Exhibit B
AMERICAN COMMUNICATIONS SERVICES, INC.
INVESTMENT AGREEMENT
OCTOBER 21, 1994
INVESTMENT AGREEMENT
Dated October 21, 1994
The parties to this agreement are American
Communications Services, Inc., a Delaware corporation (the
"Company"), and the purchasers named on the signature page of
this agreement (individually, a "Purchaser", and collectively,
the "Purchasers").
The parties agree as follows:
1. Sale and Purchase of Series A Preferred Shares and
Warrants. Simultaneously with the execution of this agreement,
(a) the Company is issuing and selling to each Purchaser, and
each Purchaser is purchasing from the Company, free and clear of
all claims, liens, charges, security interests and other
encumbrances of any nature ("Liens"), the number of shares of 9%
Series A Convertible Preferred Stock of the Company (the "Series
A Preferred Shares") and warrants to purchase the number of
shares of common stock of the Company (the "Warrants") set forth
opposite that Purchaser's name on schedule 1, and (b) in
consideration for such Series A Preferred Shares and Warrants,
each Purchaser is (i) paying the Company, by wire transfer of
immediately available funds, the amount set forth opposite that
Purchaser's name on schedule 1, (ii) converting the principal
amount of convertible bridge notes dated June 28, 1994 (the
"Convertible Bridge Notes") issued by the Company and payable to
the order of that Purchaser set forth opposite that Purchaser's
name on schedule 1, which constitute all the Convertible Bridge
Notes issued and payable to the order of that Purchaser, or (iii)
converting the $250,000 obligation of the Company to Apex
Investment Fund II, L.P. in respect of Fort Worth, Texas.
2. Closing. The closing of the purchase and sale
under this agreement is taking place simultaneously with the
execution of this agreement at the offices of Proskauer ▇▇▇▇
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
3. Representations and Warranties
3.1 Representations and Warranties of the Purchasers.
Each Purchaser represents and warrants to the Company as follows:
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.
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).
3.1.3 Consents of Third Parties. Except for
conflicts, breaches, terminations, accelerations, defaults and
violations specified in (b) and (c) below 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.
3.1.4 Litigation. There is no judicial or adminis-
trative action or 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
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.
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 A Preferred Shares and the Warrants for
investment and not with a view to distribution in violation of
the 1933 Act.
3.1.6 Brokers. Except as set forth on 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.
3.2 Representations and Warranties of the Company.
The Company represents and warrants to each Purchaser as follows:
3.2.1 Reincorporation; Existence and Power
3.2.1.1 Reincorporation. On September 29, 1994,
American Communication Services, Inc., a Colorado corporation
(the "Predecessor"), merged into the Company pursuant to the
agreement and plan of merger described on schedule 3.2.1.1, and
all the statements in that agreement and plan of merger and in
the related certificate of merger filed with the secretary of
state of Delaware are true and correct. As used in this
agreement, the term "Company" includes the Predecessor, unless
the context manifestly requires otherwise.
3.2.1.2 Existence and Power. Except as set forth on
schedule 3.2.1.2, 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 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 set forth on schedule 3.2.1.2 (the "Business
Plan"), and to own, lease and operate their properties as they
now do and as contemplated by the Business Plan. Except as set
forth on schedule 3.2.1.2, the Company and each of its
subsidiaries are qualified to do business as foreign corporations
in each jurisdiction in which they are required to be qualified.
3.2.2 Authorization. The execution, delivery and
performance of each of the Transaction Documents have been duly
authorized by all necessary action, 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).
3.2.3 Consents of Third Parties. The execution,
delivery and performance of each of the Transaction Documents by
the Company will not, and the transactions referred to in section
3.2.1.1 did not: (a) violate or conflict with the certificate of
incorporation (with respect to the Company, a true and correct
copy of which (including the certificate of designation in
respect of the Series A Preferred Shares (the "Certificate of
Resolution") is included on schedule 3.2.3), charter or by-laws
of the Company, the Predecessor or any of the Company's
subsidiaries; (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 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.
3.2.4 Litigation. There is no judicial or adminis-
trative action or 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 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 to any aspect of its or
their properties or businesses (except any such orders, injunc-
tions or decrees and any administrative proceedings applicable
generally throughout the industry in which the Company and its
subsidiaries operate).
