UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. )*
American Communications Services, Inc.
(name of Issuer)
Common Stock, $.01 Par Value
(Title of Class of Securities)
02520B 10 2
(CUSIP Number)
Joseph R. Thornton
c/o The Huff Alternative Income Fund, L.P.
67 Park Place
Morristown, N.J. 97960
(201) 984-5818
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
February 13, 1995
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule
13G to report the acquisition which is the subject of this
Schedule 13D, and is filing this schedule because of Rule 13d-
1(b)(3) or (4), check the following box. [ ]
Check the following box if a fee is being paid with the
statement. [x] (A fee is not required only if the reporting
person: (1) has a previous statement on file reporting
beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment
subsequent thereto reporting beneficial ownership of five percent
or less of such class.) (See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits,
should be filed with the Commission. See Rule 13d-1(a) for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a
reporting person's initial filing on this form with respect to
the subject class of securities, and for any subsequent amendment
containing information which would alter disclosures provided in
a prior cover page.
The information required on the remainder of this cover page
shall not be deemed to be "filed" for the purpose of Section 18
of the Securities Exchange Act of 1934 ("Act') or otherwise
subject to the liabilities of that section of the Act but shall
be subject to all other provisions of the Act (however, see the
Notes).
Exhibit Index appears on Page - __
CUISIP No.
1 Name of Reporting Person
S.S or I.R.S. Identification No. of Above Person
The Huff Alternative Income Fund, L.P.
2 Check the Appropriate Box if a Member of a Group*
(a) [ ]
(b) [x]
3 SEC Use Only
4 Source of Funds
WC
5 Check Box if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e)
[ ]
6 Citizenship or Place of Organization
Delaware
7 Sole Voting Power
Number of -0-
Shares
Beneficially 8 Shared Voting Power
Owned By 11,246,782
Each
Reporting 9 Sole Dispositive Power
Person -0-
With
10 Shared Dispositive Power
11,246,782
11 Aggregate Amount Beneficially Owned by Each Reporting Person
11,246,782
12 Check Box if the Aggregate Amount in Row (11)
[ ]
Excludes Certain Shares*
13 Percent of Class Represented by Amount in Row (11)
46.2%
14 Type of Reporting Person*
PN
* SEE INSTRUCTIONS BEFORE FILLING OUT!
CUISIP No.
1 Name of Reporting Person
S.S or I.R.S. Identification No. of Above Person
WRH Partners, L.L.C.
2 Check the Appropriate Box if a Member of a Group*
(a) [ ]
(b) [x]
3 SEC Use Only
4 Source of Funds
AF
5 Check Box if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e)
[ ]
6 Citizenship or Place of Organization
Delaware
7 Sole Voting Power
Number of -0-
Shares
Beneficially 8 Shared Voting Power
Owned By 11,246,782
Each
Reporting 9 Sole Dispositive Power
Person -0-
With
10 Shared Dispositive Power
11,246,782
11 Aggregate Amount Beneficially Owned by Each Reporting Person
11,246,782
12 Check Box if the Aggregate Amount in Row (11)
[ ]
Excludes Certain Shares*
13 Percent of Class Represented by Amount in Row (11)
46.2%
14 Type of Reporting Person*
OO
* SEE INSTRUCTIONS BEFORE FILLING OUT!
CUISIP No.
1 Name of Reporting Person
S.S or I.R.S. Identification No. of Above Person
Paladin Court Co., Inc.
2 Check the Appropriate Box if a Member of a Group*
(a) [ ]
(b) [x]
3 SEC Use Only
4 Source of Funds
AF
5 Check Box if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e)
[ ]
6 Citizenship or Place of Organization
Delaware
7 Sole Voting Power
Number of -0-
Shares
Beneficially 8 Shared Voting Power
Owned By 11,246,782
Each
Reporting 9 Sole Dispositive Power
Person -0-
With
10 Shared Dispositive Power
11,246,782
11 Aggregate Amount Beneficially Owned by Each Reporting Person
11,246,782
12 Check Box if the Aggregate Amount in Row (11)
[ ]
Excludes Certain Shares*
13 Percent of Class Represented by Amount in Row (11)
46.2%
14 Type of Reporting Person*
CO
* SEE INSTRUCTIONS BEFORE FILLING OUT!
CUISIP No.
1 Name of Reporting Person
S.S or I.R.S. Identification No. of Above Person
DBC II Corp.
2 Check the Appropriate Box if a Member of a Group*
(a) [ ]
(b) [x]
3 SEC Use Only
4 Source of Funds
AF
5 Check Box if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e)
[ ]
6 Citizenship or Place of Organization
Delaware
7 Sole Voting Power
Number of -0-
Shares
Beneficially 8 Shared Voting Power
Owned By 11,246,782
Each
Reporting 9 Sole Dispositive Power
Person -0-
With
10 Shared Dispositive Power
11,246,782
11 Aggregate Amount Beneficially Owned by Each Reporting Person
11,246,782
12 Check Box if the Aggregate Amount in Row (11)
[ ]
Excludes Certain Shares*
13 Percent of Class Represented by Amount in Row (11)
46.2%
14 Type of Reporting Person*
CO
* SEE INSTRUCTIONS BEFORE FILLING OUT!
CUISIP No.
1 Name of Reporting Person
S.S or I.R.S. Identification No. of Above Person
William R. Huff
2 Check the Appropriate Box if a Member of a Group*
(a) [ ]
(b) [x]
3 SEC Use Only
4 Source of Funds
AF
5 Check Box if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e)
[ ]
6 Citizenship or Place of Organization
United States
7 Sole Voting Power
Number of 24,000
Shares
Beneficially 8 Shared Voting Power
Owned By 11,246,782
Each
Reporting 9 Sole Dispositive Power
Person 24,000
With
10 Shared Dispositive Power
11,246,782
11 Aggregate Amount Beneficially Owned by Each Reporting Person
11,270,782
12 Check Box if the Aggregate Amount in Row (11)
[x]
Excludes Certain Shares*
13 Percent of Class Represented by Amount in Row (11)
46.3%
14 Type of Reporting Person*
IN
* SEE INSTRUCTIONS BEFORE FILLING OUT!
CUISIP No.
1 Name of Reporting Person
S.S or I.R.S. Identification No. of Above Person
Donna B. Charlton
2 Check the Appropriate Box if a Member of a Group*
(a) [ ]
(b) [x]
3 SEC Use Only
4 Source of Funds
AF
5 Check Box if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e)
[ ]
6 Citizenship or Place of Organization
United States
7 Sole Voting Power
Number of 7,000
Shares
Beneficially 8 Shared Voting Power
Owned By 11,246,782
Each
Reporting 9 Sole Dispositive Power
Person 7,000
With
10 Shared Dispositive Power
11,246,782
11 Aggregate Amount Beneficially Owned by Each Reporting Person
11,253,782
12 Check Box if the Aggregate Amount in Row (11)
[x]
Excludes Certain Shares*
13 Percent of Class Represented by Amount in Row (11)
46.3%
14 Type of Reporting Person*
IN
* SEE INSTRUCTIONS BEFORE FILLING OUT!
Item 1. Security and Issuer.
This statement relates to the Common Stock, par value
$0.01 (the "Common Stock"), of American Communications Services,
Inc. (the "Company"). The Company's principal executive offices
are located at 131 National Business Parkway, Suite 100,
Annapolis Junction, Maryland 20701.
Item 2. Identity and Background.
(a) This statement is filed by: (i) The Huff
Alternative Income Fund, L.P., a Delaware limited partnership
(the "Fund"), with respect to 1,919,793 shares of Common Stock
(the "Regular Shares") and, in addition, certain Derivative
Securities (as defined below), which entitle the Fund to acquire,
in the aggregate, 9,326,989 shares of Common Stock (the "Shares
Underlying the Derivative Securities"), (ii) WRH Partners,
L.L.C., a Delaware limited liability company ("WRH") and General
Partner of the Fund, with respect to the Regular Shares and
certain Shares Underlying the Derivative Securities
(collectively, the "Securities") held by the Fund; (iii) Paladin
Court Co., Inc., a Delaware corporation ("Paladin") and a General
Manager of WRH, with respect to the Securities held by the Fund;
(iv) DBC II Corp., a Delaware corporation ("DBC") and a General
Manager of WRH, with respect to the Securities held by the Fund;
and (v) each of William R. Huff ("Huff") and Donna B. Charlton
("Charlton"), the sole shareholders of Paladin and DBC,
respectively, with respect to the Securities held by the Fund
and, in the case of Huff, with respect to Derivative Securities
that entitle him to acquire, in the aggregate, an additional
24,000 shares of Common Stock he owns directly, and, in the case
of Charlton, with respect to Derivative Securities that entitle
her to acquire, in the aggregate, an additional 7,000 shares of
Common Stock she owns directly. As used in this statement, the
term "Derivative Securities" means, collectively, (i) a warrant
dated June 26, 1995, which is exercisable at the option of the
holder, at any time, to purchase from the Company, for $1.79 a
share, up to 100,000 shares of Common Stock), subject to
antidilution adjustments, (ii) 138,889 shares of 9% Series A-1
Convertible Preferred Stock, each of which is convertible, at the
option of the holder, at any time, into 40 shares of Common Stock
(i.e., an aggregate of 5,555,560 shares of Common Stock), subject
to antidilution adjustments, (iii) 100,775 shares of 9% Series B-
2 Convertible Preferred Stock, each of which is convertible, at
the option of the holder, at any time, into 35.71429 shares of
Common Stock (i.e., an aggregate of 3,599,108 shares of Common
Stock), subject to antidilution adjustments and (iv) a warrant
dated June 26, 1995, which is exercisable at the option of the
holder, at any time, to purchase from the Company, for $2.50 a
share, up to 100,000 shares of Common Stock, subject to
antidilution adjustments. The Fund, WRH, Paladin, DBC, Huff and
Charlton are sometimes referred to collectively in this statement
as the "Reporting Persons."
(b) The address of the principal office and the
principal business of the Reporting Persons are set forth on
annex 1 to this statement.
(c) The principal occupations of the Reporting Persons
are set forth on annex 1 to this statement.
(d) None of the persons listed on annex 1 to this
statement has, during the last five years, been convicted in a
criminal proceeding (excluding traffic violations or similar
misdemeanors).
(e) None of the persons listed on annex 1 to this
statement has, during the last five years, been a party to a
civil proceeding of a judicial or administrative body of
competent jurisdiction and, as a result of such proceeding, was
or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any
violation with respect to such laws.
(f) The citizenship of the Reporting Persons is set
forth on annex 1 to this statement.
Item 3. Source and Amount of Funds and Other Consideration.
Pursuant to an agreement dated October 21, 1994 among
the Company and the Purchasers named in that agreement (the "1994
Purchase Agreement") (attached to this statement as exhibit B and
incorporated by reference in this statement), the Fund purchased
from the Company 138,889 shares of 9% Series A Convertible Stock
(the "Original Series A Convertible Preferred Stock"), a warrant
(the "Original Antidilution Warrant") to purchase from the
Company, for $.01 a share, up to 1,491,000 shares of Common
Stock, and a warrant (the "Original Regular Warrant") to purchase
from the Company, for $2.25 a share (which was subsequently
reduced by amendment to $1.125 a share), up to 77,000 shares of
Common Stock, for an aggregate purchase price of $12,500,000,
which amount was paid to the Company from working capital of the
Fund. On December 2, 1994, the Fund exercised the Original
Antidilution Warrant and, pursuant to the Original Antidilution
Warrant, purchased 1,491,000 shares of Common Stock for $14,467,
which amount was paid to the Company from working capital of the
Fund. On January 5, 1995, the Fund exercised the Original
Regular Warrant, and, pursuant to the Original Regular Warrant,
as amended, purchased 77,000 shares of Common Stock for $86,625,
which amount was paid to the Company from working capital of the
Fund.
Pursuant to agreements dated June 26, 1995 among the
Company and the Purchasers named in those agreements
(collectively, the "1995 Purchase Agreements") (attached to this
statement as exhibit C and incorporated by reference in this
statement), the Fund (a) purchased from the Company 100,000
shares of Series B-2 Convertible Preferred Stock, a warrant to
purchase from the Company, for $2.50 a share, up to 100,000
shares of Common Stock and a warrant (the "June Warrant") to
purchase from the Company, for $.01 a share, up to 428,571 shares
of Common Stock for an aggregate purchase price of $10,000,000,
which amount was paid to the Company from working capital of the
Fund, and (b) acquired 138,889 shares of Series A-1 Convertible
Preferred Stock in exchange for 138,889 shares of the Original
Series A Convertible Preferred Stock. In connection with the
transactions contemplated by the 1995 Purchase Agreements, the
Fund received additional warrants to purchase from the Company,
for $1.79 a share, up to 100,000 shares of Common Stock. On
December 29, 1995, the Fund exercised the June Warrant, and,
pursuant to the June Warrant, purchased 428,571 shares of Common
Stock for $4,285, which amount was paid to the Company from
working capital of the Fund.
Item 4. Purpose of the Transaction.
Pursuant to the 1994 Purchase Agreement and the 1995
Purchase Agreements, the Fund purchased the Regular Shares and
the Derivative Securities from the Company for investment
purposes.
The Reporting Persons may make further purchases of
securities of the Company, and may dispose of such securities, at
any time.
Pursuant to a letter agreement dated October 21, 1994
among the Purchasers under the 1994 Purchase Agreement and
Anthony J. Pompliano and Richard A. Kozak (collectively, the
"Managers") (the "Co-Sale Agreement") (attached to this statement
as exhibit D and incorporated by reference in this statement),
each Manager granted each Purchaser certain "tag-along" and
"first refusal" rights.
Pursuant to a stockholders agreement dated June 26,
1995 among the Company and the Stockholders named in that
agreement (the "June 1995 Stockholders Agreement") (attached to
this statement as exhibit E and incorporated by reference in this
statement), and subject to the limitations and qualifications set
forth in the June 1995 Stockholders Agreement, the parties agreed
that, if a Stockholder wished to sell any of his Stock (as
defined in the June 1995 Stockholders Agreement), he would give
the Company and the other Stockholders notice of that fact and
the terms on which he wished to sell his Stock; and, upon receipt
of that notice, the Company and the other Stockholders would have
the right to purchase that Stock on those terms. The June 1995
Stockholders Agreement also provides that, if a Manager sold or
agreed to sell any Stock, he would cause the purchaser to whom he
was to sell the Stock to offer to purchase from each other
Stockholder, on the same terms, a proportionate quantity of the
other Stockholder's Stock. In addition, the June 1995
Stockholders Agreement provides that, if holders of at least two-
thirds of the Series B Preferred Stock and at least two-thirds of
the Series A-1 Preferred Stock wished to sell at least two-thirds
of all the Stock to a third party, all the Stockholders would
sell or cause to be sold all their Stock to that third party on
the same terms and vote their Stock in favor of the transaction.
The June 1995 Stockholders Agreement provides that it will
terminate on the earliest of a Qualifying Offering, a sale of the
Company or June 26, 2005. The June 1995 Stockholders Agreement
also provides for the termination of the Co-Sale Agreement.
Pursuant to a governance agreement dated November 8,
1995 among the Company and the Voting Shareholders named in that
agreement (the "November 1995 Governance Agreement") (attached to
this statement as exhibit F and incorporated by reference in this
statement), the parties agreed that, pending the adoption of the
Certificate of Designation Amendments (as defined in the November
1995 Governance Agreement) and subject to the limitations and
qualifications set forth in the November 1995 Governance
Agreement, (a) a "Triggering Event" would be the events or
transactions set forth in section 2(e) of the Certificate of
Designations Amendments, rather than the events or transactions
set forth in section 2(e) of the Current Certificate of
Designations (as defined in the November 1995 Governance
Agreement), (b) matters relating to the size, composition,
election and powers of the board of directors and the committees
of the board of directors of the Company would be governed by
section 6 of the Certificate of Designations Amendments, rather
than by section 6 of the Current Certificate of Designations, and
(c) the rights of the holders of Preferred Stock to vote as a
separate class on certain matters would be governed by section 7
of the Certificate of Designations Amendments, rather than by
section 7 of the Current Certificate of Designations. The
November 1995 Governance Agreement provided that it would
terminate on the earliest of a Qualifying Offering, adoption of
the Certificate of Designations Amendments and six months after
the Fund and ING Equity Partners, L.P. notified the other parties
that they wished to terminate the agreement. On January 26,
1996, the stockholders of the Company approved the adoption of
the Certificate of Designations Amendments, which were thereafter
adopted. On February 26, 1996, the November 1995 Governance
Agreement was amended (the "Supplement to the November 1995
Governance Agreement") (attached to this statement as exhibit G
and incorporated by reference in this statement) to reduce the
size of the board of directors from 11 to seven members, four of
whom are elected by holders of the Common Stock and three of whom
are elected by holders of the Preferred Stock.
Pursuant to a voting rights agreement dated November 8,
1995 among the Voting Shareholders named in that agreement (the
"Voting Rights Agreement") (attached to this statement as exhibit
H and incorporated by reference in this statement), as amended on
December 14, 1995 (such amendment is attached to this statement
as exhibit I and incorporated by reference in this statement),
the Voting Shareholders agreed, subject to the limitations and
qualifications set forth in the Voting Rights Agreement, as
amended, (a) in any Election of Directors (as defined in the
Voting Rights Agreement, as amended), to vote their shares as set
forth in section 1 of the Voting Rights Agreement, as amended,
and (b) to use their best efforts to cause their respective
nominees to the board of directors of the Company to appoint
members to the compensation committee and the audit committee of
the board of directors of the Company as set forth in section 2
of the Voting Rights Agreement, as amended, and to cause the
board of directors of each subsidiary of the Company to be
composed as set forth in section 3 of the Voting Rights
Agreement, as amended. The Voting Rights Agreement, as amended,
provides that it will terminate on the earliest of a Qualifying
Offering, the written agreement of the Fund and ING Equity
Partners, L.P. or November 8, 2005.
Other than as set forth in this item 4, none of the
Reporting Persons has any plans or proposals that relate to, or
could result in, any of the matters referred to in paragraphs (a)
through (j), inclusive, of item 4 of Schedule 13D. Such entities
and persons may, at any time and from time to time, review or
reconsider their position and formulate plans or proposals with
respect to their position, but have no present intention of doing
so.
The foregoing summary of the transactions, including
the summaries of the 1994 Purchase Agreement, the 1995 Purchase
Agreements, the Co-Sale Agreement, the June 1995 Stockholders
Agreement, the November 1995 Governance Agreement, the Amendment
to the November 1995 Governance Agreement and the Voting Rights
Agreement, as amended, does not purport to be a complete
description in those agreements and is qualified in its entirety
by reference to those agreements, which are incorporated in this
statement by reference.
Item 5. Interest in Securities of the Issuer.
A. The Huff Alternative Income Fund, L.P.
(a) Aggregate number of shares of Common Stock
beneficially owned: 11,246,782
Percentage: 46.2% The percentages used in
item 5 are calculated based upon the shares
of Common Stock stated by the Company to be
issued and outstanding as of September 30,
1996, as reflected on the Company's Form 10-Q
for the fiscal quarter ended September 30,
1996.
(b) 1. Sole power to vote or to direct vote: -0-
2. Shared power to vote or to direct vote:
11,246,782
3. Sole power to dispose or to direct the
disposition: -0-
4. Shared power to dispose or to direct the
disposition: 11,246,782
(c) Other than as reported in item 4 above, there were
no transactions by the Reporting Persons during
the past sixty days.
(d) Each of the Reporting Persons may be deemed to
have the right to receive or the power to direct
the receipt of dividends from, or proceeds from
the sale of, the Securities.
(e) Not applicable.
B. WRH Partners, L.L.C.
(a) Aggregate number of shares of Common Stock
beneficially owned: 11,246,782
Percentage: 46.2%
(b) 1. Sole power to vote or to direct vote: -0-
2. Shared power to vote or to direct vote:
11,246,782
3. Sole power to dispose or to direct the
disposition: -0-
4. Shared power to dispose or to direct the
disposition: 11,246,782
(c) Other than as reported in item 4 above, there were
no transactions by the Reporting Persons during
the past sixty days.
(d) Each of the Reporting Persons may be deemed to
have the right to receive or the power to direct
the receipt of dividends from, or proceeds from
the sale of, the Securities.
(e) Not applicable.
C. Paladin Court Co., Inc.
(a) Aggregate number of shares of Common Stock
beneficially owned: 11,246,782
Percentage: 46.2%
(b) 1. Sole power to vote or to direct vote: -0-
2. Shared power to vote or to direct vote:
11,246,782
3. Sole power to dispose or to direct the
disposition: -0-
4. Shared power to dispose or to direct the
disposition: 11,246,782
(c) Other than as reported in item 4 above, there were
no transactions by the Reporting Persons during
the past sixty days.
(d) Each of the Reporting Persons may be deemed to
have the right to receive or the power to direct
the receipt of dividends from, or proceeds from
the sale of, the Securities.
(e) Not applicable.
D. DBC II Corp.
(a) Aggregate number of shares of Common Stock
beneficially owned: 11,246,782
Percentage: 46.2%
(b) 1. Sole power to vote or to direct vote: -0-
2. Shared power to vote or to direct vote:
11,246,782
3. Sole power to dispose or to direct the
disposition: -0-
4. Shared power to dispose or to direct the
disposition: 11,246,782
(c) Other than as reported in item 4 above, there were
no transactions by the Reporting Persons during
the past sixty days.
(d) Each of the Reporting Persons may be deemed to
have the right to receive or the power to direct
the receipt of dividends from, or proceeds from
the sale of, the Securities.
(e) Not applicable.
E. William R. Huff
(a) Aggregate number of shares of Common Stock
beneficially owned: 11,270,782
Percentage: 46.3%
(b) 1. Sole power to vote or to direct vote: 24,000
2. Shared power to vote or to direct vote:
11,246,782
3. Sole power to dispose or to direct the
disposition: 24,000
4. Shared power to dispose or to direct the
disposition: 11,246,782
(c) Other than as reported in Item 4 above, there were
no transactions by the Reporting Persons during
the past sixty days.
(d) Each of the Reporting Persons may be deemed to
have the right to receive or the power to direct
the receipt of dividends from, or proceeds from
the sale of, the Securities.
(e) Not applicable.
F. Donna B. Charlton
(a) Aggregate number of shares of Common Stock
beneficially owned: 11,253,782
Percentage: 46.3%
(b) 1. Sole power to vote or to direct vote: 7,000
2. Shared power to vote or to direct vote:
11,246,782
3. Sole power to dispose or to direct the
disposition: 7,000
4. Shared power to dispose or to direct the
disposition: 11,246,782
(c) Other than as reported in Item 4 above, there were
no transactions by the Reporting Persons during
the past sixty days.
(d) Each of the Reporting Persons may be deemed to
have the right to receive or the power to direct
the receipt of dividends from, or proceeds from
the sale of, the Securities.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or
Relationships with Respect to Securities of the Issuer.
Except as described in item 4 above, there are no
contracts, arrangements, understandings or relationships (legal
or otherwise) among the persons named in item 2 above or between
such persons and any other person with respect to any securities
of the Company, including but not limited to transfer or voting
of any securities, finder's fees, joint ventures, loan or option
arrangements, puts or calls, guarantees of profits, divisions of
profits or losses or the giving or withholding of proxies.
Item 7. Materials to be Filed as Exhibits.
There is filed herewith:
Exhibit A - Written agreement relating to the filing of
joint acquisition statements as required by
Rule 13d-1(f)(1) under the Securities
Exchange Act of 1934.
Exhibit B - Investment agreement dated October 21, 1994
among American Communications Services, Inc.
and the named Purchasers.
Exhibit C - Series B preferred stock and warrant purchase
agreement dated June 26, 1995 among American
Communications Services, Inc. and the named
Purchasers.
Stock exchange agreement dated June 26, 1995
among American Communications Services, Inc.
and the named Series A Stockholders.
Exhibit D - Agreement dated October 21, 1995 among the
Purchasers named in the investment agreement
dated October 21, 1995 and Anthony J.
Pompliano and Richard A. Kozak.
Exhibit E - Stockholders agreement dated June 26, 1995
among American Communications Services, Inc.
and the named Stockholders.
Exhibit F - Governance agreement dated November 8, 1995
among American Communications Services, Inc.
and the named Voting Shareholders.
Exhibit G - Supplemental governance agreement dated
February 26, 1996 among American
Communications Services, Inc. and the named
Voting Shareholders.
Exhibit H - Voting rights agreement dated November 8,
1995 among the named Voting Shareholders.
Exhibit I - First amendment of voting rights agreement
dated December 14, 1995 among the named
Voting Shareholders.
ANNEX 1
The following is set forth below with respect to the
Fund and WRH: (a) name; (b) address; (c) principal business;
(d) state of organization; (e) general or managing partners; and
(f) controlling persons. The following is set forth below with
respect to Paladin and DBC: (a) name; (b) address; (c) principal
business; (d) state of organization; (e) executive officers; and
(f) directors; and (g) controlling persons. The following is set
forth below with respect to each of William R. Huff and Donna B.
Charlton: (a) name; (b) business address; (c) principal
occupation; and (d) citizenship.
1. (a) The Huff Alternative Income Fund, L.P.
(b) 67 Park Place
Morristown, New Jersey 07960
(c) The principal business of the Fund is that of a private
investment limited partnership.
(d) Delaware
(e) WRH Partners, L.L.C. is the General Partner of the
Fund.
(f) Each of the other Reporting Persons is a controlling
person of the Fund.
2. (a) WRH Partners, L.L.C.
(b) 67 Park Place
Morristown, New Jersey 07960
(c) The principal business of the Fund is serving as
General Partner of the Fund.
(d) Delaware
(e) Paladin Court Co., Inc. and DBC II Corp. are the
General Managers of WRH.
(f) Each of Paladin, DBC, William R. Huff and Donna B.
Charlton is a controlling person of WRH.
3. (a) Paladin Court Co., Inc.
(b) 67 Park Place
Morristown, New Jersey 07960
(c) The principal business of Paladin is serving as General
Manager of WRH.
(d) Delaware
(e) William R. Huff is the sole executive officer of
Paladin.
(f) William R. Huff is the sole director of Paladin.
(g) William R. Huff is a controlling person of Paladin.
4. (a) DBC II Corp.
(b) 67 Park Place
Morristown, New Jersey 07960
(c) The principal business of DBC is serving as General
Manager of WRH.
(d) Delaware
(e) Donna B. Charlton is the sole executive officer of DBC.
(f) Donna B. Charlton is the sole director of DBC.
(g) Donna B. Charlton is a controlling person of DBC.
5. (a) William R. Huff
(b) 67 Park Place
Morristown, New Jersey 07960
(c) The principal occupation of William R. Huff is
management of the Fund, through Paladin and WRH, and
management of other affiliated entities.
(d) United States.
6. (a) Donna B. Charlton
(b) 67 Park Place
Morristown, New Jersey 07960
(c) The principal occupation of Donna B. Charlton is
management of the Fund, through DBC and WRH, and
management of other affiliated entities.
(d) United States
SIGNATURES
After reasonable inquiry and to the best of our
knowledge and belief, the undersigned certify that the
information set forth in this statement is true, complete and
correct.
Dated: December 19, 1996
/s/ William R. Huff THE HUFF ALTERATIVE INCOME
William R. Huff, FUND, L.P.
Individually By: WRH Partners, L.L.C.
General Partner
Paladin Court Co., Inc. By: DBC II Corp.
General Manager
By: /s/ William R. Huff By: /s/ Donna B. Charlton
William R. Huff Donna B. Charlton
President President
/s/ Donna B. Charlton WRH Partners, L.L.C.
Donna B. Charlton,
Individually By: DBC II Corp.
General Manager
DBC II Corp. By: /s/ Donna B. Charlton
Donna B. Charlton
President
By: /s/ Donna B. Charlton
Donna B. Charlton
President
EXHIBIT INDEX
Exhibit A - Written agreement relating to the filing of joint
acquisition statements as required by Rule 13d-
1(f)(1) under the Securities Exchange Act of 1934.
Exhibit B - Investment agreement dated October 21, 1994 among
American Communications Services, Inc. and the
named Purchasers.
Exhibit C - Series B preferred stock and warrant purchase
agreement dated June 26, 1995 among American
Communications Services, Inc. and the named
Purchasers.
Stock exchange agreement dated June 26, 1995 among
American Communications Services, Inc. and the
named Series A Stockholders.
Exhibit D - Agreement dated October 21, 1995 among the
Purchasers named in the investment agreement dated
October 21, 1995 and Anthony J. Pompliano and
Richard A. Kozak.
Exhibit E - Stockholders agreement dated June 26, 1995 among
American Communications Services, Inc. and the
named Stockholders.
Exhibit F - Governance agreement dated November 8, 1995 among
American Communications Services, Inc. and the
named Voting Shareholders.
Exhibit G - Supplemental governance agreement dated February
26, 1996 among American Communications Services,
Inc. and the named Voting Shareholders.
Exhibit H - Voting rights agreement dated November 8, 1995
among the named Voting Shareholders.
Exhibit I - First amendment of voting rights agreement dated
December 14, 1995 among the named Voting
Shareholders.
EXHIBIT A
The undersigned agree that the Schedule 13D dated this
date to which this document is an exhibit is filed on behalf of
each of them.
Dated: December 19, 1996
/s/ William R. Huff THE HUFF ALTERNATIVE INCOME
William R. Huff, FUND, L.P.
Individually
By: WRH Partners, L.L.C.
General Partner
Paladin Court Co., Inc. By: DBC II Corp.
General Manager
By:/s/ William R. Huff By:/s/ Donna B. Charlton
William R. Huff Donna B. Charlton
President President
/s/ Donna B. Charlton WRH Partners, L.L.C.
Donna B. Charlton,
Individually By: DBC II Corp.
