ADVANCED COMMUNICATIONS GROUP, INC.
000 XXXXX XXXXX XXXX XXXX, XXXXX 000
XX. LOUIS, MISSOURI 63017
January 15, 1998
Northwestern Public Service Company
00 Xxxxx Xxxxxx, X.X.
Huron, South Dakota 57350
Gentlemen:
Advanced Communications Group, Inc., a Delaware corporation ("ACG"), and
Northwestern Public Service Company, a Delaware corporation ("Northwestern"),
have agreed to negotiate in good faith to enter into a definitive agreement
on commercially reasonable terms with respect to a strategic alliance between
ACG and Northwestern (the "Strategic Alliance Agreement"). In consideration
of Northwestern's agreement to so negotiate in good faith and its willingness
to permit ACG to disclose the existence of this agreement, ACG has agreed to
issue to Northwestern Growth Corporation ("NGC") shares of a new series of
ACG preferred stock contemporaneously with the closing (the "Closing") of
ACG's proposed initial public offering of 8,000,000 shares of common stock,
par value $.0001 per share (the "Common Stock") with respect to which ACG has
filed a Registration Statement on Form S-1, as amended (File No. 333-37671)
(the "Registration Statement"). Our agreements with respect to these matters
are as follows:
1. ACG and Northwestern will negotiate in good faith to agree upon, execute
and deliver the Strategic Alliance Agreement (more fully described below)
pursuant to which ACG and its subsidiaries will, among other things, have
the exclusive right to sell their telecommunications services, which are
expected to include long distance service, local service, Internet access
and other services, yellow page services, cellular and other wireless
services and data transmission services ("Telecommunications Services"), to
the electric utility and natural gas customers of Northwestern in the
states of South Dakota and Nebraska (the "Customers"), provided that the
rates charged by ACG for these services are competitive with the rates
charged by other providers of similar services in the relevant market. The
Strategic Alliance Agreement will also contain mutually satisfactory
provisions with respect to the following matters:
A. ACG's access to Northwestern's rights-of-way for the purpose of
stringing or laying fiber optic cables (to the extent Northwestern is
able to grant such access without additional cost to Northwestern).
B. Northwestern's receipt of a negotiated fee with respect to ACG
Telecommunications Services purchased by the Customers (which fee
shall be adjusted from time to time to reflect the appropriate market
conditions).
C. Subject to Northwestern's existing contractual commitments, ACG will
also have the right to provide Northwestern's Telecommunications
Services, provided that the pricing and other terms of service
(including quality) are competitive with those otherwise available to
Northwestern.
D. Northwestern's assistance and cooperation with ACG in its efforts to
sell Telecommunications Services to the Customers, including, without
limitation, providing customer lists, introductions and bill stuffers,
subject to receipt by Northwestern of any necessary regulatory
approvals, with any incremental costs of providing such information
and services to be taken into account in the negotiations referred to
in paragraph B above.
E. The scope and duration of Northwestern's agreement not to compete with
ACG.
1
2. Upon the Closing, ACG will issue to NGC a number of shares of ACG Series A
Redeemable Convertible Preferred Stock (the "Preferred Stock"), equal to
the amount determined by dividing $2,000,000 by the initial public offering
price of the Common Stock, which will have the terms set forth on the
Certificate of Designation attached hereto as Annex A (the "Certificate of
Designation").
3. As provided in the Certificate of Designation, if ACG and Northwestern have
not entered into the Strategic Alliance Agreement prior to the first
anniversary date of the Closing, ACG shall have the right at any time
during the next month (the 13th month following the Closing) to redeem all
of the Preferred Stock for an aggregate redemption price of $1,250,000.
Prior to the earlier of the execution of the Strategic Alliance Agreement
or the end of the 13th month following the Closing, NGC may not transfer or
otherwise dispose of any of the Preferred Stock.
