-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DBffUrg5OkUZKnZhBRUFkHDECmKpahLugZp41zH7Kicf+sOcePa0U4WWUz9QtkfX pMSAx5vzXhibfSNYMTsHpQ== 0001056114-98-000004.txt : 19980518 0001056114-98-000004.hdr.sgml : 19980518 ACCESSION NUMBER: 0001056114-98-000004 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19980410 ITEM INFORMATION: FILED AS OF DATE: 19980515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CTC COMMUNICATIONS CORP CENTRAL INDEX KEY: 0000764841 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-TELEPHONE INTERCONNECT SYSTEMS [7385] IRS NUMBER: 042731202 STATE OF INCORPORATION: MA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-13627 FILM NUMBER: 98622885 BUSINESS ADDRESS: STREET 1: 360 SECOND AVE CITY: WALTHAM STATE: MA ZIP: 02154 BUSINESS PHONE: 6174668080 MAIL ADDRESS: STREET 1: 360 SECOND AVENUE CITY: WALTHAM STATE: MA ZIP: 02154 FORMER COMPANY: FORMER CONFORMED NAME: COMPUTER TELEPHONE CORP DATE OF NAME CHANGE: 19920703 8-K 1 CTC FORM 8-K DATED 5/15/98 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report May 15, 1998 (Date of earliest event reported) (April 10, 1998) CTC COMMUNICATIONS CORP. (Exact name of registrant as specified in its charter) Massachusetts 0-13627 04-2731202 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 360 Second Ave., Waltham, Massachusetts 02154 (Address of principal executive offices) (Zip Code) (781) 466-8080 (Registrant's telephone number including area code) (Former name or former address if changed since last report) Item 5. The summary information contained herein is qualified in its entirety by reference to the texts of the relevant documents referred to herein and attached as exhibits hereto. A. Spectrum Equity Investors II, L.P. Private Placement On April 10, 1998, the Registrant issued for investment to Spectrum Equity Investors II, L.P. ("Spectrum") and certain other private investors (together with Spectrum, the "Investors") an aggregate of 666,666 shares of Series A Convertible Preferred Stock (the "Preferred Shares") for $12 million, pursuant to the terms and conditions of a Securities Purchase Agreement of even date among the Registrant and the Investors (the "Spectrum Private Placement"). The Registrant also issued for investment to the Investors five-year warrants to purchase an aggregate of 133,333 shares of its Common Stock at an exercise price of $9.00 per share. Spectrum purchased 98.63% of the Preferred Shares and warrants in the private placement. The Registrant intends to use the proceeds of the private placement for working capital. The Registrant entered into a registration rights agreement with the Investors with respect to the shares of Common Stock issuable upon conversion of the Preferred Shares and upon exercise of the warrants ("Registrable Securities") providing for "piggyback" registration rights and demand registration rights as follows. At any time after October 9, 1998, upon demand of a majority of the holders of the Registrable Securities on a fully diluted basis after giving effect to the conversion of all of the Preferred Shares and the exercise of all warrants, the Registrant has agreed to file a Registration Statement covering the Registrable Securities on no more than three occasions; provided, however that the Registrant shall be permitted to delay the filing for the 180 day period immediately following the commencement of the Registrant's public offering of equity securities. In addition, in the event of a mandatory conversion of the Preferred Shares (see "Certificate of Designation" discussed below), the Company has agreed to file a Registration Statement covering the Registrable Securities. The Registrant has agreed to pay all expenses of filing the registration statement, except that the holders of the Registrable Securities shall bear the costs of their own legal counsel and any underwriting commissions applicable to the securities sold by them. Robert J. Fabbricatore, Chairman and Chief Executive Officer of the Registrant, individually and as trustee and general partner of certain affiliated entities, which together held 27.23% of the Registrant's outstanding shares of Common Stock as of such date, entered into a Voting Agreement with Spectrum under the terms of which Mr. Fabbricatore individually and on behalf of his affiliated entities agreed to vote their shares in favor of the election to the Registrant's Board of Directors of up to two persons designated by a majority of the Preferred Shareholders. Kevin J. Maroni and William P. Collatos, general partners of Spectrum and designees of the Preferred Shareholders, were elected Class III directors of the Registrant effective April 10, 1998. Spectrum is an unaffiliated private equity fund with offices in Boston and Palo Alto which manages $360 million in private capital for investments in growing telecommunications companies. B. Restatement of the Bylaws On March 24, 1998, the Board of Directors of the Registrant approved Amended and Restated Bylaws and increased the number of Board members from five to eight effective April 10, 1998. The Amended and Restated Bylaws provide that the Board of Directors is classified into three classes, so that each director (after a transitional period) serves for three years, with one class of directors being elected each year. The Board of Directors is currently comprised of two Class I Directors (Henry Hermann and Ralph Sillari), two Class II Directors (J. Richard Murphy and Richard Santagati) and three Class III Directors (Robert J. Fabbricatore, Kevin J. Maroni and William P. Collatos). The terms of the Class I, Class II and Class III Directors expire upon the election and qualification of successor directors at annual meetings of stockholders held following the end of fiscal years 1998, 1999 and 2000, respectively. Prior to joining Spectrum as a General Partner in 1994, Mr. Maroni served as Manager, Finance and Development at Time Warner Telecommunications, where he was involved in corporate development projects. From 1990 to 1992, Mr. Maroni served as a consultant in the private equity group of Harvard Management Company. Mr. Maroni is currently a director of Pathnet, Inc., Formus Communications, Inc., WNP Communications, Inc. and American Cellular Corp. Prior to co-founding Spectrum as a General Partner in 1993, Mr. Collatos was a founding General Partner of Media/Communications Partners and a General Partner of TA Associates. Mr. Collatos currently serves as a director of Galaxy Telecom, Inc., TSR Paging Inc., Golden Sky Systems Inc., and Internet Network Services Holdings Ltd. C. Certificate of Designation for Preferred Shares On April 10, 1998, the Registrant filed a Certificate of Designation with the Secretary of the Commonwealth of Massachusetts setting forth the designations, preferences and relative and other special rights, qualifications, limitations and restrictions of the 666,666 Preferred Shares issued in connection with the Spectrum Private Placement. Each Preferred Share accrues a dividend in an amount equal to 9% per annum of the $18.00 purchase price for each Preferred Share compounding semiannually in arrears from the date of issuance and prorated on a daily basis payable upon liquidation or conversion of the Preferred Shares. Upon liquidation, dissolution or winding up of the Registrant, the Preferred Shares rank senior to any other junior class of the Registrant's capital stock. The Preferred Shares are convertible at any time at the holder's election into shares of the Registrant's Common Stock. In addition, the Preferred Shares will automatically be converted into shares of the Registrant's Common Stock (i) if the market price of the Common Stock reaches certain levels or (ii) at such time as at least 500,000 Preferred Shares have been converted. The Preferred Shareholders are entitled to vote such number of Preferred Shares which they hold equal to the lesser of (i) the whole number of shares into which such Preferred Shares are convertible and the number of shares issuable upon exercise of the warrants held by them and (ii) the number of Preferred Shares held by them multiplied by 2.476. Except as otherwise provided by law, the Preferred Shareholders vote with the holders of the Common Stock as a single class. Item 7c. Exhibits. Exhibit 3.1 Articles of Incorporation including the Certificate of Designation for the Series A Convertible Preferred Stock. Exhibit 3.2 Amended and Restated Bylaws. Exhibit 10.1 Securities Purchase Agreement dated April 10, 1998 Exhibit 10.2 Registration Rights Agreement dated April 10, 1998 Exhibit 10.3 Form of Warrant dated April 10, 1998. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CTC COMMUNICATIONS CORP. (Registrant) By: /s/ John D. Pittenger John D. Pittenger Executive Vice President May 15, 1998 EX-3.1 2 ARTICLES INCLUDING CERTIFICATE OF DESIGNATION EXHIBIT 3.1 Federal Identification No. 04-2731202 THE COMMONWEALTH OF MASSACHUSETTS William Francis Galvin Secretary of the Commonwealth ONE ASHBURTON PLACE, BOSTON, MASSACHUSETTS 02108 (General Laws, Chapter 156B, Section 26) We, STEVEN P. MILTON, PRESIDENT and JOHN D. PITTENGER, CLERK, of CTC COMMUNICATIONS CORP. located at 360 SECOND AVE., WALTHAM, MASSACHUSETTS 02154 do hereby certify that at a meeting of the directors of the corporation held on March 25, 1998, the following vote establishing and designating a class or series of stock and determining the relative rights and preferences thereof was duly adopted: See Attached Exhibit I. CTC COMMUNICATIONS CORP. Certificate of Vote of Directors Establishing a Class or Series of Stock EXHIBIT I RESOLVED, that pursuant to the authority vested in the Board of Directors of the Corporation by its Restated Articles of Organization, as amended (the "Articles of Organization"), the Board of Directors does hereby create, authorize and provide for the issuance of Series A Convertible Preferred Stock, par value $1.00 per share, consisting of 666,666 shares, having the designations, preferences and relative and other special rights, qualifications, limitations and restrictions in the form of Exhibit B attached hereto ("Certificate of Designation"). Exhibit B CTC COMMUNICATIONS CORP. SERIES A CONVERTIBLE PREFERRED STOCK CERTIFICATE OF DESIGNATION _________________________ Pursuant to Section 26 of the Business Corporation Law of Massachusetts _________________________ CTC Communications Corp. (the "Corporation"), a corporation organized and existing under the Business Corporation Law of Massachusetts, does hereby certify that pursuant to the authority vested in the Board of Directors of the Corporation by its Articles of Organization, as amended, and pursuant to the provisions of Section 26 of the Business Corporation Law of Massachusetts, said Board of Directors, by unanimous written consent, adopted the following resolution which remains in full force and effect as of the date hereof: RESOLVED, that pursuant to the authority vested in the Board of Directors of the Corporation (the "Board of Directors") by its Articles of Organization, as amended, (hereinafter referred to as the "Articles of Organization"), the Board of Directors does hereby create, authorize and provide for the issuance of Series A Convertible Preferred Stock, par value $1.00 per share, consisting of 666,666 shares, having the following designations, preferences and relative and other special rights, qualifications, limitations and restrictions: 1. Designation. The designation of such series is "Series A Convertible Preferred Stock" (hereinafter in this Certificate of Designation called the "Series A Preferred Stock") and the number of shares constituting such series shall be 666,666, which number may be decreased (but not increased) by the Board of Directors without a vote of stockholders; provided, however, that such number may not be decreased below the number of then currently outstanding shares of Series A Preferred Stock. All capitalized terms used in this Certificate of Designation and not otherwise defined shall have the meaning given to such terms in Section 14 hereof. 2. Dividends. The holders of Series A Preferred Stock shall be entitled to participate in all dividends that are declared and paid on Common Stock on the same basis as if all of the Series A Preferred Stock had been converted to Common Stock in accordance with Section 7 hereof. 3. Liquidation Preference. (a) In the event of any liquidation, dissolution or winding up of the affairs of the Corporation, either voluntarily or involuntarily, each holder of Series A Preferred Stock shall be entitled, after provision for the payment of the Corporation's debts and other liabilities, to be paid in cash in full, before any distribution is made on any Junior Securities, an amount in cash (the "Liquidation Amount") equal to the greater of (i) the Series A Preference Amount, or (ii) the Minimum Preference Amount, provided, however, if the amount each such holder of Series A Preferred Stock would have received had such holder converted all Series A Preferred Stock held by such holder into Common Stock immediately prior to such liquidation, dissolution or winding up of the Corporation would be equal to or greater than the Liquidation Amount, the Series A Preferred Stock shall be automatically converted into Common Stock in accordance with the terms herein, effective immediately prior to such liquidation, dissolution or winding up of the Corporation. If, upon any such liquidation, dissolution or other winding up of the affairs of the Corporation, the net assets of the Corporation distributable among the holders of all outstanding Senior Preferred Stock shall be insufficient to permit the payment to such holders of the full preferential amount to which they are entitled with respect to their Senior Preferred Stock, then the entire net assets of the Corporation remaining after the provision for the payment of the Corporation's debts and other liabilities shall be distributed among the holders of the Senior Preferred Stock ratably in proportion to the full preferential amounts to which they would otherwise be respectively entitled on account of their Senior Preferred Stock. Upon any such liquidation, dissolution or winding up of the Corporation, after the holders of Senior Preferred Stock shall have been paid in full the preferential amounts to which they shall be entitled to receive on account of their Senior Preferred Stock, the remaining net assets of the Corporation shall be distributed to the other stockholders of the Corporation as their respective interests may appear. (b) Consolidation, Merger, etc. A consolidation or merger of the Corporation with or into any other corporation or corporations (a "merger") other than a merger in which the holders of the Corporation's Common Stock own a majority of the voting power of the surviving corporation, or a Sale of the Corporation, or the effectuation by the Corporation or its stockholders of a transaction or a series of related transactions in which more than fifty percent (50%) of the voting power of the Corporation is disposed of (a "reorganization") shall be deemed to constitute a liquidation, dissolution or winding up of the Corporation within the meaning of this Section 3, provided, however, the transfer of all or substantially all of the Corporation's assets to one or more wholly owned subsidiaries of the Corporation shall not be deemed a liquidation, dissolution or winding up of the Corporation within the meaning of this Section 3. Any reorganization of the Corporation required by any court or administrative body in order to comply with any provision of law shall be deemed to be an involuntary liquidation, dissolution or winding up of the Corporation unless the preferences, qualifications, limitations, restrictions and special or relative rights granted to or imposed upon the holders of Series A Preferred Stock are not adversely affected by such reorganization. Notwithstanding the foregoing, a consolidation, merger, Sale of the Corporation or reorganization shall not be deemed a liquidation, dissolution or winding up of the Corporation for the purposes of this Section 3 if (i) the holders of the Requisite Percentage of the Series A Preferred Stock waive in writing the provisions of the preceding two sentences, as applicable and (ii) the Board of Directors of the Corporation consents to such waiver. (c) Holders of Series A Preferred Stock shall not be entitled to any additional distribution in the event of any liquidation, dissolution or winding up of the affairs of the Corporation in excess of the amounts set forth in this Section 3. 4. Voting. (a) Rights of Series A Preferred Stock. Except as otherwise required by law or as provided herein and subject to the rights of any class or series of capital stock of the Corporation that hereafter may be issued in compliance with the terms of this Certificate of Designation, the shares of the Series A Preferred Stock shall vote together with the shares of the Corporation's Common Stock and any other shares of the Corporation's stock which, by its terms, is entitled to vote together with the Series A Preferred Stock and the Common Stock as a single class at any annual or special meeting of stockholders of the Corporation, or may act by written consent in the same manner as the Corporation's Common Stock, upon the following basis: each holder of shares of Series A Preferred Stock shall be entitled to such number of votes for the Series A Preferred Stock held by such holder on the record date fixed for such meeting, or on the effective date of such written consent, as shall be equal to the lesser of (i) the whole number of shares of the Corporation's Common Stock issuable upon conversion and exercise of all shares of Series A Preferred Stock and Warrants held by such holder immediately after the close of business on the record date fixed for such meeting or the effective date of such written consent and (ii) the number of shares of Series A Preferred Stock held by such holder multiplied by 2.476. 5. Special Approval Rights. (a) Restricted Actions. So long as any shares of Series A Preferred Stock are outstanding, the affirmative vote of the holders of the Requisite Percentage of Series A Preferred Stock, acting by written consent or voting separately as a single class in person or by proxy, at a special or annual meeting of holders of Series A Preferred Stock called for the purpose, shall be necessary to authorize the Corporation to take any of the following actions (herein, each a "Restricted Action"): (A) authorize, or increase or permit any Subsidiary to authorize or increase, the authorized number of shares of, or issue additional shares of Series A Preferred Stock or any class or series of the Corporation's or any Subsidiary's capital stock or options, warrants or other rights to acquire any such capital stock ranking with respect to liquidation preference, dividends or voting rights, senior in right to, or on a parity with, the Series A Preferred Stock or entitling the holders thereof to receive any dividends or distributions (other than stock dividends) at any time when any shares of Series A Preferred Stock are outstanding; provided however, that nothing contained in this Section 5 shall restrict the Company from authorizing or issuing (i) Common Stock or warrants or options to acquire Common Stock or (ii) Straight Preferred Stock; (B) amend, repeal or change, directly or indirectly, any of the provisions of the Articles of Organization of the Corporation, as amended, or the By-laws of the Corporation in any manner that would alter or change the powers, preferences or special rights of the shares of Series A Preferred Stock so as to affect them adversely; (C) at any time when the outstanding shares of Series A Preferred Stock and Preferred Stock Derivatives represent at least four and 55/100 percent (4.55%) of the Corporation's Common Stock Deemed Outstanding, authorize or effect the declaration or payment of dividends or other distributions (other than stock dividends) upon, or the redemption or repurchase of, any equity securities of the Corporation other than repurchase of Common Stock from departing employees that has been approved by the Compensation Committee and the Board of Directors; or (D) at any time when the outstanding shares of Series A Preferred Stock and Preferred Stock Derivatives represent at least four and 55/100 percent (4.55%) of the Corporation's Common Stock Deemed Outstanding, permit the Board of Directors of the Corporation to consist of more than eleven (11) members. (b) Approval. The approval rights of the holders of shares of Series A Preferred Stock to authorize the Corporation to take any of the Restricted Actions as provided in this Section 5 may be exercised at any annual meeting of stockholders, at a special meeting of the holders of Series A Preferred Stock held for such purpose or by written consent. At each meeting of stockholders at which the holders of shares of Series A Preferred Stock shall have the right, voting separately as a single class, to authorize the Corporation to take any Restricted Action as provided in this Section 5, the presence in person or by proxy of the holders of the Requisite Percentage of Series A Preferred Stock entitled to vote on the matter shall be necessary and sufficient to constitute a quorum. At any such meeting or at any adjournment thereof, in the absence of a quorum of the holders of shares of Series A Preferred Stock, a majority of the holders of such shares present in person or by proxy shall have the power to adjourn the meeting as to the actions to be taken by the holders of shares of Series A Preferred Stock from time to time and place to place without notice other than announcement at the meeting until a quorum shall be present. 6. Compensation Committee. Unless otherwise consented to by the holders of the Requisite Percentage of outstanding Series A Preferred Stock, so long as any shares of Series A Preferred Stock are outstanding and so long as the outstanding shares of Series A Preferred Stock and Preferred Stock Derivatives represent at least four and 55/100 percent (4.55%) of the Corporation's Common Stock Deemed Outstanding, the Board of Directors shall elect a Compensation Committee of the Board of Directors consisting of three (3) individuals, one of whom shall be a director designated in writing by the holders of a majority of the Series A Preferred Stock, and the other two of which shall consist of independent directors who are not employed by the Corporation and are not Affiliates of those stockholders who are Affiliates of the Corporation ("Independent Directors"), which Compensation Committee shall be increased by one (1) member, which member shall be the member added pursuant to Section 7.6 of the Purchase Agreement or another member satisfactory to the holders of the Requisite Percentage of outstanding Series A Preferred Stock and the Corporation's chief executive officer. So long as any shares of Series A Preferred Stock are outstanding and so long as the outstanding shares of Series A Preferred Stock and Preferred Stock Derivatives represent at least four and 55/100 percent (4.55%) of the Corporation's Common Stock Deemed Outstanding, decisions of the Compensation Committee must be made by the affirmative vote of at least three (3) members. The Compensation Committee shall approve all recommendations to the Board of Directors as to the following, and the Board of Directors shall not have the power to approve any of the following without such recommendation, so long as any shares of Series A Preferred Stock are outstanding and so long as the outstanding shares of Series A Preferred Stock and Preferred Stock Derivatives represent at least four and 55/100 percent (4.55%) of the Corporation's Common Stock Deemed Outstanding, provided however, that nothing contained herein shall restrict the Corporation from honoring its contractual obligations existing on April 10, 1998 and disclosed in the Purchase Agreement: (i) the terms of employment, including compensation, of all new senior management employees; (ii) any increases in the compensation or benefits of any senior management employee; (iii) the terms of, and allocations of awards to senior management employees under, any bonus, profit-sharing, or similar incentive plan arrangements; (iv) the award of any other incentive or bonus compensation to senior management employees; (v) the issuance of capital stock or Convertible Securities to any employees or directors of the Corporation or its Subsidiaries; and (vi) the issuance of capital stock or Convertible Securities to consultants to the Corporation or its Subsidiaries other than Common Stock, warrants and options to purchase Common Stock representing more than 40,000 shares of Common Stock in the aggregate on a fully diluted basis with respect to all such issuances during any fiscal year. 7. Conversion Rights. (a) Conversion Procedure. (i) At any time and from time to time, any holder of Series A Preferred Stock shall have the right, at its option, to convert all or any portion of each share of Series A Preferred Stock (including any fraction of a share) held by such holder into a number of shares of fully paid and nonassessable Common Stock computed by dividing the Series A Preference Amount by the Conversion Price in effect on the Conversion Date; provided, however, that in the event of the conversion of Series A Preference Stock pursuant to Section 3(a) or Section 7(g) of this Certificate of Designation, the number of shares of fully paid and nonassessable Common Stock into which each Share of Series A Preferred Stock shall convert shall be computed by dividing the greater of the Series A Preference Amount or $21.39 by the Conversion Price in effect on the Conversion Date. Notwithstanding any other provision hereof, if a conversion of Series A Preferred Stock is to be made in connection with a Sale of the Corporation, such conversion may, at the election of any holder tendering Series A Preferred Stock for conversion, be conditioned upon the consummation of the Sale of the Corporation, in which case such conversion shall not be deemed to be effective until immediately prior to the consummation of such Sale of the Corporation. (ii) Subject to the provisions of Section 7(a)(i), each conversion of Series A Preferred Stock shall be deemed to have been effected as of the close of business on the effective date of such conversion specified in a written notice (the "Conversion Date"); provided, however, that the Conversion Date shall not be a date earlier than the date such notice is so given, and if such notice does not specify a conversion date, the Conversion Date shall be deemed to be the date such notice is given to the Corporation. On the Conversion Date, the rights of the holder of such Series A Preferred Stock as such holder (including the right to receive dividends) shall cease and the Person or Persons in whose name or names any certificate or certificates for shares of Common Stock are to be issued upon such conversion shall be deemed to have become the holder or holders of record of the shares of Common Stock represented thereby. (iii) As soon as practicable after the Conversion Date, but in any event within ten (10) business days after the holder has delivered the certificates (or affidavits of loss in form and substance reasonably satisfactory to the Company) evidencing the shares of Series A Preferred Stock converted into shares of Common Stock in accordance herewith, the Corporation shall deliver to the converting holder: (x) a certificate or certificates representing, in the aggregate, the number of shares of Common Stock issued upon such conversion, in the same name or names as the certificates representing the converted shares and in such denomination or denominations as the converting holder shall specify and a check for cash with respect to any fractional interest in a share of Common Stock as provided in clause (vii) of this Section 7(a); and (y) a certificate representing any shares that were represented by the certificate or certificates delivered to the Corporation in connection with such conversion but that were not converted. (iv) The issuance of certificates for shares of Common Stock upon conversion of Series A Preferred Stock shall be made without charge to the holders of such Series A Preferred Stock for any issuance tax in respect thereof or other cost incurred by the Corporation in connection with such conversion and the related issuance of shares of Common Stock. Upon conversion of any shares of Series A Preferred Stock, the Corporation shall take all such actions as are necessary in order to insure that the Common Stock so issued upon such conversion shall be validly issued, fully paid and nonassessable. (v) The Corporation shall not close its books against the transfer of Series A Preferred Stock or of Common Stock issued or issuable upon conversion of Series A Preferred Stock in any manner that interferes with the timely conversion of Series A Preferred Stock. The Corporation shall assist and cooperate with any holder of shares of Series A Preferred Stock required to make any governmental filings or obtain any governmental approval prior to or in connection with any conversion of shares of Series A Preferred Stock hereunder (including, without limitation, making any filings required to be made by the Corporation). (vi) The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of issuance upon the conversion of the Series A Preferred Stock, such number of shares of Common Stock as are issuable upon the conversion of all outstanding Series A Preferred Stock. All shares of Common Stock that are so issuable shall, when issued, be duly and validly issued, fully paid and nonassessable. The Corporation shall take all such actions as may be necessary to assure that all such shares of Common Stock may be so issued without violation of any applicable law or governmental regulation applicable to the Corporation or any requirements of any domestic securities exchange upon which shares of Common Stock may be listed (except for official notice of issuance which shall be immediately delivered by the Corporation upon each such issuance). (vii) No fractional shares of Common Stock or script shall be issued upon conversion of shares of the Series A Preferred Stock. If more than one share of Series A Preferred Stock shall be surrendered for conversion at any one time by the same holder, the number of full shares of Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of Series A Preferred Stock so surrendered. Instead of any fractional shares of Common Stock which would otherwise be issuable upon conversion of any shares of Series A Preferred Stock, the Corporation shall pay a cash adjustment in respect of such fractional interest equal to the fair market value of such fractional interest as determined by the Corporation's Board of Directors. (b) Conversion Price. The initial conversion price shall be nine dollars ($9.00), which may be adjusted from time to time hereafter (as so adjusted, the "Conversion Price") . If and whenever on or after the original date of issuance of the Series A Preferred Stock the Corporation issues or sells, or in accordance with Section 7(c) is deemed to have issued or sold, any shares of its Common Stock or Convertible Securities for a consideration per share less than the Conversion Price in effect immediately prior to the time of such issue or sale, then upon such issue or sale, the Conversion Price shall be reduced to an amount determined by dividing (a) the sum of (1) the product derived by multiplying (i) the Conversion Price in effect immediately prior to such issue or sale times (ii) the number of shares of Common Stock Deemed Outstanding immediately prior to such issue or sale, plus (2) the consideration, if any, received (or deemed received pursuant to Section 7(c)(ii) below) by the Corporation upon such issue or sale, by (b) the number of shares of Common Stock Deemed Outstanding immediately after such issue or sale. (c) Effect on Conversion Price of Certain Events. For purposes of determining the adjusted Conversion Price under Section 7, the following shall be applicable: (i) Issuance of Convertible Securities. If the Corporation in any manner issues or sells any Convertible Securities, whether or not the rights to exchange or convert any such Convertible Securities are immediately exercisable, and the price per share for which Common Stock is issuable upon such conversion or exchange is less than the Conversion Price in effect immediately prior to the time of such issue or sale, then the maximum number of shares of Common Stock issuable upon conversion or exchange of such Convertible Securities shall be deemed to be outstanding and to have been issued and sold by the Corporation at the time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this paragraph, the "price per share for which Common