EXECUTION COPY
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RESTATED STOCK PURCHASE AGREEMENT
dated as of the 6th day of October, 1997
by and among
ADVANCED COMMUNICATIONS GROUP, INC.
(PURCHASER)
and
ADVANCED COMMUNICATIONS CORP.
(OLD ACG)
and
GREAT WESTERN DIRECTORIES, INC.
(COMPANY)
and
▇▇▇▇▇▇▇ ▇'▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇ AND ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
(STOCKHOLDERS)
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TABLE OF CONTENTS
1. DEFINITIONS..............................................................................................3
2. PURCHASE, SALE AND EXCHANGE..............................................................................9
2.1 Consideration for Execution of Original Agreement...............................................9
2.2 Consideration for Shares........................................................................9
2.3 Underlying Principles..........................................................................10
2.4 Post Closing Payment...........................................................................10
2.5 Section 351 Exchange Plan......................................................................12
2.6 Certain Effects of OLD ACG Merger..............................................................12
3. CLOSING.................................................................................................12
4. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF COMPANY AND STOCKHOLDERS.......................13
4.1 Due Organization...............................................................................13
4.2 Authorization..................................................................................13
4.3 Capital Stock of Company.......................................................................13
4.4 Options, etc...................................................................................14
4.5 No Bonus Shares................................................................................14
4.6 Subsidiaries...................................................................................14
4.7 Predecessor Status; etc........................................................................14
4.8 Spinoff by the Company.........................................................................14
4.9 Financial Statements...........................................................................14
4.10 Liabilities and Obligations....................................................................15
4.11 Permits and Intangibles........................................................................16
4.12 Environmental Matters..........................................................................16
4.13 Significant Customers; Material Contracts and Commitments......................................17
4.14 Real Property..................................................................................18
4.15 Employee Plans.................................................................................18
4.16 Employee Plans and Compliance with ERISA.......................................................19
4.17 Conformity with Law; Litigation................................................................20
4.18 Tax Matters....................................................................................20
4.19 No Violations..................................................................................22
4.20 Absence of Changes............................................................................22
4.21 Accounts and Notes Receivable..................................................................24
4.22 Personal Property..............................................................................24
4.23 Insurance......................................................................................25
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4.24 Intellectual Property..........................................................................25
4.25 Labor Relations................................................................................25
4.26 Disclosure.....................................................................................26
4.27 Prohibited Activities..........................................................................26
4.28 Draft Registration Statement...................................................................26
5. ADDITIONAL REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF STOCKHOLDERS........................26
5.1 Authority......................................................................................26
5.2 Preemptive Rights..............................................................................27
5.3 Tax Matters....................................................................................27
5.4 No Retained Rights.............................................................................27
6. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF PURCHASER AND OLD ACG..........................27
6.1 Due Organization...............................................................................27
6.2 Authorization..................................................................................27
6.3 Capital stock..................................................................................28
6.4 Transactions in Capital Stock, Organization Accounting.........................................28
6.5 Subsidiaries...................................................................................28
6.6 Financial Statements...........................................................................28
6.7 Liabilities and Obligations....................................................................29
6.8 Conformity with Law; Litigation................................................................29
6.9 No Violations..................................................................................29
6.10 Securities.....................................................................................30
6.11 Business; Real Property; Material Agreement....................................................30
6.12 Tax Matters....................................................................................30
6.13 Draft Registration Statement...................................................................31
7. OTHER COVENANTS PRIOR TO CLOSING........................................................................31
7.1 Access and Cooperation; Due Diligence; Audits..................................................31
7.2 Conduct of Business Pending Closing............................................................32
7.3 Prohibited Activities..........................................................................33
7.4 Exclusivity....................................................................................34
7.5 Notification of Certain Matters................................................................34
7.6 Amendment of Schedules.........................................................................35
7.7 Compliance with the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976 (the
"▇▇▇▇-▇▇▇▇▇ Act")..............................................................................35
7.8 Further Assurance..............................................................................35
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8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS ....................................................36
8.1 Representations and Warranties; Performance of Obligations.....................................36
8.2 Satisfaction...................................................................................36
8.3 No Litigation..................................................................................36
8.4 Opinion of Counsel.............................................................................36
8.5 Consents and Approvals.........................................................................36
8.6 Good Standing Certificates.....................................................................37
8.7 No Material Adverse Change.....................................................................37
8.8 Secretary's Certificates.......................................................................37
8.9 Closing of IPO.................................................................................37
8.10 Employment Agreements..........................................................................37
8.11 Section 1362(E)(3) Election....................................................................37
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER........................................................37
9.1 Representations and Warranties; Performance of Obligations.....................................38
9.2 No Litigation..................................................................................38
9.3 Company's Secretary's Certificate..............................................................38
9.4 No Material Adverse Effect.....................................................................38
9.5 Stockholders' Release..........................................................................38
9.6 Satisfaction...................................................................................39
9.7 Opinion of Counsel.............................................................................39
9.8 Consents and Approvals.........................................................................39
9.9 Good Standing Certificates.....................................................................39
9.10 FIRPTA Certificate.............................................................................39
9.11 Closing of IPO.................................................................................39
9.12 Employment Agreements..........................................................................39
9.13 Licensing Arrangements.........................................................................40
10. CERTAIN TAX AND EMPLOYEE BENEFIT MATTERS................................................................40
10.1 Preparation and Filing of Tax Returns..........................................................40
10.2 Preservation of Employee Benefit Plans.........................................................40
11. TERMINATION OF AGREEMENT................................................................................41
12. NONDISCLOSURE OF CONFIDENTIAL INFORMATION...............................................................41
12.1 Company and Stockholders.......................................................................41
12.2 Purchaser......................................................................................42
12.3 Damages........................................................................................43
12.4 Survival.......................................................................................43
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13. NONCOMPETITION..........................................................................................43
13.1 Prohibited Activities..........................................................................43
13.2 Damages........................................................................................44
13.3 Reasonable Restraint...........................................................................44
13.4 Severability, Reformation......................................................................45
13.5 Independent Covenant...........................................................................45
13.6 Materiality....................................................................................45
14. TRANSFER PROHIBITIONS AND RESTRICTIONS..................................................................45
14.1 Warrants. ....................................................................................45
14.2 Purchaser Stock................................................................................46
14.3 Legend.........................................................................................46
15. INVESTMENT REPRESENTATIONS..............................................................................46
15.1 Compliance With Law............................................................................46
15.2 Economic Risk, Sophistication..................................................................47
16. REGISTRATION RIGHTS.....................................................................................48
16.1 PiggyBack Registration Rights..................................................................48
16.2 Demand Registration Rights.....................................................................48
16.3 Registration Procedures........................................................................49
16.4 Other Registration Matters.....................................................................51
16.5 Indemnification................................................................................52
16.6 Contribution...................................................................................55
16.7 Availability of Rule 144.......................................................................56
17. GENERAL.................................................................................................56
17.1 Cooperation....................................................................................56
17.2 Successors and Assigns.........................................................................56
17.3 Entire Agreement...............................................................................56
17.4 Counterparts...................................................................................57
17.5 Brokers and Agents.............................................................................57
17.6 Expenses.......................................................................................57
17.7 Notices........................................................................................57
17.8 Governing Law..................................................................................59
17.9 Exercise of Rights and Remedies................................................................59
17.10 Time...........................................................................................59
17.11 Reformation and Severability...................................................................59
17.12 Remedies Cumulative............................................................................59
17.13 Captions.......................................................................................59
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17.14 Public Statements..............................................................................60
17.15 Amendments and Waivers.........................................................................60
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RESTATED STOCK PURCHASE AGREEMENT
THIS RESTATED STOCK PURCHASE AGREEMENT (the "Agreement") is made as
of the 6th day of October, 1997, by and among ADVANCED COMMUNICATIONS GROUP,
INC., a Delaware corporation organized in September 1997 ("Purchaser"),
ADVANCED COMMUNICATIONS CORP. (formerly named Advanced Communications Group,
Inc.), a Delaware corporation organized in June 1996 ("Old ACG"), GREAT
WESTERN DIRECTORIES, INC., a Texas corporation ("Company"), and ▇▇▇▇▇▇▇
▇'▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
(individually, a "Stockholder" and collectively, the "Stockholders"), the
owners of 1,250 shares of Common Stock, $1.00 par value, of Company ("Company
Stock"), representing all the capital stock of Company issued and outstanding
on the date of this Agreement ("Shares").
RECITALS
WHEREAS, Old ACG has entered into agreements for, or
negotiated the terms of, the acquisition by merger, asset purchase or
stock purchase of ten companies (or interests therein) engaged in
various aspects of the telecommunications industry ("Founding
Companies") for voting capital stock and other consideration,
including cash, one of such agreements being the Stock Purchase
Agreement dated as of June 16, 1997 among Old ACG, the Company and
the Stockholders ("Original Agreement"); and
WHEREAS, Old ACG issued to Stockholders on June 16, 1997,
non-transferable warrants to purchase an aggregate of 2,000,000
shares of Old ACG's Common Stock, $.00001 par value,
contemporaneously with the execution and delivery of the Original
Agreement; and
WHEREAS, Old ACG intended to close the acquisition of the
Founding Companies substantially contemporaneously with the
consummation of an initial underwritten public offering of its common
stock; and
WHEREAS, the executive officers of Old ACG have determined
that it is desirable for licensing and other regulatory purposes to
restructure the acquisitions of the Founding Companies; and
WHEREAS, as the initial step in the implementation of the
restructured proposal, Old ACG formed Purchaser as a new Delaware
corporation in September 1997 to serve as the
vehicle for the acquisition of the Founding Companies substantially
contemporaneously with the consummation of an initial underwritten
public offering ("IPO") of Common Stock, $.0001 par value, of
Purchaser ("Purchaser Stock") at the price to the public reflected in
the final prospectus of Purchaser relating to the IPO ("IPO Price");
and
WHEREAS, under the restructured proposal, contemporaneously
with the consummation of the IPO and as part of a single transaction,
the stockholders of the Founding Companies, including Stockholders
and Old ACG, will transfer, by stock or asset purchase or reverse
triangular merger, the stock or substantially all the assets of
certain companies and other assets in which they own an interest to
Purchaser in exchange for voting capital stock of Purchaser and other
consideration, including cash, voting stock, options, warrants,
notes, convertible notes and other property of Purchaser, under
circumstances that will constitute a tax-free transfer of property
under Section 351 of the Internal Revenue Code of 1986, as amended,
and the rules and regulations thereunder ("Code"), to the extent of
their receipt of voting capital stock of Purchaser; and
WHEREAS, substantially contemporaneously with the execution
of this Agreement and in order to document the integrated Section 351
exchange plan contemplated herein, (a) Old ACG, the other Founding
Companies, their stockholders and others are amending and restating
their respective acquisition agreements; and (b) Purchaser and Old
ACG are entering into a merger agreement pursuant to which Old ACG
will become a wholly-owned subsidiary of Purchaser substantially
contemporaneously with the consummation of the IPO; and
WHEREAS, it is contemplated that prior to the consummation
of the IPO, Old ACG will effect an approximately one-for-two reverse
stock split, the exact magnitude of which will be dependent upon the
ultimate post IPO valuation of Purchaser by the managing underwriters
in the IPO and the anticipated IPO Price; and
WHEREAS, the IPO, the acquisitions of the Founding Companies
and Old ACG are described in the Registration Statement on Form S-1
of Purchaser (draft of October 2, 1997), a copy of which is attached
to this Agreement as Annex I ("Draft Registration Statement"); and
WHEREAS, Purchaser, Old ACG, Company and the Stockholders
desire to amend and restate the Original Agreement in its entirety
and transform it into this Agreement; and
WHEREAS, Purchaser desires to acquire all the Shares
directly from Stockholders for the consideration set forth in Section
2.2 of this Agreement, and Stockholders have
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agreed to sell the Shares to Purchaser on the terms and subject to
the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the
mutual representations, warranties, covenants and agreements herein
contained, the parties hereby agree as follows:
1. DEFINITIONS
Unless the context otherwise requires, capitalized terms used in this
Agreement or in any schedule, or annex attached hereto and not otherwise
defined shall have the following meanings for all purposes of this Agreement:
"Affiliates" has the meaning set forth in Section 4.8.
"Agreed Rate" means the prime rate of interest reported in The Wall
Street Journal on the Closing Date.
"Agreement" has the meaning set forth in the first paragraph of this
Agreement.
"Annex" means each Annex attached hereto that represents a document
relevant to the transactions contemplated in this Agreement.
"Arbitrator" has the meaning set forth in Section 2.4(iii).
"Balance Sheet Date" has the meaning set forth in Section 4.9.
"Cash Report" has the meaning set forth in Section 2.4(ii).
"Charter Documents" means the Certificate of Incorporation, Articles
of Incorporation or other instrument pursuant to which any
corporation, partnership or other business entity that is a signatory
to this Agreement was formed or organized in accordance with
applicable law.
"Closing" has the meaning set forth in Section 3.
"Closing Date" has the meaning set forth in Section 3.
"Code" has the meaning set forth in the sixth recital of this
Agreement.
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"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Company Financial Statements" has the meaning set forth in Section
4.9.
"Company Operating Profit" means, as of any date, the amount by which
Company's revenues for the period beginning on January 1, 1997 and
ending on the date such determination is being made exceed the costs
and expenses (other than deferred income Taxes) appropriately
deducted in the computation of profit and loss for such period in
accordance with generally accepted accounting principles.
"Company Stock" has the meaning set forth in the first paragraph of
this Agreement.
"Controlled Group" has the meaning set forth in Section 4.16.
"Deemed Closing Date" means the the Closing Date, except if the
Closing occurs after December 31, 1997, in which case it means
December 31, 1997.
"Disputed Matter" has the meaning set forth in Section 2.4(ii).
"Distributable Cash" means, as of any date or for any period, all
collected cash balances of Company in excess of the level required to
support the ongoing operations of the Company in accordance with
prudent business practices so as not to require the infusion of
additional working capital.
"Draft Registration Statement" has the meaning set forth in the ninth
recital of this Agreement.
"Environmental Laws" has the meaning set forth in Section 4.12.
"ERISA" has the meaning set forth in Section 4.15.
"Final Cash Report" has the meaning set forth in Section 2.4(iv).
"Founding Companies" has the meaning set forth in the first recital
of this Agreement.
"Founding Stockholders" has the meaning set forth in Section 16.2.
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"Hazardous Wastes" and "Hazardous Substances" have the meanings set
forth in Section 4.12.
"▇▇▇▇-▇▇▇▇▇ Act" has the meaning set forth in Section 7.7.
"Initial Disclosure Date" means March 31, 1997.
"Intellectual Property" means all patents, trademarks, service marks,
copyrights and applications therefor, all tradenames, brand names,
logos, inventions, discoveries, improvements, processes,
technologies, know-how, formulae, drawings, specifications, trade
secrets, plans, computer software (including source codes and other
documentation thereof), files, programs, notebooks and records, all
other proprietary, technical and other information, data and
intellectual property, and all licenses, permits and other rights to
use the foregoing, whether patentable or unpatentable, used or held
for use in or associated with the ownership of Company's assets, or
the conduct of Company's business (or, if Company does not own any
such proprietary, technical or other information, data and
intellectual property, a paid-up or royalty-free, irrevocable
license, permit or other right to use the same), including, without
limitation, the Intellectual Property described in Schedule 4.24, but
expressly excluding the technology owned by Big Stuff, Inc. relating
to the colorizing of yellow pages and the generation of world wide
web pages except to the extent that Company is licensed to use such
technology
"IPO" has the meaning set forth in the fifth recital of this
Agreement.
"IPO Price" has the meaning set forth in the fifth recital of this
Agreement.
"IRS" or "Internal Revenue Service" means the Internal Revenue
Service of the Department of the Treasury.
"June Balance Sheet" has the meaning set forth in Section 4.9.
"Leases" means all real and personal property leased by Company and
used, useful or held for use in connection with Company's business.
"Liens" has the meaning set forth in Section 4.3.
"Material Adverse Effect" has the meaning set forth in Section 4.1.
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"Material Documents" has the meaning set forth in Section 4.19.
"Measurement Period" has the meaning set forth in Section 2.4(ii).
"Notes" means the Purchaser's 5% Subordinated Notes due [Closing
Date], 1999 in the original principal amount of $15 million and
substantially in the form of Annex III.
"Old ACG" has the meaning set forth in the first paragraph of this
Agreement.
"Old ACG Financial Statements" has the meaning set forth in Section
6.6.
"OLD ACG Merger" means the reverse triangular merger of OLD ACG with
a wholly-owned subsidiary of Purchaser, pursuant to which Old ACG
will become a wholly owned subsidiary of Purchaser.
"Old Warrants" means the Series A Warrants, the Series B Warrants and
the Series C Warrants.
"Person" means an individual, a corporation, a partnership, an
association, a limited liability company, a joint stock company, a
trust, or other unincorporated organization.
"Prohibited Activities" has the meaning set forth in Paragraph 4.27.
"Proscribed Business" has the meaning set forth in Section 13.1.
"Purchaser" has the meaning set forth in the first paragraph of this
Agreement.
"Purchaser Charter Documents" has the meaning set forth in Section
6.1.
"Purchaser Documents" has the meaning set forth in Section 6.9.
"Purchaser Stock" has the meaning set forth in the fifth recital of
this Agreement.
"Qualified Plans" has the meaning set forth in Section 4.16.
Restricted Payment" means any declaration or payment of any dividend
or distribution in respect of the capital stock of Company or any
direct or indirect redemption, purchase or other acquisition of any
of the capital stock of Company.
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"Registrable Securities" means (i) the shares of Purchaser Stock
acquired by Stockholders constituting part of the Stock Component and
(ii) the shares of Warrant Stock acquired by the holders of Warrants
upon the exercise thereof.
"Restricted Securities" has the meaning set forth in introductory
paragraph to Section 15.
"Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a
particular Tax.
"Schedule" means each Schedule attached hereto, which shall reference
the relevant sections of this Agreement, on which parties hereto
disclose information as part of their respective representations,
warranties, covenants and agreements.
"SEC" means the United States Securities and Exchange Commission.
"Section 351 Exchange Plan" means the Section 351 Exchange Plan in
the form of Annex II.
"Series A Warrants" means the 666,666 non-transferrable Warrants,
substantially in the form of Annex IV to the Original Agreement, to
purchase a like number of shares of Purchaser Stock on the terms set
forth therein at an initial exercise price of $2.50 per share.
"Series B Warrants" means the 666,667 non-transferrable Warrants,
substantially in the form of Annex V to the Original Agreement, to
purchase a like number of shares of Purchaser Stock on the terms set
forth therein at an initial exercise price of $2.50 per share.
"Series C Warrants" means the 666,667 non-transferrable Warrants,
substantially in the form of Annex VI to the Original Agreement, to
purchase a like number of shares of Purchaser Stock on the terms set
forth therein at an initial exercise price of $2.50 per share.
"Series D Warrants" means the 500,000 non-transferable Warrants,
substantially in the form of Annex IV, to purchase a like number of
shares of Purchaser Stock on the terms set forth therein at an
initial exercise price equal to the IPO Price.
"Series D Warrant Stock" means the shares of Purchaser Stock issuable
upon the exercise of the Series D Warrants.
"Shares" has the meaning set forth in the first paragraph of this
Agreement;
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"Stock Component" has the meaning set forth in Section 2.2.
"Stockholder" and "Stockholders" have the meanings set forth in the
first paragraph of this Agreement.
"Subsidiaries" means, with respect to any Person, any corporation or
other organization, whether incorporated or unincorporated, of which
(i) such Person or any other Subsidiary of such Person is a general
partner (excluding partnerships, the general partnership interests of
which held by such Person or any Subsidiary of such Person do not
have a majority of the voting interests in such partnership) or (ii)
at least a majority of the securities or other interests having by
their terms ordinary voting power to elect a majority of the Board of
Directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or
controlled by such Person, by any one or more of its Subsidiaries, or
by such Person and one or more of its Subsidiaries; provided,
however, that under no circumstances shall Big Stuff, Inc. be deemed
to be a Subsidiary of Company or any Stockholder.
"Tax" or "Taxes" means all Federal, state, local or foreign net or
gross income, gross receipts, net proceeds, sales, use, ad valorem,
value added, franchise, bank shares, withholding, payroll,
employment, excise, property, deed, stamp, alternative or add on
minimum, environmental or other taxes, assessments, duties, fees,
levies or other governmental charges of any nature whatever, whether
disputed or not, together with any interest, penalties, additions to
tax or additional amounts with respect thereto.
"TBCA" means the Texas Business Corporation Act.
"Termination Date" has the meaning set forth in Section 13.1.
"Territory" has the meaning set forth in Section 13.1(i).
"Transfer Taxes" has the meaning set forth in Section 17.6.
"Warrants" means the Old Warrants and the Series D Warrants.
"Warrant Stock" means shares of Purchaser Stock issued upon the
exercise of the Warrants.
"1933 Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
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2. PURCHASE, SALE AND EXCHANGE
2.1 Consideration for Execution of Original Agreement. Pursuant to
the terms of the Original Agreement and contemporaneously with the execution
and delivery hereof, Purchaser issued to each Stockholder, in consideration of
such Stockholder's execution and delivery of the Original Agreement, the
number of Old Warrants of each series set forth below opposite the name of
such Stockholder:
Number of Old Warrants
-------------------------------------------
Name of Stockholder Series A Series B Series C
------------------- -------- -------- --------
▇▇▇▇▇▇▇ ▇'▇▇▇▇ 500,000 500,000 500,000
▇▇▇▇▇ ▇▇▇▇▇▇▇ 100,000 100,000 100,000
▇▇▇▇▇ ▇▇▇▇▇▇ 33,333 33,333 33,334
▇▇▇ ▇▇▇▇▇▇▇ 33,333 33,334 33,333
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ - - -
------- ------- -------
Total 666,666 666,667 666,667
2.2 Consideration for Shares. Pursuant to the terms of this Agreement
and subject to the remaining provisions of this Section 2, at the Closing, (x)
Stockholders will transfer, convey, assign and deliver to Purchaser the
Shares, together with stock powers duly endorsed by Stockholders so that the
Shares may be duly registered in Purchaser's name, and (y) Purchaser will
acquire the Shares from Stockholders for an aggregate consideration of $55
million in immediately available funds, $15 million principal amount of Notes,
500,000 Series D Warrants and such number of shares of Purchaser Stock
(rounded to the nearest whole share) as shall be determined by dividing $10
million by the IPO Price ("Stock Component"). The number of Shares to be
exchanged by each Stockholder and the amount of cash and the other
consideration deliverable to each Stockholder are set forth below opposite the
name of such Stockholder:
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PRINCIPAL NUMBER OF NUMBER OF
NUMBER OF AMOUNT OF AMOUNT OF SERIES D SHARES OF
NAME OF STOCKHOLDER SHARES CASH NOTES WARRANTS PURCHASER STOCK (1)
------------------- ------ ---- ----- -------- -------------------
▇▇▇▇▇▇▇ ▇'▇▇▇▇ 700.00 $30,800,000 $8,400,000 280,000 56%
▇▇▇▇▇ ▇▇▇▇▇▇▇ 312.50 $13,750,000 $3,750,000 125,000 25%
▇▇▇▇▇ ▇▇▇▇▇▇ 87.50 $3,850,000 $1,050,000 35,000 7%
▇▇▇ ▇▇▇▇▇▇▇ 87.50 $3,850,000 $1,050,000 35,000 7%
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 62.50 $2,750,000 $2,750,000 25,000 5%
TOTAL 1,250.00 $55,000,000 $15,000,000 500,000 100%
2.3 Underlying Principles. The aggregate consideration payable by
Purchaser to Stockholders for the Shares was negotiated based upon the
assumptions and agreements that (x) Company will have no outstanding
obligation for the repayment of borrowed money as of the Closing Date (it
being understood for this purpose that accounts payable incurred in the
ordinary course of business do not constitute obligations for the repayment of
borrowed money) and (y) Company is permitted to make Restricted Payments to
Stockholders through the earlier to occur of the Closing Date or December 31,
1997 in an aggregate amount not exceeding the lesser of Company Operating
Profit or Distributable Cash.
2.4 Post Closing Payment.
(i) As promptly as practicable after the end of the calendar
month in which the Deemed Closing Date occurs, Purchaser will post
all entries and close Company's books as of the end of such month.
Financial statements for Company as of the Deemed Closing Date will
be prepared based upon the assumption that Company's profit and loss
for the month in which the Deemed Closing Date occurs will be
allocated between Purchaser and Stockholders based upon the number of
days in the month that each owned or is deemed to have owned the
Company Stock. Purchaser's first day of ownership of the Company
Stock will be the Closing Date, unless the Closing does not occur by
December 31, 1997, in which case Purchaser's first day of ownership
will be deemed to be January 1, 1997.
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(1) Expressed as a percentage of the Stock Component.
