Exhibit 10.29
BTI TELECOM CORP.
___________________________________________
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
January 12, 2001
___________________________________________
BTI TELECOM CORP.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
January 12, 2001
TABLE OF CONTENTS
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ARTICLE I PURCHASE AND SALE OF SHARES................................. 1
1.1 Purchase and Sale of Series B Preferred Stock at the Closings... 1
1.2 Series B Warrants............................................... 2
1.3 The Series B Conversion Shares.................................. 2
1.4 Closings; Delivery.............................................. 2
1.5 Use of Proceeds................................................. 3
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY............... 3
2.1 Organization and Corporate Power................................ 3
2.2 Authorization................................................... 4
2.3 Government Approvals............................................ 4
2.4 Authorized and Outstanding Stock................................ 5
2.5 Charter Documents............................................... 6
2.6 Subsidiaries.................................................... 6
2.7 Financial Information........................................... 6
2.8 Events Subsequent to the Date of the Financial Statements....... 7
2.9 SEC Filings..................................................... 8
2.10 Litigation...................................................... 8
2.11 Compliance with Laws and Other Instruments...................... 9
2.12 Taxes........................................................... 9
2.13 Real Property................................................... 10
2.14 Title to Properties and Assets.................................. 11
2.15 Intellectual Property........................................... 11
2.16 Agreements of Directors, Officers and Employees................. 11
2.17 Governmental and Industrial Approvals........................... 12
2.18 Federal Reserve Regulations..................................... 12
2.19 Contracts and Commitments....................................... 12
2.20 Securities Act.................................................. 14
2.21 Registration Rights............................................. 14
2.22 Insurance Coverage.............................................. 14
2.23 Employee Matters................................................ 14
2.24 No Brokers or Finders........................................... 15
2.25 Transactions with Affiliates.................................... 15
2.26 Assumptions, Guarantees, etc. of Indebtedness of Other Persons.. 15
2.27 Disclosures..................................................... 15
2.28 Environmental and Safety Laws................................... 16
2.29 Investment Company Act.......................................... 16
ARTICLE III INVESTMENT REPRESENTATIONS................................... 17
3.1 Representations and Warranties.................................. 17
3.2 Permitted Sales................................................. 18
ARTICLE IV COVENANTS OF THE COMPANY.................................... 18
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4.1 Conduct of Business.............................................................................. 18
4.2 Access to Information............................................................................ 18
4.3 Notice of Certain events......................................................................... 19
4.4 Approvals........................................................................................ 19
4.5 U.S. Real Property Holding Corporation Status.................................................... 19
ARTICLE V COVENANTS OF THE COMPANY AND THE PURCHASER..................................................... 20
5.1 Further Assurances............................................................................... 20
5.2 Tax Consistency.................................................................................. 20
5.3 Waiver of Certain Adjustments; Consents.......................................................... 20
ARTICLE VI CONDITIONS OF OBLIGATIONS OF THE PURCHASER AND THE COMPANY..................................... 21
ARTICLE VII CONDITIONS OF PURCHASERS' OBLIGATION........................................................... 21
7.1 Conditions to the First Closing.................................................................. 21
7.2 Conditions to the Second Closing................................................................. 23
ARTICLE VIII CONDITIONS OF THE COMPANY'S OBLIGATION......................................................... 25
8.1 Effect of Conditions............................................................................. 25
8.2 Representations and Warranties................................................................... 25
8.3 Performance...................................................................................... 25
8.4 Shareholders Agreement........................................................................... 25
8.5 Redemption Agreement............................................................................. 25
8.6 Investor Rights Agreement........................................................................ 26
ARTICLE IX CERTAIN DEFINITIONS............................................................................ 26
ARTICLE X MISCELLANEOUS.................................................................................. 29
10.1 Survival of Representations...................................................................... 29
10.2 Indemnification.................................................................................. 29
10.3 Termination...................................................................................... 30
10.4 Parties in Interest.............................................................................. 31
10.5 Amendments and Waivers........................................................................... 31
10.6 Notices.......................................................................................... 31
10.7 Counterparts..................................................................................... 32
10.8 Effect of Headings............................................................................... 32
10.9 Severability..................................................................................... 32
10.10 Specific Enforcement............................................................................. 32
10.11 Governing Law.................................................................................... 33
10.12 Public Announcements............................................................................. 33
10.13 No Third Party Beneficiaries..................................................................... 33
10.14 Expenses......................................................................................... 33
SCHEDULES
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EXHIBITS
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A Second Amended and Restated Articles of Incorporation
B First Closing Series B Warrant
C Second Closing Series B Warrant
D Opinion of Company Counsel
E Opinion of Regulatory Counsel
F Amended and Restated Shareholders Agreement
G Series B Redemption Agreement
H Amended and Restated Investor Rights Agreement
I Xxxxxx Purchase Agreement
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BTI TELECOM CORP.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES B PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is
entered into as of the 12/th/ day of January 2001 by and among BTI Telecom
Corp., a North Carolina corporation (the "Company"), Welsh, Carson, Xxxxxxxx &
Xxxxx VIII, L.P., a Delaware limited partnership, and BTI Investors LLC, a
Delaware limited liability company (together, the "Purchaser"), and WCAS
Information Partners, L.P., a Delaware limited partnership ("Info Partners" and,
collectively with the Purchaser, the "WCAS Purchaser").
WHEREAS, the WCAS Purchaser previously acquired 200,000 shares of Series A
Preferred Stock, par value $.01 per share (the "Series A Preferred Stock"), of
the Company and warrants (collectively, the "Series A Warrant") to purchase up
to an aggregate of 4,500,000 shares of Common Stock, no par value per share (the
"Common Stock"), of the Company;
WHEREAS, the Company desires to enter into this agreement with the WCAS
Purchaser to raise additional capital through the sale and issuance to the
Purchaser of shares of its Series B Preferred Stock, par value $.01 per share
(the "Series B Preferred Stock"); and
WHEREAS, the parties hereto desire to enter into this agreement to enable
the Purchaser to acquire shares of Series B Preferred Stock and the Series B
Warrants (defined below) on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement, the parties to
this Agreement hereby mutually agree as follows.
ARTICLE I
PURCHASE AND SALE OF SHARES
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1.1 Purchase and Sale of Series B Preferred Stock at each Closing. (a)
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At the First Closing (as herein defined), the Company will sell to the
Purchaser, and the Purchaser agrees to purchase, an aggregate of Ten Thousand
(10,000) shares of the Series B Preferred Stock (the "First Closing Purchased
Shares") at a price of One Thousand Dollars ($1,000.00) per share, for an
aggregate purchase price of Ten Million Dollars ($10,000,000) (the "First
Closing Purchase Price") payable as provided in Section 1.4(a).
(b) At the Second Closing (as herein defined), the Company will sell to
the Purchaser, and the Purchaser agrees to purchase, an aggregate of Forty
Thousand (40,000) shares of the Series B Preferred Stock (the "Second Closing
Purchased Shares") at a price of One Thousand Dollars ($1,000.00) per share, for
an aggregate purchase price of Forty Million Dollars ($40,000,000) (the "Second
Closing Purchase Price") payable as provided in Section 1.4(b).
(c) The Series B Preferred Stock shall have the rights, terms and
privileges set forth in the Company's Second Amended and Restated Articles of
Incorporation, a copy of which is attached hereto as Exhibit A (the "Articles").
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The Purchased Shares and the Series B Warrants shall be allocated between the
Purchaser as set forth on Schedule 1.1.
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1.2 Series B Warrants. (a) In addition to the First Closing Purchased
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Shares, at the First Closing the Company shall, subject to the terms and
conditions contained therein, issue to Purchaser one or more warrants in the
form of Exhibit B attached hereto (collectively, the "First Closing Series B
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Warrant") to purchase up to an aggregate of Two Million One Hundred Thousand
(2,100,000) shares of the Common Stock at an initial exercise price per share of
One Cent ($0.01); the shares of Common Stock issued or issuable upon the
exercise or exchange of the First Closing Series B Warrant are referred to
herein as the "First Closing Warrant Shares".
(b) In addition to the Second Closing Purchased Shares, at the Second
Closing the Company shall, subject to the terms and conditions contained
therein, issue to Purchaser one or more warrants in the form of Exhibit C
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attached hereto (collectively, the "Second Closing Series B Warrant", and
together with the First Closing Series B Warrant, the "Series B Warrants") to
purchase up to an aggregate of Eight Million Four Hundred Thousand (8,400,000)
shares of the Common Stock at an initial exercise price per share of One Cent
($0.01); the shares of Common Stock issued or issuable upon the exercise or
exchange of the Second Closing Series B Warrant are referred to herein as the
"Second Closing Warrant Shares".
1.3 The Series B Conversion Shares. The Company has authorized and
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reserved and hereby covenants that it will continue to reserve, free of any
preemptive rights or encumbrances, a sufficient number of its authorized but
previously unissued shares of Common Stock to satisfy the rights of conversion
of the holders of the Purchased Shares and the rights of exercise or exchange of
the holders of the Series B Warrants.
1.4 Closings; Delivery.
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(a) First Closing. The purchase of the First Closing Purchased Shares
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by the Purchaser and the issuance to the Purchaser of the First Closing Series B
Warrant shall be made at a closing (the "First Closing") to be held at the
offices of Xxxxxx Xxxxxxx Xxxxx & Xxxxxx LLP, 0000 Xxxx Xxxxx Xxxxx, Xxxxx 000,
Xxxxxxx, Xxxxx Xxxxxxxx 00000, at 10:00 a.m. within two business days following
the later of (i) satisfaction or waiver of the conditions to closing set forth
in Articles VI and VIII and Section 7.1 and (ii) the due date for the
Purchaser's receipt of capital contributions from its limited partners in
response to a capital call notice in respect of the First Closing Purchase
Price, or at such other time and on such other date as the Purchaser and the
Company may mutually agree.
Subject to the satisfaction or waiver of the conditions set forth in
Articles VI and VIII and Section 7.1, Purchaser shall pay the First Closing
Purchase Price at the First Closing, which payment shall be by check or wire
transfer of immediately available federal funds. At the First Closing, the
Company will deliver to the Purchaser one or more certificates representing the
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First Closing Purchased Shares purchased by such Purchaser and the First Closing
Series B Warrant.
(b) Second Closing. The purchase of the Second Closing Purchased
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Shares by the Purchaser and the issuance to the Purchaser of the Second Closing
Series B Warrant shall be made at a closing (the "Second Closing") to be held at
the offices of Xxxxxx Xxxxxxx Xxxxx & Xxxxxx LLP, 0000 Xxxx Xxxxx Xxxxx, Xxxxx
000, Xxxxxxx, Xxxxx Xxxxxxxx 00000, at 10:00 a.m. within two business days
following the later of (i) satisfaction or waiver of the conditions to closing
set forth in Articles VI and VIII and Section 7.2 and (ii) the due date for the
Purchaser's receipt of capital contributions from its limited partners in
response to a capital call notice in respect of the Second Closing Purchase
Price, or at such other time and on such other date as the Purchaser and the
Company may mutually agree.
