Series G Preferred Stock Purchase Agreement - Birch Telecom Inc. and BTI Ventures LLC
EXECUTION COPY
SERIES G PREFERRED STOCK PURCHASE AGREEMENT
BY AND AMONG
BIRCH TELECOM, INC.
AND
BTI VENTURES L.L.C.
DATED AS OF MARCH 26, 2001
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TABLE OF CONTENTS
PAGE
1. Agreement To Sell And Purchase...........................................................................1
1.1 Authorization of Shares.........................................................................1
1.2 Sale and Purchase...............................................................................1
2. Closing, Delivery And Payment............................................................................1
2.1 Closings........................................................................................1
2.2 Delivery........................................................................................2
3. Representations And Warranties Of The Company............................................................2
3.1 Organization, Good Standing and Qualification...................................................2
3.2 Subsidiaries....................................................................................2
3.3 Capitalization; Voting Rights...................................................................3
3.4 Authorization; Binding Obligations..............................................................4
3.5 SEC Reports; Financial Statements...............................................................4
3.6 Undisclosed Liabilities.........................................................................5
3.7 Contracts; Action...............................................................................5
3.8 Obligations to Related Parties..................................................................6
3.9 Changes.........................................................................................6
3.10 Title to Properties and Assets; Liens, etc......................................................7
3.11 Patents and Trademarks..........................................................................7
3.12 Compliance with Other Instruments...............................................................8
3.13 Litigation......................................................................................8
3.14 Tax Returns and Payments........................................................................9
3.15 Employees......................................................................................10
3.16 Registration Rights............................................................................10
3.17 Compliance with Laws...........................................................................10
3.18 Environmental and Safety Laws..................................................................11
3.19 Offering Valid.................................................................................13
3.20 Employee Benefit Plans.........................................................................13
3.21 Insurance......................................................................................14
3.22 Books and Records..............................................................................14
3.23 Business Plan; Projections.....................................................................14
3.24 Accounts Receivable and Bad Debts..............................................................14
3.25 Licenses.......................................................................................14
3.26 Network........................................................................................15
3.27 Customers......................................................................................15
3.28 No Broker......................................................................................15
3.29 Disclosure.....................................................................................15
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4. Representations And Warranties Of Purchaser.............................................................15
4.1 Requisite Power; Authorization; Binding Obligations............................................15
4.2 Investment Representations.....................................................................16
4.3 Transfer Restrictions..........................................................................17
5. Covenants of the Company................................................................................17
5.1 Ordinary Course of Business....................................................................17
5.2 Basic Financial Information....................................................................17
5.3 Access.........................................................................................18
5.4 D&O Insurance..................................................................................18
5.5 Independent Accountants........................................................................18
5.6 Use of Proceeds................................................................................19
5.7 Efforts........................................................................................19
5.8 Notification of Certain Matters................................................................19
5.9 New Certificate................................................................................19
5.10 Existing Warrants..............................................................................19
5.11 Additional Investments.........................................................................19
6. Conditions To Closing...................................................................................20
6.1 Conditions to Purchaser's Obligation to Purchase the Initial Shares............................20
6.2 Conditions to Company's Obligations to Sell the Initial Shares.................................22
6.3 Conditions to Purchaser's Obligation to Purchase the Subsequent Shares.........................22
6.4 Conditions to Company's Obligations to Sell the Subsequent Shares..............................23
7. Miscellaneous...........................................................................................23
7.1 Governing Law; Jurisdiction; Waiver of Jury Trial..............................................23
7.2 Survival.......................................................................................23
7.3 Successors and Assigns; Assignment.............................................................24
7.4 Entire Agreement; Supercedes Prior Agreement...................................................24
7.5 Severability...................................................................................24
7.6 Amendment and Waiver...........................................................................24
7.7 Delays or Omissions............................................................................24
7.8 Notices........................................................................................24
7.9 Expenses; Indemnification......................................................................25
7.10 Interpretation.................................................................................26
7.11 Knowledge......................................................................................26
7.12 Termination....................................................................................26
7.13 Counterparts; Execution by Facsimile Signature.................................................26
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INDEX OF EXHIBITS
Exhibit A Form of New Certificate
Exhibit B Form of Amended and Restated Purchasers Rights Agreement
Exhibit C Monitoring Agreement
Exhibit D Form of Legal Opinion
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BIRCH TELECOM, INC.
SERIES G PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES G PREFERRED STOCK PURCHASE AGREEMENT (the "AGREEMENT") is
entered into as of March 26, 2001 by and among BIRCH TELECOM, INC., a Delaware
corporation (the "COMPANY"), and BTI VENTURES L.L.C. , a Delaware limited
liability company, together with such affiliates as it shall designate
("PURCHASER").
RECITALS
WHEREAS, the Company has authorized the sale and issuance of an
aggregate of up to 329,000,000 shares of its Series G Preferred Stock;
WHEREAS, Purchaser desires to purchase up to an aggregate of
300,000,000 shares of Series G Preferred Stock from the Company on the terms and
conditions set forth herein; and
WHEREAS, the Company desires to issue and sell such shares of Series G
Preferred Stock to Purchaser on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE.
1.1 AUTHORIZATION OF SHARES. On or prior to the First Closing (as defined
below), the Company shall have authorized (i) the sale and issuance to Purchaser
of an aggregate of 300,000,000 shares of Series G Preferred Stock (the
"SHARES"), and (ii) the issuance of such shares of Common Stock to be issued
upon conversion of the Shares (the "CONVERSION SHARES"). The Shares and the
Conversion Shares shall have the rights, preferences, privileges and
restrictions set forth in the Second Restated Certificate of Incorporation of
the Company in the form attached hereto as Exhibit A (the "NEW CERTIFICATE").
1.2 SALE AND PURCHASE. Subject to the terms and conditions hereof, (a) at
the First Closing, the Company hereby agrees to issue and sell to Purchaser, and
Purchaser agrees to purchase from the Company, 214,285,715 Shares (the "INITIAL
SHARES") at a purchase price of $0.35 per Share for an aggregate purchase price
of $75,000,000.25, and (b) at the Second Closing (as defined below), the Company
hereby agrees to issue and sell to Purchaser, and Purchaser agrees to purchase
from the Company, 85,714,285 Shares (the "SUBSEQUENT SHARES") at a purchase
price of $0.35 per Share for an aggregate purchase price of $29,999,999.75.
2. CLOSING, DELIVERY AND PAYMENT.
2.1 CLOSINGS. The closing of the sale and purchase of the Initial Shares
under this Agreement (the "FIRST CLOSING") shall take place at 10:00 a.m. on the
second business day after the satisfaction or waiver of the conditions set forth
in Sections 6.1 and 6.2, at the offices of the Company, 2020 Baltimore Avenue,
Kansas City, Missouri 64108, or at such other time or place
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as the Company and Purchaser may mutually agree (such date is hereinafter
referred to as the "FIRST CLOSING DATE"). The closing of the sale and purchase
of the Subsequent Shares under this Agreement (the "SECOND CLOSING" and together
with the First Closing, the "CLOSINGS") shall take place at 10:00 a.m. on July
31, 2001 subject to the satisfaction or waiver of the conditions set forth in
Sections 6.3 and 6.4, at the offices of the Company, 2020 Baltimore Avenue,
Kansas City, Missouri 64108, or at such other time or place as the Company and
Purchaser may mutually agree (such date is hereinafter referred to as the
"SECOND CLOSING DATE" and together with the First Closing Date, the "CLOSING
DATES").
2.2 DELIVERY. Subject to the terms and conditions hereof, the Company will
deliver to Purchaser all of the Initial Shares at the First Closing and all of
the Subsequent Shares at the Second Closing, in each case by delivery of a
certificate or certificates evidencing such Shares to be purchased at the
respective Closing, free and clear of any mortgage, pledge, lien, lease,
encumbrance or charge or other claim (collectively, an "ENCUMBRANCE"), and
Purchaser will make payment to the Company of the respective purchase prices
therefor by wire transfer of immediately available funds to an account
designated by the Company.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth on a Schedule of Exceptions delivered by the
Company at the First Closing, the Company hereby represents and warrants to
Purchaser as of the date of this Agreement and each Closing Date as follows:
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. Each of the Company
and its Subsidiaries (as defined below) is a corporation or other entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of incorporation or formation and has all requisite power and
authority to own and operate its respective properties and assets and to carry
on its respective business as currently conducted and as currently proposed to
be conducted. The Company has all requisite corporate power and authority to
execute and deliver this Agreement and the Amended and Restated Purchasers
Rights Agreement in the form of Exhibit B attached hereto (the "PURCHASERS
RIGHTS AGREEMENT," and together with any other agreement entered into in
connection with this transaction, the "RELATED AGREEMENTS"), to issue and sell
the Shares and to carry out the provisions of this Agreement and the Related
Agreements. Each of the Company and its Subsidiaries is duly qualified and is
authorized to do business and is in good standing as a foreign corporation or
other entity in all jurisdictions in which the nature of its activities and of
its properties (both owned and leased) makes such qualification necessary,
except for those jurisdictions in which failure to do so would not have a
material adverse effect on the assets, liabilities, business, results of
operations, financial condition or prospects of the Company and its
Subsidiaries, taken as a whole (a "MATERIAL ADVERSE EFFECT"). Schedule 3.1 lists
all the jurisdictions in which the Company is qualified as a foreign corporation
and the dates of such qualifications.
