and herewith makes payment of_________________ ($__________) representing
the aggregate Exercise Price thereof, and requests that the certificate
representing the securities issuable hereunder be issued in the name of
___________________________________________ and delivered to__________
_______________________, whose address is_____________________.
Dated:_______________ ______________________________
_____________________________________________________
Signature(s) of Registered Holder(s)
NOTE: THE ABOVE SIGNATURE(S) MUST CORRESPOND WITH THE
NAME AS WRITTEN ON THE FACE OF THIS WARRANT CERTIFICATE
IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT
OR ANY CHANGE WHATSOEVER.
7
<PAGE>
Exhibit 10.32
ADVANCED COMMUNICATIONS GROUP, INC.
FORM OF SERIES P WARRANT
Total Number of Series P Warrants: 75,000 Warrant No. P-1
Number of Series P Warrants represented
by this Warrant Certificate: 30,000
This Warrant Certificate certifies that, for value received,
Wilmot Matthews
is the registered holder of the number of Warrants set forth above. Each
Warrant entitles Holder, at any time or from time to time on or before the
Expiration Date, to purchase from the Company one fully paid and
nonassessable share of Common Stock at the Exercise Price, subject to
adjustment as provided herein.
"COMMON STOCK" means the Common Stock, $.0001 par value per share,
of the Company, or such other class of securities as shall then represent the
common equity of the Company.
"COMPANY" means Advanced Communications Group, Inc., a Delaware
corporation.
"ELECTION TO EXERCISE" means the Election to Exercise on page 7
hereof.
"EXERCISE PRICE" means $6.96, subject to adjustment as provided in
Section 3 hereof.
"EXPIRATION DATE" means 5:00 p.m. (St. Louis time) on the tenth
anniversary of the Grant Date, or, if earlier, the first anniversary of the
Holder's date of death.
"FAIR MARKET VALUE" means, on any given date, the closing price of
the shares of Common Stock, as reported on the New York Stock Exchange for
such date or such national securities exchange as may be designated by the
Board or, if Common Stock was not traded on such date, on the next preceding
day on which Common Stock was traded.
"FAMILY MEMBER" has the meaning ascribed to it in the General
Instructions to Form S-8 under the Securities Act of 1933, as the same may be
amended from time to time. For the sake of clarity, as of the date of this
Warrant Certificate, "Family Member" means any child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, former spouse, sibling, niece,
nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, including adoptive relationships, any
person sharing the employee's household (other than a tenant or employee), a
trust in which these persons have more than fifty percent of the beneficial
interests, a foundation in which these persons (or the employee) control the
management of assets, and any other entity in which these persons (or the
employee) own more than fifty percent of the voting interests.
1
<PAGE>
"GRANT DATE" means June 3, 1999.
"HOLDER" means the registered holder identified above of the number
of Warrants represented by this Warrant Certificate or any Permitted
Transferee, to the extent applicable.
"PERMITTED TRANSFEREE" means a Family Member who has acquired these
Warrants directly from the registered holder identified above through a gift
or a domestic relations order.
"SHAREHOLDER APPROVAL DATE" means _______________ __, 2000.
"WARRANTS" means the Series P Warrants represented by this Warrant
Certificate.
1. EXERCISE OF WARRANTS.
(a) Subject to Section 1(c) hereof, the Warrants evidenced
by this Warrant Certificate may be exercised in whole or in part at any time
on or after the Shareholder Approval Date and before the Expiration Date by
presentation and surrender at the office of the Company specified herein of
(i) this Warrant Certificate with the Election to Exercise duly completed and
executed, and (ii) payment of the Exercise Price as then in effect, by bank
draft or cashier's check, for the number of Warrants being exercised. If
Holder at any time exercises less than all the Warrants evidenced by this
Warrant Certificate, the number of Warrants represented by this Warrant
Certificate shall be reduced to the number of Warrants equal to the number of
Warrants originally represented by this Warrant Certificate less the
cumulative number of Warrants previously exercised.
(b) To the extent that the Warrants evidenced by this
Warrant Certificate have not been exercised at or prior to the Expiration
Date, such Warrants shall expire and the rights of Holder shall become void
and of no effect.
(c) In its discretion, the Company may permit the Holder to
exercise an Warrant through a "cashless exercise" procedure involving a
broker or dealer approved by the Company, provided that the Holder has
delivered an irrevocable notice of exercise (the "NOTICE") to the broker or
dealer and such broker or dealer agrees: (i) to sell immediately the number
of shares of Common Stock specified in the Notice to be acquired upon
exercise of the Warrant in the ordinary course of its business, (ii) to pay
promptly to the Company the aggregate exercise price (plus the amount
necessary to satisfy any applicable tax liability), and (iii) to pay to the
Holder the balance of the proceeds of the sale of such shares over the amount
determined under clause (ii) of this sentence, less applicable commissions
and fees; PROVIDED, HOWEVER, that the Company may modify the provisions of
this sentence to the extent necessary to conform the exercise of the Warrant
to Regulation T under the Exchange Act. The manner in which the Exercise
Price may be paid may be subject to certain conditions specified by the
Company. No fractional shares (or cash in lieu thereof) shall be issued upon
exercise of a Warrant and the number of shares that may be purchased upon
exercise shall be rounded to the nearest number of whole shares.
(d) PAYMENT ALTERNATIVES FOR SECTION 16 PERSONS.
2
<PAGE>
(i) Persons subject to Section 16 of the Exchange Act
shall have the unfettered right (but not the obligation) to pay the
Exercise Price in full in shares of Common Stock with a Fair Market
Value (determined as of the date of exercise of such Warrant and,
where such shares are withheld (as described below), net of the
applicable Exercise Price) at least equal to such full payment.
(ii) Common Stock used to pay the Exercise Price may be
shares that are already owned by the Holder who is subject to
Section 16 of the Exchange Act, or such Holder shall have the right
but not the obligation to direct the Company to withhold shares of
Common Stock that would otherwise have been received by such Holder
upon exercise of the Warrant. It is the intent of this Section that
the transactions described in this Section 1(d) qualify for the
exemption from short-swing profit liability under Section 16 of the
Exchange Act pursuant to the "disposition to the issuer" exemption
set forth at Rule 16b-3(e) promulgated under Section 16 of the
Exchange Act.
2. RESTRICTIONS ON TRANSFER. The Warrants evidenced by this
Warrant Certificate shall not be assignable or otherwise transferable by
Holder otherwise than (i) to a Permitted Transferee; (ii) by Holder's will;
or (iii) by the laws of descent and distribution. During the lifetime of
Holder, the Warrants shall be exercisable only by Holder; after Holder's
death, the Warrants shall be exercisable only by the personal representative
of Holder's estate. Compliance with this provision is the responsibility of
the Holder. No transfer to heirs or legatees of Holder shall be effective to
bind the Company unless the Company shall have been furnished with written
notice thereof and a copy of such evidence as the Board may deem necessary to
establish the validity of the transfer and the acceptance by the transferee
or transferees of the terms and conditions hereof.
3. ANTIDILUTION ADJUSTMENTS. The number of shares of Common
Stock purchasable on the exercise of the Warrants evidenced by this Warrant
Certificate, and the Exercise Price, shall be subject to adjustment from time
to time upon the happening of certain events, as follows:
(a) MERGERS, CONSOLIDATIONS AND RECLASSIFICATIONS. In case
of any reclassification or change of outstanding securities issuable upon
exercise of the Warrants evidenced by this Warrant Certificate at any time
(other than a change in par value, or from par value to no par value, or from
no par value to par value or as a result of a subdivision or combination to
which paragraph (b) of this Section 3 applies), or in case of any
consolidation or merger of the Company with or into another corporation
(other than a merger with another corporation in which the Company is the
surviving corporation and which does not result in any reclassification or
change other than a change in par value, or from par value to no par value,
or from no par value to par value, or as a result of a subdivision or
combination to which paragraph (b) of this Section 3 applies in the
securities issuable upon exercise of this Warrant), Holder shall have, and
the Company, or such successor corporation or other entity, shall covenant in
the constituent documents effecting any of the foregoing transactions that
Holder does have, the right to obtain upon the exercise of the Warrants
evidenced by this Warrant Certificate, in lieu of each share of Common Stock,
other securities, money or other property theretofore issuable upon exercise
of a Warrant, the kind and amount of shares of stock, other securities, money
or other property receivable upon such reclassification, change,
consolidation or merger by a holder of
3
<PAGE>
the shares of Common Stock, other securities, money or other property
issuable upon exercise of a Warrant if the Warrants evidenced by this Warrant
Certificate had been exercised immediately prior to such reclassification,
change, consolidation or merger. The constituent documents effecting any such
reclassification, change, consolidation or merger shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided in paragraph (a) of this Section 3. The provisions of
paragraph (a) of this Section 3 shall similarly apply to successive
reclassifications, changes, consolidations or mergers.
(b) SUBDIVISIONS AND COMBINATIONS. If the Company shall
subdivide its shares of Common Stock into a greater number of shares (or pay
to any holders of securities of the Company a dividend payable in, or make
any other distribution of, Common Stock), the Exercise Price in effect
immediately prior to such subdivision shall be proportionately reduced, and
the number of shares of Common Stock purchasable upon exercise of the
Warrants evidenced by this Warrant Certificate shall be proportionately
increased, as at the effective date of such subdivision, dividend or
distribution or if the Company shall take a record of holders of its Common
Stock for such purpose, as at such record date, whichever is earlier. If the
Company shall combine its shares of Common Stock into a smaller number of
shares, the Exercise Price in effect immediately prior to such combination
shall be proportionately increased, and the number of shares of Common Stock
purchasable upon exercise of the Warrants evidenced by this Warrant
Certificate shall be proportionately reduced, as at the effective date of
such combination, or if the Company shall take a record of holders of its
Common Stock for purposes of such combination, as at such record date,
whichever is earlier.
(c) CALCULATION OF EXERCISE PRICE. The Exercise Price in
effect from time to time shall be calculated to four decimal places and
rounded to the nearest thousandth.
4. ADJUSTMENT TO EXERCISE PRICE. Whenever the Exercise Price
is required to be adjusted as provided in Section 3, the Company shall
forthwith compute the adjusted Exercise Price and shall maintain a record
setting forth such adjusted Exercise Price and showing in reasonable detail
the facts upon which such adjustment is based.
5. NOTICES TO HOLDER. In the event:
(a) of the conveyance or sale of all or substantially all
of the assets of the Company, or of any reclassification or change of the
Common Stock or other securities issuable upon exercise of the Warrants
(other than a change in par value, or from par value to no par value, or from
no par value to par value or as a result of a subdivision or combination), or
a tender offer or exchange offer for all shares of Common Stock (or other
securities issuable upon the exercise of the Warrants); or
(b) the Company shall declare any dividend (or any other
distribution) on the Common Stock, other than regular cash dividends; or
4
<PAGE>
(c) the Company shall authorize the granting to the holders
of Common Stock of rights or warrants to subscribe for or purchase any shares
of any class or series of capital stock; or
(d) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
the Company shall cause to be sent to Holder, at least 30 days prior
to the applicable record date hereinafter specified, or promptly in the case
of events for which there is no record date, a written notice stating (x) the
date for the determination of the holders of record of shares of Common Stock
(or other securities issuable upon the exercise of the Warrants) entitled to
receive any such dividends or other distribution, (y) the initial expiration
date set forth in any tender offer or exchange offer for shares of Common
Stock (or other securities issuable upon the exercise of the Warrants), or
(z) the date on which any such consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up is expected to become effective or
consummated, and the date as of which it is expected that holders of record
of shares of Common Stock (or other securities issuable upon the exercise of
the Warrants) shall be entitled to exchange such shares for securities or
other property, if any, deliverable upon such reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation or
winding up. Failure to give such notice or any defect therein shall not
affect the legality or validity of any distribution, right, option, warrant,
issuance, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up, or the vote upon any action.
6. COMPLIANCE WITH LAWS. Upon the acquisition of any shares
pursuant to the exercise of the Warrants, Holder (or Holder's estate if
applicable) will enter into such written representations, warranties and
agreements as the Company may reasonably request in order to comply with
applicable securities laws. Notwithstanding any of the other provisions
hereof, Holder agrees that he will not exercise the Warrants, and that the
Company will not be obligated to issue any shares pursuant to this Warrant
Certificate, if the exercise of the Warrants or the issuance of such shares
of Common Stock would constitute a violation by Holder or by the Company of
any provision of any law or regulation of any governmental authority.
7. COVENANTS OF THE COMPANY. THE COMPANY COVENANTS AND AGREES
THAT:
(a) Until the Expiration Date, the Company shall at all
times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Common Stock (and other securities),
for the purpose of enabling it to satisfy any obligation to issue shares of
Common Stock (and other securities) upon the exercise of the Warrants
evidenced by this Warrant Certificate, the number of shares of Common Stock
(and other securities) issuable upon the exercise of such Warrants.
(b) All Common Stock (and other securities) which may be
issued upon exercise of the Warrants evidenced by this Warrant Certificate
shall upon issuance be validly issued, fully paid, non-assessable and free
from all taxes, liens and charges with respect to the issuance thereof.
5
<PAGE>
8. WITHHOLDING OF TAX. The Company may make such provisions as
it may deem appropriate for the withholding of any taxes which it determines
is required in connection with the Warrants.
9. NO RIGHTS AS STOCKHOLDER. Holder shall not, by virtue of
holding such Warrants, be entitled to any rights of a stockholder of the
Company either at law or in equity, and the rights of Holder are limited to
those expressed herein.
10. RESOLUTION OF DISPUTES. Holder agrees, for and on behalf of
Holder and Holder's heirs, personal representatives and successors, that the
resolution of any dispute or disagreement which may arise hereunder shall be
determined by the Board in its sole discretion and judgment, and that any
such determination and any interpretation by the Board of the terms of this
Warrant Certificate shall be final and shall be binding and conclusive, for
all purposes, upon the Company, Holder and Holder's heirs, personal
representatives and successors.
11. NOTICES. All notices provided for hereunder shall be in
writing and may be given by registered or certified mail, return receipt
requested, telex, telegram, telecopier, air courier guaranteeing overnight
delivery of personal delivery, if to Holder at the following address:
Wilmot Matthews
---------------------------------------------
---------------------------------------------
and, if to the Company:
Advanced Communications Group, Inc.
390 South Woods Mill Road, Suite 150
St. Louis, Missouri 63017
Attention: Chairman and Chief Executive Officer
Telecopier: (314) 530-9432
12. GOVERNING LAW. This Warrant Certificate shall be
governed by and construed in accordance with the laws of the State of
Delaware.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate
to be executed this ____ day of____, 2000 by its Chairman of the Board and Chief
Executive Officer, thereunto duly authorized.
ADVANCED COMMUNICATIONS GROUP, INC.
By: _______________________________
Richard O'Neal, Chairman of the
Board and Chief Executive Officer
6
<PAGE>
ELECTION TO EXERCISE
[To be executed on exercise of the Warrants
evidenced by this Warrant Certificate]
TO: Advanced Communications Group, Inc.
The undersigned, the holder of the Warrants evidenced by the
attached Warrant Certificate, hereby irrevocably elects to exercise ______
Warrants, and herewith makes payment of____ ($____) representing the
aggregate Exercise Price thereof, and requests that the certificate
representing the securities issuable hereunder be issued in the name of
______________________________ and delivered to_____________________________,
whose address is__________________________________________________.
Dated: ____________ ____________________________________
____________________________________
Signature(s) of Registered Holder(s)
NOTE: THE ABOVE SIGNATURE(S) MUST CORRESPOND WITH THE NAME AS WRITTEN ON THE
FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER.
7
<PAGE>
EXHIBIT 10.33
ADVANCED COMMUNICATIONS GROUP, INC.
FORM OF SERIES P WARRANT
Total Number of Series P Warrants: 75,000 Warrant No. P-2
Number of Series P Warrants represented
by this Warrant Certificate: 10,000
This Warrant Certificate certifies that, for value received,
Nicholas J. Ross
is the registered holder of the number of Warrants set forth above. Each Warrant
entitles Holder, at any time or from time to time on or before the Expiration
Date, to purchase from the Company one fully paid and nonassessable share of
Common Stock at the Exercise Price, subject to adjustment as provided herein.
"COMMON STOCK" means the Common Stock, $.0001 par value per share, of
the Company, or such other class of securities as shall then represent the
common equity of the Company.
"COMPANY" means Advanced Communications Group, Inc., a Delaware
corporation.
"ELECTION TO EXERCISE" means the Election to Exercise on page 7 hereof.
"EXERCISE PRICE" means $6.96, subject to adjustment as provided in
Section 3 hereof.
"EXPIRATION DATE" means 5:00 p.m. (St. Louis time) on the tenth
anniversary of the Grant Date, or, if earlier, the first anniversary of the
Holder's date of death.
"FAIR MARKET VALUE" means, on any given date, the closing price of the
shares of Common Stock, as reported on the New York Stock Exchange for such date
or such national securities exchange as may be designated by the Board or, if
Common Stock was not traded on such date, on the next preceding day on which
Common Stock was traded.
"FAMILY MEMBER" has the meaning ascribed to it in the General
Instructions to Form S-8 under the Securities Act of 1933, as the same may be
amended from time to time. For the sake of clarity, as of the date of this
Warrant Certificate, "Family Member" means any child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, including adoptive relationships, any person sharing the
employee's household (other than a tenant or employee), a trust in which these
persons have more than fifty percent of the beneficial interests, a foundation
in which these persons (or the employee) control the management of assets, and
any other entity in which these persons (or the employee) own more than fifty
percent of the voting interests.
1
<PAGE>
"GRANT DATE" means June 3, 1999.
"HOLDER" means the registered holder identified above of the number of
Warrants represented by this Warrant Certificate or any Permitted Transferee, to
the extent applicable.
"PERMITTED TRANSFEREE" means a Family Member who has acquired these
Warrants directly from the registered holder identified above through a gift or
a domestic relations order.
"SHAREHOLDER APPROVAL DATE" means _______________ , 2000.
"WARRANTS" means the Series P Warrants represented by this Warrant
Certificate.
1. EXERCISE OF WARRANTS.
(a) Subject to Section 1(c) hereof, the Warrants
evidenced by this Warrant Certificate may be exercised in whole or in part at
any time on or after the Shareholder Approval Date and before the Expiration
Date by presentation and surrender at the office of the Company specified
herein of (i) this Warrant Certificate with the Election to Exercise duly
completed and executed, and (ii) payment of the Exercise Price as then in
effect, by bank draft or cashier's check, for the number of Warrants being
exercised. If Holder at any time exercises less than all the Warrants
evidenced by this Warrant Certificate, the number of Warrants represented by
this Warrant Certificate shall be reduced to the number of Warrants equal to
the number of Warrants originally represented by this Warrant Certificate
less the cumulative number of Warrants previously exercised.
(b) To the extent that the Warrants evidenced by this
Warrant Certificate have not been exercised at or prior to the Expiration
Date, such Warrants shall expire and the rights of Holder shall become void
and of no effect.
(c) In its discretion, the Company may permit the
Holder to exercise an Warrant through a "cashless exercise" procedure
involving a broker or dealer approved by the Company, provided that the
Holder has delivered an irrevocable notice of exercise (the "NOTICE") to the
broker or dealer and such broker or dealer agrees: (i) to sell immediately
the number of shares of Common Stock specified in the Notice to be acquired
upon exercise of the Warrant in the ordinary course of its business, (ii) to
pay promptly to the Company the aggregate exercise price (plus the amount
necessary to satisfy any applicable tax liability), and (iii) to pay to the
Holder the balance of the proceeds of the sale of such shares over the amount
determined under clause (ii) of this sentence, less applicable commissions
and fees; PROVIDED, HOWEVER, that the Company may modify the provisions of
this sentence to the extent necessary to conform the exercise of the Warrant
to Regulation T under the Exchange Act. The manner in which the Exercise
Price may be paid may be subject to certain conditions specified by the
Company. No fractional shares (or cash in lieu thereof) shall be issued upon
exercise of a Warrant and the number of shares that may be purchased upon
exercise shall be rounded to the nearest number of whole shares.
(d) PAYMENT ALTERNATIVES FOR SECTION 16 PERSONS.
2
<PAGE>
(i) Persons subject to Section 16 of the Exchange Act
shall have the unfettered right (but not the obligation) to pay the
Exercise Price in full in shares of Common Stock with a Fair Market
Value (determined as of the date of exercise of such Warrant and, where
such shares are withheld (as described in Section 1(d)(ii) below), net
of the applicable Exercise Price) at least equal to such full payment.
(ii) Common Stock used to pay the Exercise Price may
be shares that are already owned by the Holder who is subject to
Section 16 of the Exchange Act, or such Holder shall have the right but
not the obligation to direct the Company to withhold shares of Common
Stock that would otherwise have been received by such Holder upon
exercise of the Warrant. It is the intent of this Section 1(d) that the
transactions described in this Section 1(d) qualify for the exemption
from short-swing profit liability under Section 16 of the Exchange Act
pursuant to the "disposition to the issuer" exemption set forth at Rule
16b-3(e) promulgated under Section 16 of the Exchange Act.
2. RESTRICTIONS ON TRANSFER. The Warrants evidenced by this
Warrant Certificate shall not be assignable or otherwise transferable by
Holder otherwise than (i) to a Permitted Transferee; (ii) by Holder's will;
or (iii) by the laws of descent and distribution. During the lifetime of
Holder, the Warrants shall be exercisable only by Holder; after Holder's
death, the Warrants shall be exercisable only by the personal representative
of Holder's estate. Compliance with this provision is the responsibility of
the Holder. No transfer to heirs or legatees of Holder shall be effective to
bind the Company unless the Company shall have been furnished with written
notice thereof and a copy of such evidence as the Board may deem necessary to
establish the validity of the transfer and the acceptance by the transferee
or transferees of the terms and conditions hereof.
3. ANTIDILUTION ADJUSTMENTS. The number of shares of Common
Stock purchasable on the exercise of the Warrants evidenced by this Warrant
Certificate, and the Exercise Price, shall be subject to adjustment from time
to time upon the happening of certain events, as follows:
(a) MERGERS, CONSOLIDATIONS AND RECLASSIFICATIONS. In
case of any reclassification or change of outstanding securities issuable
upon exercise of the Warrants evidenced by this Warrant Certificate at any
time (other than a change in par value, or from par value to no par value, or
from no par value to par value or as a result of a subdivision or combination
to which paragraph (b) of this Section 3 applies), or in case of any
consolidation or merger of the Company with or into another corporation
(other than a merger with another corporation in which the Company is the
surviving corporation and which does not result in any reclassification or
change other than a change in par value, or from par value to no par value,
or from no par value to par value, or as a result of a subdivision or
combination to which paragraph (b) of this Section 3 applies in the
securities issuable upon exercise of this Warrant), Holder shall have, and
the Company, or such successor corporation or other entity, shall covenant in
the constituent documents effecting any of the foregoing transactions that
Holder does have, the right to obtain upon the exercise of the Warrants
evidenced by this Warrant Certificate, in lieu of each share of Common Stock,
other securities, money or other property theretofore issuable upon exercise
of a Warrant, the kind and amount of shares of stock, other securities, money
or other property receivable upon such reclassification, change,
consolidation or merger by a holder of
3
<PAGE>
the shares of Common Stock, other securities, money or other property
issuable upon exercise of a Warrant if the Warrants evidenced by this Warrant
Certificate had been exercised immediately prior to such reclassification,
change, consolidation or merger. The constituent documents effecting any such
reclassification, change, consolidation or merger shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided in paragraph (a) of this Section 3. The provisions of
paragraph (a) of this Section 3 shall similarly apply to successive
reclassifications, changes, consolidations or mergers.
(b) SUBDIVISIONS AND COMBINATIONS. If the Company
shall subdivide its shares of Common Stock into a greater number of shares
(or pay to any holders of securities of the Company a dividend payable in, or
make any other distribution of, Common Stock), the Exercise Price in effect
immediately prior to such subdivision shall be proportionately reduced, and
the number of shares of Common Stock purchasable upon exercise of the
Warrants evidenced by this Warrant Certificate shall be proportionately
increased, as at the effective date of such subdivision, dividend or
distribution or if the Company shall take a record of holders of its Common
Stock for such purpose, as at such record date, whichever is earlier. If the
Company shall combine its shares of Common Stock into a smaller number of
shares, the Exercise Price in effect immediately prior to such combination
shall be proportionately increased, and the number of shares of Common Stock
purchasable upon exercise of the Warrants evidenced by this Warrant
Certificate shall be proportionately reduced, as at the effective date of
such combination, or if the Company shall take a record of holders of its
Common Stock for purposes of such combination, as at such record date,
whichever is earlier.
(c) CALCULATION OF EXERCISE PRICE. The Exercise Price
in effect from time to time shall be calculated to four decimal places and
rounded to the nearest thousandth.
4. ADJUSTMENT TO EXERCISE PRICE. Whenever the Exercise Price
is required to be adjusted as provided in Section 3, the Company shall
forthwith compute the adjusted Exercise Price and shall maintain a record
setting forth such adjusted Exercise Price and showing in reasonable detail
the facts upon which such adjustment is based.
5. NOTICES TO HOLDER. In the event:
(a) of the conveyance or sale of all or substantially
all of the assets of the Company, or of any reclassification or change of the
Common Stock or other securities issuable upon exercise of the Warrants
(other than a change in par value, or from par value to no par value, or from
no par value to par value or as a result of a subdivision or combination), or
a tender offer or exchange offer for all shares of Common Stock (or other
securities issuable upon the exercise of the Warrants); or
(b) the Company shall declare any dividend (or any
other distribution) on the Common Stock, other than regular cash dividends; or
4
<PAGE>
(c) the Company shall authorize the granting to the
holders of Common Stock of rights or warrants to subscribe for or purchase
any shares of any class or series of capital stock; or
(d) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
the Company shall cause to be sent to Holder, at least 30 days prior to
the applicable record date hereinafter specified, or promptly in the case of
events for which there is no record date, a written notice stating (x) the date
for the determination of the holders of record of shares of Common Stock (or
other securities issuable upon the exercise of the Warrants) entitled to receive
any such dividends or other distribution, (y) the initial expiration date set
forth in any tender offer or exchange offer for shares of Common Stock (or other
securities issuable upon the exercise of the Warrants), or (z) the date on which
any such consolidation, merger, conveyance, transfer, dissolution, liquidation
or winding up is expected to become effective or consummated, and the date as of
which it is expected that holders of record of shares of Common Stock (or other
securities issuable upon the exercise of the Warrants) shall be entitled to
exchange such shares for securities or other property, if any, deliverable upon
such reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up. Failure to give such notice or any defect therein
shall not affect the legality or validity of any distribution, right, option,
warrant, issuance, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up, or the vote upon any action.
6. COMPLIANCE WITH LAWS. Upon the acquisition of any shares
pursuant to the exercise of the Warrants, Holder (or Holder's estate if
applicable) will enter into such written representations, warranties and
agreements as the Company may reasonably request in order to comply with
applicable securities laws. Notwithstanding any of the other provisions
hereof, Holder agrees that he will not exercise the Warrants, and that the
Company will not be obligated to issue any shares pursuant to this Warrant
Certificate, if the exercise of the Warrants or the issuance of such shares
of Common Stock would constitute a violation by Holder or by the Company of
any provision of any law or regulation of any governmental authority.