Stock is issuable" shall be determined by dividing (a) the total amount received or receivable by the Corporation as consideration for the issue or sale of such Convertible Securities, plus the cumulative minimum aggregate amount of additional consideration, if any, payable to the Corporation upon the exercise, conversion or exchange thereof and, if applicable, the exercise, conversion and exchange of any other Convertible Securities that such Convertible Securities may be converted into or exchanged for, by (b) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment of the Conversion Price shall be made when Common Stock and, if applicable, any other Convertible Securities, are actually issued upon the exercise, conversion or exchange of such Convertible Securities. (ii) Change in Exercise Price or Conversion Rate. If the additional consideration payable to the Corporation upon the exercise, conversion or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exchangeable for Common Stock should change at any time, the Conversion Price in effect at the time of such change shall be readjusted to the Conversion Price that would have been in effect at such time had such Convertible Securities that are still outstanding provided for such changed additional consideration or changed conversion rate, as the case may be, at the time such Convertible Securities were initially granted, issued or sold; and on the termination date of any right to exercise, convert or exchange such Convertible Securities without such right having been duly exercised, the Conversion Price then in effect hereunder shall be increased to the Conversion Price that would have been in effect at the time of such termination had such Convertible Securities, to the extent outstanding immediately prior to such termination, never been issued. (iii) Exceptions for Excluded Securities. Notwithstanding the foregoing, no adjustments shall be made under this Section 7(c) with respect to the issuance of any Excluded Securities. (iv) Valuation of Non-Cash Consideration. In the event that Convertible Securities are issued for consideration other than cash, the value of such consideration shall be made by a good faith determination by the Board. (d) Subdivision or Combination of Common Stock. If the Corporation at any time subdivides (by any stock split, stock dividend, recapitalization or otherwise) its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such combination shall be proportionately reduced, and conversely, in the event the outstanding shares of Common Stock shall be combined (by reverse stock split or otherwise) into a smaller number of shares, the Conversion Price in effect immediately prior to such combination shall be proportionately increased. In any such event all numbers, percentages, computations and the like in this Certificate of Designation shall be deemed modified as necessary to give appropriate effect to such subdivision or combination. (e) Certain Events. If an event not specified in this Section 7 occurs that has substantially the same economic effect on the Series A Preferred Stock as those specifically enumerated, then this Section 7 shall be construed liberally, mutatis mutandis, in order to give the Series A Preferred Stock the intended benefit of the protections provided under this Section 7. In such event, the Corporation's Board of Directors shall make an appropriate adjustment in the Conversion Price so as to protect the rights of the holders of Series A Preferred Stock; provided that no such adjustment shall increase the Conversion Price as otherwise determined pursuant to this Section 7 or decrease the number of shares of Common Stock issuable upon conversion of each share of Series A Preferred Stock. (f) Notices. (i) Immediately upon any adjustment of the Conversion Price, the Corporation shall give written notice thereof to all holders of Series A Preferred Stock, setting forth in reasonable detail and certifying the calculation of such adjustment. (ii) The Corporation shall give written notice to all holders of Series A Preferred Stock at least twenty (20) days prior to the date on which the Corporation closes its books or takes a record (a) with respect to any dividend or distribution upon Common Stock, (b) with respect to any pro rata subscription offer to holders of Common Stock or (c) for determining rights to vote with respect to any dissolution or liquidation. (g) Mandatory Conversion. Each share of Series A Preferred Stock shall automatically be converted into fully paid and nonassessable shares of Common Stock of the Corporation on the basis set forth in Section 7(a) upon not less than 10 days prior written notice of conversion (the "Conversion Notice") from the Corporation, which Conversion Notice and mandatory conversion shall not be effective unless (i) the average closing bid price (or closing sales price, as applicable) per share for the Corporation's Common Stock on the Nasdaq Stock Market (or such national stock exchange upon which the Corporation's Common Stock is then listed), for the period of thirty (30) consecutive trading days ending on the last trading day prior to the giving of the Conversion Notice, is (aa) in the case of a Conversion Notice given prior to April 10, 2002, at least three hundred percent (300%) of the highest Conversion Price in effect during any portion of such thirty (30) trading day period or (bb) in the case of a Conversion Notice given on or after April 10, 2002, at least one hundred percent (100%) of the highest Conversion Price in effect during any portion of such thirty (30) trading day period, and (ii) a "Shelf Registration" pursuant to the Registration Rights Agreement with respect to the "Registrable Securities" (including those issuable upon such conversion) shall be effective as of the time the Series A Preferred Stock converts into Common Stock. Holders of shares of Series A Preferred Stock so converted may deliver to the Corporation at its principal office (or such other office or agency of the Corporation as the Corporation may designate by notice in writing to such holders) during its usual business hours, the certificate or certificates for the shares so converted. At such time as at least 500,000 shares of Series A Preferred Stock shall have been converted into Common Stock pursuant to this Section 7, all other then outstanding shares of Series A Preferred Stock shall thereupon automatically be converted into fully paid and nonassessable shares of Common Stock of the Corporation in the basis set forth in Section 7(a). As promptly as practicable after such conversion, the Corporation shall issue and deliver to such holder a certificate or certificates for the number of whole shares of Common Stock to which such holder is entitled, together with any cash dividends and payment in lieu of fractional shares to which such holder may be entitled pursuant to this Section 7. Until such time as a holder of shares of Series A Preferred Stock shall surrender its certificate or certificates therefor as provided above, such certificates shall be deemed to represent the shares of Common Stock to which such holder shall be entitled upon the surrender thereof. 8. Redemption. (a) The Series A Preferred Stock may be redeemed (in whole or in part) at the option of the holders of the Requisite Percentage of Series A Preferred Stock on or after the Maturity Date (an "Optional Redemption"). In any such case, the holders of the Requisite Percentage of Series A Preferred Stock shall notify the Corporation in writing of its or their intent to exercise the rights afforded by this Section 8(a) and specify a date not less than 90 nor more than 180 days from the date of such notice on which the Series A Preferred Stock shall be redeemed (the "Optional Redemption Date"). Upon receipt of such notice, the Corporation shall promptly notify the remaining holders of the Series A Preferred Stock of the Optional Redemption Date. The remaining holders have the right to participate in such redemption if they so elect by giving the Corporation written notice to such effect within 20 days of having received such notice. The Corporation shall redeem on the Optional Redemption Date all shares of Series A Preferred Stock being redeemed in cash by wire transfer of immediately available funds in an amount equal to the greater of the Series A Preference Amount of such shares or the Minimum Preference Amount of such shares to the extent funds are legally available for such redemption. (b) If the funds of the Corporation legally available for redemption of shares of Series A Preferred Stock on an Optional Redemption Date are insufficient to redeem the total number of outstanding shares of Series A Preferred Stock entitled to redemption, the holders of shares of Series A Preferred Stock entitled to redemption shall share ratably in any funds legally available for redemption of such shares according to the respective amounts that would be payable with respect to the full number of shares owned by them if all such outstanding shares were redeemed in full. At any time thereafter when additional funds of the Corporation are legally available for the redemption of such shares of Series A Preferred Stock, such funds will be used at the earliest permissible time, to redeem the balance of such shares, or such portion thereof for which funds are then legally available. From and after the Corporation's receipt of an Optional Redemption notice pursuant to Section 8(a), the Corporation shall be obligated to use its best efforts to take such actions as may be necessary (including, without limitation, the issuance of additional equity securities, the revaluation or recapitalization of the Corporation or the consummation of a merger or sale of assets) in order to permit the full and timely redemption of the shares of Series A Preferred Stock entitled to redemption. (c) If, for any reason, the Corporation fails to redeem all shares of Series A Preferred Stock entitled to redemption on an Optional Redemption Date (i) the unredeemed shares shall remain outstanding and shall continue to have all rights and preferences (including, without limitation, dividend and voting rights) provided for herein, and (ii) the holders of such unredeemed shares shall have the ongoing right to be redeemed in accordance with this Section 8, together with such rights and remedies as may be available under applicable law. (d) The notices provided for in this Section 8 shall be sent, if by or on behalf of the Corporation, to the holders of the Series A Preferred Stock at their respective addresses as shall then appear on the records of the Corporation, or if by any holder of Series A Preferred Stock to the Corporation at its principal executive office as set forth in the Purchase Agreement, by first class mail, postage prepaid, (i) notifying such recipient of the redemption, the date of such redemption, the number of shares of Series A Preferred Stock to be redeemed, and the redemption price therefor and (ii) in the case of any notice by or on behalf of the Corporation, stating the place or places at which the shares called for redemption shall, upon presentation and surrender of such certificates representing such shares, be redeemed. 9. Status of Reacquired Shares. Any shares of Series A Preferred Stock redeemed pursuant to Section 8 or otherwise acquired by the Corporation in any manner whatsoever shall be canceled and shall not under any circumstances be reissued; and the Corporation may from time to time take such appropriate corporate action as may be necessary to reduce accordingly the number of authorized shares of Series A Preferred Stock. 10. Rank. The Series A Preferred Stock shall rank senior in right as to dividends and upon liquidation, dissolution or winding up to all Junior Securities, whenever issued. 11. Identical Rights. Each share of the Series A Preferred Stock shall have the same relative rights and preferences as, and shall be identical in all respects with, all other shares of the Series A Preferred Stock. 12. Certificates. So long as any shares of the Series A Preferred Stock are outstanding, there shall be set forth on the face or back of each stock certificate issued by the Corporation a statement as required by Section 27(c)(2) of the Business Corporation Law of Massachusetts. 13. Amendments. Any provision of these terms of the Series A Preferred Stock may be amended, modified or waived if and only if the holder of the Requisite Percentage of Series A Preferred Stock has consented in writing or by an affirmative vote to such amendment, modification or waiver of any such provision of this Certificate of Designation. 14. Definitions. "Affiliate or Affiliates" shall mean with respect to any Person, any other Person that would be considered to be an affiliate of such Person under Rule 144(a) under the Securities Act of 1933, as amended, as in effect on April 10, 1998, if such Person were issuing securities. "Articles of Organization" shall mean the Articles of Organization of the Company, as amended from time to time. "Certificate of Designation" shall mean this Certificate of Designations of the Series A Preferred Stock. "Common Stock" shall mean the Corporation's Common Stock, $.01 par value. "Common Stock Deemed Outstanding" shall mean, at any given time, the number of shares of Common Stock actually outstanding at such time, plus the number of shares of Common Stock issuable upon conversion of the Series A Preferred Stock, plus the number of shares of Common Stock issuable upon the exercise in full of all Convertible Securities whether or not the Convertible Securities are convertible into, exercisable or exchangeable for Common Stock at such time. "Conversion Price" shall have the meaning set forth in Section 7(b) hereof. "Convertible Securities" shall mean securities or obligations that are exercisable for, convertible into or exchangeable for shares of Common Stock. The term includes options, warrants or other rights to subscribe for or purchase Common Stock or to subscribe for or purchase other securities that are convertible into or exchanged for Common Stock. "Excluded Securities" shall mean any (a) Common Stock or Convertible Securities outstanding as of April 10, 1998 and disclosed in the Purchase Agreement, (b) Common Stock issuable upon the exercise, conversion or exchange of Convertible Securities described in clause (a), or (c) Common Stock or warrants or options to acquire Common Stock issued after April 10, 1998 to (i) employees, directors or consultants to the Corporation or its subsidiaries with the approval of the Compensation Committee to the extent such approval is required under Section 5(c) hereof, (ii) lenders who are not Affiliates of the Corporation as partial consideration for senior debt financing to the Corporation, (iii) equipment lessors who are not Affiliates of the Corporation as partial consideration for equipment lease financing to the Corporation, (iv) licensors who are not Affiliates of the Corporation as partial consideration for license agreements with the Corporation, (v) bond and Straight Preferred Stock purchasers as partial consideration for issuances of debt securities or Straight Preferred Stock pursuant to underwritten public offerings of such debt securities or Straight Preferred Stock under the Securities Act of 1933, as amended, (vi) bond and Straight Preferred Stock purchasers as partial consideration for issuance of such debt securities or Straight Preferred Stock pursuant to offerings under Rule 144A yielding the Corporation, with respect to each such offering, proceeds of at least $75,000,000 (net of any interest or dividend escrows or similar arrangements), (vii) bond and Straight Preferred Stock purchasers as partial consideration for issuances of such debt securities or Straight Preferred Stock pursuant to offerings under Rule 144A yielding the Corporation with respect to each such offering, proceeds of at least $40,000,000 (net of any interest or dividend escrows or similar arrangements) sold to at least five purchasers, who are not Affiliates of one another, (viii) any Persons (including the stockholders or owners of Persons) as all or part of the consideration paid for the acquisition of ownership interests in, or assets of, such Person unless (aa) such Person is an Affiliate of the Corporation (other than a Subsidiary) or (bb) Affiliates of the Corporation collectively own more than ten percent (10%) of the ownership interests in such Person or (ix) to Comm-Tract Corp. and Comm-Tract Corp. of New York or their owners in consideration for the acquisition of said companies by the Corporation involving the issuance of Common Stock at a price which is not less than $9.00 per share. For purposes of clause (viii) above, the value of consideration other than cash received by the Corporation in return for the issuance of Common Stock shall be determined in good faith by the Board. "Independent Directors" shall have the meaning set forth in Section 6 hereof. "Junior Securities" shall mean any of the Corporation's Common Stock and all other equity securities of the Corporation other than (i) the Series A Preferred Stock and (ii) any other shares of the Corporation's preferred stock (a) which by their terms, state that they are not Junior Securities or provide the holders thereof with rights pari passu with or senior to those of the holders of Series A Preferred Stock and (b) are issued in compliance with this Certificate of Designation. "Maturity Date" shall mean April 9, 2003; provided however, that if, on or before October 9, 1998, the Corporation completes and closes a debt financing yielding the Corporation proceeds of at least $75,000,000 (net of any interest escrow or similar arrangement), then the Maturity Date shall mean the earlier of April 9, 2010 or the 180th day following the stated maturity date of such debt. "Minimum Preference Amount" shall mean $25.41 per share of Series A Preferred Stock. "Person" shall mean an individual, partnership, corporation, association, trust, joint venture, unincorporated organization and any government, governmental department or agency or political subdivision thereof. "Preferred Stock" shall mean the Series A Preferred Stock. "Preferred Stock Derivatives" shall mean any Common Stock or Convertible Securities issued to holders of Series A Preferred Stock in exchange therefor, as a stock dividend thereon, in respect thereof in connection with a stock split or recapitalization or in connection with the exercise of preemptive rights pertaining thereto pursuant to the Purchase Agreement. "Purchase Agreement" shall mean that certain Securities Purchase Agreement dated as of April 10, 1998 among the Purchasers named therein and the Corporation, as it may be amended from time to time. "Purchase Price" of any share of Series A Preferred Stock shall be $18.00. "Registration Rights Agreement" shall mean that certain Registration Rights Agreement between the Corporation and the holder(s) of the Series A Preferred Stock, as it may be amended from time to time. "Required Consent" shall have the meaning set forth in Section 5. "Requisite Percentage" shall mean a majority. "Restricted Action" shall have the meaning set forth in Section 5. "Sale of the Corporation" shall mean a single transaction or a series of transactions pursuant to which a Person or Persons acquire (i) capital stock of the Corporation possessing the voting power to elect a majority of the Corporation's board of directors (whether by merger, consolidation or sale or transfer of the Corporation's capital stock); or (ii) all or substantially all of the Corporation's assets determined on a consolidated basis. "Senior Preferred Stock" shall mean the Series A Preferred Stock and any other preferred stock of the Corporation designated by the Corporation in accordance with this Certificate of Designation, the terms of which preferred stock provide for it to be treated as Senior Preferred Stock for purposes of the particular sections herein in which the term "Senior Preferred Stock" is used. "Series A Preference Amount" shall mean, as of any date, an amount per share of Series A Preferred Stock equal to the Purchase Price increasing from the date of issuance of such share through the date in question at a rate of nine percent (9%) per annum, compounding semi- annually in arrears from the date of issuance and prorated on a daily basis for partial periods. "Series A Preferred Stock" shall mean the Corporation's Series A Preferred Stock, $1.00 par value. "Straight Preferred Stock" shall mean preferred stock of the Corporation which (i) is neither a Convertible Security nor convertible into or exchangeable for any other security other than preferred stock meeting the requirements of this definition or debt securities, (ii) is issued solely for cash payable upon issuance, (iii) accrues dividends only at a rate or rates fixed in the certificate of designation or amendment to the Articles of Organization designating such preferred stock, (iv) has no voting rights other than as required by law, (v) entitles the holders thereof to receive, in the aggregate, not more than the purchase price therefor plus the amount of any accrued unpaid dividends in respect thereof, and (vi) does not otherwise directly or indirectly alter or change the powers, preferences or special rights of the shares of Series A Preferred Stock so as to affect them adversely. "Subsidiary" shall mean, with respect to any Person, any corporation, partnership, association or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a partnership, association or other business entity, a majority of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a partnership, association or other business entity if such Person or Persons shall be allocated a majority of partnership, association or other business entity gains or losses or shall be or control the managing general partner of such partnership, association or other business entity. "Warrants" shall mean the Warrants issued pursuant to the Purchase Agreement to purchase 133,333 shares of Common Stock, as adjusted from time to time. 15. Severability of Provisions. If any right, preference or limitation of the Series A Preferred Stock set forth in this Resolution (as such Resolution may be amended from time to time) is invalid, unlawful or incapable of being enforced by reason of any rule, law or public policy, all other rights preferences and limitations set forth in this Resolution (as so amended) which can be given effect without implicating the invalid, unlawful or unenforceable right preference or limitation shall, nevertheless, remain in full force and effect, and no right, preference or limitation herein set forth shall be deemed dependent upon any other right, preference or limitation unless so expressed herein. SIGNED UNDER THE PENALTIES OF PERJURY, this 10th day of April, 1998, /s/ Steven P. Milton, President /s/ John D. Pittenger, Clerk. THE COMMONWEALTH OF MASSACHUSETTS William Francis Galvin Secretary of the Commonwealth ONE ASHBURTON PLACE, BOSTON, MASSACHUSETTS 02108 ARTICLES OF AMENDMENT Federal Identification General Laws, Chapter 156B, Section 72 No. 04-2731202 We, STEVEN P. MILTON, PRESIDENT and JOHN D. PITTENGER, CLERK, of COMPUTER TELEPHONE CORP. located at 360 SECOND AVE., WALTHAM, MASSACHUSETTS 02154 do hereby certify that these ARTICLES OF AMENDMENT affecting Articles NUMBERED 1 of the Articles of Organization were duly adopted at a meeting held on 09/26/96, by vote of: 5,407,571 shares of Common Stock out of 9,601,155 shares outstanding, being at least a majority of each type, class or series outstanding and entitled to vote thereon: To change Article 1 of the Restated Articles of Organization relating to the name of the corporation to read as follows: "1. The name by which the corporation shall be known is: CTC Communications Corp." The foregoing amendment will become effective when these articles of amendment are filed in accordance with Chapter 156B, Section 6 of The General Laws unless these articles specify, in accordance with the vote adopting the amendment, a later effective date not more than thirty days after such filing, in which event the amendment will become effective on such later date. EFFECTIVE DATE: immediately upon filing. IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereunto signed our names this 26th day of September, in the year 1996. /s/ STEVEN P. MILTON, President /s/ JOHN D. PITTENGER, Clerk THE COMMONWEALTH OF MASSACHUSETTS ARTICLES OF AMENDMENT GENERAL LAWS, CHAPTER 156B, SECTION 72 I hereby approve the within articles of amendment and, the filing fee in the amount of $100.00 having been paid, said articles are deemed to have been filed with me this 30th day of September, 1996. /s/ William Francis Galvin William Francis Galvin, Secretary of the Commonwealth THE COMMONWEALTH OF MASSACHUSETTS William Francis Galvin Secretary of the Commonwealth ONE ASHBURTON PLACE, BOSTON, MASSACHUSETTS 02108 Federal Identification No. 04-2731202 RESTATED ARTICLES OF ORGANIZATION General Laws, Chapter 156B, Section 74 This certificate must be submitted to the Secretary of the Commonwealth within sixty days after the date of the vote of stockholders adopting the restated articles of organization. The fee for filing this certificate is prescribed by General Laws, Chapter 156B, Section 114. Make check payable to the Commonwealth of Massachusetts. ----------------------- We, Robert J. Fabbricatore, President, and John D. Pittenger, Clerk, of Computer Telephone Corp., located at: 360 Second Avenue, Waltham, Massachusetts 02154 do hereby certify that the following restatement of the articles of organization of the corporation was duly adopted at a meeting held on August 21, 1995, by vote of 2,487,140 shares of Class 1 Common Stock out of 3,116,937 shares outstanding, being at least two-thirds of each class of stock outstanding and entitled to vote and of each class or series of stock adversely affected thereby: - 1. The name by which the corporation shall be known is:- Computer Telephone Corp. 2. The purposes for which the corporation is formed are as follows:- (a) For the sale, installation and service of computer controlled tele-communication systems. (b) To carry on any business or other activity which may be lawfully carried on by a corporation organized under the Business Corporation Law of The Commonwealth of Massachusetts, whether or not related to those referred to in the foregoing paragraph. 3. The total number of shares and the par value, if any, of each class of stock which the corporation is authorized to issue is as follows:
WITHOUT PAR VALUE WITH PAR VALUE ----------------- -------------- CLASS OF STOCK NUMBER OF SHARES NUMBER OF SHARES PAR VALUE - -------------- ---------------- ---------------- --------- Preferred None 1,000,000 $1.00 Common None 25,000,000 $ .01
4. If more than one class is authorized, a description of each of the different classes of stock with, if any, the preferences, voting powers, qualifications, special or relative rights or privileges as to each class thereof and any series now established: There are two (2) classes of stock of the corporation: Common Stock, par value $.01 per share; and Preferred Stock, par value $1.00 per share. A description of each such class of stock with, if any, the preferences, voting powers, qualifications, special or relative rights or privileges as to each such class of stock is as follows: A. RIGHTS AND PRIVILEGES AS TO COMMON STOCK The preferences, voting powers, qualifications and special rights or privileges of the Common Stock are as follows: 1. DIVIDEND RIGHTS (a) The holders of all then outstanding shares of Common Stock shall be entitled to receive dividends, when as and if declared by the Board of Directors of the corporation, out of any funds legally available therefor. (b) Nothing in these Articles of Organization shall be taken to mean that the Board of Directors is under any obligation to declare or pay dividends. 2. VOTING RIGHTS (a) The holder of each share of Common Stock shall be entitled to one vote per share. B. RIGHTS AND PRIVILEGES AS TO PREFERRED STOCK 1. The Board of Directors may fix, by resolutions adopted prior to the issuance of any shares of a particular series of Preferred Stock (to the extent not inconsistent with the preferences, rights and powers of series of Preferred Stock at the time outstanding), the voting powers of stock of such class, if any, and the designations, preferences and relative, participating, optional and other special rights and the qualifications, limitations and restrictions of such series within such class, including but without limiting the generality of the foregoing, the following: (a) The rate and times at which, and the terms and conditions on which, dividends on Preferred Stock of such series shall be paid; (b) The right, if any, of the holders of Preferred Stock of such series to convert the same into, or exchange the same for, shares of other series or classes of stock of the corporation and the terms and conditions of such conversions or exchanges; (c) The redemption price or prices and the time or times at which, and the terms and conditions on which, Preferred Stock of such series may be redeemed; (d) The rights of the holders of Preferred Stock of such series upon the voluntary or involuntary liquidation, merger, consolidation, distribution, or sale of assets, dissolution or winding up of the corporation; and (e) The terms of the sinking fund or redemption or purchase account, if any, to be provided for the Preferred Stock of such series. 2. At any time when there shall have been established and designated one or more series of Preferred Stock consisting of a number of shares which is less than all of the authorized number of shares of Preferred Stock, the remaining authorized shares of Preferred Stock shall be deemed to be shares of an undesignated series of Preferred Stock until designated by the Board of Directors. 3. Notwithstanding the fixing of the number of shares constituting a particular series, the Board of Directors may at any time thereafter authorize the issuance of additional shares of the same series or the redesignation of any then unissued shares of such series as authorized and unissued Preferred Stock undesignated as to series. 