3.2 SUBSIDIARIES. The Company does not own voting securities or other
similar interests of any corporation or other entity that is sufficient to
enable the Company to elect a majority of the members of such corporation's or
other entity's Board of Directors or other governing body, except for those
corporations or other entities set forth in the SEC Reports (as defined below)
or Schedule 3.2 (each a "SUBSIDIARY" and collectively, the "SUBSIDIARIES"). All
the outstanding shares of capital stock or other equity interests of the
Subsidiaries have been validly issued and
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are fully paid and non-assessable and all such outstanding shares are owned
directly by the Company free of any Encumbrance. Except as set forth in the SEC
Reports or Schedule 3.2, neither the Company nor any of its Subsidiaries is a
participant in any joint venture, partnership or similar arrangement.
3.3 CAPITALIZATION; VOTING RIGHTS.
(a) As of the date hereof, the authorized capital stock of the
Company consists of 208,403,275 shares, of which 150,000,000 are shares of
Common Stock, par value $0.001 per share, 8,590,855 shares of which are issued
and outstanding and 12,673,992 shares of which are reserved for future issuance
to employees pursuant to the Stock Option Plans (as hereinafter defined) and
58,403,275 are shares of Preferred Stock, par value $0.001 per share; 8,750,000
of which are designated Series B Preferred Stock, 8,572,039 of which are issued
and outstanding; 8,500,000 shares of which are designated Series C Preferred
Stock, 6,270,527 of which are issued and outstanding; 3,00,000 of which are
designated Series D Preferred Stock, of which 2,868,538 are issued and
outstanding; 1,904,898 of which are designated Series E Preferred Stock, none of
which are issued and outstanding; and 30,000,000 of which are designated Series
F Preferred Stock, 23,596,492 of which are issued and outstanding. All issued
and outstanding shares of the Company's capital stock (i) have been duly
authorized and validly issued, (ii) are fully paid and nonassessable, (iii) were
issued in compliance with all applicable state and federal laws concerning the
issuance of securities. The rights, preferences, privileges and restrictions of
the Preferred Stock are as stated in the Company's Restated Certificate of
Incorporation, as amended, in effect on the date hereof (the "CURRENT
CERTIFICATE").
(b) The Company has delivered to Purchaser a copy of the Company's
1998 Stock Option Plan (the "1998 PLAN") and 2000 Equity Participation Plan (the
"2000 PLAN" and, together with the 1998 Plan, the "STOCK OPTION PLANS").
Schedule 3.3 sets forth a true and complete summary of all options issued under
each Stock Option Plan, including the holder, issue date, exercise price,
vesting status and expiration date of such option. Other than the 12,673,992
shares reserved for issuance under the Stock Option Plans, the options issued
pursuant to the Stock Option Plans as set forth on Schedule 3.3 and 115,000
outstanding warrants (the "EXISTING WARRANTS") to purchase 2,530,473 shares of
Common Stock pursuant to the Warrant Agreement, dated as of June 23, 1998,
between the Company and Norwest Bank Minnesota, National Association, as Warrant
Agent, and except as may be granted pursuant to this Agreement and the Related
Agreements, there are no outstanding options, warrants, rights (including
conversion or preemptive rights and rights of first refusal), proxy or
shareholder agreements, or agreements of any kind for the purchase or
acquisition from the Company or any Subsidiary of any of their securities.
Except as described in this Agreement or set forth in Schedule 3.3, (x) there
are no outstanding obligations of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any securities of the Company or any
voting or equity securities or interests of any subsidiary of the Company, (y)
there is no voting trust or other agreement or understanding to which the
Company or any of its Subsidiaries is a party or is bound with respect to the
voting of the capital stock or other voting securities of the Company or any of
its Subsidiaries and (z) there are no other options, calls, warrants or other
rights, agreements, arrangements or commitments of any character relating to the
issued or unissued capital stock of the Company or any of its Subsidiaries to
which the Company or any of its Subsidiaries is a party.
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(c) On each Closing Date, the Company's authorized capital stock will
be as set forth in the New Certificate, and the rights, preferences, privileges
and restrictions of the Preferred Stock will be as stated in the New
Certificate. When issued in accordance with the provisions of this Agreement and
the New Certificate, the Shares and the Conversion Shares will be duly
authorized, validly issued, fully paid and nonassessable and will be delivered
free and clear of any Encumbrances and will have the rights, preferences,
privileges and restrictions set forth in the New Certificate; PROVIDED, HOWEVER,
that such shares may be subject to restrictions on transfer under the Purchasers
Rights Agreement or under state or federal securities laws or as otherwise
required by such laws at the time a transfer is proposed.
(d) Schedule 3.3 sets forth as of the date hereof the name of each
person or entity owning any of the Company's outstanding equity securities and
the number and class of equity security owned by each such person or entity.
3.4 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on the part
of the Company, its officers, directors and shareholders (including but not
limited to obtaining the approvals of (i) the disinterested directors of the
Board of Directors, (ii) 75% of the holders of Series B Preferred Stock and
Series D Preferred Stock, voting together as a class, (iii) holders of a
majority of the Common Stock, voting as a separate class, (iv) holders of a
majority of each series of Preferred Stock, each series voting as a separate
class, (v) holders of a majority of all the Company's outstanding Preferred
Stock, voting together as a class, and (vi) holders of at least two-thirds of
the Company's outstanding capital stock, voting together as a class) necessary
for the authorization, execution and delivery of this Agreement and the Related
Agreements, the consummation of the transactions contemplated hereby and
thereby, and the performance of all obligations of the Company hereunder and
thereunder (including but not limited to the filing of the New Certificate with
the Secretary of State of the State of Delaware, the authorization, sale,
issuance and delivery of the Shares, and the authorization, reservation,
issuance and delivery of the Conversion Shares) has been or will be taken prior
to the First Closing. This Agreement and the Related Agreements, when executed
and delivered, will be valid and binding obligations of the Company enforceable
against it in accordance with their terms, except (a) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application affecting enforcement of creditors' rights; (b) general principles
of equity that restrict the availability of equitable remedies; and (c) to the
extent that the enforceability of the indemnification provisions in Section 2.5
of the Purchasers Rights Agreement may be limited by applicable laws. The sale
of the Shares is not and will not be subject to any preemptive rights or rights
of first refusal that have not been properly waived.
3.5 SEC REPORTS; FINANCIAL STATEMENTS.
(a) The Company has filed with the Securities and Exchange Commission
(the "SEC") all forms, reports, schedules, proxy statements (collectively, and
in each case including all exhibits and schedules thereto and documents
incorporated by reference therein, the "SEC REPORTS") required to be filed by
the Company with the SEC since September 1, 1998. As of their respective dates,
the SEC Reports complied in all material respects with the requirements of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), or the
Securities Act of 1933, as amended (the "SECURITIES ACT"), and the rules and
regulations promulgated thereunder and none of such SEC Reports contained any
untrue statement of a material fact or omitted to
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state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
(b) The Company has delivered to Purchaser an unaudited consolidated
balance sheet (the "STATEMENT DATE BALANCE SHEET") of the Company and its
Subsidiaries as at December 31, 2000 (the "STATEMENT DATE") and unaudited
consolidated statement of income and cash flows of the Company and its
Subsidiaries for the twelve-months ending on the Statement Date (the "STATEMENT
DATE INCOME STATEMENT" and "STATEMENT DATE CASH FLOW STATEMENT" respectively,
and collectively with the Statement Date Balance Sheet and all audited and
unaudited financial statements included in the SEC Reports, the "FINANCIAL
STATEMENTS"). Except as set forth on Schedule 3.5(b), the Financial Statements,
together with the notes thereto, have been prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis throughout
the periods indicated, except as disclosed therein, and present fairly the
consolidated financial position of the Company and its Subsidiaries as of the
respective dates presented therein and the consolidated results of operations
and cash flows of the Company and its Subsidiaries for the respective periods
presented therein; PROVIDED, HOWEVER, that the unaudited financial statements
are subject to normal recurring year-end audit adjustments (which are not
individually or in the aggregate expected to be material).
3.6 UNDISCLOSED LIABILITIES. Except as and to the extent set forth on the
Statement Date Balance Sheet of the Company and its Subsidiaries at the
Statement Date, neither the Company nor any Subsidiaries has any liabilities
that are material (individually or in the aggregate), except current liabilities
incurred in the ordinary course of business consistent with past practice
subsequent to the Statement Date.
3.7 CONTRACTS; ACTION.
(a) Except (i) as set forth on Schedule 3.7(a), (ii) as described in
the Company's Annual Report on Form 10-K for the year ended December 31, 1999
(the "1999 FORM 10-K"), and (iii) for agreements between the Company or any
Subsidiary and its employees with respect to the sale of Common Stock, there are
no agreements, contracts, understandings or proposed transactions between the
Company or any Subsidiary and any of its officers, directors, affiliates or any
affiliate thereof.
(b) Attached hereto as Schedule 3.7(b) is a list of (i) all "material
contracts" with the meaning of Item 601 of Regulation S-K of the SEC, and (ii)
all contracts restricting the Company or any of its Subsidiaries from engaging
in any line of business or competing with any person or entity or in any
geographical area, or from using or disclosing any information in its possession
(other than routine vendor and customer confidentiality agreements and
confidentiality agreements with potential acquisition targets) (collectively
referring to the items in clauses (i) and (ii), the "CONTRACTS").