7. COVENANTS OF THE COMPANY. The Company covenants and agrees
that:
(a) Until the Expiration Date, the Company shall at
all times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Common Stock (and other securities),
for the purpose of enabling it to satisfy any obligation to issue shares of
Common Stock (and other securities) upon the exercise of the Warrants
evidenced by this Warrant Certificate, the number of shares of Common Stock
(and other securities) issuable upon the exercise of such Warrants.
(b) All Common Stock (and other securities) which may
be issued upon exercise of the Warrants evidenced by this Warrant Certificate
shall upon issuance be validly issued, fully paid, non-assessable and free
from all taxes, liens and charges with respect to the issuance thereof.
5
<PAGE>
8. WITHHOLDING OF TAX. The Company may make such provisions as
it may deem appropriate for the withholding of any taxes which it determines
is required in connection with the Warrants.
9. NO RIGHTS AS STOCKHOLDER. Holder shall not, by virtue of
holding such Warrants, be entitled to any rights of a stockholder of the
Company either at law or in equity, and the rights of Holder are limited to
those expressed herein.
10. RESOLUTION OF DISPUTES. Holder agrees, for and on behalf of
Holder and Holder's heirs, personal representatives and successors, that the
resolution of any dispute or disagreement which may arise hereunder shall be
determined by the Board in its sole discretion and judgment, and that any
such determination and any interpretation by the Board of the terms of this
Warrant Certificate shall be final and shall be binding and conclusive, for
all purposes, upon the Company, Holder and Holder's heirs, personal
representatives and successors.
11. NOTICES. All notices provided for hereunder shall be in
writing and may be given by registered or certified mail, return receipt
requested, telex, telegram, telecopier, air courier guaranteeing overnight
delivery of personal delivery, if to Holder at the following address:
Nicholas J. Ross
____________________________________________________________
____________________________________________________________
and, if to the Company:
Advanced Communications Group, Inc.
390 South Woods Mill Road, Suite 150
St. Louis, Missouri 63017
Attention: Chairman and Chief Executive Officer
Telecopier: (314) 530-9432
12. GOVERNING LAW. This Warrant Certificate shall be governed
by and construed in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate
to be executed this ____ day of _____________, 2000 by its Chairman of the
Board and Chief Executive Officer, thereunto duly authorized.
ADVANCED COMMUNICATIONS GROUP, INC.
By:_____________________________________________
Richard O'Neal, Chairman of the Board and
Chief Executive Officer
6
<PAGE>
ELECTION TO EXERCISE
[To be executed on exercise of the Warrants evidenced by this
Warrant Certificate]
TO: Advanced Communications Group, Inc.
The undersigned, the holder of the Warrants evidenced by the
attached Warrant Certificate, hereby irrevocably elects to exercise _________
Warrants, and herewith makes payment of _______($_____ ) representing the
aggregate Exercise Price thereof, and requests that the certificate
representing the securities issuable hereunder be issued in the name of
______________________________________ and delivered to ____________________,
whose address is __________________________.
Dated: ______________ ____________________________________
____________________________________
Signature(s) of Registered Holder(s)
NOTE: THE ABOVE SIGNATURE(S) MUST CORRESPOND WITH THE NAME AS WRITTEN ON THE
FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER.
7
<PAGE>
EXHIBIT 10.34
ADVANCED COMMUNICATIONS GROUP, INC.
FORM OF SERIES P WARRANT
Total Number of Series P Warrants: 75,000 Warrant No. P-3
Number of Series P Warrants represented
by this Warrant Certificate: 10,000
This Warrant Certificate certifies that, for value received,
George Anderson
is the registered holder of the number of Warrants set forth above. Each Warrant
entitles Holder, at any time or from time to time on or before the Expiration
Date, to purchase from the Company one fully paid and nonassessable share of
Common Stock at the Exercise Price, subject to adjustment as provided herein.
"COMMON STOCK" means the Common Stock, $.0001 par value per share, of
the Company, or such other class of securities as shall then represent the
common equity of the Company.
"COMPANY" means Advanced Communications Group, Inc., a Delaware
corporation.
"ELECTION TO EXERCISE" means the Election to Exercise on page 7 hereof.
"EXERCISE PRICE" means $6.96, subject to adjustment as provided in
Section 3 hereof.
"EXPIRATION DATE" means 5:00 p.m. (St. Louis time) on the tenth
anniversary of the Grant Date, or, if earlier, the first anniversary of the
Holder's date of death.
"FAIR MARKET VALUE" means, on any given date, the closing price of the
shares of Common Stock, as reported on the New York Stock Exchange for such date
or such national securities exchange as may be designated by the Board or, if
Common Stock was not traded on such date, on the next preceding day on which
Common Stock was traded.
"FAMILY MEMBER" has the meaning ascribed to it in the General
Instructions to Form S-8 under the Securities Act of 1933, as the same may be
amended from time to time. For the sake of clarity, as of the date of this
Warrant Certificate, "Family Member" means any child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, including adoptive relationships, any person sharing the
employee's household (other than a tenant or employee), a trust in which these
persons have more than fifty percent of the beneficial interests, a foundation
in which these persons (or the employee) control the management of assets, and
any other entity in which these persons (or the employee) own more than fifty
percent of the voting interests.
<PAGE>
"GRANT DATE" means June 3, 1999.
"HOLDER" means the registered holder identified above of the number
of Warrants represented by this Warrant Certificate or any Permitted
Transferee, to the extent applicable.
"PERMITTED TRANSFEREE" means a Family Member who has acquired these
Warrants directly from the registered holder identified above through a gift
or a domestic relations order.
"SHAREHOLDER APPROVAL DATE" means_________________ ___, 2000.
"WARRANTS" means the Series P Warrants represented by this Warrant
Certificate.
1. EXERCISE OF WARRANTS.
(a) Subject to Section 1(c) hereof, the Warrants
evidenced by this Warrant Certificate may be exercised in whole or in part at
any time on or after the Shareholder Approval Date and before the Expiration
Date by presentation and surrender at the office of the Company specified
herein of (i) this Warrant Certificate with the Election to Exercise duly
completed and executed, and (ii) payment of the Exercise Price as then in
effect, by bank draft or cashier's check, for the number of Warrants being
exercised. If Holder at any time exercises less than all the Warrants
evidenced by this Warrant Certificate, the number of Warrants represented by
this Warrant Certificate shall be reduced to the number of Warrants equal to
the number of Warrants originally represented by this Warrant Certificate
less the cumulative number of Warrants previously exercised.
(b) To the extent that the Warrants evidenced by this
Warrant Certificate have not been exercised at or prior to the Expiration
Date, such Warrants shall expire and the rights of Holder shall become void
and of no effect.
(c) In its discretion, the Company may permit the
Holder to exercise an Warrant through a "cashless exercise" procedure
involving a broker or dealer approved by the Company, provided that the
Holder has delivered an irrevocable notice of exercise (the "NOTICE") to the
broker or dealer and such broker or dealer agrees: (i) to sell immediately
the number of shares of Common Stock specified in the Notice to be acquired
upon exercise of the Warrant in the ordinary course of its business, (ii) to
pay promptly to the Company the aggregate exercise price (plus the amount
necessary to satisfy any applicable tax liability), and (iii) to pay to the
Holder the balance of the proceeds of the sale of such shares over the amount
determined under clause (ii) of this sentence, less applicable commissions
and fees; PROVIDED, HOWEVER, that the Company may modify the provisions of
this sentence to the extent necessary to conform the exercise of the Warrant
to Regulation T under the Exchange Act. The manner in which the Exercise
Price may be paid may be subject to certain conditions specified by the
Company. No fractional shares (or cash in lieu thereof) shall be issued upon
exercise of a Warrant and the number of shares that may be purchased upon
exercise shall be rounded to the nearest number of whole shares.
(d) PAYMENT ALTERNATIVES FOR SECTION 16 PERSONS.
2
<PAGE>
(i) Persons subject to Section 16 of the Exchange Act
shall have the unfettered right (but not the obligation) to pay the
Exercise Price in full in shares of Common Stock with a Fair Market
Value (determined as of the date of exercise of such Warrant and, where
such shares are withheld (as described in Section 1(d)(ii) below), net
of the applicable Exercise Price) at least equal to such full payment.
(ii) Common Stock used to pay the Exercise Price may
be shares that are already owned by the Holder who is subject to
Section 16 of the Exchange Act, or such Holder shall have the right but
not the obligation to direct the Company to withhold shares of Common
Stock that would otherwise have been received by such Holder upon
exercise of the Warrant. It is the intent of this Section 1(d) that the
transactions described in this Section 1(d) qualify for the exemption
from short-swing profit liability under Section 16 of the Exchange Act
pursuant to the "disposition to the issuer" exemption set forth at Rule
16b-3(e) promulgated under Section 16 of the Exchange Act.
2. RESTRICTIONS ON TRANSFER. The Warrants evidenced by this
Warrant Certificate shall not be assignable or otherwise transferable by
Holder otherwise than (i) to a Permitted Transferee; (ii) by Holder's will;
or (iii) by the laws of descent and distribution. During the lifetime of
Holder, the Warrants shall be exercisable only by Holder; after Holder's
death, the Warrants shall be exercisable only by the personal representative
of Holder's estate. Compliance with this provision is the responsibility of
the Holder. No transfer to heirs or legatees of Holder shall be effective to
bind the Company unless the Company shall have been furnished with written
notice thereof and a copy of such evidence as the Board may deem necessary to
establish the validity of the transfer and the acceptance by the transferee
or transferees of the terms and conditions hereof.
3. ANTIDILUTION ADJUSTMENTS. The number of shares of Common
Stock purchasable on the exercise of the Warrants evidenced by this Warrant
Certificate, and the Exercise Price, shall be subject to adjustment from time
to time upon the happening of certain events, as follows:
(a) MERGERS, CONSOLIDATIONS AND RECLASSIFICATIONS. In
case of any reclassification or change of outstanding securities issuable
upon exercise of the Warrants evidenced by this Warrant Certificate at any
time (other than a change in par value, or from par value to no par value, or
from no par value to par value or as a result of a subdivision or combination
to which paragraph (b) of this Section 3 applies), or in case of any
consolidation or merger of the Company with or into another corporation
(other than a merger with another corporation in which the Company is the
surviving corporation and which does not result in any reclassification or
change other than a change in par value, or from par value to no par value,
or from no par value to par value, or as a result of a subdivision or
combination to which paragraph (b) of this Section 3 applies in the
securities issuable upon exercise of this Warrant), Holder shall have, and
the Company, or such successor corporation or other entity, shall covenant in
the constituent documents effecting any of the foregoing transactions that
Holder does have, the right to obtain upon the exercise of the Warrants
evidenced by this Warrant Certificate, in lieu of each share of Common Stock,
other securities, money or other property theretofore issuable upon exercise
of a Warrant, the kind and amount of shares of stock, other securities, money
or other property receivable upon such reclassification, change,
consolidation or merger by a holder of
3
<PAGE>
the shares of Common Stock, other securities, money or other property
issuable upon exercise of a Warrant if the Warrants evidenced by this Warrant
Certificate had been exercised immediately prior to such reclassification,
change, consolidation or merger. The constituent documents effecting any such
reclassification, change, consolidation or merger shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided in paragraph (a) of this Section 3. The provisions of
paragraph (a) of this Section 3 shall similarly apply to successive
reclassifications, changes, consolidations or mergers.
(b) SUBDIVISIONS AND COMBINATIONS. If the Company
shall subdivide its shares of Common Stock into a greater number of shares
(or pay to any holders of securities of the Company a dividend payable in, or
make any other distribution of, Common Stock), the Exercise Price in effect
immediately prior to such subdivision shall be proportionately reduced, and
the number of shares of Common Stock purchasable upon exercise of the
Warrants evidenced by this Warrant Certificate shall be proportionately
increased, as at the effective date of such subdivision, dividend or
distribution or if the Company shall take a record of holders of its Common
Stock for such purpose, as at such record date, whichever is earlier. If the
Company shall combine its shares of Common Stock into a smaller number of
shares, the Exercise Price in effect immediately prior to such combination
shall be proportionately increased, and the number of shares of Common Stock
purchasable upon exercise of the Warrants evidenced by this Warrant
Certificate shall be proportionately reduced, as at the effective date of
such combination, or if the Company shall take a record of holders of its
Common Stock for purposes of such combination, as at such record date,
whichever is earlier.
(c) CALCULATION OF EXERCISE PRICE. The Exercise Price
in effect from time to time shall be calculated to four decimal places and
rounded to the nearest thousandth.
4. ADJUSTMENT TO EXERCISE PRICE. Whenever the Exercise Price
is required to be adjusted as provided in Section 3, the Company shall
forthwith compute the adjusted Exercise Price and shall maintain a record
setting forth such adjusted Exercise Price and showing in reasonable detail
the facts upon which such adjustment is based.
5. NOTICES TO HOLDER. In the event:
(a) of the conveyance or sale of all or substantially
all of the assets of the Company, or of any reclassification or change of the
Common Stock or other securities issuable upon exercise of the Warrants
(other than a change in par value, or from par value to no par value, or from
no par value to par value or as a result of a subdivision or combination), or
a tender offer or exchange offer for all shares of Common Stock (or other
securities issuable upon the exercise of the Warrants); or
(b) the Company shall declare any dividend (or any
other distribution) on the Common Stock, other than regular cash dividends; or
4
<PAGE>
(c) the Company shall authorize the granting to the
holders of Common Stock of rights or warrants to subscribe for or purchase
any shares of any class or series of capital stock; or
(d) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
the Company shall cause to be sent to Holder, at least 30 days prior
to the applicable record date hereinafter specified, or promptly in the case
of events for which there is no record date, a written notice stating (x) the
date for the determination of the holders of record of shares of Common Stock
(or other securities issuable upon the exercise of the Warrants) entitled to
receive any such dividends or other distribution, (y) the initial expiration
date set forth in any tender offer or exchange offer for shares of Common
Stock (or other securities issuable upon the exercise of the Warrants), or
(z) the date on which any such consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up is expected to become effective or
consummated, and the date as of which it is expected that holders of record
of shares of Common Stock (or other securities issuable upon the exercise of
the Warrants) shall be entitled to exchange such shares for securities or
other property, if any, deliverable upon such reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation or
winding up. Failure to give such notice or any defect therein shall not
affect the legality or validity of any distribution, right, option, warrant,
issuance, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up, or the vote upon any action.
6. COMPLIANCE WITH LAWS. Upon the acquisition of any shares
pursuant to the exercise of the Warrants, Holder (or Holder's estate if
applicable) will enter into such written representations, warranties and
agreements as the Company may reasonably request in order to comply with
applicable securities laws. Notwithstanding any of the other provisions
hereof, Holder agrees that he will not exercise the Warrants, and that the
Company will not be obligated to issue any shares pursuant to this Warrant
Certificate, if the exercise of the Warrants or the issuance of such shares
of Common Stock would constitute a violation by Holder or by the Company of
any provision of any law or regulation of any governmental authority.
7. COVENANTS OF THE COMPANY. The Company covenants and agrees
that:
(a) Until the Expiration Date, the Company shall at
all times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Common Stock (and other securities),
for the purpose of enabling it to satisfy any obligation to issue shares of
Common Stock (and other securities) upon the exercise of the Warrants
evidenced by this Warrant Certificate, the number of shares of Common Stock
(and other securities) issuable upon the exercise of such Warrants.
(b) All Common Stock (and other securities) which may
be issued upon exercise of the Warrants evidenced by this Warrant Certificate
shall upon issuance be validly issued, fully paid, non-assessable and free
from all taxes, liens and charges with respect to the issuance thereof.
5
<PAGE>
8. WITHHOLDING OF TAX. The Company may make such provisions as
it may deem appropriate for the withholding of any taxes which it determines
is required in connection with the Warrants.
9. NO RIGHTS AS STOCKHOLDER. Holder shall not, by virtue of
holding such Warrants, be entitled to any rights of a stockholder of the
Company either at law or in equity, and the rights of Holder are limited to
those expressed herein.
10. RESOLUTION OF DISPUTES. Holder agrees, for and on behalf of
Holder and Holder's heirs, personal representatives and successors, that the
resolution of any dispute or disagreement which may arise hereunder shall be
determined by the Board in its sole discretion and judgment, and that any
such determination and any interpretation by the Board of the terms of this
Warrant Certificate shall be final and shall be binding and conclusive, for
all purposes, upon the Company, Holder and Holder's heirs, personal
representatives and successors.
11. NOTICES. All notices provided for hereunder shall be in
writing and may be given by registered or certified mail, return receipt
requested, telex, telegram, telecopier, air courier guaranteeing overnight
delivery of personal delivery, if to Holder at the following address:
George Anderson
_________________________________
_________________________________
and, if to the Company:
Advanced Communications Group, Inc.
390 South Woods Mill Road, Suite 150
St. Louis, Missouri 63017
Attention: Chairman and Chief Executive Officer
Telecopier: (314) 530-9432
12. GOVERNING LAW. This Warrant Certificate shall be governed
by and construed in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate
to be executed this ____ day of _____________, 2000 by its Chairman of the
Board and Chief Executive Officer, thereunto duly authorized.
ADVANCED COMMUNICATIONS GROUP, INC.
By: ___________________________________________
Richard O'Neal, Chairman of the Board and
Chief Executive Officer
6
<PAGE>
ELECTION TO EXERCISE
[To be executed on exercise of the Warrants evidenced
by this Warrant Certificate]
TO: Advanced Communications Group, Inc.
The undersigned, the holder of the Warrants evidenced by the
attached Warrant Certificate, hereby irrevocably elects to exercise _________
Warrants, and herewith makes payment of __________________ ($_________ )
representing the aggregate Exercise Price thereof, and requests that the
certificate representing the securities issuable hereunder be issued in the
name of ___________________ ___________________ and delivered to
__________________, whose address is ___________________________.
Dated: _____________________ ____________________________
__________________________________________
Signature(s) of Registered Holder(s)
NOTE: THE ABOVE SIGNATURE(S) MUST CORRESPOND WITH THE NAME AS WRITTEN ON THE
FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER.
7
<PAGE>
EXHIBIT 10.35
ADVANCED COMMUNICATIONS GROUP, INC.
FORM OF SERIES P WARRANT
Total Number of Series P Warrants: 75,000 Warrant No. P-4
Number of Series P Warrants represented
by this Warrant Certificate: 20,000
This Warrant Certificate certifies that, for value received,
Maxwell Gotlieb
is the registered holder of the number of Warrants set forth above. Each
Warrant entitles Holder, at any time or from time to time on or before the
Expiration Date, to purchase from the Company one fully paid and
nonassessable share of Common Stock at the Exercise Price, subject to
adjustment as provided herein.
"COMMON STOCK" means the Common Stock, $.0001 par value per share,
of the Company, or such other class of securities as shall then represent the
common equity of the Company.
"COMPANY" means Advanced Communications Group, Inc., a Delaware
corporation.
"ELECTION TO EXERCISE" means the Election to Exercise on page 7
hereof.
"EXERCISE PRICE" means $6.96, subject to adjustment as provided in
Section 3 hereof.
"EXPIRATION DATE" means 5:00 p.m. (St. Louis time) on the tenth
anniversary of the Grant Date, or, if earlier, the first anniversary of the
Holder's date of death.
"FAIR MARKET VALUE" means, on any given date, the closing price of
the shares of Common Stock, as reported on the New York Stock Exchange for
such date or such national securities exchange as may be designated by the
Board or, if Common Stock was not traded on such date, on the next preceding
day on which Common Stock was traded.
"FAMILY MEMBER" has the meaning ascribed to it in the General
Instructions to Form S-8 under the Securities Act of 1933, as the same may be
amended from time to time. For the sake of clarity, as of the date of this
Warrant Certificate, "Family Member" means any child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, former spouse, sibling, niece,
nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, including adoptive relationships, any
person sharing the employee's household (other than a tenant or employee), a
trust in which these persons have more than fifty percent of the beneficial
interests, a foundation in which these persons (or the employee) control the
management of assets, and any other entity in which these persons (or the
employee) own more than fifty percent of the voting interests.
<PAGE>
"GRANT DATE" means June 3, 1999.
"HOLDER" means the registered holder identified above of the number
of Warrants represented by this Warrant Certificate or any Permitted
Transferee, to the extent applicable.
"PERMITTED TRANSFEREE" means a Family Member who has acquired these
Warrants directly from the registered holder identified above through a gift
or a domestic relations order.
"SHAREHOLDER APPROVAL DATE" means ________________ ___, 2000.
"WARRANTS" means the Series P Warrants represented by this Warrant
Certificate.
1. EXERCISE OF WARRANTS.
(a) Subject to Section 1(c) hereof, the Warrants evidenced
by this Warrant Certificate may be exercised in whole or in part at any time
on or after the Shareholder Approval Date and before the Expiration Date by
presentation and surrender at the office of the Company specified herein of
(i) this Warrant Certificate with the Election to Exercise duly completed and
executed, and (ii) payment of the Exercise Price as then in effect, by bank
draft or cashier's check, for the number of Warrants being exercised. If
Holder at any time exercises less than all the Warrants evidenced by this
Warrant Certificate, the number of Warrants represented by this Warrant
Certificate shall be reduced to the number of Warrants equal to the number of
Warrants originally represented by this Warrant Certificate less the
cumulative number of Warrants previously exercised.
(b) To the extent that the Warrants evidenced by this
Warrant Certificate have not been exercised at or prior to the Expiration
Date, such Warrants shall expire and the rights of Holder shall become void
and of no effect.
(c) In its discretion, the Company may permit the Holder to
exercise an Warrant through a "cashless exercise" procedure involving a
broker or dealer approved by the Company, provided that the Holder has
delivered an irrevocable notice of exercise (the "NOTICE") to the broker or
dealer and such broker or dealer agrees: (i) to sell immediately the number
of shares of Common Stock specified in the Notice to be acquired upon
exercise of the Warrant in the ordinary course of its business, (ii) to pay
promptly to the Company the aggregate exercise price (plus the amount
necessary to satisfy any applicable tax liability), and (iii) to pay to the
Holder the balance of the proceeds of the sale of such shares over the amount
determined under clause (ii) of this sentence, less applicable commissions
and fees; PROVIDED, HOWEVER, that the Company may modify the provisions of
this sentence to the extent necessary to conform the exercise of the Warrant
to Regulation T under the Exchange Act. The manner in which the Exercise
Price may be paid may be subject to certain conditions specified by the
Company. No fractional shares (or cash in lieu thereof) shall be issued upon
exercise of a Warrant and the number of shares that may be purchased upon
exercise shall be rounded to the nearest number of whole shares.
(d) PAYMENT ALTERNATIVES FOR SECTION 16 PERSONS.
2
<PAGE>
(i) Persons subject to Section 16 of the Exchange Act shall
have the unfettered right (but not the obligation) to pay the Exercise
Price in full in shares of Common Stock with a Fair Market Value
(determined as of the date of exercise of such Warrant and, where such
shares are withheld (as described in Section 1(d)(ii) below), net of
the applicable Exercise Price) at least equal to such full payment.
(ii) Common Stock used to pay the Exercise Price may be shares
that are already owned by the Holder who is subject to Section 16 of
the Exchange Act, or such Holder shall have the right but not the
obligation to direct the Company to withhold shares of Common Stock
that would otherwise have been received by such Holder upon exercise of
the Warrant. It is the intent of this Section 1(d) that the
transactions described in this Section 1(d) qualify for the exemption
from short-swing profit liability under Section 16 of the Exchange Act
pursuant to the "disposition to the issuer" exemption set forth at Rule
16b-3(e) promulgated under Section 16 of the Exchange Act.
2. RESTRICTIONS ON TRANSFER. The Warrants evidenced by this Warrant
Certificate shall not be assignable or otherwise transferable by Holder
otherwise than (i) to a Permitted Transferee; (ii) by Holder's will; or (iii)
by the laws of descent and distribution. During the lifetime of Holder, the
Warrants shall be exercisable only by Holder; after Holder's death, the
Warrants shall be exercisable only by the personal representative of Holder's
estate. Compliance with this provision is the responsibility of the Holder.
No transfer to heirs or legatees of Holder shall be effective to bind the
Company unless the Company shall have been furnished with written notice
thereof and a copy of such evidence as the Board may deem necessary to
establish the validity of the transfer and the acceptance by the transferee
or transferees of the terms and conditions hereof.
3. ANTIDILUTION ADJUSTMENTS. The number of shares of Common Stock
purchasable on the exercise of the Warrants evidenced by this Warrant
Certificate, and the Exercise Price, shall be subject to adjustment from time
to time upon the happening of certain events, as follows:
(a) MERGERS, CONSOLIDATIONS AND RECLASSIFICATIONS. In case
of any reclassification or change of outstanding securities issuable upon
exercise of the Warrants evidenced by this Warrant Certificate at any time
(other than a change in par value, or from par value to no par value, or from
no par value to par value or as a result of a subdivision or combination to
which paragraph (b) of this Section 3 applies), or in case of any
consolidation or merger of the Company with or into another corporation
(other than a merger with another corporation in which the Company is the
surviving corporation and which does not result in any reclassification or
change other than a change in par value, or from par value to no par value,
or from no par value to par value, or as a result of a subdivision or
combination to which paragraph (b) of this Section 3 applies in the
securities issuable upon exercise of this Warrant), Holder shall have, and
the Company, or such successor corporation or other entity, shall covenant in
the constituent documents effecting any of the foregoing transactions that
Holder does have, the right to obtain upon the exercise of the Warrants
evidenced by this Warrant Certificate, in lieu of each share of Common Stock,
other securities, money or other property theretofore issuable upon exercise
of a Warrant, the kind and amount of shares of stock, other securities, money
or other property receivable upon such reclassification, change,
consolidation or merger by a holder of
3
<PAGE>
the shares of Common Stock, other securities, money or other property
issuable upon exercise of a Warrant if the Warrants evidenced by this Warrant
Certificate had been exercised immediately prior to such reclassification,
change, consolidation or merger. The constituent documents effecting any such
reclassification, change, consolidation or merger shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided in paragraph (a) of this Section 3. The provisions of
paragraph (a) of this Section 3 shall similarly apply to successive
reclassifications, changes, consolidations or mergers.
(b) SUBDIVISIONS AND COMBINATIONS. If the Company shall
subdivide its shares of Common Stock into a greater number of shares (or pay
to any holders of securities of the Company a dividend payable in, or make
any other distribution of, Common Stock), the Exercise Price in effect
immediately prior to such subdivision shall be proportionately reduced, and
the number of shares of Common Stock purchasable upon exercise of the
Warrants evidenced by this Warrant Certificate shall be proportionately
increased, as at the effective date of such subdivision, dividend or
distribution or if the Company shall take a record of holders of its Common
Stock for such purpose, as at such record date, whichever is earlier. If the
Company shall combine its shares of Common Stock into a smaller number of
shares, the Exercise Price in effect immediately prior to such combination
shall be proportionately increased, and the number of shares of Common Stock
purchasable upon exercise of the Warrants evidenced by this Warrant
Certificate shall be proportionately reduced, as at the effective date of
such combination, or if the Company shall take a record of holders of its
Common Stock for purposes of such combination, as at such record date,
whichever is earlier.
(c) CALCULATION OF EXERCISE PRICE. The Exercise Price in
effect from time to time shall be calculated to four decimal places and
rounded to the nearest thousandth.
4. ADJUSTMENT TO EXERCISE PRICE. Whenever the Exercise Price is
required to be adjusted as provided in Section 3, the Company shall forthwith
compute the adjusted Exercise Price and shall maintain a record setting forth
such adjusted Exercise Price and showing in reasonable detail the facts upon
which such adjustment is based.