Subject to the satisfaction or waiver of the conditions set forth in
Articles VI and VIII and Section 7.2, Purchaser shall pay the Second Closing
Purchase Price at the Second Closing, which payment shall be by check or wire
transfer of immediately available federal funds. At the Second Closing, the
Company will deliver to the Purchaser one or more certificates representing the
Second Closing Purchased Shares purchased by such Purchaser and the Second
Closing Series B Warrant.
1.5 Use of Proceeds. (a) The Company shall use the proceeds received
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upon the sale of the First Closing Purchased Shares at the First Closing
immediately to pay off existing vendor obligations, for general working capital
purposes and capital expenditures and to pay fees, costs and expenses incurred
by the Company in connection with the transactions contemplated by this
Agreement.
(b) The Company shall use the proceeds received upon the sale of the
Second Closing Purchased Shares at the Second Closing (i) to further build and
enhance its telecommunications network, (ii) to expand its infrastructure and
marketing resources, (iii) to make acquisitions, (iv) to pay interest expense
related to existing indebtedness in accordance with scheduled payment dates, (v)
for other general corporate purposes and (vi) to pay fees, costs and expenses
incurred by the Company in connection with the transactions contemplated by this
Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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In order to induce the Purchaser to purchase the Purchased Shares and the
Series B Warrants, the Company makes the following representations and
warranties as of the date hereof and as of the date of each Closing.
2.1 Organization and Corporate Power.
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(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation and has
all requisite corporate
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power and authority and all material licenses, permits, authorizations, consents
and approvals necessary to own and operate its properties and to carry on its
business as presently conducted. The Company is duly licensed or qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
wherein the character of its property, or the nature of the activities presently
conducted by it, makes such license or qualification necessary, except for those
jurisdictions where the failure to be so licensed or to so qualify would not,
individually or in the aggregate, have a material adverse effect on the
condition (financial or otherwise), business, assets, results of operations or
prospects of the Company and it Subsidiaries, taken as a whole (a "Material
Adverse Effect").
(b) Each of the Company's Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation and has all requisite corporate power
and authority and all material licenses, permits, authorizations, consents and
approvals necessary to own and operate its properties and to carry on its
business as presently conducted. Each of the Company's Subsidiaries is duly
licensed or qualified to do business as a foreign corporation and is in good
standing in each jurisdiction wherein the character of its property, or the
nature of the activities presently conducted by it, makes such license or
qualification necessary, except for those jurisdictions where the failure to be
so licensed or to so qualify would not, individually or in the aggregate, have a
Material Adverse Effect.
2.2 Authorization. The Company has all necessary corporate power and has
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taken all necessary corporate action required for the due authorization,
execution, delivery and performance by the Company of this Agreement, the
Amended and Restated Shareholders Agreement, a copy of which is attached hereto
as Exhibit F (the "Shareholders Agreement"), the Series B Redemption Agreement,
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a copy of which is attached hereto as Exhibit G (the "Redemption Agreement"),
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the Amended and Restated Investor Rights Agreement, a copy of which is attached
hereto as Exhibit H (the "Investor Rights Agreement"), and any other agreements
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or instruments executed by the Company in connection herewith or therewith
(collectively, the "Related Agreements"), and the consummation of the
transactions contemplated herein or therein, and for the due authorization,
issuance, sale and delivery of the Purchased Shares, the Series B Warrants and
the Series B Underlying Shares. Except as set forth on Schedule 2.2, the
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issuance of the Purchased Shares and the Series B Warrants does not, and the
issuance of the Series B Underlying Shares will not, require any further
corporate action and is not and will not be subject to any preemptive right,
right of first refusal or the like. Assuming due execution and delivery of this
Agreement and the Related Agreements by the Purchaser, this Agreement
constitutes, and, when executed and delivered in accordance with this Agreement,
the Related Agreements and the other agreements and instruments executed by the
Company in connection herewith or therewith will constitute, legal, valid and
binding obligations of the Company enforceable against the Company in accordance
with their respective terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally and by general
equitable principles.
2.3 Government Approvals. Except as set forth on Schedule 2.3, no
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material consent, approval, permit, license or authorization of, or designation,
declaration or filing with, any court
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or governmental authority is or will be required on the part of the Company in
connection with the execution, delivery and performance by the Company of this
Agreement, any of the Related Agreements and any other agreements or instruments
executed by the Company in connection herewith or therewith, or in connection
with the issuance of the Purchased Shares, the Series B Warrants or the Series B
Underlying Shares. The failure of the Company to obtain the approvals set forth
on Schedule VI would not have a Material Adverse Effect.
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2.4 Authorized and Outstanding Stock. As of the date hereof, the date of
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the First Closing or the date of the Second Closing, as the case may be, the
authorized capital stock of the Company consists of (i) 500,000,000 shares of
Common Stock (the number of validly issued and outstanding shares of Common
Stock, as well as the record and beneficial owners of such shares, are as set
forth in Schedule 2.4 attached hereto); 23,391,813 shares have been reserved for
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issuance upon conversion of Series A Preferred Stock; 4,500,000 shares have been
reserved for issuance upon exercise or exchange of the Series A Warrant;
15,000,000 shares have been reserved for issuance upon conversion of Series B
Preferred Stock; 18,600,000 shares have been reserved for issuance upon exercise
or exchange of the Series B Warrants; and 7,500,000 shares have been reserved
for issuance pursuant to the Company's 1997 Stock Plan, under which 19,375
shares of Common Stock have been issued upon the exercise or exchange of options
(options to purchase 3,848,583 shares of Common Stock were issued and
outstanding as of October 31, 2000, and options to purchase 3,632,042 shares of
Common Stock remain available for future issuance as of October 31, 2000); and
(ii) 10,000,000 shares of Preferred Stock, of which 200,000 shares are
designated "Series A Preferred Stock," all of which shares are validly issued
and outstanding and held of record and owned beneficially as set forth in
Schedule 2.4 attached hereto, and 60,000 shares are designated "Series B
------------
Preferred Stock," none of which are issued and outstanding prior to the First
Closing (the number of shares of Series B Preferred Stock which are validly
issued and outstanding immediately prior to the Second Closing, as well as the
record and beneficial owners of such shares, shall be as set forth in Schedule
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2.4 attached hereto). 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 Articles, and
all such designations, powers, preferences, rights, qualifications, limitations
and restrictions are valid, binding and enforceable and in accordance with all
applicable laws, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally and by general equitable
principles. All issued and outstanding shares of capital stock are, and when
issued in accordance with the terms hereof, all Purchased Shares, the Series B
Warrants and all Series B Underlying Shares will be, duly and validly
authorized, validly issued and fully paid and nonassessable with no personal
liability attaching to the ownership thereof (other than attributable to acts of
the Purchaser), free and clear of all liens, charges, restrictions, claims or
encumbrances of any nature whatsoever and free from any restrictions on transfer
(collectively, "Liens"), except for restrictions imposed by federal or state
securities or "blue-sky" laws and except for those imposed pursuant to this
Agreement or any Related Agreement. Except as set forth on Schedule 2.4, (i)
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there are no outstanding shares of capital stock or voting securities of the
Company, (ii) the Company is not party to any shareholder agreement, voting
agreement or any other agreement and, to the best knowledge of the Company,
there is no shareholder agreement, voting agreement, first refusal or preemptive
rights agreement or any other agreement which would affect the rights of the
shareholders of the Company and (iii) there are no
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outstanding warrants, options, commitments, preemptive rights, rights to acquire
or purchase, obligations to repurchase, redeem or otherwise acquire or to pay
any dividend or make any other distribution in respect of, or conversion rights
or demands of any character relating to the capital stock or other securities of
the Company. With respect to each outstanding warrant or option to acquire
securities of the Company, Schedule 2.4 sets forth the applicable holder,
------------
exercise price, vesting provisions and number of underlying securities;
provided, that such information with respect to options shall only be as of
October 31, 2000. All issued and outstanding shares of capital stock of the
Company were issued (x) in transactions exempt from the registration provisions
of the Act, (y) in compliance with or in transactions exempt from the
registration provisions of applicable state securities or "blue-sky" laws and
(z) in compliance with law in all other respects. The Company has provided the
Purchaser or its representatives with a true, correct and complete copy of the
Company's 1997 Stock Plan, which is the only equity incentive plan or proposal
that has been offered to any of the Company's or any of its Subsidiaries'
employees, directors, officers or consultants, except as otherwise disclosed on
Schedule 2.4.
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2.5 Charter Documents. The Company has provided to the Purchaser or its
-----------------
representatives for their examination (a) complete and accurate copies of the
Articles of Incorporation and Bylaws of the Company, both as amended to date,
and (b) the minute books of the Company containing all consents to actions
without a meeting and all minutes of meetings of the Company's shareholders and
Board of Directors which are complete and accurate records of all such meetings
and consents. The Company is not in violation of any term of its Articles,
Bylaws, or other organizational documents.
2.6 Subsidiaries. Except as set forth on Schedule 2.6, the Company has no
------------ ------------
Subsidiaries nor any investment or other interest in (including any interest in
any partnership, joint venture or other non-corporate business enterprise), or
any outstanding loan or advance to or from, any Person, including, without
limitation, any officer, director or shareholder. Except as set forth on
Schedule 2.6, all of the outstanding shares of capital stock of each of the
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Company's Subsidiaries are owned by the Company, directly or indirectly, in each
case free and clear of any Liens, and all of such shares are duly authorized,
validly issued, fully paid and non-assessable. Except as set forth on Schedule
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2.6, there are no outstanding subscriptions, warrants, options, convertible
---
securities, or other rights (contingent or other) pursuant to which any of the
Company's Subsidiaries is or may become obligated to issue any shares of its
capital stock to any Person other than the Company or one of its other
Subsidiaries.
2.7 Financial Information. The Company has previously delivered to the
---------------------
Purchaser (i) the audited consolidated balance sheets of the Company and its
Subsidiaries as of December 31, 1997, 1998 and 1999 and the related audited
consolidated statements of operations, shareholders' equity and cash flows for
each of the years ended December 31, 1997, 1998 and 1999 and (ii) the unaudited
consolidated balance sheet of the Company and its Subsidiaries as of September
30, 2000, and the related unaudited consolidated statements of operations,
shareholders' equity and cash flows, for the nine (9) months then ended
(collectively, the "Financial Statements"). The Financial Statements, together
with any accompanying footnotes, are complete and correct in all material
respects, are in accordance with the books and records of the Company and
present fairly, in accordance with generally accepted accounting principles
("GAAP") applied on a basis consistent with prior periods, the consolidated
financial condition
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and results of operations and cash flows of the Company and its Subsidiaries as
of the dates and for the periods shown, except that the unaudited Financial
Statements do not contain footnote disclosures that would be required by GAAP.
