EXHIBIT 10.27
BTI TELECOM CORP.
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SERIES A PREFERRED STOCK PURCHASE AGREEMENT
December 10, 1999
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BTI TELECOM CORP.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
December 10, 1999
INDEX
ARTICLE I PURCHASE AND SALE OF SHARES........................................................................1
1.1 PURCHASE AND SALE OF SERIES A PARTICIPATING PREFERRED STOCK AT THE CLOSING...............................1
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1.2 WARRANT..................................................................................................1
1.3 THE CONVERSION SHARES....................................................................................2
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1.4 CLOSING; DELIVERY........................................................................................2
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1.5 USE OF PROCEEDS..........................................................................................2
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ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................................................3
2.1 ORGANIZATION AND CORPORATE POWER.........................................................................3
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2.2 AUTHORIZATION............................................................................................3
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2.3 GOVERNMENT APPROVALS.....................................................................................4
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2.4 AUTHORIZED AND OUTSTANDING STOCK.........................................................................4
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2.5 CHARTER DOCUMENTS........................................................................................5
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2.6 SUBSIDIARIES.............................................................................................5
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2.7 FINANCIAL INFORMATION....................................................................................5
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2.8 EVENTS SUBSEQUENT TO THE DATE OF THE FINANCIAL STATEMENTS................................................6
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2.9 SEC FILINGS..............................................................................................7
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2.10 LITIGATION............................................................................................7
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2.11 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS............................................................8
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2.12 TAXES.................................................................................................8
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2.13 REAL PROPERTY.........................................................................................9
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2.14 TITLE TO PROPERTIES AND ASSETS........................................................................9
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2.15 INTELLECTUAL PROPERTY................................................................................10
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2.16 AGREEMENTS OF DIRECTORS, OFFICERS AND EMPLOYEES......................................................10
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2.17 GOVERNMENTAL AND INDUSTRIAL APPROVALS................................................................10
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2.18 FEDERAL RESERVE REGULATIONS..........................................................................11
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2.19 CONTRACTS AND COMMITMENTS............................................................................11
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2.20 SECURITIES ACT.......................................................................................12
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2.21 REGISTRATION RIGHTS..................................................................................12
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2.22 INSURANCE COVERAGE...................................................................................13
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2.23 EMPLOYEE MATTERS.....................................................................................13
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2.24 NO BROKERS OR FINDERS................................................................................14
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2.25 TRANSACTIONS WITH AFFILIATES.........................................................................14
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2.26 ASSUMPTIONS, GUARANTEES, ETC. OF INDEBTEDNESS OF OTHER PERSONS.......................................14
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2.27 U.S. REAL PROPERTY HOLDING CORPORATION...............................................................14
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2.28 DISCLOSURES..........................................................................................14
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2.29 ENVIRONMENTAL AND SAFETY LAWS........................................................................15
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2.30 YEAR 2000............................................................................................15
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2.31 INVESTMENT COMPANY ACT...............................................................................16
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ARTICLE III INVESTMENT REPRESENTATIONS.....................................................................16
3.1 REPRESENTATIONS AND WARRANTIES..........................................................................16
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3.2 PERMITTED SALES.........................................................................................17
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ARTICLE IV COVENANTS OF THE COMPANY.......................................................................17
4.1 CONDUCT OF BUSINESS.....................................................................................17
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4.2 ACCESS TO INFORMATION...................................................................................18
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4.3 NOTICE OF CERTAIN EVENTS................................................................................18
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4.4 APPROVALS...............................................................................................19
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ARTICLE V COVENANTS OF THE COMPANY AND THE PURCHASER.....................................................19
5.1 FURTHER ASSURANCES......................................................................................19
5.2 TAX CONSISTENCY.........................................................................................19
ARTICLE VI CONDITIONS OF OBLIGATIONS OF THE PURCHASER AND THE COMPANY.....................................19
ARTICLE VII CONDITIONS OF PURCHASERS' OBLIGATION...........................................................19
7.1 EFFECT OF CONDITIONS....................................................................................19
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7.2 REPRESENTATIONS AND WARRANTIES..........................................................................20
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7.3 PERFORMANCE.............................................................................................20
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7.4 OPINIONS OF COUNSEL.....................................................................................20
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7.5 COMPLIANCE CERTIFICATE..................................................................................20
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7.6 AMENDED AND RESTATED ARTICLES AND BYLAWS................................................................20
7.7 CERTIFIED CHARTER DOCUMENTS.............................................................................20
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7.8 NO MATERIAL ADVERSE CHANGE..............................................................................20
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7.9 SHAREHOLDERS AGREEMENT..................................................................................20
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7.10 REDEMPTION AGREEMENT.................................................................................21
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7.11 INVESTOR RIGHTS AGREEMENT............................................................................21
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7.12 STOCK REPURCHASE AGREEMENT...........................................................................21
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7.13 CONSENTS AND WAIVERS.................................................................................21
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7.14 PROCEEDINGS AND DOCUMENTS............................................................................21
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ARTICLE VIII CONDITIONS OF THE COMPANY'S OBLIGATION.........................................................21
8.1 EFFECT OF CONDITIONS....................................................................................21
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8.2 REPRESENTATIONS AND WARRANTIES..........................................................................21
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8.3 PERFORMANCE.............................................................................................21
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8.4 SHAREHOLDERS AGREEMENT..................................................................................21
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8.5 REDEMPTION AGREEMENT....................................................................................22
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8.6 INVESTOR RIGHTS AGREEMENT...............................................................................22
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ARTICLE IX CERTAIN DEFINITIONS............................................................................22
ARTICLE X RIGHT OF FIRST REFUSAL.........................................................................23
10.1 RIGHT OF FIRST REFUSAL...............................................................................23
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10.2 NOTICE...............................................................................................23
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10.3 SALE BY FSM..........................................................................................23
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10.4 SALE OF ADDITIONAL SERIES A PARTICIPATING PREFERRED STOCK............................................24
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10.5 TERMINATION OF RIGHTS................................................................................24
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ARTICLE XI MISCELLANEOUS..................................................................................24
11.1 SURVIVAL OF REPRESENTATIONS..........................................................................24
11.2 INDEMNIFICATION......................................................................................24
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11.3 TERMINATION..........................................................................................26
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11.4 PARTIES IN INTEREST..................................................................................26
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11.5 AMENDMENTS AND WAIVERS...............................................................................26
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11.6 NOTICES..............................................................................................27
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11.7 COUNTERPARTS.........................................................................................27
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11.8 EFFECT OF HEADINGS...................................................................................28
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11.9 SEVERABILITY.........................................................................................28
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11.10 SPECIFIC ENFORCEMENT.................................................................................28
11.11 GOVERNING LAW........................................................................................28
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11.12 PUBLIC ANNOUNCEMENTS.................................................................................28
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11.13 NO THIRD PARTY BENEFICIARIES.........................................................................28
11.14 EXPENSES.............................................................................................28
SCHEDULES
EXHIBITS
A Amended and Restated Articles of Incorporation
B Common Stock Purchase Warrant
C Opinion of Company Counsel
D Shareholders Agreement
E Redemption Agreement
F Investor Rights Agreement
G Stock Repurchase Agreement
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BTI TELECOM CORP.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is
entered into as of the 10th day of December 1999, by and among BTI Telecom
Corp., a North Carolina corporation (the "Company"); FS Multimedia, Inc., a
North Carolina corporation and wholly-owned subsidiary of the Company ("FSM");
and Welsh, Carson, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ VIII, L.P., a Delaware limited partnership,
WCAS Information Partners, L.P., a Delaware limited partnership, and BTI
Investors LLC, a Delaware limited liability company (collectively, the
"Purchaser").
WHEREAS, the Company desires to enter into this agreement with the
Purchaser to raise capital through the sale and issuance of shares of its
preferred stock to the Purchaser; and
WHEREAS, the Purchaser desires to enter into this agreement to acquire
shares of preferred stock of the Company on the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement, the parties to this Agreement hereby mutually agree as follows.
ARTICLE I
PURCHASE AND SALE OF SHARES
1.1 Purchase and Sale of Series A Preferred Stock at the Closing. At
the Closing (as herein defined), the Company will sell to the Purchaser, and the
Purchaser agrees to purchase, an aggregate of Two Hundred Thousand (200,000)
shares of the Company's Series A Preferred Stock, par value $.01 per share (the
"Series A Preferred Stock"), at a price of One Thousand Dollars ($1,000.00) per
share, for an aggregate purchase price of Two Hundred Million Dollars
($200,000,000) (the "Purchase Price") payable as provided in Section 1.4. The
Series A Preferred Stock shall have the rights, terms and privileges set forth
in the Company's Amended and Restated Articles of Incorporation, a copy of which
is attached hereto as Exhibit A (the "Articles"). The shares of Series A
Preferred Stock purchased pursuant to this Section 1.1 are referred to herein as
the "Purchased Shares." The Purchased Shares and the Warrant shall be allocated
among the Purchaser as set forth on Schedule 1.1.
1.2 Warrant. In addition to the Series A Preferred Stock, at the
Closing the Company shall, subject to the terms and conditions contained in the
warrant, issue to Purchaser one or more warrants in the form of Exhibit B
attached hereto (collectively, the "Warrant") to purchase up to an aggregate of
Four Million Five Hundred Thousand (4,500,000) shares of the Company's Common
Stock at an initial exercise price per share of One Cent ($0.01).