4. Northwestern agrees (on its behalf and on behalf of NGC) that, until the
expiration of three years from the date of this agreement, it will not
without the prior written approval of ACG or its Board of Directors (a) in
any manner acquire or make any proposal to acquire, directly or indirectly,
any securities, or any direct or indirect rights to acquire any securities,
or any property, of ACG or any of its subsidiaries; (b) propose to enter
into, directly or indirectly, any merger, business combination or other
extraordinary transaction involving ACG or any of its subsidiaries or the
purchase, directly or indirectly, a material portion of the assets of ACG
or any of its subsidiaries; (c) make, or in any way participate, in any
"solicitation" of "proxies" to vote (as those terms are used in the rules
of the Securities and Exchange Commission) any voting securities of ACG or
act, alone or in concert with others, to seek to control or influence the
management, Board of Directors or policies of ACG; (d) form, join or in any
way participate in a "group" as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended, in connection with any of the
foregoing; (e) enter into or disclose any intention, plan or arrangement
inconsistent with the forgoing; or (f) advise, assist or encourage any
other persons in connection with any of the foregoing. Further,
Northwestern agrees to advise ACG promptly of any inquiry or proposal made
to it or to NGC with respect to any of the foregoing. Northwestern also
agrees (on its behalf and on behalf of NGC) during such period not to (a)
request ACG (or its directors, officers, employees, or agents), directly or
indirectly, to amend or waive any provisions of this paragraph (including
this sentence) or (b) take any action which might require ACG to make a
public announcement regarding the possibility of a business combination or
merger. The agreement set forth in this paragraph shall remain in full
force and effect during the entire three year period, whether or not a
Strategic Alliance Agreement is negotiated, executed or delivered.
5. NGC represents and warrants that it is able to bear the economic risk of an
investment in the Preferred Stock and can afford to sustain a total loss of
such investment, and NGC has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of
NGC's proposed investment in ACG. NGC understands that an investment in the
Preferred Stock is very speculative and involves a high degree of risk. NGC
also represents and warrants that: (a) it has received and reviewed a copy
of the Registration Statement and is generally familiar with the
transactions described therein; (b) it confirms that it has had its access
to the books, records, plants, facilities, properties, personnel and
officers of ACG and the Acquired Companies for the purpose of conducting an
investigation of the financial condition, corporate status, business,
properties and assets of ACG and the Acquired Companies prior to its
execution of this Agreement; (c) it has had an adequate opportunity to ask
questions and receive answers from the officers of ACG and the Acquired
Companies (as defined in the Registration Statement) concerning any and all
matters relating to the transactions described in this Agreement, the
Acquisitions (as defined in the Registration Statement) and the
Registration Statement including, without limitation, the background and
experience of the current and proposed officers and directors of ACG and
the Acquired Companies, the plans for the operations of the business of ACG
and the Acquired Companies; (d) it has asked any and all questions in the
nature described in clause (c) above and all questions have been answered
to its satisfaction; and (e) it is acquiring the Preferred Stock and the
2
Common Stock issuable upon the conversion thereof for its own account, for
investment and not with a view to, or for offer or resale in connection
with, a distribution thereof within the meaning of the Securities Act or a
distribution thereof in violation of any applicable state securities laws.
Northwestern does not object to the inclusion of the proposed disclosures
substantially in the form set forth on Annex B in Amendment No. 2 to the
Registration Statement.
If this letter correctly reflects our understanding with respect to the
matters set forth herein, kindly sign one original of this letter and return
it to the undersigned, at which time it will become a binding agreement
between us. The other counterpart is for your records.
Although this letter does constitute a binding agreement between us, it does
not contain all matters upon which agreement must be reached in the Strategic
Alliance Agreement, and does not constitute a binding agreement with respect
to those matters. Any such binding agreement with respect to the Strategic
Alliance Agreement will only arise as a result of the negotiation, execution
and delivery of a written Strategic Alliance Agreement between ACG and
Northwestern having terms and conditions satisfactory to both. Neither party
to this letter may bring any claim or action against the other as a result of
a failure in good faith to agree on or enter into the Strategic Alliance
Agreement.