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 the
subsidiaries designated on schedule 3.2.5 as "Non-Operating
Subsidiaries" (the "Non-Operating Subsidiaries") in accordance
with section 5.5 will not adversely affect the Company or any of
the Company's other subsidiaries (the "Operating Subsidiaries").
3.2.6 Records. Copies of all the certificates of
incorporation and by-laws of the Company and each of its
Operating Subsidiaries have been delivered to the Purchasers and
are complete and correct, and the minute books of the Company and
each of its Operating Subsidiaries have been exhibited to the
Purchasers and are complete and correct in all material respects.
3.2.7 Capitalization. Schedule 3.2.7 sets forth
(a) the states of incorporation of the Company and each of its
Operating 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 Operating Subsidiaries, (c) the number of
issued and outstanding shares of each class of capital stock of
the Company and each of its Operating Subsidiaries and (d) the
number of shares of each such class reserved for issuance under
all outstanding securities, Benefit Arrangements (as defined in
section 3.2.14.1) and other agreements and instruments. Schedule
3.2.7 sets forth the name of each owner of record and, to the
actual knowledge of the Company, each beneficial owner of capital
stock, options, warrants and other rights to acquire capital
stock of the Company and each of its subsidiaries, and the number
of shares of each class owned by each as of October 17, 1994.
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 in the Transaction Documents or on schedule
3.2.7, (x) there are no outstanding options, warrants 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 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 any of its or their 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 Company's actual knowledge, 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 transfera-
bility, purchase or redemption of any capital stock of the
Company or rights to acquire such capital stock.
3.2.8 Financial Information
3.2.8.1 Financial Statements. Schedule 3.2.8.1 sets
forth the following financial statements (collectively, the
"Financial Statements"): (a) the unaudited consolidated balance
sheet of the Company and its subsidiaries as of September 30,
1994 (the "Balance Sheet Date"); (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-months ended September 30, 1994; and (d) the audited
consolidated statements of deficit accumulated during the
development stage and cash flows of the Company and its subsid-
iaries 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).
3.2.8.2 Liabilities. Except as set forth on the
balance sheet as of the Balance Sheet Date included in the
Financial Statements (the "Balance Sheet Date Balance Sheet") or
on any schedule to this agreement, neither the Company nor any of
its subsidiaries has any debts, liabilities or obligations,
whether accrued, absolute, contingent or otherwise, other than
debts, liabilities and obligations that have been incurred by the
Company or its subsidiaries since the Balance Sheet Date in the
ordinary course of business and consistent with past practice or
that are set forth on schedule 3.2.8.2. The representations in
the purchase agreement among American Communication Services of
Louisville, Inc. ("ACSL"), the Company and AT&T Credit
Corporation that is referred to in the loan agreement between
AT&T Credit Corporation and ACSL referred to on schedule 3.2.9
(the "ACSL Agreement") and in the letter attached to schedule
3.2.8.2 are incorporated in this agreement by reference as if
made by the Company to the Purchasers and as if the represen-
tations regarding ACSL in the ACSL Agreement were regarding the
Company and each of its subsidiaries, mutatis mutandis.
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 Date Balance Sheet
(other than properties and assets disposed of since the Balance
Sheet Date 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 Date
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 or 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, collec-
tively, the "Immaterial Liens").
3.2.9 Absence of Certain Changes. Since the
Balance Sheet Date, the Company and each of its subsidiaries have
operated their businesses in the ordinary course, and there has
not been any material adverse change in any of their businesses,
financial condition, results of operations or prospects. Since
the Balance Sheet Date, 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 $50,000 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 or contingent), other than
current liabilities reflected on the Balance Sheet Date 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 (as defined in section 3.2.16.3) 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 $50,000, (k) made capital expenditures, or commitments
therefor, in excess of $50,000 in the aggregate, (l) suffered
damage, destruction or casualty in excess of $25,000 in the
aggregate or (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.
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. 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.