1.3 The Conversion Shares. The Company has authorized and reserved and
hereby covenants that it will continue to reserve, free of any preemptive rights
or encumbrances, a sufficient number of its authorized but previously unissued
shares of Common Stock, no par value per share (the "Common Stock"), to satisfy
the rights of conversion of the holders of the Purchased Shares and the rights
of exercise or exchange of the holder of the Warrant. The shares of Common Stock
issued or issuable upon conversion of the Purchased Shares are referred to
herein as the "Conversion Shares"; the shares of Common Stock issued or issuable
upon the exercise or exchange of the Warrant are referred to herein as the
"Warrant Shares"; and the Conversion Shares and Warrant Shares shall be
collectively referred to herein as the "Underlying Shares."
1.4 Closing; Delivery.
(a) Closing. The purchase of the Purchased Shares by the
Purchaser and the issuance to the Purchaser of the Warrant shall be made at a
closing (the "Closing") to be held at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ &
▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at
10:00 a.m. within two business days following the later of (i) satisfaction or
waiver of the conditions to closing set forth in Articles VI, VII and VIII, and
(ii) the due date for the Purchaser's receipt of capital contributions from its
limited partners in response to a capital call notice in respect of the Purchase
Price, or at such other time and on such other date as the Purchaser and the
Company may mutually agree.
(b) Payment and Delivery. Subject to the satisfaction or
waiver of the conditions set forth in Articles VI, VII and VIII hereof,
Purchaser shall pay the Purchase Price at the Closing, which payment shall be by
check or wire transfer of immediately available federal funds. At the Closing,
the Company will deliver to the Purchaser one or more certificates representing
the Purchased Shares purchased by such Purchaser and the Warrant.
1.5 Use of Proceeds. The Company shall use the proceeds received upon
the sale of the Purchased Shares at the Closing (i) to develop and enhance its
telecommunications network, (ii) to expand its infrastructure and marketing
resources, (iii) to make acquisitions, (iv) to pay debt obligations, (v) for
working capital purposes, (vi) to purchase shares of its Common Stock held by
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ pursuant to a Stock Repurchase Agreement in the form attached
hereto as Exhibit G, provided that the aggregate purchase price for such shares
shall not exceed $65,000,000 (at a per share price of $8.55), (vii) to make
investments in FSM, or, upon approval by the Board of Directors of the Company,
investments in a joint venture, strategic alliance or other arrangement
involving the FSM business, to which FSM has contributed its assets, and to
which FSM, Business Telecom, Inc. ("BTI") or the Company is a party (the "FSM
Related Entity"); provided that such investments shall not exceed $10,000,000 in
the aggregate, and (viii) to pay fees, costs and expenses incurred by the
Company in connection with the transactions contemplated by this Agreement.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce the Purchaser to purchase the Purchased Shares and
the Warrant, the Company makes the following representations and warranties as
of the date hereof and as of the date of the Closing.
2.1 Organization and Corporate Power.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority and all
material licenses, permits, authorizations, consents and approvals necessary to
own and operate its properties and to carry on its business as presently
conducted. The Company is duly licensed or qualified to do business as a foreign
corporation and is in good standing in each jurisdiction wherein the character
of its property, or the nature of the activities presently conducted by it,
makes such license or qualification necessary, except for those jurisdictions
where the failure to be so licensed or to so qualify would not, individually or
in the aggregate, have a material adverse effect on the condition (financial or
otherwise), business, assets, results of operations or prospects of the Company
and it Subsidiaries, taken as a whole (a "Material Adverse Effect").
(b) Each of the Company's Subsidiaries is a corporation
duly organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation and has all requisite corporate power
and authority and all material licenses, permits, authorizations, consents and
approvals necessary to own and operate its properties and to carry on its
business as presently conducted. Each of the Company's Subsidiaries is duly
licensed or qualified to do business as a foreign corporation and is in good
standing in each jurisdiction wherein the character of its property, or the
nature of the activities presently conducted by it, makes such license or
qualification necessary, except for those jurisdictions where the failure to be
so licensed or to so qualify would not, individually or in the aggregate, have a
Material Adverse Effect.
2.2 Authorization. The Company has all necessary corporate power and
has taken all necessary corporate action required for the due authorization,
execution, delivery and performance by the Company of this Agreement, the
Shareholders Agreement referred to in Section 7.9, the Redemption Agreement
referred to in Section 7.10, the Investor Rights Agreement referred to in
Section 7.11, the Stock Repurchase Agreement referred to in Section 7.12, and
any other agreements or instruments executed by the Company in connection
herewith or therewith (collectively, the "Related Agreements"), and the
consummation of the transactions contemplated herein or therein, and for the due
authorization, issuance, sale and delivery of the Purchased Shares, the Warrant
and the Underlying Shares. Except as set forth on Schedule 2.2, the issuance of
the Purchased Shares and the Warrant does not, and the issuance of the
Underlying Shares will not, require any further corporate action and is not and
will not be subject to any preemptive right, right of first refusal or the like.
Assuming due execution and delivery of
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this Agreement and the Related Agreements by the Purchaser, this Agreement, the
Related Agreements and the other agreements and instruments executed by the
Company in connection herewith or therewith constitute legal, valid and binding
obligations of the Company enforceable against the Company in accordance with
their respective terms except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally and by general equitable
principles.
2.3 Government Approvals. Except as set forth on Schedule 2.3, no
material consent, approval, permit, license or authorization of, or designation,
declaration or filing with, any court or governmental authority is or will be
required on the part of the Company in connection with the execution, delivery
and performance by the Company of this Agreement, any of the Related Agreements
and any other agreements or instruments executed by the Company in connection
herewith or therewith, or in connection with the issuance of the Purchased
Shares, the Warrant or the Underlying Shares.
2.4 Authorized and Outstanding Stock. As of the date hereof, the
authorized capital stock of the Company consists of (i) 500,000,000 shares of
Common Stock, of which 100,000,000 shares are validly issued and outstanding and
held of record and owned beneficially as set forth in Schedule 2.4 attached
hereto; 23,391,813 shares have been reserved for issuance upon conversion of
Series A Preferred Stock; 4,500,000 shares have been reserved for issuance upon
exercise or exchange of the Warrant; shares have been reserved to be sold in an
initial public offering that would have an aggregate offering price of up to
$125,000,000, plus an additional number of shares equal to 15% of the total
offering amount to cover over-allotments in connection with such offering and
7,500,000 shares have been reserved for issuance pursuant to the Company's 1997
Stock Plan, under which no shares of Common Stock have been issued upon the
exercise or exchange of options, options to purchase 3,386,259 shares of Common
Stock were issued and outstanding as of September 30, 1999, and options to
purchase 4,113,741 shares of Common Stock remain available for future issuance;
and (ii) 10,000,000 shares of Preferred Stock of which 200,000 shares are
designated "Series A Preferred Stock," none of which are issued and outstanding.
The designations, powers, preferences, rights, qualifications, limitations and
restrictions in respect of each class and series of authorized capital stock of
the Company are as set forth in the Articles, and all such designations, powers,
preferences, rights qualifications, limitations and restrictions are valid,
binding and enforceable and in accordance with all applicable laws except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally and by general equitable principles. All issued and
outstanding shares of capital stock are, and when issued in accordance with the
terms hereof, all Purchased Shares, the Warrant and all Underlying Shares will
be, duly and validly authorized, validly issued and fully paid and nonassessable
with no personal liability attaching to the ownership thereof (other than
attributable to acts of the Purchaser), free and clear of all liens, charges,
restrictions, claims or encumbrances of any nature whatsoever and free from any
restrictions on transfer (collectively, "Liens"), except for restrictions
imposed by federal or state securities or "blue-sky" laws and except for those
imposed pursuant to this Agreement or any Related Agreement. Except as set forth
on Schedule 2.4, (i) there are no outstanding shares of capital stock or voting
securities of the Company, (ii) the Company is not party to any shareholder
agreement, voting agreement or
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any other agreement, and, to the best knowledge of the Company, there is no
shareholder agreement, voting agreement, first refusal or preemptive rights
agreement or any other agreement, which would affect the rights of the
shareholders of the Company, and (iii) there are no outstanding warrants,
options, commitments, preemptive rights, rights to acquire or purchase,
obligations to repurchase, redeem or otherwise acquire or to pay any dividend or
make any other distribution in respect of, or conversion rights or demands of
any character relating to the capital stock or other securities of the Company.
All issued and outstanding shares of capital stock of the Company were issued
(x) in transactions exempt from the registration provisions of the Act, (y) in
compliance with or in transactions exempt from the registration provisions of
applicable state securities or "blue-sky" laws, and (z) in compliance with law
in all other respects. The Company has provided the Purchaser or its
representatives with a true, correct and complete copy of the Company's 1997
Stock Plan, which is the only equity incentive plan or proposal that has been
offered to any of the Company's or any of its Subsidiaries' employees,
directors, officers or consultants, except as otherwise disclosed on Schedule
2.4.
2.5 Charter Documents. The Company has provided to the Purchaser or its
representatives for their examination (a) complete and accurate copies of the
Articles of Incorporation and Bylaws of the Company, both as amended to date and
(b) the minute books of the Company containing all consents to actions without a
meeting and all minutes of meetings of the Company's shareholders and Board of
Directors which are complete and accurate records of all such meetings and
consents. The Company is not in violation of any term of its Articles, Bylaws,
or other organizational documents.
2.6 Subsidiaries. Except as set forth on Schedule 2.6, the Company has
no Subsidiaries nor any investment or other interest in (including any interest
in any partnership, joint venture or other non-corporate business enterprise),
or any outstanding loan or advance to or from, any Person, including, without
limitation, any officer, director or shareholder. Except as set forth on
Schedule 2.6, all of the outstanding shares of capital stock of each of the
Company's Subsidiaries are owned by the Company, directly or indirectly, in each
case free and clear of any Liens, and all of such shares are duly authorized,
validly issued, fully paid and non-assessable. There are no outstanding
subscriptions, warrants, options, convertible securities, or other rights
(contingent or other) pursuant to which any of the Company's Subsidiaries is or
may become obligated to issue any shares of its capital stock to any Person
other than the Company or one of its other Subsidiaries.