5. NOTICES TO HOLDER. In the event:
(a) of the conveyance or sale of all or substantially all
of the assets of the Company, or of any reclassification or change of the
Common Stock or other securities issuable upon exercise of the Warrants
(other than a change in par value, or from par value to no par value, or from
no par value to par value or as a result of a subdivision or combination), or
a tender offer or exchange offer for all shares of Common Stock (or other
securities issuable upon the exercise of the Warrants); or
(b) the Company shall declare any dividend (or any other
distribution) on the Common Stock, other than regular cash dividends; or
4
<PAGE>
(c) the Company shall authorize the granting to the holders
of Common Stock of rights or warrants to subscribe for or purchase any shares
of any class or series of capital stock; or
(d) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
the Company shall cause to be sent to Holder, at least 30 days prior
to the applicable record date hereinafter specified, or promptly in the case
of events for which there is no record date, a written notice stating (x) the
date for the determination of the holders of record of shares of Common Stock
(or other securities issuable upon the exercise of the Warrants) entitled to
receive any such dividends or other distribution, (y) the initial expiration
date set forth in any tender offer or exchange offer for shares of Common
Stock (or other securities issuable upon the exercise of the Warrants), or
(z) the date on which any such consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up is expected to become effective or
consummated, and the date as of which it is expected that holders of record
of shares of Common Stock (or other securities issuable upon the exercise of
the Warrants) shall be entitled to exchange such shares for securities or
other property, if any, deliverable upon such reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation or
winding up. Failure to give such notice or any defect therein shall not
affect the legality or validity of any distribution, right, option, warrant,
issuance, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up, or the vote upon any action.
6. COMPLIANCE WITH LAWS. Upon the acquisition of any shares pursuant
to the exercise of the Warrants, Holder (or Holder's estate if applicable)
will enter into such written representations, warranties and agreements as
the Company may reasonably request in order to comply with applicable
securities laws. Notwithstanding any of the other provisions hereof, Holder
agrees that he will not exercise the Warrants, and that the Company will not
be obligated to issue any shares pursuant to this Warrant Certificate, if the
exercise of the Warrants or the issuance of such shares of Common Stock would
constitute a violation by Holder or by the Company of any provision of any
law or regulation of any governmental authority.
7. COVENANTS OF THE COMPANY. The Company covenants and agrees that:
(a) Until the Expiration Date, the Company shall at all
times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Common Stock (and other securities),
for the purpose of enabling it to satisfy any obligation to issue shares of
Common Stock (and other securities) upon the exercise of the Warrants
evidenced by this Warrant Certificate, the number of shares of Common Stock
(and other securities) issuable upon the exercise of such Warrants.
(b) All Common Stock (and other securities) which may be
issued upon exercise of the Warrants evidenced by this Warrant Certificate
shall upon issuance be validly issued, fully paid, non-assessable and free
from all taxes, liens and charges with respect to the issuance thereof.
5
<PAGE>
8. WITHHOLDING OF TAX. The Company may make such provisions as it
may deem appropriate for the withholding of any taxes which it determines is
required in connection with the Warrants.
9. NO RIGHTS AS STOCKHOLDER. Holder shall not, by virtue of holding
such Warrants, be entitled to any rights of a stockholder of the Company
either at law or in equity, and the rights of Holder are limited to those
expressed herein.
10. RESOLUTION OF DISPUTES. Holder agrees, for and on behalf of
Holder and Holder's heirs, personal representatives and successors, that the
resolution of any dispute or disagreement which may arise hereunder shall be
determined by the Board in its sole discretion and judgment, and that any
such determination and any interpretation by the Board of the terms of this
Warrant Certificate shall be final and shall be binding and conclusive, for
all purposes, upon the Company, Holder and Holder's heirs, personal
representatives and successors.
11. NOTICES. All notices provided for hereunder shall be in writing
and may be given by registered or certified mail, return receipt requested,
telex, telegram, telecopier, air courier guaranteeing overnight delivery of
personal delivery, if to Holder at the following address:
Maxwell Gotlieb
------------------------
------------------------
and, if to the Company:
Advanced Communications Group, Inc.
390 South Woods Mill Road, Suite 150
St. Louis, Missouri 63017
Attention: Chairman and Chief Executive Officer
Telecopier: (314) 530-9432
12. GOVERNING LAW. This Warrant Certificate shall be governed by and
construed in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate
to be executed this ____ day of ___________, 2000 by its Chairman of the
Board and Chief Executive Officer, thereunto duly authorized.
ADVANCED COMMUNICATIONS GROUP, INC.
By: ____________________________________
Richard O'Neal, Chairman of the Board and
Chief Executive Officer
6
<PAGE>
ELECTION TO EXERCISE
[To be executed on exercise of the Warrants
evidenced by this Warrant Certificate]
TO: Advanced Communications Group, Inc.
The undersigned, the holder of the Warrants evidenced by the
attached Warrant Certificate, hereby irrevocably elects to exercise _________
Warrants, and herewith makes payment of ___________________ ($ ____________)
representing the aggregate Exercise Price thereof, and requests that the
certificate representing the securities issuable hereunder be issued in the
name of ______________________________________ and delivered to
______________________ __________________ , whose address is
___________________________________.
Dated: ______________ ______________________________
___________________________________
Signature(s) of Registered Holder(s)
NOTE: THE ABOVE SIGNATURE(S) MUST CORRESPOND WITH THE NAME AS WRITTEN ON THE
FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER.
7
<PAGE>
EXHIBIT 10.36
ADVANCED COMMUNICATIONS GROUP, INC.
FORM OF SERIES P WARRANT
Total Number of Series P Warrants: 75,000 Warrant No. P-5
Number of Series P Warrants represented
by this Warrant Certificate: 5,000
This Warrant Certificate certifies that, for value received,
Robert Flynn
is the registered holder of the number of Warrants set forth above. Each Warrant
entitles Holder, at any time or from time to time on or before the Expiration
Date, to purchase from the Company one fully paid and nonassessable share of
Common Stock at the Exercise Price, subject to adjustment as provided herein.
"COMMON STOCK" means the Common Stock, $.0001 par value per share, of
the Company, or such other class of securities as shall then represent the
common equity of the Company.
"COMPANY" means Advanced Communications Group, Inc., a Delaware
corporation.
"ELECTION TO EXERCISE" means the Election to Exercise on page 7 hereof.
"EXERCISE PRICE" means $6.96, subject to adjustment as provided in
Section 3 hereof.
"EXPIRATION DATE" means 5:00 p.m. (St. Louis time) on the tenth
anniversary of the Grant Date, or, if earlier, the first anniversary of the
Holder's date of death.
"FAIR MARKET VALUE" means, on any given date, the closing price of the
shares of Common Stock, as reported on the New York Stock Exchange for such date
or such national securities exchange as may be designated by the Board or, if
Common Stock was not traded on such date, on the next preceding day on which
Common Stock was traded.
"FAMILY MEMBER" has the meaning ascribed to it in the General
Instructions to Form S-8 under the Securities Act of 1933, as the same may be
amended from time to time. For the sake of clarity, as of the date of this
Warrant Certificate, "Family Member" means any child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, including adoptive relationships, any person sharing the
employee's household (other than a tenant or employee), a trust in which these
persons have more than fifty percent of the beneficial interests, a foundation
in which these persons (or the employee) control the management of assets, and
any other entity in which these persons (or the employee) own more than fifty
percent of the voting interests.
1
<PAGE>
"GRANT DATE" means June 3, 1999.
"HOLDER" means the registered holder identified above of the number of
Warrants represented by this Warrant Certificate or any Permitted Transferee, to
the extent applicable.
"PERMITTED TRANSFEREE" means a Family Member who has acquired these
Warrants directly from the registered holder identified above through a gift or
a domestic relations order.
"SHAREHOLDER APPROVAL DATE" means __________ ___, 2000.
"WARRANTS" means the Series P Warrants represented by this Warrant
Certificate.
1. EXERCISE OF WARRANTS.
(a) Subject to Section 1(c) hereof, the Warrants
evidenced by this Warrant Certificate may be exercised in whole or in part at
any time on or after the Shareholder Approval Date and before the Expiration
Date by presentation and surrender at the office of the Company specified
herein of (i) this Warrant Certificate with the Election to Exercise duly
completed and executed, and (ii) payment of the Exercise Price as then in
effect, by bank draft or cashier's check, for the number of Warrants being
exercised. If Holder at any time exercises less than all the Warrants
evidenced by this Warrant Certificate, number of Warrants represented by this
Warrant Certificate shall be reduced to the number of Warrants equal to the
number of Warrants originally represented by this Warrant Certificate less
the cumulative number of Warrants previously exercised.
(b) To the extent that the Warrants evidenced by this
Warrant Certificate have not been exercised at or prior to the Expiration
Date, such Warrants shall expire and the rights of Holder shall become void
and of no effect.
(c) In its discretion, the Company may permit the
Holder to exercise an Warrant through a "cashless exercise" procedure
involving a broker or dealer approved by the Company, provided that the
Holder has delivered an irrevocable notice of exercise (the "NOTICE") to the
broker or dealer and such broker or dealer agrees: (i) to sell immediately
the number of shares of Common Stock specified in the Notice to be acquired
upon exercise of the Warrant in the ordinary course of its business, (ii) to
pay promptly to the Company the aggregate exercise price (plus the amount
necessary to satisfy any applicable tax liability), and (iii) to pay to the
Holder the balance of the proceeds of the sale of such shares over the amount
determined under clause (ii) of this sentence, less applicable commissions
and fees; PROVIDED, HOWEVER, that the Company may modify the provisions of
this sentence to the extent necessary to conform the exercise of the Warrant
to Regulation T under the Exchange Act. The manner in which the Exercise
Price may be paid may be subject to certain conditions specified by the
Company. No fractional shares (or cash in lieu thereof) shall be issued upon
exercise of a Warrant and the number of shares that may be purchased upon
exercise shall be rounded to the nearest number of whole shares.
(d) PAYMENT ALTERNATIVES FOR SECTION 16 PERSONS.
2
<PAGE>
(i) Persons subject to Section 16 of the Exchange Act shall
have the unfettered right (but not the obligation) to pay the Exercise
Price in full in shares of Common Stock with a Fair Market Value
(determined as of the date of exercise of such Warrant and, where such
shares are withheld (as described in Section 1(d)(ii) below), net of
the applicable Exercise Price) at least equal to such full payment.
(ii) Common Stock used to pay the Exercise Price may be shares
that are already owned by the Holder who is subject to Section 16 of
the Exchange Act, or such Holder shall have the right but not the
obligation to direct the Company to withhold shares of Common Stock
that would otherwise have been received by such Holder upon exercise of
the Warrant. It is the intent of this Section 1(d) that the
transactions described in this Section 1(d) qualify for the exemption
from short-swing profit liability under Section 16 of the Exchange Act
pursuant to the "disposition to the issuer" exemption set forth at Rule
16b-3(e) promulgated under Section 16 of the Exchange Act.
2. RESTRICTIONS ON TRANSFER. The Warrants evidenced by this
Warrant Certificate shall not be assignable or otherwise transferable by
Holder otherwise than (i) to a Permitted Transferee; (ii) by Holder's will;
or (iii) by the laws of descent and distribution. During the lifetime of
Holder, the Warrants shall be exercisable only by Holder; after Holder's
death, the Warrants shall be exercisable only by the personal representative
of Holder's estate. Compliance with this provision is the responsibility of
the Holder. No transfer to heirs or legatees of Holder shall be effective to
bind the Company unless the Company shall have been furnished with written
notice thereof and a copy of such evidence as the Board may deem necessary to
establish the validity of the transfer and the acceptance by the transferee
or transferees of the terms and conditions hereof.
3. ANTIDILUTION ADJUSTMENTS. The number of shares of Common
Stock purchasable on the exercise of the Warrants evidenced by this Warrant
Certificate, and the Exercise Price, shall be subject to adjustment from time
to time upon the happening of certain events, as follows:
(a) MERGERS, CONSOLIDATIONS AND RECLASSIFICATIONS. In
case of any reclassification or change of outstanding securities issuable
upon exercise of the Warrants evidenced by this Warrant Certificate at any
time (other than a change in par value, or from par value to no par value, or
from no par value to par value or as a result of a subdivision or combination
to which paragraph (b) of this Section 3 applies), or in case of any
consolidation or merger of the Company with or into another corporation
(other than a merger with another corporation in which the Company is the
surviving corporation and which does not result in any reclassification or
change other than a change in par value, or from par value to no par value,
or from no par value to par value, or as a result of a subdivision or
combination to which paragraph (b) of this Section 3 applies in the
securities issuable upon exercise of this Warrant), Holder shall have, and
the Company, or such successor corporation or other entity, shall covenant in
the constituent documents effecting any of the foregoing transactions that
Holder does have, the right to obtain upon the exercise of the Warrants
evidenced by this Warrant Certificate, in lieu of each share of Common Stock,
other securities, money or other property theretofore issuable upon exercise
of a Warrant, the kind and amount of shares of stock, other securities, money
or other property receivable upon such reclassification, change,
consolidation or merger by a holder of
3
<PAGE>
the shares of Common Stock, other securities, money or other property
issuable upon exercise of a Warrant if the Warrants evidenced by this Warrant
Certificate had been exercised immediately prior to such reclassification,
change, consolidation or merger. The constituent documents effecting any such
reclassification, change, consolidation or merger shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided in paragraph (a) of this Section 3. The provisions of
paragraph (a) of this Section 3 shall similarly apply to successive
reclassifications, changes, consolidations or mergers.
(b) SUBDIVISIONS AND COMBINATIONS. If the Company
shall subdivide its shares of Common Stock into a greater number of shares
(or pay to any holders of securities of the Company a dividend payable in, or
make any other distribution of, Common Stock), the Exercise Price in effect
immediately prior to such subdivision shall be proportionately reduced, and
the number of shares of Common Stock purchasable upon exercise of the
Warrants evidenced by this Warrant Certificate shall be proportionately
increased, as at the effective date of such subdivision, dividend or
distribution or if the Company shall take a record of holders of its Common
Stock for such purpose, as at such record date, whichever is earlier. If the
Company shall combine its shares of Common Stock into a smaller number of
shares, the Exercise Price in effect immediately prior to such combination
shall be proportionately increased, and the number of shares of Common Stock
purchasable upon exercise of the Warrants evidenced by this Warrant
Certificate shall be proportionately reduced, as at the effective date of
such combination, or if the Company shall take a record of holders of its
Common Stock for purposes of such combination, as at such record date,
whichever is earlier.
(c) CALCULATION OF EXERCISE PRICE. The Exercise Price
in effect from time to time shall be calculated to four decimal places and
rounded to the nearest thousandth.
4. ADJUSTMENT TO EXERCISE PRICE. Whenever the Exercise Price
is required to be adjusted as provided in Section 3, the Company shall
forthwith compute the adjusted Exercise Price and shall maintain a record
setting forth such adjusted Exercise Price and showing in reasonable detail
the facts upon which such adjustment is based.
5. NOTICES TO HOLDER. In the event:
(a) of the conveyance or sale of all or substantially
all of the assets of the Company, or of any reclassification or change of the
Common Stock or other securities issuable upon exercise of the Warrants
(other than a change in par value, or from par value to no par value, or from
no par value to par value or as a result of a subdivision or combination), or
a tender offer or exchange offer for all shares of Common Stock (or other
securities issuable upon the exercise of the Warrants); or
(b) the Company shall declare any dividend (or any
other distribution) on the Common Stock, other than regular cash dividends; or
4
<PAGE>
(c) the Company shall authorize the granting to the
holders of Common Stock of rights or warrants to subscribe for or purchase
any shares of any class or series of capital stock; or
(d) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
the Company shall cause to be sent to Holder, at least 30 days prior
to the applicable record date hereinafter specified, or promptly in the case
of events for which there is no record date, a written notice stating (x) the
date for the determination of the holders of record of shares of Common Stock
(or other securities issuable upon the exercise of the Warrants) entitled to
receive any such dividends or other distribution, (y) the initial expiration
date set forth in any tender offer or exchange offer for shares of Common
Stock (or other securities issuable upon the exercise of the Warrants), or
(z) the date on which any such consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up is expected to become effective or
consummated, and the date as of which it is expected that holders of record
of shares of Common Stock (or other securities issuable upon the exercise of
the Warrants) shall be entitled to exchange such shares for securities or
other property, if any, deliverable upon such reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation or
winding up. Failure to give such notice or any defect therein shall not
affect the legality or validity of any distribution, right, option, warrant,
issuance, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up, or the vote upon any action.
6. COMPLIANCE WITH LAWS. Upon the acquisition of any shares
pursuant to the exercise of the Warrants, Holder (or Holder's estate if
applicable) will enter into such written representations, warranties and
agreements as the Company may reasonably request in order to comply with
applicable securities laws. Notwithstanding any of the other provisions
hereof, Holder agrees that he will not exercise the Warrants, and that the
Company will not be obligated to issue any shares pursuant to this Warrant
Certificate, if the exercise of the Warrants or the issuance of such shares
of Common Stock would constitute a violation by Holder or by the Company of
any provision of any law or regulation of any governmental authority.
7. COVENANTS OF THE COMPANY. The Company covenants and agrees
that:
(a) Until the Expiration Date, the Company shall at
all times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Common Stock (and other securities),
for the purpose of enabling it to satisfy any obligation to issue shares of
Common Stock (and other securities) upon the exercise of the Warrants
evidenced by this Warrant Certificate, the number of shares of Common Stock
(and other securities) issuable upon the exercise of such Warrants.
(b) All Common Stock (and other securities) which may
be issued upon exercise of the Warrants evidenced by this Warrant Certificate
shall upon issuance be validly issued, fully paid, non-assessable and free
from all taxes, liens and charges with respect to the issuance thereof.
5
<PAGE>
8. WITHHOLDING OF TAX. The Company may make such provisions as
it may deem appropriate for the withholding of any taxes which it determines
is required in connection with the Warrants.
9. NO RIGHTS AS STOCKHOLDER. Holder shall not, by virtue of
holding such Warrants, be entitled to any rights of a stockholder of the
Company either at law or in equity, and the rights of Holder are limited to
those expressed herein.
10. RESOLUTION OF DISPUTES. Holder agrees, for and on behalf of
Holder and Holder's heirs, personal representatives and successors, that the
resolution of any dispute or disagreement which may arise hereunder shall be
determined by the Board in its sole discretion and judgment, and that any
such determination and any interpretation by the Board of the terms of this
Warrant Certificate shall be final and shall be binding and conclusive, for
all purposes, upon the Company, Holder and Holder's heirs, personal
representatives and successors.
11. NOTICES. All notices provided for hereunder shall be in
writing and may be given by registered or certified mail, return receipt
requested, telex, telegram, telecopier, air courier guaranteeing overnight
delivery of personal delivery, if to Holder at the following address:
Robert Flynn
________________________________________________
________________________________________________
and, if to the Company:
Advanced Communications Group, Inc.
390 South Woods Mill Road, Suite 150
St. Louis, Missouri 63017
Attention: Chairman and Chief Executive Officer
Telecopier: (314) 530-9432
12. GOVERNING LAW. This Warrant Certificate shall be governed
by and construed in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate
to be executed this ____ day of __________, 2000 by its Chairman of the Board
and Chief Executive Officer, thereunto duly authorized.
ADVANCED COMMUNICATIONS GROUP, INC.
By:___________________________________________
Richard O'Neal, Chairman of the Board and
Chief Executive Officer
6
<PAGE>
ELECTION TO EXERCISE
[To be executed on exercise of the Warrants evidenced
by this Warrant Certificate]
TO: Advanced Communications Group, Inc.
The undersigned, the holder of the Warrants evidenced by the attached
Warrant Certificate, hereby irrevocably elects to exercise _________ Warrants,
and herewith makes payment of _______ ($____________) representing the
aggregate Exercise Price thereof, and requests that the certificate
representing the securities issuable hereunder be issued in the name
of _____________________ and delivered to_____________________, whose address
is _____________________________.
Dated:_____________ ____________________________________
____________________________________
Signature(s) of Registered Holder(s)
NOTE: THE ABOVE SIGNATURE(S) MUST CORRESPOND WITH THE NAME AS WRITTEN ON THE
FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER.
7
<PAGE>
Exhibit 10.39
NOTE REDEMPTION AGREEMENT
This NOTE REDEMPTION AGREEMENT (THE "AGREEMENT") is made and entered
into as of this 3rd day of June, 1999 by and between Advanced Communications
Group, Inc., a Delaware corporation ("ACG"), and Larry Baldwin (THE "NOTE
HOLDER").
RECITALS
A. The Note Holder is the holder of a certain 5% Subordinated
Note executed by ACG in favor of the Note Holder and dated February 18, 1998
(THE "NOTE").
B. ACG desires to repay the principal amount of the Note
including any accrued but unpaid interest by issuing to the Note Holder an
equivalent amount of ACG common stock (THE "REDEMPTION") and the Note Holder
desires to accept repayment in the form of ACG common stock.
C. ACG desires the Pay-off to occur, and the Note Holder wishes
to accept the Pay-off, concurrently with (i) the closing of the acquisition by
ACG or a subsidiary of ACG of all the outstanding stock of YPTel Corporation, a
Canadian corporation, (ii) the closing of the acquisition by ACG or a subsidiary
of ACG of all the outstanding capital stock of Web YP, Inc., a Texas
corporation, and (iii) the closing of the acquisition by ACG or a subsidiary of
ACG of all the outstanding capital stock of Big Stuff, Inc., a Texas corporation
(COLLECTIVELY, THE "ACQUISITION CLOSINGS").
NOW, THEREFORE, for $10.00 from ACG to the Note Holder and other good
and valuable consideration set forth herein, the receipt and sufficiency of
which is hereby acknowledged, the parties agree as follows:
ARTICLE I - TERMS OF REDEMPTION
1.1 THE REDEMPTION. Pursuant to Section 3.01 of the Note, ACG
shall redeem the Note at a redemption price equal to the principal amount to be
redeemed, together with accrued and unpaid interest on the principal amount
thereof (THE "REDEMPTION PRICE"). ACG will pay the Redemption Price to the Note
Holder in an equivalent amount of ACG common stock valued at $5.50 per share,
with any resulting fractional shares to be paid in cash.
1.2 WAIVER OF NOTICE. The Note Holder agrees that this Agreement
serves as adequate notice of redemption and hereby waives any right to notice of
redemption afforded by Section 3.02 of the Note.
1.3 TIMING OF REDEMPTION. The Redemption will occur concurrent
with and conditional upon the Acquisition Closings. If for any reason the
Acquisition Closings do not occur, ACG will not be obligated to redeem, and the
Note Holders will not be
<PAGE>
obligated to accept ACG's offer of redemption of, the Note in accordance with
the terms and conditions of the Agreement.
1.4 REGISTRATION OF SHARES. Upon Redemption of the Notes, ACG
shall ensure that the ACG common stock issued to the Note Holders has been
registered, at its own expense, under the Securities Act of 1933, as amended, or
any applicable state securities laws.
ARTICLE II - GENERAL PROVISIONS
2.1 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
2.2 ENTIRE AGREEMENT. This Agreement supersedes any and all prior
negotiations and oral or written agreements made relating to the subject matter
hereof and, except for written agreements, if any, executed and delivered
simultaneously with or subsequent to the date of this Agreement, constitutes the
entire agreement of the parties relating to the subject matter hereof.
2.3 AMENDMENTS. This Agreement may not be altered or amended
except by a writing signed by the duly authorized representatives of both ACG
and the Note Holder.
2.4 WAIVER. No waiver of any of the terms of this Agreement shall
be effective unless in writing and signed by the duly authorized representative
of the party to be charged therewith. No waiver of any provision hereof shall
extend to or affect any obligation not expressly waived, impair any rights
consequent on such obligation, or imply a subsequent waiver of that or any other
provision.
2.5 GOVERNING LAW. This Agreement shall be deemed to have been
entered into, governed by and construed and interpreted in accordance with the
laws of the State of Texas.
2.6 BINDING EFFECT. Except as otherwise provided to the contrary,
this Agreement shall be binding upon and inure to the benefit of the parties and
their respective heirs, executors, administrators, successors and permitted
assigns.
2.7 HEADINGS. The description headings of the several sections of
this Agreement are inserted for convenience only and do not qualify or affect
the terms and conditions thereof.
2.8 REMEDIES CUMULATIVE. Every right and remedy of the parties,
whether evidenced hereby or by any other agreement or instrument, shall be
cumulative and in addition to every other right and remedy herein or therein
enumerated or allowed by law, and may be exercised singularly or concurrently.
In the event that there shall be any
<PAGE>
inconsistency or conflict between such rights and remedies, then such rights
and remedies shall be deemed to be exercisable in the alternative by either
party, in its sole discretion.
2.9 FURTHER ASSURANCES. The parties covenant and agree to execute
all such further documents, instruments and agreements and to give all such
further undertakings and to perform all such further acts or deeds that may be
reasonably required from time to time in order to carry out the terms of this
Agreement in accordance with their true intent.
<PAGE>
IN WITNESS WHEREOF, the duly authorized representatives of the parties
to this Agreement have executed this Agreement as of the date first written
above.
ADVANCED COMMUNICATIONS GROUP, INC.
By: /s/ James Cragg
--------------------------------
NOTE HOLDER
By: /s/ Larry Baldwin
--------------------------------
Larry Baldwin
<PAGE>
Exhibit 10.40
NOTE REDEMPTION AGREEMENT
This NOTE REDEMPTION AGREEMENT (THE "AGREEMENT") is made and entered
into as of this 3rd day of June, 1999 by and between Advanced Communications
Group, Inc., a Delaware corporation ("ACG"), and Ron Baldwin (THE "NOTE
HOLDER").
RECITALS
A. The Note Holder is the holder of a certain 5% Subordinated
Note executed by ACG in favor of the Note Holder and dated February 18, 1998
(THE "NOTE").
B. ACG desires to repay the principal amount of the Note
including any accrued but unpaid interest by issuing to the Note Holder an
equivalent amount of ACG common stock (THE "REDEMPTION") and the Note Holder
desires to accept repayment in the form of ACG common stock.
C. ACG desires the Pay-off to occur, and the Note Holder wishes
to accept the Pay-off, concurrently with (i) the closing of the acquisition by
ACG or a subsidiary of ACG of all the outstanding stock of YPTel Corporation, a
Canadian corporation, (ii) the closing of the acquisition by ACG or a subsidiary
of ACG of all the outstanding capital stock of Web YP, Inc., a Texas
corporation, and (iii) the closing of the acquisition by ACG or a subsidiary of
ACG of all the outstanding capital stock of Big Stuff, Inc., a Texas corporation
(COLLECTIVELY, THE "ACQUISITION CLOSINGS").
NOW, THEREFORE, for $10.00 from ACG to the Note Holder and other good
and valuable consideration set forth herein, the receipt and sufficiency of
which is hereby acknowledged, the parties agree as follows:
ARTICLE I - TERMS OF REDEMPTION
1.1 THE REDEMPTION. Pursuant to Section 3.01 of the Note, ACG
shall redeem the Note at a redemption price equal to the principal amount to be
redeemed, together with accrued and unpaid interest on the principal amount
thereof (THE "REDEMPTION PRICE"). ACG will pay the Redemption Price to the Note
Holder in an equivalent amount of ACG common stock valued at $5.50 per share,
with any resulting fractional shares to be paid in cash.
