EXHIBIT C
SERIES B PREFERRED STOCK
AND WARRANT PURCHASE AGREEMENT
between
AMERICAN COMMUNICATIONS SERVICES, INC.
and
THE PURCHASERS NAMED IN
SCHEDULE 2.1
JUNE 26, 1995
TABLE OF CONTENTS
Page
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . .1
2. Sale, Purchase and Closing. . . . . . . . . . . . . . . . .7
2.1. Sale and Purchase of Initial Shares and Initial
Warrants . . . . . . . . . . . . . . . . . . . . . .7
2.2. Closing for Initial Shares and Initial Warrants . . 7
2.3. Purchase of Deferred Shares and Deferred Warrant . . 7
2.4. Closing for Purchase of Deferred Shares and
Deferred Warrant . . . . . . . . . . . . . . . . . . 9
3. Representations and Warranties. . . . . . . . . . . . . . . 9
3.1. Representations and Warranties of the Purchasers. . 9
3.1.1. Existence and Power. . . . . . . . . . . . . 9
3.1.2. Authorization. . . . . . . . . . . . . . . . 9
3.1.3. Consents of Third Parties. . . . . . . . . . 9
3.1.4. Litigation. . . . . . . . . . . . . . . . . .10
3.1.5. Investment. . . . . . . . . . . . . . . . . .10
3.1.6. Brokers. . . . . . . . . . . . . . . . . . . 10
3.1.7. Understanding Among the Purchasers. . . . . .10
3.2. Representations and Warranties of the Company. . . . . .11
3.2.1. Existence and Power. . . . . . . . . . . . . 11
3.2.2. Authorization. . . . . . . . . . . . . . . . 11
3.2.3. Consents of Third Parties. . . . . . . . . . 11
3.2.4. Litigation. . . . . . . . . . . . . . . . . .12
3.2.5. Subsidiaries. . . . . . . . . . . . . . . . .12
3.2.6. Records. . . . . . . . . . . . . . . . . . . 13
3.2.7. Capitalization. . . . . . . . . . . . . . . .13
3.2.8. Financial Information. . . . . . . . . . . . 15
3.2.8.1. Financial Statements. . . . . . . . . 15
3.2.8.2. Liabilities. . . . . . . . . . . . . .15
3.2.8.3. Assets. . . . . . . . . . . . . . . . 15
3.2.9. Absence of Certain Changes. . . . . . . . .16
3.2.10. Taxes. . . . . . . . . . . . . . . . . . . 17
3.2.11. Other Agreements. . . . . . . . . . . . . .17
3.2.12. Waivers. . . . . . . . . . . . . . . . . . 20
3.2.13. Agreements Regarding Employees. . . . . . .10
3.2.14. Employee Benefit Plans and Benefit
Arrangements. . . . . . . . . . . . . . . .21
3.2.15. Compliance With Law. . . . . . . . . . . ..22
3.2.16. Real Property. . . . . . . . . . . . . . . 22
3.2.16.1. Owned Real Property. . . . . . . . . 22
3.2.16.2. Leases. . . . . . . . . . . . . . . .22
3.2.16.3. Easements and Rights of Way. . . . . 22
3.2.17. Proprietary Rights. . . . . . . . . . . . . 22
3.2.17.1. General. . . . . . . . . . . . . . . 22
3.2.17.2. Litigation. . . . . . . . . . . . . .23
3.2.17.3. Trade Secrets. . . . . . . . . . . . 23
3.2.18. Environmental Matters. . . . . . . . . . . 24
3.2.19. Permits and Licenses. . . . . . . . . . . .24
3.2.20. Related Party Transactions. . . . . . . . .24
3.2.21. Insurance. . . . . . . . . . . . . . . . . 25
3.2.22. Disclosure. . . . . . . . . . . . . . . . .25
3.2.23. Offering and Approvals. . . . . . . . . . 26
3.2.24. Brokers. . . . . . . . . . . . . . . . . . 27
3.2.25. Leasehold Interests. . . . . . . . . . . . 27
3.2.26. Loans and Advances. . . . . . . . . . . . .27
3.2.27. Assumptions, Guarantees, etc. of
Indebtedness of Other Persons. . . . . . . 27
3.2.28. Significant Customers and Suppliers. . . . 28
3.2.29. Further Equity Financing. . . . . . . . . .28
4. Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . 28
5. General Post-Closing Covenants. . . . . . . . . . . . . . .29
5.1. Financial Data. . . . . . . . . . . . . . . . . . . 31
5.2. Books of Record and Account; Reserves; Reporting. . .31
5.3. Inspections. . . . . . . . . . . . . . . . . . . . . 31
5.4. Triggering Events, Etc.. . . . . . . . . . . . . . . 32
5.5. Observer. . . . . . . . . . . . . . . . . . . . . . .32
5.6. Reserve for Conversion Shares and Warrants. . . . . .32
5.7. Corporate Existence. . . . . . . . . . . . . . . . . 33
5.8. Restrictive Agreements Prohibited. . . . . . . . . . 33
5.9. Expenses of Directors. . . . . . . . . . . . . . . . 33
5.10. Obligations and Taxes. . . . . . . . . . . . . .33
5.11. Directors and Officers Liability Insurance. . . 33
5.12. No Actions Requiring Divestiture. . . . . . . . 34
5.13. Indemnification, Etc.. . . . . . . . . . . . . .34
5.14. Major Business Milestones. . . . . . . . . . . .34
5.15. Non-Operating Subsidiaries. . . . . . . . . . . 34
5.16. Amendment to the Charter and By-laws. . . . . . 34
5.17. Best Efforts to Close. . . . . . . . . . . . . 35
5.18. Delivery of Certain Employment Agreements. . . .35
6. Conditions to the Obligations of the Purchasers. . . . . .35
6.1. Opinion of Company's Counsel. . . . . . . . . . . . .35
6.2. Representations and Warranties to be True and. . . . 36
Correct. . . . . . . . . . . . . . . . . . . . . . . 36
6.3. Performance. . . . . . . . . . . . . . . . . . . . . 36
6.4. All Proceedings to be Satisfactory. . . . . . . . . .36
6.5. Supporting Documents. . . . . . . . . . . . . . . . .36
6.6. Registration Rights Agreement. . . . . . . . . . . . 37
6.7. Election of Directors. . . . . . . . . . . . . . . .37
6.8. Stockholders Agreement. . . . . . . . . . . . . . . .37
6.9. Employment Agreements. . . . . . . . . . . . . . . . 37
6.10. Certificate of Designations. . . . . . . . . . .38
6.11 Subsidiary By-laws and Charters By-laws. . . . .38
6.12. Put Rights. . . . . . . . . . . . . . . . . . . 38
6.13. Preemptive Rights. . . . . . . . . . . . . . . .38
6.14. Execution and Delivery of this Agreement. . . . 38
6.15. Purchase by Other Purchasers. . . . . . . . . . 38
6.16. Amendment of AT&T Agreements. . . . . . . . . . 38
6.17. AT&T Agreements. . . . . . . . . . . . . . . . .39
6.18. Series A Preferred Stock Investment Agreements. 39
6.19. Debt Financing Commitments. . . . . . . . . . . 39
6.20. Fees of Purchaser's Counsel. . . . . . . . . . .39
6.21. Committees. . . . . . . . . . . . . . . . . . . 39
6.22. Fort Worth Debt Financing. . . . . . . . . . . .39
6.23. Series A Exchange and Waiver. . . . . . . . . . 40
6.24. ▇▇▇▇ Warrants. . . . . . . . . . . . . . . . . .40
6.25. Director Indemnification Agreements. . . . . . .40
7. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . .40
7.1. Definition. . . . . . . . . . . . . . . . . . . . . .40
7.2. Legend. . . . . . . . . . . . . . . . . . . . . . . .40
7.3. Governing Law; Consent to Jurisdiction. . . . . . .40
7.3.1. Governing Law. . . . . . . . . . . . . . . 40
7.3.2. Consent to Jurisdiction. . . . . . . . . . 41
7.4. Notices. . . . . . . . . . . . . . . . . . . . .41
7.5. Further Assurances. . . . . . . . . . . . . . . . . .42
7.6. Fees and Expenses. . . . . . . . . . . . . . . . . .43
7.7. Counterparts. . . . . . . . . . . . . . . . . . . . .43
7.8 Equitable Relief. . . . . . . . . . . . . . . . . . .43
7.9. Separability. . . . . . . . . . . . . . . . . . . . .43
7.10. Assignment. . . . . . . . . . . . . . . . . . . 43
7.11. Publicity. . . . . . . . . . . . . . . . . . . .43
7.12. Entire Agreement. . . . . . . . . . . . . . . . 43
7.13. Amendment and Modification; Waiver of
Compliance; Conflicts. . . . . . . . . . . . . .44
7.14. Further Issuances of Preferred Stock. . . . . . 45
7.15. Survival of Agreements. . . . . . . . . . . . . 45
7.16. Brokerage. . . . . . . . . . . . . . . . . . . .45
7.17. Counterparts. . . . . . . . . . . . . . . . . . 45
LIST OF EXHIBITS AND SCHEDULES
Exhibits:
Form of Series B Warrant for Common Stock A
ING Warrant for 100,000 shares of Common Stock B
Charter Amendment C
By-laws D
Legal Opinion of ▇▇▇▇ & ▇▇▇▇▇▇▇ E
Registration Rights Agreement F
Stockholders Agreement G
Employment Agreement for ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, III H
Employment Agreement for ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ I
Employment Agreement for ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ J
Letter Agreement to the Board of Directors of the Company K
Series A-1 and B Certificate of Designations L
Stock Exchange Agreement M
Series A Waiver N
▇▇▇▇ Warrant for 100,000 Shares of Common
Stock at $1.79 per share ▇
▇▇▇▇ Warrant for 100,000 Shares of Common
Stock at $2.50 per share P
Director Indemnification Agreement Q
Schedules:
Purchasers 2.1
Purchaser Brokers 3.1.6
Business Plan 3.2.1
Violations 3.2.3
Litigation 3.2.4
Subsidiaries 3.2.5
Capitalization 3.2.7
Recent Liabilities 3.2.8.2
Recent Asset Sales 3.2.8.3
Certain Charges 3.2.9
Tax Non-compliance 3.2.10
Certain Material Contracts 3.2.11(A) and 3.2.11(B)
Employee Agreements 3.2.13
Employee Benefit Plans 3.2.14
Compliance with the Law Exceptions 3.2.15
Leases 3.2.16.2
Easements 3.2.16.3
Proprietary Rights 3.2.17.1
Absent Permits and Licenses 3.2.19
Affiliate Transactions 3.2.20
Insurance 3.2.21
Company Brokers 3.2.24
Guaranties and Assumptions 3.2.27
Use of Proceeds Exceptions 4
Major Business Milestones 5.15
Put Rights to be Waived 6.12(A)
Put Rights to be Assigned 6.12
Put Rights Remaining 6.12
SERIES B PREFERRED STOCK AND
WARRANT PURCHASE AGREEMENT
Series B Preferred Stock and Warrant Purchase Agreement
(the "Agreement"), dated as of June 26, 1995, between American
Communications Services, Inc., a Delaware corporation (the
"Company"), and the purchasers named on Schedule 2.1 of this
Agreement (individually, a "Purchaser", and collectively, the
"Purchasers").
The parties agree as follows:
SECTION 1. Definitions. As used herein, the following
terms shall have the following respective meanings (such meanings
to be equally applicable to both the singular and plural forms of
the terms defined):
"1993 Act" shall have the meaning set forth in Section
3.1.5.
"5% Shareholders" shall have the meaning set forth in
Section 3.2.20.
"Accountants" shall have the meaning set forth in
Section 5.1.
"ACSFW" shall mean American Communications Services of
Forth Worth, Inc.
"ACSFW Agreement" shall mean the Purchase Agreement,
dated February 28, 1995, among the Company, ACSFW and AT&T Credit
Corporation.
"ACSL" shall mean American Communications Services of
Louisville, Inc.
"ACSL Agreement" shall mean the Purchase Agreement,
dated October 17, 1994, among the Company, ACSL and AT&T Credit
Corporation.
"Affiliate" shall mean, with respect to any Person, (a)
any Person which directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, such Person, (B) any partner of such Person, or (c)
any Person who is a director or executive officer (i) of such
Person, (ii) of any subsidiary of such Person, or (iii) of any
Person described in clause (a) above, or, with respect to a
stockholder of the Company, the Company; provided, that any
Affiliate of a corporation shall be deemed an Affiliate of such
corporation's shareholders. For purposes of this definition,
"control" of a Person shall mean the power, direct or indirect,
(i) to vote or direct the voting of more than 5% of the
outstanding shares of the voting capital stock of such Person, or
(ii) to direct or cause the direction of the management and
policies of such Person, whether by contract or otherwise.
"Agreement" shall have the meaning set forth in the
preamble.
"AT&T Term Sheet" shall mean the ACS, Inc. Facility:
Summary of Terms and Conditions, dated April 5, 1994 and execute
by ACSL and the Company and the letter dated May 16, 1995 from
AT&T Capital Corporation regarding the availability of
$31,250,000 to the Company and its Subsidiaries for special
access networks.
"Balance Sheet" shall have the meaning set forth in
Section 3.2.8.2.
"Benefit Arrangement" means any life or health
insurance, hospitalization, savings, bonus, deferred
compensation, incentive compensation, holiday, vacation,
severance pay, sick pay, sick leave, disability, tuition refund,
service award, company car, scholarship, relocation, patent
award, fringe benefit, individual employment, consulting or
severance contract or other policy or practice of the Company or
any of its Subsidiaries providing employee or executive
compensation or benefits to Employees, other than Employee
Benefit Plans.
"Budget" shall have the meaning set forth in Section
5.1.
"Business Plan" shall have the meaning set forth in
Section 3.2.1.