(c) Except as set forth in Schedule 3.7(c), neither the Company nor
any of its Subsidiaries is, nor to the Company's knowledge is any other party to
any Contract, in material default under, or in material breach or material
violation of, any Contract and, to the knowledge of the Company, no event has
occurred which, with the giving of notice or passage of time or both would
constitute a material default by the Company under any Contract. Other than
Contracts which have terminated or expired in accordance with their terms, each
of the Contracts
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is a valid and binding obligation of the Company enforceable against the Company
in accordance with its terms (subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, general equitable
principles (whether considered on a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing) and is in full force and
effect. No event has occurred which either entitles, or would, on notice or
lapse of time or both, entitle the holder of any indebtedness of the Company or
any of its Subsidiaries to accelerate or which does accelerate the maturity of
any indebtedness for borrowed money of the Company or any of the Subsidiaries.
(d) Since July 13, 1999, except as set forth on Schedule 3.7(d),
neither the Company nor any Subsidiary has (i) declared or paid any dividends,
or authorized or made any distribution upon or with respect to any class or
series of its capital stock, (ii) incurred any indebtedness for money borrowed
or any other liabilities, individually, in excess of $1,000,000, (iii) made any
loans or advances to any person, other than ordinary advances for travel
expenses, or (iv) sold, exchanged or otherwise disposed of any of its assets or
rights, other than the sale of its inventory in the ordinary course of business.
(e) For the purposes of subsection (d) above, all indebtedness,
liabilities, agreements, understandings, instruments, contracts and proposed
transactions involving the same person or entity (including persons or entities
the Company or any Subsidiary has reason to believe are affiliated therewith)
shall be aggregated for the purpose of meeting the individual minimum dollar
amounts of such subsections.
3.8 OBLIGATIONS TO RELATED PARTIES. There are no obligations of the
Company or any Subsidiary to their respective officers, directors, shareholders,
or employees other than (a) for payment of salary for services rendered, (b)
reimbursement for reasonable expenses incurred on behalf of the Company or
Subsidiary and (c) for other standard employee benefits made generally available
to all employees (including stock option agreements outstanding under the Stock
Option Plans). Except as set forth on Schedule 3.8, neither the Company nor any
Subsidiary is a guarantor or indemnitor of any indebtedness of any other person,
firm or corporation.
3.9 CHANGES Since the Statement Date and except as set forth on Schedule
3.9, there has not been:
(a) any change in the assets, liabilities, financial condition or
operations of the Company and its Subsidiaries from that reflected in the
Statement Date Balance Sheet and Statement Date Income Statement, other than
changes in the ordinary course of business, none of which individually or in the
aggregate has had, or could reasonably be expected to have, a Material Adverse
Effect;
(b) any resignation or termination of any key officers of the Company
and its Subsidiaries; and the Company does not know of the impending resignation
or termination of employment of any such key officer;
(c) any material damage, destruction or loss, whether or not covered
by insurance;
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(d) any waiver by the Company or any Subsidiary of a valuable right
or of a material debt owed to it;
(e) any direct or indirect loans made by the Company or any
Subsidiary to any shareholder, employee, officer or director of the Company or
any Subsidiary, other than travel advances and salary advances (which salary
advances do not exceed $25,000 in the aggregate) made in the ordinary course of
business consistent with past practice;
(f) any material change in any compensation arrangement or agreement
with any employee, officer, director or shareholder (other than compensation
increases in the ordinary course of business consistent with past practice);
(g) any declaration or payment of any dividend or other distribution
of the assets of the Company or any Subsidiary;
(h) to the Company's knowledge, any labor organization activity;
(i) any debt, obligation or liability incurred, assumed or guaranteed
by the Company or any Subsidiary, except those for immaterial amounts and for
current liabilities incurred in the ordinary course of business and consistent
with past practice;
(j) any sale, assignment or transfer of any material patents,
trademarks, copyrights, trade secrets or other intangible assets;
(k) any change in any Contract which could reasonably be expected to
have a Material Adverse Effect;
(l) any action taken by the Company or any Subsidiary that requires
Purchaser's consent under Section 8.3 of the Amended and Restated Purchasers
Rights Agreement, dated as of April 13, 2000, among the Company and certain
stockholders of the Company (the "EXISTING PURCHASERS RIGHTS AGREEMENT") or
Section 3(b)(iii) of Article Fourth of the Current Certificate; or
(m) any other event or condition of any character that, either
individually or cumulatively, has had, or could reasonably be expected to have,
a Material Adverse Effect.
3.10 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company and each of
its Subsidiaries has good and marketable title to its respective properties and
assets, including the properties and assets reflected in the Statement Date
Balance Sheet, and good title to its respective leasehold estates, in each case
subject to no Encumbrance. The Company and each of its Subsidiaries is in
compliance with all material terms of each lease to which it is a party or is
otherwise bound.
3.11 PATENTS AND TRADEMARKS. Except as set forth in Schedule 3.11, the
Company and each of its Subsidiaries owns or possesses sufficient legal rights
to all patents, trademarks, service marks, trade names, copyrights, trade
secrets, licenses, information and other proprietary rights and processes
necessary for their respective businesses as now conducted and as currently
proposed to be conducted, without any known infringement of the rights of
others. Neither the Company nor any of its Subsidiaries has received any
communications alleging that it has
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violated or, by conducting its business as currently proposed, would violate any
of the patents, trademarks, service marks, trade names, copyrights or trade
secrets, licenses, information or other proprietary rights and processes of any
other person or entity. Neither the Company nor any of its Subsidiaries is aware
that any of its employees is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere with their duties to the Company or any of its Subsidiaries or that
would conflict with the Company's or any of its Subsidiaries' business as
presently proposed to be conducted. Neither the execution nor delivery of this
Agreement, nor the carrying on of the Company's or any of its Subsidiaries'
business by the employees of the Company or its Subsidiaries, nor the conduct of
the Company's or any of its Subsidiaries' business as currently proposed, will
conflict with or result in a breach of the terms, conditions or provisions of,
or constitute a default under, any contract, covenant or instrument under which
any employee is now obligated. Neither the Company nor any of its Subsidiaries
believes it is or will be necessary to utilize any inventions, trade secrets or
proprietary information of any of its employees made prior to their employment
by the Company or any of its Subsidiaries, except for inventions, trade secrets
or proprietary information that have been assigned to the Company or any of its
Subsidiaries.
3.12 COMPLIANCE WITH OTHER INSTRUMENTS. Neither the Company nor any of its
Subsidiaries is in violation or default of (i) the Current Certificate or
Bylaws, (ii) any Contract or (iii) any judgment, decree, order, writ, or any
statute, rule or regulation, including, without limitation, requirements of the
Federal Communications Commission (the "FCC") or any state regulatory agency
applicable to the Company or any Subsidiary, except for such violations or
defaults in respect of clauses (ii) or (iii) which would not, individually or in
the aggregate, be reasonably expected to have a Material Adverse Effect. The
execution, delivery, and performance of this Agreement, and the Related
Agreements, and the issuance and sale of the Shares pursuant hereto, will not,
with or without the passage of time or giving of notice, result in any
violation, or be in conflict with or constitute a default under (i) the Current
Certificate (or when filed, the New Certificate) or Bylaws, (ii) any Contract or
(iii) any judgment, decree, order, writ or any statute, rule or regulation
including, without limitation, requirements of the FCC or any state regulatory
agency applicable to the Company or any Subsidiary. The execution, delivery and
performance of this Agreement, and the Related Agreements, and the issuance and
sale of the Shares pursuant hereto, will not result in the creation of any
Encumbrance upon any of the properties or assets of the Company and its
Subsidiaries or the suspension, revocation, impairment, forfeiture or nonrenewal
of any permit or license (including but not limited to any License (as defined
below)), authorization or approval applicable to the Company, its business or
operations or any of its assets or properties.
3.13 LITIGATION. Except as set forth on Schedule 3.13, there is no action,
suit, proceeding or investigation pending or to the Company's knowledge
currently threatened against the Company or any Subsidiary. The foregoing
includes, without limitation, actions pending or threatened (or any basis
therefor known to the Company) involving the prior employment of any of the
Company's or any Subsidiary's employees, their use in connection with the
Company's or any Subsidiary's business of any information or techniques
allegedly proprietary to any of their former employers, or their obligations
under any agreements with prior employers. Neither the Company nor any
Subsidiary is a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government authority. There is no
action, suit, proceeding or
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investigation by the Company or any Subsidiary currently pending or which the
Company or any Subsidiary intends to initiate.
3.14 TAX RETURNS AND PAYMENTS.
(a) Except as set forth on Schedule 3.14(a), each of the Company and
its Subsidiaries has accurately prepared and filed on time with all appropriate
governmental authorities all material Tax (as defined below) returns and other
material documents that it has been required to file in respect of any Taxes for
all fiscal periods ending on or prior to the First Closing Date and all such
returns or other material documents are correct and complete in all material
respects and do not contain a disclosure statement under Section 6662 of the
Internal Revenue Code of 1986, as amended (the "CODE").
(b) Each of the Company and its Subsidiaries has paid in full all
material Taxes due on or before the date hereof and, in the case of such Taxes
accruing on or before such date that are not due on or before such date, the
Company has made adequate provision in its books and records and Financial
Statements to the extent currently required by GAAP.