3.2.11 Material Contracts. Set forth on schedule
3.2.11 is a list of the following (which list excludes items
otherwise set forth in the Transaction Documents): (a) each
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 $50,000; (b) each
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 $50,000; (c) each agreement
with customers that involves annual payments to the Company or
any of its subsidiaries of more than $50,000; (d) each 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) each agreement under which the Company or any of its
subsidiaries is restricted from engaging in any business in any
geographic area; (f) each 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) each agreement under which the Company or any of its subsid-
iaries has agreed to register the sale of any of its securities
under the 1933 Act; (h) each loan or credit agreement to which
the Company or any of its subsidiaries is a party or by which any
of them or their properties or assets may be subject; (i) each
agreement under which the Company or any of its subsidiaries has
granted, or agreed to grant, a Lien on any of its assets; (j)
each 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; and (k) each other 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 $50,000, other than (i) items referred to in (a)
through (j) above, (ii) any Employee Benefit Plans (as defined in
section 3.2.14.1), (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. In this agreement, the term "Material Contract" means
any commitment, agreement, mortgage, license, lease, order or
instrument 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.
3.2.12 Defaults. Neither the Company nor any of its
subsidiaries nor any other party to any Material Contract is in
default under any Material Contract, and 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.
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 subsid-
iaries' 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 or understanding 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.
3.2.14 Material Benefit Arrangements
3.2.14.1 Definition. As used in this agreement, the
following terms have the following respective meanings:
(a) "Employee" means any current, former or
retired employee (or any employee on an approved leave of
absence) of the Company or any of its subsidiaries;
(b) "Employee Benefit Plan" means any
"employee benefit plan" (as defined in section 3(3) of the
Employee Retirement Income Security Act of 1974 ("ERISA")) main-
tained or contributed to by the Company or any of its subsid-
iaries or any predecessor of the Company or any of its subsid-
iaries or in which the Company or any of its subsidiaries or any
predecessor of the Company or any of its subsidiaries partici-
pates or participated and that covers Employees, including (i)
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"); and
(c) "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.
3.2.14.2 Employee Benefit Plans and Benefit
Arrangements. Set forth on schedule 3.2.14.2 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,
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.
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 buildout 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.
3.2.16 Real Property
3.2.16.1 Owned Real Property. Neither the Company nor
any of its subsidiaries owns any real property.
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.
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 with all applicable laws, ordinances,
regulations and orders.
3.2.17 Proprietary Rights
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 ("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.
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.
No Proprietary Right is subject to any outstanding order,
judgment, decree, stipulation or agreement restricting its use in
the manufacture, use or sale of any product 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.
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. No person
consulting or otherwise employed or affiliated with the Company
or any of its subsidiaries has employed any trade secrets 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.
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 (as defined below)
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. The Company and each of its subsidiaries are
in compliance in all material respects with all applicable
Environmental Laws. As used in this agreement, the term
"Environmental Laws" means 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.
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 authoriza-
tions, 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.
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 actual 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 actual 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.
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 and each of its subsidiaries are engaged within
accepted industry standards and customs.
3.2.22 Business Plan. The Business Plan and, except
as otherwise provided in the Transaction Documents, the Company's
confidential private placement memorandum dated August 1, 1994 do
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 such private placement
memorandum will be realized).
3.2.23 Offering. Neither the Company nor any person
authorized or employed by it as agent, broker, dealer or other-
wise in connection with the offering or sale of the Series A
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, 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 action (including, without limitation,
any offer, issuance or sale of any securities under circumstances
that might require the integration of such securities with the
Series A 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 A Preferred Shares or the Warrants to the
registration provisions of the 1933 Act.
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.
4. Use of Proceeds. The Company shall use the net
proceeds from the sale of the Series A Preferred Shares and the
Warrants under this agreement to fund the buildout, acquisition
and operation of the voice and data telecommunications system
described in the Business Plan and to fund selling, general and
administrative expenses substantially as described in the
Business Plan (or to fund such other expenses as two-thirds of
the total number of Preferred Directors (as defined in the
Certificate of Resolution) may from time to time authorize (it
being understood that no such authorization shall be effective if
given at any time there is any vacancy among the Elected
Preferred Directors (as defined in the Certificate of
Resolution)).
