EXHIBIT 4.14
AGREEMENT
THIS AGREEMENT (the "Agreement") is made as of November 27, 1996,
by and among Dakota Cooperative Telecommunications, Inc., a South Dakota
cooperative corporation ("Dakota"), and Xxxx X. Xxxxx, Xxxx X. Xxxxxx,
Xxxxxxx X. Xxxxxx, Xxxxxx X. Xxxxxx and Xxxx Xxxxxxxxx (each a "Seller" and
collectively "Sellers"). Capitalized terms used in this Agreement and not
otherwise defined are defined in the Merger Agreement (the "Merger
Agreement") to which this Agreement is an exhibit.
Pursuant to the Merger Agreement, Sellers will receive shares of
Dakota preferred stock (the "Dakota Preferred Stock") in connection with
the merger of TCIC Communications, Inc. with and into Dakota Acquisition
Corp. #1, a wholly owned subsidiary of Dakota. This Agreement sets forth
certain agreements between Dakota and Sellers (collectively the "Parties")
with respect to the Dakota Preferred Stock and certain other matters.
ACCORDINGLY, Dakota and Sellers agree as follows:
SECTION 1. CLASS AND AMOUNT. The Dakota Preferred Stock will
be Non-Voting Non-Cumulative Preferred Stock and there will be an aggregate
of 931 shares issued to Sellers in connection with the Merger.
SECTION 2. NO DIVIDENDS. Except as expressly provided in
this Agreement, no dividends or other distributions will be made on or with
respect to the Dakota Preferred Stock, unless subsequently declared by
Dakota's Board of Directors (the "Dakota Board of Directors") in its sole
discretion. Dividends may be declared on Dakota's common stock or other
preferred stock subsequently issued without being declared on the Dakota
Preferred Stock.
SECTION 3. LIQUIDATION PREFERENCE. Upon the liquidation,
dissolution or winding up of the affairs of Dakota, whether voluntary or
involuntary, Sellers will be entitled to receive in full, out of the assets
of Dakota available for distribution to members, including its capital,
before any amount is paid to, or distributed among, the holders of Dakota
common stock or other preferred stock of Dakota ranking junior to the
Dakota Preferred Stock, the sum of $1,000 per share of Dakota Preferred
Stock held by them as of such date, plus all accrued and unpaid Non-
Liquidity Fees owing under Section 4 below as of the time of payment.
SECTION 4. NON-LIQUIDITY FEES. The Parties are entering into
the Merger Agreement and consummating the Merger with the present
contemplation that Dakota will be converted into a business corporation
with shares of stock registered under the Securities Act of 1933, as
amended (the "Securities Act"). However, the Parties acknowledge that such
a conversion is subject to a variety of known and unknown contingencies
(including Dakota member approval) and accordingly may not take place at
all or may not take place within the time period presently contemplated.
To compensate Sellers in the event the conversion is not completed or is
delayed beyond September 1, 1997, and in recognition of the transfer
restrictions placed on the Dakota Preferred Stock, Sellers will be entitled
to receive a non-liquidity fee ("Non-Liquidity Fee") of $80 per annum for
each share of Dakota Preferred Stock held by them, to be paid when, as and
if declared and ordered by the Dakota Board of Directors. The Non-
Liquidity Fees will accrue on the fifteenth day of June and December in
each year (each a "Non-Liquidity Fee Accrual Date"), except that if any
Non-Liquidity Fee Accrual Date is not a business day in Sioux Falls, South
Dakota, then the Non-Liquidity Fee Accrual Date will be the next business
day. The first Non-Liquidity Fee Accrual Date will be December 15, 1997
and will be for the period beginning September 1, 1997 and ending December
15, 1997. The amount of the Non-Liquidity Fee accrued for such initial
period will be $26.67 per share of Dakota Preferred Stock. Non-Liquidity
Fees do not accrue until the applicable Non-Liquidity Fee Accrual Date, at
which time they accrue in full, and no Non-Liquidity Fee shall accrue with
respect to any period prior to September 1, 1997. Accrued Non-Liquidity
Fees may be paid from time to time at the discretion of the Dakota Board of
Directors, and will continue to accumulate as accrued until paid. If
payment is made in an amount less than the total amount of the Non-
Liquidity Fees at the time accrued, it will be allocated on a pro rata
basis among all shares of Dakota Preferred Stock then held by Sellers. No
interest will accrue or be payable on any accrued but unpaid Non-Liquidity
Fees. At the election of the Dakota Board of Directors, Non-Liquidity Fees
may be paid in cash, by the issuance of additional shares of Dakota
Preferred Stock on the basis of one share of Dakota Preferred Stock for
each $1,000 of Non-Liquidity Fees accrued and owing or a combination of
cash and additional shares of Dakota Preferred Stock. Fractional shares of
Dakota Preferred Stock may be issued. In the event the Dakota Board of
Directors were to ever declare a dividend on the Dakota Preferred Stock,
the amount of such dividend will be deducted from any Non-Liquidity Fee
otherwise owing under this Agreement. Non-Liquidity Fees will cease to
accrue upon the earlier of (a) the termination of this Agreement under
Section 13 below or (b) the date the members of Dakota approve a plan to
liquidate and dissolve Dakota.