The Company and its Subsidiaries do not have any material liability, contingent
or otherwise, which is not adequately reflected in or reserved against in the
Financial Statements, except for liabilities arising in the ordinary course of
business since December 31, 1999. Since December 31, 1999, (i) there has been no
material change in the business, assets, liabilities, condition (financial or
otherwise) or operations of the Company and its Subsidiaries (on a consolidated
basis) except for changes in the ordinary course of business which, in the
aggregate, would not reasonably be expected to be materially adverse and (ii)
none of the business, prospects, condition (financial or otherwise), operations,
property or affairs of the Company and its Subsidiaries (on a consolidated
basis) has been materially adversely affected by any occurrence or development,
in the aggregate, whether or not insured against.
2.8 Events Subsequent to the Date of the Financial Statements. Except as
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set forth on Schedule 2.8, since December 31, 1999, neither the Company nor any
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of its Subsidiaries has (i) issued or repurchased any stock, bond or other
security, (ii) incurred or assumed any indebtedness for borrowed money in excess
of $1,000,000 in the aggregate for the Company and its Subsidiaries or incurred
or become subject to any material liability (absolute, accrued or contingent),
except liabilities (other than indebtedness) under contracts entered into in the
ordinary course of business, (iii) discharged or satisfied any material Lien or
incurred or paid any material obligation or liability (absolute, accrued or
contingent), other than liabilities shown on the Financial Statements and
liabilities incurred since December 31, 1999 in the ordinary course of business,
(iv) declared, set aside or made any payment or distribution to shareholders or
purchased or redeemed any shares of its capital stock or other securities, (v)
mortgaged, pledged or subjected to any material Lien any of its assets, tangible
or intangible, other than Liens of real property taxes not yet due and payable,
(vi) sold, assigned or transferred any of its material tangible assets except in
the ordinary course of business, or canceled any material debt or claim, (vii)
sold, assigned, transferred or granted any license with respect to any material
patent, trademark, trade name, service xxxx, copyright, trade secret or other
intangible asset, except pursuant to license or other agreements entered into in
the ordinary course of business, (viii) suffered any material loss, waived any
right or relinquished any contract of substantial value whether or not in the
ordinary course of business, (ix) made any material change in the compensation
or benefits provided to any current or former director, officer, employee or
consultant of the Company or any of its Subsidiaries, (x) made any material
change in its manner of business or operations, (xi) entered into any material
transaction except in the ordinary course of business or as otherwise
contemplated hereby, (xii) incurred any material liability or obligation of any
nature whatsoever (contingent or otherwise) other than those incurred in the
ordinary course of business, (xiii) materially increased the compensation paid
to any employee, consultant, director or agent, (xiv) changed in any material
respect its accounting or tax methods or practices, or (xv) entered into any
commitment (contingent or otherwise) to do any of the foregoing.
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2.9 SEC Filings.
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(a) The Company has delivered to the Purchaser (i) its annual reports
on Form 10-K for its fiscal years ended December 31, 1998 and 1999, (ii) its
quarterly reports on Form 10-Q for its fiscal quarters ended after December 31,
1999 and (iii) all of its other reports, statements, schedules and registration
statements filed with the Securities and Exchange Commission (the "SEC") since
December 31, 1999 (the documents referred to in this Section 2.9 being referred
to collectively as the "SEC Documents").
(b) As of its filing date, each SEC Document complied as to form in
all material respects with the applicable requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the Act.
(c) As of its filing date, each SEC Document filed pursuant to the
Exchange Act did not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
(d) Each such registration statement as amended or supplemented, if
applicable, filed pursuant to the Act as of the date such statement or amendment
became effective did not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading.
2.10 Litigation. Except as otherwise set forth on Schedule 2.10, there is
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no material action, suit, claim, litigation or governmental proceeding or
investigation pending or, to the knowledge of the Company, threatened, by or
against the Company or any of its Subsidiaries or affecting any of their
respective properties or assets, or against any officer, key employee or
shareholder of the Company or any of its Subsidiaries in his capacity as such,
nor, to the knowledge of the Company, 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 with any substantial chance of
recovery where such recovery would likely have a Material Adverse Effect or that
might materially adversely affect the validity of this Agreement, any of the
Related Agreements, any of the Purchased Shares, the Series B Warrants or the
Series B Underlying Shares, or prevent, alter or materially delay any action
taken or to be taken pursuant hereto. Neither the Company, nor any of its
Subsidiaries, nor any officer, key employee or shareholder of the Company or any
of its Subsidiaries in his capacity as such is, to the knowledge of the Company,
in default with respect to any order, writ, injunction, decree, ruling or
decision of any court, commission, board or other government agency which
default may reasonably be expected to have a Material Adverse Effect. The
foregoing sentences include, without limiting their generality, actions pending
or, to the knowledge of the Company, threatened involving the prior employment
of employees of the Company or any of its Subsidiaries or the use in the
business of the Company and its Subsidiaries of any information or technologies
allegedly proprietary to any of such former employers. Except as set forth at
Schedule 2.10, there is no action or suit by the Company or any of its
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Subsidiaries pending, threatened or contemplated against others.
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2.11 Compliance with Laws and Other Instruments. Each of the Company and
------------------------------------------
it Subsidiaries is in compliance with all of the provisions of this Agreement
and of its organizational documents, and in all material respects with the
provisions of each mortgage, indenture, lease, license, other agreement or
instrument, judgment, decree, judicial order, statute and regulation by which it
is bound or to which it or any of its properties or assets are subject.
Except as set forth on Schedule 2.11, neither the execution, delivery or
-------------
performance of this Agreement and the Related Agreements, nor the offer,
issuance, sale or delivery of the Purchased Shares, the Series B Warrants or the
Series B Underlying Shares, with or without the giving of notice or passage of
time, or both, will violate, or result in any breach of, or constitute a default
under, or give rise to a right of termination, cancellation or acceleration
under, or require any consent under, or result in the imposition of any material
Lien upon any asset of the Company or any of its Subsidiaries pursuant to any
provision of the Company's Articles or Bylaws, the organizational documents of
any of its Subsidiaries, or any statute, rule or regulation, contract, lease,
judgment, decree or other document or instrument by which the Company or any of
its Subsidiaries is bound or to which the Company or any of its Subsidiaries or
any of their respective properties or assets are subject or, to the knowledge of
the Company, will cause the Company or any of its Subsidiaries to lose the
benefit of any material right or privilege it presently enjoys or cause any
Person who is expected to normally do any material amount of business with the
Company or any of its Subsidiaries to discontinue to do so on the same basis.
2.12 Taxes. (a) The Company and its Subsidiaries have filed all tax
-----
returns, reports and forms (including statements of estimated taxes owed)
required to be filed within the applicable periods for such filings and have
paid all taxes required to be paid, and have established adequate reserves (net
of estimated tax payments already made) for the payment of all taxes accruing
through the end of the last period for which the Company and it Subsidiaries
ordinarily record items on their respective books. All such tax returns,
reports and forms are true, correct and complete in all material respects.
Except as set forth on Schedule 2.12, no deficiencies for any tax are currently
-------------
assessed against the Company or any of its Subsidiaries, and no tax returns of
the Company or any of its Subsidiaries have ever been audited and, to the
knowledge of the Company, there is no such audit pending or contemplated. All
returns filed with respect to tax years of the Company and its Subsidiaries
through the tax year ended December 31, 1997 have been examined and closed or
are returns with respect to which the applicable period for assessment under
applicable law, after giving effect to extensions or waivers, has expired.
Except as provided on Schedule 2.12, neither the Company nor any of its
-------------
Subsidiaries has any obligation under any tax sharing agreement, tax allocation
agreement or tax indemnity agreement or any other agreement or arrangement in
respect of any tax with any person other than the Company or its Subsidiaries.
Neither the Company nor any of its Subsidiaries has been a member of an
affiliated, consolidated, combined or unitary group other than one of which the
Company was the common parent. Proper and adequate amounts have been withheld
by the Company and its Subsidiaries from their respective employees and other
persons for all periods in compliance in all material respects with the tax,
social security and unemployment, excise and other withholding provisions of all
federal, state, local and foreign laws. There is no tax lien, whether imposed
by any federal, state, local, or foreign taxing authority, outstanding against
the assets, properties or business of the Company or any of its Subsidiaries.
For the purposes of this Agreement, the term "tax" shall include (i) all
federal, state, local and foreign taxes, including income, franchise, property,
sales, use, gross receipts,
9
excise, withholding, payroll and employment taxes and other similar assessments
of any kind whatsoever, including all interest, penalties and additions imposed
with respect to such amounts, and (ii) any liability of the Company or any of
its Subsidiaries for the payment of any amount as a result of being a party to
any tax sharing agreement or with respect to the payment of any amount of the
type described in (i) as a result of any existing express or implied agreement
or arrangement (including, but not limited to, an indemnification agreement or
arrangement). BTI Telecom Corp. was and validly elected to be an S corporation
for its taxable years ended December 31, 1986 through September 23, 1997,
inclusive, which S corporation election was accepted by the Internal Revenue
Service for periods audited by the Internal Revenue Service.
(b) The Company is not now, has never been and does not contemplate
becoming a "United States Real Property Holding Corporation" as defined in
Section 897(c)(2) of the Code and Section 1.897-2(b) of the Treasury regulations
thereunder.
(c) If, as of the date of each Closing, the WCAS Purchaser were to acquire
the Purchased Shares and exercise the Series B Warrants and the Series A Warrant
in full (assuming the Series B Warrants and the Series A Warrant were
immediately exercisable), such transactions would not result in any payments,
benefits or other events under any Plan which may give rise to a "parachute
payment" as defined in Section 280G(b)(2)(A), (B) or (C) of the Code, whether or
not such payment, benefit or event is exempt or excluded under Section
280G(b)(5) (a "Parachute Payment"). The Company has no present plan or
intention to make any payment or take any action that would give rise to a
Parachute Payment.
2.13 Real Property.
-------------
(a) Schedule 2.13 sets forth the addresses and uses of all real property
-------------
that the Company or any of its Subsidiaries owns, leases or subleases, and any
material Lien or encumbrance on any such owned real property or the Company's or
its Subsidiary's leasehold interest therein, specifying in the case of each such
lease or sublease, the name of the lessor or sublessor, as the case may be, the
lease term and the obligations of the lessee thereunder. To the best knowledge
of the Company, the Company and its Subsidiaries are in material compliance with
all laws, regulations and orders relating to the protection of human health or
the environment.
(b) Except as set forth on Schedule 2.13, the Company and its Subsidiaries
-------------
have good, clear and marketable title to, and own free and clear of material
Liens, all property listed as owned by the Company or any of its Subsidiaries on
Schedule 2.13, except where the failure to do so would not have a Material
-------------
Adverse Effect, and there is no material violation by the Company or any of its
Subsidiaries of any law, regulation or ordinance (including without limitation
laws, regulations or ordinances relating to zoning, environmental, city planning
or similar matters) relating to any real property owned, leased or subleased by
the Company or any of its Subsidiaries.