"By-laws" shall have the meaning set forth in Section
3.2.3.
"Certificate of Designations" shall mean certificate of
designations of the Company for the Series A-1 Preferred Stock
and the Series B Preferred Stock; provided that the term
Certificate of Designations shall apply to the corresponding
portion of the Charter should the Charter be restated to include
such Certificate of Designations.
"CERCLA" shall have the meaning set forth in Section
3.2.18.
"Charter" shall have the meaning set forth in Section
3.2.3.
"Citations" shall have the meaning set forth in Section
3.2.18.
"Closing" shall have the meaning set forth in Section
2.2.
"Closing Date" shall have the meaning set forth in
Section 2.2.
"Code" shall have the meaning set forth in Section
3.2.14.
"Common Stock" shall mean the common stock, par value
$.01 per share, of the Company.
"Company" shall have the meaning set forth in the
preamble.
"Deferred Shares" shall have the meaning set forth in
Section 2.3.
"Deferred Warrant" shall have the meaning set forth in
Section 2.3.
"Easements" shall have the meaning set forth in Section
3.2.16.3.
"Employee" means any current (or former or retired, to
the extent applicable) employee (or any employee on an approved
leave of absence) of the Company or any of its Subsidiaries.
"Employee Benefit Plan" means any "employee benefit
plan" (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974 ("ERISA")) maintained or contributed
to by the Company or any of its Subsidiaries or any predecessor
of the Company or any of its Subsidiaries or in which the Company
or any of its Subsidiaries or any predecessor of the Company or
any of its Subsidiaries participates or participated and that
covers Employees, including any such plan that is an "employee
welfare benefit plan" (as defined in Section 3(1) of ERISA),
including any retiree medical or life insurance plan, and (ii)
any such plan that is an "employee pension benefit plan" (as
defined in Section 3(2) of ERISA) ("Pension Plans").
"Environmental Laws" shall mean all Federal, state and
local laws, ordinances, regulations, rules and administrative
orders relating to employee health and safety, air, water or
noise pollution or otherwise relating to public health and safety
or environmental protection (including the protection of
endangered species), or the use, generation, manufacture,
accumulation, storage, discharge, release, disposal or
transportation of hazardous materials.
"Financial Statements" shall have the meaning set forth
in 3.2.8.1.
"Fully-Diluted Basis" shall mean on a fully-diluted
basis, assuming exercise or conversion, as appropriate, of every
option, warrant, convertible security or other right to obtain
any of the capital stock of the Company or any of its
Subsidiaries whether or not then exercisable or convertible and
not calculated by application of the "treasury method".
"GAAP" shall have the meaning set forth in Section
3.2.8.1.
"▇▇▇▇" shall mean The ▇▇▇▇ Alternative Income Fund,
L.P.
"Immaterial Liens" shall have the meaning set forth in
Section 3.2.8.3.
"ING" shall have the meaning set forth in Section 2.1.
"Initial Shares" shall have the meaning set forth in
Section 2.1.
"Initial Warrants" shall have the meaning set forth in
Section 2.1.
"Investment Agreement" shall have the meaning set forth
in Section 3.2.5.
"Liens" shall have the meaning set forth in Section
2.1.
"Material Contract" means any commitment, agreement,
mortgage, license, lease, order, instrument or Proprietary Right
required to be set forth on Schedule 3.2.11, 3.2.13, 3.2.16.2,
3.2.16.3 or 3.2.17.1.
"Non-Operating Subsidiaries" shall have the meaning set
forth in Section 3.2.5.
"Non-Preferred Directors" shall mean all members of the
board of directors of the Company other than the Preferred
Directors.
"Person" shall mean any individual, corporation,
general or limited partnership, joint venture,
association,limited liability company, joint stock company,
trust, business trust bank, trust company or estate (including
any beneficiaries thereof), unincorporated organization,
cooperation or association or government or any agency or
political subdivision thereof, or other entity.
"Preferred Directors" shall have the meaning set forth
in the Certificate of Designations.
"Proprietary Rights" shall have the meaning set forth
in Section 3.2.17.1.
"Purchasers" shall have the meaning set forth in the
preamble.
"Registration Rights Agreement" shall mean the
Registration Rights Agreement, dated the date hereof, among the
Company, the Purchasers, and the other parties named therein.
"Qualifying Holder" shall have the meaning set forth in
Section 5.1.
"SEC" shall have the meaning set forth in Section
3.2.23.
"Series A-1 Directors" shall have the meaning set forth
in the Certificate of Designations.
"Series A-1 Preferred Stock" shall mean SHARES of 9%
Series A-1 Convertible Preferred Stock, par value $1.00 per
share, of the Company.
"Series A Investors" shall mean all holders of Series
A-1 Preferred Stock as of the date hereof.
"Series A Preferred Stock" shall mean shares of 9%
Series A Convertible Preferred Stock, par value $1.00 per share,
of the Company.
"Series B Directors" shall mean the Series B-1
Directors, the Series B-2 Directors, the Series B-3 Director, and
the Series B-4 Director, collectively.
"Series B-1 Directors" shall have the meaning set forth
in the Certificate of Designations.
"Series B-2 Directors" shall have the meaning set forth
in the Certificate of Designations.
"Series B-3 Director" shall have the meaning set forth
in the Certificate of Designations.
"Series B-4 Director" shall have the meaning set forth
in the Certificate of Designations.
"Series B-1 Preferred Stock" shall mean shares of 9%
Series B-1 Convertible Preferred Stock, par value $1.00 per
share, of the Company.
"Series B-2 Preferred Stock" shall mean shares of 9%
Series B-2 Convertible Preferred Stock, par value $1.00 per
share, of the Company.
"Series B-3 Preferred Stock" shall mean shares of 9%
Series B-3 Convertible Preferred Stock, par value $1.00 per
share, of the Company.
"Series B-4 Preferred Stock" shall mean shares of 9%
Series B-4 Convertible Preferred Stock, par value $1.00 per
share, of the Company.
"Series B Preferred Stock" shall mean shares of Series
B-1 Preferred Stock, Series B-2 Preferred Stock, Series B-3
Preferred Stock, and Series B-4 Preferred Stock.
"Series B Preferred Shares" shall mean the Initial
Shares and the Deferred Shares.
"Stockholders Agreement" shall mean the Stockholders
Agreement, dated the date hereof, among the Company, the
Purchasers, and the other parties named therein.
"Subsidiary" shall mean, as to the Company, any
corporation of which not than 50% of the outstanding stock having
ordinary voting power to elect a majority of the board of
directors of such corporation (irrespective of whether or not at
the time, stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening
of any contingency) is at the time directly or indirectly owned
by the Company, or by one or more of its Subsidiaries, or by the
Company and one or more of its Subsidiaries.
"Superfund Notices" shall have the meaning set forth in
Section 3.2.18.
"Transaction Documents" shall have the meaning set
forth in Section 3.2.1.
"Triggering Event" shall have the meaning set forth in
Section 5.1.
"Warrants" shall mean the Initial Warrants and the
Deferred Warrant.
"Written Notice" shall have the meaning set forth in
Section 3.2.18.
SECTION 2. Sale, Purchase and Closing
SECTION 2.1. Sale and Purchase of Initial Shares and
Initial Warrants. The Company agrees to issue and sell to each
Purchaser, and each Purchaser agrees to purchase from the
Company, free and clear of all claims, liens, charges, security
interests and other encumbrances of any nature ("Liens"), the
series of and the number of shares of Series B Preferred Stock
set forth opposite that Purchaser's name on Schedule 2.1 (the
"Initial Shares"). The Company agrees to issue and sell (i) to
each Purchaser and each Purchaser agrees to purchase from the
Company, free and clear of all Liens, a Warrant entitling such
Purchaser, at its option, to purchase the number of shares of
Common Stock set forth opposite that Purchaser's name on Schedule
2.1 at an initial exercise price of $0.01 per share of Common
Stock in the form of Exhibit A, and (ii) to ING Equity Partners,
L.P. I ("ING"), and ING agrees to purchaser from the company,
free and clear of all Liens, a warrant entitling ING, at its
option, to purchase 100,000 shares of Common Stock at an initial
exercise price of $2.50 per share of Common Stock in the form of
Exhibit B (collectively, the "Initial Warrants"). In
consideration for such Initial Shares and the Initial Warrants,
each Purchaser agrees to pay the Company, by wire transfer of
immediately available funds, the amount set forth opposite that
Purchaser's name on Schedule 2.1. The Company and the
Purchasers, having adverse interests and as a result of arms'
length bargaining, agree that (i) neither the Purchasers nor any
of their Affiliates or associates have rendered or have agreed to
render any services to the Company in connection with this
Agreement or the issuance of the Initial Shares and Initial
Warrants; and (ii) the Initial Warrants are not being issued as a
form of compensation.
SECTION 2.2. Closing for Initial Shares and Initial
Warrants. The closing of the purchase and sale under Section 2.1
shall take place at the offices of ▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, at 10:00 a.m., New York time,
on June 26, 1995 or at such other location, date or time as may
be agreed upon by the Company and the Purchasers (such closing
being called the "Closing" and such date and time being called
the "Closing Date").
SECTION 2.3. Purchase of Deferred Shares and Deferred
Warrant.
(a) The Company agrees to issue and sell to ING, and
ING commits and agrees to purchase from the Company, free and
clear of all Liens, 50,000 shares of Series B-4 Preferred Stock
(the "Deferred Shares") and a warrant entitling ING, at its
option, to purchase 214,286 (as appropriately adjusted to reflect
all Recapitalization Events, as defined in the Certificate of
Designations, occurring after the date hereof) of share of Common
Stock at an initial exercise price of $0.01 (as appropriately
adjusted to reflect all Recapitalization Events, as defined in
the Certificate of Designations, occurring after the date hereof,
such that the aggregate exercise price for the entire Deferred
Warrant shall be no more than $2,142.86) per share of Common
Stock in the form of Exhibit A (the "Deferred Warrant") subject
only to the conditions set forth in Section 2.3(b) below;
provided, that ING may at any time and from time to time prior to
January 31, 1996, and at its option, waive the foregoing
conditions and elect to purchase all or any portion of the
Deferred Shares and the proportionate amount of the Deferred
Warrant, by providing notice thereof to the Company, in which
case, the purchase and sale of all or any portion of the Deferred
Shares and the proportionate amount of the Deferred Warrant will
be promptly consummated in accordance with this Agreement. The
purchase price for the Deferred Shares and the Deferred Warrant
shall be $4,997,857.14 in aggregate, payable to the Company by
wire transfer of immediately available funds. The Company and
ING, having adverse interests and as a result of arm's length
bargaining, agree that (i) neither ING nor any of its Affiliates
or associates have rendered or have agreed to render any services
to the Company in connection with this Agreement or the issuance
of the Deferred Shares and Deferred Warrant' and (ii) the
Deferred Warrant is not being issued as a form of compensation.
(b) The foregoing purchase and sale of the Deferred
Shares and Deferred Warrant will be conditioned upon, and subject
to, each of the following:
(1) Such purchase and sale shall provide financing for
the Greenville and Columbia, South Carolina municipal networks;
the El Paso, Texas municipal network;and the Albuquerque, New
Mexico or equivalent municipal network of the Company or other
expenditures in accordance with the Business Plan;
(2) Prior to or concurrently with such purchase and
sale, the Company shall have entered into and borrowed under a
definitive, final loan and security agreements with AT&T Credit
Corporation or any other recognized lender relating to the
Greenville and Columbia, South Carolina municipal networks; the
El Paso, Texas municipal network; and the Albuquerque, New Mexico
or equivalent municipal network which are similar to, or no less
favorable to the Company in any material respect than, the loan
and security agreements entered into prior to the date of this
Agreement by the Company or its Subsidiaries with AT&T Credit
Corporation;
(3) The Company shall have delivered to ING an
officer's certificate, dated as of the date of such purchase and
sale, signed by the Chairman, President and Chief Financial
Officer of the Company, certifying the foregoing matters referred
to in clauses (1) and (2); and
(4) Such purchase and sale shall be closed by no later
than January 31, 1996.
SECTION 2.4. Closing for Purchase of Deferred Shares
and Deferred Warrant. The closing of the purchase and sale of
the Deferred Shares and Deferred Warrant shall occur on the fifth
business day following the date of ING's notice referred to in
Section 2.3(a) or the satisfaction of the conditions referred to
in Section 2.3(b) at the Company's principal executive offices,
or at such other time, place and location as may be agreed by the
Company and ING.
SECTION 3. Representations and Warranties
SECTION 3.1. Representations and Warranties of the
Purchasers. Each Purchaser represents and warrants to the
Company and to each of the other Purchasers as follows:
SECTION 3.1.1. Existence and Power. That Purchaser is
validly existing and in good standing under the law of the
jurisdiction of its organization and has the full power and
authority to enter into and perform this Agreement.
SECTION 3.1.2. Authorization. The execution, delivery
and performance by that Purchaser of this Agreement have been
duly authorized by all necessary action, and this Agreement
constitutes the valid and binding obligation of that Purchaser
enforceable against it in accordance with its terms, except to
the extent enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights in general and
subject to general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at
law).
SECTION 3.1.3. Consents of Third Parties. Except for
conflicts, breaches, terminations, accelerations, defaults and
violations specified in (b) and (c) below in this Section 3.1.3
that could not reasonably be expected to have a material adverse
effect on that Purchaser's ability to perform its obligations
under this Agreement, the execution, delivery and performance by
that Purchaser of this Agreement will not: (a) violate or
conflict with its partnership agreement, certificate of
incorporation or by-laws or other similar organizational
documents; (b) conflict with, or result in the breach,
termination or acceleration of, or constitute a default under,
any lease, mortgage, license, agreement, commitment or other
instrument to which it is a party or by which it or any of its
properties are bound; or (c) constitute a violation of any law,
regulation, order, writ, judgment, injunction or decree
applicable to it or any of its properties or require any
governmental consent, registration or approval.
