EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
AMONG
CTC COMMUNICATIONS CORP.
AND
EACH OF THE PURCHASERS NAMED IN SCHEDULE 2.1
April 10, 1998
TABLE OF CONTENTS
ARTICLE I DEFINITIONS
ARTICLE II SALE AND PURCHASE OF PURCHASED SECURITIES
SECTION 2.1. The Series A Preferred Stock and Warrants
SECTION 2.2. Sale and Purchase of Purchased Securities
SECTION 2.3. Closing
SECTION 2.4. Use of Proceeds
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.1. Organization and Good Standing
SECTION 3.2. Authorization; Noncontravention
SECTION 3.3. Enforceability
SECTION 3.4. Capitalization
SECTION 3.5. Subsidiaries
SECTION 3.6. Required Filings and Consents
SECTION 3.7. Undisclosed Liabilities
SECTION 3.8. Absence of Certain Developments
SECTION 3.9. Interested Party Transactions
SECTION 3.10. Tax Returns
SECTION 3.11. Title to Assets
SECTION 3.12. Material Contracts and Obligations
SECTION 3.13. Real and Personal Property - Leased
SECTION 3.14. Necessary Licenses and Permits
SECTION 3.15. Compliance with Law
SECTION 3.16 Litigation
SECTION 3.17. No Material Adverse Changes
SECTION 3.18. Employee Benefit Plans
SECTION 3.19. Withholding, Contracts, Labor Relations
SECTION 3.20. Governmental Regulations
SECTION 3.21. Corporate Documents, Books and Records
SECTION 3.22. Disclosure
SECTION 3.23. Certain Agreements of Officers and Employees
SECTION 3.24. Registration Rights
SECTION 3.25. Compliance with Securities Laws
ARTICLE IV PURCHASERS' REPRESENTATIONS
SECTION 4.1. Investment Intent
SECTION 4.2. Authorization
SECTION 4.3. Enforceability
SECTION 4.4. Experience of Purchaser
SECTION 4.5. Ability of Purchaser to Bear Risk of Investment
SECTION 4.6. Access to Information
SECTION 4.7. Reliance
SECTION 4.8. Transfer Restriction
ARTICLE V CONDITIONS TO EACH PURCHASER'S OBLIGATIONS TO PURCHASE
SECTION 5.1. Related Agreements
SECTION 5.2. Charter Documents; Good Standing Certificates
SECTION 5.3. Proof of Corporate Action
SECTION 5.4. Incumbency Certificate
SECTION 5.5. Legal Opinion
SECTION 5.6. Representations and Warranties; Officer's Certificate
SECTION 5.7. Legality; Governmental and Other Authorizations
SECTION 5.8. Payment of Certain Fees and Disbursements
SECTION 5.9. Charter Amendment
SECTION 5.10. General
ARTICLE VI CONDITIONS TO THE COMPANY'S OBLIGATIONS
SECTION 6.1. Representations
SECTION 6.2. Related Agreements
SECTION 6.3. Legality; Governmental and Other Authorizations
SECTION 6.4. General
ARTICLE VII COVENANTS APPLICABLE FOLLOWING THE CLOSING
SECTION 7.1. Financial Statements
SECTION 7.2. Additional Information
SECTION 7.3. Annual Budget
SECTION 7.4. SEC Filings
SECTION 7.5. Inspection
SECTION 7.6. Independent Director
ARTICLE VIII PREEMPTIVE RIGHTS
SECTION 8.1 Right to Purchase
ARTICLE IX ASSIGNMENT OF PURCHASED SECURITIES
ARTICLE X EXPENSES, INDEMNITY
SECTION 10.1 Expenses
SECTION 10.2 Indemnification
ARTICLE XI NOTICES
ARTICLE XII SURVIVAL AND TERMINATION OF COVENANTS, AGREEMENTS,
REPRESENTATIONS AND WARRANTIES
ARTICLE XIII AMENDMENTS AND WAIVERS
ARTICLE XIV CHOICE OF LAW; SUBMISSION TO JURISDICTION AND WAIVER OF
JURY TRIAL; DISPUTE RESOLUTION
SECTION 14.1. Governing Law
SECTION 14.2. Consent To the Exclusive Jurisdiction Of the Courts
of Massachusetts
SECTION 14.3. Waiver Of Jury Trial
SECTION 14.4. Equitable Remedies
SECTION 14.5 Arbitration
ARTICLE XV ENTIRE AGREEMENT; COUNTERPARTS; SECTION HEADINGS
LIST OF EXHIBITS
EXHIBIT A Form of Warrant
EXHIBIT B Certificate of Designation
EXHIBIT C Form of Registration Rights Agreement
EXHIBIT D Forms of Opinion of the Company's Counsel
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement") as of April 10, 1998 among
CTC COMMUNICATIONS CORP., a Massachusetts corporation (the "Company"), and
each of the purchasers named in the attached Schedule 2.1, (individually a
"Purchaser" and collectively the "Purchasers").
WHEREAS, the Company wishes to issue and sell to the Purchasers an
aggregate of 666,666 shares of the authorized but unissued Series A
Convertible Preferred Stock, $1.00 par value, of the Company (the "Series
A Preferred Stock" ) and the Company's Warrants for the purchase of the
aggregate of 133,333 shares of the Company's Common Stock, $.01 par value
(the "Warrants"). The Series A Preferred Stock and the Warrants are
collectively referred to herein as the "Purchased Securities"; and
WHEREAS, the Purchasers, severally, wish to purchase the Purchased
Securities on the terms and subject to the conditions set forth in this
Agreement;
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained in this Agreement, the parties agree as follows:
ARTICLE I
DEFINITIONS
For all purposes of this Agreement the following terms shall have the
meanings set forth in this Article I:
"AAA" has the meaning specified in Article XIV of this Agreement.
"AAA Rules" has the meaning specified in Article XIV of this Agreement.
"Affiliate" shall mean with respect to any Person, any other Person that
would be considered to be an affiliate of such Person under Rule 144(a)
under the Securities Act of 1933, as amended, as in effect on April 10,
1998, if such Person were issuing securities.
"Agreement" has the meaning specified in the introduction to this
Agreement.
"Blue Sky Filings" has the meaning specified in Section 3.6 of this
Agreement.
"Capital Stock" means, as to any Person that is a corporation, the
authorized shares of such Person's capital stock, including all classes of
common, preferred, voting and nonvoting capital stock, and, as to any
Person that is not a corporation or an individual, the ownership interests
in such Person, including, without limitation, the right to share in
profits and losses, the right to receive distributions of cash and
property, and the right to receive allocations of items of income, gain,
loss, deduction and credit and similar items from such Person, whether or
not such interests include voting or similar rights entitling the holder
thereof to exercise control over such Person.
"Certificate of Designation" has the meaning specified in Section 2.1 of
this Agreement.
"Charter" means the articles or certificate of incorporation, statute,
constitution, joint venture or partnership agreement or articles or other
organizational document of any Person other than an individual, each as
from time to time amended or modified.
"Closing" has the meaning specified in Section 2.3 of this Agreement.
"Closing Date" has the meaning specified in Section 2.3 of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" has the meaning specified in Section 3.4 of this Agreement.
"Common Stock Deemed Outstanding" has the meaning specified in the
Certificate of Designation.
"Company" has the meaning specified in the introduction to this Agreement.
"Conversion Price" means, initially, nine dollars ($9.00) and, thereafter,
as adjusted pursuant to the Certificate of Designation.
"Convertible Securities" has the meaning specified in the Certificate of
Designation.
"Damages" has the meaning specified in Section 10.2 of this Agreement.
"Dispute" has the meaning specified in Section 14.5 of this Agreement.
"Distribution" means (a) the declaration or payment of any dividend of
cash or property in respect of any shares of any class of the Company's or
any of its Subsidiaries' Capital Stock or other equity securities; (b) the
purchase, redemption or other retirement of any shares of any class of the
Company's or any of its Subsidiaries' Capital Stock or other equity
securities, directly or indirectly or otherwise; or (c) any other
distribution on or in respect of any shares of any class of the Company's
or any of its Subsidiaries' Capital Stock or other equity securities.
"Employee Benefit Plan" means any employee benefit plan within the meaning
of Sec. 3(3) of ERISA maintained or contributed to by the Company or any
ERISA Affiliate, other than a Multiemployer Plan.
"ERISA" means the Employee Retirement Income Security Act of 1974, any
successor statute of similar import, and the rules and regulations
thereunder, collectively, and from time to time amended and in effect.
"ERISA Affiliate" means any Person which is treated as a single employer
with the Company under Sec. 414 of the Code.
"Exchange Act" means the Securities and Exchange Act of 1934, as amended,
or any successor federal statute, and the rules and regulations of the
Securities and Exchange Commission thereunder, all as the same shall be in
effect at the time.
"Excluded Securities" has the meaning specified in the Certificate of
Designation.
"Family Member" means, as applied to any individual, such individual's
spouse, child (including a stepchild or an adopted child) grandchild,
parent, brother or sister thereof or any present or former spouse of any
of the foregoing, and each trust created for the exclusive benefit of one
or more of them.
"Foreign Official" has the meaning specified in Section 3.15(b) of this
Agreement.
"Generally accepted accounting principles or "GAAP" means accounting
principles which are (a) consistent with the principles promulgated or
adopted by the Financial Accounting Standards Board and its predecessors
and other recognized principle setting bodies, in effect from time to
time, and (b) such that a certified public accountant would, insofar as
the use of accounting principles is pertinent, be in a position to base an
opinion as to financial statements in which such principles have been
properly applied.
"Guaranteed Pension Plan" means any employee pension benefit plan within
the meaning of Sec. 3(2) of ERISA maintained or contributed to by the
Company or any ERISA Affiliate, the benefits of which are guaranteed on
termination in full or in part by the PBGC pursuant to Title IV of ERISA,
other than a Multiemployer Plan.