SECTION 5. VOTING. Except as provided by South Dakota law,
Sellers, as holders of shares of Dakota Preferred Stock, will have no vote
on any matter submitted to a vote of the members of Dakota.
SECTION 6. PREEMPTIVE RIGHTS. Sellers, as holders of shares
of Dakota Preferred Stock, will have no preemptive or preferential right to
subscribe for or purchase any shares of any class or series of capital
stock of Dakota, now or later authorized, or any securities convertible
into, or carrying options or warrants to purchase, shares of any class or
series of capital stock of Dakota, now or later authorized, whether issued
for cash, property, services, by way of capital stock of Dakota or
otherwise.
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SECTION 7. LIMITATIONS. In addition to other rights as may
be provided under applicable law, without the written consent of the
holders of a majority of the then outstanding shares of Dakota Preferred
Stock, Dakota will not authorize or create any class or series of preferred
stock ranking prior to the Dakota Preferred Stock with respect to the
distribution of assets in liquidation.
SECTION 8. REDEMPTION. Except with respect to mandatory
conversion provided for in Section 9 of this Agreement, the shares of the
Dakota Preferred Stock are not redeemable without the consent of the
holders thereof.
SECTION 9. MANDATORY CONVERSION. At such time as (a)
Dakota's common stock is first registered under the Securities Act
(including a sufficient number of shares of Dakota common stock to be
issued pursuant to this Section 9), (b) the contemplated business
corporation conversion is approved by the requisite vote of Dakota's
members and (c) a Certificate of Amendment is issued by the South Dakota
Secretary of State concerning the amendments to Dakota's Articles of
Incorporation required to consummate the business corporation conversion
(the date on which the last of these requirements is satisfied being
referred to as the "Conversion Date"), the Dakota Preferred Stock will
automatically be converted into whole shares of Dakota common stock. The
number of shares of Dakota common stock issuable to Sellers upon such
conversion will be set such that Sellers, as the sole owners of the Dakota
Preferred Stock, will collectively receive such number of shares of Dakota
common stock that would equal 6.75 percent of the outstanding shares of
Dakota common stock after conversion assuming (y) that the conversion was
effected on November 30, 1996 and (z) that all patronage credits
outstanding on the books and records of Dakota as of that date, reduced by
the amount of cash used by Dakota in connection with the business
corporation conversion to retire patronage credits or cash out odd-lot
holders (not to exceed $500,000), were converted into additional
outstanding shares of Dakota common stock. Any shares of Dakota Preferred
Stock issued after the date of this Agreement in payment of any Non-
Liquidity Fee under Section 4 above or upon exercise of any Warrants
granted to Sellers shall be converted into shares of Dakota common stock at
the same per share ratio as the shares converted under the foregoing
conversion formula. On or after the Conversion Date, Sellers agree to
surrender their certificates representing Dakota Preferred Stock as
requested by Dakota and in a form properly endorsed and completed for
conversion and each Seller hereby irrevocably constitutes and appoints
Dakota as his lawful attorney-in-fact to execute and deliver any necessary
conveyances, assignments and assurances and to do all acts necessary,
proper and convenient to effectuate the foregoing surrender of the Dakota
Preferred Stock certificates and the conversion of the Dakota Preferred
Stock into shares of Dakota common stock. It is the intent of the Parties
that on the Conversion Date each certificate representing the Dakota
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Preferred Stock will represent only the right to receive shares of Dakota
common stock as provided in this Agreement and no other right or benefit.
No certificates for fractional share interests of Dakota common stock need
to be issued upon conversion of the Dakota Preferred Stock. Instead, Dakota
may, in its sole discretion, settle all such fractional share interests in
cash.
SECTION 10. TRANSFER RESTRICTIONS. The Dakota Preferred Stock
will not be registered under applicable federal or state securities laws.
The Dakota Preferred Stock may not be sold, transferred or otherwise
disposed of to any Person whether voluntarily or by operation of law,
except by will or according to the laws of descent and distribution or with
the prior written consent of Dakota which may be withheld in its sole
discretion. If any assignment, pledge or transfer of the Dakota Preferred
Stock shall be made or attempted, or if any attachment, execution,
garnishment or lien shall be issued against or placed upon the same, the
Dakota Preferred Stock shall be void and of no further effect.
SECTION 11. TCIC COMMUNICATIONS, INC. BOARD REPRESENTATION.
