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Exhibit 4.7
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STOCK AND WARRANT PURCHASE AGREEMENT
By and Among
Z-TEL TECHNOLOGIES, INC.
And
THE INVESTORS LISTED ON SCHEDULE I HERETO
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Dated October 19, 2000
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Table of Contents
Page
ARTICLE 1 DEFINITIONS 1
1.1 Definitions 1
1.2 Additional Definitions 8
1.3 Accounting Terms; Financial Covenants 9
ARTICLE 2 PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS 9
2.1 Purchase and Sale of Preferred Shares and Warrants 9
2.3 Use of Proceeds 10
2.4 Initial Closing 10
2.5 Additional Closings 10
ARTICLE 3 CONDITIONS TO THE OBLIGATION OF THE
INVESTORS TO CLOSE 11
3.1 Representations and Warranties True 11
3.2 Compliance with this Agreement 11
3.3 Officer's Certificate 11
3.4 Secretary's Certificate 11
3.5 Documents 12
3.6 Purchase Permitted by Applicable Laws; Legal Investment 12
3.7 Filing of Certificate of Designation 12
3.8 Opinion of Counsel 12
3.9 Approval of Counsel to the Investors 12
3.10 Consents and Approvals 12
3.11 No Material Adverse Change 13
3.12 Conduct of Business 13
3.13 Registration Rights Agreement 13
3.14 Charter and By-Laws of the Company 13
3.15 Market Conditions 13
3.16 No Litigation 13
3.17 No Default or Breach 13
3.18 HSR Act 14
3.19 Election of Directors 14
3.20 Warrants 14
ARTICLE 4 CONDITIONS TO THE OBLIGATION OF THE
COMPANY TO CLOSE 14
4.1 Representations and Warranties True 14
4.2 Compliance with this Agreement 14
4.3 Issuance Permitted by Applicable Laws 14
4.4 Approval of Counsel to the Company 15
4.5 Consents and Approvals 15
4.6 HSR Act 15
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ARTICLE 5 REPRESENTATIONS AND WARRANTIES
OF THE COMPANY 15
5.1 Corporate Existence and Power 15
5.2 Corporate Authorization; No Contravention 16
5.3 Governmental Authorization; Third Party Consents 16
5.4 Binding Effect 16
5.5 No Legal Bar 16
5.6 Litigation 17
5.7 No Default or Breach 17
5.8 Title to Properties 17
5.9 Taxes 18
5.10 Financial Condition 18
5.11 No Material Adverse Change 18
5.12 Commission Documents 18
5.13 Environmental Matters 18
5.14 Investment Company 19
5.15 Subsidiaries 19
5.16 Capitalization 19
5.17 Solvency 19
5.18 Private Offering 19
5.19 Broker's, Finder's or Similar Fees 20
5.20 Full Disclosure 20
5.21 Regulatory Compliance 20
5.22 Registration Rights Agreement; Shareholders Agreement 21
5.23 Trade Relations 22
5.24 Material Contracts. 22
5.25 Business Model 22
5.26 No Undisclosed Financial Liabilities 22
5.27 Intellectual Property 22
5.28 ERISA 24
5.29 Labor Relations 24
ARTICLE 6 REPRESENTATIONS AND WARRANTIES AND
COVENANTS OF THE INVESTORS 25
6.1 Existence and Power 25
6.2 Authorization; No Contravention 25
6.3 Binding Effect 25
6.4 No Legal Bar 26
6.5 Purchase for Own Account 26
6.6 Broker's, Finder's or Similar Fees 27
6.7 Investment Knowledge 27
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ARTICLE 7 INDEMNIFICATION 27
7.1 Indemnification by the Company 27
7.2 Notification 28
7.3 Registration Rights Agreement 29
ARTICLE 8 AFFIRMATIVE COVENANTS 29
8.1 Financial Statements 29
8.2 Certificates; Other Information 30
8.3 Preservation of Corporate Existence 31
8.4 Payment of Obligations 31
8.5 Compliance with Laws 31
8.6 Notices 32
8.7 Issue Taxes 32
8.8 Reservation of Shares 32
8.9 Inspection 33
8.10 Board Representation 34
8.11 Registration and Listing 35
8.12 Private Offering 35
8.13 Additional Registration Rights 35
ARTICLE 9 NEGATIVE COVENANTS 36
9.1 Consolidations and Mergers 36
9.2 Transactions with Affiliates 36
9.3 No Inconsistent Agreements 36
9.4 Issuance of Preferred Stock 37
ARTICLE 10 DISPOSITIONS 37
10.1 Dispositions by ▇▇▇▇▇ 37
10.2 Dispositions by the Fund 38
ARTICLE 11 MISCELLANEOUS 39
11.1 Survival of Provisions 39
11.2 Notices 39
11.3 Successors and Assigns 40
11.4 Amendment and Waiver 41
11.5 Counterparts 41
11.6 Headings 41
11.7 Determinations 41
11.8 Governing Law 42
11.9 Jurisdiction 42
11.10 Severability 42
11.11 Rules of Construction 42
11.12 Remedies 42
11.13 Entire Agreement 42
11.14 Attorneys' Fees 43
11.15 Publicity 43
11.16 Expenses 43
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EXHIBITS
Exhibit A Form of Warrant
Exhibit B Form of Certificate of Designation
Exhibit C Form of Registration Rights Agreement
SCHEDULES
Schedule 1 Investors
Schedule 5.6 Litigation
Schedule 5.15 Subsidiaries
Schedule 5.16 Capitalization
Schedule 5.21 Regulatory Compliance
Schedule 5.22 Registration Rights Agreements; Shareholders Agreements
Schedule 5.25 Business Model
Schedule 5.26 Undisclosed Liability
Schedule 5.27 Intellectual Property
Schedule 5.29 Labor Relations
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STOCK AND WARRANT PURCHASE AGREEMENT (this "Agreement"), dated October
19, 2000, by and among Z-Tel Technologies, Inc., a corporation organized under
the laws of Delaware (the "Company"), and each of the investors listed on
Schedule 1 hereto (the "Investors").
The Company proposes that the Company issue to each of the Investors,
and each of the Investors proposes to purchase, upon the terms and subject to
the conditions set forth in this Agreement, (i) the number of shares of Series
E 8% Convertible Preferred Stock, par value $.01 per share, (the "Preferred
Stock") set forth opposite such Investor's name on Schedule 1 and (ii) and a
warrant (the "Warrant") to purchase, subject to the terms and conditions set
forth in the form of Warrant attached hereto as Exhibit A, that number of
shares of Common Stock (subject to adjustment), set forth opposite such
Investor's name on Schedule 1.
In consideration of the mutual covenants and agreements set forth
herein and for good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions . As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings
indicated:
"Affiliate" has the meaning ascribed to such term in Rule
12b-2 of the General Rules and Regulations under the Exchange Act; provided
that for purposes of this Agreement no Investor shall be deemed an Affiliate of
the Company.
"Agreement" means this Agreement as the same may be amended,
supplemented or modified in accordance with the terms hereof.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in the City of New York, New York are
authorized or required by law or executive order to close.
"Certificate of Designation" means the Certificate of
Designation with respect to the Preferred Stock (the form of which is attached
hereto as Exhibit B) to be adopted by the Board of Directors of the Company and
filed with the Secretary of State of the State of Delaware.
"Certificate of Incorporation" means the Amended and Restated
Certificate of Incorporation of the Company, dated May 30, 2000, in the form
attached
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as Exhibit 3.1 to the Company's Registration Statement on Form S-8, filed July
18, 2000, as the same may be amended from time to time.
"Change of Control" of the Company shall mean such times as:
(i) Any Person or "group" (within the meaning of Section
13(d)(3) of the Exchange Act) is or becomes the beneficial owner, directly or
indirectly, of outstanding shares of stock of the Company entitling such Person
or Persons to exercise 50% or more of the total votes (excluding the Preferred
Stock) entitled to be cast at a regular or special meeting, or by action by
written consent, of shareholders of the Company (the term "beneficial owner"
shall be determined in accordance with Rule 13d-3, promulgated by the
Commission under the Exchange Act);
(ii) A majority of the Board of Directors of the Company
shall consist of Persons other than Continuing Directors. The term "Continuing
Director" shall mean any member of the Board of Directors on the Closing Date
or designated pursuant to this Agreement and any other member of the Board of
Directors who shall be recommended or elected to succeed or become a Continuing
Director by a majority of Continuing Directors who are then members of the
Board of Directors.
(iii) The shareholders of the Company shall have approved
a recapitalization, reorganization, merger, consolidation or similar
transaction, in each case with respect to which all or substantially all the
Persons who were the respective beneficial owners, directly or indirectly, of
the outstanding shares of capital stock of the Company immediately prior to
such recapitalization, reorganization, merger, consolidation or similar
transaction, will own less than 50% of the combined voting power of the then
outstanding shares of capital stock of the Company resulting from such
recapitalization, reorganization, merger, consolidation or similar transaction;
provided that any such recapitalization shall not be considered a Change of
Control if the holders of Preferred Stock have the right to participate on at
least a pari passu basis.
(iv) The shareholders of the Company shall have approved
of the sale or other disposition of all or substantially all the assets of the
Company in one transaction or in a series of related transactions;
(v) Any transaction occurs, the result of which is that
the Common Stock is not required to be registered under Section 12 of the
Exchange Act and that the holders of Common Stock do not receive common stock
of the Person surviving such transaction which is required to be registered
under Section 12 of the Exchange Act; or
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(vi) (i) Immediately after any merger, consolidation,
recapitalization or similar transaction, ▇▇▇▇▇ or a "group" (within the meaning
of Section 13(d)(3) of the Exchange Act) shall be the beneficial owners,
directly or indirectly, of outstanding shares of capital stock of the Company
(or any Person surviving such transaction) entitling them collectively to
exercise 50% or more of the total voting power of shares of capital stock of
the Company (or the surviving Person in such transaction) and (2) in connection
with or as a result of such transaction, the Company (or such surviving Person)
shall have incurred or issued additional indebtedness such that the total
indebtedness so incurred or issued equals at least 50% of the consideration
payable in such transaction; provided that any such transactions shall not be
considered a Change of Control if the holders of Preferred Stock have the right
to participate on at least a pari passu basis.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission or
any similar agency then having jurisdiction to enforce the Securities Act.
"Commission Documents" means all registration statements,
proxy statements, reports and other documents (and all amendments thereto),
required to be filed by the Company since October 19, 1999 under the Securities
Act or the Exchange Act.
"Common Stock" means the common stock, par value $.01 per
share, and each other class of capital stock of the Company into which such
stock is reclassified or reconstituted.
"Communications Act" means the Communications Act of 1934, as
amended by the Telecommunications Act of 1996, as amended.
"Communications Licenses" means all licenses, waivers,
consents, permits or other authorizations issued or granted by the FCC or any
other state or local public utilities commission to the Company or any of its
Subsidiaries in connection with ownership and operation of the services
provided by the Company and its Subsidiaries.
"Company" means Z-Tel Technologies, Inc., a Delaware
corporation.
"Condition of the Company" means the assets, business,
properties or financial condition of the Company and its Subsidiaries taken as
a whole.
"Consolidated Net Worth" means, as of the date of
determination with respect to any Person, the consolidated stockholders' equity
(which, in the case of
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the Company, shall include the Preferred Stock) of such Person and its
Subsidiaries, determined in accordance with GAAP.
"Contingent Obligation" means, as applied to any Person, any
direct or indirect liability of that Person with respect to any Indebtedness,
lease, dividend, guaranty, letter of credit or other obligation (the "primary
obligation") of another Person (the "primary obligor"), including, without
limitation, any obligation of such first-mentioned Person, whether or not
contingent, (a) to purchase, repurchase or otherwise acquire such primary
obligations or any property constituting direct or indirect security therefor,
or (b) to advance or provide funds (i) for the payment or discharge of any such
primary obligation, or (ii) to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency or any
balance sheet item, level of income or financial condition of the primary
obligor, or (c) to purchase property, securities or services primarily for the
purpose of assuring the beneficiary of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation, or
(d) otherwise to assure or hold harmless the beneficiary of any such primary
obligation against loss in respect thereof. The amount of any Contingent
Obligation shall be deemed to be an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Contingent Obligation
is made or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof as determined by the Company in good faith.