"Indebtedness" means all obligations, contingent and otherwise, which in
accordance with GAAP should be classified on the obligor's balance sheet
as liabilities, or to which reference should be made by footnotes thereto,
including without limitation, in any event and whether or not so
classified: (i) all debt and similar monetary obligations, whether direct
or indirect; (ii) all liabilities secured by any mortgage, pledge,
security interest, lien, charge or other encumbrance existing on property
owned or acquired subject thereto, whether or not the liability secured
thereby shall have been assumed; (iii) all guaranties, endorsements and
other contingent obligations whether direct or indirect in respect of
Indebtedness or performance of others, including any obligation to supply
funds to or in any manner to invest in, directly or indirectly, the
debtor, to purchase Indebtedness, or to assure the owner of Indebtedness
against loss, through an agreement to purchase goods, supplies or services
for the purpose of enabling the debtor to make payment of the Indebtedness
held by such owner or otherwise, and (iv) obligations to reimburse issuers
of any letters of credit.
"Indemnitees" has the meaning specified in Section 10.2 of this Agreement.
"Lien" means (a) any encumbrance, mortgage, pledge, lien, charge or other
security interest of any kind upon any property or assets of any
character, or upon the income or profits therefrom; (b) any acquisition of
or agreement to have an option to acquire any property or assets upon
conditional sale or other title retention agreement, device or arrangement
(including a capitalized lease); or (c) any sale, assignment, pledge or
other transfer for security of any accounts, general intangibles or
chattel paper, with or without recourse, provided, however, that the term
"Lien" shall not include (i) statutory liens for Taxes to the extent that
the payment thereof is not in arrears or otherwise due, (ii) encumbrances
in the nature of zoning restrictions, easements, rights or restrictions of
record on the uses of real property if the same do not detract from the
value of the property encumbered thereby or impair the use of such
property in the business of the Company as currently conducted or proposed
to be conducted, (iii) statutory or common law liens to secure landlords,
lessors or renters under leases or rental agreements confined to the
premises rented to the extent that no payment or performance under any
such lease or rental agreement is in arrears or is otherwise due, (iv)
deposits or pledges made in connection with, or to secure payment of,
worker's compensation, unemployment insurance, old age pension programs
mandated under applicable laws or other social security regulations and
(v) statutory or common law liens in favor of carriers, warehousemen,
mechanics and materialmen, statutory or common law liens to secure claims
for labor, materials or supplies and other like liens, which secure
obligations to the extent that payment thereof is not in arrears or
otherwise due in the case of (i) - (v), which have been incurred in the
ordinary course of business.
"Material Adverse Effect" has the meaning specified in Section 3.17 of
this Agreement.
"Multiemployer Plan" means a multiemployer plan within the meaning of
Section 3(37) of ERISA.
"New Securities" shall mean (a) any Capital Stock of the Company whether
now authorized or not, (b) any rights, options, or warrants to purchase
said shares, and (c) securities of any type whatsoever that are, or may
become, convertible into, exercisable, exchangeable, or carrying rights to
subscribe for any equity securities of the Company.
"Notice of Proposed Issuance" has the meaning specified in Section 8.1(a)
of this Agreement.
"Offered New Shares" has the meaning specified in Section 8.1(a) of this
Agreement.
"Permits" has the meaning specified in Section 3.14 of this Agreement.
"Per Share Price" has the meaning specified in Section 2.2(a) of this
Agreement.
"Person" means an individual, partnership, corporation, association,
trust, joint venture, unincorporated organization, and any government,
governmental department or agency or political subdivision thereof.
"Preferred Stock Derivatives" has the meaning set forth in the Certificate
of Designation.
"Purchased Securities" has the meaning specified in the Recitals to this
Agreement.
"Purchaser(s)" means the purchasers set forth on Schedule 2.1.
"Registrable Securities" means those shares of Common Stock constituting
Preferred Stock Derivatives or issued upon conversion or exercise of the
Purchased Securities and any Preferred Stock Derivatives and which have
not been sold to third parties pursuant to a registered public offering or
pursuant to Rule 144(k) under the Securities Act.
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of the date hereof, as the same shall be amended from time to
time, among the Company and the Purchasers in the form of Exhibit C
attached hereto.
"Related Agreements" means the Certificate of Designation and the
Registration Rights Agreement.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Securities
and Exchange Commission thereunder, all as the same shall be in effect at
the time.
"Security Documents" has the meaning specified in Section 3.25(b) of this
Agreement.
"Series A Preferred Stock" has the meaning specified in the Recitals to
this Agreement.
"Spectrum" means Spectrum Equity Investors II, L.P.
"Subsidiary" means any Person which the Company now or hereafter shall at
the time own, directly or indirectly through a subsidiary, at least a
majority of the outstanding capital stock (or other beneficial interest)
entitled to vote generally; and the term "Subsidiaries" shall mean all of
such Persons collectively.
"Taxes" means (A) all net income, gross income, gross receipts, sales,
use, ad valorem, transfer, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium,
property or windfall profits taxes, or other taxes of any kind whatsoever,
together with any interest and any penalties, additions to tax or
additional amounts imposed by any taxing authority (domestic or foreign)
upon the Company with respect to all periods or portions thereof ending on
or before the date hereof and/or (B) any liability of the Company for the
payment of any amounts of the type described in the immediately preceding
clause (A) as a result of being a member of an affiliated or combined
group.
"Third Party Claims" has the meaning specified in Section 10.2 of this
Agreement.
"Twenty Day Period" has the meaning specified in Section 8.1(b) of this
Agreement.
"Voting Agreement" means the Voting Agreement dated as of the date hereof
among Spectrum, Xxxxxx X. Xxxxxxxxxxxx and the other Stockholders named
therein.
"Warrants" has the meaning specified in the Recitals to this Agreement.
ARTICLE II
SALE AND PURCHASE OF PURCHASED SECURITIES
SECTION 2.1. The Series A Preferred Stock and Warrants. The Company has
duly authorized the issuance and sale to the Purchasers of (a) an
aggregate of 666,666 shares of its authorized Series A Convertible
Preferred Stock and (b) Warrants in the form of Exhibit A attached hereto
for the purchase of an aggregate of 133,333 shares of the Company's Common
Stock. The designations, rights and preferences and other terms and
conditions relating to the Series A Preferred Stock are as set forth in
the Certificate of Designation in the form attached hereto as Exhibit B
(the "Certificate of Designation").
SECTION 2.2. Sale and Purchase of Purchased Securities.
(a) Series A Preferred Stock. Subject to all of the terms and
conditions hereof and in reliance on the representations and warranties
set forth or referred to herein, at the Closing the Company agrees to
issue and sell to each Purchaser, at a price of $18.00 per share (the "Per
Share Price"), and each Purchaser hereby agrees to purchase at the Per
Share Price, that number of shares of Series A Preferred Stock set forth
opposite the name of such Purchaser under the heading "Number of Shares of
Series A Preferred Stock to be Purchased" on Schedule 2.1.
(b) Warrants. Subject to the terms and conditions hereof and in
reliance on the representations and warranties set forth or referenced to
herein, at the Closing the Company agrees to issue to each Purchaser, and
each Purchaser hereby agrees to purchase, at a price of $.01 per share of
Common Stock covered thereby, Warrants to purchase the number of shares of
Common Stock set forth opposite such Purchaser's name under the heading
"Number of Warrants to be Issued" on Schedule 2.1. The Warrants shall
have a term of five (5) years from the Closing and shall be exercisable at
a price of $9.00 per share.
SECTION 2.3. Closing. The closing of the purchase and sale of the
Purchased Securities (the "Closing") will take place at the offices of
Xxxxxxx & Xxxxxx, 000 Xxxxxxx Xxxxxx, Xxxxxx, XX 00000 at 10:00 a.m. on
April 10, 1998, or at such other place, time and date as the parties
hereto may agree upon (the "Closing Date"). At the Closing, the Company
will deliver to the Purchasers the Purchased Securities against payment of
the purchase price therefor as provided in Section 2.2 for each Purchased
Security in immediately available funds on or before the Closing Date. The
Purchased Securities will be issued on the Closing Date, and registered to
each such Purchaser in the Company's records, in the amounts designated on
Schedule 2.1 hereto.
SECTION 2.4. Use of Proceeds. Proceeds from the sale of the Purchased
Securities hereunder shall be used as determined from time to time by the
Company's Board of Directors.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce each of the Purchasers to enter into this Agreement and
to purchase the Purchased Securities, the Company hereby represents and
warrants that:
SECTION 3.1. Organization and Good Standing. The Company is duly
organized, validly existing and in good standing in its jurisdiction of
incorporation and is duly qualified as a foreign corporation and
authorized to do business in each jurisdiction listed in Schedule 3.1,
which such jurisdictions are the only jurisdictions in which the nature of
its business or property makes such qualification necessary and where the
failure to so qualify would not have a Material Adverse Effect. The
Company has the corporate power to own its properties and to carry on its
business as now conducted and as proposed to be conducted.
SECTION 3.2. Authorization; Noncontravention. The execution, delivery
and performance by the Company of this Agreement and of each Related
Agreement, and the issuance and sale by the Company of the Purchased
Securities hereunder: (a) are within the Company's corporate power and
authority; (b) have been duly authorized by all necessary corporate,
stockholder and other proceedings, as the case may be; and (c) do not and
will not result in the creation of any Lien upon any of the Company's
property or conflict with or result in any breach of any provision of the
Company's Charter or by-laws or any law, regulation, order, judgment,
writ, injunction, license, permit, agreement or instrument to which the
Company is subject.
SECTION 3.3. Enforceability. The execution and delivery by the Company
of this Agreement and of each Related Agreement, and the issuance and sale
by the Company of the Purchased Securities hereunder, will result in
legally binding obligations of the Company, enforceable against it in
accordance with the respective terms and provisions hereof and thereof (i)
except as may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to enforcement of creditors' rights
generally and (ii) subject to general principles of equity.