Very truly yours,
Advanced Communications Group, Inc.
By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------------
Xxxxxxx X. Xxxxxxx
Chairman, President and
Chief Executive Officer
AGREED AND ACCEPTED
January 15, 1998
Northwestern Public Service Company
By:
-------------------------------
Authorized Officer
Northwestern Growth Corporation
By:
-------------------------------
Authorized Officer
3
ANNEX A
CERTIFICATE OF DESIGNATION
OF
SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK
OF
ADVANCED COMMUNICATIONS GROUP, INC.
Advanced Communications Group, Inc., a Delaware corporation (the
"Corporation"), does hereby certify that the following resolution was duly
adopted on January , 1998 by the Board of Directors of the Corporation (the
"Board of Directors") either at a meeting duly convened and held or by
unanimous written consents of all Directors executed pursuant to authority
conferred upon the Board of Directors by the provisions of the Certificate of
Incorporation of the Corporation that authorize the issuance of up to
20,000,000 shares of preferred stock, par value $.0001 per share ("Preferred
Stock"):
BE IT RESOLVED, that the issuance of a series of Preferred Stock of
Advanced Communications Group, Inc. (the "Corporation") is hereby
authorized, and the designation, powers, preferences and relative,
participating, optional and other special rights, and qualifications,
limitations and restrictions thereof, of the shares of said series, in
addition to those set forth in the Certificate of Incorporation of the
Corporation, are hereby fixed as follows:
SECTION 1. DESIGNATION. The distinctive serial designation of said
series shall be "Series A Redeemable Convertible Preferred Stock"
(hereinafter called "Series A"). Each share of Series A shall be
identical in all respects with all other shares of Series A.
SECTION 2. NUMBER OF SHARES. The number of shares in Series A shall be
, which number may from time to time be increased (but not in
excess of the total number of authorized shares of Preferred Stock) or
decreased (but not below the number of shares of Series A then
outstanding) by the Board of Directors. Shares of Series A that are
redeemed, purchased or otherwise acquired by the Corporation or
converted into Common Stock shall be cancelled and shall revert to
authorized but unissued shares of Preferred Stock undesignated as to
series.
SECTION 3. DEFINITIONS. As used herein with respect to Series A, the
following terms shall have the following meanings:
(a) The term "junior stock" shall mean the Common Stock and any other
class or series of stock of the Corporation hereafter authorized
over which Series A has preference or priority in the
distribution of assets on any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation.
(b) The term "parity stock" shall mean any other class or series of
stock of the Corporation hereafter authorized which ranks on a
parity with Series A in the distribution of assets on any
voluntary or involuntary liquidation, dissolution or winding up
of the Corporation.
(c) The term "senior stock" shall mean any other class or series of
stock of the Corporation hereafter authorized which ranks ahead
of the Series A in the distribution of assets on any voluntary or
involuntary liquidation, dissolution or winding up of the
Corporation.
(d) The term "business day" shall mean each 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.
SECTION 4. DIVIDENDS. The holders of shares of Series A shall not be
entitled to receive, nor shall the Board of Directors declare,
dividends on the shares of Series A.
SECTION 5. LIQUIDATION RIGHTS. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of
the Corporation, then, before any distribution or payment shall be
made to the holders of any junior stock, but after all distributions
and payments shall be made to the holders of senior stock, the holders
of shares of Series A shall be entitled to be paid in full an amount
equal to [the initial public offering price of the Common Stock] per
share (the "Liquidation Amount").
If upon any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation, the assets distributable
to the holders of Series A and the holders of all parity stock shall
be insufficient to permit the payment in full to such holders of all
preferential amounts payable to them, then the entire assets of the
Corporation then distributable, after distribution of amounts payable
with respect to the senior stock, shall be distributed ratably among
the holders of Series A and the holders of all parity stock in
proportion to the respective amounts that would be payable on a per
share basis if such assets were sufficient to permit payment in full
of all preferential amounts.