"Contractual Obligations" means as to any Person, any
provision of any security issued by such Person or of any agreement,
undertaking, contract, indenture, mortgage, deed of trust or other instrument
to which such Person is a party or by which it or any of its property is bound.
"Copyrights" means any foreign or United States copyright
registrations and applications for registration thereof, and any non-registered
copyrights.
"Environmental Laws" means any applicable federal, state,
territorial, provincial or local law, common law doctrine, rule, order, decree,
judgment, injunction, license, permit or regulation in effect as of the Closing
Date and each Additional Closing Date, relating to environmental matters,
including those pertaining to air, soil, surface water, ground water (including
the protection, cleanup, removal, remediation or damage thereof), or any other
environmental matter, together with any other laws (federal, state,
territorial, provincial or local) relating to emissions, discharges, releases
or threatened releases of any contaminant including, without limitation,
medical, biological, biohazardous or radioactive waste and materials, into
ambient air, land, surface water, groundwater, personal property or structures,
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transportation, discharge or handling of any
contaminant, including, without limitation, the Comprehensive Environmental
Response, Compensation, and Liability
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Act (42 U.S.C. ss. 9601 et seq.), the Hazardous Material Transportation Act (49
U.S.C. ss. 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C.
ss. 6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C. ss. 1251
et seq.), the Clean Air Act (42 U.S.C. ss. 7401 et seq.), the Toxic Substances
Control Act (15 U.S.C. ss. 2601 et seq.), the Federal Insecticide, Fungicide
and Rodenticide Act (7 U.S.C. ss. 136 et seq.), and the Oil Pollution Act of
1990 (33 U.S.C. ss. 2701 et seq.).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder.
"FCC" means the Federal Communications Commission.
"FCC Rules" means the current rules, regulations and policies
of the FCC.
"Fund" means The 1818 Fund III, L.P., a Delaware limited
partnership.
"GAAP" means generally accepted accounting principles in the
United States in effect from time to time.
"Governmental Authority" means the government of any nation,
state or other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Holder," with respect to Preferred Shares, Warrants, Warrant
Shares or Common Stock issued upon conversion of the Preferred Shares, means
the Investors and any subsequent direct or indirect transferee of such
security; provided that the term Holder shall not include any Person who owns
such security if it has been registered under the Securities Act or if it has
been transferred to such Person after such security has been the subject of a
distribution to the public pursuant to Rule 144 (or any successor provision)
under the Securities Act or otherwise distributed under circumstances not
requiring a legend.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended, and the rules and regulations of the Federal Trade
Commission thereunder.
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"Indebtedness" means as to any Person, without duplication,
(a) all obligations of such Person for borrowed money (including, without
limitation, reimbursement and all other obligations with respect to surety
bonds, letters of credit and bankers' acceptances, whether or not matured), (b)
all obligations evidenced by notes, bonds, debentures or similar instruments,
(c) all obligations to pay the deferred purchase price of property or services,
except trade accounts payable and accrued liabilities arising in the ordinary
course of business, (d) all interest rate and currency swaps and similar
agreements under which payments are obligated to be made, whether periodically
or upon the happening of a contingency, (e) all indebtedness created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), (f) all obligations under leases which
have been or should be, in accordance with GAAP, recorded as capital leases,
(g) all indebtedness secured by any Lien (other than Liens in favor of lessors
under leases other than leases included in clause (f)) on any property or asset
owned or held by that Person regardless of whether the indebtedness secured
thereby shall have been assumed by that Person or is non-recourse to the credit
of that Person, (h) all obligations of such Person to reimburse or prepay any
bank or other Person in respect of amounts paid under a letter of credit,
banker's acceptance or similar instrument, (i) all capital stock issued by such
Person subject to mandatory redemption that is not contingent upon future
events or circumstances, and (j) any Contingent Obligation.
"Internet Assets" means any Internet domain names and other
computer user identifiers and any rights in and to sites on the worldwide web,
including rights in and to any text, graphics, audio and video files and html
or other code incorporated in such sites.
"Investors" means each of the investors listed on Schedule 1.
"Knowledge" means knowledge after due inquiry.
"Lien" means any mortgage, deed of trust, pledge,
hypothecation, assignment, encumbrance, lien (statutory or other) or
preference, priority or other security interest or preferential arrangement of
any kind or nature whatsoever (including, without limitation, those created by,
arising under or evidenced by any conditional sale or other title retention
agreement, the interest of a lessor under a capitalized lease obligation, or
any financing lease having substantially the same economic effect as any of the
foregoing).
"NASDAQ" means the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotations System.
"NYSE" means the New York Stock Exchange, Inc.
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"Orders" means any judgment, injunction, writ, award, decree
or order of any nature of any Governmental Authority against, or binding upon,
the Company.
"Patents" means any foreign or United States patents and
patent applications, including any divisions, continuations,
continuations-in-part, substitutions or reissues thereof, whether or not
patents are issued on such applications and whether or not such applications
are modified, withdrawn or resubmitted.
"Person" means any individual, firm, corporation,
partnership, limited liability company, trust, incorporated or unincorporated
association, joint venture, joint stock company, Governmental Authority or
other entity of any kind, and shall include any successor (by merger or
otherwise) of such entity.
"Preferred Stock" means the Series E 8% Convertible Preferred
Stock, par value $.01 per share, of the Company.
"Registration Rights Agreement" means the Registration Rights
Agreement in the form attached hereto as Exhibit C.
"Requirements of Law" means as to any Person, the Certificate
of Incorporation and By-laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder.
"Software" means any computer software programs, source code,
object code, data and documentation.
"Solvent" means, with respect to any Person, that the fair
saleable value on a going concern basis of the assets and property of such
Person is, on the date of determination, greater than the total amount of
liabilities (including Contingent Obligations) of such Person as of such date
and that, as of such date, such Person is able to pay all liabilities of such
Person as such liabilities mature. In computing the amount of Contingent
Obligations at any time, such liabilities will be computed as the amount which,
in light of all the facts and circumstances existing at such time, represents
the amount that is probable to become an actual or matured liability.
"Subsidiary" means, with respect to any Person, another
Person of which 50% or more of the voting power of the voting equity securities
or equity
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interest is owned, directly or indirectly, by such first-mentioned Person.
Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of
the Company.
"Taxes" means all federal, state, county, local, foreign and
other taxes, including, without limitation, income taxes, estimated taxes,
excise taxes, sales taxes, use taxes, gross receipts taxes, franchise taxes,
employment and payroll related taxes, property taxes and import duties, whether
or not measured in whole or in part by net income.
"Trade Secrets" means any trade secrets, whether in the form
of research records, processes, procedures, manufacturing formulae, technical
know-how, technology, blue prints, designs, plans, inventions (whether
patentable and whether reduced to practice), or invention disclosures and
improvements thereto.
"Trademarks" means any foreign or United States trademarks,
service marks, trade dress, trade names, brand names, designs and logos,
corporate names, product or service identifiers, whether registered or
unregistered, and all registrations and applications for registration thereof.
"Warrant" has the meaning assigned to that term in the
preamble to this Agreement.
1.2 Additional Definitions. The following terms are defined in
the section of the Agreement set forth opposite such term:
Term Section
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Additional Closing 2.5
Additional Investors 2.5
Annual Report on Form 10-K 5.15
Business Model 5.25
Closing Date 2.4
Indemnified Party 7.1
Initial Closing 2.4
Intellectual Property 5.27
Liabilities 7.1
Material Contracts 5.24
1999 Audited Financials 5.10
1998 Audited Financials 5.10
Preferred Shares 2.1
Purchase Price 2.1
▇▇▇▇▇ 10.1(a)
2000 Interim Financials 5.10
Warrant Shares 2.1
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1.3 Accounting Terms; Financial Covenants. All accounting terms
used herein not expressly defined in this Agreement shall have the respective
meanings given to them in accordance with sound accounting practice. The term
"sound accounting practice" shall mean such accounting practice as, in the
opinion of the independent accountants regularly retained by the Company,
conforms at the time to GAAP applied on a consistent basis except for changes
with which such accountants concur. If any changes in accounting principles are
hereafter occasioned by promulgation of rules, regulations, pronouncements or
opinions by or are otherwise required by the Financial Accounting Standards
Board or the American Institute of Certified Public Accountants (or successors
thereto or agencies with similar functions), and any of such changes results in
a change in the method of calculation of, or affects the results of such
calculation of, any of the financial covenants, standards or terms found
herein, then the parties hereto agree to enter into and diligently pursue
negotiations in order to amend such financial covenants, standards or terms so
as to reflect fairly and equitably such changes, with the desired result that
the criteria for evaluating the Company's financial condition and results of
operations shall be the same after such changes as if such changes had not been
made.
ARTICLE 2
PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS
2.1 Purchase and Sale of Preferred Shares and Warrants. Subject
to the terms and conditions herein set forth, the Company agrees to issue and
sell to each Investor, and each Investor severally agrees to purchase from the
Company, on the Closing Date the number of shares of Preferred Stock and a
Warrant to purchase the aggregate number of shares of Common Stock set forth
opposite such Investor's name on Schedule 1, for the purchase price set forth
opposite such Investor's name on Schedule 1 (all of the shares of Preferred
Stock being purchased pursuant hereto being referred to herein as the
"Preferred Shares;" all of the shares of Common Stock issuable upon the
exercise of the Warrants being issued pursuant hereto being referred to herein
as the "Warrant Shares;" and the aggregate purchase price for the Preferred
Shares and Warrants being referred to herein as the "Purchase Price"). The
Purchase Price shall be paid to the Company in cash, by wire transfer of
immediately available funds to an account designated by the Company, one
Business Day prior to the Closing Date.
2.2 Certificate of Designation. The Preferred Shares shall have
the preferences and rights set forth in the Certificate of Designation.
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2.3 Use of Proceeds. The Company shall use the proceeds from the
sale of the Preferred Shares and the Warrants to the Investors to fund the
Company's working capital and operating funds.
2.4 Initial Closing. Subject to Articles 3 and 4, the purchase
and issuance of the Preferred Shares and the Warrants shall take place at the
closing (the "Initial Closing") to be held at the offices of ▇▇▇▇, Weiss,
Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, 1285 Avenue of the Americas, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇-▇▇▇▇ on November 10, 2000, or such later date on or prior to December 31,
2000 as the parties may agree (the "Initial Closing Date"), at 10:00 a.m., New
York City time. At the Initial Closing, subject to the terms and conditions set
forth herein, the Company shall sell the Preferred Shares and Warrants to the
Investors by delivering to each of the Investors a certificate representing the
number of Preferred Shares set forth opposite such Investor's name on Schedule 1
and a Warrant exercisable for the number of shares of Common Stock set forth
opposite such Investor's name on Schedule 1, each registered in the name of such
Investor or its designees, with appropriate issue stamps, if any, affixed at the
expense of the Company, free and clear of any Lien. At the Initial Closing, the
Investors shall purchase the Preferred Shares and Warrants in accordance with
the provisions of Section 2.1.
2.5 Additional Closings.
(a) Conditions of Additional Closing. At any time and
from time to time during the ninety (90) day period immediately following the
Initial Closing, the Fund may by written notice advise the Company that it
and/or a Person or Persons designated by it (and reasonably acceptable to the
Company) (any such person who is not an Investor, an "Additional Investor")
elects to purchase, subject to Articles 3 and 4, shares of Preferred Stock
(together with Warrants to purchase one-half of a share of Common Stock for
each share of Preferred Stock to be purchased); provided that in no event shall
the Company issue more than 2,083,333 shares of Preferred Stock pursuant to
this Section 2.5. Such notice to the Company shall include the name of the
Additional Investor, the number of shares of Preferred Stock (together with
Warrants to purchase one-half of a share of Common Stock for each share of
Preferred Stock) to be purchased, and the scheduled date of the closing of the
purchase of such shares of Preferred Stock and Warrants (which date shall in no
event be earlier than two business days and no later than five business days
after the date of such notice). Each date specified in such notice on which
such purchase shall be scheduled to occur shall be an "Additional Closing."