5. General Post-Closing Covenants. As long as any
Purchaser or any of its transferees in a private placement holds
any Registrable Shares (as defined in section 6.11.1), the
Company shall perform the following covenants:
5.1 Financial Data.
(a) The Company shall furnish to each Purchaser
and its transferees (a "Qualifying Holder") that, together with
its affiliates and associates, purchases an aggregate of at least
11,112 Series A Preferred Shares:
(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 selected by the Company and reasonably acceptable to
The ▇▇▇▇ Alternative Income Fund, L.P. ("▇▇▇▇") (the
"Accountants"), 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 the 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 Resolution) 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 of 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 (or
summaries, if oral) of any material inquiry, threat or complaint
(if the inquiry, threat or complaint is in writing, any inquiry,
threat or conflict) 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 A 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
and a non-diluted 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 Resolution), 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.
(b) Each Purchaser hereby waives and relinquishes
any rights, contractual or otherwise, to the extent permitted by
applicable law, to receive, review, inspect or otherwise obtain
any information concerning, or have access to, the Company or any
of its subsidiaries or its or their businesses, operations,
finances or prospects, whether of the type described in section
5.1(a) or otherwise, except to the extent specifically provided
for Qualifying Holders under section 5.1(a).
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 ▇▇▇▇
or its 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
transactions contemplated by the Transaction Documents shall be
approved by ▇▇▇▇ in writing prior to any such filing.
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.
5.4 Triggering Events, Etc. As long as any Series A
Preferred Shares are outstanding, the Company shall comply with
each provision of the Certificate of Resolution, and shall use
its best efforts not to cause, or suffer to exist or to continue
to exist, any Triggering Events.
5.5 Non-Operating Subsidiaries. As promptly as
practicable after the date of this agreement, the Company shall
cause all the Non-Operating Subsidiaries to be (a) merged with
the Company or one or more of the Operating Subsidiaries, or (b)
dissolved and liquidated.
5.6 Subsidiary Directors. The Company shall take all
action required to cause the board of directors of each Operating
Subsidiary and each other subsidiary the Company or any of its
subsidiaries from time to time forms, acquires or otherwise
controls to be comprised of the same members as the Company's
board of directors and shall cause the individual directors
serving as the Preferred Directors (as defined in the Certificate
of Resolution) to have the same approval rights regarding the
actions described in section 6(d) of the Certificate of
Resolution as those individuals have as Preferred Directors of
the Company (it being understood that this section 5.6 may be
amended or waived by the Purchasers of two-thirds of the Series A
Preferred Shares).
5.7 Observer. The Company shall, and shall cause each
Operating Subsidiary to, give ▇▇▇▇ notices of all meetings of
their respective boards of directors, and ▇▇▇▇ 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 Operating
Subsidiary to, from time to time reimburse such observer for
reasonable out-of-pocket expenses incurred in attending such
meetings.
6. Registration Rights
6.1 Demand Registration. Any time after June 30, 1995
(or, if sooner, upon shares being included in a registration
statement in accordance with any agreement listed on schedule
6.1), upon receipt of a notice (a "Demand Request") from
Purchasers and others identified on schedule 6.11.1 holding not
less than the Requisite Percentage of Registrable Shares
demanding the Company effect the registration under the 1933 Act
of any or all of their Registrable Shares, the Company shall file
a registration statement on a form to be selected by those making
the Demand Request (the "Demanding Shareholders") and effect the
registration under the 1933 Act of the Registrable Shares
specified in the Demand Request (a "Demand Registration"). The
Company shall be obligated to effect only three (four, if shares
are included in a registration statement in accordance with any
agreement listed on schedule 6.1) Demand Registrations using Form
S-1 (or its successor form(s)) ("Long-Form Demand
Registrations"), and shall not be obligated to effect any Demand
Registrations other than Long-Form Demand Registrations that are
made pursuant to Demand Requests made after the sixth anniversary
of the Closing Date; however, notwithstanding anything to the
contrary in this agreement, if, for any reason (other than the
fault of the Demanding Shareholders), a Long-Form Demand
Registration fails to become effective and to provide for the
distribution of all the Registrable Shares specified in the
Demand Request, or the effectiveness is not maintained for at
least 120 days in accordance with section 6.4 or the Company
fails to perform all its obligations under this section 6.1 with
respect to that Long-Form Demand Registration, the Demanding
Shareholders shall thereafter continue to be entitled to the same
number of Long-Form Demand Registrations in accordance with this
section 6.1 to which they had been entitled immediately before
the Demand Request that gave rise to that Long-Form Demand
Registration. The holders of a majority of the Registrable
Shares making a particular Demand Request may, at their option,
elect (which election shall be included in the Demand Request) to
make the Demand Registration underwritten, in which event, and
subject to the rights of GKM under the agreement referred to on
schedule 3.2.24, the holders of a majority of the Registrable
Shares making the Demand Request shall be entitled to select the
underwriter(s).