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(ii) As promptly as practicable following the preparation of
Company's financial statements as of the Deemed Closing Date, and in
no event later than the last day of the month next following the
month in which the Deemed Closing Date occurs, Purchaser shall
prepare and submit to Stockholders a schedule setting forth the
Company Operating Profit for the period beginning on January 1, 1997
and ending on either (aa) the date preceding the Closing Date or (bb)
if the Closing does not occur by December 31, 1997, then December 31,
1997 (the "Measurement Period"), the Distributable Cash generated
during the Measurement Period and the Restricted Payments made by
Company to Stockholders during the Measurement Period (the "Cash
Report"). Representative of Stockholders shall have access to
Company's books and records in order to verify the accuracy of the
Cash Report. The parties shall endeavor to resolve any disagreements
relating to the Cash Report by the end of the second calendar month
following the month in which the Deemed Closing Date occurs. If all
disagreements relating to the Cash Report cannot be resolved by the
parties, all matters in dispute (collectively, the "Disputed Matter")
shall be resolved by arbitration as set forth in Section 2.4(iii).
(iii) Any Disputed Matter shall be promptly submitted to and
reviewed by Deloitte & Touche LLP, or other nationally recognized
independent accounting firm mutually acceptable to Stockholders and
Purchaser ("Arbitrator"). The Arbitrator shall consider only the
Disputed Matter and shall act promptly to resolve in writing the
Disputed Matter. The Arbitrator's decision with respect to the
Disputed Matter shall be final and binding on Stockholders and
Purchaser. Stockholders and Purchaser shall each be responsible for
and pay one-half of the fees and expenses of the Arbitrator. Each
party shall be responsible for and pay its own expenses incurred in
connection with the resolution of any Disputed Matter.
(iv) As promptly as practicable following the first to occur
of (x) an agreement between Purchaser and Stockholders with respect
to the accuracy of the Cash Report or (y) a decision by the
Arbitrator with respect to the appropriate figures for inclusion in
the Cash Report (in either event, the "Final Cash Report"), the
following action shall be taken:
(1) If the amount of Distributable Cash generated
during the Measurement Period (as reflected in the Final
Cash Report) exceeds the aggregate Restricted Payments made
to Stockholders during the Measurement Period (as reflected
in the Final Cash Report), the excess, together with simple
interest thereon from the Closing Date at the Agreed Rate
(calculated on the basis of a 365-day year), shall be
promptly remitted by Purchaser to Stockholders on a pro rata
basis; or
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(2) If the aggregate Restricted Payments made to
Stockholders during the Measurement Period (as reflected in
the Final Cash Report) exceeds the amount of Distributable
Cash generated during the Measurement Period (as reflected
in the Final Cash Report), the excess, together with simple
interest thereon from the Closing Date at the Agreed Rate
(calculated on the basis of a 365-day year), shall be
promptly remitted by Stockholders to Purchaser. The
obligations of Stockholders to remit such funds shall be
joint and several.
(v) Stockholders have filed a request with the IRS for a tax
refund in respect of Company's 1996 tax year. To the extent that such
refund is not received by Company prior to the preparation of the
Cash Report but is received prior to the payment of the funds
contemplated by Section 2.4(iv), the Cash Report or Final Cash
Report, as the case may be, shall be amended to include the amount of
such refund in the amount of Distributable Cash generated during the
Measurement Period as reflected thereon. In the event that the
foregoing refund is received by Company subsequent to the payment of
the funds contemplated by Section 2.4(iv), Purchaser shall remit such
refund pro rata to Stockholders promptly, but in no event later than
five days after its receipt.
2.5 Section 351 Exchange Plan. By executing this Agreement, each
Stockholder is deemed to have approved and adopted the Section 351 Exchange
Plan to the same extent as if he had subscribed his signature thereon.
2.6 Certain Effects of OLD ACG Merger. The Old ACG Merger will be
effected substantially contemporaneously with the consummation of the IPO.
Upon the consummation of the Old ACG Merger, the Old Warrants shall become
exercisable for Purchaser Stock upon the same terms and conditions as they
were exercisable for Old ACG Stock immediately prior to t he Old ACG Merger.
3. CLOSING
The closing of the transactions contemplated by this Agreement
("Closing") shall take place on the date of the closing of the sale of shares
of the Purchaser Stock in the IPO, or such other date as the parties hereto
may designate (the "Closing Date"), at such place in New York City as the
parties may mutually agree.
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4. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF
COMPANY AND STOCKHOLDERS
Company and Stockholders, jointly and severally, represent, warrant,
covenant and agree (i) that all of the following representations and
warranties in this Section 4 are true at the date of this Agreement and,
subject to Section 7.6, shall be true at the Closing Date and (ii) that all of
the covenants and agreements in this Section 4 shall be materially complied
with or performed at and as of the Closing Date. None of the representations,
warranties, covenants and agreements set forth in this Section 4 shall survive
the Closing Date. For purposes of this Section 4, the term Company shall mean
and refer to Company and all of its Subsidiaries, if any.
4.1 Due Organization. Company is a corporation duly organized,
validly existing and in good standing under the laws of the state of Texas,
and is duly authorized and qualified to do business and is in good standing
under the laws of each jurisdiction where such qualification is required
except (i) as set forth on Schedule 4.1 or (ii) where the failure to be so
authorized or qualified would not have a material adverse effect on the
business, operations, affairs, prospects, properties, assets or condition
(financial or otherwise), of Company (as used herein with respect to Company
or with respect to any other Person, a "Material Adverse Effect"). Schedule
4.1 contains a list of all such jurisdictions in which Company is authorized
or qualified to do business. True, complete and correct copies of the Charter
Documents and Bylaws, each as amended, of Company are attached hereto as
Schedule 4.1. The stock records of Company as heretofore made available to
Purchaser, are correct and complete in all material respects. There are no
minutes in the possession of Company or any Stockholder which have not been
made available to Purchaser, and all of such minutes are correct and complete
in all material respects.
4.2 Authorization. Company has all requisite corporate power and
authority to enter into this Agreement and to perform its obligations
hereunder. The execution and delivery by Company of this Agreement and its
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action of Company. This Agreement has been duly
executed and delivered by Company and is a valid and binding obligation of
Company, enforceable against Company in accordance with its terms.
4.3 Capital Stock of Company. The authorized capital stock of Company
consists of 10,000 shares of Company Stock, of which 1,250 shares are issued
and outstanding and owned of record and beneficially by Stockholders in the
amounts set forth in Section 2.1; and, as of the Closing Date, such shares
will be owned free and clear of all mortgages, liens, security interests,
pledges, voting trusts, restrictions, encumbrances and claims of every kind
(collectively, the "Liens"). All of the issued and outstanding shares of
Company Stock (i) have been duly authorized
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and validly issued and (ii) are fully paid and nonassessable. Further, none of
such shares was issued in violation of the preemptive rights of any past or
present stockholder.
4.4 Options, etc. Except as set forth on Schedule 4.4, Company has
not acquired any Company Stock since January 1, 1994. No option, warrant,
call, conversion right or commitment of any kind exists which obligates
Company to issue any of its authorized but unissued capital stock. Company has
no obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any of its equity securities or any interests therein or to pay any
dividend (other than discretionary cash dividends payable with respect to the
Company Stock) or make any distribution in respect thereof. Neither the voting
stock structure of Company nor the relative ownership of shares among any of
its stockholders has been altered or changed in contemplation of the
transactions contemplated by this Agreement.
4.5 No Bonus Shares. None of the outstanding shares of Company Stock
was issued pursuant to awards, grants or bonuses.
4.6 Subsidiaries. Except as set forth on Schedule 4.6, Company has no
Subsidiaries; Company does not presently own, of record or beneficially, or
control, directly or indirectly, any capital stock, securities convertible
into capital stock or any other equity interest in any Person; and Company is
not directly or indirectly, a participant in any joint venture, partnership or
other non-corporate entity.
4.7 Predecessor Status; etc. Set forth in Schedule 4.7 is a listing
of all names of all predecessor companies of Company, including the names of
any entities acquired by Company (by stock purchase, merger or otherwise) or
owned by Company or from whom Company previously acquired material assets in
excess of $250,000, in any case, since January 1, 1991. Except as disclosed on
Schedule 4.7, Company has not been, within such period of time, a Subsidiary
or division of another corporation or a part of an acquisition which was later
rescinded.
4.8 Spinoff by the Company. Except as set forth on Schedule 4.8,
there has not been any sale, spin-off or split-up of material assets in excess
of $250,000 of either Company or any other Person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, Company ("Affiliates") since January 1, 1994.
4.9 Financial Statements. Attached hereto as Schedule 4.9 are copies
of the following financial statements of Company (the "Company Financial
Statements"): audited Balance Sheets as of January 31, 1996 and December 31,
1996, unaudited Balance Sheets as of January 31, 1995 and June 30, 1997 ("June
Balance Sheet"), audited Statements of Operations and Cash Flows in each
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case for the fiscal years ended January 31, 1995 and 1996 and December 31,
1996, audited Statements of Stockholders' Equity for the fiscal years ended
January 31, 1995 and 1996 and the eleven months ended December 31, 1996,
unaudited Statements of Operations and Cash Flows and for the six months ended
June 30, 1997 and 1996 (June 30, 1997 being hereinafter referred to as the
"Balance Sheet Date"), unaudited statements of Stockholders' Equity for the
six months ended June 30, 1997 and the related notes thereto. The audited
Company Financial Statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated (except as noted thereon or on Schedule 4.9). The unaudited
Company Financial Statements were prepared in accordance with the books and
records of Company in accordance with accounting principles consistently
applied. Company's Balance Sheets present fairly the financial position of
Company as of the dates indicated thereon, and Company's Statements of
Operations, Stockholder's Equity and Cash Flows included in the Company
Financial Statements present fairly the results of operations for the periods
indicated thereon in accordance with generally accepted accounting principles.
Company's Financial Statements at and for the fiscal periods ended December
31, 1996 and January 31, 1995 and 1996 have been examined by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
PLLC, independent public accountants.
4.10 Liabilities and Obligations. Company has no material liabilities
of any kind, character or description, whether accrued, absolute, secured or
unsecured, contingent or otherwise, that are not reflected on the June Balance
Sheet or otherwise reflected in the Company Financial Statements at the
Balance Sheet Date. Company has no indebtedness or any other obligation
outstanding under any loan agreements, indemnity or guaranty agreements,
bonds, mortgages, Liens, pledges or other security agreements. Except as set
forth on Schedule 4.10, since the Initial Disclosure Date, Company has not
incurred any material liabilities of any kind, character and description,
whether accrued, absolute, secured or unsecured, contingent or otherwise,
other than liabilities incurred in the ordinary course of business. Company
has also disclosed to Purchaser on Schedule 4.10, in the case of those
contingent liabilities related to pending or threatened litigation or other
liabilities which are not fixed or otherwise accrued or reserved, the
following information:
(i) a summary description of the liability together with the
following:
(x) copies of all relevant documentation relating
thereto;
(y) amounts claimed and any other action or relief
sought; and
(z) name of claimant and all other parties to the
claim, suit or proceeding;
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(ii) the name of each court or agency before which such
claim, suit or proceeding is pending;
(iii) the date such claim, suit or proceeding was
instituted; and
(iv) a good faith and reasonable estimate of the maximum
amount, if any, which is likely to become payable with respect to
each such liability.
4.11 Permits and Intangibles. Company holds all licenses, franchises,
permits and other governmental authorizations the absence of any of which
could have a Material Adverse Effect on its business, and Company has
delivered to Purchaser an accurate list and summary description (which is set
forth on Schedule 4.11) of all such licenses, franchises, permits and other
governmental authorizations, including titles, certificates, trademarks, trade
names, patents, patent applications and copyrights owned or held by Company
(including interests in software or other technology systems, programs and
intellectual property) (it being understood and agreed that a list of all
environmental permits and other environmental approvals is set forth on
Schedule 4.12). To the knowledge of Company, the licenses, franchises, permits
and other governmental authorizations listed on Schedules 4.11 and 4.12 are
valid in all material respects, and Company has not received any notice that
any governmental authority intends to cancel, terminate or not renew any such
license, franchise, permit or other governmental authorization. Company has
conducted and is conducting its business in substantial compliance with the
requirements, standards, criteria and conditions set forth in the licenses,
franchises, permits and other governmental authorizations listed on Schedules
4.11 and 4.12 and is not in violation of any of the foregoing except where
such non-compliance or violation would not have a Material Adverse Effect on
Company. Except as specifically provided in Schedule 4.11, the transactions
contemplated by this Agreement will not result in a material default under or
a material breach or violation of, or materially adversely affect the rights
and benefits afforded to Company by, any such license, franchise, permit or
government authorization.
4.12 Environmental Matters. Except as set forth on Schedule 4.12, (i)
Company has substantially complied with and is in compliance with all Federal,
state, local and foreign statutes (civil and criminal), laws, ordinances,
regulations, rules, notices, permits, judgments, orders and decrees applicable
to it or any of its properties, assets, operations and businesses relating to
environmental protection (collectively "Environmental Laws") including,
without limitation, Environmental Laws relating to air, water, land and the
generation, storage, use, handling, transportation, treatment or disposal of
Hazardous Wastes and Hazardous Substances including petroleum and petroleum
products (as such terms are defined in any applicable Environmental Law); (ii)
Company has obtained and substantially adhered to all necessary permits and
other approvals necessary to treat, transport, store, dispose of and otherwise
handle Hazardous Wastes and
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Hazardous Substances, a list of all of which permits and approvals is set
forth on Schedule 4.12 and reported to the appropriate authorities, to the
extent required by all Environmental Laws, all past and present sites owned
and operated by Company where Hazardous Wastes or Hazardous Substances have
been treated, stored, disposed of or otherwise handled; (iii) there have been
no releases or threats of releases (as defined in Environmental Laws) at,
from, in or on any property owned or operated by Company except as permitted
by Environmental Laws; (iv) no on-site or off-site location to which Company
has transported or disposed of Hazardous Wastes and Hazardous Substances or
arranged for the transportation of Hazardous Wastes and Hazardous Substances,
which site is the subject of any Federal, state, local or foreign enforcement
action or any other investigation, could lead to any material claim against
Company for any clean-up cost, remedial work, damage to natural resources,
property damage or personal injury, including, but not limited to, any claim
under the comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended; and (v) Company has no contingent liability in connection
with any release of any Hazardous Waste or Hazardous Substance into the
environment.
4.13 Significant Customers; Material Contracts and Commitments.
Company has delivered to Purchaser an accurate list (which is set forth on
Schedule 4.13) of all significant customers, or Persons that are sources of a
significant number of customers, it being understood and agreed that a
"significant customer," for purposes of this Section 4.13, means a customer
(or Person) (i) representing 2% or more of Company's annual revenues as of the
Initial Disclosure Date or (ii) reasonably expected to represent 2% or more of
Company's revenues during the twelve-month period ending March 31, 1998.
Except to the extent set forth on Schedule 4.13, none of Company's significant
customers (or Persons that are sources of a significant number of customers)
has canceled or substantially reduced or, to the knowledge of Company, is
currently attempting or threatening to cancel a contract or substantially
reduce utilization of the services provided by Company. Company has listed on
Schedule 4.13 all material contracts, commitments and similar agreements to
which Company is a party or by which it or any of its properties are bound
(including, but not limited to, contracts with significant customers, joint
venture or partnership agreements, contracts with any labor organizations,
strategic alliances and options to purchase land), other than agreements
listed on other Schedules to this Agreement, (x) in existence as of the
Initial Disclosure Date and (y) entered into since the Initial Disclosure
Date, and in each case has delivered true, complete and correct copies of such
agreements to Purchaser. Company has complied with all material commitments
and obligations pertaining to it, and is not in material default under any
contract or agreement listed on Schedule 4.13 and no notice of default under
any such contract or agreement has been received. Company has also indicated
on Schedule 4.13 a summary description of all plans or projects involving the
acquisition of any personal property, business or assets requiring, in any
event, the payment of more than $50,000 by Company.
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4.14 Real Property. Company has good and insurable title to the real
property owned or leased by it and used or held for use in its business,
subject to no Lien except for:
(w) Liens reflected on Schedule 4.10 as securing specified
liabilities (with respect to which no material default exists);
(x) Liens for current taxes not yet payable and assessments
not in default;
(y) easements for utilities serving the property only; and
(z) easements, covenants and restrictions and other
exceptions to title shown of record in the office of the County
Clerks in which the properties, assets and leasehold estates are
located which do not adversely affect in any material respect the
current use of the property.
All Leases by Company are in full force and effect in all material respects
and constitute valid and binding agreements of the parties (and their
successors) thereto in accordance with their respective terms.
4.15 Employee Plans. Schedule 4.15 represents an accurate list of all
employee benefit plans of Company, including all employment agreements and
other agreements or arrangements containing "golden parachute" or other
similar provisions, and deferred compensation agreements, and classifications
of employees covered thereby as of the Initial Disclosure Date. Except for the
employee benefit plans, if any, described on Schedule 4.15, Company does not
sponsor, maintain or contribute to any plan program, fund or arrangement that
constitutes an "employee pension benefit plan," and Company does not have any
obligation to contribute to or accrue or pay any benefits under any deferred
compensation or retirement funding arrangement on behalf of any employee or
employees (such as, for example, and without limitation, any individual
retirement account or annuity, any "excess benefit plan" (within the meaning
of Section 3(36) of the Employee Retirement Income Security Act of 1974, as
amended "ERISA") or any non-qualified deferred compensation arrangement). For
the purposes of this Agreement, the term "employee pension benefit plan" shall
have the same meaning as is given that term in Section 3(2) of ERISA. Company
has not sponsored, maintained or contributed to any employee pension benefit
plan other than the plans set forth on Schedule 4.15, nor is Company required
to contribute to any retirement plan pursuant to the provisions of any
collective bargaining agreement establishing the terms and conditions or
employment of any of Company's employees.
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Company is not now, nor as a result of its past activities can it
reasonably be expected to become, liable to the Pension Benefit Guaranty
Corporation (other than for premium payments) or to any multiemployer employee
pension benefit plan under the provisions of Title IV of ERISA.
All employee benefit plans listed on Schedule 4.15 and the
administration thereof are in substantial compliance with their terms and all
applicable provisions of ERISA and the regulations issued thereunder, as well
as with all other applicable Federal, state and local statutes, ordinances and
regulations.
All accrued contribution obligations of Company with respect to any
plan listed on Schedule 4.15 have either been fulfilled in their entirety or
are fully reflected on the balance sheet of Company as of the Balance Sheet
Date.
4.16 Employee Plans and Compliance with ERISA. All employee benefit
plans listed on Schedule 4.15 that are intended to qualify (the "Qualified
Plans") under Section 401(a) of the Code are, and have been so qualified and
have been determined by the Internal Revenue Service to be so qualified, and
copies of such determination letters (other than in the case of defined
contribution plans sponsored by unaffiliated financial institutions) are
included as part of Schedule 4.15. Except as disclosed on Schedule 4.15, all
reports and other documents required to be filed with any governmental agency
or distributed to plan participants or beneficiaries (including, but not
limited to, actuarial reports, audits or tax returns) have been timely filed
or distributed, and copies thereof are included as part of Schedule 4.15.
Neither any Stockholder nor any such plan listed in Schedule 4.15, nor Company
has engaged in any transaction prohibited under the provisions of Section 4975
of the Code or Section 406 of ERISA. No employee benefit plan listed on
Schedule 4.15 has incurred an accumulated funding deficiency, as defined in
Section 412(a) of the Code and Section 302(1) of ERISA; and Company has not
incurred (i) any liability for excise tax or penalty payable to the Internal
Revenue Service or (ii) any liability to the Pension Benefit Guaranty
Corporation (other than for premium payments). Furthermore:
(v) there have been no terminations or discontinuance of
contributions to any Qualified Plan intended to qualify under Section
401(a) of the Code without notice to and approval by the Internal
Revenue Service;
(w) no plan listed on Schedule 4.15 that is subject to the
provisions of Title IV of ERISA has been terminated;
(x) there have been no "reportable events" (as that phrase
is defined in Section 4043 of ERISA) with respect to employee benefit
plans listed in Schedule 4.15;
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(y) Company has not incurred liability under Section 4062 of
ERISA; and
(z) no circumstances exist pursuant to which Company could
reasonably be expected to have any direct or indirect liability
whatsoever (including, but not limited to, any liability to any
multiemployer plan or the Pension Benefit Guaranty Corporation under
Title IV of ERISA or to the Internal Revenue Service for any excise
tax or penalty, or being subject to any statutory Lien to secure
payment of any such liability) with respect to any plan now or
heretofore maintained or contributed to by any entity other than
Company that is, or at any time was, a member of a "controlled group"
(as defined in Section 412(n)(6)(B) of the Code) that includes
Company.
The transactions contemplated by this Agreement together with any amounts paid
or payable by Company or any member of the Controlled Group has not resulted
in and will not result in payments to "disqualified individuals" (as defined
in Section 280G(c) of the Code) of Company or any member of the Controlled
Group which, individually or in the aggregate will constitute "excess
parachute payments" (as defined in Section 280G(b) of the Code) resulting in
the imposition of the excise tax under Section 4999 of the Code or the
disallowance of deductions under Section 280G of the Code.
4.17 Conformity with Law; Litigation. Except to the extent set forth
on Schedule 4.17, Company is not in violation of any law or regulation or any
order of any court or Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over Company which would have a Material Adverse Effect; and
except to the extent set forth on Schedule 4.17, there are no material claims,
actions, suits or proceedings, commenced or, to the knowledge of Company,
threatened, against or affecting Company, at law or in equity, or before or by
any Federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over Company and
no notice of any claim, action, suit or proceeding, whether pending or
threatened, has been received by Company or any Stockholder. Company has
conducted and is conducting its business in substantial compliance with the
requirements, standards, criteria and conditions set forth in applicable
Federal, state and local statutes, ordinances, permits, licenses, orders,
approvals, variances, rules and regulations, including all such permits,
licenses, orders and other governmental approvals set forth on schedules to
this Agreement, and is not in violation of any of the foregoing which might
have a Material Adverse Effect.
4.18 Tax Matters.
(i) Company is, as of the date first set forth above, taxed
under Subchapter S of the Code and will remain so through the Deemed
Closing Date. Stockholders have filed all
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income Tax Returns that they were required to file with respect to
Company, and Company has filed all Tax Returns that it was required
to file. All such Tax Returns filed by Company were correct and
complete in all material respects. All Taxes owed by Company (whether
or not shown on any Tax Return) have been paid. Except as set forth
on Schedule 4.18, Company is not currently the beneficiary of any
extension of time within which to file any Tax Return. Since January
1, 1994, no claim with respect to Company has been made by an
authority in a jurisdiction where Company does not file Tax Returns
that it is or may be subject to taxation by that jurisdiction. There
is no Lien affecting any of Company's assets that arose in connection
with any failure or alleged failure to pay any Tax.
(ii) Company has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, stockholder or
other party.
(iii) Company does not expect any authority to assess any
material amount of additional Taxes against Company for any period
for which Tax Returns have been filed. There is no material dispute
or claim concerning any Tax liability of Company either claimed or
raised by any authority in writing or as to which Company has
knowledge based upon direct inquiry by any agent of such authority.
Schedule 4.18(iii) lists all income Tax Returns of Company for
taxable periods ended on or after January 1, 1992, indicates those
Tax Returns of which Company is aware that have been audited and
indicates those Tax Returns that currently are the subject of audit.
Company has delivered to Purchaser correct and complete copies of all
Tax Returns, examination reports and statements of deficiencies
assessed against or agreed to by Company for any taxable period ended
on or after January 1, 1993.
(iv) Except as set forth on Schedule 4.18(iv), neither
Stockholders nor Company has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a
Tax assessment or deficiency.
(v) Company has not filed a consent under Section 341(f) of
the Code concerning collapsible corporations. Company has not made
any payments, is not obligated to make any
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payments and is not a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be
fully deductible under Section 280G of the Code.
(vi) Except as set forth on Schedule 4.18(vi), none of
Company's assets secures any debt, the interest on which is
tax-exempt under Section 103(a) of the Code. None of Company's assets
are "tax-exempt use property" within the meaning of Section 168(h) of
the Code. The transactions contemplated by this Agreement are not
subject to Tax withholding pursuant to the provisions of Section 3406
or Subchapter A of Chapter 3 of the Code or any other provision of
applicable law.
(vii) Company has not received a ruling from any taxing
authority or entered into any agreement regarding Taxes with any
taxing authority that would, individually or in the aggregate, apply
to Company after the Closing Date.