(b) Amendments. The Company and the Additional Investors
purchasing Preferred Stock and Warrants at each Additional Closing will execute
counterpart signature pages to this Agreement and Registration Rights Agreement
and such Additional Investors will, upon delivery to the Company of such
signature pages, become parties to, and bound by, this Agreement and
Registration Rights Agreement
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each to the same extent as if they had been Investors at the Initial Closing.
Immediately after each Additional Closing, Schedule 1 to this Agreement will be
amended to list the Additional Investors purchasing shares of Preferred Stock
and Warrants hereunder and setting forth the number of shares of Preferred
Stock and the number of shares of Common Stock for which the Warrant may be
exercised acquired by each Additional Investor or existing Investors under this
Agreement at each such Additional Closing. The Company will promptly furnish to
each Investor copies of the amendments to Schedule 1 referred to in the
preceding sentence.
(c) Status of Additional Investors. Upon the completion
of each Additional Closing as provided in this Section 2.5, each New Investor
will be deemed to be an "Investor" for all purposes of this Agreement and
Registration Rights Agreement.
ARTICLE 3
CONDITIONS TO THE OBLIGATION
OF THE INVESTORS TO CLOSE
The obligation of the Investors to purchase the Preferred Shares and
the Warrants, to pay the Purchase Price at the Initial Closing and any
Additional Closing ("Relevant Closing Date") and to perform any obligations
hereunder shall be subject to the satisfaction or waiver of the following
conditions on or before the Relevant Closing Date (except as set forth below):
3.1 Representations and Warranties True. The representations and
warranties of the Company contained in Section 5 hereof shall be true and
correct in all material respects at and as of the Relevant Closing Date as if
made at and as of such Date; provided that any representation and warranty
qualified in any respect by materiality shall be true and correct at and as of
the Relevant Closing Date as if made at and as of such Date.
3.2 Compliance with this Agreement. The Company shall have
performed and complied with all of its agreements and conditions set forth or
contemplated herein that are required to be performed or complied with by the
Company on or before the Relevant Closing Date.
3.3 Officer's Certificate. The Investors shall have received a
certificate, dated the Relevant Closing Date and signed by the President or a
Vice-President of the Company, certifying that the conditions set forth in
Sections 3.1 and 3.2 hereof have been satisfied on and as of such date.
3.4 Secretary's Certificate. The Investors shall have received a
certificate, dated the Relevant Closing Date and signed by the Secretary or an
Assistant Secretary of the Company, certifying the truth and correctness of
attached copies of the
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Certificate of Incorporation and By-laws of the Company and resolutions of the
Board of Directors and shareholders of the Company, if applicable, approving
this Agreement and the transactions contemplated hereby.
3.5 Documents. Prior to the Initial Closing Date, the Investors
shall have received copies of such documents as they reasonably may request in
connection with the sale of the Preferred Shares and the Warrants and the
transactions contemplated hereby, all in form and substance reasonably
satisfactory to the Investors.
3.6 Purchase Permitted by Applicable Laws; Legal Investment. The
acquisition of and payment for the Preferred Shares and the Warrants to be
acquired by the Investors hereunder and the consummation of the transactions
contemplated hereby (a) shall not be prohibited by any applicable law or
governmental regulation and (b) shall not subject any of the Investors to any
penalty or, in its reasonable judgment, other onerous condition under or
pursuant to any applicable law or governmental regulation.
3.7 Filing of Certificate of Designation. Prior to the Initial
Closing Date, the Certificate of Designation shall have been duly filed by the
Company with the Secretary of State of the State of Delaware.
3.8 Opinion of Counsel. The Investors shall have received the
opinion of King & Spalding, counsel to the Company, dated the Initial Closing
Date, in a form satisfactory to the Investors.
3.9 Approval of Counsel to the Investors. Prior to the Initial
Closing Date, all actions and proceedings hereunder and all documents required
to be delivered by the Company hereunder or in connection with the consummation
of the transactions contemplated hereby, and all other related matters, shall
have been reasonably acceptable to ▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇,
counsel to the Investors, as to their form and substance.
3.10 Consents and Approvals. All consents, exemptions,
authorizations, or other actions by, or notices to, or filings with,
Governmental Authorities and other Persons, necessary or required in connection
with the execution, delivery or performance (including, without limitation, the
payment of dividends on the Preferred Stock and the issuance of Common Stock
upon the conversion of the Preferred Stock or exercise of the Warrants) by the
Company or enforcement against the Company of this Agreement, the Preferred
Shares, the Warrants or the Registration Rights Agreement shall have been
obtained and be in full force and effect, and the Investors shall have been
furnished with appropriate evidence thereof.
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3.11 No Material Adverse Change Since June 30, 2000, there shall
have been no material adverse change, nor shall any such change be threatened,
in the Condition of the Company since that date.
3.12 Conduct of Business. The Company shall have conducted its
business in the ordinary course from the date hereof to the Initial Closing
Date, and no transaction not in the ordinary course of business shall have
occurred without the Investors' consent.
3.13 Registration Rights Agreement. Prior to the Initial Closing
Date, the Company shall have duly executed and delivered to the Investors the
Registration Rights Agreement.
3.14 Charter and By-Laws of the Company. Except for the
Certificate of Designation or as otherwise approved by the Fund, no amendments
to the Certificate of Incorporation or By-Laws of the Company as in effect on
the date hereof shall have been effected.
3.15 Market Conditions. Between the date of this Agreement and
the Relevant Closing Date, (a) trading in the Common Stock shall not have been
suspended by the Commission or by the NASDAQ for a material portion of a
trading day, (b) trading in securities generally on the NYSE or NASDAQ shall
not have been suspended or limited or minimum or maximum prices shall not have
been generally established on such exchange, or additional material
governmental restrictions, not in force on the date of this Agreement, shall
not have been imposed upon trading in securities generally by such exchange or
by order of the Commission or any court or other Governmental Authority, (c) a
general banking moratorium shall not have been declared by either Federal or
New York State authorities and (d) any material adverse change in the financial
or securities markets in the United States or in political, financial or
economic conditions in the United States or any outbreak or material escalation
of hostilities or declaration by the United States of a national emergency or
war or other calamity or crisis shall not have occurred.
3.16 No Litigation. No action, suit, proceeding, claim or dispute
shall have been brought or otherwise arisen at law, in equity, in arbitration
or before any Governmental Authority against the Company or any of its
Subsidiaries which would, if adversely determined, (i) have a material adverse
effect on the Condition of the Company or (ii) have a material adverse effect
on the ability of the Company to perform its obligations under this Agreement,
the Preferred Shares, the Warrants or the Registration Rights Agreement.
3.17 No Default or Breach. Neither the Company nor any of its
Subsidiaries shall have been in default under or with respect to any
Contractual Obligation in any respect, which, individually or together with all
such defaults, would
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be materially adverse to the Condition of the Company or which could materially
adversely affect the ability of the Company to perform its obligations under
this Agreement, the Preferred Shares, the Warrants or the Registration Rights
Agreement.
3.18 HSR Act. Any applicable waiting period under the HSR Act with
respect to the Preferred Shares and Warrants to be purchased by the Investors
shall have expired or been terminated.
3.19 Election of Directors. On the Initial Closing Date, two
individuals designated by the Fund shall have been elected to the Board of
Directors of the Company in accordance with Section 8.10(a).
3.20 Warrants. The Company shall have duly executed and delivered
to each Investor a Warrant exercisable for the number of shares of Common Stock
set forth opposite such Investor's name on Schedule 1 hereto, registered in the
name of such Investor.
ARTICLE 4
CONDITIONS TO THE OBLIGATION
OF THE COMPANY TO CLOSE
The obligations of the Company to issue and sell the Preferred Shares
and the Warrants, and to consummate the transactions contemplated herein on the
Relevant Closing Date, shall be subject to the satisfaction or waiver of the
following conditions on or before the Closing Date:
4.1 Representations and Warranties True. The representations and
warranties of the Investors contained in Section 6 hereof shall be true and
correct in all material respects at and as of the Relevant Closing Date as if
made at and as of such date.
4.2 Compliance with this Agreement. The Investors shall have
performed and complied with all of their agreements and conditions set forth or
contemplated herein that are required to be performed or complied with by the
Investors on or before the Relevant Closing Date.
4.3 Issuance Permitted by Applicable Laws. The issuance of the
Preferred Shares and the Warrants and the consummation of the transactions
contemplated hereby by the Company (a) shall not be prohibited by any
applicable law or governmental regulation and (b) shall not subject the Company
to any penalty or, in its reasonable judgment, other onerous condition under or
pursuant to any applicable law or governmental regulation.
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4.4 Approval of Counsel to the Company. All actions and
proceedings hereunder and all documents required to be delivered by the
Investors hereunder or in connection with the consummation of the transactions
contemplated hereby, and all other related matters, shall have been reasonably
acceptable to King & Spalding, counsel to the Company, as to their form and
substance.
4.5 Consents and Approvals. All consents, exemptions,
authorizations, or other actions by, or notices to, or filings with,
Governmental Authorities and other Persons necessary or required in connection
with the execution, delivery or performance by the Investors or enforcement
against the Investors of this Agreement shall have been obtained and be in full
force and effect, and the Company shall have been furnished with appropriate
evidence thereof.
4.6 HSR Act. Any applicable waiting period under the HSR Act with
respect to the Preferred Shares and Warrants to be purchased by the Investors
shall have expired or been terminated.
ARTICLE 5
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Investors, and to
each of them, as follows:
5.1 Corporate Existence and Power. The Company and each of its
Subsidiaries:
(a) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization;
(b) has (i) full corporate (or other organizational)
power and authority and (ii) all governmental licenses, authorizations,
consents and approvals to own and operate its property, to lease the property
it operates as lessee and to conduct the business in which it is currently, or
is currently proposed to be, engaged;
(c) is duly qualified as a foreign person, licensed and
in good standing under the laws of each jurisdiction where its ownership, lease
or operation of property or the conduct of its business requires such
qualification; and
(d) is in compliance with all Requirements of Law;
except, in the case of (b)(ii), (c) or (d) of this Section 5.1, to the extent
that the failure to so comply would not have a material adverse effect on the
Condition of the Company.
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5.2 Corporate Authorization; No Contravention. The execution,
delivery and performance by the Company of this Agreement, the Registration
Rights Agreement and the transactions contemplated hereby and thereby,
including without limitation the issuance of the Preferred Shares, the Warrants
and the Common Stock issuable upon the conversion of the Preferred Shares and
exercise of the Warrants:
(a) are within the Company's corporate power and
authority and have been duly authorized by all necessary corporate action; and
(b) will not violate, conflict with or result in any
breach or contravention of or the creation of any Lien under, any Material
Contract of the Company or any of its Subsidiaries or any order or decree
directly relating to the Company or any of its Subsidiaries.
5.3 Governmental Authorization; Third Party Consents. Except as
contemplated by Section 4.6 and certain consents from holders of registration
rights, no approval, consent, exemption, authorization, or other action by, or
notice to, or filing with, any Governmental Authority or any other Person, is
necessary or required in connection with the execution, delivery or performance
by the Company or enforcement against the Company of this Agreement, the
Preferred Shares, the Warrants, the Registration Rights Agreement or the
transactions contemplated hereby or thereby.
5.4 Binding Effect. This Agreement has been duly executed and
delivered by the Company, and at the Initial Closing and each Additional
Closing, the Preferred Shares, the Warrants and the Registration Rights
Agreement will be duly executed or delivered, as applicable, by the Company.