1.2 WAIVER OF NOTICE. The Note Holder agrees that this Agreement
serves as adequate notice of redemption and hereby waives any right to notice of
redemption afforded by Section 3.02 of the Note.
1.3 TIMING OF REDEMPTION. The Redemption will occur concurrent
with and conditional upon the Acquisition Closings. If for any reason the
Acquisition Closings do not occur, ACG will not be obligated to redeem, and the
Note Holders will not be
<PAGE>
obligated to accept ACG's offer of redemption of, the Note in accordance with
the terms and conditions of the Agreement.
1.4 REGISTRATION OF SHARES. Upon Redemption of the Notes, ACG
shall ensure that the ACG common stock issued to the Note Holders has been
registered, at its own expense, under the Securities Act of 1933, as amended, or
any applicable state securities laws.
ARTICLE II - GENERAL PROVISIONS
2.1 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
2.2 ENTIRE AGREEMENT. This Agreement supersedes any and all prior
negotiations and oral or written agreements made relating to the subject matter
hereof and, except for written agreements, if any, executed and delivered
simultaneously with or subsequent to the date of this Agreement, constitutes the
entire agreement of the parties relating to the subject matter hereof.
2.3 AMENDMENTS. This Agreement may not be altered or amended
except by a writing signed by the duly authorized representatives of both ACG
and the Note Holder.
2.4 WAIVER. No waiver of any of the terms of this Agreement shall
be effective unless in writing and signed by the duly authorized representative
of the party to be charged therewith. No waiver of any provision hereof shall
extend to or affect any obligation not expressly waived, impair any rights
consequent on such obligation, or imply a subsequent waiver of that or any other
provision.
2.5 GOVERNING LAW. This Agreement shall be deemed to have been
entered into, governed by and construed and interpreted in accordance with the
laws of the State of Texas.
2.6 BINDING EFFECT. Except as otherwise provided to the contrary,
this Agreement shall be binding upon and inure to the benefit of the parties and
their respective heirs, executors, administrators, successors and permitted
assigns.
2.7 HEADINGS. The description headings of the several sections of
this Agreement are inserted for convenience only and do not qualify or affect
the terms and conditions thereof.
2.8 REMEDIES CUMULATIVE. Every right and remedy of the parties,
whether evidenced hereby or by any other agreement or instrument, shall be
cumulative and in addition to every other right and remedy herein or therein
enumerated or allowed by law, and may be exercised singularly or concurrently.
In the event that there shall be any
<PAGE>
inconsistency or conflict between such rights and remedies, then such rights
and remedies shall be deemed to be exercisable in the alternative by either
party, in its sole discretion.
2.9 FURTHER ASSURANCES. The parties covenant and agree to execute
all such further documents, instruments and agreements and to give all such
further undertakings and to perform all such further acts or deeds that may be
reasonably required from time to time in order to carry out the terms of this
Agreement in accordance with their true intent.
<PAGE>
IN WITNESS WHEREOF, the duly authorized representatives of the parties
to this Agreement have executed this Agreement as of the date first written
above.
ADVANCED COMMUNICATIONS GROUP, INC.
By: /s/ James Cragg
--------------------------------
NOTE HOLDER
By: /s/ Ron Baldwin
--------------------------------
Ron Baldwin
<PAGE>
Exhibit 10.41
NOTE REDEMPTION AGREEMENT
This NOTE REDEMPTION AGREEMENT (THE "AGREEMENT") is made and entered into
as of this 3rd day of June, 1999 by and between Advanced Communications Group,
Inc., a Delaware corporation ("ACG"), and Ronnie Emmanuel (THE "NOTE HOLDER").
RECITALS
A. The Note Holder is the holder of a certain 5% Subordinated Note
executed by ACG in favor of the Note Holder and dated February 18, 1998 (THE
"NOTE").
B. ACG desires to repay the principal amount of the Note including any
accrued but unpaid interest by issuing to the Note Holder an equivalent amount
of ACG common stock (THE "REDEMPTION") and the Note Holder desires to accept
repayment in the form of ACG common stock.
C. ACG desires the Pay-off to occur, and the Note Holder wishes to accept
the Pay-off, concurrently with (i) the closing of the acquisition by ACG or a
subsidiary of ACG of all the outstanding stock of YPTel Corporation, a Canadian
corporation, (ii) the closing of the acquisition by ACG or a subsidiary of ACG
of all the outstanding capital stock of Web YP, Inc., a Texas corporation, and
(iii) the closing of the acquisition by ACG or a subsidiary of ACG of all the
outstanding capital stock of Big Stuff, Inc., a Texas corporation (COLLECTIVELY,
THE "ACQUISITION CLOSINGS").
NOW, THEREFORE, for $10.00 from ACG to the Note Holder and other good and
valuable consideration set forth herein, the receipt and sufficiency of which is
hereby acknowledged, the parties agree as follows:
ARTICLE I - TERMS OF REDEMPTION
1.1 THE REDEMPTION. Pursuant to Section 3.01 of the Note, ACG shall
redeem the Note at a redemption price equal to the principal amount to be
redeemed, together with accrued and unpaid interest on the principal amount
thereof (THE "REDEMPTION PRICE"). ACG will pay the Redemption Price to the Note
Holder in an equivalent amount of ACG common stock valued at $5.50 per share,
with any resulting fractional shares to be paid in cash.
1.2 WAIVER OF NOTICE. The Note Holder agrees that this Agreement serves
as adequate notice of redemption and hereby waives any right to notice of
redemption afforded by Section 3.02 of the Note.
1.3 TIMING OF REDEMPTION. The Redemption will occur concurrent with and
conditional upon the Acquisition Closings. If for any reason the Acquisition
Closings do not occur, ACG will not be obligated to redeem, and the Note Holders
will not be
<PAGE>
obligated to accept ACG's offer of redemption of, the Note in accordance with
the terms and conditions of the Agreement.
1.4 REGISTRATION OF SHARES. Upon Redemption of the Notes, ACG shall
ensure that the ACG common stock issued to the Note Holders has been registered,
at its own expense, under the Securities Act of 1933, as amended, or any
applicable state securities laws.
ARTICLE II - GENERAL PROVISIONS
2.1 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
2.2 ENTIRE AGREEMENT. This Agreement supersedes any and all prior
negotiations and oral or written agreements made relating to the subject matter
hereof and, except for written agreements, if any, executed and delivered
simultaneously with or subsequent to the date of this Agreement, constitutes the
entire agreement of the parties relating to the subject matter hereof.
2.3 AMENDMENTS. This Agreement may not be altered or amended except by a
writing signed by the duly authorized representatives of both ACG and the Note
Holder.
2.4 WAIVER. No waiver of any of the terms of this Agreement shall be
effective unless in writing and signed by the duly authorized representative of
the party to be charged therewith. No waiver of any provision hereof shall
extend to or affect any obligation not expressly waived, impair any rights
consequent on such obligation, or imply a subsequent waiver of that or any other
provision.
2.5 GOVERNING LAW. This Agreement shall be deemed to have been entered
into, governed by and construed and interpreted in accordance with the laws of
the State of Texas.
2.6 BINDING EFFECT. Except as otherwise provided to the contrary, this
Agreement shall be binding upon and inure to the benefit of the parties and
their respective heirs, executors, administrators, successors and permitted
assigns.
2.7 HEADINGS. The description headings of the several sections of this
Agreement are inserted for convenience only and do not qualify or affect the
terms and conditions thereof.
2.8 REMEDIES CUMULATIVE. Every right and remedy of the parties, whether
evidenced hereby or by any other agreement or instrument, shall be cumulative
and in addition to every other right and remedy herein or therein enumerated or
allowed by law, and may be exercised singularly or concurrently. In the event
that there shall be any
<PAGE>
inconsistency or conflict between such rights and remedies, then such rights
and remedies shall be deemed to be exercisable in the alternative by either
party, in its sole discretion.
2.9 FURTHER ASSURANCES. The parties covenant and agree to execute all
such further documents, instruments and agreements and to give all such further
undertakings and to perform all such further acts or deeds that may be
reasonably required from time to time in order to carry out the terms of this
Agreement in accordance with their true intent.
<PAGE>
IN WITNESS WHEREOF, the duly authorized representatives of the parties to
this Agreement have executed this Agreement as of the date first written above.
ADVANCED COMMUNICATIONS GROUP, INC.
By: /s/ James Cragg
--------------------------------
NOTE HOLDER
By: /s/ Ronnie Emmanuel
--------------------------------
Ronnie Emmanuel
<PAGE>
Exhibit 10.42
NOTE REDEMPTION AGREEMENT
This NOTE REDEMPTION AGREEMENT (THE "AGREEMENT") is made and entered into
as of this 3rd day of June, 1999 by and between Advanced Communications Group,
Inc., a Delaware corporation ("ACG"), and Richard O'Neal (THE "NOTE HOLDER").
RECITALS
A. The Note Holder is the holder of a certain 5% Subordinated Note
executed by ACG in favor of the Note Holder and dated February 18, 1998 (THE
"NOTE").
B. ACG desires to repay the principal amount of the Note including any
accrued but unpaid interest by issuing to the Note Holder an equivalent amount
of ACG common stock (THE "REDEMPTION") and the Note Holder desires to accept
repayment in the form of ACG common stock.
C. ACG desires the Pay-off to occur, and the Note Holder wishes to accept
the Pay-off, concurrently with (i) the closing of the acquisition by ACG or a
subsidiary of ACG of all the outstanding stock of YPTel Corporation, a Canadian
corporation, (ii) the closing of the acquisition by ACG or a subsidiary of ACG
of all the outstanding capital stock of Web YP, Inc., a Texas corporation, and
(iii) the closing of the acquisition by ACG or a subsidiary of ACG of all the
outstanding capital stock of Big Stuff, Inc., a Texas corporation (COLLECTIVELY,
THE "ACQUISITION CLOSINGS").
NOW, THEREFORE, for $10.00 from ACG to the Note Holder and other good and
valuable consideration set forth herein, the receipt and sufficiency of which is
hereby acknowledged, the parties agree as follows:
ARTICLE I - TERMS OF REDEMPTION
1.1 THE REDEMPTION. Pursuant to Section 3.01 of the Note, ACG shall
redeem the Note at a redemption price equal to the principal amount to be
redeemed, together with accrued and unpaid interest on the principal amount
thereof (THE "REDEMPTION PRICE"). ACG will pay the Redemption Price to the Note
Holder in an equivalent amount of ACG common stock valued at $5.50 per share,
with any resulting fractional shares to be paid in cash.
1.2 WAIVER OF NOTICE. The Note Holder agrees that this Agreement serves
as adequate notice of redemption and hereby waives any right to notice of
redemption afforded by Section 3.02 of the Note.
1.3 TIMING OF REDEMPTION. The Redemption will occur concurrent with and
conditional upon the Acquisition Closings. If for any reason the Acquisition
Closings do not occur, ACG will not be obligated to redeem, and the Note Holders
will not be
<PAGE>
obligated to accept ACG's offer of redemption of, the Note in accordance with
the terms and conditions of the Agreement.
1.4 REGISTRATION OF SHARES. Upon Redemption of the Notes, ACG shall
ensure that the ACG common stock issued to the Note Holders has been registered,
at its own expense, under the Securities Act of 1933, as amended, or any
applicable state securities laws.
ARTICLE II - GENERAL PROVISIONS
2.1 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
2.2 ENTIRE AGREEMENT. This Agreement supersedes any and all prior
negotiations and oral or written agreements made relating to the subject matter
hereof and, except for written agreements, if any, executed and delivered
simultaneously with or subsequent to the date of this Agreement, constitutes the
entire agreement of the parties relating to the subject matter hereof.
2.3 AMENDMENTS. This Agreement may not be altered or amended except by a
writing signed by the duly authorized representatives of both ACG and the Note
Holder.
2.4 WAIVER. No waiver of any of the terms of this Agreement shall be
effective unless in writing and signed by the duly authorized representative of
the party to be charged therewith. No waiver of any provision hereof shall
extend to or affect any obligation not expressly waived, impair any rights
consequent on such obligation, or imply a subsequent waiver of that or any other
provision.
2.5 GOVERNING LAW. This Agreement shall be deemed to have been entered
into, governed by and construed and interpreted in accordance with the laws of
the State of Texas.
2.6 BINDING EFFECT. Except as otherwise provided to the contrary, this
Agreement shall be binding upon and inure to the benefit of the parties and
their respective heirs, executors, administrators, successors and permitted
assigns.
2.7 HEADINGS. The description headings of the several sections of this
Agreement are inserted for convenience only and do not qualify or affect the
terms and conditions thereof.
2.8 REMEDIES CUMULATIVE. Every right and remedy of the parties, whether
evidenced hereby or by any other agreement or instrument, shall be cumulative
and in addition to every other right and remedy herein or therein enumerated or
allowed by law, and may be exercised singularly or concurrently. In the event
that there shall be any
<PAGE>
inconsistency or conflict between such rights and remedies, then such rights
and remedies shall be deemed to be exercisable in the alternative by either
party, in its sole discretion.
2.9 FURTHER ASSURANCES. The parties covenant and agree to execute all
such further documents, instruments and agreements and to give all such further
undertakings and to perform all such further acts or deeds that may be
reasonably required from time to time in order to carry out the terms of this
Agreement in accordance with their true intent.
<PAGE>
IN WITNESS WHEREOF, the duly authorized representatives of the parties to
this Agreement have executed this Agreement as of the date first written above.
ADVANCED COMMUNICATIONS GROUP, INC.
By: /s/ James Cragg
--------------------------------
NOTE HOLDER
By: /s/ Richard O'Neal
--------------------------------
Richard O'Neal
<PAGE>
Exhibit 10.43
NOTE REDEMPTION AGREEMENT
This NOTE REDEMPTION AGREEMENT (THE "AGREEMENT") is made and entered into
as of this 3rd day of June, 1999 by and between Advanced Communications Group,
Inc., a Delaware corporation ("ACG"), and Steve Sparks (THE "NOTE HOLDER").
RECITALS
A. The Note Holder is the holder of a certain 5% Subordinated Note
executed by ACG in favor of the Note Holder and dated February 18, 1998 (THE
"NOTE").
B. ACG desires to repay the principal amount of the Note including any
accrued but unpaid interest by issuing to the Note Holder an equivalent amount
of ACG common stock (THE "REDEMPTION") and the Note Holder desires to accept
repayment in the form of ACG common stock.
C. ACG desires the Pay-off to occur, and the Note Holder wishes to accept
the Pay-off, concurrently with (i) the closing of the acquisition by ACG or a
subsidiary of ACG of all the outstanding stock of YPTel Corporation, a Canadian
corporation, (ii) the closing of the acquisition by ACG or a subsidiary of ACG
of all the outstanding capital stock of Web YP, Inc., a Texas corporation, and
(iii) the closing of the acquisition by ACG or a subsidiary of ACG of all the
outstanding capital stock of Big Stuff, Inc., a Texas corporation (COLLECTIVELY,
THE "ACQUISITION CLOSINGS").
NOW, THEREFORE, for $10.00 from ACG to the Note Holder and other good and
valuable consideration set forth herein, the receipt and sufficiency of which is
hereby acknowledged, the parties agree as follows:
ARTICLE I - TERMS OF REDEMPTION
1.1 THE REDEMPTION. Pursuant to Section 3.01 of the Note, ACG shall
redeem the Note at a redemption price equal to the principal amount to be
redeemed, together with accrued and unpaid interest on the principal amount
thereof (THE "REDEMPTION PRICE"). ACG will pay the Redemption Price to the Note
Holder in an equivalent amount of ACG common stock valued at $5.50 per share,
with any resulting fractional shares to be paid in cash.
1.2 WAIVER OF NOTICE. The Note Holder agrees that this Agreement serves
as adequate notice of redemption and hereby waives any right to notice of
redemption afforded by Section 3.02 of the Note.
1.3 TIMING OF REDEMPTION. The Redemption will occur concurrent with and
conditional upon the Acquisition Closings. If for any reason the Acquisition
Closings do not occur, ACG will not be obligated to redeem, and the Note Holders
will not be
<PAGE>
obligated to accept ACG's offer of redemption of, the Note in accordance with
the terms and conditions of the Agreement.
1.4 REGISTRATION OF SHARES. Upon Redemption of the Notes, ACG shall
ensure that the ACG common stock issued to the Note Holders has been registered,
at its own expense, under the Securities Act of 1933, as amended, or any
applicable state securities laws.
ARTICLE II - GENERAL PROVISIONS
2.1 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
2.2 ENTIRE AGREEMENT. This Agreement supersedes any and all prior
negotiations and oral or written agreements made relating to the subject matter
hereof and, except for written agreements, if any, executed and delivered
simultaneously with or subsequent to the date of this Agreement, constitutes the
entire agreement of the parties relating to the subject matter hereof.
2.3 AMENDMENTS. This Agreement may not be altered or amended except by a
writing signed by the duly authorized representatives of both ACG and the Note
Holder.
2.4 WAIVER. No waiver of any of the terms of this Agreement shall be
effective unless in writing and signed by the duly authorized representative of
the party to be charged therewith. No waiver of any provision hereof shall
extend to or affect any obligation not expressly waived, impair any rights
consequent on such obligation, or imply a subsequent waiver of that or any other
provision.
2.5 GOVERNING LAW. This Agreement shall be deemed to have been entered
into, governed by and construed and interpreted in accordance with the laws of
the State of Texas.
2.6 BINDING EFFECT. Except as otherwise provided to the contrary, this
Agreement shall be binding upon and inure to the benefit of the parties and
their respective heirs, executors, administrators, successors and permitted
assigns.
2.7 HEADINGS. The description headings of the several sections of this
Agreement are inserted for convenience only and do not qualify or affect the
terms and conditions thereof.
2.8 REMEDIES CUMULATIVE. Every right and remedy of the parties, whether
evidenced hereby or by any other agreement or instrument, shall be cumulative
and in addition to every other right and remedy herein or therein enumerated or
allowed by law, and may be exercised singularly or concurrently. In the event
that there shall be any
<PAGE>
inconsistency or conflict between such rights and remedies, then such rights
and remedies shall be deemed to be exercisable in the alternative by either
party, in its sole discretion.
2.9 FURTHER ASSURANCES. The parties covenant and agree to execute all
such further documents, instruments and agreements and to give all such further
undertakings and to perform all such further acts or deeds that may be
reasonably required from time to time in order to carry out the terms of this
Agreement in accordance with their true intent.
<PAGE>
IN WITNESS WHEREOF, the duly authorized representatives of the parties to
this Agreement have executed this Agreement as of the date first written above.
ADVANCED COMMUNICATIONS GROUP, INC.
By: /s/ James Cragg
--------------------------------
NOTE HOLDER
By: /s/ Steve Sparks
--------------------------------
Steve Sparks
<PAGE>
Exhibit 10.52
SEVERANCE AGREEMENT AND FULL GENERAL RELEASE
This Severance Agreement and Full General Release ("Agreement") is made
and entered into on this 16th day of December, 1998, by and between Advanced
Communications Group, Inc. ("Company"), a Delaware corporation, and Richard
P. Anthony ("Executive").
WHEREAS, Executive was employed by Company under the terms of an Amended
and Restated Employment Agreement, a copy of which is attached hereto as
Exhibit A ("Exhibit A" or the "Employment Agreement). Unless otherwise
defined herein, capitalized terms herein shall have the same meanings as in
the Employment Agreement; and
WHEREAS, Executive's employment with Company ended on November 9, 1998,
under Section 6.1 (f) of the Employment Agreement; and
WHEREAS, Company and Executive wish to settle any disputes existing
between them.
NOW THEREFORE, in consideration of the mutual promises, agreements and
releases contained in this Agreement, the parties agree as follows:
A. COMPANY'S AGREEMENT
Except as specifically provided under the terms of this Agreement, all
other obligations of Company under the Employment Agreement shall
cease. In exchange for this Agreement, Company agrees to provide
Executive the following benefits, beginning upon the Effective Date of
this Agreement as provided under Section E hereof:
1. Two Hundred Fifty Thousand Dollars ($250,000.00), payable in a lump
sum on the Effective Date of this Agreement in satisfaction of the
Company's obligation to pay Executive his Base Salary for a one (1)
year period under Section 6.1(f) of the Employment Agreement;
2. The transfer of ownership to Executive of the Company computer
currently in Executive's possession;
3. The right to exercise the Three-Hundred Fifty Thousand (350,000)
Remaining Options, which Company acknowledges are fully vested,
according to the terms of an amendment to Company's Nonqualified
Stock Option Agreement by and between the Company and Executive and
dated as of the date of the Agreement ("NSO Agreement"), a copy of
which amendment is attached hereto as Exhibit B; and
4. The right to exercise the One Hundred Fifty Thousand (150,000)
Three-Month Options awarded in Section 3.4 of the Employment
Agreement through November 8, 2001;
5. Through November 8, 1999, Company-paid health insurance under the
terms of a group health insurance plan of Company; and
<PAGE>
6. One-Hundred Four Thousand One Hundred Twenty-Five Dollars
($104,125.00) as severance, payable within five (5) business days
following the Effective Date of this Agreement.
The procedure for Executive exercising the Three-Month Options and
the Remaining Options shall be that procedure set forth in the NSO
Agreement, as amended by this Agreement. All payments made under
this Agreement will be by check payable to Executive or by direct
deposit to an account designated in writing by Executive.
B. EXECUTIVE'S AGREEMENTS
1. FULL AND GENERAL RELEASE OF LIABILITY
Executive hereby releases Company and its officers, directors,
employees, agents, insurers, successors, parents, subsidiaries,
partnerships, joint ventures, and all affiliated companies (the
"Released Parties") from any and all claims and demands of any kind,
known or unknown, which he may have against Company or any of the
Released Parties as of the date he signs this Agreement, or which he
may have had at any time before the date of signing. Executive
understands that he is releasing Company and all of the Released
Parties, to the maximum extent permissible by law, from any
liability which Executive believes Company or any of the Released
Parties may have had to him, at any time up to and including the
date he signs this Agreement. This release includes a waiver (a
giving up of) any legal rights or claims Executive may have or may
have had, including claims of race, color, national origin, sex or
gender, age, or disability discrimination, arising under Title VII
of the Civil Rights Act of 1964, the Rehabilitation Act of 1973, the
Civil Rights Act of 1866 (Section 1981), the Americans with
Disabilities Act of 1990, the Employee Retirement Income Security
Act of 1974, the Age Discrimination in Employment Act, the Family
and Medical Leave Act of 1993, the Missouri Service Letter Statute,
the Missouri Human Rights Act, the Texas Employment Discrimination
Law, the Employment Agreement, and under any other federal, state or
local statute, regulation, or the common law of any state, including
but not limited to any and all claims in tort or contract, to the
maximum extent permitted by applicable law, except as otherwise
specifically provided in this Agreement. This release shall not
preclude Executive from being indemnified by Company with respect to
his acts or omissions on behalf of Company during his employment by
Company.
Company hereby releases Executive from any and all claims and
demands of any kind, known or unknown, which Company may have had
against Executive as of the date Company signs this Agreement, or
which Company may have had at any time before the date of signing,
to the maximum extent permitted by applicable law.
2
<PAGE>
2. RESIGNATION FROM COMPANY AND AFFILIATES
(a) Executive agrees his employment with Company was terminated as
of November 9, 1998. Executive further agrees to voluntarily
resign as an officer, chairman, and as a member of the Board of
Directors of any subsidiary or affiliate of Company (including,
but not limited to, KIN Network, Inc. and Liberty Cellular,
Inc.). Executive will resign from the Board of Directors of
Company on the Effective Date of this Agreement. Such
resignation shall be in the form attached hereto as Exhibit C-1
and Exhibit C-2 shall be executed by Executive, and a signed
original of such resignation shall be returned to counsel for
Company (as set forth in Section E) with the signed original of
this Agreement and of the NSO Agreement.
(b) Executive acknowledges he is not entitled to future employment
with or to provide consulting services to Company or to its
successors, assigns, subsidiaries or affiliates, except as
provided for in this Agreement.
(c) Executive acknowledges that as of the Effective Date, Executive
has filed or caused to be filed all reports required to be
filed under Section 16 of the Exchange Act of 1934, as amended,
and that he has not engaged in any transactions which would
require the filing of Form 4 by February 15, 1999. Executive
agrees that he will promptly inform Company if he engages in a
transaction in Company's Common Stock which, because of
transactions prior to the date hereof, would require the filing
of a Form 4 or Form 5.
3. ADEQUACY OF CONSIDERATION
Executive acknowledges that the benefits provided by Company under this
Agreement are adequate consideration for Executive's execution of this
Agreement and all attachments hereto, and further acknowledges that the
sum is in excess of any amounts to which he may otherwise be entitled
under existing policies or practices of Company or under the Employment
Agreement.
4. SURVIVING OBLIGATIONS UNDER EMPLOYMENT AGREEMENT
(a) Executive understands and agrees that all obligations of
Company under the Employment Agreement have been released,
other than as expressly set forth in this Agreement.
Notwithstanding that Company's obligations have been released,
Executive agrees that, in accordance with Section 6.2 of the
Employment Agreement, he is not relieved of any continuing
obligations at cessation of his employment expressly provided
for in the Employment Agreement, including, but not limited to,
those set forth in Section 5 (Protection of Confidential
Information and Executive Non-
3
<PAGE>
Competition). Executive agrees that the provisions of Section
5.1 shall apply for three (3) years following the Effective
Date of this Agreement and the provisions of Section 5.5(ii)
shall apply for one (1) year following the Effective Date of
this Agreement. Company acknowledges that the provisions of
Section 5.5(i) and (iii) of the Employment Agreement shall
terminate upon the Effective Date of this Agreement.
(b) Executive agrees that as of the Effective Date, he shall return
all Company property not previously returned to Company,
pursuant to Section 7 of the Employment Agreement.
(c) Executive shall not take any action inconsistent with
Executive's relationship and responsibilities as a current Board
member or as a former employee and executive of Company and its
subsidiaries and affiliates, or take any action which is
intended, or may be reasonably expected, to harm the
reputation, business, prospects, or operations of Company or its
subsidiaries or affiliates, including, but not limited to,
making any disparaging remarks about Company, its subsidiaries
and affiliates, and their respective officers, directors or
employees. To that end, Executive shall continue to (i)
cooperate and assist in the orderly transition of management
when reasonably requested by Company or its subsidiaries or
affiliates including execution of any minutes or other
appropriate documents, and (ii) cooperate and assist Company
and its subsidiaries and affiliates in any pending, threatened
or new litigation, and in any investigation or audit by any
governmental entity, including but not limited to, providing
truthful information to Company (and its subsidiaries or
affiliates) representatives, Company (and its subsidiaries or
affiliates) attorneys, and governmental investigators (if
required by applicable law). Company shall make reasonable
efforts to prevent disparaging remarks about Executive.
Executive agrees not to make disparaging remarks about the
Company, its officers, directors or employees or with regard to
his association with Company.