General Manager
DBC II Corp. By: /s/ Donna B. Charlton
Donna B. Charlton
President
By: /s/ Donna B. Charlton
Donna B. Charlton
President
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 Rose
Goetz & Mendelsohn, 1585 Broadway, New York, New York 10036.
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 Huff Alternative Income Fund, L.P. ("Huff") (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 Huff
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 Huff 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 Huff notices of all meetings of
their respective boards of directors, and Huff 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 Huff
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 Huff 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:
600 Hunter Drive
Suite 301
Oak Brook, Illinois 60521
Attention: Chief Executive Officer
Fax: 708-573-1831
with a copy to:
Ross & Hardies
Park Avenue Tower
65 East 55th Street
New York, New York 10022-3215
Attention: Kevin T. Collins, Esq.
Fax: 212-421-5682
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
Huff 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/Richard A. Kozak
Richard A. Kozak, President and
Chief Operating Officer
PURCHASERS:
THE HUFF ALTERNATIVE INCOME FUND, L.P.
By: WRH PARTNERS, L.L.C.
General Partner
By: PALADIN COURT CO., INC.
General Manager
By:
William R. Huff
President
By: /s/ Joseph R. Thornton
Joseph R. Thornton
Attorney-in-Fact
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. Huff 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 Ross & Hardies E
Registration Rights Agreement F
Stockholders Agreement G
Employment Agreement for George M. Tronsrue, III H
Employment Agreement for Riley M. Murphy I
Employment Agreement for Douglas R. Hudson 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
Huff Warrant for 100,000 Shares of Common
Stock at $1.79 per share O
Huff 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.
"Huff" shall mean The Huff 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 Mayer, Brown & Platt, 1675
Broadway, New York, New York 10019, 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 Huff 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 mark 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 Anthony J.
Pompliano and Richard A Kozak 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 Ross & Hardies, 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, Anthony J. Pompliano, Sr., Richard A.
Kozak 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 Anthony J.
Pompliano, Sr. and Richard A. Kozak 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: George M. Tronsrue,
III, Riley M. Murphy and Douglas R. Hudson. Each of Anthony J.
Pompliano, Sr. and Richard A. Kozak 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 Huff. 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. Huff 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. Huff Warrants. The Company shall have
issued to Huff, free and clear of all Liens, (i) a warrant
entitling Huff, 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 Huff, 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:
131 National Business Parkway
Suite 100
Annapolis Junction, MD 20701
Attention: Chief Executive Officer
Fax: 301-490-7091
with a copy to:
Ross & Hardies
Park Avenue Tower
65 East 55th Street
New York, New York 10022-3215
Attention: Kevin T. Collins, Esq.
Fax: 212-421-5682
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, Huff 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 Huff 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/ Richard A. Kozak
Richard A. Kozak
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 Huff Alternative Income Fund, L.P.
By: WRH PARTNERS, L.L.C.
general partner
By: PALADIN COURT CO., INC.
general manager
By: *
Name: William R. Huff
Title: President
* Joseph R. Thornton
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:
Richard A. Kozak - 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/ Olivier L. Trouveroy
Name: Oliver L. Trouveroy
Title: MANAGING DIRECTOR
THE HUFF ALTERNATIVE INCOME FUND, L.P.
By: WRH PARTNERS, L.L.C.
general partner
By: PALADIN COURT CO., INC.
general manager
By:
Name: William R. Huff
Title: President
APEX INVESTMENT FUND I, L.P.
By: APEX MANAGEMENT PARTNERS, L.P.,
general partner
By: First Analysis Corporation,
general partner
By: /s/ George M. Middlemas
Name: George M. Middlemas
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/ George M. Middlemas
Name: George M. Middlemas
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. Oliver Nicklin, Jr.
Name: F. Oliver Nicklin, Jr.
Title: President
ARGENTUM CAPITAL PARTNERS, L.P.
BY: BR Associates, Inc.,
general partner
By:
Name: Daniel Raynor
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. Oliver Nicklin, Jr.
Name: F. Oliver Nicklin, Jr.
Title: President
DELAWARE CHARTER GUARANTEE & TRUST CO. CUSTODIAN
FOR
MARK B. CHASIN IRA:
/s/ Mark B. Chasin - Self Directed Plan
Mark B. Chasin
Self-Directed Plan
GABRIELLE GREEN UNYGTMA:
By: /s/Alan Green
Alan Green
Custodian
ZACHARY GREEN UNYGTMA:
By: /s/Alan Green,
Alan Green
Custodian
/s/Alan Green
Alan Green
/s/ Christopher Green
Christopher Green
/s/ Jennifer Green
Jennifer Green
/s/Richard T. Tyner
Richard T. Tyner
/s/Barry Yampel
Barry Yampel
/s/William R. Huff
William R. Huff
/s/Cathy Markey Huff
Cathy Markey Huff
/s/Christopher L. Rafferty
Christopher L. Rafferty
STOCK EXCHANGE AGREEMENT
This STOCK EXCHANGE AGREEMENT is made and entered
into as of June 26, 1995 by and among American Communications
Services, Inc., a Delaware corporation (the "Company") and the
holders (the "Series A Stockholders") of the Company's 9% Series
A Convertible Preferred Stock, $1.00 par value per share (the
"Series A Preferred Stock").
R E C I T A L S:
WHEREAS, for the purpose of obtaining additional
financing the Company is offering for sale shares of 9% Series B-
1 Convertible Preferred Stock, $1.00 par value per share (the
"Series B-1 Preferred Stock"), 9% Series B-2 Convertible
Preferred Stock, $1.00 par value per share (the "Series B-2
Preferred Stock"), 9% Series B-3 Convertible Preferred Stock,
$1.00 par value per share (the "Series B-3 Preferred Stock") and
9% Series B-4 Convertible Preferred Stock, $1.00 par value per
share (the "Series B-4 Preferred Stock"), (the Series B-1
Preferred Stock, Series B-2 Preferred Stock, Series B-3 Preferred
Stock and Series B-4 Preferred Stock hereinafter collectively
referred to as the "Series B Preferred Stock"), and Warrants to
purchase common stock; and
WHEREAS, the Company and the Series A Stockholders
desire to induce certain investors to purchase the Series B
Preferred Stock; and
WHEREAS, the retirement of the Series A Preferred
Stock is necessary to facilitate the consummation of the sale of
the Series B Preferred Stock; and
WHEREAS, the Company and Series A Stockholders deem
it in the best interests of the Series A Stockholders and in the
best interests of the Company to retire the Series A Preferred
Stock; and
WHEREAS, in order to facilitate the retirement of the
Series A Preferred Stock, the Company and the Series A
Stockholders have agreed to exchange the Series A Preferred Stock
for shares of the Company's 9% Series A-1 Convertible Preferred
Stock, $1.00 par value per share (the "Series A-1 Preferred
Stock"), subject to the terms and conditions of this Agreement.
NOW THEREFORE, in consideration of the foregoing and
for other good and valuable consideration, and the
representations, warranties and agreements of the parties
contained herein, the parties hereby agree as follows:
1. SHARE EXCHANGE
1.1 Exchange. Each of the Series A Stockholders
does hereby transfer, assign, convey and deliver to the Company
the number of shares of Series A Preferred Stock set forth
opposite that Stockholder's name on Schedule 1.1, in exchange for
an equal number of Series A-1 Preferred Stock. Each of the
Series A Stockholders has delivered to the Company the
certificate or certificates representing such shares, with duly
executed stock powers endorsed in blank.
1.2 Conditions to Exchange. The transactions
contemplated by this Agreement shall be conditioned upon and
shall occur simultaneously with the consummation of the sale by
the Company of at least 227,500 shares of the Series B Preferred
Stock (the "Series B Preferred Stock Transaction") to the
purchasers thereof pursuant to that certain Series B Preferred
Stock and Warrant Purchase Agreement dated June 21, 1995 (the
"Series B Purchase Agreement"), and at such time, the shares of
Series A Preferred Stock delivered hereunder shall be cancelled
and a new certificate or certificates shall be issued and
delivered promptly to each Series A Stockholder evidencing that
number of shares of Series A-1 Preferred Stock equal to the
number of shares of Series A Preferred Stock set forth opposite
such Series A Stockholder's name on Schedule 1.1. If for any
reason the consummation of such sale of shares of Series B
Preferred Stock shall not have occurred on or before July 15,
1995, the Company shall return promptly to each Series A
Stockholder the certificate or certificates evidencing shares of
Series A Preferred Stock previously delivered to the Company by
such Series A Stockholder.
1.3 Restricted Stock. Each of the Series A
Stockholders does hereby acknowledge that the shares of Series A-
1 Preferred Stock received by that Series A Stockholders pursuant
to this Agreement have not been registered under the Securities
Act of 1933, as amended (the "Securities Act") or the securities
laws of any other jurisdiction and constitute "Restricted
Securities" within the meaning of Rule 144 under the Securities
Act and therefore may not be resold unless registered under the
Securities Act or sold pursuant to an exemption from such
registration. The certificate(s) representing the Series A-1
Preferred Stock issued pursuant to this Agreement shall bear such
legend as the Company deems necessary or appropriate to comply
with the Securities Act and any other applicable federal and
state law.
1.4 Series A Investment Agreement. Sections 3, 4,
5 (with the exception of 5.5 and 5.6), 7 and 8 (including the
subsections thereof, the "Surviving Sections") of the Investment
Agreement dated October 21, 1994 between the Company and the
Series A Stockholders (the "Series A Investment Agreement") and
the definitions of defined terms used in the Surviving Sections
but defined elsewhere in the Series A Investment Agreement shall
remain in full force and effect as if the shares of Series A-1
Preferred Stock issued to the Series A Stockholders hereunder
were issued and sold to the Series A Stockholders pursuant to the
Series A Investment Agreement at the time the shares of Series A
Preferred Stock purchased by the Series A Stockholders thereunder
were issued. Except as provided in the preceding sentence, the
Series A Investment Agreement shall be deemed to be terminated
and the provisions thereof to be null and void and the rights of
the Series A Stockholders with respect to the Series A-1
Preferred Stock and Warrants (as defined in the Series A
Investment Agreement) issued to the Series A Stockholders shall
be governed by and subject to (A) the Certificate of Designations
(the "Certificate of Designations") relating to the Series A-1
Preferred Stock and Series B Preferred Stock, a copy of which is
attached hereto as Exhibit A and made a part hereof, (B) the
Stockholders Agreement dated June 21, 1995 by and among the
Company, the Series A Stockholders (therein called the "Series A-
1 Stockholders") and the Series B Stockholders, a copy of which
is attached hereto as Exhibit B and (C) the Registration Rights
Agreement dated June 21, 1995 by and among the Company, the
Series A Stockholders (therein called the "Series A-1
Stockholders") and the Series B Stockholders, a copy of which is
attached hereto as Exhibit B and (C) the Registration Rights
Agreement dated June 21, 1995 by and among the Company, the
Series A Stockholders (therein called the "Series A-1
Stockholers") and the Series B Stockholders, a copy of which is
attached hereto as Exhibit B and (C) the Registration Rights
Agreement dated June 21, 1995 by and among the Company, the
Series A Stockholders (therein the "Series A-1 Stockholders") and
the Series B Stockholders, a copy of which is attached hereto as
Exhibit C.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents sand warrants to the Series A
Stockholders as follows:
2.1 Existence and Power. The Company is validly
existing and in good standing under the laws of its state of
incorporation. The Company has the full corporate power and
authority to enter into and perform this Agreement and each other
instrument it is executing and delivering in connection with this
Agreement (collectively, the "Transaction Documents"). The
Company has the full corporate power and authority to carry on
its business as now conducted, and to own, lease and operate its
properties as it now does. The Company is qualified to do
business as a foreign corporation in each jurisdiction in which
it is required to be qualified.
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).
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 or by-laws of the Company, the predecessor to
the Company 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 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.
2.4 Litigation. There is no judicial or
administrative 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 2.4,
there is not 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,
injunctions or decrees and any administrative proceedings
applicable generally throughout the industry in which the Company
and its subsidiaries operate).
2.5 Validity of Shares. The shares of Series A-1
Preferred Stock issued by the Company in exchange for Series A
Preferred Stock, are validly issued, fully paid and non-
assessable.
3. REPRESENTATIONS AND WARRANTIES OF THE SERIES A
STOCKHOLDERS
The Series A Stockholders each hereby represents and
warrants to the Company as follows:
3.1 Existence and Power. That each Series A
Stockholder 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.
3.2 Authorization. The execution, delivery and
performance by that Series A Stockholder of this Agreement have
been duly authorized by all necessary action, and this Agreement
constitutes the valid and binding obligation of that Series A
Stockholder enforceable against it in accordance with is 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).
3.3 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
Series A Stockholder's ability to perform its obligations under
this Agreement, the execution, delivery and performance by that
Series A Stockholder 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.
3.4 Litigation. There is no judicial or
administrative action or proceeding pending or, to the best of
the knowledge of that Series A Stockholder, threatened, nor, to
the best of the knowledge of that Series A Stockholder, 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 Series A Stockholder, threatened, nor, to the best of
the knowledge of that Series A Stockholder, is there any
governmental investigation pending or threatened, nor is there
any order, injunction or decree outstanding, against that Series
A Stockholder that would have a material adverse effect upon that
Series A Stockholder's ability to perform its obligations under
this Agreement.
3.5 Investment. That the Series A Stockholder is
an accredited investor (within the meaning of the rules and
regulations under the Securities Act) and will be acquiring
Series A-1 Preferred Stock for investment and not with a view to
distribution in violation of the Securities Act.
3.6 Brokers. Except as set forth on schedule 3.16
of the Series B Purchase Agreement, no agreement, arrangement or
understanding with any broker or finder in connection with the
transactions contemplated by this Agreement has been entered into
by that Series A Stockholder.
3.7 Ownership. That each Series A Stockholder is
the record and beneficial owner of the shares of Series A
Preferred Stock set forth opposite that Series A Stockholder's
name on Schedule 1.1, free and clear of all liens, claims and
encumbrances of any kind.
4. ADDITIONAL AGREEMENTS
4.1 Indemnification. The Company, on one hand, and
each Series A Stockholder, on the other hand, agree to indemnify
and hold harmless the other party from and against any and all
damage, loss, liability, claim, or expense (including reasonable
attorney's fees) incurred by such other party resulting from, or
which exists or arises due to (i) any inaccuracy, breach or
omission of, from or in, the representations and warranties of
such party contained in this Agreement, or (ii) the
nonfulfillment of any agreement or obligation of such party under
this Agreement.
4.2 Further Acknowledgement. Each of the Series A
Stockholders hereby authorizes the cancellation of the Series A
Preferred Stock to be effective simultaneously upon the closing
of the Series B Preferred Stock Transaction and the issuance of
Series A-1 Preferred Stock to such holder. Each of the Series A
Stockholders acknowledges and agrees that, except as provided
herein, upon the consummation of the transactions contemplated by
this Agreement such Series A Stockholder shall have no rights as
a Series A Stockholder and further, that this Agreement
constitutes a settlement and relinquishment of its rights as a
holder of the Series A Preferred Stock, including but not limited
to, the conversion rights with respect to the Series A Preferred
Stock. Accordingly, in consideration of the agreements made by
the Company hereunder, each of the Series A Stockholders hereby
releases and discharges the Company, and its successors and
assigns, from any and all claims, demands, rights or liabilities
which that Series A Stockholder ever had, now have or may have in
the future, by reason of, arising out of, or in any way connected
with each of the Series A Stockholders' status as a holder of the
Series A Preferred Stock (it being understood, however, that
nothing in this Section 4.2 is intended to affect the claims,
demands, rights or liabilities of the Series A Stockholders under
the Series A Investment Agreement, to the extent those claims,
demands, rights or liabilities remain by reasons of Section 1.4
of this Agreement).
5. GENERAL PROVISIONS
The parties further covenant and agree as follows:
5.1 Amendments. This Agreement may be amended,
supplemented or interpreted at any time only by written
instrument duly executed by each of the parties hereto.
5.2 Contents of Agreement, Parties in Interest,
Assignment. This Agreement sets forth the entire understanding
of the parties with respect to the subject matter hereof. Any
previous agreements or understandings between the parties
regarding the subject matter hereof are merged into and
superseded by this Agreement in accordance with its terms. All
representations, warranties, terms and conditions of this
Agreement shall be binding upon and inure to the benefit of and
be enforceable by the respective heirs, legal representatives,
successors and permitted assigns of the parties hereto.
5.3 Severability. In the event that any one or
more of the provisions contained in this Agreement shall be
invalid, illegal or unenforceable in any respect for any reason,
the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions of this
Agreement shall not be in any way impaired.
5.4 Headings. The headings of the Sections and the
subsections of this Agreement are inserted for convenience of
reference only and shall not constitute a part hereof.
5.5 Instruments of Further Assurance. Each of the
parties hereto agrees, upon the request of any of the other
parties hereto, from time to time to executive and deliver to
such other party or parties all such instruments and documents of
further assurance or otherwise as shall be reasonable under the
circumstances, and to do any and all such acts and things as may
reasonably be required to carry out the obligations of such
requested party hereunder.
5.6 Specific Performance, Etc. Each of the parties
hereto will be entitled to specific performance of its rights
under this Agreement. Each of the parties hereto agrees that a
breach of any of the provisions of this Agreement will cause
irreparable injury to the nonbreaching parties, that such
nonbreaching parties have no adequate remedy at law in respect of
such breach and, as a consequence, that each and every provision
contained in this Agreement shall be specifically enforceable
against all parties hereto.
5.7 Governing Law; Jurisdiction. This Agreement
shall be governed, construed and enforced in accordance with the
internal laws of the State of New York, excluding any choice of
law rules which may direct the application of the laws of another
jurisdiction.
5.8 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.
IN WITNESS WHEREOF, this Agreement has been executed
by the parties hereto as of the day and year first above written.
THE COMPANY:
American Communications Services, Inc.
By: /s/ Richard A. Kozak
Name: Richard A. Kozak
Its: President and COO
THE SERIES A STOCKHOLDERS:
The Huff Alternative Income Fund, L.P.
By:
Name:
Its:
Apex Investment Fund I, L.P.
By:
Name:
Its:
IN WITNESS WHEREOF, this Agreement has been executed
by the parties hereto as of the day and year first above written.
THE COMPANY:
American Communications Services, Inc.
By:____________________________________
Name:
Its:
THE SERIES A STOCKHOLDERS:
The Huff Alternative Income Fund, L.P.
By: WRH Partners, L.L.C., general partner
By: Paladin Court Co., Inc., general manager
By: *
Name: William Huff
Its: President
* Joseph R. Thornton
Attorney-in-fact
Apex Investment Fund I, L.P.
By:____________________________________
Name:
its:
IN WITNESS WHEREOF, this Agreement has been executed
by the parties hereto as of the day and year first above written.
THE COMPANY:
American Communications Services, Inc.
By:____________________________________
Name:
Its:
THE SERIES A STOCKHOLDERS:
The Huff Alternative Income Fund, L.P.
By:____________________________________
Name:
Its:
Apex Investment Fund I, L.P.
By: Apex Management Partnership, its General Partner
By: /s/ George M. Middlemas
Name: George M. Middlemas
Its: General Partner
Apex Investment Fund II, L.P.
By: Apex Management Partnership, its General Partner
By: /s/ George M. Middlemas
Name: George M. Middlemas
Its: 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/ Steve F. Bouck
Name: Steve F. Bouck
Its: Executive Vice President
Ethos Partners L.P.
By:____________________________________
Name:
Its:
Zelus International Ltd.
By:____________________________________
Name:
Its:
Global Opportunity Fund I Ltd.
By:____________________________________
Name:
Its:
U.S. Signal Corporation
By:____________________________________
Name:
Its:
Apex Investment Fund II, L.P.
By:____________________________________
Name:
Its:
The Productivity Fund II, L.P.
By:____________________________________
Name:
Its:
Ethos Partners L.P.
By:____________________________________
Name:
Its:
Zelus International Ltd.
By:____________________________________
Name:
Its:
Global Opportunity Fund I Ltd.
By:____________________________________
Name:
Its:
U.S. Signal Corporation
By: /s/ Richard Postma
Name: Richard Postma
Its: Assistant Secretary
William G. Salatich Consulting, Inc. Retirement Plan and Trust
By: /s/William G. Salatich
Name: William G. Salatich
Its: Trustee
Prime Management II, L.P.
By:____________________________________
Name:
Its:
Brad Peery Capital L.P.
By:____________________________________
Name:
Its:
Brad Peery Capital International
By:____________________________________
Name:
Its:
William G. Salatich Consulting, Inc. Retirement Plan and Trust
By:____________________________________
Name: William G. Salatich
Its: Trustee
Prime Management II, L.P.
By: /s/ William P. Glasgow
Name: William P. Glasgow
Its: SVP
Brad Peery Capital L.P.
By:____________________________________
Name:
Its:
Brad Peery Capital International
By:____________________________________
Name:
Its:
William G. Salatich Consulting, Inc. Retirement Plan and Trust
By:____________________________________
Name: William G. Salatich
Its: Trustee
Prime Management II, L.P.
By:____________________________________
Name:
Its:
Brad Peery Capital L.P.
By: /s/ Brad Peery
Name: Brad Peery
Its: General Partner
Brad Peery Capital International
By: /s/ Brad Peery
Name: Brad Peery
Its: Investment Adviser
TABLE OF CONTENTS
Page
1. SHARE EXCHANGE . . . . . . . . . . . . . . . . . . . . . 2
1.1 Exchange . . . . . . . . . . . . . . . . . . . . . 2
1.2 Conditions to Exchange . . . . . . . . . . . . . . 2
1.3 Restricted Stock . . . . . . . . . . . . . . . . . 3
1.4 Series A Investment Agreement. . . . . . . . . . . 3
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . 4
2.1 Existence and Power. . . . . . . . . . . . . . . . 4
2.2 Authorization. . . . . . . . . . . . . . . . . . . 5
2.3 Consents of Third Parties. . . . . . . . . . . . . 5
2.4 Litigation . . . . . . . . . . . . . . . . . . . . 5
2.5 Validity of Shares . . . . . . . . . . . . . . . . 6
3. REPRESENTATIONS AND WARRANTIES OF THE SERIES A
STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . 6
3.1 Existence and Power . . . . . . . . . . . . . . . 6
3.2 Authorization . . . . . . . . . . . . . . . . . . 7
3.3 Consents of Third Parties . . . . . . . . . . . . . 7
3.4 Litigation . . . . . . . . . . . . . . . . . . . . .8
3.5 Investment . . . . . . . . . . . . . . . . . . . 8
3.6 Brokers. . . . . . . . . . . . . . . . . . . . . . 8
3.7 Ownership. . . . . . . . . . . . . . . . . . . . . 8
4. ADDITIONAL AGREEMENTS. . . . . . . . . . . . . . . . . . 8
4.1 Indemnification. . . . . . . . . . . . . . . . . . 8
4.2 Further Acknowledgement. . . . . . . . . . . . . . 8
5. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . 9
5.1 Amendments . . . . . . . . . . . . . . . . . . . . 9
5.2 Contents of Agreement, Parties in Interest,
Assignment . . . . . . . . . . . . . . . . . . . . 9
5.3 Severability . . . . . . . . . . . . . . . . . . . 10
5.4 Headings . . . . . . . . . . . . . . . . . . . . . 10
5.5 Instruments of Further Assurance . . . . . . . . . 10
5.6 Specific Performance, Etc. . . . . . . . . . . . . 10
5.7 Governing Law; Jurisdiction. . . . . . . . . . . . 10
5.8 Counterparts . . . . . . . . . . . . . . . . . . . 11
EXHIBIT D
October 21, 1994
The Purchasers Under the
Investment Agreement Dated
October 21, 1994
c/o The Huff Alternative Income Fund, L.P.
30 Schuyler Place
Morristown, New Jersey 07960
Gentlemen:
In order to induce you to consummate the closing under
the investment agreement dated October 21, 1994 among American
Communications Services, Inc. (the "Company") and you, the
undersigned agree as follows:
1. Co-Sale. If, at any time prior to the
consummation of a Qualifying Offering (as defined in the
certificate of resolution relating to the Company's 9% Series A
Convertible Preferred Stock), either of the undersigned or any of
the undersigned's affiliates (as that term is used in the rules
and regulations under the Securities Exchange Act of 1934 (the
"Securities Rules")) or associates (as that term is used in the
Securities Rules) (collectively, the "Section 1 Seller") sells or
agrees to sell any shares of common stock of the Company
beneficially owned (as that term is used in the Securities Rules)
by him or them to someone other than the Company or any of its
subsidiaries, the Section 1 Seller shall cause the purchaser to
offer to purchase from each of you, at a price per share not less
than the price per share at which the Section 1 Seller shall have
sold or agreed to sell his shares and otherwise on the same terms
as those on which the Section 1 Seller shall have sold or agreed
to sell his shares, a number of shares equal to the fraction of
the number of shares of which you acquire beneficial ownership
under the Investment Agreement referred to above determined by
dividing the number of shares the Section 1 Seller is selling by
the total number of shares the Section 1 Seller beneficially owns
on the date of this letter agreement.
2. First Refusal. If, at any time prior to the
consummation of a Qualifying Offering, either of the undersigned
or any of the undersigned's affiliates or associates
(collectively, the "Section 2 Seller") receives from a third
party, and wishes to accept, a bona fide offer to purchase shares
of common stock of the Company the Section 2 Seller beneficially
owns (but excluding shares acquired in open-market purchases
after the date of this letter agreement) (the "Offered Shares"),
the Section 2 Seller shall give notice to each of you (stating
the number of Offered Shares, the name and address of the offeror
and the terms and conditions of the offer) and you shall have the
option to purchase, on the same terms as those offered by the
third party, all (but not fewer than all) the Offered Shares (in
such proportions among you as you shall agree, or, absent an
agreement, in the proportions in which each of you that wishes to
purchase the Offered Shares acquires beneficial ownership of
shares of common stock of the Company under the Investment
Agreement referred to above). This option shall be exercisable
by notice given to the Section 2 Seller within 10 days after the
date of receipt of the notice to each of you. If you do not
exercise the option to purchase all the Offered Shares, at any
time within 60 days after the expiration of the option, the
Section 2 Seller may transfer all (but not fewer than all) the
Offered Shares to the third party offeror at the price and on the
terms and conditions stated in the offer (but, if the transfer to
the third party is not made within that 60-day period, those
shares shall again be subject to this section 2). Your rights
under this section 2 shall be in addition to, and shall not
limit, your rights under section 1.
3. Family Transfers. Nothing in this letter
agreement shall be deemed to restrict the transfer of any
securities by the undersigned or the undersigned's affiliates or
associates to their respective family members (within the meaning
of the Securities Rules) or the transfer of any securities by
will or the laws of descent and distribution, as long as the
transferee agrees in writing to be bound by the provisions of
this agreement as if the transferee were one of the undersigned.
4. Legend. At all times prior to the consummation of
a Qualifying Offering, each certificate representing shares of
common stock of the Company the undersigned beneficially own
shall bear the following legend:
"The shares represented by this certificate
are subject to an agreement dated October 21,
1994, a copy of which is on file at the
office of the Company."
Prior to the consummation of a Qualifying Offering, the Company
shall not issue any certificate evidencing any such shares that
does not bear that legend.
5. Notices. Any notices and other communications
under this letter 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
address or facsimile number given below (or at such other address
or facsimile number for such party as shall be specified by
notice given under this letter agreement):
(a) if to the Company or one of the undersigned,
to that party at:
600 Hunter Drive
Suite 301
Oak Brook, Illinois 60521
Fax No. (708) 573-1831
with a copy to:
Ross & Hardies
Park Avenue Tower
65 East 55th Street
New York, New York 10022-3215
Attention: Kevin T. Collins, Esq.
Fax No. (212) 421-5682
(b) if to you, to you at:
c/o The Huff Alternative Income Fund, L.P.
30 Schuyler Place
Morristown, New Jersey 07960
Fax No. (201) 984-5818
Attention: Ms. Donna B. Charlton
All such notices and communications shall be deemed received upon
(a) actual receipt thereof by the addressee, (b) actual delivery
thereof to the appropriate address or (c) in the case of a
facsimile transmission, upon transmission thereof by the sender
and issuance by the transmitting machine of a confirmation slip
confirming that 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.
6. Governing Law. This letter 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.
7. Equitable Relief. The parties acknowledge that
the remedy at law for breach of this letter 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 6 is in
addition to, and not in lieu of, any other rights or remedies a
party may have.
8. Entire Agreement. This letter 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, may
not by changed or terminated orally and any amendment or
modification must be in writing and signed by the party to be
charged.
Please acknowledge your agreement with the foregoing by
executing this letter agreement in the spaces provided below.
/s/ Anthony J. Pompliano
Anthony J. Pompliano
/s/ Richard A. Kozak
Richard A. Kozak
Agreed to and accepted as
to the second sentence of
section 4 only:
AMERICAN COMMUNICATIONS
SERVICES, INC.
By: /s/ Richard A. Kozak
Richard A. Kozak
Agreed to and accepted:
THE HUFF ALTERNATIVE
INCOME FUND, L.P.
By: WRH PARTNERS, L.L.C.
General Partner
By: PALADIN COURT CO., INC.
General Manager
*
By:
William R. Huff
President
* By: /s/ Joseph R. Thornton
Joseph R. Thornton
Attorney-in-Fact
EXHIBIT E
- -----------------------------------------------------------------
AMERICAN COMMUNICATIONS SERVICES, INC.