2.7 Financial Information. The Company has previously delivered to the
Purchaser (i) the audited consolidated balance sheets of the Company and its
Subsidiaries as of December 31, 1996, 1997 and 1998 and the related audited
consolidated statements of operations, shareholders' equity and cash flows for
each of the years ended December 31, 1996, 1997 and 1998, and (ii) the unaudited
consolidated balance sheet of the Company and its Subsidiaries as of September
30, 1999, and the related unaudited consolidated statements of operations,
shareholders' equity and cash flows, for the nine (9) months then ended
(collectively, the "Financial Statements"). The Financial Statements, together
with any accompanying footnotes, are complete and correct in all material
respects, are in accordance with the books and records of the Company and
present fairly, in accordance with generally accepted accounting principles
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("GAAP") applied on a basis consistent with prior periods, the consolidated
financial condition and results of operations and cash flows of the Company and
its Subsidiaries as of the dates and for the periods shown, except that the
unaudited Financial Statements do not contain footnote disclosures that would be
required by GAAP. The Company and its Subsidiaries do not have any material
liability, contingent or otherwise, which is not adequately reflected in or
reserved against in the Financial Statements, except for liabilities arising in
the ordinary course of business since December 31, 1998. Since December 31,
1998, (i) there has been no material change in the business, assets,
liabilities, condition (financial or otherwise) or operations of the Company and
its Subsidiaries (on a consolidated basis) except for changes in the ordinary
course of business which, in the aggregate, would not reasonably be expected to
be materially adverse, and (ii) none of the business, prospects, condition
(financial or otherwise), operations, property or affairs of the Company and its
Subsidiaries (on a consolidated basis) has been materially adversely affected by
any occurrence or development, in the aggregate, whether or not insured against.
2.8 Events Subsequent to the Date of the Financial Statements. Except
as set forth on Schedule 2.8, since December 31, 1998, neither the Company nor
any of its Subsidiaries has (i) issued or repurchased any stock, bond or other
security, (ii) incurred or assumed any indebtedness for borrowed money in excess
of $1,000,000 in the aggregate for the Company and its Subsidiaries or incurred
or become subject to any material liability (absolute, accrued or contingent),
except liabilities (other than indebtedness) under contracts entered into in the
ordinary course of business, (iii) discharged or satisfied any material Lien or
incurred or paid any material obligation or liability (absolute, accrued or
contingent), other than liabilities shown on the Financial Statements and
liabilities incurred since December 31, 1998 in the ordinary course of business,
(iv) declared, set aside or made any payment or distribution to shareholders or
purchased or redeemed any shares of its capital stock or other securities, (v)
mortgaged, pledged or subjected to any material Lien any of its assets, tangible
or intangible, other than Liens of real property taxes not yet due and payable,
(vi) sold, assigned or transferred any of its material tangible assets except in
the ordinary course of business, or canceled any material debt or claim, (vii)
sold, assigned, transferred or granted any license with respect to any material
patent, trademark, trade name, service ▇▇▇▇, copyright, trade secret or other
intangible asset, except pursuant to license or other agreements entered into in
the ordinary course of business, (viii) suffered any material loss, waived any
right or relinquished any contract of substantial value whether or not in the
ordinary course of business, (ix) made any material change in the compensation
or benefits provided to any current or former director, officer, employee or
consultant of the Company or any of its Subsidiaries, (x) made any material
change in its manner of business or operations, (xi) entered into any material
transaction except in the ordinary course of business or as otherwise
contemplated hereby, (xii) incurred any material liability or obligation of any
nature whatsoever (contingent or otherwise) other than those incurred in the
ordinary course of business, (xiii) materially increased the compensation paid
to any employee, consultant, director or agent, (xiv) changed in any material
respect its accounting or tax methods or practices, or (xv) entered into any
commitment (contingent or otherwise) to do any of the foregoing.
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2.9 SEC Filings.
(a) The Company has delivered to the Purchaser (i) its
annual reports on Form 10-K for its fiscal years ended December 31, 1997 and
1998, (ii) its quarterly reports on Form 10-Q for its fiscal quarters ended
after December 31, 1998 and (iii) all of its other reports, statements,
schedules and registration statements filed with the Securities and Exchange
Commission (the "SEC") since December 31, 1998 (the documents referred to in
this Section 2.9 being referred to collectively as the "SEC Documents").
(b) As of its filing date, each SEC Document complied
as to form in all material respects with the applicable requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Act.
(c) As of its filing date, each SEC Document filed
pursuant to the Exchange Act did not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstance under which they were
made, not misleading.
(d) Each such registration statement as amended or
supplemented, if applicable, filed pursuant to the Act as of the date such
statement or amendment became effective did not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading.
2.10 Litigation. Except as otherwise set forth on Schedule 2.10, there
is no material action, suit, claim, litigation or governmental proceeding or
investigation pending or, to the knowledge of the Company, threatened, by or
against the Company or any of its Subsidiaries or affecting any of their
respective properties or assets, or against any officer, key employee or
shareholder of the Company or any of its Subsidiaries in his capacity as such,
nor, to the knowledge of the Company, has there occurred any event or does there
exist any condition on the basis of which any such litigation, proceeding or
investigation might properly be instituted with any substantial chance of
recovery where such recovery would likely have a Material Adverse Effect or that
might materially adversely affect the validity of this Agreement, any of the
Related Agreements, any of the Purchased Shares, the Warrant or the Underlying
Shares, or prevent, alter or materially delay any action taken or to be taken
pursuant hereto. Neither the Company, nor any of its Subsidiaries, nor any
officer, key employee or shareholder of the Company or any of its Subsidiaries
in his capacity as such is, to the knowledge of the Company, in default with
respect to any order, writ, injunction, decree, ruling or decision of any court,
commission, board or other government agency which default may reasonably be
expected to have a Material Adverse Effect. The foregoing sentences include,
without limiting their generality, actions pending or, to the knowledge of the
Company, threatened involving the prior employment of employees of the Company
or any of its Subsidiaries or use in the business of the Company and its
Subsidiaries of any information or technologies allegedly proprietary to any of
such former employers. Except as set forth at Schedule 2.10, there is no action
or suit by the Company or any of its Subsidiaries pending, threatened or
contemplated against others.
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2.11 Compliance with Laws and Other Instruments. Each of the Company
and it Subsidiaries is in compliance with all of the provisions of this
Agreement and of its organizational documents, and in all material respects with
the provisions of each mortgage, indenture, lease, license, other agreement or
instrument, judgment, decree, judicial order, statute, and regulation by which
it is bound or to which it or any of its properties or assets are subject.
Except as set forth on Schedule 2.11, neither the execution, delivery or
performance of this Agreement and the Related Agreements, nor the offer,
issuance, sale or delivery of the Purchased Shares, the Warrant or the
Underlying Shares, with or without the giving of notice or passage of time, or
both, will violate, or result in any breach of, or constitute a default under,
or give rise to a right of termination, cancellation or acceleration under, or
require any consent under, or result in the imposition of any material Lien upon
any asset of the Company or any of its Subsidiaries pursuant to any provision of
the Company's Articles or Bylaws, the organizational documents of any of its
Subsidiaries, or any statute, rule or regulation, contract, lease, judgment,
decree or other document or instrument by which the Company or any of its
Subsidiaries is bound or to which the Company or any of its Subsidiaries or any
of their respective properties or assets are subject, or, to the knowledge of
the Company, will cause the Company or any of its Subsidiaries to lose the
benefit of any material right or privilege it presently enjoys or cause any
Person who is expected to normally do any material amount of business with the
Company or any of its Subsidiaries to discontinue to do so on the same basis.
2.12 Taxes. The Company and its Subsidiaries have filed all tax
returns, reports and forms (including statements of estimated taxes owed)
required to be filed within the applicable periods for such filings and have
paid all taxes required to be paid, and have established adequate reserves (net
of estimated tax payments already made) for the payment of all taxes accruing
through the end of the last period for which the Company and it Subsidiaries
ordinarily record items on their respective books. All such tax returns, reports
and forms are true, correct and complete in all material respects. Except as set
forth on Schedule 2.12, no deficiencies for any tax are currently assessed
against the Company or any of its Subsidiaries, and no tax returns of the
Company or any of its Subsidiaries have ever been audited, and, to the knowledge
of the Company, there is no such audit pending or contemplated. All returns
filed with respect to tax years of the Company and its Subsidiaries through the
tax year ended December 31, 1996, have been examined and closed or are returns
with respect to which the applicable period for assessment under applicable law,
after giving effect to extensions or waivers, has expired. Except as provided on
Schedule 2.12, neither the Company nor any of its Subsidiaries has any
obligation under any tax sharing agreement, tax allocation agreement or tax
indemnity agreement or any other agreement or arrangement in respect of any tax
with any person other than the Company or its Subsidiaries. Neither the Company
nor any of its Subsidiaries has been a member of an affiliated, consolidated,
combined or unitary group other than one of which the Company was the common
parent. Proper and adequate amounts have been withheld by the Company and its
Subsidiaries from their respective employees and other persons for all periods
in compliance in all material respects with the tax, social security and
unemployment, excise and other withholding provisions of all federal, state,
local and foreign laws. There is no tax lien, whether imposed by any federal,
state, local, or foreign taxing authority, outstanding against the assets,
properties or business of the Company or any of its Subsidiaries. For the
purposes of this Agreement, the term "tax" shall include (i) all federal, state,
local and foreign taxes, including
8
income, franchise, property, sales, use, gross receipts, excise, withholding,
payroll and employment taxes and other similar assessments of any kind
whatsoever, including all interest, penalties and additions imposed with respect
to such amounts, and (ii) any liability of the Company or any of its
Subsidiaries for the payment of any amount as a result of being a party to any
tax sharing agreement or with respect to the payment of any amount of the type
described in (i) as a result of any existing express or implied agreement or
arrangement (including, but not limited to, an indemnification agreement or
arrangement). BTI Telecom Corp. was and validly elected to be an S corporation
for its taxable years ended December 31, 1986 through September 23, 1997,
inclusive, which S corporation election was accepted by the Internal Revenue
Service for periods audited by the Internal Revenue Service.