5. The restrictions, if any, imposed by the articles of organization upon the transfer of shares of stock of any class are as follows: None. 6. Other lawful provisions, if any, for the conduct and regulation of the business and affairs of the corporation, for its voluntary dissolution, or for limiting, defining, or regulating the powers of the corporation, or of its directors or stockholders, or of any class of stockholders: (a) The directors may make, amend or repeal the By-Laws in whole or in part, except with respect to any provision thereof which by law or the By-Laws requires action by the stockholders. (b) Meetings of the stockholders may be held anywhere in the United States. (c) The corporation may be a partner in any business enterprise it would have the power to conduct by itself. (d) The directors shall have the power to fix from time to time their compensation. No person shall be disqualified from holding any office by reason of any interest. In the absence of fraud, any director, officer or stockholder of this corporation, or any concern which is a stockholder of this corporation individually, or any individual having any interest in any concern in which any such directors, officers, stockholders or individuals have any interest, may be a party to, or may be pecuniarily or otherwise interested in, any contract, transaction or other act of this corporation, and (1) such contract, transaction or act shall not be in any way invalidated or otherwise affected by that fact; (2) no such director, officer, stockholder or individual shall be liable to account to this corporation for any profit or benefit realized through any such contract, transaction or act; (3) any such director of this corporation may be counted in determining the existence of a quorum at any meeting of the directors or of any committee thereof which shall authorize any such contact, transaction or act, and may vote to authorize the same; the term "interest" including personal interest and interest as a director, officer, stockholder, shareholder, trustee, member or beneficiary of any concern; and the term "concern" meaning any corporation, association, trust, partnership, firm, person or other entity other than this corporation. (e) No Director shall be personally liable to the corporation or any stockholder for monetary damages for breach of fiduciary duty as a director, except for any matter in respect of which such director shall be liable under Sections 61 and 62 of Chapter 156B of the Massachusetts General Laws or any amendment thereto or successor provisions thereto or shall be liable by reason that, in addition to any and all other requirements for such liability, he (i) shall have breached his duty of loyalty o the corporation or its stockholders, (ii) shall not have acted in good faith or, in failing to act, shall not have acted in good faith, (iii) shall have acted in a manner involving intentional misconduct or a knowing violation of law or, in failing to act, shall have acted in a manner involving intentional misconduct or knowing violation of law, or (iv) shall have derived an improper personal benefit. Neither the amendment nor repeal of this paragraph, nor the adoption of any provision of these Restated Articles inconsistent with this paragraph, shall eliminate or reduce the effect of this paragraph in respect of any manner occurring, or any cause of action, suit or claim that, but for this paragraph would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision. The date of the fiscal year of the corporation is March 31 each year, and is unchanged. The names and addresses of certain officers and directors of the corporation are as follows: President Robert J. Fabbricatore 55 Pequossette St., 1st Floor Watertown, MA 02172 Treasurer John D. Pittenger and Clerk 57 Pound St. Medfield, MA 02052 Directors: Robert J. Fabbricatore Richard J. Santagati 55 Pequossette St., 1st Floor 8 Farmland Circle Watertown, MA 02172 Andover, MA 01810 Philip J. Richer Alphonse M. Lucchese 351 Berlin Rd. 15 Bower Circle Marlboro, MA 01752 Sudbury, MA 01776 J. Richard Murphy 172 Chestnut St. No. Andover, MA 01845 We further certify that the foregoing restated articles of organization effect no amendments to the articles of organization of the corporation as heretofore amended, except amendments to the following articles 3 and 4: Briefly describe amendments in space below: Amendment to Article 3: Article 3 increases the authorized Common Stock, $.01 par value per share, from 8,600,000 shares to 25,000,000 shares of Common Stock, par value $.01 per share. Amendment to Article 4: Article 4 changes the name of the "Class 1 Common Stock, par value $.01 per share" to "Common Stock, par value $.01 per share." Note: The 1,400,000 shares of Class 2 Common Stock were converted to Class 1 Common Stock pursuant to the terms of the Restated Articles of Organization filed with the Secretary of the Commonwealth on March 4, 1985 thereby eliminating the Class 2 Common Stock. IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto signed our names this 21st day of August in the year 1995. /s/ Robert J. Fabbricatore, President /s/ John D. Pittenger, Clerk THE COMMONWEALTH OF MASSACHUSETTS RESTATED ARTICLES OF ORGANIZATION GENERAL LAWS, CHAPTER 156B, SECTION 74 I hereby approve the within restated articles of organization and, the filing fee in the amount of $16,700.00 having been paid, said articles are deemed to have been filed with me this 23rd day of August, 1995. /s/ William Francis Galvin William Francis Galvin, Secretary of the Commonwealth EX-3.2 3 AMENDED AND RESTATED BYLAWS EXHIBIT 3.2 AMENDED AND RESTATED BY-LAWS OF CTC COMMUNICATIONS CORP. (formerly Computer Telephone Corp.) ARTICLE I Stockholders Section 1. ANNUAL MEETING. The Annual Meeting of Stockholders shall be held on the third Monday in August in each year (or if that be a legal holiday in the place where the meeting is to be held, on the next succeeding full business day) at 10:00 A.M. unless a different hour is fixed by the Directors or the President and stated in the notice of the meeting. The purposes for which the annual meeting is to be held, in addition to those prescribed by law, by the Articles of Organization or by these By-Laws, may be specified by the Directors or the President. If no Annual Meeting is held in accordance with the foregoing provisions, a special meeting may be held in lieu thereof, and any action taken at such meeting shall have the same effect as if taken at the Annual Meeting. Section 2. SPECIAL MEETINGS. Special meetings of stockholders may be called by the President or by the Directors and shall be called by the Clerk, or in case of the death, absence, incapacity or refusal of the Clerk, by any other officer, upon written application of one or more stockholders who hold at least forty percent (40%) in interest of the capital stock entitled to vote at the meeting. The call for the meeting shall state the date, hour and place and the purposes of the meeting. Section 3. PLACE OF MEETING. All meetings of stockholders shall be held at the principal office of the corporation unless a different place (within the United States) is fixed by the Directors or the President and stated in the notice of the meeting. Section 4. NOTICE OF MEETINGS. Except as hereinafter provided, a written notice of every meeting of stockholders, stating the place, date and hour thereof, and the purposes for which the meeting is to be held, shall be given by the Clerk or by the person calling the meeting at least seven days before the meeting to each stockholder entitled to vote thereat and to each stockholder, who, by law, by the Articles of Organization or by these By-Laws is entitled to such notice, by leaving such notice with him or at his residence or usual place of business, or by mailing it postage prepaid and addressed to such stockholder at his address as it appears upon the books of the corporation. No notice need be given to any stockholder if a written waiver of notice, executed before or after the meeting by the stockholder or his attorney thereunto authorized, is filed with the records of the meeting. Section 5. QUORUM. The holders of a majority interest of all stock issued, outstanding and entitled to vote at a meeting shall constitute a quorum, but a lesser number may adjourn any meeting from time to time without further notice; except that, if two or more classes of stock are outstanding and entitled to vote as separate classes, then in the case of each such class, a quorum shall consist of the holders of a majority in interest of the stock of that class issued, outstanding and entitled to vote. Section 6. VOTING AND PROXIES. Each stockholder shall have one vote for each share of stock entitled to vote held by him of record according to the records of the corporation, unless otherwise provided by the Articles of Organization. Stockholders may vote either in person or by written proxy dated not more than six months before the meeting named therein. Proxies shall be filed with the Clerk of the meeting, or of any adjournment thereof, before being voted. Except as otherwise limited therein, proxies shall entitle the persons named therein to vote at any adjournment of such meeting. A proxy with respect to stock held in the name of two or more persons shall be valid if executed by one of them unless at or prior to exercise of the proxy the corporation receives a specific written notice to the contrary from any one of them. A proxy purporting to be executed by or on behalf of a stockholder shall be deemed valid unless challenged at or prior to its exercise. Section 7. ACTION AT MEETING. When a quorum is present, the holders of a majority of the stock present or represented and voting on a matter, (or if there are two or more classes of stock entitled to vote as separate classes, then in the case of each such class, the holders of a majority of the stock of that class present or represented and voting on a matter) except where a larger vote is required by law, the Articles of Organization or these By-Laws, shall decide any matter to be voted on by the stockholders. Any election by stockholders shall be determined by a plurality of the votes cast by the stockholders entitled to vote at the election. No ballot shall be required for such election unless requested by a stockholder present or represented at the meeting and entitled to vote in the election. The corporation shall not directly or indirectly vote any share of its stock. Section 8. ACTION WITHOUT MEETING. Any action taken by stockholders may be taken without a meeting if all stockholders entitled to vote on the matter consent to the action by a writing filed with the records of the meeting of stockholders. Such consent shall be treated for all purposes as a vote at a meeting. Section 9. NOTICE OF STOCKHOLDER BUSINESS AND NOMINATION OF DIRECTORS. (a) Annual Meetings of Stockholders. (i) Nominations of persons for election to the Board of Directors of the corporation and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders (x) pursuant to the corporation's notice of meeting, (y) by or at the direction of the Board of Directors or (z) by any stockholder of the corporation who was a stockholder of record at the time of giving of notice provided for in this Section 9, is entitled to vote at the meeting and has complied with the notice procedures set forth in this Section 9. (ii) For nomination or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (z) of paragraph (a)(i) of this Section 9, the stockholder must have given timely notice thereof in writing to the Clerk of the corporation at the principal executive office of the corporation not less than 60 days nor more than 90 days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the 90th day prior to such annual meeting and not later than the close of business on the later of (x) the 60th day prior to such annual meeting and (y) the 10th day following the day on which public announcement of the date of such meeting is first made. Such stockholder's notice shall set forth: (1) as to each person whom the stockholder proposes to nominate for election or reelection as a Director all information relating to such person that is required to be disclosed in solicitations of proxies for election of Directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act") (including such person's written consent to being named in the proxy statement as a nominee and to serving as a Director if elected); (2) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; (3) as to the stockholder giving notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made, (A) the name and address of such stockholder, as they appear on the corporation's books, and of such beneficial owner and (B) the class and number of shares of the corporation which are owned beneficially and of record by such stockholder and such beneficial owner. (iii) Notwithstanding anything in the second sentence of paragraph (a)(ii) of this Section 9 to the contrary, in the event that any person nominated by the Board of Directors of the corporation for election as a Director (other than a person nominated to fill a vacancy created by the death of a Director) was not a Director or nominee named (x) in the corporation's proxy statement for the preceding annual meeting or (y) in a public announcement made by this corporation at least 60 days prior to the first anniversary of the preceding year's annual meeting (a "New Nominee"), a stockholder's notice required by this Section 9 shall also be considered timely if it shall be delivered to the Clerk of the corporation at the principal executive offices of the corporation not later than the close of business on the 10th day following the date on which public announcement is first made by the corporation of the election or nomination of such New Nominee to the Board of Directors. (iv) The corporation shall set forth in its proxy statement for each annual meeting of stockholders the date by which notice of nominations by stockholders of persons for election as a Director or for other business proposed to be brought by stockholders at the next annual meeting of stockholders must be received by the corporation to be considered timely pursuant to this Section 9. With respect to the first annual meeting of stockholders after the adoption of this Section 9, the corporation shall issue a public announcement setting forth such information not less than 30 days prior to the applicable date. (b) Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the corporation's notice of meeting. Nominations of persons for election to the Board of Directors of the corporation may be made at a special meeting of stockholders at which Directors are to be elected pursuant to the corporation's notice of meeting (x) by or at the direction of the Board of Directors or (y) by any stockholder of the corporation who (1) is a stockholder of record at the time of giving of notice provided for in this Section 9, (2) is entitled to vote at the meeting and (3) complies with the notice procedures set forth in this Section 9. Stockholders desiring to nominate persons for election to the Board of Directors at such a special meeting of stockholders shall deliver the stockholder's notice required by paragraph (a)(ii) of this Section 9 to the Clerk of the corporation at the principal executive offices of the corporation not earlier than the 90th day prior to such special meeting and not later than the close of business on the later of (A) the 60th day prior to such special meeting and (B) the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. (c) General. (i) Only persons who are nominated in accordance with the procedures set forth in this Section 9 shall be eligible to serve as Directors. Only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in Section 9. The chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth in this Section 9 and, if any proposed nomination or business is not in compliance with this Section 9, to declare that such defective proposal shall be disregarded. (ii) For purposes of this Section 9, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the corporation with the Securities Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act. (iii) Notwithstanding the foregoing provisions of this Section 9, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 9. Nothing in this Section 9 shall be deemed to limit the corporation's obligation to include stockholder proposals in its proxy statement if such inclusion is required by Rule 14a-8 under the Exchange Act or any successor Rule. ARTICLE II Directors Section 1. POWERS. The business of the corporation shall be managed by a Board of Directors who may exercise all the powers of the corporation including, but not limited to, the issuance of stock, except as otherwise provided by law, by the Articles of Organization or by these By-Laws. In the event of a vacancy in the Board of Directors, the remaining Directors, except as otherwise provided by law, may exercise the powers of the full Board until the vacancy is filled. Section 2. NUMBER. The Board of Directors shall fix the number of Directors at not less than three nor more than eleven Directors; provided, however, that the number of Directors shall be fixed at not less than two whenever there shall be only two stockholders and not less than one whenever there shall be only one stockholder. The number of Directors may be increased or decreased at any time or from time to time by the vote of a majority of the Directors then in office. No Director need be a stockholder. Section 3. CLASSIFICATION, ELECTION AND TENURE. The Directors, other than those who may be elected by the holders of any class or series of Preferred Stock voting separately by class or series, shall be classified, with respect to the duration of the term for which they severally hold office, into three classes, designated Class I, Class II, and Class III, which shall be as nearly equal in number as possible and as provided by resolution of the Board of Directors in connection with such election. Each initial Director in Class I shall hold office for a term expiring at the 1998 annual meeting of stockholders; each initial Director of Class II shall hold office for a term expiring at the 1999 annual meeting of stockholders; and each initial Director of Class III shall hold office for a term expiring at the 2000 annual meeting of stockholders. Each Director shall serve until his successor is duly elected and qualified or until his earlier death, resignation, removal or disqualification. At each annual meeting of stockholders following the 1998 annual meeting, the stockholders shall elect the successors of the class of Directors whose term expires at that meeting to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election and until their successors have been duly elected and qualified or until their earlier death, resignation, removal or disqualification. The Board of Directors shall increase or decrease the number of Directors in one or more classes as may be appropriate whenever it increases or decreases the number of Directors pursuant to Section 2 of this Article II, in order to ensure that the three classes shall be as nearly equal in number as possible. Section 4. VACANCIES. Subject to the rights of the holders of shares of any class or series of Preferred Stock, any vacancies on the Board of Directors resulting from death, resignation or removal shall only be filled by the affirmative vote of a majority of the remaining Directors then in office, even though less than a quorum of the Board of Directors, or by a sole remaining Director, and newly created Directorships resulting from any increase in the number of Directors shall be filled by the Board of Directors, or if not so filled, by the stockholders at the next annual meeting thereof or at a special meeting called for that purpose in accordance with these By-laws. Any Director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of Directors in which the new Directorship was created or the vacancy occurred and until such Director's successor shall have been elected and qualified or until his earlier death, resignation or removal. The Directors shall have and may exercise all their powers notwithstanding the existence of one or more vacancies in their number, subject to any requirement of law or of the number of Directors as required for a quorum or for any vote or other actions. Section 5. RESIGNATION. Any Director may resign by delivering his written resignation to the corporation at its principal office or to the President, Clerk or Secretary. Such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event. Section 6. REMOVAL. Except as otherwise provided in the Articles of Organization or these By-laws relating to the rights of the holders of any class or series of Preferred Stock voting separately by class or series, to elect Directors under specified circumstances any Director or Directors may be removed from office but only for cause and only by either the affirmative vote, at any regular meeting or special meeting of the stockholders, of not less than a majority of the total number of votes of the then outstanding shares of capital stock of the corporation entitled to vote generally in the election of Directors, voting together as a single class, but only if notice of such proposal was contained in the notice of such meeting, or by the affirmative vote of a majority of the Directors then in office. A Director may be removed for cause only after reasonable notice and opportunity to be heard before the body opposing him. Section 7. MEETINGS. Regular meetings of the Directors may be held without call or notice at such places and at such times as the Directors may from time to time determine, provided that any Director who is absent when such determination is made shall be given notice of the determination. A regular meeting of the Directors may be held without a call or notice at the same place as the annual meeting of stockholders or the special meeting held in lieu thereof, following such meetings of stockholders. Special meetings of the Directors may be held at any time and place designated in a call by the President, Treasurer or two or more Directors. Section 8. NOTICE OF MEETINGS. Notice of all special meetings of the Directors shall be given to each Director by the Secretary, or if there be no Secretary, by the Clerk, or Assistant Clerk, or in case of the death, absence, incapacity or refusal of such persons, by the officer or one of the Directors calling the meeting. Notice shall be given to each Director in person, by telephone, facsimile or email at least twenty-four hours in advance of the meeting, or by written notice mailed to his business or home address at least forty-eight hours in advance of the meeting. Notice need not be given to any Director if a written waiver of notice, executed by him before or after the meeting, is filed with the records of the meeting, or to any Director who attends the meeting without protesting prior thereto or at its commencement the lack of notice to him. A notice or waiver of notice of a Directors' meeting need not specify the purposes of the meeting. Section 9. QUORUM. At any meeting of the Directors, a majority of the Directors then in office shall constitute a quorum. Less than a quorum may adjourn any meeting from time to time without further notice. Section 10. ACTION AT MEETING. At any meeting of the Directors at which a quorum is present, the vote of a majority of those present, unless a different vote is specified by law, by the Articles of Organization, or by these By-Laws, shall be sufficient to decide such matter. Section 11. ACTION BY CONSENT. Any action by the Directors may be taken without a meeting if a written consent thereto is signed by all the Directors and filed with the records of the Directors' Meetings. Such consent shall be treated as a vote of the Directors for all purposes. Section 12. COMMITTEE. The Directors may, by vote of a majority of the Directors then in office, elect from their number an executive or other committees and may by like vote delegate thereto some or all of their powers except those which by law, the Articles of Organization or these By-Laws, they are prohibited from delegating. Except as the Directors may otherwise determine, any such committee may make rules for the conduct of its business, but unless otherwise provided by the Directors, or in such rules, its business shall be conducted as nearly as may be in the same manner as is provided by these By-Laws for the Directors. Section 13. MEETING BY TELECOMMUNICATIONS. Members of the Board of Directors or any committee elected thereby may participate in a meeting of such board or committee by means of a conference telephone or similar communications equipment by means of which all persons participating in a meeting can hear each other at the same time and participation by such means shall constitute presence in person at the meeting. ARTICLE III Officers Section 1. ENUMERATION. The officers of the corporation shall consist of a President, a Treasurer, a Clerk, and such other officers, including a chairman of the Board of Directors, one or more Vice Presidents, Assistant Treasurer, Assistant Clerks and Secretary as the Directors may determine. Section 2. ELECTION. The President, Treasurer and Clerk shall be elected annually by the Directors at their first meeting following the annual meeting of stockholders. Other officers may be chosen by the Directors at such meeting or at any other meeting. Section 3. QUALIFICATION. The President may, but need not be, a Director. No officer need be a stockholder. Any two or more officers may be held by the same person provided that the President and Clerk shall not be the same person. The Clerk shall be a resident of Massachusetts unless the corporation has a resident agent appointed for the purpose of service of process. Any officer may be required by the Directors to give bond for the faithful performance of his duties to the corporation in such amount and with such sureties as the Directors may determine. Section 4. TENURE. Except as otherwise provided by law, the Articles of Organization or by these By-Laws, the President, Treasurer and Clerk shall hold office until the first meeting of the Directors following the annual meeting of stockholders and thereafter until his successor is chosen and qualified; and all other officers shall hold office until the first meeting of the Directors following the annual meeting of the stockholders, unless a shorter term is specified in the vote choosing or appointing them. An officer may resign by delivering his written resignation to the corporation at its principal office or to the President, Clerk or Secretary, and such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event. Section 5. REMOVAL. The Directors may remove any officer with or without cause by a vote of a majority of the entire number of Directors then in office, provided, that an officer may be removed for cause only after reasonable notice and opportunity to be heard by the Board of Directors prior to action thereon. Section 6. CHAIRMAN, PRESIDENT AND VICE PRESIDENT. The Chairman of the Board of Directors, if there be one, shall be the chief executive officer of the corporation and shall, when present, preside at all meetings of the stockholders and at all meetings of the Board of Directors. The President shall have such duties and powers as are prescribed by the Board of Directors. Any Vice President shall have such powers as the Directors may from time to time designate. Section 7. TREASURER AND ASSISTANT TREASURER. The Treasurer shall, subject to the direction of the Directors, have general charge of the financial affairs of the corporation and shall cause to be kept accurate books of account. He shall have custody of all funds, securities, and valuable documents of the corporation, except as the Directors may otherwise provide. Any Assistant Treasurer shall have such powers as the Directors may from time to time designate. Section 8. CLERK AND ASSISTANT CLERKS. The Clerk shall keep a record of the meetings of stockholders. Unless a Transfer Agent is appointed, the Clerk shall keep or cause to be kept in Massachusetts, at the principal office of the corporation or at his office, the stock and transfer records of the corporation, in which are contained the names of all stockholders and the record address, and the amount of stock held by each. In case a Secretary is not elected, the Clerk shall keep a record of the meetings of the Directors. Any Assistant Clerk shall have such powers as the Directors may from time to time designate. In the absence of the Clerk from any meeting of stockholders, an Assistant Clerk, if one be elected, otherwise a Temporary Clerk designated by the person presiding at the meeting, shall perform the duties of the Clerk. Section 9. SECRETARY AND ASSISTANT SECRETARIES. If a Secretary is elected, he shall keep a record of the meetings of the Directors and in his absence, an Assistant Secretary, if one be elected, otherwise a Temporary Secretary designated by the person presiding at the meeting, shall keep a record of the meetings of the Directors. Any Assistant Secretary shall have such powers as the Directors may from time to time designate. Section 10. OTHER POWERS AND DUTIES. Each officer shall, subject to these By-Laws, have in addition to the duties and powers specifically set forth in these By-Laws, such duties and powers as are customarily incident to his office, and such duties and powers as the Directors may from time to time designate. ARTICLE IV Indemnification of Directors and Officers The corporation shall to the extent legally permissible indemnify each of its directors and officers and each person who shall serve or shall have served at its request as a director or officer of another corporation (and the heirs, executors and administrators of such director, officer and other person) against all expenses and liabilities which he has reasonably incurred in connection with or arising out of any actual or threatened action, suit or proceeding in which he may be involved by reason of his being or having been a director or officer of the corporation or by reason of his serving or having served at its request as a director or officer of another corporation (whether or not he continues to be a director, or officer, at the time of incurring such expenses or liabilities), such expenses and liabilities to include, but not be limited to, judgments, court costs and attorneys' fees and the cost of reasonable settlements, provided no such indemnification shall be made in relation to matters as to which such director or officer shall be finally adjudged in any such action, suit or proceeding not to have acted in good faith in the reasonable belief that his action was in the best interests of the corporation. In the event that a settlement or compromise of such action, suit or proceeding is effected, indemnification may be had but only if the Board of Directors shall have been furnished with an opinion of counsel for the corporation to the effect that such settlement or compromise is in the best interest of the corporation and that such director or officer does not appear not to have acted in good faith in the reasonable belief that his action was in the best interests of the corporation, and if the Board of Directors shall have adopted a resolution approving such settlement or compromise. The foregoing right of indemnification shall not be exclusive of other rights to which any director, officer or other corporate personnel may be entitled as a matter of law. ARTICLE V Capital Stock Section 1. CERTIFICATE OF STOCK. Each stockholder shall be entitled to a certificate of the capital stock of the corporation in such form as may be prescribed from time to time by the Directors. The certificate shall be signed by the President or a Vice President, and by the Treasurer or an Assistant Treasurer, but when a certificate is countersigned by a transfer agent or a registrar, other than a Director, officer or employee of the corporation, such signatures may be facsimiles. In case any officer who has signed or whose facsimile signature has been placed on such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer at the time of its issue. Every certificate for shares of stock which are subject to any restriction on transfer pursuant to the Articles of Organization, the By-Laws, or any agreement to which the corporation is a party, shall have the restriction noted conspicuously on the certificate and shall also set forth on the face or back either the full text of the restriction or a statement of the existence of such restriction and a statement that the corporation will furnish a copy to the holder of such certificate upon written request and without charge. Every certificate issued when the corporation is authorized to issue more than one class or series of stock shall set forth on its face or back either the full text of the preferences, voting powers, qualifications and special and relative rights of the shares of each class and series authorized to be issued or a statement of the existence of such preferences, powers, qualifications and right, and a statement that the corporation will furnish a copy thereof to the holder of such certificate upon written request and without charge. Section 2. TRANSFERS. Subject to the restrictions, if any, stated or noted on the stock certificates, shares of stock may be transferred on the books of the corporation by the surrender to the corporation or its transfer agent of the certificate therefor properly endorsed or accompanied by a written assignment and power of attorney properly executed, with necessary transfer stamps affixed, and with such proof of the authenticity of signature as the corporation or its transfer agent may reasonably require. Except as may be otherwise required by law, the Articles of Organization or these By-Laws, the corporation shall be entitled to treat the record holder of stock as shown on its books as the owner of such stock for all purposes, including the payment of dividends and the right to vote with respect thereto, regardless of any transfer, pledge or other disposition of such stock, until the shares have been transferred on the books of the corporation in accordance with the requirements of the By-Laws. It shall be the duty of each stockholder to notify the corporation of his post office address. Section 3. RECORD DATE. The Directors may fix in advance a time of not more than sixty days preceding the date of any meeting of stockholders, or the date for the payment of any dividend or the making of any distribution to stockholders, or the last day on which the consent or dissent of stockholders may be effectively expressed for any purpose, as the record date for determining the stockholders having the right to notice of and to vote at such meeting, and any adjournment thereof, or the right to receive such dividend or distribution or the right to give such consent or dissent. In such case only stockholders of record on such record date shall have such right, notwithstanding any transfer of stock on the books of the corporation after the record date. Without fixing such record date, the Directors may for any of such purposes close the transfer books for all or any part of such period. Section 4. REPLACEMENT OF CERTIFICATES. In case of the alleged loss or destruction or the mutilation of a certificate of stock, a duplicate may be