If the Liquidation Amount shall have been paid in full to each holder
of shares of Series A, the remaining assets of the Corporation shall
be distributed among the holders of junior stock, according to their
respective rights and preferences and in each case according to their
respective numbers of shares.
For the purposes of this Section 5, the consolidation or merger of the
Corporation with any other corporation shall not be deemed to
constitute a voluntary or involuntary liquidation, dissolution or
winding up of the Corporation.
SECTION 6. REDEMPTION. If, by [the date occurring twelve months after
the closing of the Corporation's initial underwritten public offering
of its Common Stock], the Corporation and Northwestern Public Service
Company, a Delaware corporation, have not entered into the written
Strategic Alliance Agreement contemplated by the letter agreement
among the Corporation, Northwestern Public Service Company and
Northwestern Growth Corporation dated January 15, 1998, then the
Corporation, at the option of the Board of Directors, may redeem in
whole the shares of Series A upon notice given as hereinafter
specified, at a redemption price per share equal to 62.5% of the
Liquidation Amount. If, by [the date occurring thirteen months after
the closing of the Corporation's initial underwritten public offering
of its Common Stock], the Corporation shall not have mailed notice of
the redemption of all shares of Series A as provided below, then the
Corporation's right to redeem the Series A shall thereupon expire.
Notice of every redemption of shares of Series A shall be mailed by
first class mail, postage prepaid, addressed to the holders of record
of the shares to be redeemed at their respective last addresses as
they shall appear on the books of the Corporation. Such mailing shall
be at least five days and not more than 30 days prior to the date
fixed for redemption. Any notice which is mailed in the manner herein
provided shall be conclusively presumed to have been duly given,
whether or not the stockholder receives such notice, and failure duly
to give such notice by mail, or any defect in such notice, to any
holder of shares of Series A designated for redemption shall not
affect the validity of the proceedings for the redemption of any other
shares of Series A.
If notice of redemption shall have been duly given, and if on or
before the redemption date specified therein all funds necessary for
such redemption shall have been set aside by the Corporation, separate
and apart from its other funds, in trust for the pro rata benefit of
the holders of the shares called for redemption, so as to be and
continue to be available therefor, then, notwithstanding that any
certificate for shares so called for redemption shall not have been
surrendered for cancellation, on and after such redemption date, all
shares so called for redemption shall no longer be deemed outstanding
and all rights with respect to such shares shall forthwith on such
redemption date cease and terminate, except only the right of the
holders thereof to receive the amount payable on redemption thereof,
without interest. Any funds so deposited and unclaimed at the end of
three years from such redemption date shall, to the extent permitted
by law, be released or repaid to the Corporation, after which time the
holders of the shares so called for redemption shall look only to the
Corporation for payment thereof.
SECTION 7. CONVERSION RIGHTS. Each holder of shares of Series A shall
have the right, at such holder's option, to convert such shares into
shares of Common Stock of the Corporation at any time following the
date occurring eighteen months after the closing of the Corporation's
initial underwritten public offering of its Common Stock (the "IPO
Date") on and subject to the following terms and conditions:
2
(a) Each share of Series A shall be convertible at the principal
office of the Corporation and at such other office or offices, if
any, as the Board of Directors may designate, into such number of
fully paid and non-assessable shares (calculated as to each
conversion to the nearest 1/100th of a share) of Common Stock of
the Corporation, as shall be determined by dividing the
Liquidation Amount by the "conversion price"; provided, however,
that the conversion price shall be adjusted in certain instances
as provided in paragraph (d) below. The conversion price is
initially the Liquidation Amount.