(d) Company agrees not to release or make public any information
referring directly or indirectly to the reasons for the
Executive's termination of employment as an employee and
officer or his resignation as a director or to the terms of
this Agreement, except as may be required by applicable law or
regulation or pursuant to any securities exchange or stock
exchange rule or regulation or in connection with any lawsuit
or arbitration proceeding. Without in any manner limiting
the right of the Company to make the disclosures it is required
to make as set forth in the immediately preceding sentence and
anything to the contrary herein notwithstanding, Executive
acknowledges and agrees that the Company is required to, and
the Company will (i) issue a press release announcing
Employee's resignation from the Board, (ii) file the Agreement
as an exhibit to
4
<PAGE>
filings the Company is required to make pursuant to Section 13
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and the rules promulgated thereunder, (iii)
file the Agreement as an exhibit to filings the Company may
make pursuant to the Securities Act of 1933, as amended, and
(iv) describe the terms of the Agreement (x) in the Company's
proxy statement for its 1999 Annual Meeting as required by
Section 14 of the Exchange Act and the rules, regulations and
schedules promulgated thereunder and (y) in the Company's
Annual Report on Form 10-K for the fiscal year ending 1998 as
required by Section 13 of the Exchange Act and the rules and
regulations promulgated thereunder.
C. NO ADMISSION OF LIABILITY
Executive acknowledges that this Agreement shall not in any way be
construed as an admission of any liability on the part of Company,
its subsidiaries, affiliates, officers, directors, or employees and that
all such liability is expressly denied by Company and such individuals
and entities.
D. VOLUNTARY NATURE OF AGREEMENT AND ADVICE OF COUNSEL
Executive acknowledges that he has read this Agreement and any attached
exhibits, understands their terms, and signs the Agreement voluntarily
of his own free will, without coercion or duress, and with full
understanding of the significance and binding effect of the Agreement.
Executive is hereby advised to consult with his attorney before signing
this Agreement.
E. CONSIDERATION PERIOD AND REVOCATION
Executive received this Agreement on December 16, 1998. Executive
acknowledges that he has had a reasonable period of time, and has had
adequate opportunity, to consider the terms of the Agreement and whether
to enter into the Agreement. Executive has twenty-one (21) calendar
days, after the date Executive received the Agreement, within which to
consider the Agreement, although he may sign and return it sooner if he
desires. Executive may revoke the Agreement, by delivering a written
notice of revocation to Albert S. Rose, Esquire, Blackwell Sanders
Peper Martin, LLP, 720 Olive Street, Suite 2400, St. Louis, Missouri
63101, within seven (7) calendar days after Executive signs the
Agreement. The Agreement will become effective and enforceable
immediately after the seven (7) day revocation period expires (the
"Effective Date"), if Executive has not revoked this Agreement prior to
that time. Exhibits B and C to this Agreement must be executed and not
revoked by Executive for this Agreement or Exhibits B and C to be
effective and enforceable.
F. BINDING EFFECT
This Agreement will be binding upon Executive and his heirs,
administrators, representatives, executors, successors and assigns, and
will inure to the benefit of
5
<PAGE>
Company and its successors and assigns, except any services may only be
performed by Executive.
G. NO LIENS
Executive represents and warrants that there are no existing or
outstanding attorneys' liens or other liens which are not extinguished
or satisfied by the execution of this Agreement. Executive agrees to
indemnify and hold harmless Company for any liability in connection
with such liens.
H. REMEDIES FOR BREACH
If Executive breaches any term of this Agreement, any payments under
this Agreement which would otherwise become payable subsequent to the
date of such breach, shall cease and terminate, and in the event any
such payments have been prepaid, any amount so prepaid shall be
immediately returned to the Company. Company may also pursue any other
remedies available at law and equity, including, but not limited to,
recovery of its costs and attorneys' fees.
I. GOVERNING LAW
This Agreement will be interpreted and enforced in accordance with the
laws of the State of Missouri, without giving effect to the conflict of
law provisions thereof.
J. SEVERABILITY
Should any provision of this Agreement be declared or determined by a
court of competent jurisdiction or arbitrator, as the case may be, to be
invalid or otherwise unenforceable, the remaining parts, terms and
provisions shall continue to be valid, legal and enforceable, and will
be performed and enforced to the fullest extent permitted by law.
K. COMPLETE AGREEMENT
Except as provided for herein, this Agreement (which includes Exhibits
A, B and C) contains the entire agreement between Executive and Company
and supersedes all prior agreements or understandings between them on
the subject matters of this Agreement. No change or waiver of any part
of the Agreement will be valid unless in writing and signed by both
Executive and Company. Except where the context requires a different
interpretation to effectuate the purposes of this Agreement, the term
"Agreement" means this Agreement and all exhibits to this Agreement.
L. MEDIATION AND ARBITRATION
Actions by Company to enforce Section 5 of the Employment Agreement
shall be in accordance with the provisions set forth in Section 5.7 of
the Employment Agreement. Actions by Company to enforce Section 7 of the
Employment Agreement shall be
6
<PAGE>
through court action in a court of competent jurisdiction, unless
otherwise agreed to by Company. Except for actions by Company seeking to
enforce the provisions of Sections 5 or 7 of the Employment Agreement,
any dispute, controversy, or claim brought by Company or Executive
concerning or related to this Agreement (inclusive of all exhibits
hereto), shall be settled in the following manner. One party shall
notify the other party in writing that there is a dispute, controversy,
or claim, and shall provide fifteen (15) days' notice to the other
party to resolve such dispute, controversy, or claim. If the dispute,
controversy, or claim is not resolved in such fifteen (15) day period,
the party initiating the dispute, controversy or claim shall obtain a
list of three (3) mediators from U.S. Arbitration & Mediation Midwest,
Inc. or its successor. Each party, beginning with the party initiating
the dispute, controversy, or claim, shall strike one mediator from the
list. The remaining mediator shall then be contacted to schedule a
mediation in St. Louis, Missouri or such other place as is agreed upon
by the parties. If the mediation is unsuccessful in resolving the
dispute, controversy, or claim, such matter shall then be resolved by
binding arbitration in St. Louis, Missouri or such other place as is
agreed upon by the parties, in accordance with the Employment Dispute
Resolution Rules of the American Arbitration Association. Judgment upon
the award rendered by the arbitrator may be entered in any court having
jurisdiction. In reaching his or her decision, the arbitrator shall have
no authority to change or modify any provision of this Agreement. The
cost of the mediation and arbitration shall be borne equally by the
parties; attorneys' fees and witness expenses shall be borne by the
party incurring them.
M. COOPERATION
Each party agrees to reasonably cooperate with the other party or
their agents in taking all steps necessary to effectuate the
purposes of this Agreement and any exhibits to this Agreement,
including but not limited to, executing documents and providing
information when reasonably requested by the other party.
7
<PAGE>
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED
BY THE PARTIES.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
Advanced Communications Richard P. Anthony
Group, Inc.
By /s/ James Cragg
--------------------- /s/ Richard P. Anthony
- ------------------------ ----------------------
Name James Cragg
-------------------
Title EVP
-------------------
8
<PAGE>
Exhibit 10.53
CONSULTING AGREEMENT
THIS AGREEMENT dated as of July 14, 1999, is entered into by and between
Advanced Communications Group, Inc., a Delaware corporation (the "Company"),
and Compass Telecommunications, Inc., a Delaware corporation ("Consultant").
W I T N E S S E T H
WHEREAS, the Company is engaged in the Telecommunication Business (as
defined in the Stock Purchase Agreement dated as of the date hereof between
Consultant, the Company and certain subsidiaries of the Company (the "Stock
Purchase Agreement");
WHEREAS, certain employees of Consultant have acquired throughout the
years substantial experience in the Telecommunication Business; and
WHEREAS, Consultant has agreed to acquire the Telecommunication
Subsidiaries (as defined in the Stock Purchase Agreement) of the Company,
subject to the closing conditions referenced therein, including without
limitation, the receipt of all governmental and other consents and approvals
as described therein.
The parties hereto agree as follows:
1. Capitalized terms not otherwise defined herein shall have the
definitions given in the Stock Purchase Agreement.
2. The Company agrees to engage the Consultant for the period
commencing on the date that the notification period under the HSR Act has
expired or been earlier terminated (the "Commencement Date") through the
earlier to occur of (i) the Closing Date or (ii) the date on which the Stock
Purchase Agreement is terminated in accordance with its terms (the
"Consultancy Period"), upon the terms and conditions hereinafter set forth.
Consultant agrees to furnish services to the Company and to make its
employees available to the Company for consultation, review and advice with
respect to the Telecommunication Business, which shall include but not
necessarily be limited to the following activities and aspects of the
business:
a. Management of the Telecommunications Subsidiaries;
b. Sales force activity/performance;
<PAGE>
c. Product packaging and marketing, pricing, marketing partnership
agreements;
d. Customer service, support and relations - billing system
installation, order entry;
e. Network performance and service quality;
f. Network investment/conversion project, co-location policies and
negotiation and rollout program;
g. Management and workforce key hires;
h. Employee relations;
i. Supplier contracts, facilities agreements, interconnection
agreements, and equipment purchases;
j. Relations with regulators;
k. Strategic relations with suppliers and customers;
l. Financial practices - accounts receivable management, regional
bell operating company billing issues and related settlements;
m. Transition process and matters.
Requests for consultation may be submitted directly to Consultant by
designated executive officers of the Company. The Company will appoint an
executive to serve as point person to work with each employee of Consultant
in such employee's specialty area. Consultant shall respond to reasonable
requests of the Executive Committee and Consultant shall present to the
Executive Committee its recommendations. The Executive Committee shall meet
with Consultant not more frequently than bi-weekly and the Executive
Committee shall use its best efforts to act promptly on recommendations from
Consultant. Consultant shall be an independent contractor. All decisions as
to the management and control of the Company shall be made solely by the
officers and directors of the Company and Consultant shall have no say in
such management and control.
Consultant agrees that during the Consultancy Period, as defined above,
Consultant will faithfully render such consulting and advisory services as
identified in Section 2(a) - (m) inclusive (the "Consulting Services").
Except for conditions beyond the control of Consultant, Consultant,
recognizing the time demands associated with providing the Consulting
Services, agrees to be available to provide Consulting Services during
-2-
<PAGE>
damages, losses and expenses (including reasonable attorneys' fees) arising
from Consultant's provision of the services hereunder to the Company.
10. This Agreement contains the entire agreement between the parties as
to the subject matter hereof and may not be changed except in writing.
11. This Agreement shall be subject to, and be governed by, the laws of
Delaware and any controversy arising under this agreement shall be subject to
the exclusive jurisdiction of the Texas courts or, if the parties hereto can
acquire jurisdiction, in the United States District Court for Northern
District of Texas.
12. Any notice required or permitted to be given under this Agreement
shall be sufficient if in writing and if sent in accordance with the
procedures of the Stock Purchase Agreement.
13. Nothing contained in this Agreement shall prevent the Consultant
and its employees and/or any other individual associated with the Consultant
from engaging in a business or businesses separate and apart from that of the
Company.
14. For purposes of this Agreement, Consultant shall continue to be
bound under the Confidentiality and Non-Disclosure Agreement signed June 2,
1999 between Compass Partners and Bank of America Securities, on behalf of
the Company with respect to the sale of the Telecommunication Subsidiaries.
15. Consultant may not assign its rights or sub-contract or delegate
its performance hereunder without the prior written consent of Company, and
any attempted assignment, sub-contracting or delegation without Company's
prior written consent shall be void.
16. The failure to enforce at any time any of the provisions of this
Agreement or to require at any time performance by the other party of any of
the provisions hereof shall in no way be construed to be a waiver of such
provisions or to affect either the validity of this Agreement, or any part
hereof, or the right of either party thereafter to enforce each and every
provision in accordance with the terms of this Agreement.
17. The validity or enforceability of any particular provisions of this
Agreement shall not affect the other provisions hereof, and this Agreement
shall be construed in all respects as if such invalid or unenforceable
provisions were omitted.
-4-
<PAGE>
18. This document constitutes the full understanding between the
parties and no terms, conditions, understanding or agreement purporting to
modify or vary the terms of this Agreement shall be binding unless hereafter
made in writing with reference to this Agreement and signed by Consultant and
a duly authorized representative of Company.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
ADVANCED COMMUNICATIONS GROUP, INC.
By: /s/ Richard A. O'Neal
----------------------------------
Name: Richard A. O'Neal
----------------------------------
Title: CEO
----------------------------------
COMPASS TELECOMMUNICATIONS, INC.
By: /s/ Robert C. M. Baker
----------------------------------
Name: Robert C. M. Baker
----------------------------------
Title: CEO
----------------------------------
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<PAGE>
Exhibit 10.54
DIRECTORY SALES AGREEMENT
THIS AGREEMENT dated as of November 19, 1999, is entered into by and
between IONEX Telecommunications, Inc., a Delaware corporation (the "Company"),
and Advanced Communications Group, Inc., a Delaware corporation ("ACG").
WITNESSETH
WHEREAS, ACG is engaged in the Telecommunication Business (as defined in
the Stock Purchase Agreement dated as of July 14, 1999 and as amended in the
First Amendment to the Stock Purchase Agreement of the even date herewith
between the Company, ACG and certain subsidiaries of ACG (the "Stock Purchase
Agreement"));
WHEREAS, the Company has agreed to acquire the Telecommunication
Subsidiaries (as defined in the Stock Purchase Agreement) of ACG, subject to the
closing conditions referenced in the Stock Purchase Agreement, including without
limitation, the receipt of certain governmental and other consents and approvals
as described therein;
WHEREAS, ACG owns all of the outstanding shares of Great Western
Directories, Inc., a Texas corporation, (ACG, Great Western Directories, Inc.
and their successors and assigns being collectively referred to herein as the
"Sales Agents");
WHEREAS, the Sales Agents are engaged in the business of publishing yellow
pages directories in certain markets within the United States and selling
advertising space within such directories; and
WHEREAS, the Sales Agents desire to provide certain sales, marketing and
promotional services to the Company in conjunction with the Sales Agents' own
sales, marketing and promotional activities, and the Company desires to receive
such sales, marketing and promotional services from the Sales Agents.
The parties hereto agree as follows:
1. Capitalized terms not otherwise defined herein shall have the
definitions given in the Stock Purchase Agreement.
2. The Company agrees to engage the Sales Agents as a provider of Sales
Services (as hereinafter defined) in the markets in which the Sales Agents are
currently publishing and distributing, and will in the future publish and
distribute, yellow pages directories (the "Territory") for a period of five (5)
years commencing on the date hereof (the "Initial Term"). The Company may extend
the duration of the Initial Term for one additional five (5) year period by
providing written notice, no less than ninety (90) days prior to the expiration
of the Initial Term, to all of the Sales Agents of its intention to so extend
the initial Term (the Initial Term, together with the extension thereto, if any,
being hereinafter referred to as the "Term"). The Sales Agents agree to act as a
provider of Sales Services (as hereinafter defined) in the Territory during the
Term. The term, "Sales Services," as used herein, shall mean those services
relating to
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the sale, marketing and promotion of the Company's products and services,
including, but not necessarily limited to the following:
a. Soliciting potential customers of the Company in conjunction with the
Sales Agents' own customer solicitation efforts;
b. Marketing and promoting the Company's products and services to
potential customers of the Company;
c. Selling the Company's products and services;
d. Taking orders for the Company's products and services;
e. Obtaining customer leads for, and communicating them to, the Company;
and
f. Other ancillary services required in the performance of (a) through
(e) above.
The Sales Agents agree that during the Term, as defined above, the Sales
Agents will faithfully render the Sales Services and the Company will be the
only company or entity active in the telecommunications industry to which the
Sales Agents provide Sales Services. The Sales Agents shall render the Sales
Services in compliance with any and all Laws, including but not limited to, any
and all Laws relating to the provision of the products and services offered by
the Company.
3. Subject to the terms of this SECTION 3, the Company shall pay to the
Sales Agents during the Term a commission in an amount equal eighteen percent
(18.0%) of the aggregate revenues collected (excluding taxes and regulatory
charges) by the Company attributable to billings made for each of the Company's
products and services during the second, third, fourth and fifth months after
the initial sale of each of such products and services that are the Direct
Result of the Sales Services of the Sales Agents (it being understood that a
sale will be deemed to be the "Direct Result" of the Sales Services of the Sales
Agents only if such Sales Agents [VALIDATE] prospective customers, present
products and services to such prospective customers and consummate a sale of
such products and/or services with such customers as evidenced by a written
order). (the "Commission"). In addition to the other payments contemplated in
this SECTION 3, the Company shall pay to the Sales Agents twenty-five Dollars
($25.00) for every Qualified Lead reported to the Company by the Sales Agents.
The term, "Qualified Lead," as used in this Agreement, shall be determined in
the sole discretion of the Company and shall be subject to change as the Company
deems necessary or appropriate. The Company shall pay the Sales Agents the
Commission and Qualified Lead payments monthly, within thirty (30) days after
the end of the month in which the Commissions or the Qualified Lead Payments as
the case may be, have been earned, based on the revenues collected during the
previous month and the number of Qualified Leads during such month.
4. The Company shall provide the Sales Agents with: (i) all marketing,
promotional and other documentation necessary for the Sales Agents to provide
the Sales Services; (ii) training on the Company's products and services, which
training will be consistent with such
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training provided to the Company's own sales force; and (iii) an order entry
process designed to ensure the quality of service called for in Section 7
hereof.
5. The Company shall, in its sole discretion, establish the prices at
which it will offer the products and services promoted, marketed and sold
through the Sales Services of the Sales Agents.
6. Except as set forth below, the Company shall have no right to
terminate payments to the Sales Agents hereunder except for violation of any of
the provisions of this Agreement or willful failure to perform Sales Services
after written notice of such violation or failure to perform services on behalf
of the Company has been delivered to the Sales Agents and the Sales Agents have
failed to correct such violation or to perform such services within fifteen (15)
business days after the receipt by the Sales Agents of such written notice,
which shall specifically identify the alleged violation or failure.
7. In performance of the Sales Services, the Sales Agents will employ
methods and procedures of a quality at least equal to those employed when the
Sales Agents perform similar services for their own businesses and affairs.
8. The Sales Agents are, and shall remain at all times, independent
contractors of the Company in the performance of all Sales Services hereunder,
and all persons employed by the Sales Agents to perform such Sales Services
shall be and remain employees solely of the Sales Agents by which they are
employed and subject only to the Sales Agents' respective supervisory personnel.
In addition, the Sales Agents shall not hold themselves out to any person as
employees of the Company or as having the authority to obligate the Company in
any way.
9. The Sales Agents have no authority to commit the Company in any
manner, cause or undertaking whatever, without the prior consent of the Company
and similarly, the Company has no authority to commit the Sales Agents in any
matter, cause or undertaking whatever without the prior consent of the Sales
Agents.
10. The Sales Agents have no authority to make representations,
commitments or guarantees not specifically authorized by the Company.
11. The Sales Agents shall abide by and comply with all sales policies and
operating regulations of the Company, as in effect, from time to time, and of
which the Sales Agents have been made aware in writing prior to the taking of
effect of such sales policies and operating regulations, if future changes do
not materially alter the terms of this Agreement. If the Sales Agents believe
that changes in the Company's sales policies and operating regulations have
materially altered the terms of this Agreement, the Sales Agents shall give the
Company written notice of such belief before taking any action contrary to the
sales policies and operating regulations then in effect.
12. The Sales Agents shall be responsible for hiring all employees of the
Sales Agents and paying all wages, costs and expenses thereof.
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13. Confidentiality.
a. For purposes hereof, "Confidential Information" means any and all
information of the Company that might reasonably be considered
confidential, secret, sensitive, proprietary or private. To the extent
practical, Confidential Information shall be marked "proprietary" or
"confidential." Confidential Information shall include the following:
(1) Data, know-how, formulae, processes, designs, sketches,
photographs, plans, drawings, specifications, samples, reports, lists,
financial information, studies, findings, inventions and ideas, or
proprietary information relating to either party or the methods or
techniques used by either party;
(2) Data, documents, or proprietary information employed in
connection with the marketing and implementation of each party's
products, including cost information, business policies and
procedures, revenues, markets, distributor and customer lists, and
similar items of information; and
(3) Any other data or information obtained by either party
during the Term which is not generally known to and not readily
ascertainable by proper means by third persons who could obtain
economic value from its use or disclosure.
b. The Sales Agents shall treat as confidential all Confidential
Information that comes into the Sales Agents' knowledge through their
provision of Sales Services to the Company under this Agreement. The Sales
Agents shall take any reasonable steps necessary to prevent disclosure of
any Confidential Information to any third person as they would take in
protecting their own proprietary or confidential information and shall not
use any portion of the Confidential Information for any purpose not
authorized herein.
c. No person receiving Confidential Information shall be under any
obligation imposed by this Section with respect to any Confidential
Information (i) which is, at the time of disclosure, available to the
general public, (ii) which becomes at a later date available to the general
public through no fault on its part and then only after said later date,
(iii) which it can demonstrate was in its possession before receipt from
the discloser, (iv) which is disclosed to it without restriction on
disclosure by a third party who has the lawful right to disclose such
information, or (v) after fifteen years from the date of receipt of such
information.
14. The Company shall indemnify and hold harmless the Sales Agents,
their employees, their subsidiaries, and their subsidiaries' employees from
and against all claims, damages, losses and expenses (including reasonable
attorneys' fees) arising from the content or out of the provision of Sales
Services. Notwithstanding the foregoing, however, the Company shall have no
obligation to indemnify the Sales Agents against any claims, damages, losses,
or expenses in connection with the provision of Sales Services arising from
any violation by the Sales Agents of any law or any of the Companies' sales
policies or operating regulations, or the
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gross negligence or willful misconduct of the Sales Agents, their employees,
their subsidiaries, and their subsidiaries' employees or for any liability,
loss, or damage the Sales Agents might suffer as a result of the Sales
Agents' breach of this Agreement.
15. The Sales Agents shall indemnify and hold harmless the Company, its
employees, its subsidiaries, and its subsidiaries' employees from and against
all claims, damages, losses and expenses (including reasonable attorneys' fees)
arising from the content or out of the provision of Sales Services.
Notwithstanding the foregoing, however, the Sales Agents shall have no
obligation to indemnify the Company against any claims, damages, losses, or
expenses in connection with the provision of Sales Services arising from the
gross negligence or willful misconduct of the Company, its employees, its
subsidiaries, and its subsidiaries' employees or for any liability, loss, or
damage the Company might suffer as a result of the Company's breach of this
Agreement.
16. This Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of Delaware without giving effect
to the principles of conflicts of law thereof.
17. Any notice, request, instruction or other document to be given
hereunder by a party hereto shall be in writing and shall be deemed to have been
given (a) when received if given in person or by courier or a courier service,
(b) on the date of transmission if sent by telex, facsimile or other wire
transmission or (c) six (6) Business Days after being deposited in the U.S.
mail, certified or registered mail, postage prepaid;
a. If to the Sales Agents, addressed as follows:
Advanced Communications Group, Inc.
Mr. Michael A. Pruss
390 South Woodsmill Road
Chesterfield, MO 63017
Facsimile No: (314) 205-8141
with a copy to:
Blackwell Sanders Peper Martin, LLP
720 Olive Street 24' Floor
St. Louis, MO 63 101
Attn: Matthew W. Geekie
Facsimile No: (314) 345-6060
b. If to the Company, addressed as follows:
IONEX Telecommunications, Inc.
1950 Stemmons Freeway
Suite 4033
Dallas, TX 75207
Attn: Rick L. Weller
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Facsimile No.: (214) 760-9705
with a copy to:
Mayer, Brown & Platt
190 S. LaSalle Street
Chicago, IL 60603
Attention: John R. Sagan
Facsimile No: (312) 701-7711
or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided.
18. The Sales Agents may not assign their rights or sub-contract or
delegate their performance hereunder without the prior written consent of the
Company, and any attempted assignment, sub-contracting or delegation without the
Company's prior written consent shall be void.
19. The validity or enforceability of any particular provisions of this
Agreement shall not affect the other provisions hereof, and this Agreement shall
be construed in all respects as if such invalid or unenforceable provisions were
omitted.
20. The failure of a party hereto at any time or times to require
performance of any provision shall in no manner affect its right at a later time
to enforce the same. No waiver by a party of any condition or of any breach of
any term, covenant, representation or warranty contained in this Agreement shall
be effective unless in writing, and no waiver in any one or more instances shall
be deemed to be a further or continuing waiver of any such condition or breach
in other instances or a waiver of any condition or breach or any other term,
covenant, representation or warranty.
21. This Agreement may be executed in one or more counterparts, each of
which when so executed shall be deemed an original, but all of which together
shall constitute one and the same instrument.
22. The use of the masculine, feminine or neuter gender herein shall not
limit any provision of this Agreement. The use of the terms "including" or
"include" shall in all cases herein mean "including, without limitation" or
"include, without limitation," respectively.
23. In the event either party to this Agreement commences any litigation,
proceeding or other legal action in connection with or relating to this
Agreement or any matters described or contemplated herein, with respect to any
of the matters described or contemplated herein, the parties to this Agreement
hereby (a) agree under all circumstances absolutely and irrevocably to institute
any litigation, proceeding or other legal action in a court of competent
jurisdiction located within the City of Dallas, Texas, whether a state or
federal court, (b) agree that in the event of any such litigation, proceeding or
action, such parties will consent and submit to personal jurisdiction in any
such court described in clause (a) of this Section and to service of process
upon them in accordance with the rules and statutes governing service of process
(it being understood that nothing in this Section shall be deemed to prevent any
party from seeking
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to remove any action to a federal court in Dallas, Texas), (c) agree to waive
to the full extent permitted by law any objection that they may now or
hereafter have to the venue of any such litigation, proceeding or action in
any such court or that any such litigation, proceeding or action was brought
in an inconvenient forum, (d) designate, appoint and direct CT Corporation
System as its authorized agent to receive on its behalf service of any and
all process and documents in any legal proceeding in the State of Texas, (e)
agree to notify the other party to this Agreement immediately if such agent
shall refuse to act, or be prevented from acting, as agent and in such event,
promptly to designate another agent in the City of Dallas, Texas,
satisfactory to the Sales Agents and the Company, to serve in place of such
agent and deliver to the other party written evidence of such substitute
agent's acceptance of such designation; (f) agree as an alternative method of
service to service of process in any legal proceeding by mailing of copies
thereof to such party at its address set forth herein for communications to
such party; (g) agree that any service made as provided herein shall be
effective and binding service in every respect; and (h) agree that nothing
herein shall effect the rights of any party to effect service of process in
any other manner permitted by Law.
EACH PARTY HERETO WAIVES THE RIGHT TO TRIAL BY JURY IN ANY DISPUTE IN CONNECTION
WITH OR RELATING TO THIS AGREEMENT OR ANY MATTERS DESCRIBED OR CONTEMPLATED
HEREIN, AND AGREE TO TAKE ANY AND ALL ACTION NECESSARY TO APPROPRIATE TO EFFECT
SUCH WAIVER.
24. This document constitutes the full understanding between the parties
and no terms, conditions, understanding or agreement purporting to modify or
vary the terms of this Agreement shall be binding unless hereafter made in
writing with reference to this Agreement and signed by the Sales Agents and a
duly authorized representative of Company.
[The remainder of this page intentionally left blank.]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
IONEX TELECOMMUNICATIONS, INC.
By: /s/ R.C. Mark Baker
Name: R.C. Mark Baker
Title: Chief Executive Officer
ADVANCED COMMUNICATIONS GROUP, INC.
(on its own behalf and on behalf of the
Sales Agents)
By: /s/ Richard A. O'Neal
Name: /s/ Richard A. O'Neal
Title: Chairman and Acting
Chief Executive Officer
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Exhibit 10.55
TRANSITIONAL SERVICES AGREEMENT
THIS TRANSITIONAL SERVICES AGREEMENT, executed this 19th day of November,
1999, is among Advanced Communications Group, Inc. a Delaware corporation, and
its subsidiaries ("ACG"), and IONEX Telecommunications, Inc. f/k/a Compass
Telecommunications, Inc., a Delaware corporation ("CTI").