6.2 Piggyback Registration. If at any time on or
before the 40th day following the sixth anniversary of the
Closing Date the Company determines or is requested or receives a
demand (pursuant to an agreement binding on the Company) from any
person or entity to register under the 1933 Act for sale to the
public any of the Company's securities on a form that also would
permit the registration under the 1933 Act for sale to the public
of any of the Registrable Shares held by a Purchaser, the Company
shall within 10 days thereafter give each Purchaser notice of its
intent to effect a registration, and, subject to sections 6.5 and
6.7, shall include in the registration all Registrable Shares
held by each Purchaser with respect to which the Company shall
have received a notice (a "Piggyback Request") specifying the
number of Registrable Shares to be included within 30 days after
the Company shall have given each Purchaser the notice pursuant
to this section 6.2.
6.3 Obligation of Shareholder. Any Demand Request or
Piggyback Request (a "Request") shall express the present intent
to offer for sale to the public the number of Registrable Shares
to be included in the registration statement and contain an
undertaking reasonably to provide such information and materials
and take such action as may be required to permit the Company to
comply with all applicable requirements of the SEC and to obtain
acceleration of the effective date of the registration statement.
6.4 Obligations of the Company. With respect to any
registration statement referred to in section 6.1 or 6.2, the
Company shall:
(a) use its best efforts to have the registration
statement declared effective as promptly as practicable, and in
any event within 120 days after the applicable Request, and shall
promptly notify each Purchaser, and such other persons as the
Purchaser designates, if any, and confirm such advice in writing,
(i) when the registration statement becomes effective, (ii) when
any post-effective amendment to the registration statement
becomes effective and (iii) of any request by the SEC for any
amendment or supplement to the registration statement or any
prospectus relating to the registration statement or for addi-
tional information;
(b) make available for inspection by any
underwriters participating in any planned disposition of
Registrable Shares and any attorney, accountant or other agent
retained by any Purchaser or the underwriters all financial and
other records reasonably necessary to permit them to demonstrate
that they have conducted a reasonable investigation of matters
described in the registration statement and cause the appropriate
Company officers to supply all such information reasonably
requested by each Purchaser, the underwriters or their agents;
(c) use reasonable efforts to qualify, not later
than the effective date of the registration statement, the
Registrable Shares under such "blue sky" or other state
securities laws as any Purchaser or underwriter may reasonably
request (it being understood, however, that the obligation under
this section 6.4(c) shall not obligate the Company to qualify as
a foreign corporation or a dealer in securities or to execute or
file any general consent to service of process under the law of
any such jurisdiction where it is not otherwise subject);
(d) furnish each Purchaser and any underwriter
such number of copies of the registration statement, each
amendment to the registration statement, the prospectus included
in each such registration statement and each amendment to each
registration statement, each amendment or supplement to any
prospectus and such other documents as the Purchaser and any
underwriter may request to facilitate the disposition of the
Registrable Shares;
(e) use best efforts to keep the registration
statement in effect and current for at least 120 days from the
effective date of the registration statement, and from time to
time to amend or supplement the registration statement or the
prospectus to the extent necessary to permit the completion of
the sale or distribution of the Registrable Shares within that
period in compliance with the 1933 Act. If at any time the SEC
institutes or threatens to institute any proceeding for the
purpose of issuing a stop order suspending the effectiveness of
any such registration statement, the Company shall promptly
notify each Purchaser and use best efforts to prevent the
issuance of any such stop order or to obtain its withdrawal as
soon as possible. The Company shall promptly advise each
Purchaser of any order or communication of any public board or
body addressed to the Company suspending or threatening to
suspend the qualification of any of the Registrable Shares for
sale in any jurisdiction; and
(f) insofar as the methods of distribution
proposed to be used are not reflected in the last prospectus
filed by the Company as part of the registration statement or
pursuant to Rule 424 under the 1933 Act, each Purchaser shall
promptly provide the Company with a description of the method or
methods of distribution of the Registrable Shares from time to
time contemplated by that Purchaser, and the Company shall file
any and all amendments and supplements necessary to include the
description in the registration statement.