issued in place thereof, upon such terms as the Directors may prescribe. ARTICLE VI Section 1. FISCAL YEAR. Except as from time to time otherwise determined by the Directors, the fiscal year of the corporation shall be the twelve months ending March 31. Section 2. SEAL. The seal of the corporation shall, subject to alterations by the Directors, bear its name, the word "Massachusetts" and the year of its incorporation. Section 3. EXECUTION OF INSTRUMENTS. All deeds, leases, transfers, contracts, bonds, notes and other obligations authorized to be executed by an officer of the corporation in its behalf shall be signed by the President or the Treasurer except as the Directors may generally or in particular cases otherwise determine. Section 4. VOTING OF SECURITIES. Except as the Directors may otherwise designate, the President or Treasurer may waive notice of, and appoint any person or persons to act as proxy or attorney in fact for this corporation (with or without power of substitution) at any meeting of stockholders or shareholders of any other corporation or organization, the securities of which may be held by this corporation. The President shall have the power to vote any such securities held by this corporation unless the Directors shall, by vote, otherwise stipulate. Section 5. CORPORATE RECORDS. The original, or attested copies, of the Articles of Organization, By-Laws and records of all meetings of the incorporates and stockholders, and the stock and transfer records, which shall contain the names of all stockholders and the record address and the amount of stock held by each, shall be kept in Massachusetts at the principal office of the corporation, or at an office of its transfer agent or of the Clerk. Said copies and records need not all be kept in the same office. They shall be available at all reasonable times to the inspection of any stockholder for any proper purpose but not to secure a list of stockholders for the purpose of selling said list or copies thereof or of using the same for a purpose other than in the interest of the applicant, as a stockholder, relative to the affairs of the corporation. Section 6. CORPORATION MAY ACT AS PARTNER. The corporation, in accordance with the Articles of Organization and Section 9A of the General Laws of Massachusetts, Chapter 156B (Ter. Ed.) is hereby empowered to be a partner in any business enterprise which the corporation would have power to conduct itself. Section 7. ARTICLES OF ORGANIZATION. All references in these By-Laws to the Articles of Organization shall be deemed to refer to the Articles of Organization of the corporation, as amended and in effect from time to time. Section 8. AMENDMENTS. Except as otherwise required by law, these By- Laws may at any time be amended by vote of the stockholders, provided that notice of the substance of the proposed amendment is stated in the notice of the meeting, or may be amended by vote of a majority of the Directors then in office, except that no amendment may be made by the Directors which alters the provisions of these By-Laws with respect to removal of Directors or the election of committees by Directors and delegation of powers thereto, or amendment of these By-Laws. No change in the date of the annual meeting may be made within sixty days before the date fixed in these By-Laws. Not later than the time of giving notice of the meeting of stockholders next following the making, amending or repealing by the Directors of any By-Law, notice thereof stating the substance of such change shall be given to all stockholders entitled to vote on amending the By-Laws. ARTICLE VII Repayment of Disallowed Expenses Any payments made to an officer of the corporation such as a salary, commission, bonus, interest, or rent, or entertainment expense incurred by him, which shall be disallowed in whole or in part as a deductible expense by the Internal Revenue Service, shall be reimbursed by such officer to the corporation to the full extent of such disallowance. It shall be the duty of the Directors, as a Board, to enforce payment of each amount disallowed. In lieu of payment by the officer, subject to determination of the Directors, proportionate amounts may be withheld from his future compensation payments until the amount owed to the corporation has been recovered. ARTICLE VII Control Share Acquisitions Statute The provisions of Chapter 110D of the Massachusetts General Laws shall not apply to control share acquisitions (as defined in said Chapter 110D) of the corporation. EX-10.1 4 SPECTRUM SECURITIES PURCHASE AGREEMENT EXHIBIT 10.1 SECURITIES PURCHASE AGREEMENT AMONG CTC COMMUNICATIONS CORP. AND EACH OF THE PURCHASERS NAMED IN SCHEDULE 2.1 April 10, 1998 TABLE OF CONTENTS ARTICLE I DEFINITIONS ARTICLE II SALE AND PURCHASE OF PURCHASED SECURITIES SECTION 2.1. The Series A Preferred Stock and Warrants SECTION 2.2. Sale and Purchase of Purchased Securities SECTION 2.3. Closing SECTION 2.4. Use of Proceeds ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY SECTION 3.1. Organization and Good Standing SECTION 3.2. Authorization; Noncontravention SECTION 3.3. Enforceability SECTION 3.4. Capitalization SECTION 3.5. Subsidiaries SECTION 3.6. Required Filings and Consents SECTION 3.7. Undisclosed Liabilities SECTION 3.8. Absence of Certain Developments SECTION 3.9. Interested Party Transactions SECTION 3.10. Tax Returns SECTION 3.11. Title to Assets SECTION 3.12. Material Contracts and Obligations SECTION 3.13. Real and Personal Property - Leased SECTION 3.14. Necessary Licenses and Permits SECTION 3.15. Compliance with Law SECTION 3.16 Litigation SECTION 3.17. No Material Adverse Changes SECTION 3.18. Employee Benefit Plans SECTION 3.19. Withholding, Contracts, Labor Relations SECTION 3.20. Governmental Regulations SECTION 3.21. Corporate Documents, Books and Records SECTION 3.22. Disclosure SECTION 3.23. Certain Agreements of Officers and Employees SECTION 3.24. Registration Rights SECTION 3.25. Compliance with Securities Laws ARTICLE IV PURCHASERS' REPRESENTATIONS SECTION 4.1. Investment Intent SECTION 4.2. Authorization SECTION 4.3. Enforceability SECTION 4.4. Experience of Purchaser SECTION 4.5. Ability of Purchaser to Bear Risk of Investment SECTION 4.6. Access to Information SECTION 4.7. Reliance SECTION 4.8. Transfer Restriction ARTICLE V CONDITIONS TO EACH PURCHASER'S OBLIGATIONS TO PURCHASE SECTION 5.1. Related Agreements SECTION 5.2. Charter Documents; Good Standing Certificates SECTION 5.3. Proof of Corporate Action SECTION 5.4. Incumbency Certificate SECTION 5.5. Legal Opinion SECTION 5.6. Representations and Warranties; Officer's Certificate SECTION 5.7. Legality; Governmental and Other Authorizations SECTION 5.8. Payment of Certain Fees and Disbursements SECTION 5.9. Charter Amendment SECTION 5.10. General ARTICLE VI CONDITIONS TO THE COMPANY'S OBLIGATIONS SECTION 6.1. Representations SECTION 6.2. Related Agreements SECTION 6.3. Legality; Governmental and Other Authorizations SECTION 6.4. General ARTICLE VII COVENANTS APPLICABLE FOLLOWING THE CLOSING SECTION 7.1. Financial Statements SECTION 7.2. Additional Information SECTION 7.3. Annual Budget SECTION 7.4. SEC Filings SECTION 7.5. Inspection SECTION 7.6. Independent Director ARTICLE VIII PREEMPTIVE RIGHTS SECTION 8.1 Right to Purchase ARTICLE IX ASSIGNMENT OF PURCHASED SECURITIES ARTICLE X EXPENSES, INDEMNITY SECTION 10.1 Expenses SECTION 10.2 Indemnification ARTICLE XI NOTICES ARTICLE XII SURVIVAL AND TERMINATION OF COVENANTS, AGREEMENTS, REPRESENTATIONS AND WARRANTIES ARTICLE XIII AMENDMENTS AND WAIVERS ARTICLE XIV CHOICE OF LAW; SUBMISSION TO JURISDICTION AND WAIVER OF JURY TRIAL; DISPUTE RESOLUTION SECTION 14.1. Governing Law SECTION 14.2. Consent To the Exclusive Jurisdiction Of the Courts of Massachusetts SECTION 14.3. Waiver Of Jury Trial SECTION 14.4. Equitable Remedies SECTION 14.5 Arbitration ARTICLE XV ENTIRE AGREEMENT; COUNTERPARTS; SECTION HEADINGS LIST OF EXHIBITS EXHIBIT A Form of Warrant EXHIBIT B Certificate of Designation EXHIBIT C Form of Registration Rights Agreement EXHIBIT D Forms of Opinion of the Company's Counsel SECURITIES PURCHASE AGREEMENT SECURITIES PURCHASE AGREEMENT (the "Agreement") as of April 10, 1998 among CTC COMMUNICATIONS CORP., a Massachusetts corporation (the "Company"), and each of the purchasers named in the attached Schedule 2.1, (individually a "Purchaser" and collectively the "Purchasers"). WHEREAS, the Company wishes to issue and sell to the Purchasers an aggregate of 666,666 shares of the authorized but unissued Series A Convertible Preferred Stock, $1.00 par value, of the Company (the "Series A Preferred Stock" ) and the Company's Warrants for the purchase of the aggregate of 133,333 shares of the Company's Common Stock, $.01 par value (the "Warrants"). The Series A Preferred Stock and the Warrants are collectively referred to herein as the "Purchased Securities"; and WHEREAS, the Purchasers, severally, wish to purchase the Purchased Securities on the terms and subject to the conditions set forth in this Agreement; NOW THEREFORE, in consideration of the premises and the mutual covenants contained in this Agreement, the parties agree as follows: ARTICLE I DEFINITIONS For all purposes of this Agreement the following terms shall have the meanings set forth in this Article I: "AAA" has the meaning specified in Article XIV of this Agreement. "AAA Rules" has the meaning specified in Article XIV of this Agreement. "Affiliate" shall mean with respect to any Person, any other Person that would be considered to be an affiliate of such Person under Rule 144(a) under the Securities Act of 1933, as amended, as in effect on April 10, 1998, if such Person were issuing securities. "Agreement" has the meaning specified in the introduction to this Agreement. "Blue Sky Filings" has the meaning specified in Section 3.6 of this Agreement. "Capital Stock" means, as to any Person that is a corporation, the authorized shares of such Person's capital stock, including all classes of common, preferred, voting and nonvoting capital stock, and, as to any Person that is not a corporation or an individual, the ownership interests in such Person, including, without limitation, the right to share in profits and losses, the right to receive distributions of cash and property, and the right to receive allocations of items of income, gain, loss, deduction and credit and similar items from such Person, whether or not such interests include voting or similar rights entitling the holder thereof to exercise control over such Person. "Certificate of Designation" has the meaning specified in Section 2.1 of this Agreement. "Charter" means the articles or certificate of incorporation, statute, constitution, joint venture or partnership agreement or articles or other organizational document of any Person other than an individual, each as from time to time amended or modified. "Closing" has the meaning specified in Section 2.3 of this Agreement. "Closing Date" has the meaning specified in Section 2.3 of this Agreement. "Code" means the Internal Revenue Code of 1986, as amended. "Common Stock" has the meaning specified in Section 3.4 of this Agreement. "Common Stock Deemed Outstanding" has the meaning specified in the Certificate of Designation. "Company" has the meaning specified in the introduction to this Agreement. "Conversion Price" means, initially, nine dollars ($9.00) and, thereafter, as adjusted pursuant to the Certificate of Designation. "Convertible Securities" has the meaning specified in the Certificate of Designation. "Damages" has the meaning specified in Section 10.2 of this Agreement. "Dispute" has the meaning specified in Section 14.5 of this Agreement. "Distribution" means (a) the declaration or payment of any dividend of cash or property in respect of any shares of any class of the Company's or any of its Subsidiaries' Capital Stock or other equity securities; (b) the purchase, redemption or other retirement of any shares of any class of the Company's or any of its Subsidiaries' Capital Stock or other equity securities, directly or indirectly or otherwise; or (c) any other distribution on or in respect of any shares of any class of the Company's or any of its Subsidiaries' Capital Stock or other equity securities. "Employee Benefit Plan" means any employee benefit plan within the meaning of Sec. 3(3) of ERISA maintained or contributed to by the Company or any ERISA Affiliate, other than a Multiemployer Plan. "ERISA" means the Employee Retirement Income Security Act of 1974, any successor statute of similar import, and the rules and regulations thereunder, collectively, and from time to time amended and in effect. "ERISA Affiliate" means any Person which is treated as a single employer with the Company under Sec. 414 of the Code. "Exchange Act" means the Securities and Exchange Act of 1934, as amended, or any successor federal statute, and the rules and regulations of the Securities and Exchange Commission thereunder, all as the same shall be in effect at the time. "Excluded Securities" has the meaning specified in the Certificate of Designation. "Family Member" means, as applied to any individual, such individual's spouse, child (including a stepchild or an adopted child) grandchild, parent, brother or sister thereof or any present or former spouse of any of the foregoing, and each trust created for the exclusive benefit of one or more of them. "Foreign Official" has the meaning specified in Section 3.15(b) of this Agreement. "Generally accepted accounting principles or "GAAP" means accounting principles which are (a) consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors and other recognized principle setting bodies, in effect from time to time, and (b) such that a certified public accountant would, insofar as the use of accounting principles is pertinent, be in a position to base an opinion as to financial statements in which such principles have been properly applied. "Guaranteed Pension Plan" means any employee pension benefit plan within the meaning of Sec. 3(2) of ERISA maintained or contributed to by the Company or any ERISA Affiliate, the benefits of which are guaranteed on termination in full or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer Plan. "Indebtedness" means all obligations, contingent and otherwise, which in accordance with GAAP should be classified on the obligor's balance sheet as liabilities, or to which reference should be made by footnotes thereto, including without limitation, in any event and whether or not so classified: (i) all debt and similar monetary obligations, whether direct or indirect; (ii) all liabilities secured by any mortgage, pledge, security interest, lien, charge or other encumbrance existing on property owned or acquired subject thereto, whether or not the liability secured thereby shall have been assumed; (iii) all guaranties, endorsements and other contingent obligations whether direct or indirect in respect of Indebtedness or performance of others, including any obligation to supply funds to or in any manner to invest in, directly or indirectly, the debtor, to purchase Indebtedness, or to assure the owner of Indebtedness against loss, through an agreement to purchase goods, supplies or services for the purpose of enabling the debtor to make payment of the Indebtedness held by such owner or otherwise, and (iv) obligations to reimburse issuers of any letters of credit. "Indemnitees" has the meaning specified in Section 10.2 of this Agreement. "Lien" means (a) any encumbrance, mortgage, pledge, lien, charge or other security interest of any kind upon any property or assets of any character, or upon the income or profits therefrom; (b) any acquisition of or agreement to have an option to acquire any property or assets upon conditional sale or other title retention agreement, device or arrangement (including a capitalized lease); or (c) any sale, assignment, pledge or other transfer for security of any accounts, general intangibles or chattel paper, with or without recourse, provided, however, that the term "Lien" shall not include (i) statutory liens for Taxes to the extent that the payment thereof is not in arrears or otherwise due, (ii) encumbrances in the nature of zoning restrictions, easements, rights or restrictions of record on the uses of real property if the same do not detract from the value of the property encumbered thereby or impair the use of such property in the business of the Company as currently conducted or proposed to be conducted, (iii) statutory or common law liens to secure landlords, lessors or renters under leases or rental agreements confined to the premises rented to the extent that no payment or performance under any such lease or rental agreement is in arrears or is otherwise due, (iv) deposits or pledges made in connection with, or to secure payment of, worker's compensation, unemployment insurance, old age pension programs mandated under applicable laws or other social security regulations and (v) statutory or common law liens in favor of carriers, warehousemen, mechanics and materialmen, statutory or common law liens to secure claims for labor, materials or supplies and other like liens, which secure obligations to the extent that payment thereof is not in arrears or otherwise due in the case of (i) - (v), which have been incurred in the ordinary course of business. "Material Adverse Effect" has the meaning specified in Section 3.17 of this Agreement. "Multiemployer Plan" means a multiemployer plan within the meaning of Section 3(37) of ERISA. "New Securities" shall mean (a) any Capital Stock of the Company whether now authorized or not, (b) any rights, options, or warrants to purchase said shares, and (c) securities of any type whatsoever that are, or may become, convertible into, exercisable, exchangeable, or carrying rights to subscribe for any equity securities of the Company. "Notice of Proposed Issuance" has the meaning specified in Section 8.1(a) of this Agreement. "Offered New Shares" has the meaning specified in Section 8.1(a) of this Agreement. "Permits" has the meaning specified in Section 3.14 of this Agreement. "Per Share Price" has the meaning specified in Section 2.2(a) of this Agreement. "Person" means an individual, partnership, corporation, association, trust, joint venture, unincorporated organization, and any government, governmental department or agency or political subdivision thereof. "Preferred Stock Derivatives" has the meaning set forth in the Certificate of Designation. "Purchased Securities" has the meaning specified in the Recitals to this Agreement. "Purchaser(s)" means the purchasers set forth on Schedule 2.1. "Registrable Securities" means those shares of Common Stock constituting Preferred Stock Derivatives or issued upon conversion or exercise of the Purchased Securities and any Preferred Stock Derivatives and which have not been sold to third parties pursuant to a registered public offering or pursuant to Rule 144(k) under the Securities Act. "Registration Rights Agreement" means the Registration Rights Agreement dated as of the date hereof, as the same shall be amended from time to time, among the Company and the Purchasers in the form of Exhibit C attached hereto. "Related Agreements" means the Certificate of Designation and the Registration Rights Agreement. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations of the Securities and Exchange Commission thereunder, all as the same shall be in effect at the time. "Security Documents" has the meaning specified in Section 3.25(b) of this Agreement. "Series A Preferred Stock" has the meaning specified in the Recitals to this Agreement. "Spectrum" means Spectrum Equity Investors II, L.P. "Subsidiary" means any Person which the Company now or hereafter shall at the time own, directly or indirectly through a subsidiary, at least a majority of the outstanding capital stock (or other beneficial interest) entitled to vote generally; and the term "Subsidiaries" shall mean all of such Persons collectively. "Taxes" means (A) all net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property or windfall profits taxes, or other taxes of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts imposed by any taxing authority (domestic or foreign) upon the Company with respect to all periods or portions thereof ending on or before the date hereof and/or (B) any liability of the Company for the payment of any amounts of the type described in the immediately preceding clause (A) as a result of being a member of an affiliated or combined group. "Third Party Claims" has the meaning specified in Section 10.2 of this Agreement. "Twenty Day Period" has the meaning specified in Section 8.1(b) of this Agreement. "Voting Agreement" means the Voting Agreement dated as of the date hereof among Spectrum, Robert J. Fabbricatore and the other Stockholders named therein. "Warrants" has the meaning specified in the Recitals to this Agreement. ARTICLE II SALE AND PURCHASE OF PURCHASED SECURITIES SECTION 2.1. The Series A Preferred Stock and Warrants. The Company has duly authorized the issuance and sale to the Purchasers of (a) an aggregate of 666,666 shares of its authorized Series A Convertible Preferred Stock and (b) Warrants in the form of Exhibit A attached hereto for the purchase of an aggregate of 133,333 shares of the Company's Common Stock. The designations, rights and preferences and other terms and conditions relating to the Series A Preferred Stock are as set forth in the Certificate of Designation in the form attached hereto as Exhibit B (the "Certificate of Designation"). SECTION 2.2. Sale and Purchase of Purchased Securities. (a) Series A Preferred Stock. Subject to all of the terms and conditions hereof and in reliance on the representations and warranties set forth or referred to herein, at the Closing the Company agrees to issue and sell to each Purchaser, at a price of $18.00 per share (the "Per Share Price"), and each Purchaser hereby agrees to purchase at the Per Share Price, that number of shares of Series A Preferred Stock set forth opposite the name of such Purchaser under the heading "Number of Shares of Series A Preferred Stock to be Purchased" on Schedule 2.1. (b) Warrants. Subject to the terms and conditions hereof and in reliance on the representations and warranties set forth or referenced to herein, at the Closing the Company agrees to issue to each Purchaser, and each Purchaser hereby agrees to purchase, at a price of $.01 per share of Common Stock covered thereby, Warrants to purchase the number of shares of Common Stock set forth opposite such Purchaser's name under the heading "Number of Warrants to be Issued" on Schedule 2.1. The Warrants shall have a term of five (5) years from the Closing and shall be exercisable at a price of $9.00 per share. SECTION 2.3. Closing. The closing of the purchase and sale of the Purchased Securities (the "Closing") will take place at the offices of Edwards & Angell, 101 Federal Street, Boston, MA 02110 at 10:00 a.m. on April 10, 1998, or at such other place, time and date as the parties hereto may agree upon (the "Closing Date"). At the Closing, the Company will deliver to the Purchasers the Purchased Securities against payment of the purchase price therefor as provided in Section 2.2 for each Purchased Security in immediately available funds on or before the Closing Date. The Purchased Securities will be issued on the Closing Date, and registered to each such Purchaser in the Company's records, in the amounts designated on Schedule 2.1 hereto. SECTION 2.4. Use of Proceeds. Proceeds from the sale of the Purchased Securities hereunder shall be used as determined from time to time by the Company's Board of Directors. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY In order to induce each of the Purchasers to enter into this Agreement and to purchase the Purchased Securities, the Company hereby represents and warrants that: SECTION 3.1. Organization and Good Standing. The Company is duly organized, validly existing and in good standing in its jurisdiction of incorporation and is duly qualified as a foreign corporation and authorized to do business in each jurisdiction listed in Schedule 3.1, which such jurisdictions are the only jurisdictions in which the nature of its business or property makes such qualification necessary and where the failure to so qualify would not have a Material Adverse Effect. The Company has the corporate power to own its properties and to carry on its business as now conducted and as proposed to be conducted. SECTION 3.2. Authorization; Noncontravention. The execution, delivery and performance by the Company of this Agreement and of each Related Agreement, and the issuance and sale by the Company of the Purchased Securities hereunder: (a) are within the Company's corporate power and authority; (b) have been duly authorized by all necessary corporate, stockholder and other proceedings, as the case may be; and (c) do not and will not result in the creation of any Lien upon any of the Company's property or conflict with or result in any breach of any provision of the Company's Charter or by-laws or any law, regulation, order, judgment, writ, injunction, license, permit, agreement or instrument to which the Company is subject. SECTION 3.3. Enforceability. The execution and delivery by the Company of this Agreement and of each Related Agreement, and the issuance and sale by the Company of the Purchased Securities hereunder, will result in legally binding obligations of the Company, enforceable against it in accordance with the respective terms and provisions hereof and thereof (i) except as may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally and (ii) subject to general principles of equity. SECTION 3.4. Capitalization. (a) Capital Stock. The Company's authorized capital stock consists solely of 25,000,000 shares of common stock, $.01 par value per share (the "Common Stock") and 1,000,000 shares of undesignated preferred stock, $1.00 par value per share. Of such authorized shares, immediately prior to the execution of this Agreement, 9,974,683 shares of Common Stock were issued and outstanding and no shares of preferred stock were issued and outstanding. Prior to the Closing, the amendment to the Charter reflected in the Certificate of Designation in the form attached as Exhibit A shall be duly filed with the Massachusetts Secretary of State. All of the issued and outstanding shares of the Company's Capital Stock have been duly authorized and validly issued, are fully paid and non-assessable and were issued in compliance with all applicable state and Federal securities laws. Upon the issuance and sale to the Purchasers of the Purchased Securities, the Purchasers, in the aggregate, will own approximately 10.314% of the Company's Common Stock Deemed Outstanding. Schedule 3.4 sets forth a complete and correct schedule of the number of shares of issued and outstanding Capital Stock and of any subscription, warrant, option, convertible security or other options or rights (contingent or otherwise) to purchase shares of Capital Stock, or securities convertible into shares of Capital Stock of the Company held by Robert J. Fabbricatore or any of his Affiliates immediately prior to the Closing. Schedule 3.4 also sets forth the name of the holder and vesting schedule for each outstanding option issued pursuant to the Company's 1993 stock option plan and 1996 stock option plan. The Company is not aware of any purchase of securities of the Company or other circumstances existing as of the date hereof that would require the making of a filing pursuant to Rule 13d-1 under the Securities Exchange Act of 1934, as amended and as to which such a filing has not yet been made. (b) Purchased Securities. The Purchased Securities which are being issued hereunder have been duly and validly authorized and, when issued and delivered in accordance with the terms hereof for the consideration provided herein, will be validly issued, fully paid and nonassessable and will not be subject to any Lien. On or prior to Closing, the Company will have authorized and reserved, and covenants to continue to reserve, a sufficient number of shares of Common Stock for issuance upon the exercise of the Warrants. The shares of Common Stock that will be issued upon exercise of the Warrants and against payment therefor in accordance with the terms of the Warrants, will be validly issued, fully paid and nonassessable and will not be subject to any Lien, subject to applicable restrictions on transfer under Federal and state securities laws. No further approval or authorization of the stockholders or the directors of the Company or any successor or other Person is or will be required for the issuance of the Common Stock upon exercise of the Warrants. (c) Options, Etc. Except as set forth on Schedule 3.4(c) and except for the Purchased Securities to be issued in accordance with the terms hereof: (a) The Company does not have any subscription, warrant, option, convertible security or other options or rights (contingent or otherwise) to purchase shares of Capital Stock, or securities convertible into shares of Capital Stock, authorized, issued or outstanding, nor is the Company obligated in any manner to issue shares of its Capital Stock or securities convertible into or evidencing any right to acquire shares of its Capital Stock, or to distribute to holders of any of its Capital Stock any evidence of indebtedness or assets; (b) no Person has any preemptive right, right of first refusal or similar right to acquire additional shares of Capital Stock of the Company in connection with the sale and purchase of the Purchased Securities pursuant to this Agreement or otherwise; (c) the Company does not have any obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any of its Capital Stock or any interests therein, or to pay any dividend or make any other distribution in respect thereto; and (d) to the Company's knowledge, there are no voting trusts, stockholders' agreements, or proxies relating to the Capital Stock. SECTION 3.5. Subsidiaries. The Company does not have any Subsidiaries. SECTION 3.6. Required Filings and Consents. Except as set forth in Schedule 3.6 hereto, the execution, delivery and performance by the Company of this Agreement and of each Related Agreement, and the issuance and sale of the Purchased Securities hereunder and the issuance of any Common Stock upon conversion of any of the Purchased Securities, do not and will not require the approval or consent of, or any filing with, any governmental authority or agency or any other Person other than a Notice of Sale of Securities Pursuant to Regulation D, Section 4(2), and/or Uniform Limited Offering Exemption on Form D and any required state securities law filings relating to the issuance and sale of the Purchased Securities which have been filed or are permitted to be filed after the date of such issuance and sale (the "Blue Sky Filings"). SECTION 3.7. Undisclosed Liabilities. The Company does not have any known liabilities or obligations of any nature, whether absolute, accrued, contingent or otherwise, which are not in the aggregate reflected or reserved against in the December 31, 1997 balance sheet contained in the Company's report on Form 10-Q for the quarter ended December 31, 1997, except for (i) liabilities disclosed in Schedule 3.7 or not required to be disclosed because of a materiality qualifier in the representations and warranties and (ii) liabilities that may have arisen in the ordinary and usual course of business and consistent with past practice and that individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect. SECTION 3.8. Absence of Certain Developments. Except for entering into this Agreement and except as disclosed on Schedule 3.8(a) hereof or in the SEC Documents, since March 31, 1997: (a) The Company has conducted its business in the ordinary course consistent with past practice and has not: (i) declared, set aside, paid to a reserve fund or made any payment or distribution of cash or other property to its stockholders or equity holders with respect to any class of its Capital Stock or other equity interest or purchased or redeemed any shares of its Capital Stock or other equity interests; (ii) suffered any substantial loss to any of its material assets; (iii) made any increases in the base compensation, bonuses, paid vacation time allowed or fringe benefits for its directors, officers, partners, employees or consultants, except for normal periodic increases in base compensation for employees; (iv) suffered damage, destruction or other casualty loss, or forfeiture of, any property or assets, whether or not covered by insurance, which may reasonably be expected to have a Material Adverse Effect; (v) paid any bonuses, deferred or otherwise, or deferred any compensation to any of its directors, officers, partners or employees; (vi) made any material change in accounting