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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
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ARTICLE 1 DEFINITIONS...........................................................1
1.1 Definitions...........................................................1
1.2 Additional Definitions................................................8
1.3 Accounting Terms; Financial Covenants.................................8
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.......................................................9
2.4 Initial Closing.......................................................9
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............................................................11
3.6 Purchase Permitted by Applicable Laws; Legal Investment..............11
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...........................................12
3.12 Conduct of Business..................................................12
3.13 Registration Rights Agreement........................................12
3.14 Charter and By-Laws of the Company...................................12
3.15 Market Conditions....................................................13
3.16 No Litigation........................................................13
3.17 No Default or Breach.................................................13
3.18 HSR Act..............................................................13
3.19 Election of Directors................................................13
3.20 Warrants.............................................................13
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...................................14
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4.5 Consents and Approvals...............................................14
4.6 HSR Act..............................................................14
ARTICLE 5 REPRESENTATIONS AND WARRANTIES
OF THE COMPANY.......................................................15
5.1 Corporate Existence and Power........................................15
5.2 Corporate Authorization; No Contravention............................15
5.3 Governmental Authorization; Third Party Consents.....................15
5.4 Binding Effect.......................................................16
5.5 No Legal Bar.........................................................16
5.6 Litigation...........................................................16
5.7 No Default or Breach.................................................17
5.8 Title to Properties..................................................17
5.9 Taxes................................................................17
5.10 Financial Condition..................................................17
5.11 No Material Adverse Change...........................................18
5.12 Commission Documents.................................................18
5.13 Environmental Matters................................................18
5.14 Investment Company...................................................18
5.15 Subsidiaries.........................................................18
5.16 Capitalization.......................................................18
5.17 Solvency.............................................................19
5.18 Private Offering.....................................................19
5.19 Broker's, Finder's or Similar Fees...................................19
5.20 Full Disclosure......................................................19
5.21 Regulatory Compliance................................................20
5.22 Registration Rights Agreement; Shareholders Agreement................21
5.23 Trade Relations......................................................21
5.24 Material Contracts...................................................21
5.25 Business Model.......................................................21
5.26 No Undisclosed Financial Liabilities.................................22
5.27 Intellectual Property................................................22
5.28 ERISA................................................................23
5.29 Labor Relations......................................................24
ARTICLE 6 REPRESENTATIONS AND WARRANTIES AND
COVENANTS OF THE INVESTORS...........................................24
6.1 Existence and Power..................................................24
6.2 Authorization; No Contravention......................................24
6.3 Binding Effect.......................................................25
6.4 No Legal Bar.........................................................25
6.5 Purchase for Own Account.............................................25
6.6 Broker's, Finder's or Similar Fees...................................26
6.7 Investment Knowledge.................................................26
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ARTICLE 7 INDEMNIFICATION......................................................27
7.1 Indemnification by the Company.......................................27
7.2 Notification.........................................................28
7.3 Registration Rights Agreement........................................28
ARTICLE 8 AFFIRMATIVE COVENANTS................................................29
8.1 Financial Statements.................................................29
8.2 Certificates; Other Information......................................30
8.3 Preservation of Corporate Existence..................................30
8.4 Payment of Obligations...............................................30
8.5 Compliance with Laws.................................................31
8.6 Notices..............................................................31
8.7 Issue Taxes..........................................................31
8.8 Reservation of Shares................................................31
8.9 Inspection...........................................................32
8.10 Board Representation.................................................33
8.11 Registration and Listing.............................................34
8.12 Private Offering.....................................................34
8.13 Additional Registration Rights.......................................35
ARTICLE 9 NEGATIVE COVENANTS...................................................35
9.1 Consolidations and Mergers...........................................35
9.2 Transactions with Affiliates.........................................35
9.3 No Inconsistent Agreements...........................................36
9.4 Issuance of Preferred Stock..........................................36
ARTICLE 10 DISPOSITIONS.........................................................36
10.1 Dispositions by Xxxxx................................................36
10.2 Dispositions by the Fund.............................................37
ARTICLE 11 MISCELLANEOUS........................................................38
11.1 Survival of Provisions...............................................38
11.2 Notices..............................................................38
11.3 Successors and Assigns...............................................39
11.4 Amendment and Waiver.................................................40
11.5 Counterparts.........................................................40
11.6 Headings.............................................................40
11.7 Determinations.......................................................40
11.8 Governing Law........................................................40
11.9 Jurisdiction.........................................................41
11.10 Severability.........................................................41
11.11 Rules of Construction................................................41
11.12 Remedies.............................................................41
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11.13 Entire Agreement.....................................................41
11.14 Attorneys' Fees......................................................42
11.15 Publicity............................................................42
11.16 Expenses.............................................................42
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, Xxxxx 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 X.X.X.xx. 7401 ET SEQ.), the Toxic
Substances Control Act (15 X.X.X.xx. 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 X.X.X.xx. 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 Xxxx-Xxxxx-Xxxxxx 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
Xxxxx 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 Xxxx, Weiss,
Rifkind, Xxxxxxx & Xxxxxxxx, 1285 Avenue of the Americas, Xxx Xxxx, Xxx Xxxx
00000-0000 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
11
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
12
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 Xxxx, Weiss, Rifkind, Xxxxxxx
& Xxxxxxxx, 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.