2.13 Real Property.
(a) Schedule 2.13 sets forth the addresses and uses of all real
property that the Company or any of its Subsidiaries owns, leases or subleases,
and any material Lien or encumbrance on any such owned real property or the
Company's or its Subsidiary's leasehold interest therein, specifying in the case
of each such lease or sublease, the name of the lessor or sublessor, as the case
may be, the lease term and the obligations of the lessee thereunder. To the best
knowledge of the Company, the Company and its Subsidiaries are in material
compliance with all laws, regulations and orders relating to the protection of
human health or the environment.
(b) Except as set forth on Schedule 2.13, the Company and its
Subsidiaries have good, clear and marketable title to, and own free and clear of
material Liens, all property listed as owned by the Company or any of its
Subsidiaries on Schedule 2.13, except where the failure to do so would not have
a Material Adverse Effect, and there is no material violation by the Company or
any of its Subsidiaries of any law, regulation or ordinance (including without
limitation laws, regulations or ordinances relating to zoning, environmental,
city planning or similar matters) relating to any real property owned, leased or
subleased by the Company or any of its Subsidiaries.
(c) There are no defaults by the Company or any of its Subsidiaries or,
to the knowledge of the Company, by any other party thereto, which might curtail
in any material respect the present use of the property listed on Schedule 2.13.
The performance by the Company of this Agreement and the Related Agreements will
not result in the termination of, or in any increase of any amounts payable
under, any lease listed on Schedule 2.13.
2.14 Title to Properties and Assets. Except as set forth on Schedule
2.14, each of the Company and its Subsidiaries has good, clear and marketable
title to its properties and assets held at the date of Closing (except any
properties and assets held under capitalized leases) and has good title to all
its leasehold interests, in each case subject to no mortgage, pledge, lien,
lease, encumbrance or charge, other than (a) the lien of current taxes not yet
due and payable, and (b) possible minor liens and encumbrances that do not in
any case, either individually or in the aggregate, materially detract from the
value of the property subject thereto or materially impair the intended use of
such property. The tangible property and assets held under any
9
material lease by the Company or any of its Subsidiaries are held under leases
that remain in force, and there exists no default or other occurrence or
condition that could result in a material default or termination thereunder.
2.15 Intellectual Property. Each of the Company and its Subsidiaries
has sufficient title and ownership of or is licensed under all material patents,
trademarks, service marks, trade names, copyrights, trade secrets, information,
inventions, computer programs, documentation, proprietary rights and processes
(collectively, "Intellectual Property") necessary for its business as now
conducted without any infringement of the rights of others. Set forth on
Schedule 2.15, is a true, correct and complete list of all Intellectual Property
owned by, registered in the name of or of which the Company or any of its
Subsidiaries is a licensor or licensee, all registrations and applications for
registration of any of the Company's or any of its Subsidiaries' Intellectual
Property, and all material unregistered copyrights and trademarks held by the
Company or any of its Subsidiaries and a brief description of the nature of each
such right. Except as set forth on Schedule 2.15, there are no outstanding
options, licenses or agreements relating to the foregoing nor is the Company or
any of its Subsidiaries bound by or a party to any options, licenses or
agreements with respect to the Intellectual Property of any other person or
entity. Except as set forth at Schedule 2.15, neither the Company nor any of its
Subsidiaries has received any communications alleging that the Company or any of
its Subsidiaries has violated or, by conducting its business as currently
proposed, would violate any of the Intellectual Property of any other person or
entity. The Company does not believe it or any of its Subsidiaries is utilizing
or that it will be necessary to utilize any Intellectual Property of any of its
employees (or people it currently intends to hire) made or developed prior to
their employment by the Company or any of its Subsidiaries.
2.16 Agreements of Directors, Officers and Employees. To the best
knowledge of the Company, no director, officer or employee of or consultant to
the Company or any of its Subsidiaries is in violation in any material respect
of any material terms of any employment contract, noncompetition agreement,
nondisclosure agreement, patent disclosure or assignment agreement or other
contract or agreement containing restrictive covenants relating to the right of
any such director, officer, employee or consultant to be employed or engaged by
the Company or any of its Subsidiaries because of the nature of the business
conducted or proposed to be conducted by the Company or any of its Subsidiaries,
or relating to the use of trade secrets or proprietary information of others.
2.17 Governmental and Industrial Approvals. Except as set forth in
Schedule 2.17, each of the Company and its Subsidiaries has all the material
permits, licenses, orders, franchises and other rights and privileges of all
federal, state, local and foreign governmental or regulatory bodies necessary
for it to conduct its business as presently conducted and as proposed to be
conducted, and each of the Company and its Subsidiaries has been operating its
business pursuant to and in material compliance with the terms of all such
permits, licenses, orders, franchises and other rights and privileges. Except as
set forth in Schedule 2.17, all such permits, licenses, orders, franchises and
other rights and privileges are in full force and effect in all material
respects and, to the knowledge of the Company, no suspension or cancellation of
any of them is threatened. None of such permits, licenses, orders, franchises
and other rights and
10
privileges will be affected by the consummation of the transactions contemplated
in this Agreement and the Related Agreements.
2.18 Federal Reserve Regulations. The Company is not engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulations T, U or X of the Board of Governors of
the Federal Reserve System), and no part of the proceeds of the sale of the
Purchased Shares will be used to purchase or carry any margin security or to
extend credit to others for the purpose of purchasing or carrying any margin
security or in any other manner which would involve a violation of any of the
regulations of the Board of Governors of the Federal Reserve System.
2.19 Contracts and Commitments. Except for such contracts, agreements
or commitments which are set forth on Schedule 2.19 attached hereto, neither the
Company nor any of its Subsidiaries is a party to or bound by:
(a) any contract, agreement or commitment which involves payment by the
Company or its Subsidiaries, or might result in payments to the Company or its
Subsidiaries, of $1,000,000 or more in the aggregate in any twelve month period;
(b) any agreement or indemnification or guarantee not entered into in
the ordinary course of business other than indemnification agreements between
the Company or any of its Subsidiaries and any of their respective officers or
directors;
(c) any agreement, contract or commitment limiting the freedom of the
Company or any of its Subsidiaries to engage in any line of business or compete
or deal with any person or in any geographic area (including, but not limited
to, any noncompetition or exclusivity provisions) or which would so limit the
Company or any of its Subsidiaries after the Closing;
(d) any agreement, contract or commitment relating to capital
expenditures and involving future obligations in excess of $1,000,000 in the
aggregate in any twelve month period for the Company and its Subsidiaries and
not cancelable without penalty;
(e) any agreement, contract or commitment currently in force relating
to the disposition or acquisition of assets not in the ordinary course of
business or any ownership interest in any corporation, partnership, joint
venture or other business enterprise;
(f) any mortgages, indentures, loans or credit agreements, security
agreements or other agreements or instruments relating to the borrowing of
money, extension of credit, or the placing of a Lien on any asset of the Company
or any of its Subsidiaries;
(g) any joint marketing or development agreement;
(h) any distribution agreement (identifying any that contain
exclusivity provisions) that involves payment to the Company or its Subsidiaries
of $1,000,000 or more in the aggregate in any twelve month period; or
11
(i) any stock redemption or stock purchase agreement.
(j) any agreement with a customer, vendor or supplier involving payment
by the Company or its Subsidiaries of $1,000,000 or more in the aggregate in any
twelve month period;
(k) any lease of personal property providing for annual rentals of
$1,000,000 or more in the aggregate in any twelve month period;
(l) any material option, license, franchise or similar agreement,
including agreements with municipalities regarding license or franchise fees;
(m) any IRU, interconnection, co-location or fiber agreements involving
payment by the Company or its Subsidiaries of $1,000,000 or more in the
aggregate in any twelve month period; or
(n) any material agency, dealer, sales representative, marketing or
other similar agreement.
The Company has made available to the Purchaser a written copy all
other contracts, agreements or commitments by which the Company or any of its
Subsidiaries is a party or is bound that are otherwise material.
Each Company Contract is a valid and binding agreement of the Company
or a Subsidiary, as the case may be, and is in full force and effect. True and
complete copies of each Company Contract have been delivered to the Purchaser.
None of the Company or any of its Subsidiaries, or, to the Company's
knowledge, any other party to a Company Contract (as defined below), has
breached, violated or defaulted under, or received notice that it has breached,
violated or defaulted under, any of the material terms or conditions of any of
the agreements, contracts or commitments described in this Section 2.19 (any
such agreement, contract or commitment, including those described in the second
preceding paragraph, a "Company Contract") in such manner as would permit any
other party to cancel or terminate any such Company Contract, or would permit
any other party to seek damages, which action would have a Material Adverse
Effect.
2.20 Securities Act. The Company has complied and will comply with all
applicable federal or state securities laws in connection with the issuance and
sale of the Purchased Shares and the Warrant, the issuance of the Conversion
Shares upon conversion of the Purchased Shares and the issuance of the Warrant
Shares upon exercise of the Warrant. Neither the Company nor, to the knowledge
of the Company, anyone acting on its behalf has offered any of the Purchased
Shares or similar securities, or solicited any offers to purchase any of such
securities, so as to bring the issuance and sale of the Purchased Shares under
the registration provisions of the Act.
