SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report May 15, 1998
(Date of earliest event reported) (April 10, 1998)
CTC COMMUNICATIONS CORP.
(Exact name of registrant as specified in its charter)
Massachusetts 0-13627 04-2731202
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
360 Second Ave., Waltham, Massachusetts 02154
(Address of principal executive offices) (Zip Code)
(781) 466-8080
(Registrant's telephone number including area code)
(Former name or former address if changed since last report)
<PAGE>
Item 5.
The summary information contained herein is qualified in its
entirety by reference to the texts of the relevant documents
referred to herein and attached as exhibits hereto.
A. Spectrum Equity Investors II, L.P. Private Placement
On April 10, 1998, the Registrant issued for investment to Spectrum
Equity Investors II, L.P. ("Spectrum") and certain other private
investors (together with Spectrum, the "Investors") an aggregate of
666,666 shares of Series A Convertible Preferred Stock (the
"Preferred Shares") for $12 million, pursuant to the terms and
conditions of a Securities Purchase Agreement of even date among
the Registrant and the Investors (the "Spectrum Private
Placement"). The Registrant also issued for investment to the
Investors five-year warrants to purchase an aggregate of 133,333
shares of its Common Stock at an exercise price of $9.00 per share.
Spectrum purchased 98.63% of the Preferred Shares and warrants in
the private placement.
The Registrant intends to use the proceeds of the private placement
for working capital.
The Registrant entered into a registration rights agreement with
the Investors with respect to the shares of Common Stock issuable
upon conversion of the Preferred Shares and upon exercise of the
warrants ("Registrable Securities") providing for "piggyback"
registration rights and demand registration rights as follows. At
any time after October 9, 1998, upon demand of a majority of the
holders of the Registrable Securities on a fully diluted basis
after giving effect to the conversion of all of the Preferred
Shares and the exercise of all warrants, the Registrant has agreed
to file a Registration Statement covering the Registrable
Securities on no more than three occasions; provided, however that
the Registrant shall be permitted to delay the filing for the 180
day period immediately following the commencement of the
Registrant's public offering of equity securities. In addition, in
the event of a mandatory conversion of the Preferred Shares (see
"Certificate of Designation" discussed below), the Company has
agreed to file a Registration Statement covering the Registrable
Securities. The Registrant has agreed to pay all expenses of
filing the registration statement, except that the holders of the
Registrable Securities shall bear the costs of their own legal
counsel and any underwriting commissions applicable to the
securities sold by them.
Robert J. Fabbricatore, Chairman and Chief Executive Officer of the
Registrant, individually and as trustee and general partner of
certain affiliated entities, which together held 27.23% of the
Registrant's outstanding shares of Common Stock as of such date,
entered into a Voting Agreement with Spectrum under the terms of
which Mr. Fabbricatore individually and on behalf of his affiliated
entities agreed to vote their shares in favor of the election to
the Registrant's Board of Directors of up to two persons designated
by a majority of the Preferred Shareholders.
Kevin J. Maroni and William P. Collatos, general partners of
Spectrum and designees of the Preferred Shareholders, were elected
Class III directors of the Registrant effective April 10, 1998.
Spectrum is an unaffiliated private equity fund with offices in
Boston and Palo Alto which manages $360 million in private capital
for investments in growing telecommunications companies.
B. Restatement of the Bylaws
On March 24, 1998, the Board of Directors of the Registrant
approved Amended and Restated Bylaws and increased the number of
Board members from five to eight effective April 10, 1998. The
Amended and Restated Bylaws provide that the Board of Directors is
classified into three classes, so that each director (after a
transitional period) serves for three years, with one class of
directors being elected each year. The Board of Directors is
currently comprised of two Class I Directors (Henry Hermann and
Ralph Sillari), two Class II Directors (J. Richard Murphy and
Richard Santagati) and three Class III Directors (Robert J.
Fabbricatore, Kevin J. Maroni and William P. Collatos). The terms
of the Class I, Class II and Class III Directors expire upon the
election and qualification of successor directors at annual
meetings of stockholders held following the end of fiscal years
1998, 1999 and 2000, respectively.
Prior to joining Spectrum as a General Partner in 1994, Mr. Maroni
served as Manager, Finance and Development at Time Warner
Telecommunications, where he was involved in corporate development
projects. From 1990 to 1992, Mr. Maroni served as a consultant in
the private equity group of Harvard Management Company. Mr. Maroni
is currently a director of Pathnet, Inc., Formus Communications,
Inc., WNP Communications, Inc. and American Cellular Corp.
Prior to co-founding Spectrum as a General Partner in 1993, Mr.
Collatos was a founding General Partner of Media/Communications
Partners and a General Partner of TA Associates. Mr. Collatos
currently serves as a director of Galaxy Telecom, Inc., TSR Paging
Inc., Golden Sky Systems Inc., and Internet Network Services
Holdings Ltd.
C. Certificate of Designation for Preferred Shares
On April 10, 1998, the Registrant filed a Certificate of
Designation with the Secretary of the Commonwealth of Massachusetts
setting forth the designations, preferences and relative and other
special rights, qualifications, limitations and restrictions of the
666,666 Preferred Shares issued in connection with the Spectrum
Private Placement. Each Preferred Share accrues a dividend in an
amount equal to 9% per annum of the $18.00 purchase price for each
Preferred Share compounding semiannually in arrears from the date
of issuance and prorated on a daily basis payable upon liquidation
or conversion of the Preferred Shares. Upon liquidation,
dissolution or winding up of the Registrant, the Preferred Shares
rank senior to any other junior class of the Registrant's capital
stock. The Preferred Shares are convertible at any time at the
holder's election into shares of the Registrant's Common Stock. In
addition, the Preferred Shares will automatically be converted into
shares of the Registrant's Common Stock (i) if the market price of
the Common Stock reaches certain levels or (ii) at such time as at
least 500,000 Preferred Shares have been converted. The Preferred
Shareholders are entitled to vote such number of Preferred Shares
which they hold equal to the lesser of (i) the whole number of
shares into which such Preferred Shares are convertible and the
number of shares issuable upon exercise of the warrants held by
them and (ii) the number of Preferred Shares held by them
multiplied by 2.476. Except as otherwise provided by law, the
Preferred Shareholders vote with the holders of the Common Stock as
a single class.
Item 7c. Exhibits.
Exhibit 3.1 Articles of Incorporation including the
Certificate of Designation for the
Series A Convertible Preferred Stock.
Exhibit 3.2 Amended and Restated Bylaws.
Exhibit 10.1 Securities Purchase Agreement dated
April 10, 1998
Exhibit 10.2 Registration Rights Agreement dated
April 10, 1998
Exhibit 10.3 Form of Warrant dated April 10, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
CTC COMMUNICATIONS CORP.
(Registrant)
By: /s/ John D. Pittenger
John D. Pittenger
Executive Vice President
May 15, 1998
EXHIBIT 3.1
Federal Identification
No. 04-2731202
THE COMMONWEALTH OF MASSACHUSETTS
William Francis Galvin
Secretary of the Commonwealth
ONE ASHBURTON PLACE, BOSTON, MASSACHUSETTS 02108
(General Laws, Chapter 156B, Section 26)
We, STEVEN P. MILTON, PRESIDENT and JOHN D. PITTENGER, CLERK, of
CTC COMMUNICATIONS CORP. located at 360 SECOND AVE., WALTHAM,
MASSACHUSETTS 02154 do hereby certify that at a meeting of the
directors of the corporation held on March 25, 1998, the following
vote establishing and designating a class or series of stock and
determining the relative rights and preferences thereof was duly adopted:
See Attached Exhibit I.
CTC COMMUNICATIONS CORP.
Certificate of Vote of Directors
Establishing a Class or Series of Stock
EXHIBIT I
RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Corporation by its Restated Articles of Organization, as amended
(the "Articles of Organization"), the Board of Directors does hereby
create, authorize and provide for the issuance of Series A Convertible
Preferred Stock, par value $1.00 per share, consisting of 666,666 shares,
having the designations, preferences and relative and other special
rights, qualifications, limitations and restrictions in the form of
Exhibit B attached hereto ("Certificate of Designation").
Exhibit B
CTC COMMUNICATIONS CORP.
SERIES A CONVERTIBLE PREFERRED STOCK
CERTIFICATE OF DESIGNATION
_________________________
Pursuant to Section 26 of the
Business Corporation Law of Massachusetts
_________________________
CTC Communications Corp. (the "Corporation"), a corporation organized and
existing under the Business Corporation Law of Massachusetts, does hereby
certify that pursuant to the authority vested in the Board of Directors of
the Corporation by its Articles of Organization, as amended, and pursuant
to the provisions of Section 26 of the Business Corporation Law of
Massachusetts, said Board of Directors, by unanimous written consent,
adopted the following resolution which remains in full force and effect as
of the date hereof:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Corporation (the "Board of Directors") by its Articles of
Organization, as amended, (hereinafter referred to as the "Articles of
Organization"), the Board of Directors does hereby create, authorize and
provide for the issuance of Series A Convertible Preferred Stock, par
value $1.00 per share, consisting of 666,666 shares, having the following
designations, preferences and relative and other special rights,
qualifications, limitations and restrictions:
1. Designation. The designation of such series is "Series A Convertible
Preferred Stock" (hereinafter in this Certificate of Designation called
the "Series A Preferred Stock") and the number of shares constituting such
series shall be 666,666, which number may be decreased (but not increased)
by the Board of Directors without a vote of stockholders; provided,
however, that such number may not be decreased below the number of then
currently outstanding shares of Series A Preferred Stock. All capitalized
terms used in this Certificate of Designation and not otherwise defined
shall have the meaning given to such terms in Section 14 hereof.
2. Dividends. The holders of Series A Preferred Stock shall be entitled
to participate in all dividends that are declared and paid on Common Stock
on the same basis as if all of the Series A Preferred Stock had been
converted to Common Stock in accordance with Section 7 hereof.
3. Liquidation Preference. (a) In the event of any liquidation,
dissolution or winding up of the affairs of the Corporation, either
voluntarily or involuntarily, each holder of Series A Preferred Stock
shall be entitled, after provision for the payment of the Corporation's
debts and other liabilities, to be paid in cash in full, before any
distribution is made on any Junior Securities, an amount in cash (the
"Liquidation Amount") equal to the greater of (i) the Series A Preference
Amount, or (ii) the Minimum Preference Amount, provided, however, if the
amount each such holder of Series A Preferred Stock would have received
had such holder converted all Series A Preferred Stock held by such holder
into Common Stock immediately prior to such liquidation, dissolution or
winding up of the Corporation would be equal to or greater than the
Liquidation Amount, the Series A Preferred Stock shall be automatically
converted into Common Stock in accordance with the terms herein, effective
immediately prior to such liquidation, dissolution or winding up of the
Corporation. If, upon any such liquidation, dissolution or other winding
up of the affairs of the Corporation, the net assets of the Corporation
distributable among the holders of all outstanding Senior Preferred Stock
shall be insufficient to permit the payment to such holders of the full
preferential amount to which they are entitled with respect to their
Senior Preferred Stock, then the entire net assets of the Corporation
remaining after the provision for the payment of the Corporation's debts
and other liabilities shall be distributed among the holders of the Senior
Preferred Stock ratably in proportion to the full preferential amounts to
which they would otherwise be respectively entitled on account of their
Senior Preferred Stock. Upon any such liquidation, dissolution or winding
up of the Corporation, after the holders of Senior Preferred Stock shall
have been paid in full the preferential amounts to which they shall be
entitled to receive on account of their Senior Preferred Stock, the
remaining net assets of the Corporation shall be distributed to the other
stockholders of the Corporation as their respective interests may appear.
(b) Consolidation, Merger, etc. A consolidation or merger of the
Corporation with or into any other corporation or corporations (a
"merger") other than a merger in which the holders of the Corporation's
Common Stock own a majority of the voting power of the surviving
corporation, or a Sale of the Corporation, or the effectuation by the
Corporation or its stockholders of a transaction or a series of related
transactions in which more than fifty percent (50%) of the voting power of
the Corporation is disposed of (a "reorganization") shall be deemed to
constitute a liquidation, dissolution or winding up of the Corporation
within the meaning of this Section 3, provided, however, the transfer of
all or substantially all of the Corporation's assets to one or more wholly
owned subsidiaries of the Corporation shall not be deemed a liquidation,
dissolution or winding up of the Corporation within the meaning of this
Section 3. Any reorganization of the Corporation required by any court or
administrative body in order to comply with any provision of law shall be
deemed to be an involuntary liquidation, dissolution or winding up of the
Corporation unless the preferences, qualifications, limitations,
restrictions and special or relative rights granted to or imposed upon the
holders of Series A Preferred Stock are not adversely affected by such
reorganization. Notwithstanding the foregoing, a consolidation, merger,
Sale of the Corporation or reorganization shall not be deemed a
liquidation, dissolution or winding up of the Corporation for the purposes
of this Section 3 if (i) the holders of the Requisite Percentage of the
Series A Preferred Stock waive in writing the provisions of the preceding
two sentences, as applicable and (ii) the Board of Directors of the
Corporation consents to such waiver.
(c) Holders of Series A Preferred Stock shall not be entitled to any
additional distribution in the event of any liquidation, dissolution or
winding up of the affairs of the Corporation in excess of the amounts set
forth in this Section 3.
4. Voting.
(a) Rights of Series A Preferred Stock. Except as otherwise
required by law or as provided herein and subject to the rights of any
class or series of capital stock of the Corporation that hereafter may be
issued in compliance with the terms of this Certificate of Designation,
the shares of the Series A Preferred Stock shall vote together with the
shares of the Corporation's Common Stock and any other shares of the
Corporation's stock which, by its terms, is entitled to vote together with
the Series A Preferred Stock and the Common Stock as a single class at any
annual or special meeting of stockholders of the Corporation, or may act
by written consent in the same manner as the Corporation's Common Stock,
upon the following basis: each holder of shares of Series A Preferred
Stock shall be entitled to such number of votes for the Series A Preferred
Stock held by such holder on the record date fixed for such meeting, or on
the effective date of such written consent, as shall be equal to the
lesser of (i) the whole number of shares of the Corporation's Common Stock
issuable upon conversion and exercise of all shares of Series A Preferred
Stock and Warrants held by such holder immediately after the close of
business on the record date fixed for such meeting or the effective date
of such written consent and (ii) the number of shares of Series A
Preferred Stock held by such holder multiplied by 2.476.
5. Special Approval Rights.
(a) Restricted Actions. So long as any shares of Series A
Preferred Stock are outstanding, the affirmative vote of the holders of
the Requisite Percentage of Series A Preferred Stock, acting by written
consent or voting separately as a single class in person or by proxy, at a
special or annual meeting of holders of Series A Preferred Stock called
for the purpose, shall be necessary to authorize the Corporation to take
any of the following actions (herein, each a "Restricted Action"):
(A) authorize, or increase or permit any Subsidiary to authorize
or increase, the authorized number of shares of, or issue additional
shares of Series A Preferred Stock or any class or series of the
Corporation's or any Subsidiary's capital stock or options, warrants or
other rights to acquire any such capital stock ranking with respect to
liquidation preference, dividends or voting rights, senior in right to,
or on a parity with, the Series A Preferred Stock or entitling the
holders thereof to receive any dividends or distributions (other than
stock dividends) at any time when any shares of Series A Preferred
Stock are outstanding; provided however, that nothing contained in this
Section 5 shall restrict the Company from authorizing or issuing (i)
Common Stock or warrants or options to acquire Common Stock or (ii)
Straight Preferred Stock;
(B) amend, repeal or change, directly or indirectly, any of the
provisions of the Articles of Organization of the Corporation, as
amended, or the By-laws of the Corporation in any manner that would
alter or change the powers, preferences or special rights of the shares
of Series A Preferred Stock so as to affect them adversely;
(C) at any time when the outstanding shares of Series A Preferred
Stock and Preferred Stock Derivatives represent at least four and
55/100 percent (4.55%) of the Corporation's Common Stock Deemed
Outstanding, authorize or effect the declaration or payment of
dividends or other distributions (other than stock dividends) upon, or
the redemption or repurchase of, any equity securities of the
Corporation other than repurchase of Common Stock from departing
employees that has been approved by the Compensation Committee and the
Board of Directors; or
(D) at any time when the outstanding shares of Series A Preferred
Stock and Preferred Stock Derivatives represent at least four and
55/100 percent (4.55%) of the Corporation's Common Stock Deemed
Outstanding, permit the Board of Directors of the Corporation to
consist of more than eleven (11) members.
(b) Approval. The approval rights of the holders of shares of
Series A Preferred Stock to authorize the Corporation to take any of the
Restricted Actions as provided in this Section 5 may be exercised at any
annual meeting of stockholders, at a special meeting of the holders of
Series A Preferred Stock held for such purpose or by written consent. At
each meeting of stockholders at which the holders of shares of Series A
Preferred Stock shall have the right, voting separately as a single class,
to authorize the Corporation to take any Restricted Action as provided in
this Section 5, the presence in person or by proxy of the holders of the
Requisite Percentage of Series A Preferred Stock entitled to vote on the
matter shall be necessary and sufficient to constitute a quorum. At any
such meeting or at any adjournment thereof, in the absence of a quorum of
the holders of shares of Series A Preferred Stock, a majority of the
holders of such shares present in person or by proxy shall have the power
to adjourn the meeting as to the actions to be taken by the holders of
shares of Series A Preferred Stock from time to time and place to place
without notice other than announcement at the meeting until a quorum shall
be present.
6. Compensation Committee. Unless otherwise consented to by the holders
of the Requisite Percentage of outstanding Series A Preferred Stock, so
long as any shares of Series A Preferred Stock are outstanding and so long
as the outstanding shares of Series A Preferred Stock and Preferred Stock
Derivatives represent at least four and 55/100 percent (4.55%) of the
Corporation's Common Stock Deemed Outstanding, the Board of Directors
shall elect a Compensation Committee of the Board of Directors consisting
of three (3) individuals, one of whom shall be a director designated in
writing by the holders of a majority of the Series A Preferred Stock, and
the other two of which shall consist of independent directors who are not
employed by the Corporation and are not Affiliates of those stockholders
who are Affiliates of the Corporation ("Independent Directors"), which
Compensation Committee shall be increased by one (1) member, which member
shall be the member added pursuant to Section 7.6 of the Purchase
Agreement or another member satisfactory to the holders of the Requisite
Percentage of outstanding Series A Preferred Stock and the Corporation's
chief executive officer. So long as any shares of Series A Preferred
Stock are outstanding and so long as the outstanding shares of Series A
Preferred Stock and Preferred Stock Derivatives represent at least four
and 55/100 percent (4.55%) of the Corporation's Common Stock Deemed
Outstanding, decisions of the Compensation Committee must be made by the
affirmative vote of at least three (3) members. The Compensation
Committee shall approve all recommendations to the Board of Directors as
to the following, and the Board of Directors shall not have the power to
approve any of the following without such recommendation, so long as any
shares of Series A Preferred Stock are outstanding and so long as the
outstanding shares of Series A Preferred Stock and Preferred Stock
Derivatives represent at least four and 55/100 percent (4.55%) of the
Corporation's Common Stock Deemed Outstanding, provided however, that
nothing contained herein shall restrict the Corporation from honoring its
contractual obligations existing on April 10, 1998 and disclosed in the
Purchase Agreement:
(i) the terms of employment, including compensation, of all new
senior management employees;
(ii) any increases in the compensation or benefits of any senior
management employee;
(iii) the terms of, and allocations of awards to senior management
employees under, any bonus, profit-sharing, or similar incentive plan
arrangements;
(iv) the award of any other incentive or bonus compensation to
senior management employees;
(v) the issuance of capital stock or Convertible Securities to any
employees or directors of the Corporation or its Subsidiaries; and
(vi) the issuance of capital stock or Convertible Securities to
consultants to the Corporation or its Subsidiaries other than Common
Stock, warrants and options to purchase Common Stock representing more
than 40,000 shares of Common Stock in the aggregate on a fully diluted
basis with respect to all such issuances during any fiscal year.
7. Conversion Rights.
(a) Conversion Procedure.
(i) At any time and from time to time, any holder of Series A
Preferred Stock shall have the right, at its option, to convert all or
any portion of each share of Series A Preferred Stock (including any
fraction of a share) held by such holder into a number of shares of
fully paid and nonassessable Common Stock computed by dividing the
Series A Preference Amount by the Conversion Price in effect on the
Conversion Date; provided, however, that in the event of the conversion
of Series A Preference Stock pursuant to Section 3(a) or Section 7(g)
of this Certificate of Designation, the number of shares of fully paid
and nonassessable Common Stock into which each Share of Series A
Preferred Stock shall convert shall be computed by dividing the greater
of the Series A Preference Amount or $21.39 by the Conversion Price in
effect on the Conversion Date.
Notwithstanding any other provision hereof, if a conversion of Series A
Preferred Stock is to be made in connection with a Sale of the
Corporation, such conversion may, at the election of any holder
tendering Series A Preferred Stock for conversion, be conditioned upon
the consummation of the Sale of the Corporation, in which case such
conversion shall not be deemed to be effective until immediately prior
to the consummation of such Sale of the Corporation.
(ii) Subject to the provisions of Section 7(a)(i), each conversion of
Series A Preferred Stock shall be deemed to have been effected as of
the close of business on the effective date of such conversion
specified in a written notice (the "Conversion Date"); provided,
however, that the Conversion Date shall not be a date earlier than the
date such notice is so given, and if such notice does not specify a
conversion date, the Conversion Date shall be deemed to be the date
such notice is given to the Corporation. On the Conversion Date, the
rights of the holder of such Series A Preferred Stock as such holder
(including the right to receive dividends) shall cease and the Person
or Persons in whose name or names any certificate or certificates for
shares of Common Stock are to be issued upon such conversion shall be
deemed to have become the holder or holders of record of the shares of
Common Stock represented thereby.
(iii) As soon as practicable after the Conversion Date, but in any
event within ten (10) business days after the holder has delivered the
certificates (or affidavits of loss in form and substance reasonably
satisfactory to the Company) evidencing the shares of Series A
Preferred Stock converted into shares of Common Stock in accordance
herewith, the Corporation shall deliver to the converting holder:
(x) a certificate or certificates representing, in the
aggregate, the number of shares of Common Stock issued upon such
conversion, in the same name or names as the certificates
representing the converted shares and in such denomination or
denominations as the converting holder shall specify and a check for
cash with respect to any fractional interest in a share of Common
Stock as provided in clause (vii) of this Section 7(a); and
(y) a certificate representing any shares that were
represented by the certificate or certificates delivered to the
Corporation in connection with such conversion but that were not
converted.
(iv) The issuance of certificates for shares of Common Stock upon
conversion of Series A Preferred Stock shall be made without charge to
the holders of such Series A Preferred Stock for any issuance tax in
respect thereof or other cost incurred by the Corporation in connection
with such conversion and the related issuance of shares of Common
Stock. Upon conversion of any shares of Series A Preferred Stock, the
Corporation shall take all such actions as are necessary in order to
insure that the Common Stock so issued upon such conversion shall be
validly issued, fully paid and nonassessable.
(v) The Corporation shall not close its books against the transfer of
Series A Preferred Stock or of Common Stock issued or issuable upon
conversion of Series A Preferred Stock in any manner that interferes
with the timely conversion of Series A Preferred Stock. The
Corporation shall assist and cooperate with any holder of shares of
Series A Preferred Stock required to make any governmental filings or
obtain any governmental approval prior to or in connection with any
conversion of shares of Series A Preferred Stock hereunder (including,
without limitation, making any filings required to be made by the
Corporation).
(vi) The Corporation shall at all times reserve and keep available out
of its authorized but unissued shares of Common Stock, solely for the
purpose of issuance upon the conversion of the Series A Preferred
Stock, such number of shares of Common Stock as are issuable upon the
conversion of all outstanding Series A Preferred Stock. All shares of
Common Stock that are so issuable shall, when issued, be duly and
validly issued, fully paid and nonassessable. The Corporation shall
take all such actions as may be necessary to assure that all such
shares of Common Stock may be so issued without violation of any
applicable law or governmental regulation applicable to the Corporation
or any requirements of any domestic securities exchange upon which
shares of Common Stock may be listed (except for official notice of
issuance which shall be immediately delivered by the Corporation upon
each such issuance).
(vii) No fractional shares of Common Stock or script shall be issued
upon conversion of shares of the Series A Preferred Stock. If more
than one share of Series A Preferred Stock shall be surrendered for
conversion at any one time by the same holder, the number of full
shares of Common Stock issuable upon conversion thereof shall be
computed on the basis of the aggregate number of shares of Series A
Preferred Stock so surrendered. Instead of any fractional shares of
Common Stock which would otherwise be issuable upon conversion of any
shares of Series A Preferred Stock, the Corporation shall pay a cash
adjustment in respect of such fractional interest equal to the fair
market value of such fractional interest as determined by the
Corporation's Board of Directors.
(b) Conversion Price. The initial conversion price shall be nine dollars
($9.00), which may be adjusted from time to time hereafter (as so
adjusted, the "Conversion Price") . If and whenever on or after the
original date of issuance of the Series A Preferred Stock the Corporation
issues or sells, or in accordance with Section 7(c) is deemed to have
issued or sold, any shares of its Common Stock or Convertible Securities
for a consideration per share less than the Conversion Price in effect
immediately prior to the time of such issue or sale, then upon such issue
or sale, the Conversion Price shall be reduced to an amount determined by
dividing (a) the sum of (1) the product derived by multiplying (i) the
Conversion Price in effect immediately prior to such issue or sale times
(ii) the number of shares of Common Stock Deemed Outstanding immediately
prior to such issue or sale, plus (2) the consideration, if any, received
(or deemed received pursuant to Section 7(c)(ii) below) by the Corporation
upon such issue or sale, by (b) the number of shares of Common Stock
Deemed Outstanding immediately after such issue or sale.
(c) Effect on Conversion Price of Certain Events. For purposes of
determining the adjusted Conversion Price under Section 7, the following
shall be applicable:
(i) Issuance of Convertible Securities. If the Corporation in any
manner issues or sells any Convertible Securities, whether or not the
rights to exchange or convert any such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock
is issuable upon such conversion or exchange is less than the
Conversion Price in effect immediately prior to the time of such issue
or sale, then the maximum number of shares of Common Stock issuable
upon conversion or exchange of such Convertible Securities shall be
deemed to be outstanding and to have been issued and sold by the
Corporation at the time of the issuance or sale of such Convertible
Securities for such price per share. For the purposes of this
paragraph, the "price per share for which Common Stock is issuable"
shall be determined by dividing (a) the total amount received or
receivable by the Corporation as consideration for the issue or sale of
such Convertible Securities, plus the cumulative minimum aggregate
amount of additional consideration, if any, payable to the Corporation
upon the exercise, conversion or exchange thereof and, if applicable,
the exercise, conversion and exchange of any other Convertible
Securities that such Convertible Securities may be converted into or
exchanged for, by (b) the total maximum number of shares of Common
Stock issuable upon the conversion or exchange of all such Convertible
Securities. No further adjustment of the Conversion Price shall be
made when Common Stock and, if applicable, any other Convertible
Securities, are actually issued upon the exercise, conversion or
exchange of such Convertible Securities.
(ii) Change in Exercise Price or Conversion Rate. If the additional
consideration payable to the Corporation upon the exercise, conversion
or exchange of any Convertible Securities, or the rate at which any
Convertible Securities are convertible into or exchangeable for Common
Stock should change at any time, the Conversion Price in effect at the
time of such change shall be readjusted to the Conversion Price that
would have been in effect at such time had such Convertible Securities
that are still outstanding provided for such changed additional
consideration or changed conversion rate, as the case may be, at the
time such Convertible Securities were initially granted, issued or
sold; and on the termination date of any right to exercise, convert or
exchange such Convertible Securities without such right having been
duly exercised, the Conversion Price then in effect hereunder shall be
increased to the Conversion Price that would have been in effect at the
time of such termination had such Convertible Securities, to the extent
outstanding immediately prior to such termination, never been issued.