13
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
14
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.
15
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.
16
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
17
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.
18
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
19
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
20
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.
21
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.
22
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.
23
5.27 INTELLECTUAL PROPERTY.
(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
24
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
25
(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
26
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
27
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, Xxxxx Brothers Xxxxxxxx & 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
28
any legal, 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
29
notify the Company of the commencement thereof, the Company shall be entitled to
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:
30
8.1 FINANCIAL STATEMENTS. The Company shall deliver to
the Investors and any of their Affiliates that are Holders:
(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.
31
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 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
32
business, except such as to which such failure to comply would not have a
material adverse effect on the Condition of the Company.
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
33
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 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
34
fund sponsored by Xxxxx Brothers Xxxxxxxx & Co. if such transferee enters into a
confidentiality agreement having substantially the same terms as this Section
8.9(b).
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
35
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.
(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.
36
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.
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
37
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 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 XXXXX.
(a) If D. Xxxxxxx Xxxxx ("Xxxxx") 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, Xxxxx
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 Xxxxx unless the sum of such shares plus all other shares of Common
Stock sold or transferred by Xxxxx 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
38
the number of shares of Common Stock held by Xxxxx on the date hereof (assuming
the exercise of all options held by Xxxxx). 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 Xxxxx within ten
Business Days after receipt of the notice provided for in the first sentence of
this Section 10.1, participate in such sale on the same terms and conditions as
those offered by Xxxxx to such third party or parties, by including in such sale
in place of an equal number of shares of Common Stock held by Xxxxx (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
Xxxxx 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 Xxxxx 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 Xxxxx; PROVIDED, HOWEVER, that any proposed sale or
transfer by any of such transferees shall be deemed to be a sale or transfer by
Xxxxx 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 Xxxxx or if Xxxxx is no longer either
an officer or director of the Company. The term "disability" shall mean, with
respect to Xxxxx, that due to physical or mental infirmity, whether total or
partial, Xxxxx 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
39
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 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
40
or certified first-class mail, return receipt requested, telecopier, courier
service or personal delivery:
(a) if to the Fund at the following address:
The 1818 Fund III, L.P. c/o Brown Brothers
Xxxxxxxx & Co. 00 Xxxx Xxxxxx Xxx Xxxx, Xxx
Xxxx 00000 Telecopier No.: (000) 000-0000
Attention: Xxxxxxxx X. Xxxxxx
with a copy to:
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx
1285 Avenue of the Americas Xxx Xxxx, Xxx
Xxxx 00000-0000 Telecopier No.: (212)
757-3990 Attention: Xxxxxxx Xxxxx, Esq.
(b) if to the Company at the following address:
Z-Tel Technologies, Inc. 0000 Xxxxx Xxxxxxx
Xxxxxx Xxxxxxxxx Xxxxx 000 Xxxxx, Xxxxxxx
00000 Telecopier No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
with a copy to:
King & Spalding 000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000 Telecopier No.: (404)
572-5100 Attention: Xxxxxx Xxxxx
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.
41
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) 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
42
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.
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
43
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 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 Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx), (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.
44
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. Xxxxxxx Xxxxx
----------------------------------
Name: D. Xxxxxxx Xxxxx
Title: CEO
THE 1818 FUND III, L.P.
By: Xxxxx Brothers Xxxxxxxx & Co.,
General Partner
By: /s/ Xxxxxxxx X. Xxxxxx
----------------------------------
Name: Xxxxxxxx X. Xxxxxx
Title: Partner
The undersigned hereby agrees to be
bound by and perform in accordance
with Section 10.1 of this Agreement.
/s/ D. Xxxxxxx Xxxxx
----------------------------------
D. Xxxxxxx Xxxxx