2.21 Registration Rights. Except as set forth on Schedule 2.21, the
Company has not granted any rights relating to registration of its capital stock
under the Act or state securities laws other than those contained in this
Agreement and any of the Related Agreements.
12
2.22 Insurance Coverage. The Company and its Subsidiaries carry, or are
covered by insurance with insurers that are financially sound and reputable and
in such amounts with such deductibles and against such risks and losses as are
reasonable for the business and assets of the Company and its Subsidiaries and
is customary for companies similarly situated.
2.23 Employee Matters. Schedule 2.23 sets forth a list of each material
employment, consulting, severance, change in control, sale bonus or similar
contract (whether or not written) under which the Company of any of its
Subsidiaries has any liability, actual or contingent, and each "employee benefit
plan" (as defined in Section 3(3) of ERISA) and each other material contract,
plan or arrangements (whether or not written) providing for bonuses,
profit-sharing, stock option or other stock related rights or other forms of
incentive or deferred compensation, insurance coverage (including any
self-insured arrangements), health or medical benefits, disability benefits,
workers' compensation, supplemental unemployment benefits, severance benefits
and post-employment or retirement benefits (including compensation, pension,
health, medical or life insurance benefits) or any other material employees
benefits of any kind maintained, contributed to or required to be contributed to
by the Company or any of its Subsidiaries (collectively, the "Plans"). The
Company has made available to Purchaser copies of each such written Plan and a
written description of each unwritten Plan (in each case, including all
amendments and interpretations relating thereto) and copies of the three most
recent annual reports on Form 5500, if any, relating to each such Plan. Neither
any Plan nor any other plan maintained, contributed to or required to be
contributed to by any entity that would be treated as a single employer with the
Company under Section 414 of the Code is a plan subject to Title IV of ERISA.
Neither the Company nor any of its Subsidiaries has any material current or
projected liability in respect of post-employment or post-retirement health or
medical or life insurance benefits for retired or former employees of the
Company or any of its Subsidiaries, except pursuant to the continuation coverage
requirements of Section 4980B of the Code and Section 601 et seq. of ERISA or
other applicable law. If, as of the date of the Closing, the Purchaser were to
acquire the Purchased Shares and exercise the Warrant in full (assuming the
Warrant were immediately exercisable), such transactions would not result in any
payments, benefits or other events under any Plan which may give rise to a
"parachute payment" as defined in Section 280G(b)(2)(A), (B) or (C) of the Code,
whether or not such payment, benefit or event is exempt or excluded under
Section 280G(b)(5). The Company has no knowledge that any of the officers or
other key employees of the Company or any of its Subsidiaries presently intends
to terminate his employment. To the Company's knowledge, no employee of the
Company or any of its Subsidiaries is in violation of any term of any contract
or covenant (either with the Company or with another entity) relating to
employment, patents, assignment of inventions, proprietary information
disclosure, noncompetition or nonsolicitation. The Company and its Subsidiaries
are in compliance in all material respects with all applicable laws and
regulations relating to labor, employment, fair employment practices, terms and
conditions of employment, and wages and hours. Neither the Company nor any of
its Subsidiaries is a party to any collective bargaining agreement or other
labor union contract and, to the Company's knowledge, there are no activities or
proceedings of any labor union to organize any such employees. The Company and
its Subsidiaries are in material compliance with the terms of all Plans listed
on Schedule 2.23, and each such Plan is in compliance in all material respects
with all of the requirements and provisions of applicable law, including without
limitation the Employee Retirement Income
13
Security Act of 1974, as amended ("ERISA"), and the Internal Revenue Code of
1986 (the "Code"). Each Plan intended to qualify under Code Section 401(a) so
qualifies and any related trust is exempt from federal tax under Code Section
501(a); each such Plan and trust has received a favorable determination letter
from the IRS or is an adoption of a prototype in respect of which the IRS has
issued a favorable opinion, and nothing has occurred since the date of such
determination letter that would materially adversely affect such qualification
or tax-exempt status. To the knowledge of the Company, no such Plan has been
involved in any "prohibited transaction" as defined in Code Section 4975.
2.24 No Brokers or Finders. Except as set forth on Schedule 2.24, no
person has or will have, as a result of the transactions contemplated by this
Agreement, any right, interest or claim against or upon the Company or any of
its Subsidiaries, or to the Company's best knowledge, the Purchaser for any
commission, fee or other compensation as a finder or broker; and the Company
agrees to indemnify and hold the Purchaser harmless against any such
commissions, fees or other compensation.
2.25 Transactions with Affiliates. Except as set forth on Schedule
2.25, there are no material loans, leases or other agreements or business
arrangements between the Company or any of its Subsidiaries on the one hand, and
any officer, director, employee or shareholder of the Company or any of its
Subsidiaries or any family member or affiliate of such officer, director,
employee or shareholder on the other hand. Except as set forth on Schedule 2.25,
no officer, director, shareholder or employee of the Company or any of its
Subsidiaries, including any member of their immediate families, is the direct or
indirect owner of an interest in any business or person that is a competitor,
supplier or customer of the Company or any of its Subsidiaries (except for a
passive investment in less than five percent (5%) of the common stock of any
publicly traded company).
2.26 Assumptions, Guarantees, etc. of Indebtedness of Other Persons.
Except as set forth on Schedule 2.26, neither the Company nor any of its
Subsidiaries has assumed, guaranteed, endorsed or otherwise become directly or
contingently liable on or for any indebtedness of any other Person, except where
such assumption, guarantee, endorsement or other liability would not have a
Material Adverse Effect and except guarantees by endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business. Except as set forth on Schedule 2.26, neither the Company
nor any of its Subsidiaries has assumed, guaranteed, endorsed or otherwise
become directly or contingently liable on or for any indebtedness of any
affiliate of the Company.
2.27 U.S. Real Property Holding Corporation. The Company is not now,
has never been and does not contemplate becoming a "United States Real Property
Holding Corporation" as defined in Section 897(c)(2) of the Code and Section
1.897-2(b) of the Treasury regulations thereunder.
2.28 Disclosures. Neither this Agreement, any Schedule or Exhibit to
this Agreement, the Related Agreements, the Financial Statements, nor any other
agreement, document or written statement made by the Company and furnished by
the Company to the Purchaser or counsel to
14
the Purchaser in connection with the transactions contemplated hereby, contains
any untrue statement of material fact or omits to state any material fact
necessary to make the statements contained herein or therein not misleading.
There is no fact known to the Company that has not been disclosed herein or in
any other agreement, document or written statement furnished by the Company to
the Purchaser or its counsel in connection with the transactions contemplated
hereby which materially adversely affects the Company or any of its Subsidiaries
or could reasonably be expected to have a Material Adverse Effect.
2.29 Environmental and Safety Laws. Except where the failure to do so
would not have a Material Adverse Effect: (i) each of the Company and its
Subsidiaries has duly complied with, and the operation of its business,
equipment other assets and the facilities owned or leased by it are in
compliance with the provisions of all applicable federal, state and local
environmental, health and safety laws, statutes, ordinances, rules, permits and
regulations of any governmental or quasi governmental authority relating to (a)
discharges to surface water or ground water, (b) solid or liquid waste disposal,
(c) the use, storage, generation, handling, transport, discharge, release or
disposals of toxic or hazardous substances or waste, (d) the emission of
non-ionizing electromagnetic radiation, or (e) other environmental, health or
safety matters, including, without limitation, the Comprehensive Environment
Response Compensation Liability Act of 1980, as amended by the Superfund
Amendments and Authorization Act of 1986, the Occupational Safety and Health
Act, the Resource Conservation and Recovery Act of 1976, as amended, the Federal
Water Pollution Control Act of 1970, the Safe Drinking Water Act of 1974, the
Toxic Substance Control Act of 1976, the Emergency Planning and Community Right
to Know Act of 1986, as amended, and the Clean Air Act, as amended (collectively
"Environmental and Health Laws"); (ii) there are no investigations,
administrative proceedings, judicial actions, orders, claims or notices which
are pending or anticipated or threatened against the Company or any of its
Subsidiaries relating to actual or potential violations of or liability under
any of the Environmental and Health Laws; (iii) neither the Company nor any of
its Subsidiaries has received notice of or knows or has any reason to suspect,
any facts which might constitute a violation of or which might result in
liability to the Company or any of its Subsidiaries pursuant to any
Environmental and Health Laws, and (iv) there are no liabilities of or relating
to the Company or any of its Subsidiaries of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise which
relate to the use, ownership or occupancy of any property or facilities by the
Company or any of its Subsidiaries or to the operation of its business or on
prior to the date hereof and which relate to or result in a violation of or
liability under any Environmental and Health Laws.
2.30 Year 2000. The Company and its Subsidiaries have developed and
budgeted for a comprehensive program to address the "Year 2000 problem" (that
is, the inability of computers, as well as embedded microchips in non-computing
devices, to perform properly date-sensitive functions with respect to certain
dates prior to and after December 31, 1999). The Company and its Subsidiaries
have implemented that program substantially in accordance with their timetable
and budget and it has designed such program to substantially avoid the Year 2000
problem as to all computers, as well as embedded microchips in non-computing
devices, that are material to their business, properties or operations. The
Company and its Subsidiaries have developed
15
feasible contingency plans that they have designed to adequately ensure
uninterrupted and unimpaired business operations in the event of failure of
their own or a third party's systems or equipment due to the Year 2000 problem,
including those of vendors, customers and suppliers, as well as a general
failure of or interruption in their communications and delivery infrastructure.