4.19 No Violations. Company is not in violation of its Charter
Documents. Neither Company nor, to the knowledge of Company, any other party
thereto, is in material default under any Lease, instrument, agreement,
license, or permit set forth on any schedule to this Agreement, or any other
material agreement to which it is a party or by which its properties are bound
(the "Material Documents"); and, except as set forth in Schedule 4.19, (i) the
rights and benefits of Company under the Material Documents will not be
materially adversely affected by the transactions contemplated hereby and (ii)
the execution of this Agreement and the performance of the obligations
hereunder and the consummation of the transactions contemplated hereby will
not result in any material violation or breach or constitute a material
default under, any of the terms or provisions of the Material Documents or the
Charter Documents. Except as set forth on Schedule 4.19, none of the Material
Documents requires notice to, or the consent or approval of, any governmental
agency or other third party with respect to any of the transactions
contemplated hereby in order to remain in full force and effect in all
material respects, and consummation of the transactions contemplated hereby
will not give rise to any right to termination, cancellation or acceleration
or loss of any material right or benefit. Except as set forth on Schedule
4.19, to the knowledge of Company, none of the Material Documents prohibits
the use or publication by Company or Purchaser of the name of any other party
to such Material Document, and none of the Material Documents prohibits or
restricts Company from freely providing services to any other customer or
potential customer of Company, any of the Other Founding Companies or
Purchaser.
4.20 Absence of Changes. Since the Initial Disclosure Date, except as
set forth on Schedule 4.20, there has not been:
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(i) any material adverse change in the financial condition,
assets, liabilities (contingent or otherwise), income or business of
Company;
(ii) any damage, destruction or loss (whether or not covered
by insurance) materially adversely affecting the properties or
business of Company;
(iii) any change in the authorized capital of Company or its
outstanding securities or any change in its ownership interests or
any grant of any options, warrants, calls, conversion rights or
commitments;
(iv) any Restricted Payment in an amount in excess of the
lesser of Company Operating Profit and Distributable Cash;
(v) any increase in the compensation, bonus, sales
commissions or fee arrangement payable or to become payable by
Company to any of its officers, directors, Stockholders, employees,
consultants or agents, except for ordinary and customary bonuses and
salary increases for employees in accordance with past practice;
(vi) any work interruptions, labor grievances or labor
claims filed, or any other similar labor event or condition of any
character, materially adversely affecting the business of Company;
(vii) any sale or transfer, or any agreement to sell or
transfer, any material assets, property or rights of Company to any
Person, including, without limitation, any Stockholder and its
Affiliates outside the ordinary course of business of Company;
(viii) any cancellation, or agreement to cancel, any
indebtedness or other obligation owing to Company, including without
limitation any indebtedness or obligation of any Stockholder or any
Affiliate thereof outside the ordinary course of business of Company;
(ix) any plan, agreement or arrangement granting any
preferential right to purchase or acquire any interest in any of the
assets, property or rights of Company or requiring consent of any
party to the transfer and assignment of any such assets, property or
rights;
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(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, right or asset
outside of the ordinary course of the Company's business;
(xi) any waiver of any material rights or claims of Company;
(xii) any material breach, amendment or termination of any
contract, agreement, license, permit or other right to which Company
is a party;
(xiii) any transaction by Company outside the ordinary
course of its business;
(xiv) any cancellation or termination of a material contract
with a customer or client prior to the scheduled termination date; or
(xv) any other distribution of property or assets by Company
outside the ordinary course of Company's business;
4.21 Accounts and Notes Receivable. As of May 31, 1997, Company's
accounts and notes receivable (including receivables from and advances to
employees and Stockholders or their Affiliates) were $49.9 million, of which
no single account represented more than $333,944. Except to the extent
reflected on Schedule 4.21, such accounts, notes and other receivables are
collectible, net of reserves reflected in the June Balance Sheet.
4.22 Personal Property. Company has delivered to Purchaser a
depreciation schedule (which is set forth on Schedule 4.22) which includes (i)
all personal property included (or that will be included) in "depreciable
plant, property and equipment" on the balance sheet of Company, (ii) all
personal property owned by Company with a value in excess of $50,000 (x) as of
the Initial Disclosure Date and (y) acquired since the Initial Disclosure Date
and (iii) all Leases and agreements in respect of personal property,
including, in the case of each of (i), (ii) and (iii), (1) true, complete and
correct copies of all such Leases and (2) an indication as to which assets are
currently owned, or were formerly owned, by the Stockholders, relatives of the
Stockholders, or Affiliates of Company. Except as set forth on Schedule 4.22,
(a) all personal property used by Company in its business is either owned by
Company or leased by Company pursuant to a Lease included on Schedule 4.22,
(b) all of the personal property listed on Schedule 4.22 is in good working
order and condition, ordinary wear and tear excepted and (c) all Leases and
agreements included on Schedule 4.22 are, to the knowledge of Company and
Stockholders, in full force and effect and constitute valid and binding
agreements of the parties (and their successors) thereto in accordance with
their respective terms.
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4.23 Insurance. Company has delivered to Purchaser, as set forth on
and attached to Schedule 4.23, (i) an accurate list as of the Initial
Disclosure Date of all insurance policies carried by Company, (ii) an accurate
list of all insurance loss runs on workers compensation claims received for
the past three policy years and (iii) true, complete and correct copies of all
insurance policies currently in effect. Such insurance policies evidence all
of the insurance that Company is required to carry pursuant to all of its
contracts and other agreements and pursuant to all applicable laws or that
management of Company otherwise believes is prudent and appropriate to insure
against the risks inherent in Company's business in accordance with customary
industry practices. All of such insurance policies are currently in full force
and effect and shall remain in full force and effect through the Closing Date.
No insurance carried by Company has ever been canceled by the insurer, and
Company has never been denied coverage.
4.24 Intellectual Property. Except as set forth in Schedule 4.24,
Company either owns or has the right to use by license, sublicense, agreement,
or permission all of Company's inventions, improvements, domestic and foreign
patents and applications therefor, customer lists, copyrights, copyright
registrations and applications therefor, trademarks, tradenames, service
marks, trade dress, logos, rights in computer software, and all rights granted
or retained in licenses under any of the foregoing which are used in
connection with the conduct of Company's business as presently conducted.
Except as set forth on Schedule 4.24, none of the Intellectual Property which
is used in connection with the conduct of Company's business is, or has been
in the past five years involved in, or the subject of, any pending or, to the
knowledge of Company, threatened infringement, interference, opposition or
similar action, suit or proceeding or, to the knowledge of Company, has
otherwise been challenged in any way. Except as set forth on Schedule 4.24,
the Intellectual Property will afford Purchaser the right to use all
technology, know-how, technical and other information, data and other
intellectual property, whether patentable or unpatentable, and whether owned
by Company, any other Person or others, necessary for the conduct of Company's
business in a manner consistent with Company's prior practice. The license
fees, royalties and other amounts payable by Company in connection with the
use of the Intellectual Property, together with the terms and conditions on
which and periods for which such amounts are payable, are described in
Schedule 4.24. Any licenses fees, royalties or other amounts payable as a
result of the consummation of the transactions contemplated by this Agreement
shall be paid by Purchaser.
4.25 Labor Relations. Except as set forth on Schedule 4.25, Company
is not a party to any collective bargaining agreement; and there are no
controversies pending or, to Company's knowledge, threatened between Company
and any of its current or former employees or any labor or other collective
bargaining unit representing any current or former employee of Company that
could reasonably be expected to result in a labor strike, dispute, slow-down
or work stoppage or otherwise have a Material Adverse Effect. Company is not
aware of any organizational effort
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presently being made or threatened by or on behalf of any labor union with
respect to employees of Company. To Company's knowledge, no executive, key
employee or group of employees of Company has any plan to terminate employment
with Company.
4.26 Disclosure. This Agreement, including the Schedules and Annexes
hereto, together with all other documents and information made available to
Purchaser and its representatives in writing pursuant hereto, present fairly
the business and operations of Company for the time periods with respect to
which such information was requested. Company's rights under the documents
delivered pursuant hereto would not be materially adversely affected by, and
no statement made herein would be rendered untrue in any material respect by,
any other document to which Company is a party, or to which its properties are
subject, or by any other fact or circumstance regarding Company (which fact or
circumstance was, or should reasonably, after due inquiry, have been known to
Company) that is not disclosed pursuant hereto or thereto.
4.27 Prohibited Activities. Except as set forth on Schedule 4.27,
Company has not, between the Initial Disclosure Date and the date of this
Agreement, taken any of the actions set forth in Section 7.3 ("Prohibited
Activities").
4.28 Draft Registration Statement. The text of, and the financial
statements and other financial information contained in, the Draft
Registration Statement, insofar as they were provided by the Company expressly
for inclusion therein but not otherwise, are true, accurate and complete in
all material respects and do not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
5. ADDITIONAL REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS OF STOCKHOLDERS
Each Stockholder further, severally and not jointly, represents
warrants, covenants and agrees (i) that all of the following representations
and warranties in this Section 5 are true at the date of this Agreement and,
subject to Section 7.6, shall be true at the Closing Date and (ii) that all of
the covenants and agreements in this Section 5 shall be complied with or
performed at and as of the Closing Date. The representations, warranties,
covenants and agreements set forth in this Section 5 shall not survive the
Closing Date.
5.1 Authority. Each Stockholder has the full legal right, power and
authority to enter into this Agreement. This Agreement has been executed and
delivered by each Stockholder and constitutes a legal, valid and binding
obligation of such Stockholder.
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5.2 Preemptive Rights. Each Stockholder does not have, or hereby
waives, any preemptive or other right to acquire Company Stock or Purchaser
Stock that such Stockholder has or may have had other than the rights of such
Stockholder to acquire Purchaser Stock upon the exercise of Warrants.
5.3 Tax Matters. Each Stockholder has been advised by his counsel
that certain aspects of the transactions contemplated by this Agreement
qualify for the deferral of gain pursuant to Section 351 of the Code.
5.4 No Retained Rights. No Stockholder will retain any right after
the Closing in any Company Stock to be transferred by him at the Closing but,
to the extent that such right may exist upon the consummation of the Closing,
such right shall be deemed to have been released and extinguished.
6. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF
PURCHASER AND OLD ACG
Purchaser and Old ACG, jointly and severally, represent, warrant,
covenant and agree (i) that all of the following representations and
warranties in this Section 6 are true at the date of this Agreement and,
subject to Section 7.6, shall be true at the Closing Date and that all of the
covenants and agreements in this Section 6 shall be complied with or performed
at and as of the Closing Date. The representations, warranties, covenants and
agreements set forth in this Section 6 shall not survive the Closing Date.
6.1 Due Organization. Purchaser and Old ACG each is a corporation
duly organized, validly existing and in good standing under the laws of the
state of Delaware, and is duly authorized and qualified to do business under
all applicable laws, regulations, ordinances and orders of public authorities
to carry on its business in the places and in the manner as now conducted,
except where the failure to be so authorized or qualified would not have a
Material Adverse Effect. True, complete and correct copies of the Charter
Documents and By-laws, each as amended, of Purchaser and Old ACG
(collectively, the "Purchaser Charter Documents") are attached hereto as
Schedule 6.1.
6.2 Authorization. Each of Purchaser and Old ACG has all requisite
corporate power and authority to enter into this Agreement and to perform its
obligations hereunder. The execution and delivery by each of Purchaser and Old
ACG of this Agreement and its consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action of
Purchaser and Old ACG. This Agreement has been duly executed and delivered by
each of
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Purchaser and Old ACG and is a valid and binding obligation of each of
Purchaser and Old ACG, enforceable against each of them in accordance with its
terms.
6.3 Capital stock. The authorized capital stock of Old ACG is as set
forth on Schedule 6.3. All of the issued and outstanding shares of the capital
stock of Old ACG (i) have been duly authorized and validly issued, (ii) are
fully paid and nonassessable, (iii) are owned of record and beneficially by
the Persons set forth on Schedule 6.3, and (iv) were offered, issued, sold and
delivered by Old ACG in compliance with all applicable state and Federal laws
concerning the offer, issuance, sale and delivery of securities. Further, none
of such shares was issued in violation of the preemptive rights of any past or
present stockholder of Old ACG. Subject only to changes resulting from the
consummation of the reverse stock split referred to in the eight recital of
this Agreement and the consummation of Purchaser's acquisition of Old ACG in
the reverse triangular merger, the capitalization of Purchaser will be
identical to the capitalization of Old ACG immediately prior to the
consummation of the IPO.
6.4 Transactions in Capital Stock, Organization Accounting. Except as
set forth on Schedule 6.3 or contemplated to be issued in connection with the
acquisition of the Founding Companies, (i) no option, warrant, call,
conversion right or commitment of any kind exists which obligates Old ACG to
issue any of its authorized but unissued capital stock and (ii) Old ACG has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interests therein or to pay any dividend
or make any distribution in respect thereof. Schedule 6.3 also includes
complete and accurate copies of all stock option or stock purchase plans,
including a list, accurate as of the date hereof, of all outstanding options,
warrants or other rights to acquire shares of capital stock of Old ACG.
6.5 Subsidiaries. Neither Purchaser nor Old ACG has any Subsidiaries,
except for each of the companies identified on Schedule 6.5. Except as set
forth in the preceding sentence, neither Purchaser nor Old ACG presently owns,
of record or beneficially, or controls, directly or indirectly, any capital
stock, securities convertible into capital stock or any other equity interest
in any corporation, association or business entity, and neither Purchaser nor
Old ACG, directly or indirectly, is a participant in any joint venture,
partnership or other non-corporation entity.
6.6 Financial Statements. Attached hereto as Schedule 6.6 are copies
of the following financial statements of Old ACG, which reflect the results of
its operations from inception in June 1996 (the "Old ACG Financial
Statements"): Old ACG's audited Balance Sheet as of December 31, 1996 and its
unaudited Balance Sheet as of June 30, 1997, and audited Statements of
Operations, Stockholder's Equity and Cash Flows and related notes thereto for
the period from June 10, 1996 through December 31, 1996 and unaudited
Statements of Operations, Stockholder's Equity and Cash
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Flows for the six months ended June 30, 1997. The audited Old ACG Financial
Statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the period indicated
(except as noted thereon or on Schedule 6.6). The unaudited Old ACG Financial
Statements were prepared in accordance with the books and records of Old ACG
in accordance with accounting principles consistently applied. Old ACG's
Balance Sheets present fairly the financial position of Old ACG as of the
dates indicated thereon, and Old ACG's Statements of Operations, Stockholder's
Equity and Cash Flows included in the Old ACG Financial Statements present
fairly the results of operations for the periods indicated thereon in
accordance with generally accepted accounting principles. Old ACG's Financial
Statements at and for the period ended December 31, 1996 have been examined by
KPMG Peat Marwick LLP, independent public accountants.
6.7 Liabilities and Obligations. Except as set forth on Schedule 6.7,
neither Purchaser nor Old ACG has any material liabilities, contingent or
otherwise, except as set forth in or contemplated by this Agreement or the
Draft Registration Statement and except for fees incurred in connection with
the transactions contemplated hereby and thereby.
6.8 Conformity with Law; Litigation. Except to the extent set forth
on Schedule 6.8, or in the Draft Registration Statement, neither Purchaser nor
Old ACG is in violation of any law or regulation or any order of any court or
Federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality having jurisdiction over it which would have
a Material Adverse Effect; and except to the extent set forth on Schedule 6.8,
or in the Draft Registration Statement, there are no material claims, actions,
suits or proceedings, pending or, to the knowledge of either Purchaser or Old
ACG, threatened, against or affecting either Purchaser or Old ACG, at law or
in equity, or before or by any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over it and no notice of any claim, action, suit or proceeding,
whether pending or threatened, has been received. Each of Purchaser and Old
ACG has conducted and is conducting is businesses in substantial compliance
with the requirements, standards, criteria and conditions set forth in
applicable Federal, state and local statutes, ordinances, permits, licenses,
orders, approvals, variances, rules and regulations and is not in violation of
any of the foregoing which might have a Material Adverse Effect.
6.9 No Violations. Neither Purchaser nor Old ACG is in violation of
any Purchaser Charter Document. Neither Purchaser nor Old ACG, nor to the
knowledge of Purchaser or Old ACG, any other party thereto, is in default
under any Lease, instrument, agreement, license, or permit to which Purchaser
or Old ACG is a party, or by which Purchaser or Old ACG or any of its
properties, are bound (collectively, the "Purchaser Documents"); and (i) the
rights and benefits of
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Purchaser and Old ACG under the Purchaser Documents will not be adversely
affected by the transactions contemplated hereby and (ii) the execution of
this Agreement and the performance of the obligations hereunder and the
consummation of the transactions contemplated hereby will not result in any
material violation or breach or constitute a default under, any of the terms
or provisions of the Purchaser Documents or the Purchaser Charter Documents.
Except as set forth on Schedule 6.9, none of the Purchaser Documents requires
notice to, or the consent or approval of, any governmental agency or other
third party with respect to any of the transactions contemplated hereby in
order to remain in full force and effect, and consummation of the transactions
contemplated hereby will not give rise to any right to termination,
cancellation or acceleration or loss of any right or benefit.
6.10 Securities. The execution and delivery by Purchaser of the
Series D Warrants and the Notes have been duly authorized by all necessary
corporate action of Purchaser. Upon the execution and delivery of the Series D
Warrants and the Notes at the Closing in accordance with the terms of this
Agreement, the Series D Warrants and the Notes will be valid and binding
obligations of Purchaser, enforceable against Purchaser in accordance with
their terms. The shares of Purchaser Stock comprising the Stock Component and
the Series D Warrant Stock have been duly authorized and reserved for issuance
and such shares, when issued upon the consummation of the transaction
contemplated by this Agreement and upon the exercise of the Series D Warrants
in accordance with the terms thereof, respectively, will be validly issued,
fully paid and nonassessable.
6.11 Business; Real Property; Material Agreement. Old ACG was formed
in June 1996, and Purchaser was formed in September 1997. Neither Purchaser
nor Old ACG has conducted any material business since the date of its
inception, except raising capital and in connection with this Agreement and
similar agreements with Founding Companies. Except as disclosed on Schedule
6.11, neither Purchaser nor Old ACG owns or has at any time owned any real
property or any material personal property or is a party to any other material
agreement.
6.12 Tax Matters.
(i) Old ACG has filed all Tax Returns that it was required
to file. All such Tax Returns filed by Old ACG were correct and
complete in all material respects. All Taxes owed by Old ACG (whether
or not shown on any Tax Return) have been paid. Old ACG is not
currently the beneficiary of any extension of time within which to
file any Tax Return. Since Old ACG's formation in June 1996 , no
claim with respect to Old ACG has been made by an authority in a
jurisdiction where Old ACG does not file Tax Returns that it is or
may
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be subject to taxation by that jurisdiction. There is no Lien
affecting any of Old ACG's assets that arose in connection with any
failure or alleged failure to pay any Tax.
(ii) Old ACG has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, stockholder or
other party.
(iii) Old ACG does not expect any authority to assess any
material amount of additional Taxes against it for any period for
which Tax Returns have been filed. There is no material dispute or
claim concerning any Tax liability of Old ACG either claimed or
raised by any authority in writing or as to which Old ACG has
knowledge based upon direct inquiry by any agent of such authority.
6.13 Draft Registration Statement. The text of, and the financial
statements and other financial information contained in, the Draft
Registration Statement, insofar as they relate to Purchaser or Old ACG but not
otherwise, are true, accurate and complete in all material respects and do not
include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading.
7. OTHER COVENANTS PRIOR TO CLOSING
7.1 Access and Cooperation; Due Diligence; Audits.
(i) Between the date of this Agreement and the Closing Date,
Company will afford to the officers and authorized representatives of
Purchaser access to all of Company's sites, properties, books and
records and will furnish Purchaser with such additional financial and
operating data and other information as to the business and
properties of Company as Purchaser may from time to time reasonably
request. Company will cooperate with Purchaser, its representatives,
auditors and counsel in the preparation of any documents or other
material that may be required in connection with any documents or
materials required by this Agreement. Purchaser will cause all
information obtained in connection with the negotiation and
performance of this Agreement to be treated as confidential in
accordance with the provisions of Section 12.
(ii) Between the date of this Agreement and the Closing,
Purchaser will afford to the officers and authorized representatives
of Company and Stockholders access to all sites, properties, books
and records of Purchaser, Old ACG and the other Founding Companies,
and will furnish Company and Stockholders with such additional
financial and
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operating data and other information as to the business and
properties of Purchaser, Old ACG and the other Founding Companies as
Company and Stockholders may from time to time reasonably request.
Purchaser will cooperate with Company and Stockholders, their
representatives, auditors and counsel in the preparation of any
documents or other material which may be required in connection with
any documents or materials required by this Agreement. Company and
Stockholders will cause all information obtained in connection with
the negotiation and performance of this Agreement to be treated as
confidential in accordance with the provisions of Section 12.
(iii) Company agrees to permit an independent accounting
firm selected by Purchaser to audit and render a report on the
Company Financial Statements, provided that all the costs and
expenses of such audits are paid by Purchaser.
7.2 Conduct of Business Pending Closing. Unless otherwise approved in
writing by Purchaser, between the date of this Agreement and the Closing Date,
Company will:
(i) carry on business in substantially the same manner as it
has heretofore;
(ii) maintain its properties and facilities, including those
held under Lease, in as good working order and condition as at
present, ordinary wear and tear excepted;
(iii) perform in all material respects all of its
obligations under agreements relating to or affecting its respective
assets, properties or rights;
(iv) keep in full force and effect in all material respects
the present insurance policies or other comparable insurance
coverage;
(v) use its reasonable efforts to maintain and preserve its
business organization intact, retain its respective present key
employees and maintain its respective relationships with suppliers,
customers and others having business relationships with it;
(vi) maintain present Lease instruments and not enter into
new or amended Lease or debt instruments;
(vii) maintain or reduce present salaries and commission
levels for all officers, directors, employees and agents except for
ordinary and customary bonus and salary increases for employees in
accordance with prior practices; and
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(viii) maintain material compliance with all material
permits, laws, rules and regulations, consent orders, and all other
orders of applicable courts, regulatory agencies and similar
governmental authorities;
7.3 Prohibited Activities. Between the date of this Agreement and the
Closing Date, Company, will not, without prior written consent of Purchaser:
(i) make any change in its Charter Documents or By-laws;
(ii) issue any securities, options, warrants, calls,
conversion rights or commitments relating to its securities of any
kind;
(iii) make any Restricted Payment in excess of the lesser of
Company Operating Profit and Distributable Cash;
(iv) merge or consolidate or agree to merge or consolidate
with or into any other Person;
(v) commit a material breach or amend or terminate any
material agreement, permit, license or other right;
(vi) enter into any contract or commitment or incur or agree
to incur any liability or make any capital expenditures, except if it
is in the normal course of business (consistent with past practice)
or involves an amount not in excess of $50,000;
(vii) create, assume or permit to exist any Lien upon any
asset or property whether now owned or hereafter acquired, except (x)
with respect to purchase money Liens incurred in connection with the
acquisition of equipment with an aggregate cost not in excess of
$50,000 necessary or desirable for the conduct of its business, (y)
(1) Liens for Taxes either not yet due or being contested in good
faith and by appropriate proceedings (and for which contested Taxes
adequate reserves have been established and are being maintained) or
(2) materialmen's, mechanics', workers', repairmen's, employees' or
other like Liens arising in the ordinary course of business, or (3)
Liens set forth on any Schedule to this Agreement;
(viii) sell, assign, lease or otherwise transfer or dispose
of any property or equipment except in the normal course of business;
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(ix) negotiate for the acquisition of any business or the
start-up of any new business;
(x) waive any material right or claim; provided that it may
negotiate and adjust bills in the course of good faith disputes with
customers in a manner consistent with past practice; or
(xi) enter into any other transaction outside the ordinary
course of its business or prohibited hereunder.
7.4 Exclusivity. Neither any Stockholder, nor Company, nor any agent,
officer, director, trustee or any representative of any of the foregoing will,
during the period commencing on the date of this Agreement and ending with,
the earlier to occur of the Closing Date or the termination of this Agreement
in accordance with its terms, directly/or indirectly:
(i) solicit or initiate the submission of proposals or
offers from any Person for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any Person other than
Purchaser or its authorized agents relating to
any acquisition or purchase of all or a material amount of the assets of, or
any equity interest in, Company or any merger, consolidation or business
combination of Company.