SECTION 3.1.4. Litigation. There is no judicial or
administrative action or other proceeding pending or, to the best
of the knowledge of that Purchaser, threatened, nor, to the best
of the knowledge of that Purchaser, is there any governmental
investigation pending or threatened, that questions the validity
of this Agreement or any action taken or to be taken by it in
connection with this Agreement. There is no litigation or other
proceeding pending or, to the best of the knowledge of that
Purchaser, threatened, nor, to the best of the knowledge of that
Purchaser, is there any governmental investigation pending or
threatened, nor is there any order, injunction or decree
outstanding, against that Purchaser that would have a material
adverse effect upon that Purchaser's ability to perform its
obligations under this Agreement.
SECTION 3.1.5. Investment. That Purchaser is an
accredited investor (within the meaning of the rules and
regulations under the Securities Act of 1933 (the "1933 Act"))
and will be acquiring the Series B Preferred Shares and the
Warrants for investment and not with a view to distribution in
violation of the 1993 Act.
SECTION 3.1.6. Brokers. Except as set forth in
Schedule 3.1.6, that Purchaser has not entered into any
agreement, arrangement or understanding with any broker or finder
in connection with the transactions contemplated by this
Agreement.
SECTION 3.1.7. Understanding Among the Purchasers.
The determination of each Purchaser to purchase the Series B
Preferred Shares and the Warrants pursuant to this Agreement has
been made by such Purchaser independent of any other Purchaser
and independent of any statements or opinions as to the
advisability of such purchase or as to the properties, business,
prospects or condition (financial or otherwise) of the Company
which may have been made or given by any other Purchaser or by
any agent or employee of any other Purchaser. In addition, it is
acknowledged by each of the Purchasers that none of the other
Purchasers has acted as an agent of any Purchaser in connection
with making its investment hereunder and that none of the
Purchasers will be acting as an agent of any Purchaser in
connection with monitoring its investment hereunder.
SECTION 3.2. Representations and Warranties of the
Company. The Company represents and warrants to each Purchaser
as follows:
SECTION 3.2.1. Existence and Power. The Company and
each of its subsidiaries are corporations validly existing and in
good standing under the laws of their respective states of
incorporation. The Company has the full corporate power and
authority to enter into and perform this Agreement, the Warrants
the Registration Rights Agreement, the Stockholders Agreement and
each other instrument it is executing and delivering in
connection with this Agreement (collectively, the "Transaction
Documents"). The Company and each of its Subsidiaries have the
full corporate power and authority to carry on their businesses
as now conducted and as contemplated by the business plan of the
Company, dated January 20, 1995 and set forth on Schedule 3.2.1
(the "Business Plan"), and to own, lease and operate their
properties as they now do and as contemplated by the Business
Plan. The Company and, except as set forth on Schedule 3.2.5,
each of its Subsidiaries are qualified to do business as foreign
corporations in each jurisdiction in which they are required to
be qualified and where the failure to be so qualified could have
a material adverse effect on the business operations or financial
condition of the Company or its Subsidiaries.
SECTION 3.2.2. Authorization. The execution, delivery
and performance of each of the Transaction Documents have been
duly authorized by all necessary action of the Company, and each
of the Transaction Documents constitutes the valid and binding
obligation of the Company enforceable against the Company in
accordance with its terms, except to the extent enforceability
may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of
creditors rights in general and subject to general principles of
equity (regardless of whether enforceability is considered in a
proceeding in equity or at law).
SECTION 3.2.3. Consents of Third Parties. The
execution, delivery and performance of each of the Transaction
Documents by the Company will not: (a) violate or conflict with
the certificate of incorporation of the Company, as amended (the
"Charter", which shall include the Certificate of Designations
and all other certificates of designations of the Company), or
the by-laws of the Company, as amended (the "By-laws")or the
certificate of incorporation or by-laws of any of the Company's
Subsidiaries; (b) except as set forth on Schedule 3.2.7, conflict
with, or result in the breach, termination or acceleration of, or
constitute a default under, any lease, mortgage, license,
agreement, commitment or other instrument to which the Company or
any of its Subsidiaries is a party or by which it or any of its
Subsidiaries or any of its or their properties are bound; (c)
constitute a violation of any law, regulation, order, writ,
judgment, injunction or decree applicable to the company or any
of its Subsidiaries or any of the Company's or its Subsidiaries'
properties or, except as set forth on Schedule 3.2.3, require any
governmental consent, registration or approval; or (d) result in
the creation of any Lien upon the properties or assets of the
Company or any of its Subsidiaries.
SECTION 3.2.4. Litigation. There is no judicial or
administrative action or other proceeding pending or, to the best
of the knowledge of the Company, threatened, nor, to the best of
the knowledge of the Company, is there any governmental
investigation pending or threatened, that questions the validity
of any of the Transaction Documents or any action taken or to be
taken by the Company or any of its Subsidiaries in connection
with any of the Transaction Documents. Except as set forth on
Schedule 3.2.4, there is no litigation or other proceeding
pending or, to the best of the knowledge of the Company,
threatened, nor, to the best of the knowledge of the Company, is
there any governmental investigation pending or threatened, nor
is there any order, injunction or decree outstanding, by or
against the Company or any of its Subsidiaries or relating in any
manner or to any material aspect of its or their properties or
businesses (except any, such orders, injunctions or decrees and
any administrative proceedings applicable generally throughout
the industry in which the Company and its Subsidiaries operate).
Except as set forth on Schedule 3.2.4, the Company has not
received any opinion or memorandum from legal counsel to the
Company to the effect that it is exposed, from a legal
standpoint, to any liability or disadvantage which may be
material to its business, financial condition, operations,
property or affairs. The Company is not in default with respect
to any order, writ, injunction or decree known to or served upon
the Company or any court or of any Federal, state, municipal or
other governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign. There is no action or
suit by the Company pending or threatened against others.
SECTION 3.2.5. Subsidiaries. Except for the
Subsidiaries and joint venture interests listed on Schedule
3.2.5, the Company does not have any equity or other interest in
any other business. Except as set forth on Schedule 3.2.5, the
Company owns all the outstanding capital stock of the
Subsidiaries listed on Schedule 3.2.5. The merger or dissolution
and liquidation of each of the Subsidiaries designated on
Schedule 3.2.5 of the Investment Agreement, dated October 21,
1994, among the Company and the investors named therein (the
"Investment Agreement") as "Non-Operating Subsidiaries" (the
"Non-Operating Subsidiaries") in the manner provided in Section
5.15 will not adversely affect the Company or any of the
Company's other subsidiaries.
SECTION 3.2.6. Records. Copies of all the
certificates of incorporation and by-laws of the Company and each
of its Subsidiaries have been delivered to the Purchasers and are
complete and correct, and the minute books of the Company and
each of its Subsidiaries have been exhibited to the Purchasers
and are complete and correct in all material respects.
SECTION 3.2.7. Capitalization. Schedule 3.2.7 set
forth (a) the states of incorporation of the Company and each of
its Subsidiaries and where each is qualified to do business as a
foreign corporation, (b) the authorized capital stock of the
Company and each of its Subsidiaries, (c) the number of issued
and outstanding shares of each class of capital stock of the
Company and each of its Subsidiaries and (d) the number of shares
of each such class reserved or otherwise committed for issuance
under all outstanding securities, Benefit Arrangements and other
agreements and instruments. Schedule 3.2.7 sets forth, as of the
date hereof, the name of each owner or record and, to the actual
knowledge of the Company, each beneficial owner of capital stock
(except for changes in ownership occurring by way of trades of
Common Stock among public stockholders after June 20, 1995),
options, warrants, convertible securities and other rights to
acquire capital stock of the Company and each of its
Subsidiaries, the number of shares of each class of capital stock
of the Company and its Subsidiaries owned by each owner, the
number of shares of capital stock of the Company and its
Subsidiaries issuable upon the exercise of conversion of all
rights to obtain such capital stock as of the date of issuance of
such rights, the date of issuance of each right to obtain shares
of capital stock of the Company and its Subsidiaries, the number
of shares of capital stock of the Company and its Subsidiaries
issuable upon the exercise of conversion of all rights to obtain
such capital stock as of the date hereof giving effect to the
transactions contemplated hereby, the exercise of conversion
price for such right to obtain capital stock as of the date
hereof giving effect to the transactions contemplated hereby and
the exercise period for such right to obtain capital stock as of
the date hereof. Schedule 3.2.7 lists all agreements or
instruments that evidence any options, warrants, convertible
securities or other rights to obtain shares of the capital stock
of the Company and its Subsidiaries. The designations, powers,
preferences, rights, qualifications, limitations and restrictions
in respect of each class and series of authorized capital stock
of the Company are as set forth in the Charter, and all such
designations, powers, preferences, rights, qualifications,
limitations and restrictions are valid, binding and enforceable
and in accordance with all applicable laws. All the issued and
outstanding shares of capital stock of the Company and each of
its Subsidiaries were duly authorized for issuance and are
validly issued, fully paid and nonassessable. Except as set
forth on Schedule 3.2.7, all of the outstanding securities of the
Company were issued in Company were issued in compliance with all
applicable Federal and state securities laws. Except as set
forth in the Transaction Documents or on Schedule 3.2.7 (x) there
are no outstanding options, warrants, convertible securities or
other rights of any kind to acquire any capital stock or any
securities convertible into any capital stock of the Company or
any of its Subsidiaries nor are there any obligations to issue
any such capital stock, options, warrants, convertible securities
or other rights or securities; (y) there are no restrictions of
any kind on the transfer of the outstanding capital stock of the
Company or any of its Subsidiaries to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any of its or their properties are bound, except
those imposed by applicable Federal and state securities laws;
and (z) there are no contracts, letters of intent or other
understandings (whether formal or informal, written or oral, firm
or contingent) that require or may require the Company or any of
its Subsidiaries to repurchase, redeem or otherwise acquire any
of its or their capital stock or register the sale of any of its
or their securities under the 1933 Act. Schedule 3.2.7 sets
forth, for each contract, letter of intent or other understanding
(whether formal or informal, written or oral, firm or contingent
that requires or may require the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any of
its or their capital stock, all terms of such repurchase,
including the currently applicable repurchase price, the maximum
repurchase price and the time period during which the Company may
be required to repurchase any capital stock. Except as set forth
in the Transaction Documents or on Schedule 3.2.7, there are no
preemptive or similar rights with respect to the Company's or any
of its Subsidiaries' capital stock. Except as set forth in the
Transaction Documents or on Schedule 3.2.7, neither the Company
nor, to the best knowledge of the Company, any shareholder of the
Company is a party to any voting agreements, voting trusts,
proxies or any other agreements, instruments or understandings
with respect to the voting of any capital stock of the Company,
or any agreement with respect to the transferability, purchase or
redemption of any capital stock of the Company or right to
acquire such capital stock. Except as set forth on Schedule
3.2.7, neither the issuance of the Series B Preferred Shares and
the Warrants nor the exercise of the Warrants and conversion of
the Series B Preferred Shares will cause any anti-dilution or
similar adjustment to the exercise price, conversion rate or the
amount or nature of the property received upon exercise or
conversion of any options, warrants, convertible securities or
other rights to obtain shares of the capital stock of the Company
or its Subsidiaries. Schedule 3.2.7 sets forth the percentage
ownership of the Common Stock by each of ING Equity Partners,
L.P. I, The ▇▇▇▇ Alternative Income Fund, L.P., Apex Investment
Fund I, L.P., Apex Investment Fund II, L.P., The Productivity
Fund II, L.P., Environmental Private Equity Fund, L.P. and
Argentum Capital Partners, L.P. on a Fully-Diluted Basis as of
the Closing Date. Schedule 3.2.7 also sets forth the percentage
ownership of the Common Stock, on a Fully-Diluted Basis as of the
Closing Date, that ING Equity Partners, L.P.I would have if it
were to purchase the Deferred Shares and Deferred Warrant on the
Closing Date.
SECTION 3.2.8. Financial Information.
SECTION 3.2.8.1. Financial Statements. The following
financial statements have been delivered to each of the
Purchasers (collectively, the "Financial Statements"): (a) the
unaudited consolidated balance sheet of the Company and its
Subsidiaries as of March 31, 1995 (the "Balance Sheet"); (b) the
audited consolidated balance sheets of the Company and its
Subsidiaries as of June 30, 1994 and 1993; (c) the unaudited
consolidated statements of operations and cash flows of the
Company and its Subsidiaries for the three-month periods ended
September 30, 1994, December 31, 1994 and March 31, 1995; and (d)
the audited consolidated statements of operations, Series A
Preferred Stock and Common Stock holder equity (deficit) and cash
flows of the Company and its Subsidiaries for the period May 17,
1989 (inception) to June 30, 1994 and each of the years ended
June 30, 1994 and 1993. Each of the Financial Statements has
been prepared in accordance with generally accepted accounting
principles ("GAAP") consistently applied and fairly presents the
Company's and its Subsidiaries' consolidated financial position
and results of operations as of its respective date or for its
respective period (subject, in the case of the Financial
Statements referred to (a) and (c) above, to normal, recurring,
year-end adjustments).
SECTION 3.2.8.2. Liabilities. Except as set forth on
the Balance Sheet or on any Schedule to this Agreement, neither
the Company nor any of its Subsidiaries (i) has any debts,
liabilities or obligations, whether accrued, absolute, contingent
or otherwise or (ii) is a party to a contract, letter of intent,
commitment or other understanding which will result in it having
any debts, liabilities or obligations, other than debts,
liabilities and obligations that have been incurred by the
Company or its Subsidiaries since the date of the Balance Sheet
in the order course of business and consistent with past practice
or that are set forth on Schedule 3.2.8.2.