STOCKHOLDERS AGREEMENT
Dated as of June 26, 1995
- -----------------------------------------------------------------
TABLE OF CONTENTS
(Not Part of Agreement)
Page
ARTICLE I
Certain Definitions
Affiliate . . . . . . . . . . . . . . . . . . . . . . . 2
Agreement . . . . . . . . . . . . . . . . . . . . . . . 2
Board of Directors. . . . . . . . . . . . . . . . . . . 3
By-Laws . . . . . . . . . . . . . . . . . . . . . . . . 3
Charter . . . . . . . . . . . . . . . . . . . . . . . . 3
Closing Date. . . . . . . . . . . . . . . . . . . . . . 3
Commission. . . . . . . . . . . . . . . . . . . . . . . 3
Common Stock. . . . . . . . . . . . . . . . . . . . . . 3
Exchange Act. . . . . . . . . . . . . . . . . . . . . . 3
First Analysis Stockholders . . . . . . . . . . . . . . 3
First Offer Price and Terms . . . . . . . . . . . . . . 3
GAAP. . . . . . . . . . . . . . . . . . . . . . . . . . 3
Huff. . . . . . . . . . . . . . . . . . . . . . . . . . 4
ING . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Investment Agreement. . . . . . . . . . . . . . . . . . 4
Management Stockholders . . . . . . . . . . . . . . . . 4
Notice of Intention . . . . . . . . . . . . . . . . . . 4
Offered Shares. . . . . . . . . . . . . . . . . . . . . 4
Offerees. . . . . . . . . . . . . . . . . . . . . . . . 4
Permitted Transferee. . . . . . . . . . . . . . . . . . 4
Person. . . . . . . . . . . . . . . . . . . . . . . . . 4
Preferred Stock . . . . . . . . . . . . . . . . . . . . 4
Preferred Stockholders. . . . . . . . . . . . . . . . . 4
Public Offering . . . . . . . . . . . . . . . . . . . . 4
Purchase Agreement. . . . . . . . . . . . . . . . . . . 4
Qualifying Offering . . . . . . . . . . . . . . . . . . 4
Registration Rights Agreement . . . . . . . . . . . . . 4
Securities. . . . . . . . . . . . . . . . . . . . . . . 4
Securities Act. . . . . . . . . . . . . . . . . . . . . 5
Selling Stockholder . . . . . . . . . . . . . . . . . . 5
Selling Stockholders. . . . . . . . . . . . . . . . . . 5
Series A1 Investors . . . . . . . . . . . . . . . . . . 5
Series A1 Preferred Stock . . . . . . . . . . . . . . . 5
Series A1 Stockholders. . . . . . . . . . . . . . . . . 5
Series B Preferred Stock. . . . . . . . . . . . . . . . 5
Series B Stockholders . . . . . . . . . . . . . . . . . 5
Stock . . . . . . . . . . . . . . . . . . . . . . . . . 5
Stockholder . . . . . . . . . . . . . . . . . . . . . . 5
Subsidiary. . . . . . . . . . . . . . . . . . . . . . . 5
Transaction Documents . . . . . . . . . . . . . . . . . 5
Voting Stock. . . . . . . . . . . . . . . . . . . . . . 6
Voting Stockholder. . . . . . . . . . . . . . . . . . . 6
ARTICLE II
Management
2.1. Registration of Common Stock . . . . . . . . . . 6
2.2. No Conflict with Agreement . . . . . . . . . . . 6
ARTICLE III
3.1. [INTENTIONALLY OMITTED]. . . . . . . . . . . . . 6
ARTICLE IV
Transfers of Stock
4.1. Restrictions on Transfer . . . . . . . . . . . . 6
4.2. Exceptions to Restrictions . . . . . . . . . . . 7
4.3. Endorsement of Certificates. . . . . . . . . . . 8
4.4. Improper Transfer. . . . . . . . . . . . . . . . 8
ARTICLE V
Right of First Offer; Tag Along Sales
5.1. Transfers by a Stockholder . . . . . . . . . . . 9
5.2. Transfer of Offered Shares to Third Party. . . . 11
5.3. Purchase of Offered Shares . . . . . . . . . . . 11
5.4. Waiting Period with Respect to Subsequent
Transfers. . . . . . . . . . . . . . . . . . . . 11
5.5. Legally Binding Obligation . . . . . . . . . . . 12
5.6. Right to Join in Sale. . . . . . . . . . . . . . 12
5.7. Take Along . . . . . . . . . . . . . . . . . . . 13
ARTICLE VI
Termination
6.1. Certain Terminations . . . . . . . . . . . . . . 14
ARTICLE VII
Miscellaneous
7.1. Successors and Assigns . . . . . . . . . . . . . 14
7.2. Amendment and Modification; Waiver of
Compliance; Conflicts. . . . . . . . . . . . . . 15
7.3. Notices. . . . . . . . . . . . . . . . . . . . . 16
7.4. Entire Agreement . . . . . . . . . . . . . . . . 16
7.5. Injunctive Relief. . . . . . . . . . . . . . . . 17
7.6. Inspection . . . . . . . . . . . . . . . . . . . 17
7.7. Headings . . . . . . . . . . . . . . . . . . . . 17
7.8. Recapitalizations, Exchanges, Etc.,
Affecting the Common Stock; New Issuances. . . . 17
7.9. Ratification of Prior Acts of Board of
Directors of Company; Right to Negotiate . . . . 17
7.10. LITIGATION . . . . . . . . . . . . . . . . . . . 18
7.11. No Strict Construction . . . . . . . . . . . . . 18
7.12. Counterparts . . . . . . . . . . . . . . . . . . 18
7.13. Termination of Previous Stockholder Agreement. . 18
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT, dated as of June 26, 1995, among
AMERICAN COMMUNICATIONS SERVICES, INC., a Delaware corporation
(the "Company"), the Series A-1 Stockholders (as hereinafter
defined), the Series B Stockholders (as hereinafter defined) and
the Management Stockholders (as hereinafter defined).
W I T N E S S E T H:
WHEREAS, on the date hereof, the Company is authorized by
its Charter (as hereinafter defined) to issue capital stock
consisting of (i) 30,000,000 shares of Common Stock, par value
$0.01 per share ("Common stock"); (ii) 186,664 shares of 9%
Series A-1 Convertible Preferred Stock, par value $1.00 per share
("Series A-1 Preferred Stock"); (iii) 100,000 shares of 9% Series
B-1 Convertible Preferred Stock, par value $1.00 per share
("Series B-1 Preferred Stock"); (iv) 102,500 shares of 9% Series
B-2 Convertible Preferred Stock, par value $1.00 per share
("Series B-2 Preferred Stock"); (v) 25,000 shares of 9% Series B-
3 Convertible Preferred Stock, par value $1.00 per share ("Series
B-3 Preferred Stock"); and (vi) 50,000 shares of 9% Series B-4
Convertible Preferred Stock, par value $1.00 per share ("Series
B-4 Preferred Stock") (the Series B-1 Preferred Stock, Series B-2
Preferred Stock, Series B-3 Preferred Stock, and Series B-4
Preferred Stock being hereinafter sometimes referred to as the
"Series B Preferred Stock") (the Series A-1 Preferred Stock and
the Series B Preferred Stock being hereinafter sometimes referred
to as the "Preferred Stock") (the Common Stock and the Preferred
Stock are sometimes hereinafter collectively referred to as the
"Stock"); and (vii) 535,836 shares of undesignated preferred
stock, par value $1.00 per share; and each of the classes of
Stock has the respective voting powers, designations, preferences
and relative, participating, optional and other special rights
and the qualifications, limitations and restrictions set forth
with respect thereto in such Charter; and
WHEREAS, as of the date hereof and after giving effect to
the transactions contemplated hereby, the Stockholders (as
hereinafter defined) will beneficially own the shares of Stock
and warrants, options, convertible securities or other rights to
acquire shares of Stock as set forth in the Schedule 3.2.7 of the
Purchase Agreement; and
WHEREAS, pursuant to the Series B Preferred Stock and
Warrant Purchase Agreement (the "Purchase Agreement"), of even
date herewith, among the Company and the Series B Stockholders,
the Series B Stockholders are acquiring shares of Series B
Preferred Stock and warrants to purchase common stock; and
WHEREAS, the parties hereto deem it in their best interests
and in the best interests of the Company to provide consistent
and uniform management for the Company and desire to enter into
this Agreement in order to effectuate that purpose and to set
forth their respective rights and obligations in connection with
their investment in the Company; and
WHEREAS, the parties hereto also desire to restrict the
sale, assignment, transfer, encumbrance or other disposition of
the shares of capital stock of the Company, including issued and
outstanding shares of Common Stock and Preferred Stock that may
be issued hereafter, and to provide for certain rights and
obligations in respect thereto as hereinafter provided;
WHEREAS, certain Stockholders are parties to a Letter
Agreement regarding co-sale and first refusal rights, dated
October 17, 1994, among the Company, the Management Stockholders
and the Series A-1 Investors (as hereinafter defined) wish to
terminate such Letter Agreement in favor of this Agreement in
order to induce the Series B Stockholders to consummate the
transaction contemplated by the Purchase Agreement and to fulfil
a condition of Purchase Agreement; and
NOW, THEREFORE, in consideration of the mutual agreements
and understandings set forth herein, the parties hereto hereby
agree as follows:
ARTICLE I
Certain Definitions
As used in this Agreement, the following terms shall have
the following respective meanings:
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 any
Stockholder, the Company; provided, that any Affiliate of a
corporation shall be deemed an Affiliate of such corporation's
stockholders. 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
Voting 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 mean this Agreement as in effect on the date
hereof and as hereafter from time to time amended, modified or
supplemented in accordance with the terms hereof.
Board of Directors shall mean the Board of Directors of the
Company, as duly constituted in accordance with this Agreement,
or any committee thereof duly constituted in accordance with this
Agreement, the By-laws and applicable law and duly authorized to
make the relevant determination or take the relevant action. To
the extent that the Board of Directors is required under this
Agreement to authorize or approve, or make a determination in
respect of a transaction between the Company, on the one hand,
and a Stockholder, and/or a Stockholder's Affiliates, on the
other hand, the Board of Directors shall be deemed to exclude
such Stockholder, any of its Affiliates, and any of the
directors, officers, employees, agents or representatives of such
Stockholder and/or its Affiliates, who are members of the Board
of Directors.
By-Laws shall mean the By-Laws of the Company as amended and
in effect on the date hereof, and as hereafter further amended or
restated in accordance with the terms hereof and pursuant to
applicable law.
Charter shall mean the Certificate of Incorporation of the
Company as in effect on the date hereof, including all
certificates of designations of the Company, and as hereafter
from time to time amended, restated, modified or supplemented in
accordance with the terms hereof and pursuant to applicable law.
Closing Date shall mean the date on which the transactions
contemplated by the Purchase Agreement shall be consummated.
Commission shall mean the Securities and Exchange Commission
and any successor commission or agency having similar powers.
Common Stock shall mean the Common Stock, par value $.01 per
share, of the Company Exchange Act shall mean the Securities
Exchange Act of 1934, as amended, or any similar Federal statute
then in effect, and a reference to a particular section thereof
shall include a reference to the comparable section, if any, of
such similar Federal statute.
First Analysis Stockholders shall mean the Argentum Capital
Partners, L.P., Environmental Private Equity Fund II, L.P., Apex
Investment Fund I, L.P. the Apex Investment Fund II, L.P. and the
Productivity Fund II, L.P.
First Offer Price and Terms shall have the meaning specified
in Section 5.1(a).
GAAP shall mean the generally accepted accounting principles
in the United States of America in effect from time to time,
applied on a consistent basis both as to classification of items
and amounts.
Huff shall mean The Huff Alternative Income Fund, L.P.
ING shall mean ING Equity Partners, L.P. I.
Investment Agreement shall have the meaning specified in
Section 7.2(d).
Management Stockholders shall mean Anthony J. Pompliano, Sr.
and Richard A. Kozak.
Notice of Exercise shall have the meaning specified in
Section 5.1(b).
Notice of Intention shall have the meaning specified in
Section 5.1(a).
Offered Shares shall have the meaning specified in Section
5.1.
Offerees shall have the meaning specified in Section 5.6(b).
Permitted Transferee shall mean, (i) the Company and (ii)
those Persons to whom transfers of Common Stock and Preferred
Stock are permitted to be made by them pursuant to Section 4.2
and Article V hereof.
Person shall mean an individual or a corporation,
association, partnership, joint venture, organization, business,
trust, or any other entity or organization, including a
government or any subdivision or agency thereof.
Preferred Stock shall mean the Series A-1 Preferred Stock
and the Series B Preferred Stock.
Preferred Stockholders shall mean the Series A-1
Stockholders and the Series B Stockholders.
Public Offering shall mean a public offering and sale of
equity securities of the Company pursuant to an effective
registration statement under the Securities Act.
Purchase Agreement shall mean the Series B Preferred Stock
and Warrant Purchase Agreement, of even date herewith, by and
among the Company and the purchasers named therein.
Qualifying Offering shall have the meaning set forth in the
Charter.
Registration Rights Agreement shall have the meaning
specified in Section 5.1(a).
Securities shall mean any Common Stock, Preferred Stock or
other capital stock of the Company.
Securities Act shall mean, as of any date, the Securities
Act of 1933, as amended, or any similar federal statute then in
effect, and in reference to a particular section thereof shall
include a reference to the comparable section, if any, of any
such similar federal statute and the rules and regulations
thereunder.
Selling Stockholder shall have the meaning specified in
Section 5.1(a).
Selling Stockholders shall have the meaning specified in
Section 5.7.
Series A-1 Investors shall mean The Huff Alternative Income
Fund, L.P., the Apex Investment Fund I, L.P., the Apex Investment
Fund II, L.P., the Productivity Fund II, L.P, Ethos Partners
L.P., Zelus International Ltd., Global Opportunity Fund I Ltd.,
William G. Salatich and U.S. Signal Corporation.
Series A-1 Preferred Stock shall mean the 9% Series A-1
Convertible Preferred Stock, par value $1.00 per share, of the
Company.
Series A-1 Stockholders shall mean the Series A-1 Investors,
Brad Peery Capital L.P., Brad Peery Capital International, and
Prime Management II, L.P.
Series B Preferred Stock shall mean the 9% Series B
Convertible Preferred Stock, par value $1.00 per share, of the
Company.
Series B Stockholders shall mean the Purchasers, as defined
in the Purchase Agreement.
Stock shall mean the Common Stock and the Preferred Stock.
Stockholder shall mean any of the Series A-1 Stockholders,
the Series B Stockholders and the Management Stockholders, and
any Permitted Transferee of any such Person who becomes a party
to or bound by the provisions of this Agreement in accordance
with the terms hereof.
Subsidiary shall mean as to any Person a corporation of
which outstanding shares of stock having ordinary voting power
(other than stock having such power only by reason of the
happening of a contingency) to elect a majority of the Board of
Directors of such corporation are at the time owned, directly or
indirectly through one or more intermediaries, or both, by such
Person.
Transaction Documents shall mean this Agreement, the
Purchase Agreement, the Registration Rights Agreement, the
Charter, the By-Laws, each of the agreements that are exhibits
hereto and thereto, and all agreements, instruments and documents
contemplated thereby.
Voting Stock shall mean capital stock of the Company of any
class or classes, the holders of which are ordinarily, in the
absence of contingencies, entitled to vote for the election of
corporate directors (or Persons performing similar functions),
including without limitation, the Common Stock and the Preferred
Stock.
Voting Stockholder shall mean a Stockholder who holds Voting
Stock or retains, by proxy or otherwise, the power to vote Voting
Stock.
ARTICLE II
Management
Section 2.1. Registration of Common Stock. In
contemplation of a Public Offering of the Company's Common Stock,
each Voting Stockholder shall, at a meeting convened for the
purpose of amending the Charter, vote to increase the number of
authorized shares of Common Stock and, if necessary, increase the
number of issued and outstanding shares of Common Stock, whether
by stock split, stock dividend or otherwise, or change in its par
value, as recommended by a majority of the members of the Board
of Directors in order to facilitate such Public Offering.
Section 2.2. No Conflict with Agreement. Each Voting
Stockholder shall vote his shares of Voting Stock, and shall take
all actions necessary, to ensure that the Charter and By-Laws do
not, at any time, conflict with the provisions of this Agreement.
ARTICLE III
Section 3.1. [INTENTIONALLY OMITTED]
ARTICLE VI
Transfers of Stock
Section 4.1. Restrictions on Transfer. Each Stockholder
agrees that such Stockholder will not, directly or indirectly,
offer, sell, transfer, assign or otherwise dispose of (or make
any exchange, gift, assignment or pledge of) (collectively, for
purposes of Articles IV and V hereof only, a "transfer") any
Stock except (a) as provided in Section 4.2; (b) in accordance
with Article V; and (c) a conversion of Preferred Stock into
Common Stock pursuant to the Charter. In addition to the other
restrictions noted in this Article IV, each Stockholder agrees
that it will not, directly or indirectly, transfer any of its
Stock except as permitted under the Securities Act and other
applicable securities laws.
Section 4.2. Exceptions to Restrictions. The provisions of
Section 4.1 and Article V shall not apply to any of the following
transfers:
(a) From any Stockholder that is a natural person to
(i) such Stockholder's spouse or children or (ii) to any
trust solely for such Stockholder's benefit or the benefit
of such Stockholder's spouse or children; provided, that, in
each case referred to above, such Stockholder acts as
trustee and retains the sole power to direct the voting and
disposition of such Securities; and provided, further that
each such Person including any such trust (each a "Permitted
Transferee") shall execute a counterpart of and become a
party to this Agreement and shall agree in a writing in form
and substance satisfactory to the Company to be bound and
becomes bound by the terms of this Agreement as a
Stockholder.
(b) From any Stockholder to any Affiliate of the
Company, or pursuant to a merger or consolidation involving
the Company or a sale of all or substantially all of the
outstanding shares of Common Stock.
(c) Pursuant to a Public Offering or an open market
sale following a Public Offering in accordance with Rule 144
of the Commission.
(d) Pursuant to an offer from any Person to purchase
securities of the Company from any and all Stockholders;
provided, that, such offer is made on the same terms and
conditions and is open on a pro rata basis to all
stockholders.
(e) From any Stockholder to an Affiliate of such
Stockholder.
(f) From any Stockholder to another Stockholder.
(g) With respect to Section 5.6 only, from ING, Huff,
the First Analysis Stockholders or their respective
Affiliates; provided, it is agreed by all of the parties
hereto, that all provisions of Section 4.1 and Article V
shall apply to any transfer from ING, Huff, the First
Analysis Stockholders or their respective Affiliates, and
that this Section 4.2(g) shall exempt transfers from ING,
Huff, the First Analysis Stockholders or their respective
Affiliates from Section 5.6 only and not from any other
Section or Article of this Agreement.
Section 4.3. Endorsement of Certificates.
(a) Upon the execution of this Agreement, in addition
to any other legend which the Company may deem advisable
under the Securities Act and certain state securities laws,
all certificates representing shares of issued and
outstanding Common Stock and Preferred Stock shall be
endorsed at all times prior to a Qualifying Offering as
follows:
THIS CERTIFICATE IS SUBJECT TO, AND IS
TRANSFERABLE ONLY UPON COMPLIANCE WITH, THE PROVISIONS
OF A STOCKHOLDERS AGREEMENT, DATED JUNE 26, 1995, AMONG
THE COMPANY AND CERTAIN OF ITS STOCKHOLDERS. A COPY OF
THE ABOVE REFERENCED AGREEMENTS ARE ON FILE AT THE
OFFICE OF THE COMPANY AT 131 NATIONAL BUSINESS PARKWAY,
SUITE 100, ANNAPOLIS JUNCTION, MD 20701 AND WILL BE
PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE UPON
REQUEST.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AND MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT, OR AN EXEMPTION FROM
REGISTRATION, UNDER SAID ACT.
(b) Except as otherwise expressly provided in this
Agreement, all certificates representing shares of Stock
hereafter issued to or acquired by any of the Stockholders
or their successors hereto (including, without limitation,
all certificates representing shares of Common Stock
hereafter issued upon conversion of shares of Preferred
Stock) shall bear the legends set forth above, and the
shares of Stock represented by such certificates shall be
subject to the applicable provisions of this Agreement. The
obligations of each party hereto shall be binding upon each
transferee to whom Stock is transferred by any party hereto,
whether or not such transfer is permitted under the terms of
this Agreement, except for transfers described in 4.2(c).
Prior to consummation of any transfer, except for transfers
described in 4.2(c), such party shall cause the transferee
to execute an agreement in form and substance reasonably
satisfactory to the other parties hereto, providing that
such transferee shall full comply with the terms of this
Agreement. Prompt notice shall be given to the Company and
each Stockholder by the transferor of any transfer (whether
or not to a Permitted Transferee) of any Stock.
Section 4.4. Improper Transfer. Any attempt to transfer or
encumber any shares of Stock not in accordance with this
Agreement shall be null and void and neither the Company nor any
transfer agent of such securities shall give any effect to such
attempted transfer to encumbrance in its stock records.
ARTICLE V
Right of First Offer;
Tag Along Sales
Section 5.1. Transfers by a Stockholder.
(a) Except for sales of securities contemplated by the
Registration Rights Agreement, dated the date hereof, among the
Company, the Series B Stockholders and the other parties named
therein (the "Registration Rights Agreement"), transfers
permitted by Sections 4.1 and 4.2 and transactions subject to
Section 5.7, if at any time any Stockholder shall desire to sell
any Stock owned by him or it (such Stockholder desiring to sell
shares of such Stock being referred to herein as a "Selling
Stockholder"), then such Selling Stockholder shall deliver
written notice of its desire to sell such Stock (a "Notice of
Intention"), accompanied by a copy of a proposal relating to such
sale (the "Sale Proposal"), to each of the other Stockholders and
to the Company, setting forth such Selling Stockholder's desire
to make such sale, the number and class of shares of Stock
proposed to be transferred (the "Offered Securities") and the
price at which and terms on which such Selling Stockholder
proposes to sell the Offered Securities (the "First Offer Price
and Terms") and other terms applicable thereto.
(b) Upon receipt of the Notice of Intention, the Company
and the other Stockholders shall then have the right to purchase
the First Offer Price and Terms and on the other terms specified
in the Sale Proposal all or, subject to Section 5.1(d), any
portion of the Offered Securities in the following order of
priority: (i) if the Selling Stockholder is a Management
Stockholder, the other Management Stockholders shall have the
first right to purchase the Offered Securities pro rata among
those Management Stockholders so electing on the basis of the
respective number of shares of Common Stock owned or held as
trustee by such Management Stockholders (or in such other
proportions as such Management Stockholders may agree), and
thereafter, the Preferred Stockholders shall have the right to
purchase the Offered Securities pro rata among the Preferred
Stockholders so electing to purchase on the basis of the
respective numbers of shares of Stock (with Preferred Stock
considered on an as if converted basis) owned by such Preferred
Stockholders (or in such other proportion as such Preferred
Stockholders may agree), and thereafter, the Company shall have
the right to purchase the Offered Securities; (ii) if the Selling
Stockholder is a Series A-1 Stockholder, the other Series A-1
Stockholders shall have the first right to purchase the Offered
Securities pro rata among those of the Series A-1 Stockholders so
electing on the basis of the respective numbers of shares of
Stock (with Preferred Stock considered on an as if converted
basis) owned by such Series A-1 Stockholders (or in such other
proportion as such Series A-1 Stockholders may agree), and
thereafter, the Series B Stockholders shall have the right to
purchase the Offered Securities pro rata among the Series B
Stockholders so electing to purchase on the basis of the
respective numbers of shares of Stock (with Preferred Stock
considered on an as if converted basis) owned by such Series B
Stockholders (or in such other proportion as such Series B
Stockholders may agree), and thereafter the Company shall have
the right to purchase the Offered Securities; and (iii) if the
Selling Stockholder is a Series B Stockholder, the other Series B
Stockholders shall have the first right to purchase the Offered
Securities pro rata among those of the Series B Stockholders so
electing on the basis of the respective numbers of shares of
Stock (with Preferred Stock considered on an as if converted
basis) owned by such Series B Stockholders (or in such other
proportion as such Series B Stockholders may agree), and
thereafter, the Series A-1 Stockholders shall have the right to
purchase the Offered Securities pro rata among the Series A-1
Stockholders so electing to purchase on the basis of the
respective numbers of shares of Stock (with Preferred Stock
considered on an as if converted basis) owned by such Series A-1
Stockholders (or in such other proportion as such Series A-1
Stockholders may agree), and thereafter, the Company shall have
the right to purchase the Offered Securities. The rights of the
Stockholders and the Company pursuant to this Section 5.1(b)
shall be exercisable by the delivery of notice to the Selling
Stockholder (the "Notice of Exercise"), within 30 calendar days
from the date of delivery of the Notice of Intention. The Notice
of Exercise shall state the total number of shares of the Offered
Securities such Stockholder (or the Company) is willing to
purchase without regard to whether or not other Stockholders
purchase any shares of the Offered Securities. A copy of such
Notice of Exercise shall also be delivered by each Stockholder to
the Company and each other Stockholder. The rights of the
Stockholders and the Company pursuant to this Section 5.1(b)
shall terminate if unexercised 30 calendar days after the date of
delivery of the Notice of Intention.
(c) In the event that the Stockholders or the Company
exercise their rights to purchase any or all of the Offered
Securities in accordance with Section 5.1(b), then the Selling
Stockholder must sell the Offered Securities to such Stockholders
(or, as the case may be, the Company within 30 calendar days from
the date of delivery of the Notice of Exercise received by the
Selling Stockholder.
(d) Notwithstanding the foregoing provisions of this
Section 5.1, unless the Selling Stockholder shall have consented
to the purchase of less than all of the Offered Securities, no
Stockholder or Stockholders nor the Company may purchase any
Offered Securities hereunder unless all of the Offered Securities
are to be so purchased.
(e) For purposes of this Article V, any Person who has
failed to give notice of the election of any option hereunder
within the specified time period will be deemed to have waived
its rights on the day after the last day of such period.
(f) Each Stockholder in its capacity only as a stockholder
agrees and acknowledges that the Company may purchase or acquire
Common Stock pursuant to Section 5.1(b) hereof, and approves such
purchases and acquisitions, and waives any objection or claim
relating thereto, whether against the Company, the Board of
Directors or otherwise.
Section 5.2. Transfer of Offered Shares to Third Party. If
all notices required to be given pursuant to Section 5.1 have
been duly given and the Stockholders and the Company do not
exercise their respective options to purchase all of the Offered
Securities at the First Offer Price and Terms and the Selling
Stockholder does not desire to sell less than all the Offered
Securities or if with the consent of the Selling Stockholder, the
other Stockholders and the Company purchase less than all of the
Offered Securities pursuant to the provisions hereof, then in
either such event the Selling Stockholder shall have the right,
subject to compliance by the Selling Stockholder with the
provisions to Section 4.3(b) hereof, for a period of 180 calendar
days from the earlier of (i) the expiration of the option period
pursuant to Section 5.1 with respect to such Sale Proposal or
(ii) the date on which such Selling Stockholder receives notice
from the other Stockholders and the Company that they will not
exercise in whole or in part the options granted pursuant to
Section 5.1, to enter into an agreement to sell, or to sell, to
any third party which is not an Affiliate of, or related to, the
Selling Stockholder the Offered Securities remaining unsold at a
price of not less than 90% of the First Offer Price and Terms,
and on the other terms no less favorable (taken as a whole) to
the purchaser than those specified in the Sale Proposal.
Section 5.3. Purchase of Offered Shares. The consummation
of any purchase and sale pursuant to Section 5.1 shall take place
on such date, not later than 30 calendar days after the
expiration of the option period pursuant to Section 5.1 with
respect to such option, as the Selling Stockholder shall select.
Prior to the consummation of any sale pursuant to Section 5.1,
the Selling Stockholder shall comply with Section 4.3(b) hereof.
Upon the consummation of any such purchase and sale, the Selling
Stockholder shall deliver certificates evidencing the Offered
Securities sold duly endorsed, or accompanied by written
instruments of transfer in form satisfactory to the purchaser
duly executed by the Selling Stockholder free and clear of any
liens, against delivery of the First Offer Price and Terms,
payable in the manner specified in Section 5.1(a).
Section 5.4. Waiting Period with Respect to Subsequent
Transfers. In the event that the Stockholders and the Company do
not exercise their options to purchase all of the Offered
Securities, and the Selling Stockholder shall not have sold the
remaining Offered Securities to a third party for any reason
before the expiration, as applicable, of the 180-day period
described in Section 5.2, then such Selling Stockholder shall not
give another Notice of Intention pursuant to Section 5.1 for a
period of 90 calendar days after the last day of such 180-day
period.
Section 5.5. Legally Binding Obligation. Subject to
Section 5.1(a), making a written offer, giving or failing to give
written notice within the stated period, accepting an offer or
making a decision or election, in each case as provided in
Section 5.1 or 5.2, shall create a legally binding obligation to
buy or sell, or a legally binding obligation to refrain from
buying or selling, or a legally binding waiver of the right to
buy or sell, as the case may be, the subject Common Stock as
provided in such Section 5.1 or 5.2.
Section 5.6. Right to Join in Sale.
(a) Anything in this Agreement to the contrary
notwithstanding, if any Stockholder or group of Stockholders
proposes, other than transfers to a Permitted Transferee pursuant
to Section 4.2 (except for Section 4.2(b)), transactions subject
to Section 5.7 and transfers by any of ING, Huff, the First
Analysis Stockholders or their respective Affiliates or Permitted
Transferees, to sell, dispose of or otherwise transfer any Stock
(each a "Disposing Stockholder"), such person or group shall
refrain from effecting such transaction unless, prior to the
consummation thereof, each other Stockholder shall have been
afforded the opportunity to join in such sale of Common Stock on
a pro rata basis, as hereinafter provided.