This Agreement constitutes the legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, subject,
as to enforcement of remedies, to bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer, or similar laws affecting creditors' rights
generally from time to time in effect and general equitable principles, except
that any rights to indemnification set forth in this Agreement may be limited
by federal and state securities laws and public policy considerations. At the
Initial Closing and each Additional Closing, the Registration Rights Agreement,
the Warrants and the Preferred Shares will constitute the legal, valid and
binding obligations of the Company enforceable against the Company in
accordance with their respective terms, subject, as to enforcement of remedies,
to bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer, or
similar laws affecting creditors' rights generally from time to time in effect
and general equitable principles, except that any rights to indemnification set
forth in the Registration Rights Agreement may be limited by federal and state
securities laws and public policy considerations.
5.5 No Legal Bar. Neither the execution, delivery or performance
of this Agreement or the Registration Rights Agreement nor the issuance or
performance
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of the terms of the Preferred Shares or the Warrants will violate any
Requirement of Law or any rule or regulation of NASDAQ.
5.6 Litigation.
(a) Except as set forth on Schedule 5.6, there are no
actions, suits, proceedings, claims or disputes pending, or to the Knowledge of
the Company, threatened, at law, in equity, in arbitration or before any
Governmental Authority against the Company or any of its Subsidiaries:
(i) with respect to this Agreement, the
Preferred Shares, the Warrants or the Registration Rights Agreement or any of
the transactions contemplated hereby or thereby; or
(ii) which would, if adversely determined, (i)
have a material adverse effect on the Condition of the Company or (ii) have a
material adverse effect on the ability of the Company to perform its
obligations under this Agreement, the Preferred Shares, the Warrants or the
Registration Rights Agreement.
(b) No injunction, writ, temporary restraining order,
decree or any order of any nature has been issued by any court or other
Governmental Authority purporting to enjoin or restrain the execution, delivery
and performance of this Agreement, the Preferred Shares, the Warrants or the
Registration Rights Agreement.
5.7 No Default or Breach. No event has occurred and is continuing
which constitutes a default under or breach of any of the provisions of Article
8 or 9. No event which constitutes a default under or breach of any of the
provisions of Article 8 or 9 is likely to result from the incurring of
obligations by the Company under this Agreement, or the Registration Rights
Agreement or from the issuance of the Preferred Shares or the Warrants. Neither
the Company nor any of its Subsidiaries is in default under or with respect to
any Contractual Obligation in any respect, which, individually or together with
all such defaults, would have a material adverse effect on the Condition of the
Company or on the ability of the Company to perform its obligations under this
Agreement, the Preferred Shares, the Warrants or the Registration Rights
Agreement.
5.8 Title to Properties. The Company and each of its Subsidiaries
have good and defensible title to, or hold leases in full force and effect in
all their real property, except for such defects in title as could not,
individually or in the aggregate, have a material adverse effect on the
Condition of the Company or the ability of the Company to perform its
obligations under this Agreement, the Preferred Shares, the Warrants or the
Registration Rights Agreement.
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5.9 Taxes. The Company and its Subsidiaries have filed or caused
to be filed, or have properly filed extensions for, all income tax returns
which are required to be filed and have paid or caused to be paid all taxes as
shown on said returns and on all assessments received by it to the extent that
such taxes have become due, except taxes the validity or amount of which is
being contested in good faith by appropriate proceedings and with respect to
which adequate reserves have been set aside. The Company and its Subsidiaries
have paid or caused to be paid, or have established reserves that the Company
reasonably believes to be adequate for all income tax liabilities applicable to
the Company and its Subsidiaries for all fiscal years which have not been
examined and reported on by the taxing authorities (or closed by applicable
statutes).
5.10 Financial Condition. The Company heretofore has delivered to
the Investors true and correct copies of audited consolidated financial
statements of the Company and its Subsidiaries dated as of December 31, 1998
(the "1998 Audited Financials), December 31, 1999 (the "1999 Audited
Financials") and the unaudited consolidated financial statements of the Company
and its Subsidiaries dated as of June 30, 2000 (the "2000 Interim Financials").
The 1998 Audited Financials, 1999 Audited Financials and the 2000 Interim
Financials have been prepared in accordance with GAAP applied consistently and
present fairly in all material respects the consolidated financial condition of
the Company as of the dates thereof and the consolidated results of operations
of the Company for the period, or portion thereof, then ended (except in the
case of the 2000 Interim Financials, for normal year-end adjustments and the
absence of footnotes).
5.11 No Material Adverse Change. Since June 30, 2000, there has
not been any material adverse change, nor to the Knowledge of the Company is
any such change threatened, in the Condition of the Company.
5.12 Commission Documents. The Company has filed all registration
statements, proxy statements, reports and other documents required to be filed
by it under the Securities Act or the Exchange Act, and all amendments thereto.
The Company has furnished or made available to the Investors copies of all
Commission Documents, each as filed with the Commission. Each Commission
Document, as amended, when filed with the Commission or as so amended was true
and accurate in all material respects and in compliance in all material
respects with the requirements of its respective report form.
5.13 Environmental Matters. The Company is in compliance with all
applicable Environmental Laws except as would not have a material adverse
effect on the Condition of the Company. There is no civil, criminal or
administrative judgment, action, suit, demand, claim, hearing, notice of
violation, investigation, proceeding, notice or demand letter pending or, to
the Knowledge of the Company, threatened against the Company pursuant to
Environmental Laws except as would not have a
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material adverse effect on the Condition of the Company; and, to the Knowledge
of the Company, there are no past or present events, conditions, circumstances,
activities, practices, incidents, agreements, actions or plans which could
reasonably be expected to prevent compliance with, or which have given rise to
or will give rise to liability under, Environmental Laws except as would have
not have a material adverse effect on the Condition of the Company.
5.14 Investment Company. Neither the Company nor any Person
controlling the Company is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
5.15 Subsidiaries. Schedule 5.15 sets forth a complete and
accurate list of all of the Subsidiaries of the Company together with their
respective jurisdictions of incorporation or organization. Each such Subsidiary
is directly or indirectly wholly owned by the Company.
5.16 Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of 150,000,000 shares of Common Stock, par value
$.0l per share, and 39,523,816 shares of preferred stock, par value $.01 per
share, of which as of the date hereof, 33,678,287 shares of Common Stock and
4,688,247 shares of preferred stock are issued and outstanding. Except as set
forth on Schedule 5.16, there are no shares of capital stock of the Company
reserved for issuance. All of the outstanding shares of capital stock of the
Company have been duly authorized and are fully paid and non-assessable. The
Preferred Shares when issued upon payment of the Purchase Price, and the shares
of Common Stock when issued upon conversion of the Preferred Shares or exercise
of the Warrants, will be duly authorized, and, in each case, validly issued,
fully paid and nonassessable. Except for the Warrants, this Agreement, or as
set forth on Schedule 5.16 or in the Certificate of Designation, there are no
options, warrants or other rights to any Person to purchase shares of capital
stock or other securities of the Company, and the Company is not obligated in
any manner to issue shares of its capital stock or other securities. Except as
contemplated hereby and for relevant state and federal securities laws, there
are no restrictions on the transfer of shares of capital stock of the Company
issued or issuable to the Investors.
5.17 Solvency. On and as of the Closing Date, after giving effect
to the transactions contemplated in this Agreement, the Company will be
Solvent.
5.18 Private Offering. No form of general solicitation or general
advertising was used by the Company or, to its knowledge, its representatives
in connection with the offer or sale of the Preferred Shares. Assuming the
truth and accuracy of the Investors' representation in Section 6.5, no
registration of the Preferred Shares or the Warrants pursuant to the provisions
of the Securities Act or any state securities or "blue sky" laws will be
required by the offer, sale or issuance of the Preferred Shares or the Warrants
pursuant to this Agreement. The Company agrees
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that neither it, nor anyone acting on its behalf, will offer or sell the
Preferred Shares or the Warrants or any other security so as to require the
registration of the Preferred Shares or the Warrants pursuant to the provisions
of the Securities Act or any state securities or "blue sky" laws, unless such
Preferred Shares or the Warrants are so registered.
5.19 Broker's, Finder's or Similar Fees. Except for the obligation
of the Company to pay an advisory fee to Breckenridge Securities Corp., and as
set forth on Schedule 5.16, there are no brokerage commissions, finder's fees
or similar fees or commissions payable in connection with the transactions
contemplated hereby based on any agreement, arrangement or understanding with
the Company or any of its Subsidiaries, or any action taken by any such entity.
5.20 Full Disclosure.
(a) No statement by the Company contained in (i) this
Agreement or (ii) any certificates delivered to the Investors in connection
with the purchase and sale of the Preferred Shares at the Closing contains (or
will contain) an untrue statement of a material fact or omits (or will omit) to
state a material fact required to be stated therein or necessary to make the
statements made, in the light of the circumstances in which made, not
materially false or misleading.
(b) There is no fact that the Company has not disclosed
to the Investors in writing which materially adversely affects, or insofar as
the Company can reasonably foresee could materially adversely affect, the
Condition of the Company or the ability of the Company to perform its
obligations under this Agreement, the Preferred Shares, the Warrants, the
Registration Rights Agreement or any document contemplated hereby or thereby.
5.21 Regulatory Compliance.
(a) The Company and its Subsidiaries hold all
Communications Licenses required under the Communications Act, the FCC Rules or
other state or local laws or rules to own and operate their properties and to
carry on the business of the Company and its Subsidiaries as now conducted,
except as would not have a material adverse effect on the Condition of the
Company.
(b) Set forth on Schedule 5.21 is a complete list of all
Communications Licenses of the Company and its Subsidiaries relating to or used
in connection with the business of the Company and its Subsidiaries, including
which legal entity holds such License and, if such legal entity is neither the
Company nor any of its Subsidiaries, a summary of the terms under which the
Company and its Subsidiaries is permitted to engage in the business relating to
such License. Such list correctly sets forth the expiration date, if any, of
each such Communications License.
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Each such Communications License is in full force and effect, and is not
subject to any special conditions outside the ordinary course. The Company and
its Subsidiaries have taken all actions and performed all of their obligations
that are necessary to maintain such Communications Licenses without adverse
modification or impairment.
(c) The Company and its Subsidiaries are not parties to,
nor to the best knowledge of the Company and each Subsidiary is there
threatened in writing, any formal investigation, notice of apparent liability,
violation, forfeiture or other notice, order or formal complaint issued by or
before any court or regulatory body, including the FCC, that could in any
manner threaten or adversely affect the validity or continued effectiveness of
the Communications Licenses of the Company and its Subsidiaries. Since January
1, 1998, the Company and each Subsidiary has filed in a substantially timely
manner all material reports, applications, documents, instruments and
information required to be filed by it pursuant to the Communications Act, the
FCC Rules or other state or local laws or rules related to Communications
Licenses. All such filings are accurate and complete in all material respects.
(d) The Company and its Subsidiaries are in compliance
with the Communications Licenses, the Communications Act, the FCC Rules or
other state or local laws or rules, except as would not have a material adverse
effect on the Condition of the Company.
(e) The Company and the Subsidiaries are not aware of
any facts, and the Company and the Subsidiaries have received no formal written
notice, indicating that the Company and the Subsidiaries, in their ownership
and operation of the business of the Company and the Subsidiaries, are not in
compliance with all requirements of (i) applicable FCC Rules or the
Communications Act, or (ii) similar state and local statutes, regulations and
ordinances, except as would not have a material adverse effect on the Condition
of the Company.
(f) No consent, waiver or other action of, or filing or
notification to, the FCC is required for the consummation of the transactions
contemplated hereby.
5.22 Registration Rights Agreement; Shareholders Agreement.
Schedule 5.22 sets forth all agreements to which the Company or any Subsidiary
is a party or by which it is bound relating to the registration of its
securities or, in the case of a Subsidiary, the securities of the Company.
Except as set forth on Schedule 5.22, no agreements grant any registration
rights to any Person which are inconsistent with the rights to be granted to
the Investors in the Registration Rights Agreement. Schedule 5.22 sets forth
all agreements to which the Company or any of its subsidiaries has Knowledge
relating to the voting of Common Stock or restricting the transfer of Common
Stock.