SECTION 3.4. Capitalization. (a) Capital Stock. The Company's
authorized capital stock consists solely of 25,000,000 shares of common
stock, $.01 par value per share (the "Common Stock") and 1,000,000 shares
of undesignated preferred stock, $1.00 par value per share. Of such
authorized shares, immediately prior to the execution of this Agreement,
9,974,683 shares of Common Stock were issued and outstanding and no shares
of preferred stock were issued and outstanding. Prior to the Closing, the
amendment to the Charter reflected in the Certificate of Designation in
the form attached as Exhibit A shall be duly filed with the Massachusetts
Secretary of State. All of the issued and outstanding shares of the
Company's Capital Stock have been duly authorized and validly issued, are
fully paid and non-assessable and were issued in compliance with all
applicable state and Federal securities laws. Upon the issuance and sale
to the Purchasers of the Purchased Securities, the Purchasers, in the
aggregate, will own approximately 10.314% of the Company's Common Stock
Deemed Outstanding. Schedule 3.4 sets forth a complete and correct
schedule of the number of shares of issued and outstanding Capital Stock
and of any subscription, warrant, option, convertible security or other
options or rights (contingent or otherwise) to purchase shares of Capital
Stock, or securities convertible into shares of Capital Stock of the
Company held by Xxxxxx X. Xxxxxxxxxxxx or any of his Affiliates
immediately prior to the Closing. Schedule 3.4 also sets forth the name
of the holder and vesting schedule for each outstanding option issued
pursuant to the Company's 1993 stock option plan and 1996 stock option
plan. The Company is not aware of any purchase of securities of the
Company or other circumstances existing as of the date hereof that would
require the making of a filing pursuant to Rule 13d-1 under the Securities
Exchange Act of 1934, as amended and as to which such a filing has not yet
been made.
(b) Purchased Securities. The Purchased Securities which are
being issued hereunder have been duly and validly authorized and, when
issued and delivered in accordance with the terms hereof for the
consideration provided herein, will be validly issued, fully paid and
nonassessable and will not be subject to any Lien. On or prior to
Closing, the Company will have authorized and reserved, and covenants to
continue to reserve, a sufficient number of shares of Common Stock for
issuance upon the exercise of the Warrants. The shares of Common Stock
that will be issued upon exercise of the Warrants and against payment
therefor in accordance with the terms of the Warrants, will be validly
issued, fully paid and nonassessable and will not be subject to any Lien,
subject to applicable restrictions on transfer under Federal and state
securities laws. No further approval or authorization of the stockholders
or the directors of the Company or any successor or other Person is or
will be required for the issuance of the Common Stock upon exercise of the
Warrants.
(c) Options, Etc. Except as set forth on Schedule 3.4(c) and
except for the Purchased Securities to be issued in accordance with the
terms hereof: (a) The Company does not have any subscription, warrant,
option, convertible security or other options or rights (contingent or
otherwise) to purchase shares of Capital Stock, or securities convertible
into shares of Capital Stock, authorized, issued or outstanding, nor is
the Company obligated in any manner to issue shares of its Capital Stock
or securities convertible into or evidencing any right to acquire shares
of its Capital Stock, or to distribute to holders of any of its Capital
Stock any evidence of indebtedness or assets; (b) no Person has any
preemptive right, right of first refusal or similar right to acquire
additional shares of Capital Stock of the Company in connection with the
sale and purchase of the Purchased Securities pursuant to this Agreement
or otherwise; (c) the Company does not have any obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its Capital
Stock or any interests therein, or to pay any dividend or make any other
distribution in respect thereto; and (d) to the Company's knowledge, there
are no voting trusts, stockholders' agreements, or proxies relating to the
Capital Stock.
SECTION 3.5. Subsidiaries. The Company does not have any Subsidiaries.
SECTION 3.6. Required Filings and Consents. Except as set forth in
Schedule 3.6 hereto, the execution, delivery and performance by the
Company of this Agreement and of each Related Agreement, and the issuance
and sale of the Purchased Securities hereunder and the issuance of any
Common Stock upon conversion of any of the Purchased Securities, do not
and will not require the approval or consent of, or any filing with, any
governmental authority or agency or any other Person other than a Notice
of Sale of Securities Pursuant to Regulation D, Section 4(2), and/or
Uniform Limited Offering Exemption on Form D and any required state
securities law filings relating to the issuance and sale of the Purchased
Securities which have been filed or are permitted to be filed after the
date of such issuance and sale (the "Blue Sky Filings").
SECTION 3.7. Undisclosed Liabilities.
The Company does not have any known liabilities or obligations of any
nature, whether absolute, accrued, contingent or otherwise, which are not
in the aggregate reflected or reserved against in the December 31, 1997
balance sheet contained in the Company's report on Form 10-Q for the
quarter ended December 31, 1997, except for (i) liabilities disclosed in
Schedule 3.7 or not required to be disclosed because of a materiality
qualifier in the representations and warranties and (ii) liabilities that
may have arisen in the ordinary and usual course of business and
consistent with past practice and that individually or in the aggregate
could not reasonably be expected to have a Material Adverse Effect.
SECTION 3.8. Absence of Certain Developments. Except for entering into
this Agreement and except as disclosed on Schedule 3.8(a) hereof or in the
SEC Documents, since March 31, 1997:
(a) The Company has conducted its business in the ordinary course
consistent with past practice and has not:
(i) declared, set aside, paid to a reserve fund or made any
payment or distribution of cash or other property to its
stockholders or equity holders with respect to any class of its
Capital Stock or other equity interest or purchased or redeemed any
shares of its Capital Stock or other equity interests;
(ii) suffered any substantial loss to any of its material
assets;
(iii) made any increases in the base compensation, bonuses,
paid vacation time allowed or fringe benefits for its directors,
officers, partners, employees or consultants, except for normal
periodic increases in base compensation for employees;
(iv) suffered damage, destruction or other casualty loss, or
forfeiture of, any property or assets, whether or not covered by
insurance, which may reasonably be expected to have a Material
Adverse Effect;
(v) paid any bonuses, deferred or otherwise, or deferred any
compensation to any of its directors, officers, partners or
employees;
(vi) made any material change in accounting procedures,
policies or practices;
(vii) entered into any agreement or arrangement outside of the
ordinary course of business granting any rights to purchase or lease
any of its assets, properties or rights or requiring the consent of
any Person to the transfer, assignment or lease of any such assets,
properties or rights; or
(viii) entered into any agreement or understanding to do
any of the foregoing.
(b) Except as disclosed on Schedule 3.8(b) or in the SEC Documents, other
than in the ordinary course of business consistent with past practice,
since March 31, 1997 the Company has not:
(i) sold, leased, subleased, assigned or transferred any of
its tangible or intangible properties or assets, or canceled, waived
or compromised any debts or claims;
(ii) entered into any other material transaction, or any
amendment of any contract, lease, agreement or license which is
material to its business; or
(iii) entered into any agreement or understanding to do any of
the foregoing.
SECTION 3.9. Interested Party Transactions. Except as set forth in
Schedule 3.9 or disclosed in the Company SEC Reports under an appropriate
heading, since March 31, 1997, no event has occurred that would be
required to be reported by the Company as a Certain Relationship or
Related Transaction, pursuant to Item 404 of Regulation S-K promulgated by
the SEC.
SECTION 3.10. Tax Returns. The Company has filed all Tax returns and
reports which are required to be filed with any foreign, federal, state or
local governmental authority or agency and has paid all Taxes which have
become due, and made adequate provision for the payment of all Taxes that
will become due, under applicable foreign, federal, state or local
governmental law or regulations with respect to the periods in respect of
which such returns and reports were filed, and all assessments of Taxes.
To the Company's knowledge, there have been no additional assessments
since the date of such returns and reports, and there will be no
additional assessments for which adequate reserves appearing on the
Balance Sheet have not been established. To the Company's knowledge, the
Company has made adequate provisions for all current Taxes.
SECTION 3.11. Title to Assets. Except as disclosed on Schedule 3.11 or
in the SEC Documents, the Company owns all of its assets, and has good and
marketable title with respect thereto free and clear of all Liens.
SECTION 3.12. Material Contracts and Obligations.
(a) The SEC Documents, as supplemented by Schedule 3.12(a), include each
agreement, contract or other instrument (including all amendments thereto)
to which the Company is a party or by which it or any of its assets are
bound and which would be required pursuant to the Exchange Act and the
rules and regulations thereunder to be filed as an exhibit to an Annual
Report on Form 10-K, a Quarterly Report on Form 10-Q or a Current Report
on Form 8-K. The Company has made available to the Purchasers on or prior
to the date hereof true, correct and complete copies of each such
agreement, contract, instrument and amendment.
(b) Except as disclosed in Schedule 3.12(b), and except as disclosed in
the SEC Documents, (i) the Company has not breached, is not in default
under, or has not received written notice of any breach of or default
under, any of the agreements, contracts or other instruments referred to
in Schedule 3.12(a), (ii) to the best knowledge of the Company, no other
party to any of the agreements, contracts or other instrument referred to
in Schedule 3.12(a) has breached or is in default of any of its
obligations thereunder, and (iii) to the knowledge of the Company, each of
the agreements, contracts and other instruments referred to in Schedule
3.12(a) is in full force and effect.
SECTION 3.13. Real and Personal Property - Leased. The Company has the
right to quiet enjoyment of all real property in which it holds a
leasehold interest for the full term thereof, including all renewal terms
of the lease or similar agreement relating thereto.
SECTION 3.14. Necessary Licenses and Permits. Except as set forth on
Schedule 3.14 and except as disclosed in the SEC Documents, the Company
has all licenses, permits, consents, concessions and other authorizations
of governmental, regulatory or administrative agencies or authorities,
whether foreign, federal, state, or local (collectively "Permits"),
required to own and lease its properties and assets and to conduct its
business as now conducted except where the failure to have such Permits
would not have a Material Adverse Effect. Except as disclosed in the SEC
Documents, and except to the extent the failure to be in compliance would
not have a Material Adverse Effect, the Company is in compliance with the
terms of the Permits.
SECTION 3.15. Compliance with Law.
(a) Except as may be set forth on Schedule 3.15(a) hereto or in the SEC
Documents, the Company is not in default under, or in violation of, or has
violated (and not cured) any law (including, without limitation, the
Communications Act of 1934, as amended, and Telecommunications Act of
1996, as amended, laws relating to the issuance or sale of securities,
antitrust, zoning and building codes and ordinances, occupational safety,
the protection of the environment, transportation, storage or disposal of
hazardous waste, anti-pollution and air and water quality laws),
regulations, orders or any licenses, franchises, permits, authorizations
or concessions granted by, or any judgment, decree, writ, injunction or
order of, any governmental or regulatory authority, applicable to its
business or any of its properties or assets, except where such defaults
and violations would not, in the aggregate, have a Material Adverse
Effect. The Company has not received any notification alleging any
violations of any of the foregoing within the last five years with respect
to which adequate corrective action has not been taken.