(c) Each of the Company and its Subsidiaries has withheld from each
payment made to any of its present or former employees, officers, directors and
managers all amounts required by law to be withheld or remitted. Each of the
Company and its Subsidiaries has remitted all social security contributions and
other Taxes payable by it in respect of its employees. Each of the Company and
its Subsidiaries has charged, collected and remitted all material Taxes as
required under applicable legislation on any sale, supply or delivery
whatsoever, made by the Company or any of its Subsidiaries.
(d) At least two business days before the First Closing, the Company
shall deliver to Purchaser or to its accountants schedules, and if requested,
copies, of all reassessments of Taxes of the Company or any of its Subsidiaries
that have been issued and are outstanding. No governmental authority has
challenged, disputed or questioned the Company or any of its Subsidiaries in
writing in respect of any Taxes or of any Tax returns, filings or other reports
filed under any statute providing for such Taxes.
(e) Except as set forth in Schedule 3.14(e), neither the Company nor
any of its Subsidiaries has (i) granted any waiver of any statute of limitations
with respect to, or any extension of a period for the assessment of, any Tax, or
(ii) requested any extension of time within which to file any federal income Tax
Return or any state income or franchise Tax Return, which Tax Return has not
been filed as of the date hereof.
(f) Except as set forth in Schedule 3.14(f), neither the Company nor
any of its Subsidiaries (i) is a party to or bound by (nor will it become a
party to or become bound by) any Tax indemnity, Tax sharing, Tax allocation or
similar agreement or arrangement (or administrative or accounting practice
having substantially the same effect); (ii) has filed a consent under Section
341(f) of the Code (or any corresponding provisions of state, local or foreign
income tax law) or agreed to have Section 341(f) of the Code (or any
corresponding provision of state, local or foreign tax law) apply to any
disposition of any asset owned by it; (iii) has agreed to make or is required to
make any material adjustment under Section 481(a) of the Code; (iv) has been a
member of an affiliate group of corporations, within the meaning of Section 1504
of the Code (other than the affiliated group of which the Company is the common
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parent corporation); (v) owns material assets that directly or indirectly secure
debt the interest on which is tax-exempt under Section 103(a) of the Code; (vi)
is obligated under any agreements in connection with industrial development
bonds or other obligations with respect to which the excludability from gross
income of the holder for federal or state income tax purposes would be affected
by the transactions contemplated hereunder, or (vii) owns any property of a
character, the indirect transfer of which pursuant to this Agreement, would give
rise to any material documentary, stamp or other transfer tax.
(g) Neither the Company nor any of its Subsidiaries is, or has been,
a United States real property holding corporation (as defined in Section
897(c)(2) of the Code) during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code, and, to the Company's knowledge, no foreign person
directly or indirectly holds (within the meaning of Section 897(c)(3) of the
Code), more than 5% of the voting stock of the Company.
(h) Except as set forth on Schedule 3.14(h), neither the Company nor
any of its Subsidiaries is a party to any agreement, contract, arrangement or
plan that has resulted or would result, separately or in the aggregate, in
connection with this Agreement or any change of control of the Company or any of
its Subsidiaries, in the payment of any material "excess parachute payments"
within the meaning of Section 280G of the Code.
(i) For purposes of this Agreement, the term "TAX" or "TAXES" shall
mean all taxes, charges, fees, levies, imposts and other assessments, including
all income, sales, use, goods and services, value added, capital, capital gains,
alternative net worth, transfer, profits, withholding, payroll, employer health,
excise, real property and personal property taxes, and any other taxes, customs
duties, fees, assessments or similar charges in the nature of a tax, including,
without limitation, any interest, fines and penalties imposed by any
governmental authority.
3.15 EMPLOYEES. Neither the Company nor any of its Subsidiaries has any
collective bargaining agreements with any of its employees. There is no labor
union organizing activity pending or, to the knowledge of the Company or any of
its Subsidiaries, threatened with respect to the Company or any of its
Subsidiaries. Neither the Company nor any of its Subsidiaries is aware that any
officer or key employee, or that any group of key employees, intends to
terminate their employment with the Company or any of its Subsidiaries, nor does
the Company or any of its Subsidiaries have a present intention to terminate the
employment of any officer, key employee or group of key employees.
3.16 REGISTRATION RIGHTS. Except as required pursuant to the Existing
Purchasers Rights Agreement or as set forth in Schedule 3.16, neither the
Company nor any of its Subsidiaries is currently under any obligation, and has
not granted any rights, to register any of the Company's or any Subsidiary's
currently outstanding securities or any of its securities that may hereafter be
issued under the Securities Act or state securities laws.
3.17 COMPLIANCE WITH LAWS.
(a) Neither the Company nor any of its Subsidiaries has been, or
currently is, in violation, in any material respect, of any material statute,
rule, regulation, order or restriction of any domestic or foreign government
authority thereof in respect of the conduct of its business or the ownership of
its properties. Except as set forth on Schedule 3.17(a), the Company is in
compliance, in all material respects, with all applicable material FCC and state
regulatory agency
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tariffing requirements, reporting requirements, universal service and
telecommunications relay service funding obligations and other
telecommunications regulations. Except as set forth on Schedule 3.17(a), no
governmental orders, permissions, consents, approvals or authorizations are
required to be obtained and no registrations or declarations are required to be
filed in connection with the execution and delivery of this Agreement and the
issuance of the Shares.
(b) Except as set forth on Schedule 3.17(b), there are no proceedings
or investigations pending or threatened, before the FCC or any state regulatory
agency directed specifically at the Company or, in the case of matters of
general applicability to the telecommunications industry, in which the Company
is identified for possible disparate treatment or whose outcome may have a
disparate impact on the Company in which any of the following matters are being
considered which are reasonably likely to have a Material Adverse Effect, nor
has the Company or any of its Subsidiaries received written notice or inquiry
from the FCC or any state regulatory agency, indicating that any of such matters
should be considered or may become the object of consideration or investigation
specifically regarding the Company which are reasonably likely to have a
Material Adverse Effect, or, in the case of matters of general applicability to
the telecommunications industry, in which the Company is identified for possible
disparate treatment or whose outcome may have a disparate impact on the Company
or which otherwise involves: (a) increases or reductions in access charges,
universal service contributions or the like; (b) traffic routing restrictions or
restrictions on use of facilities; (c) reduction or restriction of rates charged
to customers; (d) reduction of earnings; (e) refunds or other forfeitures of
amounts previously charged to customers; (f) use of NXX codes; or (g) failure to
meet any expense, infrastructure, service quality or other commitments
previously made to or imposed by the FCC or any state regulatory agency.
(c) Except as set forth on Schedule 3.17(c), neither the Company nor
any of its Subsidiaries has any outstanding commitments made in the context of a
matter or proceeding related specifically to the Company or, in the case of
matters of general applicability to the telecommunications industry, in which
the Company is identified for possible disparate treatment or whose outcome may
have a disparate impact on the Company (and no such obligations have been
imposed upon the Company and remain outstanding), regarding: (a) increases or
reductions in access charges, universal service contributions or the like; (b)
traffic routing restrictions or restrictions on use of facilities; (c) reduction
or restriction of rates charged to customers; (d) reduction of earnings; (e)
refunds or other forfeitures of amounts previously charged to customers; (f) use
of NXX codes; or (g) expenses, infrastructure expenditures, service quality or
other regulatory requirements, to or by the FCC or any state regulatory agency,
in each case which are reasonably likely to have a Material Adverse Effect.
3.18 ENVIRONMENTAL AND SAFETY LAWS.
(a) All material licenses or permits which are required under
Environmental Laws (as defined below) (each an "ENVIRONMENTAL PERMIT") for the
conduct of the business of the Company or any Subsidiary or the operation of any
property owned, leased or occupied by the Company or any of its Subsidiaries
which are required to be obtained or applied for by the Company or any of its
Subsidiaries have been so obtained or applied for.
(b) Neither the Company nor any Subsidiary has failed to comply in
any material respect with any Environmental Laws or any Environmental Permit and
neither the Company nor
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any Subsidiary has been notified by any governmental authority of any such
non-compliance and, to the Company's knowledge, no Environmental Permit will be
modified, suspended, canceled or revoked or cannot be renewed in the ordinary
course of business.
(c) To the Company's knowledge, no Hazardous Substance (as defined
below) is currently or has been in the past generated, stored, handled, treated,
transported to or from or disposed of on any property currently or formerly
owned by the Company or any of its Subsidiaries, or operated or leased by the
Company or any of its Subsidiaries. To the Company's knowledge, neither the
Company nor any Subsidiary has generated, disposed of, transported or arranged
for the transportation (directly or indirectly) of any Hazardous Substances to
any location that is listed or, to the knowledge of the Company, proposed for
listing on the National Properties List or the CERCLA Information System under
CERCLA, or under any similar state, local or foreign list, or where there has
been a Release (as defined below) or suspected Release of a Hazardous Substance.
Neither the Company nor any Subsidiary has generated or disposed of any
Hazardous Substance in a manner which could reasonably be expected to give rise
to a material liability under any Environmental Law.
(d) Neither the Company nor any Subsidiary has received any written
notice from any person or entity advising it that it is responsible for or
potentially responsible for cleanup or remediation of any Hazardous Substances.