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5.23 Trade Relations. There exists (i) to the Knowledge of the
Company, no actual or (ii) so far as the Company is aware, no threatened,
material change in the business relationship of the Company and its
Subsidiaries taken as a whole with any customer or any group of customers, or
with any supplier, which would have a material adverse effect on the business
of the Company and its Subsidiaries, taken as a whole.
5.24 Material Contracts. All contracts, agreements and commitments
of the Company and its Subsidiaries required to be filed with the Company's
Commission Documents ("Material Contracts") are in full force and effect and
binding upon the parties thereto in accordance with their terms, subject, as to
enforcement of remedies, to bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer, or similar laws affecting creditors' rights generally from
time to time in effect and general equitable principles. Neither the Company
nor any of its Subsidiaries, nor, to the Knowledge of the Company or any of its
Subsidiaries, any other party to a Material Contract, is in default under, and
no condition exists that with notice or lapse of time, or both, would
constitute a default under any Material Contract, in each case other than
defaults that individually or in the aggregate would not have a material
adverse effect on the Condition of the Company. Neither the Company nor any of
its Subsidiaries has any knowledge of any threatened cancellation or
termination of any Material Contract.
5.25 Business Model. Prior to the date hereof, the Company
delivered to the Investors the Z-Tel Technologies, Inc. Consolidated Business
Model "Budget View" dated August 29, 2000, a copy of which is attached as
Schedule 5.25 (the "Business Model"). The assumptions used in preparation of
the Business Model were reasonable when made and continue to be reasonable as
of the Closing Date. The Business Model has been prepared in good faith. The
Investors acknowledge that the Business Model contains assumptions about future
events and that actual results during the period or periods covered may differ
from the data and results contained in such Business Model and such differences
may be material and adverse to the Company.
5.26 No Undisclosed Financial Liabilities. Except as set forth on
Schedule 5.26, the Company and its Subsidiaries, after giving effect to the
transactions contemplated hereby, will not have any material direct or indirect
indebtedness, liability (including, without limitation, product liability or
warranty claim), obligation, whether known or unknown, fixed or unfixed,
contingent or otherwise, and whether or not of a kind required by GAAP to be
set forth on a financial statement, other than (i) liabilities fully and
adequately reflected on the 2000 Interim Financials, (ii) liabilities incurred
since June 30, 2000 in the ordinary course of business, (iii) liabilities
incurred pursuant to this Agreement and (iv) liabilities which individually or
in the aggregate would not have a material adverse effect on the Condition of
the Company.
5.27 Intellectual Property.
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(a) (i) The Company is the owner of all, or has the
license or right to use, sell and license all of, the Copyrights, Patents,
Trade Secrets, Trademarks, Internet Assets, Software and other proprietary
rights (collectively, "Intellectual Property") that are used in connection with
its business as presently conducted or contemplated in the Business Plan, free
and clear of all Liens, except as would have not have a material adverse effect
on the Condition of the Company.
(ii) Except as set forth on Schedules 5.6 and
5.27, no action, suit, proceeding, hearing, investigation, charge, complaint,
claim or demand is pending or, to the knowledge of the Company, threatened in
writing, which challenges the validity, enforceability, use or ownership of the
Intellectual Property.
(iii) The Company has substantially performed all
obligations imposed upon it under any Intellectual Property licenses, and is
not, nor to the knowledge of the Company is any other party thereto, in breach
of or default thereunder in any respect, nor is there any event which with
notice or lapse of time or both would constitute a default thereunder. All of
the Intellectual Property licenses are enforceable and in full force and
effect, and will continue to be so on identical terms immediately following the
Closing except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance or transfer, moratorium or
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity relating to enforceability (regardless of whether
considered in a proceeding at law or in equity).
(b) To the Knowledge of the Company, no Person is
infringing upon or otherwise violating any Trademarks of the Company and to the
knowledge of the Company, no Person is violating any other Intellectual
Property rights of the Company.
(c) Except as set forth in Schedule 5.6, no former
employer of any employee of the Company has made a claim against the Company
that such employee is utilizing Intellectual Property of such former employer.
(d) The Company is not a party to or bound by any
license or other agreement requiring the payment by the Company of any royalty
payment, excluding such agreements relating to software licensed for use solely
on the computers of the Company.
(e) To the Knowledge of the Company, no employee of the
Company is in violation of any term of any employment agreement, patent or
invention disclosure agreement or other contract or agreement relating to the
relationship of such employee with the Company. Subject to Section 5.6, to the
knowledge of the Company, no employee of the Company is in violation of any
term of any employment
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agreement, patent or invention disclosure agreement or other contract or
agreement relating to the relationship of such employee with any prior
employer.
(f) To the Knowledge of the Company, none of the Trade
Secrets of the Company, wherever located, the value of which is contingent upon
maintenance of confidentiality thereof, has been disclosed to any Person other
than employees, representatives and agents of the Company, except as required
pursuant to the filing of a patent application by the Company or pursuant to a
non-disclosure agreement.
(g) Except on Schedule 5.27, it is not necessary for the
Company's business to use any Intellectual Property owned by any director,
officer, employee or consultant of the Company (or persons the Company
presently intends to hire).
(h) All present employees of the Company have executed
and delivered confidentiality agreements with the Company, and are obligated
under the terms thereof to protect all confidential information received during
the course of employment for a period of five years after such information is
received.
5.28 ERISA. Neither the Company nor any of the Subsidiaries has
violated any provisions of ERISA, or the rules and regulations promulgated
thereunder, except for such violations which would not, individually or in the
aggregate, have a material adverse effect on the Condition of the Company. If
any plan subject to ERISA is adopted, the execution and delivery of this
Agreement and the sale of the Preferred Shares and the Warrants will not
involve any non-exempt prohibited transaction within the meaning of Section 406
of ERISA or Section 4975 of the Code.
5.29 Labor Relations. Except to the extent set forth in Schedule
5.29, (a) neither the Company nor any of its Subsidiaries is a party to any
collective bargaining agreement, (b) the Company and each of its Subsidiaries
is in compliance with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, including
but not limited to, the Workers Adjustment and Retraining Notification Act, and
neither the Company nor any of its Subsidiaries is engaged in any unfair labor
practice, (c) there is no unfair labor practice complaint against the Company
or any of its Subsidiaries or pending before the National Labor Relations
Board, (d) there is no labor strike, dispute, slowdown or stoppage actually
pending or, to the best of the Company's or any Subsidiary's Knowledge,
threatened against or affecting the Company or any of its Subsidiaries, (e)
with respect to the Company or any of its Subsidiaries, no grievance or
arbitration proceeding arising out of or under collective bargaining agreements
is pending or exists and, to the best of the Company's or any Subsidiary's
Knowledge, no claim therefor is threatened, and (f) neither the Company nor any
of its Subsidiaries has experienced any work stoppage or other labor difficulty
since inception; except in the case of clauses
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(b), (c), (d), (e) and (f) as would not have a material adverse effect on the
Condition of the Company.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
AND COVENANTS OF THE INVESTORS
The Investors severally and not jointly represent and warrant to, and
covenant and agree with, the Company as follows:
6.1 Existence and Power. Each of the Investors:
(a) is duly organized and validly existing under the
laws of the jurisdiction of its organization; and
(b) has full power and authority to own and operate its
property, to lease the property it operates as
lessee and to conduct the business in which it is
currently, or is currently proposed to be, engaged.
6.2 Authorization; No Contravention. The execution, delivery and
performance by each of the Investors of this Agreement, the Registration Rights
Agreement and the transactions contemplated hereby and thereby, including
without limitation the acquisition of the Preferred Shares, the Warrants and
the Common Stock issuable upon the conversion of the Preferred Shares and
exercise of the Warrants: (a) is within the Investor's power and authority and
has been duly authorized by all necessary action;
(b) does not contravene the terms of the Investor's
governing documents, or any amendment thereof;
(c) will not violate, conflict with or result in any
breach or contravention of or the creation of any Lien under, any Contractual
Obligation of the Investor, or any order or decree directly relating to the
Investor, and
(d) does not require approval, consent, exemption,
authorization or other action by, or notice to, or filing with, any
Governmental Authority or any other Person, other than filing and expiration of
the applicable waiting period under the HSR Act.
6.3 Binding Effect. This Agreement has been and, on the Initial
Closing Date, the Registration Rights Agreement will be duly executed and
delivered by each of the Investors, constitutes the legal, valid and binding
obligation of each of the Investors enforceable against it in accordance with
its terms, except as
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enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability.
6.4 No Legal Bar. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement will not violate any
Requirement of Law or any Contractual Obligation of any of the Investors.
6.5 Purchase for Own Account. The Preferred Shares and the
Warrants (including, for purposes of this Section 6.5, the Common Shares
issuable upon conversion of the Preferred Shares and exercise of the Warrants)
to be acquired by each of the Investors pursuant to this Agreement are being
acquired for its own account for investment purposes and with no view toward
any "distribution" thereof within the meaning of the Securities Act, without
prejudice, however, to the rights of such Investors at all times to sell or
otherwise dispose of all or any part of the Preferred Shares or the Warrants
under an effective registration statement under the Securities Act, or under an
exemption from such registration available under the Securities Act, or
pursuant to Article 10 hereof, and subject, nevertheless, to the disposition of
the Investors' property being at all times within their control. If any of the
Investors should in the future decide to dispose of any of the Preferred
Shares, Warrants, the shares of Common Stock issuable upon conversion of the
Preferred Shares or the Warrant Shares, such Investor understands and agrees
that it may do so only in compliance with the Securities Act and applicable
state securities laws, as then in effect, and that stop-transfer instructions
to that effect, where applicable, will be in effect with respect to the
Preferred Shares. If any of the Investors should decide to dispose of the
Preferred Shares or Warrants, other than pursuant to the provisions of the
Registration Rights Agreement or Article 10 hereof, such Investor, if requested
by the Company, will have the obligation in connection with such disposition,
at the Investors's expense, of delivering to the Company an opinion of counsel
of recognized standing in securities law, to the effect that the proposed
disposition of the Preferred Shares or Warrants would not be in violation of
the Securities Act or any applicable state securities laws and, assuming such
opinion is required and is otherwise appropriate in form and substance under
the circumstances, the Company will accept, and will recommend to any
applicable transfer agent or trustee for any such securities that it accept,
such opinion. The Investors agree to the imprinting, so long as required by
law, of a legend on certificates representing all of the Preferred Shares and
the shares of Common Stock issued on conversion thereof to the following
effect:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES
ACT") OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD
OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN
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APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR
SUCH LAWS."
The Investors agree to the imprinting, so long as required by law, of a legend
on the Warrants and the Warrant Shares to the following effect:
"THE WARRANT AND SHARES ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "SECURITIES ACT") OR QUALIFIED UNDER ANY STATE
SECURITIES LAW. THE WARRANT AND SHARES ISSUABLE UPON EXERCISE
OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE,
TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT WITH RESPECT THERETO UNLESS
SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN A TRANSACTION
THAT IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT."
6.6 Broker's, Finder's or Similar Fees. There are no brokerage
commissions, finder's fees or similar fees or commissions payable in connection
with the transactions contemplated hereby based on any agreement, arrangement
or understanding with the Investors or any action taken by the Investors.
6.7 Investment Knowledge. Each Investor has sufficient knowledge
and experience in financial and business matters and the business in which the
Company is engaged so as to be capable of evaluating the merits and risks of
its investment in the Preferred Shares, Warrants, the shares of Common Stock
issuable upon conversion of the Preferred Shares and the Warrant Shares, and is
able to bear the economic risk of the loss of its investment in the Company.
Each of the Investors is an "accredited investor" within the meaning of Rule
501 promulgated under the Securities Act.