(b) To the Company's knowledge, no present or former officer, director,
employee or agent of the Company has in order to assist the Company in
obtaining or retaining any License offered, paid, promised to pay or
authorized the payment of any money, or offered, given, promised to give,
or authorized the giving of anything of value to (i) any officer or
employee of any government or any department, agency, instrumentality
thereof, or any person acting in an official capacity for or on behalf of
any such government or department, agency or instrumentality (such an
officer or employee being referred to as a "foreign official"), (ii) any
foreign political party or official thereof or any candidate for foreign
political office, or (iii) any person, while knowing that all or a portion
of such money or thing of value will be offered, given, or promised,
directly or indirectly, to any foreign official, to any foreign political
party or official thereof, or to any candidate for foreign political
office, in each case, for purposes of the following:
(A)(i) illegally or corruptly influencing any act or decision
of any such foreign official, political party or official thereof,
or candidate in such person's official capacity, or (ii) inducing
such foreign official, political party or official thereof, or
candidate to do or omit to do any act in violation of the lawful
duty of such person, or
(B) illegally or corruptly inducing such foreign official,
political party or official thereof, or candidate to use such
person's influence with a foreign government or instrumentality
thereof to affect or influence any act or decision of such
government or instrumentality.
SECTION 3.16. Litigation. Except as set forth on Schedule 3.16 hereto
and except as disclosed in the SEC Documents, there is no suit, claim,
action, proceeding or investigation pending or, to the Company's
knowledge, threatened against the Company or any of its respective assets
or properties at law or in equity or before any governmental authority or
instrumentality or before any arbitrator of any kind or, to the Company's
knowledge, against any officer of the Company and relating to the Company,
nor to the Company's knowledge, has there occurred any event or does there
exist any condition on the basis of which any such litigation, proceeding
or investigation might properly be instituted. Except as set forth on
Schedule 3.16 hereto or as disclosed in the SEC Documents, neither the
Company nor to the Company's knowledge, any officer of the Company has
been a party to any such suit, claim, action, proceeding or investigation
during the past two years involving the Company's business, assets or
properties, nor has any such suit, claim, action, proceeding or
investigation been threatened by or against the Company.
SECTION 3.17. No Material Adverse Changes. Except as set forth on
Schedule 3.17 hereto or in the SEC Documents, since March 31, 1997 there
has occurred no material adverse change in the business, assets,
properties (tangible and intangible), operations, or financial condition
of the Company, whether or not in the ordinary course of business, whether
separately or in the aggregate with other occurrences or developments (a
"Material Adverse Effect"), and the Company has no knowledge of any
occurrence or development which might reasonably be expected to result in
any such Material Adverse Effect.
SECTION 3.18. Employee Benefit Plans. Except as described on Schedule
3.18, the Company does not maintain or operate any Employee Benefit Plan
nor has any such Plan been maintained or operated during the past three
years. The Company does not maintain or contribute to any Guaranteed
Pension Plan or Multiemployer Plan. With respect to each Employee Benefit
Plan listed on
Schedule 3.18, to the extent applicable,
(a) Each such Benefit Plan has been maintained and operated in all
material respects in compliance with its terms and with all applicable
provisions of the Employee Retirement Income Security Act of 1974, as
amended("ERISA"), the Code and all applicable regulations, rulings and
other authority issued thereunder;
(b) All contributions required by law to have been made under each such
Benefit Plan (without regard to any waivers granted under Section 412 of
the Code) to any fund or trust established thereunder or in connection
therewith have been made by the due date thereof;
(c) Each such Benefit Plan intended to qualify under Section 401(a) of
the Code is the subject of a favorable unrevoked determination letter
issued by the Internal Revenue Service as to its qualified status under
the Code, which determination letter may still be relied upon as to such
tax qualified status, and no circumstances have occurred that would
adversely affect qualified status of any such Benefit Plan;
(d) No Benefit Plan is subject to Title IV of ERISA;
(e) None of such Benefit Plans that are "employee welfare benefit plans"
as defined in Section 3(1) of ERISA provides for continuing benefits or
coverage for any participant or beneficiary of a participant after such
participant's termination of employment, except as required by applicable
law, including section 4980B of the Code or Section 601 of ERISA; and
(f) Neither the Company nor any trade or business (whether or not
incorporated) under common control with the Company within the meaning of
Section 4001 of ERISA has, or at any time has had, any obligation to
contribute to any "multiemployer plan" as defined in Section 3(37) of
ERISA.
SECTION 3.19. Withholding, Contracts, Labor Relations. The Company has
withheld all amounts required by law or agreement to be withheld by it
from the wages, salaries and other payments to its employees and is not
liable for any arrears of wages or any taxes or penalties for failure to
comply with any of the foregoing. Except as set forth in Schedule 3.19,
there are no pending, or to the knowledge of the Company, threatened or
anticipated (a) employment discrimination charges or complaints against or
involving the Company before any federal, state, or local board,
department, commission or agency, (b) unfair labor practice charges or
complaints, disputes or grievances affecting the Company, (c) union
representation petitions respecting the employees of the Company, (d)
efforts being made to organize any of the employees of the Company or (e)
strikes, slow downs, work stoppages, or lockouts or threats thereof
affecting the Company.
SECTION 3.20. Governmental Regulations. The Company is not a "holding
company", or a "subsidiary company" of a "holding company" or an
"affiliate" of a "holding company", as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended; nor is the
Company an "investment company", or an "affiliated person" or a "principal
underwriter" of an "investment company", as such terms are defined in the
Investment Company Act of 1940, as amended. The Company is not now, nor
has it been within the past five years, a "United States real property
holding corporation" as defined in Section 897 of the Code.
SECTION 3.21. Corporate Documents, Books and Records. Complete and
correct copies of the Charter and by-laws, and of all amendments thereto,
of the Company have been previously delivered or made available to each of
the Purchasers, and, other than the filing of the Certificate of
Designation, no changes in said documents will be made on or before the
Closing Date other than as disclosed to, and concurred to in writing by,
each of the Purchasers.
SECTION 3.22. Disclosure. No representation or warranty made in this
Agreement, considered as a whole, contains any untrue statement of
material fact or omits to state a material fact necessary in order to make
the statements contained herein or therein, in light of the circumstances
in which they were made, not misleading.
SECTION 3.23. Certain Agreements of Officers and Employees.
(a) To the Company's best knowledge and belief, no officer or employee of
the Company is, or is now expected to be, in violation of any term of any
employment contract, patent disclosure agreement, proprietary information
agreement, noncompetition agreement, nonsolicitation agreement, or any
other contract or agreement or restrictive covenant relating to the right
of any such officer or employee to be an employee, to be employed by the
Company which violation could be reasonably expected to have a Material
Adverse Effect upon the Company.
(b) To the best knowledge of the Company, no officer of the Company, nor
any key employee of the Company whose termination, either individually or
in the aggregate, would have a Material Adverse Effect on the Company, has
any present intention of terminating his or her employment with the
Company.
SECTION 3.24. Registration Rights. Except as set forth in Schedule 3.24,
and except for the rights granted to the Purchasers pursuant to the
Registration Rights Agreement of even date herewith, no Person has demand
or other registration rights to cause the Company to file any registration
statement under the Securities Act relating to the securities of the
Company or any right to participate in any such registration statement.
SECTION 3.25. Compliance with Securities Laws. (a) The Company has
complied and will comply with all applicable United States Federal and
state securities laws in connection with the offer, issuance and sale of
the Purchased Securities. Assuming that the Purchasers' representations
and warranties contained in Article IV are true and correct, the Company
has not, either directly or through any agent, offered any securities to,
or otherwise approached, negotiated or communicated in respect of any
securities with, any Person so as thereby to require that the offer or
sale of the Purchased Securities be registered pursuant to the provisions
of Section 5 of the Securities Act. Assuming that the Purchasers'
representations and warranties contained in Article IV are true and
correct, the offer, sale and issuance of the Purchased Securities and the
Warrants (and of the Common Stock issuable upon the exercise of the
Warrants) in conformity with the terms of this Agreement are exempt from
the registration requirements of Section 5 of the Securities Act and all
applicable state securities laws (or are otherwise registered or qualified
under applicable state securities law).
(b) The Company has filed all forms, reports and documents
required to be filed with the SEC prior to the date hereof, and has
heretofore delivered or made available to the Purchasers, in the form
filed with the SEC, its (i) Annual Reports on Form 10-K for the fiscal
years ended Xxxxx 00, 0000, (xx) its Quarterly Reports on Form 10-Q for
the quarters ended June 30, 1997, September 30, 1997 and December 31,
1998, (iii) the Company's Proxy Statement with respect to the 1997 annual
meeting of its stockholders; (iv) all other reports, registration
statements, or information statements filed with the SEC subsequent to
March 31, 1997 (collectively, the "SEC Documents"), and (v) all amendments
and supplements to all such reports and registration statements filed by
the Company with the SEC pursuant to the requirements of the Exchange Act
or the Securities Act. The SEC Documents (i) complied as to form with the
applicable requirements under the Securities Act or the Exchange Act, as
the case may be, and (ii) did not at the time they were filed contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading; and each of the balance sheets contained in or incorporated by
reference into any of the Company's SEC Documents (including the related
notes and schedules thereto) fairly presents the financial position of the
Company as of its date, and each of the statements of income and changes
in shareholders' equity and cash flows or equivalent statements in the
Company's SEC Documents (including any related notes and schedules
thereto) fairly presents the results of operations, changes in
shareholders' equity and changes in cash flows, as the case may be, of the
Company for the periods to which they relate, in each case, in compliance
with applicable accounting requirements and with the published rules of
the SEC with respect thereto and in accordance with generally accepted
accounting principles consistently applied during the periods involved,
except, in each case, as may be noted therein, subject to normal year-end
audit adjustments (which are not expected to be material) in the case of
unaudited statements.