(c) There are no defaults by the Company or any of its Subsidiaries or, to
the knowledge of the Company, by any other party thereto, which might curtail in
any material respect the present use of the property listed on Schedule 2.13.
-------------
The performance by the
10
Company of this Agreement and the Related Agreements will not result in the
termination of, or in any increase of any amounts payable under, any lease
listed on Schedule 2.13.
-------------
2.14 Title to Properties and Assets. Except as set forth on Schedule 2.14,
------------------------------ -------------
each of the Company and its Subsidiaries has good, clear and marketable title to
its properties and assets held at the date of Closing (except any properties and
assets held under capitalized leases) and has good title to all its leasehold
interests, in each case subject to no mortgage, pledge, lien, lease, encumbrance
or charge, other than (a) the lien of current taxes not yet due and payable and
(b) possible minor liens and encumbrances that do not in any case, either
individually or in the aggregate, materially detract from the value of the
property subject thereto or materially impair the intended use of such property.
The tangible property and assets held under any material lease by the Company or
any of its Subsidiaries are held under leases that remain in force, and there
exists no default or other occurrence or condition that could result in a
material default or termination thereunder.
2.15 Intellectual Property. Each of the Company and its Subsidiaries has
---------------------
sufficient title and ownership of or is licensed under all material patents,
trademarks, service marks, trade names, copyrights, trade secrets, information,
inventions, computer programs, documentation, proprietary rights and processes
(collectively, "Intellectual Property") necessary for its business as now
conducted without any infringement of the rights of others. Set forth on
Schedule 2.15 is a true, correct and complete list of all Intellectual Property
-------------
owned by, registered in the name of or of which the Company or any of its
Subsidiaries is a licensor or licensee, all registrations and applications for
registration of any of the Company's or any of its Subsidiaries' Intellectual
Property, and all material unregistered copyrights and trademarks held by the
Company or any of its Subsidiaries and a brief description of the nature of each
such right. Except as set forth on Schedule 2.15, there are no outstanding
-------------
options, licenses or agreements relating to the foregoing nor is the Company or
any of its Subsidiaries bound by or a party to any options, licenses or
agreements with respect to the Intellectual Property of any other person or
entity. Except as set forth at Schedule 2.15, neither the Company nor any of
-------------
its Subsidiaries has received any communications alleging that the Company or
any of its Subsidiaries has violated or, by conducting its business as currently
proposed, would violate any of the Intellectual Property of any other person or
entity. The Company does not believe it or any of its Subsidiaries is utilizing
or that it will be necessary to utilize any Intellectual Property of any of its
employees (or people it currently intends to hire) made or developed prior to
their employment by the Company or any of its Subsidiaries.
2.16 Agreements of Directors, Officers and Employees. Except as set forth
-----------------------------------------------
in Schedule 2.16, to the best knowledge of the Company, no director, officer or
-------------
employee of or consultant to the Company or any of its Subsidiaries is in
violation in any material respect of any material terms of any employment
contract, noncompetition agreement, nondisclosure agreement, patent disclosure
or assignment agreement or other contract or agreement containing restrictive
covenants relating to the right of any such director, officer, employee or
consultant to be employed or engaged by the Company or any of its Subsidiaries
because of the nature of the business conducted or proposed to be conducted by
the Company or any of its Subsidiaries, or relating to the use of trade secrets
or proprietary information of others.
11
2.17 Governmental and Industrial Approvals. Except as set forth in
-------------------------------------
Schedule 2.17, each of the Company and its Subsidiaries has all the material
-------------
permits, licenses, orders, franchises and other rights and privileges of all
federal, state, local and foreign governmental or regulatory bodies necessary
for it to conduct its business as presently conducted and as proposed to be
conducted, and each of the Company and its Subsidiaries has been operating its
business pursuant to and in material compliance with the terms of all such
permits, licenses, orders, franchises and other rights and privileges. Except as
set forth in Schedule 2.17, all such permits, licenses, orders, franchises
-------------
and other rights and privileges are in full force and effect in all material
respects and, to the knowledge of the Company, no suspension or cancellation of
any of them is threatened. None of such permits, licenses, orders, franchises
and other rights and privileges will be affected by the consummation of the
transactions contemplated in this Agreement and the Related Agreements.
2.18 Federal Reserve Regulations. The Company is not engaged in the
---------------------------
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulations T, U or X of the Board of Governors of
the Federal Reserve System), and no part of the proceeds of the sale of the
Purchased Shares will be used to purchase or carry any margin security or to
extend credit to others for the purpose of purchasing or carrying any margin
security or in any other manner which would involve a violation of any of the
regulations of the Board of Governors of the Federal Reserve System.
2.19 Contracts and Commitments. Except for such contracts, agreements or
-------------------------
commitments which are set forth on Schedule 2.19 attached hereto, neither the
-------------
Company nor any of its Subsidiaries is a party to or bound by:
(a) any contract, agreement or commitment which involves payment by the
Company or its Subsidiaries, or might result in payments to the Company or its
Subsidiaries, of $1,000,000 or more in the aggregate in any twelve month period;
(b) any agreement or indemnification or guarantee not entered into in the
ordinary course of business, other than indemnification agreements between the
Company or any of its Subsidiaries and any of their respective officers or
directors;
(c) any agreement, contract or commitment limiting the freedom of the
Company or any of its Subsidiaries to engage in any line of business or compete
or deal with any person or in any geographic area (including, but not limited
to, any noncompetition or exclusivity provisions) or which would so limit the
Company or any of its Subsidiaries after each Closing;
(d) any agreement, contract or commitment relating to capital expenditures
and involving future obligations in excess of $1,000,000 in the aggregate in any
twelve month period for the Company and its Subsidiaries and not cancelable
without penalty;
(e) any agreement, contract or commitment currently in force relating to
the disposition or acquisition of assets not in the ordinary course of business
or any ownership interest in any corporation, partnership, joint venture or
other business enterprise;
12
(f) any mortgages, indentures, loans or credit agreements, security
agreements or other agreements or instruments relating to the borrowing of
money, extension of credit, or the placing of a Lien on any asset of the Company
or any of its Subsidiaries;
(g) any joint marketing or development agreement;
(h) any distribution agreement (identifying any that contain exclusivity
provisions) that involves payment to the Company or its Subsidiaries of
$1,000,000 or more in the aggregate in any twelve month period;
(i) any stock redemption or stock purchase agreement;
(j) any agreement with a customer, vendor or supplier involving payment by
the Company or its Subsidiaries of $1,000,000 or more in the aggregate in any
twelve month period;
(k) any lease of personal property providing for annual rentals of
$1,000,000 or more in the aggregate in any twelve month period;
(l) any material option, license, franchise or similar agreement,
including agreements with municipalities regarding license or franchise fees;
(m) any IRU, interconnection, co-location or fiber agreements involving
payment by the Company or its Subsidiaries of $1,000,000 or more in the
aggregate in any twelve month period; or
(n) any material agency, dealer, sales representative, marketing or other
similar agreement.
The Company has made available to the Purchaser a written copy all other
contracts, agreements or commitments by which the Company or any of its
Subsidiaries is a party or is bound that are otherwise material.
Each Company Contract (as defined below) is a valid and binding agreement
of the Company or a Subsidiary, as the case may be, and is in full force and
effect. True and complete copies of each Company Contract have been delivered to
the Purchaser (or made available to the Purchaser in connection with the
purchase of the Series A Preferred Stock).
None of the Company or any of its Subsidiaries, or, to the Company's
knowledge, any other party to a Company Contract, has breached, violated or
defaulted under, or received notice that it has breached, violated or defaulted
under, any of the material terms or conditions of any of the agreements,
contracts or commitments described in this Section 2.19 (any such agreement,
contract or commitment, including those described in the second preceding
paragraph, a "Company Contract") in such manner as would permit any other party
to cancel or terminate any such Company Contract, or would permit any other
party to seek damages, which action would have a Material Adverse Effect.
13
2.20 Securities Act. The Company has complied and will comply with all
--------------
applicable federal or state securities laws in connection with the issuance and
sale of the Purchased Shares and the Series B Warrants, the issuance of the
Series B Conversion Shares upon conversion of the Purchased Shares and the
issuance of the Series B Warrant Shares upon exercise of the Series B Warrants.
Neither the Company nor, to the knowledge of the Company, anyone acting on its
behalf has offered any of the Purchased Shares or similar securities, or
solicited any offers to purchase any of such securities, so as to bring the
issuance and sale of the Purchased Shares under the registration provisions of
the Act.
2.21 Registration Rights. Except as set forth on Schedule 2.21, the
------------------- -------------
Company has not granted any rights relating to registration of its capital stock
under the Act or state securities laws other than those contained in this
Agreement and any of the Related Agreements.
2.22 Insurance Coverage. The Company and its Subsidiaries carry, or are
------------------
covered by insurance with insurers that are financially sound and reputable and
in such amounts with such deductibles and against such risks and losses as are
reasonable for the business and assets of the Company and its Subsidiaries and
is customary for companies similarly situated.
2.23 Employee Matters. Schedule 2.23 sets forth a list of each material
---------------- -------------
employment, consulting, severance, change in control, sale bonus or similar
contract (whether or not written) under which the Company of any of its
Subsidiaries has any liability, actual or contingent, and each "employee benefit
plan" (as defined in Section 3(3) of ERISA) and each other material contract,
plan or arrangements (whether or not written) providing for bonuses, profit-
sharing, stock option or other stock related rights or other forms of incentive
or deferred compensation, insurance coverage (including any self-insured
arrangements), health or medical benefits, disability benefits, workers'
compensation, supplemental unemployment benefits, severance benefits and post-
employment or retirement benefits (including compensation, pension, health,
medical or life insurance benefits) or any other material employees benefits of
any kind maintained, contributed to or required to be contributed to by the
Company or any of its Subsidiaries (collectively, the "Plans"). The Company has
made available to Purchaser copies of each such written Plan and a written
description of each unwritten Plan (in each case, including all amendments and
interpretations relating thereto) and copies of the three most recent annual
reports on Form 5500, if any, relating to each such Plan. Neither any Plan nor
any other plan maintained, contributed to or required to be contributed to by
any entity that would be treated as a single employer with the Company under
Section 414 of the Code is a plan subject to Title IV of ERISA. Except as set
forth on Schedule 2.23, neither the Company nor any of its Subsidiaries has any
-------------
material current or projected liability in respect of post-employment or post-
retirement health or medical or life insurance benefits for retired or former
employees of the Company or any of its Subsidiaries, except pursuant to the
continuation coverage requirements of Section 4980B of the Code and Section 601
et seq. of ERISA or other applicable law. The Company has no knowledge that any
of the officers or other key employees of the Company or any of its Subsidiaries
presently intends to terminate his employment. To the Company's knowledge, no
employee of the Company or any of its Subsidiaries is in violation of any term
of any contract or covenant (either with the Company or with another entity)
relating to employment, patents, assignment of inventions, proprietary
information disclosure, noncompetition or nonsolicitation. The Company and its
Subsidiaries are in compliance in all
14
material respects with all applicable laws and regulations relating to labor,
employment, fair employment practices, terms and conditions of employment, and
wages and hours. Neither the Company nor any of its Subsidiaries is a party to
any collective bargaining agreement or other labor union contract and, to the
Company's knowledge, there are no activities or proceedings of any labor union
to organize any such employees. The Company and its Subsidiaries are in material
compliance with the terms of all Plans listed on Schedule 2.23, and each such
-------------
Plan is in compliance in all material respects with all of the requirements and
provisions of applicable law, including without limitation the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and the Code. Each
Plan intended to qualify under Code Section 401(a) so qualifies and any related
trust is exempt from federal tax under Code Section 501(a); each such Plan and
trust has received a favorable determination letter from the IRS or is an
adoption of a prototype in respect of which the IRS has issued a favorable
opinion, and nothing has occurred since the date of such determination letter
that would materially adversely affect such qualification or tax-exempt status.