ARTICLE 7
INDEMNIFICATION
7.1 Indemnification by the Company. In addition to all other sums
due hereunder or provided for in this Agreement, the Company agrees to
indemnify and hold harmless the Investors and their Affiliates (including,
without limitation, ▇▇▇▇▇ Brothers ▇▇▇▇▇▇▇▇ & Co.) and their respective
officers, directors, agents, employees, subsidiaries, partners and controlling
persons (each, an "Indemnified Party") to the fullest extent permitted by law
from and against any and all losses, claims, damages, expenses (including
reasonable fees, disbursements and other charges of counsel) or other
liabilities ("Liabilities") resulting from any breach of any covenant,
agreement, representation or warranty of the Company in this Agreement or any
legal,
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administrative or other actions (including actions brought by the Company or
any equity holders of the Company or derivative actions brought by any Person
claiming through the Company or in the Company's name), proceedings or
investigations (whether formal or informal), or written threats thereof, based
upon, relating to or arising out of this Agreement, the Preferred Shares, the
Warrants, the Registration Rights Agreement, the transactions contemplated
hereby or thereby, or any indemnified person's role therein or in the
transactions contemplated hereby or thereby; provided, however, that the
Company shall not be liable under this Section 7.1: (a) for any amount paid in
settlement of claims without the Company's consent (which consent shall not be
unreasonably withheld), (b) with respect to Liabilities arising solely out of
actions brought by the partners or members of any of the Investors against an
Indemnified Party or by one Indemnified Party against another, (c) to the
extent that it is finally judicially determined that such Liabilities resulted
primarily from (i) the willful misconduct, bad faith or gross negligence of
such Indemnified Party or (ii) a breach of the Investor's representations in
Article 6 or any breach of the Investor's obligations under this Agreement or
the Registration Rights Agreement, or (d) any Liabilities arising solely from
the transfer of the Preferred Shares or the Warrants by any of the Investors to
any Person; provided, further, that if and to the extent that such
indemnification is unenforceable for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of such indemnified
liability which shall be permissible under applicable laws. In connection with
the obligation of the Company to indemnify for expenses as set forth above, the
Company further agrees to reimburse each Indemnified Party for all such
expenses (including reasonable fees, disbursements and other charges of
counsel) as they are incurred by such Indemnified Party; provided, however,
that if an Indemnified Party is reimbursed hereunder for any expenses, such
reimbursement of expenses shall be refunded to the extent it is finally
judicially determined that the Liabilities in question resulted primarily from
the willful misconduct, bad faith or gross negligence of such Indemnified
Party. The maximum aggregate amount the Company shall be required to pay any
Investor under this section 7.1 with respect to Liabilities resulting from any
breach of any covenant, agreement, representation or warranty of the Company in
this Agreement shall not exceed the aggregate Purchase Price paid by such
Investor under this Agreement.
7.2 Notification. Each Indemnified Party under this Article 7
will, promptly after the receipt of notice of the commencement of any action or
other proceeding against such Indemnified Party in respect of which indemnity
may be sought from the Company under this Article 7, notify the Company in
writing of the commencement thereof. The omission of any Indemnified Party so
to notify the Company of any such action shall not relieve the Company from any
liability which it may have to such Indemnified Party (i) other than pursuant
to this Article 7 or (ii) under this Article 7 unless, and only to the extent
that, such omission results in the Company's forfeiture of substantive rights
or defenses. In case any such action or other proceeding shall be brought
against any Indemnified Party and it shall promptly notify the Company of the
commencement thereof, the Company shall be entitled to
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participate therein and, to the extent that it may wish, to assume the defense
thereof, with counsel reasonably satisfactory to such Indemnified Party;
provided, however, that any Indemnified Party may, at its own expense, retain
separate counsel to participate in such defense. Notwithstanding the foregoing,
in any action or proceeding in which both the Company and an Indemnified Party
is, or is reasonably likely to become, a party, such Indemnified Party shall
have the right to employ separate counsel at the Company's expense and to
control its own defense of such action or proceeding if, in the reasonable
opinion of counsel to such Indemnified Party, (a) there are or may be legal
defenses available to such Indemnified Party or to other indemnified parties
that are different from or additional to those available to the Company or (b)
any conflict or potential conflict exists between the Company and such
Indemnified Party that would make such separate representation advisable;
provided, however, that in no event shall the Company be required to pay
unreasonable fees or expenses or fees and expenses under this Section 7 for
more than one firm of attorneys in any jurisdiction in any one legal action or
group of related legal actions. The Company agrees that the Company will not,
without the prior written consent of the Investors, settle, compromise or
consent to the entry of any judgment in any pending or threatened claim, action
or proceeding relating to the matters contemplated hereby (if any Indemnified
Party is a party thereto or has been actually threatened to be made a party
thereto) unless such settlement, compromise or consent includes an
unconditional release of the Investors and each other Indemnified Party from
all liability arising or that may arise out of such claim, action or
proceeding. The rights accorded to indemnified parties hereunder shall be in
addition to any rights that any Indemnified Party may have at common law, by
separate agreement or otherwise.
7.3 Registration Rights Agreement. Notwithstanding anything to
the contrary in this Article 7, the indemnification and contribution provisions
of the Registration Rights Agreement shall govern any claim made with respect
to registration statements filed pursuant thereto or sales made thereunder.
ARTICLE 8
AFFIRMATIVE COVENANTS
The Company hereby covenants and agrees (a) with the Investors, and
each of them, and any Affiliate of the Investors with respect to all of this
Article 8, and (b) with any other Holder, with respect to all of this Article 8
except Sections 8.1(c), 8.9, 8.10 and 8.12, so long as such Investor, such
Affiliate or such Holder holds any Preferred Shares or Warrants, and with
respect to Section 8.10, 8.11, 8.12 and 8.13 so long as such Investor, such
Affiliate or such Holder holds any shares of Common Stock issued or issuable
upon conversion of the Preferred Shares or exercise of the Warrants:
8.1 Financial Statements. The Company shall deliver to the
Investors and any of their Affiliates that are Holders:
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(a) as soon as available, but not later than one hundred
twenty (120) days after the end of each fiscal year of the Company, a copy of
the audited consolidated balance sheet of the Company and its Subsidiaries as
of the end of such year and the related consolidated statements of income and
cash flows for such fiscal year, setting forth in each case in comparative form
the figures for the previous year, all in reasonable detail and accompanied by
a management discussion and analysis of the operations of the Company and its
Subsidiaries for such fiscal year and by the opinion of [insert name of
Company's accountants] (or any successor thereto) or another nationally
recognized independent public accounting firm which report shall state that
such consolidated financial statements present fairly in all material respects
the financial position for the periods indicated in conformity with GAAP
applied on a basis consistent with prior years (except for changes with respect
to which such accounting firm concurs); provided, however, that the delivery of
a copy of the Company's Annual Report on Form 10-K shall satisfy the
requirements of this Section 8.1(a);
(b) commencing with the fiscal period ending on
September 30, 2000, as soon as available, but in any event not later than
fourty-five (45) days (or fifty (50) days if the Company avails itself of the
time extension provided by Rule 12b-25 promulgated under the Exchange Act)
after the end of each of the first three fiscal quarters of each year, the
unaudited consolidated balance sheet of the Company and its Subsidiaries, and
the related consolidated statements of income and cash flow for quarter and for
the period commencing on the first day of the fiscal year and ending on the
last day of such quarter, all certified by an appropriate officer of the
Company; provided, however, that the delivery of a copy of the Company's
Quarterly Report on Form 10-Q shall satisfy the requirements of this Section
8.1(b);
(c) annual budgets and such other financial and
operating data of the Company and its Subsidiaries, as the Investors reasonably
may request, to the extent that such information is formally prepared for the
Company's Chairman, President, Board of Directors and/or banks or other
lenders, subject to the provisions of Section 8.9(b);
(d) at any time when it is not subject to Section 13 or
15(d) of the Exchange Act, upon request, to the Investors and prospective
investors of the Preferred Shares or the Warrants, information of the type that
would satisfy the requirement of subsection (d)(4)(i) of Rule 144A (or any
similar successor provision) under the Securities Act; and
(e) except as otherwise provided in Sections 8.1(a) and
(b), promptly after the same are filed, copies of all Commission Documents.
8.2 Certificates; Other Information. The Company shall furnish to
the Investors and to any Affiliate of the Investors that is a Holder,
concurrently with
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the delivery of the financial statements referred to in Section 8.1(a), a
certificate of the Company's Chief Financial Officer stating that to the
knowledge of such officer there is no default under or breach of Articles 8 and
9, except as specified in such certificates.
8.3 Preservation of Corporate Existence. The Company shall, and
shall cause each of its Subsidiaries to:
(a) preserve and maintain in full force and effect its
corporate or organizational existence under the laws of its jurisdiction of
incorporation or organization except as permitted by Section 9.2;
(b) preserve and maintain in full force and effect all
material rights, privileges, qualifications, licenses and franchises necessary
in the normal conduct of its business; and
(c) use its reasonable efforts to preserve its business
organization.
8.4 Payment of Obligations. The Company shall, and shall cause
its Subsidiaries to, pay and discharge as the same shall become due and
payable, all their respective obligations and liabilities, including without
limitation:
(a) all tax liabilities, assessments and governmental
charges or levies upon it or its properties or assets, unless the same are
being contested in good faith by appropriate proceedings and adequate reserves
in accordance with GAAP are being maintained by the Company or such Subsidiary;
(b) all lawful claims which the Company and each of its
Subsidiaries is obligated to pay, which are due and which, if unpaid, might by
law become a Lien upon its property (other than Liens which individually or in
the aggregate would not have a material adverse effect on the Condition of the
Company), unless the same are being contested in good faith by appropriate
proceedings and adequate reserves in accordance with GAAP are being maintained
by the Company or such Subsidiary; and
(c) all payments of principal of and interest on
Indebtedness when due (giving effect to any grace periods relating thereto).
8.5 Compliance with Laws. The Company shall comply, and shall
cause each Subsidiary to comply, in all material respects with all Requirements
of Law and with the directions of any Governmental Authority having
jurisdiction over it or its business, except such as to which such failure to
comply would not have a material adverse effect on the Condition of the
Company.
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8.6 Notices. Upon knowledge of the Chief Executive Officer, the
President or the Chief Financial Officer of the Company of the events described
below, the Company shall give written notice within 10 days to the Investors
of:
(a) the occurrence of any default under, or breach of,
any provision of Article 8 or 9 accompanied by a certificate specifying the
nature of such default or breach, the period of existence thereof and the
action that the Company has taken or proposes to take with respect thereto; and
(b) any (i) material default or event of default under
any material Contractual Obligation, of the Company or any of its Subsidiaries,
or (ii) material dispute, litigation, investigation, proceeding or suspension
which may exist at any time between the Company or any of its Subsidiaries and
any Governmental Authority;
each accompanied by a statement setting forth details of the occurrence
referred to therein and stating what action the Company proposes to take with
respect thereto.
8.7 Issue Taxes. The Company shall pay, or cause to be paid, all
documentary and similar taxes levied under the laws of any applicable
jurisdiction in connection with the issuance of the Preferred Shares and the
Warrants and the execution and delivery of the other agreements and documents
contemplated hereby and any modification of the Preferred Shares or the
Warrants or such other agreements and documents and will hold the Investors
harmless, without limitation as to time, against any and all Liabilities with
respect to all such taxes.
8.8 Reservation of Shares.
(a) The Company shall at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issue
or delivery upon conversion of the Preferred Shares as provided in the
Certificate of Designation, such number of shares of Common Stock as shall then
be issuable or deliverable upon the conversion of all outstanding Preferred
Shares. Such shares of Common Stock shall, when issued or delivered in
accordance with the Certificate of Designation, be duly and validly issued and
fully paid and non-assessable. The Company shall issue the Common Stock into
which the Preferred Shares are convertible upon the proper surrender of the
Preferred Shares in accordance with the provisions of the Certificate of
Designation and shall otherwise comply with the terms thereof.
(b) The Company shall at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issue
or delivery upon exercise of the Warrants as provided therein, the Warrant
Shares. Such Warrant Shares shall, when issued or delivered in accordance with
the Warrants, be duly and validly issued and fully paid and non-assessable. The
Company shall issue the Warrant
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Shares upon the proper surrender of a notice in accordance with the provisions
of the Warrants and shall otherwise comply with the terms thereof.
