REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Registration Rights Agreement"),
dated as of May ___, 2004 by and between Z-Tel Technologies, Inc. ("Z-Tel") and
the Metropolitan Government of Nashville and Davidson County, Tennessee ("Metro
Nashville")
WITNESSETH:
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WHEREAS Metro Nashville is the Plaintiff and Z-Tel is the defendant in
a lawsuit filed in the United States District Court for the Middle District of
Florida, Tampa Division (Case No. 8:02-CV-1708-T-24EAJ) (the "Litigation"), and
WHEREAS the parties have agreed to settle the Litigation (the
"Settlement") subject to the approval of the Metropolitan Council of Metro
Nashville, (the "Metropolitan Council"), and
WHEREAS as part of the Settlement, Z-Tel has agreed to issue and
deliver shares of its authorized but unissued common stock to Metro Nashville
(the "Settlement Stock") and to register same pursuant to a Registration
Statement on Form S-3 (the "S-3 Registration Statement") under the Securities
Act of 1933 (the "Securities Act") so as to permit public offer and sale of same
by Metro Nashville, and WHEREAS the parties have agreed to memorialize their
rights and obligations with respect to the registration of the Settlement Stock
for offer and sale in this Registration Rights Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt whereof
and the sufficiency of which are hereby acknowledged, it is hereby agreed as
follows:
(A) Z-Tel represents that on the date hereof it has been, and on the
date of its filing of the S-3 Registration Statement, it will continue to be
subject to the requirements of Section 12 or 15(d) of the Securities Exchange
Act of 1934 (the "Exchange Act"), and in each instance, has filed or will have
filed, on a timely basis, all of the reports required to be filed pursuant to
Section 13, 14 or 15(d) of the Exchange Act for a period of at least twelve
calendar months immediately preceding the date hereof and thereof.
(B) Z-Tel further represents and warrants that it knows of no
impediment to its ability to register the Settlement Stock under an S-3
Registration Statement so as to permit the offer and sale of the Settlement
Stock by Metro Nashville on a continuous basis pursuant to Rule 415 under the
Securities Act.
(C) No later than 30 calendar days after the date of approval (the
"Approval Date") of the Settlement by the Metropolitan Council, Z-Tel shall file
the S-3 Registration Statement with the SEC together with any required consents,
opinions, exhibits and other documents to register the Settlement Stock for a
public offering to be made on a continuous basis by Metro Nashville pursuant to
Rule 415 under the Securities Act. At the same time, Z-Tel shall file such
additional applications with any other regulatory authority where registration
or an exemption is required to be obtained in order to enable public sale of the
Settlement Stock.
(D) Z-Tel will use its best efforts to assure that the S-3 Registration
Statement is declared effective by the SEC as soon as possible. Those best
efforts will include but will not be limited to Z-Tel's best efforts to prepare
and file the S-3 Registration Statement and any required amendments thereto, and
cause it to be declared effective by the SEC as promptly as practicable and to
take or cause to be taken all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable law to consummate and
make effective in the most expeditious manner practicable, the completion of
registration of the Settlement Stock. These acts will include Z-Tel's using
prompt, substantial and persistent efforts as a prudent person desirous of
achieving a result would use in similar circumstances. Metro Nashville shall
provide the information concerning its status as a Selling Security Holder
reasonably requested by Z-Tel for inclusion in the S-3 Registration Statement.
(E) Z-Tel will also use its best efforts to assure that the S-3
Registration Statement is kept continuously effective under the Securities Act
until the date that all of the Settlement Stock has been sold or can be sold
publicly under Rule 144(k) (the "Registration Period").
(F) Z-Tel shall similarly use its best efforts to (i) register and
qualify, unless an exemption from registration and/or qualification applies, the
public offer and sale by Metro Nashville of the Settlement Stock under the
securities or "blue sky" laws of all applicable jurisdictions in the United
States, (ii) prepare and file in those jurisdictions such amendments (including
post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof during
the Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualifications in effect during the Registration
Period, and (iv) take all other actions reasonably necessary to qualify the
Settlement Stock for offer and sale in such jurisdictions; provided that Z-Tel
shall not be required in connection therewith or as a condition thereto to (x)
qualify to do business in any jurisdiction where it would not otherwise be
required to qualify but for this paragraph (F); (y) subject itself to general
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taxation in any such jurisdiction; or (z) file a general consent to service of
process in any such jurisdiction.
(G) Z-Tel will provide Metro Nashville (by transmittal to Xxxx Xxxx,
Director of Law) with all notices and other papers filed with or received by
Z-Tel in connection with the S-3 Registration Statement promptly upon receipt or
transmittal by Z-Tel (including, without limitation, its employees, attorneys,
accountants and other agents) of such notices or papers. Z-Tel will also keep
Metro Nashville fully and currently advised as to all other communications and
developments regarding the attempt to register the Settlement Stock.
(H) Z-Tel will bear all costs and expenses in connection with
registration of the Settlement Stock, excluding any expenses (including
attorney's fees) incurred by Metro Nashville or its representatives in reviewing
the S-3 Registration Statement or in providing any information to Z-Tel
necessary to prepare the S-3 Registration Statement.