ARTICLE IV
PURCHASERS' REPRESENTATIONS
Each of the Purchasers hereby represents and warrants, severally and not
jointly, as follows:
SECTION 4.1. Investment Intent. Such Purchaser is acquiring the
Purchased Securities to be purchased by it or him pursuant to Section 2
hereof for investment and not with a view to the distribution thereof.
SECTION 4.2. Authorization. This Agreement and the Related Agreements to
which such Purchaser is a party have been executed by a duly authorized
Person on such Purchaser's behalf; and the execution, delivery and
performance hereof and thereof have been duly authorized by all
appropriate action.
SECTION 4.3. Enforceability. The execution and delivery by such
Purchaser of this Agreement and each of the Related Agreements will result
in legally binding obligations of such Purchaser enforceable against it or
him in accordance with the respective terms and provisions hereof and
thereof.
SECTION 4.4. Experience of Purchaser. Such Purchaser has such knowledge,
sophistication and experience in business and financial matters so as to
be capable of evaluating the merits and risks of the prospective
investment in the Purchased Securities, and has so evaluated the merits
and risks of such investment.
SECTION 4.5. Ability of Purchaser to Bear Risk of Investment. Such
Purchaser is able to bear the economic risk of an investment in the
Purchased Securities and, at the present time, is able to afford a
complete loss of such investment.
SECTION 4.6. Access to Information. Such Purchaser acknowledges that it
has been afforded (i) the opportunity to ask such questions as it had
deemed necessary of, and to receive answers from, representatives of the
Company concerning the terms and conditions of the offering of the
Purchased Securities and the merits and risks of investing in the
Purchased Securities; (ii) access to information about the Company and the
Company's financial condition, results of operations, business,
properties, management and prospects believed by it to be sufficient to
enable it to evaluate its investments.
SECTION 4.7. Reliance. Such Purchaser understands and acknowledges that
(i) the Purchased Securities are being offered and sold to such Purchaser
without registration under the Securities Act in a private placement that
is exempt from the registration provisions of the Securities Act under
Section 4(2) of the Securities Act or Regulation D promulgated thereunder
and (ii) the availability of such exemption, depends in part on, and the
Company will rely upon the accuracy and truthfulness of, the foregoing
representations and such Purchaser hereby consents to such reliance.
SECTION 4.8. Transfer Restriction. (a) A Purchaser may only dispose of
the Purchased Securities held by it, pursuant to an effective registration
statement under the Securities Act, to the Company or pursuant to an
available exemption from the registration requirements of the Securities
Act. In connection with any transfer of Purchased Securities other than
pursuant to an effective registration statement or to the Company, the
Company may require the transferor thereof to provide to the Company a
written opinion of counsel experienced in the area of United States
securities laws selected by the transferor, the form and substance of
which opinion shall be reasonably satisfactory to the Company, to the
effect that such transfer does not require registration of such
transferred securities under the Securities Act. Notwithstanding the
foregoing, the Company hereby consents to and agrees to register (i) any
transfer of Purchased Securities by one Purchaser to another Purchaser,
and agrees that no documentation other than executed transfer documents
shall be required for any such transfer, and (ii) any transfer of
Purchased Securities by any Purchaser to an Affiliate or a beneficial
owner of such Purchaser or to an Affiliate or a beneficial owner of
another Purchaser, or any transfer among any such Affiliates or beneficial
owners, provided that the transferee certifies to the Company that it is
an "accredited investor" as defined in Rule 501(a) under the Securities
Act and any transferee shall agree in writing to be bound by the terms of
this Agreement and shall have the rights of a Purchaser under this
Agreement. Each Purchaser acknowledges and agrees that any instrument
evidencing Purchased Securities shall bear a legend noting the foregoing
restrictions as well as any other legend required by law. The foregoing
transfer restrictions shall not apply, and no legend shall appear on the
Purchased Securities, to the extent the Purchased Securities are sold
pursuant to a transaction registered pursuant to an effective registration
statement under the Securities Act or to the extent they are transferred
pursuant to Rule 144(k) under the Securities Act.
ARTICLE V
CONDITIONS TO EACH PURCHASER'S OBLIGATIONS TO PURCHASE
Each Purchaser's obligation to purchase the Purchased Securities pursuant
to Section 2.2 of this Agreement is subject to compliance by the Company
with its agreements and representations herein contained, and to the
satisfaction, on or prior to the Closing Date, of the following
conditions:
SECTION 5.1. Agreements. Each of the Related Agreements shall have been
executed and delivered in the form provided for herein, and each of the
Related Agreements shall be in full force and effect and no term or
condition thereof shall have been amended, modified or waived except with
the prior written consent of such Purchaser. All covenants, agreements
and conditions contained in the Related Agreements which are to be
performed or complied with on or prior to the Closing Date shall have been
performed or complied with in all material respects. The Voting Agreement
shall be executed and delivered in the form provided for herein.
SECTION 5.2. Charter Documents; Good Standing Certificates. Such
Purchaser shall have received from the Company (a) a copy of the Company's
Charter, certified by the Massachusetts Secretary of State to be true and
complete, (b) a copy, certified by the Secretary of the Company to be true
and complete as of the Closing Date, of the by-laws thereof; and (c) a
certificate of the relevant governmental authority or other appropriate
official of each state in which each of the Company is incorporated or
qualified to do business (if the Company actually does business in such
state) as to the Company's corporate good standing in such state or
qualification to do business, as the case may be.
SECTION 5.3. Proof of Corporate Action. Such Purchaser shall have
received from the Company copies certified by the Secretary thereof to be
true and complete as of the Closing Date, of the records of all corporate
action taken to authorize the execution, delivery and performance of this
Agreement and each of the Related Agreements to which the Company is a
party.
SECTION 5.4. Incumbency Certificate. Such Purchaser shall have received
from the Company an incumbency certificate, dated the Closing Date, signed
by a duly authorized officer thereof certifying as to the name, office,
signature specimen and due authority of each individual who shall sign, in
the name and on behalf of the Company, this Agreement and each of the
Related Agreements to which the Company is or is to become a party.
SECTION 5.5. Legal Opinion. The Purchasers shall have received from
Ropes & Xxxx and Xxxxxxx X. Xxxxx, Esq., counsel to the Company, favorable
opinions satisfactory to the Purchasers in form and substance covering the
matters set forth in Exhibit D hereto.
SECTION 5.6. Representations and Warranties; Officer's Certificate. The
representations and warranties contained or incorporated by reference
herein shall be true and correct in all material respects on and as of the
Closing Date with the same force and effect as though made on and as of
the Closing Date except for those representations and warranties which
relate specifically to a particular date, provided that such
representations and warranties were true and correct in all material
respects as of such date; and the Company shall have performed and
complied with all conditions and agreements required to be performed or
complied with by each of them prior to the Closing; and such Purchaser
shall have received on the Closing Date a certificate to these effects
signed by an authorized officer of the Company.
SECTION 5.7. Legality; Governmental and Other Authorizations. The
purchase of the Purchased Securities by such Purchaser shall not be
prohibited by any law or governmental order or regulation, and shall not
subject the Company to any penalty, special tax, or other onerous
condition. All necessary consents, approvals, licenses, permits, orders
and authorizations of, or registrations, declarations and filings with,
any governmental or administrative agency or of or with any other Person,
with respect to any of the transactions contemplated by this Agreement or
any of the Related Agreements, shall have been duly obtained or made and
shall be in full force and effect other than the Blue Sky Filings.
SECTION 5.8. Payment of Certain Fees and Disbursements. At the Closing,
the Purchasers shall have been reimbursed, subject to and in accordance
with Article X hereof, for all reasonable fees and expenses of Xxxxxxx &
Xxxxxx incurred by the Purchasers through the Closing Date in connection
with the transactions contemplated by this Agreement.
SECTION 5.9. Charter Amendment. The Company's Charter shall have been
amended by the filing of a Certificate of Designation in the form of
Exhibit B hereto.
SECTION 5.10. Election to Board. Xxxxx X. Xxxxxx and Xxxxxxx X. Xxxxxxxx
shall have been elected to the Company's Board of Directors as Class III
Directors, and Xxxxx X. Xxxxxx shall have been appointed to the
Compensation Committee of the Company's Board of Directors.
SECTION 5.11. General. All instruments and legal, governmental,
administrative and corporate proceedings in connection with the
transactions contemplated by this Agreement and the Related Agreements
shall be satisfactory in form and substance to the Purchasers' counsel,
and the Purchasers shall have received copies of all documents, including,
without limitation, records of corporate or other proceedings, the opinion
of counsel contemplated in Section 5.5 hereof, and any consents, licenses,
approvals, permits and orders required to be secured by the Company in
connection with the transactions contemplated herein or which any
Purchaser may have requested in connection therewith.
ARTICLE VI
CONDITIONS TO THE COMPANY'S OBLIGATIONS
The Company's obligation to sell and issue the Purchased Securities
pursuant to this Agreement is subject to compliance by each of the
Purchasers with the agreements herein contained, and to the satisfaction
on or prior to the Closing Date, of the following conditions:
SECTION 6.1. Representations. The representations made by each Purchaser
in Article IV hereof shall be true and correct in all material respects
when made and shall be true and correct in all material respects as of the
Closing Date.
SECTION 6.2. Related Agreements. Each of the Related Agreements to which
such Purchaser is a party shall have been executed by such Purchaser. All
covenants, agreements and conditions contained in the Related Agreements
which are to be performed or complied with by such Purchaser on or prior
to the Closing Date shall have been performed or complied with by such
Purchaser in all material respects.
SECTION 6.3. Legality; Governmental and Other Authorizations. The sale
of the Purchased Securities by the Company shall not be prohibited by any
law or governmental order or regulation, and shall not subject the Company
to any penalty, special tax, or other onerous condition. All necessary
consents, approvals, licenses, permits, orders and authorizations of, or
registrations, declarations and filings with, any governmental or
administrative agency or of or with any other Person, with respect to any
of the transactions contemplated by this Agreement or any of the Related
Agreements, shall have been duly obtained or made and shall be in full
force and effect other than the Blue Sky Filings.