No capital expenditure is planned or required in respect of the assets of the
Company or any of its Subsidiaries pursuant to or to comply with any
Environmental Law, nor has the Company or any of its Subsidiaries received any
written notice of any such requirement.
(e) There is no claim pending or, to the best knowledge of the
Company, threatened against the Company or any of its Subsidiaries or pending
or, to the knowledge of the Company, threatened against any other person or
entity whose liability for any environmental claim the Company or any of its
Subsidiaries has or may have retained or assumed either contractually or by
operation of law under any Environmental Law. To the Company's knowledge, no
real property currently or formerly owned by the Company or any of its
Subsidiaries, or operated or leased by the Company or any of its Subsidiaries
(during the period of such operation or lease) has been impacted by any Release
or threatened Release of any Hazardous Substance.
(f) Each of the Company and its Subsidiaries has delivered or
otherwise made available for inspection to the Purchaser true, accurate and
complete copies and results of any reports, studies, analyses, tests or
monitoring possessed or initiated by the Company or any of its Subsidiaries
pertaining to Hazardous Substances in, on, beneath or adjacent to any property
or regarding compliance by the Company or any of its Subsidiaries with
applicable Environmental Laws.
(g) To the Company's knowledge, there are no underground or
above-ground storage tanks (whether or not currently in use) located on or under
any real property currently owned, leased or operated by the Company or any of
its Subsidiaries.
(h) For purposes of this Agreement, the term (i) "ENVIRONMENTAL LAWS"
shall mean all federal, foreign, state, local or municipal environmental, health
or safety-related laws, regulations, by-laws, rules, ordinances, judicial or
administrative decrees or decisions, orders or
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requirements applicable to the Company or any of its Subsidiaries relating to
the physical or environmental condition or use of their respective properties,
their respective businesses or pollution or protection of human health or the
Environment, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C., ss.9601, et seq., as
amended ("CERCLA"), the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901, et seq., as amended, the Clean Air Act, 42 U.S.C. Section 7401 et
seq., as amended, the Clean Water Act, 33 U.S.C. Section et seq., the Toxic
Substance Control Act, 15 U.S.C. ss.2601 et seq., the Occupational Safety and
Health Act, laws relating to Releases or threatened Releases of Hazardous
Substances into the Environment or otherwise relating to the manufacture,
generation, processing, distribution, use, treatment, storage, abatement,
existence, holding, Release, transport or handling of Hazardous Substances, and
all laws and regulations with regard to recordkeeping, notification, disclosure
and reporting requirements respecting Hazardous Substances; (ii) "HAZARDOUS
SUBSTANCES" shall mean any pollutant, contaminant, toxic substance, hazardous
waste, hazardous material, or hazardous substance, or any oil, petroleum or
petroleum product, each as defined or listed in, or classified pursuant to, any
Environmental Laws; and (iii) "RELEASE" shall have the meaning ascribed to such
term in any Environmental Laws.
3.19 OFFERING VALID. Assuming the accuracy of the representations and
warranties of the Purchaser contained in Section 4 hereof, the offer, sale and
issuance of the Shares will be exempt from the registration requirements of the
Securities Act and will have been registered or qualified (or are exempt from
registration and qualification) under the registration, permit or qualification
requirements of all applicable state securities laws.
3.20 EMPLOYEE BENEFIT PLANS.
(a) Schedule 3.20 contains a true and complete list of each "employee
benefit plan" (within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), stock purchase, stock
option, severance, employment, change-in-control, fringe benefit, bonus,
incentive, deferred compensation and all other employee benefit plans,
agreements, programs, policies or other arrangements, whether or not subject to
ERISA, under which any employee or former employee of the Company or its
Subsidiaries has any present or future right to benefits and under which the
Company or its Subsidiaries has any present of future liability. All such plans,
agreements, programs, policies and arrangements shall be collectively referred
to as the "COMPANY PLAN".
(b) Each Company Plan has been established and administered in
accordance with its terms, in all material respects, and in material compliance
with the applicable provisions of ERISA, the Code and other applicable laws,
rules and regulations and neither the Company nor any of its Subsidiaries has
incurred any material tax, fine, lien, penalty or other liability imposed by
ERISA, the Code or other applicable law, rule and regulations; and each Company
Plan which is intended to be qualified within the meaning of Code section 401(a)
has received a favorable determination or if such plan is a prototype plan, the
prototype plan has received a favorable determination letter, in all material
respects, to its qualifications, or is in a form in which the Internal Revenue
Service consider the terms of such Company Plan to be qualified without the need
to receive such a letter, and subsequent to that term nothing has occurred,
whether by action or failure to act, that could reasonably be expected to cause
the loss of such qualification.
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(c) No Company Plan is (i) subject to Title IV or ERISA or (ii) a
"multiemployer plan" (as such term is defined in section 3(37) of ERISA) and
neither the Company nor any of its Subsidiaries has incurred any withdrawal
liability or termination liability with respect to any such plan that remains
unsatisfied. The Company has not engaged in, and is not a successor or parent
corporation to any entity that has engaged in, a transaction described in
Section 4069 or 4212(c).
(d) Except as disclosed on Schedule 3.20(d), with respect to any
Company Plan, no actions, suits or claims (other than routine claims for
benefits in the ordinary course) are pending or, to the knowledge of the Company
or any of its Subsidiaries, threatened or reasonably expected to arise.
(e) Except as disclosed on Schedule 3.20(e), no Company Plan exists
that could result in the payment to any present or former employee of the
Company or its Subsidiaries of any money or other property or accelerate or
provide any other rights or benefits to any present or former employee of the
Company or its Subsidiaries as a direct result of the transaction contemplated
by this Agreement, whether or not such payment would constitute a parachute
payment within the meaning of Code section 280G.
3.21 INSURANCE. Each insurance policy pertaining to the assets or
operations of the Company and each Subsidiary is in full force and effect and
neither the Company nor any Subsidiary has any claims pending under any such
policies nor has the Company or any Subsidiary been denied coverage with respect
to any claim or potential claim filed under any such policies.
3.22 BOOKS AND RECORDS. The books of account, stock records, minute books
and other records of the Company and each of its Subsidiaries are accurate,
up-to-date and complete in all material respects, and have been maintained in
accordance with prudent business practices.
3.23 BUSINESS PLAN; PROJECTIONS. Attached as Schedule 3.23(a) is the
Company's Business Plan, dated March 19, 2001 (the "2001 BUSINESS PLAN"), which
consists of the budget for the Company and its Subsidiaries for 2001 on a
consolidated basis, and attached as Schedule 3.23(b) are the projections of the
future performance of the Company and its Subsidiaries, on a consolidated basis,
including annual income, net profits and cash flows for each year of the
five-year period ending 2005 (the "PROJECTIONS"). The Projections have been
prepared in good faith and are based on what the Company and its management
believe to be a reasonable assessment of the future performance of the Company
and its Subsidiaries. All material assumptions used in the preparation of the
Projections are set forth in the notes thereto. Notwithstanding the foregoing,
no representation is made that the projections will be attained.
3.24 ACCOUNTS RECEIVABLE AND BAD DEBTS. All notes and accounts receivable
of the Company and its Subsidiaries shown on the Statement Date Balance Sheet
were generated for valid consideration in the ordinary course of business.
3.25 LICENSES. All licenses used by the Company or any of its Subsidiaries
and which is material to the conduct and operation of the Company business (the
"LICENSES") are in full force and effect. The Company and its Subsidiaries have
complied in all material respects with the terms of the Licenses and there are
no pending, or to the knowledge of the Company, threatened, modifications,
amendments or revocations of the Licenses which, individually or in
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the aggregate, would reasonably be expected to have a Material Adverse Effect.
All fees due and payable from the Company or any of its Subsidiaries to
governmental authorities pursuant to the Licenses have been paid. All reports
required of the Company or any of its Subsidiaries to be filed in connection
with the Licenses have been timely filed and are accurate and complete. The
Company believes it can obtain, without undue burden or expense, any similar
authority for the conduct of its business as planned to be conducted. Except as
specified in Schedule 3.25, no registrations, filings, applications, notices,
transfers, consents, approvals, audits, qualifications, waivers or other action
of any kind is required by virtue of the execution and delivery of this
Agreement or any Related Agreement, or of the consummation of the transactions
contemplated hereby or thereby, including but not limited to the issuance and
sale of the Shares, (a) to avoid the loss of any License pursuant to the terms
thereof or the violation or breach of any law applicable thereto, or (b) to
enable the Company and its Subsidiaries to hold and enjoy the same after each
Closing Date in the conduct of its business as conducted immediately prior to
the First Closing Date. Except as set forth in Schedule 3.25, the Company and
its Subsidiaries have received authorization from the FCC to provide
international telecommunications service.
3.26 NETWORK. The Company's and its Subsidiaries' switches are (i) fully
installed, (ii) interconnected to the incumbent telephone company's local
network and (iii) capable of carrying commercial traffic. The Company's and its
Subsidiaries' collocation sites possess all of the necessary equipment to carry
commercial traffic and are linked via leased or owned transmission cable to a
switch owned by the Company or any Subsidiary.
3.27 CUSTOMERS. No single customer of the Company accounted for more than
5% of the Company's consolidated net sales for 2000, and the Company does not
anticipate any single customer accounting for more than 5% of the Company's
consolidated net sales in 2001. Schedule 3.27 sets forth as of December 31,
2000, the total number of lines in service.