(b) In order to convert shares of Series A into Common Stock the
holder thereof shall surrender at the office or offices
hereinabove mentioned the certificate or certificates therefor,
duly endorsed or assigned to the Corporation or in blank, and
give written notice to the Corporation at said office or offices
that such holder elects to convert such shares. No payment or
adjustment shall be made upon any conversion on account of any
unpaid or accrued dividends on account of any dividends on the
Common Stock issued upon conversion.
Shares of Series A shall be deemed to have been converted
immediately prior to the close of business on the day of the
surrender of the certificates for such shares for conversion in
accordance with the foregoing provisions, and the person or
persons entitled to receive the Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder
or holders of such Common Stock at such time. As promptly as
practicable on or after the conversion date, the Corporation
shall issue and shall deliver at such office a certificate or
certificates for the number of full shares of Common Stock
issuable upon such conversion, together with payment in lieu of
any fraction of a share, as hereinafter provided, to the person
or persons entitled to receive the same.
(c) No fractional shares of Common Stock shall be issued upon
conversion of shares of Series A, but, instead of any fraction of
a share which would otherwise be issuable, the Corporation shall
pay cash in respect of such fraction in an amount equal to the
same fraction of the Closing Price (as defined below) on the date
on which the certificate or certificates for such shares were
duly surrendered for conversion, or, if such date is not a
Trading Day (as defined below), on the next Trading Day.
(d) The conversion price shall be deemed to be proportionately
adjusted from time to time as follows:
(i) In case the Corporation shall (A) pay a dividend or make
a distribution on its outstanding Common Stock in shares of its
capital stock, (B) subdivide its outstanding Common Stock into a
greater number of shares, (C) combine its outstanding Common
Stock into a smaller number of shares or (D) issue by
reclassification of its Common Stock (whether pursuant to a
merger or consolidation or otherwise) any other shares of the
Corporation, the holder of any shares of Series A surrendered for
conversion after the record date fixed by the Board of Directors
for such dividend, distribution, subdivision, combination or
reclassification shall be entitled to receive the aggregate
number and kind of shares of capital stock of the Corporation
which, if such shares of Series A had been converted immediately
prior to such record date at the conversion price then in effect,
such holder would have been entitled to receive by virtue of such
dividend, distribution, subdivision, combination or
reclassification; and the conversion price shall be deemed to
have been adjusted after such record date to apply to such
aggregate number and kind of shares. Such adjustment shall be
made whenever any of the events listed above shall occur.
(ii) In case the Corporation shall fix a record date for
issuing to all holders of Common Stock rights or warrants
expiring within 45 days entitling them to subscribe for or
purchase Common Stock at a price per share less than the current
market price per share (as determined pursuant to clause (iv)
below) on such record date, the conversion price in effect from
and after such record date shall be reduced so that it
3
shall be equal to the price determined by multiplying the
conversion price in effect immediately prior to such record date
by a fraction, of which the numerator shall be the number of
shares of Common Stock outstanding on such record date plus the
number of shares of Common Stock which the aggregate offering
price of the total number of shares of Common Stock so offered
for subscription or purchase would purchase at such current
market price and of which the denominator shall be the number of
shares of Common Stock outstanding on such record date plus the
number of additional shares of Common Stock so offered for
subscription or purchase. For the purpose of this clause (ii),
the issuance of rights or warrants to subscribe for or purchase
securities convertible into Common Stock shall be deemed to be
the issuance of rights or warrants to purchase the Common Stock
into which such securities are convertible at an aggregate
offering price equal to the aggregate offering price of such
securities plus the minimum aggregate amount (if any) payable
upon conversion of such securities into Common Stock. Such
adjustment shall be made successively whenever such a record date
is fixed. In case such rights or warrants are not issued after
such a record date has been fixed, the conversion price shall be
readjusted to the conversion price which would have been in
effect if such record date had not been fixed.