To the knowledge of the Company, no such Plan has been involved in any
"prohibited transaction" as defined in Code Section 4975.
2.24 No Brokers or Finders. Except as set forth on Schedule 2.24, no
--------------------- -------------
person has or will have, as a result of the transactions contemplated by this
Agreement, any right, interest or claim against or upon the Company or any of
its Subsidiaries, or to the Company's best knowledge, the Purchaser for any
commission, fee or other compensation as a finder or broker; and the Company
agrees to indemnify and hold the Purchaser harmless against any such
commissions, fees or other compensation.
2.25 Transactions with Affiliates. Except as set forth on Schedule 2.25,
---------------------------- -------------
there are no material loans, leases or other agreements or business arrangements
between the Company or any of its Subsidiaries on the one hand, and any officer,
director, employee or shareholder of the Company or any of its Subsidiaries or
any family member or affiliate of such officer, director, employee or
shareholder on the other hand. Except as set forth on Schedule 2.25, no
-------------
officer, director, shareholder or employee of the Company or any of its
Subsidiaries, including any member of their immediate families, is the direct or
indirect owner of an interest in any business or person that is a competitor,
supplier or customer of the Company or any of its Subsidiaries (except for a
passive investment in less than five percent (5%) of the common stock of any
publicly traded company).
2.26 Assumptions, Guarantees, etc. of Indebtedness of Other Persons.
--------------------------------------------------------------
Except as set forth on Schedule 2.26, neither the Company nor any of its
-------------
Subsidiaries has assumed, guaranteed, endorsed or otherwise become directly or
contingently liable on or for any indebtedness of any other Person, except where
such assumption, guarantee, endorsement or other liability would not have a
Material Adverse Effect and except guarantees by endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business. Except as set forth on Schedule 2.26, neither the Company
-------------
nor any of its Subsidiaries has assumed, guaranteed, endorsed or otherwise
become directly or contingently liable on or for any indebtedness of any
affiliate of the Company.
2.27 Disclosures. Neither this Agreement, any Schedule or Exhibit to this
-----------
Agreement, the Related Agreements, the Financial Statements, nor any other
agreement, document or written
15
statement made by the Company and furnished by the Company to the Purchaser or
counsel to the Purchaser in connection with the transactions contemplated
hereby, contains any untrue statement of material fact or omits to state any
material fact necessary to make the statements contained herein or therein not
misleading. There is no fact known to the Company that has not been disclosed
herein or in any other agreement, document or written statement furnished by the
Company to the Purchaser or its counsel in connection with the transactions
contemplated hereby which materially adversely affects the Company or any of its
Subsidiaries or could reasonably be expected to have a Material Adverse Effect.
2.28 Environmental and Safety Laws. Except where the failure to do so
-----------------------------
would not have a Material Adverse Effect: (i) each of the Company and its
Subsidiaries has duly complied with, and the operation of its business,
equipment other assets and the facilities owned or leased by it are in
compliance with the provisions of all applicable federal, state and local
environmental, health and safety laws, statutes, ordinances, rules, permits and
regulations of any governmental or quasi governmental authority relating to (a)
discharges to surface water or ground water, (b) solid or liquid waste disposal,
(c) the use, storage, generation, handling, transport, discharge, release or
disposals of toxic or hazardous substances or waste, (d) the emission of non-
ionizing electromagnetic radiation, or (e) other environmental, health or safety
matters, including, without limitation, the Comprehensive Environment Response
Compensation Liability Act of 1980, as amended by the Superfund Amendments and
Authorization Act of 1986, the Occupational Safety and Health Act, the Resource
Conservation and Recovery Act of 1976, as amended, the Federal Water Pollution
Control Act of 1970, the Safe Drinking Water Act of 1974, the Toxic Substance
Control Act of 1976, the Emergency Planning and Community Right to Know Act of
1986, as amended, and the Clean Air Act, as amended (collectively "Environmental
and Health Laws"); (ii) there are no investigations, administrative proceedings,
judicial actions, orders, claims or notices which are pending or anticipated or
threatened against the Company or any of its Subsidiaries relating to actual or
potential violations of or liability under any of the Environmental and Health
Laws; (iii) neither the Company nor any of its Subsidiaries has received notice
of or knows or has any reason to suspect, any facts which might constitute a
violation of or which might result in liability to the Company or any of its
Subsidiaries pursuant to any Environmental and Health Laws, and (iv) there are
no liabilities of or relating to the Company or any of its Subsidiaries of any
kind whatsoever, whether accrued, contingent, absolute, determined, determinable
or otherwise which relate to the use, ownership or occupancy of any property or
facilities by the Company or any of its Subsidiaries or to the operation of its
business or on prior to the date hereof and which relate to or result in a
violation of or liability under any Environmental and Health Laws.
2.29 Investment Company Act. Neither the Company nor any of its
----------------------
Subsidiaries is an "investment company" as defined in the Investment Company Act
of 1940, as amended. The consummation of the transactions contemplated by this
Agreement and the Related Agreements do not and will not violate any provision
of such Act or any rule, regulation or order issued by the SEC thereunder.
16
ARTICLE III
INVESTMENT REPRESENTATIONS
--------------------------
3.1 Representations and Warranties. The Purchaser hereby represents and
------------------------------
warrants to the Company as follows:
(a) Assuming due execution and delivery by the Company of this
Agreement and the Related Agreements, this Agreement and the Related Agreements
to which the Purchaser is a party constitute legal, valid and binding
obligations of the Purchaser, enforceable against the Purchaser in accordance
with their respective terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally and by general
equitable principles;
(b) The Purchaser has been advised and understands that the Purchased
Shares have not been registered under the Act, on the grounds that no
distribution or public offering of the Purchased Shares is to be effected, and
that in this connection, the Company is relying in part on the representations
of the Purchaser set forth in this Article III;
(c) The Purchaser has been further advised and understands that no
public market now exists for any of the securities issued by the Company, other
than the 10 1/2% Senior Notes due 2007 issued by the Company pursuant to that
certain Indenture, dated September 22, 1997, by and among the Company, Business
Telecom, Inc. and First Trust of New York, National Association, and that a
public market may never exist for the Purchased Shares, Series B Conversion
Shares, the Series B Warrants or the Series B Warrant Shares;
(d) The Purchaser is purchasing the Purchased Shares for investment
purposes, for its own account and not with a view to, or for sale in connection
with, any distribution thereof in violation of Federal or state securities laws;
(e) The Purchaser is an "accredited investor" as such term is defined
in Rule 501 promulgated under the Act;
(f) By reason of its business or financial experience, the Purchaser
has the capacity to protect its own interest in connection with the transactions
contemplated hereunder;
(g) The Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Purchased Shares;
(h) No person has or will have, as a result of the transactions
contemplated by this Agreement, any right, interest or claim against or upon the
Company or any of its Subsidiaries for any commission, fee or other compensation
as a finder or broker because of any act or omission by the Purchaser; and
(i) The Purchaser has all necessary power and has taken all necessary
action required for the due authorization, execution, delivery and performance
by the Purchaser of this
17
Agreement and the Related Agreements. The execution, delivery and performance of
this Agreement and the Related Agreements will not violate or conflict with the
organizational documents of the Purchaser or any material agreement, contract or
other instrument to which the Purchaser is a party.
3.2 Permitted Sales. Notwithstanding the foregoing representations, the
---------------
Company agrees that it will not deem to be a breach of the Purchaser's
representations under Section 3.1(d) any transfer permitted under the
Shareholders Agreement.
ARTICLE IV
COVENANTS OF THE COMPANY
------------------------
The Company covenants and agrees with the Purchaser that:
4.1 Conduct of Business. From the date hereof until the date of the
-------------------
Second Closing, the Company shall, and shall cause each of its Subsidiaries to,
conduct its business in the ordinary course consistent with past practice and
shall use its best efforts to preserve intact its business organizations and
relationships with third parties and to keep available the services of its
present officers and employees. Without limiting the generality of the
foregoing, from the date hereof until the date of the Second Closing, the
Company shall not, and shall not permit any of its Subsidiaries to: (a) merge or
consolidate with any other Person or acquire a material amount of assets from
any other Person; (b) sell, lease, license or otherwise dispose of any assets or
property except (i) pursuant to existing contracts or commitments or (ii)
inventory in the ordinary course consistent with past practice; (c) take any
action that would require the approval or consent of the Purchaser under the
Articles or the Shareholders Agreement had such document been effective as of
the date hereof or (d) agree or commit to do any of the foregoing.
The Company will not, and will not permit any of its Subsidiaries to, (i)
take or agree or commit to take any action that would make any representation or
warranty of the Company hereunder inaccurate in any respect at, or as of any
time prior to, the date of the Second Closing or (ii) omit or agree or commit to
omit to take any action necessary to prevent any such representation or warranty
from being inaccurate in any respect at any time.
4.2 Access to Information.
---------------------
(a) From the date hereof until termination hereof, the Company will
(i) give, and will cause each of its Subsidiaries to give, the Purchaser, its
counsel, financial advisors, auditors and other authorized representatives full
access to the offices, properties, books and records of the Company and its
Subsidiaries, (ii) furnish, and will cause each of its Subsidiaries to furnish,
to the Purchaser, its counsel, financial advisors, auditors and other authorized
representatives such financial and operating data and other information relating
to the Company or any of its Subsidiaries as such Persons may reasonably request
and (iii) instruct the employees, counsel and financial advisors of it or any of
its Subsidiaries to cooperate with the Purchaser in its investigation of the
Company or any of its Subsidiaries. No investigation by the
18
Purchaser or other information received by the Purchaser shall operate as a
waiver or otherwise affect any representation, warranty or agreement given or
made by the Company hereunder.