(iii) Exceptions for Excluded Securities. Notwithstanding the
foregoing, no adjustments shall be made under this Section 7(c) with
respect to the issuance of any Excluded Securities.
(iv) Valuation of Non-Cash Consideration. In the event that
Convertible Securities are issued for consideration other than cash,
the value of such consideration shall be made by a good faith
determination by the Board.
(d) Subdivision or Combination of Common Stock. If the Corporation at
any time subdivides (by any stock split, stock dividend, recapitalization
or otherwise) its outstanding shares of Common Stock into a greater number
of shares, the Conversion Price in effect immediately prior to such
combination shall be proportionately reduced, and conversely, in the event
the outstanding shares of Common Stock shall be combined (by reverse stock
split or otherwise) into a smaller number of shares, the Conversion Price
in effect immediately prior to such combination shall be proportionately
increased. In any such event all numbers, percentages, computations and
the like in this Certificate of Designation shall be deemed modified as
necessary to give appropriate effect to such subdivision or combination.
(e) Certain Events. If an event not specified in this Section 7 occurs
that has substantially the same economic effect on the Series A Preferred
Stock as those specifically enumerated, then this Section 7 shall be
construed liberally, mutatis mutandis, in order to give the Series A
Preferred Stock the intended benefit of the protections provided under
this Section 7. In such event, the Corporation's Board of Directors shall
make an appropriate adjustment in the Conversion Price so as to protect
the rights of the holders of Series A Preferred Stock; provided that no
such adjustment shall increase the Conversion Price as otherwise
determined pursuant to this Section 7 or decrease the number of shares of
Common Stock issuable upon conversion of each share of Series A Preferred
Stock.
(f) Notices.
(i) Immediately upon any adjustment of the Conversion Price, the
Corporation shall give written notice thereof to all holders of Series
A Preferred Stock, setting forth in reasonable detail and certifying
the calculation of such adjustment.
(ii) The Corporation shall give written notice to all holders of
Series A Preferred Stock at least twenty (20) days prior to the date on
which the Corporation closes its books or takes a record (a) with
respect to any dividend or distribution upon Common Stock, (b) with
respect to any pro rata subscription offer to holders of Common Stock
or (c) for determining rights to vote with respect to any dissolution
or liquidation.
(g) Mandatory Conversion. Each share of Series A Preferred Stock shall
automatically be converted into fully paid and nonassessable shares of
Common Stock of the Corporation on the basis set forth in Section 7(a)
upon not less than 10 days prior written notice of conversion (the
"Conversion Notice") from the Corporation, which Conversion Notice and
mandatory conversion shall not be effective unless (i) the average closing
bid price (or closing sales price, as applicable) per share for the
Corporation's Common Stock on the Nasdaq Stock Market (or such national
stock exchange upon which the Corporation's Common Stock is then listed),
for the period of thirty (30) consecutive trading days ending on the last
trading day prior to the giving of the Conversion Notice, is (aa) in the
case of a Conversion Notice given prior to April 10, 2002, at least three
hundred percent (300%) of the highest Conversion Price in effect during
any portion of such thirty (30) trading day period or (bb) in the case of
a Conversion Notice given on or after April 10, 2002, at least one hundred
percent (100%) of the highest Conversion Price in effect during any
portion of such thirty (30) trading day period, and (ii) a "Shelf
Registration" pursuant to the Registration Rights Agreement with respect
to the "Registrable Securities" (including those issuable upon such
conversion) shall be effective as of the time the Series A Preferred Stock
converts into Common Stock. Holders of shares of Series A Preferred Stock
so converted may deliver to the Corporation at its principal office (or
such other office or agency of the Corporation as the Corporation may
designate by notice in writing to such holders) during its usual business
hours, the certificate or certificates for the shares so converted. At
such time as at least 500,000 shares of Series A Preferred Stock shall
have been converted into Common Stock pursuant to this Section 7, all
other then outstanding shares of Series A Preferred Stock shall thereupon
automatically be converted into fully paid and nonassessable shares of
Common Stock of the Corporation in the basis set forth in Section 7(a).
As promptly as practicable after such conversion, the Corporation shall
issue and deliver to such holder a certificate or certificates for the
number of whole shares of Common Stock to which such holder is entitled,
together with any cash dividends and payment in lieu of fractional shares
to which such holder may be entitled pursuant to this Section 7. Until
such time as a holder of shares of Series A Preferred Stock shall
surrender its certificate or certificates therefor as provided above, such
certificates shall be deemed to represent the shares of Common Stock to
which such holder shall be entitled upon the surrender thereof.
8. Redemption.
(a) The Series A Preferred Stock may be redeemed (in whole or in part) at
the option of the holders of the Requisite Percentage of Series A
Preferred Stock on or after the Maturity Date (an "Optional Redemption").
In any such case, the holders of the Requisite Percentage of Series A
Preferred Stock shall notify the Corporation in writing of its or their
intent to exercise the rights afforded by this Section 8(a) and specify a
date not less than 90 nor more than 180 days from the date of such notice
on which the Series A Preferred Stock shall be redeemed (the "Optional
Redemption Date"). Upon receipt of such notice, the Corporation shall
promptly notify the remaining holders of the Series A Preferred Stock of
the Optional Redemption Date. The remaining holders have the right to
participate in such redemption if they so elect by giving the Corporation
written notice to such effect within 20 days of having received such
notice. The Corporation shall redeem on the Optional Redemption Date all
shares of Series A Preferred Stock being redeemed in cash by wire transfer
of immediately available funds in an amount equal to the greater of the
Series A Preference Amount of such shares or the Minimum Preference Amount
of such shares to the extent funds are legally available for such
redemption.
(b) If the funds of the Corporation legally available for redemption of
shares of Series A Preferred Stock on an Optional Redemption Date are
insufficient to redeem the total number of outstanding shares of Series A
Preferred Stock entitled to redemption, the holders of shares of Series A
Preferred Stock entitled to redemption shall share ratably in any funds
legally available for redemption of such shares according to the
respective amounts that would be payable with respect to the full number
of shares owned by them if all such outstanding shares were redeemed in
full. At any time thereafter when additional funds of the Corporation are
legally available for the redemption of such shares of Series A Preferred
Stock, such funds will be used at the earliest permissible time, to redeem
the balance of such shares, or such portion thereof for which funds are
then legally available. From and after the Corporation's receipt of an
Optional Redemption notice pursuant to Section 8(a), the Corporation shall
be obligated to use its best efforts to take such actions as may be
necessary (including, without limitation, the issuance of additional
equity securities, the revaluation or recapitalization of the Corporation
or the consummation of a merger or sale of assets) in order to permit the
full and timely redemption of the shares of Series A Preferred Stock
entitled to redemption.
(c) If, for any reason, the Corporation fails to redeem all shares
of Series A Preferred Stock entitled to redemption on an Optional
Redemption Date (i) the unredeemed shares shall remain outstanding and
shall continue to have all rights and preferences (including, without
limitation, dividend and voting rights) provided for herein, and (ii) the
holders of such unredeemed shares shall have the ongoing right to be
redeemed in accordance with this Section 8, together with such rights and
remedies as may be available under applicable law.
(d) The notices provided for in this Section 8 shall be sent, if
by or on behalf of the Corporation, to the holders of the Series A
Preferred Stock at their respective addresses as shall then appear on the
records of the Corporation, or if by any holder of Series A Preferred
Stock to the Corporation at its principal executive office as set forth in
the Purchase Agreement, by first class mail, postage prepaid, (i)
notifying such recipient of the redemption, the date of such redemption,
the number of shares of Series A Preferred Stock to be redeemed, and the
redemption price therefor and (ii) in the case of any notice by or on
behalf of the Corporation, stating the place or places at which the shares
called for redemption shall, upon presentation and surrender of such
certificates representing such shares, be redeemed.
9. Status of Reacquired Shares. Any shares of Series A Preferred
Stock redeemed pursuant to Section 8 or otherwise acquired by the
Corporation in any manner whatsoever shall be canceled and shall not under
any circumstances be reissued; and the Corporation may from time to time
take such appropriate corporate action as may be necessary to reduce
accordingly the number of authorized shares of Series A Preferred Stock.
10. Rank. The Series A Preferred Stock shall rank senior in right as to
dividends and upon liquidation, dissolution or winding up to all Junior
Securities, whenever issued.
11. Identical Rights. Each share of the Series A Preferred Stock shall
have the same relative rights and preferences as, and shall be identical
in all respects with, all other shares of the Series A Preferred Stock.
12. Certificates. So long as any shares of the Series A Preferred Stock
are outstanding, there shall be set forth on the face or back of each
stock certificate issued by the Corporation a statement as required by
Section 27(c)(2) of the Business Corporation Law of Massachusetts.
13. Amendments. Any provision of these terms of the Series A Preferred
Stock may be amended, modified or waived if and only if the holder of the
Requisite Percentage of Series A Preferred Stock has consented in writing
or by an affirmative vote to such amendment, modification or waiver of any
such provision of this Certificate of Designation.
14. Definitions.
"Affiliate or Affiliates" shall mean with respect to any Person, any
other Person that would be considered to be an affiliate of such Person
under Rule 144(a) under the Securities Act of 1933, as amended, as in
effect on April 10, 1998, if such Person were issuing securities.
"Articles of Organization" shall mean the Articles of Organization of
the Company, as amended from time to time.
"Certificate of Designation" shall mean this Certificate of
Designations of the Series A Preferred Stock.
"Common Stock" shall mean the Corporation's Common Stock, $.01 par
value.
"Common Stock Deemed Outstanding" shall mean, at any given time, the
number of shares of Common Stock actually outstanding at such time,
plus the number of shares of Common Stock issuable upon conversion of
the Series A Preferred Stock, plus the number of shares of Common Stock
issuable upon the exercise in full of all Convertible Securities
whether or not the Convertible Securities are convertible into,
exercisable or exchangeable for Common Stock at such time.
"Conversion Price" shall have the meaning set forth in Section 7(b)
hereof.
"Convertible Securities" shall mean securities or obligations that are
exercisable for, convertible into or exchangeable for shares of Common
Stock. The term includes options, warrants or other rights to
subscribe for or purchase Common Stock or to subscribe for or purchase
other securities that are convertible into or exchanged for Common
Stock.
"Excluded Securities" shall mean any (a) Common Stock or Convertible
Securities outstanding as of April 10, 1998 and disclosed in the
Purchase Agreement, (b) Common Stock issuable upon the exercise,
conversion or exchange of Convertible Securities described in clause
(a), or (c) Common Stock or warrants or options to acquire Common Stock
issued after April 10, 1998 to (i) employees, directors or consultants
to the Corporation or its subsidiaries with the approval of the
Compensation Committee to the extent such approval is required under
Section 5(c) hereof, (ii) lenders who are not Affiliates of the
Corporation as partial consideration for senior debt financing to the
Corporation, (iii) equipment lessors who are not Affiliates of the
Corporation as partial consideration for equipment lease financing to
the Corporation, (iv) licensors who are not Affiliates of the
Corporation as partial consideration for license agreements with the
Corporation, (v) bond and Straight Preferred Stock purchasers as
partial consideration for issuances of debt securities or Straight
Preferred Stock pursuant to underwritten public offerings of such debt
securities or Straight Preferred Stock under the Securities Act of
1933, as amended, (vi) bond and Straight Preferred Stock purchasers as
partial consideration for issuance of such debt securities or Straight
Preferred Stock pursuant to offerings under Rule 144A yielding the
Corporation, with respect to each such offering, proceeds of at least
$75,000,000 (net of any interest or dividend escrows or similar
arrangements), (vii) bond and Straight Preferred Stock purchasers as
partial consideration for issuances of such debt securities or Straight
Preferred Stock pursuant to offerings under Rule 144A yielding the
Corporation with respect to each such offering, proceeds of at least
$40,000,000 (net of any interest or dividend escrows or similar
arrangements) sold to at least five purchasers, who are not Affiliates
of one another, (viii) any Persons (including the stockholders or
owners of Persons) as all or part of the consideration paid for the
acquisition of ownership interests in, or assets of, such Person unless
(aa) such Person is an Affiliate of the Corporation (other than a
Subsidiary) or (bb) Affiliates of the Corporation collectively own more
than ten percent (10%) of the ownership interests in such Person or
(ix) to Comm-Tract Corp. and Comm-Tract Corp. of New York or their
owners in consideration for the acquisition of said companies by the
Corporation involving the issuance of Common Stock at a price which is
not less than $9.00 per share. For purposes of clause (viii) above,
the value of consideration other than cash received by the Corporation
in return for the issuance of Common Stock shall be determined in good
faith by the Board.
"Independent Directors" shall have the meaning set forth in Section 6
hereof.
"Junior Securities" shall mean any of the Corporation's Common Stock
and all other equity securities of the Corporation other than (i) the
Series A Preferred Stock and (ii) any other shares of the Corporation's
preferred stock (a) which by their terms, state that they are not
Junior Securities or provide the holders thereof with rights pari passu
with or senior to those of the holders of Series A Preferred Stock and
(b) are issued in compliance with this Certificate of Designation.
"Maturity Date" shall mean April 9, 2003; provided however, that if, on
or before October 9, 1998, the Corporation completes and closes a debt
financing yielding the Corporation proceeds of at least $75,000,000
(net of any interest escrow or similar arrangement), then the Maturity
Date shall mean the earlier of April 9, 2010 or the 180th day following
the stated maturity date of such debt.
"Minimum Preference Amount" shall mean $25.41 per share of Series A
Preferred Stock.
"Person" shall mean an individual, partnership, corporation,
association, trust, joint venture, unincorporated organization and any
government, governmental department or agency or political subdivision
thereof.
"Preferred Stock" shall mean the Series A Preferred Stock.
"Preferred Stock Derivatives" shall mean any Common Stock or
Convertible Securities issued to holders of Series A Preferred Stock in
exchange therefor, as a stock dividend thereon, in respect thereof in
connection with a stock split or recapitalization or in connection with
the exercise of preemptive rights pertaining thereto pursuant to the
Purchase Agreement.
"Purchase Agreement" shall mean that certain Securities Purchase
Agreement dated as of April 10, 1998 among the Purchasers named therein
and the Corporation, as it may be amended from time to time.
"Purchase Price" of any share of Series A Preferred Stock shall be
$18.00.
"Registration Rights Agreement" shall mean that certain Registration
Rights Agreement between the Corporation and the holder(s) of the
Series A Preferred Stock, as it may be amended from time to time.
"Required Consent" shall have the meaning set forth in Section 5.
"Requisite Percentage" shall mean a majority.
"Restricted Action" shall have the meaning set forth in Section 5.
"Sale of the Corporation" shall mean a single transaction or a series
of transactions pursuant to which a Person or Persons acquire (i)
capital stock of the Corporation possessing the voting power to elect a
majority of the Corporation's board of directors (whether by merger,
consolidation or sale or transfer of the Corporation's capital stock);
or (ii) all or substantially all of the Corporation's assets determined
on a consolidated basis.
"Senior Preferred Stock" shall mean the Series A Preferred Stock and
any other preferred stock of the Corporation designated by the
Corporation in accordance with this Certificate of Designation, the
terms of which preferred stock provide for it to be treated as Senior
Preferred Stock for purposes of the particular sections herein in which
the term "Senior Preferred Stock" is used.
"Series A Preference Amount" shall mean, as of any date, an amount per
share of Series A Preferred Stock equal to the Purchase Price
increasing from the date of issuance of such share through the date in
question at a rate of nine percent (9%) per annum, compounding semi-
annually in arrears from the date of issuance and prorated on a daily
basis for partial periods.
"Series A Preferred Stock" shall mean the Corporation's Series A
Preferred Stock, $1.00 par value.
"Straight Preferred Stock" shall mean preferred stock of the
Corporation which (i) is neither a Convertible Security nor convertible
into or exchangeable for any other security other than preferred stock
meeting the requirements of this definition or debt securities, (ii) is
issued solely for cash payable upon issuance, (iii) accrues dividends
only at a rate or rates fixed in the certificate of designation or
amendment to the Articles of Organization designating such preferred
stock, (iv) has no voting rights other than as required by law, (v)
entitles the holders thereof to receive, in the aggregate, not more
than the purchase price therefor plus the amount of any accrued unpaid
dividends in respect thereof, and (vi) does not otherwise directly or
indirectly alter or change the powers, preferences or special rights of
the shares of Series A Preferred Stock so as to affect them adversely.
"Subsidiary" shall mean, with respect to any Person, any corporation,
partnership, association or other business entity of which (i) if a
corporation, a majority of the total voting power of shares of stock
entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof is at the
time owned or controlled, directly or indirectly, by that Person or one
or more of the other Subsidiaries of that Person or a combination
thereof, or (ii) if a partnership, association or other business
entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or
indirectly, by any Person or one or more Subsidiaries of that person or
a combination thereof. For purposes hereof, a Person or Persons shall
be deemed to have a majority ownership interest in a partnership,
association or other business entity if such Person or Persons shall be
allocated a majority of partnership, association or other business
entity gains or losses or shall be or control the managing general
partner of such partnership, association or other business entity.
"Warrants" shall mean the Warrants issued pursuant to the Purchase
Agreement to purchase 133,333 shares of Common Stock, as adjusted from
time to time.
15. Severability of Provisions. If any right, preference or limitation
of the Series A Preferred Stock set forth in this Resolution (as such
Resolution may be amended from time to time) is invalid, unlawful or
incapable of being enforced by reason of any rule, law or public policy,
all other rights preferences and limitations set forth in this Resolution
(as so amended) which can be given effect without implicating the invalid,
unlawful or unenforceable right preference or limitation shall,
nevertheless, remain in full force and effect, and no right, preference or
limitation herein set forth shall be deemed dependent upon any other
right, preference or limitation unless so expressed herein.
SIGNED UNDER THE PENALTIES OF PERJURY, this 10th day of April, 1998,
/s/ Steven P. Milton, President
/s/ John D. Pittenger, Clerk.
THE COMMONWEALTH OF MASSACHUSETTS
William Francis Galvin
Secretary of the Commonwealth
ONE ASHBURTON PLACE, BOSTON, MASSACHUSETTS 02108
ARTICLES OF AMENDMENT Federal Identification
General Laws, Chapter 156B, Section 72 No. 04-2731202
We, STEVEN P. MILTON, PRESIDENT and JOHN D. PITTENGER, CLERK, of
COMPUTER TELEPHONE CORP. located at 360 SECOND AVE., WALTHAM,
MASSACHUSETTS 02154 do hereby certify that these ARTICLES OF
AMENDMENT affecting Articles NUMBERED 1 of the Articles of
Organization were duly adopted at a meeting held on 09/26/96, by
vote of: 5,407,571 shares of Common Stock out of 9,601,155 shares
outstanding, being at least a majority of each type, class or
series outstanding and entitled to vote thereon:
To change Article 1 of the Restated Articles of Organization
relating to the name of the corporation to read as follows:
"1. The name by which the corporation shall be known is:
CTC Communications Corp."
The foregoing amendment will become effective when these articles
of amendment are filed in accordance with Chapter 156B, Section 6
of The General Laws unless these articles specify, in accordance
with the vote adopting the amendment, a later effective date not
more than thirty days after such filing, in which event the
amendment will become effective on such later date.
EFFECTIVE DATE: immediately upon filing.
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have
hereunto signed our names this 26th day of September, in the year
1996.
/s/ STEVEN P. MILTON, President
/s/ JOHN D. PITTENGER, Clerk
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
GENERAL LAWS, CHAPTER 156B, SECTION 72
I hereby approve the within articles of amendment and, the filing
fee in the amount of $100.00 having been paid, said articles are
deemed to have been filed with me this 30th day of September, 1996.
/s/ William Francis Galvin
William Francis Galvin, Secretary of the Commonwealth
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
William Francis Galvin
Secretary of the Commonwealth
ONE ASHBURTON PLACE, BOSTON, MASSACHUSETTS 02108
Federal Identification
No. 04-2731202
RESTATED ARTICLES OF ORGANIZATION
General Laws, Chapter 156B, Section 74
This certificate must be submitted to the Secretary of the
Commonwealth within sixty days after the date of the vote of
stockholders adopting the restated articles of organization. The
fee for filing this certificate is prescribed by General Laws,
Chapter 156B, Section 114. Make check payable to the
Commonwealth of Massachusetts.
-----------------------
We, Robert J. Fabbricatore, President, and John D. Pittenger,
Clerk, of Computer Telephone Corp., located at:
360 Second Avenue, Waltham, Massachusetts 02154
do hereby certify that the following restatement of the articles
of organization of the corporation was duly adopted at a meeting
held on August 21, 1995, by vote of 2,487,140 shares of Class 1
Common Stock out of 3,116,937 shares outstanding, being at least
two-thirds of each class of stock outstanding and entitled to
vote and of each class or series of stock adversely affected
thereby: -
1. The name by which the corporation shall be known is:-
Computer Telephone Corp.
2. The purposes for which the corporation is formed are as
follows:-
(a) For the sale, installation and service of computer
controlled tele-communication systems.
(b) To carry on any business or other activity which may be
lawfully carried on by a corporation organized under
the Business Corporation Law of The Commonwealth of
Massachusetts, whether or not related to those referred
to in the foregoing paragraph.
<PAGE>
3. The total number of shares and the par value, if any, of
each class of stock which the corporation is authorized to issue
is as follows:
<TABLE>
<CAPTION>
WITHOUT PAR VALUE WITH PAR VALUE
----------------- --------------
CLASS OF STOCK NUMBER OF SHARES NUMBER OF SHARES PAR VALUE
- -------------- ---------------- ---------------- ---------
<S> <C> <C> <C>
Preferred None 1,000,000 $1.00
Common None 25,000,000 $ .01
</TABLE>
4. If more than one class is authorized, a description of each
of the different classes of stock with, if any, the preferences,
voting powers, qualifications, special or relative rights or
privileges as to each class thereof and any series now
established:
There are two (2) classes of stock of the corporation:
Common Stock, par value $.01 per share; and Preferred Stock,
par value $1.00 per share. A description of each such class
of stock with, if any, the preferences, voting powers,
qualifications, special or relative rights or privileges as
to each such class of stock is as follows:
A. RIGHTS AND PRIVILEGES AS TO COMMON STOCK
The preferences, voting powers, qualifications and
special rights or privileges of the Common Stock are as
follows:
1. DIVIDEND RIGHTS
(a) The holders of all then outstanding shares of
Common Stock shall be entitled to receive
dividends, when as and if declared by the
Board of Directors of the corporation, out of
any funds legally available therefor.
(b) Nothing in these Articles of Organization
shall be taken to mean that the Board of
Directors is under any obligation to declare
or pay dividends.
2. VOTING RIGHTS
(a) The holder of each share of Common Stock
shall be entitled to one vote per share.
<PAGE>
B. RIGHTS AND PRIVILEGES AS TO PREFERRED STOCK
1. The Board of Directors may fix, by resolutions
adopted prior to the issuance of any shares of a
particular series of Preferred Stock (to the
extent not inconsistent with the preferences,
rights and powers of series of Preferred Stock at
the time outstanding), the voting powers of stock
of such class, if any, and the designations,
preferences and relative, participating, optional
and other special rights and the qualifications,
limitations and restrictions of such series within
such class, including but without limiting the
generality of the foregoing, the following:
(a) The rate and times at which, and the terms
and conditions on which, dividends on
Preferred Stock of such series shall be paid;
(b) The right, if any, of the holders of
Preferred Stock of such series to convert the
same into, or exchange the same for, shares
of other series or classes of stock of the
corporation and the terms and conditions of
such conversions or exchanges;
(c) The redemption price or prices and the time
or times at which, and the terms and
conditions on which, Preferred Stock of such
series may be redeemed;
(d) The rights of the holders of Preferred Stock
of such series upon the voluntary or
involuntary liquidation, merger,
consolidation, distribution, or sale of
assets, dissolution or winding up of the
corporation; and
(e) The terms of the sinking fund or redemption
or purchase account, if any, to be provided
for the Preferred Stock of such series.
2. At any time when there shall have been
established and designated one or more series of
Preferred Stock consisting of a number of shares
which is less than all of the authorized number of
shares of Preferred Stock, the remaining
authorized shares of Preferred Stock shall be
deemed to be shares of an undesignated series of
Preferred Stock until designated by the Board of
Directors.
3. Notwithstanding the fixing of the number of
shares constituting a particular series, the Board
of Directors may at any time thereafter authorize
the issuance of additional shares of the same
series or the redesignation of any then unissued
shares of such series as authorized and unissued
Preferred Stock undesignated as to series.
<PAGE>
5. The restrictions, if any, imposed by the articles of
organization upon the transfer of shares of stock of any
class are as follows:
None.
6. Other lawful provisions, if any, for the conduct and
regulation of the business and affairs of the corporation,
for its voluntary dissolution, or for limiting, defining, or
regulating the powers of the corporation, or of its
directors or stockholders, or of any class of stockholders:
(a) The directors may make, amend or repeal the By-Laws in
whole or in part, except with respect to any provision
thereof which by law or the By-Laws requires action by
the stockholders.
(b) Meetings of the stockholders may be held anywhere in
the United States.
(c) The corporation may be a partner in any business
enterprise it would have the power to conduct by
itself.
(d) The directors shall have the power to fix from time to
time their compensation. No person shall be
disqualified from holding any office by reason of any
interest. In the absence of fraud, any director,
officer or stockholder of this corporation, or any
concern which is a stockholder of this corporation
individually, or any individual having any interest in
any concern in which any such directors, officers,
stockholders or individuals have any interest, may be a
party to, or may be pecuniarily or otherwise interested
in, any contract, transaction or other act of this
corporation, and
(1) such contract, transaction or act shall not be in
any way invalidated or otherwise affected by that
fact;
(2) no such director, officer, stockholder or
individual shall be liable to account to this
corporation for any profit or benefit realized
through any such contract, transaction or act;
(3) any such director of this corporation may be
counted in determining the existence of a quorum
at any meeting of the directors or of any
committee thereof which shall authorize any such
contact, transaction or act, and may vote to
authorize the same;
the term "interest" including personal interest
and interest as a director, officer, stockholder,
shareholder, trustee, member or beneficiary of any
concern; and
the term "concern" meaning any corporation,
association, trust, partnership, firm, person or
other entity other than this corporation.
<PAGE>
(e) No Director shall be personally liable to the
corporation or any stockholder for monetary damages for
breach of fiduciary duty as a director, except for any
matter in respect of which such director shall be
liable under Sections 61 and 62 of Chapter 156B of the
Massachusetts General Laws or any amendment thereto or
successor provisions thereto or shall be liable by
reason that, in addition to any and all other
requirements for such liability, he (i) shall have
breached his duty of loyalty o the corporation or its
stockholders, (ii) shall not have acted in good faith
or, in failing to act, shall not have acted in good
faith, (iii) shall have acted in a manner involving
intentional misconduct or a knowing violation of law
or, in failing to act, shall have acted in a manner
involving intentional misconduct or knowing violation
of law, or (iv) shall have derived an improper personal
benefit. Neither the amendment nor repeal of this
paragraph, nor the adoption of any provision of these
Restated Articles inconsistent with this paragraph,
shall eliminate or reduce the effect of this paragraph
in respect of any manner occurring, or any cause of
action, suit or claim that, but for this paragraph
would accrue or arise, prior to such amendment, repeal
or adoption of an inconsistent provision.