(iii) In case the Corporation shall fix a record date for
the distribution to all holders of Common Stock (whether pursuant
to a merger or consolidation or otherwise) of assets (excluding
cash dividends out of retained earnings), or rights to subscribe
(excluding those referred to in clause (ii) above), then in each
such case the conversion price in effect from and after such
record date shall be adjusted so that the same shall be equal to
the price determined by multiplying the conversion price in
effect immediately prior to such record date by a fraction, of
which the numerator shall be the current market price per share
(determined as provided in clause (iv) below) of the Common Stock
on such record date less the fair market value (as determined by
the Board of Directors, whose determination in good faith shall
be conclusive) of the portion of the evidences of indebtedness or
assets so distributed or of such rights to subscribe applicable
to one share of Common Stock and of which the denominator shall
be such current market price per share of Common Stock. Such
adjustment shall be made whenever any such a record date is
fixed. In case such distribution is not made after such a record
date has been fixed, the conversion price shall be readjusted to
the conversion price which would have been in effect if such
record date had not been fixed.
(iv) For the purpose of any computation under clauses (ii)
and (iii) above, the current market price per share of Common
Stock on any date shall be deemed to be the average of the daily
Closing Prices for 30 consecutive Trading Days selected by the
Corporation commencing not less than 10 nor more than 45 Trading
Days before the date in question.
(v) In case the Corporation shall be a party to any
transaction (including, without limitation, a merger,
consolidation, sale of all or substantially all of the
Corporation's assets, liquidation or recapitalization of the
Common Stock, but excluding any transaction to which clauses (i),
(ii) or (iii) above applies) in which the previously outstanding
Common Stock shall be changed into or exchanged for different
securities of the Corporation or common stock or other securities
of another corporation or interests in a noncorporate entity or
other property (including cash) or any combination of any of the
foregoing, then, as a condition of the consummation of such
transaction, lawful and adequate provision shall be made so that
each holder of shares of Series A shall be entitled, upon
conversion, to an amount per share of Series A equal to (A) the
aggregate amount of stock, securities, cash or any other property
(payable in kind), as the case may be, into which or for which
each share of Common Stock is changed or exchanged, times (B) the
number of shares of Common Stock into which a share of Series A
is convertible immediately prior to the consummation of such
transaction.
4
(vi) In any case in which this subsection (d) shall require
that an adjustment as a result of any event become effective from
and after a record date, the Corporation may elect to defer until
after the occurrence of such event (A) issuing to the holder of
any shares of Series A converted after such record date and
before the occurrence of such event the additional shares of
Common Stock issuable upon such conversion over and above the
shares issuable on the basis of the conversion price in effect
immediately prior to adjustment and (B) paying to such holder any
amount in cash in lieu of a fractional share of Common Stock
pursuant to subsection (c) above. In lieu of the shares of the
issuance of which is deferred pursuant to item (A) above, the
Corporation shall issue or cause one of its transfer agents to
issue due bills or other appropriate evidence of the right to
receive such shares.
(vii) Any adjustment in the conversion price otherwise
required by this Section 7 to be made may be postponed until the
date of the next adjustment otherwise required to be made if such
adjustment (together with any other adjustments postponed
pursuant to this paragraph (vii) and not theretofore made) would
not require an increase or decrease of more than 1% in such
price. All calculations under this subsection (d) shall be made
to the nearest cent or to the nearest 1/100th of a share, as the
case may be.
(viii) In case at any time, as a result of an adjustment
made pursuant to paragraph (i) above, the holder of any shares of
Series A thereafter surrendered for conversion shall become
entitled to receive any shares of capital stock of the
Corporation other than Common Stock, thereafter the number of
such other shares so receivable upon conversion of such shares of
Series A shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in
paragraphs (i) to (vii), inclusive, above, and the other
provisions of this subsection (d) with respect to the Common
Stock shall apply on like terms to any such other shares.