SECTION 6.4. General. All instruments and legal, governmental,
administrative, corporate proceedings in connection with the transactions
contemplated by this Agreement and the Related Agreements shall be
satisfactory in form and substance to the Company, and the Company shall
have received copies of all documents, including, without limitation, any
consents, licenses, approvals, permits and orders required to be secured
by each Purchaser in connection with the transactions contemplated herein
or which the Company may have requested in connection therewith.
ARTICLE VII
COVENANTS APPLICABLE FOLLOWING THE CLOSING
The Company hereby agrees that until the earlier to occur of (i) the fifth
anniversary of the Closing Date, or (ii) the date as of which all shares
of Series A Preferred Stock shall have been converted or shall otherwise
cease to be outstanding, it will comply with the following provisions:
SECTION 7.1. Financial Statements. The Company shall deliver to Spectrum
promptly after filing with the SEC, the Company's quarterly report filed
on Form 10-Q and the Company's annual report filed on Form 10-K.
SECTION 7.2. Additional Information. Promptly after the date the Company
is notified of a request by Spectrum, the Company will deliver to Spectrum
any such additional information as Spectrum may reasonably request from
time to time (which requests shall be no more frequent than once a month),
including, without limitation, sales force growth and productivity
statistics and access lines (booked and provisioned) by customer.
SECTION 7.3. Annual Budget. The Company shall furnish to Spectrum,
promptly following approval thereof by the Board, a true and complete copy
of the Company's three-year operating budget.
SECTION 7.4. SEC Filings. Promptly upon filing with the SEC, the Company
shall provide to Spectrum copies of all public filings made by the Company
pursuant to the Securities Act or the Exchange Act.
SECTION 7.5. Inspection. The Company shall permit authorized
representatives of Spectrum to visit and inspect any of the properties of
the Company, including its books of account, and to make copies thereof at
the expense of Spectrum and to discuss its affairs, finances and accounts
with its officers, administrative employees and independent accountants,
all at such reasonable times with reasonable notice as may be reasonably
requested but in no event more than one time in any calendar month and all
in a manner that does not interfere with the business operations of the
Company; provided that all such information provided to Spectrum by the
Company under this Article VII will be maintained as confidential by
Spectrum and not be disclosed to third parties and provided, further that,
subject to the foregoing, Spectrum may provide summaries of such
information to its Affiliates and beneficial owners on a confidential
basis in connection with reports provided by Spectrum to its Affiliates
and beneficial owners in its fiduciary capacity.
SECTION 7.6. Independent Director. The Company shall use its best
efforts to increase the size of its Board of Directors to eight (8) as
soon after Closing as possible by adding an independent director with
relevant industry expertise, which independent director shall be
satisfactory to the Purchasers and the Company's chief executive officer.
ARTICLE VIII
PREEMPTIVE RIGHTS
SECTION 8.1 Right to Purchase. Until the date as of which all shares of
Series A Preferred Stock shall have been converted or shall otherwise
cease to be outstanding, the Company shall only issue New Securities in
accordance with the following terms:
(a) The Company shall not issue any New Securities (other than
Excluded Securities) unless it first delivers to each Purchaser a written
(or oral if pursuant to Section 8.1(f)) notice (the "Notice of Proposed
Issuance") specifying the type and total number of such New Securities
that the Company then intends to issue (the "Offered New Shares"), all of
the material terms (or terms then known if pursuant to Section 8.1(f)),
including the price upon which the Company proposes to issue the Offered
New Shares and stating that the Purchasers shall have the right to
purchase the Offered New Shares in the manner specified in this Section
8.1 for the same price per share and in accordance with the same terms and
conditions specified in such Notice of Proposed Issuance.
(b) During the twenty (20) consecutive day period commencing on
the date the Company delivers to all of the Purchasers the Notice of
Proposed Issuance (the "Twenty Day Period"), the Purchasers shall have the
option to purchase a portion of the Offered New Shares at the same price
per share and upon the same terms and conditions specified in the Notice
of Proposed Issuance. Each Purchaser electing to purchase Offered New
Shares must give written notice of its election to the Company prior to
the expiration of the Twenty Day Period.
(c) Each Purchaser shall have the right to purchase up to that
number of the Offered New Shares as shall be equal to the number of the
Offered New Shares multiplied by a fraction, the numerator of which shall
be the number of outstanding Registrable Securities and shares of Common
Stock then issuable upon conversion and exercise of all Purchased
Securities and Preferred Stock Derivatives then owned by such Purchaser
and the denominator of which shall be the aggregate number of shares of
Common Stock Deemed Outstanding. The amount of such Offered New Shares
that each Purchaser is entitled to purchase under this Section 8.1(c)
shall be referred to as its "Proportionate Share". No Purchaser shall
have any right of oversubscription.
(d) To the extent the Offered New Shares have not been purchased
by the Purchasers pursuant to paragraphs (a)-(c) hereof, then the Company
shall have the right, until the expiration of one-hundred eighty (180)
consecutive days commencing on the first day immediately following the
expiration of the Twenty Day Period, to issue the Offered New Shares at
not less than, and on terms no more favorable to the purchaser than the
price and terms specified in the Notice of Proposed Issuance. If for any
reason the Offered New Shares are not issued within such period and at
such price and on such terms, the right to issue in accordance with the
Notice of Proposed Issuance shall expire and the provisions of this
Agreement shall continue to be applicable to the Offered New Shares.
(e) Notwithstanding the foregoing, the preemptive rights described
in this Article VIII shall not apply with respect to the issuance of (i)
any Excluded Securities, (ii) the issuance of any shares pursuant to a
transaction registered under the Securities Act at a price greater than
the Conversion Price at that time, or (iii) issuance of Common Stock or
warrants or options to acquire Common Stock to any Persons (including the
stockholders or owners of Persons) as all or part of the consideration
paid for the acquisition of ownership interests in, or assets of, such
Person.
(f) Notwithstanding paragraphs (a), (b) and (c) above, if the New
Securities with respect to which preemptive rights are applicable under
this Article are to be sold pursuant to (x) a transaction registered under
the Securities Act or (y) a transaction pursuant to Rule 144A under the
Securities Act yielding the Corporation proceeds of at least $40,000,000
(net of any interest or dividend escrows or similar arrangements), the
following shall apply in lieu of Section 8.1(b): (i) any Purchaser wishing
to exercise such rights must commit to purchase such New Securities and
consummate the purchase of such New Securities at the same time and on the
same terms as such other purchasers in the offering, (ii) if a Rule 144A
offering, such Purchaser must meet the legal qualifications to participate
in such offering and (iii) the Company will provide any Purchaser
indicating to the Company orally or in writing an interest in
participating in such offering with substantially the same information at
substantially the same times as provided to the other purchasers in such
offering.
ARTICLE IX
ASSIGNMENT OF PURCHASED SECURITIES
Whether or not any express assignment has been made in this Agreement, the
provisions of this Agreement that are for the benefit of each Purchaser as
the holder of any Purchased Securities or Registrable Securities are also
for the benefit of, and enforceable by, all subsequent holders of such
Purchased Securities or Registrable Securities, and the provisions of this
Agreement that subject the Purchasers to obligations as the holder of any
Purchased Securities or Registrable Securities also shall subject all
subsequent holders of Purchased Securities and Registrable Securities
thereto. Notwithstanding the foregoing, the rights provided to Spectrum
pursuant to Article VII of this Agreement cannot be assigned without the
Company's prior consent.
ARTICLE X
EXPENSES; INDEMNITY
SECTION 10.1. Expenses. The Company hereby agrees to pay all reasonable
legal fees and disbursements of a single counsel to the Purchasers
incurred by the Purchasers through the Closing not to exceed in the
aggregate a maximum of $100,000. From and after the Closing, the Company
hereby agrees to pay on demand all reasonable attorneys' fees of a single
counsel to the Purchasers incurred in connection with any amendments,
modifications, approvals, consents or waivers with respect to this
Agreement or any Related Agreement proposed by or discussed with the
Company.
SECTION 10.2. Indemnification. Notwithstanding any disclosures made in
the Schedules hereto, the Company hereby agrees to indemnify, exonerate
and hold each of the Purchasers and their (if applicable) general and
limited partners and their respective shareholders, officers, directors,
employees, attorneys and agents ("Indemnitees") free and harmless from and
against any and all actions, causes of action, or suits brought against
them by third parties other than the Company ("Third Party Claims"),
losses, liabilities, settlement costs, damages and expenses, including,
without limitation, reasonable attorneys' fees and disbursements
(collectively, "Damages") arising from any such Third Party Claim,
incurred in the capacity as a Purchaser by any of the Indemnitees as a
result of or relating to (i) any transaction by the Company financed or to
be financed in whole or in part, directly or indirectly, with proceeds
from the sale of any of the Purchased Securities, (ii) the execution,
delivery, performance or enforcement of this Agreement, the Related
Agreements or any other agreement contemplated hereby or thereby
(including, without limitation, any failure by the Company to comply with
any of its covenants or any breach of its representations and warranties
in this Agreement, the Related Agreements or any other agreement
contemplated hereby or thereby) except where such Damages are caused by
the willful misconduct or gross negligence of the Purchasers. Notice of
any claim for indemnification by an Indemnitee must be made promptly after
such Indemnitee has notice of the relevant Third Party Claim. No
Indemnitee shall settle a Third Party Claim for which indemnification is
sought hereunder without the consent of the Company, which consent shall
not be unreasonably withheld or delayed.
ARTICLE XI
NOTICES
All demands, notices, requests, consents and other communications required
or permitted under this Agreement, any Related Agreement or the Purchased
Securities shall be in writing and shall be personally delivered or sent
by facsimile machine (with a confirmation copy sent by one of the other
methods authorized in this Section), commercial (including FedEx) or U.S.
Postal Service overnight delivery service, or, deposited with the U.S.
Postal Service mailed first class, registered or certified mail, postage
prepaid, as set forth below:
If to the Company, addressed to:
CTC Communications Corp.
