EXHIBIT 4
BACKUP PURCHASE AGREEMENT
BACKUP PURCHASE AGREEMENT, dated as of July 2, 2001 (this
"AGREEMENT"), among Z-Tel Communications, Inc. a Delaware corporation
("COMMUNICATIONS"), Touch 1 Communications, Inc., an Alabama corporation,
("TOUCH 1" and, together with Communications, the "COMPANIES"), The 1818 Fund
III, L.P. (the "FUND"), and the other investors whose signatures appear on the
signature pages hereto (the "ADDITIONAL INVESTORS" and, together with the Fund,
the "INVESTORS").
W I T N E S S E T H:
WHEREAS, pursuant to the Stock and Warrant Purchase Agreement,
dated July 2, 2001 (the "INVESTMENT AGREEMENT"), among Z-Tel Technologies, Inc.,
the sole shareholder of Communications and Touch 1 (the "PARENT"), and the
Investors, the Investors have agreed severally to purchase shares of the
Parent's 12% Junior Redeemable Convertible Preferred Stock, Series G (the
"PREFERRED SHARES");
WHEREAS, in order to induce the Investors to purchase the
Preferred Shares, the Parent has agreed to redeem the Preferred Shares under
certain circumstances in accordance with the terms and conditions of the Z-Tel
Technologies, Inc. Certificate of Designation of 12% Junior Redeemable
Convertible Preferred Stock, Series G (the "CERTIFICATE OF DESIGNATION");
WHEREAS, the Parent and the Companies are engaged in related
businesses, and the Companies will derive substantial direct and indirect
benefit from the funds received by the Parent in connection with the sale of the
Preferred Shares;
WHEREAS, it is a condition precedent to the obligation of the
Investors to purchase the Preferred Shares under the Investment Agreement that
the Companies shall have executed and delivered this Agreement for the benefit
of the Investors; and
NOW, THEREFORE, in consideration of the premises and to induce
the Investors to enter into the Investment Agreement and to induce the Investors
to purchase the Preferred Shares, the Companies, jointly and severally, agree
with the Investors, as follows:
Section 1. DEFINED TERMS.
(a) Unless otherwise defined herein, capitalized terms used herein
shall have the meanings given to them in the Certificate of Designation.
"CARRIER CONTRACTS" has the meaning assigned in the Investment
Agreement.
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"CONTRACTUAL OBLIGATION" as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"DOCUMENTS" has the meaning assigned in Section 6(b).
"LIEN" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement and any
financing lease having substantially the same economic effect as any of the
foregoing).
"MATERIAL ADVERSE EFFECT" means a material adverse effect on
(a) the business, operations, property, condition (financial or otherwise) or
prospects of the Companies or (b) the validity or enforceability of this or any
of the other Documents or the rights or remedies of the Investors hereunder or
thereunder.
"OBLIGATIONS" means the prompt and complete payment and
performance of all of the Companies' obligations hereunder.
"PARENT DEFAULT" means the failure of the Parent (for any
reason whatsoever) to redeem all of the then-outstanding Preferred Shares on the
Applicable Redemption Date and pay in full the Applicable Redemption Price on or
prior to such date in accordance with the provisions of the Certificate of
Designation.
"REQUIREMENT 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
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"UNREDEEMED PREFERRED SHARES" means any Preferred Shares held
by the Investors, their successors or assigns following the Applicable
Redemption Date with respect to which the Parent has not deposited funds for
redemption in accordance with the provisions of the Certificate of Designation.
(b) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and section and
paragraph references are to this Agreement unless otherwise specified.
(c) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
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Section 2. PURCHASE OBLIGATION.
(a) The Companies shall, on the first Business Day following a
Parent Default, purchase all Unredeemed Preferred Shares at a price per share
equal to the Applicable Redemption Price payable by the Parent pursuant to the
provisions of the Certificate of Designation, payable in immediately available
funds and otherwise in accordance with the provisions of the Certificate of
Designation.