7.5 Notification of Certain Matters. Stockholders and Company shall
give prompt notice to Purchaser of (i) the occurrence or non-occurrence of any
event the occurrence or non-occurrence of which would likely cause any
representation or warranty of Company or Stockholders contained herein to be
untrue or inaccurate in any material respect at or prior to the Closing Date
and (ii) any material failure of Stockholders or Company to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied
by such Person hereunder as of such date. Purchaser shall give prompt notice
to Company and Stockholders of (i) the occurrence or non-occurrence of any
event the occurrence or non-occurrence of which would likely cause any
representation or warranty of Purchaser and Old ACG contained herein to be
untrue or inaccurate in any material respect at or prior to the Closing Date
and (ii) any material failure of Purchaser or Old ACG to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder as of such date. The delivery of any notice pursuant to this
Section 7.5 shall not be deemed to (i) modify the representations or
warranties hereunder of the party delivering such notice, which modification
may only be made pursuant to Section 7.6, (ii) modify the conditions set forth
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in Sections 8 and 9, or (iii) limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
7.6 Amendment of Schedules. Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until the Closing
to supplement or amend promptly the Schedules with respect to any matter
hereafter arising or discovered which, if existing or known at the date of
this Agreement, would have been required to be set forth or described in the
Schedules. Notwithstanding the foregoing sentence, no amendment or supplement
to a Schedule prepared by Company, Stockholders, Purchaser or Old ACG that
constitutes or reflects an event or occurrence that would have a Material
Adverse Effect may be made unless Purchaser and Old ACG or Stockholders and
Company, as the case may be, consents to such amendment or supplement. For all
purposes of this Agreement, including without limitation for purposes of
determining whether the conditions set forth in Sections 8.1 and 9.1 have been
fulfilled, the Schedules shall be deemed to be the Schedules as amended or
supplemented pursuant to this Section 7.6. No party to this Agreement shall be
liable to any other party if this Agreement shall be terminated pursuant to
the provisions of Section 11.1(v). Neither the entry by Purchaser into any
other agreement after the date hereof for the acquisition of one or more
companies involved in or assets associated with the telecommunication
business, yellow page publishing business or related activities nor the
performance by Purchaser of its obligations thereunder shall be deemed to
require the amendment to or a supplementation of any Schedule hereto.
7.7 Compliance with the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of 1976 (the "▇▇▇▇-▇▇▇▇▇ Act"). All parties to this Agreement hereby recognize
that compliance with the ▇▇▇▇-▇▇▇▇▇ Act will be required in connection with
the transactions contemplated herein. Accordingly, (i) each of the parties
hereto agrees to cooperate and use its best efforts to comply with the
▇▇▇▇-▇▇▇▇▇ Act; (ii) such compliance by Company and Stockholders shall be
deemed a condition precedent in addition to the conditions precedent set forth
in Section 9 of this Agreement, and such compliance by Purchaser shall be
deemed a condition precedent in addition to the conditions precedent set forth
in Section 8 of this Agreement; (iii) the parties agree to cooperate and use
their best efforts to cause all filings required under the ▇▇▇▇-▇▇▇▇▇ Act to
be made; and (iv) Purchaser shall be responsible for all filing fees under the
▇▇▇▇-▇▇▇▇▇ Act.
7.8 Further Assurance. The parties hereto agree to execute and
deliver, or cause to be executed and delivered, such further instruments or
documents or take such other action as may be reasonably necessary or
convenient to carry out the transactions contemplated by this Agreement.
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8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS
The obligations of Stockholders with respect to actions to be taken
on the Closing Date are subject to the satisfaction or waiver on or prior to
the Closing Date of all of the following conditions. Upon Closing, all
conditions not satisfied shall be deemed to have been waived:
8.1 Representations and Warranties; Performance of Obligations. All
representations and warranties of Purchaser and Old ACG contained in this
Agreement shall be true and correct in all material respects as of the Closing
Date with the same effect as though such representations and warranties had
been made on and as of such date; all of the terms, covenants and conditions
of this Agreement to be complied with or performed by Purchaser and Old ACG on
or before the Closing Date shall have been duly complied with or performed in
all material respects; and a certificate to the foregoing effect dated the
Closing Date, and signed by the President or any Vice President of each of
Purchaser and Old ACG shall have been delivered to Stockholders.
8.2 Satisfaction. All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all other
related legal matters shall be reasonably satisfactory to Stockholders and
their counsel.
8.3 No Litigation. No action or proceeding before a court or any
other governmental agency or body shall have been instituted or threatened to
restrain or prohibit the transactions contemplated herein and no governmental
agency or body shall have taken any other action or made any request of
Company or Stockholders as a result of which Stockholders deems it inadvisable
to proceed with the transactions hereunder.
8.4 Opinion of Counsel. Stockholders shall have received an opinion
from counsel for Purchaser and Old ACG, dated the Closing Date, in the form
and substance reasonably acceptable to Stockholders, relating to, insofar as
Purchaser and Old ACG are concerned, as the case may be, (a) the
authorization, execution, delivery, performance and enforceability of the
Agreement, the Series D Warrants and the Notes, (b) the consummation of the
transactions contemplated herein and (c) such other legal matters as
Stockholders may reasonably request.
8.5 Consents and Approvals. All necessary consents of and filings
with any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made.
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8.6 Good Standing Certificates. Purchaser shall have delivered to
Stockholders a certificate, dated as of a date no later than ten days prior to
the Closing Date, duly issued by the Delaware Secretary of State and, unless
waived by Stockholders, in each state in which Purchaser is authorized to do
business, showing that Purchaser is in good standing and authorized to do
business and that all state franchise and/or income Tax Returns and Taxes for
Purchaser, for all periods prior to the Closing Date have been filed and paid
to the extent required.
8.7 No Material Adverse Change. No event or circumstance shall have
occurred with respect to Purchaser that would constitute a Material Adverse
Effect.
8.8 Secretary's Certificates. Stockholders shall have received a
certificate or certificates, dated the Closing Date and signed by the
Secretary of each of Purchaser and Old ACG, certifying the completeness and
accuracy of the attached copies of Purchaser's Charter Documents (including
amendments thereto), By-Laws (including amendments thereto), and resolutions
of the board of directors approving Purchaser's and Old ACG's entering into
this Agreement and its consummation of the transactions contemplated hereby.
8.9 Closing of IPO. The sale by Purchaser of shares of Purchaser
Stock in the IPO shall have closed prior to or substantially contemporaneously
with the consummation of the transactions contemplated herein.
8.10 Employment Agreements. ▇▇▇▇▇▇▇ ▇'▇▇▇▇ shall have been afforded
an opportunity to enter into an employment agreement substantially in the form
of Annex V providing for an annual minimum salary of $300,000, ▇▇▇▇▇ ▇▇▇▇▇▇▇
shall have been afforded an opportunity to enter into an employment agreement
substantially in the form of Annex VI providing for an annual minimum salary
of $175,000 and ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇ each shall have been afforded an
opportunity to enter into an employment agreement substantially in the form of
Annex VII providing for an annual minimum salary of $155,000 and $155,000,
respectively.
8.11 Section 1362(E)(3) Election. Stockholders and Purchaser shall
have executed a ss. 1362(E)(3) election for filing with the IRS relating to
the allocation of profits for tax year 1997 upon the disqualification of
Company as a Subchapter S corporation.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
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The obligations of Purchaser with respect to actions to be taken on
the Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions. Upon Closing, all conditions
not satisfied shall be deemed to have been waived.
9.1 Representations and Warranties; Performance of Obligations. All
the representations and warranties of Company and Stockholders contained in
this Agreement shall be true and correct in all material respects as of the
Closing Date with the same effect as though such representations and
warranties had been made on and as of such date; all of the terms, covenants
and conditions of this Agreement to be complied with or performed by Company
and Stockholders on or before the Closing Date shall have been duly performed
or complied with in all material respects; and Company and Stockholders each
shall have delivered to Purchaser a certificate dated the Closing Date and
signed by them to such effect.
9.2 No Litigation. No action or proceeding before a court or any
other governmental agency or body shall have been instituted or threatened to
restrain or prohibit the transactions contemplated herein and no governmental
agency or body shall have taken any other action or made any request of
Purchaser as a result of which the management of Purchaser deems it
inadvisable to proceed with the transactions hereunder.
9.3 Company's Secretary's Certificate. Purchaser shall have received
a certificate, dated the Closing Date and signed by the Secretary of Company,
certifying the completeness and accuracy of the attached copies of Company's
Charter Documents (including amendments thereto), By-Laws (including
amendments thereto), and resolutions of the board of directors approving the
Company's entering into this Agreement and the consummation of the
transactions contemplated hereby.
9.4 No Material Adverse Effect. No event or circumstance shall have
occurred with respect to Company which would constitute a Material Adverse
Effect, and Company shall not have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of Company to
conduct its business.
9.5 Stockholders' Release. Stockholders shall have delivered to
Purchaser an instrument dated the Closing Date releasing (i) Company from any
and all claims of Stockholders (including those under existing agreements) and
(ii) the obligations of Purchaser and Old ACG to Stockholders, except in each
case for the obligations arising under this Agreement, the transactions
contemplated by this Agreement and as otherwise listed on Schedule 9.5.
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9.6 Satisfaction. All actions, proceedings, instruments and documents
required to carry out the transactions contemplated by this Agreement or
incidental hereto and all other related legal matters shall have been
reasonably satisfactory to Purchaser and its counsel.
9.7 Opinion of Counsel. Purchaser shall have received an opinion from
counsel to Stockholders, dated the Closing Date, in the form and substance
reasonably acceptable to Purchaser, relating to, insofar as Company and
Stockholder are concerned, (a) the authorization, execution, delivery,
performance and enforceability of the Agreement, (b) the consummation of the
transactions contemplated herein and (c) such other matters as Purchaser may
reasonably request.
9.8 Consents and Approvals. All necessary consents of and filings
with any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; and all
required consents and approvals of third parties shall have been obtained.
9.9 Good Standing Certificates. Company shall have delivered to
Purchaser a certificate, dated as of a date no earlier than ten days prior to
the Closing Date, duly issued by the appropriate governmental authority in
Company's state of incorporation and, unless waived by Purchaser, in each
state in which Company is authorized to do business, showing Company is in
good standing and authorized to do business and that all state franchise
and/or income Tax Returns and Taxes for Company for all periods prior to the
Closing have been filed and paid.
9.10 FIRPTA Certificate. Each Stockholder shall have delivered to
Purchaser a certificate to the effect that he is not a foreign Person under
Section 1.1445-2(b) of the Treasury regulations.
9.11 Closing of IPO. The sale by Purchaser of shares of Purchaser
Stock in the IPO shall have closed prior to or substantially contemporaneously
with the consummation of the transactions contemplated by this Agreement.
9.12 Employment Agreements. ▇▇▇▇▇▇▇ ▇'▇▇▇▇ shall have executed and
delivered an employment agreement with Company substantially in the form of
Annex V providing for an annual minimum salary of $300,000, ▇▇▇▇▇ ▇▇▇▇▇▇▇
shall have been afforded an opportunity to enter into an employment agreement
with the Company substantially in the form of Annex VI providing for an annual
minimum salary of $175,000 and ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇ each shall have
entered into an employment agreement with Company substantially in the form of
Annex VII providing for an annual minimum salary of $155,000 and $155,000,
respectively.
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9.13 Licensing Arrangements. The licensing arrangements between Big
Stuff, Inc. and Company relating to the colorizing of yellow pages and the
reselling of world wide web sites shall have been documented on terms
satisfactory to Purchaser.
10. CERTAIN TAX AND EMPLOYEE BENEFIT MATTERS
10.1 Preparation and Filing of Tax Returns.
(i) Stockholders shall file or cause to be filed all
separate Federal income Tax Returns (and any state and local Tax
Returns filed on the basis similar to that of S corporations under
Federal income Tax rules) of Company for all taxable periods that end
on or before the Closing Date. Each Stockholder shall pay or cause to
be paid all Tax liabilities (in excess of all amounts already paid
with respect thereto or properly accrued or reserved with respect
thereto on the Company Financial Statements) shown by such Returns to
be due.
(ii) Purchaser shall file or cause to be filed all separate
Returns of, or that include, Company for all taxable periods ending
after the Closing Date.
(iii) Each party hereto shall, and shall cause its
Subsidiaries and Affiliates to, provide to each of the other parties
hereto such cooperation and information as any of them reasonably may
request in filing any Return, amended Return or claim for refund,
determining a liability for Taxes or a right to refund of Taxes or in
conducting any audit or other proceeding in respect of Taxes. Such
cooperation and information shall include providing copies of all
relevant portions of relevant Returns, together with relevant
accompanying schedules and work papers, relevant documents relating
to rulings or other determinations by Taxing authorities and relevant
records concerning the ownership and Tax basis of property, which
such party may possess. Each party shall make its employees
reasonably available on a mutually convenient basis at its cost to
provide explanation of any documents or information so provided.
Subject to the preceding sentence, each party required to file
Returns pursuant to this Agreement shall bear all costs of filing
such Returns.
10.2 Preservation of Employee Benefit Plans. Following the Closing
Date, Purchaser shall not terminate any health insurance, life insurance or
401(k) plan in effect at Company until such time as Purchaser is able to
replace such plan with a plan that is applicable to Purchaser and all of its
then existing Subsidiaries; provided that Purchaser shall have no obligation
to provide
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replacement plans that have the same terms and provisions as the existing
plans; provided, further, that any new health insurance plan shall provide for
coverage for preexisting conditions.
11. TERMINATION OF AGREEMENT
This Agreement may be terminated at any time prior to the Closing
Date solely:
(i) by mutual consent of Stockholders and the board of directors of
Purchaser;
(ii) by Stockholders, on the one hand, or by Purchaser (acting
through its board of directors), on the other hand, if the transactions
contemplated by this Agreement to take place at the Closing shall not have
been consummated by January 31, 1998, unless the failure of such transactions
to be consummated is due to the willful failure of the party seeking to
terminate this Agreement to perform any of its obligations under this
Agreement to the extent required to be performed by it prior to or on the
Closing Date;
(iii) by Stockholders, on the one hand, or by Purchaser on the other
hand, if, prior to October 16, 1997, a registration statement on Form S-1
relating to the IPO has not been filed by Purchaser with the SEC pursuant to
the 1933 Act;
(iv) by Stockholders, on the one hand, or by Purchaser, on the other
hand, if a material breach or default shall be made by the other party or
parties in the observance or in the due and timely performance of any of the
material covenants, agreements or conditions contained herein, and the curing
of such default shall not have been made on or before the Closing Date; or
(v) by Stockholders, on the one hand, or by Purchaser, on the other
hand, if either such party or parties declines to consent to an amendment or
supplement to a Schedule proposed by the other party or parties pursuant to
Section 7.6 because such proposed amendment constitutes or reflects an event
or occurrence that would have a Material Adverse Effect on the party or
parties proposing the same.
12. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
12.1 Company and Stockholders. Company and Stockholders recognize and
acknowledge that they had in the past, currently have, and in the future may
have, access to certain confidential information of Purchaser and Old ACG,
such as operational policies, and pricing and cost policies that are valuable,
special and unique assets of Purchaser and Old ACG. Company and Stockholders
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agree that they will not disclose such confidential information to any Person
for any purpose or reason whatsoever, except (i) to authorized representatives
of Purchaser and (ii) to counsel and other advisers; provided that such
advisers (other than counsel) agree to the confidentiality provisions of this
Section 12.1, unless (x) such information becomes known to the public
generally through no fault of Company and Stockholders, (y) disclosure is
required by law or the order of any governmental authority under color of law;
provided, that prior to disclosing any information pursuant to this clause
(y), Company and Stockholders, if possible, shall give immediate prior written
notice thereof to Purchaser and provide Purchaser with the opportunity to
contest such disclosure, or (z) the disclosing party reasonably believes that
such disclosure is required in connection with the defense of a lawsuit
against the disclosing party. In the event of a breach or threatened breach by
either Company or any Stockholder of the provisions of this Section 12.1,
Purchaser shall be entitled to an injunction (without the posting of bond or
proof of actual damages) restraining Company or any Stockholder, as the case
may be, from disclosing, in whole or in part, such confidential information.
Nothing herein shall be construed as prohibiting Purchaser from pursuing any
other available remedy for such breach or threatened breach, including the
recovery of damages. In the event the transactions contemplated by this
Agreement are not consummated, Company and Stockholders (including their
representatives, advisors and legal counsel) shall within ten business days
after a request from Purchaser, deliver all copies of the confidential
information of Purchaser in their possession in any form whatsoever
(including, but not limited to, reports, memoranda or other materials prepared
by Company and Stockholders or their representatives, advisors or legal
counsel at their direction).
12.2 Purchaser. Each of Purchaser and Old ACG recognizes and
acknowledges that it has in the past, currently has and in the future may
have, prior to the Closing, access to certain confidential information of
Company, such as operational policies, and pricing and cost policies that are
valuable, special and unique assets of Company. Each of Purchaser and Old ACG
agrees that, prior to the Closing, or if the transactions contemplated by this
Agreement are not consummated, it will not disclose such confidential
information to any Person for any purpose or reason whatsoever, except (i) to
authorized representatives of Company, other Founding Companies or any
Stockholder; and (ii) to counsel and other advisers; provided that such
advisers (other than counsel) agree to the confidentiality provisions of this
Section 12.2, unless (x) such information becomes known to the public
generally through no fault of Purchaser and Old ACG (y) disclosure is required
by law or the order of any governmental authority under color of law;
provided, that prior to disclosing any information pursuant to this clause
(y), Purchaser shall, if possible, give immediate prior written notice thereof
to Company and provide Company with the opportunity to contest such
disclosure, or (z) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party. In the event of a breach or
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threatened breach by Purchaser or Old ACG of the provisions of this Section
12.2, Company shall be entitled to an injunction (without the posting of bond
or proof of actual damages) restraining Purchaser or Old ACG from disclosing,
in whole or in part, such confidential information. Nothing herein shall be
construed as prohibiting Company from pursuing any other available remedy for
such breach or threatened breach, including the recovery of damages. In the
event the transactions contemplated by this Agreement are not consummated,
Purchaser and Old ACG (including its representatives, advisors and legal
counsel) shall within ten business days after a request from Company, deliver
all copies of the confidential information of Company in their possession in
any form whatsoever (including, but not limited to, any reports, memoranda, or
other materials prepared by either Purchaser or Old ACG or its
representatives, advisors or legal counsel at its direction).
12.3 Damages. Because of the difficulty of measuring economic losses
as a result of the breach of the foregoing covenants in Section 12.1 and 12.2
and because of the immediate and irreparable damage that would be caused for
which no other adequate remedy exists, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may
be enforced against another party by injunction and restraining order.
12.4 Survival. The obligations of the parties under this Article 12
shall survive the termination of this Agreement for a period of three years
from the Closing Date or the termination of this Agreement pursuant to Section
11.
13. NONCOMPETITION
13.1 Prohibited Activities. Each of the Stockholders will not, for a
period of 36 calendar months following the date of cessation of his employment
with Company after the Closing Date ("Termination Date") in the case of
Messrs. ▇'▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇ ▇▇▇▇▇▇▇ and following the
Closing Date in the case of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, for any reason whatsoever,
directly or indirectly, for himself or on behalf of or in conjunction with any
other Person:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales representative,
in the sale or marketing of any yellow page publishing, telecommunication
services and natural gas or electrical goods and services (collectively, the
"Proscribed Business"), within the States of Arkansas, California, Kansas,
Missouri, Oklahoma and Texas (the "Territory");
(ii) call upon any Person within the Territory who is employee of
Purchaser (including the Subsidiaries thereof) in a sales representative or
managerial capacity for the purpose or with the
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intent of enticing such employee away from or out of the employ of Purchaser
(including the Subsidiaries thereof); provided that each Stockholder shall be
permitted to call upon and hire immediate family members;
(iii) call upon any Person which is or which has been, within one
year prior to the Closing Date or the Termination Date, as the case may be, a
customer of Purchaser (including the Subsidiaries thereof), or of Company
within the Territory, for the purpose of soliciting or selling products or
services in direct competition with Purchaser (including the Subsidiaries
thereof) within the Territory;
(iv) call upon any prospective acquisition candidate, on any
Stockholder's own behalf or on behalf of any competitor of Purchaser
(including the Subsidiaries thereof) engaged in a Proscribed Business, which
candidate, to the actual knowledge of such Stockholder after due inquiry, was
called upon by Purchaser (including the Subsidiaries thereof) or for which, to
the actual knowledge of such Stockholder after due inquiry, Purchaser (or any
Subsidiary thereof) made an acquisition analysis, for the purpose of acquiring
such entity; or
(v) disclose existing or prospective customers of Company to any
Person for any reason or purpose whatsoever except to the extent that Company
has in the past disclosed such information to the public for valid business
reasons.
Notwithstanding the above, the foregoing covenants shall not be
deemed to prohibit any Stockholder from acquiring and holding as a passive
investment not more than five percent of the capital stock of a competing
business whose stock is traded on a national securities exchange or the
National Association of Securities Dealers' Automated Quotation System.
13.2 Damages. Because of the difficulty of measuring economic losses
to Purchaser as a result of a breach of any of the foregoing covenants, and
because of the immediate and irreparable damage that could be caused to
Purchaser for which it would have no other adequate remedy, each Stockholder
agrees that any of the foregoing covenants may be enforced by Purchaser in the
event of breach by such Stockholder, by injunction and restraining order.
13.3 Reasonable Restraint. It is agreed by the parties hereto that
the foregoing covenants in this Section 13 impose a reasonable restraint on
Stockholders in light of the activities and business of Purchaser (including
the Subsidiaries thereof) on the date of the execution of this Agreement and
the reasonably foreseeable plans of Purchaser.
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13.4 Severability, Reformation. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant
shall not affect the provisions of any other covenant. Moreover, in the event
any court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention
of the parties that such restrictions be enforced to the fullest extent the
court deems reasonable, and the Agreement shall thereupon be automatically
reformed.
13.5 Independent Covenant. All of the covenants in this Section 13
shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any
Stockholder against Purchaser (including the Subsidiaries thereof), whether
predicated on this Agreement or otherwise, shall not constitute a defense to
the enforcement by Purchaser of such covenants. It is specifically agreed that
the period of 36 calendar months stated at the beginning of this Section 13,
during which the agreements and covenants of each Stockholder made in this
Section 13 shall be effective, shall be computed by excluding from such
computation any time during which such Stockholder is in violation of any
provision of this Section 13. The covenants contained in this Section 13 shall
not be affected by any breach of any other provision hereof by any party
hereto and shall become void if the transactions contemplated by this
Agreement are not consummated.
13.6 Materiality. Stockholders hereby agree that the covenants set
forth in this Section 14 are a material and substantial part of the
transactions contemplated by this Agreement.
14. TRANSFER PROHIBITIONS AND RESTRICTIONS
14.1 Warrants. STOCKHOLDERS ACKNOWLEDGE THAT THE WARRANTS ARE
NON-TRANSFERRABLE AND HENCE CANNOT BE SOLD, ASSIGNED, EXCHANGED, TRANSFERRED,
ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF BY ANY
STOCKHOLDER EXCEPT (I) PURSUANT TO THE LAWS OF DESCENT AND DISTRIBUTION, (II)
IN CONNECTION WITH A TENDER OFFER OR EXCHANGE OFFER FOR ALL THE PURCHASER
STOCK OR (III) TO A STOCKHOLDER'S LINEAL DESCENDANTS, OR TRUSTS CREATED FOR
THEIR BENEFIT, IN EACH CASE ONLY IF THE TRANSFEREE AGREES TO BE BOUND BY THE
TERMS OF THIS SECTION 14. In addition, Stockholders further acknowledge that
for a period of one year from the date of the original issuance of any Warrant
Stock upon the exercise of a Warrant, except pursuant to Section 16, no
Stockholder may sell, assign, exchange, transfer, encumber, pledge,
distribute, appoint, or otherwise dispose of any Warrant Stock. The Warrant
Stock delivered to the Stockholders upon exercise of the Warrants will bear a
legend substantially in the form set forth in Section 14.3 and contain such
other information as Purchaser may deem necessary or appropriate.
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14.2 Purchaser Stock. Except for transfers to immediate family
members who agree to be bound by the restrictions set forth in this Section
14.2 (or trusts for the benefit of the Stockholders or family members, the
trustees of which so agree), for a period of one year from the Closing, except
pursuant to ▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇ of the Stockholders shall sell, assign, exchange,
transfer, encumber, pledge, distribute, appoint, or otherwise dispose of any
Purchaser Stock received by the Stockholders in the transaction contemplated
herein. The Purchaser Stock delivered to the Stockholders pursuant to Section
2 of this Agreement will bear a legend substantially in the form set forth in
Section 14.3 and contain such other information as Purchaser may deem
necessary or appropriate:
14.3 Legend. The following legend satisfies the requirements of
Sections 14.1 and 14.2:
THIS SECURITY MAY NOT BE SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED,
PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL
NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE,
TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION
PRIOR TO [FIRST ANNIVERSARY OF DATE OF ORIGINAL ISSUANCE]. UPON THE WRITTEN
REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS
RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER
THE DATE SPECIFIED ABOVE.
15. INVESTMENT REPRESENTATIONS
Stockholders acknowledge that the Notes, the shares of Purchaser Stock
comprising the Stock Component and the Warrant Stock (collectively "Restricted
Securities") will not be registered under the 1933 Act and therefore may not
be resold without compliance with the requirements of the 1933 Act and
applicable state securities laws. All of the Restricted Securities will be
acquired by Stockholders solely for their own respective accounts, for
investment purposes only, and not with a view to the distribution thereof.