6.5 Conditions to the Obligations of the Company. The
Company may postpone, for up to 90 days, the filing of any
registration statement otherwise required to be prepared and
filed by it under this agreement, if, at the time it receives a
Request, the Company would be required to prepare financial
statements other than those it customarily prepares or the
registration and offering would interfere with any material
financing, acquisition, corporate reorganization or other
material corporate transaction or development involving the
Company or any of its subsidiaries that is pending or imminent at
the time and promptly gives each Purchaser notice of that
determination (it being understood, however, that, in any such
event, the Company shall use best efforts to minimize the length
of the postponement). If the Company shall so postpone the
filing of a registration statement, a Purchaser shall have the
right to withdraw its Request by giving written notice to the
Company within 30 days after the Company shall have given the
notice of postponement and, in the event of the withdrawal, the
Request that was withdrawn shall not be deemed to have been made.
6.6 Expenses of Registration. All expenses (excluding
underwriting or brokerage commissions attributable to the
Registrable Shares to be sold) incurred in connection with all
registrations under this agreement and the "blue sky" qualifica-
tions referred to in section 6.4(c), including, without limita-
tion, all registration and qualification fees, printers' and
accounting fees and fees and disbursements of counsel for the
Company, shall be borne by the Company. Notwithstanding the
foregoing, however, in any registration under this section 6, the
Company shall be obligated to bear the fees or expenses of only
one counsel for the Purchasers (which counsel shall be selected
by the holders of a majority of the Registrable Shares making the
Demand Request, in the case of a Demand Request, or otherwise by
holders of a majority of the Registrable Shares included in the
registration), and shall not be required to bear any such fees or
expenses in respect of more than two (three, if shares are
included in a registration statement in accordance with any
agreement listed on schedule 6.1) Long-Form Demand Registrations.
6.7 Underwriting Requirements. In connection with any
offering pursuant to a Piggyback Request, the Company shall not
be required to register any Registrable Shares held by any
Purchaser, unless the Purchaser accepts the terms of the under-
writing and then only in such quantity as will not, in the
written opinion of the underwriters, exceed the maximum number of
Registrable Shares that can be marketed without materially and
adversely affecting the offering, if any, by the Company. If, as
a consequence of the provisions of the preceding sentence, the
number of a particular Purchaser's Registrable Shares is reduced,
the percentage of reduction shall not be more than the percentage
of reduction applicable to any other Purchaser or any other
shareholder entitled to participate under any registration rights
agreement listed on schedule 3.2.11 and not listed on schedule
6.1.
6.8 Other Registration Rights. Without the prior
written consent of the Purchasers of a majority of the Series A
Preferred Shares, the Company shall not enter into any other
agreement entitling any person or entity to registration rights.
6.9 Indemnification. To the extent permitted by law,
the Company shall indemnify and hold harmless each underwriter,
if any, and each Purchaser that participates in any registration
under this agreement, and each person, if any, who is a director,
officer, agent, partner or shareholder of, or who controls
(within the meaning of Rule 12b-2 under the Securities Exchange
Act of 1934 (the "Exchange Act")), any such parties, against
losses, claims, damages and liabilities customarily indemnified
against in offerings and in accordance with the underwriter's
customary form. Such indemnification shall include contribution
in the manner and to the extent customarily provided and in
accordance with the underwriter's customary form. No Purchaser
in any such registration that relates to an underwritten offering
shall be required to make any representation or warranty to the
underwriter(s) or the Company, except as they relate solely to
that Purchaser and its method of distribution, and no such
Purchaser shall be liable under any underwriting agreement in an
aggregate amount greater than the net proceeds it receives in the
underwriting.