The date of the fiscal year of the corporation is March 31 each
year, and is unchanged.
The names and addresses of certain officers and directors of the
corporation are as follows:
President Robert J. Fabbricatore
55 Pequossette St., 1st Floor
Watertown, MA 02172
Treasurer John D. Pittenger
and Clerk 57 Pound St.
Medfield, MA 02052
Directors:
Robert J. Fabbricatore Richard J. Santagati
55 Pequossette St., 1st Floor 8 Farmland Circle
Watertown, MA 02172 Andover, MA 01810
Philip J. Richer Alphonse M. Lucchese
351 Berlin Rd. 15 Bower Circle
Marlboro, MA 01752 Sudbury, MA 01776
J. Richard Murphy
172 Chestnut St.
No. Andover, MA 01845
<PAGE>
We further certify that the foregoing restated articles of
organization effect no amendments to the articles of organization
of the corporation as heretofore amended, except amendments to
the following articles 3 and 4:
Briefly describe amendments in space below:
Amendment to Article 3: Article 3 increases the authorized
Common Stock, $.01 par value per share, from 8,600,000 shares to
25,000,000 shares of Common Stock, par value $.01 per share.
Amendment to Article 4: Article 4 changes the name of the
"Class 1 Common Stock, par value $.01 per share" to "Common
Stock, par value $.01 per share."
Note: The 1,400,000 shares of Class 2 Common Stock were converted
to Class 1 Common Stock pursuant to the terms of the Restated
Articles of Organization filed with the Secretary of the
Commonwealth on March 4, 1985 thereby eliminating the Class 2
Common Stock.
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have
hereto signed our names this 21st day of August in the year 1995.
/s/ Robert J. Fabbricatore, President
/s/ John D. Pittenger, Clerk
THE COMMONWEALTH OF MASSACHUSETTS
RESTATED ARTICLES OF ORGANIZATION
GENERAL LAWS, CHAPTER 156B, SECTION 74
I hereby approve the within restated articles of organization
and, the filing fee in the amount of $16,700.00 having been paid,
said articles are deemed to have been filed with me this 23rd day
of August, 1995.
/s/ William Francis Galvin
William Francis Galvin, Secretary of the Commonwealth
EXHIBIT 3.2
AMENDED AND RESTATED
BY-LAWS
OF
CTC COMMUNICATIONS CORP.
(formerly Computer Telephone Corp.)
ARTICLE I
Stockholders
Section 1. ANNUAL MEETING. The Annual Meeting of Stockholders
shall be held on the third Monday in August in each year (or if that be a
legal holiday in the place where the meeting is to be held, on the next
succeeding full business day) at 10:00 A.M. unless a different hour is
fixed by the Directors or the President and stated in the notice of the
meeting. The purposes for which the annual meeting is to be held, in
addition to those prescribed by law, by the Articles of Organization or by
these By-Laws, may be specified by the Directors or the President. If no
Annual Meeting is held in accordance with the foregoing provisions, a
special meeting may be held in lieu thereof, and any action taken at such
meeting shall have the same effect as if taken at the Annual Meeting.
Section 2. SPECIAL MEETINGS. Special meetings of stockholders may
be called by the President or by the Directors and shall be called by the
Clerk, or in case of the death, absence, incapacity or refusal of the
Clerk, by any other officer, upon written application of one or more
stockholders who hold at least forty percent (40%) in interest of the
capital stock entitled to vote at the meeting. The call for the meeting
shall state the date, hour and place and the purposes of the meeting.
Section 3. PLACE OF MEETING. All meetings of stockholders shall be
held at the principal office of the corporation unless a different place
(within the United States) is fixed by the Directors or the President and
stated in the notice of the meeting.
Section 4. NOTICE OF MEETINGS. Except as hereinafter provided, a
written notice of every meeting of stockholders, stating the place, date
and hour thereof, and the purposes for which the meeting is to be held,
shall be given by the Clerk or by the person calling the meeting at least
seven days before the meeting to each stockholder entitled to vote thereat
and to each stockholder, who, by law, by the Articles of Organization or
by these By-Laws is entitled to such notice, by leaving such notice with
him or at his residence or usual place of business, or by mailing it
postage prepaid and addressed to such stockholder at his address as it
appears upon the books of the corporation. No notice need be given to any
stockholder if a written waiver of notice, executed before or after the
meeting by the stockholder or his attorney thereunto authorized, is filed
with the records of the meeting.
Section 5. QUORUM. The holders of a majority interest of all stock
issued, outstanding and entitled to vote at a meeting shall constitute a
quorum, but a lesser number may adjourn any meeting from time to time
without further notice; except that, if two or more classes of stock are
outstanding and entitled to vote as separate classes, then in the case of
each such class, a quorum shall consist of the holders of a majority in
interest of the stock of that class issued, outstanding and entitled to
vote.
Section 6. VOTING AND PROXIES. Each stockholder shall have one
vote for each share of stock entitled to vote held by him of record
according to the records of the corporation, unless otherwise provided by
the Articles of Organization. Stockholders may vote either in person or
by written proxy dated not more than six months before the meeting named
therein. Proxies shall be filed with the Clerk of the meeting, or of any
adjournment thereof, before being voted. Except as otherwise limited
therein, proxies shall entitle the persons named therein to vote at any
adjournment of such meeting. A proxy with respect to stock held in the
name of two or more persons shall be valid if executed by one of them
unless at or prior to exercise of the proxy the corporation receives a
specific written notice to the contrary from any one of them. A proxy
purporting to be executed by or on behalf of a stockholder shall be deemed
valid unless challenged at or prior to its exercise.
Section 7. ACTION AT MEETING. When a quorum is present, the
holders of a majority of the stock present or represented and voting on a
matter, (or if there are two or more classes of stock entitled to vote as
separate classes, then in the case of each such class, the holders of a
majority of the stock of that class present or represented and voting on a
matter) except where a larger vote is required by law, the Articles of
Organization or these By-Laws, shall decide any matter to be voted on by
the stockholders. Any election by stockholders shall be determined by a
plurality of the votes cast by the stockholders entitled to vote at the
election. No ballot shall be required for such election unless requested
by a stockholder present or represented at the meeting and entitled to
vote in the election. The corporation shall not directly or indirectly
vote any share of its stock.
Section 8. ACTION WITHOUT MEETING. Any action taken by
stockholders may be taken without a meeting if all stockholders entitled
to vote on the matter consent to the action by a writing filed with the
records of the meeting of stockholders. Such consent shall be treated for
all purposes as a vote at a meeting.
Section 9. NOTICE OF STOCKHOLDER BUSINESS AND NOMINATION OF
DIRECTORS.
(a) Annual Meetings of Stockholders.
(i) Nominations of persons for election to the Board of Directors
of the corporation and the proposal of business to be considered by the
stockholders may be made at an annual meeting of stockholders (x) pursuant
to the corporation's notice of meeting, (y) by or at the direction of the
Board of Directors or (z) by any stockholder of the corporation who was a
stockholder of record at the time of giving of notice provided for in this
Section 9, is entitled to vote at the meeting and has complied with the
notice procedures set forth in this Section 9.
(ii) For nomination or other business to be properly brought before
an annual meeting by a stockholder pursuant to clause (z) of paragraph
(a)(i) of this Section 9, the stockholder must have given timely notice
thereof in writing to the Clerk of the corporation at the principal
executive office of the corporation not less than 60 days nor more than
90 days prior to the first anniversary of the preceding year's annual
meeting; provided, however, that in the event that the date of the
annual meeting is advanced by more than 30 days or delayed by more than
60 days from such anniversary date, notice by the stockholder to be
timely must be so delivered not earlier than the 90th day prior to such
annual meeting and not later than the close of business on the later of
(x) the 60th day prior to such annual meeting and (y) the 10th day
following the day on which public announcement of the date of such
meeting is first made. Such stockholder's notice shall set forth: (1)
as to each person whom the stockholder proposes to nominate for
election or reelection as a Director all information relating to such
person that is required to be disclosed in solicitations of proxies for
election of Directors, or is otherwise required, in each case pursuant
to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") (including such person's written consent to being
named in the proxy statement as a nominee and to serving as a Director
if elected); (2) as to any other business that the stockholder proposes
to bring before the meeting, a brief description of the business
desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such business
of such stockholder and the beneficial owner, if any, on whose behalf
the proposal is made; (3) as to the stockholder giving notice and the
beneficial owner, if any, on whose behalf the nomination or proposal is
made, (A) the name and address of such stockholder, as they appear on
the corporation's books, and of such beneficial owner and (B) the class
and number of shares of the corporation which are owned beneficially
and of record by such stockholder and such beneficial owner.
(iii) Notwithstanding anything in the second sentence of paragraph
(a)(ii) of this Section 9 to the contrary, in the event that any person
nominated by the Board of Directors of the corporation for election as
a Director (other than a person nominated to fill a vacancy created by
the death of a Director) was not a Director or nominee named (x) in the
corporation's proxy statement for the preceding annual meeting or (y)
in a public announcement made by this corporation at least 60 days
prior to the first anniversary of the preceding year's annual meeting
(a "New Nominee"), a stockholder's notice required by this Section 9
shall also be considered timely if it shall be delivered to the Clerk
of the corporation at the principal executive offices of the
corporation not later than the close of business on the 10th day
following the date on which public announcement is first made by the
corporation of the election or nomination of such New Nominee to the
Board of Directors.
(iv) The corporation shall set forth in its proxy statement for
each annual meeting of stockholders the date by which notice of
nominations by stockholders of persons for election as a Director or
for other business proposed to be brought by stockholders at the next
annual meeting of stockholders must be received by the corporation to
be considered timely pursuant to this Section 9. With respect to the
first annual meeting of stockholders after the adoption of this Section
9, the corporation shall issue a public announcement setting forth such
information not less than 30 days prior to the applicable date.
(b) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been
brought before the meeting pursuant to the corporation's notice of
meeting. Nominations of persons for election to the Board of Directors
of the corporation may be made at a special meeting of stockholders at
which Directors are to be elected pursuant to the corporation's notice
of meeting (x) by or at the direction of the Board of Directors or (y)
by any stockholder of the corporation who (1) is a stockholder of
record at the time of giving of notice provided for in this Section 9,
(2) is entitled to vote at the meeting and (3) complies with the notice
procedures set forth in this Section 9. Stockholders desiring to
nominate persons for election to the Board of Directors at such a
special meeting of stockholders shall deliver the stockholder's notice
required by paragraph (a)(ii) of this Section 9 to the Clerk of the
corporation at the principal executive offices of the corporation not
earlier than the 90th day prior to such special meeting and not later
than the close of business on the later of (A) the 60th day prior to
such special meeting and (B) the 10th day following the day on which
public announcement is first made of the date of the special meeting
and of the nominees proposed by the Board of Directors to be elected at
such meeting.
(c) General.
(i) Only persons who are nominated in accordance with the
procedures set forth in this Section 9 shall be eligible to serve as
Directors. Only such business shall be conducted at a meeting of
stockholders as shall have been brought before the meeting in
accordance with the procedures set forth in Section 9. The chairman of
the meeting shall have the power and duty to determine whether a
nomination or any business proposed to be brought before the meeting
was made in accordance with the procedures set forth in this Section 9
and, if any proposed nomination or business is not in compliance with
this Section 9, to declare that such defective proposal shall be
disregarded.
(ii) For purposes of this Section 9, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News
Service, Associated Press or comparable national news service or in a
document publicly filed by the corporation with the Securities Exchange
Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(iii) Notwithstanding the foregoing provisions of this Section 9, a
stockholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this Section 9. Nothing in this Section 9 shall be
deemed to limit the corporation's obligation to include stockholder
proposals in its proxy statement if such inclusion is required by
Rule 14a-8 under the Exchange Act or any successor Rule.
ARTICLE II
Directors
Section 1. POWERS. The business of the corporation shall be managed
by a Board of Directors who may exercise all the powers of the corporation
including, but not limited to, the issuance of stock, except as otherwise
provided by law, by the Articles of Organization or by these By-Laws. In
the event of a vacancy in the Board of Directors, the remaining Directors,
except as otherwise provided by law, may exercise the powers of the full
Board until the vacancy is filled.
Section 2. NUMBER. The Board of Directors shall fix the
number of Directors at not less than three nor more than eleven Directors;
provided, however, that the number of Directors shall be fixed at not less
than two whenever there shall be only two stockholders and not less than
one whenever there shall be only one stockholder. The number of Directors
may be increased or decreased at any time or from time to time by the vote
of a majority of the Directors then in office. No Director need be a
stockholder.
Section 3. CLASSIFICATION, ELECTION AND TENURE. The
Directors, other than those who may be elected by the holders of any class
or series of Preferred Stock voting separately by class or series, shall
be classified, with respect to the duration of the term for which they
severally hold office, into three classes, designated Class I, Class II,
and Class III, which shall be as nearly equal in number as possible and as
provided by resolution of the Board of Directors in connection with such
election.
Each initial Director in Class I shall hold office for a term expiring at
the 1998 annual meeting of stockholders; each initial Director of Class II
shall hold office for a term expiring at the 1999 annual meeting of
stockholders; and each initial Director of Class III shall hold office for
a term expiring at the 2000 annual meeting of stockholders. Each Director
shall serve until his successor is duly elected and qualified or until his
earlier death, resignation, removal or disqualification. At each annual
meeting of stockholders following the 1998 annual meeting, the
stockholders shall elect the successors of the class of Directors whose
term expires at that meeting to hold office for a term expiring at the
annual meeting of stockholders held in the third year following the year
of their election and until their successors have been duly elected and
qualified or until their earlier death, resignation, removal or
disqualification.
The Board of Directors shall increase or decrease the number of Directors
in one or more classes as may be appropriate whenever it increases or
decreases the number of Directors pursuant to Section 2 of this Article
II, in order to ensure that the three classes shall be as nearly equal in
number as possible.
Section 4. VACANCIES. Subject to the rights of the holders of shares of
any class or series of Preferred Stock, any vacancies on the Board of
Directors resulting from death, resignation or removal shall only be
filled by the affirmative vote of a majority of the remaining Directors
then in office, even though less than a quorum of the Board of Directors,
or by a sole remaining Director, and newly created Directorships resulting
from any increase in the number of Directors shall be filled by the Board
of Directors, or if not so filled, by the stockholders at the next annual
meeting thereof or at a special meeting called for that purpose in
accordance with these By-laws. Any Director elected in accordance with
the preceding sentence shall hold office for the remainder of the full
term of the class of Directors in which the new Directorship was created
or the vacancy occurred and until such Director's successor shall have
been elected and qualified or until his earlier death, resignation or
removal. The Directors shall have and may exercise all their powers
notwithstanding the existence of one or more vacancies in their number,
subject to any requirement of law or of the number of Directors as
required for a quorum or for any vote or other actions.
Section 5. RESIGNATION. Any Director may resign by delivering his
written resignation to the corporation at its principal office or to the
President, Clerk or Secretary. Such resignation shall be effective upon
receipt unless it is specified to be effective at some other time or upon
the happening of some other event.
Section 6. REMOVAL. Except as otherwise provided in the Articles of
Organization or these By-laws relating to the rights of the holders of any
class or series of Preferred Stock voting separately by class or series,
to elect Directors under specified circumstances any Director or Directors
may be removed from office but only for cause and only by either the
affirmative vote, at any regular meeting or special meeting of the
stockholders, of not less than a majority of the total number of votes of
the then outstanding shares of capital stock of the corporation entitled
to vote generally in the election of Directors, voting together as a
single class, but only if notice of such proposal was contained in the
notice of such meeting, or by the affirmative vote of a majority of the
Directors then in office. A Director may be removed for cause only after
reasonable notice and opportunity to be heard before the body opposing
him.
Section 7. MEETINGS. Regular meetings of the Directors may be held
without call or notice at such places and at such times as the Directors
may from time to time determine, provided that any Director who is absent
when such determination is made shall be given notice of the
determination. A regular meeting of the Directors may be held without a
call or notice at the same place as the annual meeting of stockholders or
the special meeting held in lieu thereof, following such meetings of
stockholders.
Special meetings of the Directors may be held at any time and place
designated in a call by the President, Treasurer or two or more Directors.
Section 8. NOTICE OF MEETINGS. Notice of all special meetings of the
Directors shall be given to each Director by the Secretary, or if there be
no Secretary, by the Clerk, or Assistant Clerk, or in case of the death,
absence, incapacity or refusal of such persons, by the officer or one of
the Directors calling the meeting. Notice shall be given to each Director
in person, by telephone, facsimile or email at least twenty-four hours in
advance of the meeting, or by written notice mailed to his business or
home address at least forty-eight hours in advance of the meeting. Notice
need not be given to any Director if a written waiver of notice, executed
by him before or after the meeting, is filed with the records of the
meeting, or to any Director who attends the meeting without protesting
prior thereto or at its commencement the lack of notice to him. A notice
or waiver of notice of a Directors' meeting need not specify the purposes
of the meeting.
Section 9. QUORUM. At any meeting of the Directors, a majority of the
Directors then in office shall constitute a quorum. Less than a quorum
may adjourn any meeting from time to time without further notice.
Section 10. ACTION AT MEETING. At any meeting of the Directors at
which a quorum is present, the vote of a majority of those present, unless
a different vote is specified by law, by the Articles of Organization, or
by these By-Laws, shall be sufficient to decide such matter.
Section 11. ACTION BY CONSENT. Any action by the Directors may be
taken without a meeting if a written consent thereto is signed by all the
Directors and filed with the records of the Directors' Meetings. Such
consent shall be treated as a vote of the Directors for all purposes.
Section 12. COMMITTEE. The Directors may, by vote of a majority of
the Directors then in office, elect from their number an executive or
other committees and may by like vote delegate thereto some or all of
their powers except those which by law, the Articles of Organization or
these By-Laws, they are prohibited from delegating. Except as the
Directors may otherwise determine, any such committee may make rules for
the conduct of its business, but unless otherwise provided by the
Directors, or in such rules, its business shall be conducted as nearly as
may be in the same manner as is provided by these By-Laws for the
Directors.
Section 13. MEETING BY TELECOMMUNICATIONS. Members of the Board of
Directors or any committee elected thereby may participate in a meeting of
such board or committee by means of a conference telephone or similar
communications equipment by means of which all persons participating in a
meeting can hear each other at the same time and participation by such
means shall constitute presence in person at the meeting.
ARTICLE III
Officers
Section 1. ENUMERATION. The officers of the corporation shall consist of
a President, a Treasurer, a Clerk, and such other officers, including a
chairman of the Board of Directors, one or more Vice Presidents, Assistant
Treasurer, Assistant Clerks and Secretary as the Directors may determine.
Section 2. ELECTION. The President, Treasurer and Clerk shall be elected
annually by the Directors at their first meeting following the annual
meeting of stockholders. Other officers may be chosen by the Directors at
such meeting or at any other meeting.
Section 3. QUALIFICATION. The President may, but need not be, a
Director. No officer need be a stockholder. Any two or more officers may
be held by the same person provided that the President and Clerk shall not
be the same person. The Clerk shall be a resident of Massachusetts unless
the corporation has a resident agent appointed for the purpose of service
of process. Any officer may be required by the Directors to give bond for
the faithful performance of his duties to the corporation in such amount
and with such sureties as the Directors may determine.
Section 4. TENURE. Except as otherwise provided by law, the Articles of
Organization or by these By-Laws, the President, Treasurer and Clerk shall
hold office until the first meeting of the Directors following the annual
meeting of stockholders and thereafter until his successor is chosen and
qualified; and all other officers shall hold office until the first
meeting of the Directors following the annual meeting of the stockholders,
unless a shorter term is specified in the vote choosing or appointing
them. An officer may resign by delivering his written resignation to the
corporation at its principal office or to the President, Clerk or
Secretary, and such resignation shall be effective upon receipt unless it
is specified to be effective at some other time or upon the happening of
some other event.
Section 5. REMOVAL. The Directors may remove any officer with or without
cause by a vote of a majority of the entire number of Directors then in
office, provided, that an officer may be removed for cause only after
reasonable notice and opportunity to be heard by the Board of Directors
prior to action thereon.
Section 6. CHAIRMAN, PRESIDENT AND VICE PRESIDENT. The Chairman of the
Board of Directors, if there be one, shall be the chief executive officer
of the corporation and shall, when present, preside at all meetings of the
stockholders and at all meetings of the Board of Directors. The President
shall have such duties and powers as are prescribed by the Board of
Directors. Any Vice President shall have such powers as the Directors may
from time to time designate.
Section 7. TREASURER AND ASSISTANT TREASURER. The Treasurer shall,
subject to the direction of the Directors, have general charge of the
financial affairs of the corporation and shall cause to be kept accurate
books of account. He shall have custody of all funds, securities, and
valuable documents of the corporation, except as the Directors may
otherwise provide.
Any Assistant Treasurer shall have such powers as the Directors may from
time to time designate.
Section 8. CLERK AND ASSISTANT CLERKS. The Clerk shall keep a record of
the meetings of stockholders. Unless a Transfer Agent is appointed, the
Clerk shall keep or cause to be kept in Massachusetts, at the principal
office of the corporation or at his office, the stock and transfer records
of the corporation, in which are contained the names of all stockholders
and the record address, and the amount of stock held by each.
In case a Secretary is not elected, the Clerk shall keep a record of the
meetings of the Directors.
Any Assistant Clerk shall have such powers as the Directors may from time
to time designate. In the absence of the Clerk from any meeting of
stockholders, an Assistant Clerk, if one be elected, otherwise a Temporary
Clerk designated by the person presiding at the meeting, shall perform the
duties of the Clerk.
Section 9. SECRETARY AND ASSISTANT SECRETARIES. If a Secretary is
elected, he shall keep a record of the meetings of the Directors and in
his absence, an Assistant Secretary, if one be elected, otherwise a
Temporary Secretary designated by the person presiding at the meeting,
shall keep a record of the meetings of the Directors.
Any Assistant Secretary shall have such powers as the Directors may from
time to time designate.
Section 10. OTHER POWERS AND DUTIES. Each officer shall, subject to
these By-Laws, have in addition to the duties and powers specifically set
forth in these By-Laws, such duties and powers as are customarily incident
to his office, and such duties and powers as the Directors may from time
to time designate.
ARTICLE IV
Indemnification of Directors and Officers
The corporation shall to the extent legally permissible indemnify each of
its directors and officers and each person who shall serve or shall have
served at its request as a director or officer of another corporation (and
the heirs, executors and administrators of such director, officer and
other person) against all expenses and liabilities which he has reasonably
incurred in connection with or arising out of any actual or threatened
action, suit or proceeding in which he may be involved by reason of his
being or having been a director or officer of the corporation or by reason
of his serving or having served at its request as a director or officer of
another corporation (whether or not he continues to be a director, or
officer, at the time of incurring such expenses or liabilities), such
expenses and liabilities to include, but not be limited to, judgments,
court costs and attorneys' fees and the cost of reasonable settlements,
provided no such indemnification shall be made in relation to matters as
to which such director or officer shall be finally adjudged in any such
action, suit or proceeding not to have acted in good faith in the
reasonable belief that his action was in the best interests of the
corporation. In the event that a settlement or compromise of such action,
suit or proceeding is effected, indemnification may be had but only if the
Board of Directors shall have been furnished with an opinion of counsel
for the corporation to the effect that such settlement or compromise is in
the best interest of the corporation and that such director or officer
does not appear not to have acted in good faith in the reasonable belief
that his action was in the best interests of the corporation, and if the
Board of Directors shall have adopted a resolution approving such
settlement or compromise.
The foregoing right of indemnification shall not be exclusive of other
rights to which any director, officer or other corporate personnel may be
entitled as a matter of law.
ARTICLE V
Capital Stock
Section 1. CERTIFICATE OF STOCK. Each stockholder shall be entitled to a
certificate of the capital stock of the corporation in such form as may be
prescribed from time to time by the Directors. The certificate shall be
signed by the President or a Vice President, and by the Treasurer or an
Assistant Treasurer, but when a certificate is countersigned by a transfer
agent or a registrar, other than a Director, officer or employee of the
corporation, such signatures may be facsimiles. In case any officer who
has signed or whose facsimile signature has been placed on such
certificate shall have ceased to be such officer before such certificate
is issued, it may be issued by the corporation with the same effect as if
he were such officer at the time of its issue.
Every certificate for shares of stock which are subject to any restriction
on transfer pursuant to the Articles of Organization, the By-Laws, or any
agreement to which the corporation is a party, shall have the restriction
noted conspicuously on the certificate and shall also set forth on the
face or back either the full text of the restriction or a statement of the
existence of such restriction and a statement that the corporation will
furnish a copy to the holder of such certificate upon written request and
without charge.
Every certificate issued when the corporation is authorized to issue more
than one class or series of stock shall set forth on its face or back
either the full text of the preferences, voting powers, qualifications and
special and relative rights of the shares of each class and series
authorized to be issued or a statement of the existence of such
preferences, powers, qualifications and right, and a statement that the
corporation will furnish a copy thereof to the holder of such certificate
upon written request and without charge.
Section 2. TRANSFERS. Subject to the restrictions, if any, stated or
noted on the stock certificates, shares of stock may be transferred on the
books of the corporation by the surrender to the corporation or its
transfer agent of the certificate therefor properly endorsed or
accompanied by a written assignment and power of attorney properly
executed, with necessary transfer stamps affixed, and with such proof of
the authenticity of signature as the corporation or its transfer agent may
reasonably require. Except as may be otherwise required by law, the
Articles of Organization or these By-Laws, the corporation shall be
entitled to treat the record holder of stock as shown on its books as the
owner of such stock for all purposes, including the payment of dividends
and the right to vote with respect thereto, regardless of any transfer,
pledge or other disposition of such stock, until the shares have been
transferred on the books of the corporation in accordance with the
requirements of the By-Laws.
It shall be the duty of each stockholder to notify the corporation of his
post office address.
Section 3. RECORD DATE. The Directors may fix in advance a time of not
more than sixty days preceding the date of any meeting of stockholders, or
the date for the payment of any dividend or the making of any distribution
to stockholders, or the last day on which the consent or dissent of
stockholders may be effectively expressed for any purpose, as the record
date for determining the stockholders having the right to notice of and to
vote at such meeting, and any
adjournment thereof, or the right to receive such dividend or distribution
or the right to give such consent or dissent. In such case only
stockholders of record on such record date shall have such right,
notwithstanding any transfer of stock on the books of the corporation
after the record date. Without fixing such record date, the Directors may
for any of such purposes close the transfer books for all or any part of
such period.
Section 4. REPLACEMENT OF CERTIFICATES. In case of the alleged loss or
destruction or the mutilation of a certificate of stock, a duplicate may
be issued in place thereof, upon such terms as the Directors may
prescribe.
ARTICLE VI
Section 1. FISCAL YEAR. Except as from time to time otherwise determined
by the Directors, the fiscal year of the corporation shall be the twelve
months ending March 31.
Section 2. SEAL. The seal of the corporation shall, subject to
alterations by the Directors, bear its name, the word "Massachusetts" and
the year of its incorporation.
Section 3. EXECUTION OF INSTRUMENTS. All deeds, leases, transfers,
contracts, bonds, notes and other obligations authorized to be executed by
an officer of the corporation in its behalf shall be signed by the
President or the Treasurer except as the Directors may generally or in
particular cases otherwise determine.
Section 4. VOTING OF SECURITIES. Except as the Directors may otherwise
designate, the President or Treasurer may waive notice of, and appoint any
person or persons to act as proxy or attorney in fact for this corporation
(with or without power of substitution) at any meeting of stockholders or
shareholders of any other corporation or organization, the securities of
which may be held by this corporation. The President shall have the power
to vote any such securities held by this corporation unless the Directors
shall, by vote, otherwise stipulate.