(ix) The Board of Directors may in its discretion make such
reductions in the conversion price, in addition to those required
by this subsection (d), as shall be determined by the Board of
Directors to be advisable in order to avoid taxation so far as
practicable of any dividend of stock or stock rights or any event
treated as such for Federal income tax purposes to the
recipients. The Board of Directors shall have the power to
resolve any ambiguity or correct any error in this subsection
(d), and its action in so doing shall be final and conclusive.
(e) Whenever the conversion price is adjusted as herein provided:
(i) The Corporation shall compute the adjusted conversion
price in accordance with this Section 7 and shall cause to be
prepared a certificate signed by the Corporation's treasurer
setting forth the adjusted conversion price and showing in
reasonable detail the facts upon which such adjustment is based,
and such certificate shall forthwith be filed with each transfer
agent for the shares of Series A; and
(ii) A notice stating that the conversion price has been
adjusted and setting forth the adjusted conversion price shall,
as soon as practicable, be mailed to the holders of record of
outstanding shares of Series A.
(f) In case:
(i) The Corporation shall declare a dividend or other
distribution on its Common Stock payable otherwise than in cash
out of retained earnings or in obligations to pay cash out of
retained earnings; or
(ii) The Corporation shall authorize the issuance to the
holders of its Common Stock of rights or warrants entitling them
to subscribe for or purchase any shares of capital stock or any
class or any other subscription rights or warrants; or
5
(iii) Of any reclassification of the capital stock of the
Corporation (other than a subdivision or combination of its
outstanding shares of Common Stock), or of any consolidation or
merger to which the Corporation is a party and for which approval
of any stockholders of the Corporation is required, or of the
sale, transfer or other disposition of all or substantially all
of the assets of the Corporation; or
(iv) Of the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation;
then the Corporation shall cause to be filed with each transfer agent
for the shares of Series A and shall cause to be mailed to the holders
of record of the outstanding shares of Series A, at least 20 days (or
10 days in any case specified in clause (i) or (ii) above) prior to
the applicable record or effective date hereinafter specified, a
notice stating (x) the date as of which the holders of record of
Common Stock to be entitled to such dividend, distribution, rights or
warrants are to be determined, or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, disposition,
liquidation, dissolution or winding up is expected to become
effective, and the date as of which it is expected that holders of
record of Common Stock shall be entitled to exchange their shares for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, disposition,
liquidation, dissolution or winding up. Failure to give notice as
required by this subsection (f), or any defect therein, shall not
affect the legality or validity of any such dividend, distribution,
right, warrant, reclassification, consolidation, merger, sale,
transfer, disposition, liquidation, dissolution or winding up, or the
vote on any action margin authorizing such.
(g) The Corporation shall at all times reserve and keep available, free
from preemptive rights, out of its authorized but unissued Common
Stock, for the purpose of issuance upon conversion of shares of Series
A, the full number of shares of Common Stock then deliverable upon the
conversion of all shares of Series A then outstanding.
(h) The Corporation will pay any and all taxes that may be payable in
respect of the issuance or delivery of shares of Common Stock on
conversion of shares of Series A pursuant hereto. The Corporation
shall not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issuance and delivery of
shares of Common Stock in a name other than that in which the shares
of Series A so converted were registered, and no such issuance or
delivery shall be made unless and until the person requesting such
issuance has paid to the Corporation the amount of any such tax or has
established to the satisfaction of the Corporation that such tax has
been paid.
(i) For the purpose of this Section 7, the term "Common Stock" shall
include any stock of any class or series of the Corporation which has
no preference or priority in the payment of dividends or in the
distribution of assets in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation and which is
not subject to redemption by the Corporation. However, shares issuable
upon conversion of shares of Series A shall include only shares of the
class designated as Common Stock as of the original date of issuance
of shares of Series A or shares of the Corporation of any classes or
series resulting from any reclassification or reclassifications
thereof and which have no preference or priority in the payment of
dividends or in the distribution of assets in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation and which are not subject to redemption by the
Corporation, provided that if at any time there shall be more than one
such resulting class or series, the shares of each such class and
series then so issuable shall be substantially in the proportion which
the total number of shares of such class and series resulting from all
such reclassifications bears to the total number of shares of all such
classes and series resulting from all such reclassifications.