(b) Prior to consummation of any proposed sale, disposition
or transfer of shares of Stock described in Section 5.6(a), the
Disposing Stockholder shall cause the person or group that
proposes to acquire such shares (the "Proposed Purchaser") to
offer (the "Purchase Offer") in writing to each other Stockholder
(collectively, the "Offerees") to purchase shares of Stock owned
by such Stockholder (regardless of whether the shares of Stock
proposed to be sold by the Disposing Stockholders are the same
class as the shares of Stock owned by such Stockholders), such
that the number of shares of such Stock so offered to be
purchased from such Stockholder shall be equal to the product
obtained by multiplying the total number of shares of such Stock
then owned by such Stockholder by a fraction, the numerator of
which is the aggregate number of shares of Stock proposed to be
purchased by the Proposed Purchaser from all Stockholders
(including the Disposing Stockholder or Stockholders) and the
denominator of which is the aggregate number of shares of Stock
then owned by all of the Offerees and the Disposing Stockholder,
in all cases considering Preferred Stock on an as if converted
basis. Such purchase shall be made at the highest price per
share and on such other terms and conditions as the Proposed
Purchaser has offered to purchase shares of Stock to be sold by
the Disposing Stockholder or Stockholders, in all cases
considering Preferred Stock on an as if converted basis. Each
Stockholder shall have 20 calendar days from the date of receipt
of the Purchase Offer in which to accept such Purchase Offer, and
the closing of such purchase shall occur within 30 calendar days
after such acceptance or at such other time as such Stockholder
and the Proposed Purchaser may agree. The number of shares of
Stock to be sold to the Proposed Purchaser by the Disposing
Stockholder or Stockholders shall be reduced by the aggregate
number of shares of Stock purchased by the Proposed Purchaser
from the other Stockholders pursuant to the acceptance by them of
Purchase Offers in accordance with the provisions of this Section
5.6(b), considering Preferred Stock on an as if converted basis.
In the event that a sale or other transfer subject to this
Section 5.6 is to be made to a Proposed Purchaser who is not a
Stockholder, the Disposing Stockholder shall notify the Proposed
Purchaser that the sale or other transfer is subject to this
Section 5.6 and shall ensure that no sale or other transfer is
consummated without the Proposed Purchaser first complying with
this Section 5.6. It shall be the responsibility of each
Disposing Stockholder to determine whether any transaction to
which it is a party is subject to this Section 5.6.
Section 5.7. Take Along. If at any time holders of at
least two-thirds of the Series B Preferred Stock and holders of
at least two-thirds of Series A-1 Preferred Stock (such Series
A-1 Stockholders and Series B Stockholders being referred to in
this Section 5.7 as the "Selling Stockholders") shall determine
to sell or exchange (in a business combination or otherwise) two-
thirds or more of their aggregate shares of Stock (considering
Preferred Stock on an as if converted basis) in a bona fide
arm's-length transaction to a third party in which the same price
per share shall be payable in respect of all shares of any class
of the Stock (considering Preferred Stock on an as if converted
basis), then, upon the written request of such Selling
Stockholders, each other Stockholder shall be obligated to, and
shall, if so requested by such third party, (a) sell, transfer
and deliver or cause to be sold, transferred and delivered to
such third party, all shares of Stock owned by them at the same
price per share and on the same terms as are applicable to the
Selling Stockholders (considering Preferred Stock on an as if
converted basis), and (b) if stockholder approval of the
transaction is required, vote his, her or its shares of Voting
Stock in favor thereof. The provisions of Sections 5.1 through
5.4, inclusive, and Section 5.6 shall not apply to any
transactions to which this Section 5.7 applies.
ARTICLE VI
Termination
Section 6.1. Certain Terminations.
(a) The provisions of Articles II, III, IV and V shall
terminate on the date on which any of the following events first
occurs: (i) a Qualifying Offering, (ii) a merger or
consolidation of the Company with or into another Person that is
being not an Affiliate of the Company, as a result of which the
Stockholders own less than 51% of the outstanding shares of
Voting Stock of the surviving or resulting corporation, or (iii)
ten years from the date of this Agreement; provided that the
provisions of Section 2.2 shall not terminate until all
accumulated or declared dividends with respect to all of the
Preferred Stock are paid in full and all amounts under any notes
issued pursuant to the terms of the Charter are paid in full.
(b) Notwithstanding the foregoing, this Agreement shall in
any event terminate with respect to any Stockholder when such
Stockholder no longer owns any Stock or warrants or options to
acquire Stock and no longer is due dividends with respect to
Preferred Stock or amounts under any notes issued pursuant to the
terms of the Charter, and shall terminate with respect to all
Stockholders upon the written consent of Huff and ING.
ARTICLE VII
Miscellaneous
Section 7.1. Successors and Assigns. Except as otherwise
provided herein, all of the terms and provisions of this
Agreement shall be binding upon, inure to the benefit of and
shall be enforceable by the respective successors and assigns of
the parties hereto. No Stockholder may assign any of its rights
hereunder to any Person other than a transferee that has complied
with the requirements of Sections 4.2 and 5.3 (if applicable) as
provided therein in all respects. The Company may not assign any
of its rights hereunder to any Person other than its rights
hereunder to any Person other than an Affiliate of the Company.
If any transferee of any Stockholder shall acquire any
Securities, in any manner, whether by operation of law or
otherwise, such shares shall be held subject to all of the terms
of this Agreement, and by taking and holding such shares such
Person shall be entitled to receive the benefits of and be
conclusively deemed to have agreed to be bound by and to comply
with all of the terms and provisions of this Agreement.
Section 6.2. Amendment and Modification; Waiver of
Compliance; Conflicts.
(a) This Agreement may be amended only by a written
instrument duly executed by (i) the holders of a majority of the
shares of the Series A-1 Preferred Stock, (ii) the holders of a
majority of the shares of the Series B Preferred Stock, and (iii)
to the extent that such proposed amendment would materially and
adversely affect the rights of the Management Stockholders under
this Agreement as a group, the holders of a majority of the
shares of Voting Stock owned by the Management Stockholders (it
being understood that any change requested by the managing
underwriter in a public offering would not be deemed to
materially and adversely affect the rights of the Management
Stockholders). In the event of the amendment or modification of
this Agreement in accordance with its terms, the Stockholders
shall cause the Board of Directors of the Company to meet within
30 calendar days following such amendment or modification or as
soon thereafter as is practicable for the purpose of adopting any
amendment to the Charter and By-Laws of the Company that may be
required as a result of such amendment or modification to this
Agreement, and, if required, proposing such amendments to the
Stockholders entitled to vote thereon, and the Stockholders agree
to vote in favor of such amendments.
(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.
(c) In addition to the provisions of Section 7.2(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 (i) the holders of a majority of the
shares of the Series A-1 Preferred Stock and (ii) the holders of
a majority of the shares of the Series B 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.
(d) Notwithstanding the foregoing or 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 Charter, 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 shares of Preferred Stock held by each such party
(including securities issued upon conversion or exchange thereof)
for new securities containing substantially the same terms as
such shares of Preferred Stock and by amending this Agreement as
required for such creation and issuance (as long as such
amendment affects all parties, other than the Company,
similarly).
Section 7.3. Notices. Any notice, request, claim, demand,
document and other communication hereunder to any party shall be
effective upon receipt (or refusal of receipt) and shall be in
writing and delivered personally or sent by telex or telecopy
(with such telex or telecopy confirmed promptly in writing sent
by first class mail), or first class mail, or other similar means
of communication, as follows:
(i) If to ING, addressed to ING Equity Partners, L.P.,
135 East 57th Street, 9th Floor, New York, New York 10022,
Attention: Olivier L. Trouveroy;
(ii) If to the Company, addressed to American
Communications Services, Inc., 131 National Business
Parkway, Suite 100, Annapolis Junction, MD 20701, Attention:
Richard A. Kozak; or
(iii) If to a Stockholder other than ING, to the address
of such Stockholder set forth in the stock records of the
Company;
or, in each case, to such other address or telex or telecopy
number as such party may designate in writing to each Stockholder
and the Company by written notice given in the manner specified
herein.
All such communications shall be deemed to have been given,
delivered or made when so delivered by hand or sent by telex
(answer back received) or telecopy, or five business days after
being so mailed.
Section 7.4. Entire Agreement. This Agreement contains the
entire agreement among the parties hereto with respect to its
subject matter and supersedes all prior oral and written
agreements and memoranda and undertakings among the parties
hereto with regard to such subject matter. The Company
represents to the Stockholders that the rights granted to the
holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted or obligations accepted
under any other agreement (including the Charter) to which the
Company is a party.
Section 7.5. Injunctive Relief. The Stockholders
acknowledge and agree that a violation of any of the terms of
this Agreement will cause the Stockholders irreparable injury for
which an adequate remedy at law is not available. Therefore, the
Stockholders agree that each Stockholder shall be entitled to an
injunction, restraining order or other equitable relief from any
court of competent jurisdiction, restraining any Stockholder from
committing any violations of the provisions of this Agreement.
Section 7.6. Inspection. For so long as this Agreement
shall be in effect, this Agreement shall be made available for
inspection by any Stockholder at the principal executive offices
of the Company.
Section 7.7. Headings. The section and paragraph headings
contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this
Agreement.
Section 7.8. Recapitalizations, Exchanges, Etc., Affecting
the Common Stock; New Issuances. The provisions of this
Agreement shall apply, to the full extent set forth herein with
respect to the Common Stock and the Preferred Stock and to any
and all equity or debt securities of the Company or any successor
or assign of the Company (whether by merger, consolidation, sale
of assets, or otherwise) which may be issued in respect of, in
exchange for, or in substitution of, such equity or debt
securities and shall be appropriately adjusted for any stock
dividends, splits, reverse splits, combinations,
reclassifications, recapitalizations, reorganizations and the
like occurring after the date hereof.
Section 7.9. Ratification of Prior Acts of Board of
Directors of Company; Right to Negotiate. Each of the
Stockholders hereby adopts, ratifies and confirms all of the
actions heretofore taken by the Board of Directors in all
respects, including, without limitation, in respect of the
Purchase Agreement and the transactions contemplated thereby.
Nothing in this Agreement (apart from Article V hereof) shall be
deemed to restrict or prohibit the Company from purchasing Stock
from any Stockholder at any time upon such terms and conditions
and at such price as may be mutually agreed upon between the
Company and such Stockholder, whether or not at the time of such
purchase, circumstances exist which specifically grant the
Company the right to purchase, or such Stockholder the right to
sell, Stock pursuant to the terms of this Agreement.
Section 7.10. LITIGATION. THIS AGREEMENT SHALL BE GOVERNED
BY, CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK. EACH OF THE PARTIES HERETO
ACKNOWLEDGES AND AGREES THAT IN THE EVENT OF ANY BREACH OF THIS
AGREEMENT, THE NON-BREACHING PARTY WOULD BE IRREPARABLY AND COULD
NOT BE MADE WHOLE BY MONETARY DAMAGES, AND THAT, IN ADDITION TO
ANY OTHER REMEDY TO WHICH THEY MAY BE ENTITLED AT LAW OR IN
EQUITY, THE PARTIES SHALL BE ENTITLED TO SUCH EQUITABLE OR
INJUNCTIVE RELIEF AS MAY BE APPROPRIATE. EACH PARTY AGREES THAT
JURISDICTION AND VENUE WILL BE PROPER IN THE SOUTHERN DISTRICT OF
NEW YORK AND WAIVES ANY OBJECTIONS BASED UPON FORUM NON
CONVENIENS. EACH PARTY WAIVES PERSONAL SERVICE OF PROCESS AND
AGREES THAT A SUMMONS AND COMPLAINT COMMENCING AN ACTION OR
PROCEEDING SHALL BE PROPERLY SERVED AND SHALL CONFER PERSONAL
JURISDICTION IF SERVED BY REGISTERED OR CERTIFIED MAIL TO THE
PARTY AT THE ADDRESS SET FORTH IN THIS AGREEMENT, OR AS OTHERWISE
PROVIDED BY THE LAWS OF THE STATE OF NEW YORK OR THE UNITED
STATES. THE CHOICE OF FORUM SET FORTH IN THIS SECTION 7.10 SHALL
NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT
OBTAINED IN ANY OTHER FORUM OR THE TAKING OF ANY ACTION UNDER
THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE
JURISDICTION.
Section 7.11. No Strict Construction. The language used in
this Agreement will be deemed to be the language chosen by the
parties hereto to express their mutual intent, and no rule of
strict construction will be applied against any person.
Section 7.12. 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 7.13. Termination of Previous Stockholder
Agreement. Each of the Series A-1 Investors, the Management
Stockholders and the Company acknowledges and accepts that the
Letter Agreement regarding co-sale and first refusal rights,
dated October 17, 1994, among the Company, the Management
Stockholders and the Series A-1 Stockholders is hereby terminated
and shall cease to be of any force or effect.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be duly executed as of the date first above
written.
AMERICAN COMMUNICATIONS SERVICES, INC.
By: /s/ Richard A. Kozak
Richard A. Kozak - President & COO
STOCKHOLDERS:
ING EQUITY PARTNERS, L.P.I.
By: LEXINGTON PARTNERS, L.P.
its general partner
By: LEXINGTON PARTNERS, INC.
its general partner
By: /s/ Olivier L. Trouveroy
Name: Olivier L. Trouveroy
Title: Managing Director
THE HUFF ALTERNATIVE INCOME FUND, L.P.
By: WRH PARTNERS, L.L.C.
general manager
By: PALADIN COURT CO., INC.
general manager
By: *____________________________
William R. Huff
President
*/s/ Joseph R. Thornton
Joseph R. Thornton
Attorney in Fact
APEX INVESTMENT FUND I, L.P.
By: APEX MANAGEMENT PARTNERSHIP, L.P.,
general partner
By: /s/George M. Middlemas
Name: George M. Middlemas
Title: General Partner
APEX INVESTMENT FUND II, L.P.
By: APEX MANAGEMENT PARTNERSHIP, L.P.,
general partner
By: /s/ George M. Middlemas
Name: George M. Middlemas
Title: General Partner
THE PRODUCTIVITY FUND II, L.P.
By: FIRST ANALYSIS MANAGEMENT
COMPANY II, general partner
By: FIRST ANALYSIS CORPORATION,
general partner
By: /s/ Steve F. Bouck
Name: Steve F. Bouck
Title: Executive Vice
President
________________________
Anthony J. Pompliano, Sr.
________________________
Richard A. Kozak
STOCKHOLDERS AGREEMENT
APEX INVESTMENT FUND I, L.P.
By: APEX MANAGEMENT PARTNERSHIP,
L.P.,
general partner
By: First Analysis Corporation
general partner
By:
Name:
Title:
APEX INVESTMENT FUND II, L.P.
By: APEX MANAGEMENT PARTNERSHIP,
L.P., general partner
By: First Analysis Corporation
general partner
By:
Name:
Title:
THE PRODUCTIVITY FUND II, L.P.
By: FIRST ANALYSIS MANAGEMENT
COMPANY II, general partner
By: FIRST ANALYSIS CORPORATION,
general partner
By:
Name:
Title:
ARGENTUM CAPITAL PARTNERS, L.P.
By: BR Associates, Inc.,
general partner
By: /s/ Daniel Raynor
Name: Daniel Raynor
Title: Chairman
ETHOS PARTNERS, L.P.
By: ____________________________
Name:
Title:
ZELUS INTERNATIONAL LTD.
By: ___________________________
Name:
Title:
GLOBAL OPPORTUNITY FUND I LTD.
By: ___________________________
Name:
Title:
/s/ William G. Salatich
William G. Salatich
U.S. SIGNAL CORPORATION
By: ____________________________
Name:
Title:
ETHOS PARTNERS, L.P.
By: ______________________________
Name:
Title:
ZELUS INTERNATIONAL LTD.
By: _________________________
Name:
Title:
GLOBAL OPPORTUNITY FUND I LTD.
By: _____________________________
Name:
Title:
_____________________________________
William G. Salatich
U.S. SIGNAL CORPORATION
By: /s/ Richard Postma
Name: Richard Postma
Title: Ass't Secretary
STOCKHOLDERS AGREEMENT
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. Oliver Nicklin, Jr.
Name: F. Oliver Nicklin, Jr.
Title: President
__________________________
Anthony J. Pompliano, Sr.
__________________________
Richard A. Kozak
ETHOS PARTNERS, L.P.
By: ______________________________
Name:
Title:
ZELUS INTERNATIONAL LTD.
By: __________________________
Name:
BRAD PEERY CAPITAL, L.P.
By: /s/ Brad Peery
general partner
By: /s/ Brad Peery Capital Inc.
Name: Brad Peery Capital Inc.
Title: General Partner
BRAD PEERY CAPITAL INTERNATIONAL
By: /s/ Brad Peery
Name: Brad Peery
Title: Investment Advisor
PRIME MANAGEMENT II, L.P.
By: _____________________
general partner
By:
Name:
Title:
BRAD PEERY CAPITAL, L.P.
By: _______________________
general partner
By: __________________________
Name:
Title:
BRAD PERRY CAPITAL INTERNATIONAL
By: _________________________
Name:
Title:
PRIME MANAGEMENT II, L.P.
By: /s/ William P. Glasgow
general partner
By:
Name: William Glasgow
Title: Senior Vice-President
BRAD PEERY CAPITAL, L.P.
By: ________________________
general partner
By: _________________________
Name: Brad Peery Capital Inc.
Title: General Partner
BRAD PERRY CAPITAL INTERNATIONAL
By: ______________________________
Name: Brad Peery
Title: Investment Advisor
PRIME MANAGEMENT II, L.P.
By: ___________________________
general partner
By:
Name:
Title:
/s/ Ricahrd I. Tyner
Richard T. Tyner
STOCKHOLDERS AGREEMENT
DELAWARE CHARTER GUARANTEE & TRUST CO.
CUSTODIAN FOR MARK B. CHASIN IRA:
/s/ Mark B. Chasin, Self Directed Plan
Mark B. Chasin
Self-Directed Plan
STOCKHOLDERS AGREEMENT
ZACHARY GREEN UNYGTMA:
By: Alan Green,
Custodian
/s/ Alan Green
Alan Green
STOCKHOLDERS AGREEMENT
GABRIELLE GREEN UNYGTMA:
By: Alan Green,
Custodian
/s/ Alan Green
Alan Green
STOCKHOLDERS AGREEMENT
/s/ Alan Green
Alan Green
STOCKHOLDERS AGREEMENT
/s/ Christpoher Green
Christopher Green
STOCKHOLDERS AGREEMENT
/s/ Jennifer Green
Jennifer Green
STOCKHOLDERS AGREEMENT
/s/ Barry Yampol
Barry Yampol
STOCKHOLDERS AGREEMENT
/s/William R. Huff
William R. Huff
STOCKHOLDERS AGREEMENT
/s/ Cathy Markey Huff
Cathy Markey Ruff
STOCKHOLDERS AGREEMENT
/s/ Christopher L. Rafferty
Christopher L. Rafferty
EXHIBIT F
GOVERNANCE AGREEMENT
THIS GOVERNANCE AGREEMENT (this "Agreement"), dated as of
November 8, 1995, by and among American Communications Services,
Inc., a Delaware corporation (the "Company"), and certain holders
of the outstanding shares of 9% Series A-1 Convertible Preferred
Stock, $100 par value (the "Series A-1 Preferred Stock"), 9%
Series B-1 Convertible Preferred Stock, $1.00 par value, 9%
Series B-2 Convertible Preferred Stock, $1.00 par value and 9%
Series B-3 Convertible Preferred Stock, $1.00 par value
(collectively, the "Series B Preferred Stock" and together with
the Series A-1 Preferred Stock, the "Preferred Stock") of the
Company set forth in Schedule I hereto (collectively the "Voting
Shareholders").
R E C I T A L S
WHEREAS, the Company's Certificate of Designations of
the Board of Directors relating to the Series A-1 Preferred Stock
and the Series B Preferred Stock filed with the Secretary of
State of the State of Delaware on June 26, 1995 (the "Current
Certificate of Designations") contains provisions relating to the
size, composition, election and powers of the Board of Directors
of the Company (the "Board") and certain separate class voting
rights for the holders of the Series A-1 Preferred Stock and
Series B Preferred Stock (the "Preferred Veto Rights");
WHEREAS, The Nasdaq SmallCap Market ("NASDAQ") has
required that the foregoing provisions in the Current Certificate
be amended and restated in the manner set forth in Exhibit A (the
"Certificate of Designations Amendments") as a condition to the
Company's continued listing on NASDAQ; and
WHEREAS, the Voting Shareholders deem it to be in their
best interests and the best interests of the Company for the
Company's listing on NASDAQ to be maintained; and
WHEREAS, the Voting Shareholders deem it to be in their
best interests and the best interests of the Company to use all
reasonable efforts to cause the composition and election of the
Board and the Preferred Veto Rights to be consistent with the
Certificate of Designations Amendments until such time as such
amendments are approved by the stockholders of the Company,
notwithstanding any contrary provisions in the Current
Certificate of Designations; and
WHEREAS, pursuant to the Certificate of Designations of
the Board of Directors relating to the 9% Series A Convertible
Preferred Stock (the "Series A Certificate") which was filed with
the Secretary of State of the State of Delaware on October 19,
1994 it is deemed that a Triggering Event (as such term was
defined in the Series A Certificate) would have occurred on or
prior to June 26, 1995, the date a Certificate of Elimination
relating to the Series A Certificate was filed with the Secretary
of State of the State of Delaware; and
WHEREAS, pursuant to the Series A Certificate the
occurrence of a Triggering Event would have caused an increase in
the size of the Board of Directors from seven directors to 11
directors and result in the composition of the Board changing
from four directors elected by the holders of the Common Stock
and three directors elected by the holders of the Preferred Stock
to four directors elected by the holders of the Common Stock and
seven directors elected by the holders of the Preferred Stock;
and
WHEREAS, under the Series A Certificate the Board would
have remained at 11 directors, with four elected by the holders
of the Common Stock and seven elected by the holders of the
Preferred Stock, for one year after all Triggering Events had
been cured; and
WHEREAS, the aforementioned Triggering Event would have
been deemed to have been cured on June 26, 1995; and
WHEREAS, the provisions regarding the size and
composition of the Board including upon the occurrence of a
Triggering Event, contained in the Certificate of Designations
Amendments are substantially similar to those set forth in the
Series A Certificate.
NOW THEREFORE, in consideration of the foregoing and
for other good and valuable consideration, the parties hereto
hereby agree as follows:
1. Triggering Event.
Until such time as the Certificate of Designations
Amendments are duly adopted by the stockholders of the Company
and filed with the Secretary of State of the State of Delaware
("Approval of the Certificate of Designations Amendments"),
notwithstanding any contrary provisions contained in the Current
Certificate of Designations, a Triggering Event shall be the
occurrence of any of the events or transactions set forth in
Section 2(e) of the Certificate of Designations Amendments,
rather than the occurrence of any of the events or transactions
set forth in Section 2(e) of the Current Certificate of
Designations.
2. Board of Directors.
Until Approval of the Certificate of Designations
Amendments, notwithstanding any contrary provisions in the
Current Certificate of Designations, the parties agree that
matters relating to the size, composition, election and powers of
the Board and the Committees of the Board shall be governed by
the terms and provisions set forth in Section 6 of the
Certificate of Designations Amendments, rather than Section 6 of
the Current Certificate of Designations; provided that, until
June 26, 1996 (unless another Triggering Event occurs prior
thereto, in which case the applicable provisions of the
Certificate of Designations Amendments shall apply with respect
thereto), the Board shall consist of 11 directors, four of whom
will be elected by the holders of the Common Stock (the "Common
Directors") and seven of whom will be elected by the holders of
the Preferred Stock (the "Preferred Directors"); and provided
further, that on June 26, 1996 (unless another Triggering Event
shall have occurred prior thereto) the Board shall revert to
seven directors, four of whom will be Common Directors and three
of whom will be Preferred Directors.
3. Preferred Stockholder Veto Rights.
Until approval of the Certificate of Designations
Amendments, notwithstanding any contrary provisions in the
Current Certificate of Designations, the parties agree that the
terms and provisions set forth in Section 7 of the Certificate of
Designations Amendments relating to the rights of the holders of
the Preferred Stock to vote as a separate class on certain
matters will govern the Company's obligation in this regard,
rather than the provisions of Section 7 of the Current
Certificate of Designations.
4. Further Assurances.
The Voting Shareholders will use all reasonable efforts
and take all reasonable actions to enable the Company to be
governed by the terms and provisions of this Agreement.
5. General Provisions.
5.1 Contents of Agreement, Parties in Interest,
Assignment. This Agreement sets forth the entire understanding
of the parties with respect to the subject matter hereof. Any
previous agreements or understandings between the parties
regarding the subject hereof are merged into and superseded by
this Agreement. All terms and conditions of this Agreement shall
be binding upon and inure to the benefit of and be enforceable by
the respective heirs, legal representatives, successors and
permitted assigns of the parties hereto. If any transferee of
any Voting Shareholder shall acquire any shares of Preferred
Stock or any shares of Common Stock from such Voting Shareholders
in any manner, whether by operation of law or otherwise, such
shares shall be held subject to all of the terms of this
Agreement, and by taking and holding such shares such transferee
shall be entitled to receive the benefits of and be conclusively
deemed to have agreed to be bound by and to comply with all of
the terms and provisions of this Agreement.
5.2 Severability. In the event that any one or more
of the provisions contained in this Agreement shall be invalid or
unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other
respect and of the remaining provisions of this Agreement shall
not be in any way impaired.
5.3 Headings. The headings of the Sections and the
subsections of this Agreement are inserted for convenience of
reference only and shall not constitute a part hereof.
5.4 Notices. Any notice, request, claim, demand,
document and other communication hereunder to any party shall be
effective upon receipt (or refusal of receipt) and shall be in
writing and delivered personally or sent by telex or telecopy
(with such telex or telecopy confirmed promptly in writing sent
by first class mail), or first class mail, or other similar means
of communications, as follows:
(i) If to Huff, addressed to The Huff
Alternative Income Fund, L.P., 67 Park
Place, 9th Floor, Morristown, New Jersey
07960, Attention: Joseph Thornton,
Telecopier Number (201) 984-5818;
(ii) If to ING, addressed to ING Equity Partners,
L.P., 135 East 57th Street, 9th Floor, New
York, New York 10022, Attention: Olivier L.
Trouveroy, Telecopier Number (212) 750-2970;
(iii) If to the Company, addressed to American
Communications Services, Inc., 131
National Business Parkway, Suite 100,
Annapolis Junction, MD 20701, Attention:
Richard A. Kozak, Telecopier Number
(301) 617-4276; or
(iv) If to a Voting Shareholder other than Huff or
ING, to the address of such Voting
Shareholder set forth in the stock records of
the Company;
or, in each case, to such other address or telex or
telecopy number as such party may designate in writing to each
Voting Shareholder and the Company by written notice given in the
manner specified herein.
All such communications shall be deemed to have been
given, delivered or made when so delivered by hand or sent by
telex (answer back received) or telecopy, or five business days
after being so mailed.
5.5 LITIGATION. THIS AGREEMENT SHALL BE GOVERNED BY,
CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK. EACH OF THE PARTIES HERETO ACKNOWLEDGES
AND AGREES THAT IN THE EVENT OF ANY BREACH OF THIS AGREEMENT, THE
NON-BREACHING PARTIES WOULD BE IRREPARABLY HARMED AND COULD NOT
BE MADE WHOLE BY MONETARY DAMAGES, AND THAT, IN ADDITION TO ANY
OTHER REMEDY TO WHICH THEY MAY BE ENTITLED AT LAW OR IN EQUITY,
THE PARTIES SHALL BE ENTITLED TO SUCH EQUITABLE OR INJUNCTIVE
RELIEF AS MAY BE APPROPRIATE. EACH PARTY AGREES THAT
JURISDICTION AND VENUE WILL BE PROPER IN THE SOUTHERN DISTRICT OF
NEW YORK AND WAIVES ANY OBJECTIONS BASED UPON FORUM NON
CONVENIENS. EACH PARTY WAIVES PERSONAL SERVICE OF PROCESS AND
AGREES THAT A SUMMONS AND COMPLAINT COMMENCING AN ACTION OR
PROCEEDING SHALL BE PROPERLY SERVED AND SHALL CONFER PERSONAL
JURISDICTION IF SERVED BY REGISTERED OR CERTIFIED MAIL TO THE
PARTY AT THE ADDRESS SET FORTH IN THIS AGREEMENT, OR AS OTHERWISE
PROVIDED BY THE LAWS OF THE STATE OF NEW YORK OR THE UNITED
STATES. THE CHOICE OF FORUM SET FORTH IN THIS SECTION 5.5 SHALL
NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT
OBTAINED IN ANY OTHER FORUM OR THE TAKING OF ANY ACTION UNDER
THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE
JURISDICTION.
5.6 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.
5.7 Recapitalization, Exchanges, Etc., Affecting the
Stock; New Issuances. The provisions of this Agreement shall
apply, to the full extent set forth herein, with respect to the
Common Stock and the Preferred Stock now held or hereafter
acquired by the Voting Shareholders, and to any and all equity or
debt securities of the Company or any successor or assign of the
Company (whether by merger, consolidation, sale of assets, or
otherwise) which may be issued in respect of, in exchange for, or
in substitution of, such equity or debt securities and shall be
appropriately adjusted for any stock dividends, splits, reverse
splits, combinations, reclassifications, recapitalizations,
reorganizations and the like occurring after the date hereof.
5.8 Termination. This Agreement shall terminate upon
the earliest of (i) a Qualifying Offering (as defined in the
Certificate of Designations Amendments), (ii) Approval of the
Certificate of Designations Amendments, or (iii) six months after
notice by The Huff Alternative Income Fund, L.P. ("Huff") and ING
Equity Partners, L.P. ("ING") to the other parties that Huff and
ING have agreed to terminate this Agreement; provided that the
Company shall file a Current Report on Form 8-K with the
Securities and Exchange Commission and NASDAQ promptly after
receiving any such termination notice from HUFF and ING.