15.1 Compliance With Law. Stockholders represent, warrant, covenant
and agree that none of the Restricted Securities will be offered, sold,
assigned, exchanged, transferred, encumbered, distributed, appointed or
otherwise disposed of except after full compliance with all of the applicable
provisions of the 1933 Act and the rules and regulations of the SEC thereunder
and the provisions of applicable state securities laws and regulations. All
the Restricted Securities shall bear the following legend in addition to the
legend required under Section 14 of this Agreement:
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THE [SHARES/NOTES] REPRESENTED BY THIS SECURITY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE
SECURITIES LAWS (COLLECTIVELY, THE "ACTS") AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED UNLESS AND UNTIL (A) THE [SHARES/NOTES] REPRESENTED BY THIS
SECURITY SHALL HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND APPLICABLE STATE SECURITIES LAWS (COLLECTIVELY, THE "ACTS") OR
(B) THE HOLDER OF THE [SHARES/NOTES] REPRESENTED BY THIS SECURITY PROVIDES THE
ISSUER WITH (X) AN UNQUALIFIED WRITTEN OPINION OF LEGAL COUNSEL, WHICH COUNSEL
AND OPINION (IN FORM AND SUBSTANCE) SHALL BE REASONABLY SATISFACTORY TO THE
ISSUER, TO THE EFFECT THAT THE PROPOSED DISPOSITION OF THE [SHARES/NOTES]
REPRESENTED BY THIS SECURITY MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE
ACTS OR (Y) SUCH OTHER EVIDENCE AS MAY BE REASONABLY SATISFACTORY TO THE
ISSUER THAT THE PROPOSED DISPOSITION MAY BE EFFECTED WITHOUT REGISTRATION
UNDER THE ACTS.
15.2 Economic Risk, Sophistication. Each Stockholder represents that
he has received, has read and understands the Draft Registration Statement,
and in particular the risk factors described therein. Each Stockholder further
represents that he is able to bear the economic risk of an investment in the
Restricted Securities and can afford to sustain a total loss of such
investment and either (i) has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits and risks of the
proposed investment in Purchaser or (ii) together with the senior executives
of the Company, with whom he has consulted, has such knowledge and experience
in financial and business matters that he is capable of evaluating the merits
and risks of the proposed investment in Purchaser. Stockholders have had an
adequate opportunity to ask questions and receive answers from the officers of
Purchaser and the Company concerning any and all matters relating to the
transactions described herein including, without limitation, the background
and experience of the current and proposed officers and directors of
Purchaser, the plans for the operations of the business of Purchaser and any
plans for additional acquisitions and the like. Stockholders have asked any
and all questions in the nature described in the preceding sentence and all
questions have been answered to their satisfaction. Purchaser agrees to afford
Stockholders another opportunity to ask similar questions regarding Purchaser
prior to any exercise of their Warrants. At the time of any such exercise,
Purchaser may, as a condition to the issuance of any Warrant Stock upon the
exercise of Warrants, require the reaffirmation of the statements contained in
this Section 15.2 by the Stockholder seeking to exercise Warrants.
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16. REGISTRATION RIGHTS
16.1 PiggyBack Registration Rights. Whenever Purchaser proposes to
register any Purchaser Stock for its own or the account of others under the
1933 Act for a public offering other than (i) any registration of shares to be
used as consideration for acquisitions of additional businesses by Purchaser
and (ii) registrations relating to employee benefit plans, Purchaser shall
give each Stockholder then owning Registrable Securities that has not been
registered under the 1933 Act prompt written notice of its intent to do so.
Upon the written request of any such Stockholder given within 15 days after
receipt of such notice, Purchaser shall cause to be included in such
registration all Registrable Securities which any Stockholder requests;
provided, however, if Purchaser is advised in writing in good faith by any
managing underwriter of an underwritten offering of the securities being
offered pursuant to any registration statement under this Section 16.1 that
the number of shares to be sold by Persons other than Purchaser is greater
than the number of such shares which can be offered without adversely
affecting the offering, Purchaser may reduce pro rata the number of shares
offered for the accounts of such Persons (based upon the number of shares held
by such Person) to a number deemed satisfactory by such managing underwriter.
16.2 Demand Registration Rights. At any time after the first
anniversary of the Closing Date, Stockholders or their permitted transferees
("Founding Stockholders") holding a majority of the Registrable Securities
then outstanding (but not less than 500,000 shares), which shares have not
been previously registered or sold and which shares are not entitled to be
sold under Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act, may request in writing that Purchaser file a registration
statement under the 1933 Act covering the registration of such shares of
Registrable Securities issued to and held by the Founding Stockholders or
their permitted transferees (a "Demand Registration"). Within ten days of the
receipt of such request, Purchaser shall give written notice of such request
to all other Founding Stockholders and shall, as soon as practicable but in no
event later than 45 days after notice from the Founding Stockholders
requesting such registration, file and use its best efforts to cause to become
effective a registration statement covering all such shares. Purchaser shall
be obligated to effect only one Demand Registration for all Founding
Stockholders; provided, however, that Purchaser shall not be deemed to have
satisfied its obligation under this Section 16.2 unless and until a Demand
Registration covering all shares of Registrable Securities requested to be
registered has been filed and become effective under the 1933 Act and has
remained current and effective for not less than 90 days (or such shorter
period as is required to complete the distribution and sale of all shares
registered thereunder).
-48-
Notwithstanding the foregoing paragraph, following such a demand a
majority of the disinterested directors of Purchaser (i.e. directors who have
not demanded or elected to sell shares in any such public offering) may defer
the filing of the registration statement for a 30 day period.
If at the time of any request for a Demand Registration Purchaser has
formulated plans to file within 60 days after such request a registration
statement covering the sale of any of its securities in a public offering
under the 1933 Act, no registration of Registrable Securities shall be
initiated under this Section 16.2 until 90 days after the effective date of
such registration statement unless Purchaser is no longer proceeding
diligently to secure the effectiveness of such registration statement;
provided that Purchaser shall provide the Founding Stockholders the right to
participate in such public offering pursuant to, and subject to, Section 16.1.
16.3 Registration Procedures. All expenses incurred in connection
with the registrations under this Section 16 (including all registration,
filing, qualification, legal, printing and accounting fees, but excluding
underwriting commissions and discounts), shall be borne by Purchaser. In
connection with registrations under Sections 16.1 and 16.2 Purchaser will, as
expeditiously as practicable:
(i) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become and remain effective;
provided that Purchaser may discontinue any registration of its
securities that is being effected pursuant to Section 16.2 at any
time prior to the effective date of the registration statement
relating thereto.
(ii) Prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to such
registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement
effective for a period as may be requested by the Stockholders
holding a majority of the Registrable Securities covered thereby not
exceeding 90 days and to comply with the provisions of the 1933 Act
with respect to the disposition of all securities covered by such
registration statement during such period in accordance with the
intended methods of disposition by the seller or sellers thereof set
forth in such registration statement; provided, that before filing a
registration statement or prospectus relating to the sale of
Registrable Securities, or any amendments or supplements thereto,
Purchaser will furnish to counsel to each holder of Registrable
Securities covered by such registration statement or prospectus,
copies of all documents proposed to be filed, which documents will be
subject to the review of such
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counsel, and Purchaser will give reasonable consideration in good
faith to any comments of such counsel.
(iii) Furnish to each holder of Registrable Securities
covered by the registration statement and to each underwriter, if
any, of such Registrable Securities, such number of copies of a
preliminary prospectus and prospectus for delivery in conformity with
the requirements of the 1933 Act, and such other documents, as such
Person may reasonably request, in order to facilitate the public sale
or other disposition of the Registrable Securities.
(iv) Use its best efforts to register or qualify the
Registrable Securities covered by such registration statement under
such other securities or blue sky laws of such jurisdictions as each
seller shall reasonably request, and do any and all other acts and
things which may be reasonably necessary or advisable to enable such
seller to consummate the disposition of the Registrable Securities
owned by such seller, in such jurisdictions, except that Purchaser
shall not for any such purpose be required (x) to qualify to do
business as a foreign corporation in any jurisdiction where, but for
the requirements of this Section 16.3(iv), it is not then so
qualified, or (y) to subject itself to taxation in any such
jurisdiction, or (z) to take any action which would subject it to
general or unlimited service of process in any such jurisdiction
where it is not then so subject.
(v) Use its best efforts to cause the Registrable Securities
covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof to consummate the
disposition of such Registrable Securities.
(vi) Immediately notify each seller of Registrable
Securities covered by such registration statement, at any time when a
prospectus relating thereto is required to be delivered under the
1933 Act within the appropriate period mentioned in Section 16.3(ii),
if Purchaser becomes aware that the prospectus included in such
registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then
existing, and, at the request of any such seller, deliver a
reasonable number of copies of an amended or supplemental prospectus
as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, each prospectus shall not
include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances
then existing.
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(vii) Otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC and make generally
available to its security holders, in each case as soon as
practicable, but not later than 45 calendar days after the close of
the period covered thereby (90 calendar days in case the period
covered corresponds to a fiscal year of the Purchaser), an earnings
statement of Purchaser which will satisfy the provisions of Section
11 (a) of the 1933 Act.
(viii) Use its best efforts in cooperation with the
underwriters to list such Registrable Securities on each securities
exchange as they may reasonably designate.
(ix) In the event the offering is an underwritten offering,
use its best efforts to obtain a "cold comfort" letter from the
independent public accountants for Purchaser in customary form and
covering such matters of the type customarily covered by such
letters.
(x) Execute and deliver all instruments and documents
(including in an underwritten offering an underwriting agreement in
customary form) and take such other actions and obtain such
certificates and opinions as the Stockholders holding a majority of
the shares of Registrable Securities covered by the Registration
Statement may reasonably request in order to effect an underwritten
public offering of such Registrable Securities.
(xi) Make available for inspection by the seller of such
Registrable Securities covered by such registration statement, by any
underwriter participating in any disposition to be effected pursuant
to such registration statement and by any attorney, accountant or
other agent retained by any such seller or any such underwriter, all
pertinent financial and other records, pertinent corporate documents
and properties of Purchaser, and cause all of Purchaser's officers,
directors and employees to supply all information reasonably
requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement.
(xii) Obtain for delivery to the underwriter or agent an
opinion or opinions from counsel for Purchaser in customary form and
in form and scope reasonably satisfactory to such underwriter or
agent and its counsel.
16.4 Other Registration Matters.
(i) Each Stockholder holding shares of Registrable
Securities covered by a Registration Statement referred to in this
Section 16 will, upon receipt of any notice from
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Purchaser of the happening of any event of the kind described in
Section 16.3(vi), forthwith discontinue disposition of the
Registrable Securities pursuant to the registration statement
covering such Registrable Securities until such holder's receipt of
the copies of the supplemented or amended prospectus contemplated by
Section 16.3(vi).
(ii) If a registration pursuant to Section 16.1 or 16.2
involves an underwritten offering, each of ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇ agrees, if his shares of Registrable
Securities are included in such registration, and ▇▇▇▇▇▇▇ ▇'▇▇▇▇
agrees, whether or not his shares of Registrable Securities are
included in such registration, not to effect any public sale or
distribution, including any sale pursuant to Rule 144 under the 1933
Act, of any Registrable Securities, or of any security convertible
into or exchangeable or exercisable for any Registrable Securities
(other than as part of such underwritten offering), without the
consent of the managing underwriter, during a period commencing seven
calendar days before and ending 180 calendar days (or such lesser
number as the managing underwriter shall designate) after the
effective date of such registration. Similarly, each of the
Stockholders agrees not to effect any sale or distribution, including
any sale pursuant to the registration rights provided in Section
16.1, of any Registrable Securities, or of any security convertible
into or exchangeable or exercisable for any Registrable Securities,
without the consent of the managing underwriter of the IPO during a
period commencing on the effective date of the Draft Registration
Statement and ending 365 calendar days (or such lesser number as such
managing underwriter shall designate) after such effective date.
16.5 Indemnification.
(i) In the event of any registration of any securities of
Purchaser under the 1933 Act pursuant to Section 16.1 or 16.2,
Purchaser will, and it hereby agrees to, indemnify and hold harmless,
to the extent permitted by law, each seller of any Registrable
Securities covered by such registration statement, each Affiliate of
such seller and their respective directors, officers, employees and
agents or general and limited partners (and directors, officers,
employees and agents thereof) and, if such seller is a portfolio or
investment fund, its investment advisors or agents, each other Person
who participates as an underwriter in the offering or sale of such
securities and each other Person, if any, who controls such seller or
any such underwriter within the meaning of the 1933 Act, as follows:
(x) against any and all loss, liability, claim,
damage or expense whatsoever arising out of or based upon an
untrue statement or alleged untrue statement of a material
fact contained in any registration statement (or any
-52-
amendment or supplement thereto), including all documents
incorporated therein by reference, or the omission or
alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements therein
not misleading, or arising out of an untrue statement or
alleged untrue statement of a material fact contained in any
preliminary prospectus or prospectus (or any amendment or
supplement thereto) or the omission or alleged omission
therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under
which they were made, not misleading;
(y) against any and all loss, liability, claim,
damage and expense whatsoever to the extent of the aggregate
amount paid in settlement of any litigation, or
investigation or proceeding by any governmental agency or
body, commenced or threatened, or of any claim whatsoever
based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, if such
settlement is effected with the written consent of
Purchaser; and
(z) against any and all expense reasonably incurred
by them in connection with investigating, preparing or
defending against any litigation, or investigation or
proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue
statement or mission to the extent that any such expense is
not paid under subsection (x) or (y) above;
Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such seller or any such
director, officer, employee, agent, general or limited partner,
investment advisor or agent, underwriter or controlling Person and
shall survive the transfer of such securities by such seller.
(ii) Purchaser may require, as a condition to including any
Registrable Securities in any registration statement filed in
accordance with Section 16.1 or 16.2, that Purchaser shall have
received an undertaking reasonably satisfactory to it from the
prospective seller of such Registrable Securities or any underwriter,
to indemnify and hold harmless (in the same manner and to the same
extent as set forth in Section 16.5(i)) Purchaser with respect to any
statement or alleged statement in or omission or alleged omission
from such registration statement, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement, if such
statement or alleged statement or omission or alleged omission was
made in reliance upon and in conformity with written information
furnished
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to Purchaser by or on behalf of such seller or underwriter
specifically stating that it is for use in the preparation of such
registration statement, preliminary, final or summary prospectus or
amendment or supplement. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of
Purchaser or any such director, officer or controlling Person and
shall survive the transfer of such securities by such seller. In that
event, the obligations of the Purchaser and such sellers pursuant to
this Section 16.5 are to be several and not joint; provided, however,
that, with respect to each claim pursuant to this Section 16.5,
Purchaser shall be liable for the full amount of such claim, and each
such seller's liability under this Section 16.5 shall be limited to
an amount equal to the net proceeds (after deducting the underwriting
discount and expenses) received by such seller from the sale of
Registrable Securities held by such seller pursuant to this
Agreement.
(iii) Promptly after receipt by an indemnified party
hereunder of written notice of the commencement of any action or
proceeding involving a claim referred to in this Section 16.5, such
indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party, give written notice to such
indemnifying party of the commencement of such action; provided,
however, that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of its
obligations under this Section 16.5, except to the extent (not
including any such notice of an underwriter) that the indemnifying
party is materially prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, unless
in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying parties may exist
in respect of such claim (in which case the indemnifying party shall
not be liable for the fees and expenses of more than one firm of
counsel selected by holders of a majority of the shares of
Registrable Securities included in the offering or more than one firm
of counsel for the underwriters in connection with any one action or
separate but similar or related actions), the indemnifying party will
be entitled to participate in and to assume the defense thereof,
jointly with any other indemnifying party similarly notified, to the
extent that it may wish with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to
such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently
incurred by such indemnifying party in connection with the defense
thereof, provided that the indemnifying party will not agree to any
settlement without the prior consent of the indemnified party (which
consent shall not be unreasonably withheld) unless such settlement
requires no more than a monetary payment for which the indemnifying
party agrees to indemnify the indemnified party and includes a full,
unconditional and complete release of the indemnified party;
provided, however, that the
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indemnified party shall be entitled to take control of the defense of
any claim as to which, in the reasonable judgment of the indemnifying
party's counsel, representation of both the indemnifying party and
the indemnified party would be inappropriate under the applicable
standards of professional conduct due to actual or potential
differing interests between them. In the event that the indemnifying
party does not assume the defense of a claim pursuant to this Section
16.5(iii), the indemnified party will have the right to defend such
claim by all appropriate proceedings, and will have control of such
defense and proceedings, and the indemnified party shall have the
right to agree to any settlement without the prior consent of the
indemnifying party. Each indemnified party shall, and shall cause its
legal counsel to, provide reasonable cooperation to the indemnifying
party and its legal counsel in connection with its assuming the
defense of any claim, including the furnishing of the indemnifying
party with all papers served in such proceeding. In the event that an
indemnifying party assumes the defense of an action under this
Section 16.5(iii), then such indemnifying party shall, subject to the
provisions of this Section 16.5, indemnify and hold harmless the
indemnified party from any and all losses, claims, damages or
liabilities by reason of such settlement or judgment.
(iv) Purchaser and each seller of Registrable Securities
shall provide for the foregoing indemnity (with appropriate
modifications) in any underwriting agreement with respect to any
required registration or other qualification of securities under any
federal or state law or regulation of any governmental authority.
16.6 Contribution. In order to provide for just and equitable
contribution in circumstances under which the indemnity contemplated by
Section 16.5 is for any reason not available or insufficient for any reason to
hold harmless an indemnified party in respect of any losses, claims, damages
or liabilities referred to therein, the parties required to indemnify by the
terms thereof shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by such indemnity agreement
incurred by Purchaser, any seller of Registrable Securities and one or more of
the underwriters, except to the extent that contribution is not permitted
under Section 11 (f) of the 1933 Act. In determining the amounts which the
respective parties shall contribute, there shall be considered the relative
benefits received by each party from the offering of the Registrable
Securities by taking into account the portion of the proceeds of the offering
realized by each, and the relative fault of each party by taking into account
the parties' relative knowledge and access to information concerning the
matter with respect to which the claim was asserted, the opportunity to
correct and prevent any statement or omission and any other equitable
considerations appropriate under the circumstances. Purchaser and each Person
selling securities agree with each other that no seller of Registrable
Securities shall be required to contribute any
-55-
amount in excess of the amount such seller would have been required to pay to
an indemnified party if the indemnity under Section 16.5(ii) were available.
Purchaser and each such seller agree with each other and the underwriters of
the Registrable Securities, if requested by such underwriters, that it would
not be equitable if the amount of such contribution were determined by pro
rata or per capita allocation (even if the underwriters were treated as one
entity for such purpose) or for the underwriters' portion of such contribution
to exceed the percentage that the underwriting discount bears to the initial
public offering price of the Registrable Securities. For purposes of this
Section 16.6, each Person, if any, who controls an underwriter within the
meaning of Section 15 of the 1933 Act shall have the same rights to
contribution as such underwriter, and each director and each officer of
Purchaser who signed the registration statement, and each Person, if any, who
controls Purchaser or a seller of Registrable Securities within the meaning of
Section 15 of the 1933 Act shall have the same rights to contribution as
Purchaser or a seller of Registrable Securities, as the case may be.
16.7 Availability of Rule 144. Purchaser shall not be obligated to
register shares of Registrable Securities held by any Stockholder at any time
when the resale provisions of Rule 144(k) (or any similar or successor
provision) promulgated under the 1933 Act are available to such Stockholder.
17. GENERAL
17.1 Cooperation. Company, Stockholders and Purchaser shall deliver
or cause to be delivered to each other on the Closing Date and at such other
times and places as shall be reasonably agreed to, such additional instruments
as the any of the others may reasonably request for the purpose of carrying
out this Agreement.
17.2 Successors and Assigns. This Agreement and the rights of the
parties hereunder may not be assigned (except (i) by operation of law or (ii)
by Purchaser to one of its wholly-owned Subsidiaries, under circumstances that
does not relieve Purchaser of its obligations under this Agreement), and any
such unpermitted purported assignment shall be void and of no legal force and
effect..
17.3 Entire Agreement. This Agreement (including the Schedules and
Annexes) and the documents delivered pursuant hereto constitute the entire
agreement and understanding among the Company, Stockholders, Purchaser and Old
ACG, and supersede any prior agreement and understanding relating to the
subject matter of this Agreement. This Agreement, upon execution and delivery,
constitutes a valid and binding agreement of the parties hereto enforceable in
accordance with its terms and may be modified or amended only by a written
instrument executed by Company,
-56-
Stockholders, Purchaser and Old ACG, acting through their respective officers
or representatives, duly authorized by their respective Boards of Directors in
the cases of Company, Purchaser and Old ACG. Any disclosure made on any
Schedule delivered pursuant hereto shall be deemed to have been disclosed for
purposes of any other Schedule required hereby; provided that each party to
this Agreement shall make a good faith effort to cross reference disclosures,
as necessary or advisable, between related Schedules.
17.4 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.
17.5 Brokers and Agents. Except as disclosed on Schedule 17.5, each
party represents and warrants that it employed no broker or agent in
connection with this transaction and agrees to indemnify the other parties
hereto against all loss, cost, damage or expense arising out of claims for
fees or commission of brokers employed or alleged to have been employed by
such indemnifying party.
17.6 Expenses. Whether or not the transactions herein contemplated
shall be consummated, Purchaser will pay the fees, expenses and disbursements
of Purchaser, Old ACG and Company and their respective agents,
representatives, accountants and counsel incurred in connection with the
subject matter of this Agreement and any amendments thereto, including all
costs and expenses incurred in the performance and compliance with all
conditions to be performed by Purchaser, Old ACG and Company under this
Agreement. Stockholders shall pay all sales, use, transfer, real property
transfer, gains, stock transfer and other similar taxes ("Transfer Taxes")
imposed in connection with the sale of shares of Company Stock owned by them
to Purchaser, the fees and expenses of Stockholders' legal counsel and all
other costs and expenses incurred by Stockholders in their performance and
compliance with all conditions to be performed by them under this Agreement.
17.7 Notices. All notices of communications required or permitted
hereunder shall be in writing, addressed to the party to be notified, and may
be given by (i) depositing the same in United States mail, postage prepaid and
registered or certified with return receipt requested, (ii) by telecopying the
same if receipt thereof is confirmed or (iii) by delivering the same in person
to an officer or agent of such party.
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(x) If to Purchaser or Old ACG, addressed to Purchaser at:
Advanced Communications Group, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
Bracewell & ▇▇▇▇▇▇▇▇▇, L.L.P.
South Tower Pennzoil Place
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
(y) If to Stockholders, addressed to them at:
(Name of Stockholder)
Great Western Directories, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
(z) If to Company, addressed to it at:
Great Western Directories, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇'▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
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with a copy to:
McAfee & ▇▇▇▇
Tenth Floor, Two Leadership Square
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 17.7 from time to time.
17.8 Governing Law. This Agreement shall be construed in accordance
with the laws of the State of Texas.
17.9 Exercise of Rights and Remedies. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall
it be construed as a waiver of or acquiescence in any such breach or default,
or of any similar breach or default occurring later; nor shall any waiver of
any single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
17.10 Time. Time is of the essence with respect to this Agreement.
17.11 Reformation and Severability. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
practicable, be modified in such manner as to be valid, legal and enforceable
but so as to most nearly retain the intent of the parties, and if such
modification is not possible, such provision shall be severed from this
Agreement; and in either case the validity, legality and enforceability of the
remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
17.12 Remedies Cumulative. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
17.13 Captions. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
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17.14 Public Statements. The parties hereto shall consult with each
other and no party shall issue any public announcement or statement with
respect to the transactions contemplated hereby without the consent of the
other parties, unless the party desiring to make such announcement or
statement, after seeking such consent from the other parties, obtains advice
from legal counsel that a public announcement or statement is required by
applicable law.
17.15 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived only
with the written consent of Company, Stockholders, Purchaser and Old ACG. Any
amendment or waiver effected in accordance with this Section 17.15 shall be
binding upon each of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
ADVANCED COMMUNICATIONS GROUP, INC.
BY:
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NAME: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
TITLE: CHAIRMAN AND CHIEF EXECUTIVE OFFICER
ADVANCED COMMUNICATIONS CORP.
BY:
--------------------------------------------
NAME: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
TITLE: CHAIRMAN AND CHIEF EXECUTIVE OFFICER
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GREAT WESTERN DIRECTORIES, INC.
BY:
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NAME: ▇▇▇▇▇▇▇ ▇'▇▇▇▇
TITLE: PRESIDENT
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▇▇▇▇▇▇▇ ▇'▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇▇
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ANNEX I
DRAFT REGISTRATION STATEMENT
(separately provided)
ANNEX II
ADVANCED COMMUNICATIONS GROUP, INC.