2.31 Investment Company Act. Neither the Company nor any of its
Subsidiaries is an "investment company" as defined in the Investment Company Act
of 1940, as amended. The consummation of the transactions contemplated by this
Agreement and the Related Agreements do not and will not violate any provision
of such Act or any rule, regulation or order issued by the SEC thereunder.
ARTICLE III
INVESTMENT REPRESENTATIONS
3.1 Representations and Warranties. The Purchaser hereby represents and
warrants to the Company as follows:
(a) Assuming due execution and delivery by the Company of
this Agreement and the Related Agreements, this Agreement and the Related
Agreements to which the Purchaser is a party constitute legal, valid and binding
obligations of the Purchaser, enforceable against the Purchaser in accordance
with their respective terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally and by general
equitable principles;
(b) The Purchaser has been advised and understands that
the Purchased Shares have not been registered under the Act, on the grounds that
no distribution or public offering of the Purchased Shares is to be effected,
and that in this connection, the Company is relying in part on the
representations of the Purchaser set forth in this Article III;
(c) The Purchaser has been further advised and
understands that no public market now exists for any of the securities issued by
the Company, other than the 10 1/2% Senior Notes due 2007 issued by the Company
pursuant to that certain Indenture, dated September 22, 1997, by and among the
Company, Business Telecom, Inc. and First Trust of New York, National
Association, and that a public market may never exist for the Purchased Shares,
Conversion Shares, the Warrant or the Warrant Shares;
(d) The Purchaser is purchasing the Purchased Shares for
investment purposes, for its own account and not with a view to, or for sale in
connection with, any distribution thereof in violation of Federal or state
securities laws;
(e) The Purchaser is an "accredited investor" as such
term is defined in Rule 501 promulgated under the Act;
16
(f) By reason of its business or financial experience,
the Purchaser has the capacity to protect its own interest in connection with
the transactions contemplated hereunder;
(g) The Purchaser is aware of the Company's business
affairs and financial condition and has acquired sufficient information about
the Company to reach an informed and knowledgeable decision to acquire the
Purchased Shares;
(h) No person has or will have, as a result of the
transactions contemplated by this Agreement, any right, interest or claim
against or upon the Company or any of its Subsidiaries for any commission, fee
or other compensation as a finder or broker because of any act or omission by
the Purchaser; and
(i) The Purchaser has all necessary power and has taken
all necessary action required for the due authorization, execution, delivery and
performance by the Purchaser of this Agreement and the Related Agreements. The
execution, delivery and performance of this Agreement and the Related Agreements
will not violate or conflict with the organizational documents of the Purchaser
or any material agreement, contract or other instrument to which the Purchaser
is a party.
3.2 Permitted Sales. Notwithstanding the foregoing representations, the
Company agrees that it will not deem to be a breach of the Purchaser's
representations under Section 3.1 (d) any transfer permitted under the
Shareholders Agreement referred to in Section 8.4 hereof.
ARTICLE IV
COVENANTS OF THE COMPANY
The Company covenants and agrees with the Purchaser that:
4.1 Conduct of Business. From the date hereof until the date of the
Closing, the Company shall, and shall cause each of its Subsidiaries to, conduct
its business in the ordinary course consistent with past practice and shall use
its best efforts to preserve intact its business organizations and relationships
with third parties and to keep available the services of its present officers
and employees. Without limiting the generality of the foregoing, from the date
hereof until the date of the Closing, the Company shall not, and shall not
permit any of its Subsidiaries to: (a) merge or consolidate with any other
Person or acquire a material amount of assets from any other Person; (b) sell,
lease, license or otherwise dispose of any assets or property except (i)
pursuant to existing contracts or commitments or (ii) inventory in the ordinary
course consistent with past practice; (c) take any action that would require the
approval or consent of the Purchaser under the Articles or the Shareholders
Agreement had such document been effective as of the date hereof or (d) agree or
commit to do any of the foregoing. The Purchaser acknowledges that the Company
is exploring a potential acquisition of Q-Comm Corporation, subject to the
Purchaser's right, referred to in clause (c) above, to consent to such
acquisition.
The Company will not, and will not permit any of its Subsidiaries to,
(i) take or agree or commit to take any action that would make any
representation or warranty of the Company
17
hereunder inaccurate in any respect at, or as of any time prior to, the date of
the Closing or (ii) omit or agree or commit to omit to take any action necessary
to prevent any such representation or warranty from being inaccurate in any
respect at any time.
4.2 Access to Information.
(a) From the date hereof until termination hereof, the
Company will (i) give, and will cause each of its Subsidiaries to give, the
Purchaser, its counsel, financial advisors, auditors and other authorized
representatives full access to the offices, properties, books and records of the
Company and its Subsidiaries, (ii) furnish, and will cause each of its
Subsidiaries to furnish, to the Purchaser, its counsel, financial advisors,
auditors and other authorized representatives such financial and operating data
and other information relating to the Company or any of its Subsidiaries as such
Persons may reasonably request and (iii) instruct the employees, counsel and
financial advisors of it or any of its Subsidiaries to cooperate with the
Purchaser in its investigation of the Company or any of its Subsidiaries. No
investigation by the Purchaser or other information received by the Purchaser
shall operate as a waiver or otherwise affect any representation, warranty or
agreement given or made by the Company hereunder.
(b) On and after the Closing, the Company will afford
promptly to the Purchaser and its agents reasonable access to the books of
account, financial and other records (including, without limitation,
accountant's work papers), information, employees and auditors of it and its
Subsidiaries to the extent necessary or useful for the Purchaser in connection
with any audit, investigation, dispute or litigation or any other reasonable
business purpose relating to the Company or its Subsidiaries.
4.3 Notice of Certain Events. Prior to Closing, the Company shall
promptly notify the Purchaser of:
(a) any notice or other communication from any Person
alleging that the consent of such Person is or may be required in connection
with the transactions contemplated by this Agreement and the Related Agreements;
(b) any notice or other communication from any
governmental or regulatory agency or authority in connection with the
transactions contemplated by this Agreement and the Related Agreements;
(c) any actions, suits, claims, investigations or
proceedings commenced or, to its knowledge threatened against, relating to or
involving or otherwise affecting the Company, any of its Subsidiaries or any of
their respective officers, key employees or shareholders that, if pending on the
date of this Agreement, would have been required to have been disclosed pursuant
to Section 2.10 or 2.28 or that relate to the consummation of the transactions
contemplated by this Agreement and the Related Agreements, and
(d) any proposed or pending changes or amendments (of
which the Company is aware) to any laws, rules or regulations, which changes or
amendments may delay, restrict, prohibit or otherwise materially adversely
affect the conduct of the business operations of the
18
Company and its Subsidiaries or the consummation of the transactions
contemplated by this Agreement and the Related Agreements.
4.4 Approvals. The Company shall use all reasonable efforts to obtain
the approvals set forth on Schedule VI as soon as practicable after closing.
ARTICLE V
COVENANTS OF THE COMPANY AND THE PURCHASER
5.1 Further Assurances. Subject to the terms and conditions of this
Agreement, the Company and the Purchaser will use their reasonable best efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary or desirable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement.
5.2 Tax Consistency. The Company and the Purchaser confirm that the
Series A Preferred Stock is intended to be "common stock" for purposes of
Section 305 of the Code and agree not to take any voluntary action inconsistent
with such intention.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF THE PURCHASER AND THE COMPANY
The obligations of the Purchaser and the Company to consummate the
Closing are subject to the satisfaction of the following conditions:
(i) Except as set forth on Schedule VI, all regulatory
approvals have been received and any applicable waiting period under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended, relating to
the transactions contemplated hereby shall have expired or been terminated.
(ii) No provision of any applicable law or regulations and no
judgment, injunction, order or decree shall prohibit the consummation of the
Closing.
ARTICLE VII
CONDITIONS OF PURCHASER'S OBLIGATION
7.1 Effect of Conditions. The obligations of the Purchaser to purchase
and pay for the Purchased Shares at the Closing hereunder shall be subject at
its election to the satisfaction of each of the conditions stated in the
following Sections of this Article.
19
7.2 Representations and Warranties. The representations and warranties
of the Company contained in this Agreement shall be true and correct on the date
of the Closing with the same effect as though made on and as of that date, and
the Purchasers shall have received a certificate dated as of such Closing and
signed by the Company's President on behalf of the Company to that effect.
7.3 Performance. The Company shall have performed and complied with all
of the agreements, covenants and conditions contained in this Agreement required
to be performed or complied with by it at or prior to the Closing, and the
Purchasers shall have received a certificate dated as of such Closing and signed
by the Company's President on behalf of the Company to that effect.
7.4 Opinions of Counsel. The Purchasers shall have received opinions,
dated the date of the Closing, from (i) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇ LLP,
corporate counsel to the Company, in the form attached as Exhibit C and (ii)
Swidler, Berlin, Shereff & ▇▇▇▇▇▇▇▇, LLP, regulatory counsel to the Company,
covering customary matters in form and substance reasonably acceptable to
Purchaser.
7.5 Compliance Certificate Counsel for the Purchaser shall have
received a certificate, dated as of the Closing, signed by the Company's
President certifying that the conditions specified in this Article VII have been
fulfilled.
7.6 Amended and Restated Articles of Incorporation and Bylaws. The
Company shall have duly filed with the Secretary of State of the State of North
Carolina the Articles, and the Articles, together with the Company's Amended and
Restated Bylaws shall be in full force and effect as of the Closing.
7.7 Certified Charter Documents. Counsel for the Purchaser shall have
received a copy of the Company's Articles of Incorporation, certified by the
Secretary of State of the State of North Carolina and copies of the Company's
Bylaws certified by its Secretary, as well as any and all other documents,
including certificates as to resolutions adopted and incumbency of officers and
certificates from appropriate authorities as to the legal existence and good
standing of the Company and its Subsidiaries, which the Purchaser or its counsel
may reasonably request.