5.9 Endorsement of Certificates.
(i) Upon the execution of this Agreement, in
addition to any other legend which the Company may deem advisable
under the Securities Act and certain state securities laws, all
certificates representing shares of issued and outstanding Common
Stock and Preferred Stock held by the Voting Shareholders shall
be endorsed at all times prior to termination of this Agreement
as follows:
THIS CERTIFICATE IS SUBJECT TO, AND IS TRANSFERABLE
ONLY UPON COMPLIANCE WITH, THE PROVISIONS OF A GOVERNANCE
AGREEMENT, DATED AS OF NOVEMBER 8, 1995, AMONG THE COMPANY
AND CERTAIN OF ITS STOCKHOLDERS. A COPY OF THE ABOVE
REFERENCED AGREEMENT IS ON FILE AT THE OFFICE OF THE COMPANY
AT 131 NATIONAL BUSINESS PARKWAY, SUITE 100, ANNAPOLIS
JUNCTION, MD 23070 AND WILL BE PROVIDED TO THE HOLDER HEREOF
WITHOUT CHARGE UPON REQUEST.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT
BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT, OR AN EXEMPTION FROM REGISTRATION, UNDER SAID
ACT.
(ii) Except as otherwise expressly provided in
this Agreement, all certificates representing shares Of stock
hereafter issued to or acquired by any of the Voting Shareholders
or their successors hereto (including, without limitation, all
certificates representing shares of Common Stock hereafter issued
upon conversion of shares of Preferred Stock) shall bear the
legends set forth above, and, the shares of such stock
represented by such certificates shall be subject to the
applicable provisions of this Agreement. The obligations of each
party hereto shall be binding upon each transferee to whom such
stock is transferred by any party hereto. Prior to consummation
of any transfer, such party shall cause the transferee to execute
an agreement in form and substance reasonably satisfactory to the
other parties hereto, providing that such transferee shall fully
comply, with the terms of this Agreement. Prompt notice shall be
given to the company and each Voting Shareholder by the
transferor of any transfer of any stock.
(iii) Any attempt to transfer or encumber any
shares of stock not in accordance with this Agreement shall be
null and void and neither the Company nor any transfer agent of
such securities shall give any effect to such attempted transfer
or encumbrance in its stock records.
Governance Agreement
5.10 Expenses. The Company will reimburse the Voting
Shareholders for the reasonable expenses, including reasonable
counsel fees, which they incur in connection with this Agreement.
5.11 Cost of Enforcement. The party which prevails in
any suit or proceeding against the other to enforce any provision
of this Agreement or to recover damages resulting from a breach
of this Agreement shall be entitled to receive from the
nonprevailing party the costs and reasonable attorneys' fees of
the prevailing party incurred in such suit or proceeding.
IN WITNESS WHEREOF, this Agreement has been executed by
the parties hereto as of the day and year first above written.
AMERICAN COMMUNICATIONS SERVICES, INC.
By: /s/Richard A. Kozak
Name: Richard A. Kozak
Title: President & COO
THE HUFF ALTERNATIVE INCOME FUND, L.P.
By: WRH PARTNER, L.L.C
general partner
By:
Name:
Title:
Governance Agreement
5.10 Expenses. The Company will reimburse the Voting
Shareholders for the reasonable expenses, including reasonable
counsel fees, which they incur in connection with this Agreement.
5.11 Cost of Enforcement. The party which prevails in
any suit or proceeding against the other to enforce any provision
of this Agreement or to recover damages resulting from a breach
of this Agreement shall be entitled to receive from the
nonprevailing party the costs and reasonable attorneys' fees of
the prevailing party incurred in such suit or proceeding.
IN WITNESS WHEREOF, this Agreement has been executed by
the parties hereto as of the day and year first above written.
AMERICAN COMMUNICATIONS SERVICES, INC.
By:
Name:
Title:
THE HUFF ALTERNATIVE INCOME FUND, L.P.
By: WRH PARTNER, L.L.C
general partner
By: /s/Donna B. Charlton
Name: Donna B. Charlton
Title:
Governance Agreement
ING EQUITY PARTNERS, L.P. I
By: LEXINGTON PARTNERS, L.P.
its general partner
By: LEXINGTON PARTNERS, INC.
its general partner
By: /s/ Olivier Troveroy
Name: Olivier Trouveroy
Title: Managing Director
APEX INVESTMENT FUND, L.P.
By: APEX MANAGEMENT PARTNERSHIP, L.P.,
general partner
By: _________________________________
George M. Middlemas
General Partner
APEX INVESTMENT FUND II, L.P.
By: APEX MANAGEMENT PARTNERSHIP, L.P.,
general partner
By: ___________________________________
George M. Middlemas
General Partner
Governance Agreement
ING EQUITY PARTNERS, L.P. I
By: LEXINGTON PARTNERS, L.P.
its general partner
By: LEXINGTON PARTNERS, INC.
its general partner
By: ___________________________
Name:
Title:
APEX INVESTMENT FUND, L.P.
By: APEX MANAGEMENT PARTNERSHIP, L.P.,
general partner
By: /s/ George M. Middlemas
George M. Middlemas
General Partner
APEX INVESTMENT FUND II, L.P.
By: APEX MANAGEMENT PARTNERSHIP, L.P.,
general partner
By: /s/ George M. Middlemas
George M. Middlemas
General Partner
Governance Agreement
THE PRODUCTIVITY FUND II, L.P.
By: FIRST ANALYSIS MANAGEMENT
COMPANY II,
its general partner
By: FIRST ANALYSIS CORPORATION
general partner
By: /s/ Bret R. Maxwell
Name: Bret R. Maxwell
Title: Managing Director
ARGENTUM CAPITAL PARTNERS, L.P.
By: BR Associates, Inc.,
general partner
By: __________________________
Name:
Title:
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/ Bret R. Maxwell
Name: Bret R. Maxwell
Title: Managing Director
Governance Agreement
THE PRODUCTIVITY FUND II, L.P.
By: FIRST ANALYSIS MANAGEMENT
COMPANY II,
its general partner
By: FIRST ANALYSIS CORPORATION,
general partner
By: _______________________________
Name:
Title:
ARGENTUM CAPITAL PARTNERS, L.P.
By: BR Associates, Inc.
general partner
By: /s/ Daniel Raynor
Name: Daniel Raynor
Title: Chairman
ENVIRONMENTAL PRIVATE EQUITY
FUND II, L.P.
By: Environmental Private Equity
Management II, L.P.
it general partner
By: First Analysis EPEF Management
Company II, general partner
By: First Analysis Corporation,
general partner
By: _________________________________
Name:
Title:
SCHEDULE I
VOTING SHAREHOLDERS
<TABLE>
Voting Series A-1 Series B-1 Series-2 Series-3
Shareholder Preferred Preferred Preferred Preferred
<S> <C> <C> <C> <C>
The Huff 138,889 100,000
Alternative
Income Fund, L.P.
ING Equity 100,000
Partners, L.P. I
Apex 2,595 4,904.85
Investment
Fund I, L.P.
Apex 16,808 3,269.90
Investment
Fund II, L.P.
The Productivity 10,249 1,380.61
Fund II, L.P.
Argentum 4,000.00
Capital
Partners, L.P.
Environmental 6,056 11,444.64
Private Equity
Fund II, L.P.
</TABLE>
EXHIBIT A
AMENDED AND RESTATED
CERTIFICATE OF DESIGNATIONS
OF THE BOARD OF DIRECTORS
OF
AMERICAN COMMUNICATIONS SERVICES, INC.
RELATING TO 9% SERIES A-1 CONVERTIBLE PREFERRED STOCK,
9% SERIES B-1 CONVERTIBLE PREFERRED STOCK,
9% SERIES B-2 CONVERTIBLE PREFERRED STOCK,
9% SERIES B-3 CONVERTIBLE PREFERRED STOCK,
AND 9% SERIES B-4 CONVERTIBLE PREFERRED STOCK
("Certificate of Designations")
________________________________
Pursuant to Sections 151(g), 141(f) and 242 of the
Delaware General Corporation Law ("DGCL")
_________________________________
Anthony J. Pompliano, Chairman of the Board of
Directors of American Communications Services, Inc., a Delaware
corporation (the "Company"), certifies that the following
resolutions were (i) adopted by the Company's Board of Directors
by unanimous written consent dated November 7, 1995 pursuant to
DGCL 141 (f); (ii) approved by the holders of at least a majority
of the outstanding 9% Series A-1 Convertible Preferred Stock (the
"Series A-1 Preferred Stock"), voting as a separate class, at a
meeting duly called and held on _____________________; (iii)
approved by the holders of at least a majority of the outstanding
9% Series B-1 Convertible Preferred Stock (the "Series B-1
Preferred Stock"), voting as a separate class, at a meeting duly
called and held on _____________________; and (iv) approved by
the holders of at least a majority of the outstanding common
stock, $.01 par value (the "Common Stock"), voting as a separate
class pursuant to DGCL Section 242(b)(2), at a meeting duly
called and held on ____________________; and (v) approved by the
holders of at least a majority of the outstanding common stock,
Series A-1 Preferred Stock and Series B Preferred Stock (as
hereinafter defined), voting together as a single class, at a
meeting duly called and held on ____________________________:
WHEREAS, pursuant to the Certificate of Designations of
the Board of Directors relating to the 9% Series A Convertible
Preferred Stock (the "Series A Certificate") which was filed with
the Secretary of State of the State of Delaware on October 19,
1994 a Triggering Event (as such term was defined in the Series A
Certificate) would be deemed to have occurred on or prior to June
26, 1995, the date a Certificate of Elimination relating to the
Series A Certificate was filed with the Secretary of State of the
State of Delaware; and
WHEREAS, pursuant to the Series A Certificate the
occurrence of a Triggering Event would cause an increase in the
size of the Board of Directors from seven members to 11 members
and result in the composition of the Board changing from four
directors elected by the holders of the Common Stock and three
directors elected by the holders of the Preferred Stock to four
directors elected by the holders of the Common Stock and seven
directors elected by the holders of the Preferred Stock; and
WHEREAS, under the Series A Certificate the Board of
Directors would remain at 11 members, with four elected by the
holders of the Common Stock and seven elected by the holders of
the Preferred Stock, for one year after all Triggering Events
have been cured; and
WHEREAS, the aforementioned Triggering Event would be
deemed to have been cured on June 26, 1995; and
WHEREAS, the provisions set forth in this Certificate
of Designations regarding the size and composition of the Board
of Directors, including upon the occurrence of a Triggering
Event, are substantially similar to those set forth in the Series
A Certificate; and
WHEREAS, the Board of Directors will upon filing of
this Certificate of Designations be composed of 11 members, four
of whom were elected by the holders of the Common Stock or
designated by the directors elected by the holders of the Common
Stock and seven of whom were elected by the holders of Preferred
Stock; and
WHEREAS, unless another Triggering Event (as defined in
this Certificate of Designation) occurs prior thereto the Board
of Directors will revert to seven members on June 25, 1996 and
the individuals who are currently serving on the Board of
Directors as Expansion Preferred Directors (as defined in this
Certificate of Designations) will cease to serve on the Board as
Preferred Directors at that time.
RESOLVED, that the Company is authorized to issue
464,164 shares of convertible preferred stock, par value $1.00
per share, with such voting powers and such designations,
preferences and relative, participating, optional and other
special rights, and qualifications, limitations and restrictions
thereof, as follows:
1. Designation. Of the preferred stock authorized by
this resolution, 186,664 shares shall be known as "9% Series A-1
Convertible Preferred Stock" ("the Series A-1 Preferred Stock"),
100,000 shares shall be known as "9% Series B-1 Convertible
Preferred Stock" (the "Series B-1 Preferred Stock"), 102,500
shares shall be known as "9% Series B-2 Convertible Preferred
Stock" (the "Series B-2 Preferred Stock"), 25,000 shares shall be
known as "9% Series B-3 Convertible Preferred Stock" (the "Series
B-3 Preferred Stock") and 50,000 shares shall be known as "9%
Series B-4 Convertible Preferred Stock" (the "Series B-4
Preferred Stock"). The Series B-1 Preferred Stock, the Series B-
2 Preferred Stock, the Series B-3 Preferred Stock and the Series
B-4 Preferred Stock are referred to herein collectively as the
"Series B Preferred Stock." The Series A-1 Preferred Stock and
the Series B Preferred Stock are referred to herein collectively
as the "Preferred Stock".
2. Dividends.
(a) Amount. The holders of shares of the Preferred
Stock shall be entitled to receive, when and as declared payable
by the board of directors from funds legally available for that
purpose, dividends in cash at the annual rate of (i) 9%, except
as provided in the following clause (ii), at all times, and (ii)
18%, (A) from and after January 1, 2000 and (B) at any time after
the occurrence and before the cure of a Triggering Event (as
defined in section 2(e)), of the Series A-1 Liquidation Value (as
defined in section 5) or the Series B Liquidation Value (as
defined in section 5), as the case may be, of those shares as of
the immediately preceding Dividend Payment Date (as defined
below) (or the date of issue, in the case of the initial Dividend
Payment Date), and no more, payable in equal amounts quarterly on
the last day of December, March, June and September in each year
(unless that day is not a business day (as defined in section
3(d)), in which event on the next business day) (each a "Dividend
Payment Date") to holders of record as they appear on the
register for the Preferred Stock on the December 15, March 15,
June 15 or September 15, respectively, immediately preceding the
Dividend Payment Date.
(b) Dividend Periods; Accumulation of Dividend. A
quarterly dividend period shall begin on the day following each
Dividend Payment Date and end on the next succeeding Dividend
Payment Date. Notwithstanding the foregoing, the first quarterly
dividend period with respect to each series of Preferred Stock
shall commence on the initial date of issue of such series and
end on the first Dividend Payment Date thereafter, and the
dividend for that period shall be determined on the basis of the
actual number of days in that period. If dividends shall not
have been so paid upon all outstanding shares of Preferred Stock,
the deficiency shall be cumulative. Notwithstanding the
foregoing, the initial date of issue of all of the shares of
Series A-1 Preferred Stock shall be deemed to be October 21,
1994; and the initial date of issue of all of the shares of
Series B-1 Preferred Stock, Series B-2 Preferred Stock and Series
B-3 Preferred Stock shall be deemed to be June 26, 1995.
Accumulated dividends shall, subject to section 2(c), be payable
in cash at any subsequent Dividend Payment Date, or, if earlier,
(i) at the time of conversion in accordance with section 3 or 4
or (ii) at the time stated and in accordance with section 2(c).
(c) Special Payment Provisions. Notwithstanding
anything to the contrary in section 2(a) or 2(b), no dividends
shall be paid, or declared and set apart for payment, on or
before December 31, 1997, or, if earlier, at the time of
conversion in accordance with section 3 or 4. On January 1, 1998,
the Company shall, to the extent permitted by law, issue and
deliver to each holder a promissory note in the form of exhibit
2(c) hereto, executed by the Company and payable to the order of
the holder in the principal amount of that holder's accumulated
and accrued dividends.
(d) Dividend Priorities. As to dividends, the Series
A-1 Preferred Stock and Series B Preferred Stock shall rank pari
passu with each other and shall rank senior to the common stock
from time to time created. No dividend or distribution, whether
in cash, stock or other property, shall be paid, declared or set
apart for payment or made on or in respect of the common stock of
the Company, and, except pursuant to the agreements listed on
schedule 6.12(C) to the Series B Purchase Agreement (as defined
in section 2 (e)(iv)), no redemption, purchase or other
acquisition for value by the Company shall be made, or any funds
set apart for any sinking fund for such redemption, purchase or
other acquisition, of shares of common stock of the Company until
the earlier of a Qualifying Offering (as defined in section
4(a)(ii)) or January 1, 1998, and thereafter, unless all accrued
and unpaid dividends on all outstanding shares of Preferred
Stock, including without limitation any accrued and unpaid
dividends represented by any promissory note issued hereunder, to
the end of the quarterly dividend period coinciding with or next
preceding that date shall have been paid or declared and set
apart for payment; provided, however, that the foregoing
provisions of this sentence shall not prohibit a dividend on any
shares of any class or series of stock, which dividend is payable
in shares of any class or series of stock of the Company ranking
on a parity with or junior to the class or series of stock on
which the dividend is payable both as to dividends and as to any
distribution, including, without limitation, a distribution upon
liquidation, dissolution or winding-up of the Company.
(e) As used in this Certificate of Designations, the
term "Triggering Event" shall mean any of the following:
(i) the Company or any subsidiary shall have
failed to pay or prepay when due any principal, interest or
premium on any indebtedness for borrowed money after any
applicable cure period;
(ii) the Company or any subsidiary shall have
breached any of its other obligations in respect of any
indebtedness for borrowed money, or any condition shall have
existed, as a result of which any such indebtedness may, after
any applicable cure period, become or be declared due prior to
its stated maturity, and such breach or condition shall remain
uncured, unremedied or unwaived for 120 or more days after such
breach or condition;
(iii) there shall have been any material
misrepresentation or breach of warranty by the Company under the
investment agreement dated October 21, 1994 among the Company and
certain of the initial holders of the Company's 9% Series A
Convertible Preferred Stock, as amended by the Exchange Agreement
dated June 26, 1995 among the Company and the holders of the
Series A Preferred Stock as of such date (as may be amended from
time to time, the "Series A Investment Agreement");
(iv) there shall have been any material
misrepresentation or breach of warranty by the Company under the
(A) Series B Preferred Stock and Warrant Purchase Agreement dated
June 26, 1995 among the Company and the initial holders of the
Series B Preferred Stock, (as may be amended from time to time,
the "Series B Purchase Agreement"), (B) Stockholders Agreement
dated June 26, 1995 among the holders of the Series A-1 Preferred
Stock, the holders of the Series B Preferred Stock and certain
holders of common stock, (as may be amended from time to time,
the "Stockholders Agreement), (C) Registration Rights Agreement
dated June 26, 1995 among the Company, the holders of the Series
A-1 Preferred Stock, the holders of the Series B Preferred Stock,
certain holders of the common stock and certain holders of
options or warrants convertible into common stock, (as may be
amended from time to time, the "Registration Rights Agreement"),
and (D) Governance Agreement dated as of November 8, 1995 among
the Company and certain holders of the Series A-1 Preferred
Stock, Series B Preferred Stock and Common Stock, (as may be
amended from time to time, the "Governance Agreement") that
remains uncured, unremedied or unwaived for 30 or more days after
such misrepresentation or breach;
(v) there shall have been any material breach of
any agreement by the Company under any of the Transaction
Documents (as defined in the Series A Investment Agreement) that
remain uncured for 30 or more days after the Company first has or
should have had actual knowledge of the breach;
(vi) there shall have been any material breach of
any agreement by the Company under any of the Transaction
Documents (as defined in the Series B Purchase Agreement) that
remains uncured for 30 or more days after the Company first has
or should have had actual knowledge of the breach;
(vii) The Company shall have failed to pay any
dividends on any outstanding shares of Preferred Stock when
payable hereunder whether pursuant to a promissory note issued
hereunder or otherwise and such failure shall remain uncured,
unremedied or unwaived for 30 or more days;
(viii) the Company shall have failed to comply with
any provisions of this Certificate of Designations of any other
provisions of its certificate of incorporation or by-laws
relating to the Preferred Stock, or the Company shall have
materially failed to comply with any other provisions of its
certificate of incorporation or by-laws, and such failure shall
remain uncured, unremedied or unwaived for 30 or more days after
such failure;
(ix) the Company and its subsidiaries shall have
failed by 20% or more to meet the major business milestones set
forth in schedule 5.15 to the Series B Purchase Agreement;
(x) a court of governmental authority of
competent jurisdiction shall have entered an order appointing,
without consent by the Company, a custodian, receiver, trustee or
other officer with similar powers with respect to it or with
respect to any substantial part of its property, or if an order
for relief shall have been entered in any case or proceeding for
liquidation or reorganization or otherwise to take advantage of
any insolvency law of any jurisdiction, or ordering the
dissolution, winding-up or liquidation of the Company or any
subsidiary, or if any petition for any such relief shall have
been filed against the Company or a subsidiary and such petition
shall not have been dismissed within 60 days; or
(xi) final judgment shall have been rendered
against the Company or any subsidiary for the payment of money in
excess of $250,000 and such judgment shall not have been
discharged or execution thereon shall not have been stayed
pending appeal, within 60 days after entry thereof or, in the
event of such a stay, such judgment is not discharged within 60
days after such stay expires.
3. Optional Conversion. The holder of each
outstanding share of Preferred Stock shall have the right at any
time, or from time to time, at the holder's option to convert
that share into common stock in accordance with this section 3.
(a) Conversion Price. (i) Except as otherwise
provided in this section 3, each share of Series A-1 Preferred
Stock shall be convertible (at the office or agency referred to
in section 3(b)(i)) into a number of fully paid and nonassessable
shares (calculated as to each conversion to the nearest 1/10,000
of a share) of common stock equal to the number obtained by
dividing $90.00 by $2.25 ($2.25 being the "Series A-1 Conversion
Price") or, if the Series A-1 Conversion Price shall have been
adjusted in accordance with this section 3, by dividing $90.00 by
the Series A-1 Conversion Price as last adjusted and in effect at
the date any share or shares of Series A-1 Preferred Stock are
surrendered for conversion. For purposes hereof the term "Series
A-1 Conversion Price" shall refer to the conversion price for the
Series A-1 Preferred Stock, as last adjusted pursuant to this
section 3.
(ii) Except as otherwise provided in this section
3, each share of Series B Preferred Stock shall be convertible
(at the office or agency referred to in section 3(b)(i)) into a
number of fully paid and nonassessable shares (calculated as to
each conversion to the nearest 1/10,000 of a share) of common
stock equal to the number obtained by dividing $100.00 by $2.80
($2.80 being the "Series B Conversion Price") or, if the Series B
Conversion Price shall have been adjusted in accordance with this
section 3, by dividing $100.00 by the Series B Conversion Price
as last adjusted and in effect at the date any share or shares of
Series B Preferred Stock are surrendered for conversion. For
purposes hereof the term "Series B Conversion Price" shall refer
to the conversion price for the Series B Preferred Stock, as last
adjusted pursuant to this section 3.
(b) Procedures.
(i) To exercise the right to convert shares of
Preferred Stock into shares of common stock, the holder of the
shares of the Preferred Stock to be converted shall present and
surrender the certificate(s) representing the shares during usual
business hours at any office or agency of the Company maintained
for the transfer of the Preferred Stock and shall deliver a
written notice of the election of the holder to convert the
shares represented by that certificate or any portion of those
shares specified in that notice. That notice also shall state
the name or names (with address(es)) in which the certificate or
certificates for shares of common stock issuable on conversion
shall be issued. If so required by the Company, any certificate
for shares of Preferred Stock surrendered for conversion shall be
accompanied by instruments of transfer, in form reasonably
satisfactory to the Company, duly executed by the holder of the
shares surrendered for conversion or the holder's duly authorized
representative. Each conversion of shares of Preferred Stock
shall be deemed to have been effected on the date (the
"conversion date") on which the certificate or certificates
representing the shares shall have been surrendered and that
written notice and any required instruments of transfer shall
have been so received, and the person or persons in whose name or
names any certificate or certificates for shares of common stock
shall be issuable on conversion shall be deemed to have become
the holder or holders of record of the shares of common stock
represented by the certificate or certificates immediately prior
to the close of business on the conversion date.
(ii) As promptly as practicable after the
presentation and surrender for conversion of any certificate for
shares of Preferred Stock, the Company shall issue and deliver to
or upon the written order of the holder of those shares a
certificate or certificates for the aggregate number of full
shares of common stock issuable upon conversion. In case any
certificate for shares of Preferred Stock shall be surrendered
for conversion of only a portion of the shares represented by
that certificate, the Company shall deliver to or upon the
written order of the holder of those shares a certificate or
certificates for the number of shares of Series A-1 Preferred
Stock or Series B Preferred Stock, as the case may be,
represented by the surrendered certificate that are not being
converted. The issuance of certificates for shares of common
stock issuable upon the conversion of shares of Preferred Stock
shall be made without charge to the converting holder for any tax
in respect of the issue of the shares of common stock. The
Company shall not, however, be required to pay any tax that may
be payable based on the issue and delivery of any certificate in
a name other than that of the holder of the shares of Preferred
Stock being converted, and the Company shall not be required to
issue or deliver any such certificate, unless and until the
person requesting the issue shall have paid the Company the
amount of that tax or established to the reasonable satisfaction
of the Company that such tax has been paid or that no tax is due.
(iii) Upon any conversion of shares of Preferred
Stock into shares of common stock in accordance with this section
3 at any time on or before December 31, 1997, the Company shall
deliver to the holder, within three (3) business days after the
conversion date, in lieu of all accrued and unpaid dividends
through the conversion date on all shares to be converted, a
promissory note in the form of exhibit 3(b)(iii) hereto, executed
by the Company and payable to the order of that holder in the
principal amount of that holder's accumulated and accrued
dividends only those dividends shall be payable on shares of
common stock issuable upon conversion as may be declared and may
be payable to those entitled to be holders of record of shares of
common stock after that conversion date in accordance with
section 3(b)(i).
(c) Adjustment of Conversion Price Upon Issuance of
Common Stock. Except as provided in section 3(c)(ix), if at any
time the Company shall issue, grant or sell, or is, in accordance
with section 3(c)(i) through (x), deemed to have issued, granted
or sold, any shares of common stock for a consideration per share
less than the Series A-1 Conversion Price or Series B Conversion
Price, as the case may be, in effect immediately prior to the
issuance, grant or sale (or, in the case of any pro rata
distribution to holders of the common stock of rights to
subscribe for the common stock or options, rights, warrants or
other securities convertible into or exchangeable or exercisable
for the common stock (a "Pro Rata Rights Offering"), the lesser
of such Conversion Price or the market price of the common stock
(as defined in section 3(d)) at that time), then, upon that
issuance, grant or sale, such Conversion Price shall be reduced
to the amount specified in the following clause (ww) (or, in the
case of Pro Rata Rights Offerings, the lesser of the following
clauses (ww) and (xx)):
(ww) in the case of the issuance, grant or
sale, or deemed issuance, grant or sale, by the
Company of shares of common stock for a
consideration per share less than such Conversion
Price, the price determined by dividing (1) an
amount equal to the sum of (A) the number of
shares of common stock outstanding immediately
prior to that issuance, grant or sale (including
as outstanding all shares of common stock issuable
upon conversion of all outstanding shares of
Preferred Stock for which the conversion price is
being adjusted) multiplied by such Conversion
Price then in effect, and (B) the consideration,
if any, received by the Company upon that
issuance, grant or sale, by (2) the total number
of shares of common stock outstanding immediately
after that issuance, grant or sale (including as
outstanding all shares of common stock issuable
upon conversion of all outstanding shares of
Preferred Stock for which the conversion price is
being adjusted); and
(xx) in the case of the issuance, grant or
sale, or deemed issuance, grant or sale, by the
Company of shares of common stock for a
consideration per share less than the market price
of the common stock, the price determined by
multiplying such Conversion Price in effect
immediately prior to that issuance, grant or sale
by a fraction, (1) the numerator of which shall be
the sum of (A) the number of shares of common
stock outstanding immediately prior to that
issuance, grant or sale (including as outstanding
all shares of common stock issuable upon
conversion of all outstanding shares of Preferred
Stock for which the conversion price is being
adjusted) multiplied by the market price of the
common stock immediately prior to that issuance,
grant or sale plus (B) the consideration, if any,
received by the Company upon that issuance, grant
or sale, and (2) the denominator of which shall be
the total number of shares of common stock
outstanding immediately after that issuance, grant
or sale (including as outstanding all shares of
common stock issuable upon conversion of all
outstanding shares of Preferred Stock for which
the conversion price is being adjusted) multiplied
by the market price of the common stock
immediately prior to that issuance, grant or sale.
For purposes of this section 3(c), the following also
shall be applicable:
(i) Issuance of Rights or Options. In case at
any time the Company shall in any manner grant (whether
directly or by assumption in a merger or otherwise) any
rights to subscribe for or to purchase, or any options or
warrants for the purchase of, common stock or any stock or
securities convertible into or exchangeable for common stock
(such rights, warrants or options being called "Options" and
such convertible or exchangeable stock or securities being
called "Convertible Securities"), whether or not such
Options or the right to convert or exchange such Convertible
Securities are immediately exercisable, and the price per
share for which common stock is issuable upon the exercise
of such Options or upon conversion or exchange of such
Convertible Securities (determined by dividing (A) the total
amount, if any, received or receivable by the Company as
consideration for the granting of such Options, plus the
minimum aggregate amount of additional consideration payable
to the Company upon the exercise of such Options, plus, in
the case of Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable upon the
conversion or exchange of such Convertible Securities, by
(B) the total maximum number of shares of common stock
issuable upon the exercise of such Options or upon the
conversion or exchange of such Convertible Securities) shall
be less than the Series A-1 Conversion Price or Series B
Conversion Price, as the case may be, immediately prior to
the granting of such Options, then the total maximum number
of shares of common stock issuable upon the exercise of such
Options or upon conversion or exchange of the total maximum
number of such Convertible Securities issuable upon the
exercise of such Options shall be deemed to have been issued
for such price per share as of the date of the granting of
such Options and thereafter shall be deemed to be
outstanding, Except as otherwise provided in section
3(c)(iii), no additional adjustment of such Conversion Price
shall be made upon the actual issuance of such common stock
upon exercise of such Options or upon conversion or exchange
of such Convertible Securities. Notwithstanding anything to
the contrary in this section 3(c), the issuance of the
Warrants (as defined in the Series A Investment Agreement)
and the Warrants (as defined in the Series B Purchase
Agreement) and any subsequent exercise of the Warrants (as
defined in the Series A Investment Agreement) or the
Warrants (as defined in the Series B Purchase Agreement)
shall not affect either the Series A-1 Conversion Price or
the Series B Conversion Price. If, upon the expiration of
such Options or rights to convert or exchange such
Convertible Securities, such Options remain unexercised or
such Convertible Securities remain unconverted or
unexchanged, as the case may be, such Conversion Price shall
again be adjusted as if such unexercised Options or
unconverted or unexchanged Convertible Securities had not
been granted.