Section 5. CORPORATE RECORDS. The original, or attested copies, of the
Articles of Organization, By-Laws and records of all meetings of the
incorporates and stockholders, and the stock and transfer records, which
shall contain the names of all stockholders and the record address and the
amount of stock held by each, shall be kept in Massachusetts at the
principal office of the corporation, or at an office of its transfer agent
or of the Clerk. Said copies and records need not all be kept in the same
office. They shall be available at all reasonable times to the inspection
of any stockholder for any proper purpose but not to secure a list of
stockholders for the purpose of selling said list or copies thereof or of
using the same for a purpose other than in the interest of the applicant,
as a stockholder, relative to the affairs of the corporation.
Section 6. CORPORATION MAY ACT AS PARTNER. The corporation, in
accordance with the Articles of Organization and Section 9A of the General
Laws of Massachusetts, Chapter 156B (Ter. Ed.) is hereby empowered to be a
partner in any business enterprise which the corporation would have power
to conduct itself.
Section 7. ARTICLES OF ORGANIZATION. All references in these By-Laws to
the Articles of Organization shall be deemed to refer to the Articles of
Organization of the corporation, as amended and in effect from time to
time.
Section 8. AMENDMENTS. Except as otherwise required by law, these By-
Laws may at any time be amended by vote of the stockholders, provided that
notice of the substance of the proposed amendment is stated in the notice
of the meeting, or may be amended by vote of a majority of the Directors
then in office, except that no amendment may be made by the Directors
which alters the provisions of these By-Laws with respect to removal of
Directors or the election of committees by Directors and delegation of
powers thereto, or amendment of these By-Laws. No change in the date of
the annual meeting may be made within sixty days before the date fixed in
these By-Laws. Not later than the time of giving notice of the meeting of
stockholders next following the making, amending or repealing by the
Directors of any By-Law, notice thereof stating the substance of such
change shall be given to all stockholders entitled to vote on amending the
By-Laws.
ARTICLE VII
Repayment of Disallowed Expenses
Any payments made to an officer of the corporation such as a salary,
commission, bonus, interest, or rent, or entertainment expense incurred by
him, which shall be disallowed in whole or in part as a deductible expense
by the Internal Revenue Service, shall be reimbursed by such officer to
the corporation to the full extent of such disallowance. It shall be the
duty of the Directors, as a Board, to enforce payment of each amount
disallowed. In lieu of payment by the officer, subject to determination
of the Directors, proportionate amounts may be withheld from his future
compensation payments until the amount owed to the corporation has been
recovered.
ARTICLE VII
Control Share Acquisitions Statute
The provisions of Chapter 110D of the Massachusetts General Laws shall not
apply to control share acquisitions (as defined in said Chapter 110D) of
the corporation.
EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
AMONG
CTC COMMUNICATIONS CORP.
AND
EACH OF THE PURCHASERS NAMED IN SCHEDULE 2.1
April 10, 1998
TABLE OF CONTENTS
ARTICLE I DEFINITIONS
ARTICLE II SALE AND PURCHASE OF PURCHASED SECURITIES
SECTION 2.1. The Series A Preferred Stock and Warrants
SECTION 2.2. Sale and Purchase of Purchased Securities
SECTION 2.3. Closing
SECTION 2.4. Use of Proceeds
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.1. Organization and Good Standing
SECTION 3.2. Authorization; Noncontravention
SECTION 3.3. Enforceability
SECTION 3.4. Capitalization
SECTION 3.5. Subsidiaries
SECTION 3.6. Required Filings and Consents
SECTION 3.7. Undisclosed Liabilities
SECTION 3.8. Absence of Certain Developments
SECTION 3.9. Interested Party Transactions
SECTION 3.10. Tax Returns
SECTION 3.11. Title to Assets
SECTION 3.12. Material Contracts and Obligations
SECTION 3.13. Real and Personal Property - Leased
SECTION 3.14. Necessary Licenses and Permits
SECTION 3.15. Compliance with Law
SECTION 3.16 Litigation
SECTION 3.17. No Material Adverse Changes
SECTION 3.18. Employee Benefit Plans
SECTION 3.19. Withholding, Contracts, Labor Relations
SECTION 3.20. Governmental Regulations
SECTION 3.21. Corporate Documents, Books and Records
SECTION 3.22. Disclosure
SECTION 3.23. Certain Agreements of Officers and Employees
SECTION 3.24. Registration Rights
SECTION 3.25. Compliance with Securities Laws
ARTICLE IV PURCHASERS' REPRESENTATIONS
SECTION 4.1. Investment Intent
SECTION 4.2. Authorization
SECTION 4.3. Enforceability
SECTION 4.4. Experience of Purchaser
SECTION 4.5. Ability of Purchaser to Bear Risk of Investment
SECTION 4.6. Access to Information
SECTION 4.7. Reliance
SECTION 4.8. Transfer Restriction
ARTICLE V CONDITIONS TO EACH PURCHASER'S OBLIGATIONS TO PURCHASE
SECTION 5.1. Related Agreements
SECTION 5.2. Charter Documents; Good Standing Certificates
SECTION 5.3. Proof of Corporate Action
SECTION 5.4. Incumbency Certificate
SECTION 5.5. Legal Opinion
SECTION 5.6. Representations and Warranties; Officer's Certificate
SECTION 5.7. Legality; Governmental and Other Authorizations
SECTION 5.8. Payment of Certain Fees and Disbursements
SECTION 5.9. Charter Amendment
SECTION 5.10. General
ARTICLE VI CONDITIONS TO THE COMPANY'S OBLIGATIONS
SECTION 6.1. Representations
SECTION 6.2. Related Agreements
SECTION 6.3. Legality; Governmental and Other Authorizations
SECTION 6.4. General
ARTICLE VII COVENANTS APPLICABLE FOLLOWING THE CLOSING
SECTION 7.1. Financial Statements
SECTION 7.2. Additional Information
SECTION 7.3. Annual Budget
SECTION 7.4. SEC Filings
SECTION 7.5. Inspection
SECTION 7.6. Independent Director
ARTICLE VIII PREEMPTIVE RIGHTS
SECTION 8.1 Right to Purchase
ARTICLE IX ASSIGNMENT OF PURCHASED SECURITIES
ARTICLE X EXPENSES, INDEMNITY
SECTION 10.1 Expenses
SECTION 10.2 Indemnification
ARTICLE XI NOTICES
ARTICLE XII SURVIVAL AND TERMINATION OF COVENANTS, AGREEMENTS,
REPRESENTATIONS AND WARRANTIES
ARTICLE XIII AMENDMENTS AND WAIVERS
ARTICLE XIV CHOICE OF LAW; SUBMISSION TO JURISDICTION AND WAIVER OF
JURY TRIAL; DISPUTE RESOLUTION
SECTION 14.1. Governing Law
SECTION 14.2. Consent To the Exclusive Jurisdiction Of the Courts
of Massachusetts
SECTION 14.3. Waiver Of Jury Trial
SECTION 14.4. Equitable Remedies
SECTION 14.5 Arbitration
ARTICLE XV ENTIRE AGREEMENT; COUNTERPARTS; SECTION HEADINGS
LIST OF EXHIBITS
EXHIBIT A Form of Warrant
EXHIBIT B Certificate of Designation
EXHIBIT C Form of Registration Rights Agreement
EXHIBIT D Forms of Opinion of the Company's Counsel
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement") as of April 10, 1998 among
CTC COMMUNICATIONS CORP., a Massachusetts corporation (the "Company"), and
each of the purchasers named in the attached Schedule 2.1, (individually a
"Purchaser" and collectively the "Purchasers").
WHEREAS, the Company wishes to issue and sell to the Purchasers an
aggregate of 666,666 shares of the authorized but unissued Series A
Convertible Preferred Stock, $1.00 par value, of the Company (the "Series
A Preferred Stock" ) and the Company's Warrants for the purchase of the
aggregate of 133,333 shares of the Company's Common Stock, $.01 par value
(the "Warrants"). The Series A Preferred Stock and the Warrants are
collectively referred to herein as the "Purchased Securities"; and
WHEREAS, the Purchasers, severally, wish to purchase the Purchased
Securities on the terms and subject to the conditions set forth in this
Agreement;
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained in this Agreement, the parties agree as follows:
ARTICLE I
DEFINITIONS
For all purposes of this Agreement the following terms shall have the
meanings set forth in this Article I:
"AAA" has the meaning specified in Article XIV of this Agreement.
"AAA Rules" has the meaning specified in Article XIV of this Agreement.
"Affiliate" shall mean with respect to any Person, any other Person that
would be considered to be an affiliate of such Person under Rule 144(a)
under the Securities Act of 1933, as amended, as in effect on April 10,
1998, if such Person were issuing securities.
"Agreement" has the meaning specified in the introduction to this
Agreement.
"Blue Sky Filings" has the meaning specified in Section 3.6 of this
Agreement.
"Capital Stock" means, as to any Person that is a corporation, the
authorized shares of such Person's capital stock, including all classes of
common, preferred, voting and nonvoting capital stock, and, as to any
Person that is not a corporation or an individual, the ownership interests
in such Person, including, without limitation, the right to share in
profits and losses, the right to receive distributions of cash and
property, and the right to receive allocations of items of income, gain,
loss, deduction and credit and similar items from such Person, whether or
not such interests include voting or similar rights entitling the holder
thereof to exercise control over such Person.
"Certificate of Designation" has the meaning specified in Section 2.1 of
this Agreement.
"Charter" means the articles or certificate of incorporation, statute,
constitution, joint venture or partnership agreement or articles or other
organizational document of any Person other than an individual, each as
from time to time amended or modified.
"Closing" has the meaning specified in Section 2.3 of this Agreement.
"Closing Date" has the meaning specified in Section 2.3 of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" has the meaning specified in Section 3.4 of this Agreement.
"Common Stock Deemed Outstanding" has the meaning specified in the
Certificate of Designation.
"Company" has the meaning specified in the introduction to this Agreement.
"Conversion Price" means, initially, nine dollars ($9.00) and, thereafter,
as adjusted pursuant to the Certificate of Designation.
"Convertible Securities" has the meaning specified in the Certificate of
Designation.
"Damages" has the meaning specified in Section 10.2 of this Agreement.
"Dispute" has the meaning specified in Section 14.5 of this Agreement.
"Distribution" means (a) the declaration or payment of any dividend of
cash or property in respect of any shares of any class of the Company's or
any of its Subsidiaries' Capital Stock or other equity securities; (b) the
purchase, redemption or other retirement of any shares of any class of the
Company's or any of its Subsidiaries' Capital Stock or other equity
securities, directly or indirectly or otherwise; or (c) any other
distribution on or in respect of any shares of any class of the Company's
or any of its Subsidiaries' Capital Stock or other equity securities.
"Employee Benefit Plan" means any employee benefit plan within the meaning
of Sec. 3(3) of ERISA maintained or contributed to by the Company or any
ERISA Affiliate, other than a Multiemployer Plan.
"ERISA" means the Employee Retirement Income Security Act of 1974, any
successor statute of similar import, and the rules and regulations
thereunder, collectively, and from time to time amended and in effect.
"ERISA Affiliate" means any Person which is treated as a single employer
with the Company under Sec. 414 of the Code.
"Exchange Act" means the Securities and Exchange Act of 1934, as amended,
or any successor federal statute, and the rules and regulations of the
Securities and Exchange Commission thereunder, all as the same shall be in
effect at the time.
"Excluded Securities" has the meaning specified in the Certificate of
Designation.
"Family Member" means, as applied to any individual, such individual's
spouse, child (including a stepchild or an adopted child) grandchild,
parent, brother or sister thereof or any present or former spouse of any
of the foregoing, and each trust created for the exclusive benefit of one
or more of them.
"Foreign Official" has the meaning specified in Section 3.15(b) of this
Agreement.
"Generally accepted accounting principles or "GAAP" means accounting
principles which are (a) consistent with the principles promulgated or
adopted by the Financial Accounting Standards Board and its predecessors
and other recognized principle setting bodies, in effect from time to
time, and (b) such that a certified public accountant would, insofar as
the use of accounting principles is pertinent, be in a position to base an
opinion as to financial statements in which such principles have been
properly applied.
"Guaranteed Pension Plan" means any employee pension benefit plan within
the meaning of Sec. 3(2) of ERISA maintained or contributed to by the
Company or any ERISA Affiliate, the benefits of which are guaranteed on
termination in full or in part by the PBGC pursuant to Title IV of ERISA,
other than a Multiemployer Plan.
"Indebtedness" means all obligations, contingent and otherwise, which in
accordance with GAAP should be classified on the obligor's balance sheet
as liabilities, or to which reference should be made by footnotes thereto,
including without limitation, in any event and whether or not so
classified: (i) all debt and similar monetary obligations, whether direct
or indirect; (ii) all liabilities secured by any mortgage, pledge,
security interest, lien, charge or other encumbrance existing on property
owned or acquired subject thereto, whether or not the liability secured
thereby shall have been assumed; (iii) all guaranties, endorsements and
other contingent obligations whether direct or indirect in respect of
Indebtedness or performance of others, including any obligation to supply
funds to or in any manner to invest in, directly or indirectly, the
debtor, to purchase Indebtedness, or to assure the owner of Indebtedness
against loss, through an agreement to purchase goods, supplies or services
for the purpose of enabling the debtor to make payment of the Indebtedness
held by such owner or otherwise, and (iv) obligations to reimburse issuers
of any letters of credit.
"Indemnitees" has the meaning specified in Section 10.2 of this Agreement.
"Lien" means (a) any encumbrance, mortgage, pledge, lien, charge or other
security interest of any kind upon any property or assets of any
character, or upon the income or profits therefrom; (b) any acquisition of
or agreement to have an option to acquire any property or assets upon
conditional sale or other title retention agreement, device or arrangement
(including a capitalized lease); or (c) any sale, assignment, pledge or
other transfer for security of any accounts, general intangibles or
chattel paper, with or without recourse, provided, however, that the term
"Lien" shall not include (i) statutory liens for Taxes to the extent that
the payment thereof is not in arrears or otherwise due, (ii) encumbrances
in the nature of zoning restrictions, easements, rights or restrictions of
record on the uses of real property if the same do not detract from the
value of the property encumbered thereby or impair the use of such
property in the business of the Company as currently conducted or proposed
to be conducted, (iii) statutory or common law liens to secure landlords,
lessors or renters under leases or rental agreements confined to the
premises rented to the extent that no payment or performance under any
such lease or rental agreement is in arrears or is otherwise due, (iv)
deposits or pledges made in connection with, or to secure payment of,
worker's compensation, unemployment insurance, old age pension programs
mandated under applicable laws or other social security regulations and
(v) statutory or common law liens in favor of carriers, warehousemen,
mechanics and materialmen, statutory or common law liens to secure claims
for labor, materials or supplies and other like liens, which secure
obligations to the extent that payment thereof is not in arrears or
otherwise due in the case of (i) - (v), which have been incurred in the
ordinary course of business.
"Material Adverse Effect" has the meaning specified in Section 3.17 of
this Agreement.
"Multiemployer Plan" means a multiemployer plan within the meaning of
Section 3(37) of ERISA.
"New Securities" shall mean (a) any Capital Stock of the Company whether
now authorized or not, (b) any rights, options, or warrants to purchase
said shares, and (c) securities of any type whatsoever that are, or may
become, convertible into, exercisable, exchangeable, or carrying rights to
subscribe for any equity securities of the Company.
"Notice of Proposed Issuance" has the meaning specified in Section 8.1(a)
of this Agreement.
"Offered New Shares" has the meaning specified in Section 8.1(a) of this
Agreement.
"Permits" has the meaning specified in Section 3.14 of this Agreement.
"Per Share Price" has the meaning specified in Section 2.2(a) of this
Agreement.
"Person" means an individual, partnership, corporation, association,
trust, joint venture, unincorporated organization, and any government,
governmental department or agency or political subdivision thereof.
"Preferred Stock Derivatives" has the meaning set forth in the Certificate
of Designation.
"Purchased Securities" has the meaning specified in the Recitals to this
Agreement.
"Purchaser(s)" means the purchasers set forth on Schedule 2.1.
"Registrable Securities" means those shares of Common Stock constituting
Preferred Stock Derivatives or issued upon conversion or exercise of the
Purchased Securities and any Preferred Stock Derivatives and which have
not been sold to third parties pursuant to a registered public offering or
pursuant to Rule 144(k) under the Securities Act.
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of the date hereof, as the same shall be amended from time to
time, among the Company and the Purchasers in the form of Exhibit C
attached hereto.
"Related Agreements" means the Certificate of Designation and the
Registration Rights Agreement.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Securities
and Exchange Commission thereunder, all as the same shall be in effect at
the time.
"Security Documents" has the meaning specified in Section 3.25(b) of this
Agreement.
"Series A Preferred Stock" has the meaning specified in the Recitals to
this Agreement.
"Spectrum" means Spectrum Equity Investors II, L.P.
"Subsidiary" means any Person which the Company now or hereafter shall at
the time own, directly or indirectly through a subsidiary, at least a
majority of the outstanding capital stock (or other beneficial interest)
entitled to vote generally; and the term "Subsidiaries" shall mean all of
such Persons collectively.
"Taxes" means (A) all net income, gross income, gross receipts, sales,
use, ad valorem, transfer, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium,
property or windfall profits taxes, or other taxes of any kind whatsoever,
together with any interest and any penalties, additions to tax or
additional amounts imposed by any taxing authority (domestic or foreign)
upon the Company with respect to all periods or portions thereof ending on
or before the date hereof and/or (B) any liability of the Company for the
payment of any amounts of the type described in the immediately preceding
clause (A) as a result of being a member of an affiliated or combined
group.
"Third Party Claims" has the meaning specified in Section 10.2 of this
Agreement.
"Twenty Day Period" has the meaning specified in Section 8.1(b) of this
Agreement.
"Voting Agreement" means the Voting Agreement dated as of the date hereof
among Spectrum, Robert J. Fabbricatore and the other Stockholders named
therein.
"Warrants" has the meaning specified in the Recitals to this Agreement.
ARTICLE II
SALE AND PURCHASE OF PURCHASED SECURITIES
SECTION 2.1. The Series A Preferred Stock and Warrants. The Company has
duly authorized the issuance and sale to the Purchasers of (a) an
aggregate of 666,666 shares of its authorized Series A Convertible
Preferred Stock and (b) Warrants in the form of Exhibit A attached hereto
for the purchase of an aggregate of 133,333 shares of the Company's Common
Stock. The designations, rights and preferences and other terms and
conditions relating to the Series A Preferred Stock are as set forth in
the Certificate of Designation in the form attached hereto as Exhibit B
(the "Certificate of Designation").
SECTION 2.2. Sale and Purchase of Purchased Securities.
(a) Series A Preferred Stock. Subject to all of the terms and
conditions hereof and in reliance on the representations and warranties
set forth or referred to herein, at the Closing the Company agrees to
issue and sell to each Purchaser, at a price of $18.00 per share (the "Per
Share Price"), and each Purchaser hereby agrees to purchase at the Per
Share Price, that number of shares of Series A Preferred Stock set forth
opposite the name of such Purchaser under the heading "Number of Shares of
Series A Preferred Stock to be Purchased" on Schedule 2.1.
(b) Warrants. Subject to the terms and conditions hereof and in
reliance on the representations and warranties set forth or referenced to
herein, at the Closing the Company agrees to issue to each Purchaser, and
each Purchaser hereby agrees to purchase, at a price of $.01 per share of
Common Stock covered thereby, Warrants to purchase the number of shares of
Common Stock set forth opposite such Purchaser's name under the heading
"Number of Warrants to be Issued" on Schedule 2.1. The Warrants shall
have a term of five (5) years from the Closing and shall be exercisable at
a price of $9.00 per share.
SECTION 2.3. Closing. The closing of the purchase and sale of the
Purchased Securities (the "Closing") will take place at the offices of
Edwards & Angell, 101 Federal Street, Boston, MA 02110 at 10:00 a.m. on
April 10, 1998, or at such other place, time and date as the parties
hereto may agree upon (the "Closing Date"). At the Closing, the Company
will deliver to the Purchasers the Purchased Securities against payment of
the purchase price therefor as provided in Section 2.2 for each Purchased
Security in immediately available funds on or before the Closing Date. The
Purchased Securities will be issued on the Closing Date, and registered to
each such Purchaser in the Company's records, in the amounts designated on
Schedule 2.1 hereto.
SECTION 2.4. Use of Proceeds. Proceeds from the sale of the Purchased
Securities hereunder shall be used as determined from time to time by the
Company's Board of Directors.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce each of the Purchasers to enter into this Agreement and
to purchase the Purchased Securities, the Company hereby represents and
warrants that:
SECTION 3.1. Organization and Good Standing. The Company is duly
organized, validly existing and in good standing in its jurisdiction of
incorporation and is duly qualified as a foreign corporation and
authorized to do business in each jurisdiction listed in Schedule 3.1,
which such jurisdictions are the only jurisdictions in which the nature of
its business or property makes such qualification necessary and where the
failure to so qualify would not have a Material Adverse Effect. The
Company has the corporate power to own its properties and to carry on its
business as now conducted and as proposed to be conducted.
SECTION 3.2. Authorization; Noncontravention. The execution, delivery
and performance by the Company of this Agreement and of each Related
Agreement, and the issuance and sale by the Company of the Purchased
Securities hereunder: (a) are within the Company's corporate power and
authority; (b) have been duly authorized by all necessary corporate,
stockholder and other proceedings, as the case may be; and (c) do not and
will not result in the creation of any Lien upon any of the Company's
property or conflict with or result in any breach of any provision of the
Company's Charter or by-laws or any law, regulation, order, judgment,
writ, injunction, license, permit, agreement or instrument to which the
Company is subject.
SECTION 3.3. Enforceability. The execution and delivery by the Company
of this Agreement and of each Related Agreement, and the issuance and sale
by the Company of the Purchased Securities hereunder, will result in
legally binding obligations of the Company, enforceable against it in
accordance with the respective terms and provisions hereof and thereof (i)
except as may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to enforcement of creditors' rights
generally and (ii) subject to general principles of equity.
SECTION 3.4. Capitalization. (a) Capital Stock. The Company's
authorized capital stock consists solely of 25,000,000 shares of common
stock, $.01 par value per share (the "Common Stock") and 1,000,000 shares
of undesignated preferred stock, $1.00 par value per share. Of such
authorized shares, immediately prior to the execution of this Agreement,
9,974,683 shares of Common Stock were issued and outstanding and no shares
of preferred stock were issued and outstanding. Prior to the Closing, the
amendment to the Charter reflected in the Certificate of Designation in
the form attached as Exhibit A shall be duly filed with the Massachusetts
Secretary of State. All of the issued and outstanding shares of the
Company's Capital Stock have been duly authorized and validly issued, are
fully paid and non-assessable and were issued in compliance with all
applicable state and Federal securities laws. Upon the issuance and sale
to the Purchasers of the Purchased Securities, the Purchasers, in the
aggregate, will own approximately 10.314% of the Company's Common Stock
Deemed Outstanding. Schedule 3.4 sets forth a complete and correct
schedule of the number of shares of issued and outstanding Capital Stock
and of any subscription, warrant, option, convertible security or other
options or rights (contingent or otherwise) to purchase shares of Capital
Stock, or securities convertible into shares of Capital Stock of the
Company held by Robert J. Fabbricatore or any of his Affiliates
immediately prior to the Closing. Schedule 3.4 also sets forth the name
of the holder and vesting schedule for each outstanding option issued
pursuant to the Company's 1993 stock option plan and 1996 stock option
plan. The Company is not aware of any purchase of securities of the
Company or other circumstances existing as of the date hereof that would
require the making of a filing pursuant to Rule 13d-1 under the Securities
Exchange Act of 1934, as amended and as to which such a filing has not yet
been made.
(b) Purchased Securities. The Purchased Securities which are
being issued hereunder have been duly and validly authorized and, when
issued and delivered in accordance with the terms hereof for the
consideration provided herein, will be validly issued, fully paid and
nonassessable and will not be subject to any Lien. On or prior to
Closing, the Company will have authorized and reserved, and covenants to
continue to reserve, a sufficient number of shares of Common Stock for
issuance upon the exercise of the Warrants. The shares of Common Stock
that will be issued upon exercise of the Warrants and against payment
therefor in accordance with the terms of the Warrants, will be validly
issued, fully paid and nonassessable and will not be subject to any Lien,
subject to applicable restrictions on transfer under Federal and state
securities laws. No further approval or authorization of the stockholders
or the directors of the Company or any successor or other Person is or
will be required for the issuance of the Common Stock upon exercise of the
Warrants.
(c) Options, Etc. Except as set forth on Schedule 3.4(c) and
except for the Purchased Securities to be issued in accordance with the
terms hereof: (a) The Company does not have any subscription, warrant,
option, convertible security or other options or rights (contingent or
otherwise) to purchase shares of Capital Stock, or securities convertible
into shares of Capital Stock, authorized, issued or outstanding, nor is
the Company obligated in any manner to issue shares of its Capital Stock
or securities convertible into or evidencing any right to acquire shares
of its Capital Stock, or to distribute to holders of any of its Capital
Stock any evidence of indebtedness or assets; (b) no Person has any
preemptive right, right of first refusal or similar right to acquire
additional shares of Capital Stock of the Company in connection with the
sale and purchase of the Purchased Securities pursuant to this Agreement
or otherwise; (c) the Company does not have any obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its Capital
Stock or any interests therein, or to pay any dividend or make any other
distribution in respect thereto; and (d) to the Company's knowledge, there
are no voting trusts, stockholders' agreements, or proxies relating to the
Capital Stock.
SECTION 3.5. Subsidiaries. The Company does not have any Subsidiaries.
SECTION 3.6. Required Filings and Consents. Except as set forth in
Schedule 3.6 hereto, the execution, delivery and performance by the
Company of this Agreement and of each Related Agreement, and the issuance
and sale of the Purchased Securities hereunder and the issuance of any
Common Stock upon conversion of any of the Purchased Securities, do not
and will not require the approval or consent of, or any filing with, any
governmental authority or agency or any other Person other than a Notice
of Sale of Securities Pursuant to Regulation D, Section 4(2), and/or
Uniform Limited Offering Exemption on Form D and any required state
securities law filings relating to the issuance and sale of the Purchased
Securities which have been filed or are permitted to be filed after the
date of such issuance and sale (the "Blue Sky Filings").
SECTION 3.7. Undisclosed Liabilities.
The Company does not have any known liabilities or obligations of any
nature, whether absolute, accrued, contingent or otherwise, which are not
in the aggregate reflected or reserved against in the December 31, 1997
balance sheet contained in the Company's report on Form 10-Q for the
quarter ended December 31, 1997, except for (i) liabilities disclosed in
Schedule 3.7 or not required to be disclosed because of a materiality
qualifier in the representations and warranties and (ii) liabilities that
may have arisen in the ordinary and usual course of business and
consistent with past practice and that individually or in the aggregate
could not reasonably be expected to have a Material Adverse Effect.