procedures, policies or practices; (vii) entered into any agreement or arrangement outside of the ordinary course of business granting any rights to purchase or lease any of its assets, properties or rights or requiring the consent of any Person to the transfer, assignment or lease of any such assets, properties or rights; or (viii) entered into any agreement or understanding to do any of the foregoing. (b) Except as disclosed on Schedule 3.8(b) or in the SEC Documents, other than in the ordinary course of business consistent with past practice, since March 31, 1997 the Company has not: (i) sold, leased, subleased, assigned or transferred any of its tangible or intangible properties or assets, or canceled, waived or compromised any debts or claims; (ii) entered into any other material transaction, or any amendment of any contract, lease, agreement or license which is material to its business; or (iii) entered into any agreement or understanding to do any of the foregoing. SECTION 3.9. Interested Party Transactions. Except as set forth in Schedule 3.9 or disclosed in the Company SEC Reports under an appropriate heading, since March 31, 1997, no event has occurred that would be required to be reported by the Company as a Certain Relationship or Related Transaction, pursuant to Item 404 of Regulation S-K promulgated by the SEC. SECTION 3.10. Tax Returns. The Company has filed all Tax returns and reports which are required to be filed with any foreign, federal, state or local governmental authority or agency and has paid all Taxes which have become due, and made adequate provision for the payment of all Taxes that will become due, under applicable foreign, federal, state or local governmental law or regulations with respect to the periods in respect of which such returns and reports were filed, and all assessments of Taxes. To the Company's knowledge, there have been no additional assessments since the date of such returns and reports, and there will be no additional assessments for which adequate reserves appearing on the Balance Sheet have not been established. To the Company's knowledge, the Company has made adequate provisions for all current Taxes. SECTION 3.11. Title to Assets. Except as disclosed on Schedule 3.11 or in the SEC Documents, the Company owns all of its assets, and has good and marketable title with respect thereto free and clear of all Liens. SECTION 3.12. Material Contracts and Obligations. (a) The SEC Documents, as supplemented by Schedule 3.12(a), include each agreement, contract or other instrument (including all amendments thereto) to which the Company is a party or by which it or any of its assets are bound and which would be required pursuant to the Exchange Act and the rules and regulations thereunder to be filed as an exhibit to an Annual Report on Form 10-K, a Quarterly Report on Form 10-Q or a Current Report on Form 8-K. The Company has made available to the Purchasers on or prior to the date hereof true, correct and complete copies of each such agreement, contract, instrument and amendment. (b) Except as disclosed in Schedule 3.12(b), and except as disclosed in the SEC Documents, (i) the Company has not breached, is not in default under, or has not received written notice of any breach of or default under, any of the agreements, contracts or other instruments referred to in Schedule 3.12(a), (ii) to the best knowledge of the Company, no other party to any of the agreements, contracts or other instrument referred to in Schedule 3.12(a) has breached or is in default of any of its obligations thereunder, and (iii) to the knowledge of the Company, each of the agreements, contracts and other instruments referred to in Schedule 3.12(a) is in full force and effect. SECTION 3.13. Real and Personal Property - Leased. The Company has the right to quiet enjoyment of all real property in which it holds a leasehold interest for the full term thereof, including all renewal terms of the lease or similar agreement relating thereto. SECTION 3.14. Necessary Licenses and Permits. Except as set forth on Schedule 3.14 and except as disclosed in the SEC Documents, the Company has all licenses, permits, consents, concessions and other authorizations of governmental, regulatory or administrative agencies or authorities, whether foreign, federal, state, or local (collectively "Permits"), required to own and lease its properties and assets and to conduct its business as now conducted except where the failure to have such Permits would not have a Material Adverse Effect. Except as disclosed in the SEC Documents, and except to the extent the failure to be in compliance would not have a Material Adverse Effect, the Company is in compliance with the terms of the Permits. SECTION 3.15. Compliance with Law. (a) Except as may be set forth on Schedule 3.15(a) hereto or in the SEC Documents, the Company is not in default under, or in violation of, or has violated (and not cured) any law (including, without limitation, the Communications Act of 1934, as amended, and Telecommunications Act of 1996, as amended, laws relating to the issuance or sale of securities, antitrust, zoning and building codes and ordinances, occupational safety, the protection of the environment, transportation, storage or disposal of hazardous waste, anti-pollution and air and water quality laws), regulations, orders or any licenses, franchises, permits, authorizations or concessions granted by, or any judgment, decree, writ, injunction or order of, any governmental or regulatory authority, applicable to its business or any of its properties or assets, except where such defaults and violations would not, in the aggregate, have a Material Adverse Effect. The Company has not received any notification alleging any violations of any of the foregoing within the last five years with respect to which adequate corrective action has not been taken. (b) To the Company's knowledge, no present or former officer, director, employee or agent of the Company has in order to assist the Company in obtaining or retaining any License offered, paid, promised to pay or authorized the payment of any money, or offered, given, promised to give, or authorized the giving of anything of value to (i) any officer or employee of any government or any department, agency, instrumentality thereof, or any person acting in an official capacity for or on behalf of any such government or department, agency or instrumentality (such an officer or employee being referred to as a "foreign official"), (ii) any foreign political party or official thereof or any candidate for foreign political office, or (iii) any person, while knowing that all or a portion of such money or thing of value will be offered, given, or promised, directly or indirectly, to any foreign official, to any foreign political party or official thereof, or to any candidate for foreign political office, in each case, for purposes of the following: (A)(i) illegally or corruptly influencing any act or decision of any such foreign official, political party or official thereof, or candidate in such person's official capacity, or (ii) inducing such foreign official, political party or official thereof, or candidate to do or omit to do any act in violation of the lawful duty of such person, or (B) illegally or corruptly inducing such foreign official, political party or official thereof, or candidate to use such person's influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality. SECTION 3.16. Litigation. Except as set forth on Schedule 3.16 hereto and except as disclosed in the SEC Documents, there is no suit, claim, action, proceeding or investigation pending or, to the Company's knowledge, threatened against the Company or any of its respective assets or properties at law or in equity or before any governmental authority or instrumentality or before any arbitrator of any kind or, to the Company's knowledge, against any officer of the Company and relating to the Company, nor to the Company's knowledge, has there occurred any event or does there exist any condition on the basis of which any such litigation, proceeding or investigation might properly be instituted. Except as set forth on Schedule 3.16 hereto or as disclosed in the SEC Documents, neither the Company nor to the Company's knowledge, any officer of the Company has been a party to any such suit, claim, action, proceeding or investigation during the past two years involving the Company's business, assets or properties, nor has any such suit, claim, action, proceeding or investigation been threatened by or against the Company. SECTION 3.17. No Material Adverse Changes. Except as set forth on Schedule 3.17 hereto or in the SEC Documents, since March 31, 1997 there has occurred no material adverse change in the business, assets, properties (tangible and intangible), operations, or financial condition of the Company, whether or not in the ordinary course of business, whether separately or in the aggregate with other occurrences or developments (a "Material Adverse Effect"), and the Company has no knowledge of any occurrence or development which might reasonably be expected to result in any such Material Adverse Effect. SECTION 3.18. Employee Benefit Plans. Except as described on Schedule 3.18, the Company does not maintain or operate any Employee Benefit Plan nor has any such Plan been maintained or operated during the past three years. The Company does not maintain or contribute to any Guaranteed Pension Plan or Multiemployer Plan. With respect to each Employee Benefit Plan listed on Schedule 3.18, to the extent applicable, (a) Each such Benefit Plan has been maintained and operated in all material respects in compliance with its terms and with all applicable provisions of the Employee Retirement Income Security Act of 1974, as amended("ERISA"), the Code and all applicable regulations, rulings and other authority issued thereunder; (b) All contributions required by law to have been made under each such Benefit Plan (without regard to any waivers granted under Section 412 of the Code) to any fund or trust established thereunder or in connection therewith have been made by the due date thereof; (c) Each such Benefit Plan intended to qualify under Section 401(a) of the Code is the subject of a favorable unrevoked determination letter issued by the Internal Revenue Service as to its qualified status under the Code, which determination letter may still be relied upon as to such tax qualified status, and no circumstances have occurred that would adversely affect qualified status of any such Benefit Plan; (d) No Benefit Plan is subject to Title IV of ERISA; (e) None of such Benefit Plans that are "employee welfare benefit plans" as defined in Section 3(1) of ERISA provides for continuing benefits or coverage for any participant or beneficiary of a participant after such participant's termination of employment, except as required by applicable law, including section 4980B of the Code or Section 601 of ERISA; and (f) Neither the Company nor any trade or business (whether or not incorporated) under common control with the Company within the meaning of Section 4001 of ERISA has, or at any time has had, any obligation to contribute to any "multiemployer plan" as defined in Section 3(37) of ERISA. SECTION 3.19. Withholding, Contracts, Labor Relations. The Company has withheld all amounts required by law or agreement to be withheld by it from the wages, salaries and other payments to its employees and is not liable for any arrears of wages or any taxes or penalties for failure to comply with any of the foregoing. Except as set forth in Schedule 3.19, there are no pending, or to the knowledge of the Company, threatened or anticipated (a) employment discrimination charges or complaints against or involving the Company before any federal, state, or local board, department, commission or agency, (b) unfair labor practice charges or complaints, disputes or grievances affecting the Company, (c) union representation petitions respecting the employees of the Company, (d) efforts being made to organize any of the employees of the Company or (e) strikes, slow downs, work stoppages, or lockouts or threats thereof affecting the Company. SECTION 3.20. Governmental Regulations. The Company is not a "holding company", or a "subsidiary company" of a "holding company" or an "affiliate" of a "holding company", as such terms are defined in the Public Utility Holding Company Act of 1935, as amended; nor is the Company an "investment company", or an "affiliated person" or a "principal underwriter" of an "investment company", as such terms are defined in the Investment Company Act of 1940, as amended. The Company is not now, nor has it been within the past five years, a "United States real property holding corporation" as defined in Section 897 of the Code. SECTION 3.21. Corporate Documents, Books and Records. Complete and correct copies of the Charter and by-laws, and of all amendments thereto, of the Company have been previously delivered or made available to each of the Purchasers, and, other than the filing of the Certificate of Designation, no changes in said documents will be made on or before the Closing Date other than as disclosed to, and concurred to in writing by, each of the Purchasers. SECTION 3.22. Disclosure. No representation or warranty made in this Agreement, considered as a whole, contains any untrue statement of material fact or omits to state a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances in which they were made, not misleading. SECTION 3.23. Certain Agreements of Officers and Employees. (a) To the Company's best knowledge and belief, no officer or employee of the Company is, or is now expected to be, in violation of any term of any employment contract, patent disclosure agreement, proprietary information agreement, noncompetition agreement, nonsolicitation agreement, or any other contract or agreement or restrictive covenant relating to the right of any such officer or employee to be an employee, to be employed by the Company which violation could be reasonably expected to have a Material Adverse Effect upon the Company. (b) To the best knowledge of the Company, no officer of the Company, nor any key employee of the Company whose termination, either individually or in the aggregate, would have a Material Adverse Effect on the Company, has any present intention of terminating his or her employment with the Company. SECTION 3.24. Registration Rights. Except as set forth in Schedule 3.24, and except for the rights granted to the Purchasers pursuant to the Registration Rights Agreement of even date herewith, no Person has demand or other registration rights to cause the Company to file any registration statement under the Securities Act relating to the securities of the Company or any right to participate in any such registration statement. SECTION 3.25. Compliance with Securities Laws. (a) The Company has complied and will comply with all applicable United States Federal and state securities laws in connection with the offer, issuance and sale of the Purchased Securities. Assuming that the Purchasers' representations and warranties contained in Article IV are true and correct, the Company has not, either directly or through any agent, offered any securities to, or otherwise approached, negotiated or communicated in respect of any securities with, any Person so as thereby to require that the offer or sale of the Purchased Securities be registered pursuant to the provisions of Section 5 of the Securities Act. Assuming that the Purchasers' representations and warranties contained in Article IV are true and correct, the offer, sale and issuance of the Purchased Securities and the Warrants (and of the Common Stock issuable upon the exercise of the Warrants) in conformity with the terms of this Agreement are exempt from the registration requirements of Section 5 of the Securities Act and all applicable state securities laws (or are otherwise registered or qualified under applicable state securities law). (b) The Company has filed all forms, reports and documents required to be filed with the SEC prior to the date hereof, and has heretofore delivered or made available to the Purchasers, in the form filed with the SEC, its (i) Annual Reports on Form 10-K for the fiscal years ended March 31, 1997, (ii) its Quarterly Reports on Form 10-Q for the quarters ended June 30, 1997, September 30, 1997 and December 31, 1998, (iii) the Company's Proxy Statement with respect to the 1997 annual meeting of its stockholders; (iv) all other reports, registration statements, or information statements filed with the SEC subsequent to March 31, 1997 (collectively, the "SEC Documents"), and (v) all amendments and supplements to all such reports and registration statements filed by the Company with the SEC pursuant to the requirements of the Exchange Act or the Securities Act. The SEC Documents (i) complied as to form with the applicable requirements under the Securities Act or the Exchange Act, as the case may be, and (ii) did not at the time they were filed contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and each of the balance sheets contained in or incorporated by reference into any of the Company's SEC Documents (including the related notes and schedules thereto) fairly presents the financial position of the Company as of its date, and each of the statements of income and changes in shareholders' equity and cash flows or equivalent statements in the Company's SEC Documents (including any related notes and schedules thereto) fairly presents the results of operations, changes in shareholders' equity and changes in cash flows, as the case may be, of the Company for the periods to which they relate, in each case, in compliance with applicable accounting requirements and with the published rules of the SEC with respect thereto and in accordance with generally accepted accounting principles consistently applied during the periods involved, except, in each case, as may be noted therein, subject to normal year-end audit adjustments (which are not expected to be material) in the case of unaudited statements. ARTICLE IV PURCHASERS' REPRESENTATIONS Each of the Purchasers hereby represents and warrants, severally and not jointly, as follows: SECTION 4.1. Investment Intent. Such Purchaser is acquiring the Purchased Securities to be purchased by it or him pursuant to Section 2 hereof for investment and not with a view to the distribution thereof. SECTION 4.2. Authorization. This Agreement and the Related Agreements to which such Purchaser is a party have been executed by a duly authorized Person on such Purchaser's behalf; and the execution, delivery and performance hereof and thereof have been duly authorized by all appropriate action. SECTION 4.3. Enforceability. The execution and delivery by such Purchaser of this Agreement and each of the Related Agreements will result in legally binding obligations of such Purchaser enforceable against it or him in accordance with the respective terms and provisions hereof and thereof. SECTION 4.4. Experience of Purchaser. Such Purchaser has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Purchased Securities, and has so evaluated the merits and risks of such investment. SECTION 4.5. Ability of Purchaser to Bear Risk of Investment. Such Purchaser is able to bear the economic risk of an investment in the Purchased Securities and, at the present time, is able to afford a complete loss of such investment. SECTION 4.6. Access to Information. Such Purchaser acknowledges that it has been afforded (i) the opportunity to ask such questions as it had deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Purchased Securities and the merits and risks of investing in the Purchased Securities; (ii) access to information about the Company and the Company's financial condition, results of operations, business, properties, management and prospects believed by it to be sufficient to enable it to evaluate its investments. SECTION 4.7. Reliance. Such Purchaser understands and acknowledges that (i) the Purchased Securities are being offered and sold to such Purchaser without registration under the Securities Act in a private placement that is exempt from the registration provisions of the Securities Act under Section 4(2) of the Securities Act or Regulation D promulgated thereunder and (ii) the availability of such exemption, depends in part on, and the Company will rely upon the accuracy and truthfulness of, the foregoing representations and such Purchaser hereby consents to such reliance. SECTION 4.8. Transfer Restriction. (a) A Purchaser may only dispose of the Purchased Securities held by it, pursuant to an effective registration statement under the Securities Act, to the Company or pursuant to an available exemption from the registration requirements of the Securities Act. In connection with any transfer of Purchased Securities other than pursuant to an effective registration statement or to the Company, the Company may require the transferor thereof to provide to the Company a written opinion of counsel experienced in the area of United States securities laws selected by the transferor, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred securities under the Securities Act. Notwithstanding the foregoing, the Company hereby consents to and agrees to register (i) any transfer of Purchased Securities by one Purchaser to another Purchaser, and agrees that no documentation other than executed transfer documents shall be required for any such transfer, and (ii) any transfer of Purchased Securities by any Purchaser to an Affiliate or a beneficial owner of such Purchaser or to an Affiliate or a beneficial owner of another Purchaser, or any transfer among any such Affiliates or beneficial owners, provided that the transferee certifies to the Company that it is an "accredited investor" as defined in Rule 501(a) under the Securities Act and any transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights of a Purchaser under this Agreement. Each Purchaser acknowledges and agrees that any instrument evidencing Purchased Securities shall bear a legend noting the foregoing restrictions as well as any other legend required by law. The foregoing transfer restrictions shall not apply, and no legend shall appear on the Purchased Securities, to the extent the Purchased Securities are sold pursuant to a transaction registered pursuant to an effective registration statement under the Securities Act or to the extent they are transferred pursuant to Rule 144(k) under the Securities Act. ARTICLE V CONDITIONS TO EACH PURCHASER'S OBLIGATIONS TO PURCHASE Each Purchaser's obligation to purchase the Purchased Securities pursuant to Section 2.2 of this Agreement is subject to compliance by the Company with its agreements and representations herein contained, and to the satisfaction, on or prior to the Closing Date, of the following conditions: SECTION 5.1. Agreements. Each of the Related Agreements shall have been executed and delivered in the form provided for herein, and each of the Related Agreements shall be in full force and effect and no term or condition thereof shall have been amended, modified or waived except with the prior written consent of such Purchaser. All covenants, agreements and conditions contained in the Related Agreements which are to be performed or complied with on or prior to the Closing Date shall have been performed or complied with in all material respects. The Voting Agreement shall be executed and delivered in the form provided for herein. SECTION 5.2. Charter Documents; Good Standing Certificates. Such Purchaser shall have received from the Company (a) a copy of the Company's Charter, certified by the Massachusetts Secretary of State to be true and complete, (b) a copy, certified by the Secretary of the Company to be true and complete as of the Closing Date, of the by-laws thereof; and (c) a certificate of the relevant governmental authority or other appropriate official of each state in which each of the Company is incorporated or qualified to do business (if the Company actually does business in such state) as to the Company's corporate good standing in such state or qualification to do business, as the case may be. SECTION 5.3. Proof of Corporate Action. Such Purchaser shall have received from the Company copies certified by the Secretary thereof to be true and complete as of the Closing Date, of the records of all corporate action taken to authorize the execution, delivery and performance of this Agreement and each of the Related Agreements to which the Company is a party. SECTION 5.4. Incumbency Certificate. Such Purchaser shall have received from the Company an incumbency certificate, dated the Closing Date, signed by a duly authorized officer thereof certifying as to the name, office, signature specimen and due authority of each individual who shall sign, in the name and on behalf of the Company, this Agreement and each of the Related Agreements to which the Company is or is to become a party. SECTION 5.5. Legal Opinion. The Purchasers shall have received from Ropes & Gray and Leonard R. Glass, Esq., counsel to the Company, favorable opinions satisfactory to the Purchasers in form and substance covering the matters set forth in Exhibit D hereto. SECTION 5.6. Representations and Warranties; Officer's Certificate. The representations and warranties contained or incorporated by reference herein shall be true and correct in all material respects on and as of the Closing Date with the same force and effect as though made on and as of the Closing Date except for those representations and warranties which relate specifically to a particular date, provided that such representations and warranties were true and correct in all material respects as of such date; and the Company shall have performed and complied with all conditions and agreements required to be performed or complied with by each of them prior to the Closing; and such Purchaser shall have received on the Closing Date a certificate to these effects signed by an authorized officer of the Company. SECTION 5.7. Legality; Governmental and Other Authorizations. The purchase of the Purchased Securities by such Purchaser shall not be prohibited by any law or governmental order or regulation, and shall not subject the Company to any penalty, special tax, or other onerous condition. All necessary consents, approvals, licenses, permits, orders and authorizations of, or registrations, declarations and filings with, any governmental or administrative agency or of or with any other Person, with respect to any of the transactions contemplated by this Agreement or any of the Related Agreements, shall have been duly obtained or made and shall be in full force and effect other than the Blue Sky Filings. SECTION 5.8. Payment of Certain Fees and Disbursements. At the Closing, the Purchasers shall have been reimbursed, subject to and in accordance with Article X hereof, for all reasonable fees and expenses of Edwards & Angell incurred by the Purchasers through the Closing Date in connection with the transactions contemplated by this Agreement. SECTION 5.9. Charter Amendment. The Company's Charter shall have been amended by the filing of a Certificate of Designation in the form of Exhibit B hereto. SECTION 5.10. Election to Board. Kevin J. Maroni and William P. Collatos shall have been elected to the Company's Board of Directors as Class III Directors, and Kevin J. Maroni shall have been appointed to the Compensation Committee of the Company's Board of Directors. SECTION 5.11. General. All instruments and legal, governmental, administrative and corporate proceedings in connection with the transactions contemplated by this Agreement and the Related Agreements shall be satisfactory in form and substance to the Purchasers' counsel, and the Purchasers shall have received copies of all documents, including, without limitation, records of corporate or other proceedings, the opinion of counsel contemplated in Section 5.5 hereof, and any consents, licenses, approvals, permits and orders required to be secured by the Company in connection with the transactions contemplated herein or which any Purchaser may have requested in connection therewith. ARTICLE VI CONDITIONS TO THE COMPANY'S OBLIGATIONS The Company's obligation to sell and issue the Purchased Securities pursuant to this Agreement is subject to compliance by each of the Purchasers with the agreements herein contained, and to the satisfaction on or prior to the Closing Date, of the following conditions: SECTION 6.1. Representations. The representations made by each Purchaser in Article IV hereof shall be true and correct in all material respects when made and shall be true and correct in all material respects as of the Closing Date. SECTION 6.2. Related Agreements. Each of the Related Agreements to which such Purchaser is a party shall have been executed by such Purchaser. All covenants, agreements and conditions contained in the Related Agreements which are to be performed or complied with by such Purchaser on or prior to the Closing Date shall have been performed or complied with by such Purchaser in all material respects. SECTION 6.3. Legality; Governmental and Other Authorizations. The sale of the Purchased Securities by the Company shall not be prohibited by any law or governmental order or regulation, and shall not subject the Company to any penalty, special tax, or other onerous condition. All necessary consents, approvals, licenses, permits, orders and authorizations of, or registrations, declarations and filings with, any governmental or administrative agency or of or with any other Person, with respect to any of the transactions contemplated by this Agreement or any of the Related Agreements, shall have been duly obtained or made and shall be in full force and effect other than the Blue Sky Filings. SECTION 6.4. General. All instruments and legal, governmental, administrative, corporate proceedings in connection with the transactions contemplated by this Agreement and the Related Agreements shall be satisfactory in form and substance to the Company, and the Company shall have received copies of all documents, including, without limitation, any consents, licenses, approvals, permits and orders required to be secured by each Purchaser in connection with the transactions contemplated herein or which the Company may have requested in connection therewith. ARTICLE VII COVENANTS APPLICABLE FOLLOWING THE CLOSING The Company hereby agrees that until the earlier to occur of (i) the fifth anniversary of the Closing Date, or (ii) the date as of which all shares of Series A Preferred Stock shall have been converted or shall otherwise cease to be outstanding, it will comply with the following provisions: SECTION 7.1. Financial Statements. The Company shall deliver to Spectrum promptly after filing with the SEC, the Company's quarterly report filed on Form 10-Q and the Company's annual report filed on Form 10-K. SECTION 7.2. Additional Information. Promptly after the date the Company is notified of a request by Spectrum, the Company will deliver to Spectrum any such additional information as Spectrum may reasonably request from time to time (which requests shall be no more frequent than once a month), including, without limitation, sales force growth and productivity statistics and access lines (booked and provisioned) by customer. SECTION 7.3. Annual Budget. The Company shall furnish to Spectrum, promptly following approval thereof by the Board, a true and complete copy of the Company's three-year operating budget. SECTION 7.4. SEC Filings. Promptly upon filing with the SEC, the Company shall provide to Spectrum copies of all public filings made by the Company pursuant to the Securities Act or the Exchange Act. SECTION 7.5. Inspection. The Company shall permit authorized representatives of Spectrum to visit and inspect any of the properties of the Company, including its books of account, and to make copies thereof at the expense of Spectrum and to discuss its affairs, finances and accounts with its officers, administrative employees and independent accountants, all at such reasonable times with reasonable notice as may be reasonably requested but in no event more than one time in any calendar month and all in a manner that does not interfere with the business operations of the Company; provided that all such information provided to Spectrum by the Company under this Article VII will be maintained as confidential by Spectrum and not be disclosed to third parties and provided, further that, subject to the foregoing, Spectrum may provide summaries of such information to its Affiliates and beneficial owners on a confidential basis in connection with reports provided by Spectrum to its Affiliates and beneficial owners in its fiduciary capacity. SECTION 7.6. Independent Director. The Company shall