7.8 No Material Adverse Change. The business, properties, assets
results of operations or condition (financial or otherwise) of the Company or
any of its Subsidiaries shall not have been materially adversely affected since
the date of this Agreement, whether by fire, casualty, act of God or otherwise,
and there shall have been no other changes in the business, properties, assets,
results of operations, condition (financial or otherwise), management or
prospects of the Company or any of its Subsidiaries that would have a material
adverse effect on their respective businesses or assets.
7.9 Shareholders Agreement. A Shareholders Agreement in the form of
Exhibit D attached hereto shall have been executed by the Company and the
shareholders of the Company named therein.
20
7.10 Redemption Agreement. A Redemption Agreement in the form of
Exhibit E attached hereto shall have been executed by the Company.
7.11 Investor Rights Agreement. An Investor Rights Agreement in the
form of Exhibit F attached hereto shall have been executed by the Company.
7.12 Stock Repurchase Agreement. A Stock Repurchase Agreement in the
form of Exhibit G attached hereto shall have been executed by the Company and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
7.13 Consents and Waivers. The Company shall have obtained all consents
or waivers including (i) any consents or approvals from third parties or
governmental or regulatory authorities (except for those set forth on Schedule
VI) and (ii) those consents set forth on Schedule 7.13, in form and substance
satisfactory to the Purchaser, necessary to execute this Agreement and the other
agreements and documents contemplated herein, to issue the Purchased Shares, the
Conversion Shares, the Warrant and the Warrant Shares, and to carry out the
transactions contemplated hereby and thereby. All corporate and other action and
governmental or regulatory filings necessary to effectuate the terms of this
Agreement, the Related Agreements, the Purchased Shares, the Conversion Shares,
the Warrant, the Warrant Shares, and other agreements and instruments executed
and delivered by the Company in connection herewith shall have been made or
taken.
7.14 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
incidental thereto shall be reasonably satisfactory in form and substance to the
Purchaser and its counsel, and the Purchaser and its counsel shall have received
all such counterpart original and certified or other copies of such documents as
it may reasonably request.
ARTICLE VIII
CONDITIONS OF THE COMPANY'S OBLIGATION
8.1 Effect of Conditions. The Company's obligation to sell the
Purchased Shares shall be subject at its election to the satisfaction of each of
the conditions stated in the following Sections of this Article.
8.2 Representations and Warranties. The representations and warranties
of the Purchaser contained in this Agreement shall be true and correct on the
date of the Closing with the same effect as though made on and as of that date.
8.3 Performance. The Purchaser shall have performed and complied with
all of the agreements, covenants and conditions contained in this Agreement
required to be performed or complied with by it at or prior to the Closing.
8.4 Shareholders Agreement. A Shareholders Agreement in the form of
Exhibit D attached hereto shall have been executed by the Purchaser and the
shareholders of the Company named therein.
21
8.5 Redemption Agreement. A Redemption Agreement in the form of Exhibit
E attached hereto shall have been executed by the Purchaser.
8.6 Investor Rights Agreement. An Investor Rights Agreement in the form
of Exhibit F attached hereto shall have been executed by the Purchaser.
ARTICLE IX
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"Act" means the Securities Act of 1933, as amended.
"Agreement" means this Series A Preferred Stock Purchase Agreement as
from time to time amended and in effect between the parties.
"Closing" shall have the meaning set forth in Section 1.4.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute.
"Common Stock" will include the Company's Common Stock, no par value
per share, as authorized on the date of this Agreement.
"Company" means BTI Telecom Corp., a North Carolina corporation, and
its successors.
"Conversion Shares" shall have the meaning set forth in Section 1.3.
"Person" means an individual, corporation, partnership, joint venture,
trust or unincorporated organization or a government or agency or political
subdivision thereof.
"Purchased Shares" shall have the meaning set forth in Section 1.1.
"Purchaser" shall have the meaning set forth in the recitals thereof.
"Related Agreements" shall have the meaning set forth in Section 2.2.
"Series A Preferred Stock" shall have the meaning set forth in Section
1.1.
"Subsidiary" or "Subsidiaries" means any corporation, association or
other business entity of which the Company and/or any of its other Subsidiaries
(as herein defined) directly or indirectly owns at the time more than fifty
percent (50%) of the outstanding voting equity of such entity other than
directors' qualifying shares or has the power, by contract or otherwise to elect
a majority of the board of directors or equivalent governing body.
22
"Underlying Shares" shall have the meaning set forth in Section 1.3.
"Warrant" shall have the meaning set forth in Section 1.2.
"Warrant Shares" shall have the meaning set forth in Section 1.3.
ARTICLE X
RIGHT OF FIRST REFUSAL
10.1 Right of First Refusal. FSM hereby grants, and, if applicable, FSM
and the Company shall cause any FSM Related Entity that is controlled by the
Company or FSM (a "Controlled FSM Related Entity"), to grant to the Purchaser so
long as it shall own, of record or beneficially, any shares of Series A
Preferred Stock or Underlying Shares, the right to purchase all, but not less
than all, of the equity securities which FSM or a Controlled FSM Related Entity,
from time to time, proposes to sell and issue (the "FSM Securities").
Notwithstanding the foregoing, the right of first refusal granted in
this Article X shall not apply to any securities issued by FSM or a Controlled
FSM Related Entity in connection with any joint venture, strategic alliance or
other arrangement involving a business similar to FSM and to which FSM, BTI or
the Company is a party, or to the transfer of assets of FSM in any such joint
venture, strategic alliance or other similar arrangements, unless the aggregate
financial commitment of BTI and FSM or the Controlled FSM Related Entity is
greater than $10,000,000. For purposes of Sections 10.2 through 10.5 hereof, the
defined term "FSM" shall mean FSM or the Controlled FSM Related Entity, as
applicable, and all references to FSM in these sections shall be modified
accordingly.
10.2 Notice. In the event FSM proposes to undertake an issuance of its
equity securities, it shall give the Purchaser written notice of its intention,
describing the type of FSM Securities and the price and the terms upon which FSM
proposes to issue the same. The Purchaser shall have forty-five (45) business
days from the date of receipt of any such notice to agree to purchase all, but
not less than all, of such FSM Securities for the price and upon the terms
specified in the notice by giving written notice to FSM. During the period
beginning upon receipt of such notice and ending upon the closing of such
purchase, FSM shall provide the Purchaser with access to all of the due
diligence information and materials that the Purchaser shall reasonably request.
The closing of the purchase of such FSM Securities shall be at FSM's principal
place of business within fifteen (15) days (subject to the satisfaction of any
required regulatory approvals) following the expiration of the 45 day period, or
at such other time or place as FSM and the Purchaser may determine.
10.3 Sale by FSM. In the event the Purchaser fails to exercise its
right of first refusal, FSM shall have 120 days thereafter to enter into written
agreements that include the price and transaction structure terms with respect
to the sale of the FSM Securities with respect to which the Purchaser's right
was not exercised, at a price and upon terms that are not more favorable to the
third party purchaser than those offered to the Purchaser. To the extent FSM
does not (i)
23
enter into written agreements that include the price and transaction structure
terms with respect to the sale of all such FSM Securities within said 120 day
period, or (ii) consummate the transactions covered by written agreements with
respect to the sale of FSM Securities entered into within said 120 day period on
terms no more favorable (and with the same purchaser or purchasers) than those
set forth in such written agreements, FSM shall not thereafter issue or sell
such FSM Securities without first again offering such securities to the
Purchaser in the manner provided above.
10.4 Sale of Additional Series A Preferred Stock. In the event the
Purchaser fails to exercise its right of first refusal and FSM sells the FSM
Securities to one or more third party purchasers (the "Investors") the Company
may, within 90 days of the date hereof, sell to such Investors, in addition to
the shares of FSM Securities sold to such Investors, that number of shares of a
newly issued series of preferred stock of the Company with substantially the
same dividend, conversion and liquidation rights and preferences as the Series A
Preferred Stock (but without any governance, voting or veto rights) having a
maximum aggregate purchase price of $15,000,000.
10.5 Termination of Rights. The rights granted to the Purchaser under
this Article X shall expire upon the earlier of (a) the sale by FSM of any FSM
Securities to the Purchaser or to one or more Investors pursuant to this Article
X or (b) the date which is 24 months from the date hereof.
ARTICLE XI
MISCELLANEOUS
11.1 Survival. All covenants and agreements made herein or in any
certificates or documents executed in connection herewith shall survive the
execution and delivery hereof and the Closing in accordance with their
respective terms, or if no such term is specified, indefinitely. The
representations and warranties made herein or in any certificates or documents
executed in connection herewith shall survive the execution and delivery hereof
and the closing of the transaction contemplated hereby for a period of eighteen
months, with the exception of Sections 2.23 and 2.29, which shall survive the
execution and delivery hereof and the closing of the transaction contemplated
hereby for a period of three years, and Section 2.12, which will survive until
the expiration of the statute of limitations applicable to the matters covered
thereby (giving effect to any waiver, mitigation or extension thereof), if
later. Notwithstanding the preceding sentence, any covenant, agreement,
representation or warranty in respect of which indemnity may be sought under
this Agreement shall survive the time at which it would otherwise terminate
pursuant to the preceding sentence, if notice of the inaccuracy or breach
thereof giving rise to such right of indemnity shall have been given to the
party against whom such indemnity may be sought prior to such termination time.