SECTION 3.8. Absence of Certain Developments. Except for entering into
this Agreement and except as disclosed on Schedule 3.8(a) hereof or in the
SEC Documents, since March 31, 1997:
(a) The Company has conducted its business in the ordinary course
consistent with past practice and has not:
(i) declared, set aside, paid to a reserve fund or made any
payment or distribution of cash or other property to its
stockholders or equity holders with respect to any class of its
Capital Stock or other equity interest or purchased or redeemed any
shares of its Capital Stock or other equity interests;
(ii) suffered any substantial loss to any of its material
assets;
(iii) made any increases in the base compensation, bonuses,
paid vacation time allowed or fringe benefits for its directors,
officers, partners, employees or consultants, except for normal
periodic increases in base compensation for employees;
(iv) suffered damage, destruction or other casualty loss, or
forfeiture of, any property or assets, whether or not covered by
insurance, which may reasonably be expected to have a Material
Adverse Effect;
(v) paid any bonuses, deferred or otherwise, or deferred any
compensation to any of its directors, officers, partners or
employees;
(vi) made any material change in accounting procedures,
policies or practices;
(vii) entered into any agreement or arrangement outside of the
ordinary course of business granting any rights to purchase or lease
any of its assets, properties or rights or requiring the consent of
any Person to the transfer, assignment or lease of any such assets,
properties or rights; or
(viii) entered into any agreement or understanding to do
any of the foregoing.
(b) Except as disclosed on Schedule 3.8(b) or in the SEC Documents, other
than in the ordinary course of business consistent with past practice,
since March 31, 1997 the Company has not:
(i) sold, leased, subleased, assigned or transferred any of
its tangible or intangible properties or assets, or canceled, waived
or compromised any debts or claims;
(ii) entered into any other material transaction, or any
amendment of any contract, lease, agreement or license which is
material to its business; or
(iii) entered into any agreement or understanding to do any of
the foregoing.
SECTION 3.9. Interested Party Transactions. Except as set forth in
Schedule 3.9 or disclosed in the Company SEC Reports under an appropriate
heading, since March 31, 1997, no event has occurred that would be
required to be reported by the Company as a Certain Relationship or
Related Transaction, pursuant to Item 404 of Regulation S-K promulgated by
the SEC.
SECTION 3.10. Tax Returns. The Company has filed all Tax returns and
reports which are required to be filed with any foreign, federal, state or
local governmental authority or agency and has paid all Taxes which have
become due, and made adequate provision for the payment of all Taxes that
will become due, under applicable foreign, federal, state or local
governmental law or regulations with respect to the periods in respect of
which such returns and reports were filed, and all assessments of Taxes.
To the Company's knowledge, there have been no additional assessments
since the date of such returns and reports, and there will be no
additional assessments for which adequate reserves appearing on the
Balance Sheet have not been established. To the Company's knowledge, the
Company has made adequate provisions for all current Taxes.
SECTION 3.11. Title to Assets. Except as disclosed on Schedule 3.11 or
in the SEC Documents, the Company owns all of its assets, and has good and
marketable title with respect thereto free and clear of all Liens.
SECTION 3.12. Material Contracts and Obligations.
(a) The SEC Documents, as supplemented by Schedule 3.12(a), include each
agreement, contract or other instrument (including all amendments thereto)
to which the Company is a party or by which it or any of its assets are
bound and which would be required pursuant to the Exchange Act and the
rules and regulations thereunder to be filed as an exhibit to an Annual
Report on Form 10-K, a Quarterly Report on Form 10-Q or a Current Report
on Form 8-K. The Company has made available to the Purchasers on or prior
to the date hereof true, correct and complete copies of each such
agreement, contract, instrument and amendment.
(b) Except as disclosed in Schedule 3.12(b), and except as disclosed in
the SEC Documents, (i) the Company has not breached, is not in default
under, or has not received written notice of any breach of or default
under, any of the agreements, contracts or other instruments referred to
in Schedule 3.12(a), (ii) to the best knowledge of the Company, no other
party to any of the agreements, contracts or other instrument referred to
in Schedule 3.12(a) has breached or is in default of any of its
obligations thereunder, and (iii) to the knowledge of the Company, each of
the agreements, contracts and other instruments referred to in Schedule
3.12(a) is in full force and effect.
SECTION 3.13. Real and Personal Property - Leased. The Company has the
right to quiet enjoyment of all real property in which it holds a
leasehold interest for the full term thereof, including all renewal terms
of the lease or similar agreement relating thereto.
SECTION 3.14. Necessary Licenses and Permits. Except as set forth on
Schedule 3.14 and except as disclosed in the SEC Documents, the Company
has all licenses, permits, consents, concessions and other authorizations
of governmental, regulatory or administrative agencies or authorities,
whether foreign, federal, state, or local (collectively "Permits"),
required to own and lease its properties and assets and to conduct its
business as now conducted except where the failure to have such Permits
would not have a Material Adverse Effect. Except as disclosed in the SEC
Documents, and except to the extent the failure to be in compliance would
not have a Material Adverse Effect, the Company is in compliance with the
terms of the Permits.
SECTION 3.15. Compliance with Law.
(a) Except as may be set forth on Schedule 3.15(a) hereto or in the SEC
Documents, the Company is not in default under, or in violation of, or has
violated (and not cured) any law (including, without limitation, the
Communications Act of 1934, as amended, and Telecommunications Act of
1996, as amended, laws relating to the issuance or sale of securities,
antitrust, zoning and building codes and ordinances, occupational safety,
the protection of the environment, transportation, storage or disposal of
hazardous waste, anti-pollution and air and water quality laws),
regulations, orders or any licenses, franchises, permits, authorizations
or concessions granted by, or any judgment, decree, writ, injunction or
order of, any governmental or regulatory authority, applicable to its
business or any of its properties or assets, except where such defaults
and violations would not, in the aggregate, have a Material Adverse
Effect. The Company has not received any notification alleging any
violations of any of the foregoing within the last five years with respect
to which adequate corrective action has not been taken.
(b) To the Company's knowledge, no present or former officer, director,
employee or agent of the Company has in order to assist the Company in
obtaining or retaining any License offered, paid, promised to pay or
authorized the payment of any money, or offered, given, promised to give,
or authorized the giving of anything of value to (i) any officer or
employee of any government or any department, agency, instrumentality
thereof, or any person acting in an official capacity for or on behalf of
any such government or department, agency or instrumentality (such an
officer or employee being referred to as a "foreign official"), (ii) any
foreign political party or official thereof or any candidate for foreign
political office, or (iii) any person, while knowing that all or a portion
of such money or thing of value will be offered, given, or promised,
directly or indirectly, to any foreign official, to any foreign political
party or official thereof, or to any candidate for foreign political
office, in each case, for purposes of the following:
(A)(i) illegally or corruptly influencing any act or decision
of any such foreign official, political party or official thereof,
or candidate in such person's official capacity, or (ii) inducing
such foreign official, political party or official thereof, or
candidate to do or omit to do any act in violation of the lawful
duty of such person, or
(B) illegally or corruptly inducing such foreign official,
political party or official thereof, or candidate to use such
person's influence with a foreign government or instrumentality
thereof to affect or influence any act or decision of such
government or instrumentality.
SECTION 3.16. Litigation. Except as set forth on Schedule 3.16 hereto
and except as disclosed in the SEC Documents, there is no suit, claim,
action, proceeding or investigation pending or, to the Company's
knowledge, threatened against the Company or any of its respective assets
or properties at law or in equity or before any governmental authority or
instrumentality or before any arbitrator of any kind or, to the Company's
knowledge, against any officer of the Company and relating to the Company,
nor to the Company's knowledge, has there occurred any event or does there
exist any condition on the basis of which any such litigation, proceeding
or investigation might properly be instituted. Except as set forth on
Schedule 3.16 hereto or as disclosed in the SEC Documents, neither the
Company nor to the Company's knowledge, any officer of the Company has
been a party to any such suit, claim, action, proceeding or investigation
during the past two years involving the Company's business, assets or
properties, nor has any such suit, claim, action, proceeding or
investigation been threatened by or against the Company.
SECTION 3.17. No Material Adverse Changes. Except as set forth on
Schedule 3.17 hereto or in the SEC Documents, since March 31, 1997 there
has occurred no material adverse change in the business, assets,
properties (tangible and intangible), operations, or financial condition
of the Company, whether or not in the ordinary course of business, whether
separately or in the aggregate with other occurrences or developments (a
"Material Adverse Effect"), and the Company has no knowledge of any
occurrence or development which might reasonably be expected to result in
any such Material Adverse Effect.
SECTION 3.18. Employee Benefit Plans. Except as described on Schedule
3.18, the Company does not maintain or operate any Employee Benefit Plan
nor has any such Plan been maintained or operated during the past three
years. The Company does not maintain or contribute to any Guaranteed
Pension Plan or Multiemployer Plan. With respect to each Employee Benefit
Plan listed on
Schedule 3.18, to the extent applicable,
(a) Each such Benefit Plan has been maintained and operated in all
material respects in compliance with its terms and with all applicable
provisions of the Employee Retirement Income Security Act of 1974, as
amended("ERISA"), the Code and all applicable regulations, rulings and
other authority issued thereunder;
(b) All contributions required by law to have been made under each such
Benefit Plan (without regard to any waivers granted under Section 412 of
the Code) to any fund or trust established thereunder or in connection
therewith have been made by the due date thereof;
(c) Each such Benefit Plan intended to qualify under Section 401(a) of
the Code is the subject of a favorable unrevoked determination letter
issued by the Internal Revenue Service as to its qualified status under
the Code, which determination letter may still be relied upon as to such
tax qualified status, and no circumstances have occurred that would
adversely affect qualified status of any such Benefit Plan;
(d) No Benefit Plan is subject to Title IV of ERISA;
(e) None of such Benefit Plans that are "employee welfare benefit plans"
as defined in Section 3(1) of ERISA provides for continuing benefits or
coverage for any participant or beneficiary of a participant after such
participant's termination of employment, except as required by applicable
law, including section 4980B of the Code or Section 601 of ERISA; and
(f) Neither the Company nor any trade or business (whether or not
incorporated) under common control with the Company within the meaning of
Section 4001 of ERISA has, or at any time has had, any obligation to
contribute to any "multiemployer plan" as defined in Section 3(37) of
ERISA.
SECTION 3.19. Withholding, Contracts, Labor Relations. The Company has
withheld all amounts required by law or agreement to be withheld by it
from the wages, salaries and other payments to its employees and is not
liable for any arrears of wages or any taxes or penalties for failure to
comply with any of the foregoing. Except as set forth in Schedule 3.19,
there are no pending, or to the knowledge of the Company, threatened or
anticipated (a) employment discrimination charges or complaints against or
involving the Company before any federal, state, or local board,
department, commission or agency, (b) unfair labor practice charges or
complaints, disputes or grievances affecting the Company, (c) union
representation petitions respecting the employees of the Company, (d)
efforts being made to organize any of the employees of the Company or (e)
strikes, slow downs, work stoppages, or lockouts or threats thereof
affecting the Company.
SECTION 3.20. Governmental Regulations. The Company is not a "holding
company", or a "subsidiary company" of a "holding company" or an
"affiliate" of a "holding company", as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended; nor is the
Company an "investment company", or an "affiliated person" or a "principal
underwriter" of an "investment company", as such terms are defined in the
Investment Company Act of 1940, as amended. The Company is not now, nor
has it been within the past five years, a "United States real property
holding corporation" as defined in Section 897 of the Code.
SECTION 3.21. Corporate Documents, Books and Records. Complete and
correct copies of the Charter and by-laws, and of all amendments thereto,
of the Company have been previously delivered or made available to each of
the Purchasers, and, other than the filing of the Certificate of
Designation, no changes in said documents will be made on or before the
Closing Date other than as disclosed to, and concurred to in writing by,
each of the Purchasers.
SECTION 3.22. Disclosure. No representation or warranty made in this
Agreement, considered as a whole, contains any untrue statement of
material fact or omits to state a material fact necessary in order to make
the statements contained herein or therein, in light of the circumstances
in which they were made, not misleading.
SECTION 3.23. Certain Agreements of Officers and Employees.
(a) To the Company's best knowledge and belief, no officer or employee of
the Company is, or is now expected to be, in violation of any term of any
employment contract, patent disclosure agreement, proprietary information
agreement, noncompetition agreement, nonsolicitation agreement, or any
other contract or agreement or restrictive covenant relating to the right
of any such officer or employee to be an employee, to be employed by the
Company which violation could be reasonably expected to have a Material
Adverse Effect upon the Company.
(b) To the best knowledge of the Company, no officer of the Company, nor
any key employee of the Company whose termination, either individually or
in the aggregate, would have a Material Adverse Effect on the Company, has
any present intention of terminating his or her employment with the
Company.
SECTION 3.24. Registration Rights. Except as set forth in Schedule 3.24,
and except for the rights granted to the Purchasers pursuant to the
Registration Rights Agreement of even date herewith, no Person has demand
or other registration rights to cause the Company to file any registration
statement under the Securities Act relating to the securities of the
Company or any right to participate in any such registration statement.
SECTION 3.25. Compliance with Securities Laws. (a) The Company has
complied and will comply with all applicable United States Federal and
state securities laws in connection with the offer, issuance and sale of
the Purchased Securities. Assuming that the Purchasers' representations
and warranties contained in Article IV are true and correct, the Company
has not, either directly or through any agent, offered any securities to,
or otherwise approached, negotiated or communicated in respect of any
securities with, any Person so as thereby to require that the offer or
sale of the Purchased Securities be registered pursuant to the provisions
of Section 5 of the Securities Act. Assuming that the Purchasers'
representations and warranties contained in Article IV are true and
correct, the offer, sale and issuance of the Purchased Securities and the
Warrants (and of the Common Stock issuable upon the exercise of the
Warrants) in conformity with the terms of this Agreement are exempt from
the registration requirements of Section 5 of the Securities Act and all
applicable state securities laws (or are otherwise registered or qualified
under applicable state securities law).
(b) The Company has filed all forms, reports and documents
required to be filed with the SEC prior to the date hereof, and has
heretofore delivered or made available to the Purchasers, in the form
filed with the SEC, its (i) Annual Reports on Form 10-K for the fiscal
years ended March 31, 1997, (ii) its Quarterly Reports on Form 10-Q for
the quarters ended June 30, 1997, September 30, 1997 and December 31,
1998, (iii) the Company's Proxy Statement with respect to the 1997 annual
meeting of its stockholders; (iv) all other reports, registration
statements, or information statements filed with the SEC subsequent to
March 31, 1997 (collectively, the "SEC Documents"), and (v) all amendments
and supplements to all such reports and registration statements filed by
the Company with the SEC pursuant to the requirements of the Exchange Act
or the Securities Act. The SEC Documents (i) complied as to form with the
applicable requirements under the Securities Act or the Exchange Act, as
the case may be, and (ii) did not at the time they were filed contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading; and each of the balance sheets contained in or incorporated by
reference into any of the Company's SEC Documents (including the related
notes and schedules thereto) fairly presents the financial position of the
Company as of its date, and each of the statements of income and changes
in shareholders' equity and cash flows or equivalent statements in the
Company's SEC Documents (including any related notes and schedules
thereto) fairly presents the results of operations, changes in
shareholders' equity and changes in cash flows, as the case may be, of the
Company for the periods to which they relate, in each case, in compliance
with applicable accounting requirements and with the published rules of
the SEC with respect thereto and in accordance with generally accepted
accounting principles consistently applied during the periods involved,
except, in each case, as may be noted therein, subject to normal year-end
audit adjustments (which are not expected to be material) in the case of
unaudited statements.
ARTICLE IV
PURCHASERS' REPRESENTATIONS
Each of the Purchasers hereby represents and warrants, severally and not
jointly, as follows:
SECTION 4.1. Investment Intent. Such Purchaser is acquiring the
Purchased Securities to be purchased by it or him pursuant to Section 2
hereof for investment and not with a view to the distribution thereof.
SECTION 4.2. Authorization. This Agreement and the Related Agreements to
which such Purchaser is a party have been executed by a duly authorized
Person on such Purchaser's behalf; and the execution, delivery and
performance hereof and thereof have been duly authorized by all
appropriate action.
SECTION 4.3. Enforceability. The execution and delivery by such
Purchaser of this Agreement and each of the Related Agreements will result
in legally binding obligations of such Purchaser enforceable against it or
him in accordance with the respective terms and provisions hereof and
thereof.
SECTION 4.4. Experience of Purchaser. Such Purchaser has such knowledge,
sophistication and experience in business and financial matters so as to
be capable of evaluating the merits and risks of the prospective
investment in the Purchased Securities, and has so evaluated the merits
and risks of such investment.
SECTION 4.5. Ability of Purchaser to Bear Risk of Investment. Such
Purchaser is able to bear the economic risk of an investment in the
Purchased Securities and, at the present time, is able to afford a
complete loss of such investment.
SECTION 4.6. Access to Information. Such Purchaser acknowledges that it
has been afforded (i) the opportunity to ask such questions as it had
deemed necessary of, and to receive answers from, representatives of the
Company concerning the terms and conditions of the offering of the
Purchased Securities and the merits and risks of investing in the
Purchased Securities; (ii) access to information about the Company and the
Company's financial condition, results of operations, business,
properties, management and prospects believed by it to be sufficient to
enable it to evaluate its investments.
SECTION 4.7. Reliance. Such Purchaser understands and acknowledges that
(i) the Purchased Securities are being offered and sold to such Purchaser
without registration under the Securities Act in a private placement that
is exempt from the registration provisions of the Securities Act under
Section 4(2) of the Securities Act or Regulation D promulgated thereunder
and (ii) the availability of such exemption, depends in part on, and the
Company will rely upon the accuracy and truthfulness of, the foregoing
representations and such Purchaser hereby consents to such reliance.
SECTION 4.8. Transfer Restriction. (a) A Purchaser may only dispose of
the Purchased Securities held by it, pursuant to an effective registration
statement under the Securities Act, to the Company or pursuant to an
available exemption from the registration requirements of the Securities
Act. In connection with any transfer of Purchased Securities other than
pursuant to an effective registration statement or to the Company, the
Company may require the transferor thereof to provide to the Company a
written opinion of counsel experienced in the area of United States
securities laws selected by the transferor, the form and substance of
which opinion shall be reasonably satisfactory to the Company, to the
effect that such transfer does not require registration of such
transferred securities under the Securities Act. Notwithstanding the
foregoing, the Company hereby consents to and agrees to register (i) any
transfer of Purchased Securities by one Purchaser to another Purchaser,
and agrees that no documentation other than executed transfer documents
shall be required for any such transfer, and (ii) any transfer of
Purchased Securities by any Purchaser to an Affiliate or a beneficial
owner of such Purchaser or to an Affiliate or a beneficial owner of
another Purchaser, or any transfer among any such Affiliates or beneficial
owners, provided that the transferee certifies to the Company that it is
an "accredited investor" as defined in Rule 501(a) under the Securities
Act and any transferee shall agree in writing to be bound by the terms of
this Agreement and shall have the rights of a Purchaser under this
Agreement. Each Purchaser acknowledges and agrees that any instrument
evidencing Purchased Securities shall bear a legend noting the foregoing
restrictions as well as any other legend required by law. The foregoing
transfer restrictions shall not apply, and no legend shall appear on the
Purchased Securities, to the extent the Purchased Securities are sold
pursuant to a transaction registered pursuant to an effective registration
statement under the Securities Act or to the extent they are transferred
pursuant to Rule 144(k) under the Securities Act.
ARTICLE V
CONDITIONS TO EACH PURCHASER'S OBLIGATIONS TO PURCHASE
Each Purchaser's obligation to purchase the Purchased Securities pursuant
to Section 2.2 of this Agreement is subject to compliance by the Company
with its agreements and representations herein contained, and to the
satisfaction, on or prior to the Closing Date, of the following
conditions:
SECTION 5.1. Agreements. Each of the Related Agreements shall have been
executed and delivered in the form provided for herein, and each of the
Related Agreements shall be in full force and effect and no term or
condition thereof shall have been amended, modified or waived except with
the prior written consent of such Purchaser. All covenants, agreements
and conditions contained in the Related Agreements which are to be
performed or complied with on or prior to the Closing Date shall have been
performed or complied with in all material respects. The Voting Agreement
shall be executed and delivered in the form provided for herein.
SECTION 5.2. Charter Documents; Good Standing Certificates. Such
Purchaser shall have received from the Company (a) a copy of the Company's
Charter, certified by the Massachusetts Secretary of State to be true and
complete, (b) a copy, certified by the Secretary of the Company to be true
and complete as of the Closing Date, of the by-laws thereof; and (c) a
certificate of the relevant governmental authority or other appropriate
official of each state in which each of the Company is incorporated or
qualified to do business (if the Company actually does business in such
state) as to the Company's corporate good standing in such state or
qualification to do business, as the case may be.
SECTION 5.3. Proof of Corporate Action. Such Purchaser shall have
received from the Company copies certified by the Secretary thereof to be
true and complete as of the Closing Date, of the records of all corporate
action taken to authorize the execution, delivery and performance of this
Agreement and each of the Related Agreements to which the Company is a
party.
SECTION 5.4. Incumbency Certificate. Such Purchaser shall have received
from the Company an incumbency certificate, dated the Closing Date, signed
by a duly authorized officer thereof certifying as to the name, office,
signature specimen and due authority of each individual who shall sign, in
the name and on behalf of the Company, this Agreement and each of the
Related Agreements to which the Company is or is to become a party.
SECTION 5.5. Legal Opinion. The Purchasers shall have received from
Ropes & Gray and Leonard R. Glass, Esq., counsel to the Company, favorable
opinions satisfactory to the Purchasers in form and substance covering the
matters set forth in Exhibit D hereto.
SECTION 5.6. Representations and Warranties; Officer's Certificate. The
representations and warranties contained or incorporated by reference
herein shall be true and correct in all material respects on and as of the
Closing Date with the same force and effect as though made on and as of
the Closing Date except for those representations and warranties which
relate specifically to a particular date, provided that such
representations and warranties were true and correct in all material
respects as of such date; and the Company shall have performed and
complied with all conditions and agreements required to be performed or
complied with by each of them prior to the Closing; and such Purchaser
shall have received on the Closing Date a certificate to these effects
signed by an authorized officer of the Company.
SECTION 5.7. Legality; Governmental and Other Authorizations. The
purchase of the Purchased Securities by such Purchaser shall not be
prohibited by any law or governmental order or regulation, and shall not
subject the Company to any penalty, special tax, or other onerous
condition. All necessary consents, approvals, licenses, permits, orders
and authorizations of, or registrations, declarations and filings with,
any governmental or administrative agency or of or with any other Person,
with respect to any of the transactions contemplated by this Agreement or
any of the Related Agreements, shall have been duly obtained or made and
shall be in full force and effect other than the Blue Sky Filings.
SECTION 5.8. Payment of Certain Fees and Disbursements. At the Closing,
the Purchasers shall have been reimbursed, subject to and in accordance
with Article X hereof, for all reasonable fees and expenses of Edwards &
Angell incurred by the Purchasers through the Closing Date in connection
with the transactions contemplated by this Agreement.
SECTION 5.9. Charter Amendment. The Company's Charter shall have been
amended by the filing of a Certificate of Designation in the form of
Exhibit B hereto.
SECTION 5.10. Election to Board. Kevin J. Maroni and William P. Collatos
shall have been elected to the Company's Board of Directors as Class III
Directors, and Kevin J. Maroni shall have been appointed to the
Compensation Committee of the Company's Board of Directors.
SECTION 5.11. General. All instruments and legal, governmental,
administrative and corporate proceedings in connection with the
transactions contemplated by this Agreement and the Related Agreements
shall be satisfactory in form and substance to the Purchasers' counsel,
and the Purchasers shall have received copies of all documents, including,
without limitation, records of corporate or other proceedings, the opinion
of counsel contemplated in Section 5.5 hereof, and any consents, licenses,
approvals, permits and orders required to be secured by the Company in
connection with the transactions contemplated herein or which any
Purchaser may have requested in connection therewith.
ARTICLE VI
CONDITIONS TO THE COMPANY'S OBLIGATIONS
The Company's obligation to sell and issue the Purchased Securities
pursuant to this Agreement is subject to compliance by each of the
Purchasers with the agreements herein contained, and to the satisfaction
on or prior to the Closing Date, of the following conditions:
SECTION 6.1. Representations. The representations made by each Purchaser
in Article IV hereof shall be true and correct in all material respects
when made and shall be true and correct in all material respects as of the
Closing Date.
SECTION 6.2. Related Agreements. Each of the Related Agreements to which
such Purchaser is a party shall have been executed by such Purchaser. All
covenants, agreements and conditions contained in the Related Agreements
which are to be performed or complied with by such Purchaser on or prior
to the Closing Date shall have been performed or complied with by such
Purchaser in all material respects.
SECTION 6.3. Legality; Governmental and Other Authorizations. The sale
of the Purchased Securities by the Company shall not be prohibited by any
law or governmental order or regulation, and shall not subject the Company
to any penalty, special tax, or other onerous condition. All necessary
consents, approvals, licenses, permits, orders and authorizations of, or
registrations, declarations and filings with, any governmental or
administrative agency or of or with any other Person, with respect to any
of the transactions contemplated by this Agreement or any of the Related
Agreements, shall have been duly obtained or made and shall be in full
force and effect other than the Blue Sky Filings.
SECTION 6.4. General. All instruments and legal, governmental,
administrative, corporate proceedings in connection with the transactions
contemplated by this Agreement and the Related Agreements shall be
satisfactory in form and substance to the Company, and the Company shall
have received copies of all documents, including, without limitation, any
consents, licenses, approvals, permits and orders required to be secured
by each Purchaser in connection with the transactions contemplated herein
or which the Company may have requested in connection therewith.
ARTICLE VII
COVENANTS APPLICABLE FOLLOWING THE CLOSING
The Company hereby agrees that until the earlier to occur of (i) the fifth
anniversary of the Closing Date, or (ii) the date as of which all shares
of Series A Preferred Stock shall have been converted or shall otherwise
cease to be outstanding, it will comply with the following provisions:
SECTION 7.1. Financial Statements. The Company shall deliver to Spectrum
promptly after filing with the SEC, the Company's quarterly report filed
on Form 10-Q and the Company's annual report filed on Form 10-K.
SECTION 7.2. Additional Information. Promptly after the date the Company
is notified of a request by Spectrum, the Company will deliver to Spectrum
any such additional information as Spectrum may reasonably request from
time to time (which requests shall be no more frequent than once a month),
including, without limitation, sales force growth and productivity
statistics and access lines (booked and provisioned) by customer.
SECTION 7.3. Annual Budget. The Company shall furnish to Spectrum,
promptly following approval thereof by the Board, a true and complete copy
of the Company's three-year operating budget.
SECTION 7.4. SEC Filings. Promptly upon filing with the SEC, the Company
shall provide to Spectrum copies of all public filings made by the Company
pursuant to the Securities Act or the Exchange Act.
SECTION 7.5. Inspection. The Company shall permit authorized
representatives of Spectrum to visit and inspect any of the properties of
the Company, including its books of account, and to make copies thereof at
the expense of Spectrum and to discuss its affairs, finances and accounts
with its officers, administrative employees and independent accountants,
all at such reasonable times with reasonable notice as may be reasonably
requested but in no event more than one time in any calendar month and all
in a manner that does not interfere with the business operations of the
Company; provided that all such information provided to Spectrum by the
Company under this Article VII will be maintained as confidential by
Spectrum and not be disclosed to third parties and provided, further that,
subject to the foregoing, Spectrum may provide summaries of such
information to its Affiliates and beneficial owners on a confidential
basis in connection with reports provided by Spectrum to its Affiliates
and beneficial owners in its fiduciary capacity.
SECTION 7.6. Independent Director. The Company shall use its best
efforts to increase the size of its Board of Directors to eight (8) as
soon after Closing as possible by adding an independent director with
relevant industry expertise, which independent director shall be
satisfactory to the Purchasers and the Company's chief executive officer.