6.10 Holdback. At the request of holders of a majority
of the Registrable Shares then outstanding, each Purchaser shall,
and shall cause that Purchaser's transferees in private
placements to, agree with the underwriters in any underwritten
public offering of shares of capital stock of the Company not to
sell or otherwise dispose of any Registrable Shares for up to 180
days, in the case of the first public offering by the Company of
its shares of capital stock after the date of this agreement
pursuant to a registration statement under the 1933 Act, or up to
90 days, in the case of subsequent underwritten public offerings
by the Company of shares of its capital stock, after the
effective date of any registration statement covering any such
public offering.
6.11 Definitions. As used in this section 6, the
following terms have the following respective meanings:
6.11.1 "Registrable Shares" means (a) the Series A
Preferred Shares, (b) the Warrants, (c) the shares of common
stock of the Company issuable upon conversion of the Series A
Preferred Shares and exercise of the Warrants and (d) the shares
of common stock issuable upon exercise of warrants issued to ▇▇▇▇
on September 27, 1994.
6.11.2 "Requisite Percentage" means (a) in the case of
the first Long-Form Demand Registration, 40% of the total number
of shares of common stock of the Company constituting Registrable
Shares (including, for these purposes, the shares of common stock
of the Company issuable upon exercise or conversion of all
Registrable Shares) outstanding on the first day after the
closing under this agreement (such shares, the "Deemed
Outstanding Common Shares"), (b) in the case of subsequent Long-
Form Demand Registrations, 25% of the total number of Deemed
Outstanding Common Shares, and (c) in the case of all other
Demand Registrations, 10% of the total number of Deemed
Outstanding Common Shares.
6.12 Registration Under Exchange Act. Not later than
December 31, 1995, the Company shall register its common stock
under section 12 of the Exchange Act. Thereafter, the Company
shall make all filings required of companies so registered, and
otherwise shall comply with the Exchange Act (it being understood
that this section 6.12 may be amended at any time by the
Purchasers of two-thirds of the Series A Preferred Shares).
7. 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. In the event of any breach of
warranty or misrepresentation in section 3.2.7, the Company shall
issue to each Purchaser that number of additional shares of the
Company's common stock that would have been required to be issued
to that Purchaser at the closing under this agreement to increase
that Purchaser's percentage of beneficial ownership of the
Company's common stock to the percentage that Purchaser would
then have beneficially owned had that representation or warranty
been correct, which adjustment shall be made by way of a
calculation of the type provided for in the first paragraph of
the Warrant issued to ▇▇▇▇ hereunder, mutatis mutandis. The
remedy provided in the immediately preceding sentence is in
addition to, and not in limitation of, any other rights or
remedies a Purchaser may have.
8. Miscellaneous
8.1 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.
8.2 Legend. Each Purchaser acknowledges that the
Series A Preferred Shares and 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 A
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."
8.3 Governing Law; Consent to Jurisdiction
8.3.1 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.
8.3.2 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 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.
8.4 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 8.4):
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 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.
8.5 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.
8.6 Fees and Expenses. Except as provided in the
letter agreement dated September 27, 1994 between the Company and
▇▇▇▇ and as otherwise expressly provided in the Transaction
Documents, no party shall be responsible for any other's fees or
expenses in connection with the transactions contemplated by the
Transaction Documents.
8.7 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.
8.8 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 8.8 is in addition
to, and not in lieu of, any other rights or remedies a party may
have.
8.9 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.
8.10 Assignment. Any Purchaser may assign its rights
under this agreement and the Certificate of Resolution (to the
extent applicable) to any third party that purchases from that
Purchaser Series A Preferred Shares, Warrants or shares of common
stock of the Company 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 11,112 Series A Preferred Shares.
8.11 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).
8.12 Entire Agreement. This agreement is the invest-
ment agreement dated October 19, 1994 referred to in the Certi-
ficate of Resolution. This agreement and the other Transaction
Documents contain a complete statement of all the arrangements
among the parties with respect to their subject matter, supersede
all existing agreements among them with respect to that subject
matter, may not be changed or terminated orally and any amendment
or modification must be in writing and signed by the party to be
charged.
AMERICAN COMMUNICATIONS SERVICES, INC.
By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President and
Chief Operating Officer
PURCHASERS:
THE ▇▇▇▇ ALTERNATIVE INCOME FUND, L.P.
By: WRH PARTNERS, L.L.C.
General Partner
By: PALADIN COURT CO., INC.
General Manager
By:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
President
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Attorney-in-Fact