(b) On the first Business Day following a Parent Default, the
Companies shall deposit for the benefit of the holders of Preferred Shares to be
purchased the funds necessary for such purchase with a bank or trust company
having capital and surplus of at least $1 billion, with instructions to such
bank or trust company to pay the full redemption as provided in the Certificate
of Designation to holders of Preferred Shares upon surrender of certificates for
such shares; PROVIDED, HOWEVER, that the making of such deposit shall not
release the Companies from any obligations hereunder. Any moneys so deposited by
the Companies and unclaimed at the end of two years from the date of the Parent
Default shall revert to the Companies and, upon demand, such bank or trust
company shall pay over to the Companies such unclaimed amounts and thereupon
such bank or trust company shall be relieved of all responsibility in respect
thereof and any holder of Unredeemed Preferred Shares so redeemed shall look
only to the Companies and the Parent for the payment of the full Applicable
Redemption Amount.
(c) All obligations of the Companies hereunder shall be joint and
several.
Section 3. AMENDMENTS, ETC. WITH RESPECT TO OBLIGATIONS. The
Companies shall remain obligated hereunder notwithstanding that, without any
reservation of rights against the Companies and without notice to or further
assent by the Companies, any demand for payment of any of the Obligations made
by the Investors may be rescinded by such party and any of the Obligations
continued, and the Obligations, or the liability of any other party upon or for
any part thereof, may, from time to time, in whole or in part, be renewed,
extended, amended, modified, accelerated, compromised, waived, surrendered or
released by the Investors, and the Investment Agreement, the Certificate of
Designation and any other documents executed and delivered in connection
therewith may be amended, modified, supplemented or terminated, in whole or in
part, as the parties thereto may deem advisable from time to time. The Investors
shall have no obligation to protect, secure, perfect or insure any lien at any
time held by it as security for the Obligations or any property subject thereto.
When making any demand hereunder against the Companies, the Investors may, but
shall be under no obligation to, make a similar demand on the Parent and any
failure by the Investors to make any such demand or to collect any payments from
the Parent or any release of the Parent shall not relieve the Companies in
respect of which a demand or collection is not made, and shall not impair or
affect the rights and remedies, express or implied, or as a matter of law, of
the Investors against the Companies. For the purposes hereof "demand" shall
include the commencement and continuance of any legal proceedings.
Section 4. WAIVER. The Companies waive any and all notice of the
creation, renewal, extension or accrual of any of the Obligations and notice of
or proof of reliance
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by the Investors upon this Agreement or acceptance of this Agreement, the
Obligations, and any of them, shall conclusively be deemed to have been created,
contracted or incurred, or renewed, extended, amended or waived, in reliance
upon this Agreement and all dealings between the Companies or the Parent, on the
one hand, and the Investors, on the other hand, likewise shall be conclusively
presumed to have been had or consummated in reliance upon this Agreement. The
Companies waive diligence, presentment, protest, demand for payment and notice
of default or nonpayment to or upon the Parent or the Companies with respect to
the Obligations. The Companies understand and agree that this Agreement shall be
construed as a continuing, absolute and unconditional guarantee of the Companies
to purchase the Preferred Shares in accordance with the terms hereof without
regard to (a) the validity, regularity or enforceability of this Agreement, any
of the Obligations or any other Documents or (b) any other circumstance
whatsoever (with or without notice to or knowledge of the Parent or the
Companies) which constitutes, or might be construed to constitute, an equitable
or legal discharge of the Parent or the Companies for the Obligations, under
this Agreement, in bankruptcy or in any other instance. When pursuing its rights
and remedies hereunder against the Companies, the Investors may, but shall be
under no obligation to, pursue such rights and remedies as it may have against
the Parent or against any collateral for the Obligations, and any failure by the
Investors to pursue such other rights or remedies or to collect any payments
from the Parent or any such other Person or to realize upon any such collateral
or any release of the Parent or any such other Person or any such collateral,
shall not relieve the Companies of any liability hereunder, and shall not impair
or affect the rights and remedies, whether express, implied or available as a
matter of law, of the Investors against the Companies. This Agreement shall
remain in full force and effect and be binding in accordance with and to the
extent of its terms upon the Companies and the successors and assigns thereof,
and shall inure to the benefit of the Investors, and their respective
successors, indorsees, transferees and assigns, until all the Obligations and
the obligations of the Companies under this Agreement shall have been satisfied
by payment in full.