3.28 NO BROKER. Except as set forth in Schedule 3.28, neither the Company
nor any of its Subsidiaries has employed any broker or finder, or incurred any
liability for any brokerage or finders' fees or any similar fees or commissions
in connection with the transactions contemplated by this Agreement.
3.29 DISCLOSURE. No representation or warranty contained in this Agreement
or any statement or information contained in any schedule, exhibit, certificate,
written statement, document or instrument, or other information attached to,
delivered or required to be delivered pursuant to this Agreement contains any
untrue statement of material fact or omits to state a material fact necessary in
order to make the statements contained herein not misleading or necessary in
order to fully and fairly provide the information required to be provided in any
such document.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser hereby represents and warrants to the Company as follows:
4.1 REQUISITE POWER; AUTHORIZATION; BINDING OBLIGATIONS. Purchaser has all
requisite power and authority to execute and deliver this Agreement and the
Related Agreements and to carry out their provisions. All action on Purchaser's
part necessary for the authorization, execution and delivery of this Agreement
and the Related Agreements, the consummation of the transactions contemplated
hereby and thereby, and the performance of all obligations of
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Purchaser hereunder and thereunder has been or will be taken prior to the First
Closing. This Agreement and the Related Agreements, when executed and delivered,
will be valid and binding obligations of Purchaser enforceable against it in
accordance with their terms, except (a) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors' rights, (b) general principles of equity
that restrict the availability of equitable remedies, and (c) to the extent that
the enforceability of the indemnification provisions of Section 2.5 of the
Purchasers Rights Agreement may be limited by applicable laws.
4.2 INVESTMENT REPRESENTATIONS. Purchaser understands that neither the
Shares nor the Conversion Shares have been registered under the Securities Act.
Purchaser also understands that the Shares are being offered and sold pursuant
to an exemption from registration contained in the Securities Act based in part
upon Purchaser's following representations and warranties:
(a) PURCHASER BEARS ECONOMIC RISK. Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. Purchaser understands that it must bear
the economic risk of this investment indefinitely unless the Shares are
registered pursuant to the Securities Act, or an exemption from registration is
available. Purchaser understands that the Company has no present intention of
registering the Shares, the Conversion Shares or any shares of its Common Stock.
Purchaser also understands that there is no assurance that any exemption from
registration under the Securities Act will be available and that, even if
available, such exemption may not allow Purchaser to transfer all or any portion
of the Shares under the circumstances, in the amounts or at the times Purchaser
might propose.
(b) ACQUISITION FOR OWN ACCOUNT. Purchaser is acquiring the Shares
for its own account for investment only, and not with a view towards their
distribution.
(c) PURCHASER CAN PROTECT ITS INTEREST. Purchaser represents that by
reason of its, or of its management's, business or financial experience,
Purchaser has the capacity to protect its own interests in connection with the
transactions contemplated in this Agreement and the Related Agreements. Further,
Purchaser is aware of no publication of any advertisement in connection with the
transactions contemplated in the Agreement.
(d) ACCREDITED INVESTOR. Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities Act.
(e) COMPANY INFORMATION. Purchaser has received and read the
Financial Statements and has had an opportunity to discuss the Company's
business, management and financial affairs with directors, officers and
management of the Company and has had the opportunity to review the Company's
operations and facilities. Purchaser has also had the opportunity to ask
questions of and receive answers from the Company and its management regarding
the terms and conditions of this investment.
(f) RULE 144. Purchaser acknowledges and agrees that the Shares must
be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. Purchaser
has been advised or is aware of the provisions of Rule 144 promulgated under the
Securities Act as in effect from time to time, which permits
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limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things: the
availability of certain current public information about the Company, the resale
occurring following the required holding period under Rule 144 and the number of
shares being sold during any three-month period not exceeding specified
limitations.
4.3 TRANSFER RESTRICTIONS. Purchaser acknowledges and agrees that the
Shares and Conversion Shares are subject to restrictions on transfer as set
forth in the Purchasers Rights Agreement.
5. COVENANTS OF THE COMPANY.
5.1 ORDINARY COURSE OF BUSINESS.
(a) Except, as otherwise contemplated by the terms of this Agreement,
during the period from the date of this Agreement to the Second Closing Date
(the "PRE-CLOSING PERIOD"), the Company shall use commercially reasonable
efforts to preserve intact its and its Subsidiaries' current business
organizations, keep available the services of their current officers and
employees and preserve their relationships with customers, suppliers, licensors,
licensees, advertisers, distributors and others having business dealings with
them to the end that their goodwill and ongoing businesses shall be unimpaired.
(b) Without limiting the generality of the foregoing, during the
Pre-Closing Period, each of the Company and its Subsidiaries shall not, without
the prior consent of Purchaser, take any action which requires Purchaser's
consent under Section 8.3 of the Existing Purchasers Rights Agreement or Section
3(b)(iii) of the Current Certificate.
5.2 BASIC FINANCIAL INFORMATION. The Company will furnish the following
reports to Purchaser:
(a) As soon as practicable after the end of each fiscal year of the
Company, and in any event within 90 days thereafter, a consolidated balance
sheet of the Company and its Subsidiaries, as at the end of such fiscal year,
and consolidated statements of income and cash flows of the Company and its
Subsidiaries, for such year, prepared in accordance with GAAP consistently
applied and setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail and followed promptly thereafter
(to the extent not immediately available) by audited financial statements
accompanied by the opinion of independent public accountants of recognized
national standing selected by the Company, and a Company-prepared comparison to
the Company's operating plan for such year.
(b) As soon as practicable after the end of the first, second, and
third quarterly accounting periods in each fiscal year of the Company, and in
any event within 45 days thereafter, a consolidated balance sheet of the Company
and its Subsidiaries, as of the end of each such quarterly period, and
consolidated statements of income and cash flows of the Company and its
Subsidiaries, for such period and for the current fiscal year to date, prepared
in accordance with GAAP consistently applied and setting forth in comparative
form the figures for the corresponding periods of the previous fiscal year and
to the Company's operating plan then in effect and approved by its Board of
Directors, subject to changes resulting from normal year-end audit adjustments,
all in reasonable detail and certified by the principal financial or
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accounting officer of the Company, except that such financial statements need
not contain the notes required by GAAP.
(c) As soon as practical after the end of each month and in any event
within 20 days thereafter, the Company will deliver to Purchaser a consolidated
balance sheet of the Company and its Subsidiaries, if any, as at the end of such
month and consolidated statements of income and cash flows of the Company and
its Subsidiaries, for each month and for the current fiscal year of the Company
to date, all subject to normal year-end audit adjustments, prepared in
accordance with GAAP consistently applied and certified by the principal
financial or accounting officer of the Company, together with a comparison of
such statements to the corresponding periods of the prior fiscal year and to the
Company's operating plan then in effect and approved by its Board of Directors.
(d) The Company will deliver to Purchaser an annual financial plan
for the Company for the next fiscal year, no later than 45 days before the start
of the Company's next fiscal year, in such manner and form as approved by the
Board of Directors of the Company, which financial plan shall include at least a
projection of income and a projected cash flow statement for each fiscal quarter
in such fiscal year and a projected balance sheet as of the end of each fiscal
quarter in such fiscal year. Any material changes in such business plan shall be
delivered to each requesting Purchaser as promptly as practicable after such
changes have been approved by the Board of Directors of the Company.
(e) In lieu of the financial information required pursuant to this
Section 5.2, the Company may deliver copies of its annual reports on Form 10-K
and its quarterly reports on Form 10-Q, respectively.
5.3 ACCESS. The Company shall, and shall cause its Subsidiaries, officers,
directors, employees, auditors and other agents to, afford the officers,
employees, auditors and other agents of Purchaser, during normal business hours
reasonable access at all reasonable times to its officers, employees, auditors,
legal counsel, properties, offices, plants and other facilities and to all books
and records, and shall furnish Purchaser with all financial, operating and other
data and information as Purchaser, through its officers, employees or agents,
may from time to time reasonably request.
5.4 D&O INSURANCE. During the period that Purchaser owns at least
6,500,000 Shares or Conversion Shares (subject to adjustment for any stock
split, reverse stock split and the like), the Company agrees to maintain
Directors and Officers Insurance in the amount of $25,000,000, or the maximum
lesser amount of coverage that can be obtained with an annual premium of
$175,000.
5.5 INDEPENDENT ACCOUNTANTS. In the event the services of the Company's
current independent public accountants, or any firm of independent public
accountants hereafter employed by the Company, are terminated, the Company will
promptly thereafter notify Purchaser and will request the firm of independent
public accountants whose services are terminated to deliver to Purchaser a
letter from such firm setting forth the reasons for the termination of their
services. In the event of such termination, the Company will promptly thereafter
engage another firm of independent public accountants of recognized national
standing. In its notice to Purchaser, the Company shall state whether the change
of accountants
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was recommended or approved by the Board of Directors of the Company or any
committee thereof.
5.6 USE OF PROCEEDS. The Company shall use the proceeds from the sale of
the Shares for working capital and general corporate purposes.
5.7 EFFORTS. Each party hereto agrees to use commercially reasonable
efforts to take any and all actions required in order to consummate the
transactions contemplated in this Agreement and the Related Agreements. Without
limiting the foregoing, the Company shall make all necessary filings with or
notifications to the state regulatory commissions listed on Schedule 5.7 hereto
as soon as possible but in any event prior to the First Closing (unless the
requirement to give such notice does not arise until the First Closing in which
case the Company shall give such notice promptly after the First Closing).