(I) Assuming the approval of the Settlement on or before June 1, 2004
by the Metropolitan Council; if the S-3 Registration Statement has not become
effective by August 31, 2004, Z-Tel may (at its option) seek a one-month
extension to September 30, 2004 by providing Metro Nashville with written notice
of Z-Tel's election to obtain that further extension together with a payment of
$20,000 by wire transfer by 2 pm CDT on September 1, 2004, which payment shall
increase the Settlement by that amount. Thereafter, if the S-3 Registration
Statement has not become effective by September 30, 2004, Z-Tel may (at its
option) obtain a further extension to October 31, 2004 for the S-3 Registration
Statement to be declared effective by providing Metro Nashville with written
notice of Z-Tel's election to obtain such further extension together with a
payment of an additional $56,000 by wire transfer by 2 pm CDT on October 1,
2004, which payment shall further increase the Settlement by that amount.
Thereafter, if the S-3 Registration Statement has not become effective by
October 30, 2004, Z-Tel may obtain (at its option) a further extension to
November 30 for the S-3 Registration Statement to become effective by providing
Metro Nashville with written notice of Z-Tel's election to obtain such further
extension together with a payment of an additional $80,000 by wire transfer by 2
pm CDT on November 1, 2004, which payment shall further increase the Settlement
by that amount. There will be no extensions beyond November 30 unless hereafter
expressly agreed in writing by Metro Nashville.
(J) If the S-3 Registration Statement has not been declared effective
by either [1] August 31 if no extension is obtained by Z-Tel as provided above
or [2] if any extension is obtained (as provided in paragraph (I) above), the
final date specified with respect to any such extension (i.e. September 30,
October 31 or November 30 as the case may be) (hereinafter "the Final Date"),
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Z-Tel may, in lieu of registration, on or before the Final Date, at Z-Tel's sole
option either: [i] pay Metro Nashville $800,000 plus interest (at the then prime
rate) from the Approval Date to the date of such payment in redemption of all of
the Settlement Stock or [ii] arrange for a private sale of the Settlement Stock
that will provide Metro Nashville with $800,000 plus such interest or (iii)
effect any combination of (i) and (ii) set forth in this sentence as selected by
Z-Tel so long as the aggregate gross proceeds to Metro Nashville equals $800,000
plus such interest. For purposes of this paragraph J, the "Final Date" means the
later of August 31, 2004 or the last date on which, as a result of any extension
or extensions that Z-Tel has obtained in accordance and by compliance with
paragraph (I) herein, the S-3 Registration Statement must be declared effective
by the SEC. The amount payable under this paragraph J will be in addition to any
payments made under paragraph I above.
(K) If on the Final Date, the S-3 Registration Statement has not become
effective and Z-Tel has neither paid the sum provided in paragraph J(i), nor
arranged for a private sale of the Settlement Stock as provided in paragraph
J(ii), nor effected a combination of J(i) and J(ii) as set forth under J(iii)
herein, Z-Tel will be deemed to be in breach of this agreement and this
settlement, and Metro Nashville shall be entitled to obtain any remedy available
to it (including, but not limited to, damages) as a result of Z-Tel's breach or
failure to consummate this agreement. Metro Nashville may either (at its option)
apply to the Court or bring separate suit to obtain such remedy or remedies.
(L) Z-Tel will deliver to Metro Nashville on the Approval Date stock
equal in value to $960,000 (representing 20 % over $800,000), as computed
pursuant to the formula discussed next. The price of Z-Tel stock for this
purpose shall be the average of the last reported sale prices for Z-Tel common
stock on NASDAQ on each of the twelve (12) trading days immediately preceding
the Approval Date. If the value of the Settlement Stock on the Effective Date of
the S-3 Registration Statement exceeds $800,000, Metro Nashville will return to
Z-Tel within ten (10) business days, that number of shares of Z-Tel stock that
is equal in value to the market value on the Effective Date less $800,000. For
purposes of valuing the stock on the Effective Date, the market value will be
deemed to be the average of the last reported sale prices for Z-Tel common stock
on NASDAQ for each of the twelve (12) trading days immediately preceding the
Effective Date.
(M) Z-Tel hereby covenants and agrees that none of its officers or
directors will sell any shares of Z-Tel common stock during the period prior to
the Effective Date of the S-3 Registration Statement or full payment to Metro
Nashville of the amounts that may be paid in lieu of such effectiveness as
provided above.
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(N) Metro Nashville hereby covenants and agrees that it will not sell
more than 200,000 shares of registered Settlement Stock in any seven calendar
day period.
(O) Both Metro Nashville and Z-Tel agree to cooperate to finalize and
execute, as promptly and efficiently as feasible, any such or other documents
that may be reasonably necessary to effectuate and consummate this Registration
Rights Agreement.
(P) Upon approval of the Settlement by the Metropolitan Council, this
Registration Rights Agreement shall be binding upon, and shall inure to the
benefit of, Z-Tel, Metro Nashville and their respective successors and assigns
or other legal representatives. If and to the extent that any provision hereof
is deemed unenforceable or invalid for any reason, that provision shall be
modified, reformed and/or novated so that it contains the provision involved to
the maximum extent enforceable or valid.
(Q) This Registration Rights Agreement shall not be amended, modified
or rescinded except in a writing executed by each of the parties hereto.
(R) This Registration Rights Agreement shall be construed and enforced
in accordance with the laws of the State of Delaware without regard to the
principle of the conflict of laws.
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement on the day, month and year first above written.
Z-Tel Technologies, Inc. Metropolitan Government
of Nashville and
Davidson County, Tennessee
By__________________________ By___________________________
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