Section 5. REINSTATEMENT. This Agreement shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any of the Obligations is rescinded or must otherwise be
restored or returned by the Investors upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Companies or the Parent, or
upon or as a result of the appointment of a receiver, intervenor or conservator
of, or trustee or similar officer for, the Companies or the Parent or any
substantial part of its property, or otherwise, all as though such payments had
not been made.
Section 6. REPRESENTATIONS AND WARRANTIES. Each of the
Companies, jointly and severally hereby represents and warrants that:
(a) Each Company (i) is a corporation duly organized, validly
existing and in good standing under the laws of Delaware, (ii) has the
corporate power and authority, and the legal right, to own and operate
its property, to lease the property it operates as lessee and to
conduct the business in which it is currently engaged, (iii) is duly
qualified as a foreign
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corporation 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, except to the extent that the
failure to be so qualified could not reasonably be expected to have a
Material Adverse Effect, and (iv) is in compliance with all
Requirements of Law except to the extent that the failure to comply
therewith could not, in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(b) Each Company has the corporate power and authority to execute,
make, deliver and perform this Agreement and all agreements,
instruments and certificates delivered from time to time in connection
herewith to which it is a party (the "DOCUMENTS") and has taken all
necessary corporate action to authorize the execution, delivery and
performance of the Documents to which it is a party. No consent or
authorization of, filing with, notice to or other act by or in respect
of, any governmental authority or any other Person is required in
connection with the execution, delivery, performance, validity or
enforceability of the Documents to which it is a party, except those
which, in the aggregate, could not be reasonably expected to have a
Material Adverse Effect if not obtained or made. This Agreement has
been, and each other Document to which it is a party will be, duly
executed and delivered on behalf of the Companies. This Agreement
constitutes, and each other Document to which it is a party when
executed and delivered will constitute, a legal, valid and binding
obligation of the Companies enforceable against them in accordance with
its terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating
to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and
an implied covenant of good faith and fair dealing.
(c) The execution, delivery and performance of the Documents to
which each Company is a party will not violate the terms of Carrier
Contracts, any material Requirement of Law or any other material
Contractual Obligation of either Company and will not result in, or
require, the creation or imposition of any Lien on any of its or their
respective properties or revenues pursuant to any such Requirement of
Law or Contractual Obligation (other than pursuant to this Agreement).
(d) No litigation, investigation or proceeding of or before any
arbitrator or governmental authority is pending or, to the knowledge of
either Company, threatened by or against either Company or against any
of its or their respective properties or revenues (i) with respect to
any of the Documents or any of the transactions contemplated hereby or
thereby, or (ii) which could reasonably be expected to have a Material
Adverse Effect.
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Section 7. COVENANT. Each Company hereby covenants and agrees
that the Carrier Contracts shall continue to arise in the Companies, in the
ordinary course of business, from and after the date of this Agreement until the
Obligations are satisfied.
Section 8. SURVIVAL OF PROVISIONS. All warranties,
representations and covenants made by the Companies 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 of the Preferred
Stock.
Section 9. NOTICES. All notices, demands and other
communications provided for or permitted hereunder shall be made in writing and
shall be by registered or certified first-class mail, return receipt requested,
telecopier, courier service or personal delivery:
(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.: (000) 000-0000
Attention: Xxxxxxx Xxxxx, Esq.
(b) if to Communications at the following address:
Z-Tel Communications, Inc.