000 Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attn: Xxxxxx Xxxxx and Xxxx Xxxxxxxxx
Facsimile No.: 000-000-0000
with a copy to:
Ropes & Xxxx
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attn: Xxxx X. Xxxxx, Esq.
Facsimile No.: 000-000-0000
Law Office of Xxxxxxx X. Xxxxx, P.A.
00 Xxxxxxx Xxxxxx
X.X. Xxx 000
Xxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx, Esq.
Facsimile No.: 000-000-0000
If to the Purchasers, addressed to:
Spectrum Equity Investors II, L.P.
Xxx Xxxxxxxxxxxxx Xxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxx
Facsimile No.: 000-000-0000
with a copy to:
Xxxxxxx & Xxxxxx
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxx, Esq.
Facsimile No.: 000-000-0000
If to any other holder of record of any security, to it at its address
set forth in the applicable register maintained by the Company with
respect thereto.
Notices shall be deemed given upon the earlier to occur of (i) receipt by
the party to whom such notice is directed; (ii) if sent by facsimile
machine, on the day (other than a Saturday, Sunday or legal holiday in the
jurisdiction to which such notice is directed) such notice is sent if sent
(as evidenced by the facsimile confirmed receipt) prior to 5:00 p.m.
Eastern Time and, if sent after 5:00 p.m. Eastern Time, on the day (other
than a Saturday, Sunday or legal holiday in the jurisdiction to which such
notice is directed) after which such notice is sent; (iii) on the first
business day (other than a Saturday, Sunday or legal holiday in the
jurisdiction to which such notice is directed) following the day the same
is deposited with the commercial carrier if sent by commercial overnight
delivery service; or (iv) the fifth day (other than a Saturday, Sunday or
legal holiday in the jurisdiction to which such notice is directed)
following deposit thereof with the U.S. Postal Service as aforesaid. Each
party, by notice duly given in accordance therewith may specify a
different address for the giving of any notice hereunder.
ARTICLE XII
SURVIVAL AND TERMINATION OF COVENANTS
AGREEMENTS, REPRESENTATIONS AND WARRANTIES,
All covenants, agreements, representations and warranties made herein or
in any certificate delivered at Closing pursuant hereto shall be deemed to
have been relied on by each such party, notwithstanding any investigation
made by such party or on its behalf. All representations and warranties
made herein or in any of the Related Agreements shall survive the
execution and delivery of this Agreement and of the Purchased Securities.
ARTICLE XIII
AMENDMENTS AND WAIVERS
Except as otherwise expressly provided herein, any term of this Agreement
may be amended and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either
retroactively or prospectively) only with the written consent of
Purchasers whose holdings of Purchased Securities and Registrable
Securities would, if converted and exercised, constitute a majority of the
Registrable Securities held by all Purchasers. Any amendment or waiver
effected in accordance with this Article XIII shall be binding upon the
Company and each holder of Purchased Securities and Registrable
Securities.
ARTICLE XIV
CHOICE OF LAW; SUBMISSION TO JURISDICTION
AND WAIVER OF JURY TRIAL; DISPUTE RESOLUTION
SECTION 14.1. Governing Law.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT GIVING EFFECT TO ANY
CONFLICTS OR CHOICE OF LAWS PROVISIONS WHICH WOULD CAUSE THE APPLICATIONS
OF THE DOMESTIC SUBSTANTIVE LAWS OF ANY OTHER JURISDICTION).
SECTION 14.2. Consent To the Exclusive Jurisdiction Of the Courts Of
Massachusetts.
(a) SUBJECT TO THE MANDATORY ARBITRATION PROVISIONS OF SECTION
14.5, EACH OF THE PARTIES HERETO HEREBY CONSENTS TO THE EXCLUSIVE
JURISDICTION OF THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS AND THE
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS, AS WELL AS
TO THE JURISDICTION OF ALL COURTS TO WHICH AN APPEAL MAY BE TAKEN FROM
SUCH COURTS, FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING
ARISING OUT OF, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER
TRANSACTION DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY, INCLUDING, WITHOUT LIMITATION, ANY PROCEEDING RELATING TO
ANCILLARY MEASURES IN AID OF ARBITRATION, PROVISIONAL REMEDIES AND INTERIM
RELIEF, OR ANY PROCEEDING TO ENFORCE ANY ARBITRAL DECISION OR AWARD.
(b) EACH PARTY HEREBY EXPRESSLY WAIVES ANY AND ALL RIGHTS TO BRING
ANY SUIT, ACTION OR OTHER PROCEEDING IN OR BEFORE ANY COURT OR TRIBUNAL
OTHER THAN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS AND COVENANTS
THAT IT SHALL NOT SEEK IN ANY MANNER TO RESOLVE ANY DISPUTE OTHER THAN AS
SET FORTH IN THIS ARTICLE XIV OR TO CHALLENGE OR SET ASIDE ANY DECISION,
AWARD OR JUDGMENT OBTAINED IN ACCORDANCE WITH THE PROVISIONS HEREOF.
(c) EACH OF THE PARTIES HERETO HEREBY EXPRESSLY WAIVES ANY AND ALL
OBJECTIONS IT MAY HAVE TO VENUE, INCLUDING, WITHOUT LIMITATION, THE
INCONVENIENCE OF SUCH FORUM, IN ANY OF SUCH COURTS. IN ADDITION, EACH OF
THE PARTIES CONSENTS TO THE SERVICE OF PROCESS BY PERSONAL SERVICE OR ANY
MANNER IN WHICH NOTICES MAY BE DELIVERED HEREUNDER IN ACCORDANCE WITH
ARTICLE XI.
SECTION 14.3. Waiver Of Jury Trial.
EACH OF THE PARTIES HERETO HEREBY VOLUNTARILY AND IRREVOCABLY WAIVES TRIAL
BY JURY IN ANY ACTION OR OTHER PROCEEDING BROUGHT IN CONNECTION WITH THIS
AGREEMENT, ANY OF THE OTHER TRANSACTION DOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
SECTION 14.4. Equitable Remedies.
The parties hereto agree that irreparable harm would occur in the event
that any of the agreements and provisions this Article XIV were not
performed fully by the parties hereto in accordance with their specific
terms or conditions or were otherwise breached, and that money damages are
an inadequate remedy for breach of the Agreement because of the difficulty
of ascertaining and quantifying the amount of damage that will be suffered
by the parties hereto in the event that this Agreement is not performed in
accordance with its terms or conditions or is otherwise breached. It is
accordingly hereby agreed that the parties hereto shall be entitled to an
injunction or injunctions to restrain, enjoin and prevent breaches of this
Agreement by the other parties and to enforce specifically such terms and
provisions of such Articles in any court of the United States or any state
having jurisdiction, such remedy being in addition to and not in lieu of,
any other rights and remedies to which the other parties are entitled to
at law or in equity.
SECTION 14.5. Arbitration.
Any controversy, dispute or claim arising out of or in connection with or
relating to this Agreement or any of the Related Agreements, or the
breach, termination or validity hereof or any transaction contemplated
hereby or thereby (any such controversy, dispute or claim being referred
to as a "Dispute") shall be finally settled by arbitration conducted
expeditiously in accordance with the Commercial Arbitration Rules then in
force (the "AAA Rules") of the American Arbitration Association (the
"AAA"). There shall be a panel of three arbitrators who shall be
appointed pursuant to AAA procedure, in each case, within fifteen (15)
business days of receipt of the demand for arbitration by the
respondent(s) in any such proceeding. Each of the arbitrators shall be an
attorney with no less than fifteen (15) years' experience in the practice
of business law (preferably with experience in the acquisition and
financing of businesses such as those engaged in by the Company and at the
time such dispute arises) who shall not have performed any legal services
for any of the parties or person controlled by any of the parties for a
period of 5 years prior to the date the demand for arbitration is received
by the respondent(s). The situs for an arbitration pursuant to this
Section shall be Boston, Massachusetts. A final award shall be rendered
as soon as reasonably possible and, in any event, within ninety (90) days
of the appointment of the panel of arbitrators; provided, however, that if
the arbitrators determine by majority vote that fairness so requires, such
ninety (90) day period may be extended by no more than sixty (60)
additional days. The parties agree that the arbitrators shall have the
right and power to shorten the length of any notice periods or other time
periods provided in the AAA Rules and to implement Expedited Procedures
under the AAA Rules in order to ensure that the arbitration process is
completed within the time frames provided herein. The arbitration
decision or award shall be reasoned and in writing. Judgment on the
decision or award rendered by the arbitrators may be entered and
specifically enforced in any court having jurisdiction thereof.
Notwithstanding the provisions of Section 14.1, any arbitration held
pursuant to the provisions of the Section shall be governed by the Federal
Arbitration Act. All arbitrations commenced pursuant to this Agreement or
any other Transaction Document while any other arbitration hereunder shall
be in progress shall be consolidated and heard by the initially
constituted panel of arbitrators.
ARTICLE XV
ENTIRE AGREEMENT; COUNTERPARTS; SECTION HEADINGS
This Agreement, the Related Agreements and the other writings referred to
herein or delivered pursuant hereto which form a part hereof contain the
entire understanding of the parties hereto with respect to its subject
matter. This Agreement supersedes all prior agreements and understandings
between the parties with respect to its subject matter.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
The descriptive headings of sections and paragraphs of this Agreement are
inserted for convenience only, and do not constitute a part of this
Agreement and shall not affect in any way the meaning or interpretation of
this Agreement.
If the Company at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) its outstanding shares of Common Stock into
a greater number of shares or if the outstanding shares of Common Stock
shall be combined (by reverse stock split or otherwise) into a smaller
number of shares, all numbers, percentages, computations and the like in
this Agreement shall be deemed modified as necessary to give appropriate
effect to such subdivision or combination.
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Agreement as of the day and year first above written.
COMPANY:
CTC COMMUNICATIONS CORP.
By:
__________________________________
Name:
Title:
PURCHASERS:
SPECTRUM EQUITY INVESTORS II, L.P.
By Spectrum Equity Associates II,
L.P., its General Partner
By:
__________________________________
Xxxxx X. Xxxxxx, a General
Partner
DOEG HILL I, L.L.C.