ARTICLE VIII
PREEMPTIVE RIGHTS
SECTION 8.1 Right to Purchase. Until the date as of which all shares of
Series A Preferred Stock shall have been converted or shall otherwise
cease to be outstanding, the Company shall only issue New Securities in
accordance with the following terms:
(a) The Company shall not issue any New Securities (other than
Excluded Securities) unless it first delivers to each Purchaser a written
(or oral if pursuant to Section 8.1(f)) notice (the "Notice of Proposed
Issuance") specifying the type and total number of such New Securities
that the Company then intends to issue (the "Offered New Shares"), all of
the material terms (or terms then known if pursuant to Section 8.1(f)),
including the price upon which the Company proposes to issue the Offered
New Shares and stating that the Purchasers shall have the right to
purchase the Offered New Shares in the manner specified in this Section
8.1 for the same price per share and in accordance with the same terms and
conditions specified in such Notice of Proposed Issuance.
(b) During the twenty (20) consecutive day period commencing on
the date the Company delivers to all of the Purchasers the Notice of
Proposed Issuance (the "Twenty Day Period"), the Purchasers shall have the
option to purchase a portion of the Offered New Shares at the same price
per share and upon the same terms and conditions specified in the Notice
of Proposed Issuance. Each Purchaser electing to purchase Offered New
Shares must give written notice of its election to the Company prior to
the expiration of the Twenty Day Period.
(c) Each Purchaser shall have the right to purchase up to that
number of the Offered New Shares as shall be equal to the number of the
Offered New Shares multiplied by a fraction, the numerator of which shall
be the number of outstanding Registrable Securities and shares of Common
Stock then issuable upon conversion and exercise of all Purchased
Securities and Preferred Stock Derivatives then owned by such Purchaser
and the denominator of which shall be the aggregate number of shares of
Common Stock Deemed Outstanding. The amount of such Offered New Shares
that each Purchaser is entitled to purchase under this Section 8.1(c)
shall be referred to as its "Proportionate Share". No Purchaser shall
have any right of oversubscription.
(d) To the extent the Offered New Shares have not been purchased
by the Purchasers pursuant to paragraphs (a)-(c) hereof, then the Company
shall have the right, until the expiration of one-hundred eighty (180)
consecutive days commencing on the first day immediately following the
expiration of the Twenty Day Period, to issue the Offered New Shares at
not less than, and on terms no more favorable to the purchaser than the
price and terms specified in the Notice of Proposed Issuance. If for any
reason the Offered New Shares are not issued within such period and at
such price and on such terms, the right to issue in accordance with the
Notice of Proposed Issuance shall expire and the provisions of this
Agreement shall continue to be applicable to the Offered New Shares.
(e) Notwithstanding the foregoing, the preemptive rights described
in this Article VIII shall not apply with respect to the issuance of (i)
any Excluded Securities, (ii) the issuance of any shares pursuant to a
transaction registered under the Securities Act at a price greater than
the Conversion Price at that time, or (iii) issuance of Common Stock or
warrants or options to acquire Common Stock to any Persons (including the
stockholders or owners of Persons) as all or part of the consideration
paid for the acquisition of ownership interests in, or assets of, such
Person.
(f) Notwithstanding paragraphs (a), (b) and (c) above, if the New
Securities with respect to which preemptive rights are applicable under
this Article are to be sold pursuant to (x) a transaction registered under
the Securities Act or (y) a transaction pursuant to Rule 144A under the
Securities Act yielding the Corporation proceeds of at least $40,000,000
(net of any interest or dividend escrows or similar arrangements), the
following shall apply in lieu of Section 8.1(b): (i) any Purchaser wishing
to exercise such rights must commit to purchase such New Securities and
consummate the purchase of such New Securities at the same time and on the
same terms as such other purchasers in the offering, (ii) if a Rule 144A
offering, such Purchaser must meet the legal qualifications to participate
in such offering and (iii) the Company will provide any Purchaser
indicating to the Company orally or in writing an interest in
participating in such offering with substantially the same information at
substantially the same times as provided to the other purchasers in such
offering.
ARTICLE IX
ASSIGNMENT OF PURCHASED SECURITIES
Whether or not any express assignment has been made in this Agreement, the
provisions of this Agreement that are for the benefit of each Purchaser as
the holder of any Purchased Securities or Registrable Securities are also
for the benefit of, and enforceable by, all subsequent holders of such
Purchased Securities or Registrable Securities, and the provisions of this
Agreement that subject the Purchasers to obligations as the holder of any
Purchased Securities or Registrable Securities also shall subject all
subsequent holders of Purchased Securities and Registrable Securities
thereto. Notwithstanding the foregoing, the rights provided to Spectrum
pursuant to Article VII of this Agreement cannot be assigned without the
Company's prior consent.
ARTICLE X
EXPENSES; INDEMNITY
SECTION 10.1. Expenses. The Company hereby agrees to pay all reasonable
legal fees and disbursements of a single counsel to the Purchasers
incurred by the Purchasers through the Closing not to exceed in the
aggregate a maximum of $100,000. From and after the Closing, the Company
hereby agrees to pay on demand all reasonable attorneys' fees of a single
counsel to the Purchasers incurred in connection with any amendments,
modifications, approvals, consents or waivers with respect to this
Agreement or any Related Agreement proposed by or discussed with the
Company.
SECTION 10.2. Indemnification. Notwithstanding any disclosures made in
the Schedules hereto, the Company hereby agrees to indemnify, exonerate
and hold each of the Purchasers and their (if applicable) general and
limited partners and their respective shareholders, officers, directors,
employees, attorneys and agents ("Indemnitees") free and harmless from and
against any and all actions, causes of action, or suits brought against
them by third parties other than the Company ("Third Party Claims"),
losses, liabilities, settlement costs, damages and expenses, including,
without limitation, reasonable attorneys' fees and disbursements
(collectively, "Damages") arising from any such Third Party Claim,
incurred in the capacity as a Purchaser by any of the Indemnitees as a
result of or relating to (i) any transaction by the Company financed or to
be financed in whole or in part, directly or indirectly, with proceeds
from the sale of any of the Purchased Securities, (ii) the execution,
delivery, performance or enforcement of this Agreement, the Related
Agreements or any other agreement contemplated hereby or thereby
(including, without limitation, any failure by the Company to comply with
any of its covenants or any breach of its representations and warranties
in this Agreement, the Related Agreements or any other agreement
contemplated hereby or thereby) except where such Damages are caused by
the willful misconduct or gross negligence of the Purchasers. Notice of
any claim for indemnification by an Indemnitee must be made promptly after
such Indemnitee has notice of the relevant Third Party Claim. No
Indemnitee shall settle a Third Party Claim for which indemnification is
sought hereunder without the consent of the Company, which consent shall
not be unreasonably withheld or delayed.
ARTICLE XI
NOTICES
All demands, notices, requests, consents and other communications required
or permitted under this Agreement, any Related Agreement or the Purchased
Securities shall be in writing and shall be personally delivered or sent
by facsimile machine (with a confirmation copy sent by one of the other
methods authorized in this Section), commercial (including FedEx) or U.S.
Postal Service overnight delivery service, or, deposited with the U.S.
Postal Service mailed first class, registered or certified mail, postage
prepaid, as set forth below:
If to the Company, addressed to:
CTC Communications Corp.
360 Second Avenue
Waltham, MA 02154
Attn: Steven Jones and John Pittenger
Facsimile No.: 617-890-1613
with a copy to:
Ropes & Gray
One International Place
Boston, MA 02114
Attn: Mary E. Weber, Esq.
Facsimile No.: 617-951-7050
Law Office of Leonard R. Glass, P.A.
45 Central Avenue
P.O. Box 579
Tenafly, NJ 07602
Attn: Leonard R. Glass, Esq.
Facsimile No.: 201-894-1718
If to the Purchasers, addressed to:
Spectrum Equity Investors II, L.P.
One International Place, 29th Floor
Boston, MA 02110
Attn: Kevin J. Maroni
Facsimile No.: 617-464-4601
with a copy to:
Edwards & Angell
101 Federal Street
Boston, MA 02110
Attn: Stephen O. Meredith, Esq.
Facsimile No.: 617-439-4170
If to any other holder of record of any security, to it at its address
set forth in the applicable register maintained by the Company with
respect thereto.
Notices shall be deemed given upon the earlier to occur of (i) receipt by
the party to whom such notice is directed; (ii) if sent by facsimile
machine, on the day (other than a Saturday, Sunday or legal holiday in the
jurisdiction to which such notice is directed) such notice is sent if sent
(as evidenced by the facsimile confirmed receipt) prior to 5:00 p.m.
Eastern Time and, if sent after 5:00 p.m. Eastern Time, on the day (other
than a Saturday, Sunday or legal holiday in the jurisdiction to which such
notice is directed) after which such notice is sent; (iii) on the first
business day (other than a Saturday, Sunday or legal holiday in the
jurisdiction to which such notice is directed) following the day the same
is deposited with the commercial carrier if sent by commercial overnight
delivery service; or (iv) the fifth day (other than a Saturday, Sunday or
legal holiday in the jurisdiction to which such notice is directed)
following deposit thereof with the U.S. Postal Service as aforesaid. Each
party, by notice duly given in accordance therewith may specify a
different address for the giving of any notice hereunder.
ARTICLE XII
SURVIVAL AND TERMINATION OF COVENANTS
AGREEMENTS, REPRESENTATIONS AND WARRANTIES,
All covenants, agreements, representations and warranties made herein or
in any certificate delivered at Closing pursuant hereto shall be deemed to
have been relied on by each such party, notwithstanding any investigation
made by such party or on its behalf. All representations and warranties
made herein or in any of the Related Agreements shall survive the
execution and delivery of this Agreement and of the Purchased Securities.
ARTICLE XIII
AMENDMENTS AND WAIVERS
Except as otherwise expressly provided herein, any term of this Agreement
may be amended and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either
retroactively or prospectively) only with the written consent of
Purchasers whose holdings of Purchased Securities and Registrable
Securities would, if converted and exercised, constitute a majority of the
Registrable Securities held by all Purchasers. Any amendment or waiver
effected in accordance with this Article XIII shall be binding upon the
Company and each holder of Purchased Securities and Registrable
Securities.
ARTICLE XIV
CHOICE OF LAW; SUBMISSION TO JURISDICTION
AND WAIVER OF JURY TRIAL; DISPUTE RESOLUTION
SECTION 14.1. Governing Law.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT GIVING EFFECT TO ANY
CONFLICTS OR CHOICE OF LAWS PROVISIONS WHICH WOULD CAUSE THE APPLICATIONS
OF THE DOMESTIC SUBSTANTIVE LAWS OF ANY OTHER JURISDICTION).
SECTION 14.2. Consent To the Exclusive Jurisdiction Of the Courts Of
Massachusetts.
(a) SUBJECT TO THE MANDATORY ARBITRATION PROVISIONS OF SECTION
14.5, EACH OF THE PARTIES HERETO HEREBY CONSENTS TO THE EXCLUSIVE
JURISDICTION OF THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS AND THE
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS, AS WELL AS
TO THE JURISDICTION OF ALL COURTS TO WHICH AN APPEAL MAY BE TAKEN FROM
SUCH COURTS, FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING
ARISING OUT OF, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER
TRANSACTION DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY, INCLUDING, WITHOUT LIMITATION, ANY PROCEEDING RELATING TO
ANCILLARY MEASURES IN AID OF ARBITRATION, PROVISIONAL REMEDIES AND INTERIM
RELIEF, OR ANY PROCEEDING TO ENFORCE ANY ARBITRAL DECISION OR AWARD.
(b) EACH PARTY HEREBY EXPRESSLY WAIVES ANY AND ALL RIGHTS TO BRING
ANY SUIT, ACTION OR OTHER PROCEEDING IN OR BEFORE ANY COURT OR TRIBUNAL
OTHER THAN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS AND COVENANTS
THAT IT SHALL NOT SEEK IN ANY MANNER TO RESOLVE ANY DISPUTE OTHER THAN AS
SET FORTH IN THIS ARTICLE XIV OR TO CHALLENGE OR SET ASIDE ANY DECISION,
AWARD OR JUDGMENT OBTAINED IN ACCORDANCE WITH THE PROVISIONS HEREOF.
(c) EACH OF THE PARTIES HERETO HEREBY EXPRESSLY WAIVES ANY AND ALL
OBJECTIONS IT MAY HAVE TO VENUE, INCLUDING, WITHOUT LIMITATION, THE
INCONVENIENCE OF SUCH FORUM, IN ANY OF SUCH COURTS. IN ADDITION, EACH OF
THE PARTIES CONSENTS TO THE SERVICE OF PROCESS BY PERSONAL SERVICE OR ANY
MANNER IN WHICH NOTICES MAY BE DELIVERED HEREUNDER IN ACCORDANCE WITH
ARTICLE XI.
SECTION 14.3. Waiver Of Jury Trial.
EACH OF THE PARTIES HERETO HEREBY VOLUNTARILY AND IRREVOCABLY WAIVES TRIAL
BY JURY IN ANY ACTION OR OTHER PROCEEDING BROUGHT IN CONNECTION WITH THIS
AGREEMENT, ANY OF THE OTHER TRANSACTION DOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
SECTION 14.4. Equitable Remedies.
The parties hereto agree that irreparable harm would occur in the event
that any of the agreements and provisions this Article XIV were not
performed fully by the parties hereto in accordance with their specific
terms or conditions or were otherwise breached, and that money damages are
an inadequate remedy for breach of the Agreement because of the difficulty
of ascertaining and quantifying the amount of damage that will be suffered
by the parties hereto in the event that this Agreement is not performed in
accordance with its terms or conditions or is otherwise breached. It is
accordingly hereby agreed that the parties hereto shall be entitled to an
injunction or injunctions to restrain, enjoin and prevent breaches of this
Agreement by the other parties and to enforce specifically such terms and
provisions of such Articles in any court of the United States or any state
having jurisdiction, such remedy being in addition to and not in lieu of,
any other rights and remedies to which the other parties are entitled to
at law or in equity.
SECTION 14.5. Arbitration.
Any controversy, dispute or claim arising out of or in connection with or
relating to this Agreement or any of the Related Agreements, or the
breach, termination or validity hereof or any transaction contemplated
hereby or thereby (any such controversy, dispute or claim being referred
to as a "Dispute") shall be finally settled by arbitration conducted
expeditiously in accordance with the Commercial Arbitration Rules then in
force (the "AAA Rules") of the American Arbitration Association (the
"AAA"). There shall be a panel of three arbitrators who shall be
appointed pursuant to AAA procedure, in each case, within fifteen (15)
business days of receipt of the demand for arbitration by the
respondent(s) in any such proceeding. Each of the arbitrators shall be an
attorney with no less than fifteen (15) years' experience in the practice
of business law (preferably with experience in the acquisition and
financing of businesses such as those engaged in by the Company and at the
time such dispute arises) who shall not have performed any legal services
for any of the parties or person controlled by any of the parties for a
period of 5 years prior to the date the demand for arbitration is received
by the respondent(s). The situs for an arbitration pursuant to this
Section shall be Boston, Massachusetts. A final award shall be rendered
as soon as reasonably possible and, in any event, within ninety (90) days
of the appointment of the panel of arbitrators; provided, however, that if
the arbitrators determine by majority vote that fairness so requires, such
ninety (90) day period may be extended by no more than sixty (60)
additional days. The parties agree that the arbitrators shall have the
right and power to shorten the length of any notice periods or other time
periods provided in the AAA Rules and to implement Expedited Procedures
under the AAA Rules in order to ensure that the arbitration process is
completed within the time frames provided herein. The arbitration
decision or award shall be reasoned and in writing. Judgment on the
decision or award rendered by the arbitrators may be entered and
specifically enforced in any court having jurisdiction thereof.
Notwithstanding the provisions of Section 14.1, any arbitration held
pursuant to the provisions of the Section shall be governed by the Federal
Arbitration Act. All arbitrations commenced pursuant to this Agreement or
any other Transaction Document while any other arbitration hereunder shall
be in progress shall be consolidated and heard by the initially
constituted panel of arbitrators.
ARTICLE XV
ENTIRE AGREEMENT; COUNTERPARTS; SECTION HEADINGS
This Agreement, the Related Agreements and the other writings referred to
herein or delivered pursuant hereto which form a part hereof contain the
entire understanding of the parties hereto with respect to its subject
matter. This Agreement supersedes all prior agreements and understandings
between the parties with respect to its subject matter.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
The descriptive headings of sections and paragraphs of this Agreement are
inserted for convenience only, and do not constitute a part of this
Agreement and shall not affect in any way the meaning or interpretation of
this Agreement.
If the Company at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) its outstanding shares of Common Stock into
a greater number of shares or if the outstanding shares of Common Stock
shall be combined (by reverse stock split or otherwise) into a smaller
number of shares, all numbers, percentages, computations and the like in
this Agreement shall be deemed modified as necessary to give appropriate
effect to such subdivision or combination.
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Agreement as of the day and year first above written.
COMPANY:
CTC COMMUNICATIONS CORP.
By:
__________________________________
Name:
Title:
PURCHASERS:
SPECTRUM EQUITY INVESTORS II, L.P.
By Spectrum Equity Associates II,
L.P., its General Partner
By:
__________________________________
Kevin J. Maroni, a General
Partner
DOEG HILL I, L.L.C.
By:
__________________________________
Dennis Patrick, Member
______________________________________
Matthew N. Mochary
______________________________________
Robert A. Nicholson
______________________________________
Benjamin Coughlin
______________________________________
Fred Wang
______________________________________
Michael J. Kennealy
______________________________________
Shawn Colo
______________________________________
Kristin Cashin
SCHEDULE 2.1
List of Purchasers
<TABLE>
<CAPTION>
Name and Address
Number of Shares
of Series A
Preferred Stock to
be Purchased
Number of Warrants
to be
Issued
Aggregate Purchase
Price of Purchased
Securities
<S>
Spectrum Equity
Investors II, L.P.
One International
Place
29th Floor
Boston, MA 02110
Attn: Kevin J.
Maroni
<C>
657,555.00
<C>
131,511.00
<C>
$11,837,305.11
Doeg Hill I,
L.L.C.
1300 Pennsylvania
Avenue
Suite 470 North
Washington, D.C.
20004
Attn: Dennis
Patrick
5,555.00
1,111.00
$100,001.11
Matthew N. Mochary
245 Lytton Avenue
Suite 175
Palo Alto, CA
94301
1,944.00
389.00
$34,995.89
Robert A.
Nicholson
One International
Place
29th Floor
Boston, MA 02110
417.00
83.00
$7,506.83
Benjamin Coughlin
One International
Place
29th Floor
Boston, MA 02110
417.00
83.00
$7,506.83
Fred Wang
245 Lytton Avenue
Suite 175
Palo Alto, CA
94301
278.00
56.00
$5,004.56
Kristin Cashin
245 Lytton Avenue
Suite 175
Palo Alto, CA
94301
278.00
56.00
$5,004.56
Michael J.
Kennealy
One International
Place
29th Floor
Boston, MA 02110
111.00
22.00
$1,998.22
Shawn Colo
245 Lytton Avenue
Suite 175
Palo Alto, CA
94301
111.00
22.00
$1,998.22
Total:
666,666.00
133,333.00
$12,001,321.33
</TABLE>
SCHEDULE 3.1
List of Jurisdictions
1. Massachusetts (jurisdiction of incorporation)
2. New York
3. Rhode Island
4. Vermont
5. Connecticut (d/b/a Computer Telephone Company)
6. Maine
7. New Hampshire
8. Ohio
9. California (d/b/a Computer Telephone Company)
SCHEDULE 3.4
1. Number of Shares of Issued and Outstanding Common Stock :
9,974,683
2. Shares of Common Stock and Options Owned by Robert J. Fabbricatore and
any of his affiliates or family members:
(a) Common Stock:
Robert J. Fabbricatore: 1,520,237 shares
Robert J. Fabbricatore, as trustee for Rita Fabbricatore, Danielle
Fabbricatore and Douglas Fabbricatore: 62,498 shares
Robert J. Fabbricatore, as General Partner of the Robert J.
Fabbricatore Family Limited Partnership: 1,133,239 shares
The records of the Transfer Agent as of April 1, 1998 disclose that
the following family members are record owners of the following
number of shares of CTC Common Stock:
Thomas Fabbricatore: 116,397 shares (+ non-assignable options to
purchase 81,255 shares of CTC Common Stock)
Nathalie Fabbricatore: 191 shares (+ non-assignable options to purchase
2,750 shares of CTC Common Stock)
Douglas Fabbricatore: 2,074 shares (+ non-assignable options to
purchase 18,300 shares of CTC Common Stock)
Rita Fabbricatore: 2,000 shares (+ non-assignable options to
purchase 1,940 shares of CTC Common Stock) and, as custodian for her
minor child: 4,000 shares.
Clara Fabbricatore: 1.34 shares
Frances Fabbricatore: 1.34 shares
James Fabbricatore: 1,000 shares
Pat Fabbricatore: 2,001.34 shares
Robert J. Fabbricatore disclaims beneficial ownership or control of
the shares of CTC Common Stock and non-assignable options to
purchase CTC Common Stock owned by the family members set forth
above.
(b) Options:
1993 Stock Option Plan:
issued options: 1,215,958
unissued options: 92,568
(gives effect to 1995 stock splits)
1996 Stock Option Plan
issued options: 1,562,500
unissued options: 187,500
3. List of Options including Name of Holder and No. of Shares Vested
1. Schedule (i) 1993 Stock Option Plan (29 pages)
2. Schedule (ii) 1996 Stock Option Plan (25 pages)
3. Schedule (iii) Stock Options issued Prior to 1993 (2 pages)
The Compensation Committee of the Board of Directors has approved a
repricing of 24 different option grants to approximately 225 employees
that total approximately 1,400,000 outstanding options out of the total of
approximately 3,000,000. The options were granted during 1995, 1996 and
1997 and were granted at prices ranging from $8.00 to $16.25. The Board
has approved repricing all options to the market price on March 20, 1998
($7.188), regardless of the position or title of the holder of the option.
SCHEDULE 3.4 (c)
Options, Etc.
(a) See Schedule 3.4
(b) None
(c) None
(d) To the Company's knowledge, none.
SCHEDULE 3.6
Required Filings and Consent
In its capacity as an authorized reseller of telephone services in the
State of New York, the Company is required to obtain approval for the
issuance of the Purchased Securities from the Public Service Commission of
the State of New York pursuant to Section 101 of the New York Public
Service Law.
The Company has filed a petition with the Public Service Commission of the
State of New York to obtain authority to issue the Purchased Securities.
SCHEDULE 3.7
Undisclosed Liabilities
None.
SCHEDULE 3.8
Absence of Certain Developments
(a) None
(b)(i) On March 24, 1998 the Company sold a 1982 Bonanza A36 airplane
for $173,000 to an unaffiliated purchaser. The proceeds of the
sale were added to the working capital of the Company.
(b) (ii) and (iii) Subject to the approval of a definitive merger
agreement by the shareholders and the Board of Directors of each
company, the receipt of a fairness opinion issued by an non-
affiliated company, and the approval of the terms of the merger
agreement by the stockholders of CTC at a meeting duly called for
such purpose, CTC has entered into a non-binding letter of intent to
acquire all of the issued and outstanding common stock of Comm-
Tract Corp. and Comm-Tract Corp. of New York in exchange for not
less than 1,000,000 nor more than 1,100,000 shares of Common Stock
of the CTC. Mr. Robert Fabbricatore, Chairman of the Board of CTC
and Mr. John Pittenger Executive Vice President and Clerk Treasurer
are stockholders of the companies to be acquired.
SCHEDULE 3.9
Interested Party Transactions
None
SCHEDULE 3.11
Title to Assets
None
SCHEDULE 3.12
Material Contracts and Obligations
(a) On February 27, 1997 the Company entered into a three year
employment contract with Steven Jones under the terms of which Mr.
Jones is employed by the Company as an Executive Vice President and
Chief Financial Officer and Director of Corporate Development
effective April 1, 1998.
(b) The Company believes that as at March 31, 1998, it may be in
violation of certain financial covenants as contained in the
Revolving and Term Loan Agreement dated November 7, 1997 between the
Company as Borrower and Fleet National Bank as Lender.
The Company will be unable to make a determination with respect to such
possible violations until completion of its annual audit for the fiscal
year ended March 31, 1998.
SCHEDULE 3.14
Necessary Licenses and Permits
None
SCHEDULE 3.15
Compliance with Law
(a) To the knowledge of the Company - None
(b) None
SCHEDULE 3.16
Litigation
1. CTC COMMUNICATIONS CORP. vs Joanne Weed and Maureen Gordon-Johnson
- - USDC - District of Connecticut 3:98CIV400 (DIS).
2. OPTIMA COMMUNICATIONS, INC. vs Computer Telephone Corp. - Supreme
Court of the State of New York, Rockland County
Index No. 3287/96.
There is no other material litigation other than disclosed in the
SEC Documents.
SCHEDULE 3.17
No Material Adverse Changes
None
SCHEDULE 3.18
Employee Benefit Plans
Company 1993 Employee Stock Option Plan
Company 1996 Employee Stock Option Plan
Company Employee Stock Purchase Plan
The Employee Stock Purchase Plan enables participating employees to
purchase Company shares at 85% of the lower of the market prices
prevailing on the Valuation Dates of January 2 and July 1. Individuals
can contribute up to 5% of their base salary.
Company Employee Stock Bonus Plan
The Employee Stock Bonus Plan previously adopted by the Company has not
been utilized to date.
Company 401K Savings Plan (Adopted September 1, 1993).
In September 1993, the Company established a defined contribution plan
("401(k) Plan") covering all employees who meet certain eligibility
requirements. Participants may make contributions to the Plan up to
15% of their compensation (as defined) up to a maximum established by
law. The Company may make a matching contribution of an amount to be
determined by the Board of Directors but subject to a maximum of 6% of
compensation contributed by each participant.
SCHEDULE 3.19
Withholding, Contracts, Labor Relations
(a) None
(b) None
(c) None
(d) None
(e) None
SCHEDULE 3.24
Registration Rights
None
Exhibit 10.2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and entered
into as of April 10, 1998 between CTC COMMUNICATIONS CORP., a
Massachusetts corporation (the "Company"), and those entities whose names
appear on the signature pages hereof (the "Holders").
This Agreement is made in connection with the Securities Purchase
Agreement, dated the date hereof (the "Purchase Agreement") between the
Company and the Holders, pursuant to which the Holders are acquiring
Series A Convertible Preferred Stock of the Company and Warrants to
acquire Common Stock in the Company. The execution of and delivery of
this Agreement is a condition precedent to the obligations of the Holders
under the Purchase Agreement.
Unless otherwise defined herein, capitalized terms so used herein and not
defined shall have the same meaning as provided in the Purchase Agreement.
The parties hereby agree as follows:
1. Certain Definitions.
As used in this Agreement, the following terms shall have the following
respective meanings:
(a) "Business Day" means any day, other than a Saturday, Sunday or
legal holiday, on which banks in the State of New York are open for
business.
(b) "Commission" means the Securities and Exchange Commission.
(c) "Common Stock" means the Common Stock, par value $.01 per
share, of the Company, as constituted on the date hereof, any shares into
which such Common Stock shall have been changed, or any shares resulting
from any reclassification of such Common Stock.
(d) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute thereto, and the rules and regulations
of the Commission promulgated thereunder, all as the same shall be in
effect at the time.
(e) "Holders" means the Holders referred to in the Preamble and
any other person holding Registrable Securities to whom these registration
rights have been assigned pursuant to Section 9(f) of this Agreement.
(f) "Other Securities" shall mean Common Stock or other equity
securities (excluding Registrable Securities) issued by the Company
following the date of this Agreement.
(g) "Preferred Stock Derivatives" shall have the meaning set forth
in the Certificate of Designation designating the Series A Preferred
Stock.
(h) "Person" shall mean an individual, partnership, corporation,
association, trust, joint venture, unincorporated organization and any
government, governmental department or agency or political subdivision
thereof.