(ii) Issuance of Convertible Securities. In case
the Company shall in any manner issue (whether directly or
by assumption in a merger or otherwise), grant or sell any
Convertible Securities, whether or not the rights to
exchange or convert such Convertible Securities are
immediately exercisable, and the price per share for which
common stock is issuable upon such conversion or exchange
(determined by dividing (A) the total amount received or
receivable by the Company as consideration for the issuance,
grant or sale of such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if
any, payable to the Company upon the conversion or exchange
of such Convertible Securities, by (B) the total maximum
number of shares of common stock issuable upon the
conversion or exchange of such Convertible Securities) shall
be less than the Series A-1 Conversion Price or the Series B
Conversion Price, as the case may be, immediately prior to
the issuance, grant or sale, then the total maximum number
of shares of common stock issuable upon conversion or
exchange of such Convertible Securities shall be deemed to
have been issued for such price per share as of the date of
the issuance or sale of such Convertible Securities and
thereafter shall be deemed to be outstanding; provided,
however, that (Y) except as otherwise provided in section
3(c)(iii), no additional adjustment of such Conversion Price
shall be made upon the actual issuance of such common stock
upon conversion or exchange of such Convertible Securities
and (Z) if any such issuance, grant or sale of such
Convertible Securities is made upon exercise of any Option
to purchase any of the Convertible Securities for which
adjustments of such Conversion Price have been or are to be
made pursuant to other provisions of this section 3(c), no
further adjustment of such Conversion Price shall be made by
reason of the issuance, grant or sale. If, upon the
expiration of the right to convert or exchange such
Convertible Securities, such Convertible Securities remain
unconverted or unexchanged, as the case may be, such
Conversion Price shall again be adjusted as if such
unconverted or unexchanged Convertible Securities had not
been issued, granted or sold.
(iii) Change in Option Price or Conversion Rate.
If the purchase price provided for in any Option referred to
in section 3(c)(i), the additional consideration, if any,
payable upon the conversion or exchange of any Convertible
Securities referred to in section 3(c)(i) or (ii) or the
rate at which any Convertible Securities referred to in
section 3(c)(i) or (ii) are convertible into or exchangeable
for common stock shall change at any time (other than under
or by reason of provisions designed to protect against
dilution), the Series A-1 Conversion Price or the Series B
Conversion Price in effect at the time of that event shall
be readjusted to the Series A-1 Conversion Price or the
Series B Conversion Price, as the case may be, that would
have been in effect at that time had such Options or
Convertible Securities still outstanding provided for that
changed purchase price, additional consideration or
conversion rate, as the case may be, at the time initially
granted, issued or sold.
(iv) Stock Dividends. In case the Company shall
declare a dividend or make any other distribution upon any
stock of the Company payable in common stock, Options or
Convertible Securities, any common stock, Options or
Convertible Securities, as the case may be, issuable in
payment of that dividend or distribution shall be deemed to
have been issued, granted or sold without consideration and
the Series A-1 Conversion Price and the Series B Conversion
Price shall be adjusted accordingly under the provisions of
this section 3(c).
(v) Consideration for Stock. In case any shares
of common stock, Options or Convertible Securities shall be
issued, granted or sold for cash, the consideration received
by the Company shall be deemed to be the amount received by
the Company, without deduction of any expenses incurred or
any underwriting commissions or concessions paid or allowed
in connection with the issuance, grant or sale. In case any
shares of common stock, Options or Convertible Securities
shall be issued, granted or sold for a consideration other
than cash, the amount of the consideration other than cash
received by the Company shall be deemed to be the fair
market value of that consideration as determined in good
faith by disinterested members of the board of directors of
the Company (which shall consider, if the transaction
involves, directly or indirectly, 2,000,000 or more shares
of common stock, the opinion of a leading firm of investment
bankers selected by a majority of the Preferred Directors
(as defined in section 6(d)) and reasonably acceptable to
the Company and whose reasonable fees and expenses shall be
paid by the Company), without deduction of any expenses
incurred or any underwriting commissions or concessions paid
or allowed in connection with the issuance, grant or sale.
In case any Options shall be issued in connection with the
issuance, grant or sale of other securities of the Company,
together comprising one integral transaction in which the
parties do not specifically allocate consideration to such
Options, such Options shall be deemed to have been issued
without consideration and the Conversion Price shall be
adjusted accordingly under the provisions of this section
3(c) .
(vi) Record Date. In case the Company shall take
a record of the holders of its common stock for the purpose
of entitling them (A) to receive a dividend or other
distribution payable in common stock, Options or Convertible
Securities, or (B) to subscribe for or purchase common
stock, Options or Convertible Securities, then, upon such
issuance, grant or sale, that record date shall be deemed to
be the date of the issuance, grant or sale of the shares of
common stock deemed to have been issued, granted or sold
upon the declaration of the dividend or the making of the
other distribution or the date of the granting of the right
of subscription or purchase, as the case may be.
(vii) Treasury Shares. The number of shares of
common stock outstanding at any given time shall not include
shares owned or held by or for the account of the Company or
any of its subsidiaries, and the disposition (other than to
the Company or any of its subsidiaries) of any such shares
shall be considered an issuance, grant or sale of common
stock for purposes of this section 3(c).
(viii) Subdivision or Combination of Stock. In case
the Company shall at any time subdivide its outstanding
shares of common stock into a greater number of shares (by
way of dividend, split or otherwise), the Series A-1
Conversion Price and the Series B Conversion Price in effect
immediately prior to the subdivision shall be
proportionately reduced, and in case the outstanding shares
of common stock shall be combined into a smaller number of
shares (by way of reverse split or otherwise) the Series A-1
Conversion Price and the Series B Conversion Price in effect
immediately prior to the combination shall be
proportionately increased.
(ix) Certain Issues of Common Stock Excepted.
Notwithstanding anything to the contrary in this section
3(c), the Company shall not be required to make any
adjustment of the Series A-1 Conversion Price or Series B
Conversion Price in case of (A) the issuance of shares of
common stock upon conversion of shares of Preferred Stock,
(B) the issuance of shares of common stock pursuant to
Options and Convertible Securities outstanding on June 26,
1995 or issuable pursuant to agreements which are effective
on or before such date, and set forth on exhibit A to
schedule 3.2.7 to the Series B Purchase Agreement, or (C)
the issuance of up to an additional 750,000 shares of common
stock (or the issuance of Options to purchase such shares)
to employees or consultants of the Company and its
subsidiaries as management or employee incentives (as
approved by the board of directors to the extent so required
pursuant to sections 6(d) and 7).
(x) Reorganization or Reclassification. If any
capital reorganization or reclassification of the capital
stock of the Company shall be effected in such a way
(including, without limitation, by way of consolidation or
merger or a sale of all or substantially all its assets)
that holders of common stock shall be entitled to receive
stock, securities or assets with respect to or in exchange
for common stock, then, as a condition of the reorganization
or reclassification, lawful and adequate provisions shall be
made whereby each holder of shares of Preferred Stock shall
thereafter have the right to receive, in lieu of the shares
of common stock of the Company theretofore receivable upon
the conversion of such shares, such shares of stock,
securities or assets as may be issued or payable with
respect to or in exchange for a number of shares of common
stock equal to the number of shares of common stock
theretofore so receivable had the reorganization or
reclassification not taken place, and in any such case
appropriate provision shall be made with respect to the
rights and interests of the holder to the end that the
provision of this section 3 (including, without limitation,
provisions for adjustment of the Series A-1 Conversion Price
and Series B Conversion Price) shall thereafter be
applicable, as nearly as may be, in relation to any shares
of stock, securities or assets thereafter deliverable upon
the exercise of those conversion rights. In the event of a
merger or consolidation of the Company as a result of which
a greater or lesser number of shares of common stock of the
surviving corporation are issuable to holders of common
stock of the Company outstanding immediately prior to the
merger or consolidation, the Series A-1 Conversion Price and
Series B Conversion Price in effect immediately prior to the
merger or consolidation shall be adjusted in the same manner
as though there were a subdivision or combination of the
outstanding shares of common stock of the Company in
accordance with section 3(c)(viii).
(xi) Certain Distributions. In the event that the
Company shall make any distribution of its assets upon or
with respect to the common stock that does not constitute a
dividend payable out of earnings or any surplus legally
available for dividends under the Delaware General
Corporation Law and that distribution does not constitute a
liquidation under section 5, the holder of each outstanding
share of Preferred Stock shall, after the record date for
that distribution or, in the absence of a record date, after
the date of that distribution, receive, the amount of such
assets (or, at the option of the Company, a sum equal to the
value of such assets at the time of distribution as
determined in good faith by the board of directors of the
Company (which shall consider the opinion of a leading firm
of investment bankers selected by a majority of the
Preferred Directors and reasonably acceptable to the Company
and whose reasonable fees and expenses shall be paid by the
Company)) that would have been distributed to such holder if
the holder had converted that share of Preferred Stock into
common stock immediately prior to the record date for that
distribution or, in the absence of a record date,
immediately prior to the date of that distribution.
(d) Market Price of the Common Stock. For all
purposes of this section 3 and section 4, the "market price of
the common stock" at any date shall be determined as follows:
(i) if the common stock is publicly traded at the time of
determination, the average of the closing prices for the common
stock on all domestic securities exchanges on which such security
may at the time be listed (it being understood that, for these
purposes, the NASDAQ National Market System is deemed an
"exchange") or, if there have been no sales on any such exchange
on such day, the average of this highest bid and lowest asked
prices on all such exchanges at the end of such day, or, if on
any day such security is not so listed, the average of the
representative bid and asked prices quoted on the NASDAQ System
as of 4:00 p.m., New York time, on such day, or if on such day
such security is not quoted in the NASDAQ System, the average of
the highest bid and lowest asked prices on such day in the
domestic over-the-counter market as reported by the National
Quotation Bureau, Incorporated, or any similar successor
organization, in each such case averaged over a period of
twenty-one (21) days consisting of the day as of which "market
price of the common stock" is being determined and the twenty
(20) consecutive business days prior to such day (a "business
day" being a day that is not a legal holiday or other day on
which banking institutions or any national securities exchanges
are authorized by law or executive order to close); or (ii) if
the common stock is not publicly traded at the time of
determination then, solely for purposes of this section 3, the
fair value of the common stock as determined by the Company's
board of directors, taking into account their fiduciary duties
(including to the holders of the Preferred Stock as if
converted).
(e) Immaterial Adjustments. Notwithstanding the
foregoing provisions of this section 3, (i) no adjustment in the
number of shares of common stock into which any share of
Preferred Stock is convertible shall be required, unless the
adjustment would require an increase or decrease in the number of
shares of at least 1% and (ii) no adjustment in either the Series
A-1 Conversion Price or Series B Conversion Price shall be
required, unless the adjustment would require an increase or
decrease of at least $.001 per share; provided, however, that any
adjustments that, by reason of this section 3(e), are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment. On any conversion date,
all adjustments so carried forward shall be made at the time of
such conversion. All calculations under this section 3 shall be
made to the nearest $.001 or the nearest 1/10,000 of a share, as
the case may be.
(f) Notice of Adjustment. Whenever any adjustment is
required in the shares into which any share of Preferred Stock is
convertible, the Company shall promptly (i) file with each office
or agency maintained by the Company for the transfer of Preferred
Stock a statement describing in reasonable detail the adjustment
and the method of calculation used (which, at the time of such
filing, shall be certified as correct by the Company's
independent accountants) and (ii) cause a notice of the
adjustment, setting forth the adjusted Series A-1 Conversion
Price or Series B Conversion Price, as the case may be, to be
mailed to the holders of record of shares of Preferred Stock at
their respective addresses on the books of the Company.
(g) No Rights After Conversion. All shares of
Preferred Stock that shall have been surrendered for conversion
in accordance with this section 3 or section 4 shall no longer be
deemed to be outstanding and all rights with respect to those
shares, including the rights, if any, to receive notices and to
vote, shall cease, except for the right of the holders, subject
to the provisions of this section 3, to receive shares of common
stock upon the conversion and any accumulated and accrued but
unpaid dividends.
(h) Certain Notices. In the event that:
(i) the Company shall take action to make any
distribution to the holders of its common stock;
(ii) the Company shall take action to effect a Pro
Rata Rights Offering;
(iii) the Company shall take action to accomplish
any capital reorganization, or reclassification of the
capital stock of the Company (other than a subdivision,
split or combination of its common stock), or a
consolidation or merger to which the Company is a party
and for which approval of any stockholders of the
Company is required, or the sale or transfer of all or
substantially all the assets of the Company; or
(iv) the Company shall take action or attempt to
take action to cause a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
then the Company shall (A) in case of any such distribution or
Pro Rata Rights Offering, at least 30 days prior to the date or
expected date on which the books of the Company shall close or a
record shall be taken for the determination of holders entitled
to the distribution or rights, and (B) in the case of any such
reorganization, reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding-up, at least 30
days prior to the date or expected date when that event shall
take place (for the avoidance of doubt, it being understood that,
in each such case, the shares of Preferred Stock shall continue
to be convertible at any time during the applicable 30-day (or
longer) period), cause written notice thereof to be mailed to
each holder of shares of Preferred Stock at the holder's address
on the books of the Company. Any notice under clause (A) also
shall specify the date or expected date on which the holders of
common stock shall be entitled to the distribution or rights, and
any notice under clause (B) also shall specify the date or
expected date on which the holders of common stock shall be
entitled to exchange their common stock for securities or other
property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation
or winding-up.
(i) Common Stock. For purposes of this section 3, the
term "common stock" shall mean (i) the class of stock designated
as the common stock of the Company on the date of this
Certificate of Designations or (ii) any other class of stock
resulting from successive changes or reclassifications of such
common stock consisting solely of changes in par value, or from
no par value to par value, or from par value to no par value. If
at any time as a result of an adjustment pursuant to section 3(c)
a holder of shares of Preferred Stock thereafter surrendered for
conversion shall become entitled to receive any shares of the
Company other than shares of common stock, thereafter the number
of such other shares so receivable upon conversion of shares of
Preferred Stock shall be subject to adjustment from time to time
in a manner and on terms as nearly equivalent as practicable to
the provisions with respect to the common stock in section 3(c),
and the other provisions of this section 3 with respect to the
common stock shall apply on like terms to any such other shares.
(j) Fractions. No fractional share of common stock,
or scrip representing a fractional share, shall be issued upon
the conversion of any Preferred Stock. If more than one share of
Preferred Stock shall be surrendered for conversion at one time
by the same holder, the number of full shares of common stock
issuable upon conversion shall be computed on the basis of the
aggregate number of shares so surrendered. If any fractional
interest in a share of common stock would be deliverable upon the
conversion of any shares of Preferred Stock, the Company shall
pay, in lieu of the fractional share, in cash that fraction of
the market price of the common stock on the business day
immediately preceding the conversion.
(k) Reserved Shares. The Company shall at all times
reserve and keep available, free from preemptive rights, out of
its authorized but unissued stock, for the purpose of effecting
the conversion of the shares of Preferred Stock, a number of its
authorized shares of common stock sufficient to effect the
conversion of all outstanding shares of Preferred Stock into
common stock at any time; provided, however, that nothing in this
section 3(k) shall preclude the Company from satisfying its
obligations in respect of the conversion of shares by delivery of
shares of common stock then held in the treasury of the Company.
The Company shall, from time to time, use its best efforts to
cause the authorized number of shares of common stock to be
increased, if the aggregate number of authorized shares of common
stock remaining unissued and the issued shares of common stock in
its treasury (other than any shares of common stock reserved for
issuance in any other connection) shall not be sufficient to
permit the conversion of all outstanding shares of Preferred
Stock into common stock.
4. Automatic Conversion
(a) General
(i) In the event the Company consummate a
Qualifying Offering, all outstanding shares of Preferred Stock
shall be converted into shares of common stock simultaneously
with the first closing of the Qualifying Offering, automatically
and without any further action by any person. The number of
shares of common stock into which each share of Series A-1
Preferred Stock shall be converted shall be the number obtained
by dividing $90.00 by the Series A-1 Conversion Price then in
effect and the number of shares of common stock into which each
share of Series B Preferred Stock shall be converted shall be the
number obtained by dividing $100.00 by the Series B Conversion
Price then in effect.
(ii) As used in this Certificate of Designations,
the term "Qualifying Offering" means a fully-distributed, firm
commitment underwritten public offering of shares of common stock
of the Company registered under the Securities Act of 1933, (A)
in which (y) the gross proceeds to the Company (i.e., gross
proceeds without any deduction for expenses or for underwriting
commissions or concessions) are at least $15,000,000 and (z) the
initial price to the public per share of common stock is at least
$5.00, as appropriately adjusted to reflect all subdivisions,
splits, share dividends or combinations of the common stock or
any Pro Rata Rights Offering (any such subdivision, split, share
dividend, combination or Pro Rata Rights Offering, a
Recapitalization Event") occurring after the date of this
Certificate of Designations and (B) the result of which is the
inclusion of the common stock in the NASDAQ National Market
System or listing of the common stock on the New York Stock
Exchange.
(iii) Immediately after the conversion under this
section 4, the Company shall give a written notice of the
conversion (the "Automatic Conversion Notice") to all the former
holders of record of shares of Preferred Stock at their
respective addresses on the books of the Company. The Automatic
Conversion Notice shall set forth the instructions for effecting
the exchange of certificates, which shall be as nearly the same
as practicable as under section 3, the terms of which (including,
without limitation, sections 3(g) and 3(j)) are, except as
otherwise expressly provided in this section 4, incorporated in
this section 4, mutatis mutandis.
(iv) Notwithstanding anything to the contrary in
this section 4(a) and except as provided in section 3(c)(xi), no
dividend or other distribution of any nature whatsoever payable
in respect of the common stock after the conversion under this
section 4 shall be paid (but shall accrue) to a holder of any
unsurrendered certificate evidencing shares of Preferred Stock,
unless the certificate or certificates evidencing the holder's
shares of Preferred Stock so converted are delivered to the
Company in accordance with the Automatic Conversion Notice or the
holder notifies the Company that the certificate or certificates
have been lost, stolen or destroyed and executes an agreement
reasonably satisfactory to the Company to indemnify the Company
against any resulting loss it incurs. Thereupon, (A) there shall
be issued and delivered to the holder, in the holder's name shown
on the certificate or certificates, a certificate or certificates
evidencing the number of shares of common stock into which the
holder's shares of Preferred Stock were converted (together with
any cash payment in lieu of a fractional share) and (B) the
holder shall be entitled to payment of the amount referred to in
the immediately preceding sentence.
(b) Notwithstanding anything to the contrary in this
Certificate of Designations, upon any conversion of shares of
Preferred Stock into shares of common stock pursuant to this
section 4, the Company shall pay, on the conversion date, all
accumulated and accrued but unpaid dividends in cash; provided,
however, that if, in connection with the Qualifying Offering, the
underwriter advises the Company in writing that such payment
would materially and adversely affect the Qualifying Offering, in
lieu of the immediate payment of such accumulated and accrued but
unpaid dividends to the holder, the Company shall, within 30 days
after delivering the Automatic Conversion Notice, (i) pay the
holder its pro rata share, based upon the aggregate amount of
accumulated and accrued but unpaid dividends owed by the Company
to all holders of Preferred Stock and the amount of such
dividends owed to such holder, the greatest of (A) the amount the
underwriter advises would not so affect the Qualifying Offering,
(B) 5% of the net proceeds to the Company of the Qualifying
Offering (i.e., gross proceeds less deductions for all expenses
and underwriting commissions and concessions), but not more than
all accumulated and accrued but unpaid dividends, or (C) 10% of
the then accumulated and accrued but unpaid dividends, and (ii)
issue and deliver to each holder a promissory note in the form of
exhibit 4(b) hereto, executed by the Company and payable to the
order of that holder in the principal amount of the balance of
that holder's accumulated and accrued dividends; provided that,
at the option of such holder and in lieu of the receipt of such a
promissory note in the form of exhibit 4(b) hereto, such holder
may elect, by written notice delivered to the Company no later
than 20 days after the Company's delivery of the Automatic
Conversion Notice, to receive the number of shares of common
stock equal to the principal amount of such note divided by the
initial price to the public per share of the common stock sold in
the Qualifying Offering. A certificate representing such shares
of common stock shall be delivered by the Company to such holder
as soon as practicable after the Company's receipt of such
holder's election to receive such shares of common stock, but in
no event later than 20 days after such receipt.
(c) Any note issued pursuant to sections 2(c),
3(b)(iii) or 4(b) may be converted at any time prior to payment
in full thereof, at the option of the holder of such note, by
written notice given to the Company by such holder, into the
number of shares of common stock equal to (i) the sum of the then
outstanding principal amount of such note and any accrued
interest thereon, divided by (ii) the market price of the common
stock as of the date notice of such election is given by such
holder; provided, however, that if such notice is given within 20
business days after consummation of the Qualifying Offering, the
number of shares of common stock to be issued hereunder shall be
determined by dividing the amount determined under clause (i) by
the initial price to the public per share of the common stock
sold in the Qualifying Offering. A certificate representing such
shares of common stock shall be delivered by the Company to such
holder as soon as practicable after the Company's receipt of such
holder's election to receive such shares of common stock and the
Company's receipt and cancellation of such note, but in no event
later than 20 days after receipt of such election and note.
5. Liquidation. In the event of any liquidation,
dissolution or winding-up of the Company, whether voluntary or
involuntary, the holders of outstanding shares of Preferred Stock
shall be entitled to receive for each such share payment in cash
equal to the sum of (a) $90.00 in the case of Series A-1
Preferred Stock (the "Series A-1 Liquidation Value") and $100.00
in the case of the Series B Preferred Stock (the "Series B
Liquidation Value"), plus in each case an amount equal to all
accrued but unpaid dividends (but excluding accumulated
dividends) to the date of payment, or final payment, if there is
more than one payment (the "Series A-1 Liquidation Value", the
"Series B Liquidation Value", and the amount of such accrued and
unpaid dividends shall collectively constitute the "Liquidation
Value"), plus (b) an amount (the "Accumulated Dividend Amount")
equal to all accumulated but unpaid dividends to the Dividend
Payment Date immediately preceding the date of payment or final
payment, as the case may be, and no more. As to distribution
upon liquidation, dissolution or winding-up, the Series A-1
Preferred Stock and Series B Preferred Stock shall rank pari
passu with each other and shall rank senior to the common stock
of the Company. An amount equal to the sum of the Liquidation
Value plus the Accumulated Dividend Amount shall be paid to the
holders of Preferred Stock before any payment or distribution
shall be made to the holders of shares of common stock of the
Company. The voluntary sale, conveyance, lease, exchange or
transfer of all or substantially all the assets of the Company
(unless, in connection therewith, the liquidation, dissolution or
winding-up of the Company is specifically approved), or the
merger or consolidation of the Company into or with any other
corporation, or the merger of any other corporation into it, or
any purchase or redemption of shares of stock of the Company of
any class or series, shall not be deemed to be a liquidation,
dissolution or winding-up of the Company for purposes of this
section 5. Nothing in this section 5 shall be deemed to limit in
any way the right of the holders of shares of Preferred Stock to
convert any or all of those shares at any time before or
simultaneously with the payment to all those holders in respect
of those shares of an amount equal to the Liquidation Value plus
the Accumulated Dividend Amount in respect of all those shares.
After the distributions described above have been paid, the
remaining assets of the Company available for distribution to
stockholders shall be distributed among the holders of the
Preferred Stock, any other series or class of preferred stock
entitled to a share of the remaining assets of the Company and
common stock pro rata based on the number of shares of common
stock held by each (assuming full conversion of all such
Preferred Stock or such other series or class of preferred
stock).
6. Voting; Governance.
(a) General. Except as otherwise provided in this
section 6 and in section 7 or as required by law, the holders of
Preferred Stock shall vote with the holders of common stock (and
any other series or class of preferred stock entitled to so vote)
as a single class and shall be entitled to one vote for each
share of common stock into which the shares of Preferred Stock so
held would be convertible on the record date for the vote of
stockholders.
(b) Board of Directors.
(i) Subject to section 6(b)(ii), the board of
directors of the Company shall have seven members, of which the
holders of shares of common stock shall have the right to elect
four and the holders of shares of Preferred Stock shall have the
right to elect three (the directors so elected by the holders of
the Preferred Stock, the "Elected Preferred Directors").
(ii) Upon the occurrence of a Triggering Event,
(A) the board of directors shall be increased to 11 members, (B)
the newly created directorships resulting from that increase
shall be filled by individuals elected by the holders of
Preferred Stock (those so elected, the "Expansion Preferred
Directors") and (C) the board of directors shall continue to have
11 members, of which holders of shares of common stock shall have
the right to elect four, and of which holders of shares of
Preferred Stock shall have the right to elect three Elected
Preferred Directors and, until the first anniversary of the cure
of the Triggering Event the occurrence of which gave rise to the
provisions of this subparagraph (ii), four Expansion Preferred
Directors. One year after all Triggering Events shall have been
cured, the board of directors shall be reduced to seven directors
and the Expansion Preferred Directors shall cease to be
directors. Notwithstanding the foregoing the occurrence of the
Triggering Events in Section 2(e)(iv) or 2(e)(vi) shall not cause
the increase in the size of the board of directors or the other
foregoing provisions of this Section 6(b)(ii) to be implemented.
(c) Procedures
(i) Each director of the Company shall hold
office for a term expiring at the next annual meeting of
stockholders. Any vacancy caused by the death or resignation of
a Preferred Director may be filled only by the holders of
Preferred Stock entitled to vote for such Preferred Director. A
special meeting of the holders of the Preferred Stock entitled to
vote with respect to filling the vacancy shall be called and held
as promptly as practicable after any such death or resignation at
the direction of a majority of the board of directors, and in any
event shall be called within ten days, to be held within 15 days,
after receipt of a written request by the holders of record of at
least 50% of the then outstanding shares of Preferred Stock so
entitled to vote. In connection with any special meeting to be
held for the purpose of electing a Preferred Director to fill a
vacancy, only such holders of the Preferred Stock entitled to
vote for such Preferred Director shall be notified and be
permitted to participate at such meeting. If any special meeting
of the holders of Preferred Stock required to be called for the
election of directors pursuant to this section 6(c) shall not
have been called within ten days after the request therefor has
been made upon the secretary of the Company, the holders of
record of at least 50% of the then outstanding shares of the
Preferred Stock so entitled to vote may designate in writing one
of their number to call the meeting, and the meeting may be
called by the person so designated upon notice in accordance with
the notice required for annual meetings of stockholders. Any
holder of shares of Preferred Stock so designated shall have
access to the stock record books of the Company for the purpose
of so calling a special meeting. The Company shall pay the
reasonable expenses of calling and holding any such meeting.
(ii) Any special meeting of the holders of shares
of Preferred Stock to vote for the election of directors pursuant
to this section 6(c) shall be held in the city in which the next
preceding annual meeting of stockholders of the Company was held.
At a special or annual meeting for the election of directors by
the holders of shares of Preferred Stock, the presence in person
or by proxy of the holders of 50% of the outstanding shares of
Preferred Stock entitled to vote thereon shall constitute a
quorum. In connection with any special meeting to be held for
the purpose of electing a Preferred Director to fill a vacancy,
only such holders of the Preferred Stock entitled to vote for
such Preferred Director shall be notified and be permitted to
participate at such meeting. A majority of the holders of the
shares of Preferred Stock entitled to vote thereon present in
person or by proxy shall have the power to adjourn the meeting
for the purpose of such election, from time to time without
notice, other than announcement at the meeting, until a quorum
shall be present.
(iii) In connection with any vote for the Preferred
Directors, each holder of Preferred Stock entitled to vote
thereon as provided herein shall be entitled to one vote per
share, and the nominees receiving a plurality of the votes
entitled to be cast shall be elected.
(d) Certain Major Decisions. The board of directors
of the Company shall act by majority vote of the directors with
any interested parties in affiliated transactions being recused
(that is, by a majority of the disinterested directors in
accordance with Section 144 of the DGCL). Each director shall
have one vote on all matters to be voted upon by the board of
directors. In determining the presence of a quorum at all
meetings of the board of directors, a quorum shall consist of a
majority of the total number of directors. Notwithstanding the
foregoing, the unanimous consent of the Elected Preferred
Directors and if there are any Expansion Preferred Directors then
on the Board, the consent of six-sevenths (6/7's) of the total
number of the Elected Preferred Directors and Expansion Preferred
Directors, if any (collectively, the "Preferred Directors"),
shall be required to approve any action specified in section 7
and, in addition, any of the following (it being understood that,
notwithstanding anything to the contrary in this certificate, no
such action may be approved at any time there is any vacancy
among the Elected Preferred Directors):
(i) disposition or encumbrance of a material
portion of the assets or business of the Company or any of its
subsidiaries, including, for these purposes, any sale of
securities of any of the Company's subsidiaries, affiliates or
joint ventures (by the Company or any such entities), except as
set forth in Schedule 3.2.7 to the Series B Purchase Agreement;
(ii) formation of any joint venture, partnership
or other business combination by the Company or any of its
subsidiaries;
(iii) expenditures by the Company or any subsidiary
in a single transaction or a series of related transactions in
excess of $500,000, or commitments to make any such expenditures;
(iv) dividends or distributions, whether in cash
or otherwise, in respect of the Company's common stock, or any
redemption, purchase or other acquisition of any capital stock of
the Company (or securities convertible into or exchangeable for
such capital stock) or authorization, issuance or grant of any
securities of the Company or any subsidiary, other than the put
rights referred to in Schedule 3.2.7 to the Series B Purchase
Agreement;
(v) selection of an underwriter or placement
agent of any financing involving the Company's or its
subsidiaries, securities;
(vi) establishment of any committees of the board
of directors (other than the compensation and audit committees);
(vii) any transaction with an affiliate or an
associate of the Company or any subsidiary (other than a direct
or indirect wholly-owned subsidiary of the Company) (it being
understood that the transactions contemplated by this clause
(vii) do not include compensation and benefit arrangements with
employees, subject to section 6(d)(ix)), except those
transactions contemplated by the Series B Purchase Agreement or
set forth on Schedule 3.2.20 to the Series B Purchase Agreement;
(viii) incurrence by the Company or any subsidiary
of any indebtedness for borrowed money (in addition to
indebtedness outstanding on the date of this certificate),
including obligations under capital leases, or guarantees of any
such indebtedness of another person or entity, or the issuance of
any securities of the Company or any subsidiary, except for the
financing referred to in Schedule 3.2.9 to the Series B Purchase
Agreement;
(ix) change the compensation or benefits to any
officer, director or employee of the Company or any subsidiary
from the amounts in effect at June 26, 1995;
(x) any amendment or other change in any
insurance policy covering the Company or any subsidiary on the
date of this certificate, or any change in the identity of any
insurer;
(xi) except as set forth on Schedule 3.2.11 to the
Series B Purchase Agreement any leasehold commitment involving
consideration or a liability, contingent or otherwise, in excess
of $50,000 in the aggregate;
(xii) any change in the accounting policies or
procedures of the Company or any subsidiary or any change in the
Company's independent accountants;
(xiii) any other transaction or series or related
transactions which any party's total commitments and obligations
exceed $50,000; and
(xiv) any change in the Business Plan (as defined
in the Series B Purchase Agreement), including, without
limitation, the Company or any subsidiary, directly or indirectly
through an affiliate or joint venture, entering into any line of
business other than as contemplated by the Business Plan, or the
acquisition or creation of any other business or entity.