(b) On and after the First Closing, the Company will afford promptly
to the Purchaser and its agents reasonable access to the books of account,
financial and other records (including, without limitation, accountant's work
papers), information, employees and auditors of it and its Subsidiaries to the
extent necessary or useful for the Purchaser in connection with any audit,
investigation, dispute or litigation or any other reasonable business purpose
relating to the Company or its Subsidiaries.
4.3 Notice of Certain Events. Prior to the Second Closing, the Company
------------------------
shall promptly notify the Purchaser of:
(a) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement and the Related Agreements;
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement and the Related Agreements;
(c) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge threatened against, relating to or involving or
otherwise affecting the Company, any of its Subsidiaries or any of their
respective officers, key employees or shareholders that, if pending on the date
of this Agreement, would have been required to have been disclosed pursuant to
Section 2.10 or 2.27 or that relate to the consummation of the transactions
contemplated by this Agreement and the Related Agreements;
(d) any proposed or pending changes or amendments (of which the
Company is aware) to any laws, rules or regulations, which changes or amendments
may delay, restrict, prohibit or otherwise materially adversely affect the
conduct of the business operations of the Company and its Subsidiaries or the
consummation of the transactions contemplated by this Agreement and the Related
Agreements; and
(e) any inquiry, offer or proposal, whether written or oral, (i)
received by the Company regarding a possible investment in, purchase of or other
business combination involving the Company or any of its Subsidiaries or (ii)
received or made by or on behalf of the Company regarding a possible sale or
purchase of assets or a business by the Company or any of its Subsidiaries, in
each case for consideration in excess of $25 million.
4.4 Approvals. The Company shall use all reasonable efforts to obtain the
---------
approvals set forth on Schedule VI as soon as practicable after the First
-----------
Closing.
4.5 U.S. Real Property Holding Corporation Status. The Company shall not,
---------------------------------------------
and shall cause its Subsidiaries not to, take any action that would, or omit to
take any action, the omission of which would, result in it becoming a "United
States Real Property Holding
19
Corporation" as defined in Section 897(c)(2) of the Code and Treasury Regulation
Section 1.897-2(b).
ARTICLE V
COVENANTS OF THE COMPANY AND THE PURCHASER
------------------------------------------
5.1 Further Assurances. Subject to the terms and conditions of this
------------------
Agreement, the Company and the Purchaser will use their reasonable best efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary or desirable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement.
5.2 Tax Consistency. The Company and the Purchaser confirm that the
---------------
Series B Preferred Stock is intended to be "common stock" for purposes of
Section 305 of the Code and agree not to take any voluntary action inconsistent
with such intention.
5.3 Waiver of Certain Adjustments; Consent. (a) The WCAS Purchaser
--------------------------------------
hereby waives any adjustments to the Series A Conversion Value (as defined in
the Company's Amended and Restated Articles of Incorporation) that would have
otherwise occurred pursuant to Section 4(d) of the Company's Amended and
Restated Articles of Incorporation as a result of, and hereby consents to, the
issuance of the First Closing Purchased Shares, the First Closing Series B
Warrant and the Xxxxxx Securities (as defined below).
(b) The WCAS Purchaser hereby waives any adjustments to the Series A
Conversion Value or the Series B Conversion Value (each, as defined in the
Articles) that would have otherwise occurred pursuant to Section 4(d) of the
Articles as a result of, and hereby consents to, the issuance of the Second
Closing Purchased Shares and the Second Closing Series B Warrant.
(c) The WCAS Purchaser hereby waives any adjustment to the exercise price
or number of shares of stock issuable upon exercise of the Series A Warrant that
would have otherwise occurred pursuant to the terms of the Series A Warrant as a
result of the issuance of the First Closing Purchased Shares, the Second Closing
Purchased Shares, the Series B Warrants and the Xxxxxx Securities.
20
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF THE PURCHASER AND THE COMPANY
----------------------------------------------------------
The obligations of the Purchaser and the Company to consummate each Closing
are subject to the satisfaction of the following conditions:
(i) Except as set forth on Schedule VI, all regulatory approvals
-----------
have been received and any applicable waiting period under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended, relating to the transactions
contemplated by the applicable Closing shall have expired or been terminated;
and
(ii) No provision of any applicable law or regulations and no
judgment, injunction, order or decree shall prohibit the consummation of the
applicable Closing.
ARTICLE VII
CONDITIONS OF PURCHASER'S OBLIGATION
------------------------------------
7.1 Conditions to the First Closing.
-------------------------------
(a) Effect of Conditions. The obligations of the Purchaser to
--------------------
purchase and pay for the First Closing Purchased Shares at the First Closing
hereunder shall be subject at its election to the satisfaction of each of the
conditions stated in the following paragraphs of this Section 7.1.
(b) Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in this Agreement shall be true and correct
on the date of the First Closing with the same effect as though made on and as
of that date, and the Purchaser shall have received a certificate dated as of
the First Closing and signed by the Company's President on behalf of the Company
to that effect.
(c) Performance. The Company shall have performed and complied with
-----------
all of the agreements, covenants and conditions contained in this Agreement
required to be performed or complied with by it at or prior to the First
Closing, and the Purchaser shall have received a certificate dated as of the
First Closing and signed by the Company's President on behalf of the Company to
that effect.
(d) Opinions of Counsel. The Purchaser shall have received opinions,
-------------------
dated the date of the First Closing, from (i) Xxxxxx Xxxxxxx Xxxxx & Xxxxxx LLP,
corporate counsel to the Company, in the form attached as Exhibit D, and (ii)
---------
Swidler, Berlin, Shereff & Xxxxxxxx, LLP, regulatory counsel to the Company, in
the form attached as Exhibit E.
---------
21
(e) Compliance Certificate. Counsel for the Purchaser shall have
----------------------
received a certificate, dated as of the First Closing, signed by the Company's
President certifying that the conditions specified in this Section 7.1 have been
fulfilled.
(f) Amended and Restated Articles of Incorporation and Bylaws. The
---------------------------------------------------------
Company shall have duly filed with the Secretary of State of the State of North
Carolina the Articles, and the Articles, together with the Company's Amended and
Restated Bylaws shall be in full force and effect as of the First Closing.
(g) Certified Charter Documents. Counsel for the Purchaser shall
---------------------------
have received a copy of the Articles, certified by the Secretary of State of the
State of North Carolina and copies of the Company's Bylaws certified by its
Secretary, as well as any and all other documents, including certificates as to
resolutions adopted and incumbency of officers and certificates from appropriate
authorities as to the legal existence and good standing of the Company and its
Subsidiaries, which the Purchaser or its counsel may reasonably request.
(h) No Material Adverse Change. Since the date of this Agreement,
--------------------------
(i) there shall have been no Material Adverse Effect, (ii) there shall have been
no material adverse change in the capital markets for the equity or debt
securities of comparable companies and (iii) there shall have been no other
changes in the business, properties, assets, results of operations, condition
(financial or otherwise), management or prospects of the Company or any of its
Subsidiaries that would have a material adverse effect on their respective
businesses or assets.
(i) Shareholders Agreement. The Shareholders Agreement shall have
----------------------
been executed by the Company and the shareholders of the Company named therein.
(j) Redemption Agreement. The Redemption Agreement shall have been
--------------------
executed by the Company.
(k) Investor Rights Agreement. The Investor Rights Agreement shall
-------------------------
have been executed by the Company.
(l) Consents and Waivers. The Company shall have obtained all
--------------------
consents or waivers including (i) any consents or approvals from third parties
or governmental or regulatory authorities (except for those set forth on
Schedule VI) and (ii) those consents set forth on Schedule 7.1(l), in form and
----------- ---------------
substance satisfactory to the Purchaser, necessary to execute this Agreement and
the other agreements and documents contemplated herein, to issue the First
Closing Purchased Shares, the First Closing Conversion Shares, the First Closing
Series B Warrant and the First Closing Warrant Shares, and to carry out the
transactions contemplated hereby and thereby. All corporate and other action
and governmental or regulatory filings necessary to effectuate the terms of this
Agreement, the Related Agreements, the First Closing Purchased Shares, the First
Closing Conversion Shares, the First Closing Series B Warrant, the First Closing
Warrant Shares, and other agreements and instruments executed and delivered by
the Company in connection herewith shall have been made or taken.
(m) Proceedings and Documents. All corporate and other proceedings
-------------------------
in connection with the transactions contemplated at the First Closing and all
documents incidental
22
thereto shall be reasonably satisfactory in form and substance to the Purchaser
and its counsel, and the Purchaser and its counsel shall have received all such
counterpart original and certified or other copies of such documents as it may
reasonably request.
(n) Budget Approval. The Purchaser shall have approved the Company's
---------------
annual budget for the fiscal year 2001.
(o) Xxxxxx Investment. Concurrently with the First Closing, Xxxxx
-----------------
Xxxxxx shall purchase Nine Thousand Nine Hundred Ninety-Nine (9,999) shares of
Series B Preferred Stock and a First Closing Series B Warrant to purchase up to
an aggregate of Two Million One Hundred Thousand (2,100,000) shares of the
Common Stock at an initial exercise price per share of One Cent ($0.01) in cash
pursuant to the terms of a purchase agreement in the form attached as Exhibit I.
--------
The shares of Series B Preferred Stock and the First Closing Series B Warrant
issued to Xxxxx Xxxxxx pursuant to such purchase agreement are referred to
collectively herein as the "Xxxxxx Securities".
(p) Use of Proceeds. Concurrently with the First Closing, the
---------------
Company shall use the proceeds of the First Closing Purchased Shares to pay off
existing vendor obligations and for general working capital purposes and capital
expenditures.
(q) Extension of Waivers. The lenders under (i) the Second Amended
--------------------
and Restated Loan Agreement dated as of September 22, 1997 between Business
Telecom, Inc. and General Electric Capital Corporation and the other lenders
party thereto, as amended (the "GECC Agreement"), and (ii) the Loan Agreement
dated as of September 8, 1999 among Business Telecom, Inc. and Bank of America,
National Association, and the other lenders party thereto, as amended (the "BofA
Agreement" and, together with the GECC Agreement, the "Senior Debt Agreements"),
have agreed to extend until at least March 13, 2001 the waivers and forbearances
granted by such lenders under the Senior Debt Agreements.
7.2 Conditions to the Second Closing.
--------------------------------
(a) Effect of Conditions. The obligations of the Purchaser to
--------------------
purchase and pay for the Second Closing Purchased Shares at the Second Closing
hereunder shall be subject at its election to the satisfaction of each of the
conditions stated in the following paragraphs of this Section 7.2.
(b) Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in this Agreement shall be true and correct
on the date of the Second Closing with the same effect as though made on and as
of that date, and the Purchaser shall have received a certificate dated as of
the Second Closing and signed by the Company's President on behalf of the
Company to that effect.