SECTION 3.2.8.3. Assets. The Company and each of its
Subsidiaries have good and valid title to their properties and
assets as reflected on the Balance Sheet (other than properties
and assets disposed of since the date of the Balance Sheet in the
ordinary course of business and consistent with past practice and
that are set forth on Schedule 3.2.8.3), and, except as set forth
in the notes to the Balance Sheet or on Schedule 3.2.8.3, all
such properties and assets are free and clear of all Liens, other
than Liens for current taxes not yet due and payable and
imperfections of title, if any, not material in amount and not
materially detracting from the value of impairing the use of the
property subject thereto or impairing the operations or proposed
operations of the Company or any Subsidiary (such immaterial
imperfections of title, collectively, the "Immaterial Liens").
SECTION 3.2.9. Absence of Certain Changes. Since the
date of the Balance Sheet, (i) there has been no change in the
assets, liabilities or financial condition of the Company and its
Subsidiaries from that reflected in the Balance Sheet except for
changes in the ordinary course of business which in the aggregate
have not been materially adverse and (ii) none of the business,
financial condition, operations, property or affairs of the
Company and its Subsidiaries has been materially adversely
affected by any occurrence or development, individually or in the
aggregate, whether or not insured against; provided, that
operating losses in the ordinary course of business subsequent to
the date of the Balance Sheet shall not be considered as such a
materially adverse occurrence or development. Since the date of
the Balance Sheet, except as set forth on Schedule 3.2.9, neither
the Company nor any of its Subsidiaries has (a) issued any stock,
bonds or other securities, (b) borrowed any amount or incurred
any liabilities (absolute or contingent), other than liabilities
incurred in the ordinary course of business and consistent with
past practice and that do not exceed $100,000 in the case of any
one liability or any series of related liabilities, (c)
discharged or satisfied any Lien or paid any obligation or
liability (absolute, accrued or contingent), other than current
liabilities reflected on the Balance Sheet, (d) declared, set
aside or made any payment or distribution to shareholders or
purchased or redeemed any shares of its capital stock or other
securities, (e) mortgaged, pledged or otherwise subjected to a
Lien any of its assets, tangible or intangible, other than Liens
for current taxes not yet due and payable and Immaterial Liens,
(f) sold, assigned or transferred any of its tangible assets or
cancelled any debts or claims, (g) sold, assigned or transferred
any patents, trademarks, trade names, copyrights, trade secrets,
permits, licenses, rights, Easements or other intangible assets,
(h) suffered any material loss of property, or waived any rights
of substantial value, whether or not in the ordinary course of
business, (i) made any change in executive compensation, (j)
entered into any transaction the value of which exceeds $100,000,
(k) made capital expenditures, or commitments therefore, in
excess of $100,000 in the aggregate, (l) suffered damage,
destruction or casualty in excess of $50,000 in the aggregate,
(m) surrendered, had revoked or suspended or otherwise terminated
or had terminated any license, permit, Easement or other
approval, authorization or consent from any court, administrative
agency or other governmental authority relating to its business
operations or construction of its systems, (n) made any material
change in the manner of business or operations of the Company,
(o) entered into any transaction except in the ordinary course of
business or as otherwise contemplated hereby or (p) entered into
any commitment (contingent or otherwise) to do any of the
foregoing.
SECTION 3.2.10. Taxes. Except as set forth on
Schedule 3.2.10, the Company and each of its Subsidiaries have
(a) filed, within the requisite time (including any extensions
applied for), with the appropriate Federal, state and local
taxing authorities all tax returns required to be filed by or
with respect to them, and those tax returns are correct and
complete in all material respects, and (b) paid in full or made
adequate provision for the payment of all taxes, interest and
penalties shown to be due on, or known to be due with respect to,
those tax returns as well as all other taxes, assessments and
governmental charges which have become due or payable, including,
without limitation, all taxes which the Company is obligated to
withhold from amounts owing to employees, creditors and third
parties. All such taxes with respect to which the Company has
become obligated pursuant to elections made by the Company in
accordance with GAAP have been paid and adequate reserves have
been established for all taxes accrued but not yet payable.
Neither the Company nor any of its Subsidiaries has received any
notice of deficiency or assessment from any Federal, state or
local taxing authority with respect to its liabilities for taxes
that have not been fully paid or finally settled, nor, to the
best of the knowledge of the Company, is there a pending or
threatened investigation by any such authority with respect to
the Company's or any of its Subsidiaries' taxes. The Federal
income tax returns of the Company have never been audited by the
Internal Revenue Service. There is no tax lien, whether imposed
by any Federal, state, county or local taxing authority,
outstanding against the assets, properties or business of the
Company. Neither the Company nor any of its stockholders has
ever filed a consent pursuant to Section 341(f) of the Internal
Revenue Code of 1986, as amended (the "Code"), relating to
collapsible corporations.
SECTION 3.2.11. Other Agreements. Except as set forth
in Schedule 3.2.11(A), the Company is not a party to or otherwise
bound by any written or oral contract or instrument or other
restriction which individually or in the aggregate could
materially adversely affect the business, financial condition,
operations, property or affairs of the Company. Except as set
forth in Schedule 3.2.11(B), the Company is not a party to or
otherwise bound by any written or oral:
(a) commitment or agreement to which the Company or
any of its Subsidiaries is a party for the purchase of
any materials, supplies or services that involves or
will involve an expenditure by it within any 12-month
period of more than $100,000;
(b) personal property lease under which the Company or
any of its Subsidiaries is either a lessor or lessee
that involves annual payments or receipts of more than
$100,000;
(c) agreement with customers that involves annual
payments to the Company or any of its Subsidiaries of
more than $100,000;
(d) agreement between the Company or any of its
Subsidiaries, on the one hand, and any of its or their
Affiliates, associates or shareholders, on the other
hand, other than (i) agreements solely between or among
any of the Company and its Subsidiaries and (ii)
agreements set forth on Schedule 3.2.13 or 3.2.14 or
Exhibit A to Schedule 3.2.7;
(e) agreement under which the Company or any of its
Subsidiaries is restricted from engaging in any
business in any geographic area or is otherwise limited
or restricted in its or their right to compete in any
respect;
(f) agreement to which the Company or any of its
Subsidiaries is a party containing any provisions
relating to a change in control of the Company or any
of its Subsidiaries;
(g) agreement under which the Company or any of its
Subsidiaries has agreed to register the sale of any of
its securities under the 1933 Act;
(h) loan or credit agreement to which the Company or
any of its Subsidiaries is a party or to which any of
them or their properties or assets may be subject;
(i) agreement under which the Company or any of its
Subsidiaries has granted, or agreed to grant, a lien on
any of its Assets;
(j) agreement under which the Company or any of its
Subsidiaries has any obligation or liability to
purchase any of its or any other issuer's securities;
(k) distributor, dealer, manufacturer's representative
or sales agency contract or agreement which is not
terminable on less than ninety (90) days' notice
without cost or other liability to the Company;
(l) sales contract which entitles any customer to a
rebate or right of set-off, to return any product to
the Company after acceptance thereof or to delay the
acceptance thereof, or which varies in any material
respect from the Company's standard form contracts;
(m) contract or other commitment with any supplier
containing any provision permitting any party other
than the Company to renegotiate the price or other
terms, or containing any pay-back or other similar
provision, upon the occurrence of a failure by the
Company to meet its obligations under the contract when
due or the occurrence of any other event;
(n) contract for the future purchase of fixed assets
or for the future purchase of materials, supplies or
equipment in excess of its normal operating
requirements;
(o) bonus, pension, profit-sharing, retirement,
hospitalization, insurance, stock purchase, stock
option or other plan, contract or understanding
pursuant to which benefits are provided to any employee
of the Company (other than group insurance plans
applicable to employees generally);
(p) guaranty of any obligation for borrowed money or
otherwise;
(q) voting trust or agreement, stockholders'
agreement, pledge agreement, buy-sell agreement or
first refusal or preemptive rights agreement relating
to any securities of the Company;
(r) agreement, or group of agreements with the same
party or any group of parties which are Affiliates,
under which the Company has advanced or agreed to
advance money or has agreed to lease any property as
lessee or lessor;
(s) assignment, license or other agreement with
respect to any form of intangible property;
(t) other contract or group of related contracts with
the same party involving more than $100,000 or
continuing over a period of more than six months from
the date or dates thereof (including renewals or
extensions optional with another party), which contract
or group of contracts is not terminable by the Company
without penalty upon notice of thirty (30) days or
less, but excluding any contract or group of contracts
with a customer of the Company for the sale, lease or
rental of the Company's products or services if such
contract or group of contracts was entered into by the
Company in the ordinary course of business; or
(u) other contract, plan, arrangement, commitment,
agreement and instrument to which the Company or any of
its Subsidiaries is a party or by which the Company or
any of its Subsidiaries or its or their properties are
bound that requires aggregate annual payments by the
Company and its Subsidiaries of more than $100,000 or a
copy of which would be required to be filed with the
SEC as an exhibit to a registration statement on Form
S-1 if the Company were registering securities under
the 1933 Act, other than (i) items referred to in (a)
through (t) above, (ii) any Employee Benefit Plans,
(iii) any Benefit Arrangements and (iv) any agreements
set forth on Schedule 3.2.13, 3.2.16.2, 3.2.16.3 or
3.2.17.1;
The Company and, to the best of the Company's knowledge, each
other party thereto have in all material respects performed all
obligations required to be performed by them to date, have
received no notice of default and are not in default (with due
notice or lapse of time or both) in any material respect under
any Material Contract now in effect to which the Company is a
party or by which it or its property may be bound. The Company
has no present expectation or intention of not fully performing
all its obligations under each such Material Contract, and the
Company has no knowledge of any breach or anticipated breach of
the other party to any Material Contract to which the Company is
a party. The Company is in substantial compliance with all of
the terms and provisions of its Charter and By-laws, as amended.
SECTION 3.2.12. Waivers. Except as set forth on
Schedule 3.2.12, neither the Company nor any of its Subsidiaries
has waived any of its or their rights under any Material
Contract. No party has notified the Company or any of its
Subsidiaries of its intention to cease to perform any of its
obligations under any Material Contract, and each of the Material
Contracts is in full force and effect.
SECTION 3.2.13. Agreements Regarding Employees.
Neither the Company nor any of its Subsidiaries is a party to or
bound by any collective bargaining or similar labor agreement and
the Company is not aware of efforts or actions by any of its or
its Subsidiaries' employees to organize or join a labor union or
similar organization for collective bargaining purposes. The
Company and each of its Subsidiaries are in compliance in all
material respects with all applicable laws and regulations
respecting labor, employment, discrimination, fair employment
practices, terms and conditions of employment, wage and hour
restrictions and the like. Except as set forth on Schedule
3.2.13, neither the Company nor any of its Subsidiaries is a
party to or bound by any agreement, arrangement, understanding,
commitment or letter of intent, including severance agreements,
with any current or former employee or consultant. Set forth on
Schedule 3.2.13 is a list of all employees of the Company and its
Subsidiaries, with their annual cash compensation as of the date
of this Agreement. Except as set forth on Schedule 3.2.13, no
senior officer or key employee or group of senior officers or key
employees of the Company or any of its Subsidiaries has notified
the Company or any of its Subsidiaries that he, she or they
intend to terminate his, her or their employment with the Company
or any of its Subsidiaries. Neither the Company nor any of its
Subsidiaries has a present intention to terminate any senior
officer or key employee or group of senior officers or key
employees. Except as set forth on Schedule 3.2.13, there are no
actual or, to the best of the knowledge of the Company,
contemplated material disputes involving the current or former
employees of the Company or any of its Subsidiaries. No officer
or key employee of the Company has advised the Company (orally or
in writing) that he intends to terminate employment with the
Company. Each of the officers of the Company, each key employee
and each other employee now employed by the Company who has
access to confidential information of the Company has executed a
non-disclosure and non-competition agreement, and such agreements
are in full force and effect.
SECTION 3.2.14. Employee Benefit Plans and Benefit
Arrangements. Set forth on Schedule 3.2.14 is a list and brief
description of all Employee Benefit Plans and all material
Benefit Arrangements. With respect to each of those Employee
Benefit Plans and Benefit Arrangements, the Company has, to the
extent applicable, delivered to the Purchasers copies of: (a)
all plan and related trust documents (including amendments): (b)
the most recent summary plan description and the most recent
annual report and actuarial report; and (c) the most recent
determination letter from the Internal Revenue Service; no event
has occurred for which, and there exists no condition or set of
circumstances under which, to the best of the knowledge of the
Company, the Company or any of its Subsidiaries or any Pension
Plan could be subject to any material liability under Section 502
of ERISA or Section 4975 of the Internal Revenue Code of 1986
(the "Code"). With respect to each such Employee Benefit Plan
and Benefit Arrangement: (x) the Company and each of its
Subsidiaries are in compliance in all material respects with the
terms of the Employee Benefit Plan or Benefit Arrangement and
with the requirements prescribed by all applicable statutes,
orders and governmental rules and regulations, including, but not
limited to, ERISA and the Code; (y) each Pension Plan intended to
qualify under Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service with
respect to such qualification; its related trust has been
determined to be exempt from taxation under Section 501(a) of the
Code; and nothing has occurred that would adversely affect such
qualification or exemption; and (z) there are no actions,
qualification or exemption; and (z) there are no actions,
proceedings or investigations (other than routine claims for
benefits) pending or, to the best of the knowledge of the
Company, threatened in respect of any Employee Benefit Plan or
Benefit Amount.