8.9 Inspection.
(a) The Company will permit, and will cause each of its
Subsidiaries to permit, representatives of the Investors to visit and inspect
any of its properties, to examine its corporate, financial and operating
records and make copies thereof or abstracts therefrom, and to discuss its
affairs, finances and accounts with their respective officers and independent
public accountants, all at such reasonable times during normal business hours
and as often as may be reasonably requested, upon reasonable advance notice to
the Company.
(b) The Investors and any Holder which is an Affiliate
of any of the Investors expressly agrees that any confidential information
relating to the Company and its Subsidiaries obtained (i) in negotiation and
execution of this Agreement, (ii) during any inspection pursuant to Section
8.9(a), (iii) pursuant to Section 8.1(c) or 8.10, (iv) from the Company or any
of its Subsidiaries or representatives thereof which is clearly marked
"Confidential" on the first or cover page thereof or (v) in conducting its due
diligence investigation of the Company prior to the execution of this
Agreement, (collectively, the "Information") shall be kept confidential by the
Investors and such Affiliate, and that they shall use their best efforts to
cause any person designated pursuant to Section 8.10 to attend meetings of the
Board of Directors to keep all Information confidential.
The term "Information" shall not include any information which (i) at
the time of disclosure or thereafter is generally available to or known by the
public (other than as a result of its disclosure by the Investors or such
Affiliate), (ii) was available to the Investors or such Affiliate on a
non-confidential basis prior to disclosure to the Investors or such Affiliate
by the Company, (iii) becomes available to the Investors or such Affiliate on a
non-confidential basis from a Person who is not to the Investors' or such
Affiliate's knowledge otherwise bound by a confidentiality agreement with the
Company, or (iv) has been independently developed by the Investors or its
Affiliates.
Notwithstanding the foregoing, the Investors and their Affiliates may
disclose Information to: (i) their advisors, representatives, agents, partners
or employees, with the understanding that such parties are bound by the
agreement of the disclosing party in this Section 8.9(b) and (ii) any
prospective transferee of the Preferred Shares or the Warrants or of an
interest in the Investors or in a successor fund sponsored by ▇▇▇▇▇ Brothers
▇▇▇▇▇▇▇▇ & Co. if such transferee enters into a confidentiality agreement
having substantially the same terms as this Section 8.9(b).
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8.10 Board Representation.
(a) The Company shall promptly cause two vacancies to be
created on its Board of Directors (by increasing the number of members of the
Board of Directors or otherwise) and at the Initial Closing shall cause two
persons designated by the Fund (unless, after customary investigation of such
persons' qualifications, the Board of Directors reasonably determines in good
faith that either or both of such persons is not qualified or acceptable under
standards applied fairly and equally to all nominees) to be selected to fill
such vacancies. One of the persons designated by the Fund may, at the Fund's
written election, be designated by an Additional Investor, but in no case shall
the Holders of Preferred Stock collectively designate more than two persons to
serve on the Board of Directors. Such designees shall serve until the next
succeeding annual meeting of stockholders of the Company to be held after such
election.
(b) Commencing with such next succeeding annual meeting
of stockholders of the Company referred to in Section 8.10(a), (i) so long as
the Fund holds 50% of the shares of Preferred Stock or Common Stock issued or
issuable upon conversion of the Preferred Shares (whether or not the Preferred
Shares have been converted) acquired by it under this Agreement, the Fund shall
be entitled to designate two directors to the Company's Board of Directors (one
of whom at the Fund's written election may be designated by an Additional
Investor) or (ii) so long as the Fund holds 25% of the shares of Common Stock
issued or issuable upon conversion of the Preferred Shares (whether or not such
shares have been converted) acquired by it under this Agreement, the Fund shall
be entitled to designate one director to the Company's Board of Directors, and,
in either case, at relevant future annual meetings of the stockholders of the
Company, a successor to replace any such director upon expiration of his or her
term. The Company shall cause such designees (unless, after customary
investigation of any such person's qualifications, the Board of Directors
reasonably determines in good faith that such person is not qualified or
acceptable under standards applied fairly and equally to all nominees) to be
included in the slate of nominees recommended by the Board to the Company's
stockholders for election as directors, and the Company shall use its
reasonable best efforts to cause the election of such designees, including
voting all shares for which the Company holds proxies (unless otherwise
directed by the stockholder submitting such proxy) or is otherwise entitled to
vote, in favor of the election of such person. Notwithstanding the foregoing,
if the Fund has not designated a person pursuant to Section 8.10(a), or if the
Fund is entitled to designate a director or directors to the Company's Board of
Directors by virtue of the first sentence of this Section 8.10(b) and the Fund
does not designate at least one director to the Company's Board of Directors,
the Fund shall be entitled to receive all notices and materials distributed to
the members of the Board of Directors of the Company, and to designate one
person who shall be entitled to attend all meetings of the Board of Directors
and committees thereof and to receive minutes of all such meetings upon
preparation thereof.
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(c) In the event any designee of the Fund (or at the
Fund's written election, by an Additional Investor) shall cease to serve as a
director for any reason, other than by reason of the Fund not being entitled to
designate a designee as provided in Section 8.10(a) or 8.10(b), the Company
shall use its reasonable best efforts to cause the vacancy resulting thereby to
be filled by a designee of the Fund (or at the Fund's written election, by an
Additional Investor).
8.11 Registration and Listing. If any shares of Common Stock
required to be reserved for purposes of conversion of the Preferred Shares as
provided in the Certificate of Designation or for purposes of exercise of the
Warrants as provided therein require registration with or approval of any
Governmental Authority under any Federal or state or other applicable law
before such Common Stock may be issued or delivered upon such conversion or
exercise, the Company will endeavor in good faith and as expeditiously as
possible to cause such Common Stock to be duly registered or approved, as the
case may be, unless such registration or approval is required solely because of
a breach of the Investors' representation contained in Section 6.5. So long as
the Common Stock is quoted on the NASDAQ or listed on any national securities
exchange, the Company, if permitted by the rules of such system or exchange,
will quote or list and keep quoted or listed on such system or exchange, upon
official notice of issuance, all Common Stock issuable or deliverable upon
conversion of the Preferred Shares and exercise of the Warrants.
8.12 Private Offering. In the event the Company proposes to sell
Common Stock in an offering not required to be registered under the Securities
Act, it will give the Investors at least 20 Business Days prior notice. If any
of the Investors elects by written notice to the Company within 15 Business
Days after receipt of such notice, it may participate in the sale (under the
same terms and conditions as set out in such offering), by including in such
sale in place of an equal number of shares of Common Stock to be sold by the
Company, such aggregate number of shares of Common Stock as is equal to the
product obtained by multiplying (i) the number of shares of Common Stock
proposed to be sold by the Company by (ii) a fraction (A) the numerator of
which is the number of shares of Common Stock into which the Preferred Shares
held by such Investor have heretofore been or may be converted and (B) the
denominator of which is the sum of (x) the amount of such numerator and (y) the
total number of shares of Common Stock outstanding at such time. The provisions
of this Section 8.12 shall not apply to issuances of Common Stock in connection
with: (1) acquisitions by the Company, (2) the exercise of options or
conversion of convertible securities and (3) services rendered to the Company.
8.13 Additional Registration Rights. The Company shall not provide
any registration rights with respect to its securities which are superior or
inconsistent with those granted under the Registration Rights Agreement.
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ARTICLE 9
NEGATIVE COVENANTS
The Company hereby covenants and agrees with the Investors, any
Affiliate of the Investors, and any Holder so long as such Person holds any
Preferred Shares or Warrants, that without the prior consent of such Person in
accordance with Section 11.4:
9.1 Consolidations and Mergers. The Company shall not merge,
consolidate with or into, or convey, transfer, lease or otherwise dispose of
(whether in one transaction or in a series of transactions) all or
substantially all of its assets (whenever acquired), except the Company may
consolidate or merge with or into, or sell all or substantially all of its
assets to, any Person if:
(a) The corporation or partnership formed by such
consolidation or surviving such merger or the Person which acquires all or
substantially all of the assets of the Company shall be (after giving effect to
such transaction) a Solvent corporation or partnership organized or formed, as
the case may be, and existing under, the laws of the United States, any state
thereof, or the District of Columbia and shall expressly assume in writing all
of the obligations of the Company under this Agreement, the Preferred Shares,
the Warrants and the Registration Rights Agreement;
(b) immediately after giving effect to such transaction,
no default under, or breach of, provisions of Article 8 and 9 exists; and
(c) the Company shall have furnished to the Holders (i)
an opinion of counsel satisfactory to a majority in interest of the Holders
addressing the matters (other than Solvency) set forth in clause (a) above and
(ii) the certificate of the Chief Financial Officer of the Company to the
effect that such transaction has been consummated in compliance with the
foregoing requirements; provided that nothing in this Section 9.1 shall affect
the rights of any Holder under this Agreement, the Preferred Shares, the
Warrants or the Registration Rights Agreement.
9.2 Transactions with Affiliates. The Company shall not, and
shall not permit any of its Subsidiaries to, enter into any transaction with
any Affiliate of the Company or of any such Subsidiary, except on terms no less
favorable to the Company or such Subsidiary than those the Company or such
Subsidiary would obtain in a comparable arm's-length transaction with a Person
not an Affiliate of the Company or such subsidiary; provided that any
transaction approved by a majority of the independent directors of the Company
shall be conclusively deemed to be on such terms.
9.3 No Inconsistent Agreements. Neither the Company nor any of
its Subsidiaries shall enter into any loan or other agreement, or enter into
any amendment
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or other modification to any currently existing agreement, which by its terms
restricts or prohibits the ability of the Company to pay dividends on the
Preferred Stock, to issue Common Stock upon conversion of the Preferred Stock
in accordance with the Certificate of Designation and this Agreement or to
issue the Warrant Shares; provided, however, that the foregoing shall not
prevent the Company from entering into loan or other agreements that contain
restrictions on the ability of the company to pay dividends on the Preferred
Stock either (i) during the existence of an event of default under such
agreements or (ii) if such payment or repurchase would, although not in itself
a breach of any covenant in any such agreement, result in the occurrence of a
default or event of default arising from a breach by the Company of one or more
covenants regarding the financial condition of the Company so long as, on the
date such agreement is entered into, (x) the terms of any such covenants would
not prohibit such payment on such date and (y) the Company does not reasonably
anticipate that any of the terms of such covenants is likely to be breached
during the term of such agreement as a result of such payment of dividend.
9.4 Issuance of Preferred Stock. The Company shall not issue any
Preferred Stock except pursuant to this Agreement.
ARTICLE 10
DISPOSITIONS
10.1 Dispositions by ▇▇▇▇▇.
(a) If D. ▇▇▇▇▇▇▇ ▇▇▇▇▇ ("▇▇▇▇▇") at any time or from
time to time proposes or agrees to sell or transfer to a Person or a "group"
(within the meaning of Section 13(d)(3) of the Exchange Act) of Persons, any
shares of Common Stock held by him, and so long as the Fund and all Holders
that are Affiliates of the Fund hold collectively at least five percent of the
Common Stock issued or issuable upon conversion of the Preferred Stock, ▇▇▇▇▇
shall give written notice of such proposed sale to the Fund within 15 Business
Days prior to the date of such sale, which notice shall state the price and
other terms of the proposed transaction and shall state the number of shares
proposed to be sold; provided, however, that the provisions of this Section
10.1(a) shall not apply to the sale or transfer of any shares of Common Stock
held by ▇▇▇▇▇ unless the sum of such shares plus all other shares of Common
Stock sold or transferred by ▇▇▇▇▇ during the period from the Closing Date to
the date of the proposed sale or transfer of such share shall be equal to or
greater than 25% of the number of shares of Common Stock held by ▇▇▇▇▇ on the
date hereof (assuming the exercise of all options held by ▇▇▇▇▇). So long as
the Fund and all Holders that are Affiliates of the Fund hold collectively at
least five percent of the Common Stock issued or issuable upon conversion of
the Preferred Stock, the Fund and each such Holder may, upon giving written
notice thereof to ▇▇▇▇▇ within ten Business Days after receipt of the notice
provided for in the first sentence of this Section 10.1, participate
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in such sale on the same terms and conditions as those offered by ▇▇▇▇▇ to such
third party or parties, by including in such sale in place of an equal number
of shares of Common Stock held by ▇▇▇▇▇ (excluding any shares with respect to
which the provisions of this Section 10.1(a) shall not apply in accordance with
the preceding sentence hereof) such aggregate number of shares of Common Stock
as is equal to the product obtained by multiplying (i) the number of shares of
Common Stock proposed to by sold by ▇▇▇▇▇ by (ii) a fraction (A) the numerator
of which is the number of shares of Common Stock into which the Preferred
Shares held by the Fund and each such Holder have theretofore been converted or
may be converted and (B) the denominator of which is the sum of (x) the amount
of such numerator and (y) 7,345,800 (which number shall be adjusted
appropriately for any subdivision, combination, reclassification or similar
event with respect to the Common Stock).