Upon the issuance of the Dakota Preferred Stock and at all times that such
stock remains outstanding, one of the three seats on the Board of Directors
of TCIC Communications, Inc. will be filled by a designee of Sellers. Such
designee will be selected by Sellers by the affirmative vote or consent of
the holders of a majority of the then outstanding shares of Dakota
Preferred Stock.
SECTION 12. OTHER RIGHTS. During such time as the Dakota
Preferred Stock remains outstanding, and subject to the confidentiality
undertakings below, Sellers will be entitled to receive monthly financial
statements for Dakota and its subsidiaries (prepared by management) and
such other information as is distributed to the holders of Dakota's common
stock. In addition, and again subject to the confidentiality undertakings
below, the designee of Sellers described in Section 11 of this Agreement
will be entitled to attend meetings of the Board of Directors (except
during any "executive session"). Sellers agree to treat in strict
confidence all documents, materials and other information obtained under
this Section 12 (collectively the "Dakota Information") and to not disclose
such Dakota Information to any third party or use such Dakota Information
other than for the sole and exclusive benefit of Dakota.
SECTION 13. TERMINATION. This Agreement will automatically
terminate at such time as the shares of Dakota Preferred Stock are
converted into shares of Dakota common stock under Section 9 of this
Agreement.
SECTION 14. BINDING EFFECT; BENEFITS; ASSIGNMENT. All of the
terms of this Agreement will be binding upon, inure to the benefit of and
be enforceable by and against the permitted assigns, heirs and legal
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representatives of Sellers and the successors and authorized assigns of
Dakota. Except as otherwise expressly provided in this Agreement, nothing
in this Agreement, express or implied, is intended to confer upon any other
Person any rights or remedies under or by reason of this Agreement, this
Agreement being for the exclusive benefit of Dakota and Sellers and their
respective heirs, legal representatives, successors and assigns. Neither
Dakota nor any Seller will assign any of its or his respective rights or
obligations under this Agreement to any other Person without the prior
written consent of the other, and any such purported assignment shall be
null and void.
SECTION 15. ENTIRE AGREEMENT. This Agreement, the Merger
Agreement and the Exhibits thereto and Dakota's Amended Articles of
Incorporation as constituted on the date of this Agreement set forth the
entire agreement and understanding of Dakota and Sellers in respect of the
terms of the Dakota Preferred Stock and the other matters addressed in this
Agreement and supersede all prior agreements, arrangements and
understandings relating to the subject matter hereof. No representation,
promise, inducement or statement of intention has been made by either
Dakota or Sellers that is not embodied in the Merger Agreement or the
Exhibits thereto, and neither Dakota nor Sellers will be bound by or liable
for any alleged representation, promise, inducement or statement of
intention not so set forth.
SECTION 16. AMENDMENT AND WAIVER. This Agreement may be
amended, modified, superseded or canceled and any of the terms, covenants
or conditions hereof may be waived only by a written instrument executed by
Dakota and Sellers or, in the case of a waiver, by or on behalf of the
Party waiving compliance. The failure of Dakota or Sellers at any time to
require performance of any provision of this Agreement will in no manner
affect the right of that Party at a later time to enforce such provision.
No waiver by Dakota or Sellers of any condition or of any Breach of any
term contained in this Agreement, in any one or more instances, will be
deemed to be or construed as a further or continuing waiver of any
condition or of any Breach of such term, or any other term set forth in
this Agreement.
SECTION 17. GOVERNING LAW. This Agreement will be governed by
and construed in accordance with the laws of the State of South Dakota as
applicable to Contracts made and to be performed in the State of South
Dakota without regard to conflict of laws principles.
SECTION 18. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which when so executed will be deemed to be an
original and such counterparts will together constitute one and the same
agreement.
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SECTION 19. SEVERABILITY. Any provision, or clause of any
provisions, of this Agreement that may be found to be contrary to South
Dakota law or otherwise unenforceable will not affect the remaining terms
of this Agreement, which will be construed as if the unenforceable
provision or clause were absent from this Agreement.
SECTION 20. HEADINGS. The headings of the sections and
paragraphs in this Agreement have been inserted for convenience of
reference only and will not restrict or otherwise modify any of the terms
or provisions of this Agreement.
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The parties have executed this Agreement as of the date stated in
the first paragraph of this Agreement.
DAKOTA COOPERATIVE
TELECOMMUNICATIONS, INC.
By /S/ XXXXX X. XXXXXXXX
Its VICE PRESIDENT
"Dakota"
/S/ XXXX X. XXXXX
Xxxx X. Xxxxx
/S/ XXXX X. XXXXXX
Xxxx X. Xxxxxx
/S/ XXXXXXX X. XXXXXX
Xxxxxxx X. Xxxxxx
/S/ XXXXXX X. XXXXXX
Xxxxxx X. Xxxxxx
/S/ XXXX XXXXXXXXX
Xxxx Xxxxxxxxx
"Sellers"
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