SECTION 3.2.15. Compliance With Law. Neither the
Company nor any of its Subsidiaries is in violation of any
applicable law, regulation, ordinance or other requirement of any
governmental body or court, which violations singly or in the
aggregate could have a material adverse effect on the Company or
any of its Subsidiaries or its or their businesses or operations
or the planned build-out of the systems contemplated by the
Business Plan; no notices have been received by the Company or
any of its Subsidiaries alleging any such violations; and, to the
best of the knowledge of the Company, neither the Company nor any
of its Subsidiaries is under investigation for any such
violations. Except as set forth on Schedule 3.2.15, the Company
and its Subsidiaries have all necessary permits, licenses and
other material authorizations required to conduct their business
as conducted and as proposed to be conducted.
SECTION 3.2.16. Real Property.
SECTION 3.2.16.1. Owned Real Property. Neither the
Company nor any of its Subsidiaries owns any real property.
SECTION 3.2.16.2. Leases. Set forth on Schedule
3.2.16.2 is a brief description of each lease of real property to
which the Company or any of its Subsidiaries is a party.
SECTION 3.2.16.3. Easements and Rights of Way. Set
forth on Schedule 3.2.16.3 is a list and brief description of all
easements, rights of way, licenses, franchise agreements, leases
(other than those set forth on Schedule 3.2.16.2) and other
similar property rights of the Company and each of its
Subsidiaries (the "Easements"). Except as set forth on Schedule
3.2.16.3, the present and prospective uses of all the Easements
are in accordance in all material respects with all applicable
laws, ordinances, regulations and orders.
SECTION 3.2.17. Proprietary Rights.
SECTION 3.2.17.1. General. Set forth on Schedule
3.2.17.1 is a list of all patents, trademarks, trade names,
service marks, copyrights and applications therefor owned or used
or held for use by the Company or any of its Subsidiaries or of
which the Company is a licensor or licensee or in which the
Company has any right ("Proprietary Rights"), specifying as to
each, as applicable: (a) the nature of the Proprietary Right;
(b) the user of the Proprietary Right; and (c) material licenses,
sublicenses and other agreements to which the Company or any of
its Subsidiaries is a party and pursuant to which any person is
authorized to use the Proprietary Right. The Company and each of
its Subsidiaries have used the Proprietary Rights without
infringing any other party's rights in a manner that could
materially and adversely affect the Company or any of its
Subsidiaries and without any claim of any infringement and
without any infringement by others. The Company owns or
possesses adequate licenses or other rights to use all patents,
patent applications, trademarks, trademark applications, service
marks, service ▇▇▇▇ applications, trade names, copyrights,
manufacturing processes, formulae, trade secrets and know-how
necessary to the conduct of its business as conducted and as
proposed to be conducted in accordance with the Business Plan.
To the best of the Company's knowledge, all technical information
developed by and belonging to the Company which has not been
patented has been kept confidential. The Company has not granted
or assigned to any other person or entity any right to
manufacture, have manufactured, assemble or sell the products or
proposed products or to provide the services or proposed services
of the Company.
SECTION 3.2.17.2. Litigation. Neither the Company nor
any of its Subsidiaries is a party in any pending or, to the best
of the knowledge of the Company, threatened suit, action or
proceeding that involves a claim of infringement of any
Proprietary Right, and to the best of the knowledge of the
Company there is no basis for any such claim (whether or not
pending or threatened). No Proprietary Right is subject to any
outstanding order, judgment, decree, stipulation or agreement
restricting its use in the provision of any services by the
Company or any of its Subsidiaries or any of its or their
properties or restricting the licensing thereof to any person by
the Company or any of its Subsidiaries. No claim is pending or
to the best of the knowledge of the Company threatened to the
effect that any such Proprietary Right owned or licensed by the
Company, or which the Company otherwise has the right to use, is
invalid or unenforceable by the Company, and to the best of the
knowledge of the Company there is no basis for any such claim
(whether or not pending or threatened).
SECTION 3.2.17.3. Trade Secrets. No third party has
claimed that any person consulting or otherwise employed or
affiliated with the Company or any of its Subsidiaries has
violated his or her employment or other contract with that third
party, or disclosed or utilized any trade secrets or proprietary
information or documentation of that third party or interfered in
the employment or other relationship between that third party and
any of its consultants, employees or affiliates. To the best
knowledge of the Company, no third party has requested
information from the Company which suggests that such a claim
might be contemplated. To the best knowledge of the Company, no
person consulting or otherwise employed or affiliated with the
Company or any of its Subsidiaries has employed any trade secret
or any information or documentation proprietary to any former
employer, and no person consulting or otherwise employed or
affiliated with the Company or any of its Subsidiaries has
violated any confidential or contractual relationship that person
may have had with any third party, in connection with the
operations of the Company or any of its Subsidiaries and the
Company has no reason to believe there will be any such
employment or violation. To the best of the Company's knowledge,
none of the execution or delivery of the Transaction Documents,
or the carrying on of the business of the Company as officers,
employees or agents by any officer, director or key employee of
the Company, or the conduct or proposed conduct of the business
of the Company, will conflict with or result in a material breach
of the terms, conditions or provisions of or constitute a
material default under any contract, covenant or instrument under
which any such person is obligated.
SECTION 3.2.18. Environmental Matters. Neither the
Company nor any of its Subsidiaries has received any notice from
the United States Environmental Protection Agency or any other
party ("Superfund Notices") that it is a potentially responsible
person under the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), any citations from any
Federal, state or local governmental agency for noncompliance
with such agency's requirements under Environmental Laws
pertaining to the Company's or any of its Subsidiaries'
businesses ("Citations") or any written notice from private
parties alleging any such noncompliance (a "Written Notice").
There are no pending or unresolved Superfund Notices, Citations
or Written Notices. To the best of the knowledge of the Company,
the Company and each of its Subsidiaries are in compliance in all
material respects with all applicable Environmental Laws.
SECTION 3.2.19. Permits and Licenses. Except as set
forth on Schedule 3.2.19, the Company and each of its
Subsidiaries have all material permits, licenses, franchises and
other authorizations, including all Easements, necessary for the
conduct of their businesses as currently conducted (it being
understood that the businesses as currently conducted include the
businesses contemplated by the Business Plan to be conducted as
of the date of this Agreement), and all such permits, licenses,
franchises and authorizations, including Easements, are valid and
in full force and effect.
SECTION 3.2.20. Related Party Transactions. Except as
set forth on Schedule 3.2.20 or in the Transaction Documents,
neither the Company nor any of its Subsidiaries has engaged in
any transaction with any of its shareholders that owns of record
or, to the actual knowledge of the Company, beneficially more
than 5% of the Company's outstanding shares of common stock ("5%
Shareholders"), or any officers or directors of the Company or
any of its Subsidiaries or, to the best knowledge of the Company,
any Affiliates or associates of any of the foregoing. Schedule
3.2.20 sets forth all amounts paid (in any form of property or
rights) between January 1, 1994 and the date hereof or payable
within 90 days of the date hereof by the Company and any of its
Subsidiaries to any of its 5% Shareholders, or any officers or
directors of the Company or any of its Subsidiaries or, to the
best knowledge of the Company, any Affiliates or associates of
any of the foregoing. Except as set forth on Schedule 3.2.20 or
in the Transaction Documents, none of the officers or directors
of the Company or any of its Subsidiaries and, to the best
knowledge of the Company, none of the 5% Shareholders and none of
the Affiliates or associates of any of the foregoing has any
interest (other than as a non-controlling holder of securities of
a publicly traded company), either directly or indirectly, in any
person (whether as an employee, officer, director, shareholder,
agent, independent contractor, security holder, creditor,
consultant or otherwise) that presently (a) provides any services
or designs, produces or sells any products or product lines or
engages in any activity that is the same as, similar to or
competitive with any activity or business in which the Company or
any of its Subsidiaries is now engaged; (b) is a supplier of,
customer of, creditor of or has an existing contractual
relationship with the Company or any of its Subsidiaries; or
(c) has any direct or indirect interest in any asset or property
used by the Company or any of its Subsidiaries or any property,
real or personal, tangible or intangible, that is necessary or
desirable for the conduct of the business of the Company or any
of its Subsidiaries as now conducted or proposed to be conducted
in the Business Plan.
SECTION 3.2.21. Insurance. Set forth on Schedule
3.2.21 is a complete and correct list and brief description of
the insurance policies the Company and its Subsidiaries have in
effect. Such insurance constitutes adequate insurance for the
businesses in which the Company or and each of its Subsidiaries
are engaged within accepted industry standards and customs.
SECTION 3.2.22. Disclosure. As of the date hereof,
this Agreement, the Schedules and Exhibits to this Agreement, and
the Business Plan and the Registration Statement referred to
below, taken together, do not and, as of May 11, 1995, the
Company's registration statement dated February 13, 1995 on Form
SB-2, file number 33-87200, together with all amendments and
supplements thereto (the "Registration Statement"), did not,
contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements therein not
misleading (it being understood that nothing in this
representation is intended as a guarantee that any forecasted
results included in the Business Plan or the Registration
Statement will be realized). The Registration Statement complies
in all material respects with the requirements of the 1993 Act
and all regulations promulgated thereunder. There is no fact
which the Company has not disclosed to the Purchasers and their
counsel in writing and of which the Company is aware which
materially and adversely affects or, based on the best of the
knowledge of the Company given the facts and circumstances known
to the Company as of the date hereof, is likely to have a
material and adverse effect on the business, financial condition,
operations, property or affairs of the Company and its
Subsidiaries taken as a whole. The financial projections and
other estimates delivered to the Purchasers were prepared by the
Company based on the Company's experience in the industry and on
assumptions of fact and opinion as to future events which the
Company, at the date of such delivery, believed to be reasonable,
but which the Company cannot and does not assure or guarantee the
attainment of in any manner. As of the date hereof no facts have
come to the attention of the Company which would, in its opinion,
require the Company to revise or amplify the assumptions
underlying such projections and other estimates or the
conclusions derived therefrom.
SECTION 3.2.23. Offering and Approvals. Neither the
Company nor any persons authorized or employed by it as agent,
broker, dealer or otherwise in connection with the offering or
sale of the Series B Preferred Shares, the Warrants or any
similar securities of the Company has offered any such securities
for sale to, or solicited any offers to buy any such securities
from, or otherwise approached or negotiated with respect thereto
with, any person or persons other than the Purchasers or other
institutions and persons who are accredited investors (within the
meaning of the rules and regulations under the 1933 Act), and,
assuming the accuracy of the representations and warranties of
the Purchasers in Section 3.1.5, neither the Company nor any
person acting on its behalf has taken or will take any actin
(including, without limitation, any offer, issuance or sale of
any securities under circumstances that might require the
integration of such securities with the Series B Preferred Shares
or the Warrants under the 1933 Act or the rules and regulations
of the Securities and Exchange Commission (the "SEC") that might
subject the offering, issuance or sale of the Series B Preferred
Shares or the Warrants to the registration provisions of the 1933
Act. Subject to the accuracy of the representationes and
warranties of the Purchasers set forth in Section 3.1.5, no
registration or filing with, or consent or approval of or other
action by, any Federal, state or other governmental agency or
instrumentality (including any applicable Federal Communications
Commission approval) is or will be necessary for the valid
execution, delivery and performance by the Company of the
Transaction Documents, the issuance, sale and delivery of the
Series B Preferred Shares and the Warrants, the issuance and
delivery of the shares of Common Stock upon the conversion of the
Series B Preferred Shares, or the issuance and delivery of the
Shares of Common Stock upon exercise of the Warrants, other than
(i) filings pursuant to state securities laws (all of which
filings have been made by the Company) in connection with the
sale of the Series B Preferred Shares and the Warrants and (ii)
with respect to the Registration Rights Agreement, the
registration of the shares covered thereby with the SEC and
filings pursuant to state securities laws. Subject to the
accuracy of the representations and warranties of the Purchasers
set forth in Section 3.1.5, the consummation of the transactions
contemplated hereby shall not violate any Federal, state or local
law or regulation, including any regulation of the Federal
Communications Commission.
SECTION 3.2.24. Brokers. Except as set forth on
Schedule 3.2.24, neither the Company nor any of its Subsidiaries
has entered into any agreement, arrangement or understanding with
any broker or finder in connection with the transactions
contemplated by the Transaction Documents. Schedule 3.2.24 sets
forth all broker or finder fees and other amounts payable upon
the consummation of the transactions contemplated hereby.
SECTION 3.2.25. Leasehold Interests. Each lease or
agreement to which the Company is a party under which it is a
lessee of any property, real or personal, is a valid and
subsisting agreement without any material default of the Company
thereunder and, to the best of the Company's knowledge, without
any material default thereunder of any other party thereto. No
event has occurred and is continuing which, with due notice or
lapse of time or both, would constitute a default or event of
default by the Company under any such lease or Agreement or, to
the best of the Company's knowledge, by any other party thereto.
The Company's possession of such property has not been disturbed
and, to the best of the Company's knowledge, no claim has been
asserted against the Company adverse to its rights in such
leasehold interests.
SECTION 3.2.26. Loans and Advances. The Company does
not have any outstanding loans or advances to any person and is
not obligated to make any such loans or advances, except, in each
case, for (i) advances to employees of the Company in respect of
reimbursable business expenses anticipated to be incurred by them
in connection with their performance of services for the Company
and (ii) relocation expenses.
SECTION 3.2.27. Assumptions, Guarantees, etc. of
Indebtedness of Other Persons. Except as set forth on Schedule
3.2.27, the Company has not assumed, guaranteed, endorsed or
otherwise become directly or contingently liable on any
indebtedness of any other person (including, without limitation,
liability by way of agreement, contingent or otherwise, to
purchase, to provide funds for payment, to supply funds to or
otherwise invest in a debtor, or otherwise to assure a creditor
against loss), other than guaranties by the Company of
obligations of its Subsidiaries and except for guaranties by
endorsement of negotiable instruments for deposit or collection
in the ordinary course of business.
SECTION 3.2.28. Significant Customers and Suppliers.