use its best efforts to increase the size of its Board of Directors to eight (8) as soon after Closing as possible by adding an independent director with relevant industry expertise, which independent director shall be satisfactory to the Purchasers and the Company's chief executive officer. ARTICLE VIII PREEMPTIVE RIGHTS SECTION 8.1 Right to Purchase. Until the date as of which all shares of Series A Preferred Stock shall have been converted or shall otherwise cease to be outstanding, the Company shall only issue New Securities in accordance with the following terms: (a) The Company shall not issue any New Securities (other than Excluded Securities) unless it first delivers to each Purchaser a written (or oral if pursuant to Section 8.1(f)) notice (the "Notice of Proposed Issuance") specifying the type and total number of such New Securities that the Company then intends to issue (the "Offered New Shares"), all of the material terms (or terms then known if pursuant to Section 8.1(f)), including the price upon which the Company proposes to issue the Offered New Shares and stating that the Purchasers shall have the right to purchase the Offered New Shares in the manner specified in this Section 8.1 for the same price per share and in accordance with the same terms and conditions specified in such Notice of Proposed Issuance. (b) During the twenty (20) consecutive day period commencing on the date the Company delivers to all of the Purchasers the Notice of Proposed Issuance (the "Twenty Day Period"), the Purchasers shall have the option to purchase a portion of the Offered New Shares at the same price per share and upon the same terms and conditions specified in the Notice of Proposed Issuance. Each Purchaser electing to purchase Offered New Shares must give written notice of its election to the Company prior to the expiration of the Twenty Day Period. (c) Each Purchaser shall have the right to purchase up to that number of the Offered New Shares as shall be equal to the number of the Offered New Shares multiplied by a fraction, the numerator of which shall be the number of outstanding Registrable Securities and shares of Common Stock then issuable upon conversion and exercise of all Purchased Securities and Preferred Stock Derivatives then owned by such Purchaser and the denominator of which shall be the aggregate number of shares of Common Stock Deemed Outstanding. The amount of such Offered New Shares that each Purchaser is entitled to purchase under this Section 8.1(c) shall be referred to as its "Proportionate Share". No Purchaser shall have any right of oversubscription. (d) To the extent the Offered New Shares have not been purchased by the Purchasers pursuant to paragraphs (a)-(c) hereof, then the Company shall have the right, until the expiration of one-hundred eighty (180) consecutive days commencing on the first day immediately following the expiration of the Twenty Day Period, to issue the Offered New Shares at not less than, and on terms no more favorable to the purchaser than the price and terms specified in the Notice of Proposed Issuance. If for any reason the Offered New Shares are not issued within such period and at such price and on such terms, the right to issue in accordance with the Notice of Proposed Issuance shall expire and the provisions of this Agreement shall continue to be applicable to the Offered New Shares. (e) Notwithstanding the foregoing, the preemptive rights described in this Article VIII shall not apply with respect to the issuance of (i) any Excluded Securities, (ii) the issuance of any shares pursuant to a transaction registered under the Securities Act at a price greater than the Conversion Price at that time, or (iii) issuance of Common Stock or warrants or options to acquire Common Stock to any Persons (including the stockholders or owners of Persons) as all or part of the consideration paid for the acquisition of ownership interests in, or assets of, such Person. (f) Notwithstanding paragraphs (a), (b) and (c) above, if the New Securities with respect to which preemptive rights are applicable under this Article are to be sold pursuant to (x) a transaction registered under the Securities Act or (y) a transaction pursuant to Rule 144A under the Securities Act yielding the Corporation proceeds of at least $40,000,000 (net of any interest or dividend escrows or similar arrangements), the following shall apply in lieu of Section 8.1(b): (i) any Purchaser wishing to exercise such rights must commit to purchase such New Securities and consummate the purchase of such New Securities at the same time and on the same terms as such other purchasers in the offering, (ii) if a Rule 144A offering, such Purchaser must meet the legal qualifications to participate in such offering and (iii) the Company will provide any Purchaser indicating to the Company orally or in writing an interest in participating in such offering with substantially the same information at substantially the same times as provided to the other purchasers in such offering. ARTICLE IX ASSIGNMENT OF PURCHASED SECURITIES Whether or not any express assignment has been made in this Agreement, the provisions of this Agreement that are for the benefit of each Purchaser as the holder of any Purchased Securities or Registrable Securities are also for the benefit of, and enforceable by, all subsequent holders of such Purchased Securities or Registrable Securities, and the provisions of this Agreement that subject the Purchasers to obligations as the holder of any Purchased Securities or Registrable Securities also shall subject all subsequent holders of Purchased Securities and Registrable Securities thereto. Notwithstanding the foregoing, the rights provided to Spectrum pursuant to Article VII of this Agreement cannot be assigned without the Company's prior consent. ARTICLE X EXPENSES; INDEMNITY SECTION 10.1. Expenses. The Company hereby agrees to pay all reasonable legal fees and disbursements of a single counsel to the Purchasers incurred by the Purchasers through the Closing not to exceed in the aggregate a maximum of $100,000. From and after the Closing, the Company hereby agrees to pay on demand all reasonable attorneys' fees of a single counsel to the Purchasers incurred in connection with any amendments, modifications, approvals, consents or waivers with respect to this Agreement or any Related Agreement proposed by or discussed with the Company. SECTION 10.2. Indemnification. Notwithstanding any disclosures made in the Schedules hereto, the Company hereby agrees to indemnify, exonerate and hold each of the Purchasers and their (if applicable) general and limited partners and their respective shareholders, officers, directors, employees, attorneys and agents ("Indemnitees") free and harmless from and against any and all actions, causes of action, or suits brought against them by third parties other than the Company ("Third Party Claims"), losses, liabilities, settlement costs, damages and expenses, including, without limitation, reasonable attorneys' fees and disbursements (collectively, "Damages") arising from any such Third Party Claim, incurred in the capacity as a Purchaser by any of the Indemnitees as a result of or relating to (i) any transaction by the Company financed or to be financed in whole or in part, directly or indirectly, with proceeds from the sale of any of the Purchased Securities, (ii) the execution, delivery, performance or enforcement of this Agreement, the Related Agreements or any other agreement contemplated hereby or thereby (including, without limitation, any failure by the Company to comply with any of its covenants or any breach of its representations and warranties in this Agreement, the Related Agreements or any other agreement contemplated hereby or thereby) except where such Damages are caused by the willful misconduct or gross negligence of the Purchasers. Notice of any claim for indemnification by an Indemnitee must be made promptly after such Indemnitee has notice of the relevant Third Party Claim. No Indemnitee shall settle a Third Party Claim for which indemnification is sought hereunder without the consent of the Company, which consent shall not be unreasonably withheld or delayed. ARTICLE XI NOTICES All demands, notices, requests, consents and other communications required or permitted under this Agreement, any Related Agreement or the Purchased Securities shall be in writing and shall be personally delivered or sent by facsimile machine (with a confirmation copy sent by one of the other methods authorized in this Section), commercial (including FedEx) or U.S. Postal Service overnight delivery service, or, deposited with the U.S. Postal Service mailed first class, registered or certified mail, postage prepaid, as set forth below: If to the Company, addressed to: CTC Communications Corp. 360 Second Avenue Waltham, MA 02154 Attn: Steven Jones and John Pittenger Facsimile No.: 617-890-1613 with a copy to: Ropes & Gray One International Place Boston, MA 02114 Attn: Mary E. Weber, Esq. Facsimile No.: 617-951-7050 Law Office of Leonard R. Glass, P.A. 45 Central Avenue P.O. Box 579 Tenafly, NJ 07602 Attn: Leonard R. Glass, Esq. Facsimile No.: 201-894-1718 If to the Purchasers, addressed to: Spectrum Equity Investors II, L.P. One International Place, 29th Floor Boston, MA 02110 Attn: Kevin J. Maroni Facsimile No.: 617-464-4601 with a copy to: Edwards & Angell 101 Federal Street Boston, MA 02110 Attn: Stephen O. Meredith, Esq. Facsimile No.: 617-439-4170 If to any other holder of record of any security, to it at its address set forth in the applicable register maintained by the Company with respect thereto. Notices shall be deemed given upon the earlier to occur of (i) receipt by the party to whom such notice is directed; (ii) if sent by facsimile machine, on the day (other than a Saturday, Sunday or legal holiday in the jurisdiction to which such notice is directed) such notice is sent if sent (as evidenced by the facsimile confirmed receipt) prior to 5:00 p.m. Eastern Time and, if sent after 5:00 p.m. Eastern Time, on the day (other than a Saturday, Sunday or legal holiday in the jurisdiction to which such notice is directed) after which such notice is sent; (iii) on the first business day (other than a Saturday, Sunday or legal holiday in the jurisdiction to which such notice is directed) following the day the same is deposited with the commercial carrier if sent by commercial overnight delivery service; or (iv) the fifth day (other than a Saturday, Sunday or legal holiday in the jurisdiction to which such notice is directed) following deposit thereof with the U.S. Postal Service as aforesaid. Each party, by notice duly given in accordance therewith may specify a different address for the giving of any notice hereunder. ARTICLE XII SURVIVAL AND TERMINATION OF COVENANTS AGREEMENTS, REPRESENTATIONS AND WARRANTIES, All covenants, agreements, representations and warranties made herein or in any certificate delivered at Closing pursuant hereto shall be deemed to have been relied on by each such party, notwithstanding any investigation made by such party or on its behalf. All representations and warranties made herein or in any of the Related Agreements shall survive the execution and delivery of this Agreement and of the Purchased Securities. ARTICLE XIII AMENDMENTS AND WAIVERS Except as otherwise expressly provided herein, any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of Purchasers whose holdings of Purchased Securities and Registrable Securities would, if converted and exercised, constitute a majority of the Registrable Securities held by all Purchasers. Any amendment or waiver effected in accordance with this Article XIII shall be binding upon the Company and each holder of Purchased Securities and Registrable Securities. ARTICLE XIV CHOICE OF LAW; SUBMISSION TO JURISDICTION AND WAIVER OF JURY TRIAL; DISPUTE RESOLUTION SECTION 14.1. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT GIVING EFFECT TO ANY CONFLICTS OR CHOICE OF LAWS PROVISIONS WHICH WOULD CAUSE THE APPLICATIONS OF THE DOMESTIC SUBSTANTIVE LAWS OF ANY OTHER JURISDICTION). SECTION 14.2. Consent To the Exclusive Jurisdiction Of the Courts Of Massachusetts. (a) SUBJECT TO THE MANDATORY ARBITRATION PROVISIONS OF SECTION 14.5, EACH OF THE PARTIES HERETO HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS AND THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS, AS WELL AS TO THE JURISDICTION OF ALL COURTS TO WHICH AN APPEAL MAY BE TAKEN FROM SUCH COURTS, FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, INCLUDING, WITHOUT LIMITATION, ANY PROCEEDING RELATING TO ANCILLARY MEASURES IN AID OF ARBITRATION, PROVISIONAL REMEDIES AND INTERIM RELIEF, OR ANY PROCEEDING TO ENFORCE ANY ARBITRAL DECISION OR AWARD. (b) EACH PARTY HEREBY EXPRESSLY WAIVES ANY AND ALL RIGHTS TO BRING ANY SUIT, ACTION OR OTHER PROCEEDING IN OR BEFORE ANY COURT OR TRIBUNAL OTHER THAN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS AND COVENANTS THAT IT SHALL NOT SEEK IN ANY MANNER TO RESOLVE ANY DISPUTE OTHER THAN AS SET FORTH IN THIS ARTICLE XIV OR TO CHALLENGE OR SET ASIDE ANY DECISION, AWARD OR JUDGMENT OBTAINED IN ACCORDANCE WITH THE PROVISIONS HEREOF. (c) EACH OF THE PARTIES HERETO HEREBY EXPRESSLY WAIVES ANY AND ALL OBJECTIONS IT MAY HAVE TO VENUE, INCLUDING, WITHOUT LIMITATION, THE INCONVENIENCE OF SUCH FORUM, IN ANY OF SUCH COURTS. IN ADDITION, EACH OF THE PARTIES CONSENTS TO THE SERVICE OF PROCESS BY PERSONAL SERVICE OR ANY MANNER IN WHICH NOTICES MAY BE DELIVERED HEREUNDER IN ACCORDANCE WITH ARTICLE XI. SECTION 14.3. Waiver Of Jury Trial. EACH OF THE PARTIES HERETO HEREBY VOLUNTARILY AND IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION OR OTHER PROCEEDING BROUGHT IN CONNECTION WITH THIS AGREEMENT, ANY OF THE OTHER TRANSACTION DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. SECTION 14.4. Equitable Remedies. The parties hereto agree that irreparable harm would occur in the event that any of the agreements and provisions this Article XIV were not performed fully by the parties hereto in accordance with their specific terms or conditions or were otherwise breached, and that money damages are an inadequate remedy for breach of the Agreement because of the difficulty of ascertaining and quantifying the amount of damage that will be suffered by the parties hereto in the event that this Agreement is not performed in accordance with its terms or conditions or is otherwise breached. It is accordingly hereby agreed that the parties hereto shall be entitled to an injunction or injunctions to restrain, enjoin and prevent breaches of this Agreement by the other parties and to enforce specifically such terms and provisions of such Articles in any court of the United States or any state having jurisdiction, such remedy being in addition to and not in lieu of, any other rights and remedies to which the other parties are entitled to at law or in equity. SECTION 14.5. Arbitration. Any controversy, dispute or claim arising out of or in connection with or relating to this Agreement or any of the Related Agreements, or the breach, termination or validity hereof or any transaction contemplated hereby or thereby (any such controversy, dispute or claim being referred to as a "Dispute") shall be finally settled by arbitration conducted expeditiously in accordance with the Commercial Arbitration Rules then in force (the "AAA Rules") of the American Arbitration Association (the "AAA"). There shall be a panel of three arbitrators who shall be appointed pursuant to AAA procedure, in each case, within fifteen (15) business days of receipt of the demand for arbitration by the respondent(s) in any such proceeding. Each of the arbitrators shall be an attorney with no less than fifteen (15) years' experience in the practice of business law (preferably with experience in the acquisition and financing of businesses such as those engaged in by the Company and at the time such dispute arises) who shall not have performed any legal services for any of the parties or person controlled by any of the parties for a period of 5 years prior to the date the demand for arbitration is received by the respondent(s). The situs for an arbitration pursuant to this Section shall be Boston, Massachusetts. A final award shall be rendered as soon as reasonably possible and, in any event, within ninety (90) days of the appointment of the panel of arbitrators; provided, however, that if the arbitrators determine by majority vote that fairness so requires, such ninety (90) day period may be extended by no more than sixty (60) additional days. The parties agree that the arbitrators shall have the right and power to shorten the length of any notice periods or other time periods provided in the AAA Rules and to implement Expedited Procedures under the AAA Rules in order to ensure that the arbitration process is completed within the time frames provided herein. The arbitration decision or award shall be reasoned and in writing. Judgment on the decision or award rendered by the arbitrators may be entered and specifically enforced in any court having jurisdiction thereof. Notwithstanding the provisions of Section 14.1, any arbitration held pursuant to the provisions of the Section shall be governed by the Federal Arbitration Act. All arbitrations commenced pursuant to this Agreement or any other Transaction Document while any other arbitration hereunder shall be in progress shall be consolidated and heard by the initially constituted panel of arbitrators. ARTICLE XV ENTIRE AGREEMENT; COUNTERPARTS; SECTION HEADINGS This Agreement, the Related Agreements and the other writings referred to herein or delivered pursuant hereto which form a part hereof contain the entire understanding of the parties hereto with respect to its subject matter. This Agreement supersedes all prior agreements and understandings between the parties with respect to its subject matter. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. The descriptive headings of sections and paragraphs of this Agreement are inserted for convenience only, and do not constitute a part of this Agreement and shall not affect in any way the meaning or interpretation of this Agreement. If the Company at any time subdivides (by any stock split, stock dividend, recapitalization or otherwise) its outstanding shares of Common Stock into a greater number of shares or if the outstanding shares of Common Stock shall be combined (by reverse stock split or otherwise) into a smaller number of shares, all numbers, percentages, computations and the like in this Agreement shall be deemed modified as necessary to give appropriate effect to such subdivision or combination. IN WITNESS WHEREOF, the Company and the Purchasers have executed this Agreement as of the day and year first above written. COMPANY: CTC COMMUNICATIONS CORP. By: __________________________________ Name: Title: PURCHASERS: SPECTRUM EQUITY INVESTORS II, L.P. By Spectrum Equity Associates II, L.P., its General Partner By: __________________________________ Kevin J. Maroni, a General Partner DOEG HILL I, L.L.C. By: __________________________________ Dennis Patrick, Member ______________________________________ Matthew N. Mochary ______________________________________ Robert A. Nicholson ______________________________________ Benjamin Coughlin ______________________________________ Fred Wang ______________________________________ Michael J. Kennealy ______________________________________ Shawn Colo ______________________________________ Kristin Cashin SCHEDULE 2.1 List of Purchasers
Name and Address Number of Shares of Series A Preferred Stock to be Purchased Number of Warrants to be Issued Aggregate Purchase Price of Purchased Securities Spectrum Equity Investors II, L.P. One International Place 29th Floor Boston, MA 02110 Attn: Kevin J. Maroni 657,555.00 131,511.00 $11,837,305.11 Doeg Hill I, L.L.C. 1300 Pennsylvania Avenue Suite 470 North Washington, D.C. 20004 Attn: Dennis Patrick 5,555.00 1,111.00 $100,001.11 Matthew N. Mochary 245 Lytton Avenue Suite 175 Palo Alto, CA 94301 1,944.00 389.00 $34,995.89 Robert A. Nicholson One International Place 29th Floor Boston, MA 02110 417.00 83.00 $7,506.83 Benjamin Coughlin One International Place 29th Floor Boston, MA 02110 417.00 83.00 $7,506.83 Fred Wang 245 Lytton Avenue Suite 175 Palo Alto, CA 94301 278.00 56.00 $5,004.56 Kristin Cashin 245 Lytton Avenue Suite 175 Palo Alto, CA 94301 278.00 56.00 $5,004.56 Michael J. Kennealy One International Place 29th Floor Boston, MA 02110 111.00 22.00 $1,998.22 Shawn Colo 245 Lytton Avenue Suite 175 Palo Alto, CA 94301 111.00 22.00 $1,998.22 Total: 666,666.00 133,333.00 $12,001,321.33
SCHEDULE 3.1 List of Jurisdictions 1. Massachusetts (jurisdiction of incorporation) 2. New York 3. Rhode Island 4. Vermont 5. Connecticut (d/b/a Computer Telephone Company) 6. Maine 7. New Hampshire 8. Ohio 9. California (d/b/a Computer Telephone Company) SCHEDULE 3.4 1. Number of Shares of Issued and Outstanding Common Stock : 9,974,683 2. Shares of Common Stock and Options Owned by Robert J. Fabbricatore and any of his affiliates or family members: (a) Common Stock: Robert J. Fabbricatore: 1,520,237 shares Robert J. Fabbricatore, as trustee for Rita Fabbricatore, Danielle Fabbricatore and Douglas Fabbricatore: 62,498 shares Robert J. Fabbricatore, as General Partner of the Robert J. Fabbricatore Family Limited Partnership: 1,133,239 shares The records of the Transfer Agent as of April 1, 1998 disclose that the following family members are record owners of the following number of shares of CTC Common Stock: Thomas Fabbricatore: 116,397 shares (+ non-assignable options to purchase 81,255 shares of CTC Common Stock) Nathalie Fabbricatore: 191 shares (+ non-assignable options to purchase 2,750 shares of CTC Common Stock) Douglas Fabbricatore: 2,074 shares (+ non-assignable options to purchase 18,300 shares of CTC Common Stock) Rita Fabbricatore: 2,000 shares (+ non-assignable options to purchase 1,940 shares of CTC Common Stock) and, as custodian for her minor child: 4,000 shares. Clara Fabbricatore: 1.34 shares Frances Fabbricatore: 1.34 shares James Fabbricatore: 1,000 shares Pat Fabbricatore: 2,001.34 shares Robert J. Fabbricatore disclaims beneficial ownership or control of the shares of CTC Common Stock and non-assignable options to purchase CTC Common Stock owned by the family members set forth above. (b) Options: 1993 Stock Option Plan: issued options: 1,215,958 unissued options: 92,568 (gives effect to 1995 stock splits) 1996 Stock Option Plan issued options: 1,562,500 unissued options: 187,500 3. List of Options including Name of Holder and No. of Shares Vested 1. Schedule (i) 1993 Stock Option Plan (29 pages) 2. Schedule (ii) 1996 Stock Option Plan (25 pages) 3. Schedule (iii) Stock Options issued Prior to 1993 (2 pages) The Compensation Committee of the Board of Directors has approved a repricing of 24 different option grants to approximately 225 employees that total approximately 1,400,000 outstanding options out of the total of approximately 3,000,000. The options were granted during 1995, 1996 and 1997 and were granted at prices ranging from $8.00 to $16.25. The Board has approved repricing all options to the market price on March 20, 1998 ($7.188), regardless of the position or title of the holder of the option. SCHEDULE 3.4 (c) Options, Etc. (a) See Schedule 3.4 (b) None (c) None (d) To the Company's knowledge, none. SCHEDULE 3.6 Required Filings and Consent In its capacity as an authorized reseller of telephone services in the State of New York, the Company is required to obtain approval for the issuance of the Purchased Securities from the Public Service Commission of the State of New York pursuant to Section 101 of the New York Public Service Law. The Company has filed a petition with the Public Service Commission of the State of New York to obtain authority to issue the Purchased Securities. SCHEDULE 3.7 Undisclosed Liabilities None. SCHEDULE 3.8 Absence of Certain Developments (a) None (b)(i) On March 24, 1998 the Company sold a 1982 Bonanza A36 airplane for $173,000 to an unaffiliated purchaser. The proceeds of the sale were added to the working capital of the Company. (b) (ii) and (iii) Subject to the approval of a definitive merger agreement by the shareholders and the Board of Directors of each company, the receipt of a fairness opinion issued by an non- affiliated company, and the approval of the terms of the merger agreement by the stockholders of CTC at a meeting duly called for such purpose, CTC has entered into a non-binding letter of intent to acquire all of the issued and outstanding common stock of Comm- Tract Corp. and Comm-Tract Corp. of New York in exchange for not less than 1,000,000 nor more than 1,100,000 shares of Common Stock of the CTC. Mr. Robert Fabbricatore, Chairman of the Board of CTC and Mr. John Pittenger Executive Vice President and Clerk Treasurer are stockholders of the companies to be acquired. SCHEDULE 3.9 Interested Party Transactions None SCHEDULE 3.11 Title to Assets None SCHEDULE 3.12 Material Contracts and Obligations (a) On February 27, 1997 the Company entered into a three year employment contract with Steven Jones under the terms of which Mr. Jones is employed by the Company as an Executive Vice President and Chief Financial Officer and Director of Corporate Development effective April 1, 1998. (b) The Company believes that as at March 31, 1998, it may be in violation of certain financial covenants as contained in the Revolving and Term Loan Agreement dated November 7, 1997 between the Company as Borrower and Fleet National Bank as Lender. The Company will be unable to make a determination with respect to such possible violations until completion of its annual audit for the fiscal year ended March 31, 1998. SCHEDULE 3.14 Necessary Licenses and Permits None SCHEDULE 3.15 Compliance with Law (a) To the knowledge of the Company - None (b) None SCHEDULE 3.16 Litigation 1. CTC COMMUNICATIONS CORP. vs Joanne Weed and Maureen Gordon-Johnson - - USDC - District of Connecticut 3:98CIV400 (DIS). 2. OPTIMA COMMUNICATIONS, INC. vs Computer Telephone Corp. - Supreme Court of the State of New York, Rockland County Index No. 3287/96. There is no other material litigation other than disclosed in the SEC Documents. SCHEDULE 3.17 No Material Adverse Changes None SCHEDULE 3.18 Employee Benefit Plans Company 1993 Employee Stock Option Plan Company 1996 Employee Stock Option Plan Company Employee Stock Purchase Plan The Employee Stock Purchase Plan enables participating employees to purchase Company shares at 85% of the lower of the market prices prevailing on the Valuation Dates of January 2 and July 1. Individuals can contribute up to 5% of their base salary. Company Employee Stock Bonus Plan The Employee Stock Bonus Plan previously adopted by the Company has not been utilized to date. Company 401K Savings Plan (Adopted September 1, 1993). In September 1993, the Company established a defined contribution plan ("401(k) Plan") covering all employees who meet certain eligibility requirements. Participants may make contributions to the Plan up to 15% of their compensation (as defined) up to a maximum established by law. The Company may make a matching contribution of an amount to be determined by the Board of Directors but subject to a maximum of 6% of compensation contributed by each participant. SCHEDULE 3.19 Withholding, Contracts, Labor Relations (a) None (b) None (c) None (d) None (e) None SCHEDULE 3.24 Registration Rights None EX-10.2 5 REGISTRATION RIGHTS AGREEMENT Exhibit 10.2 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (the "Agreement") is made and entered into as of April 10, 1998 between CTC COMMUNICATIONS CORP., a Massachusetts corporation (the "Company"), and those entities whose names appear on the signature pages hereof (the "Holders"). This Agreement is made in connection with the Securities Purchase Agreement, dated the date hereof (the "Purchase Agreement") between the Company and the Holders, pursuant to which the Holders are acquiring Series A Convertible Preferred Stock of the Company and Warrants to acquire Common Stock in the Company. The execution of and delivery of this Agreement is a condition precedent to the obligations of the Holders under the Purchase Agreement. Unless otherwise defined herein, capitalized terms so used herein and not defined shall have the same meaning as provided in the Purchase Agreement. The parties hereby agree as follows: 1. Certain Definitions. As used in this Agreement, the following terms shall have the following respective meanings: (a) "Business Day" means any day, other than a Saturday, Sunday or legal holiday, on which banks in the State of New York are open for business. (b) "Commission" means the Securities and Exchange Commission. (c) "Common Stock" means the Common Stock, par value $.01 per share, of the Company, as constituted on the date hereof, any shares into which such Common Stock shall have been changed, or any shares resulting from any reclassification of such Common Stock. (d) "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any successor statute thereto, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect at the time. (e) "Holders" means the Holders referred to in the Preamble and any other person holding Registrable Securities to whom these registration rights have been assigned pursuant to Section 9(f) of this Agreement. (f) "Other Securities" shall mean Common Stock or other equity securities (excluding Registrable Securities) issued by the Company following the date of this Agreement. (g) "Preferred Stock Derivatives" shall have the meaning set forth in the Certificate of Designation designating the Series A Preferred Stock. (h) "Person" shall mean an individual, partnership, corporation, association, trust, joint venture, unincorporated organization and any government, governmental department or agency or political subdivision thereof. (i) "Registrable Securities" means (i) the Common Stock held by any Holder issued or issuable pursuant to the conversion of the Series A Preferred Stock or the exercise of the Warrants; (ii) any Common Stock or other securities issued or issuable pursuant to the conversion of, or with respect to, the Series A Preferred Stock or Warrants held by any Holder upon any stock split, stock dividend, recapitalization, or similar event; and (iii) securities issued in replacement or exchange of any of the securities issued in clauses (i) or (ii) above. (j) "Registration Expenses" means all expenses incident to the Company's performance of or compliance with this Agreement, including, without limitation, all registration, filing, listing and National Association of Securities Dealers, Inc. ("NASD") fees, all fees and expenses of complying with securities or blue sky laws, all word processing, duplicating and printing expenses, all messenger and delivery expenses, any transfer taxes, the fees and expenses of the Company's legal counsel and independent public accountants, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance, fees and disbursements of one counsel for all of the Holders, and any fees and disbursements of underwriters customarily paid by insurers or sellers of securities; provided, however, that Registration Expenses shall not include underwriting discounts and commissions. (k) "Securities Act" means the Securities Act of 1933, as amended, or any successor statute thereto, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect at the time. (l) "Series A Preferred Stock" means the Series A Convertible Preferred Stock, $1.00 par value per share, of the Company, as constituted on the date hereof, any shares into which such Series A Preferred Stock shall have been changed or any shares resulting from any reclassification of such Series A Preferred Stock. (m) "Warrants" means the Warrants issued pursuant to the Purchase Agreement, entitling the holders thereof to purchase 133,333 shares of Common Stock, together with any replacement warrants issued with respect thereto or any securities issued pursuant thereto. 