By:
__________________________________
Xxxxxx Xxxxxxx, Member
______________________________________
Xxxxxxx X. Xxxxxxx
______________________________________
Xxxxxx X. Xxxxxxxxx
______________________________________
Xxxxxxxx Xxxxxxxx
______________________________________
Xxxx Xxxx
______________________________________
Xxxxxxx X. Xxxxxxxx
______________________________________
Xxxxx Xxxx
______________________________________
Xxxxxxx Xxxxxx
SCHEDULE 2.1
List of Purchasers
Name and Address
Number of Shares
of Series A
Preferred Stock to
be Purchased
Number of Warrants
to be
Issued
Aggregate Purchase
Price of Purchased
Securities
Spectrum Equity
Investors II, L.P.
Xxx Xxxxxxxxxxxxx
Xxxxx
00xx Xxxxx
Xxxxxx, XX 00000
Attn: Xxxxx X.
Xxxxxx
657,555.00
131,511.00
$11,837,305.11
Doeg Hill I,
L.L.C.
0000 Xxxxxxxxxxxx
Xxxxxx
Xxxxx 000 Xxxxx
Xxxxxxxxxx, X.X.
00000
Attn: Xxxxxx
Xxxxxxx
5,555.00
1,111.00
$100,001.11
Xxxxxxx X. Xxxxxxx
000 Xxxxxx Xxxxxx
Xxxxx 000
Xxxx Xxxx, XX
00000
1,944.00
389.00
$34,995.89
Xxxxxx X.
Xxxxxxxxx
Xxx Xxxxxxxxxxxxx
Xxxxx
00xx Xxxxx
Xxxxxx, XX 00000
417.00
83.00
$7,506.83
Xxxxxxxx Xxxxxxxx
Xxx Xxxxxxxxxxxxx
Xxxxx
00xx Xxxxx
Xxxxxx, XX 00000
417.00
83.00
$7,506.83
Xxxx Xxxx
000 Xxxxxx Xxxxxx
Xxxxx 000
Xxxx Xxxx, XX
00000
278.00
56.00
$5,004.56
Xxxxxxx Xxxxxx
000 Xxxxxx Xxxxxx
Xxxxx 000
Xxxx Xxxx, XX
00000
278.00
56.00
$5,004.56
Xxxxxxx X.
Xxxxxxxx
Xxx Xxxxxxxxxxxxx
Xxxxx
00xx Xxxxx
Xxxxxx, XX 00000
111.00
22.00
$1,998.22
Xxxxx Xxxx
000 Xxxxxx Xxxxxx
Xxxxx 000
Xxxx Xxxx, XX
00000
111.00
22.00
$1,998.22
Total:
666,666.00
133,333.00
$12,001,321.33
SCHEDULE 3.1
List of Jurisdictions
1. Massachusetts (jurisdiction of incorporation)
2. New York
3. Rhode Island
4. Vermont
5. Connecticut (d/b/a Computer Telephone Company)
6. Maine
7. New Hampshire
8. Ohio
9. California (d/b/a Computer Telephone Company)
SCHEDULE 3.4
1. Number of Shares of Issued and Outstanding Common Stock :
9,974,683
2. Shares of Common Stock and Options Owned by Xxxxxx X. Xxxxxxxxxxxx and
any of his affiliates or family members:
(a) Common Stock:
Xxxxxx X. Xxxxxxxxxxxx: 1,520,237 shares
Xxxxxx X. Xxxxxxxxxxxx, as trustee for Xxxx Xxxxxxxxxxxx, Xxxxxxxx
Xxxxxxxxxxxx and Xxxxxxx Xxxxxxxxxxxx: 62,498 shares
Xxxxxx X. Xxxxxxxxxxxx, as General Partner of the Xxxxxx X.
Xxxxxxxxxxxx Family Limited Partnership: 1,133,239 shares
The records of the Transfer Agent as of April 1, 1998 disclose that
the following family members are record owners of the following
number of shares of CTC Common Stock:
Xxxxxx Xxxxxxxxxxxx: 116,397 shares (+ non-assignable options to
purchase 81,255 shares of CTC Common Stock)
Xxxxxxxx Xxxxxxxxxxxx: 191 shares (+ non-assignable options to purchase
2,750 shares of CTC Common Stock)
Xxxxxxx Xxxxxxxxxxxx: 2,074 shares (+ non-assignable options to
purchase 18,300 shares of CTC Common Stock)
Xxxx Xxxxxxxxxxxx: 2,000 shares (+ non-assignable options to
purchase 1,940 shares of CTC Common Stock) and, as custodian for her
minor child: 4,000 shares.
Xxxxx Xxxxxxxxxxxx: 1.34 shares
Xxxxxxx Xxxxxxxxxxxx: 1.34 shares
Xxxxx Xxxxxxxxxxxx: 1,000 shares
Xxx Xxxxxxxxxxxx: 2,001.34 shares
Xxxxxx X. Xxxxxxxxxxxx disclaims beneficial ownership or control of
the shares of CTC Common Stock and non-assignable options to
purchase CTC Common Stock owned by the family members set forth
above.
(b) Options:
1993 Stock Option Plan:
issued options: 1,215,958
unissued options: 92,568
(gives effect to 1995 stock splits)
1996 Stock Option Plan
issued options: 1,562,500
unissued options: 187,500
3. List of Options including Name of Holder and No. of Shares Vested
1. Schedule (i) 1993 Stock Option Plan (29 pages)
2. Schedule (ii) 1996 Stock Option Plan (25 pages)
3. Schedule (iii) Stock Options issued Prior to 1993 (2 pages)
The Compensation Committee of the Board of Directors has approved a
repricing of 24 different option grants to approximately 225 employees
that total approximately 1,400,000 outstanding options out of the total of
approximately 3,000,000. The options were granted during 1995, 1996 and
1997 and were granted at prices ranging from $8.00 to $16.25. The Board
has approved repricing all options to the market price on March 20, 1998
($7.188), regardless of the position or title of the holder of the option.
SCHEDULE 3.4 (c)
Options, Etc.
(a) See Schedule 3.4
(b) None
(c) None
(d) To the Company's knowledge, none.
SCHEDULE 3.6
Required Filings and Consent
In its capacity as an authorized reseller of telephone services in the
State of New York, the Company is required to obtain approval for the
issuance of the Purchased Securities from the Public Service Commission of
the State of New York pursuant to Section 101 of the New York Public
Service Law.
The Company has filed a petition with the Public Service Commission of the
State of New York to obtain authority to issue the Purchased Securities.
SCHEDULE 3.7
Undisclosed Liabilities
None.
SCHEDULE 3.8
Absence of Certain Developments
(a) None
(b)(i) On March 24, 1998 the Company sold a 1982 Bonanza A36 airplane
for $173,000 to an unaffiliated purchaser. The proceeds of the
sale were added to the working capital of the Company.
(b) (ii) and (iii) Subject to the approval of a definitive merger
agreement by the shareholders and the Board of Directors of each
company, the receipt of a fairness opinion issued by an non-
affiliated company, and the approval of the terms of the merger
agreement by the stockholders of CTC at a meeting duly called for
such purpose, CTC has entered into a non-binding letter of intent to
acquire all of the issued and outstanding common stock of Comm-
Tract Corp. and Comm-Tract Corp. of New York in exchange for not
less than 1,000,000 nor more than 1,100,000 shares of Common Stock
of the CTC. Xx. Xxxxxx Xxxxxxxxxxxx, Chairman of the Board of CTC
and Xx. Xxxx Xxxxxxxxx Executive Vice President and Clerk Treasurer
are stockholders of the companies to be acquired.
SCHEDULE 3.9
Interested Party Transactions
None
SCHEDULE 3.11
Title to Assets
None
SCHEDULE 3.12
Material Contracts and Obligations
(a) On February 27, 1997 the Company entered into a three year
employment contract with Xxxxxx Xxxxx under the terms of which Xx.
Xxxxx is employed by the Company as an Executive Vice President and
Chief Financial Officer and Director of Corporate Development
effective April 1, 1998.
(b) The Company believes that as at March 31, 1998, it may be in
violation of certain financial covenants as contained in the
Revolving and Term Loan Agreement dated November 7, 1997 between the
Company as Borrower and Fleet National Bank as Lender.
The Company will be unable to make a determination with respect to such
possible violations until completion of its annual audit for the fiscal
year ended March 31, 1998.
SCHEDULE 3.14
Necessary Licenses and Permits
None
SCHEDULE 3.15
Compliance with Law
(a) To the knowledge of the Company - None
(b) None
SCHEDULE 3.16
Litigation
1. CTC COMMUNICATIONS CORP. vs Xxxxxx Xxxx and Xxxxxxx Xxxxxx-Xxxxxxx
- USDC - District of Connecticut 3:98CIV400 (DIS).
2. OPTIMA COMMUNICATIONS, INC. vs Computer Telephone Corp. - Supreme
Court of the State of New York, Rockland County
Index No. 3287/96.
There is no other material litigation other than disclosed in the
SEC Documents.
SCHEDULE 3.17
No Material Adverse Changes
None
SCHEDULE 3.18
Employee Benefit Plans
Company 1993 Employee Stock Option Plan
Company 1996 Employee Stock Option Plan
Company Employee Stock Purchase Plan
The Employee Stock Purchase Plan enables participating employees to
purchase Company shares at 85% of the lower of the market prices
prevailing on the Valuation Dates of January 2 and July 1. Individuals
can contribute up to 5% of their base salary.
Company Employee Stock Bonus Plan
The Employee Stock Bonus Plan previously adopted by the Company has not
been utilized to date.
Company 401K Savings Plan (Adopted September 1, 1993).
In September 1993, the Company established a defined contribution plan
("401(k) Plan") covering all employees who meet certain eligibility
requirements. Participants may make contributions to the Plan up to
15% of their compensation (as defined) up to a maximum established by
law. The Company may make a matching contribution of an amount to be
determined by the Board of Directors but subject to a maximum of 6% of
compensation contributed by each participant.
SCHEDULE 3.19
Withholding, Contracts, Labor Relations
(a) None
(b) None
(c) None
(d) None
(e) None
SCHEDULE 3.24
Registration Rights
None