6
(j) As used in this Section 7, the term "Closing Price" on any day shall
mean 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 Corporation for that purpose; or, in all other
cases, the value established by the Board of Directors in good faith;
and the term "Trading Day" shall mean 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.
(k) The certificate of any independent firm of public accountants of
recognized standing selected by the Board of Directors shall be
presumptive evidence of the correctness of any computation made under
this Section 7.
SECTION 8. NO VOTING RIGHTS. The holders of Series A shall be entitled to
no votes per share, except as otherwise required by law or by the
Corporation's certificate of incorporation.
SECTION 9. LIMITED TRANSFERABILITY OF SERIES A. Until the earlier to occur
of (i) the date occurring thirteen months after the initial underwritten
public offering of the Corporation's Common Stock or (ii) the execution and
delivery of the written Strategic Alliance Agreement referenced in Section
6 above, the Series A and the rights represented thereby are not
transferable -regardless of whether such transfer occurs by foreclosure or
grant of a lien, pledge, or other security interest therein, other
volitional act, operation of law, or otherwise. Any attempt to transfer an
interest in any shares of Series A in violation of the foregoing is void.
SECTION 10. OTHER RIGHTS. The shares of Series A shall not have any powers,
preferences on relative, participating, optional or other special rights,
or qualifications, limitations or restrictions thereof, other than as set
forth herein.
IN WITNESS WHEREOF, Advanced Communications Group, Inc. has caused this
certificate to be signed by its undersigned duly authorized officer this day
of , 1998.
ADVANCED COMMUNICATIONS GROUP, INC.
BY:
-------------------------------
XXXXXXX X. XXXXXXX
CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
7
ANNEX B
The Company and Northwestern Public Service Company ("Northwestern") have
entered into an agreement (the "Agreement") regarding the possible creation
of a strategic alliance that would permit ACG to market its
telecommunications services to that utility's approximately 100,000 electric
and natural gas business and residential customers in South Dakota and
Nebraska. Under the terms of the Agreement, which will be consummated
contemporaneously with the Closing of the Offering, ACG will issue a number
of shares of its Series A Redeemable Convertible Preferred Stock ("Preferred
Stock") with an aggregate liquidation preference of $2 million to
Northwestern Growth Corporation ("NGC"), a wholly-owned subsidiary of
Northwestern, in exchange for, among other things, Northwestern's commitment
to negotiate in good faith a strategic alliance upon commercially reasonable
terms ("Northwestern Alliance"). Pursuant to the proposed Northwestern
Alliance, ACG would have the exclusive right to market its telecommunications
services to the customers of Northwestern and to have access to
Northwestern's rights-of-way for the purpose of laying fiber optic cables.
Subject to existing contractual commitments, ACG would also have the right to
supply all of Northwestern's telecommunications services on competitive
terms. Northwestern would cooperate with ACG in soliciting Northwestern's
customers and receive a percentage of the telecommunications revenues
generated by ACG sales to such customers. The Agreement contains a three-year
standstill agreement by Northwestern and NGC with respect to ACG containing
customary terms and conditions, regarding, among other things, mergers and
acquisitions, tender offers, proxy contests, joining groups or encouraging
others with respect to such matters.
The Preferred Stock becomes convertible into shares of Common Stock at the
initial public offering price eighteen months after the consummation of this
Offering, does not pay any dividends and is not entitled to vote in the
election of directors. If the Northwestern Alliance has not been signed by
the first anniversary date of the closing of the Offering, ACG can redeem the
shares of Preferred Stock as an entirety for $1.25 million on or prior to the
thirteenth monthly anniversary of the Closing.