2. Registration. (a) Requested Registration and Shelf Registration. (i) At any time after October 9, 1998, upon written request by those Persons holding Series A Preferred Stock, Warrants and/or Registrable Securities representing, at the time, a majority of all Registrable Securities on a fully diluted basis after giving effect to the conversion of all Series A Preferred Stock and the exercise of all Warrants (the "Requisite Holders") that the Company effect the registration under the Securities Act of all or part of the Registrable Securities (a "Requested Registration"), the Company will use its best efforts to effect and maintain the registration under the Securities Act of the Registrable Securities which the Company has been so requested to register by the Holders within ninety (90) days after receipt of such request or within sixty (60) days after receipt of such request if the Company is qualified to file a registration statement on Commission Form S-3, S-2 or any successor or similar short-form registration statement (collectively, "Commission Form S-3"); provided, however, that the Company shall not be obligated to effect a Requested Registration pursuant to this subdivision during the 180 day period immediately following the commencement of the Company's public offering of equity securities nor shall the Company be obligated to effect more than three (3) Requested Registrations under this Section 2(a)(i). Subject to subdivision (f), the Company may include in such Requested Registration other securities of the Company for sale, for the Company's account or for the account of any other person, if and to the extent that the managing underwriter determines that the inclusion of such additional shares will not interfere with the orderly sale of the underwritten securities at a price range acceptable to the requesting Holders. Upon receipt of a written request pursuant to this subdivision (a) the Company shall promptly give written notice of such request to all Holders, and all Holders shall be afforded the opportunity to participate in such request as follows: The Company will be obligated to include in the Requested Registration such number of Registrable Securities of any Holder joining in such request as are specified in a written request by the Holder received by the Company within 20 days after receipt of such written notice from the Company. (ii) In addition to the rights of the Holders under Section 2(a)(i) above, as a condition to the mandatory conversion of the Series A Preferred Stock pursuant to the Certificate of Designation designating the Series A Preferred Stock, the Company shall file and cause to become effective at the time set forth in the Certificate of Designation a shelf registration statement on Commission Form S-3 or another appropriate form pursuant to Rule 415 under the Securities Act or any similar rule that may be adopted by the Commission, with respect to all the Registrable Securities requested by such Holders to be included in such shelf registration statement (each, a "Shelf Registration"). The Company will use its best efforts to amend such Shelf Registration from time to time at the request of any Holders to cover additional Registrable Securities held by such Holders, to keep such Shelf Registration continuously effective for a period of one year following the mandatory conversion of the Series A Preferred Stock or, if earlier, until all Registrable Securities covered thereby have been sold and to take all actions required to permit the sale of Registrable Securities thereunder. All other provisions of this Agreement regarding registration procedures shall apply to a Shelf Registration. (iii) In the event the Requisite Holders request the assistance of the Company in order to effect a sale of Registrable Securities under such Shelf Registration pursuant to an underwritten offering, then (aa) the Company will use its best efforts to assist in the sale of Registrable Securities in such underwritten offering under such Shelf Registration as if such offering were a Requested Registration under this Agreement, (bb) all Holders shall have a right to participate in such underwritten offering on the same basis as if such underwritten offering were a Requested Registration under Section 2(a)(i), with the cutback provisions of Section 2(f) being applied with respect to such offering and (cc) the other provisions of this Agreement relating to Requested Registrations shall apply, insofar as reasonably possible, to such underwritten offering mutatis mutandis. (b) Incidental Registration. If the Company for itself or any of its security holders (unless pursuant to demand registration rights granted with respect to Other Securities in compliance with this Agreement if and to the extent that the managing underwriter determines that the inclusion of Registrable Securities will interfere with the orderly sale of the underwritten securities at a price range acceptable to the holders of such Other Securities) shall at any time or times after the date hereof determine to register under the Securities Act any shares of its capital stock or other securities (other than: (i) the registration of an offer, sale or other disposition of securities solely to employees of, or other persons providing services to, the Company, or any subsidiary pursuant to an employee or similar benefit plan; or (ii) relating to a merger, acquisition or other transaction of the type described in Rule 145 under the Securities Act or a comparable or successor rule, registered on Form S-4 or similar or successor forms, including resales of such securities), on each such occasion the Company will notify each Holder of such determination at least thirty (30) days prior to the filing of such registration statement, and upon the request of any Holder given in writing within twenty (20) days after the receipt of such notice, the Company will use its best efforts as soon as practicable thereafter to cause any of the Registrable Securities specified by any such Holder to be included in such registration statement to the extent such registration is permissible under the Securities Act and subject to the conditions of the Securities Act (an "Incidental Registration"). (c) Registration Statement Form. The Company shall, if permitted by law, effect any registration requested under Section 2 by the filing of a registration statement on Commission Form S-3 and shall use its best efforts to take any action necessary to maintain its eligibility to utilize Commission Form S-3 to permit resales as requested by the Holders with respect to Transactions Involving Secondary Offerings as described in General Instruction I.B.3 of Commission Form S-3. (d) Expenses. The Company shall pay all Registration Expenses incurred in connection with any Incidental Registration and any Requested Registrations, and those holders of Registrable Securities participating in such registrations shall bear a pro rata share of any applicable underwriting discounts and commissions. (e) Effective Registration Statement. A Requested Registration or an Incidental Registration requested pursuant to Section 2(a) or Section 2(b), respectively, shall not be deemed to have been effected unless it has become effective with the Commission. Notwithstanding the foregoing, a registration statement will not be deemed to have been effected if: (i) after it has become effective with the Commission, such registration is interfered with by any stop order, injunction, or other order or requirement of the Commission or other governmental agency or any court proceeding for any reason other than a misrepresentation or omission by any Holder; or (ii) the conditions to closing specified in the purchase agreement or underwriting agreement entered into in connection with such registration are not satisfied, other than solely by reason of some act or omission by any Holder. (f) Priority in Incidental Registration. If an Incidental Registration is an underwritten registration initiated by the Company, and the managing underwriters shall give written advice to the Company that, in their opinion, market conditions dictate that no more than a specified maximum number of securities (the "Underwriter's Maximum Number") could successfully be included in such Incidental Registration, then: (i) first, the Company shall be entitled to include in such registration that number of securities which the Company proposes to offer and sell for its own account in such registration and which does not exceed the Underwriter's Maximum Number; and (ii) second, the Company will be obligated and required to include in such registration that number of shares of Registrable Securities which shall have been requested by the Holders thereof having registration rights hereunder and shares held by other holders of securities of the Company entitled to participate in such Incidental Registration. If less than all of the Registrable Securities or shares held by other holders entitled to participate in such registration requested to be included in any such registration by the holders of such securities can be so included due to these priority requirements, then each requesting holder's request shall be granted on an pro rata basis with the other requesting Holders and holders of securities of the Company having rights to participate in such Incidental Registration on a pro rata basis. (g) Notwithstanding anything in paragraphs (a) and (b) of this Section 2, the Company shall have the right to (i) delay any registration of Registrable Securities requested pursuant to paragraph (a) or (b) of this Section 2 or (ii) upon written notice to the Holders, prohibit the Holders from selling Registrable Securities under the Shelf Registration, in either case for up to sixty (60) days if such registration or sale, as applicable, would, in the judgment of the Company's Board of Directors, substantially interfere with any material transaction being considered at the time of receipt of the request from the Holders or at the time of the sale prohibition notice, as applicable; provided however, that the provisions of this paragraph (g) shall not be invoked by the Company on more than two occasions during any period of 365 days and shall not be invoked so as to delay any registration or sale of Registrable Securities for more than sixty (60) days; and provided further, that the Holders shall not unreasonably withhold their consent to a delay beyond sixty (60) days if requested by the Company. The time period during which any sale prohibition is in effect under this Section 2(g) shall be added to the time period for which a registration statement is otherwise required to remain effective under Section 2(a) of this Agreement. 3. Registration Procedures. (a) If and whenever the Company is required to use its best efforts to effect the registration of any Registrable Securities under the Securities Act as provided in Section 2, the Company, as expeditiously as possible and subject to the terms and conditions of Section 2, will: (i)prepare and file with the Commission the requisite registration statement to effect such registration and use its best efforts to cause such registration to become and remain effective; (ii)permit any Holder which, in the reasonable judgment of the Holder, might be deemed to be an underwriter or a controlling person of the Company, to participate in the preparation of such registration statement and to require the insertion therein of material, furnished to the Company in writing, which in the reasonable judgment of such Holder and its counsel should be included and which is not reasonably objected to by the Company and its Counsel; (iii)prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement until the earlier of such time as all of such securities have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such registration statement or the expiration of 180 days after such registration statement becomes effective; (iv)furnish to the Holders such number of conformed copies of such registration statement and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Securities Act, in conformity with the requirements of the Securities Act, and such other documents, as the purchaser or any Holder of Registrable Securities to be sold under such registration statement may reasonably request in order to facilitate the distribution of such Registrable Securities; (v)use its best efforts to register or qualify all Registrable Securities covered by such registration statement under such other United States state securities or blue sky laws of such jurisdictions as any Holder of Registrable Securities to be sold under registration statement shall reasonably request, to keep such registration or qualification in effect for so long as such registration remains in effect, and take any other action which may be customary in similar offerings to enable the Holder of Registrable Securities to be sold under such registration statement to consummate the disposition in such jurisdictions of the securities owned by such Holder, except that the Company shall not for any such purpose be required to (a) qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this subdivision (v) be obligated to be so qualified, or (b) subject itself to taxation in any such jurisdiction. (vi)use its best efforts to cause all Registrable Securities covered by such registration statement to be registered with or approved by such other United States state governmental agencies or authorities as may be necessary to enable the Holder of Registrable Securities to be sold under such registration statement to consummate the intended disposition of such Registrable Securities; (vii)in the event of the issuance of any stop order suspending the effectiveness of the registration statement, or of any order suspending or preventing the use of any related prospectus or suspending the qualification of any Registrable Securities included in such registration statement for sale in any jurisdiction, the Company shall use its best efforts promptly to obtain the withdrawal of such order; (viii)use it best efforts to furnish to the Holders of Registrable Securities to be sold under such registration statement (1) an opinion, dated the effective date of the registration statement, of the independent counsel representing the Company for the purposes of such registration, addressed to the underwriters, if any, and to the Holders making such request, stating that such registration statement has become effective under the Securities Act and that (i) to the best knowledge of such counsel, no stop order suspending the effectiveness thereof has been issued and no proceedings for that purpose have been instituted or are pending or contemplated under the Securities Act; (ii) the registration statement, the related prospectus, and each amendment or supplement thereto, comply as to form in all material respects with the requirements of the Securities Act and the applicable rules and regulations of the Commission thereunder (except that such counsel need express no opinion as to financial statements contained therein); (iii) such counsel has no reason to believe that either the registration statement or the prospectus, or any amendment or supplement thereto, contains any untrue statement of a material fact or omits a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (iv) the descriptions in the registration statement or the prospectus, or any amendment or supplement thereto, of all legal and governmental matters and contracts and other legal documents or instruments are accurate and fairly present the information required to be shown; and (v) such counsel does not know of any legal or governmental proceedings, pending or contemplated, required to be described in the registration statement or prospectus, or any amendment or supplement thereto, which are not described as required nor of any contracts or documents or instruments of a character required to be described in the registration statement or prospectus, or any amendment or supplement thereto or to be filed as exhibits to the registration statement which are not described and filed as required; and (2) a letter, dated the effective date of the registration statement, from the independent certified public accountants of the Company, addressed to the underwriters, if any, and to the Holders making such request, stating that they are independent certified public accountants within the meaning of the Securities Act and that in the opinion of such accountants, the financial statements and other financial data of the Company included in the registration statement or the prospectus, or any amendment or supplement thereto, comply as to form in all material respects with the applicable accounting requirements of the Securities Act. Such opinion of counsel shall additionally cover such legal matters with respect to the registration in respect of which such opinion is being given as the Holders may reasonably request. Such letter from the independent certified public accountants shall additionally cover such other financial matters (including information as to the period ending not more than five business days prior to the date of such letter) with respect to the registration in respect of which such letter is being given as the Holders may reasonably request. (ix)immediately notify the Holders of Registrable Securities included in such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made, and at the request of the Holders promptly prepare and furnish to the Holders a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made; (x)otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months, but not more than eighteen months, beginning with the first full calendar month after the effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder, and not file any amendment or supplement to such registration statement or prospectus to which any Holder shall have reasonably objected in writing on the grounds that such amendment or supplement does not comply in all material respects with the requirements of the Securities Act or of the rules or regulations thereunder, having been furnished with a copy thereof at least two business days prior to the filing thereof to the extent reasonably possible; (xi)provide a transfer agent for all Registrable Securities covered by such registration statement not later than the effective date of such registration statement; (xii)use its best efforts to cause to be quoted or listed all Registrable Securities covered by such registration statement on NASDAQ and any securities exchange on which any of the Registrable Securities are then quoted or listed; and (xiii)otherwise use its best efforts to achieve the objectives of the Holders including, without limitation, participation by senior management in presentations to prospective purchasers and other marketing activities consistent with those customarily conducted by issuers in connection with primary offerings of securities. (b) As a condition to the Company's obligation under this Section with respect to any Holder, the Company may require such Holder of Registrable Securities to be sold under such registration statement, at the Company's expense, to furnish the Company with such information and undertakings as it may reasonably request regarding such Holder and the distribution of such securities as the Company may from time to time reasonably request in writing. (c) Each Holder, by execution of this Agreement, agrees (A) that upon receipt of any notice of the Company of the happening of any event of the kind described in subdivision (a)(ix) of this Section 3, such Holder will forthwith discontinue its disposition of Registrable Securities pursuant to the registration statement relating to such Registrable Securities until the receipt by such Holder of the copies of the supplemented or amended prospectus contemplated by subdivision (a)(ix) of this Section 3 and, if so directed by the Company, will deliver to the Company all copies other than permanent file copies, then in possession of the Holders of the prospectus relating to such Registrable Securities current at the time of receipt of such notice and (B) that it will immediately notify the Company, at any time when a prospectus relating to the registration of such Registrable Securities is required to be delivered under the Securities Act, of the happening of any event as a result of which information previously furnished by such Holder to the Company for inclusion in such prospectus contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made. In the event the Company or any such Holder shall give any such notice, the period referred to in subdivision (a)(iii) of this Section 3 shall be extended by a number of days equal to the number of days during the period from and including the giving of notice pursuant to subdivision (a)(ix) of this Section 3 to and including the date when such Holder shall have received the copies of the supplemented or amended prospectus contemplated by subdivision (a)(ix) of this Section 3. 4. Underwritten Offerings. (a) Underwritten Offering. In connection with any underwritten offering pursuant to a registration requested under Section 2(a), the Company will enter into an underwriting agreement with the underwriters for such offering, such agreement to be in form and substance reasonably satisfactory to all Holders requesting such registration and such Holders' underwriters in their reasonable judgment and to contain such representations and warranties by the Company and such other terms as are customarily contained in agreements of that type, including, without limitation, indemnities to the effect and to the extent provided in Section 6. Each such Holder shall be a party to such underwriting agreement and may, at its option, require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters shall also be made to and for the benefit of each such Holder and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of each such Holder. No Holder requesting such registration shall be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such Holder and its intended method of distribution and any other representation required by law. (b) Selection of Underwriters. If a Requested Registration pursuant to Section 2(a) involves an underwritten offering, then the Company shall select the underwriter from underwriting firms of national reputation, with expertise in comparable offerings by companies engaged in businesses similar to that of the Company, subject to the approval of the Holders of a majority of the Registrable Securities to be included in such registration, which approval shall not be unreasonably withheld. (c) Holdback Agreements. Each Holder agrees, if so reasonably required by the managing underwriter in a registration pursuant to Section 2, not to effect any public sale or distribution of Registrable Securities or sales of such Registrable Securities pursuant to Rule 144 or Rule 144A under the Securities Act, during the seven (7) days prior to and the 180 days after any firm commitment underwritten registration pursuant to Section 2 has become effective (except as part of such underwritten registration) or, if the managing underwriter advises the Company that, in its opinion, no such public sale or distribution should be effected for a period of not more than 180 days after such underwritten registration in order to complete the sale and distribution of securities included in such registration and the Company gives notice to such effect to such Holders of such advice, each Holder shall not effect any public sale or distribution of Registrable Securities or sales of such Registrable Securities pursuant to Rule 144 or Rule 144A under the Securities Act during such period after such underwritten registration, except as part of such underwritten registration, whether or not such Holder participates in such registration. 5. Preparation, Reasonable Investigation. In connection with the preparation and filing of each registration statement under the Securities Act other than pursuant to an underwritten offering, the Company will give the Holders of Registrable Securities to be sold under such registration statement, the underwriters, if any, and their respective counsel and accountants, drafts and final copies of such registration statement, each prospectus included therein or filed with the Commission and each amendment thereof or supplement thereto, at least 5 business days prior to the filing thereof with the Commission, and will give each of them such access to its books and records and such opportunities to discuss the business of the Company with its officers and the independent public accountants who have certified its financial statements as shall be necessary, in the opinion of such Holders and such underwriters' respective counsel, to conduct a reasonable investigation within the meaning of the Securities Act. 6. Indemnification and Contribution. (a) Indemnification by the Company. In the event of any registration under the Securities Act pursuant to Section 2 of any Registrable Securities covered by such registration, the Company will, and hereby does, indemnify and hold harmless each Holder of Registrable Securities to be sold under such registration statement, each such Holder's legal counsel, each other person who participates as an underwriter in the offering or sale of such securities (if so required by such underwriter as a condition to including the Registrable Securities of the Holders in such registration) and each other person, if any, who controls any such Holder or any such underwriter within the meaning of the Securities Act (collectively, the "Indemnified Parties"), against any losses, claims, damages or liabilities, joint or several, to which the Holders or underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained therein or any document incorporated therein by reference, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or arise out of any violation by the Company of any rule or regulation promulgated under the Securities Act or state securities law applicable to the Company and relating to action or inaction required of the Company in connection with any such registration, and the Company will reimburse the Indemnified Parties for any legal or any other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceeding; provided, however, that the Company shall not be liable to any Indemnified Party in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Company by such Indemnified Party. (b) Indemnification by the Holders. The Company may require, as a condition to including any Registrable Securities of any person or entity in any registration statement filed pursuant to Section 2, that the Company shall have received an undertaking reasonably satisfactory to it from such person or entity to indemnify and hold harmless (in the same manner and to the same extent as set forth in subdivision (a) of this Section 6) the Company, each director of the Company, each officer of the Company and each other person, if any, who controls the Company within the meaning of the Securities Act, with respect to any statement or alleged statement in or omission or alleged omission from such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if, and only if, such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with information furnished in writing to the Company directly by such person or entity specifically for use therein; provided, however, that the obligation of any Holder hereunder shall be limited to an amount equal to the proceeds received by such Holder upon the sale of Registrable Securities sold in the offering covered by such registration. (c) Notices of Claims, etc. Promptly after receipt by an Indemnified Party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding subdivisions of this Section 6, such Indemnified Party will, if a claim in respect thereof is to be made against a party required to provide indemnification (an "Indemnifying Party"), give written notice to the latter of the commencement of such action, provided, however, that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligation under the preceding subdivisions of this Section 6, except to the extent that the Indemnifying Party is actually prejudiced by such failure to give notice. In case any such action is brought against an Indemnified Party, unless in such Indemnified Party's reasonable judgment a conflict of interest between such Indemnified and indemnifying parties may exist in respect of such claim, the Indemnifying Party shall be entitled to participate in and to assume the defense thereof, jointly with any other Indemnifying Party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such Indemnified Party, and after notice from the Indemnifying Party to such Indemnified Party of its election so to assume the defense thereof, the Indemnifying Party shall not be liable to such Indemnified Party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. No Indemnifying Party shall consent to entry of any judgment or enter into any settlement without the consent of the Indemnified Party which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. (d) Other Indemnification. Indemnification similar to that specified in the preceding subdivisions of this Section 6 (with appropriate modifications) shall be given by the Company and each Holder of Registrable Securities included in any registration statement with respect to any required registration or other qualification of securities under any Federal or state law or regulation of any governmental authority, other than the Securities Act. (e) Indemnification Payment. The indemnification required by this Section 6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. (f) Survival of Obligations. The obligations of the Company and of the Holders under this Section 6 shall survive the completion of any offering of Registrable Securities under this Agreement. (g) Contribution. If the indemnification provided for in this Section 6 is unavailable or insufficient to hold harmless an Indemnified Party, then each Indemnifying Party shall contribute to the amount paid or payable to such Indemnified Party as a result of the losses, claims, damages or liabilities referred to in this Section 6 an amount or additional amount, as the case may be, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party or parties on the one hand and the Indemnified Party on the other in connection with the statements or omissions which resulted in such losses, claims, demands or liabilities as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Indemnifying Party or parties on the one hand or the Indemnified Party on the other and the parties' relative, intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid to an Indemnified Party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this Section 6(g) shall be deemed to include any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any action or claim which is the subject of this Section 6. No person guilty of fraudulent misrepresentation within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. 7. Covenants Relating to Rule 144. With a view to making available the benefits of certain rules and regulations of the Commission which may at any time permit the sale of securities of the Company to the public without registration after such time as a public market exists for the Common Stock of the Company, the Company agrees: (a) to make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times after the effective date of the first registration under the Securities Act filed by the Company for an offering of its securities to the general public; (b) to use its best efforts to then file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act, as amended (at any time after it has become subject to such reporting requirements); and (c) so long as a Holder owns any Registrable Securities, to furnish to the Holder forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of said Rule 144 (at any time after 90 days after the effective date of the first registration statement filed by the Company for an offering of its securities to the general public), and of the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements) a copy of the most recent annual or quarterly report of the Company, and such other reports and documents of the Company as a Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing a Holder to sell any such securities without registration. 8. Other Registration Rights. The Company represents and warrants that it has not granted any registration rights to any Person other than as described in the Purchase Agreement. The Company shall not grant to any Person any registration rights more favorable than or inconsistent with any of those contained herein, so long as any of the registration rights under this Agreement remain in effect. 