(i) "Registrable Securities" means (i) the Common Stock held by
any Holder issued or issuable pursuant to the conversion of the Series A
Preferred Stock or the exercise of the Warrants; (ii) any Common Stock or
other securities issued or issuable pursuant to the conversion of, or with
respect to, the Series A Preferred Stock or Warrants held by any Holder
upon any stock split, stock dividend, recapitalization, or similar event;
and (iii) securities issued in replacement or exchange of any of the
securities issued in clauses (i) or (ii) above.
(j) "Registration Expenses" means all expenses incident to the
Company's performance of or compliance with this Agreement, including,
without limitation, all registration, filing, listing and National
Association of Securities Dealers, Inc. ("NASD") fees, all fees and
expenses of complying with securities or blue sky laws, all word
processing, duplicating and printing expenses, all messenger and delivery
expenses, any transfer taxes, the fees and expenses of the Company's legal
counsel and independent public accountants, including the expenses of any
special audits or "cold comfort" letters required by or incident to such
performance and compliance, fees and disbursements of one counsel for all
of the Holders, and any fees and disbursements of underwriters customarily
paid by insurers or sellers of securities; provided, however, that
Registration Expenses shall not include underwriting discounts and
commissions.
(k) "Securities Act" means the Securities Act of 1933, as amended,
or any successor statute thereto, and the rules and regulations of the
Commission promulgated thereunder, all as the same shall be in effect at
the time.
(l) "Series A Preferred Stock" means the Series A Convertible
Preferred Stock, $1.00 par value per share, of the Company, as constituted
on the date hereof, any shares into which such Series A Preferred Stock
shall have been changed or any shares resulting from any reclassification
of such Series A Preferred Stock.
(m) "Warrants" means the Warrants issued pursuant to the Purchase
Agreement, entitling the holders thereof to purchase 133,333 shares of
Common Stock, together with any replacement warrants issued with respect
thereto or any securities issued pursuant thereto.
2. Registration.
(a) Requested Registration and Shelf Registration. (i) At any
time after October 9, 1998, upon written request by those Persons holding
Series A Preferred Stock, Warrants and/or Registrable Securities
representing, at the time, a majority of all Registrable Securities on a
fully diluted basis after giving effect to the conversion of all Series A
Preferred Stock and the exercise of all Warrants (the "Requisite Holders")
that the Company effect the registration under the Securities Act of all
or part of the Registrable Securities (a "Requested Registration"), the
Company will use its best efforts to effect and maintain the registration
under the Securities Act of the Registrable Securities which the Company
has been so requested to register by the Holders within ninety (90) days
after receipt of such request or within sixty (60) days after receipt of
such request if the Company is qualified to file a registration statement
on Commission Form S-3, S-2 or any successor or similar short-form
registration statement (collectively, "Commission Form S-3"); provided,
however, that the Company shall not be obligated to effect a Requested
Registration pursuant to this subdivision during the 180 day period
immediately following the commencement of the Company's public offering of
equity securities nor shall the Company be obligated to effect more than
three (3) Requested Registrations under this Section 2(a)(i). Subject to
subdivision (f), the Company may include in such Requested Registration
other securities of the Company for sale, for the Company's account or for
the account of any other person, if and to the extent that the managing
underwriter determines that the inclusion of such additional shares will
not interfere with the orderly sale of the underwritten securities at a
price range acceptable to the requesting Holders. Upon receipt of a
written request pursuant to this subdivision (a) the Company shall
promptly give written notice of such request to all Holders, and all
Holders shall be afforded the opportunity to participate in such request
as follows: The Company will be obligated to include in the Requested
Registration such number of Registrable Securities of any Holder joining
in such request as are specified in a written request by the Holder
received by the Company within 20 days after receipt of such written
notice from the Company.
(ii) In addition to the rights of the Holders under Section 2(a)(i)
above, as a condition to the mandatory conversion of the Series A
Preferred Stock pursuant to the Certificate of Designation designating the
Series A Preferred Stock, the Company shall file and cause to become
effective at the time set forth in the Certificate of Designation a shelf
registration statement on Commission Form S-3 or another appropriate form
pursuant to Rule 415 under the Securities Act or any similar rule that may
be adopted by the Commission, with respect to all the Registrable
Securities requested by such Holders to be included in such shelf
registration statement (each, a "Shelf Registration"). The Company will
use its best efforts to amend such Shelf Registration from time to time at
the request of any Holders to cover additional Registrable Securities held
by such Holders, to keep such Shelf Registration continuously effective
for a period of one year following the mandatory conversion of the Series
A Preferred Stock or, if earlier, until all Registrable Securities covered
thereby have been sold and to take all actions required to permit the sale
of Registrable Securities thereunder. All other provisions of this
Agreement regarding registration procedures shall apply to a Shelf
Registration.
(iii) In the event the Requisite Holders request the assistance of
the Company in order to effect a sale of Registrable Securities under such
Shelf Registration pursuant to an underwritten offering, then (aa) the
Company will use its best efforts to assist in the sale of Registrable
Securities in such underwritten offering under such Shelf Registration as
if such offering were a Requested Registration under this Agreement, (bb)
all Holders shall have a right to participate in such underwritten
offering on the same basis as if such underwritten offering were a
Requested Registration under Section 2(a)(i), with the cutback provisions
of Section 2(f) being applied with respect to such offering and (cc) the
other provisions of this Agreement relating to Requested Registrations
shall apply, insofar as reasonably possible, to such underwritten offering
mutatis mutandis.
(b) Incidental Registration. If the Company for itself or any of
its security holders (unless pursuant to demand registration rights
granted with respect to Other Securities in compliance with this Agreement
if and to the extent that the managing underwriter determines that the
inclusion of Registrable Securities will interfere with the orderly sale
of the underwritten securities at a price range acceptable to the holders
of such Other Securities) shall at any time or times after the date hereof
determine to register under the Securities Act any shares of its capital
stock or other securities (other than: (i) the registration of an offer,
sale or other disposition of securities solely to employees of, or other
persons providing services to, the Company, or any subsidiary pursuant to
an employee or similar benefit plan; or (ii) relating to a merger,
acquisition or other transaction of the type described in Rule 145 under
the Securities Act or a comparable or successor rule, registered on Form
S-4 or similar or successor forms, including resales of such securities),
on each such occasion the Company will notify each Holder of such
determination at least thirty (30) days prior to the filing of such
registration statement, and upon the request of any Holder given in
writing within twenty (20) days after the receipt of such notice, the
Company will use its best efforts as soon as practicable thereafter to
cause any of the Registrable Securities specified by any such Holder to be
included in such registration statement to the extent such registration is
permissible under the Securities Act and subject to the conditions of the
Securities Act (an "Incidental Registration").
(c) Registration Statement Form. The Company shall, if permitted
by law, effect any registration requested under Section 2 by the filing of
a registration statement on Commission Form S-3 and shall use its best
efforts to take any action necessary to maintain its eligibility to
utilize Commission Form S-3 to permit resales as requested by the Holders
with respect to Transactions Involving Secondary Offerings as described in
General Instruction I.B.3 of Commission Form S-3.
(d) Expenses. The Company shall pay all Registration Expenses
incurred in connection with any Incidental Registration and any Requested
Registrations, and those holders of Registrable Securities participating
in such registrations shall bear a pro rata share of any applicable
underwriting discounts and commissions.
(e) Effective Registration Statement. A Requested Registration or
an Incidental Registration requested pursuant to Section 2(a) or Section
2(b), respectively, shall not be deemed to have been effected unless it
has become effective with the Commission. Notwithstanding the foregoing,
a registration statement will not be deemed to have been effected if: (i)
after it has become effective with the Commission, such registration is
interfered with by any stop order, injunction, or other order or
requirement of the Commission or other governmental agency or any court
proceeding for any reason other than a misrepresentation or omission by
any Holder; or (ii) the conditions to closing specified in the purchase
agreement or underwriting agreement entered into in connection with such
registration are not satisfied, other than solely by reason of some act or
omission by any Holder.
(f) Priority in Incidental Registration. If an Incidental
Registration is an underwritten registration initiated by the Company, and
the managing underwriters shall give written advice to the Company that,
in their opinion, market conditions dictate that no more than a specified
maximum number of securities (the "Underwriter's Maximum Number") could
successfully be included in such Incidental Registration, then: (i)
first, the Company shall be entitled to include in such registration that
number of securities which the Company proposes to offer and sell for its
own account in such registration and which does not exceed the
Underwriter's Maximum Number; and (ii) second, the Company will be
obligated and required to include in such registration that number of
shares of Registrable Securities which shall have been requested by the
Holders thereof having registration rights hereunder and shares held by
other holders of securities of the Company entitled to participate in such
Incidental Registration. If less than all of the Registrable Securities
or shares held by other holders entitled to participate in such
registration requested to be included in any such registration by the
holders of such securities can be so included due to these priority
requirements, then each requesting holder's request shall be granted on an
pro rata basis with the other requesting Holders and holders of securities
of the Company having rights to participate in such Incidental
Registration on a pro rata basis.
(g) Notwithstanding anything in paragraphs (a) and (b) of this
Section 2, the Company shall have the right to (i) delay any registration
of Registrable Securities requested pursuant to paragraph (a) or (b) of
this Section 2 or (ii) upon written notice to the Holders, prohibit the
Holders from selling Registrable Securities under the Shelf Registration,
in either case for up to sixty (60) days if such registration or sale, as
applicable, would, in the judgment of the Company's Board of Directors,
substantially interfere with any material transaction being considered at
the time of receipt of the request from the Holders or at the time of the
sale prohibition notice, as applicable; provided however, that the
provisions of this paragraph (g) shall not be invoked by the Company on
more than two occasions during any period of 365 days and shall not be
invoked so as to delay any registration or sale of Registrable Securities
for more than sixty (60) days; and provided further, that the Holders
shall not unreasonably withhold their consent to a delay beyond sixty (60)
days if requested by the Company. The time period during which any sale
prohibition is in effect under this Section 2(g) shall be added to the
time period for which a registration statement is otherwise required to
remain effective under Section 2(a) of this Agreement.
3. Registration Procedures.
(a) If and whenever the Company is required to use its best
efforts to effect the registration of any Registrable Securities under the
Securities Act as provided in Section 2, the Company, as expeditiously as
possible and subject to the terms and conditions of Section 2, will:
(i)prepare and file with the Commission the requisite
registration statement to effect such registration and use its best
efforts to cause such registration to become and remain effective;
(ii)permit any Holder which, in the reasonable judgment of the
Holder, might be deemed to be an underwriter or a controlling person of
the Company, to participate in the preparation of such registration
statement and to require the insertion therein of material, furnished to
the Company in writing, which in the reasonable judgment of such Holder
and its counsel should be included and which is not reasonably objected to
by the Company and its Counsel;
(iii)prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities
Act with respect to the disposition of all securities covered by such
registration statement until the earlier of such time as all of such
securities have been disposed of in accordance with the intended methods
of disposition by the seller or sellers thereof set forth in such
registration statement or the expiration of 180 days after such
registration statement becomes effective;
(iv)furnish to the Holders such number of conformed copies of
such registration statement and of each such amendment and supplement
thereto (in each case including all exhibits), such number of copies of
the prospectus contained in such registration statement (including each
preliminary prospectus and any summary prospectus) and any other
prospectus filed under Rule 424 under the Securities Act, in conformity
with the requirements of the Securities Act, and such other documents, as
the purchaser or any Holder of Registrable Securities to be sold under
such registration statement may reasonably request in order to facilitate
the distribution of such Registrable Securities;
(v)use its best efforts to register or qualify all Registrable
Securities covered by such registration statement under such other United
States state securities or blue sky laws of such jurisdictions as any
Holder of Registrable Securities to be sold under registration statement
shall reasonably request, to keep such registration or qualification in
effect for so long as such registration remains in effect, and take any
other action which may be customary in similar offerings to enable the
Holder of Registrable Securities to be sold under such registration
statement to consummate the disposition in such jurisdictions of the
securities owned by such Holder, except that the Company shall not for any
such purpose be required to (a) qualify generally to do business as a
foreign corporation in any jurisdiction wherein it would not but for the
requirements of this subdivision (v) be obligated to be so qualified, or
(b) subject itself to taxation in any such jurisdiction.
(vi)use its best efforts to cause all Registrable Securities
covered by such registration statement to be registered with or approved
by such other United States state governmental agencies or authorities as
may be necessary to enable the Holder of Registrable Securities to be sold
under such registration statement to consummate the intended disposition
of such Registrable Securities;
(vii)in the event of the issuance of any stop order suspending
the effectiveness of the registration statement, or of any order
suspending or preventing the use of any related prospectus or suspending
the qualification of any Registrable Securities included in such
registration statement for sale in any jurisdiction, the Company shall use
its best efforts promptly to obtain the withdrawal of such order;
(viii)use it best efforts to furnish to the Holders of
Registrable Securities to be sold under such registration statement (1) an
opinion, dated the effective date of the registration statement, of the
independent counsel representing the Company for the purposes of such
registration, addressed to the underwriters, if any, and to the Holders
making such request, stating that such registration statement has become
effective under the Securities Act and that (i) to the best knowledge of
such counsel, no stop order suspending the effectiveness thereof has been
issued and no proceedings for that purpose have been instituted or are
pending or contemplated under the Securities Act; (ii) the registration
statement, the related prospectus, and each amendment or supplement
thereto, comply as to form in all material respects with the requirements
of the Securities Act and the applicable rules and regulations of the
Commission thereunder (except that such counsel need express no opinion as
to financial statements contained therein); (iii) such counsel has no
reason to believe that either the registration statement or the
prospectus, or any amendment or supplement thereto, contains any untrue
statement of a material fact or omits a material fact necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading; (iv) the descriptions in the registration
statement or the prospectus, or any amendment or supplement thereto, of
all legal and governmental matters and contracts and other legal documents
or instruments are accurate and fairly present the information required to
be shown; and (v) such counsel does not know of any legal or governmental
proceedings, pending or contemplated, required to be described in the
registration statement or prospectus, or any amendment or supplement
thereto, which are not described as required nor of any contracts or
documents or instruments of a character required to be described in the
registration statement or prospectus, or any amendment or supplement
thereto or to be filed as exhibits to the registration statement which are
not described and filed as required; and (2) a letter, dated the effective
date of the registration statement, from the independent certified public
accountants of the Company, addressed to the underwriters, if any, and to
the Holders making such request, stating that they are independent
certified public accountants within the meaning of the Securities Act and
that in the opinion of such accountants, the financial statements and
other financial data of the Company included in the registration statement
or the prospectus, or any amendment or supplement thereto, comply as to
form in all material respects with the applicable accounting requirements
of the Securities Act.
Such opinion of counsel shall additionally cover such legal
matters with respect to the registration in respect of which such opinion
is being given as the Holders may reasonably request. Such letter from
the independent certified public accountants shall additionally cover such
other financial matters (including information as to the period ending not
more than five business days prior to the date of such letter) with
respect to the registration in respect of which such letter is being given
as the Holders may reasonably request.
(ix)immediately notify the Holders of Registrable Securities
included in such registration statement at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of
the happening of any event as result of which the prospectus included in
such registration statement, as then in effect, includes an untrue
statement of material fact or omits to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made,
and at the request of the Holders promptly prepare and furnish to the
Holders a reasonable number of copies of a supplement to or an amendment
of such prospectus as may be necessary so that, as thereafter delivered to
the purchasers of such securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances under which they were
made;
(x)otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to
its security holders, as soon as reasonably practicable, an earnings
statement covering the period of at least twelve months, but not more than
eighteen months, beginning with the first full calendar month after the
effective date of such registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act and
Rule 158 thereunder, and not file any amendment or supplement to such
registration statement or prospectus to which any Holder shall have
reasonably objected in writing on the grounds that such amendment or
supplement does not comply in all material respects with the requirements
of the Securities Act or of the rules or regulations thereunder, having
been furnished with a copy thereof at least two business days prior to the
filing thereof to the extent reasonably possible;
(xi)provide a transfer agent for all Registrable Securities
covered by such registration statement not later than the effective date
of such registration statement;
(xii)use its best efforts to cause to be quoted or listed all
Registrable Securities covered by such registration statement on NASDAQ
and any securities exchange on which any of the Registrable Securities are
then quoted or listed; and
(xiii)otherwise use its best efforts to achieve the objectives
of the Holders including, without limitation, participation by senior
management in presentations to prospective purchasers and other marketing
activities consistent with those customarily conducted by issuers in
connection with primary offerings of securities.
(b) As a condition to the Company's obligation under this Section
with respect to any Holder, the Company may require such Holder of
Registrable Securities to be sold under such registration statement, at
the Company's expense, to furnish the Company with such information and
undertakings as it may reasonably request regarding such Holder and the
distribution of such securities as the Company may from time to time
reasonably request in writing.
(c) Each Holder, by execution of this Agreement, agrees (A) that
upon receipt of any notice of the Company of the happening of any event of
the kind described in subdivision (a)(ix) of this Section 3, such Holder
will forthwith discontinue its disposition of Registrable Securities
pursuant to the registration statement relating to such Registrable
Securities until the receipt by such Holder of the copies of the
supplemented or amended prospectus contemplated by subdivision (a)(ix) of
this Section 3 and, if so directed by the Company, will deliver to the
Company all copies other than permanent file copies, then in possession of
the Holders of the prospectus relating to such Registrable Securities
current at the time of receipt of such notice and (B) that it will
immediately notify the Company, at any time when a prospectus relating to
the registration of such Registrable Securities is required to be
delivered under the Securities Act, of the happening of any event as a
result of which information previously furnished by such Holder to the
Company for inclusion in such prospectus contains an untrue statement of a
material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made. In the event the
Company or any such Holder shall give any such notice, the period referred
to in subdivision (a)(iii) of this Section 3 shall be extended by a number
of days equal to the number of days during the period from and including
the giving of notice pursuant to subdivision (a)(ix) of this Section 3 to
and including the date when such Holder shall have received the copies of
the supplemented or amended prospectus contemplated by subdivision (a)(ix)
of this Section 3.
4. Underwritten Offerings.
(a) Underwritten Offering. In connection with any underwritten
offering pursuant to a registration requested under Section 2(a), the
Company will enter into an underwriting agreement with the underwriters
for such offering, such agreement to be in form and substance reasonably
satisfactory to all Holders requesting such registration and such Holders'
underwriters in their reasonable judgment and to contain such
representations and warranties by the Company and such other terms as are
customarily contained in agreements of that type, including, without
limitation, indemnities to the effect and to the extent provided in
Section 6. Each such Holder shall be a party to such underwriting
agreement and may, at its option, require that any or all of the
representations and warranties by, and the other agreements on the part
of, the Company to and for the benefit of such underwriters shall also be
made to and for the benefit of each such Holder and that any or all of the
conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of each
such Holder. No Holder requesting such registration shall be required to
make any representations or warranties to or agreements with the Company
or the underwriters other than representations, warranties or agreements
regarding such Holder and its intended method of distribution and any
other representation required by law.
(b) Selection of Underwriters. If a Requested Registration
pursuant to Section 2(a) involves an underwritten offering, then the
Company shall select the underwriter from underwriting firms of national
reputation, with expertise in comparable offerings by companies engaged in
businesses similar to that of the Company, subject to the approval of the
Holders of a majority of the Registrable Securities to be included in such
registration, which approval shall not be unreasonably withheld.
(c) Holdback Agreements. Each Holder agrees, if so reasonably
required by the managing underwriter in a registration pursuant to Section
2, not to effect any public sale or distribution of Registrable Securities
or sales of such Registrable Securities pursuant to Rule 144 or Rule 144A
under the Securities Act, during the seven (7) days prior to and the 180
days after any firm commitment underwritten registration pursuant to
Section 2 has become effective (except as part of such underwritten
registration) or, if the managing underwriter advises the Company that, in
its opinion, no such public sale or distribution should be effected for a
period of not more than 180 days after such underwritten registration in
order to complete the sale and distribution of securities included in such
registration and the Company gives notice to such effect to such Holders
of such advice, each Holder shall not effect any public sale or
distribution of Registrable Securities or sales of such Registrable
Securities pursuant to Rule 144 or Rule 144A under the Securities Act
during such period after such underwritten registration, except as part of
such underwritten registration, whether or not such Holder participates in
such registration.
5. Preparation, Reasonable Investigation.
In connection with the preparation and filing of each registration
statement under the Securities Act other than pursuant to an underwritten
offering, the Company will give the Holders of Registrable Securities to
be sold under such registration statement, the underwriters, if any, and
their respective counsel and accountants, drafts and final copies of such
registration statement, each prospectus included therein or filed with the
Commission and each amendment thereof or supplement thereto, at least 5
business days prior to the filing thereof with the Commission, and will
give each of them such access to its books and records and such
opportunities to discuss the business of the Company with its officers and
the independent public accountants who have certified its financial
statements as shall be necessary, in the opinion of such Holders and such
underwriters' respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act.
6. Indemnification and Contribution.
(a) Indemnification by the Company. In the event of any
registration under the Securities Act pursuant to Section 2 of any
Registrable Securities covered by such registration, the Company will, and
hereby does, indemnify and hold harmless each Holder of Registrable
Securities to be sold under such registration statement, each such
Holder's legal counsel, each other person who participates as an
underwriter in the offering or sale of such securities (if so required by
such underwriter as a condition to including the Registrable Securities of
the Holders in such registration) and each other person, if any, who
controls any such Holder or any such underwriter within the meaning of the
Securities Act (collectively, the "Indemnified Parties"), against any
losses, claims, damages or liabilities, joint or several, to which the
Holders or underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened,
in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any
registration statement under which such securities were registered under
the Securities Act, any preliminary prospectus, final prospectus or
summary prospectus contained therein or any document incorporated therein
by reference, or any amendment or supplement thereto, or any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or
arise out of any violation by the Company of any rule or regulation
promulgated under the Securities Act or state securities law applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, and the Company will reimburse the
Indemnified Parties for any legal or any other expenses reasonably
incurred by them in connection with investigating or defending any such
loss, claim, liability, action or proceeding; provided, however, that the
Company shall not be liable to any Indemnified Party in any such case to
the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based upon
any untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement
in reliance upon and in conformity with written information furnished to
the Company by such Indemnified Party.
(b) Indemnification by the Holders. The Company may require, as a
condition to including any Registrable Securities of any person or entity
in any registration statement filed pursuant to Section 2, that the
Company shall have received an undertaking reasonably satisfactory to it
from such person or entity to indemnify and hold harmless (in the same
manner and to the same extent as set forth in subdivision (a) of this
Section 6) the Company, each director of the Company, each officer of the
Company and each other person, if any, who controls the Company within the
meaning of the Securities Act, with respect to any statement or alleged
statement in or omission or alleged omission from such registration
statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, if,
and only if, such statement or alleged statement or omission or alleged
omission was made in reliance upon and in conformity with information
furnished in writing to the Company directly by such person or entity
specifically for use therein; provided, however, that the obligation of
any Holder hereunder shall be limited to an amount equal to the proceeds
received by such Holder upon the sale of Registrable Securities sold in
the offering covered by such registration.
(c) Notices of Claims, etc. Promptly after receipt by an
Indemnified Party of notice of the commencement of any action or
proceeding involving a claim referred to in the preceding subdivisions of
this Section 6, such Indemnified Party will, if a claim in respect thereof
is to be made against a party required to provide indemnification (an
"Indemnifying Party"), give written notice to the latter of the
commencement of such action, provided, however, that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligation under the preceding subdivisions of
this Section 6, except to the extent that the Indemnifying Party is
actually prejudiced by such failure to give notice. In case any such
action is brought against an Indemnified Party, unless in such Indemnified
Party's reasonable judgment a conflict of interest between such
Indemnified and indemnifying parties may exist in respect of such claim,
the Indemnifying Party shall be entitled to participate in and to assume
the defense thereof, jointly with any other Indemnifying Party similarly
notified to the extent that it may wish, with counsel reasonably
satisfactory to such Indemnified Party, and after notice from the
Indemnifying Party to such Indemnified Party of its election so to assume
the defense thereof, the Indemnifying Party shall not be liable to such
Indemnified Party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof other than reasonable
costs of investigation. No Indemnifying Party shall consent to entry of
any judgment or enter into any settlement without the consent of the
Indemnified Party which does not include as an unconditional term thereof
the giving by the claimant or plaintiff to such Indemnified Party of a
release from all liability in respect to such claim or litigation.
(d) Other Indemnification. Indemnification similar to that
specified in the preceding subdivisions of this Section 6 (with
appropriate modifications) shall be given by the Company and each Holder
of Registrable Securities included in any registration statement with
respect to any required registration or other qualification of securities
under any Federal or state law or regulation of any governmental
authority, other than the Securities Act.
(e) Indemnification Payment. The indemnification required by this
Section 6 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received
or expense, loss, damage or liability is incurred.
(f) Survival of Obligations. The obligations of the Company and
of the Holders under this Section 6 shall survive the completion of any
offering of Registrable Securities under this Agreement.
(g) Contribution. If the indemnification provided for in this
Section 6 is unavailable or insufficient to hold harmless an Indemnified
Party, then each Indemnifying Party shall contribute to the amount paid or
payable to such Indemnified Party as a result of the losses, claims,
damages or liabilities referred to in this Section 6 an amount or
additional amount, as the case may be, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party or
parties on the one hand and the Indemnified Party on the other in
connection with the statements or omissions which resulted in such losses,
claims, demands or liabilities as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Indemnifying Party or parties on
the one hand or the Indemnified Party on the other and the parties'
relative, intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The amount paid to
an Indemnified Party as a result of the losses, claims, damages or
liabilities referred to in the first sentence of this Section 6(g) shall
be deemed to include any legal or other expenses reasonably incurred by
such Indemnified Party in connection with investigating or defending any
action or claim which is the subject of this Section 6. No person guilty
of fraudulent misrepresentation within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
7. Covenants Relating to Rule 144.
With a view to making available the benefits of certain rules and
regulations of the Commission which may at any time permit the sale of
securities of the Company to the public without registration after such
time as a public market exists for the Common Stock of the Company, the
Company agrees:
(a) to make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all
times after the effective date of the first registration under the
Securities Act filed by the Company for an offering of its securities
to the general public;
(b) to use its best efforts to then file with the Commission in a
timely manner all reports and other documents required of the Company
under the Securities Act and the Exchange Act, as amended (at any time
after it has become subject to such reporting requirements); and
(c) so long as a Holder owns any Registrable Securities, to
furnish to the Holder forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of said
Rule 144 (at any time after 90 days after the effective date of the
first registration statement filed by the Company for an offering of
its securities to the general public), and of the Securities Act and
the Exchange Act (at any time after it has become subject to such
reporting requirements) a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents of the
Company as a Holder may reasonably request in availing itself of any
rule or regulation of the Commission allowing a Holder to sell any such
securities without registration.
8. Other Registration Rights.
The Company represents and warrants that it has not granted any
registration rights to any Person other than as described in the Purchase
Agreement. The Company shall not grant to any Person any registration
rights more favorable than or inconsistent with any of those contained
herein, so long as any of the registration rights under this Agreement
remain in effect.
9. Miscellaneous.
(a) Specific Performance. The parties hereto acknowledge that
there may be no adequate remedy at law if any party fails to perform any
of its obligations hereunder and that each party may be irreparably harmed
by any such failure, and accordingly agree that each party, in addition to
any other remedy to which it may be entitled at law or in equity, shall be
entitled to compel specific performance of the obligations of any other
party under this Agreement in accordance with the terms and conditions of
this Agreement.