0000 Xxxxx Xxxxxx Xxxxxx Xxxx.
Xxxxx 000
Xxxxx, Xxxxxxx 00000
Telecopier No.: (000) 000-0000
Attn: Xxxxxxx X. Xxxxx, Esq.
with a copy to:
Trenam Xxxxxx
0000 Xxxx xx Xxxxxxx Xxxxx
Xxxxx, XX 00000
Fax: 000-000-0000
Attn: Xxxx Xxxx, Esq.
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(c) if to Touch 1 at the following address:
Touch 1 Communications, Inc.
000 Xxxxxxxxx Xx.
Xxxxxx, XX 00000
with a copy to:
Trenam Xxxxxx
0000 Xxxx xx Xxxxxxx Xxxxx
Xxxxx, XX 00000
Fax: 000-000-0000
Attn: Xxxx Xxxx, Esq.
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.
Section 10. SUCCESSORS AND ASSIGNS; NO THIRD PARTY BENEFICIARIES.
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. Neither Company may assign any of its
obligations under this Agreement without the written consent of the Investors.
Except as provided in the Recitals, no Person other than the parties hereto is
intended to be a beneficiary of this Agreement.
Section 11. AMENDMENT AND WAIVER. No failure or delay on the part
of the Companies 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 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 Companies 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 outstanding Series G 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 outstanding Series G
Preferred shares (whether or not converted)). Except where notice is
specifically required by this Agreement, no notice to or demand on the Companies
in
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any case shall entitle the Companies to any other or further notice or demand in
similar or other circumstances.
Section 12. 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.
Section 13. HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
Section 14. 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.
Section 15. 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 8, such service to become effective 10 days after such mailing.
Section 16. 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.
Section 17. 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.
Section 18. ENTIRE AGREEMENT. This Agreement, together with the
Certificate of Designations, the Investment Agreement exhibits and schedules
thereto and the Documents (collectively, the "TRANSACTION DOCUMENTS"), is
intended by the parties as a final expression of their agreement and intended to
be a complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein and therein.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein or therein. This Agreement and the
Transaction Documents supersede all prior agreements and understandings between
the parties with respect to such subject matter.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered by their respective representatives
hereunto duly authorized as of the date first above written.
Z-TEL COMMUNICATIONS, INC.
By: /s/ D. Xxxxxxx Xxxxx
---------------------------------------
Name: D. Xxxxxxx Xxxxx
Title: President
TOUCH 1 COMMUNICATIONS, INC.
By: /s/ D. Xxxxxxx Xxxxx
---------------------------------------
Name: D. Xxxxxxx Xxxxx
Title: Vice-President
THE 1818 FUND III, L.P.
By: Xxxxx Brothers Xxxxxxxx & Co.
General Partner
By: /s/ Xxxxxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxxxxx X. Xxxxxx
Title: Partner
(Signature Page To Backup Purchase Agreement)
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered by their respective representatives
hereunto duly authorized as of the date first above written.
ADDITIONAL INVESTORS
D. XXXXXXX XXXXX
By: /s/ D. Xxxxxxx Xxxxx
---------------------------------------
Name: D. Xxxxxxx Xxxxx
XXXXXXX XXXXXX
By: /s/ Xxxxxxx Xxxxxx
---------------------------------------
Name: Xxxxxxx Xxxxxx
FULMEAD VENTURES LIMITED
By: /s/ X. Xxxxxx
---------------------------------------
Name: X. Xxxxxx
Title: Director
XXXXXXX XX XXXXXXX
By: /s/ Xxxxxxx XxXxxxxxx
---------------------------------------
Name: Xxxxxxx XxXxxxxxx
N. XXXXX XXXXXXX
By: /s/ N. Xxxxx Xxxxxx
---------------------------------------
Name: N. Xxxxx Xxxxxxx
XXXXXXX XXXXX
By: /s/ Xxxxxxx Xxxxx
---------------------------------------
Name: Xxxxxxx Xxxxx
XXXX XXXXXXXX
By: /s/ Xxxx Xxxxxxxx
---------------------------------------
Name: Xxxx Xxxxxxxx