9. Miscellaneous. (a) Specific Performance. The parties hereto acknowledge that there may be no adequate remedy at law if any party fails to perform any of its obligations hereunder and that each party may be irreparably harmed by any such failure, and accordingly agree that each party, in addition to any other remedy to which it may be entitled at law or in equity, shall be entitled to compel specific performance of the obligations of any other party under this Agreement in accordance with the terms and conditions of this Agreement. (b) Notices. All demands, requests, notices and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if delivered personally or sent by United States first class mail, postage prepaid, and to the parties hereto at the following address or at such other address as any party hereto shall hereafter specify by notice to the other party hereto: (i) if to the Company, addressed to: CTC Communications Corp. 360 Second Avenue Waltham, MA 02154 Attention: Steven Jones and John Pittenger Facsimile No.: 617-890-1613 with a copy to: Ropes & Gray One International Place Boston, MA 02110-2624 Attention: Mary Weber, Esq. Facsimile No.: 617-951-7050 Leonard R. Glass, Esq. Law Offices of Leonard R. Glass, P.A. 45 Central Avenue P.O. Box 579 Tenafly, NJ 07602 Facsimile No.: 201-894-1718 (ii) if to the Holders, addressed to them at: Spectrum Equity Investors One International Place 29th Floor Boston, MA 02110 Attention: Kevin J. Maroni Facsimile No.: 617-464-4601 with a copy to: Edwards & Angell 101 Federal Street Boston, MA 02110 Attention: Stephen O. Meredith, Esq. Facsimile No.: 617-439-4170 Except as otherwise provided herein, all such demands, requests, notices and other communications shall be deemed to have been received on the date of personal delivery thereof or on the third business day after the mailing thereof. (c) Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of Massachusetts, without regard to conflicts of law principles thereof. (d) Headings. The descriptive headings of the several sections and paragraphs of this Agreement are inserted for convenience only, and do not constitute a part of this Agreement and shall not affect in any way the meaning or interpretation of this Agreement. (e) Entire Agreement; Amendments. This Agreement and the other writings referred to herein or delivered pursuant hereto which form a part hereof contain the entire understanding of the parties with respect to its subject matter. This Agreement supersedes all prior agreements and understandings between the parties with respect to its subject matter. This Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only by a written instrument duly executed by the Company and the Requisite Holders. Each Holder of any Registrable Securities at the time or thereafter outstanding shall be bound by an amendment or waiver authorized by this Section 9(e), whether or not any such Registrable Securities shall have been marked to indicate such consent. (f) Assignability. This Agreement and all of the provisions hereof will be assigned, without the consent of the Company, by any Holder to, and shall inure to the benefit of, any purchaser, transferee or assignee of any Series A Preferred Stock, Warrants, or Registrable Security to the extent of the securities so transferred or assigned, provided that (i) such purchaser, transferee or assignee is an Affiliate or beneficial owner of the seller, transferor or assignor, (ii) after giving effect to such sale, transfer or assignment, the purchaser, transferee or assignee holds Series A Preferred Stock, Warrants or Registrable Securities representing, upon conversion and exercise thereof, at least 50,000 shares of Common Stock (as adjusted to give effect to any stock dividends or stock splits), or (iii) the seller, transferor or assignor does not affirmatively restrict in writing the transfer or assignment of rights hereunder with respect to such securities. However, the Company shall not be required to recognize any such purchaser, transferee or assignee as a Holder under this Agreement unless and until either (i) such person becomes the holder of record of Series A Preferred Stock, Warrants, or Registrable Securities or (ii) the Company receives written notice of such purchase, transfer or assignment and a written agreement by the purchaser, assignee or transferee to be bound by the provisions of this Agreement. (g) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (h) Stock Splits, Etc. If the Company at any time subdivides (by any stock split, stock dividend, recapitalization or otherwise) its outstanding shares of Common Stock into a greater number of shares or if the outstanding shares of Common Stock shall be combined (by reverse stock split or otherwise) into a smaller number of shares, all numbers, percentages, computations and the like in this Agreement shall be deemed modified as necessary to give appropriate effect to such subdivision or combination. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. CTC COMMUNICATIONS CORP. By: Name: Title: SPECTRUM EQUITY INVESTORS II, L.P. By Spectrum Equity Associates II, L.P., its general partner By _________________________________ Kevin J. Maroni, a General Partner DOEG HILL I, LLC By: _________________________________ Dennis Patrick, Member ______________________________________ Matthew N. Mochary ______________________________________ Robert A. Nicholson ______________________________________ Benjamin Coughlin ______________________________________ Fred Wang ______________________________________ Michael J. Kennealy ______________________________________ Shawn Colo ______________________________________ Kristin Cashin EX-10.3 6 WARRANT ISSUED TO SPECTRUM Exhibit 10.3 WARRANT CTC Communications Corp. THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A PRIVATE PLACEMENT, WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD, ASSIGNED, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT COVERING THE TRANSFER OR, SUBJECT TO THE PROVISIONS OF THE SECURITIES PURCHASE AGREEMENT DATED AS OF APRIL 10, 1998 AMONG THE ISSUER AND THE PURCHASERS NAMED THEREIN, AS AMENDED FROM TIME TO TIME, AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED. Date of Issuance: April 10, 1998 Certificate No. W-__ FOR VALUE RECEIVED, CTC Communications Corp., a Massachusetts corporation (the "Corporation"), hereby grants to ______________, or its registered assigns (the "Registered Holder") the right to purchase from the Corporation _________ shares of Common Stock at a price of $9.00 per share, subject to adjustment as provided herein. This Warrant is one of the warrants (together with any replacements or subdivisions thereof, the "Warrants") issued pursuant to the terms of the Securities Purchase Agreement, dated as of April 10, 1998 (the "Purchase Agreement"), among the Corporation and the Purchasers named therein. Certain capitalized terms used herein are defined in Section 8 hereof. Capitalized terms used herein but not otherwise defined herein shall have the meanings set forth for such terms in the Purchase Agreement. This Warrant is subject to the following provisions: Section 1. Exercise of Warrant. A. Exercise Period. The Registered Holder may exercise, in whole or in part, the purchase rights represented by this Warrant at any time and from time to time after the Date of Issuance to and including the fifth (5th) anniversary of the Date of Issuance (the "Exercise Period"). B. Exercise Procedure. (i) This Warrant or any part hereof specified by the Registered Holder shall be deemed to have been exercised when the Corporation has received all of the following items (the "Exercise Time"): (a) a completed Exercise Agreement, as described in Section 1C below, executed by the Person exercising all or part of the rights represented by this Warrant; (b) this Warrant or an affidavit as provided in Section 10 hereof; (c) the aggregate Exercise Price for the number of shares of Common Stock being purchased through such exercise, such aggregate Exercise Price to be payable by any combination of (1) a bank cashier's check or wire transfer in immediately available funds to the Corporation in an amount equal to the product of the Exercise Price multiplied by the number of shares of Common Stock being purchased with the proceeds of such wire transfer or (2) a written notice to the Corporation that the Holder is exercising the Warrants (or a portion thereof) and as consideration of such exercise is authorizing the Corporation to withhold from issuance a number of shares of Common Stock issuable upon exercise of this Warrant which, when multiplied by the sum of (x) the Market Price Per Share of the Common Stock minus (y) the Exercise Price is equal to the aggregate Exercise Price for the number of shares of Common Stock being purchased with such consideration (in which event such withheld shares shall no longer be issuable under this Warrant); and (d) if this Warrant is not registered in the name of the original Registered Holder, an Assignment or Assignments substantially in the form set forth in Exhibit II hereto evidencing the assignment of this Warrant to the Purchaser. (ii) Certificates for shares of Common Stock purchased upon exercise of all or part of this Warrant shall be delivered by the Corporation to the Purchaser within ten (10) business days after the date of the Exercise Time. Unless this Warrant has expired or all of the purchase rights represented hereby have been exercised, the Corporation shall prepare a new Warrant, substantially identical hereto, representing the rights formerly represented by this Warrant which have not expired or been exercised and shall, within such ten (10) business day period, deliver such new Warrant to the Person designated for delivery in the Exercise Agreement. (iii) The Common Stock issuable upon the exercise of all or part of this Warrant shall be deemed to have been issued to the Purchaser at the Exercise Time, and the Purchaser shall be deemed for all purposes to have become the record holder of such Common Stock at the Exercise Time. (iv) The issuance of certificates for shares of Common Stock upon exercise of all or part of this Warrant shall be made without charge to the Registered Holder or the Purchaser for any issuance tax in respect thereof or other cost incurred by the Corporation in connection with such exercise and the related issuance of shares of Common Stock. Each share of Common Stock issuable upon exercise of all or part of this Warrant shall be fully paid and nonassessable and free from all Liens and charges with respect to the issuance thereof. (v) The Corporation shall from time to time take all such action as may be necessary to assure that the par value per share of the unissued Common Stock issuable upon exercise of this Warrant is at all times equal to or less than the Exercise Price, on a per share basis. (vi) The Corporation shall assist and cooperate with any Registered Holder or Purchaser required to make any governmental filings or to obtain any governmental approvals prior to or in connection with any exercise of all or part of this Warrant (including, without limitation, making any filings required to be made by the Corporation). (vii) Notwithstanding any other provision hereof, if an exercise of any portion of this Warrant is to be made in connection with a public offering or Organic Change, the exercise of any portion of this Warrant may, at the election of the holder hereof, be conditioned upon the consummation of the public offering or Organic Change, in which case such exercise shall not be deemed to be effective until immediately prior to the consummation of such public offering or Organic Change. (viii) The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of issuance upon the exercise of the Warrants, such number of shares of Common Stock as are issuable upon the exercise of all outstanding Warrants. The Corporation shall take all such actions as may be necessary to assure that all such shares of Common Stock may be so issued without violation of any applicable law or governmental regulation applicable to the Company or any requirements of NASDAQ or any securities exchange upon which shares of Common Stock may be listed or quoted (except for official notice of issuance which shall be immediately delivered by the Corporation upon each such issuance). C. Exercise Agreement. The Exercise Agreement to be executed in connection with the exercise of this Warrant shall be substantially in the form set forth in Exhibit I hereto, except that if the shares of Common Stock are not to be issued in the name of the Person in whose name this Warrant is registered, the Exercise Agreement shall also state the name of the Person to whom the certificates for the shares of Common Stock are to be issued. Section 2. Adjustment of Number of Shares and Exercise Price. A. The number of shares of Common Stock obtainable upon exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time as provided in this Section 2. B. Exercise Price. The initial exercise price shall be nine dollars ($9.00) per share of Common Stock, which may be adjusted from time to time hereafter (as so adjusted, the "Exercise Price") . If and whenever on or after the original date of issuance of the Warrants the Corporation issues or sells, or in accordance with Section 2(C) is deemed to have issued or sold, any shares of its Common Stock or Convertible Securities for a consideration per share less than the Exercise Price in effect immediately prior to the time of such issue or sale, then upon such issue or sale, the Exercise Price shall be reduced to an amount determined by dividing (a) the sum of (1) the product derived by multiplying (i) the Exercise Price in effect immediately prior to such issue or sale times (ii) the number of shares of Common Stock Deemed Outstanding immediately prior to such issue or sale, plus (2) the consideration, if any, received (or deemed received pursuant to Section 2(C)(ii) below) by the Corporation upon such issue or sale, by (b) the number of shares of Common Stock Deemed Outstanding immediately after such issue or sale. C. Effect on Exercise Price of Certain Events. For purposes of determining the adjusted Exercise Price under Section 2, the following shall be applicable: (i) Issuance of Convertible Securities. If the Corporation in any manner issues or sells any Convertible Securities, whether or not the rights to exchange or convert any such Convertible Securities are immediately exercisable, and the price per share for which Common Stock is issuable upon such conversion or exchange is less than the Exercise Price in effect immediately prior to the time of such issue or sale, then the maximum number of shares of Common Stock issuable upon exercise, conversion or exchange of such Convertible Securities shall be deemed to be outstanding and to have been issued and sold by the Corporation at the time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this paragraph, the "price per share for which Common Stock is issuable" shall be determined by dividing (a) the total amount received or receivable by the Corporation as consideration for the issue or sale of such Convertible Securities, plus the cumulative minimum aggregate amount of additional consideration, if any, payable to the Corporation upon the exercise, conversion or exchange thereof and, if applicable, the exercise, conversion and exchange of any other Convertible Securities that such Convertible Securities may be converted into or exchanged for, by (b) the total maximum number of shares of Common Stock issuable upon the exercise, conversion or exchange of all such Convertible Securities. No further adjustment of the Exercise Price shall be made when Common Stock and, if applicable, any other Convertible Securities, are actually issued upon the exercise, conversion or exchange of such Convertible Securities. (ii) Change in Exercise Price or Conversion Rate. If the additional consideration payable to the Corporation upon the exercise, conversion or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exchangeable for Common Stock should change at any time, the Exercise Price in effect at the time of such change shall be readjusted to the Exercise Price that would have been in effect at such time had such Convertible Securities that are still outstanding provided for such changed additional consideration or changed conversion rate, as the case may be, at the time such Convertible Securities were initially granted, issued or sold; and on the termination date of any right to exercise, convert or exchange such Convertible Securities without such right having been duly exercised, the Exercise Price then in effect hereunder shall be increased to the Exercise Price that would have been in effect at the time of such termination had such Convertible Securities, to the extent outstanding immediately prior to such termination, never been issued. (iii) Exceptions for Excluded Securities. Notwithstanding the foregoing, no adjustments to the Exercise Price shall be made under Section 2 with respect to the issuance of any Excluded Securities. D. Subdivision or Combination of Common Stock. If the Corporation at any time subdivides (by any stock split, stock dividend, recapitalization or otherwise) its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to such combination shall be proportionately reduced, and conversely, in the event the outstanding shares of Common Stock shall be combined (by reverse stock split or otherwise) into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall be proportionately increased. In any such event all numbers, percentages, computations and the like in this Warrant shall be deemed modified as necessary to give appropriate effect to such subdivision or combination. E. Adjustment in Number of Shares Issuable. Upon each adjustment in the Exercise Price pursuant to any provisions of Section 2(D), the number of shares of Common Stock purchasable hereunder shall be adjusted, to the nearest whole share, to the product obtained by multiplying such number of shares purchasable immediately prior to the event giving rise to such adjustment in the Exercise Price by a fraction, the numerator of which shall be the Exercise Price immediately prior to such adjustment and the denominator of which shall be the Exercise Price in effect immediately thereafter. F. Certain Events. If an event not specified in this Section 2 occurs that has substantially the same economic effect on the Warrants as those specifically enumerated, then this Section 2 shall be construed liberally, mutatis mutandis, in order to give the Warrants the intended benefit of the protections provided under this Section 2. In such event, the Corporation's Board of Directors shall make an appropriate adjustment in the Exercise Price so as to protect the rights of the holders of the Warrants; provided that no such adjustment shall increase the Exercise Price as otherwise determined pursuant to this Section 2 or decrease the number of shares of Common Stock issuable upon exercise of this Warrant. G. Notices. (i) Immediately upon any adjustment of the Exercise Price, the Corporation shall give written notice thereof to the Registered Holder of this Warrant, setting forth in reasonable detail and certifying the calculation of such adjustment. (ii) The Corporation shall give written notice to the Registered Holder of this Warrant at least twenty (20) days prior to the date on which the Corporation closes its books or takes a record (a) with respect to any dividend or distribution upon Common Stock, (b) with respect to any pro rata subscription offer to holders of Common Stock or (c) for determining rights to vote with respect to any dissolution or liquidation. Section 3. Reorganization, Reclassification, Consolidation, Merger or Sale. Any recapitalization, reorganization, reclassification, consolidation, merger (other than a consolidation or merger in which the Company is the surviving corporation and which does not result in the reclassification of any Common Stock) or sale of all or substantially all of the Corporation's assets to another Person or other transaction which is effected in such a way that holders of Common Stock are entitled to receive (either directly or upon subsequent liquidation) stock, securities, cash or assets with respect to or in exchange for Common Stock is referred to herein as an "Organic Change." Prior to the consummation of any Organic Change, the Corporation shall make appropriate provision to insure that each of the holders of the Warrants shall thereafter have the right to acquire and receive in lieu of or in addition to (as the case may be) the shares of Common Stock immediately theretofore issuable upon the exercise of such holder's Warrant, such shares of stock, securities, cash or assets as may be issued or payable with respect to or in exchange for the number of shares of Common Stock immediately theretofore issuable upon exercise of such holder's Warrant had such Organic Change not taken place. In any such case, the Corporation shall make appropriate provision with respect to such holders' rights and interests to insure that the provisions of Section 2 and Section 3 hereof shall thereafter be applicable to the Warrants. The Corporation shall not effect any such consolidation, merger or sale, unless prior to the consummation thereof, the successor entity (if other than the Corporation) resulting from consolidation or merger or the entity purchasing such assets assumes by written instrument the obligation to deliver to each such holder such shares of stock, securities, cash or assets as, in accordance with the foregoing provisions, such holder may be entitled to acquire. Section 4. Dividends. If the Corporation declares or pays a dividend upon the Common Stock, except for a stock dividend payable in shares of Common Stock, then the Exercise Price shall be reduced, on a cumulative basis, by an amount equal to the amount of such dividend which would have been paid to the holder of each share of Common Stock had all Warrants issued under the Purchase Agreement been exercised prior to the record date for payment of such dividend, until such Exercise Price has been reduced to zero, and thereafter the Corporation shall pay to the Registered Holder of this Warrant at the time of payment thereof an amount equal to such dividend. Section 5. Purchase Rights. If at any time the Corporation grants, issues or sells any rights to purchase stock, warrants, securities or other property pro rata to the holders of Common Stock (the "Purchase Rights"), then the Registered Holder of this Warrant shall be entitled to obtain, upon the same terms on which holders of Common Stock are to receive such Purchase Rights, the aggregate Purchase Rights which such holder could have acquired if such holder had held the number of shares of Common Stock issuable upon complete exercise of this Warrant immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights. Section 6. Transfer Restriction. The Warrants are subject to the transfer restrictions in Section 4.8 of the Purchase Agreement. Section 7. Certificates, Notices and Consents. A. Certificates. Upon the occurrence of any event requiring adjustments of the number of shares subject to this Warrant pursuant to Section 2, the Corporation shall mail to the Registered Holder (by registered or certified mail, postage prepaid) a certificate signed by the President or a Vice President and by the Treasurer or an Assistant Treasurer of the Corporation, setting forth in reasonable detail the events requiring the adjustment and the method by which such proposed adjustment was calculated, specifying the adjusted number of shares subject to this Warrant after giving effect to the proposed adjustment and the number of shares of Common Stock to be issued pursuant to Section 2 hereof. B. Notice. If the Corporation after the Date of Issuance shall propose to: (i) pay any dividend payable in stock to the holders of Common Stock or to make any other distribution to the holders of Common Stock or any extraordinary dividend directly or indirectly attributable to proceeds from the sale or other disposition of a significant business or asset of the Corporation; (ii) offer to the holders of Common Stock rights to subscribe for or purchase any additional shares of any class of stock or any other rights or options; (iii) effect any reclassification except the subdivision or combination of shares of outstanding Common Stock; (iv) effect any Organic Change or sale transaction described in Section 2B or the liquidation, dissolution or winding up of the Corporation; or (v) engage in any diluting event not otherwise mentioned in this Section 6B, then, in each such case, the Corporation shall mail (by registered or certified mail, postage prepaid) to the Registered Holder notice of such proposed action, which shall specify the date on which the books of the Corporation shall close, or a record date shall be established, for determining holders of Common Stock entitled to receive such stock dividends or other distribution of such rights or options, or the date on which such reclassification, reorganization, consolidation, merger, sale, transfer, other disposition, liquidation, dissolution or winding up shall take place or commence, as the case may be, and the date as of which it is expected that holders of Common Stock of record shall be entitled to receive securities or other property deliverable upon such action, if any such date is to be fixed. Such notice shall be mailed, in the case of any action covered by clauses (i), (ii) or (v) above, at least 20 days prior to the record date for determining holders of Common Stock for purposes of receiving such payment or offer, and, in the case of any action covered by clause (iii) above, at least 20 days prior to the date upon which such action takes place, and, in the case of any action covered by clause (iv) above, at least 20 days prior to the date on which the Corporation closes its books or takes a record for determining rights to vote with respect to any event covered by clause (iv) and 20 days prior to any record date to determine holders of Common Stock entitled to receive such securities or other property. C. Failure and Defects. Failure to file any certificate or notice or to mail any notice, or any defect in any certificate or notice, pursuant to this Section 6, shall not affect the legality or validity of the adjustment of the Exercise Price and/or number of shares of Common Stock subject to this Warrant pursuant to Section 2. Section 8. Definitions. The following terms have meanings set forth below: "Certificate of Designation" shall mean the Certificate of Designation of Series A Convertible Preferred Stock in the form attached to the Purchase Agreement as Exhibit B. "Common Stock" means, collectively, the Corporation's Common Stock, par value $.01 per share. "Convertible Securities" shall have the meaning set forth in the Certificate of Designation. "Date of Issuance" means the date of initial issuance of this Warrant pursuant to the Purchase Agreement (as of immediately after such issuance) regardless of the number of times new certificates representing the unexpired and unexercised rights formerly represented by this Warrant shall be issued. "Excluded Securities" shall have the meaning set forth in the Certificate of Designation. "Exercise Period" shall have the meaning set forth in Section 1(A) hereof. "Exercise Price" shall have the meaning set forth in Section 2 hereof. "Exercise Time" shall have the meaning set forth in Section 1(B) hereof. "Majority Warrant Holders" means, at any time, the holders of Warrants representing the right to purchase a majority of the aggregate number of shares of unissued Common Stock then issuable upon exercise of all Warrants. "Market Price Per Share of Common Stock" means the average closing bid price (or closing sales price, as applicable) per share for the Company's Common Stock on NASDAQ (or such national stock exchange upon which the Corporation's Common Stock is then listed), for a period of 30 consecutive trading days ending on the last trading day immediately preceding the Exercise Time. "Organic Change" shall have the meaning set forth in Section 3 hereof. "Person" means an individual, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof. "Purchaser" shall mean the Person(s) to whom shares of Common Stock are issued pursuant to the exercise of this Warrant. "Registered Holder" with respect to any Warrant means the Person to whom the Warrant was initially issued pursuant to the Purchase Agreement or any assignee of such Person as to whom the Corporation has received an executed Assignment substantially in the form of Exhibit II hereto, and "Registered Holders" at any time means all Registered Holders of Warrants then outstanding. Section 9. No Voting Rights; Limitations of Liability. Prior to the exercise of this Warrant and except as otherwise specifically provided herein or in the Purchase Agreement, this Warrant shall not entitle the holder hereof to any rights as a stockholder of the Corporation. No provision hereof, in the absence of affirmative action by the Registered Holder to purchase Common Stock, and no enumeration herein of the rights or privileges of the Registered Holder shall give rise to any liability of such holder for the exercise of Warrants hereunder or as a stockholder of the Corporation. Section 10. Warrant Exchangeable for Different Denomination. This Warrant is exchangeable, upon the surrender hereof by the Registered Holder at the principal office of the Corporation, for new Warrants of like tenor representing in the aggregate the purchase rights hereunder, and each of such new Warrants shall represent such portion of such rights as is designated by the Registered Holder at the time of such surrender. Section 11. Replacement. Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the Registered Holder being reasonably satisfactory) of the loss, theft, destruction or mutilation of any certificate evidencing this Warrant, and in the case of any such loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory to the Corporation, or in the case of any such mutilation, upon surrender and cancellation of such certificate, the Corporation shall, at its expense, execute and deliver in lieu of such certificate a new certificate of like tenor and dated the date of such lost, stolen, destroyed or mutilated certificate. Section 12. Notices. Except as otherwise expressly provided herein, all notices referred to in this Warrant shall be in writing and shall be delivered personally, sent by reputable express courier service (charges prepaid) or sent by registered or certified mail, return receipt requested, postage prepaid and shall be deemed to have been given when so delivered, sent or deposited in the U. S. Mail (i) to the Corporation, at its principal executive offices or to its registered office in its state of domicile and (ii) to the Registered Holder of this Warrant, at such holder's address as it appears in the records of the Corporation (unless otherwise indicated by any such holder). Section 13. Amendment and Waiver. Except as otherwise provided herein, the provisions of the Warrants may be amended and the Corporation may take any action herein prohibited, or omit to perform any act herein required to be performed by it, if and only if the Corporation has obtained the written consent of the Majority Warrant Holders. Section 14. Descriptive Headings; Governing Law. The descriptive headings of the several Sections and paragraphs of this Warrant are inserted for convenience only and do not constitute a part of this Warrant. This Warrant shall be governed by and construed and enforced in accordance with the laws of the State of the Commonwealth of Massachusetts, without giving effect to any choice of law or conflict provision or rule that would cause the application of the laws of any jurisdiction other than the State of the Commonwealth of Massachusetts. Section 15. Certain Expenses. The Corporation shall pay all expenses incurred by it in connection with, and all taxes and other governmental charges that may be imposed in respect of, the issuance, sale and delivery of the Warrants or the shares of Common Stock. Section 16. Registered Holders. The Corporation shall be entitled to treat the Register Holder of this Warrant as the only holder of this Warrant for all purposes. IN WITNESS WHEREOF, the Corporation has caused this Warrant to be signed and attested by its duly authorized officers under its corporate seal and to be dated the Date of Issuance hereof. CTC COMMUNICATIONS CORP. [CORPORATE SEAL] By: ______________________________ Name: ________________________ Title: ________________________ EXHIBIT I EXERCISE AGREEMENT To: Dated: The undersigned, pursuant to the provisions set forth in the attached Warrant (Certificate No. W-__), hereby agrees to subscribe for the purchase of _________ shares of the Common Stock covered by such Warrant and makes payment herewith in full therefor at the price per share provided by such Warrant. _________________________________ Name: ___________________________ Address: __________________________ __________________________________ __________________________________ EXHIBIT II ASSIGNMENT FOR VALUE RECEIVED, _____________________ hereby sells, assigns and transfers all of the rights of the undersigned under the attached Warrant (Certificate No. W-__), with respect to the number of shares of the Common Stock covered thereby set forth below, unto: Names of Assignee Address No. of Shares Date: ____________________________________ Name: ______________________________ ____________________________________ (Witness) -----END PRIVACY-ENHANCED MESSAGE-----