(e) Certain Committees.
(i) the board of directors shall establish and
maintain a compensation committee comprised of three directors,
none of whom may be an employee of the Company or any of its
subsidiaries and two of whom shall be Preferred Directors
selected by a majority of the Preferred Directors. The
compensation committee shall be responsible for recommending to
the full board of directors all stock option grants, bonuses and
other compensation arrangements for executives and key employees
and loans and other non-salary payments and other benefits and
arrangements with employees and affiliates and associates of the
Company. The compensation committee shall have such additional
powers and duties as the board of directors from time to time
determines.
(ii) The board of directors shall establish and
maintain an audit committee comprised of three directors, one of
whom shall be a senior executive officer of the Company (but not
the chief financial or chief accounting officer) and two of whom
may not be employees of the Company or any of its subsidiaries,
and shall be Preferred Directors selected by a majority of the
Preferred Directors. The audit committee shall be responsible
for selecting the Company's independent auditors and reviewing
their audit, as well as reviewing and approving the Company's
internal controls and accounting systems. The audit committee
shall have such additional powers and duties as the board of
directors from time to time determines.
(iii) In the event that the group of directors of
the Company that are specified to select a committee member
pursuant to section 6(f)(i) or 6(f)(ii) is deadlocked over its
selection of such committee member for more than 30 days, the
full board of directors shall select such committee member from
among such group of directors.
(f) Certain Expenses. The Company shall from time to
time pay (i) all reasonable out-of-pocket expenses incurred by
directors in attending meetings of the board of directors and its
committees, and (ii) the reasonable fees and expenses of two
counsel(s) selected by the Preferred Directors from time to time
to represent them as such; that counsel may, at the Preferred
Directors' election, attend any meeting of the board of directors
or any committee that includes a Preferred Director.
7. Class Voting Upon Certain Events. In addition to
such other vote, if any, as may be required by law or provided by
this Certificate of Designations, the consent of the holders of
at least 75% of the shares of the Preferred Stock at the time
outstanding, voting together as a single class, given at a
meeting (or by a written consent in lieu of a meeting) shall be
necessary for effecting or validating each of the following:
(a) authorization or creation of any other class or
series of stock, if such class or series ranks, or any series
thereof could rank, prior to or on a parity with any of the
Preferred Stock;
(b) amendment, alteration, waiver or repeal of the
provisions of the certificate of incorporation of the Company
(including this certificate) or the by-laws of the Company (for
the avoidance of doubt, it being understood that holders of at
least 75% of the shares of Preferred Stock at the time
outstanding, voting together as a single class, may effect or
validate any amendment of this Certificate of Designations
(including any amendment that changes the provisions of section 3
or 4) and may waive any provision of this Certificate of
Designations and may consent to any action or inaction that
would, in the absence of such consent, violate this Certificate
of Designations or constitute a Triggering Event);
(c) merger, consolidation or other business
combination of the Company with or into any other corporation or
recapitalization of the Company; or
(d) sale of all or substantially all the assets of the
Company.
8. Preemptive Rights. If, at any time prior to a
Qualified Offering, the Company proposes to issue any securities
to any person or entity (other than pro rata issuances of
securities to all holders of common stock, issuances of Options
to employees and issuances of common stock pursuant to Options
and Convertible Securities described on schedule 3.2.7 to the
Series B Purchase Agreement) (a "Proposed Issuance"), each holder
of shares of Preferred Stock or common stock issued upon
conversion thereof shall have the right (which the holder may
exercise in whole or in part) to purchase, upon the same terms, a
proportionate quantity of those securities in the proportion that
the aggregate number of shares of common stock (assuming exercise
of all Warrants (as defined in the Series A Investment Agreement
and that certain Note Purchase Agreement (the "Note Purchase
Agreement") dated as of June 28, 1994 relating to the Company's
15% Convertible Notes due December 31, 1994) and Warrants (as
defined in the Series B Purchase Agreement) and conversion of all
Preferred Stock) then beneficially owned (as that term is used in
the rules and regulations under the Securities Exchange Act of
1934) and that were acquired under either the Series A Investment
Agreement, the Series B Purchase Agreement or the Exchange
Agreement by that party bears to the total number of shares of
common stock (assuming exercise of all Warrants (as defined in
the Series B Purchase Agreement, Series A Investment Agreement
and Note Purchase Agreement)) and conversion of all Preferred
Stock) of the Company then beneficially owned and that were
acquired under such Investment Agreement, Exchange Agreement and
Purchase Agreement by all holders of shares of Preferred Stock or
common stock issued upon conversion thereof. The Company shall
give notice to each holder setting forth the identity of the
proposed purchaser and the time, which shall not be fewer than 45
days and not more than 60 days, within which, and the terms upon
which, each holder may elect, by written notice given to the
Company in accordance with the Company's notice to each holder,
to purchase the securities, which terms shall be the same as the
terms upon which the proposed purchaser may purchase the
securities. If there is any change in any terms of the Proposed
Issuance, the holders shall have no further rights with respect
to that Proposed Issuance, and the provisions of this section 8
shall again apply to the Proposed Issuance, as so changed, as if
the Proposed Issuance, as so changed, were being proposed
initially as the Proposed Issuance. If any holder (a "Shortfall
Purchaser") wishes to purchase a quantity of securities greater
than the holder's proportionate quantity and any other holder
wishes to purchase fewer than that holder's proportionate
quantity of securities (a "Shortfall"), the Shortfall Purchaser
may (in accordance with an election that may be made pursuant to
the Company's notice to each holder) elect to purchase any or all
of the aggregate amount of all the Shortfalls in the proportion
that the amount of Shortfalls specified by the Shortfall
Purchaser in the election to purchase securities bears to the
aggregate amount of all the Shortfalls specified by all Shortfall
Purchasers in all the election to purchase securities. Any
securities not purchased by the holders of shares of Preferred
Stock under this section 8 may thereafter be sold to the proposed
purchaser at any time within 90 days after the expiration of that
45- or 60-day period on the same terms as those upon which
holders of shares of Preferred Stock were entitled to purchase
the securities.
9. Retirement of Shares. Shares of Preferred Stock
that are converted into shares of common stock as provided in
this Certificate of Designations or otherwise acquired by the
Company in any manner shall be permanently retired and shall not
under any circumstances be reissued. The Company shall from time
to time take such appropriate corporate action as may be
necessary to reduce the authorized Preferred Stock accordingly.
10. Increase or Decrease in Shares of the Series.
Subject to the provisions of sections 6 and 7, the board of
directors is authorized to adopt, from time to time, a resolution
or resolutions providing for an increase or decrease in the
number of shares constituting Series A-1 Preferred Stock or
Series B Preferred Stock, but no such decrease shall reduce at
any time the number of shares of Preferred Stock at the time
outstanding.
11. Transfer Agent, Conversion Agent and Registrar.
The Company shall, as long as any shares of Preferred Stock are
outstanding, maintain an office or agency where the shares may be
presented for registration of transfer and exchange and for
conversion.
12. Governmental Approvals; Listing. If any shares of
common stock that would be issuable upon conversion of shares of
Preferred Stock require registration with or approval of any
governmental authority before the shares may be issued upon
conversion, the Company shall use its best efforts as
expeditiously as possible to cause the shares to be duly
registered or approved, as the case may be. The Company shall
endeavor to list the shares of (or depository shares representing
interests in) common stock required to be delivered upon
conversion of shares of Preferred Stock prior to such delivery
upon the principal national securities exchange, if any, upon
which the outstanding common stock is listed at the time of
delivery.
13. Certain Conflicts. To the extent any provision of
this Certificate of Designations conflicts, or is otherwise
inconsistent, with a provision of the Company's by-laws, the
provision of this Certificate of Designations shall be given
effect, and the by-laws shall be deemed amended accordingly.
14. Action by Consent Without a Meeting. Any action
required or permitted to be taken by holders of shares of
Preferred Stock at any meeting of shareholders may be taken
without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be
signed by holders of shares of Preferred Stock having not fewer
than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares of
Preferred Stock entitled to vote were present and voted and such
consent bearing the date of the signature of each holder of
Preferred Stock Signing the consent is delivered to the
registered office of the Company in the State of Delaware, its
principal place of business or the Secretary of the Company. Such
consent if less than unanimous consent, shall be delivered to
those holders of shares of Preferred Stock who have not consented
in writing.
15. Notice. Any notice, request, claim, demand,
document or other communication hereunder to any party shall be
effective when delivered (or upon refusal of receipt) and shall
be in writing and delivered personally or sent by telex or
telecopy (with such telex or telecopy confirmed promptly in
writing sent by first class mail), or first class mail, or other
similar means of communication, as follows:
(i) if to the Company, addressed to American
Communications Services, Inc., 131 National Business
Parkway, Suite 100, Annapolis Junction, Maryland 20701,
Attention: Richard A. Kozak;
(ii) if to a holder of Preferred Stock, to the
address of such holder set forth in the stock records of the
Company.
All such communications shall be deemed to have been
delivered when so delivered by hand or sent by telex (answer back
received) or telecopy, or five business days after being so
mailed.
Date: __________________, 1995
/s/ Anthony J. Pompliano
Name: Anthony J. Pompliano
Title: Chairman [and Chief Executive
Officer]
ATTEST:
/s/ Riley Murphy
Name: Riley Murphy
Title: Secretary
Exhibit 2(c)
PROMISSORY NOTE
Dated January 1, 1998
The undersigned, American Communications Services, Inc.
(the "Borrower"), a Delaware corporation, promises to pay to the
order of [name of holder] or its successors or assigns (the
"Lender") the principal sum of $[accumulated and accrued
dividends through December 31, 1997) and to pay simple interest
(computed on the basis of the actual number of days elapsed in a
year of 365 or 366 days, as the case may be), on the unpaid
principal of this note from the date of this note until that
principal sum shall be paid in full at the rate of 9% per year
(except that, upon the occurrence and during the continuance of a
Triggering Event (as defined in the Amended and Restated
Certificate of Designation relating to the Borrower's Series A-1
Preferred Stock and Series B Preferred Stock (the "Certificate of
Designation")), the rate of simple interest shall be 18% per
year).
Payments of principal shall be made in eight equal
installments, together with all accrued interest on the principal
amount from time to time outstanding to the date of payment, on
the last day of each calendar quarter after the date of this
note. All payments shall be made in lawful money of the United
States to the Lender at its address on the books of the Borrower
at the date of payment or, at the Lender's election, by wire
transfer in immediately available funds to such account or
accounts as the Lender may designate in writing to the Borrower
from time to time.
In addition to any other remedies the Lender may have
at law or otherwise for a breach by the Borrower of its
obligations under this note, if a Triggering Event referred to in
section 2(e) of the Certificate of Designation occurs and is
continuing, holders of 25% or more of the then outstanding
principal amount of the promissory notes issued by the Borrower
pursuant to sections 2(c), 3(b) (iii) and 4(b) of the Certificate
of Designation (such promissory notes, including this note,
collectively, the "Notes"), by notice to the Borrower, may
declare the entire unpaid principal amount of all the Notes and
all accrued and unpaid interest on all the Notes immediately due
and payable.
The indebtedness of the Borrower under this note and
the other notes may be prepaid by the Borrower at any time, or
from time to time, in whole or in part, without penalty or
premium. Any such prepayment shall first be applied to accrued
and unpaid interest, with the balance applied to any unpaid
installments of principal in the inverse order of maturity. Any
such prepayment shall be made to the Lender and all the other
Lenders referred to in the Notes pro rata in accordance with the
outstanding principal amount of the Notes.
This note shall be convertible into shares of common
stock of the Borrower pursuant to and in the manner specified in
section 4(c) of the Certificate of Designation. The Lender does
hereby (a) represent that it is an accredited investor (within
the meaning of the rules and regulations under the Securities Act
of 1933, as amended (the "Securities Act") and (b) acknowledge
that (i) the shares of common stock of the Borrower received by
the Lender upon any such conversion of this note will not be
registered under the Securities Act or the securities laws of any
other jurisdiction and constitute "Restricted Securities" within
the meaning of Rule 144 under the Securities Act and therefore
may not be resold unless registered under the Securities Act or
sold pursuant to an exemption from such registration and (ii) the
certificate(s) representing the shares of common stock of the
Borrower so received shall bear such legend as the Company deems
necessary or appropriate to comply with the Securities Act and
any other applicable federal and state law.
This note 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.
The Borrower 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 this note (and agrees
not to commence any action, suit or proceeding relating to this
note except in such courts). The Borrower further agrees that
service of any process, summons, notice or document by U.S.
registered mail to it at its address in Section [7.4] of the
Series B Purchase Agreement (as defined in the Certificate of
Designation) 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. The Borrower irrevocably and
unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this note 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.
The Borrower waives trial by jury for all actions or
proceedings arising directly or indirectly under this note.
AMERICAN COMMUNICATIONS SERVICES, INC.
By: ________________________________
Name:
Title:
Exhibit 3(b)(iii)
PROMISSORY NOTE
Dated (conversion date)
The undersigned, American Communications Services, Inc.
(the "Borrower"), a Delaware corporation, promises to pay to the
order of [name of holder] or its successors or assigns (the
"Lender") the principal sum of $[accumulated and accrued
dividends through the conversion date] and to pay simple interest
(computed on the basis of the actual number of days elapsed in a
year of 365 or 366 days, as the case may be), on the unpaid
principal of this note from the date of this note until that
principal sum shall be paid in full at the rate of 9% per year
(except that, upon the occurrence and during the continuance of a
Triggering Event (as defined in the Amended and Restated
Certificate of Designation relating to the Borrower's Series A-1
Preferred Stock and Series B Preferred Stock (the "Certificate of
Designation")), the rate of simple interest shall be 18% per
year).
Payments of principal, including, for these purposes,
all accrued interest through December 31, 1997 (the sum of such
principal and accrued interest, the "New Principal"), shall be
made in eight equal installments, together with all accrued
interest on the New Principal from time to time outstanding to
the date of payment, on the last day of each calendar quarter,
commencing March 31, 1988. All payments shall be made in lawful
money of the United States to the Lender at its address on the
books of the Borrower at the date of payment or, at the Lender's
election, by wire transfer in immediately available funds to such
account or accounts as the Lender may designate in writing to the
Borrower from time to time. For purposes of the following two
paragraphs, the term "principal amount" at any date means (a) at
all times on or before December 31, 1997, the original principal
amount, together with all accrued interest to that date, and (b)
thereafter, the New Principal.
In addition to any other remedies the Lender may have
at law or otherwise for a breach by the Borrower of its
obligations under this note, if a Triggering Event referred to in
section 2(e) of the Certificate of Designation occurs after
December 31, 1997 and is continuing, holders of 25% or more of
the then outstanding principal amount of the promissory notes
issued by the Borrower pursuant to sections 2(c), 3(b) (iii) and
4(b) of the Certificate of Designation (such promissory notes,
including this note, collectively, the "Notes"), by notice to the
Borrower, may declare the entire unpaid principal amount of all
the Notes and all accrued and unpaid interest on all the Notes
immediately due and payable.
The indebtedness of the Borrower under this note and
the other notes may be prepaid by the Borrower at any time, or
from time to time, in whole or in part, without penalty or
premium. Any such prepayment shall first be applied to accrued
and unpaid interest, with the balance applied to any unpaid
installments of principal in the inverse order of maturity. Any
such prepayment shall be made to the Lender and all the other
Lenders referred to in the Notes pro rata in accordance with the
outstanding principal amount of the Notes.
This note shall be convertible into shares of common
stock of the Borrower pursuant to and in the manner specified in
section 4(c) of the Certificate of Designation. The Lender does
hereby (a) represent that it is an accredited investor (within
the meaning of the rules and regulations under the Securities Act
of 1933, as amended (the "Securities Act") and (b) acknowledge
that (i) the shares of common stock of the Borrower received by
the Lender upon any such conversion of this note will not be
registered under the Securities Act or the securities laws of any
other jurisdiction and constitute "Restricted Securities" within
the meaning of Rule 144 under the Securities Act and therefore
may not be resold unless registered under the Securities Act or
sold pursuant to an exemption from such registration and (ii) the
certificate(s) representing the shares of common stock of the
Borrower so received shall bear such legend as the Company deems
necessary or appropriate to comply with the Securities Act and
any other applicable federal and state law.
This note 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.
The Borrower 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 this note (and agrees
not to commence any action, suit or proceeding relating to this
note except in such courts). The Borrower further agrees that
service of any process, summons, notice or document by U.S.
registered mail to it at its address in Section [7.4] of the
Series B Purchase Agreement (as defined in the Certificate of
Designation) 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. The Borrower irrevocably and
unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this note 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.
The Borrower waives trial by jury for all actions or
proceedings arising directly or indirectly under this note.
AMERICAN COMMUNICATIONS SERVICES, INC.
By: _________________________________
Name:
Title:
EXHIBIT 4(b)
PROMISSORY NOTE
Dated [conversion date]
The undersigned, American Communications Services, Inc.
(the "Borrower"), a Delaware corporation, promises to pay to the
order of [name of holder] or its successors or assigns (the
"Lender") the principal sum of $[balance of holder's accumulated
and accrued dividends through the conversion date] and to pay
simple interest (computed on the basis of the actual number of
days elapsed in a year of 365 or 366 days, as the case may be),
on the unpaid principal of this note from the date of this note
until that principal sum shall be paid in full at the rate of 9%
per year (except that, upon the occurrence and during the
continuance of a Triggering Event (as defined in the Amended and
Restated Certificate of Designation relating to the Borrower's
Series A-1 Preferred Stock and Series B Preferred Stock (the
"Certificate of Designation")), the rate of simple interest shall
be 18% per year).
Payments of principal shall be made in eight equal
installments, together with all accrued interest on the principal
amount from time to time outstanding to the date of payment, on
the last day of each calendar quarter after the date of this
note. All payments shall be made in lawful money of the United
States to the Lender at its address on the books of the Borrower
at the date of payment or, at the Lender's election, by wire
transfer in immediately available funds to such account or
accounts as the Lender may designate in writing to the Borrower
from time to time.
In addition to any other remedies the Lender may have
at law or otherwise for a breach by the Borrower of its
obligations under this note, if a Triggering Event referred to in
section 2(e) of the Certificate of Designation occurs and is
continuing, holders of 25% or more of the then outstanding
principal amount of the promissory notes issued by the Borrower
pursuant to sections 2(c), 3(b)(iii) and 4(b) of the Certificate
of Designation (such promissory notes, including this note,
collectively, the "Notes"), by notice to the Borrower, may
declare the entire unpaid principal amount of all the Notes and
all accrued and unpaid interest on all the Notes immediately due
and payable.
The indebtedness of the Borrower under this note and
the other notes may be prepaid by the Borrower at any time, or
from time to time, in whole or in part, without penalty or
premium. Any such prepayment shall first be applied to accrued
and unpaid interest, with the balance applied to any unpaid
installments of principal in the inverse order of maturity. Any
such prepayment shall be made to the Lender and all the other
Lenders referred to in the Notes pro rata in accordance with the
outstanding principal amount of the Notes.
This note shall be convertible into shares of common
stock of the Borrower pursuant to and in the manner specified in
section 4(c) of the Certificate of Designation. The Lender does
hereby (a) represent that it is an accredited investor (within
the meaning of the rules and regulations under the Securities Act
of 1933, as amended (the "Securities Act") and (b) acknowledge
that (i) the shares of common stock of the Borrower received by
the Lender upon any such conversion of this note will not be
registered under the Securities Act or the securities laws of any
other jurisdiction and constitute "Restricted Securities" within
the meaning of Rule 144 under the Securities Act and therefore
may not be resold unless registered under the Securities Act or
sold pursuant to an exemption from such registration and (ii) the
certificates) representing the shares of common stock of the
Borrower so received shall bear such legend as the Company deems
necessary or appropriate to comply with the Securities Act and
any other applicable federal and state law.
This note 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.
The Borrower 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 this note (and agrees
not to commence any action, suit or proceeding relating to this
note except in such courts). The Borrower further agrees that
service of any process, summons, notice or document by U.S.
registered mail to it at its address in Section [7.4] of the
Series B Purchase Agreement (as defined in the Certificate of
Designation) 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. The Borrower irrevocably and
unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this note 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.
The Borrower waives trial by jury for all actions or
proceedings arising directly or indirectly under this note.
AMERICAN COMMUNICATIONS SERVICES, INC.
By: ______________________________
Name:
Title:
EXHIBIT G
SUPPLEMENTAL GOVERNANCE AGREEMENT
THIS SUPPLEMENTAL GOVERNANCE AGREEMENT (this
"Agreement"), dated as of February 26, 1996, by and among
American Communications Services, Inc., a Delaware corporation
(the "Company"), and certain holders of the outstanding shares of
9% Series A-1 Convertible Preferred Stock, $1.00 par value (the
"Series A-1 Preferred Stock"), 9% Series B-1 Convertible
Preferred Stock, $1.00 par value, 9% Series B-2 Convertible
Preferred Stock, $1.00 par value, 9% Series B-3 Convertible
Preferred Stock, $1.00 par value and 9% Series B-4 Convertible
Preferred Stock, $1.00 par value (collectively, the "Series B
Preferred Stock" and together with the Series A-1 Preferred
Stock, the "Preferred Stock") of the Company set forth in
Schedule I hereto (collectively the "Voting Shareholders"). All
terms used herein and not otherwise defined shall have the
meanings ascribed to such terms in the Governance Agreement dated
as of November 9, 1995 between the Company and the Voting
Shareholders.
R E C I T A L S
WHEREAS, on November 8, 1995, in response to voting
rights issues raised by the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") and in fulfillment
of a condition to the Company's continued listing on NASDAQ, the
Company and the Voting Shareholders entered into a Governance
Agreement (the "Governance Agreement") pursuant to which, among
other things, the Voting Shareholders agree to cause the
composition and election of the Board of Directors and the
Preferred Veto Rights to be consistent with the Certificate of
Designations Amendments until such time as such amendments were
approved by the stockholders of the Company, notwithstanding any
contrary provisions in the Current Certificate of Designations;
and
WHEREAS, pursuant to the Governance Agreement, it was
deemed that a Triggering Event (as such term was defined in the
Series A Certificate) would have occurred on or prior to June 26,
1995, the date a Certificate of Elimination relating to the
Series A Certificate was filed with the Secretary of State of the
State of Delaware; and
WHEREAS, pursuant to the Series A Certificate the
occurrence of a Triggering Event would have caused an increase in
the size of the Board of Directors from seven directors to 11
directors and resulted in the composition of the Board changing
from four directors elected by the holders of the Common Stock
and three directors elected by the holders of the Preferred Stock
to four directors elected by the holders of the Common Stock and
seven directors elected by the holders of the Preferred Stock;
and
WHEREAS, under the Series A Certificate the Board would
have remained at 11 directors, with four elected by the holders
of the Common Stock and seven elected by the holders of the
Preferred Stock, for one year after all Triggering Events had
been cured; and
WHEREAS, the aforementioned Triggering Event would have
been deemed to have been cured on June 26, 1995; and
WHEREAS, in connection with the Company's application
to have its common stock, par value $0.01 per share (the "Common
Stock") be included in the NASDAQ National Market System
("NASDAQ/NMS"), NASDAQ/NMS has required that the Board revert to
its original structure of seven members; and
WHEREAS, pursuant to the Governance Agreement, the
Board was to consist of 11 directors until June 26, 1996; and
WHEREAS, the Governance Agreement was terminated
pursuant to its terms upon the approval by the Company's
stockholders on January 26, 1996 of certain amendments to the
Company's Certificate of Incorporation; and
WHEREAS, the Voting Shareholders deem it to be in their
best interests and the best interests of the Company for the
Company's Common Stock to be included in NASDAQ/NMS; and
WHEREAS, the Voting Shareholders deem it to be in their
best interests and the best interests of the Company to use all
reasonable efforts to cause the Board to revert to a seven member
board immediately.
NOW THEREFORE, in consideration of the foregoing and
for other good and valuable consideration, the parties hereto
hereby agrees as follows:
1. Board of Directors
The Board shall immediately revert to seven directors,
four of whom will be Common Directors and three of whom will be
Preferred Directors. Commencing immediately as of the date
hereof, all matters relating to the Board, including without
limitation its size, composition, powers and voting with respect
thereto shall be governed by the Amended and Restated
Certification of Incorporation and the Amended and Restated
By-Laws of the Company.
2. Further Assurances
The Voting Shareholders will use all reasonable efforts
and take all reasonable actions to enable the Company to
implement the provisions of this Agreement.
3. General Provisions
3.1 Contents of Agreement, Parties in Interest,
Assignment. This Agreement sets for the entire understanding of
the parties with respect to the subject matter hereof. Any
previous agreements or understandings between the parties
regarding the subject hereof are merged into and superseded by
this Agreement. All terms and conditions of this Agreement shall
be binding upon and inure to the benefit of and be enforceable by
the respective heirs, legal representatives, successors and
permitted assigns of the parties hereto.
3.2 Severability. In the event that any one or
more of the provisions contained in this Agreement shall be
invalid or unenforceable in any respect for any reason, the
validity, legality and enforceability of such provision in every
other respect and of the remaining provisions of this Agreement
shall not be in any way impaired.
3.3 Headings. The headings of the Sections and
the subsections of this Agreement are inserted for convenience of
reference only and shall not constitute a part hereof.
3.4 Notices. Any notice, request, claim, demand,
document and other communication hereunder to any party shall be
effective upon receipt (or refusal of receipt) and shall be in
writing and delivered personally or sent by telex or telecopy
(with such telex or telecopy confirmed promptly in writing sent
by first class mail), or first class mail, or other similar means
of communications, as follows:
(i) If to Huff, addressed to The Huff Alternative
Income Fund, L.P., 67 Park Place, 9th Floor,
Morristown, New Jersey 07960, Attention: Joseph
Thornton, Telecopier Number (201) 984-5818;
(ii) If to ING, addressed to ING Equity Partners, L.P.,
135 East 57th Street, 9th Floor, New York, New
York 10022, Attention: Olivier L. Trouveroy,
Telecopier Number (212) 750-2970;
(iii) If to the Company, addressed to American
Communications Services, Inc., 131 National
Business Parkway, Suit 100, Annapolis Junction, MD
20701, Attention: Richard A. Kozak, Telecopier
Number (301) 617-4276; or
(iv) If to a Voting Shareholder other than Huff or ING,
to the address of such Voting Shareholder set
forth in the stock records of the Company;
or, in each case, to such other address or telex or
telecopy number as such party may designate in writing to each
Voting Shareholder and the Company by written notice given in the
manner specified herein.
All such communications shall be deemed to have been
given, delivered or made when so delivered by hand or sent by
telex (answer back received) or telecopy, or five business days
after being so mailed.
3.5 LITIGATION. THIS AGREEMENT SHALL BE GOVERNED
BY, CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK. EACH OF THE PARTIES HERETO
ACKNOWLEDGES AND AGREES THAT IN THE EVENT OF ANY BREACH OF THIS
AGREEMENT, THE NON-BREACHING PARTIES WOULD BE IRREPARABLY HARMED
AND COULD NOT BE MADE WHOLE BY MONETARY DAMAGES, AND THAT, IN
ADDITION TO ANY OTHER REMEDY TO WHICH THEY MAY BE ENTITLED AT LAW
OR IN EQUITY, THE PARTIES SHALL BE ENTITLED TO SUCH EQUITABLE OR
INJUNCTIVE RELIEF AS MAY BE APPROPRIATE. EACH PARTY AGREES THAT
JURISDICTION AND VENUE WILL BE PROPER IN THE SOUTHERN DISTRICT OF
NEW YORK AND WAIVES ANY OBJECTIONS BASED UPON FORUM NON
CONVENIENS. EACH PARTY WAIVES PERSONAL SERVICE OF PROCESS AND
AGREES THAT A SUMMONS AND COMPLAINT COMMENCING AN ACTION OR
PROCEEDING SHALL BE PROPERLY SERVED AND SHALL CONFER PERSONAL
JURISDICTION IF SERVED BY REGISTERED OR CERTIFIED MAIL TO THE
PARTY AT THE ADDRESS SET FORTH IN THIS AGREEMENT, OR AS OTHERWISE
PROVIDED BY THE LAWS OF THE STATE OF NEW YORK OR THE UNITED
STATES. THE CHOICE OF FORUM SET FORTH IN THIS SECTION 3.5 SHALL
NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT
OBTAINED IN ANY OTHER FORUM OR THE TAKING OF ANY ACTION UNDER
THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE
JURISDICTION.
3.6 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.