(c) Performance. The Company shall have performed and complied with
-----------
all of the agreements, covenants and conditions contained in this Agreement
required to be performed or complied with by it at or prior to the Second
Closing, and the Purchaser shall have received a certificate dated as of the
Second Closing and signed by the Company's President on behalf of the Company to
that effect.
23
(d) Opinions of Counsel. The Purchaser shall have received opinions,
-------------------
dated the date of the Second Closing, from (i) Xxxxxx Xxxxxxx Xxxxx & Xxxxxx
LLP, corporate counsel to the Company, in the form attached as Exhibit D, and
---------
(ii) Swidler, Berlin, Shereff & Xxxxxxxx, LLP, regulatory counsel to the
Company, in the form attached as Exhibit E.
---------
(e) Compliance Certificate. Counsel for the Purchaser shall have
----------------------
received a certificate, dated as of the Second Closing, signed by the Company's
President certifying that the conditions specified in this Section 7.2 have been
fulfilled.
(f) Amended and Restated Articles of Incorporation and Bylaws. The
---------------------------------------------------------
Articles, together with the Company's Amended and Restated Bylaws shall be in
full force and effect as of the Second Closing.
(g) Certified Charter Documents. Counsel for the Purchaser shall
---------------------------
have received a copy of the Articles, certified by the Secretary of State of the
State of North Carolina and copies of the Company's Bylaws certified by its
Secretary, as well as any and all other documents, including certificates as to
resolutions adopted and incumbency of officers and certificates from appropriate
authorities as to the legal existence and good standing of the Company and its
Subsidiaries, which the Purchaser or its counsel may reasonably request.
(h) Bank Financing. The Company shall have entered into definitive
--------------
documentation, the terms of which shall be reasonably satisfactory to the
Purchaser, for $135 million principal amount of senior bank financing for
purposes of refinancing existing senior indebtedness under the Senior Debt
Agreements and for general corporate purposes.
(i) No Material Adverse Change. Since the date of this Agreement,
--------------------------
(i) there shall have been no Material Adverse Effect, (ii) there shall have been
no material adverse change in the capital markets for the equity or debt
securities of comparable companies and (iii) there shall have been no other
changes in the business, properties, assets, results of operations, condition
(financial or otherwise), management or prospects of the Company or any of its
Subsidiaries that would have a material adverse effect on their respective
businesses or assets.
(j) Shareholders Agreement. The Shareholders Agreement shall be in
----------------------
full force and effect.
(k) Redemption Agreement. The Redemption Agreement shall be in full
--------------------
force and effect.
(l) Investor Rights Agreement. The Investor Rights Agreement shall
-------------------------
be in full force and effect.
(m) Consents and Waivers. The Company shall have obtained all
--------------------
consents or waivers including (i) any consents or approvals from third parties
or governmental or regulatory authorities (except for those set forth on
Schedule VI) and (ii) those consents set forth on Schedule 7.2(m), in form and
----------- ---------------
substance satisfactory to the Purchaser, necessary to execute this Agreement and
the other agreements and documents contemplated herein, to issue the Second
Closing Purchased Shares, the Second Closing Conversion Shares, the Second
Closing Series B
24
Warrant and the Second Closing Warrant Shares, and to carry out the transactions
contemplated hereby and thereby. All corporate and other action and governmental
or regulatory filings necessary to effectuate the terms of this Agreement, the
Related Agreements, the Second Closing Purchased Shares, the Second Closing
Conversion Shares, the Second Closing Series B Warrant, the Second Closing
Warrant Shares, and other agreements and instruments executed and delivered by
the Company in connection herewith shall have been made or taken.
(n) Proceedings and Documents. All corporate and other proceedings
-------------------------
in connection with the transactions contemplated at the Second Closing and all
documents incidental thereto shall be reasonably satisfactory in form and
substance to the Purchaser and its counsel, and the Purchaser and its counsel
shall have received all such counterpart original and certified or other copies
of such documents as it may reasonably request.
(o) Due Diligence. The Purchaser shall have completed, to its
-------------
satisfaction, its due diligence investigation with respect to the Company.
(p) Xxxxx Xxxxxx'x Compensation. The parties to the Shareholders
---------------------------
Agreement shall have agreed upon the compensation package payable to Xxxxx X.
Xxxxxx following the appointment of a replacement chief executive officer of the
Company in accordance with Section 9 of the Shareholders Agreement.
(q) Deadline. The Second Closing shall have occurred on or prior to
--------
March 13, 2001.
ARTICLE VIII
CONDITIONS OF THE COMPANY'S OBLIGATION
--------------------------------------
8.1 Effect of Conditions. The Company's obligation to sell Purchased
--------------------
Shares at each Closing shall be subject at its election to the satisfaction of
each of the conditions stated in the following Sections of this Article.
8.2 Representations and Warranties. The representations and warranties of
------------------------------
the Purchaser contained in this Agreement shall be true and correct on the date
of the applicable Closing with the same effect as though made on and as of that
date.
8.3 Performance. The Purchaser shall have performed and complied with all
-----------
of the agreements, covenants and conditions contained in this Agreement required
to be performed or complied with by it at or prior to the applicable Closing.
8.4 Shareholders Agreement. The Shareholders Agreement shall have been
----------------------
executed by the Purchaser and the shareholders of the Company named therein.
8.5 Redemption Agreement. The Redemption Agreement shall have been
--------------------
executed by the Purchaser.
25
8.6 Investor Rights Agreement. The Investor Rights Agreement shall have
-------------------------
been executed by the Purchaser.
ARTICLE IX
CERTAIN DEFINITIONS
-------------------
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"Act" means the Securities Act of 1933, as amended.
"Agreement" means this Series B Preferred Stock Purchase Agreement as from
time to time amended and in effect between the parties.
"Articles" shall have the meaning set forth in Section 1.1(c).
"BofA Agreement" shall have the meaning set forth in Section 7.1(q).
"Closing" means each of the First Closing and the Second Closing.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute.
"Common Stock" shall have the meaning set forth in the recitals hereof.
"Company" shall have the meaning set forth in the preamble hereof.
"Company Contract" shall have the meaning set forth in Section 2.19.
"Damages" shall have the meaning set forth in Section 10.2(a).
"Environmental and Health Laws" shall have the meaning set forth in Section
2.28.
"ERISA" shall have the meaning set forth in Section 2.23.
"Exchange Act" shall have the meaning set forth in Section 2.9.
"final determination" shall have the meaning set forth in Section 10.2(b).
"Financial Statements" shall have the meaning set forth in Section 2.7.
"First Closing" shall have the meaning set forth in Section 1.4(a).
"First Closing Conversion Shares" means the shares of Common Stock issued
or issuable upon conversion of the First Closing Purchased Shares.
26
"First Closing Purchased Shares" shall have the meaning set forth in
Section 1.1(a).
"First Closing Purchase Price" shall have the meaning set forth in Section
1.1(a).
"First Closing Series B Warrant" shall have the meaning set forth in
Section 1.2(a).
"First Closing Warrant Shares" shall have the meaning set forth in Section
1.2(a).
"GAAP" shall have the meaning set forth in Section 2.7.
"GECC Agreement" shall have the meaning set forth in Section 7.1(q).
"Info Partners" shall have the meaning set forth in the preamble hereof.
"Intellectual Property" shall have the meaning set forth in Section 2.15.
"Investor Rights Agreement" shall have the meaning set forth in Section
2.2.
"Liens" shall have the meaning set forth in Section 2.4.
"Xxxxxx Securities" shall have the meaning set forth in Section 7.1(o).
"Material Adverse Effect" shall have the meaning set forth in Section 2.1.
"Parachute Payment" shall have the meaning set forth in Section 2.12(c).
"Person" means an individual, corporation, partnership, joint venture,
trust or unincorporated organization or a government or agency or political
subdivision thereof.
"Plans" shall have the meaning set forth in Section 2.23.
"Purchase Price" means the First Closing Purchase Price and the Second
Closing Purchase Price.
"Purchased Shares" means the First Closing Purchased Shares and the Second
Closing Purchased Shares.
"Purchaser" shall have the meaning set forth in the preamble hereof.
"Redemption Agreement" shall have the meaning set forth in Section 2.2.
"Related Agreements" shall have the meaning set forth in Section 2.2.
"SEC" shall have the meaning set forth in Section 2.9.
"SEC Documents" shall have the meaning set forth in Section 2.9.
"Second Closing" shall have the meaning set forth in Section 1.4(b).
27
"Second Closing Conversion Shares" means the shares of Common Stock issued
or issuable upon conversion of the Second Closing Purchased Shares.
"Second Closing Purchased Shares" shall have the meaning set forth in
Section 1.1(b).
"Second Closing Purchase Price" shall have the meaning set forth in Section
1.1(b).
"Second Closing Series B Warrant" shall have the meaning set forth in
Section 1.2(b).
"Second Closing Warrant Shares" shall have the meaning set forth in Section
1.2(b).
"Senior Debt Agreements" shall have the meaning set forth in Section
7.1(q).
"Series A Preferred Stock" shall have the meaning set forth in the recitals
hereof.
"Series A Warrant" shall have the meaning set forth in the recitals hereof.
"Series B Conversion Shares" means the First Closing Conversion Shares and
the Second Closing Conversion Shares.
"Series B Preferred Stock" shall have the meaning set forth in the recitals
hereof.
"Series B Underlying Shares" means the Series B Conversion Shares and
Series B Warrant Shares.
"Series B Warrants" shall have the meaning set forth in Section 1.2(b).
"Series B Warrant Shares" means the First Closing Warrant Shares and the
Second Closing Warrant Shares.
"Shareholders Agreement" shall have the meaning set forth in Section 2.2.
"Subsidiary" or "Subsidiaries" means any corporation, association or other
business entity of which the Company and/or any of its other Subsidiaries (as
herein defined) directly or indirectly owns at the time more than fifty percent
(50%) of the outstanding voting equity of such entity (other than directors'
qualifying shares) or has the power, by contract or otherwise, to elect a
majority of the board of directors or equivalent governing body.
"tax" shall have the meaning set forth in Section 2.12.
"Threshold Amount" shall have the meaning set forth in Section 10.2(a).
"WCAS Purchaser" shall have the meaning set forth in the preamble hereof.
28
ARTICLE X
MISCELLANEOUS
-------------
10.1 Survival. All covenants and agreements made herein or in any
--------
certificates or documents executed in connection herewith shall survive the
execution and delivery hereof and each Closing in accordance with their
respective terms, or if no such term is specified, indefinitely. The
representations and warranties made herein or in any certificates or documents
executed in connection herewith shall survive the execution and delivery hereof
and each Closing for a period of eighteen months, with the exception of Sections
2.23 and 2.28, which shall survive the execution and delivery hereof and each
Closing for a period of three years, and Section 2.12, which will survive until
the expiration of the statute of limitations applicable to the matters covered
thereby (giving effect to any waiver, mitigation or extension thereof), if
later. Notwithstanding the preceding sentence, any covenant, agreement,
representation or warranty in respect of which indemnity may be sought under
this Agreement shall survive the time at which it would otherwise terminate
pursuant to the preceding sentence, if notice of the inaccuracy or breach
thereof giving rise to such right of indemnity shall have been given to the
party against whom such indemnity may be sought prior to such termination time.