11.2 Indemnification.
24
(a) The Company shall indemnify and hold harmless (on an after-tax
basis, if applicable, as set forth in Section 11.2(b)) the
Purchaser and its affiliates against and from any losses, claims,
expenses (including reasonable expenses of investigation and
reasonable attorneys' fees and expenses), damages and liabilities,
insofar as such losses, claims, expenses, damages or liabilities
(or actions in respect thereof) arise out of or are based upon a
breach of or failure to perform any representations, warranty,
covenant or agreement of the Company made hereunder ("Damages");
provided that no amount of indemnity will be payable in the case
of a claim by an indemnified party under this Section 11.2 unless,
until and only to the extent claimant has suffered Damages
(determined without regard to any qualification as to materiality
or Material Adverse Effect contained in any representation,
warranty, covenant or agreement giving rise to the claim for
indemnity hereunder) aggregating in excess of $1,500,000 (the
"Threshold Amount"), at which time the indemnified party shall be
entitled to seek indemnification for all Damages in excess of the
Threshold Amount. Purchaser expressly agrees and acknowledges that
the right of indemnification granted herein to the Purchaser and
its affiliates shall be deemed to be the exclusive remedy
available to such Persons for any of the matters described in this
Section. In no case shall the indemnity obligation exceed
$70,000,000 except in the case of willful misconduct or fraud or
for Damages based upon a breach of Section 2.4 or 2.12, in which
case the indemnity obligation shall not exceed $200,000,000.
(b) Any amount paid by the Company under this Section 11.2 will be
treated as an adjustment to the Purchase Price unless a final
determination causes any such amount not to constitute an
adjustment to the Purchase Price for Federal tax purposes. In the
event of such a final determination, except to the extent, if any,
there are offsetting deductions for the respective Damages
available to the indemnitee or any such amount can be added to the
tax basis of the indemnitee's investment made pursuant to this
Agreement, the Company shall pay a grossed-up amount that reflects
the hypothetical tax consequences of the receipt or accrual of
such payment, using the maximum statutory rate (or rates, in the
case of an item that affects more than one tax) applicable to the
recipient of such payment for the relevant year, reflecting for
example, the effect of deductions available for interest paid or
accrued and for taxes such as state and local income taxes. Any
payment required to be made by the Company under this Section 11.2
that is not made when due shall bear interest at the prime rate of
interest in effect at that time for Citibank, N.A. for each day
until paid and such interest shall accrue from the date that such
obligation is due. For purposes of this Agreement, the term "final
determination" shall mean (i) any final determination of liability
in respect of a tax that, under applicable law, is not subject to
further appeal, review or modification through proceedings or
otherwise (including the expiration of a statute of limitations or
a period for the filing of claims for refunds, amended returns or
appeals from adverse determinations), including a "determination"
as defined in Section 1313(a) of the Code or execution of an
Internal Revenue
25
Service Form 870AD or (ii) the payment of tax by the Purchaser or
any of its affiliates, whichever is responsible for payment of
such tax under applicable law, with respect to any item disallowed
or adjusted by any taxing authority, provided that such
responsible party determines that no action should be taken to
recoup such payment and the other party agrees.
11.3 Termination. (a) This Agreement may be terminated at any time
prior to the Closing:
(i) by mutual written agreement of the Company and the
Purchaser;
(ii) by either the Company or the Purchaser if the Closing
shall not have been consummated on or before February 28, 2000; or
(iii) by either the Company or the Purchaser if there shall
be any law or regulation that make consummation of the transactions
contemplated hereby illegal or otherwise prohibited or if consummation
of the transactions contemplated hereby would violate any nonappealable
final order, decree or judgment or any court or governmental body
having competent jurisdiction. The party desiring to terminate this
Agreement shall give notice of such termination to the other parties to
this Agreement.
(b) If this Agreement is terminated as permitted by this
Section, such termination shall be without liability of any party (or any
stockholder, director, officer, employee, agent, consultant or representative of
such party) to the other parties to this Agreement; PROVIDED that if such
termination shall result from the (i) willful failure of one party to fulfill a
condition to the performance of the obligations of another party, (ii) failure
to perform a covenant of this Agreement or (iii) breach by one party of any
representation or warranty agreement contained herein, such party shall be fully
liable for any and all Damages incurred or suffered by the other parties as a
result of such failure or breach.
11.4 Parties in Interest. Except as otherwise set forth herein, all
covenants, agreements, representations, warranties and undertakings contained in
this Agreement shall be binding on and shall inure to the benefit of the
respective successors and assigns of the parties hereto (including transferees
of any of the Purchased Shares or Conversion Shares or the Warrant or any
Warrant Shares), except that the Company shall not have the right to assign its
rights hereunder or any interest herein without the prior consent of the
Purchaser obtained in accordance with Section 11.5 hereof.
11.5 Amendments and Waivers.
(a) Amendments or additions to this Agreement may only be made
upon written consent of the Company and the holders of a majority of the then
issued Purchased Shares; and compliance with any term, covenant, agreement,
condition or provision set forth herein may only be omitted or waived (in a
particular instance and either retroactively or prospectively) upon the written
consent of the Company and the holders of a majority of the then
26
issued Purchased Shares. Prompt notice of any such amendment or waiver shall be
given to any Person who did not consent thereto.
(b) No failure or delay on the part of any party in exercising
any right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.
(c) This Agreement (including the Schedules and Exhibits
annexed hereto, which are an integral part of this Agreement) and the Related
Agreements constitute the full and entire understanding and complete agreement
of the parties with respect to the subject matter hereof and thereof and
supersedes all prior agreements and understandings between them or any of them
as to such subject matter.
11.6 Notices. All notices, requests, consents, reports and demands
shall be in writing and shall be hand delivered, sent by facsimile or other
electronic medium, or sent by express delivery or mailed, postage prepaid, to
the Company or to the Purchaser at the address set forth below or to such other
address as may be furnished in writing to the other parties hereto:
The Company: BTI Telecom Corp.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
with a copy to: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
Post Office Drawer 17803
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
The Purchaser: Welsh, Carson, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇
with a copy to: ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
11.7 Counterparts. This Agreement and any exhibit hereto may be
executed in multiple counterparts, each of which shall constitute an original
but all of which shall constitute but one and the same instrument. One or more
counterparts of this Agreement or any exhibit hereto may be delivered via
telecopier, with the intention that they shall have the same effect as an
original counterpart hereof.
27
11.8 Effect of Headings. The article and section headings herein
are for convenience only and shall not affect the construction hereof.
11.9 Severability. Any invalidity, illegality or limitation of the
enforceability with respect to any party of any one or more of the provisions of
this Agreement, or any part thereof, whether arising by reason of the law of any
such person's domicile or otherwise, shall in no way affect or impair the
validity, legality or enforceability of the remainder of this Agreement with
respect to such party or the validity, legality or enforceability of this
Agreement with respect to any other party. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall to the extent
practicable, be modified so as to make it valid, legal and enforceable and to
retain as nearly as practicable the intent of the parties, and the validity,
legality, and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
11.10 Specific Enforcement. Each party expressly agrees that the
other parties may be irreparably damaged if this Agreement is not specifically
enforced. Upon a breach or threatened breach of the terms or covenants of this
Agreement by any party, the other parties shall, in addition to all other
remedies, each be entitled to apply for a temporary or permanent injunction,
and/or a decree for specific performance, in accordance with the provisions
hereof.
11.11 Governing Law. This Agreement shall be deemed a contract made
under the laws of the State of North Carolina and together with the rights and
obligations of the parties hereunder, shall be construed under and governed by
the laws of such State without regard to the conflict of laws provisions
thereof.
11.12 Public Announcements. No party will issue a press release or
make any public statement with respect to this Agreement or the Related
Agreements or the transactions contemplated hereby and thereby without the
approval of the other party (not to be unreasonably withheld), except as may be
required by applicable law or any listing agreement with any national securities
exchange, except that the Purchaser and the Company may disclose such terms and
information to their advisors, employees, investors, stockholders, successors or
assigns in the ordinary course.
11.13 No Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any person or entity other than the parties hereto
and their respective successors and permitted assigns.
11.14 Expenses. The Company agrees to pay all reasonable expenses of
the Purchaser which are currently estimated at $1,000,000, incurred in
connection with the closing of the transactions contemplated hereby; provided,
however, that the Company shall not be obligated to pay any such expenses unless
and until the Closing occurs (unless the Closing does not occur due to the
Company's breach).
[THE NEXT PAGE IS THE SIGNATURE PAGE.]
28
IN WITNESS WHEREOF, the parties have executed this Series A Preferred
Stock Purchase Agreement as of the date first above written.
COMPANY: BTI TELECOM CORP.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
___________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Executive Officer
FSM: FS MULTIMEDIA, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
___________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Executive Officer
PURCHASER: WELSH, CARSON, ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇ VIII, L.P.
By: WCAS VIII Associates LLC,
General Partner
By: /s/ ▇▇▇▇▇▇▇▇ ▇. Rather
___________________________________
Name: ▇▇▇▇▇▇▇▇ ▇. Rather
Title: Member
BTI INVESTORS LLC
By: /s/ ▇▇▇▇▇▇▇▇ ▇. Rather
____________________________________
Name: ▇▇▇▇▇▇▇▇ ▇. Rather
Title: Authorized Person
WCAS INFORMATION PARTNERS, L.P.
By: WCAS Info Partners,
General Partner
By: /s/ ▇▇▇▇▇▇▇▇ ▇. Rather
____________________________________
Name: ▇▇▇▇▇▇▇▇ ▇. Rather
Title: Attorney-in-fact
SCHEDULE 1.1
PURCHASER ALLOCATION
Shares of
Series A
Purchaser Preferred Stock Warrant Shares
--------- --------------- --------------
Welsh, Carson, ▇▇▇▇▇▇▇▇ 189,524 4,264,290
& ▇▇▇▇▇ VIII, L.P.
WCAS Information Partners, L.P. 1,000 22,500
BTI Investors LLC 9,476 213,210