5.8 NOTIFICATION OF CERTAIN MATTERS. During the Pre-Closing Period, the
Company shall give prompt notice to Purchaser of the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which would be
likely to cause any representation or warranty contained in Section 3 to be
untrue, or the failure of the Company to comply with or satisfy any covenant or
agreement under this Agreement.
5.9 NEW CERTIFICATE. The Company shall take all necessary corporate action
to amend and restate its Current Certificate as the New Certificate.
5.10 EXISTING WARRANTS. The Company shall use its reasonable best efforts
to obtain a valuation opinion (the "VALUATION OPINION"), at its expense and in
form and substance reasonably satisfactory to Purchaser, as contemplated by the
Warrant Agreement, dated as of June 23, 1998, between the Company and Norwest
Bank Minnesota, National Association, as Warrant Agent, from an Independent
Financial Expert (as defined therein) to determine the Current Market Value (as
defined therein) per share of Common Stock for purposes of the anti-dilution
adjustment provisions contained therein.
5.11 ADDITIONAL INVESTMENTS. The Company shall not offer, and shall not
sell, any shares of Series G Preferred Stock to any persons except upon the
terms and conditions set forth below: (a) the Company shall not offer or sell
any shares of Series G Preferred Stock to anyone other than the holders of
Series B Preferred Stock and Series D Preferred Stock on the date hereof
(collectively, the "EXISTING HOLDERS"); (b) the purchase price for each share of
Series G Preferred Stock shall be $0.35 per share; (c) for each dollar an
Existing Holder invests in shares of Series G Preferred Stock, Existing Holder
will receive a conversion price adjustment to one dollar's worth (based on the
original issue price) of the Existing Series B Preferred Stock or Series D
Preferred Stock held by such Existing Holder, as the case may be, which shall be
accomplished through the exchange of shares of Series B Preferred Stock or
Series D Preferred Stock, as applicable, for an equivalent number of shares of
Series H Preferred Stock or Series I Preferred Stock, respectively, which shall
have the terms provided in the New Certificate attached hereto (for example, if
a holder of Series B Preferred Stock invests $999,999.70 in shares of Series G
Preferred Stock, such holder will receive 2,857,142 shares of Series G Preferred
Stock and will be permitted to exchange 657,895 shares of Series B Preferred
Stock (equivalent to $999,999.70 divided by $1.52) for 657,895 shares of Series
H Preferred Stock); (d) the Existing Holders shall not be subject to a minimum
or maximum required investment in
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Series G Preferred Stock; provided that such Existing Holders shall only receive
the repricing described in (c) above to the extent of each such Existing
Holder's existing investment in shares of Series B Preferred Stock and/or Series
D Preferred Stock; (e) KCEP I, L.P., KCEP Ventures II, L.P., Advantage Capital
Missouri Partners I, L.P., Advantage Capital Missouri Partners II, L.P., Kansas
Venture Capital, Inc., New Press & Gazette Company, White Pines Limited
Partnership I and Pacific Capital, L.P. must commit to their additional
investment by executing a Recapitalization Agreement (which shall be
substantially in the form of the draft dated 3/20/01 with the changes agreed to
in the side letter executed by the Company on the date hereof) by April 5, 2001
and each such Existing Holder must consummate the purchase of shares of Series G
Preferred Stock representing 70% of such Existing Holder's aggregate additional
investment no later than April 12, 2001, with the remainder of such investment
to be consummated on the Second Closing Date, and (f) other holders of Series B
Preferred Stock and Series D Preferred Stock may sign a Recapitalization
Agreement (in substantially such form or in such other form as may be agreed
between the Company and Purchaser) after such dates but in any event such
holders must consummate their purchase of shares of Series G Preferred Stock no
later than April 30, 2001.
6. CONDITIONS TO CLOSING.
6.1 CONDITIONS TO PURCHASER'S OBLIGATION TO PURCHASE THE INITIAL SHARES.
Purchaser's obligation to purchase the Initial Shares at the First Closing is
subject to the satisfaction of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF OBLIGATIONS.
The representations and warranties made by the Company in Section 3 hereof shall
be true and correct in all materials respects as of the First Closing Date with
the same force and effect as if they had been made on and as of the First
Closing Date, except (A) for changes contemplated by this Agreement, (B) for
those representations and warranties which address matters only as of a
particular date (which representation and warranties shall be true and correct
in all material represents as of such particular date) and (C) all Material
Adverse Effect qualifications and other qualifications based on the word
"material" or similar phrases contained in such representations and warranties
shall be disregarded. The Company shall have performed all obligations and
conditions herein required to be performed or observed by it on or prior to the
First Closing Date.
(b) LEGAL INVESTMENT. On the First Closing Date, the sale and
issuance of the Shares shall be legally permitted by all laws and regulations to
which Purchaser and the Company are subject.
(c) CONSENTS, PERMITS, AND WAIVERS. The Company shall have obtained
any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Agreement and the Related
Agreements (except for such as Purchaser determines may be properly obtained
subsequent to such First Closing Date).
(c) CORPORATE DOCUMENTS. The Company shall have delivered to
Purchaser or their counsel, copies of all corporate documents of the Company as
Purchaser shall reasonably request.
(e) COMPLIANCE CERTIFICATE; SECRETARY'S CERTIFICATE; GOOD STANDING
CERTIFICATE. The Company shall have delivered to Purchaser a Compliance
Certificate, executed
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by the President of the Company, dated the First Closing Date, to the effect
that the conditions specified in Section 6.1(a) have been satisfied. The Company
shall have delivered to the Purchaser a certificate executed by the Secretary of
the Company, dated such First Closing Date, certifying as to the resolutions of
the Board of Directors of the Company and the stockholders of the Company
evidencing approval of the transactions contemplated by and from this Agreement
and the Related Agreements and the authorization of the named officer or
officers to execute and deliver this Agreement and the Related Agreements. The
Company shall have delivered to the Purchaser certificates of the Secretary of
State of the State of Delaware, dated a recent date, that the Company is in good
standing.
(f) LEGAL OPINION. The Purchaser shall have received from legal
counsel to the Company an opinion addressed to them, dated as of such First
Closing Date, in a form attached hereto as Exhibit D.
(g) PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated at the First Closing hereby and
all documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to Purchaser and its counsel, and Purchaser
and its counsel shall have received all such counterpart originals or certified
or other copies of such documents as they may reasonably request.
(h) NO MATERIAL ADVERSE EFFECT. No event or change has occurred which
has had, or could reasonably be expected to have, a Material Adverse Effect.
(i) NEW CERTIFICATE. The New Certificate, in the form set forth in
Exhibit A (or otherwise satisfactory to Purchaser), shall have been filed with
and certified by the Secretary of State of the State of Delaware.
(j) PURCHASERS RIGHTS AGREEMENT. The Purchasers Rights Agreement in
the form attached hereto as Exhibit B (or otherwise satisfactory to Purchaser)
shall have been executed and delivered by the requisite number of holders listed
on Exhibit A to the Purchasers Rights Agreement for the execution and delivery
thereof.
(k) BOARD OF DIRECTORS. Effective as of the First Closing, (i) the
Board of Directors shall no longer be classified, and (ii) the Board of
Directors of the Company shall be constituted as set forth in the Purchasers
Rights Agreement.
(l) TRANSACTION FEE. At the First Closing, the Company shall have
paid to Purchaser or one of its designees, a transaction fee of 2.0% of the
aggregate purchase price of the Initial Shares incurred for the benefit of the
Company in connection with the purchase of the Shares, in cash by wire transfer
of immediately available funds to a bank account identified by Purchaser prior
to the First Closing; PROVIDED that Purchaser may net such amount against the
purchase price to be paid for the Initial Shares at the First Closing.
(m) MONITORING AGREEMENT. Purchaser (or one of its designees) and the
Company shall have entered into a Monitoring Agreement in the form attached
hereto as Exhibit C.
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(n) CREDIT AMENDMENT. An amendment to the Company's Amended and
Restated Credit Agreement, dated as of February 2, 2000, as amended, in form and
substance satisfactory to Purchaser, shall have been duly executed by the
lenders thereunder and the Company and shall be in full force and effect.
(o) VALUATION OPINION. The Company shall have received the Valuation
Opinion.
6.2 CONDITIONS TO COMPANY'S OBLIGATIONS TO SELL THE INITIAL SHARES. The
Company's obligation to issue and sell the Initial Shares at the First Closing
is subject to the satisfaction, on or prior to the First Closing, of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties made by Purchaser in Section 4 hereof shall be true and correct in
all material respects at the date of such First Closing Date with the same force
and effect as if they had been made on and as of the First Closing Date, and the
Purchaser shall have performed all obligations and conditions herein required to
be performed or complied with by it on or prior to the First Closing Date.
(b) CONSENTS, PERMITS, AND WAIVERS. The Company shall have obtained
any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Agreement and the Related
Agreements (except for such as Purchaser determines may be properly obtained
subsequent to such First Closing Date).
(c) PURCHASERS RIGHTS AGREEMENT. The Purchasers Rights Agreement
shall have been executed and delivered by Purchaser.