10.2 Indemnification.
---------------
(a) The Company shall indemnify and hold harmless (on an after-tax
basis, if applicable, as set forth in Section 10.2(b)) the
Purchaser and its affiliates against and from any losses, claims,
expenses (including reasonable expenses of investigation and
reasonable attorneys' fees and expenses), damages and liabilities,
insofar as such losses, claims, expenses, damages or liabilities
(or actions in respect thereof) arise out of or are based upon a
breach of or failure to perform any representations, warranty,
covenant or agreement of the Company made hereunder ("Damages");
provided that no amount of indemnity will be payable in the case of
a claim by an indemnified party under this Section 10.2 unless,
until and only to the extent claimant has suffered Damages
(determined without regard to any qualification as to materiality
or Material Adverse Effect contained in any representation,
warranty, covenant or agreement giving rise to the claim for
indemnity hereunder) aggregating in excess of $375,000 (the
"Threshold Amount"), at which time the indemnified party shall be
entitled to seek indemnification for all Damages in excess of the
Threshold Amount. Purchaser expressly agrees and acknowledges that
the right of indemnification granted herein to the Purchaser and
its affiliates shall be deemed to be the exclusive remedy available
to such Persons for any of the matters described in this Section.
In no case shall the indemnity obligation exceed $17,500,000,
except in the case of willful misconduct or fraud or for Damages
based upon a breach of Section 2.4 or 2.12, in which case the
indemnity obligation shall not exceed $50,000,000.
(b) Any amount paid by the Company under this Section 10.2 will be
treated as an adjustment to the Purchase Price unless a final
determination causes any such
29
amount not to constitute an adjustment to the Purchase Price for
Federal tax purposes. In the event of such a final determination,
except to the extent, if any, there are offsetting deductions for the
respective Damages available to the indemnitee or any such amount can
be added to the tax basis of the indemnitee's investment made pursuant
to this Agreement, the Company shall pay a grossed-up amount that
reflects the hypothetical tax consequences of the receipt or accrual
of such payment, using the maximum statutory rate (or rates, in the
case of an item that affects more than one tax) applicable to the
recipient of such payment for the relevant year, reflecting for
example, the effect of deductions available for interest paid or
accrued and for taxes such as state and local income taxes. Any
payment required to be made by the Company under this Section 10.2
that is not made when due shall bear interest at the prime rate of
interest in effect at that time for Citibank, N.A. for each day until
paid and such interest shall accrue from the date that such obligation
is due. For purposes of this Agreement, the term "final determination"
shall mean (i) any final determination of liability in respect of a
tax that, under applicable law, is not subject to further appeal,
review or modification through proceedings or otherwise (including the
expiration of a statute of limitations or a period for the filing of
claims for refunds, amended returns or appeals from adverse
determinations), including a "determination" as defined in Section
1313(a) of the Code or execution of an Internal Revenue Service Form
870AD or (ii) the payment of tax by the Purchaser or any of its
affiliates, whichever is responsible for payment of such tax under
applicable law, with respect to any item disallowed or adjusted by any
taxing authority, provided that such responsible party determines that
no action should be taken to recoup such payment and the other party
agrees.
10.3 Termination. (a) This Agreement may be terminated at any time:
-----------
(i) prior to either Closing, by mutual written agreement of the
Company and the Purchaser;
(ii) by either the Company or the Purchaser if the First Closing
shall not have been consummated on or before January 12, 2001;
(iii) by either the Company or the Purchaser if the Second Closing
shall not have been consummated on or before March 15, 2001; or
(iv) prior to either Closing, by either the Company or the Purchaser
if there shall be any law or regulation that makes consummation of the
transactions contemplated hereby illegal or otherwise prohibited or if
consummation of the transactions contemplated hereby would violate any
nonappealable final order, decree or judgment or any court or governmental
body having competent jurisdiction. The party desiring to terminate this
Agreement shall give notice of such termination to the other parties to
this Agreement.
30
(b) If this Agreement is terminated as permitted by this Section,
such termination shall be without liability of any party (or any stockholder,
director, officer, employee, agent, consultant or representative of such party)
to the other parties to this Agreement; provided that if such termination shall
result from the (i) willful failure of one party to fulfill a condition to the
performance of the obligations of another party, (ii) failure to perform a
covenant of this Agreement or (iii) breach by one party of any representation or
warranty agreement contained herein, such party shall be fully liable for any
and all Damages incurred or suffered by the other parties as a result of such
failure or breach.
10.4 Parties in Interest. Except as otherwise set forth herein, all
-------------------
covenants, agreements, representations, warranties and undertakings contained in
this Agreement shall be binding on and shall inure to the benefit of the
respective successors and assigns of the parties hereto (including transferees
of any of the Purchased Shares or Series B Conversion Shares or the Series B
Warrants or any Series B Warrant Shares), except that the Company shall not have
the right to assign its rights hereunder or any interest herein without the
prior consent of the Purchaser obtained in accordance with Section 10.5 hereof.
10.5 Amendments and Waivers.
----------------------
(a) Amendments or additions to this Agreement may only be made upon
written consent of the Company and the holders of a majority of the then issued
Purchased Shares; and compliance with any term, covenant, agreement, condition
or provision set forth herein may only be omitted or waived (in a particular
instance and either retroactively or prospectively) upon the written consent of
the Company and the holders of a majority of the then issued Purchased Shares.
Prompt notice of any such amendment or waiver shall be given to any Person who
did not consent thereto.
(b) No failure or delay on the part of any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
(c) This Agreement (including the Schedules and Exhibits annexed
hereto, which are an integral part of this Agreement) and the Related Agreements
constitute the full and entire understanding and complete agreement of the
parties with respect to the subject matter hereof and thereof and supersedes all
prior agreements and understandings among them as to such subject matter.
10.6 Notices. All notices, requests, consents, reports and demands shall
-------
be in writing and shall be hand delivered, sent by facsimile or other electronic
medium, or sent by express delivery or mailed, postage prepaid, to the Company
or to the Purchaser at the address set forth below or to such other address as
may be furnished in writing to the other parties hereto:
31
The Company: BTI Telecom Corp.
0000 Xxx Xxxxx Xxxx
Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxx
with a copy to: Xxxxxx Xxxxxxx Xxxxx & Xxxxxx LLP
0000 Xxxx Xxxxx Xxxxx, Xxxxx 000
Post Office Drawer 17803
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx
The Purchaser: Welsh, Carson, Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxx, Xxxx Xxxxxxx
with a copy to: Xxxxx Xxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxxxxxx
10.7 Counterparts. This Agreement and any exhibit hereto may be executed
------------
in multiple counterparts, each of which shall constitute an original but all of
which shall constitute but one and the same instrument. One or more
counterparts of this Agreement or any exhibit hereto may be delivered via
facsimile, with the intention that they shall have the same effect as an
original counterpart hereof.
10.8 Effect of Headings. The article and section headings herein are for
------------------
convenience only and shall not affect the construction hereof.
10.9 Severability. Any invalidity, illegality or limitation of the
------------
enforceability with respect to any party of any one or more of the provisions of
this Agreement, or any part thereof, whether arising by reason of the law of any
such person's domicile or otherwise, shall in no way affect or impair the
validity, legality or enforceability of the remainder of this Agreement with
respect to such party or the validity, legality or enforceability of this
Agreement with respect to any other party. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall to the extent
practicable, be modified so as to make it valid, legal and enforceable and to
retain as nearly as practicable the intent of the parties, and the validity,
legality, and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
10.10 Specific Enforcement. Each party expressly agrees that the other
--------------------
parties may be irreparably damaged if this Agreement is not specifically
enforced. Upon a breach or threatened breach of the terms or covenants of this
Agreement by any party, the other parties shall, in addition to all other
remedies, each be entitled to apply for a temporary or permanent injunction,
and/or a decree for specific performance, in accordance with the provisions
hereof.
32
10.11 Governing Law. This Agreement shall be deemed a contract made under
-------------
the laws of the State of North Carolina and together with the rights and
obligations of the parties hereunder, shall be construed under and governed by
the laws of such State without regard to the conflict of laws provisions
thereof.
10.12 Public Announcements. No party will issue a press release or make
--------------------
any public statement with respect to this Agreement or the Related Agreements or
the transactions contemplated hereby and thereby without the approval of the
other party (not to be unreasonably withheld), except as may be required by
applicable law or any listing agreement with any national securities exchange,
except that the Purchaser and the Company may disclose such terms and
information to their advisors, employees, investors, stockholders, successors or
assigns in the ordinary course.
10.13 No Third Party Beneficiaries. This Agreement shall not confer any
----------------------------
rights or remedies upon any person or entity other than the parties hereto and
their respective successors and permitted assigns.
10.14 Expenses. The Company agrees to pay all reasonable expenses of the
--------
Purchaser (which are currently estimated at $600,000) incurred in connection
with each closing of the transactions contemplated hereby; provided that the
Company shall not be obligated to pay any such expenses unless and until the
First Closing occurs (unless such closing does not occur due to the Company's
breach).
33
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
BTI TELECOM CORP.
By: /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Chief Executive Officer
WELSH, CARSON, XXXXXXXX &
XXXXX VIII, L.P.
By: WCAS VIII Associates LLC,
General Partner
By: /s/ Xxxxxxxx X. Rather
---------------------------------------
Name: Xxxxxxxx X. Rather
Title: Member
BTI INVESTORS LLC
By: /s/ Xxxxxxxx X. Rather
---------------------------------------
Name: Xxxxxxxx X. Rather
Title: Authorized Person
WCAS INFORMATION PARTNERS, L.P.
By: WCAS Info Partners,
General Partner
By: /s/ Xxxxxxxx X. Rather
---------------------------------------
Name: Xxxxxxxx X. Rather
Title: Attorney-in-fact
SCHEDULE 1.1
------------
PURCHASER ALLOCATION
FIRST CLOSING
Series B Series B Warrant
Purchaser Preferred Stock Shares
--------- ------------------- --------------------
Welsh, Carson, Xxxxxxxx & Xxxxx VIII, L.P. 9,524 2,000,040
BTI Investors LLC 476 99,960
SECOND CLOSING
Series B Series B Warrant
Purchaser Preferred Stock Shares
--------- ------------------- --------------------
Welsh, Carson, Xxxxxxxx & Xxxxx VIII, L.P. 38,096 8,000,160
BTI Investors LLC 1,904 399,840