3.7 Expenses. The Company will reimburse the
Voting Shareholders for the reasonable expenses, including
reasonable counsel fees, which they incur in connection with this
Agreement.
3.8 Cost of Enforcement. The party which
prevails in any suit or proceeding against the other to enforce
any provision of this Agreement or to recover damages resulting
from a breach of this Agreement shall be entitled to receive from
the nonprevailing party the costs and reasonable attorneys' fees
of the prevailing party incurred in such suit or proceeding.
Supplemental Governance Agreement
IN WITNESS WHEREOF, this Agreement has been executed by
the parties hereto as of the day and year first above written.
AMERICAN COMMUNICATIONS SERVICES,
INC.
By: ______________________________
Name:
Title:
THE HUFF ALTERNATIVE INCOME FUND, L.P.
By: WRH PARTNERS, L.L.C.
general partner
By: _____________________________
Name:
Title:
Supplemental Governance Agreement
ING EQUITY PARTNERS, L.P. I
By: LEXINGTON PARTNERS, L.P.
its general partner
By: LEXINGTON PARTNERS, INC.
its general partner
By:
Name:
Title:
APEX INVESTMENT FUND, L.P.
By: APEX MANAGEMENT PARTNERSHIP,
L.P., general partner
By: _____________________________
George M. Middlemas
General Partner
APEX INVESTMENT FUND II, L.P.
By: APEX MANAGEMENT PARTNERSHIP,
L.P., general partner
By:
George M. Middlemas
General Partner
Supplemental Governance Agreement
THE PRODUCTIVITY FUND II, L.P.
By: FIRST ANALYSIS MANAGEMENT
COMPANY II,
its general partner
By: FIRST ANALYSIS CORPORATION,
general partner
By:
Name:
Title:
ARGENTUM CAPITAL PARTNERS, L.P.
By: BR Associates, Inc.,
general partner
By: ___________________________
Name:
Title:
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:
Name:
Title:
EXHIBIT H
VOTING RIGHTS AGREEMENT
THIS VOTING RIGHTS AGREEMENT (this "Agreement"), dated
as of November 8, 1995, by and among certain holders of shares of
the outstanding Common Stock, $.01 par value (the "Common Stock")
of American Communications Services, Inc. a Delaware corporation
(the "Company"), and certain holders of the outstanding shares of
9% Series A-1 Convertible Preferred Stock, $1.00 par value and 9%
Series B-1 Convertible Preferred Stock, $1.00 par value, 9%
Series B-2 Convertible Preferred Stock, $1.00 par value, and 9%
Series B-3 Convertible Preferred Stock, $1.00 par value
(collectively the "Preferred Stock") of the Company set forth in
Schedule I hereto (collectively the "Voting Shareholders").
R E C I T A L S
WHEREAS, the Voting Shareholders deem it to be in their
best interests, and in the best interests of the Company, that
they should vote their shares of Preferred Stock and Common Stock
in the manner set forth herein in connection with the election of
the Board of Directors (the "Board") of the Company;
WHEREAS, the Voting Shareholders and the Company are
parties to a Governance Agreement of even date hereof (the
"Governance Agreement") which, among other things, governs the
election of the Board until such time as the Amended and Restated
Certificate of Designations (the "Amended Certificate") which is
attached as an exhibit to the Governance Agreement is approved by
the stockholders of the Company and filed with the Secretary of
State of the State of Delaware (the "Effectiveness of the Amended
Certificate"); and
WHEREAS, in accordance with the Governance Agreement or
upon the Effectiveness of the Amended Certificate, as the case
may be, the Board shall consist of seven members, four of whom
shall be elected by the holders of the Common Stock and three of
whom shall be elected by the holders of the Preferred Stock (the
"Standard Board Structure"), provided that, except as otherwise
provided in Section 6(b)(ii) of the Amended Certificate, in the
event of a "Triggering Event" as defined in the Amended
Certificate, the Board shall be increased to, and for the period
provided in Section 6(b)(ii) of the Amended Certificate shall be
maintained at, 11 members, four of whom shall be elected by the
holders of the Common Stock and seven of whom shall be elected by
the holders of the Preferred Stock (the "Triggering Event Board
Structure"); and
WHEREAS, pursuant to the Governance Agreement, it is
deemed that a Triggering Event would have occurred on or prior to
June 25, 1995 and would have been cured on June 26, 1995.
NOW THEREFORE, in consideration of the foregoing and
for other good and valuable consideration, the parties hereto
hereby agree as follows:
1. Election of Directors
1.1 Except as otherwise set forth in Section 4
hereof, in any election of directors pursuant to the Governance
Agreement or the Amended Certificate, as the case may be, whether
pursuant to an annual or special meeting of shareholders or
otherwise ("Election of Directors"), held during a period in
which the Standard Board Structure is in effect, the Voting
Shareholders agree to vote all of the shares of Preferred Stock
which they then own in the following manner:
(i) for Christopher L. Rafferty and Edwin M. Banks,
designated by The Huff Alternative Income Fund,
L.P. ("Huff"), as Preferred Directors (as defined
in the Amended Certificate); and
(ii) for Olivier L. Trouveroy, designated by ING Equity
Partners, L.P.I. ("ING"), as a Preferred Director.
1.2 Except as otherwise set forth in Section 4
hereof, in any Election of Directors held during a period in
which the Standard Board Structure is in effect, the Voting
Shareholders agree to vote all of the shares of Common Stock
which they then own in the following manner:
(i) for Cathy Markey, designated by Huff as a director
to be elected by the holders of the Common Stock
(the "Common Directors");
(ii) for George M. Middlemas, designated by Apex
Investment Fund II, L.P. ("Apex") as a Common
Director;
(iii) prior to the ING Deferred Closing Failure (as
defined in Section 4), if any, for Benjamin P.
Giess, designated by ING as a Common Director; and
(iv) for Anthony J. Pompliano, designated by Huff and
ING as a Common Director.
1.3 Except as otherwise set forth in Section 4
hereof, in any Election of Directors held during a period in
which the Triggering Event Board Structure is in effect, the
Voting Shareholders agree to vote all of the shares of Preferred
Stock which they then own in the following manner:
(i) for Christopher L. Rafferty, Edwin M. Banks, Cathy
Markey and Peter C. Bentz designated by Huff as
Preferred Directors;
(ii) prior to the ING Deferred Closing Failure, if any,
for Olivier L, Trouveroy and Benjamin P. Giess,
and thereafter for Olivier L. Trouveroy or
Benjamin P. Geiss (but not both), designated by
ING as Preferred Directors; and
(iii) for George M. Middlemas designated by Apex as a
Preferred Director.
1.4 Except as otherwise set forth in Section 4
hereof, in any Election of Directors held during a period in
which the Triggering Event Board Structure is in effect, the
Voting Shareholders agree to vote all of the shares of Common
Stock which they then own in the following manner:
(i) for Frank Galland designated by Huff as a Common
Director;
(ii) for Anthony J. Pompliano and Steven G. Chrust each
designated by Huff and ING as a Common Director;
and
(iii) for Richard A. Kozak designated by ING as a Common
Director.
1.5 The Voting Shareholders shall have, from time
to time, the right to substitute other designees in the place and
stead of their respective designees provided for herein. The
Voting Shareholders agree to vote all of the shares of Common
Stock or Preferred Stock, as the case may be, which they then own
for any such substituted designee in any Election of Directors.
1.6 A Voting Shareholder may, from time to time,
notify the other Voting Shareholders that it wishes that they
vote all of their shares of Common Stock or Preferred Stock, as
the case may be, for the removal from the Board of any of that
Voting Shareholder's designees to the Board, with or without
cause, and the Voting Shareholders agree to vote all of the
shares of Common Stock or Preferred Stock, as the case may be,
which they then own to remove such designees from the Board and,
if necessary, to call a special meeting of stockholders for the
purpose of voting on the removal of such designees.
1.7 Any Voting Shareholder seeking to substitute
or remove a director pursuant to Sections 1.5 or 1.6 hereof shall
notify all of the other Voting Shareholders of such action,
identifying the designees who are the subject of such action.
1.8 (i) The Common Director designated by Huff
and ING pursuant to Section 1.2(iv)
hereof shall not be an employee,
associate or affiliate of Huff or ING.
(ii) The Common Director designated by Huff
pursuant to Section 1.4(i) hereof shall not
be an employee, associate or affiliate of
Huff; the Common Directors designated by Huff
and ING pursuant to Section 1.4(ii) hereof
shall not be an employee, associate or
affiliate of Huff or ING and one of whom
shall be the Chairman of the Board; and the
Common Director designated by ING pursuant to
Section 1.4(iii) hereof shall not be an
employee, associate or affiliate of ING and
shall be the president of the Company.
1.9 In any case where Huff and ING shall have the
right jointly to designate a director, (i) such designee shall
require the approval of both Huff and ING and the refusal or
failure of either Huff or ING to approve such designee shall
prohibit such person from standing for election to the Board,
provided, that the entire Board shall then have the right to
designate a substitute designee if Huff and ING cannot agree upon
a substitute designee prior to the applicable Election of
Directors and (ii) the removal of such designee from the Board
shall require the consent of either Huff or ING.
2. Certain Committees
Except as otherwise set forth in Section 4 hereof,
the Voting Shareholders agree to use their best efforts to cause
their respective nominees who are then serving on the Board to
appoint members to the Compensation Committee and Audit Committee
of the Board, subject in all cases to such nominees fiduciary
duty as a director, as follows:
(a) One director who was designated by HUFF, one
director who was designated by APEX and, prior to the ING
Deferred Closing Failure, if any, one director who was designated
by ING shall be appointed to the Compensation Committee; and
(b) One director who was designated by HUFF and,
prior to the ING Deferred Closing Failure, if any, one director
who was designated by ING shall be appointed to the Audit
Committee.
3. Boards of Subsidiaries
Except as otherwise set forth in Section 4 hereof,
the Voting Shareholders agree to use their best efforts to cause
their respective nominees who are then serving on the Board,
subject in all cases to such nominees' fiduciary duty as a
director, to cause the board of directors of each of the
subsidiaries of the Company to be composed of three members, one
of whom shall be a Common Director designated by Huff and ING,
one of whom shall be a Preferred Director designated by Huff and
prior to the ING Deferred Closing Failure, if any, one of whom
shall be a Preferred Director designated by ING.
4. Limitations on Rights
In the event ING fails to purchase all of the
Deferred Shares (as such term is defined in a certain Series B
Preferred Stock and Warrant Purchase Agreement, dated June 26,
1995 by and among the Company and the purchasers named therein
(the "Series B Purchase Agreement")), in accordance with Section
2.4 of the Series B Purchase Agreement notwithstanding the
fulfillment or waiver of all the conditions specified in Section
2.3(b) of the Series B Purchase Agreement or ING fails to
purchase all of the Deferred Shares within five business days
following the Company's closing of an offering of notes and
warrants resulting in gross proceeds of at least $80 Million (the
"ING Deferred Closing Failure"), each of the parties shall take
all necessary action (including voting all of its shares of
capital stock)), to remove (a) ING's designees to the committees
of the board of directors pursuant to Section 2, (b) ING's
designees as a Common Director under Section 1.2(iii), (c) one of
ING's designees as Preferred Director under Section 1.3(ii), and
(d) ING's designee to the board of directors of each of the
Company's subsidiaries under Section 3.
5. General Provisions
5.1. Amendments. This Agreement may be amended,
or supplemented at any time only by a written instrument duly
executed by Huff and ING.
5.2 Contents of Agreement, Parties in Interest,
Assignment. This Agreement sets forth the entire understanding
of the parties with respect to the subject matter hereof. Any
previous agreements or understandings between the parties
regarding the subject hereof are merged into and superseded by
this Agreement. All terms and conditions of this Agreement shall
be binding upon and inure to the benefit of and be enforceable by
the respective heirs, legal representatives, successors and
permitted assigns of the parties hereto. If any transferee of
any Voting Shareholder shall acquire any shares of Preferred
Stock or any shares of Common Stock from such Voting
Shareholders, in any manner, whether by operation of law or
otherwise, such shares shall be held subject to all of the terms
of this Agreement, and by taking and holding such shares such
transferee shall be entitled to receive the benefits of and be
conclusively deemed to have agreed to be bound by and to comply
with all of the terms and provisions of this Agreement.
5.3 Severability. In the event that any one or
more of the provisions contained in this Agreement shall be
invalid or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions of this
Agreement shall not be in any way impaired.
5.4 Headings. The heading of the Sections and
the subsections of this Agreement are inserted for convenience of
reference only and shall not constitute a part hereof.
5.5 Notices. Any notice, request, claim, demand,
document and other communication hereunder to any party shall be
effective upon receipt (or refusal of receipt) and shall be in
writing and delivered personally or sent by telex or telecopy
(with such telex or telecopy confirmed promptly in writing sent
by first class mail), or first class mail, or other similar means
of communications, as follows:
(i) If to Huff, addressed to The Huff Alternative
Income Fund, L.P., 67 Park Place, 9th Floor,
Morristown, New Jersey 07960, Attention: Joseph
Thornton, Telecopier Number (201) 9845818;
(ii) If to ING, addressed to ING Equity Partners, L.P.,
135 East 57th Street, 9th Floor, New York, New
York 10022, Attention: Olivier L. Trouveroy,
Telecopier Number (201) 750-2970; or
(iii) If to a Voting Shareholder other than Huff or ING,
to the address of such Voting Shareholder set
forth in the stock records of the Company;
or, in each case, to such other address or telex or
telecopy number as such party may designate in writing to each
Voting Shareholder by written notice given in the manner
specified herein.
All such communications shall be deemed to have been
given, delivered or made when so delivered by hand or sent by
telex (answer back received) or telecopy, or five business days
after being so mailed.
5.6 LITIGATION. THIS AGREEMENT SHALL BE GOVERNED
BY, CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK. EACH OF THE PARTIES HERETO
ACKNOWLEDGES AND AGREES THAT IN THE EVENT OF ANY BREACH OF THIS
AGREEMENT, THE NONBREACHING PARTIES WOULD BE IRREPARABLY HARMED
AND COULD NOT BE MADE WHOLE BY MONETARY DAMAGES, AND THAT, IN
ADDITION TO ANY OTHER REMEDY TO WHICH THEY MAY BE ENTITLED AT LAW
OR IN EQUITY, THE PARTIES SHALL BE ENTITLED TO SUCH EQUITABLE OR
INJUNCTIVE RELIEF AS MAY BE APPROPRIATE. EACH PARTY AGREES THAT
JURISDICTION AND VENUE WILL BE PROPER IN THE SOUTHERN DISTRICT OF
NEW YORK AND WAIVES ANY OBJECTIONS BASED UPON FORUM NON
CONVENIENS. EACH PARTY WAIVES PERSONAL SERVICE OF PROCESS AND
AGREES THAT A SUMMONS AND COMPLAINT COMMENCING AN ACTION OR
PROCEEDING SHALL BE PROPERLY SERVED AND SHALL CONFER PERSONAL
JURISDICTION IF SERVED BY REGISTERED OR CERTIFIED MAIL TO THE
PARTY AT THE ADDRESS SET FORTH IN THIS AGREEMENT, OR AS OTHERWISE
PROVIDED BY THE LAWS OF THE STATE OF NEW YORK OR THE UNITED
STATES. THE CHOICE OF FORUM SET FORTH IN THIS SECTION 5.6 SHALL
NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT
OBTAINED IN ANY OTHER FORUM OR THE TAKING OF ANY ACTION UNDER
THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE
JURISDICTION.
5.7 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.
5.8 Recapitalization, Exchanges, Etc., Affecting
the Stock; New Issuances. The provisions of this Agreement shall
apply, to the full extent set forth herein, with respect to the
Common Stock and the Preferred Stock now held or hereafter
acquired by the Voting Shareholders, and to any and all equity or
debt securities of the Company or any successor or assign of the
Company (whether by merger, consolidation, sale of assets, or
otherwise) which may be issued in respect of, in exchange for, or
in substitution of, such equity or debt securities and shall be
appropriately adjusted for any stock dividends, splits, reverse
splits, combinations, reclassification, recapitalization,
reorganizations and the like occurring after the date hereof.
5.9 Endorsement of Certificates.
(i) Upon the execution of this Agreement, in addition
to any other legend which the Company may deem
advisable under the Securities Act and certain
state securities laws, all certificates
representing shares of issued and outstanding
Common Stock and Preferred Stock held by the
Voting Shareholders shall be endorsed at all times
prior to termination this Agreement as follows:
THIS CERTIFICATE IS SUBJECT TO, AND IS
TRANSFERABLE ONLY UPON COMPLIANCE WITH, THE
PROVISIONS OF A VOTING RIGHTS AGREEMENT, DATED AS
OF NOVEMBER 8, 1995, AMONG THE COMPANY AND CERTAIN
OF ITS STOCKHOLDERS. A COPY OF THE ABOVE
REFERENCED AGREEMENT IS ON FILE AT THE OFFICE OF
THE COMPANY AT 131 NATIONAL BUSINESS PARKWAY,
SUITE 100, ANNAPOLIS JUNCTION, MD 230701 AND WILL
BE PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE
UPON REQUEST.
THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT, OR AN EXEMPTION FROM REGISTRATION,
UNDER SAID ACT.
(ii) Except as otherwise expressly provided in this
Agreement, all certificates representing shares of
stock hereafter issued to or acquired by any of
the Voting Shareholders or their successors hereto
(including, without limitation, all certificates
representing shares of Common Stock hereafter
issued upon conversion of shares of Preferred
Stock) shall bear the legends set forth above, and
the shares of such stock represented by such
certificates shall be subject to the applicable
provisions of this Agreement. The obligations of
each party hereto shall be binding upon each
transferee to whom such stock is transferred by
any party hereto. Prior to consummation of any
transfer, such party shall cause the transferee to
execute an agreement in form and substance
reasonably satisfactory to the other parties
hereto, providing that such transferee shall fully
comply with the terms of this Agreement. Prompt
notice shall be given to the Company and each
Voting Shareholder by the transferor of any
transfer of any stock.
(iii) Any attempt to transfer or encumber any shares of
stock not in accordance with this Agreement shall
be null and void and neither the Company nor any
transfer agent of such securities shall give any
effect to such attempted transfer or encumbrance
in its stock records.
5.10 Termination. This Agreement shall terminate
upon the earliest of (i) a Qualifying Offering (as defined in the
Amended Certificate), (ii) ten years from the date of this
Agreement or (iii) upon the written agreement of Huff and ING.
5.11 Cost of Enforcement. The party which
prevails in any suit or proceeding against the other to enforce
any provision of this Agreement or to recover damages resulting
from a breach of this Agreement shall be entitled to receive from
the nonprevailing party the costs and reasonable attorneys' fees
of the prevailing party incurred in such suit or proceeding.
IN WITNESS WHEREOF, this Agreement has been executed by
the parties hereto as of the day and year first above written.
THE HUFF ALTERNATIVE INCOME FUND, L.P.
By: WRH PARTNERS, L.L.C.
general partner
By: /s/ Donna B. Charlton
Name: Donna B. Charlton
Title:
Voting Rights Agreement
ING EQUITY PARTNERS, L.P. I
By: LEXINGTON PARTNERS, L.P.
its general partner
By: LEXINGTON PARTNERS, INC.
its general partner
By: /s/ Olivier Trouveroy
Name: Olivier Trouveroy
Title: Managing Director
APEX INVESTMENT FUND, L.P.
By: APEX MANAGEMENT PARTNERSHIP, L.P.,
general partner
By: ________________________
George M. Middlemas
General Partner
APEX INVESTMENT FUND II, L.P.
By: APEX MANAGEMENT PARTNERSHIP, L.P.
general partner
By: _________________________
George M. Middlemas
General Partner
Voting Rights Agreement
ING EQUITY PARTNERS, L.P. I
By: LEXINGTON PARTNERS, L.P.
its general partner
By: LEXINGTON PARTNERS, INC.
its general partner
By: _______________________
Name:
Title:
APEX INVESTMENT FUND, L.P.
By: APEX MANAGEMENT PARTNERSHIP, L.P.,
general partner
By: /s/George M. Middlemas
George M. Middlemas
General Partner
APEX INVESTMENT FUND II, L.P.
By: APEX MANAGEMENT PARTNERSHIP, L.P.
general partner
By: /s/George M. Middlemas
George M. Middlemas
General Partner
Voting Rights Agreement
THE PRODUCTIVITY FUND II, L.P.
By: FIRST ANALYSIS MANAGEMENT COMPANY
II,
its general partner
By: FIRST ANALYSIS CORPORATION,
general partner
By: /s/ Bret R. Maxwell
Name: Bret R. Maxwell
Title: Managing Director
ARGENTUM CAPITAL PARTNERS, L.P.
By: BR Associates, Inc.,
general partner
By: ____________________
Name:
Title:
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/ Bret R. Maxwell
Name: Bret R. Maxwell
Title: Managing Director
Voting Rights Agreement
THE PRODUCTIVITY FUND II, L.P.
By: FIRST ANALYSIS MANAGEMENT COMPANY
II,
its general partner
By: FIRST ANALYSIS CORPORATION,
general partner
By: ________________________
Name:
Title:
ARGENTUM CAPITAL PARTNERS, L.P.
By: BR Associates, Inc.,
general partner
By: /s/Daniel Raynor
Name: Daniel Raynor
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: ______________________
Name:
Title:
Voting Rights Agreement
U.S. SIGNAL CORPORATION
By: /s/ Donald Offringa
Name: Donald Offringa
Title: Chief Financial Officer
/s/ Brian Boyer
Brian Boyer
/s/ Randall Holcome
Randall Holcombe
/s/ Karen Grob Holcombe
Karen Grob Holcombe
William G. Salatich TRUSTEE
WILLIAM G. SALATICH CONSULTING INC.
RETIREMENT PLAN AND TRUST
/s/ William G. Salatich
William G. Salatich
Voting Rights Agreement
DELAWARE CHARTER GUARANTEE & TRUST CO.
CUSTODIAN FOR MARK B. CHASIN IRA:
/s/ Mark B. Chasin
Mark B. Chasin
Self-Directed Plan
/s/ William R. Huff
William R. Huff
/s/ Cathy Markey Huff
Cathy Markey Huff
/s/ Christopher L. Refferty
Christopher L. Refferty
Voting Rights Agreement
/s/ Dennis Ives
Dennis Ives
Voting Rights Agreement
/s/ Leila Davis
Leila Davis
SCHEDULE I
VOTING SHAREHOLDERS
<TABLE>
Series A-1 Series B-1 Series B-2 Series B-3 Common
Voting Shareholder Preferred Preferred Preferred Preferred Stock
__________________ ___________ ___________ ___________ ___________ ____________
<S> <C> <C> <C> <C> <C>
The Huff Alternative 138,899 100,000 1,919,793(1)
Income Fund, L.P.
ING Equity Partners, 100,000 642,856(2)
L.P., I
Apex Investment Fund 2,595 4,904.85 21,021
I, L.P.
Apex Investment Fund 16,803 3,269.90 245,560
II, L.P.
The Productivity Fund 10,249 1,380.61 259,149
II, L.P.
Argentum Capital 4,000.00 17,143
Partners, L.P.
Environmental Private 6,056 11,444.64 49,048
Equity Fund, II, L.P.
Mark B. Chasin 250 1,071(3)
(1) Includes 428,571 shares issuable upon exercise of $.01 warrants.
(2) Includes 214,285 shares issuable upon exercise of $.01 warrants.
</TABLE>
<TABLE>
Series A-1 Series B-1 Series B-2 Series B-3 Common
Voting Shareholder Preferred Preferred Preferred Preferred Stock
__________________ ___________ ___________ ___________ ___________ ____________
<S> <C> <C> <C> <C> <C>
William G. Salatich 6,762
Trustee, William G.
Salatich Consulting
Inc. Retirement Plan
and Trust
William R. Huff 600 2,571(3)
Cathy Markey Huff 175 750(3)
Christopher L. Rafferty 200 857(3)
Brian Boyer 4,107(4)
U.S. Signal Corp. 2,778 16,667
Randall Holcombe 15,500
Karen Grob Holcombe 46,500
Dennis Ives 5,000
Leila Davis 5,318
________________________
(3) Consists of stock to be issued pursuant to exercise of $.01 warrants for which the
Company has received the exercise price but not all necessary exercise forms.
(4) Includes 676 shares to be issued pursuant to Warrants which have been duly exercised.
</TABLE>
EXHIBIT I
FIRST AMENDMENT OF VOTING RIGHTS AGREEMENT
FIRST AMENDMENT OF VOTING RIGHTS AGREEMENT (this
"Amendment"), dated as of December 14, 1995, by and between The
Huff Alternative Income Fund, L.P. ("Huff") and ING Equity
Partners, L.P. I ("ING").
R E C I T A L S:
WHEREAS, a Voting Rights Agreement, dated as of
November 8, 1995 (the "Voting Rights Agreement") was executed and
delivered by certain holders of shares of the outstanding Common
Stock, $.01 par value of American Communications Services, Inc.,
a Delaware corporation (the "Company"), and certain holders of
the outstanding shares of 9% Series A-1 Convertible Preferred
Stock, $1.00 par value, 9% Series B-1 Convertible Preferred
Stock, $1.00 par value, 9% Series B-2 Convertible Preferred
Stock, $1.00 par value and 9% Series B-3 Convertible Preferred
Stock, $1.00 par value of the Company set forth in Schedule I to
the Voting Rights Agreement.
WHEREAS, an amendment of the Voting Rights Agreement
may only be accomplished by a written instrument duly executed by
Huff and ING; and
WHEREAS, Huff and ING desire to amend the Voting Rights
Agreement in the manner hereinafter provided.
NOW, THEREFORE, in consideration of the foregoing and
for other good and valuable consideration, the parties hereto
hereby agree as follows:
1. Sections 1.2, 1.3 and 1.4 of the Voting Rights
Agreement shall be deleted in their entirety and replaced with
the following:
"1.2 In any Election of Directors held during a
period in which the Standard Board Structure is in effect,
the Voting Shareholders agree to vote all of the shares of
Common Stock which they then own in the following manner:
(i) for Peter C. Bentz, designated by Huff as a
director to be elected by the holders of the
Common Stock (the "Common Directors");
(ii) for George M. Middlemas, designated by Apex
Investment Fund II, L.P. ("Apex") as a Common
Director;
(iii) for Benjamin P. Giess, designated by ING as a
Common Director; and
(iv) for Anthony J. Pompliano, designated by Huff
and ING as a Common Director.
1.3 In an Election of Directors held during a
period in which the Triggering Event Board Structure is in
effect, the Voting Shareholders agree to vote all of the shares
of Preferred Stock which they then own in the following manner:
(i) for Christopher L. Rafferty, Edwin M. Banks,
Cathy Markey and Frederick Galland,
designated by Huff as Preferred Directors.
(ii) for Olivier L. Trouveroy and Richard A.
Kozak, designated by ING as Preferred
Directors; and
(iii) for Steven H. Chrust, designated by Huff and
ING as Preferred Directors.
1.4 In any Election of Directors held during a
period in which the Triggering Event Board Structure is in
effect, the Voting Shareholders agree to vote all of the shares
of Common Stock which they then own in the following manner:
(i) for Peter C. Bentz, designated by Huff as a
Common Director;
(ii) for Benjamin P. Giess, designated by ING as a
Common Director;
(iii) for Anthony J. Pompliano, designated by Huff
and ING as a Common Director; and
(iv) for George M. Middlemas, designated by Apex
as a Common Director."
2. Section 1.8 of the Voting Rights Agreement shall
be deleted in its entirety and replaced with the following:
1.5 (i) The Common Director designated by Huff
and ING pursuant to Section 1.2(iv)
hereof shall not be an employee,
associate or affiliate of Huff or ING.
(ii) Of the Preferred Directors designated by Huff
pursuant to Section 1.3(i) hereof, one shall
not be an employee, associate or affiliate of
Huff; the Common Director designated by Huff
and ING pursuant to Section 1.4(iii) hereof
shall not be an employee, associate or
affiliate of Huff or ING and shall be the
Chairman of the Board; and of the Preferred
Directors designated by ING pursuant to
Section 1.3(ii) hereof, one shall not be an
employee, associate or affiliate of ING and
shall be the president of the Company; and
the Preferred Director designated by Huff and
ING pursuant to Section 1.3(iii) shall not be
an employee, associate or affiliate of Huff
or ING.
Except as herein amended, the terms and provisions of the Voting
Rights Agreement shall, in all other respects, remain unmodified,
are hereby ratified and reaffirmed, and shall remain in full
force and effect.
IN WITNESS WHEREOF, this Amendment has been executed by
the parties hereto as of the day and year first above written.
THE HUFF ALTERNATIVE INCOME FUND, L.P.
By: WKH PARTNERS, L.L.C.
general partner
By: /s/ Donna B. Charlton
Name: Donna B. Charlton
Title:
ING EQUITY PARTNERS, L.P. I
By: LEXINGTON PARTNERS, L.P.
its general partner
By: LEXINGTON PARTNERS, INC.
its general partner
By: /s/ Olivier Trouveroy
Name: Olivier Trouveroy
Title: Managing Director
SCHEDULE I
VOTING SHAREHOLDERS
<TABLE>
Series A-1 Series B-1 Series B-2 Series B-3 Common
Voting Shareholder Preferred Preferred Preferred Preferred Stock
__________________ ___________ ___________ ___________ ___________ ____________
<S> <C> <C> <C> <C> <C>
The Huff Alternative 138,899 100,000
Income Fund, L.P.
ING Equity Partners, 100,000 50,000
L.P., I
Apex Investment Fund 2,595 4,904.85
I, L.P.
Apex Investment Fund 16,803 3,269.90
II, L.P.
The Productivity Fund 10,249 1,380.61
II, L.P.
Argentum Capital 4,000.00
Partners, L.P.
Environmental Private 6,056 11,444.64
Equity Fund, II, L.P.
</TABLE>