SECTION 351 EXCHANGE PLAN
The Board of Directors of Advanced Communications Group, Inc., a
Delaware corporation organized in September 1997 ("Company"), has adopted this
Section 351 Exchange Plan effective as of October 3, 1997 ("Exchange Plan") in
order to comply with the requirements of Section 351 of the Internal Revenue
Code of 1986, as amended, and the rules and regulations promulgated thereunder
("Code"), and for purposes of defining the rights of various persons who may
make future transfers of voting capital stock and other consideration,
including cash and other assets (the items transferred being collectively
referred to herein as the "Assets") to the Company, all as more particularly
set forth below:
WHEREAS, the Company intends to acquire outstanding shares of capital
stock of certain corporations and other assets and acquire the outstanding
capital stock of ACG, Inc., a Delaware corporation, in a reverse triangular
merger, all as part of an integrated transaction as more particularly
described in the Company's Registration Statement in Form S-1 (draft of
October 2, 1997) ("Draft Registration Statement") relating to its initial
underwritten public offering ("IPO"), the foregoing acquisitions being
hereinafter collectively referred to as the "Acquisitions"; and
WHEREAS, the various transactions comprising the Acquisitions will
occur substantially concurrently upon the consummation of the IPO;
NOW THEREFORE, in order to obtain the Assets, the Company may elect
to exchange, as a part of a single plan, shares of its voting capital stock
and other consideration, including cash, warrants, options and promissory
notes, for such Assets as shall be transferred to the Company by one or more
of the following individuals and entities: (i) the existing shareholders of
the predecessor to the Company in a reverse triangular merger; (ii) certain
holders of capital stock of other corporations or other assets that shall be
acquired by the Company pursuant to the Acquisitions; (iii) certain other
persons or entities who may assist the Company in the Acquisitions or in the
manufacture and or marketing of its products, (iv) purchasers of the Company's
capital stock in the IPO; and (v) certain other financial investors; and
FURTHERMORE, it is the expectation of the Company (without making any
representation with respect thereto) that the parties contributing such Assets
to the Company as part of the
Acquisitions and the IPO will possess immediately after the completion of the
Acquisitions, at least 80% of the total combined voting power of all classes
of capital stock of the Company entitled to vote and at least 80% of the total
number of shares of all other classes of capital stock of the Company; and
FURTHERMORE, it is also the intention of the Company (without making
any representation with respect thereto) that the foregoing transfers of
Assets to the Company shall qualify as tax free within the provisions of
Section 351 of the Code; provided, however, that the Company does not assume
any liability or responsibility to any holder of capital stock of the Company
or any other person or entity in the event Section 351 of the Code does not
apply to such transfers of Assets; and
FURTHERMORE, it is the expectation of the Company that the parties to
the Acquisitions and the IPO will contribute Assets to the Company in the
approximate amounts contemplated by the Draft Registration Statement in
exchange for the voting capital stock, and other consideration, including
cash, options, warrants and promissory notes of the Company, in the
approximate amounts contemplated by the Draft Registration Statement.
The shares of voting capital stock and other consideration, including
cash, options, warrants and promissory notes of the Company, deliverable in
the Acquisitions may be subject to adjustment in accordance with the various
acquisition agreements between the Company and the contributing parties. This
Exchange Plan shall not obligate any party to any Acquisition to consummate
such Acquisition other than upon the terms of the definitive acquisition
agreement executed by such party with respect to such Acquisition.
By the execution of the acquisition agreement to which this Exchange
Plan is attached as Annex II, each of the contributing parties thereto
evidences such party's agreement with and adoption of this Exchange Plan.
-2-
ANNEX III
Advanced Communications Group, Inc.
$
5% SUBORDINATED NOTE DUE [ANNIVERSARY DATE OF CLOSING], 1999
DATED: , 1997
------------------
THE SECURITIES REPRESENTED HEREBY WERE NOT ISSUED IN A TRANSACTION
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS.
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED
FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED UNLESS
SUCH SALE OR TRANSFER IS COVERED BY AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS OR, IN THE OPINION OF COUNSEL TO THE
ISSUER, IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT
AND SUCH LAWS.
--------------------
Advanced Communications Group, Inc., a Delaware corporation organized
in September 1997 (the "Company"), for value received, hereby promises to pay
to , or registered assigns, the principal sum of
Dollars ($ ) in one installment on [anniversary date of closing],
1999, in such coin or currency of the United States of America as at the time
of payment shall be legal tender for the payment of public and private debts,
and to pay to the registered holder hereof interest from the date hereof,
annually on [anniversary date of closing] of each year commencing [anniversary
date of closing], 1998, on said principal sum, in like coin and currency, at a
rate per annum of five percent (5%), to Noteholder until payment of said
principal sum has been made or duly provided for; provided, however, that
payment of interest may be made at the option of the Company by wire transfer
of funds to such bank account in the United States as shall be designated in
writing to the Company by the registered holder hereof or by check mailed to
the
address of the registered holder hereof as such address shall appear in the
Note Register maintained by the Company. Interest shall be calculated on the
basis of a 360-day year of twelve 30-day months.
ARTICLE 1.
Defined Terms
SECTION a. Defined Terms. Unless the context otherwise requires,
capitalized terms used herein shall have the meanings ascribed to them in
Article IX.
ARTICLE 2.
General Provisions
SECTION a. Mutilated Destroyed, Lost or Stolen Note. In case this
Note shall become mutilated or be destroyed, lost or stolen, the Company in
its discretion may execute and deliver a new Note, in exchange and
substitution for the mutilated Note or in lieu of and in substitution for the
Note destroyed, lost or stolen. In every case the Noteholder shall furnish to
the Company such security or indemnity as may be required by it to save the
Company harmless, and, in every case of destruction, loss or theft the
Noteholder shall also furnish to the Company evidence to its satisfaction of
the destruction, loss or theft of this Note and of the ownership thereof. Upon
issuance of any substituted Note, the Company may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed
in relation thereto and other expenses connected therewith.
SECTION b. Transfer and Registration of Notes. This Note may be
presented for transfer by surrender hereof at the office of the Company
maintained for that purpose in accordance with the provisions of Section 4.02,
duly endorsed or accompanied by a written instruction of transfer in form
satisfactory to the Company, duly executed by the holder hereof or his
attorney duly authorized in writing. This Note may be transferred in whole,
but not in part. The Company will have no obligation to transfer this Note
unless its requirements are met and such transfer complies with the legend on
the first page of this Note. By its acceptance of this Note, the holder hereof
acknowledges the restrictions on transfer of this Note set forth herein, and
agrees that it will transfer this Note only as provided herein.
The Company shall not be required to register the transfer of this
Note (i) during a period beginning at the opening of business on a day which
is 15 days before the mailing of a notice of redemption of this Note and
ending on the close of business on the day of such mailing, or (ii) if this
-2-
Note has been selected for redemption in whole or in part pursuant to Article
III, except the unredeemed portion of this Note if being redeemed in part.
The Company shall keep or cause to be maintained at the office of the
Company maintained in accordance with the provisions of Section 4.02 a
register (herein sometimes referred to as the "Note Register") in which,
subject to such reasonable regulations as it may prescribe, the Company shall
register the Notes (as defined below).
SECTION c. Aggregate Principal Amount of Notes. This Note is one of a
duly authorized issue of Notes of the Company known as its 5% Subordinated
Notes due [anniversary date of closing], 1999, limited to the aggregate
principal amount of Fifteen Million and No/100 Dollars ($15,000,000.00). As
used herein, the term "Notes" refers to all of such issue of Notes.
SECTION d. Amendment of Notes. Each of the Notes may be amended with
the written consent of the holders of at least a majority in outstanding
principal amount of the Notes; provided that without the written consent of
the holder of this Note, no amendment shall (i) reduce the rate or change the
time for payment of interest on this Note, (ii) reduce the principal of or
change the maturity of this Note, (iii) amend Section 6.01, or (iv) make any
change in Article VII that adversely affects the rights of the holder of this
Note. After an amendment becomes effective, it shall bind the holders and
every subsequent holder of Notes, even if notation of the amendment is not
made on any Note. However, the Company may place an appropriate notation
regarding an amendment on any Note thereafter executed.
ARTICLE 3.
Redemption of Note
SECTION a. Redemption Price. The Company may, at its option, redeem
all or from time to time any part of this Note, upon notice as set forth in
Section 3.02 at a redemption price equal to the principal amount to be
redeemed, together with accrued and unpaid interest on the principal amount to
be redeemed to the date fixed for redemption.
SECTION b. Notice of Redemption. If the Company shall desire to
exercise the right to redeem all or any part of this Note pursuant to Section
3.01, it shall fix a date for redemption and shall mail a notice of such
redemption at least 10 days prior to the date fixed for redemption to the
holder of this Note at the last address of such holder as the same appears on
the Note Register. Such mailing shall be by first class mail. The notice if
mailed in the manner herein provided shall be conclusively presumed to have
been duly given, whether or not the holder receives such notice. In any case,
failure to give such notice by mail or any defect in the notice to the holder
of this Note shall not affect the validity of the proceedings for the
redemption of this Note.
-3-
Each such notice of redemption shall be given in the name of the
Company and shall specify the date fixed for redemption, the principal amount
to be redeemed, the redemption price at which this Note or portion hereof is
to be redeemed, the place of payment, that payment will be made upon
presentation and surrender of this Note and that interest accrued to the date
fixed for redemption will be paid as specified in such notice, and that on and
after said date fixed for redemption interest hereon or on the portions hereof
to be redeemed will cease to accrue. If this Note is to be redeemed in part
only, the notice of redemption shall also state that on and after the date
fixed for redemption, upon surrender of this Note, a new Note in aggregate
principal amount equal to the unredeemed portion hereof will be issued without
charge to the holder.
SECTION c. Payment of Note Called for Redemption. If notice of
redemption has been given as above provided, this Note or the portion of this
Note with respect to which such notice has been given shall become due and
payable on the date and at the place stated in such notice at the applicable
redemption price, together with interest accrued and unpaid to the date fixed
for redemption, and on and after such date (unless the Company shall default
in the payment of this Note or portion hereof to be redeemed at such
redemption price, together with interest accrued to such date) interest on
this Note or portion hereof so called for redemption shall cease to accrue,
and this Note or portion hereof so called for redemption shall be deemed not
to be outstanding and shall not be entitled to any benefit under this Note
except to receive payment of such redemption price, together with accrued
interest to the date fixed for redemption. On presentation and surrender of
this Note on or after the date fixed for redemption at the place of payment in
such notice specified, this Note or the specified portion hereof to be
redeemed shall be paid and redeemed by the Company at the applicable
redemption price, together with interest accrued thereon to the date fixed for
redemption.
ARTICLE 4.
Particular Covenants of the Company
SECTION a. Payment of Principal and Interest on Note. The Company
covenants and agrees that it will duly and punctually pay or cause to be paid
the principal of and the interest on this Note at the place, at the respective
times and in the manner provided herein.
SECTION b. Office for Notices and Payments etc. So long as this Note
remains outstanding, the Company will maintain in the City of Houston, Texas,
an office or agency where this Note may be presented for payment, an office or
agency where this Note may be presented for registration of transfer or
exchange as herein provided, and an office or agency where notices and demands
to or upon the Company in respect of this Note may be served. Until otherwise
designated by the Company in a written notice such offices or agencies shall
be the executive offices of the Company.
-4-
SECTION c. Limitation on Senior Debt. The Company covenants and
agrees that as long as this Note is outstanding it will not permit the
aggregate amount of Senior Indebtedness outstanding to exceed Fifty Million
and No/100 Dollars ($50,000,000.00).
ARTICLE 5.
Immunity of Incorporators, Stockholders,
Officers and Directors
SECTION a. Note Solely Corporate Obligations. No recourse for the
payment of the principal of or interest on this Note, or for any claim based
hereon or otherwise in respect hereof, and no recourse under or upon any
obligation, covenant or agreement of the Company in this Note, or because of
the creation of any indebtedness represented hereby, shall be had against any
incorporator, stockholder, officer or director, as such, past, present or
future, of the Company or of any successor corporation, either directly or
through the Company or any successor corporation, whether by virtue of any
constitution, statute, or rule of law, or by the enforcement of any assessment
or penalty or otherwise; it being expressly understood that all such liability
is hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Note.
ARTICLE 6.
Remedies in Event of Default
SECTION a. Event of Default. In case one or more of the following
Events of Default shall have occurred and be continuing:
i. default in the payment of any installment of interest
upon this Note as and when the same shall become due and payable, and
continuance of such default for a period of 30 days; or
ii. default in the payment of the principal of this Note as
and when the same shall become due and payable either at maturity,
upon redemption, by declaration or otherwise; or
iii. failure on the part of the Company duly to observe or
perform any covenants or agreements (other than a covenant or
agreement the breach or a default in the performance of which is
elsewhere in this Section 6.01 specifically dealt with) on the part
of the Company that continues for a period of 30 days after the date
on which written notice (such written notice to state it is a "Notice
of Default" hereunder) of such failure, requiring the Company
-5-
to remedy the same, shall have been given to the Company and each
holder of any Senior Indebtedness and each entity committed or
obligated to issue or fund any Senior Indebtedness (provided that
such holder or entity has previously given the holders of the Notes
written notice to the effect that it is a holder of Senior
Indebtedness or an entity committed or obligated to issue or fund
Senior Indebtedness (as the case may be) and that such holder or
entity requests that it be given any such notice) by the holder
hereof; or
iv. without the consent of the Company, a court having
jurisdiction shall enter an order for relief with respect to the
Company under the Bankruptcy Code or without the consent of the
Company a court having jurisdiction shall enter a judgment, order or
decree adjudging the Company a bankrupt or insolvent, or enter an
order for relief for reorganiza tion, arrangement, adjustment or
composition of or in respect of the Company under the Bankruptcy Code
or applicable state insolvency law and the continuance of any such
judgment, order or decree unstayed and in effect for a period of 90
consecutive days; or
v. the Company shall institute proceedings for entry of an
order for relief with respect to the Company under the Bankruptcy
Code or for an adjudication of insolvency, or shall consent to the
institution of bankruptcy or insolvency proceedings against it, or
shall file a petition seeking, or seek or consent to reorganization,
arrangement, composition or relief under the Bankruptcy Code or any
applicable state law, or shall consent to the filing of such petition
or to the appointment of a receiver, custodian, liquidator, assignee,
trustee, sequestrator or similar official (other than a custodian
pursuant to 8 Delaware Code ss.226 or any similar statute under other
state laws) of the Company or of substantially all of its property,
or the Company shall make a general assignment for the benefit of
creditors as recognized under the Bankruptcy Code; or
vi. default in the payment of any principal of or interest
on any Senior Indebtedness or on any Pari Passu Debt as and when the
same shall become due and payable and such failure is not cured
within the applicable grace period, if any, or any Senior
Indebtedness or any Pari Passu Debt having an outstanding principal
balance of at least $500,000 shall be declared to be due and payable
prior to the stated maturity thereof;
then and in each and every such case, unless the principal of this Note shall
have already become due and payable, the holders of a majority in outstanding
principal amount of Notes ("Majority Holders") by notice in writing to the
Company and each holder of any Senior Indebtedness and each entity committed
or obligated to issue or fund any Senior Indebtedness (provided that such
holder or entity has previously given the holders of the Notes written notice
to the effect that it is a holder of Senior Indebtedness or an entity
committed or obligated to issue or fund Senior Indebtedness (as the case may
be) and that such holder or entity requests that it be given any such notice),
may declare the principal of all Notes and any accrued interest to the date of
declaration to be due and payable
-6-
immediately, and upon any such declaration the same shall become and shall be
immediately due and payable, subject to Article VII.
SECTION b. Remedies Cumulative and Continuing. All powers and
remedies given by this Article VI to the holders of the Notes shall, to the
extent permitted by law, be deemed cumulative and not exclusive of any other
thereof or of any other powers and remedies available to such holders, by
judicial proceedings or otherwise, to enforce the performance or observance of
the covenants and agreements contained in the Notes, and no delay or omission
of any holder to exercise any right or power accruing upon any default
occurring and continuing as aforesaid, shall impair any such right or power,
or shall be construed to be a waiver of any such default or an acquiescence
therein; and every power and remedy given by this Article VI or by law to the
holders of the Notes may be exercised from time to time, and as often as shall
be deemed expedient, by such holders.
SECTION c. Waiver of Presentment, Demand, Etc. Except as provided
herein, the Company hereby waives presentment and demand for payment, protest,
notice of protest and nonpayment, notice of the intention to accelerate,
notice of acceleration, and agrees that its liability on this Note shall not
be affected by any renewal or extension in the time of payment hereof, by any
indulgences, and hereby consents to any and all renewals, extensions,
indulgences, releases, or changes, regardless of the number of such renewals,
extensions, indulgences, releases, or changes.
ARTICLE 7.
Subordination of Note
SECTION a. Agreement of Subordination. The Company irrevocably
covenants and agrees, and the holder of this Note, by his acceptance thereof,
likewise irrevocably covenants and agrees, that the payment of the principal
of and interest on this Note is hereby expressly subordinated, to the extent
and in the manner hereinafter set forth, to the prior payment in full of all
Senior Indebtedness. The provisions of this Article VII are made for the
benefit of the holders of Senior Indebtedness, and such holders shall, at any
time, be entitled to enforce such provisions against the Company or the holder
hereof. No holder of any Senior Indebtedness shall be deemed to owe any
fiduciary duty or any other obligation to any holder of this Note now or at
any time hereafter.
SECTION b. Payment Over of Proceeds Upon Dissolution, etc. (a) In the
event of (x) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding relative
to the Company or its creditors or its property, (y) any proceeding for
voluntary liquidation, dissolution or other winding up of the Company whether
or not involving insolvency or bankruptcy proceedings, or (z) any assignment
for the benefit of creditors or any marshaling of the assets of the Company,
then and in any such event,
-7-
(1) all Senior Indebtedness (including interest
accruing on such Senior Indebtedness after the date of
filing a petition or other action commencing any such
proceeding) shall first be paid in full, or have provision
made for payment in full to the reasonable satisfaction of
the holder of any Senior Indebtedness, before the holder of
this Note shall be entitled to receive any payment on
account of the principal of or interest on the indebtedness
evidenced by this Note, and
(2) any payment or distribution of assets of the
Company of any kind or character, whether in cash, property
or securities (other than securities of the Company or any
other corporation provided for by a plan of reorganization
or readjustment, provided the rights of the holders of
Senior Indebtedness are not altered by such reorganization
or readjustment, the payment of which is subordinate, at
least to the extent provided in this Article VII with
respect to this Note, to the payment of all Senior
Indebtedness at the time outstanding and to the payment of
all securities issued in exchange therefor to the holders of
Senior Indebtedness at the time outstanding), to which the
holder of this Note would be entitled except for the
provisions of this Article VII, shall be paid by the
liquidating trustee or agent or other person making such
payment or distribution, whether a trustee in bankruptcy, a
receiver or liquidating trustee or other trustee or agent,
directly to the holders of Senior Indebtedness or their
representative or representatives or to the trustee or
trustees under any indenture under which any instruments
evidencing any of such Senior Indebtedness may have been
issued, ratably according to the aggregate amounts remaining
unpaid on account of the principal of and premium, if any,
and interest on, the Senior Indebtedness held or represented
by each, to the extent necessary to make payment in full of
all Senior Indebtedness remaining unpaid and/or outstanding
(as the case may be), after giving effect to any concurrent
payment or distribution, or provision therefor, to the
holders of such Senior Indebtedness.
ii. No payments on account of principal of or interest on
this Note shall be made unless full payment of amounts then due for
principal of (including any sinking fund payment), premium, if any,
and interest on all Senior Indebtedness has been made or otherwise
duly provided for to the reasonable satisfaction of each holder of
any Senior Indebtedness.
iii. In the event and during the continuation of any default
or event of default in respect of any Senior Indebtedness or under
any agreement under which any Senior Indebtedness was issued
continuing beyond the period of grace, if any, specified in such
agreement, then, unless and until such default shall have been cured
or waived or shall have
-8-
ceased to exist, no payment shall be made by the Company and no
application of funds shall be made with respect to the principal of
or interest on this Note.
iv. In the event that, notwithstanding the foregoing, any
payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities (other than
securities of the Company or any other corporation provided for by a
plan of reorganization or readjustment, provided that the rights of
the holders of Senior Indebtedness are not altered by such
reorganization or readjustment, the payment of which is subordinate,
at least to the extent provided in this Article VII with respect to
this Note, to the payment of all Senior Indebtedness at the time
outstanding and to the payment of all securities issued in exchange
therefor to the holders of Senior Indebtedness at the time
outstanding), shall be received by the holder of this Note during the
continuance of any event specified in Sections 7.02(a), 7.02(b) or
7.02(c) prohibiting such payment and before all Senior Indebtedness
is paid in full or provision made for its payment to the reasonable
satisfaction of each holder of any Senior Indebtedness, such payment
or distribution (subject to Section 7.04) shall be immediately paid
by the holder hereof over to the holders of Senior Indebtedness (or
their representative or representatives or to the trustee or trustees
under any indenture under which any instruments evidencing any of
such Senior Indebtedness may have been issued), upon their written
request remaining unpaid or unprovided for as provided in the
foregoing subsection (ii) of Section 7.02(a), for application to the
payment of such Senior Indebtedness until all such Senior
Indebtedness shall have been paid in full, after giving effect to any
concurrent payment or distribution, or provision therefor, to the
holders of such Senior Indebtedness.
v. Subject to the payment in full of all Senior Indebtedness
and the irrevocable and complete termination of all commitments and
obligations to issue or fund any Senior Indebtedness (and not before
such time), the holder of this Note shall be subrogated equally and
ratably with the holders of all other Notes to all rights of the
holders of Senior Indebtedness to receive payments or distributions
of cash, property or securities of the Company applicable to the
Senior Indebtedness until the principal of and interest on this Note
shall be paid in full; and, for purposes of such subrogation, no
payments or distributions to the holders of Senior Indebtedness of
cash, property or securities distributable or paid over to the
holders of Senior Indebtedness under the provisions hereof to which
the holder of this Note or other Notes would be entitled except for
the provisions of this Article VII shall, as between the Company, its
creditors other than the holders of Senior Indebtedness, and the
holder of this Note or of other Notes, be deemed to be a payment by
the Company to or on account of the Senior Indebtedness, it being
understood that the provisions of this Article VII are and are
intended solely for the purposes of defining the relative rights of
the holder of this Note, the holders of other Notes and the holders
of the Senior Indebtedness.
-9-
vi. Nothing contained in this Article VII or elsewhere in
this Note is intended to or shall impair, as between the Company, its
creditors other than the holders of Senior Indebtedness (and the
entities committed or obligated to issue or fund any Senior
Indebtedness), and the holder of this Note, the obligation of the
Company, which is absolute and unconditional, to pay to the holder
hereof the principal of and interest hereon, as and when the same
shall become due and payable in accordance with the terms hereof, or
is intended to or shall affect the relative rights of the holder
hereof and other creditors of the Company other than the holders of
the Senior Indebtedness (and the entities committed or obligated to
issue or fund any Senior Indebtedness), nor shall anything in this
Note prevent the holder from exercising all remedies otherwise
permitted by applicable law upon the happening of any Event of
Default under this Note, subject to the rights, if any, under this
Article VII of the holders of Senior Indebtedness (and the entities
committed or obligated to issue or fund any Senior Indebtedness) in
respect of cash, property or securities of the Company received upon
the exercise of any such remedy.
vii. Without notice to or the consent of the holder of this
Note, the holders of the Senior Indebtedness or the entities
committed or obligated to issue or fund any Senior Indebtedness may
at any time and from time to time, without impairing or releasing the
subordination herein made, change the manner, place or terms of
payment, or change or extend the time of payment of or renew or alter
the Senior Indebtedness or the commitment or obligation to issue or
fund any Senior Indebtedness, or amend or supplement in any manner
any instrument evidencing the Senior Indebtedness or the commitment
or obligation to issue or fund any Senior Indebtedness, any agreement
pursuant to which the Senior Indebtedness was issued or incurred or
any instrument securing or relating to the Senior Indebtedness or the
commitment or obligation to issue or fund any Senior Indebtedness;
release any person liable in any manner for the payment or collection
of the Senior Indebtedness; exercise or refrain from exercising any
rights in respect of the Senior Indebtedness against the Company or
any other person; apply any money or other property paid by any
person or released in any manner to the Senior Indebtedness; accept
or release any security for the Senior Indebtedness; sell, exchange,
release or otherwise deal with any property pledged, mortgaged or
otherwise securing Senior Indebtedness; or exercise or refrain from
exercising any rights against the Company or any other person; all
without thereby impairing in any respect the rights of such holders
of Senior Indebtedness as provided in this Article VII.
SECTION c. No Waiver of Subordination Provision. No right of any
present or future holder of any Senior Indebtedness of the Company to enforce
subordination, as herein provided, shall at any time in any way be prejudiced
or impaired by any act or failure to act on the part of the Company or by any
act or failure to act, in good faith, by any such holder, or by any
noncompliance
-10-
by the Company with the terms, provisions and covenants of this Note,
regardless of any knowledge thereof any such holder may have or be otherwise
charged with.