(b) Notices. All demands, requests, notices and other
communications required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given if
delivered personally or sent by United States first class mail, postage
prepaid, and to the parties hereto at the following address or at such
other address as any party hereto shall hereafter specify by notice to the
other party hereto:
(i) if to the Company, addressed to:
CTC Communications Corp.
360 Second Avenue
Waltham, MA 02154
Attention: Steven Jones and John Pittenger
Facsimile No.: 617-890-1613
with a copy to:
Ropes & Gray
One International Place
Boston, MA 02110-2624
Attention: Mary Weber, Esq.
Facsimile No.: 617-951-7050
Leonard R. Glass, Esq.
Law Offices of Leonard R. Glass, P.A.
45 Central Avenue
P.O. Box 579
Tenafly, NJ 07602
Facsimile No.: 201-894-1718
(ii) if to the Holders, addressed to them at:
Spectrum Equity Investors
One International Place
29th Floor
Boston, MA 02110
Attention: Kevin J. Maroni
Facsimile No.: 617-464-4601
with a copy to:
Edwards & Angell
101 Federal Street
Boston, MA 02110
Attention: Stephen O. Meredith, Esq.
Facsimile No.: 617-439-4170
Except as otherwise provided herein, all such demands, requests, notices
and other communications shall be deemed to have been received on the date
of personal delivery thereof or on the third business day after the
mailing thereof.
(c) Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of Massachusetts, without
regard to conflicts of law principles thereof.
(d) Headings. The descriptive headings of the several sections
and paragraphs of this Agreement are inserted for convenience only, and do
not constitute a part of this Agreement and shall not affect in any way
the meaning or interpretation of this Agreement.
(e) Entire Agreement; Amendments. This Agreement and the other
writings referred to herein or delivered pursuant hereto which form a part
hereof contain the entire understanding of the parties with respect to its
subject matter. This Agreement supersedes all prior agreements and
understandings between the parties with respect to its subject matter.
This Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and
either retroactively or prospectively) only by a written instrument duly
executed by the Company and the Requisite Holders. Each Holder of any
Registrable Securities at the time or thereafter outstanding shall be
bound by an amendment or waiver authorized by this Section 9(e), whether
or not any such Registrable Securities shall have been marked to indicate
such consent.
(f) Assignability. This Agreement and all of the provisions
hereof will be assigned, without the consent of the Company, by any Holder
to, and shall inure to the benefit of, any purchaser, transferee or
assignee of any Series A Preferred Stock, Warrants, or Registrable
Security to the extent of the securities so transferred or assigned,
provided that (i) such purchaser, transferee or assignee is an Affiliate
or beneficial owner of the seller, transferor or assignor, (ii) after
giving effect to such sale, transfer or assignment, the purchaser,
transferee or assignee holds Series A Preferred Stock, Warrants or
Registrable Securities representing, upon conversion and exercise thereof,
at least 50,000 shares of Common Stock (as adjusted to give effect to any
stock dividends or stock splits), or (iii) the seller, transferor or
assignor does not affirmatively restrict in writing the transfer or
assignment of rights hereunder with respect to such securities. However,
the Company shall not be required to recognize any such purchaser,
transferee or assignee as a Holder under this Agreement unless and until
either (i) such person becomes the holder of record of Series A Preferred
Stock, Warrants, or Registrable Securities or (ii) the Company receives
written notice of such purchase, transfer or assignment and a written
agreement by the purchaser, assignee or transferee to be bound by the
provisions of this Agreement.
(g) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(h) Stock Splits, Etc. If the Company at any time subdivides (by
any stock split, stock dividend, recapitalization or otherwise) its
outstanding shares of Common Stock into a greater number of shares or if
the outstanding shares of Common Stock shall be combined (by reverse stock
split or otherwise) into a smaller number of shares, all numbers,
percentages, computations and the like in this Agreement shall be deemed
modified as necessary to give appropriate effect to such subdivision or
combination.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
CTC COMMUNICATIONS CORP.
By:
Name:
Title:
SPECTRUM EQUITY INVESTORS II, L.P.
By Spectrum Equity Associates II,
L.P., its general partner
By _________________________________
Kevin J. Maroni, a General Partner
DOEG HILL I, LLC
By: _________________________________
Dennis Patrick, Member
______________________________________
Matthew N. Mochary
______________________________________
Robert A. Nicholson
______________________________________
Benjamin Coughlin
______________________________________
Fred Wang
______________________________________
Michael J. Kennealy
______________________________________
Shawn Colo
______________________________________
Kristin Cashin
Exhibit 10.3
WARRANT
CTC Communications Corp.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A PRIVATE
PLACEMENT, WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND MAY NOT BE SOLD, ASSIGNED, PLEDGED OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT COVERING THE TRANSFER OR, SUBJECT TO THE PROVISIONS OF THE
SECURITIES PURCHASE AGREEMENT DATED AS OF APRIL 10, 1998 AMONG THE ISSUER
AND THE PURCHASERS NAMED THEREIN, AS AMENDED FROM TIME TO TIME, AN OPINION
OF COUNSEL, REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION UNDER
THE ACT IS NOT REQUIRED.
Date of Issuance: April 10, 1998 Certificate No. W-__
FOR VALUE RECEIVED, CTC Communications Corp., a Massachusetts
corporation (the "Corporation"), hereby grants to ______________, or its
registered assigns (the "Registered Holder") the right to purchase from
the Corporation _________ shares of Common Stock at a price of $9.00 per
share, subject to adjustment as provided herein. This Warrant is one of
the warrants (together with any replacements or subdivisions thereof, the
"Warrants") issued pursuant to the terms of the Securities Purchase
Agreement, dated as of April 10, 1998 (the "Purchase Agreement"), among
the Corporation and the Purchasers named therein. Certain capitalized
terms used herein are defined in Section 8 hereof. Capitalized terms used
herein but not otherwise defined herein shall have the meanings set forth
for such terms in the Purchase Agreement.
This Warrant is subject to the following provisions:
Section 1. Exercise of Warrant.
A. Exercise Period. The Registered Holder may exercise, in whole
or in part, the purchase rights represented by this Warrant at any time
and from time to time after the Date of Issuance to and including the
fifth (5th) anniversary of the Date of Issuance (the "Exercise Period").
B. Exercise Procedure.
(i) This Warrant or any part hereof specified by the Registered
Holder shall be deemed to have been exercised when the Corporation has
received all of the following items (the "Exercise Time"):
(a) a completed Exercise Agreement, as described in Section
1C below, executed by the Person exercising all or part of the rights
represented by this Warrant;
(b) this Warrant or an affidavit as provided in Section 10
hereof;
(c) the aggregate Exercise Price for the number of shares of
Common Stock being purchased through such exercise, such aggregate
Exercise Price to be payable by any combination of (1) a bank cashier's
check or wire transfer in immediately available funds to the Corporation
in an amount equal to the product of the Exercise Price multiplied by the
number of shares of Common Stock being purchased with the proceeds of such
wire transfer or (2) a written notice to the Corporation that the Holder
is exercising the Warrants (or a portion thereof) and as consideration of
such exercise is authorizing the Corporation to withhold from issuance a
number of shares of Common Stock issuable upon exercise of this Warrant
which, when multiplied by the sum of (x) the Market Price Per Share of the
Common Stock minus (y) the Exercise Price is equal to the aggregate
Exercise Price for the number of shares of Common Stock being purchased
with such consideration (in which event such withheld shares shall no
longer be issuable under this Warrant); and
(d) if this Warrant is not registered in the name of the
original Registered Holder, an Assignment or Assignments substantially in
the form set forth in Exhibit II hereto evidencing the assignment of this
Warrant to the Purchaser.
(ii) Certificates for shares of Common Stock purchased upon
exercise of all or part of this Warrant shall be delivered by the
Corporation to the Purchaser within ten (10) business days after the date
of the Exercise Time. Unless this Warrant has expired or all of the
purchase rights represented hereby have been exercised, the Corporation
shall prepare a new Warrant, substantially identical hereto, representing
the rights formerly represented by this Warrant which have not expired or
been exercised and shall, within such ten (10) business day period,
deliver such new Warrant to the Person designated for delivery in the
Exercise Agreement.
(iii) The Common Stock issuable upon the exercise of all or part of
this Warrant shall be deemed to have been issued to the Purchaser at the
Exercise Time, and the Purchaser shall be deemed for all purposes to have
become the record holder of such Common Stock at the Exercise Time.
(iv) The issuance of certificates for shares of Common Stock upon
exercise of all or part of this Warrant shall be made without charge to
the Registered Holder or the Purchaser for any issuance tax in respect
thereof or other cost incurred by the Corporation in connection with such
exercise and the related issuance of shares of Common Stock. Each share
of Common Stock issuable upon exercise of all or part of this Warrant
shall be fully paid and nonassessable and free from all Liens and charges
with respect to the issuance thereof.
(v) The Corporation shall from time to time take all such action
as may be necessary to assure that the par value per share of the unissued
Common Stock issuable upon exercise of this Warrant is at all times equal
to or less than the Exercise Price, on a per share basis.
(vi) The Corporation shall assist and cooperate with any Registered
Holder or Purchaser required to make any governmental filings or to obtain
any governmental approvals prior to or in connection with any exercise of
all or part of this Warrant (including, without limitation, making any
filings required to be made by the Corporation).
(vii) Notwithstanding any other provision hereof, if an exercise of
any portion of this Warrant is to be made in connection with a public
offering or Organic Change, the exercise of any portion of this Warrant
may, at the election of the holder hereof, be conditioned upon the
consummation of the public offering or Organic Change, in which case such
exercise shall not be deemed to be effective until immediately prior to
the consummation of such public offering or Organic Change.
(viii) The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock,
solely for the purpose of issuance upon the exercise of the Warrants, such
number of shares of Common Stock as are issuable upon the exercise of all
outstanding Warrants. The Corporation shall take all such actions as may
be necessary to assure that all such shares of Common Stock may be so
issued without violation of any applicable law or governmental regulation
applicable to the Company or any requirements of NASDAQ or any securities
exchange upon which shares of Common Stock may be listed or quoted (except
for official notice of issuance which shall be immediately delivered by
the Corporation upon each such issuance).
C. Exercise Agreement. The Exercise Agreement to be executed in
connection with the exercise of this Warrant shall be substantially in the
form set forth in Exhibit I hereto, except that if the shares of Common
Stock are not to be issued in the name of the Person in whose name this
Warrant is registered, the Exercise Agreement shall also state the name of
the Person to whom the certificates for the shares of Common Stock are to
be issued.
Section 2. Adjustment of Number of Shares and Exercise Price.
A. The number of shares of Common Stock obtainable upon exercise
of this Warrant and the Exercise Price shall be subject to adjustment from
time to time as provided in this Section 2.
B. Exercise Price. The initial exercise price shall be nine
dollars ($9.00) per share of Common Stock, which may be adjusted from time
to time hereafter (as so adjusted, the "Exercise Price") . If and
whenever on or after the original date of issuance of the Warrants the
Corporation issues or sells, or in accordance with Section 2(C) is deemed
to have issued or sold, any shares of its Common Stock or Convertible
Securities for a consideration per share less than the Exercise Price in
effect immediately prior to the time of such issue or sale, then upon such
issue or sale, the Exercise Price shall be reduced to an amount determined
by dividing (a) the sum of (1) the product derived by multiplying (i) the
Exercise Price in effect immediately prior to such issue or sale times
(ii) the number of shares of Common Stock Deemed Outstanding immediately
prior to such issue or sale, plus (2) the consideration, if any, received
(or deemed received pursuant to Section 2(C)(ii) below) by the Corporation
upon such issue or sale, by (b) the number of shares of Common Stock
Deemed Outstanding immediately after such issue or sale.
C. Effect on Exercise Price of Certain Events. For purposes of
determining the adjusted Exercise Price under Section 2, the following
shall be applicable:
(i) Issuance of Convertible Securities. If the Corporation in any
manner issues or sells any Convertible Securities, whether or not the
rights to exchange or convert any such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock is
issuable upon such conversion or exchange is less than the Exercise Price
in effect immediately prior to the time of such issue or sale, then the
maximum number of shares of Common Stock issuable upon exercise,
conversion or exchange of such Convertible Securities shall be deemed to
be outstanding and to have been issued and sold by the Corporation at the
time of the issuance or sale of such Convertible Securities for such price
per share. For the purposes of this paragraph, the "price per share for
which Common Stock is issuable" shall be determined by dividing (a) the
total amount received or receivable by the Corporation as consideration
for the issue or sale of such Convertible Securities, plus the cumulative
minimum aggregate amount of additional consideration, if any, payable to
the Corporation upon the exercise, conversion or exchange thereof and, if
applicable, the exercise, conversion and exchange of any other Convertible
Securities that such Convertible Securities may be converted into or
exchanged for, by (b) the total maximum number of shares of Common Stock
issuable upon the exercise, conversion or exchange of all such Convertible
Securities. No further adjustment of the Exercise Price shall be made
when Common Stock and, if applicable, any other Convertible Securities,
are actually issued upon the exercise, conversion or exchange of such
Convertible Securities.
(ii) Change in Exercise Price or Conversion Rate. If the
additional consideration payable to the Corporation upon the exercise,
conversion or exchange of any Convertible Securities, or the rate at which
any Convertible Securities are convertible into or exchangeable for Common
Stock should change at any time, the Exercise Price in effect at the time
of such change shall be readjusted to the Exercise Price that would have
been in effect at such time had such Convertible Securities that are still
outstanding provided for such changed additional consideration or changed
conversion rate, as the case may be, at the time such Convertible
Securities were initially granted, issued or sold; and on the termination
date of any right to exercise, convert or exchange such Convertible
Securities without such right having been duly exercised, the Exercise
Price then in effect hereunder shall be increased to the Exercise Price
that would have been in effect at the time of such termination had such
Convertible Securities, to the extent outstanding immediately prior to
such termination, never been issued.
(iii) Exceptions for Excluded Securities. Notwithstanding the
foregoing, no adjustments to the Exercise Price shall be made under
Section 2 with respect to the issuance of any Excluded Securities.
D. Subdivision or Combination of Common Stock. If the
Corporation at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) its outstanding shares of Common Stock into
a greater number of shares, the Exercise Price in effect immediately prior
to such combination shall be proportionately reduced, and conversely, in
the event the outstanding shares of Common Stock shall be combined (by
reverse stock split or otherwise) into a smaller number of shares, the
Exercise Price in effect immediately prior to such combination shall be
proportionately increased. In any such event all numbers, percentages,
computations and the like in this Warrant shall be deemed modified as
necessary to give appropriate effect to such subdivision or combination.
E. Adjustment in Number of Shares Issuable. Upon each adjustment
in the Exercise Price pursuant to any provisions of Section 2(D), the
number of shares of Common Stock purchasable hereunder shall be adjusted,
to the nearest whole share, to the product obtained by multiplying such
number of shares purchasable immediately prior to the event giving rise to
such adjustment in the Exercise Price by a fraction, the numerator of
which shall be the Exercise Price immediately prior to such adjustment and
the denominator of which shall be the Exercise Price in effect immediately
thereafter.
F. Certain Events. If an event not specified in this Section 2
occurs that has substantially the same economic effect on the Warrants as
those specifically enumerated, then this Section 2 shall be construed
liberally, mutatis mutandis, in order to give the Warrants the intended
benefit of the protections provided under this Section 2. In such event,
the Corporation's Board of Directors shall make an appropriate adjustment
in the Exercise Price so as to protect the rights of the holders of the
Warrants; provided that no such adjustment shall increase the Exercise
Price as otherwise determined pursuant to this Section 2 or decrease the
number of shares of Common Stock issuable upon exercise of this Warrant.
G. Notices.
(i) Immediately upon any adjustment of the Exercise Price, the
Corporation shall give written notice thereof to the Registered Holder
of this Warrant, setting forth in reasonable detail and certifying the
calculation of such adjustment.
(ii) The Corporation shall give written notice to the Registered
Holder of this Warrant at least twenty (20) days prior to the date on
which the Corporation closes its books or takes a record (a) with
respect to any dividend or distribution upon Common Stock, (b) with
respect to any pro rata subscription offer to holders of Common Stock
or (c) for determining rights to vote with respect to any dissolution
or liquidation.
Section 3. Reorganization, Reclassification, Consolidation, Merger
or Sale. Any recapitalization, reorganization, reclassification,
consolidation, merger (other than a consolidation or merger in which the
Company is the surviving corporation and which does not result in the
reclassification of any Common Stock) or sale of all or substantially all
of the Corporation's assets to another Person or other transaction which
is effected in such a way that holders of Common Stock are entitled to
receive (either directly or upon subsequent liquidation) stock,
securities, cash or assets with respect to or in exchange for Common Stock
is referred to herein as an "Organic Change." Prior to the consummation
of any Organic Change, the Corporation shall make appropriate provision to
insure that each of the holders of the Warrants shall thereafter have the
right to acquire and receive in lieu of or in addition to (as the case may
be) the shares of Common Stock immediately theretofore issuable upon the
exercise of such holder's Warrant, such shares of stock, securities, cash
or assets as may be issued or payable with respect to or in exchange for
the number of shares of Common Stock immediately theretofore issuable upon
exercise of such holder's Warrant had such Organic Change not taken place.
In any such case, the Corporation shall make appropriate provision with
respect to such holders' rights and interests to insure that the
provisions of Section 2 and Section 3 hereof shall thereafter be
applicable to the Warrants. The Corporation shall not effect any such
consolidation, merger or sale, unless prior to the consummation thereof,
the successor entity (if other than the Corporation) resulting from
consolidation or merger or the entity purchasing such assets assumes by
written instrument the obligation to deliver to each such holder such
shares of stock, securities, cash or assets as, in accordance with the
foregoing provisions, such holder may be entitled to acquire.
Section 4. Dividends. If the Corporation declares or pays a
dividend upon the Common Stock, except for a stock dividend payable in
shares of Common Stock, then the Exercise Price shall be reduced, on a
cumulative basis, by an amount equal to the amount of such dividend which
would have been paid to the holder of each share of Common Stock had all
Warrants issued under the Purchase Agreement been exercised prior to the
record date for payment of such dividend, until such Exercise Price has
been reduced to zero, and thereafter the Corporation shall pay to the
Registered Holder of this Warrant at the time of payment thereof an amount
equal to such dividend.
Section 5. Purchase Rights. If at any time the Corporation grants,
issues or sells any rights to purchase stock, warrants, securities or
other property pro rata to the holders of Common Stock (the "Purchase
Rights"), then the Registered Holder of this Warrant shall be entitled to
obtain, upon the same terms on which holders of Common Stock are to
receive such Purchase Rights, the aggregate Purchase Rights which such
holder could have acquired if such holder had held the number of shares of
Common Stock issuable upon complete exercise of this Warrant immediately
before the date on which a record is taken for the grant, issuance or sale
of such Purchase Rights, or, if no such record is taken, the date as of
which the record holders of Common Stock are to be determined for the
grant, issue or sale of such Purchase Rights.
Section 6. Transfer Restriction.
The Warrants are subject to the transfer restrictions in Section 4.8
of the Purchase Agreement.
Section 7. Certificates, Notices and Consents.
A. Certificates. Upon the occurrence of any event requiring
adjustments of the number of shares subject to this Warrant pursuant to
Section 2, the Corporation shall mail to the Registered Holder (by
registered or certified mail, postage prepaid) a certificate signed by the
President or a Vice President and by the Treasurer or an Assistant
Treasurer of the Corporation, setting forth in reasonable detail the
events requiring the adjustment and the method by which such proposed
adjustment was calculated, specifying the adjusted number of shares
subject to this Warrant after giving effect to the proposed adjustment and
the number of shares of Common Stock to be issued pursuant to Section 2
hereof.
B. Notice. If the Corporation after the Date of Issuance shall
propose to: (i) pay any dividend payable in stock to the holders of Common
Stock or to make any other distribution to the holders of Common Stock or
any extraordinary dividend directly or indirectly attributable to proceeds
from the sale or other disposition of a significant business or asset of
the Corporation; (ii) offer to the holders of Common Stock rights to
subscribe for or purchase any additional shares of any class of stock or
any other rights or options; (iii) effect any reclassification except the
subdivision or combination of shares of outstanding Common Stock; (iv)
effect any Organic Change or sale transaction described in Section 2B or
the liquidation, dissolution or winding up of the Corporation; or (v)
engage in any diluting event not otherwise mentioned in this Section 6B,
then, in each such case, the Corporation shall mail (by registered or
certified mail, postage prepaid) to the Registered Holder notice of such
proposed action, which shall specify the date on which the books of the
Corporation shall close, or a record date shall be established, for
determining holders of Common Stock entitled to receive such stock
dividends or other distribution of such rights or options, or the date on
which such reclassification, reorganization, consolidation, merger, sale,
transfer, other disposition, liquidation, dissolution or winding up shall
take place or commence, as the case may be, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to
receive securities or other property deliverable upon such action, if any
such date is to be fixed. Such notice shall be mailed, in the case of any
action covered by clauses (i), (ii) or (v) above, at least 20 days prior
to the record date for determining holders of Common Stock for purposes of
receiving such payment or offer, and, in the case of any action covered by
clause (iii) above, at least 20 days prior to the date upon which such
action takes place, and, in the case of any action covered by clause (iv)
above, at least 20 days prior to the date on which the Corporation closes
its books or takes a record for determining rights to vote with respect to
any event covered by clause (iv) and 20 days prior to any record date to
determine holders of Common Stock entitled to receive such securities or
other property.
C. Failure and Defects. Failure to file any certificate or
notice or to mail any notice, or any defect in any certificate or notice,
pursuant to this Section 6, shall not affect the legality or validity of
the adjustment of the Exercise Price and/or number of shares of Common
Stock subject to this Warrant pursuant to Section 2.
Section 8. Definitions. The following terms have meanings set
forth below:
"Certificate of Designation" shall mean the Certificate of
Designation of Series A Convertible Preferred Stock in the form attached
to the Purchase Agreement as Exhibit B.
"Common Stock" means, collectively, the Corporation's Common Stock,
par value $.01 per share.
"Convertible Securities" shall have the meaning set forth in the
Certificate of Designation.
"Date of Issuance" means the date of initial issuance of this
Warrant pursuant to the Purchase Agreement (as of immediately after such
issuance) regardless of the number of times new certificates representing
the unexpired and unexercised rights formerly represented by this Warrant
shall be issued.
"Excluded Securities" shall have the meaning set forth in the
Certificate of Designation.
"Exercise Period" shall have the meaning set forth in Section 1(A)
hereof.
"Exercise Price" shall have the meaning set forth in Section 2
hereof.
"Exercise Time" shall have the meaning set forth in Section 1(B)
hereof.
"Majority Warrant Holders" means, at any time, the holders of
Warrants representing the right to purchase a majority of the aggregate
number of shares of unissued Common Stock then issuable upon exercise of
all Warrants.
"Market Price Per Share of Common Stock" means the average closing
bid price (or closing sales price, as applicable) per share for the
Company's Common Stock on NASDAQ (or such national stock exchange upon
which the Corporation's Common Stock is then listed), for a period of 30
consecutive trading days ending on the last trading day immediately
preceding the Exercise Time.
"Organic Change" shall have the meaning set forth in Section 3
hereof.
"Person" means an individual, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a government or
any department or agency thereof.
"Purchaser" shall mean the Person(s) to whom shares of Common Stock
are issued pursuant to the exercise of this Warrant.
"Registered Holder" with respect to any Warrant means the Person to
whom the Warrant was initially issued pursuant to the Purchase Agreement
or any assignee of such Person as to whom the Corporation has received an
executed Assignment substantially in the form of Exhibit II hereto, and
"Registered Holders" at any time means all Registered Holders of Warrants
then outstanding.
Section 9. No Voting Rights; Limitations of Liability. Prior to
the exercise of this Warrant and except as otherwise specifically provided
herein or in the Purchase Agreement, this Warrant shall not entitle the
holder hereof to any rights as a stockholder of the Corporation. No
provision hereof, in the absence of affirmative action by the Registered
Holder to purchase Common Stock, and no enumeration herein of the rights
or privileges of the Registered Holder shall give rise to any liability of
such holder for the exercise of Warrants hereunder or as a stockholder of
the Corporation.
Section 10. Warrant Exchangeable for Different Denomination. This
Warrant is exchangeable, upon the surrender hereof by the Registered
Holder at the principal office of the Corporation, for new Warrants of
like tenor representing in the aggregate the purchase rights hereunder,
and each of such new Warrants shall represent such portion of such rights
as is designated by the Registered Holder at the time of such surrender.
Section 11. Replacement. Upon receipt of evidence reasonably
satisfactory to the Corporation (an affidavit of the Registered Holder
being reasonably satisfactory) of the loss, theft, destruction or
mutilation of any certificate evidencing this Warrant, and in the case of
any such loss, theft or destruction, upon receipt of an indemnity
reasonably satisfactory to the Corporation, or in the case of any such
mutilation, upon surrender and cancellation of such certificate, the
Corporation shall, at its expense, execute and deliver in lieu of such
certificate a new certificate of like tenor and dated the date of such
lost, stolen, destroyed or mutilated certificate.
Section 12. Notices. Except as otherwise expressly provided
herein, all notices referred to in this Warrant shall be in writing and
shall be delivered personally, sent by reputable express courier service
(charges prepaid) or sent by registered or certified mail, return receipt
requested, postage prepaid and shall be deemed to have been given when so
delivered, sent or deposited in the U. S. Mail (i) to the Corporation, at
its principal executive offices or to its registered office in its state
of domicile and (ii) to the Registered Holder of this Warrant, at such
holder's address as it appears in the records of the Corporation (unless
otherwise indicated by any such holder).
Section 13. Amendment and Waiver. Except as otherwise provided
herein, the provisions of the Warrants may be amended and the Corporation
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, if and only if the Corporation has
obtained the written consent of the Majority Warrant Holders.
Section 14. Descriptive Headings; Governing Law. The descriptive
headings of the several Sections and paragraphs of this Warrant are
inserted for convenience only and do not constitute a part of this
Warrant. This Warrant shall be governed by and construed and enforced in
accordance with the laws of the State of the Commonwealth of
Massachusetts, without giving effect to any choice of law or conflict
provision or rule that would cause the application of the laws of any
jurisdiction other than the State of the Commonwealth of Massachusetts.
Section 15. Certain Expenses. The Corporation shall pay all
expenses incurred by it in connection with, and all taxes and other
governmental charges that may be imposed in respect of, the issuance, sale
and delivery of the Warrants or the shares of Common Stock.
Section 16. Registered Holders. The Corporation shall be entitled
to treat the Register Holder of this Warrant as the only holder of this
Warrant for all purposes.
IN WITNESS WHEREOF, the Corporation has caused this Warrant to be
signed and attested by its duly authorized officers under its corporate
seal and to be dated the Date of Issuance hereof.
CTC COMMUNICATIONS CORP.
[CORPORATE SEAL]
By: ______________________________
Name: ________________________
Title: ________________________
EXHIBIT I
EXERCISE AGREEMENT
To:
Dated:
The undersigned, pursuant to the provisions set forth in the
attached Warrant (Certificate No. W-__), hereby agrees to subscribe for
the purchase of _________ shares of the Common Stock covered by such
Warrant and makes payment herewith in full therefor at the price per share
provided by such Warrant.
_________________________________
Name: ___________________________
Address: __________________________
__________________________________
__________________________________
EXHIBIT II
ASSIGNMENT
FOR VALUE RECEIVED, _____________________ hereby sells, assigns and
transfers all of the rights of the undersigned under the attached Warrant
(Certificate No. W-__), with respect to the number of shares of the Common
Stock covered thereby set forth below, unto:
Names of Assignee Address No. of Shares
Date:
____________________________________
Name: ______________________________
____________________________________
(Witness)