RECITALS
A. ACG owns all the shares of Feist Long Distance Service, Inc., a Kansas
corporation, FirsTel, Inc., a South Dakota corporation, Telecom Resources,
Inc., a Texas corporation, and Valu-line of Longview, Inc., a Texas
corporation (collectively, the "TELECOMMUNICATION SUBSIDIARIES").
B. Pursuant to a Stock Purchase Agreement dated July 13, 1999 (the "STOCK
PURCHASE AGREEMENT") among CTI, ACG, and the Telecommunication
Subsidiaries, ACG wishes to sell, and CTI wishes to buy, all the
Telecommunication Subsidiary Shares owned by ACG.
C. The parties have agreed that ACG will provide various transitional services
directly to the Telecommunication Subsidiaries on an interim basis pursuant
to the terms and conditions of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants,
agreements, and warranties herein contained, the parties agree as follows:
1. SERVICES.
1.1 SERVICES TO BE PROVIDED. In accordance with this Agreement, ACG
shall provide the following services (collectively, the "SERVICES") to the
Telecommunication Subsidiaries:
(a) Accounting services (including advice with respect to the
reporting of financial results in accordance with past
practice, and activity-based costing);
(b) Production of payroll services, and, if any, related
employee benefit plan administration, insurance claim
management and stock option related services; and
(c) Other ancillary services of and relating to those described
in (a) and (b) above.
<PAGE>
1.2 IMPLEMENTATION OF SERVICES. ACG shall provide all personnel and
computer or other technical systems necessary to provide to the
Telecommunication Subsidiaries the Services in a manner consistent with the past
practices of the Telecommunication Subsidiaries with respect to such personnel,
computer or technical systems.
1.3 COST. In consideration of the performance by ACG of its
obligations under this Agreement, CTI shall pay the following upon the
completion of the term of this Agreement to ACG (collectively, the "COSTS"):
(a) All reasonable expenses (including travel and incidental
expenses) incurred by the personnel of ACG in the provision
of Services under this Agreement;
(b) Wages and the cost of benefits actually provided under the
plans described in Schedule 1.3(b) (attached hereto) during
the thirty (30) day term of this Agreement for Seller
personnel providing Services under this Agreement (pro
rated, if applicable, to reflect the amount of time less
than 100% actually spent on business matters directly
related to the Telecommunication Subsidiaries), and the
reasonable and customary travel expenses, if any, actually
incurred by such personnel in the course of providing
Services to the Telecommunication Subsidiaries supported by
documentation acceptable to CTI; (In the case of the
Advanced Communications Group Section 401(k) plan, the "cost
of benefits actually provided" during the thirty (30) day
term of the Agreement shall be the employee matching
contributions specifically attributable to the employee
elective deferrals made with respect to compensation earned
during such thirty (30) day period.); and;
(c) The actual cost of any equipment and supplies acquired by
ACG in connection with the provision of Services under this
Agreement.
1.4 PAYMENT. At the end of the Initial Term, and at the end of each
extension of the Initial Term, if any, ACG shall produce an invoice recording
the Costs in reasonable detail and deliver such invoice to CTI. The amount due
as stated on the invoice shall be due thirty (30) days from the date of CTI's
receipt of such invoice. Any proper invoices not paid on time shall bear
interest at a rate of eight percent (8%) per annum until paid.
1.5 BOOKS AND RECORDS. ACG shall keep any and all comprehensive,
true and accurate records and accounts required by law of the provision of the
Services under this Agreement and shall provide copies of such records and
accounts if requested by CTI.
2. DELEGATION. ACG may at any time or from time to time, upon written
notice to CTI, delegate some or all its duties to perform the Services
hereunder; provided, however, that ACG shall remain liable for performance of
this Agreement.
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<PAGE>
3. WARRANTIES AND LIMITATION OF LIABILITY.
3.1 QUALITY OF SERVICES. In performance of the Services, ACG will
employ methods, procedures and utilities of a quality at least equal to those
employed when ACG performs similar services for their own business and affairs.
3.2 NO OTHER WARRANTY. ACG EXPRESSLY DISCLAIMS ALL WARRANTIES IN
CONNECTION WITH THE SERVICES IT SHALL PROVIDE TO CTI HEREUNDER, EITHER EXPRESS
OR IMPLIED, INCLUDING, WITHOUT LIMITATION, THOSE OF WORKSHIP, DESIGN,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND INFRINGEMENT.
3.3 LIMITATION OF LIABILITY. ACG shall not be liable to CTI by
reason of any error of omission or commission, performance or failure to perform
or delay in performing any Services under this Agreement, for any damages,
including, but not limited to, special, incidental or consequential damages
suffered by CTI beyond a refund to CTI of all charges paid by CTI for the
Services that caused such damages, unless such damages are caused by willful
breach or willful misconduct on the part of ACG.
3.4 FORCE MAJEURE. ACG shall not be liable to CTI for any claims,
damages, losses, or expenses arising out of the non-performance of any of ACG's
obligations under this Agreement if such claims, damages, losses, or expenses
are due to causes that are in whole or in part beyond the control of such party,
including, but not limited to, computer and associated equipment outages, acts
or omissions of any common carrier in the provision of regulated common carrier
services, telecommunications disruptions, outages, failures, downtime and/or
delays in processing information due to causes other than the negligence of ACG,
fire, explosion, earthquake, lightning, pest damage, power surges or failures,
water, acts of God, the elements, civil disturbances, acts of civil or military
authorities or of the public enemy, strikes, or labor disputes.
4. CONFIDENTIAL INFORMATION.
4.1 "CONFIDENTIAL INFORMATION" DEFINED. For purposes hereof,
"Confidential Information" means any and all information of CTI that might
reasonably be considered confidential, secret, sensitive, proprietary or
private. To the extent practicable, Confidential Information shall be marked
"proprietary" or "confidential." Confidential Information shall include the
following:
(a) Data, know-how, formulae, processes, designs, sketches,
photographs, plans, drawings, specifications, samples,
reports, lists, financial information, studies, findings,
inventions and ideas, or proprietary information relating to
either party or the methods or techniques used by either
party;
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<PAGE>
(b) Data, documents, or proprietary information employed in
connection with the marketing and implementation of each
party's products, including cost information, business
policies procedures, revenues and markets, distributor and
customer lists, and similar items of information; and
(c) Any other data or information obtained by either party
during the term of this Agreement which is not generally
known to and not readily ascertainable by proper means by
third persons who could obtain economic value from its use
or disclosure.
4.2 NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
(a) ACG shall treat as confidential all Confidential Information
that comes into ACG's knowledge through its provision of
Services to CTI under this Agreement. ACG shall take any
reasonable steps necessary to prevent disclosure of any
Confidential Information to any third person as it would
take in protecting its own proprietary or confidential
information and shall not use any portion of the
Confidential Information for any purpose not authorized
herein.
(b) No person receiving Confidential Information shall be under
any obligation imposed by this Section with respect to any
Confidential Information (i) which is, at the time of
disclosure, available to the general public, (ii) which
becomes at a later date available to the general public
through no fault on its part and then only after said later
date, (iii) which it can demonstrate was in its possession
before receipt from the discloser, (iv) which is disclosed
to it without restriction on disclosure by a third party who
has the lawful right to disclose such information, or (v)
after fifteen years from the date of disclosure.
5. STATUS AS INDEPENDENT CONTRACTOR. ACG is, and shall remain at all
times, an independent contractor of CTI in the performance of all Services
hereunder, and all persons employed by ACG to perform such Services shall be and
remain employees solely of ACG by which they are employed and subject only to
ACG's respective supervisory personnel.
6. INDEMNIFICATION. CTI shall indemnify and hold harmless ACG, its
employees, its subsidiaries, and its subsidiaries' employees from and against
all claims, damages, losses and expenses (including reasonable attorneys' fees)
arising from ACG's provision of the Services to CTI in accordance with the terms
of this Agreement. Notwithstanding the foregoing, CTI shall have no obligation
to indemnify ACG against any claims, damages, losses, or expenses, in connection
with the Services provided arising from the gross negligence or willful
misconduct of ACG, its employees, its subsidiaries, or its subsidiaries'
employees or for any other liability, loss, or damage ACG might suffer as a
result of ACG's breach of this Agreement.
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<PAGE>
7. TERM.
7.1 TERM GENERALLY. This Agreement shall commence on the Closing
Date and shall continue for thirty (30) days, (the "Initial Term"), unless
extended for up to two additional 30-day periods by mutual consent of CTI and
ACG, which consent of either party shall not be unreasonably withheld.
7.2 AUTOMATIC TERMINATION FOR BREACH. Notwithstanding the
foregoing provision, this Agreement may be terminated (a) by the
non-breaching party upon the material breach by ACG or Newco of this
Agreement or (b) by the non-breaching party upon the material breach by ACG
or the Buyer of the Stock Purchase Agreement, provided that the non-breaching
party has provided the breaching party ten (10) days' prior written notice of
the breach and the non-breaching party's intention to terminate this
Agreement and the breaching party has failed to cure such breach within such
period.
7.3 SURVIVAL OF CERTAIN PROVISIONS. Articles 3, 4, and 6 shall
survive the termination of this Agreement.
8. MISCELLANEOUS.
8.1 AMENDMENT. This Agreement may be amended, modified or
supplemented but only in writing signed by each of the parties hereto.
8.2 NOTICES. Any notice, request, instruction or other document to
be given hereunder by a party hereto shall be in writing and shall be deemed to
have been given (a) when received if given in person or by courier or a courier
service, (b) on the date of transmission if sent by telex, facsimile or other
wire transmission or (c) six (6) Business Days after being deposited in the U.S.
mail, certified or registered mail, postage prepaid:
(a) If to ACG, addressed as follows:
Advanced Communications Group, Inc.
Mr. Michael A. Pruss
390 South Woods Mill Road
Chesterfield, MO 63017
Facsimile No.: (314) 205-8141
with a copy to:
Blackwell Sanders Peper Martin, LLP
720 Olive Street, 24th Floor
St. Louis, MO 63101
Attn: Matthew W. Geekie
Facsimile No.: (314) 345-6060
(b) If to CTI, addressed as follows:
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Compass Telecommunication, Inc.
8548 Colonial Drive
Littleton, Colorado 80124
Attention: Rick L. Weller
Facsimile No.: (303) 662-8574
with a copy to:
Mayer, Brown & Platt
190 S. LaSalle St.
Chicago, IL 60603
Attention: John R. Sagan
Facsimile No.: (312) 701-7711
or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided.
8.3 WAIVER. The failure of a party hereto at any time or times to
require performance of any provision hereof shall in no manner affect its right
at a later time to enforce the same. No waiver by a party of any condition or
of any breach of any term, covenant, representation or warranty contained in
this Agreement shall be effective unless in writing, and no waiver in any one or
more instances shall be deemed to be a further or continuing waiver of any such
condition or breach in other instances or a waiver of any other condition or
breach of any other term, covenant, representation or warranty.
8.4 DEFINITIONS. Capitalized terms used herein, unless otherwise
defined, shall have the meaning ascribed them in the Stock Purchase Agreement.
8.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which when so executed shall be deemed an original, but
all of which together shall constitute one and the same instrument.
8.5 INTERPRETATION. The headings preceding the text of Articles and
Sections included in this Agreement are for convenience only and shall not be
deemed part of this Agreement or be given any effect in interpreting this
Agreement. The use of the masculine, feminine or neuter gender herein shall not
limit any provision of this Agreement. The use of the terms "including" or
"include" shall in all cases herein mean "including, without limitation" or
"include, without limitation," respectively.
8.6 APPLICABLE LAW. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Delaware without giving effect to the principles of conflicts of law thereof.
8.7 NO THIRD-PARTY BENEFICIARIES. This Agreement is solely for the
benefit of the parties hereto and, to the extent provided herein, their
respective successors, affiliates, directors,
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officers, employees, agents and representatives, and no provision of this
Agreement shall be deemed to confer upon other third parties any remedy,
claim, liability, reimbursement, cause of action or other right.
8.8 ENTIRE UNDERSTANDING. This Agreement set forth the entire
agreement and understanding of the parties hereto and supersede any and all
prior agreements, arrangements and understandings among the parties.
8.9 JURISDICTION OF DISPUTES; WAIVER OF JURY TRIAL. In the event
either party to this Agreement commences any litigation, proceeding or other
legal action in connection with or relating to this Agreement or any matters
described or contemplated herein or therein, with respect to any of the matters
described or contemplated herein or therein, the parties to this Agreement
hereby (a) agree under all circumstances absolutely and irrevocably to institute
any litigation, proceeding or other legal action in a court of competent
jurisdiction located within the City of Dallas, Texas, whether a state or
federal court, (b) agree that in the event of any such litigation, proceeding or
action, such parties will consent and submit to personal jurisdiction in any
such court described in clause (a) of this Section and to service of process
upon them in accordance with the rules and statutes governing service of process
(it being understood that nothing in this Section shall be deemed to prevent any
party from seeking to remove any action to a federal court in Dallas, Texas, (c)
agree to waive to the full extent permitted by law any objection that they may
now or hereafter have to the venue of any such litigation, proceeding or action
in any such court or that any such litigation, proceeding or action was brought
in an inconvenient forum, (d) designate, appoint and direct CT Corporation
System as its authorized agent to receive on its behalf service of any and all
process and documents in any legal proceeding in the State of Texas, (e) agree
to notify the other parties to this Agreement immediately if such agent shall
refuse to act, or be prevented from acting, as agent and, in such event,
promptly to designate another agent in the City of Dallas, Texas, satisfactory
to ACG and CTI, to serve in place of such agent and deliver to the other parties
written evidence of such substitute agent's acceptance of such designation; (f)
agree as an alternative method of service to service of process in any legal
proceeding by mailing of copies thereof to such party at its address set forth
here in for communications to such party; (g) agree that any service made as
provided herein shall be effective and binding service in every respect; and (h)
agree that nothing herein shall affect the rights of any party to effect service
of process in any other manner permitted by Law.
EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY DISPUTE IN
CONNECTION WITH OR RELATING TO THIS AGREEMENT, ANY RELATED AGREEMENT OR ANY
MATTERS DESCRIBED OR CONTEMPLATED HEREIN OR THEREIN, AND AGREE TO TAKE ANY AND
ALL ACTION NECESSARY OR APPROPRIATE TO EFFECT SUCH WAIVER.
(The remainder of this page is left intentionally blank.)
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
ADVANCED COMMUNICATIONS GROUP, INC.
By: /s/ Richard A. O'Neal
Name: /s/ Richard A. O'Neal
Title: CEO Chairman and Acting
Chief Executive Officer
IONEX TELECOMMUNICATIONS, INC.
By: /s/ R.C. Mark Baker
Name: R.C. Mark Baker
Title: Chief Executive Officer
8
<PAGE>
SCHEDULE 1.3(b) TO THE TRANSITIONAL SERVICES AGREEMENT
1. Advanced Communications Group, Inc. Retirement Savings Plan.
2. Advanced Communications Group, Inc. See SCHEDULE 3.17 of the Stock Purchase
Agreement.
9
<PAGE>
Exhibit 10.56
ADVERTISING AGREEMENT
THIS ADVERTISING AGREEMENT, executed as of this 19th day of November,
1999, is among Advanced Communications Group, Inc., a Delaware corporation
("ACG"), and Ionex Telecommunications, Inc., a Delaware corporation ("Ionex").
RECITAL
A. ACG owns all of the issued and outstanding shares of common stock of
Feist Long Distance Service, Inc., a Kansas corporation, Firstel, Inc., a South
Dakota corporation, Telecom Resources, Inc., a Texas corporation, and Value-line
of Longview, Inc., a Texas corporation (collectively, the "CLECs").
B. Pursuant to a Stock Purchase Agreement dated as of July 14, 1999 and
the First Amendment to the Stock Purchase Agreement of even date herewith, (the
"Stock Purchase Agreement") among Compass Telecommunications, Inc. (now known as
Ionex Telecommunications, Inc.), ACG and the CLECs, ACG wishes to sell, and
Ionex wishes to buy, all of the issued and outstanding shares of common stock of
the CLECs owned by ACG.
C. ACG owns all the issued and outstanding shares of Great Western
Directories, Inc., a Texas corporation ("GWD"), and owns and operates the
website known as WorldPages.com ("WorldPages").
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants, agreements and warranties herein contained, the parties agree as
follows:
1. ADVERTISEMENTS.
1.1 INTERNET ADVERTISEMENTS. For the term of this Agreement,
ACG shall cause GWD and/or WorldPages to maintain in its Internet directory a
prominent banner advertisement (hereinafter referred to as the "Web Ad")
containing information to be furnished periodically by Ionex. GWD will maintain
the banner advertisement at no charge to Ionex. Ionex may obtain from GWD and/or
WorldPages, at market rates to be agreed upon by ACG and Ionex, market by market
or product by product customization of such information.
The Web Ad shall contain a hypertext link to the Ionex web
site. The Web Ad shall appear in all 3,000 directories (in a prominent place,
i.e., in the top center) in each of six product/service categories which shall
be selected by Ionex. In addition to the six product/service categories
referenced in the preceding sentence, at Ionex's request, and expense, either
GWD or WorldPages shall cause the Web Ad to appear in additional product/service
categories at a the cost of $6,000 per additional product/service category.
1.2 YELLOW PAGES ADVERTISEMENTS. For the term of this
Agreement and at no cost to Ionex, GWD shall publish (a) one full tabbed page
(consisting of the back side of the tab)
<PAGE>
and the facing page as furnished by Ionex and (b) box advertising which is at
least equal to the largest advertisement in the category (and, in any event,
no smaller than 2QC) as furnished by Ionex in each of six product/service
categories to be selected by Ionex (the pages referenced in (a) and (b) above
being together, the "Advertising Pages"). If requested, GWD shall provide
additional pages at a reasonable cost to Ionex. The forward text or tabbed
information portion of the Advertising Pages shall appear before the
"telephone companies" portion of the yellow pages text of the telephone
directories.
1.3 GWD ADVERTISING TERRITORY. GWD shall publish the
Advertising Pages in each market where, as of the date hereof, (a) GWD or
WorldPages distributes print directories and (b) and any of the CLECs have
customers (the "Territory"). The Territory may be expanded by mutual agreement
of the parties hereto.
1.4 CONTENT OF ADVERTISEMENTS. The Web Ad and the Advertising
Pages shall contain information describing Ionex's and its subsidiaries'
communications services, including, but not limited to, long distance telephone
services, local telephone services, Internet access services, conference calling
services, fax services and cellular telephone services available to prospective
Ionex customers, as well as information on how to use and order such services.
Ionex must obtain ACG's approval, which shall not be unreasonably withheld or
denied by ACG, of all content to be placed in the Web Ad and on the Advertising
Pages.
2. LIMITATION OF LIABILITY.
2.1 LIMITATION OF LIABILITY GENERALLY. IN NO EVENT SHALL ACG
OR GWD BE LIABLE TO IONEX, ANY READER OF THE ADVERTISING PAGES, OR ANY END-USER
OF THE WEB AD FOR LOSS OF PROFITS, LOSS OF BUSINESS, LOSS OF DATA (IN THE CASE
OF THE WEB AD), INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL OR OTHER SIMILAR
DAMAGES ARISING OUT OF THE FAILURE OF ACG OR GWD TO MEET ITS OBLIGATIONS UNDER
THIS AGREEMENT.
2.2 NO WARRANTY. NEITHER ACG NOR GWD MAKE ANY WARRANTIES
HEREUNDER, EITHER EXPRESS OR IMPLIED (INCLUDING ANY WARRANTY OR MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE). NEITHER ACG NOR GWD REPRESENT OR WARRANT
THAT THE CONTENT OF THE ADVERTISING PAGES AND THE WEB AD WILL BE ERROR-FREE OR
UNINTERRUPTED, AND IONEX UNDERSTANDS AND ACKNOWLEDGES IN CONNECTION WITH THE WEB
AD THAT FOR MAINTENANCE PURPOSES OR FOR OTHER CAUSE, WHETHER INTENTIONAL OR
ACCIDENTAL, THE WEBSITE AND DATABASE MAINTAINED BY GWD MAY BE INACCESSIBLE OR
UNUSABLE FROM TIME TO TIME.
2.3 ERRORS IN ADVERTISEMENT CONTENT. In the event that Ionex's
information in the Web Ad or on the Advertising Pages contains errors or
omissions, GWD will take such reasonable steps to correct such errors or
omissions upon receipt of written notice from Ionex.
2.4 FORCE MAJEURE. Neither ACG nor GWD shall be liable to
Ionex for any claims, damages, losses or expenses arising out of the
non-performance of any of either ACG's
<PAGE>
or GWD's obligations under this Agreement if such claims, damages, losses or
expenses are due to computer and associated equipment outages, acts or
omissions of any common carrier in the provision of regulated common carrier
services, telecommunications disruptions, outages, failures, downtime and/or
delays in processing information due to causes other than the negligence of
ACG or GWD, fire, explosion, earthquake, lightning, pest damage, power surges
or failures, water, acts of God, the elements, civil disturbances, acts of
civil or military authorities or of the public enemy, strikes or labor
disputes.
3. INDEMNIFICATION. IONEX SHALL INDEMNIFY AND HOLD HARMLESS ACG AND
GWD, THEIR EMPLOYEES, THEIR SUBSIDIARIES, AND THEIR SUBSIDIARIES' EMPLOYEES FROM
AND AGAINST ALL CLAIMS, DAMAGES, LOSSES AND EXPENSES (INCLUDING REASONABLE
ATTORNEYS' FEES) ARISING FROM THE CONTENT OF OR OUT OF THE USE OF THE
ADVERTISING PAGES OR THE WEB AD. NOTWITHSTANDING THE FOREGOING, HOWEVER, IONEX
SHALL HAVE NO OBLIGATION TO INDEMNIFY EITHER ACG OR GWD AGAINST ANY CLAIMS,
DAMAGES, LOSSES OR EXPENSES IN CONNECTION WITH THE ADVERTISING PAGES OR THE WEB
AD ARISING FROM, AND TO THE EXTENT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT
OF EITHER ACG OR GWD, THEIR EMPLOYEES, THEIR SUBSIDIARIES, AND THEIR
SUBSIDIARIES' EMPLOYEES OR FOR ANY OTHER LIABILITY, LOSS OR DAMAGE ACG OR GWD
MIGHT SUFFER AS A RESULT OF ACG'S OR GWD'S BREACH OF THIS AGREEMENT.
4. TERM.
4.1 TERM. This Agreement shall commence on the Closing Date
(as defined in the Stock Purchase Agreement), and shall continue (a)
regarding the Web Ad, for five (5) years, and (b) regarding the Advertising
Pages, until the date of publication and distribution of the fifth annual
edition from the Closing Date of every telephone directory containing the
Advertising Pages published by GWD in the Territory.
4.2 TERMINATION FOR BREACH. Notwithstanding the foregoing
provision, this Agreement may be terminated by the non-breaching party upon the
material breach by ACG or Ionex of this Agreement, provided that the
non-breaching party has provided the breaching party fifteen (15) days' prior
written notice of the non-breaching party's intention to terminate this
Agreement and the breaching party has failed to cure such breach within such
period. The termination of this Agreement by a party by reason of a material
breach by the other party shall not relieve such other party of any of its
obligations accrued under this Agreement before the effective date of such
termination or of any liability for breach of this Agreement.
4.3 SURVIVAL OF CERTAIN PROVISIONS. SECTIONS 3 and 4 shall
survive the termination of this Agreement.
5. MISCELLANEOUS.
5.1 AMENDMENT. This Agreement may be amended, modified or
supplemented, but only in writing executed by each of the parties hereto.
5.2 NOTICES. Any notice, request, instruction or other
document to be given hereunder by a party hereto shall be in writing and shall
be deemed to have been given (a) when received if given in person or by courier
or a courier service, (b) on the date of transmission if
<PAGE>
sent by telex, facsimile or other wire transmission or (c) six (6) business
days after being deposited in the U.S. mail, certified or registered mail,
postage prepaid:
(a) If to ACG, addressed as follows:
Advanced Communications Group, Inc.
Mr. Michael A. Pruss
390 South Woods Mill Road
Chesterfield, MO 63017
Facsimile No.: (314) 205-8141
with a copy to:
Blackwell Sanders Peper Martin, LLP
720 Olive Street, 24th Floor
St. Louis, MO 63 101
Attention: Matthew W. Geekie
Facsimile No.: (314) 345-6060
(b) If to Ionex, addressed as follows:
Ionex Telecommunications, Inc.
1950 Stemmons Freeway
Suite 4033
Dallas, TX 75207
Attention: Rick L. Weller
Facsimile No.: (214) 760-9705
with a copy to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, IL 60603
Attention: John R. Sagan
Facsimile No.: (312) 701-7711
or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided.
5.3 WAIVER. The failure of a party hereto at any time or
times to require performance of any provision hereof shall in no manner
affect its right at a later time to enforce the same. No waiver by a party of
any condition or of any breach of any term, covenant, representation or
warranty contained in this Agreement shall be effective unless in writing,
and no waiver in any one or more instances shall be deemed to be a further or
continuing waiver of any such condition or breach in other instances or a
waiver of any other condition or breach of any other term, covenant,
representation or warranty.
<PAGE>
5.4 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which when so executed shall be deemed an original,
but all of which together shall constitute one and the same instrument.
5.5 INTERPRETATION. The headings preceding the text of the
Sections included in this Agreement are for convenience only and shall not be
deemed part of this Agreement or be given any effect in interpreting this
Agreement. The use of the masculine, feminine or neuter gender herein shall not
limit any provision of this Agreement. The use of the terms "including" or
"include" shall be in all cases herein mean "including, without limitation" or
"include, without limitation," respectively.
5.6 APPLICABLE LAW. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Delaware without giving effect to the principles of conflicts of laws thereof
5.7 ASSIGNMENT. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns; PROVIDED, HOWEVER, that no assignment of any rights or
obligations shall be made by any party hereto without the written consent of the
other party hereto, which shall not be unreasonably withheld or denied.
5.8 NO THIRD PARTY BENEFICIARIES. This Agreement is solely for
the benefit of the parties hereto and, to the extent provided herein, their
respective successors, affiliates, directors, officers, employees, agents and
representatives, and no provision of this Agreement shall be deemed to confer
upon other third parties any remedy, claim, liability, reimbursement, cause of
action or other right.
5.9 ENTIRE UNDERSTANDING. This Agreement set forth the entire
agreement and understanding of the parties hereto and supersedes any and all
prior agreements, arrangements and understandings among the parties.
5.10 JURISDICTION OF DISPUTES: WAIVER OF JURY TRIAL. In the
event either party to this Agreement commences any litigation, proceeding or
other legal action in connection with or relating to this Agreement or any
matters described or contemplated herein, with respect to any matters described
or contemplated herein, the parties to this Agreement hereby (a) agree under all
circumstances absolutely and irrevocably to institute any litigation, proceeding
or other legal action in a court of competent jurisdiction located within the
city of Dallas, Texas, whether a state or federal court, (b) agree that in the
event of any such litigation, proceeding or action, such parties will consent
and submit to personal jurisdiction in any such court described in clause (a) of
this Section and to service of process upon them in accordance with the rules
and statutes governing service of process (it being understood that nothing in
this Section shall be deemed to prevent any party from seeking to remove any
action to a federal court in Dallas, Texas), (c) agree to waive to the full
extent permitted by law any objection that they may now or hereafter have to the
venue of any such litigation, proceeding or action in any such court or that any
such litigation, proceeding or action was brought in an inconvenient forum, (d)
designate, appoint and direct CT Corporation System as its authorized agent to
receive on its behalf service of any and all process and documents in any legal
proceeding in the State of Texas, (e) agree to notify the
<PAGE>
other party to this Agreement immediately if such agent shall refuse to act,
or be prevented from acting, as agent and, in such event, promptly to
designate another agent in the City of Dallas, Texas, satisfactory to ACG and
Ionex, to serve in place of such agent and deliver to the other party written
evidence of such substitute agent's acceptance of such designation; (f) agree
as an alternative method of service to service of process in any legal
proceeding by mailing of copies thereof to such party at its address set
forth herein for communications to such party, (g) agree that any service
made as provided herein shall be effective and binding service in every
respect; and (h) agree that nothing herein shall affect the rights of any
party to effect service of process in any other manner permitted by Law.
EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY DISPUTE IN
CONNECTION WITH OR RELATING TO THIS AGREEMENT OR ANY MATTERS DESCRIBED OR
CONTEMPLATED HEREIN, AND AGREE TO TAKE ANY AND ALL ACTION NECESSARY OR
APPROPRIATE TO EFFECT SUCH WAIVER.
(The remainder of this page is left intentionally blank.)
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
ADVANCED COMMUNICATIONS GROUP, INC.
By: /s/ Richard A. O'Neal
Name: Richard A. O'Neal
Title: Chairman and Acting
Chief Executive Officer
IONEX TELECOMMUNICATIONS, INC.
By: /s/ R.C. Mark Baker
Name: R.C. Mark Baker
Title: Chief Executive Officer
<PAGE>
EXHIBIT 21
Subsidiaries of Advanced Communications Group, Inc.
ACG Acquisition II Corp., a Delaware corporation
ACG Acquisition VI Corp, a Delaware corporation
ACG Acquisition VII Corp., a Delaware corporation
ACG Exchange Company, a corporation organized in the Province of Nova Scotia
ACG Holding Company, a corporation organized in the Province of Nova Scotia
Advanced Communications Corp., a Delaware corporation
Great Western Directories, Inc., a Texas corporation
1+ USA V Acquisition Corp., a Delaware corporation
<PAGE>
EXHIBIT 23.1
The Board of Directors
Advanced Communications Group, Inc.:
The audits referred to in our report dated February 10, 1999, included the
related financial statement schedule as of December 31, 1998, and for each of
the years in the two-year period ended December 31, 1997, and for the period
from inception (June 6, 1996) through December 31, 1996, included in the
registration statement. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express
an opinion on the financial statement schedule based on our audits. In our
opinion, such financial statement schedule, when considered in relation to
the consolidated financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
/s/ KPMG LLP
St. Louis, Missouri
February ___, 1999
<PAGE>
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and
to the use of our report dated December 22, 1998, with respect to the
financial statements of Pacific Coast Publishing, Inc. included in the
Registration Statement (Form S-1) and related Prospectus of Advanced
Communications Group, Inc. for the registration of 23,851,281 shares of its
common stock.
Ernst & Young LLP
Seattle, Washington
January 28, 2000
<PAGE>
The Board of Directors
Web YP, Inc.:
We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
/s/ KPMG LLP
Houston, Texas
February ___, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEC FORM
S-1 WHICH INCLUDES FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,315
<SECURITIES> 0
<RECEIVABLES> 18,469
<ALLOWANCES> 4,246
<INVENTORY> 0
<CURRENT-ASSETS> 20,194
<PP&E> 2,814
<DEPRECIATION> 1,377
<TOTAL-ASSETS> 109,059
<CURRENT-LIABILITIES> 37,615
<BONDS> 0
0
0
<COMMON> 2
<OTHER-SE> 71,670
<TOTAL-LIABILITY-AND-EQUITY> 109,059
<SALES> 49,987
<TOTAL-REVENUES> 49,987
<CGS> 50,128
<TOTAL-COSTS> 50,128
<OTHER-EXPENSES> (75)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,766
<INCOME-PRETAX> (4,832)
<INCOME-TAX> (1,465)
<INCOME-CONTINUING> (3,367)
<DISCONTINUED> (7,378)
<EXTRAORDINARY> (51,800)
<CHANGES> 0
<NET-INCOME> (62,545)
<EPS-BASIC> (3.14)
<EPS-DILUTED> (3.14)
</TABLE>
<PAGE>
EXHIBIT 99.3
FORM OF SUPPORT AGREEMENT
AMONG
ADVANCED COMMUNICATIONS GROUP, INC.
AND
ACG HOLDING COMPANY
AND
ACG EXCHANGE COMPANY
AND
CERTAIN HOLDERS OF YPTEL CORPORATION
SHARES AS LISTED IN SCHEDULE A
AND
THE J. L. R. FAMILY TRUST AND THE PAISLEY FAMILY TRUST
-, 2000
<PAGE>
INDEX
<TABLE>
<S> <C>
ARTICLE I DEFINITIONS AND INTERPRETATION..............................................................2
1.1 DEFINED TERMS.................................................................................2
1.2 INTERPRETATION NOT AFFECTED BY HEADINGS.......................................................2
1.3 NUMBER, GENDER................................................................................2
1.4 DATE FOR ANY ACTION...........................................................................2
ARTICLE II COVENANTS OF PARENT, NEWCO I AND NEWCO II..................................................2
2.1 COVENANTS OF PARENT, NEWCO I AND NEWCO II REGARDING EXCHANGEABLE SHARES.......................2
2.2 SEGREGATION OF FUNDS..........................................................................4
2.3 RESERVATION OF SHARES OF PARENT COMMON STOCK..................................................4
2.4 NOTIFICATION OF CERTAIN EVENTS................................................................5
2.5 DELIVERY OF SHARES OF PARENT COMMON STOCK.....................................................5
2.6 QUALIFICATION OF SHARES OF PARENT COMMON STOCK................................................6
2.7 ECONOMIC EQUIVALENCE..........................................................................6
2.8 SALE OF PARENT...............................................................................10
2.9 OWNERSHIP OF OUTSTANDING SHARES OF NEWCO I AND NEWCO II......................................12
2.10 PARENT AND SUBSIDIARIES NOT TO VOTE EXCHANGEABLE SHARES.....................................13
2.11 RULE 10B-18 PURCHASES........................................................................13
ARTICLE III CERTAIN RESTRICTIONS.....................................................................13
3.1 NEWCO I RESTRICTIONS..........................................................................13
3.2 NEWCO II RESTRICTIONS.........................................................................14
3.3 PARENT SUCCESSOR OR PURCHASER.................................................................15
ARTICLE IV GENERAL...................................................................................15
4.1 TERM.........................................................................................15
4.2 SEVERABILITY.................................................................................15
4.3 AMENDMENTS, MODIFICATIONS, ETC...............................................................15
4.4 MINISTERIAL AMENDMENTS.......................................................................16
4.5 MEETING TO CONSIDER AMENDMENTS...............................................................16
4.6 ENUREMENT....................................................................................16
4.7 NOTICE.......................................................................................17
4.8 COUNTERPARTS.................................................................................19
4.9 JURISDICTION.................................................................................19
4.10 ATTORNMENT..................................................................................19
4.11 CONSTRUCTION.................................................................................19
4.12 EXCHANGEABLE SHARE PROVISIONS................................................................19
4.13 EFFECTIVENESS OF AGREEMENT...................................................................19
</TABLE>
<PAGE>
SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT is entered into as of __, 1999, by and among
Advanced Communications Group, Inc., a corporation existing under the laws of
Delaware ("PARENT"), ACG Holding Company, a Nova Scotia unlimited liability
company and wholly owned subsidiary of Parent ("NEWCO I"), ACG Exchange Inc., a
Nova Scotia limited liability company and a subsidiary of Newco I ("NEWCO II"),
certain holders of YPtel Corporation shares as set out in Schedule A hereto, The
J. L. R. Family Trust and The Paisley Family Trust.
WHEREAS, pursuant to an Agreement made as of June 3, 1999, as amended
and restated October ____, 1999 (as the same may be further amended from time to
time, the "YPTEL AGREEMENT"), by and among Parent, YPtel Corporation, a
corporation incorporated under the laws of Canada (the "COMPANY"), the
shareholders of the Company listed on Exhibit "A" attached thereto, Cold Trust,
Global Investment Trust, Freezer Trust, Storage Trust, Directory Trust,
Publisher Trust (collectively the "BARBADIAN TRUSTS"), The J.L.R. Family Trust,
The Paisley Family Trust, Edward Truant, and Douglas G. McIntyre (collectively
the "ICL PRINCIPALS") and Imperial Capital Limited, a corporation incorporated
under the laws of Ontario, the parties agreed that on the Closing Date (as
defined in the YPtel Agreement) the parties hereto would execute and deliver the
within Support Agreement;
WHEREAS, pursuant to the YPtel Agreement, the shareholders of the
Company who are parties hereto will exchange certain of the issued and
outstanding common shares of the Company owned by them for all the initially
issued and outstanding Class A Special Shares of Newco II (the "CLASS A SPECIAL
SHARES");
WHEREAS, Appendix A to the Articles of Association of Newco II, as
amended, sets forth the rights, privileges, restrictions and conditions
attaching to the Class A Special Shares (as the same may be amended from time to
time, the "EXCHANGEABLE SHARE PROVISIONS");
WHEREAS, the parties hereto desire to make appropriate provision and
to establish a procedure whereby Parent, Newco I and Newco II will take
certain actions and make certain payments and deliveries necessary to ensure
that Newco I, Newco II or Parent will be able to make certain payments and to
deliver or cause to be delivered shares of common stock of Parent, par value
US$0.0001 per share ("PARENT COMMON STOCK") in satisfaction of the
obligations of Newco II with respect to the payment and satisfaction of
dividends, Liquidation Consideration, Retraction Prices, Exchangeable Share
Consideration and Redemption Prices, all in accordance with the Exchangeable
Share Provisions and the provisions of the Exchange and Voting Trust
Agreement between Newco I, Newco II, Parent, the holders of Exchangeable
Shares and the trustee named therein, dated as of ___, 1999 (as the same may
be amended from time to time, the "EXCHANGE AND VOTING TRUST AGREEMENT");
<PAGE>
-2-
NOW, THEREFORE, in consideration of the respective covenants and
agreements provided in this Agreement and for other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged),
the parties agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 DEFINED TERMS. Each term denoted herein by initial capital letters
and not otherwise defined herein shall have the meaning attributed thereto in
the Exchangeable Share Provisions or the Exchange and Voting Trust Agreement, as
applicable, unless the context otherwise requires.
1.2 INTERPRETATION NOT AFFECTED BY HEADINGS. The division of this
Agreement into Articles, Sections and paragraphs and the insertion of headings
are for convenience of reference only and shall not affect the construction or
interpretation of this Agreement. Unless otherwise indicated, all references to
an "ARTICLE" OR "SECTION" followed by a number and/or a letter refer to the
specified Article or Section of this Agreement. The terms "THIS AGREEMENT",
"HEREOF ", "HEREIN" and "HEREUNDER" and similar expressions refer to this
Agreement and not to any particular Article, Section or other portion hereof and
include any agreement or instrument supplementary or ancillary hereto.
1.3 NUMBER AND GENDER. Words importing the singular number only shall
include the plural and vice versa. Words importing the use of any gender shall
include all genders.
1.4 DATE FOR ANY ACTION. If any date on which any action is required to
be taken under this Agreement is not a Business Day, such action shall be
required to be taken on the next succeeding Business Day. For the purposes of
this Agreement, a "BUSINESS DAY" means any day on which commercial banks are
open for business in St. Louis, Missouri and Toronto, Ontario, other than a
Saturday, a Sunday or a day observed as a holiday in Toronto, Ontario under the
laws of the Province of Ontario or the federal laws of Canada or in St. Louis,
Missouri under the laws of the State of Missouri or the federal laws of the
United States of America.
ARTICLE II
COVENANTS OF PARENT, NEWCO I AND NEWCO II
2.1 COVENANTS OF PARENT, NEWCO I AND NEWCO II REGARDING EXCHANGEABLE
SHARES. So long as any Exchangeable Shares held by a Holder are outstanding:
(a) Parent will not declare or pay any dividend on Parent Common Stock
unless (i) Newco II will have sufficient assets, funds and other
property available (including but not limited to authorized but
unissued securities available) to enable the due declaration and the
due and punctual payment in accordance with applicable law of a
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dividend on the Exchangeable Shares in accordance with Article 3 of the
Exchangeable Share Provisions and (ii) Subsection 2.1(b) shall be
complied with in connection with such dividend;
(b) Parent, Newco I and Newco II will cause Newco II to declare
simultaneously with the declaration of any dividend on Parent Common
Stock a dividend on the Exchangeable Shares and, when such dividend is
paid on Parent Common Stock, cause Newco II to pay simultaneously
therewith such dividend on the Exchangeable Shares, in each case in
accordance with Article 3 of the Exchangeable Share Provisions;
(c) Parent will advise Newco I and Newco II sufficiently in advance of the
declaration by Parent of any dividend on Parent Common Stock and take
all such other actions as are necessary, in cooperation with Newco II,
to ensure that the respective record date and payment date for a
dividend on the Exchangeable Shares shall be the same as the record
date and payment date for the corresponding dividend on Parent Common
Stock and that such dividend on the Exchangeable Shares will correspond
with any requirement of the principal stock exchange on which Parent
Common Stock or the Exchangeable Shares are listed;
(d) Parent will ensure that the record date for any dividend declared on
Parent Common Stock is not less than ten Business Days after the
declaration date for such dividend;
(e) Subject to the exercise by Newco I of the Liquidation Call Right,
Redemption Call Right or Retraction Call Right pursuant to the Exchange
and Voting Trust Agreement, Parent, Newco I and Newco II will take all
such actions and do all such things as are necessary or desirable to
enable and permit Newco II to pay and otherwise perform its obligations
with respect to the satisfaction of the Liquidation Consideration or
the Retraction Price in respect of each issued and outstanding
Exchangeable Share upon the liquidation, dissolution or winding-up of
Newco II or the delivery of a Retraction Request by a holder of
Exchangeable Shares, as the case may be, including, without limitation,
all such actions and all such things as are necessary or desirable to
enable and permit Newco II to cause to be delivered Exchangeable Share
Consideration to the holders of Exchangeable Shares in accordance with
the provisions of Article 5, 6 or 7, as the case may be, of the
Exchangeable Share Provisions; and
(f) Parent, Newco I and Newco II will take all such actions and do all such
things as are necessary or desirable to enable and permit Parent, Newco
I or Newco II, as the case may be, in accordance with applicable law,
to perform their obligations, as the case may be, pursuant to the
Exchangeable Share Provisions and the
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Exchange and Voting Trust Agreement, including but not limited to,
arising upon or from (i) the exercise by Newco I of its Retraction
Call Right, Liquidation Call Right or Redemption Call Right pursuant
to the Exchange and Voting Trust Agreement; (ii) the exercise by a
Holder of Exchangeable Shares of such Holder's Exchange Put Right or
Exchange Right pursuant to the Exchangeable Share Provisions or the
Exchange and Voting Trust Agreement; (iii) the automatic exchange of
a Holder's Exchangeable Shares in accordance with the rights set forth
in Section 5.13 of the Exchange and Voting Trust Agreement (the
"AUTOMATIC EXCHANGE RIGHTS"); or (iv) the provisions of the
Exchangeable Share Provisions, including, without limitation, all
such actions and all such things as are necessary or desirable to
enable and permit Parent, Newco I or Newco II to cause Exchangeable
Share Consideration to be delivered to the holders of Exchangeable
Shares in accordance with the Exchangeable Share Provisions and the
Exchange and Voting Trust Agreement.
2.2 SEGREGATION OF FUNDS. Parent will cause Newco II to deposit a
sufficient amount of funds in a separate account, in trust, and segregate a
sufficient amount of such assets and other property, in trust, as is necessary
to enable Newco II to pay or otherwise satisfy the applicable dividends, and if
Parent has notice of a Liquidation Event or a Retraction Request and if Newco I
has not exercised or will not exercise its Liquidation Call Right or Retraction
Call Right with respect thereto, the Liquidation Consideration or Retraction
Price, as applicable, in each case for the benefit of Holders from time to time
of the Exchangeable Shares, and Newco II will use such funds, assets and other
property so segregated exclusively for the payment of dividends and the payment
or other satisfaction of the Liquidation Consideration or the Retraction Price,
as applicable, net of any corresponding withholding tax obligations and for the
remittance of such withholding tax obligations.
2.3 RESERVATION OF SHARES OF PARENT COMMON STOCK. Parent hereby
represents, warrants and covenants that it has irrevocably reserved for issuance
and will at all times keep available, free from pre-emptive and other rights,
out of its authorized and unissued capital stock such number of shares of Parent
Common Stock (or other shares or securities into which Parent Common Stock may
be reclassified or changed as contemplated by Section 2.7 hereof) (a) as is
equal to the number of shares of Parent Common Stock for which the Exchangeable
Shares issued and outstanding from time to time and held by the Holders are
exchangeable, and (b) as are now and may hereafter be required to enable and
permit Parent to meet its obligations hereunder with respect to the Exchangeable
Share Provisions and the Exchange and Voting Trust Agreement and under any other
security or commitment pursuant to which Parent may now or hereafter be required
to issue Parent Common Stock, to enable and permit Newco II to meet its
respective obligations or exercise its rights hereunder, under the Exchange and
Voting Trust Agreement and the Exchangeable Share Provisions.
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2.4 NOTIFICATION OF CERTAIN EVENTS. In order to assist Parent to comply
with its obligations hereunder and under the Exchange and Voting Trust
Agreement, Newco II will give or cause the Transfer Agent so acting to give
Parent notice of each of the following events at the time set forth below:
(i) immediately, in the event of any determination by the Board of
Directors of Newco II to take any action which would require a
vote or consent of the Holders of Exchangeable Shares for
approval; and
(ii) immediately, upon the earlier of (A) receipt by Newco II
(directly or from Newco I) of notice of, and (B) Newco II
otherwise becoming aware of, any threatened or instituted
claim, suit, petition or other proceedings with respect to the
involuntary liquidation, dissolution or winding-up of Newco II
or to effect any other distribution of the assets of Newco II
among its shareholders for the purpose of winding-up its
affairs.
At least 30 days prior to any Automatic Redemption Date as determined by the
Board of Directors of Parent pursuant to the definition of Automatic Redemption
Date in the Exchange and Voting Trust Agreement, Parent shall notify Newco II of
an Automatic Redemption Date or possible Automatic Redemption Date, as
applicable. At least sixty (60) days prior to a Redemption Date set by Newco II
or Parent in accordance with the definition of Redemption Date in the
Exchangeable Share Provisions, the entity setting the Redemption Date shall
notify the other, whether Newco II or Parent, of the applicable Redemption Date.
2.5 DELIVERY OF SHARES OF PARENT COMMON STOCK. In furtherance of its
obligations hereunder, upon notice from Newco II of any event which requires
Newco II to cause to be delivered shares of Parent Common Stock to any Holder of
Exchangeable Shares, Parent shall forthwith contribute to the capital of Newco I
and cause Newco I to contribute to the capital of Newco II or Parent shall
otherwise deliver or cause to be delivered to Newco II (directly or from Newco
I) the requisite shares of Parent Common Stock to be received by, and issued to
the order of, the former Holder of the surrendered Exchangeable Shares, as Newco
II shall direct. All such shares of Parent Common Stock shall be duly issued as
fully paid and non-assessable. Unless Parent shall otherwise direct, in
consideration of the issuance and delivery of each such share of Parent Common
Stock, Newco II shall issue to Newco I, Common Shares of Newco II, and Newco I
shall issue to Parent common shares of Newco I having substantially equivalent
value to the Parent Common Stock so contributed (such equivalence to be
determined by Parent and Newco II from time to time). Upon notice from Newco I
of any event which requires Newco I to cause to be delivered shares of Parent
Common Stock to any Holder of Exchangeable Shares, Parent shall similarly
contribute to Newco I or otherwise deliver to Newco I the requisite shares of
Parent Common Stock to be received by, and issued to the order of, the former
Holder of the surrendered Exchangeable Shares, as Newco I shall direct. The
shares of Parent Common Stock for the former Holders may be delivered directly
to the Transfer Agent (unless Newco II or Newco I, as
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applicable otherwise directs) for delivery to such Holders. Notwithstanding
the foregoing provisions of this Section 2.5, in any case where a former
Holder of surrendered Exchangeable Shares is entitled to shares of Parent
Common Stock under the Exchangeable Share Provisions, the Exchange and Voting
Trust Agreement or this Agreement, Parent shall ensure that such shares of
Parent Common Stock are delivered to such Holder or as such Holder shall have
directed.
2.6 QUALIFICATION OF SHARES OF PARENT COMMON STOCK. If any shares of
Parent Common Stock (or other shares or securities into which Parent Common
Stock may be reclassified or changed as contemplated by Section 2.7 hereof) to
be issued or delivered hereunder require registration or qualification with or
approval of or the filing of any document including any prospectus or similar
document, the taking of any proceeding with or the obtaining of any order,
ruling or consent from any governmental or regulatory authority under any
Canadian or United States federal, provincial or state law or regulation or
pursuant to the rules and regulations of any regulatory authority, or the
fulfilment of any other legal requirement (collectively the "APPLICABLE LAWS")
before such shares (or such other shares or securities) may be issued by Parent
or delivered by Parent, Newco I or Newco II to the Holder of surrendered
Exchangeable Shares or in order that such shares (or such other shares or
securities) may be freely traded thereafter, Parent will in good faith
expeditiously take all such actions and do all such things as are necessary to
cause such shares of Parent Common Stock (or such other shares or securities) to
be and remain duly registered, qualified or approved. Parent will in good faith
take all actions and do all things as are reasonably necessary or desirable
under Applicable Laws as they exist at the relevant time to cause the shares of
Parent Common Stock (and such other shares or securities) to be issued or
delivered hereunder to be freely tradeable thereafter. Parent will in good faith
expeditiously take all such actions and do all such things as are necessary to
cause all shares of Parent Common Stock (or such other shares or securities) to
be delivered hereunder to be listed, quoted or posted for trading on all stock
exchanges and quotation systems on which outstanding shares of Parent Common
Stock (or such other shares or securities) are listed, quoted or posted for
trading at such time.
2.7 ECONOMIC EQUIVALENCE.
(a) Parent will not, without the prior approval of the Holders of the
Exchangeable Shares given in accordance with Article 10 of the Exchangeable
Share Provisions:
(i) issue or distribute shares of Parent Common Stock (or
securities exchangeable for or convertible into or carrying
rights to acquire shares of Parent Common Stock) to the
holders of all or substantially all of the then outstanding
shares of Parent Common Stock by way of stock dividend or
other distribution; or
(ii) issue or distribute rights, options or warrants to the holders
of all or substantially all of the then outstanding shares of
Parent Common
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Stock entitling them to subscribe for or to purchase shares
of Parent Common Stock (or securities exchangeable for or
convertible into or carrying rights to acquire shares of
Parent Common Stock); or
(iii) issue or distribute to the holders of all or substantially all
of the then outstanding shares of Parent Common Stock (A)
shares or securities of Parent of any class other than Parent
Common Stock (other than shares convertible into or
exchangeable for or carrying rights to acquire shares of
Parent Common Stock), (B) rights, options or warrants other
than those referred to in Subsection 2.7(a)(ii) above, (C)
evidences of indebtedness of Parent or (D) assets of Parent;
unless one or both of Newco II and Parent is permitted under applicable law to
issue and distribute the economic equivalent on a per share basis of such
rights, options, warrants, securities, shares, evidences of indebtedness or
assets to Holders of the Exchangeable Shares and the economic equivalent
(determined on the basis of the number of Parent Common Stock for which the
Exchangeable Shares then issued and outstanding and held by Holders are
exchangeable) of the items referred to in Subsections 2.7(a)(i), (ii) and (iii)
above, as applicable, is simultaneously issued or distributed to the Holders of
the Exchangeable Shares.
This Subsection 2.7(a) shall not apply to or restrict the issuance or
distribution of any of the foregoing items that are not part of an issuance or
distribution to be made available to all or substantially all of the holders of
outstanding Parent Common Stock in their capacity as such shareholders. By way
of example, but not limitation, the following are not restricted hereunder, (a)
the issuance or granting by Parent of stock options, restricted stock, "SARS" or
other securities to employees or directors of Parent or any of its subsidiaries
under a current or future employee incentive plan or other plan not made
available to all or substantially all of the holders of outstanding Parent
Common Stock, and (b) the issuance of convertible securities (including, without
limitation, notes and warrants) unless issued or offered to all or substantially
all of the holders of Parent Common Stock. This Subsection 2.7(a) shall not
apply to or restrict the issuance or distribution of shares of Parent Common
Stock or other securities to the holders of rights, options, warrants,
convertible securities or evidences of indebtedness now outstanding or which are
hereafter issued without violation of this Subsection 2.7(a).
(b) Parent will not, without the prior approval of the Holders of the
Exchangeable Shares given in accordance with Article 10 of the Exchangeable
Share Provisions:
(i) subdivide, redivide or change the then outstanding shares of
Parent Common Stock into a greater number of shares of Parent
Common Stock; or
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(ii) reduce, combine or consolidate or change the then outstanding
shares of Parent Common Stock into a lesser number of shares
of Parent Common Stock, or
(iii) reclassify or otherwise change the shares of Parent Common
Stock or effect an amalgamation, merger, reorganization or
other transaction affecting the shares of Parent Common Stock;
unless Newco II is permitted under applicable law to make the same or an
economically equivalent change to, or in the rights of holders of, the
Exchangeable Shares on a tax deferred basis if the change to the Parent Common
Stock is not a taxable event generally to the holders of Parent Common Stock
generally and the same or an economically equivalent change is simultaneously
made to, or in the rights of, the Holders of the Exchangeable Shares.
(c) Parent will ensure that the record date for both Parent and Newco
II for any event referred to in Subsection 2.7 (a) or 2.7 (b) above, or (if no
record date is applicable for such event) the effective date for any such event,
is not less than 10 Business Days after the date on which such event is declared
or announced by Parent (with simultaneous notice thereof to be given by Parent
to Newco II).
(d) Newco II agrees that, to the extent required, upon due notice from
Parent, Newco II will take or cause to be taken such steps as may be necessary
for the purposes of ensuring that appropriate dividends are paid or other
distributions are made by Newco II, or subdivisions, redivisions or changes are
made to the Exchangeable Shares, in order to implement the required economic
equivalence with respect to the Parent Common Stock and Exchangeable Shares as
provided for in this Section 2.7.
(e) The board of directors of Parent ("PARENT BOARD OF DIRECTORS")
shall determine, in good faith and in its sole discretion, economic equivalence
for the purposes of any event referred to in Section 2.7(a) or 2.7(b) above.