SECTION d. Payments to Noteholder. Nothing contained in this Article
VII or elsewhere in this Note, shall, however, affect the obligation of the
Company to make, or prevent the Company from making, at any time, except as
provided in Section 7.02, payments of principal of or interest on this Note.
SECTION e. Authorization of Noteholder to Company to Effect
Subordination. The holder of this Note by his acceptance hereof irrevocably
authorizes and directs the Company on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this
Article VII and appoints the Company his attorney-in-fact for such purpose.
SECTION f. All Provisions of Note Qualified by Article VII.
Notwithstanding anything herein contained to the contrary, all the provisions
of this Note shall, except as otherwise provided herein, be subject to the
provisions of this Article VII, so far as the same may be applicable thereto.
ARTICLE 8.
Miscellaneous Provisions
SECTION a. Successors and Assigns of Company Bound. All the
covenants, stipulations, promises and agreements in this Note contained by or
in behalf of the Company shall bind its successors and assigns, whether so
expressed or not.
SECTION b. Notice to Noteholder. When this Note provides for notice
to the holder of any event, such notice shall be sufficiently given (unless
otherwise expressly herein provided) if in writing and mailed, first class,
postage prepaid, to the holder at his address as it appears on the Note
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. Any notice which is mailed to
the holder in the manner herein provided shall be conclusively presumed to
have been duly given. Where this Note provides for notice in any manner, such
notice may be waived in writing by the person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice.
SECTION C. TEXAS CONTRACT. THIS NOTE SHALL BE DEEMED TO BE A CONTRACT
MADE UNDER THE LAWS OF THE STATE OF TEXAS, AND FOR ALL PURPOSES SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF SAID STATE.
-11-
SECTION d. Legal Holidays. In any case where the date of maturity of
interest on or principal of this Note or the date fixed for redemption of this
Note shall not be a Business Day, then payment of interest on or principal of
this Note need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made on the date
of maturity or the date fixed for redemption, and no interest shall accrue for
the period after such prior date.
SECTION e. Severability. In case any provision of this Note shall be
invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
ARTICLE 9.
Definitions
SECTION a. Definitions. The terms defined in this Section 9.01
(except as herein otherwise expressly provided or unless the context otherwise
requires) for all purposes of this Note shall have the respective meanings
specified in this Section 9.01.
"Bankruptcy Code" shall mean the United States Bankruptcy Code, 11
United States Code ss. 101 et seq. or any successor statute thereto.
"Business Day" shall mean any day except a Saturday, a Sunday or a
day on which banking institutions in the City of Houston, Texas are authorized
or required by law to close.
"Indebtedness" shall mean the following, whether outstanding on the
date hereof or hereafter created, incurred, assumed or guaranteed, (a) the
principal of, premium if any, and interest on (i) indebtedness of the Company
for money borrowed, (ii) indebtedness of the Company evidenced by bonds,
notes, debentures or similar obligations, (iii) capitalized lease obligations,
(iv) indebtedness or obligations incurred, assumed or guaranteed by the
Company in connection with the acquisition or improvement of any property or
asset or the acquisition by it or by a Subsidiary of any business, (v)
indebtedness of others of the kinds described in the preceding clauses (i),
(ii), (iii), and (iv), assumed or guaranteed by the Company or in effect
guaranteed by the Company through an agreement to purchase or otherwise, (vi)
obligations which would be classified as liabilities on the balance sheet of
the Company in accordance with generally accepted accounting principles,
evidencing the purchase price for the acquisition of assets of any kind,
tangible or intangible, by the Company or a Subsidiary, except in the ordinary
course of business, and (b) any increases, refundings, renewals,
rearrangements or extensions of and amendments, modifications and supplements
to any indebtedness, liability or obligation described in clause (a) above.
-12-
"Junior Indebtedness" shall mean Indebtedness which, by the terms of
the instrument by which such Indebtedness is created or evidenced, ranks
junior and subordinate in right of payment to the Notes.
"Note" shall mean this Note and any Note issued on exchange or
transfer hereof.
"Noteholder," "holder of this Note" or other similar terms mean any
person in whose name at the time this Note shall be registered in the Note
Register kept for that purpose in accordance with the terms hereof.
"Pari Passu Debt" shall mean any Indebtedness other than (a) Senior
Indebtedness and (b) Junior Indebtedness.
"Senior Bank Lenders" means any commercial lending institution or
group of commercial lending institutions that are or become parties to the
Company's principal working capital, acquisition financing or long-term debt
credit facilities.
"Senior Indebtedness" shall mean whether outstanding on the date
hereof or hereafter created, incurred, assumed or guaranteed, the principal
of, premium if any, and interest on Indebtedness for money borrowed by the
Company in an aggregate amount not exceeding Fifty Million and No/100 Dollars
($50,000,000.00) and owed to Senior Bank Lenders.
"Subsidiary" shall mean any corporation of which the Company, or the
Company and one or more Subsidiaries, or any one or more Subsidiaries,
directly or indirectly own voting securities entitling the holders thereof to
elect a majority of the directors, either at all times or so long as there is
no default or contingency which permits the holders of any other class or
classes of securities to vote for the election of one or more directors.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed by a duly authorized officer and has caused a facsimile or its
corporate seal to be imprinted hereon.
ADVANCED COMMUNICATIONS GROUP, INC.
[SEAL]
By:
--------------------------------
Name:
--------------------------
Title:
-------------------------
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ANNEX IV
ADVANCED COMMUNICATIONS GROUP, INC.
NON-TRANSFERRABLE SERIES D WARRANT
Total Number of Series A Warrants: 500,000 Warrant No. D
Number of Series A Warrants represented by this Warrant Certificate:
This Warrant Certificate certifies that, for value received,
is the registered holder of the number of Warrants set forth above. Each
Warrant entitles the holder thereof, at any time or from time to time after
the closing and (b) 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.
"Acts" means the Securities Act of 1933, as amended, and applicable
state securities laws.
"Agreement" means the Restated Stock Purchase Agreement dated as of
October 1, 1997 by and among Company, Old ACG, Great Western and certain
individuals, including the initial registered holder of this Warrant
Certificate.
"Board of Directors" means the board of directors of the Company (or
any authorized committee thereof).
"Closing" means the consummation of the purchase and sale of the
outstanding capital stock of Great Western as contemplated by the Agreement.
"Closing Date" means the date upon which the Closing occurs.
"Common Stock" means the Common Stock, $.00001 par value per share,
of the Company, or such other class of securities as shall then represent the
common equity of the Company.
"Common Stock Equivalent" means any Convertible Security or any
warrant, option or other right to subscribe for or purchase Common Stock or
any Convertible Security, other than pursuant to Employee Benefit Plans.
"Company" means Advanced Communications Group, Inc., a Delaware
corporation organized in September 1997.
"Conversion Securities" means the Common Stock or other securities or
property purchasable on the exercise of the Warrants.
"Convertible Security" means any security or evidence of indebtedness
that is convertible into or exchangeable for Common Stock.
"Employee Benefit Plans" means all thrift plans, stock purchase
plans, stock bonus plans, stock option plans, employee stock ownership plans
and other incentive or profit sharing arrangements for the benefit of
employees.
"Exercise Price," subject in all circumstances to adjustment in
accordance with Section 3, means $ [IPO Price].
"Expiration Date" means 5:00 p.m., Houston Time on the fifth
anniversary of the closing Date.
"Great Western" means Great Western Directories, Inc., a Texas
corporation.
"Market Price" means the average Price per share of Common Stock for
the 20 Trading Days immediately preceding the date of authorization of the
issuance of any shares of Common Stock by the Board of Directors.
"Old ACG" means ACG, Inc. (formerly Advanced Communications Group,
Inc.), a Delaware corporation organized in June 1996.
"Price" on any day means the reported last sale price per share of
Common Stock regular way on such day or, in case no such sale takes place on
such day, the average of the reported closing bid and asked prices regular
way, in each case on the New York Stock Exchange, or, if the Common Stock is
not listed or admitted to trading on such Exchange, on the American Stock
Exchange, or, if the Common Stock is not listed or admitted to trading on such
Exchange, on the principal national securities exchange on which the Common
Stock is listed or admitted to trading, or, if the Common Stock is not listed
or admitted to trading on any national securities exchange, the average of the
closing bid and asked prices in the over-the-counter market as reported by the
National Association of Securities Dealers' Automated Quotation System, or, if
not so reported, as reported by the National Quotation Bureau, Incorporated,
or any successor thereof, or, if not so reported, the average of the closing
bid and asked prices as furnished by any member of the National Association of
Securities Dealers, Inc. selected from time to time by the Company for that
purpose; or, in all other
-2-
cases, the value established by the Board of Directors in good faith; and the
"average" Price per share for any period shall be determined by dividing the
sum of the Prices determined for each Trading Day in such period by the number
of Trading Days in such period.
"Trading Day" means a day on which the principal national securities
exchange on which the Common Stock is listed or admitted to trading is open
for the transaction of business or, if the Common Stock is not listed or
admitted to trading on any national securities exchange, a Monday, Tuesday,
Wednesday, Thursday or Friday on which banking institutions in New York City
are not authorized or obligated by law or executive order to close.
"Warrants" means the Series D Warrants represented by this Warrant
Certificate.
"Warrant Shares" means the shares of Common Stock and other
securities, property or cash receivable upon the exercise of the Warrants.
1. EXERCISE OF WARRANTS. (a) The Warrants evidenced by this Warrant
Certificate may be exercised in whole or in part 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 the holder of this Warrant
Certificate at any time exercises less than all the Warrants evidenced by this
Warrant Certificate, the Company shall issue to such holder a Warrant
Certificate identical in form to this Warrant Certificate, but evidencing a
number of Warrants equal to the number of Warrants originally represented by
this Warrant Certificate less the 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 the holder shall become
void and of no effect.
2. RESTRICTIONS ON TRANSFER. THE WARRANTS EVIDENCED BY THIS WARRANT
CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED,
PLEDGED, DISTRIBUTED OR OTHERWISE DISPOSED OF EXCEPT IN THE LIMITED INSTANCES
PROVIDED IN SECTION 14 OF THE AGREEMENT. ACCORDINGLY, SUCH WARRANTS HAVE NOT
BEEN REGISTERED UNDER THE ACTS IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION
PROVISIONS THEREOF. The holder hereof acknowledges that the Conversion
Securities may not be directly or indirectly sold, transferred or otherwise
disposed of in violation of the provisions of the Acts. Any purported sale,
transfer or other disposition of this Warrant Certificate, the Warrants
evidenced hereby or the Conversion Securities in violation of this provision
shall be void and the Company shall not be required to recognize the same.
Compliance with this provision is the responsibility of the holder. Each
certificate representing Conversion Securities shall bear a legend
substantially similar to the bold-faced legend appearing in Section 15 of the
Agreement. Reference
-3-
is made to Sections 14, 15 and 16 of the Agreement that relate to the
non-transferability of the Warrants, the type of legend that shall be
imprinted on Conversion Securities and the rights of the holders of Conversion
Securities to secure registration of their securities under the Acts under
certain circumstances. Such sections are incorporated by reference herein. The
Company shall deem and treat the registered holder of this Warrant Certificate
as the true and lawful owner of the Warrants evidenced hereby for all
purposes, any claims of another person to the contrary notwithstanding.
3. ANTIDILUTION ADJUSTMENTS. The shares of Common Stock purchasable
on exercise of the Warrants evidenced by this Warrant Certificate are shares
of Common Stock as constituted as of the Closing Date. The number and kind of
securities 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
after the Closing Date (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), the holder of the Warrants
evidenced by this Warrant Certificate 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 such 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 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, at any
time after the Closing Date, 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
-4-
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, at any time after the
Closing Date, 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) Certain Issuances of Securities. If the Company at any
time after the Closing Date shall issue any additional shares of Common Stock
(otherwise than as provided in paragraphs (a) through (b) of this Section 3)
at a price per share less than the Market Price, then the Exercise Price upon
each such issuance shall be adjusted to that price determined by multiplying
the Exercise Price by a fraction:
i. the numerator of which shall be the sum of (1)
the number of shares of Common Stock outstanding immediately prior to
the issuance of such additional shares of Common Stock multiplied by
the Market Price, and (2) the consideration, if any, received and
deemed received by the Company upon the issuance of such additional
shares of Common Stock, and
ii. the denominator of which shall be the Market
Price multiplied by the total number of shares of Common Stock
outstanding immediately after the issuance of such additional shares
of Common Stock.
No adjustments of the Exercise Price shall be made under paragraph
(c) of this Section 3 upon the issuance of any additional shares of Common
Stock that (v) are issued pursuant to Employee Benefit Plans that otherwise
would cause an adjustment under paragraph (c) of this Section 3; provided that
the aggregate number of shares of Common Stock so issued (including the shares
issued pursuant to any options, rights or warrants or convertible or
exchangeable securities issued under such Employee Benefit Plans containing
the right to purchase shares of Common Stock) pursuant to Employee Benefit
Plans shall not exceed 10% of the Company's outstanding Common Stock (on a
fully diluted basis using the treasury stock method) at the time of such
issuance; (w) are issued pursuant to any Other Warrant or Common Stock
Equivalent (i) which was outstanding on the Closing Date or (ii) if upon the
issuance of any such Common Stock Equivalent, any such adjustments shall
previously have been made pursuant to paragraph (d) of this Section 3 or (iii)
if no adjustment was required pursuant to paragraph (d) of this Section 3.
-5-
(d) Common Stock Equivalents. If the Company shall, after
the Closing Date, issue any Common Stock Equivalent, or if, after any such
issuance, the price per share for which additional shares of Common Stock may
be issuable thereunder is amended, then the Exercise Price upon each such
issuance or amendment shall be adjusted as provided in paragraph (c) of this
Section 3 on the basis that (i) the maximum number of additional shares of
Common Stock issuable pursuant to all such Common Stock Equivalents shall be
deemed to have been issued as of the earlier of (a) the date on which the
Company shall enter into a firm contract for the issuance of such Common Stock
Equivalent, or (b) the date of actual issuance of such Common Stock
Equivalent; and (ii) the aggregate consideration for such maximum number of
additional shares of Common Stock shall be deemed to be the minimum
consideration received and receivable by the Company for the issuance of such
additional shares of Common Stock pursuant to such Common Stock Equivalent;
provided, however, that no adjustment shall be made pursuant to paragraph (d)
of this Section 3 unless the consideration received and receivable by the
Company per share of Common Stock for the issuance of such additional shares
of Common Stock pursuant to such Common Stock Equivalent is less than the
Market Price. No adjustment of the Exercise Price shall be made under
paragraph (d) of this Section 3 upon the issuance of any Convertible Security
which is issued pursuant to the exercise of any warrants or other subscription
or purchase rights therefor, if any adjustment shall previously have been made
in the Exercise Price then in effect upon the issuance of such warrants or
other rights pursuant to paragraph (d) of this Section 3.
(e) Miscellaneous. The following provisions shall be
applicable to the making of adjustments in the Exercise Price hereinbefore
provided in this Section 3:
i. The consideration received by the Company shall
be deemed to be the following: (I) to the extent that any additional
shares of Common Stock or any Common Stock Equivalent shall be issued
for cash consideration, the consideration received by the Company
therefor, or, if such additional shares of Common Stock or Common
Stock Equivalent are offered by the Company for subscription, the
subscription price, or, if such additional shares of Common Stock or
Common Stock Equivalent are sold to underwriters or dealers for
public offering without a subscription offering, the initial public
offering price, in any such case excluding any amounts paid or
receivable for accrued interest or accrued dividends and without
deduction of any compensation, discounts, commissions or expenses
paid or incurred by the Company for and in the underwriting of, or
otherwise in connection with, the issue thereof; (II) to the extent
that such issuance shall be for a consideration other than cash,
then, except as herein otherwise expressly provided, the fair value
of such consideration at the time of such issuance as determined in
good faith by the Board of Directors, as evidenced by a certified
resolution of such Board of Directors delivered to the holder of this
Warrant Certificate setting forth such determination. The
consideration for any additional shares of Common Stock issuable
pursuant to any Common Stock Equivalent shall be the consideration
received by the Company for issuing such Common Stock
-6-
Equivalent, plus the additional consideration payable to the Company
upon the exercise, conversion or exchange of such Common Stock
Equivalent. In case of the issuance at any time of any additional
shares of Common Stock or Common Stock Equivalent in payment or
satisfaction of any dividend upon any class of stock other than
Common Stock, the Company shall be deemed to have received for such
additional shares of Common Stock or Common Stock Equivalent (which
shall not be deemed to be a dividend payable in, or other
distribution of, Common Stock under paragraph (b) of this Section 3)
consideration equal to the amount of such dividend so paid or
satisfied.
ii. Upon the expiration of the right to convert,
exchange or exercise any Common Stock Equivalent the issuance of
which effected an adjustment in the Exercise Price, if any such
Common Stock Equivalent shall not have been converted, exercised or
exchanged, the number of shares of Common Stock deemed to be issued
and outstanding because they were issuable upon conversion, exchange
or exercise of any such Common Stock Equivalent shall no longer be
computed as set forth above, and the Exercise Price shall forthwith
be readjusted and thereafter be the price which it would have been
(but reflecting any other adjustments in the Exercise Price made
pursuant to the provisions of paragraph (c) of this Section 3 after
the issuance of such Common Stock Equivalent) had the adjustment of
the Exercise Price made upon the issuance or sale of such Common
Stock Equivalent been made on the basis of the issuance only of the
number of additional shares of Common Stock actually issued upon
exercise, conversion or exchange of such Common Stock Equivalent and
thereupon only the number of additional shares of Common Stock
actually so issued shall be deemed to have been issued and only the
consideration actually received by the Company (computed as in
subparagraph (i) of paragraph (e) of this Section 3) shall be deemed
to have been received by the Company.
iii. The number of shares of Common Stock at any
time outstanding shall not include any shares thereof then directly
or indirectly owned or held by or for the account of the Company or
its Subsidiaries (as defined in the Agreement).
iv. For the purposes of this Section 3, the term
"shares of Common Stock" shall mean shares of (i) the class of stock
designated as the Common Stock of the Company at the Closing Date or
(ii) any other class of stock resulting from successive changes or
reclassifications of such shares consisting solely of changes in par
value, or from par value to no par value, or from no par value to par
value. If at any time, because of an adjustment pursuant to paragraph
(a) of this Section 3, the Warrants shall entitle the holders to
purchase any securities other than shares of Common Stock, thereafter
the number of such other securities so purchasable upon exercise of
each Warrant and the Exercise Price of such securities shall be
subject to adjustment from time to time in a manner and on terms as
nearly
-7-
equivalent as practicable to the provisions with respect to the
Warrant Shares contained in this Section 3.
(f) 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. NOTICE OF 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 prepare and mail to
the holder hereof a certificate setting forth such adjusted Exercise Price and
showing in reasonable detail the facts upon which such adjustment is based.
5. VOLUNTARY REDUCTION. The Company may make such decreases in the
Exercise Price as shall be determined by it, as evidenced by a certified
resolution of the Board of Directors delivered to the holders, to be advisable
to avoid or diminish any income tax to the holder resulting from any dividend
or distribution of stock or issuance of rights or warrants to purchase or
subscribe for stock or from any event treated as such for income tax purposes.
Whenever the Exercise Price is reduced, the Company shall mail to the holder a
notice of the reduction at least 15 days before the date the reduced Exercise
Price takes effect, stating the reduced Exercise Price and the period for
which such reduced Exercise Price will be in effect.
6. NOTICES TO WARRANT HOLDER. In the event:
(a) of any consolidation or merger to which the Company is a
party and for which approval of any stockholders of the Company is required,
or 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
(d) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company;
-8-
then the Company shall cause to be sent to the holder hereof, 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.
7. REPORTS TO HOLDERS. The Company will cause to be delivered, by
first-class mail, postage prepaid, to the holder at such holder's address
appearing hereon, or such other address as the holder shall specify, a copy of
any reports delivered by the Company to the holders of Common Stock.
8. 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.
9. NO RIGHTS AS STOCKHOLDER. The holder of the Warrants evidenced by
this Warrant Certificate 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 the holder of the Warrants evidenced by this Warrant
Certificate are limited to those expressed herein.
-9-
10. 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 the holder at the following address:
Great Western Directories, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
and, if to the Company:
Advanced Communications Group, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Chairman and Chief Executive Officer
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
11. 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 , 1997 by its Chairman and Chief
Executive Officer, thereunto duly authorized.
ADVANCED COMMUNICATIONS GROUP, INC.
By:
-------------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Chairman and Chief Executive Officer
-10-
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.
-11-
ANNEX V
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into on ,
1997, by ▇▇▇▇▇▇▇ ▇'▇▇▇▇ ("Executive") and Great Western Directories, Inc.,
a Texas corporation ("Company") (collectively referred to as the "Parties").
Company and Executive 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 Executive and Company, Company
employs Executive, and Executive accepts employment subject to the terms and
conditions of this Agreement. The Company is a wholly-owned subsidiary of
Advanced Communications Group, Inc., a Delaware corporation ("ACG"). Unless
the context otherwise clearly requires, all references to ACG in this
Agreement shall include ACG, Company and ACG's other subsidiaries.
2. Term.
This Agreement shall commence and become effective on the date hereof and end
on the third 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. For purposes of this Agreement, "Remaining Term"
shall mean the number of months (or portion thereof) remaining between the
date such determination is made and the then scheduled expiration date of this
Agreement.
3. Compensation and other Benefits.
3.1 As compensation for his services to Company under this
Agreement, Company shall pay to Executive during the term of
this Agreement a base salary ("Base Salary") of not less
than $300,000 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 other executives of Company for any
executive benefit plans.
3.2 Executive will be entitled to a reasonable period of paid
vacation annually during the term of this Agreement
consistent with historical practice.
3.3 Executive shall receive benefits commensurate with his level
of employment under any health plan of ACG.
3.4 Executive shall be entitled to the use of a Company credit
card for Company related expenses.
3.5 After the first twelve consecutive months of employment
under this Agreement, and after every consecutive
twelve-month period thereafter, Executive shall be eligible
to receive a potential cash bonus up to 50% of Executive's
Base Salary ("Bonus") to be based upon his performance as
determined by the Compensation Committee of the Board of
Directors ("Compensation Committee") of ACG. Executive
agrees that the decision as to whether to award a Bonus, the
percentage amount thereof and the Executive's Base Salary
(but in no event less than $300,000) for each subsequent
year will be made by the Compensation Committee and will be
based upon the criteria set by such committee.
3.6 Executive will be awarded 150,000 options to acquire common
stock in ACG at a price equal to the price to public
reflected in the final prospectus relating to ACG's initial
underwritten public offering of its common stock. The
options shall have a term of five years and shall become
exercisable in 25% increments on each anniversary date of
the date of this Agreement. Accordingly, the options shall
become fully vested four years from the date of this
Agreement. The options shall, except as provided herein, be
subject to such terms and conditions as may be prescribed by
the Compensation Committee.
4. Duties and Extent of Service.
Executive shall hold the office of President of Company. Executive agrees to
perform the duties incidental to his position, as amplified from time to time
by the Chief Executive Officer of ACG and in a manner consistent with the
discharge of such duties prior to the purchase of Company by ACG. Executive's
office shall be located at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇. Executive
shall devote such time, attention, and energy to the business of Company as
he, in his sole discretion, believes is reasonably necessary for him to supply
overall strategic direction to the Company, but in no event shall Executive be
required to devote more time, attention and energy to the affairs of Company
than he devoted prior to the date of this Agreement. In no event, however,
shall Executive take any action inconsistent with Executive's relationship and
responsibilities as a Company executive, or
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which is intended, or may be reasonably expected, to harm the reputation,
business, prospects, or operations of ACG.
5. Protection of Confidential Information and Executive Non-Competition.
5.1 Executive 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
capabilities and processes; customer account and credit
data; referral sources; computer programs and software;
information relating to confidential or secret designs,
processes, formulae, plans, devices, or materials of ACG;
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; contracts, leases, marketing agreements, sales
executive 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; provided, however, that
Confidential Information shall not include any of the
foregoing insofar as they relate to Big Stuff, Inc.
5.2 Executive acknowledges and agrees that this Confidential
Information constitutes valuable, special, and unique
property of ACG.
5.3 Executive will not, at any time during or after the term of
this Agreement or his employment with Company, disclose any
Confidential Information to any person, firm, partnership,
association, company, corporation or other entity
(collectively, a "Person") for any reason or purpose.
5.4 The foregoing restrictions shall not apply to: (a) any
information in Executive's possession before its disclosure
to Executive 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 Executive. The
Confidential Information disclosed to Executive 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 Executive's
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possession, or merely because portions thereof are in the
public domain or in Executive's possession.