No customer which accounted for 10% or more of the Company's
sales during the period covered by the financial statements
referred to in Section 3.2.8 or which has been significant to the
Company thereafter, or supplier which is currently a sole source
supplier for one or more components necessary for the Company to
deliver its services has terminated, materially reduced or
threatened to terminate or materially reduce its purchases from
or provision of services to the Company, as the case may be.
SECTION 3.2.29. Further Equity Financing. The Company
believes, as of the Closing Date, that, in the absence of changed
circumstances arising after the Closing Date, the net proceeds to
the Company from the sale of the Initial Shares, the Deferred
Shares and the Warrants pursuant to this Agreement, should be
sufficient so that the Company shall be able to proceed in
accordance with the Business Plan until March 31, 1996 without
the need to raise funds through placement, in return for cash, of
any series of capital stock of the Company or its Subsidiaries or
to grant any options, warrants or other rights to acquire any of
the capital stock of the Company or its Subsidiaries other than
in accordance with agreements existing as of the date hereof, the
AT&T Term Sheet or the Company's 1995 Stock Option Plan.
SECTION 4. Use of Proceeds. The Company shall apply
all of the net proceeds to the Company form the sale of the
Series B Preferred Shares and the Warrants under this Agreement,
and the exercise of the Warrants to fund the build-out,
acquisition and operation of the voice and data telecommunica-
tions system as described in the Business Plan, to fund selling,
general and administrative expenses substantially as described in
the Business Plan, to fund selling, general and administrative
expenses substantially as described in the Business Plan and for
no other purposes. In any event, none of such proceeds shall be
paid to any Affiliates of the Company other than pursuant to
existing agreements or in the ordinary course of business, or
used to repurchase any securities of the Company or shall be paid
or used to make any payments to holders of securities of the
Company, except as listed on Schedule 4, without the prior
approval of each of the Series B Directors; provided, that, upon
the occurrence of a Governance Change Circumstance (as defined in
the Certificate of Designations), no such prior approval by the
Series B-1 Directors shall be required. Notwithstanding the
foregoing, all expenditures to be paid with such proceeds must be
approved by the Preferred Directors prior to a commitment by the
Company to such expenditures, which approval may be granted
pursuant to the Board's approval of the Company's annual Budget.
Notwithstanding any other provision of this Section 4, Section 4
shall not bar the Company from making payments under, and shall
not require approval by the Series B Directors of, agreements
that exist the date hereof, provided that such payments and
agreements are disclosed on Schedule 4 or another Schedule
attached hereto.
SECTION 5. General Post-Closing Covenants. Except as
otherwise provided below, as long as 25% of the Series B
Preferred Shares originally issued pursuant to this Agreement are
outstanding or any Purchaser or any of its transferees in a
private placement holds at least 5% of the Common Stock on a
Fully-Diluted Basis, the Company shall perform the following
covenants;
SECTION 5.1. Financial Data.
(a) The Company shall furnish to each such
Purchaser and its transferees (a "Qualifying Holder") that,
together with its Affiliates and associates, purchases or holds
an aggregate of at least 5,000 Series B Preferred Shares or
Warrant(s) exercisable into at least 50,000 shares of Common
Stock:
(i) as soon as available and in any event
within 30 days after the end of each calendar month (45 days, in
the case of a month coinciding with the end of a fiscal quarter
of the Company), a consolidated balance sheet of the Company and
its Subsidiaries, as of the end of each month and the related
consolidated statements of income, retained earnings and cash
flows for such month and such year to date, and supplemental
schedules of consolidating balance sheets and consolidating
statements of income (which will be prepared separately
Subsidiary-by-Subsidiary and, if different, city-by-city),
retained earnings and cash flows for each such month, all in
reasonable detail and stating in comparative form the respective
figures as of the end of and for the previous corresponding
period and certified by the principal financial officer of the
Company, to present fairly, in accordance with GAAP consistently
applied, the information contained therein, subject to normal,
recurring, year-end adjustments.
(ii) within 90 days following the end of
each fiscal year, all consolidated financial statements certified
without qualification by a firm of "big six" independent
accountants (the "Accountants") selected by the Company and
reasonably acceptable to a majority of the Preferred Directors,
together with copies of all correspondence between the Company
and the Accountants, including, but not limited to the
Accountants' letter to management;
(iii) as soon as available and in any event
within 90 days after the end of each fiscal year of the Company:
(A) a written statement of Accountants stating that, in making
the examination necessary for their report on the Company's
financial statements for that fiscal year, they obtained no
knowledge of any Triggering Event, as defined in the Certificate
of Designations (a "Triggering Event"), or default under any
agreement that, if in existence on the date of this Agreement,
would be a Material Contract or, if the Accountants shall have
obtained knowledge of any such event, specifying the same and the
nature and status thereof, and (B) a written statement of the
Company's chief executive officer that he has no knowledge of any
Triggering Event or any other material adverse event with respect
to the Company or any of its Subsidiaries, or, if he has such
knowledge, describing such Triggering Event or event in
reasonable detail, with a statement of the Company's action with
respect thereto taken or proposed;
(iv) promptly after receipt, copies of any
management or other letter, audit reports or report as to
material inadequacies in accounting controls (including reports
as to the absence of any such inadequacies) submitted by the
Accountants to the Company;
(v) as soon as available, copies of any
proxy statement, financial statement or report that the Company
or any Subsidiary sends or makes available generally to any of
its security holders, and of all regular and periodic reports and
registration statements that the Company or any Subsidiary files
with the SEC or with any securities exchange;
(vi) immediately after the Company obtains
knowledge or any Triggering Event or default under any agreement
that, if in existence on the date of this Agreement, would be a
Material Contract, and promptly after the Company obtains
knowledge of any other material adverse event with respect to the
Company or any of its Subsidiaries, a written statement
describing such Triggering Event or event in reasonable detail,
with a statement of the Company's action with respect thereto
taken or proposed;
(vii) promptly on receipt, copies of any
material inquiry, threat or complaint (if the inquiry, threat or
complaint is oral, then summaries of such inquiry, threat or
complaint shall be provided) involving any legal, administrative
or similar proceeding to which the Company or any Subsidiary may
become a party or by which its assets may be affected (including,
without limitation, the revocation or suspension of any license,
permit, approval or Easement) (it being understood that this
clause (vii) may be amended or waived at any time by the
Purchasers of two-thirds of the Series B Preferred Shares);
(viii) within 60 days after the end of each
fiscal year, a list showing the record holders of all outstanding
equity securities and the numbers, on a Fully-Diluted Basis and a
nondiluted basis, of securities held by each, and specifying all
options, warrants and other rights to acquire equity securities,
granted exercised or lapsed during the fiscal year, and all
equity securities issued or sold during the fiscal year;
(ix) at least 30 days before the end of each
fiscal year, a budget (a "Budget"), including projected monthly
balance sheets and statements of income and cash flows for the
following fiscal year and a projected balance sheet and
statements of income and cash flows for that fiscal year,
together with a brief written statement of the Company's chief
executive officer in support of that Budget;
(x) together with each set of financial
statements referred to in (i) above, (A) a comparison of the
consolidated financial statements for each such period with the
corresponding financial statements set forth in the Budget for
that period, with variances delineated, (B) a ratio analysis for
each such period, with a comparison of those ratios with the
ratios set forth in the Budget for that period, with variances
delineated, and (C) a brief written statement of the Company's
chief executive officer with respect to operations, problems and
achievements during the period, and setting forth goals for the
ensuing month(s), as appropriate; and
(xi) until a Qualifying Offering, as defined
in the Certificate of Designations (a "Qualifying Offering"), any
other information, including financial statements and
computations, relating to the performance of this Agreement and
the affairs of the Company or any Subsidiary that the Qualifying
Holder may from time to time reasonably request.
SECTION 5.2. Books of Record and Account; Reserves;
Reporting. The Company shall, and shall cause each Subsidiary
to, keep proper books of record and account and set aside
appropriate reserves, all in accordance with GAAP consistently
applied. The Company shall not treat the transactions
contemplated by the Transaction Documents in any manner that
would impose upon any of the Purchasers or their partners any
potential obligation, fee, liability, loss, claim, cost, expense,
tax or damage, and any filing or information reporting made by
the Company or any of its Subsidiaries with respect to the
Transaction Documents or the transaction contemplated by the
Transaction Documents shall be approved by the Preferred
Directors in writing prior to any such filing.
SECTION 5.3. Inspections. Prior to a Qualifying
Offering, each Qualifying Holder may, on reasonable notice, visit
and inspect the properties of the Company and each Subsidiary,
examine and copy their books of record and account and discuss
their affairs, finances and accounts with their officers,
employees and independent accountants, all at such reasonable
times as the Qualifying Holder may wish and in a manner that does
not unreasonably interfere with or disrupt the business in any
material respect.
SECTION 5.4. Triggering Events, Etc. As long as any
Series B Preferred Shares are outstanding, the Company shall
comply with each provision of the Certificate of Designations,
and shall use its best efforts not to cause, or suffer to exist
or to continue to exist, any Triggering Events.
SECTION 5.5. Observer. The Company shall use its best
efforts to ensure that meetings of its board of directors are
held at least four times each year and at least once each
quarter. The Company shall, and shall cause each Subsidiary to,
give the Qualifying Holders notices of all meetings of their
respective boards of directors, and, for as long as any
Qualifying Holder beneficially holds at least 5% of the Company's
Common Stock on a Fully-Diluted Basis, such Qualifying Holder
shall be entitled to designate an observer from time to time to
attend any or all such meetings. The Company shall, and shall
cause each Subsidiary to, from time to time reimburse such
observer for reasonable out-of-pocket expenses incurred in
attending such meetings.
SECTION 5.6. Reserve for Conversion Shares and
Warrants. The Company shall at all times reserve and keep
available out of its authorized but unissued shares of Common
Stock, for the purpose of effecting the conversion of the Series
B Preferred Shares and otherwise complying with the terms of this
Agreement, such number of its duly authorized shares of Common
Stock as shall be sufficient to effect the conversion of the
Series B Preferred Shares or otherwise to comply with the terms
of this Agreement; provided, that, as the Company currently does
not have sufficient authorized but unissued shares of Common
Stock to effect conversion of all of the Series B Preferred
Shares, Company shall not be obligated to do so until the Charter
has been amended to read in its entirety as set forth in Exhibit
C pursuant to Section 5.16. The Company shall at all times
reserve and keep available out of its authorized but unissued
shares of Common Stock, for the purpose of effecting the exercise
of any outstanding warrants to purchase Common Stock and
otherwise complying with the terms of this Agreement, such number
of its duly authorized shares of Common Stock as shall be
sufficient to effect the exercise of the Warrants or otherwise to
comply with the terms of this Agreement. If at any time the
number of authorized but unissued shares of Common Stock shall
not be sufficient to effect the conversion of the Series B
Preferred Shares or exercise of the Warrants, as the case may be,
or otherwise to comply with the terms of this Agreement, the
Company will forthwith take such corporate action as may be
necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for
such purposes. The Company will obtain any authorization,
consent, approval or other action by or make any filing with any
court or administrative body that may be required under
applicable state securities laws in connection with the issuance
of shares of Common Stock upon conversion of the Series B
Preferred Shares or in connection with the exercise of the
Warrants.
SECTION 5.7. Corporate Existence. The Company shall
maintain and cause each of its Subsidiaries to maintain their
respective corporate existence, rights and franchises in full
force and effect, except with respect to the merger, dissolution
or liquidation of Non-Operating Subsidiaries in accordance with
the terms of Section 5.15.
SECTION 5.8. Restrictive Agreements Prohibited.
Neither the Company nor any of its Subsidiaries shall become a
party to any agreement which by its terms conflicts with,
restricts or would prohibit the Company's performance of the
Transaction Documents or the Certificate of Designations.
SECTION 5.9. Expenses of Directors. The Company shall
promptly reimburse in full each director of the Company who is
not an employee of the Company and who was elected as a director
solely or in part by the holders of Series B Preferred Shares for
all of his reasonable out-of-pocket expenses incurred in
attending each meeting of the board of directors of the Company
or any Committee thereof.
SECTION 5.10. Obligations and Taxes. The Company
shall pay all of its indebtedness and obligations promptly and in
accordance with their terms and pay and discharge promptly all
taxes, assessments and governmental charges or levies imposed
upon it or its income or profits or in respect of its property,
before the same shall become in default, as well as all lawful
claims for labor and supplies or otherwise which, if unpaid,
might become a lien or charge upon such properties or any part
thereof; provided, however, that the Company shall not be
required to pay and discharge or to cause to be paid and
discharged any indebtedness, obligation, tax, assessment, charge,
levy or claim so long as the validity or amount thereof shall be
contested in good faith by appropriate proceedings and the
Company shall set aside on its books such reserves as are
required by GAAP with respect to any such tax, assessment,
charge, levy or claim so contested.
SECTION 5.11. Directors and Officers Liability
Insurance. The Company shall obtain a liability policy in a
customary amount and on customary terms providing coverage for
its directors and officers and shall indemnify its directors and
officers against claims relating to their conduct as directors
and officers. The Purchasers hereby acknowledge that the
director and officer insurance policies attached within Schedule
3.2.21 shall be adequate for the purposes of this Section 5.11
until such time as the Company completes a Qualifying Offering.
SECTION 5.12. No Actions Requiring Divestiture. The
Company shall not take any action or commit to take any action
that would require any of the Purchasers to sell or otherwise
transfer any securities of the Company held by such Purchaser,
pursuant to any Federal, state or local law or regulation,
including any regulation of the Federal Communications
Commission.
SECTION 5.13. Indemnification, Etc. The Company shall
indemnify and hold each Purchaser and its Affiliates and
associates (including, for these purposes, its partners, members,
officers, employees. representatives and other agents) harmless
from and against all losses, liabilities, damages and expenses
(including reasonable attorneys' fees and expenses) resulting
from any breach of warranty or agreement or any misrepresentation
by the Company under this Agreement.