With respect to situations in which the item distributed is nontaxable generally
to holders of Parent Common Stock but is taxable to Holders of Exchangeable
Shares, the lack of tax deferral shall be valued by the Parent Board of
Directors as provided in Section 2.8(j) below. In making its determinations of
economic equivalence, the following factors shall, without excluding other
factors determined by the Parent Board of Directors to be relevant, be
considered by the Parent Board of Directors:
(i) in the case of any stock dividend or other distribution
payable in Parent Common Stock, the number of such shares
issued in proportion to the number of shares of Parent Common
Stock previously outstanding;
(ii) in the case of the issuance or distribution of any rights,
options or warrants to subscribe for or purchase Parent Common
Stock (or
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securities exchangeable for or convertible into or
carrying rights to acquire Parent Common Stock), the
relationship between the exercise price of each such right,
option or warrant and the current market value (as determined
by the boards of directors of Newco II and Parent in the
manner contemplated below) of a share of Parent Common Stock;
(iii) in the case of the issuance or distribution of any other form
of property (including without limitation any shares or
securities of Parent of any class other than Parent Common
Stock, any rights, options or warrants other than those
referred to in Subsection 2.7 (e)(ii) above, any evidences of
indebtedness of Parent or any assets of Parent), the
relationship between the fair market value (as determined by
the Parent Board of Directors in the manner contemplated
below) of such property to be issued or distributed with
respect to each outstanding share of Parent Common Stock and
the current market value (as determined by the Parent Board of
Directors in the manner contemplated below) of a share of
Parent Common Stock;
(iv) in the case of any subdivision, redivision or change of the
then outstanding shares of Parent Common Stock into a greater
number of shares of Parent Common Stock or the reduction,
combination, consolidation or change of the then outstanding
shares of Parent Common Stock into a lesser number of shares
of Parent Common Stock or any amalgamation, merger,
reorganization or other transaction affecting Parent Common
Stock, the effect thereof upon the then outstanding shares of
Parent Common Stock;
(v) in all such cases, the general taxation consequences of the
relevant event to Holders of Exchangeable Shares to the extent
that such consequences may differ from the taxation
consequences to holders of Parent Common Stock as a result of
differences between taxation laws of Canada and the United
States (except for any differing consequences arising as a
result of differing marginal taxation rates and without regard
to the individual circumstances of holders of Exchangeable
Shares); and
(vi) in all such cases, the five (5) year deferral of tax available
to the Holders of Exchangeable Shares measured from the date
of their first issue.
For purposes of the foregoing determinations, the current market value of any
security listed and traded or quoted on a securities exchange shall be the
weighted average of the daily closing prices of such security during a period of
not less than 20 consecutive trading days ending not more than three trading
days before the date of determination on the principal securities exchange on
which such securities are listed and traded or quoted.
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(f) In the event of a Liquidation Event, Section 5.13 of the Exchange
and Voting Trust Agreement shall be applicable and this Section 2.7 shall not be
applicable except to confirm the right of the holders of Parent Common Stock
received upon such exchange of Exchangeable Shares to participate in the
applicable Liquidation Event in the same manner as other holders of Parent
Common Stock.
(g) In the event the item to be distributed pursuant to this Section
2.7 is not readily marketable, reference shall be made to Section 2.8(i) to the
extent applicable.
2.8 SALE OF PARENT.
(a) In the event of a proposed transaction involving the sale of Parent
(whether by shareholder sale of stock, sale of all or substantially all of its
assets or by other means) which the Parent Board of Directors desires to pursue
or recommend (the "Proposed Sale"), the following provisions shall apply.
(b) If the Proposed Sale involves the receipt by shareholders of Parent
of all cash, Parent shall ensure that the Holders of Exchangeable Shares will be
able to receive the same per share cash consideration as the holders of Parent
Common Stock and at the same time as the holders of Parent Common Stock.
(c) If the consideration receivable by holders of Parent Common Stock
is property other than cash or partly cash and partly property other than cash,
then to the EXTENT that such non-cash consideration will be non-taxable to such
holders GENERALLY, Parent will use its best efforts to take all such actions and
do all such things as are necessary or desirable to enable and permit Holders of
Exchangeable Shares to participate in such Proposed Sale to the same extent and
on an equivalent basis (such equivalence based on the number of shares of Parent
Common Stock for which the Exchangeable Shares are exchangeable) as the holders
of shares of Parent Common Stock, without discrimination, and Parent shall use
its best efforts in good faith so that Holders of Exchangeable Shares may
participate in the Proposed Sale without being required to exchange Exchangeable
Shares except to the extent of the cash component of the Proposed Sale.
(d) To the extent that the consideration receivable by holders of the
Parent Common Stock is represented in whole or in part by property other than
cash and such other property is non-taxable to such holders GENERALLY in whole
or in part, and the Parent Board of Directors, after using its best efforts to
attempt to ensure that Holders of Exchangeable Shares do not have to exchange
their shares, determines in good faith that it is not practicable in the
circumstances of the Proposed Sale to provide for the deferral of the taxable
event that will arise from such Proposed Sale in so far as it affects the
Holders of Exchangeable Shares GENERALLY (by continuation of the tax deferral
provided by the Newco II Exchangeable Shares structure or otherwise), Parent may
nevertheless enter into the Proposed Sale, ensuring firstly that the
consideration to be received by the Holders of the Exchangeable Shares is
equivalent on a per share pre-tax
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basis to the consideration to be received by holders of Parent Common Stock
and shall FURTHER use its best efforts to maintain the economic equivalency
of the Proposed Sale to such Holders of Exchangeable Shares GENERALLY,
compared to the situation of the holders of Parent Common Stock GENERALLY,
taking into account such Holders' loss of tax deferral for Canadian income
tax purposes, by:
(i) adjustment upward of the economic consideration to be received
by the Holders of the Exchangeable Shares relative to such
consideration received by holders of Parent Common Stock; or
(ii) compensating such Holders by other means.
Any issues of economic equivalency shall be determined by the Parent Board of
Directors in good faith and in its sole discretion.
(e) Parent will take all necessary steps to ensure that any exchange of
Exchangeable Shares required in connection with such Proposed Sale shall be
effective only upon, and shall be conditional upon, the closing of the Proposed
Sale.
(f) To the extent that implementation of the Proposed Sale necessarily
involves the exchange by the Holders of Exchangeable Shares of such shares, the
Parent Board of Directors shall ensure that the consideration receivable by the
Holders of Exchangeable Shares is not subject to any escrow or transfer
restrictions which would prevent immediate liquidation of such consideration to
pay tax, except as a Holder may otherwise agree.
(g) To the extent that any cash or non-cash consideration received by
holders of Parent Common Stock is taxable on the completion of the Proposed
Sale, the Parent Board of Directors need not consider the economic equivalency
to Holders of Exchangeable Shares beyond ensuring that they are able to receive
the same consideration per share and that such non-cash consideration is to the
extent taxable not subject to any escrow or other restriction and can be
liquidated immediately to pay tax, except as a Holder may otherwise agree.
(h) Subject to the foregoing provisions of this Section 2.8, if the
Proposed Sale is approved at a meeting of stockholders of Parent and the Holders
of Exchangeable Shares were entitled to vote on such Proposed Sale through the
voting trust arrangement as provided in Article 4 of the Exchange and Voting
Trust Agreement, the Proposed Sale may occur without the further approval of the
Holders of Exchangeable Shares under Article 10 of the Exchangeable Share
Provisions.
(i) If the consideration receivable by holders of the Parent Common
Stock is non-taxable to such holders generally but such consideration to be
received by Holders of Exchangeable Shares is taxable generally to Holders of
Exchangeable Shares, and if such consideration or additional compensation to be
received by Holders of Exchangeable Shares is not readily marketable, (the "NON
MARKETABLE CONSIDERATION") then Parent Board of Directors shall use its best
efforts to issue Parent Common Stock in exchange for a portion of the Non
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Marketable Consideration, acquire or arrange for the acquisition of a portion of
the Non Marketable Consideration for cash or other readily marketable
consideration, or in some other manner provide a means for the Holders of
Exchangeable Shares to similarly liquidate a portion of such Non Marketable
Consideration, such portion to be in an amount sufficient only to permit the
Holders of Exchangeable Shares to satisfy the tax liability incurred by such
Holders in connection with the Non Marketable Consideration so received.
(j) Economic equivalency for purposes of the Holders' loss of tax
deferral for Canadian income tax purposes shall be valued in Section 3.8(d)(i)
above as the amount of income tax payable upon the loss of such tax deferral
multiplied by an interest factor equal to the "PRIME RATE" per annum, which
product shall be multiplied by the period stated in years (and any fraction
thereof) from the date of the closing of the Proposed Sale to the fifth
anniversary of the date of initial issuance of the Class A Special Shares. The
"Prime Rate" shall be the average U.S. Prime Rate as last reported in the Wall
Street Journal on the Business Day closest to 60 days prior to the Proposed Sale
Date. The income tax payable shall be estimated in good faith by the Parent
Board of Directors based on the estimated fair market value of the consideration
to be received. The amount of income tax shall be calculated on an aggregate
hypothetical basis for all Holders of Exchangeable Shares (assuming there is a
capital gain and income taxes are paid based on an assumed tax rate of 50
percent) but without additional gross up for taxes based on the additional
consideration. The determinations under this subsection shall be made by the
Parent Board of Directors in good faith.
(k) In the event of any dispute concerning the application of the
provisions of this Section 2.8 in connection with a Proposed Sale, the Board of
Directors shall determine in good faith what is fair in the circumstances to
settle the matter.
(l) This Section 2.8 shall be applicable notwithstanding any provisions
in this Agreement, the Exchange and Voting Trust Agreement, or the Exchangeable
Share Provisions to the contrary and is intended to provide the Parent Board of
Directors with the authority to take the actions reasonably necessary to
implement a Proposed Sale without the prior approval of the Holders of the
Exchangeable Shares as may be otherwise required under the Support Agreement,
the Exchange and Voting Trust Agreement, or the Exchangeable Share Provisions,
but subject nevertheless to any required vote of shareholders.
2.9 OWNERSHIP OF OUTSTANDING SHARES OF NEWCO I AND NEWCO II. Without
the prior approval of Newco I and Newco II and the prior approval of the Holders
of the Exchangeable Shares given in accordance with Article 10 of the
Exchangeable Share Provisions, Parent covenants and agrees in favor of Newco I,
Newco II and the Holders that, as long as any outstanding Exchangeable Shares
are owned by a Holder, Parent will be and remain the direct or indirect
beneficial owner of all issued and
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outstanding shares in the capital of Newco I and Newco I shall remain the
direct or indirect beneficial owner of all issued and outstanding Common
Shares in the capital of Newco II; provided this shall not restrict the
pledging by Parent of any such shares to a commercial lender or financial
institution in connection with a loan or other financial accommodation to
Parent or any of its subsidiaries, but upon a foreclosure of any such shares,
the purchaser of such shares shall be bound by the covenants of Parent, Newco
I and Newco II, as applicable, hereunder.
2.10 PARENT AND SUBSIDIARIES NOT TO VOTE EXCHANGEABLE SHARES. Parent
covenants and agrees that it will appoint and cause to be appointed proxy
holders with respect to all Exchangeable Shares held by Parent and its
Subsidiaries for the sole purpose of attending each meeting of holders of
Exchangeable Shares in order to be counted as part of the quorum for each such
meeting to the extent but only to the extent that such presence is required
under the provisions of the applicable corporate statute or the Exchangeable
Share Provisions in order to obtain a quorum to conduct a meeting of holders of
Exchangeable Shares (the "REQUIRED PRESENCE"). Parent further covenants and
agrees that it will not, and will cause its Subsidiaries not to, exercise any
voting rights which may be exercisable by holders of Exchangeable Shares from
time to time pursuant to the Exchangeable Share Provisions or pursuant to the
provisions of the applicable corporate statute (or any successor or other
corporate statute by which Newco I or Newco II may in the future be governed)
with respect to any Exchangeable Shares held by it or by its Subsidiaries in
respect of any matter considered at any meeting of holders of Exchangeable
Shares; provided that to the extent, if any, of the Required Presence, Parent or
its Subsidiaries may exercise the voting rights, if any, with respect to such
Required Presence to vote such Exchangeable Shares on the same side as the
Holders of Exchangeable Shares who have cast the majority of votes (excluding
those cast by a holder not a Holder) for or against the applicable resolution to
be voted upon.
2.11 RULE 10b-18 PURCHASES. Anything to the contrary in this Agreement
notwithstanding, Parent shall not be obligated to take any action hereunder
which would prevent Parent from effecting repurchases of Parent Common Stock
pursuant to the "safe harbor" provisions of Rule 10b-18 promulgated under the
U.S. Securities Exchange Act of 1934 as amended or any successor provision
thereof.
ARTICLE III
CERTAIN RESTRICTIONS
3.1 NEWCO I RESTRICTIONS. Subject to what is hereinafter provided, so
long as any of the Exchangeable Shares are outstanding and held by Holders,
Newco I shall not at any time without, but may at any time with, the approval of
the Holders of the Exchangeable Shares given as specified in Article 10 of the
Exchangeable Share Provisions:
(a) incur indebtedness or other liabilities except as may be desirable for
or reasonably required or incidental to performance of the terms and
conditions of this Agreement, the Exchange and Voting Trust
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Agreement or the Exchangeable Share Provisions or the rights and
obligations of Newco I, Parent or Newco II relating thereto or
relating to the Class B Preferred Shares, or guarantee the obligations
of any other party except as set forth in the preceding exception or
insofar as recourse of the obligee on the guarantee is limited to the
preferred shares of YPtel Inc. held by YPtel Corporation on or after
the Closing Date and the dividends and other distributions and proceeds
with respect to such preferred shares, and any dividends issued or
other distributions made with respect to the common stock of YPtel
Corporation or Newco II or the proceeds thereof (collectively, the
"COLLATERAL");
(b) voluntarily liquidate, dissolve or wind-up or otherwise distribute its
assets or cause Newco II to do so;
(c) issue any shares other than to Parent; or
(d) transfer any of the Common Shares of Newco II other than to Parent or
Newco II, except in connection with a pledge thereof as set forth
below; or
(e) enter into or operate any business other than that of a holding company
owning the shares of Newco II and any business incidental thereto or
other than any business reasonably required or appropriate for Newco I
to carry out its rights, duties or obligations pursuant to the
provisions of the Exchangeable Share Provisions, the Support Agreement
or this Agreement or in connection with the investment and distribution
of any dividends of or distributions by Newco II or YPtel Corporation.
Nothing contained herein or in Section 3.2 below shall restrict the pledging by
Newco I of the Common Shares of Newco II (or indirectly the common stock of
YPtel Corporation) or the pledging by Newco II of the common stock of YPtel
Corporation, in either case to secure a loan or other financial accommodation to
Parent or any of its subsidiaries by a commercial lender or financial
institution ("LENDER") to the extent such security is required by such Lender in
order to preserve or better protect its lien on or rights in the Collateral or
to the extent that the Lender agrees that upon a foreclosure or sale by Lender
of such shares, the purchaser of such shares shall be bound by the covenants of
Parent, Newco I and Newco II, as applicable hereunder, each of which shall
remain liable under its respective covenants.
3.2 NEWCO II RESTRICTIONS. Subject to what is otherwise provided in
Section 3.1 above, so long as any of the Exchangeable Shares are outstanding and
held by a Holder, Newco II shall not at any time without, but may at any time
with, the approval of the Holders of the Exchangeable Shares given as specified
in Article 10 of the Exchangeable Share Provisions:
<PAGE>
-15-
(a) incur indebtedness or other liabilities except as may be desirable for
or reasonably required or incidental to performance of the terms and
conditions of this Agreement, the Exchange and Voting Trust Agreement
or the Exchangeable Share Provisions or the rights and obligations of
Newco I, Parent or Newco II relating thereto or relating to the Class B
Preferred Shares, or guarantee the obligations of any other party
insofar as recourse of the obligee on the guarantee is limited to the
Collateral;
(b) transfer any of the common stock of YPtel Corporation, other then to
Newco I, except in connection with a pledge thereof as set forth in
Section 3.1 hereof;
(c) issue any Common Shares other than to Newco I; or
(d) amend its Articles of Association after the effective date hereof,
except for minor amendments consistent with the purposes set forth in
Section 4.4 hereof.
3.3 PARENT SUCCESSOR OR PURCHASER. Subject to Section 2.8 hereof, in
the event there is a Parent Successor pursuant to Section 12.1 of the Exchange
and Voting Trust Agreement or other purchaser of substantially all the
outstanding shares of Parent Common Stock, the covenants of and restrictions
applicable to Newco I and Newco II shall continue in full force and effect
(substituting the Parent Successor or such purchaser for Parent, as applicable),
Subject to the terms of any applicable supplemental agreement referred to in
said Section 12.1, and Parent shall not thereby be released from any obligations
or liabilities then accrued hereunder except to the extent that such obligations
or liabilities are assumed by the Parent Successor or such purchaser.
ARTICLE IV
GENERAL
4.1 TERM. This Agreement shall come into force and be effective as of
the date hereof, subject to Section 4.13 below, and shall terminate and be of no
further force and effect at such time as the Exchange and Voting Trust Agreement
shall terminate (or shall no longer continue) as provided in Section 14.2 of the
Exchange and Voting Trust Agreement.
4.2 SEVERABILITY. If any provision of this Agreement is held to be
invalid, illegal or unenforceable, the validity, legality or enforceability of
the remainder of this Agreement shall not in any way be affected or impaired
thereby and this Agreement shall be carried out as nearly as possible in
accordance with its original terms and conditions.
4.3 AMENDMENTS, MODIFICATIONS, ETC. Subject to amendments of the nature
contemplated by Section 13.4 of the Exchange and Voting Trust Agreement, this
Agreement may not be amended, modified or waived except by an agreement in
writing executed by Newco I, Newco II and Parent and approved
<PAGE>
-16-
by the Holders of the Exchangeable Shares in accordance with Article 10 of
the Exchangeable Share Provisions.
4.4 MINISTERIAL AMENDMENTS. Notwithstanding the provisions of Section
4.3, Newco I, Newco II and Parent may in writing, at any time and from time to
time, upon reasonable notice to (including sufficient details of the proposed
changes) but without the approval of the Holders of the Exchangeable Shares,
amend or modify this Agreement for the purposes of:
(a) adding to the covenants of any or all parties hereto for
the protection of the Holders of the Exchangeable Shares;
(b) making such amendments or modifications not inconsistent
with this Agreement as may be necessary or desirable with
respect to matters or questions which, in the good faith
opinion of the board of directors of each of Parent,
Newco I and Newco II, having in mind the best interests
of the Holders as a whole, it may be expedient to make,
provided that each such board of directors shall be of the
good faith opinion that such amendments or modifications
will not be prejudicial to the interests of the Holders as
a whole; or
(c) making such changes or corrections which, on the advice of
counsel to Parent, Newco I and Newco II, are required for
the purpose of curing or correcting any ambiguity or defect
or inconsistent provision or clerical omission or mistake or
manifest error, provided that the boards of directors of
each of Parent, Newco I and Newco II shall be of the opinion
that such changes or corrections will not be prejudicial to
the interests of the Holders as a whole.
4.5 MEETING TO CONSIDER AMENDMENTS. Newco II, at the request of Parent,
Newco I or any ten Holders, shall call a meeting or meetings of the Holders of
the Exchangeable Shares for the purpose of considering any proposed amendment or
modification requiring approval pursuant hereto. Any such meeting or meetings
shall be called and held in accordance with the Exchangeable Share Provisions
and, to the extent applicable, the Articles of Association of Newco II and all
applicable laws and shall be held in the City of Toronto. An approval of Holders
may be obtained by written consents in lieu of a meeting, as provided in Article
10 of the Exchangeable Share Provisions.
4.6 ENUREMENT. This Agreement shall be binding upon and enure to the
benefit of the parties hereto, the Holders, from time to time, of Exchangeable
Shares and each of their respective heirs, successors and assigns. Certain of
the Company shareholders party to this Agreement are contemplated to become
Holders hereunder when the Class A Special Shares are issued on the Closing Date
while the other such shareholders may transfer their Company shares to
corporations or limited partnerships who will become Holders hereunder on the
Closing Date. Upon any such party or transferee becoming a Holder hereunder,
such party or transferee will be party to this Agreement in its capacity as a
<PAGE>
-17-
Holder. Any such transferee becoming a Holder or any other transferee hereafter
becoming a Holder shall be substituted for its transferor under this Agreement
upon the date of such transfer, and the transferor shall be released from any
obligations or liability thereafter arising under this Agreement.
4.7 NOTICE. All notices and other communications hereunder shall be in
writing and shall be deemed given to a party if delivered, sent by facsimile
transmission with confirmation of transmission, or mailed by registered or
certified mail (postage prepaid and return receipt requested) to the parties at
the following addresses and facsimile numbers (or at such other address or
facsimile number for the parties as the parties shall specify by like notice),
and such notice shall be deemed given: (i) if delivered to the party, on the
date of such delivery; (ii) if telecopied, on the date of confirmation of
receipt or transmission, unless such day is not a Business Day, in which case it
shall be deemed to have been given and received upon the immediately following
Business Day; or (iii) if mailed, five (5) Business Days after mailing:
TO PARENT, NEWCO I OR NEWCO II:
c/o 390 South Woods Mill Road
Suite 150
St. Louis, Missouri
U.S.A. 63017
Attention: the President
FACSIMILE NO.: (314) 205-8141
WITH COPIES TO:
Blackwell Sanders Peper Martin, LLP
720 Olive Street
Suite 2400
St. Louis, Missouri
U.S.A. 63101-4834
Attention: Craig Adoor
FACSIMILE NO.: (314) 345-6060
AND
Pouliot Mercure
CIBC Tower
31st floor
1155 Rene Levesque Blvd. West
Montreal, Quebec
H3B 3S6
Attention: Joel Silcoff
FACSIMILE NO.: (514) 875-4308
AND
<PAGE>
-18-
c/o Imperial Capital Limited
1 First Canadian Place
P.O. Box 438
Suite 5102
Toronto ON M5X 1E3
Attention: Managing Partner
FACSIMILE NO.: (416) 362-8660
AND
Cassels, Brock & Blackwell
Scotia Plaza, Suite 2100
40 King Street West
Toronto, Ontario M5H 3C2
CANADA
Attention: Maxwell Gotlieb
FACSIMILE NO.: (416) 360-8877
TO THE HOLDERS:
At their respective addresses
appearing on the records of
the Transfer Agent
WITH COPIES TO:
Imperial Capital Limited
1 First Canadian Place
P.O. Box 438
Suite 5102
Toronto ON M5X 1E3
Attention: Managing Partner
FACSIMILE NO.: (416) 362-8660
AND:
Cassels, Brock & Blackwell
Scotia Plaza, Suite 2100
40 King Street West
Toronto, Ontario M5H 3C2
CANADA
Attention: Maxwell Gotlieb
FACSIMILE NO.: (416) 360-8877
Any notice period providing for notice to be given twenty (20) or more days
before a specified date or event may be calculated as if the date of mailing
were the date of giving notice. Notwithstanding any requirement for written
notice in this Agreement, any notices provided herein to be given as between
Newco I, Newco II, Parent and Transfer Agent may be given by telephone, by fax
or otherwise in an informal manner as such entities may agree among themselves
<PAGE>
-19-
from time to time and such notices may be subject to standing orders as to
particular notices.
4.8 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original, and all of which taken together shall
constitute one and the same instrument. One or more of the parties may sign this
Agreement and deliver this Agreement by facsimile transmission. The parties
agree that a facsimile of a signature shall be deemed an original signature.
4.9 JURISDICTION. Except to the extent that the Delaware and Nova
Scotia corporate laws under which Parent, Newco I and Newco II are,
respectively, organized govern the determination of particular corporate issues
under this Agreement, this Agreement shall be construed and enforced in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein.
4.10 ATTORNMENT. Each of the parties hereto, on behalf of such party
and such party's heirs, personal representatives, successors and permitted
assigns, agrees that any action or proceeding arising out of or relating to this
Agreement may be instituted in the courts of Ontario, waives any objection which
it may have now or hereafter to the venue of any such action or proceeding,
irrevocably submits to the jurisdiction of such courts in any such action or
proceeding, agrees to be bound by any judgment of such courts and not to seek,
and hereby waives, any review of the merits of any such judgment by the courts
of any other jurisdiction.
4.11 CONSTRUCTION. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
4.12 EXCHANGEABLE SHARE PROVISIONS. The parties hereto agree to take
such actions, execute such documents, and vote such securities as are necessary
to give full effect to the Exchangeable Share Provisions, as if they comprised a
contract among such parties.
4.13 EFFECTIVENESS OF AGREEMENT. This Agreement is being entered into
in anticipation of the "Closing" under the YPtel Agreement and the related
issuance of Class A Special Shares to certain of the Company shareholders in
exchange for some of their Company shares. This Agreement shall not become
effective until the Class A Special Shares are so issued, and if not so issued
within sixty (60) days after the date of this Agreement, but on or before March
1, 2000 in any event, this Agreement shall be null and void.
IN WITNESS WHEREOF, the parties have caused this Support Agreement to
be signed by their respective officers duly authorized, all as of the date first
written above.
<PAGE>
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ADVANCED COMMUNICATIONS GROUP, INC.
By:_________________________________________
ACG HOLDING COMPANY
By:_________________________________________
ACG EXCHANGE COMPANY
By:_________________________________________
CERTAIN YPTEL CORPORATION
STOCKHOLDERS (See Schedule A), by
their attorney, Imperial Capital
Limited
By:__________________________________________
THE J.L.R. FAMILY TRUST
Per:
_____________________________________________
Jeffrey L. Rosenthal - as trustee with no
personal liability and liability being
limited to trust assets
Per:
_____________________________________________
Maxwell Gotlieb - as trustee with no
personal liability and liability
being limited to trust assets
THE PAISLEY FAMILY TRUST
Per:
_____________________________________________
Stephen D. Lister - as trustee with no
personal liability and liability being
limited to trust assets
Per:
_____________________________________________
Maxwell Gotlieb - as trustee with no
personal liability and liability
being limited to trust assets
<PAGE>
SCHEDULE A
CERTAIN HOLDERS OF SHARES OF YPTEL CORPORATION
<PAGE>
EXHIBIT 99.4
CONSENT OF GEORGE ANDERSON
I hereby consent to being named as a director of Advanced Communications
Group, Inc. ("Advanced") in the registration statement on Form S-1 and all
pre-effective amendments and post-effective amendments thereto to be filed by
Advanced with the Securities and Exchange Commission to effect the
registration for resale of the shares of Advanced common stock to be issued
in connection with, among other transactions, the acquisition by Advanced of
YPtel Corporation, Web YP, Inc. and Big Stuff, Inc.
/s/ George Anderson
----------------------------
George Anderson
Date: 2/01/2000
<PAGE>
EXHIBIT 99.5
CONSENT OF ROBERT FLYNN
I hereby consent to being named as a director of Advanced Communications
Group, Inc. ("Advanced") in the registration statement on Form S-1 and all
pre-effective amendments and post-effective amendments thereto to be filed by
Advanced with the Securities and Exchange Commission to effect the
registration for resale of the shares of Advanced common stock to be issued
in connection with, among other transactions, the acquisition by Advanced of
YPtel Corporation, Web YP, Inc. and Big Stuff, Inc.
/s/ Robert Flynn
------------------------------
Robert Flynn
Date: 2/01/2000
<PAGE>
EXHIBIT 99.6
CONSENT OF WILMOT MATTHEWS
I hereby consent to being named as a director of Advanced Communications
Group, Inc. ("Advanced") in the registration statement on Form S-1 and all
pre-effective amendments and post-effective amendments thereto to be filed by
Advanced with the Securities and Exchange Commission to effect the
registration for resale of the shares of Advanced common stock to be issued
in connection with, among other transactions, the acquisition by Advanced of
YPtel Corporation, Web YP, Inc. and Big Stuff, Inc.
/s/ Wilmot Matthews
------------------------------
Wilmot Matthews
Date: 02/01/2000