5.5 To protect the confidentiality of the Confidential
Information, Executive further agrees that while employed by
Company and for a period of 36 calendar months immediately
after the termination of this Agreement or his employment
with Company, regardless of whether such termination of
employment is voluntary or involuntary, he will not, for
himself, or on behalf of any other Person, (i) generally
compete in any manner whatsoever with ACG or solicit,
accept, divert, or take away from ACG the business of any
Person; (ii) directly or indirectly induce or attempt to
influence any executive, 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 the sale or
marketing of yellow page publishing services,
telecommunication services and natural gas or electrical
goods and services in the States of Arkansas, California
Kansas, Missouri, Oklahoma or Texas ("Proscribed Territory")
during the term of this Agreement or Executive's employment
with Company; provided, however, that notwithstanding the
foregoing, Executive shall be relieved of the limitations
imposed upon his activities by this Paragraph 5.5 in the
event that his employment is terminated pursuant to
subparagraph (d), (e) and (g) of Paragraph 6.1. The
territory in which Executive shall not compete with ACG as
outlined in this Paragraph 5.5 shall consist of the
Proscribed Territory.
5.6 Executive 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 Company for sales and management,
including the special training, knowledge, and confidential
information that has been or will be acquired in the course
of such employment, will give Executive distinct and
substantial advantages for potential sales and management
activities concerning such products and services. Executive
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 Executive 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 Executive. Executive therefore agrees that the
limitations as to time, geographic area,
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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. Executive also agrees that in light of the
facts acknowledged above, the substantial investment of ACG
in acquiring and developing its business and providing
special training to Executive, and the certain and
substantial harm that ACG would suffer if Executive 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 Executive might experience by
complying with its terms. Executive 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 Executive 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 Executive of the
provisions of this Paragraph 5, Executive 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
Executive or his agents, without showing any evidence of
actual monetary loss resulting from such breach, including,
but not limited to, restraining Executive from using or
disclosing, in whole or in part, such Confidential
Information or trade secrets; rendering any services to any
Person 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 attorneys'
fees from Executive.
6. Termination of Employment.
6.1 Executive'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.
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(b) Death or Disability of Executive: If Executive dies
or becomes disabled (i.e., such that he no longer
is reasonably able to perform his duties as
contemplated by this Agreement), Company shall pay
to Executive, or to the estate of Executive if he
dies, in a lump sum that part of his Base Salary
which would otherwise be payable to Executive
during the Remaining Term, after giving effect to
accrued sick leave benefits and accrued vacation
time, if any. Upon such payment, as well as
applicable insurance benefits, if any, all
obligations of Company to Executive or his estate
shall be fully satisfied, and this Agreement shall
terminate.
(c) Voluntary Resignation of Executive: If Executive
voluntarily resigns prior to the end of the term of
this Agreement, this Agreement shall terminate
immediately, and Company shall pay to Executive
that part of his Base Salary which would otherwise
be payable to Executive through the effective date
of his resignation. Upon such payment, all
obligations in any manner whatsoever of Company to
Executive shall be fully satisfied.
(d) Coerced Resignation of Executive. If Executive
resigns prior to the end of the term of this
Agreement under circumstances that he reasonably
believes were contrived by Company in order to
elicit his resignation, and if the Compensation
Committee of ACG's Board of Directors in good faith
concludes that Executive's belief is well-founded,
Company will continue to provide Executive with his
monthly compensation and benefits for the Remaining
Term.
(e) Change in Ownership, Management, or Executive's
Responsibilities: If there is a change in the
ownership of Company or the senior management staff
of ACG, and either of these changes significantly
alters Executive's job responsibilities or
compensation, Executive may resign from his
position within 60 days of such a change. If
Executive resigns pursuant to this paragraph,
Company will continue to provide Executive with his
monthly compensation and benefits for the Remaining
Term.
(f) Termination by the Company "With Cause." If
Executive (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; (v) violates any policies of ACG
as
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outlined in any ACG policy handbook; and/or (vi)
fails, in the reasonable opinion of the
Compensation Committee of ACG's Board of Directors,
to devote sufficient time to the affairs of Company
to merit his continued retention as President of
Company. Company may terminate the employment of
Executive with cause. If Executive is terminated
"with cause," Executive shall not be entitled to
receive any further salary or benefits under this
Agreement other than payment for that part of
Executive's compensation that would otherwise be
payable to Executive through the last date of his
employment with Company. Upon such payment, all
obligations of Company to Executive shall be fully
satisfied, and this Agreement will terminate.
Executive shall not be entitled to receive any
accrued vacation pay if his termination is "with
cause."
(g) Termination by the Company Without Cause. In the
event Company terminates Executive's employment for
any reason other than described in (f) above,
Executive shall be entitled to that part of the
Base Salary and benefits payable to Executive
through the last date of his employment and such
compensation and benefits shall continue thereafter
for the Remaining Term.
6.2 Termination of this Agreement shall not relieve Executive of
any continuing obligations expressly provided in this
Agreement, including, without limitation, those set forth in
Paragraphs 5.1 through 5.6.
6.3 Upon confirmation by Company or determination by arbitration
pursuant to Section 9, that Executive was terminated
pursuant to a coerced resignation pursuant to Section
6.1(d), a change in control pursuant to Section 6.1(e), or a
termination without cause pursuant to Section 6.1(g), any
employee stock options held by Executive to purchase
outstanding securities of ACG shall become fully vested.
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 Executive or furnished to
Executive while in the employ of Company shall be the sole
and exclusive property of ACG, and none of such data,
drawings or other records and written material, or copies
thereof, shall be retained by Executive upon termination of
his
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employment. This ACG property shall not be removed from
Company premises without Company's prior written consent.
7.2 Upon termination of this Agreement or whenever requested by
Company, Executive immediately shall deliver to Company all
of the ACG property or any of ACG's documents in Executive's
possession or under Executive's control, including, but not
limited to, all documents or data, Confidential Information,
accounting records, computer terminals, data, discs,
printouts and tapes and accounting machines provided by
Company. No copies of any such data shall be retained by
Executive.
8. Notices.
Any notice required or permitted to be given under this Agreement shall be in
writing and addressed to Executive at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, and to Company, c/o ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, 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 Executive or Company concerning the subject matter contained in
this Agreement (other than action by Company seeking an injunction pursuant to
Paragraph 5.7), including, but not limited to, Executive's employment,
termination from, and/or affiliation with Company, shall be settled by
arbitration in Denver, Colorado, 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.
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10. Miscellaneous.
10.1 The rights and obligations of Company under this Agreement
shall inure to the benefit of and shall be binding upon the
successors and assigns of Company. This Agreement shall be
binding upon the Executive and his agents, heirs, executors,
administrators and legal representatives. The rights and
obligations of Executive hereunder shall not be assignable
by Executive.
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
Company, Executive and ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ in connection with
the subject matter hereof.
10.5 The waiver by Company of a breach of any provision of this
Agreement by Executive shall not operate or be construed as
a waiver by Company of any subsequent breach by Executive.
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
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.
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GREAT WESTERN DIRECTORIES, INC.
By
-------------------------------- --------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇'▇▇▇▇
Its: Chairman and Chief Executive Officer
"COMPANY" "EXECUTIVE"
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ANNEX VI
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into on ,
1997, by ▇▇▇▇▇ ▇▇▇▇▇▇▇ ("Executive") and Great Western Directories, Inc.,
a Texas corporation ("Company") (collectively referred to as the "Parties").
Company and Executive 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 Executive and Company, Company
employs Executive, and Executive accepts employment subject to the terms and
conditions of this Agreement. The Company is a wholly-owned subsidiary of
Advanced Communications Group, Inc., a Delaware corporation ("ACG"). Unless
the context otherwise clearly requires, all references to ACG in this
Agreement shall include ACG, Company and ACG's other subsidiaries.
2. Term.
This Agreement shall commence and become effective on the date hereof and end
on the third 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 Company under this
Agreement, Company shall pay to Executive during the term of
this Agreement a base salary ("Base Salary") of not less
than $175,000 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 other executives of Company for any
executive benefit plans.
3.2 Executive will be entitled to a reasonable period of paid
vacation annually during the term of this Agreement
consistent with historical practice.
3.3 Executive shall receive benefits commensurate with his level
of employment under any health plan of ACG.
3.4 Executive shall be entitled to the use of a Company credit
card for Company related expenses.
3.5 After the first twelve consecutive months of employment
under this Agreement, and after every consecutive
twelve-month period thereafter, Executive shall be eligible
to receive a potential cash bonus up to 50% of Executive's
Base Salary ("Bonus") to be based upon his performance as
determined by the Compensation Committee of the Board of
Directors ("Compensation Committee") of ACG. Executive
agrees that the decision as to whether to award a Bonus, the
percentage amount thereof and the Executive's Base Salary
(but in no event less than $175,000) for each subsequent
year will be made by the Compensation Committee and will be
based upon the criteria set by such committee.
3.6 Executive will be awarded 87,000 options to acquire common
stock in ACG at a price equal to the price to public
reflected in the final prospectus relating to ACG's initial
underwritten public offering of its common stock. The
options shall have a term of five years and shall become
exercisable in 25% increments on each anniversary date of
the date of this Agreement. Accordingly, the options shall
become fully vested four years from the date of this
Agreement. The options shall, except as provided herein, be
subject to such terms and conditions as may be prescribed by
the Compensation Committee.
4. Duties and Extent of Service.
Executive shall hold the office of of Company. Executive agrees to
perform the duties incidental to his position, as determined from time to time
by the Chief Executive Officer of ACG. Executive shall devote such time,
attention, and energy to the business of Company as are required to perform
his duties and representatives 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 ACG. In any event, however,
Executive shall not take any action inconsistent with Executive's relationship
and responsibilities as a Company executive, or take any action which is
intended, or may be reasonably expected, to harm the reputation, business,
prospects, or operations of ACG.
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5. Protection of Confidential Information and Executive Non-Competition.
5.1 Executive 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
capabilities and processes; customer account and credit
data; referral sources; computer programs and software;
information relating to confidential or secret designs,
processes, formulae, plans, devices, or materials of ACG;
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; contracts, leases, marketing agreements, sales
executive 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 Executive acknowledges and agrees that this Confidential
Information constitutes valuable, special, and unique
property of ACG.
5.3 Executive will not, at any time during or after the term of
this Agreement or his employment with Company, disclose any
Confidential Information to any person, firm, partnership,
association, company, corporation or other entity
(collectively, a "Person") for any reason or purpose.
5.4 The foregoing restrictions shall not apply to: (a) any
information in Executive's possession before its disclosure
to Executive 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 Executive. The
Confidential Information disclosed to Executive 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 Executive's
possession; or merely because portions thereof are in the
public domain or in Executive's possession.
5.5 To protect the confidentiality of the Confidential
Information, Executive further agrees that while employed by
Company and for a period of 36 calendar months immediately
after the termination of this Agreement or his
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employment with Company, regardless of whether such
termination of employment is voluntary or involuntary, he
will not, for himself, or on behalf of any other Person (i)
generally compete in any manner whatsoever with ACG or
solicit, accept, divert, or take away from ACG the business
of any Person; (ii) directly or indirectly induce or attempt
to influence any executive, 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 the sale or
marketing of yellow page publishing services,
telecommunication services and natural gas or electrical
goods and services in the States of Arkansas, California,
Kansas, Missouri, Oklahoma or Texas ("Proscribed Territory")
during the term of this Agreement or Executive's employment
with Company. The territory in which Executive shall not
compete with ACG as outlined in this Paragraph 5.5 shall
consist of the Proscribed Territory.
5.6 Executive 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 Company for sales and management,
including the special training, knowledge, and confidential
information that has been or will be acquired in the course
of such employment, will give Executive distinct and
substantial advantages for potential sales and management
activities concerning such products and services. Executive
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 Executive 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 Executive. Executive 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.
Executive also agrees that in light of the facts
acknowledged above, the substantial investment of ACG in
acquiring and developing its business and providing special
training to Executive, and the certain and substantial harm
that ACG would suffer if Executive 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 Executive might experience by complying with its
terms. Executive also agrees that, if any provision of the
covenant set forth in Paragraph 5.5 is
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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 Executive 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 Executive of the
provisions of this Paragraph 5, Executive 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
Executive or his agents, without showing any evidence of
actual monetary loss resulting from such breach, including,
but not limited to, restraining Executive from using or
disclosing, in whole or in part, such Confidential
Information or trade secrets; rendering any services to any
Person 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 attorneys'
fees from Executive.
6. Termination of Employment.
6.1 Executive'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 Executive: If Executive dies
or becomes disabled (i.e., such that he no longer
is reasonably able to perform his duties as
contemplated by this Agreement), Company shall pay
to Executive, or to the estate of Executive if he
dies, that part of his Base Salary which would
otherwise be payable to Executive 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. Upon
such payment, as well as applicable insurance
benefits, if any, all obligations of Company to
Executive or his estate shall be fully satisfied,
and this Agreement shall terminate.
-5-
(c) Resignation of Executive: If Executive resigns
prior to the end of the term of this Agreement,
this Agreement shall terminate immediately, and
Company shall pay to Executive that part of his
Base Salary which would otherwise be payable to
Executive through the effective date of his
resignation. Upon such payment, all obligations in
any manner whatsoever of Company to Executive shall
be fully satisfied.
(d) Change in Ownership, Management, or Executive's
Responsibilities: If there is a change in the
ownership of Company or the senior management staff
of ACG, and either of these changes significantly
alters Executive's job responsibilities or
compensation, Executive may resign from his
position within 60 days of such a change. If
Executive resigns pursuant to this paragraph,
Company will continue to provide Executive with his
monthly compensation and benefits for a period of
one year after the initial date of any such change.
Upon completion of such payments, all obligations
in any manner whatsoever of Company to Executive
shall be fully satisfied.
(e) Termination by the Company "With Cause." If
Executive (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,
Company may terminate the employment of Executive
with cause. If Executive is terminated "with
cause," Executive shall not be entitled to receive
any further salary or benefits under this Agreement
other than payment for that part of Executive's
compensation that would otherwise be payable to
Executive through the last date of his employment
with Company. Upon such payment, all obligations of
Company to Executive shall be fully satisfied, and
this Agreement will terminate. Executive shall not
be entitled to receive any accrued vacation pay if
his termination is "with cause."
(f) Termination by the Company Without Cause. In the
event Company terminates Executive's employment for
any reason other than described in (e) above,
Executive shall be entitled to that part of the
Base Salary and benefits payable to Executive
through the last date of his employment and such
compensation and benefits shall continue thereafter
for a period of six months from termination. Upon
completion of such payments, all obligations in any
manner whatsoever of Company to Executive shall be
fully satisfied.
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6.2 Termination of this Agreement shall not relieve Executive 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 Executive or furnished to
Executive while in the employ of Company shall be the sole
and exclusive property of ACG, and none of such data,
drawings or other records and written material, or copies
thereof, shall be retained by Executive upon termination of
his employment. This ACG property shall not be removed from
Company premises without the Company's prior written
consent.
7.2 Upon termination of this Agreement or whenever requested by
Company, Executive immediately shall deliver to Company all
of the ACG property or any of ACG's documents in Executive's
possession or under Executive's control, including, but not
limited to, all documents or data, Confidential Information,
accounting records, computer terminals, data, discs,
printouts and tapes and accounting machines provided by
Company. No copies of any such data shall be retained by
Executive.
8. Notices.
Any notice required or permitted to be given under this Agreement shall be in
writing and addressed to Executive at , ,
, , and to Company, c/o ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, 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.
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9. Arbitration.
Exclusive jurisdiction with respect to any dispute, controversy, or claim
brought by Executive or Company concerning the subject matter contained in
this Agreement (other than action by Company seeking an injunction pursuant to
Paragraph 5.7), including, but not limited to, Executive's employment,
termination from, and/or affiliation with Company, shall be settled by
arbitration in Denver, Colorado 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.
10. Miscellaneous.
10.1 The rights and obligations of Company under this Agreement
shall inure to the benefit of and shall be binding upon the
successors and assigns of Company. This Agreement shall be
binding upon the Executive and his agents, heirs, executors,
administrators and legal representatives. The rights and
obligations of Executive hereunder shall not be assignable
by Executive.
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
Company, Executive and ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ in connection with
the subject matter hereof.
10.5 The waiver by Company of a breach of any provision of this
Agreement by Executive shall not operate or be construed as
a waiver by Company of any subsequent breach by Executive.
-8-
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
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.
GREAT WESTERN DIRECTORIES, INC.
By
------------------------------------ ------------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Its: Chairman and Chief Executive Officer
"COMPANY" "EXECUTIVE"
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ANNEX VII
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into on ,
1997, by ("Executive") and Great Western Directories,
Inc., a Texas corporation ("Company") (collectively referred to as the
"Parties"). Company and Executive 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 Executive and Company, Company
employs Executive, and Executive accepts employment subject to the terms and
conditions of this Agreement. The Company is a wholly-owned subsidiary of
Advanced Communications Group, Inc., a Delaware corporation ("ACG"). Unless
the context otherwise clearly requires, all references to ACG in this
Agreement shall include ACG, Company and ACG's other subsidiaries.
2. Term.
This Agreement shall commence and become effective on the date hereof and end
on the third 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 Company under this
Agreement, Company shall pay to Executive during the term of
this Agreement a base salary ("Base Salary") of not less
than $ 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 other executives of Company for any
executive benefit plans.
3.2 Executive will be entitled to a reasonable period of paid
vacation annually during the term of this Agreement
consistent with historical practice.
3.3 Executive shall receive benefits commensurate with his level
of employment under any health plan of ACG.
3.4 Executive shall be entitled to the use of a Company credit
card for Company related expenses.
4. Duties and Extent of Service.
Executive shall hold the office of of Company. Executive agrees to
perform the duties incidental to his position, as determined from time to time
by the Chief Executive Officer of ACG. Executive shall devote such time,
attention, and energy to the business of Company as are required to perform
his duties and representatives 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 ACG. In any event, however,
Executive shall not take any action inconsistent with Executive's relationship
and responsibilities as a Company executive, 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 Executive Non-Competition.
5.1 Executive 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
capabilities and processes; customer account and credit
data; referral sources; computer programs and software;
information relating to confidential or secret designs,
processes, formulae, plans, devices, or materials of ACG;
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; contracts, leases, marketing agreements, sales
executive 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 Executive acknowledges and agrees that this Confidential
Information constitutes valuable, special, and unique
property of ACG.
5.3 Executive will not, at any time during or after the term of
this Agreement or his employment with Company, disclose any
Confidential Information to any
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person, firm, partnership, association, company, corporation
or other entity (collectively, a "Person") for any reason or
purpose.
5.4 The foregoing restrictions shall not apply to: (a) any
information in Executive's possession before its disclosure
to Executive 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 Executive. The
Confidential Information disclosed to Executive 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 Executive's
possession; or merely because portions thereof are in the
public domain or in Executive's possession.
5.5 To protect the confidentiality of the Confidential
Information, Executive further agrees that while employed by
Company and for a period of 36 calendar months immediately
after the termination of this Agreement or his employment
with Company, regardless of whether such termination of
employment is voluntary or involuntary, he will not, for
himself, or on behalf of any other Person (i) generally
compete in any manner whatsoever with ACG or solicit,
accept, divert, or take away from ACG the business of any
Person; (ii) directly or indirectly induce or attempt to
influence any executive, 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 the sale or
marketing of yellow page publishing services,
telecommunication services and natural gas or electrical
goods and services in the States of Arkansas, California,
Kansas, Missouri, Oklahoma or Texas ("Proscribed Territory")
during the term of this Agreement or Executive's employment
with Company. The territory in which Executive shall not
compete with ACG as outlined in this Paragraph 5.5 shall
consist of the Proscribed Territory.
5.6 Executive 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 Company for sales and management,
including the special training, knowledge, and confidential
information that has been or will be acquired in the course
of such employment, will give Executive distinct and
substantial advantages for potential sales and management
activities concerning such products and services. Executive
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
-3-
entities in the business of developing and/or selling those
products and services, and the much more numerous
opportunities for Executive 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 Executive. Executive 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.
Executive also agrees that in light of the facts
acknowledged above, the substantial investment of ACG in
acquiring and developing its business and providing special
training to Executive, and the certain and substantial harm
that ACG would suffer if Executive 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 Executive might experience by complying with its
terms. Executive 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 Executive 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 Executive of the
provisions of this Paragraph 5, Executive 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
Executive or his agents, without showing any evidence of
actual monetary loss resulting from such breach, including,
but not limited to, restraining Executive from using or
disclosing, in whole or in part, such Confidential
Information or trade secrets; rendering any services to any
Person 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 attorneys'
fees from Executive.
6. Termination of Employment.
6.1 Executive's employment under this Agreement shall terminate
on the occurrence of any of the following events:
-4-
(a) End of Term: If the term of employment under the
Agreement or any term of renewal ends.
(b) Death or Disability of Executive: If Executive dies
or becomes disabled (i.e., such that he no longer
is reasonably able to perform his duties as
contemplated by this Agreement), Company shall pay
to Executive, or to the estate of Executive if he
dies, that part of his Base Salary which would
otherwise be payable to Executive 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. Upon
such payment, as well as applicable insurance
benefits, if any, all obligations of Company to
Executive or his estate shall be fully satisfied,
and this Agreement shall terminate.
(c) Resignation of Executive: If Executive resigns
prior to the end of the term of this Agreement,
this Agreement shall terminate immediately, and
Company shall pay to Executive that part of his
Base Salary which would otherwise be payable to
Executive through the effective date of his
resignation. Upon such payment, all obligations in
any manner whatsoever of Company to Executive shall
be fully satisfied.
(d) Change in Ownership, Management, or Executive's
Responsibilities: If there is a change in the
ownership of Company or the senior management staff
of ACG, and either of these changes significantly
alters Executive's job responsibilities or
compensation, Executive may resign from his
position within 60 days of such a change. If
Executive resigns pursuant to this paragraph,
Company will continue to provide Executive with his
monthly compensation and benefits for a period of
one year after the initial date of any such change.
Upon completion of such payments, all obligations
in any manner whatsoever of Company to Executive
shall be fully satisfied.
(e) Termination by the Company "With Cause." If
Executive (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,
Company may terminate the employment of Executive
with cause. If Executive is terminated "with
cause," Executive shall not be entitled to receive
any further salary or benefits under this Agreement
other than payment for that part of Executive's
compensation that would otherwise be
-5-
payable to Executive through the last date of his
employment with Company. Upon such payment, all
obligations of Company to Executive shall be fully
satisfied, and this Agreement will terminate.
Executive shall not be entitled to receive any
accrued vacation pay if his termination is "with
cause."
(f) Termination by the Company Without Cause. In the
event Company terminates Executive's employment for
any reason other than described in (e) above,
Executive shall be entitled to that part of the
Base Salary and benefits payable to Executive
through the last date of his employment and such
compensation and benefits shall continue thereafter
for a period of six months from termination. Upon
completion of such payments, all obligations in any
manner whatsoever of Company to Executive shall be
fully satisfied.
6.2 Termination of this Agreement shall not relieve Executive 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 Executive or furnished to
Executive while in the employ of Company shall be the sole
and exclusive property of ACG, and none of such data,
drawings or other records and written material, or copies
thereof, shall be retained by Executive upon termination of
his employment. This ACG property shall not be removed from
Company premises without the Company's prior written
consent.
7.2 Upon termination of this Agreement or whenever requested by
Company, Executive immediately shall deliver to Company all
of the ACG property or any of ACG's documents in Executive's
possession or under Executive's control, including, but not
limited to, all documents or data, Confidential Information,
accounting records, computer terminals, data, discs,
printouts and tapes and accounting machines provided by
Company. No copies of any such data shall be retained by
Executive.
-6-
8. Notices.
Any notice required or permitted to be given under this Agreement shall be in
writing and addressed to Executive at , ,
, , and to Company, c/o ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, 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 Executive or Company concerning the subject matter contained in
this Agreement (other than action by Company seeking an injunction pursuant to
Paragraph 5.7), including, but not limited to, Executive's employment,
termination from, and/or affiliation with Company, shall be settled by
arbitration in Denver, Colorado 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.
10. Miscellaneous.
10.1 The rights and obligations of Company under this Agreement
shall inure to the benefit of and shall be binding upon the
successors and assigns of Company. This Agreement shall be
binding upon the Executive and his agents, heirs, executors,
administrators and legal representatives. The rights and
obligations of Executive hereunder shall not be assignable
by Executive.
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,
-7-
negotiations and discussions, whether oral or written, and
there are no other warranties, representations, covenants or
agreements among Company, Executive and ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ in
connection with the subject matter hereof.
10.5 The waiver by Company of a breach of any provision of this
Agreement by Executive shall not operate or be construed as
a waiver by Company of any subsequent breach by Executive.
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
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.
GREAT WESTERN DIRECTORIES, INC.
By
------------------------------------ -----------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Its: Chairman and Chief Executive Officer
"COMPANY" "EXECUTIVE"
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