6.3 CONDITIONS TO PURCHASER'S OBLIGATION TO PURCHASE THE SUBSEQUENT
SHARES. Purchaser's obligation to purchase the Subsequent Shares at the Second
Closing is subject to the satisfaction of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF OBLIGATIONS.
The representations and warranties made by the Company in Section 3 hereof shall
be true and correct in all materials respects as of the Second Closing Date with
the same force and effect as if they had been made on and as of the Second
Closing Date, except (A) for changes contemplated by this Agreement, (B) for
those representations and warranties which address matters only as of a
particular date (which representation and warranties shall be true and correct
in all material represents as of such particular date) and (C) all Material
Adverse Effect qualifications and other qualifications based on the word
"material" or similar phrases contained in such representations and warranties
shall be disregarded. The Company shall have performed all obligations and
conditions herein required to be performed or observed by it on or prior to the
Second Closing Date.
(b) LEGAL INVESTMENT. On the Second Closing Date, the sale and
issuance of the Shares shall be legally permitted by all laws and regulations to
which Purchaser and the Company are subject.
(c) COMPLIANCE CERTIFICATE. The Company shall have delivered to
Purchaser a Compliance Certificate, executed by the President of the Company,
dated the Second Closing Date, to the effect that the conditions specified in
Section 6.3(a) have been satisfied.
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(d) FIRST CLOSING. The First Closing shall have been consummated.
(e) NO MATERIAL ADVERSE EFFECT. No change or event has occurred which
had had, or could reasonably be expected to have, a Material Adverse Effect.
(f) OPERATING BUDGET. The Company shall be in compliance with its
operating budget, as delivered to Purchaser on or prior to the date hereof.
(g) TRANSACTION FEE. At the Second Closing, the Company shall have
paid to Purchaser or one of its designees, a transaction fee of 2.0% of the
aggregate purchase price of the Subsequent Shares incurred for the benefit of
the Company in connection with the purchase of the Shares, in cash by wire
transfer of immediately available funds to a bank account identified by
Purchaser prior to the Second Closing; PROVIDED that Purchaser may net such
amount against the purchase price to be paid for the Subsequent Shares at the
Second Closing.
(h) ADDITIONAL EQUITY INVESTMENTS. The Company shall not have
received at least $30 million in additional equity investments, including but
not limited to the transactions contemplated by Section 5.11 ("ADDITIONAL
EQUITY"), upon terms and conditions at least as favorable to the Company as the
terms and conditions contained in this Agreement and the Related Agreements and
the transactions contemplated hereby and thereby, including but not limited to
the terms of the Series G Preferred Stock, PROVIDED that if the Company has
received less than $30 million of Additional Equity, then Purchaser's obligation
to purchase the Subsequent Shares shall be reduced by an amount equal to the
amount of such Additional Equity.
(i) LEGAL OPINION. The Purchaser shall have received from legal
counsel to the Company an opinion addressed to them, dated as of such Second
Closing Date, substantially in the form attached hereto as Exhibit D.
6.4 CONDITIONS TO COMPANY'S OBLIGATIONS TO SELL THE SUBSEQUENT SHARES. The
Company's obligation to issue and sell the Subsequent Shares at the Second
Closing is subject to the satisfaction, on or prior to the Second Closing, of no
further conditions.
7. MISCELLANEOUS.
7.1 GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL. This Agreement
shall be governed in all respects by the laws of the State of New York. No suit,
action or proceeding with respect to this Agreement may be brought in any court
or before any similar authority other than in a court of competent jurisdiction
in the State of New York, as Purchaser may elect in its sole discretion, and the
Company hereby submits to the exclusive jurisdiction of such courts for the
purpose of such suit, proceeding or judgment. The Company hereby irrevocably
waives any right which it may have had to bring such an action in any other
court, domestic or foreign, or before any similar domestic or foreign authority.
Each of the parties hereto hereby irrevocably and unconditionally waives trial
by jury in any legal action or proceeding in relation to this Agreement and for
any counterclaim therein.
7.2 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by Purchaser and the closing of
the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the
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transactions contemplated hereby shall be deemed to be representations and
warranties by the Company hereunder solely as of the date of such certificate or
instrument.
7.3 SUCCESSORS AND ASSIGNS; ASSIGNMENT. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares from time to time. This Agreement may
not be assigned without the prior written consent of the other party, except
that Purchaser may assign its rights and obligations hereunder to any affiliate.
7.4 ENTIRE AGREEMENT; SUPERCEDES PRIOR AGREEMENT. This Agreement and the
exhibits and schedules hereto, the Related Agreements and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof, and no party
shall be liable or bound to any other in any manner by any representations,
warranties, covenants and agreements except as specifically set forth herein and
therein.
7.5 SEVERABILITY. In case any provision of the Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
7.6 AMENDMENT AND WAIVER. This Agreement may be amended or modified upon
the written consent of the Company and Purchaser. The rights of the Company or
the Purchaser hereunder may only be waived with the written consent of the party
granting the waiver of such right.
7.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement or the Related
Agreements, shall impair any such right, power or remedy, nor shall it be
construed to be a waiver of any such breach, default or noncompliance, or any
acquiescence therein, or of or in any similar breach, default or noncompliance
thereafter occurring. It is further agreed that any waiver, permit, consent or
approval of any kind or character on the Purchaser's part of any breach, default
or noncompliance under this Agreement or the Related Agreements or any waiver on
such party's part of any provisions or conditions of the Agreement or the
Related Agreements, must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, or the Related Agreements, by law, or otherwise afforded to any
party, shall be cumulative and not alternative.
7.8 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified; (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day; (c) five days after having been sent by registered or certified mail,
return receipt requested, postage prepaid; or (d) one business day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be sent to the
addresses set forth below:
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If to the Company:
Birch Telecom, Inc.
2020 Baltimore Avenue
Kansas City, MO 64108
Telephone: (816) 300-3000
Fax: (816) 300-3291
Attn: General Counsel
with copies to:
Latham & Watkins
885 Third Avenue
New York, N.Y. 10022
Telephone: (212) 906-1788
Fax: (212) 751-4864
Attn: Raymond Y. Lin, Esq.
If to Purchaser:
c/o Kohlberg Kravis Roberts & Co. L.P.
9 W. 57th Street
New York, NY 10019
Telephone: (212) 750-8300
Fax: (212) 750-0333
Attn: Alexander Navab, Jr.
with copies to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, N.Y. 10017
Telephone: (212) 455-2000
Fax: (212) 455-2502
Attn: Marni J. Lerner, Esq.
7.9 EXPENSES; INDEMNIFICATION. The Company shall pay all costs and
expenses that it incurs with respect to the negotiation, execution, delivery and
performance of this Agreement and the Related Agreements (including amendments
thereto and consent in connection therewith). The Company shall at each Closing
reimburse the reasonable fees of and expenses of Purchaser incurred in
connection with the transactions contemplated by this Agreement and the Related
Agreements, including the payment of the fees and expenses of Kohlberg Kravis
Roberts & Co. L.P. in the amount previously disclosed to the Company and
Purchaser's financial, legal and accounting advisors. The Company hereby further
agrees to indemnify, exonerate and hold Purchaser and its members and its
shareholders, officers, directors, employees, affiliates and agents (each an
"INDEMNITEE") free and harmless from and against any and all actions, causes of
action, suits, losses, liabilities, damages and expenses, including, without
limitation, reasonable attorneys' fees and disbursements, incurred in any
capacity by any of such indemnitees as a
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result of or relating to any breach of any representation, warranty, covenant or
agreement of the Company in this Agreement or any Related Agreement.
7.10 INTERPRETATION. The titles of the sections and subsections of the
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement. All pronouns contained herein, and any variations
thereof, shall be deemed to refer to the masculine, feminine or neutral,
singular or plural, as to the identity of the parties hereto may require. The
words "hereof", "herein" and "hereunder" and words of similar import when used
in this Agreement will refer to the Agreement as a whole, including exhibits,
schedules and the other documents delivered in connection with this Agreement,
and not only to a particular provision of this Agreement. The words "include"
and "including" and words of similar import when used in this Agreement shall be
deemed to be followed by the words "without limitation".
7.11 KNOWLEDGE. References to "knowledge" of the Company or a Subsidiary in
this Agreement shall refer to the knowledge of each of the officers of the
Company or the Subsidiary, respectively, after due inquiry into the matters at
issue with the employees of the Company or Subsidiary, respectively, responsible
for such matters.
7.12 TERMINATION. This Agreement may be terminated by (i) mutual agreement
of the parties hereto or (ii) by Purchaser or the Company in the event the First
Closing has not occurred within 60 days of the date hereof; PROVIDED that this
termination right may not be exercised by a party whose nonperformance has
delayed any Closing.
7.13 COUNTERPARTS; EXECUTION BY FACSIMILE SIGNATURE. This Agreement may be
executed in any number of counterparts, each of which shall be an original, but
all of which together shall constitute one instrument. This Agreement may be
executed by facsimile signatures.
[Rest of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have executed this SERIES G
PREFERRED STOCK PURCHASE AGREEMENT as of the date set forth in the first
paragraph hereof.
BIRCH TELECOM, INC.
By: /s/ David E. Scott
-----------------------------------
Name: David E. Scott
Title: President
BTI VENTURES L.L.C.
By: /s/ Alexander Navab, Jr.
-----------------------------------
Name: Alexander Navab, Jr.
Title: Member