(b) Notwithstanding anything to the contrary in this
Agreement, including Section 10.1(a) hereof, the provisions of this Section
10.1 shall not apply to any sale or transfer by ▇▇▇▇▇ of any shares of Common
Stock (i) to (A) a spouse, (B) any of his lineal descendants, (C) a partnership
or trust set up for the benefit of one or more of such persons or (D) any
entity controlled by ▇▇▇▇▇; provided, however, that any proposed sale or
transfer by any of such transferees shall be deemed to be a sale or transfer by
▇▇▇▇▇ for purposes of this Section 10.1, or (ii) pursuant to a transaction
intended to be a charitable contribution.
(c) The provisions of this Section 10.1 shall terminate
upon the death or disability of ▇▇▇▇▇ or if ▇▇▇▇▇ is no longer either an
officer or director of the Company. The term "disability" shall mean, with
respect to ▇▇▇▇▇, that due to physical or mental infirmity, whether total or
partial, ▇▇▇▇▇ is permanently unable to perform his usual duties for the
Company.
10.2 Dispositions by the Fund.
(a) Except as set forth below, until the earlier to
occur of (i) the first anniversary of the Closing Date, (ii) the date on which
the Fund and all Holders that are Affiliates of the Fund collectively cease to
own at least five percent of the Common Stock issued or issuable upon
conversion of the Preferred Stock, (iii) the occurrence of a Change of Control
and (iv) the occurrence of a breach with respect to any of the covenants set
forth in Sections 8.8, 8.9, 8.10, 8.11, 8.12 and 8.13 or Article 9, which
breach remains uncured ten Business Days after written notice is provided to
the Company (the "Transfer Restriction Period"), the Fund shall not transfer or
sell any derivative security with respect to or otherwise dispose of its Common
Stock, Preferred Shares or Warrants.
(b) Notwithstanding anything in this Section 10.2 to the
contrary, the Fund may, at any time and from time to time, sell or otherwise
transfer Common Stock or Preferred Shares (i) pursuant to an exchange offer or
a tender offer
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not opposed by a majority of the Company's Board of Directors, (ii) pursuant to
any all cash tender offer made by any Person for all of the issued and
outstanding Common Stock, (iii) pursuant to the Registration Rights Agreement,
(iv) to any of the Fund's Affiliates, or (v) to the Fund's limited partners
pursuant to a pro rata distribution; provided, however, that any Affiliates (or
limited partners) of the Fund to which such securities are transferred shall
agree to be bound by all of the transfer restrictions set forth in this Section
10.2.
(c) Except as otherwise provided in Section 10.2(b), any
securities transferred by the Fund shall not thereafter be subject to the
provisions of this Section 10.2.
ARTICLE 11
MISCELLANEOUS
11.1 Survival of Provisions. All warranties, representations and
covenants made by the Company in or under this Agreement shall be considered to
have been relied upon by the Investors and shall survive the execution and
delivery of this Agreement and the issuance to the Investors of the Preferred
Shares and the Warrants, regardless of any investigation made by the Investors
or on their behalf. All warranties, representations and covenants made by the
Investors or on their behalf shall survive the execution and delivery of this
Agreement and the issuance to the Investors of the Preferred Shares and the
Warrants. Except as otherwise set forth in Article 8 or 9, all of the
representations and warranties made herein and each of the provisions of
Articles 5, 6, 7 and 11 shall survive the execution and delivery of this
Agreement, any investigation by or on behalf of the Investors or any Affiliate,
acceptance of the Preferred Shares and the Warrants and payment therefor,
payment or prepayment of the Preferred Shares and the Warrants upon redemption
or otherwise, conversion of the Preferred Shares and exercise of the Warrants
or termination of this Agreement; provided that the representations and
warranties set forth in Articles 5 and 6 shall expire and terminate upon the
earlier of (i) conversion of all of the Preferred Stock into Common Stock and
the exercise of all of the Warrants for Common Stock and (ii) the second
anniversary of the later of (x) the Initial Closing or (y) any Additional
Closing.
11.2 Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be by
registered or certified first-class mail, return receipt requested, telecopier,
courier service or personal delivery:
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(a) if to the Fund at the following address:
The 1818 Fund III, L.P.
c/o Brown Brothers ▇▇▇▇▇▇▇▇ & Co.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy to:
▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
1285 Avenue of the Americas
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
(b) if to the Company at the following address:
Z-Tel Technologies, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
with a copy to:
King & Spalding
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; when delivered by
courier, if delivered by commercial overnight courier service; five Business
Days after being deposited in the mail, postage prepaid, if mailed; and when
receipt is acknowledged, if telecopied.
11.3 Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of the
parties hereto. Each of the Investors may assign any of its rights under this
Agreement only to any of its Affiliates; provided that any such Affiliate
(including any limited partner)
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agrees to be bound by the provisions in this Agreement. The Company may not
assign any of its rights under this Agreement without the written consent of
the Investors. Except as provided in Article 7, no Person other than the
parties hereto is intended to be a beneficiary of this Agreement, the Preferred
Shares, the Warrants or the Registration Rights Agreement. Nothing in this
Section 11.3 shall prohibit the Investors from transferring Common Stock,
Preferred Shares, Warrants or Subordinated Notes to any person nor shall
anything in this Section affect any Holder's rights under the Registration
Rights Agreement.
11.4 Amendment and Waiver. No failure or delay on the part of the
Company or the Investors in exercising any right, power or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right, power or remedy preclude any other or further exercise thereof
or the exercise of any other right, power or remedy. The remedies provided for
herein are cumulative and are not exclusive of any remedies that may be
available to the Company or the Investors at law, in equity or otherwise. Any
amendment, supplement, modification or termination of or to any provision of
this Agreement, any waiver of any provision of this Agreement, and any consent
to any departure by the Company from the terms of any provision of this
Agreement, shall be effective only in the specific instance and for the
specific purpose for which made or given and shall be effective only when
signed in writing by or on behalf of holders of at least 50% of the Common
Stock issued and issuable upon conversion of the Preferred Shares (whether or
not converted) (it being understood that the terms of this Agreement may be
waived or amended with the written consent of holders of at least 50% of the
Common Stock issued and issuable upon conversion of the Preferred Shares
(whether or not converted)). Except where notice is specifically required by
this Agreement, no notice to or demand on the Company in any case shall entitle
the Company to any other or further notice or demand in similar or other
circumstances.
11.5 Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
11.6 Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
11.7 Determinations. Except where any provision expressly requires
that a determination be reasonable or a consent not be unreasonably withheld,
or be subject to qualifications to similar effect, all determinations to be
made by the Company, the Investors or any Holder hereunder in its opinion or
judgment or with its approval or otherwise shall be made by it in its sole
discretion.
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11.8 Governing Law. This Agreement has been negotiated, executed
and delivered in the State of New York and shall be governed by and construed
in accordance with the laws of the State of New York, without regard to
principles of conflicts of law.
11.9 Jurisdiction. Each party to this Agreement hereby irrevocably
agrees that any legal action or proceeding arising out of or relating to this
Agreement or any agreements or transactions contemplated hereby shall be
brought only in the courts of the State of New York located in New York City or
of the United States of America for the Southern District of New York and
hereby expressly submits to the personal jurisdiction and venue of such courts
for the purposes thereof and expressly waives any claim of improper venue and
any claim that such courts are an inconvenient forum. Each party hereby
irrevocably consents to the service of process of any of the aforementioned
courts in any such suit, action or proceeding by the mailing of copies thereof
by registered or certified mail, postage prepaid, to the address set forth in
Section 11.2, such service to become effective 10 days after such mailing.
11.10 Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way
impaired, unless the provisions held invalid, illegal or unenforceable shall
substantially impair the benefits of the remaining provisions hereof.
11.11 Rules of Construction. Unless the context otherwise requires,
"or" is not exclusive, and references to sections or subsections refer to
sections or subsections of this Agreement.
11.12 Remedies. If a breach of this Agreement or the Certificate of
Designation by the Company occurs and is continuing, any Holder may pursue any
available remedy by proceeding at law or in equity to enforce the performance
(including, without limitation, the specific performance) of any provision of
this Agreement or the Certificate of Designation. Except as otherwise provided
by law, a delay or omission by any Holder in exercising any right or remedy
accruing upon any such breach shall not impair the right or remedy or
constitute a waiver of or acquiescence in any such breach. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
11.13 Entire Agreement. This Agreement, together with the exhibits
and schedules hereto, the Certificate of Designation, the Warrants and the
Registration Rights Agreement, is intended by the parties as a final expression
of their agreement and intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein. There are no restrictions, promises,
warranties or undertakings, other than
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those set forth or referred to herein or therein. This Agreement, together with
the exhibits and schedules hereto, the Certificate of Designation, the Warrants
and the Registration Rights Agreement supersede all prior agreements and
understandings between the parties with respect to such subject matter.
11.14 Attorneys' Fees. In any action or proceeding brought to
enforce any provision of this Agreement (including, without limitation, the
representations and warranties of the Investors), the Certificate of
Designation, the Warrants or the Registration Rights Agreement or any other
document or instrument contemplated hereby or thereby, or where any provision
hereof or thereof is validly asserted as a defense, the successful party shall
be entitled to recover reasonable attorneys' fees, charges and disbursements in
addition to any other available remedy.
11.15 Publicity. Except as may be required by applicable law or
stock exchange rules, neither party hereto shall issue a publicity release or
announcement or otherwise make any public disclosure concerning this Agreement
or the transactions contemplated hereby, without prior approval by the other
party hereto. If any announcement is required by law to be made by either party
hereto, prior to making such announcement such party will deliver a draft of
such announcement to the other party and shall give the other party an
opportunity to comment thereon.
11.16 Expenses. The Company acknowledges and agrees that whether or
not the transactions contemplated hereby are consummated, the Company shall
reimburse the Investors for all reasonable consulting and legal fees and
expenses and other charges of the Investors in connection with the negotiation,
execution and delivery of this Agreement, the Preferred Shares, the Warrants
and the Registration Rights Agreement and the purchase of the Preferred Shares
(including, without limitation, all reasonable fees, disbursements and related
charges of ▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇), (ii) reasonable out-of
pocket expenses for attendance at meetings of the Board of Directors of the
Company by the Fund's Directors and any representative, and (iii) any fees and
expenses related to filing under the HSR Act. The Company agrees that it will
make such reimbursements as such fees and expenses are incurred, upon request
from the Investors.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their respective representatives hereunto duly
authorized as of the date first above written.
Z-TEL TECHNOLOGIES, INC.
By: /s/ D. ▇▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------
Name: D. ▇▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------
Title: CEO
---------------------------
THE 1818 FUND III, L.P.
By: ▇▇▇▇▇ Brothers ▇▇▇▇▇▇▇▇ & Co.,
General Partner
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
Title: Partner
---------------------------
The undersigned hereby agrees to
be bound by and perform in
accordance with Section 10.1 of
this Agreement.
/s/ D. ▇▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------------
D. ▇▇▇▇▇▇▇ ▇▇▇▇▇
44