SECTION 5.14. Major Business Milestones. The major
business milestones, for the purpose of determining the
occurrence of a Triggering Event, shall be as set forth on
Schedule 5.14.
SECTION 5.15. Non-Operating Subsidiaries. As promptly
as practicable after the date of this Agreement and in accordance
with the letter, dated June 16, 1995, from the Company's
accountants, KPMG Peat Marwick LLP, to the Company, the Company
shall cause all the Non-Operating Subsidiaries to be (a) merged
with the Company or one or more of the Subsidiaries of the
Company other than another Non-Operating Subsidiary, or (b)
dissolved and liquidated.
SECTION 5.16. Amendment to the Charter and By-laws.
At the next annual meeting of the Company's stockholders or prior
to a Qualifying Offering, whichever is earlier, (or as soon as
practicable, if any Purchaser gives the Company notice that such
Purchaser intends to convert the Series B Preferred Shares held
by such Purchaser), the Company shall take all actions required
to (i) place the amendment of the Charter to read in its entirety
as set forth in Exhibit C before the stockholders of the Company
for a stockholder vote, (ii) cause the Stockholders to ratify any
amendments to the By-laws which have been effected since August
25, 1994 and, (iii) if not previously effected, to cause the By-
laws to be amended to read as set forth on Exhibit D. The
Company shall, through its executive management and its board of
directors, recommend to the stockholders approval of the
amendment of the Charter to read in its entirety as set forth in
Exhibit C and ratification or adoption, as the case may be, of
amendments to the By-laws to read as set forth in Exhibit D at
such annual meeting; provided, however, that such recommendations
shall be subject to any action taken by the executive management
and board of directors of the Company in the exercise of good
faith judgment as to their respective fiduciary duties to the
stockholders of the Company, which judgment shall be based upon
the advice of independent counsel that a failure of the executive
management or board of directors, respectively, to withdraw or
change its recommendation would be likely to constitute a breach
of its fiduciary duties to such stockholders. Thereafter, if the
stockholders of the Company shall have approved such proposed
amendments, the Company and the board of directors promptly shall
take all actions necessary to fully and validly approve and file
such amendment, to the extent required by law, with the Secretary
of State of the State of Delaware. For so long as any shares of
Series A-1 Preferred Stock or Series B Preferred Stock are
outstanding, if the stockholders of the Company do not vote to
approve such amendments or the fiduciary duties of the management
and board of directors prevent the recommendation, approval or
filing of such amendment, the Company shall follow the procedures
of this Section 5.16 at each annual meeting until such amendments
are validly approved and filed with the Secretary of State of the
State of Delaware.
SECTION 5.17. Best Efforts to Close. The Company
shall use its best efforts to meet all conditions of Section 6
and to cause third parties to satisfy all conditions of Section 6
requiring any action by such third parties on or before June 26,
1995.
SECTION 5.18. Delivery of Certain Employment
Agreements. The Company shall deliver copies of the executed
Third Amended and Restated Employment Agreements for ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇ attached as exhibits to the Letter
Agreement entered into pursuant to Section 6.9 promptly upon
execution thereof to the counsel to each of the Purchasers.
SECTION 6. Conditions to the Obligations of the
Purchasers. The obligations of each the Purchasers to purchase
and pay for the Initial Shares and the Warrants being purchased
by it on the Closing Date is, at its option, subject to the
satisfaction, on or before the Closing Date, of the following
conditions:
SECTION 6.1. Opinion of Company's Counsel. The
Purchasers shall have received from ▇▇▇▇ & ▇▇▇▇▇▇▇, counsel for
the Company, an opinion dated the Closing Date, in the form of
Exhibit E.
SECTION 6.2. Representations and Warranties to be True
and Correct. The representations and warranties contained in
Section 3.2 shall be true, complete and correct on and as of the
Closing Date with the same effect as though such representations
and warranties had been made on and as of such date, and the
Chief Executive Officer and President of the Company shall have
certified to such effect to the Purchasers in writing.
SECTION 6.3. Performance. The Company shall have
performed and complied with all agreements contained herein
required to be performed or complied with by it prior to or at
the Closing Date, and the Chief Executive Officer and President
of the Company shall have certified to the Purchaser in writing
to such effect and to the further effect that all of the
conditions set forth in this Section 6 have been satisfied.
SECTION 6.4. All Proceedings to be Satisfactory. All
corporate and other proceedings to be taken by the Company in
connection with the transactions contemplated hereby and all
documents incident thereto shall be satisfactory in form and
substance to the Purchasers and their counsel, and the Purchasers
and their counsel shall have received all such counterpart
originals or certified or other copies of such documents as they
reasonably may request.
SECTION 6.5. Supporting Documents. The Purchasers and
their counsel have received copies of the following documents:
(i) (A) the Charter, certified as of a recent
date by the Secretary of State of the State of Delaware,
(B) a certificate of said Secretary dated as of a recent
date as to the due incorporation and good standing of the
Company, the payment of all excise taxes by the Company and
listing all documents of the Company on file with said
Secretary and (C) a certificate of the Secretary of State of
the jurisdiction of incorporation of each of the Company's
Subsidiaries dated as of a recent date as to the due
incorporation and good standing of such Subsidiary;
(ii) a certificate of the Secretary or an
Assistant Secretary of the Company dated the Closing Date
and certifying: (A) that attached thereto is a true and
complete copy of the By-laws as in effect on the date of
such certification; (B) that attached thereto is a true and
complete copy of all resolutions adopted by the board of
directors or the stockholders of the Company authorizing the
execution, delivery and performance of this Agreement, the
Registration Rights Agreement and the Stockholders
Agreement, the issuance, sale and delivery of the Series B
Preferred Shares and the Warrants and the reservation,
issuance and delivery of the shares of common stock issuable
upon exercise of the Warrants or conversion of Series B
Preferred Shares and that all such resolutions are in full
force and effect and are all the resolutions adopted in
connection with the transactions contemplated by this
Agreement, the Registration Rights Agreement and the
Stockholders Agreement; (C) that the Charter has not been
amended since the date of the last amendment referred to in
the certificate delivered pursuant to clause (i) (B) above;
and (D) to the incumbency and specimen signature of each
officer of the Company executing the Transaction Documents
and a certification by another officer of the Company as to
the incumbency and signature of the officer signing the
certificate referred to in this clause (ii); and
(iii) such additional supporting documents and
other information with respect to the operations and affairs
of the Company as the Purchasers or their counsel reasonably
may request.
SECTION 6.6. Registration Rights Agreement. The
Company and each of the other parties thereto shall have executed
and delivered the Registration Rights Agreement in the form of
Exhibit F.
SECTION 6.7. Election of Directors. The number of
directors constituting the entire board of directors of the
Company shall have been fixed at nine (9). The number of
directors constituting the entire board of directors of each of
the Subsidiaries of the Company shall have been fixed at three
(3).
SECTION 6.8. Stockholders Agreement. The Stockholders
Agreement, in the form of Exhibit G, shall have been executed and
delivered by the Company, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇ and the Series A Investors. Pursuant to the terms of the
Stockholders Agreement, the Letter Agreement regarding co-sale
and first refusal rights, dated October 21, 1994, from ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇, ▇▇. and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ to the Series A Investors,
shall have been terminated.
SECTION 6.9. Employment Agreements. Each of the
following Persons shall have entered into Employment Agreements
with the Company in the forms of Exhibits H through J
respectively and otherwise reasonably satisfactory in form and
substance to the Purchasers, which such Employment Agreements
shall amend and restate all prior employment agreements between
such Persons and the Company and copies thereof shall have been
delivered to counsel for the Purchasers: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
III, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇. Each of ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇, ▇▇. and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ shall have entered into a
Letter Agreement addressed to the Board of Directors of the
Company and with the Company in the form of Exhibit K.
SECTION 6.10. Certificate of Designations. The
Certificate of Designations shall have been duly adopted by the
Company and its board of directors and duly filed with the
Secretary of the State of Delaware to read as set forth in
Exhibit L.
SECTION 6.11. Subsidiary By-laws and Charters By-laws.
The by-laws and certificate of incorporation of each Subsidiary
of the Company shall have been amended as required by and
necessary to implement section 6(g) of the Certificate of
Designations.
SECTION 6.12. Put Rights. The obligations of the
Company to repurchase, redeem or otherwise acquire its securities
pursuant to each of the agreements listed of Schedule 6.12(A)
shall have been modified in writing so as to be satisfactory in
form and substance to each of ING and ▇▇▇▇. Apex Investment Fund
II, L.P. shall have accepted in writing assignment of all
obligations of the Company to repurchase, redeem or otherwise
acquire any of the securities of the Company pursuant to each of
the agreements listed on Schedule 6.12(B). No agreements, other
than those listed on Schedule 6.12(C(, shall obligate the Company
to repurchase, redeem or otherwise acquire its securities.
SECTION 6.13. Preemptive Rights. All stockholders of
the Company having any preemptive, first refusal or other rights
with respect to the issuance of the Series B Preferred Shares,
the Warrants or shares of Common Stock issuable upon conversion
of the Series B Preferred Shares or exercise of the Warrants
shall have irrevocably waived the same in writing.
SECTION 6.14. Execution and Delivery of this
Agreement. This Agreement shall have been executed and delivered
by the Purchasers obligated hereunder to purchase 277,500 Series
B Preferred Shares and Warrants to purchase 1,289,282 shares of
Common Stock for a total purchase price of $27,738,107.18.
SECTION 6.15. Purchase by Other Purchasers. Each
Purchaser shall have purchased and paid for the Initial Shares
and the Warrants being purchased by it at the Closing, and the
aggregate purchase price paid by all of the Purchasers for the
Initial Shares and the Initial Warrants being purchased by them
at the Closing shall be at least $22,740,250.04.
SECTION 6.16. Amendment of AT&T Agreements. The
Company, its Subsidiaries and AT&T Credit Corporation shall have
entered into written amendments of any agreements to which AT&T
Credit Corporation and the Company or any of its Subsidiaries are
parties which restrict the Company's ability to meet all of its
obligations under the Transaction Documents, the Charter, the
Certificate of Designations and the By-laws, including, but not
limited to, an amendment of the Parent Pledge and Support
Agreement, dated October 17, 1994, between the Company and AT&T
Credit Corporation to permit the payments of dividends to the
holders of the Series B Preferred Shares in accordance with the
Charter and Certificate of Designation to eliminate such
restrictions.
SECTION 6.17. AT&T Agreements. The Company shall have
delivered to each of the Purchasers and their counsel all
agreements to which AT&T Credit Corporation and the Company or
any of its Subsidiaries are parties. The Company shall have
delivered to each of the Purchasers and their counsel evidence,
reasonably satisfactory in form and substance to each of the
Purchasers and their counsel, of AT&T Credit Corporation's 7.25%
equity ownership of ACSL and the Company's 92.75% ownership of
ACSL and of AT&T Credit Corporation's 7.25% equity ownership of
ACSFW and the Company's 92.75% ownership of ACSFW.
SECTION 6.18. Series A Preferred Stock Investment
Agreements. The Company shall have delivered to each of the
Purchasers and their counsel all agreements to which both the
Company (or any of its Subsidiaries) and any of the other parties
to the Investment Agreement are parties and all amendments or
waivers with respect to such agreements.
SECTION 6.19. Debt Financing Commitments. AT&T Credit
Corporation shall have delivered to the Company a proposal
letter, satisfactory in form and substance to each of the
Purchasers, proposing that AT&T Credit Corporation provide $31
million in debt financing to the Company and its Subsidiaries for
the buildout of the Company's special access networks.
SECTION 6.20. Fees of Purchaser's Counsel. The
Company shall have paid in accordance with Section 7.6 the fees
and disbursements of Purchasers' counsels invoiced at the
Closing.
SECTION 6.21. Committees. The compensation and audit
committees of the board of directors shall have been formed in
accordance with section 6(f) of the Certificate of Designations
and the number of directors constituting each such entire
committee shall have been fixed at three (3).
SECTION 6.22. Fort Worth Debt Financing. The Company
shall have entered into and borrowed under a definitive, final
loan and security agreement with AT&T Credit Corporation relating
to the Fort Worth, Texas municipal network which is similar to,
or no less favorable to the Company in any material respect than,
the loan and security agreements entered into prior to the date
of this Agreement by the Company or its Subsidiaries with AT&T
Credit Corporation.
SECTION 6.23. Series A Exchange and Waiver. Each
share of Series A Preferred Stock shall have been exchanged for
one share of Series A-1 Preferred Stock, and all shares of Series
A Preferred Stock shall have been retired. ▇▇▇▇ and Apex
Investment Fund II, L.P. shall have entered into the Stock
Exchange Agreement substantially in the form of Exhibit M and
shall have executed the Series A Waiver with respect to the
authorization and issuance of the Initial Shares and the Deferred
Shares substantially in the form of Exhibit N.
SECTION 6.24. ▇▇▇▇ Warrants. The Company shall have
issued to ▇▇▇▇, free and clear of all Liens, (i) a warrant
entitling ▇▇▇▇, at its option, to purchase 100,000 shares of
Common Stock at an initial exercise price of $1.79 per share in
the form of Exhibit O, and (ii) a warrant entitling ▇▇▇▇, at its
option, to purchase 100,000 shares of Common Stock at an initial
exercise price of $2.50 per share in the form of Exhibit P.
SECTION 6.25. Director Indemnification Agreements.
The Company and each Preferred Director shall have executed a
Director Indemnification Agreement substantially in the form of
Exhibit Q.
SECTION 7. Miscellaneous
SECTION 7.1. Definition. As used in this Agreement,
the term "to the best of the knowledge of the Company" means to
the best of the knowledge of the Company and its Subsidiaries
after due inquiry, including knowledge of their respective books
and records.
SECTION 7.2. Legend. Each Purchaser acknowledges that
the Series B Preferred Shares and the Warrants may not be sold,
transferred or otherwise disposed of without registration under
the 1933 Act or an applicable exemption from those registration
requirements. Accordingly, as long as the sale of any Series B
Preferred Shares, or any shares of common stock issuable upon
conversion of those shares, held by a Purchaser or a Purchaser's
transferees is subject to such restrictions, each certificate
representing those shares shall bear a legend substantially as
follows: "The shares represented by this certificate have not
been registered under the Securities Act of 1933 and may not be
transferred in violation of that Act or the rules and regulations
thereunder."
SECTION 7.3. Governing Law; Consent to Jurisdiction
SECTION 7.3.1. Governing Law. This Agreement shall be
governed by and construed in accordance with the law of the state
of New York applicable to agreements made and to be performed
wholly in New York.
SECTION 7.3.2. Consent to Jurisdiction. Each party
irrevocably submits to the exclusive jurisdiction of (a) the
Supreme Court of the State of New York, New York County, and (b)
the United States District Court for the Southern District of New
York for the purposes of any suit, action or other proceeding
arising out of the Transaction Documents or any transaction
contemplated by the Transaction Documents (and agrees not to
commence any action, suit or proceeding relating to the
Transaction Documents or any such transaction except in such
courts). Each party further agrees that service of any process,
summons, notice or document by U.S. registered mail to that
party's address on schedule 2.1 shall be effective service of
process for any action, suit or proceeding in New York with
respect to any matters to which it has submitted to jurisdiction
as set forth in the immediately preceding sentence. Each party
irrevocably and unconditionally waives any objection to the
laying of venue of any action, suit or proceeding arising out of
the Transaction documents or the transactions contemplated by the
Transaction Documents in (a) the Supreme Court of the State of
New York, New York County, or (b) the United States District
Court for the Southern District of New York, and further
irrevocably and unconditionally waives and agrees not to plead or
claim in any such action, suit or proceeding brought in any such
court that such action, suit or proceeding has been brought in an
inconvenient forum.
SECTION 7.4. Notices. All notices and other
communications under this Agreement shall be in writing and may
be given by any of the following methods: (a) personal delivery;
(b) facsimile transmission; (c) registered or certified mail,
postage prepaid, return receipt requested; or (d) overnight
delivery service. Notices shall be sent to the appropriate party
at its or his address or facsimile number given below (or at such
other address or facsimile number for that party as shall be
specified by notice given under this Section 7.4):
if to the Company, to it at:
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Fax: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇ & ▇▇▇▇▇▇▇
Park Avenue Tower
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Fax: ▇▇▇-▇▇▇-▇▇▇▇
if to a Purchaser, to it at the address set forth
beneath its name on Schedule 2.1.
All such notices and communications shall be deemed received upon
(a) actual receipt by the addressee, (b) actual delivery to the
appropriate address or (c) in the case of a facsimile
transmission, upon transmission by the sender and issuance by the
transmitting machine of a confirmation slip confirming the number
of pages constituting the notice have been transmitted without
error. In the case of notices sent by facsimile transmission,
the sender shall contemporaneously mail a copy of the notice to
the addressee at the address provided for above. However, such
mailing shall in no way alter the time at which the facsimile
notice is deemed received.
SECTION 7.5. Further Assurances. From time to time,
each party shall take such action and execute and deliver such
documents as the other may reasonably request to carry out the
transactions contemplated by the Transaction Documents. The
Company shall prepare all reports, filings and other documents
and make all filings with governmental authorities reasonably
requested by any of the Purchasers and necessary for the purchase
and issuance of the Series B Preferred Shares and the Warrants or
the exercise of the Warrants.
SECTION 7.6. Fees and Expenses. Except as otherwise
stated in this Agreement, the Company will promptly (and in any
event within 30 days after receiving any statement or invoice
therefor) pay all reasonable fees, expenses and costs of the
Purchasers relating to the negotiation, preparation, execution
and delivery of the Transaction Documents, including, but not
limited to, (i) the cost of reproducing the Transaction
Documents, (ii) the reasonable fees, expenses and disbursements
of the Purchasers' counsels, independent public accountants and
other experts in negotiating and preparing the Transaction
Documents, conducting due diligence in connection with the
contemplated transactions and consummating the transactions
contemplated by the Transaction Documents, (iii) all transfer,
stamp, documentary or other similar taxes, assessments or charges
levied by any governmental or revenue authority in respect hereof
or any other document referred to herein, (iv) fees and expenses
incurred by the Purchasers in respect of the enforcement of the
rights granted to the Purchasers under the Transaction Documents
and any other agreements or instruments contemplated thereby,
including without limitation attorneys' fees and expenses and
legal costs, (v) the expenses of the Purchasers relating to the
consideration, negotiation, preparation or execution of any
amendments, waivers or consents pursuant to the provisions
hereof, whether or not any such amendments, waivers or consents
are executed and (vi) reasonable fees and expenses incurred by
each Purchaser in any filing with any governmental agency with
respect to its investment in the Company or in any other filing
with any governmental agency with respect to the Company which
mentions such Purchaser; provided, however, that the Company will
pay at the Closing all such fees, expenses and costs incurred
prior to and through the Closing immediately upon receiving a
statement or invoice therefor.
SECTION 7.7. Counterparts. This Agreement may be
executed in counterparts, each of which shall be considered an
original, but all of which together shall constitute the same
instrument.
SECTION 7.8. Equitable Relief. The parties
acknowledge that the remedy at law for breach of this Agreement
may be inadequate and that, in addition to any other remedy a
party may have for a breach of this Agreement, that party may be
entitled to an injunction restraining any such breach or
threatened breach, or a decree of specific performance, without
posting any bond or security. The remedy provided in this
Section 7.8 is in addition to, and not in lieu of, any other
rights or remedies a party may have.
SECTION 7.9. Separability. If any provision of this
Agreement is invalid or unenforceable, the balance of this
Agreement shall remain in effect, and if any provision is
inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances.
SECTION 7.10. Assignment. Any Purchaser may assign
its rights under this Agreement, the Certificate of Designations
and the Charter (to the extent applicable) to any third party
that purchases from that Purchaser Series B Preferred Shares, the
Warrants or shares of Common Stock in a private placement and
agrees in writing to be bound by the provisions of this Agreement
as if that assignee were that Purchaser, except that a Qualifying
Holder may not assign its rights under Section 5.1(a), except to
a third party that purchases from that Purchaser in a private
placement at least 5,000 Series B Preferred Shares or Warrant(s)
to purchase at least 50,000 shares of Common Stock.
SECTION 7.11. Publicity. The Company shall consult
with and obtain the consent of a Qualifying Holder before issuing
any press release or making any other public disclosure using
that Qualifying Holder's name or otherwise making reference to
that Qualifying Holder, unless the release or disclosure is
required to discharge the Company's legal obligations (in which
case the Company shall consult with that Qualifying Holder before
issuing the release or making the disclosure).
SECTION 7.12. Entire Agreement. This Agreement is the
Series B Preferred Stock and Warrant Purchase Agreement dated
June 26, 1995 referred to in the Certificate of Designations.
This Agreement contains a complete statement of all the
arrangements among the parties with respect to its subject
matter, supersedes all existing agreements among them with
respect to that subject matter. Notwithstanding the foregoing,
the rights of the holders of Series A-1 Preferred Stock under the
Investment Agreement remain in effect, except as waived or
modified pursuant to the Stock Exchange Agreement described in
Section 6.23.
SECTION 7.13. Amendment and Modification; Waiver of
Compliance; Conflicts.
(a) This Agreement may be amended, modified or
terminated only by a written instrument duly executed by the
Company, ▇▇▇▇ and ING.
(b) Except as otherwise provided in this Agreement,
any failure of any of the parties to comply with any obligation,
covenant, agreement or condition herein may be waived by the
party entitled to the benefits thereof only by a written
instrument signed by the party granting such waiver, but such
waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement or condition shall not operate as
a waiver of, or estoppel with respect to, any subsequent or other
failure; provided that ▇▇▇▇ and ING may effect any such waiver on
behalf of all of the Purchasers.
(c) In addition to the provisions of Section 7.13(b),
any failure of the Company to comply with any obligation,
covenant, agreement or condition herein may be waived by a
written instrument duly executed by a majority of the holders of
the Series A-1 Preferred Stock, but such waiver or failure to
insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or
estoppel with respect to, any subsequent or other failure.
SECTION 7.14. Further Issuances of Preferred Stock.
Notwithstanding any other provision of this Agreement, the
Company may create and issue any securities that are pari passu
or junior to the Series A-1 Preferred Stock and the Series B
Preferred Stock, if the securities are issued at a conversion
price or an all-in effective price which is equal to or greater
than $2.50 (as appropriately adjusted to reflect all
Recapitalization Events, as defined in the Certificate of
Designations, occurring after the date hereof) per common share
equivalent and equal to or greater than the price which a
reputable investment banking firm acceptable to the board of
directors of the Company opines would be at least the minimum
price which would be fair from a financial point of view to the
Company and its stockholders in the context of the transaction.
In connection with the creation or issuance of any such
securities, the parties agree to cooperate fully to enable the
Company to effect such creation or issuance, including, without
limitation, by voting in favor thereof in connection with any
amendment of the Certificate of Designations required for such
creation and issuance, by exchanging the securities issued
pursuant to this Agreement (including securities issued upon
conversion or exchange thereof) for new securities containing
substantially the same terms as such securities issued pursuant
to this Agreement and by amending this Agreement or any exhibit
to this Agreement as required for such creation and issuance (as
long as such amendment affects all parties, other than the
Company, similarly).
SECTION 7.15. Survival of Agreements. All covenants,
agreements, representations and warranties made herein or in the
Registration Rights Agreement, the Stockholders Agreement, or any
certificate or instrument delivered to the Purchasers pursuant to
or in connection with this Agreement, the Registration Rights
Agreement or the Stockholders Agreement, shall survive the
execution and delivery of this Agreement, the Registration Rights
Agreement and the Stockholders Agreement, the issuance, sale and
delivery of the Series B Preferred Shares and Warrants, and the
issuance and delivery of the shares of Common Stock upon
conversion of the Series B Preferred Shares and upon exercise of
the Warrants, and all statements contained in any certificate or
other instrument delivered by the Company hereunder or thereunder
or in connection herewith or therewith shall be deemed to
constitute representations and warranties made by the Company.
SECTION 7.16. Brokerage. Each party hereto will
indemnify and hold harmless the others against and in respect of
any claim for brokerage or other commissions relative to this
Agreement or to the transactions contemplated hereby, based in
any way on agreements, arrangements or understandings made by or
on behalf of such party with any third party.
SECTION 7.17. Counterparts. This Agreement may be
executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute
one and the same instrument.
SECTION 7.18. Titles and Subtitles. The titles and
subtitles used in this Agreement are for convenience only and are
not to be considered in construing or interpreting any term or
provision of this Agreement.
IN WITNESS WHEREOF, the Company and the Purchasers have
executed this Agreement as of the day and year first above
written.
THE COMPANY:
AMERICAN COMMUNICATIONS SERVICES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President & COO
PURCHASERS:
ING EQUITY PARTNERS, L.P.I.
By: LEXINGTON PARTNERS, L.P., its
general partner
By: LEXINGTON PARTNERS, Inc.
its general partner
By: ___________________________________
Name: _________________________________
Title: ________________________________
The ▇▇▇▇ Alternative Income Fund, L.P.
By: WRH PARTNERS, L.L.C.
general partner
By: PALADIN COURT CO., INC.
general manager
By: *
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: President
* ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Attorney-in-fact
IN WITNESS WHEREOF, the Company and the Purchasers have
executed this Agreement as of the day and year first above
written.
THE COMPANY:
AMERICAN COMMUNICATIONS SERVICES, INC.
By:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ - President & COO
PURCHASERS:
ING EQUITY PARTNERS, L.P.I.
By: LEXINGTON PARTNERS, L.P., its
general partner
By: LEXINGTON PARTNERS, Inc.
its general partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: MANAGING DIRECTOR
THE ▇▇▇▇ ALTERNATIVE INCOME FUND, L.P.
By: WRH PARTNERS, L.L.C.
general partner
By: PALADIN COURT CO., INC.
general manager
By:
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: President
APEX INVESTMENT FUND I, L.P.
By: APEX MANAGEMENT PARTNERS, L.P.,
general partner
By: First Analysis Corporation,
general partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: General Partner
APEX INVESTMENT FUND II, L.P.
By: APEX MANAGEMENT PARTNERS, L.P.,
general partner
By: First Analysis Corporation,
general partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: General Partner
THE PRODUCTIVITY FUND II, L.P.
By: FIRST ANALYSIS MANAGEMENT COMPANY
II, its general partner
By: FIRST ANALYSIS CORPORATION,
general partner
By: /s/ F. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇.
Name: F. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇.
Title: President
ARGENTUM CAPITAL PARTNERS, L.P.
BY: BR Associates, Inc.,
general partner
By:
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman
ENVIRONMENTAL PRIVATE EQUITY FUND II,
L.P.
By: Environmental Private Equity
Management II, L.P.,
its general partner
By: First Analysis EPEF Management
Company II, general partner
By: First Analysis Corporation,
general partner
By: /s/ F. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇.
Name: F. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇.
Title: President
DELAWARE CHARTER GUARANTEE & TRUST CO. CUSTODIAN
FOR
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇:
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇ - Self Directed Plan
▇▇▇▇ ▇. ▇▇▇▇▇▇
Self-Directed Plan
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ UNYGTMA:
By: /s/▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
Custodian
▇▇▇▇▇▇▇ ▇▇▇▇▇ UNYGTMA:
By: /s/▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇
Custodian
/s/▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
/s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
/s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
/s/▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
/s/▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