THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR QUALIFIED
UNDER ANY STATE SECURITIES LAW. THE 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, OFFERED FOR SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED IN A
TRANSACTION THAT IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT.
WARRANT
FOR THE PURCHASE OF SHARES
OF COMMON STOCK
OF
Z-TEL TECHNOLOGIES, INC.
THIS CERTIFIES THAT, for value received, The 1818 Fund III,
L.P., a Delaware limited partnership, or its successor or assignee (the
"Holder"), is entitled to subscribe for and purchase from Z-TEL TECHNOLOGIES,
INC., a Delaware corporation (the "Company"), 2,083,333 fully paid and
nonassessable shares of Common Stock, $0.01 par value per share, of the Company
at the purchase price of $13.80 per share (the "Exercise Price"), subject to
adjustment as provided in Sections 4 and 6 of this Warrant on or before the
Expiration Date (as hereinafter defined). This Warrant is issued pursuant to
that certain Stock Purchase Agreement, dated October 19, 2000, by and among the
Company, the Holder and the other investors named on Schedule 1 thereto (the
"Stock Purchase Agreement").
I DEFINITIONS. When used in this Warrant, the following
terms shall have the meanings specified:
A. "AFFILIATE" shall mean any affiliate, as
that term is defined under Rule 144 promulgated under the Securities Act.
B. "COMMON STOCK" shall mean the common stock,
$0.01 par value per share, of the Company.
C. "CONVERTIBLE SECURITIES" means evidences
of indebtedness, shares of stock or other securities which are convertible into
or exchangeable for, with or
<PAGE>
2
without payment of additional consideration in cash or property, additional
shares of Common Stock, either immediately or upon the arrival of a specified
date or the happening of a specified event.
D. "CURRENT MARKET PRICE" as of a particular
day means the closing price on such day of the Common Stock on The Nasdaq Stock
Market (or on the exchange or quotation system on which the Corporation's Common
Stock is then traded) as reported in THE WALL STREET JOURNAL.
E. "DERIVATIVE EQUIVALENT SHARES" shall mean
that number of shares derived by dividing the aggregate consideration received
by the Corporation for the issuance of Derivative Securities, as determined in
accordance with Section 1.6, by the Current Market Price immediately prior to
such issuance.
F. "DERIVATIVE SECURITIES" shall mean
securities, other than Options and Convertible Securities, issued for cash by
the Corporation or an Affiliate of the Corporation, the value of which is
directly based upon or derived by reference to the market value of the Common
Stock. The consideration received by the Corporation for additional shares of
Common Stock deemed to be issued in connection with the issuance of Derivative
Securities shall be determined by a recognized financial institution agreeable
to the Corporation and holders of warrants exercisable for at least two-thirds
of the total number of shares of the Common Stock issuable upon exercise of all
warrants issued pursuant to the Stock Purchase Agreement.
G. "EXERCISE NOTICE" shall mean a notice of
exercise of all or any portion of this Warrant, in the form attached hereto as
Exhibit A.
H. "FAIR MARKET VALUE" of one share of Common
Stock shall be equal to the average for the five trading days prior to the date
of such exercise of (i) the last reported sale price of the Common Stock quoted
on the Nasdaq National Market System or the principal exchange on which the
Common Stock is then listed, whichever is applicable, or (ii) the average of the
closing bid and asked prices of the Common Stock quoted in the Over-The-Counter
Market Summary, in each case as published in THE WALL STREET JOURNAL. If no
public market exists for the Common Stock at the time of such exercise, the
"fair market value" shall be determined by the Company's Board of Directors in
good faith, which shall be deemed to be fair market value unless holders of at
least 15% of the Common Stock issuable upon exercise of the Warrants issued
pursuant to the Stock Purchase Agreement request that the Company obtain an
opinion of a nationally recognized investment banking firm chosen by such
holders and the Company (at the Company's expense), in which event fair market
value shall be determined by such investment banking firm.
I. "OPTIONS" shall mean rights, options or
warrants to subscribe for, purchase or otherwise acquire either Common Stock or
Convertible Securities.
<PAGE>
3
J. "EXPIRATION DATE" shall mean the earlier to
occur of the following: (i) the exercise of all of the rights represented by
this Warrant; or (ii) five years from the Initial Closing (as defined in the
Stock Purchase Agreement).
K. "PERSON" shall mean and include an
individual, partnership, corporation, trust, joint venture, limited liability
company, incorporated organization and a government or any department or agency
thereof.
L. "REGISTRATION RIGHTS AGREEMENT" shall mean
the Registration Rights Agreement of even date herewith by and between the
Company, the Holder and each of the other signatories thereto.
M. "SECURITIES ACT" means the Securities Act
of 1933, as amended.
N. "TRANSFER" means any act pursuant to which,
directly or indirectly, the ownership or the economic benefits of assets or
securities in question is sold, exchanged, assigned, transferred, conveyed,
delivered or otherwise disposed of, and shall include the issuance of any
instrument the value of which is based upon the value of such assets or
securities.
O. "WARRANT SHARES" shall mean the shares of
Common Stock issuable to the Holder of this Warrant upon any exercise of this
Warrant.
II WARRANT EXERCISE; ISSUANCE OF CERTIFICATES;
PAYMENT FOR WARRANT SHARES.
A. This Warrant may be exercised by the Holder,
in whole or in part, at any time prior to the Expiration Date by delivery of an
Exercise Notice and, within five business days thereafter, surrender of this
Warrant (properly endorsed if required) and payment by the Holder of the
Exercise Price as provided in Section 2.2. Upon such surrender and payment, the
Holder shall be entitled to receive a certificate or certificates representing
the Warrant Shares so purchased. The Company agrees that the Warrant Shares so
purchased shall be deemed to be issued to the Holder as the record owner of such
Warrant Shares as of the close of business on the date on which this Warrant
shall have been surrendered and payment made for such shares as aforesaid.
Certificates for the Warrant Shares so purchased shall be delivered to the
Holder within a reasonable time, not exceeding five (5) business days, after the
rights represented by this Warrant shall have been so exercised. If the rights
of the Holder of this Warrant are exercised in part, the number of Warrant
Shares subject to this Warrant shall be reduced accordingly and the Company
shall reissue a Warrant or Warrants of like tenor representing in the aggregate
the right to purchase the number of Warrant Shares as so reduced.
B. Payment of the Exercise Price shall be
made by check payable to the Company, wire transfer of immediately available
funds to an account specified by the Company upon inquiry by the Holder, or as
further provided in this Section 2.2. Notwithstanding any provisions herein to
the contrary, in lieu of exercising
<PAGE>
4
this Warrant in exchange for cash, the Holder may elect to exercise all or a
portion of this Warrant by canceling all or a portion of this Warrant and
receiving in exchange therefor shares of Common Stock (as determined below)
equal to the value of this Warrant, or the portion thereof being canceled, by
surrender of this Warrant at the principal office of the Company together with a
duly executed form of subscription. If the Fair Market Value (as defined below)
of one share of Common Stock is greater than the Exercise Price (computed as of
the date of exercise of this Warrant), the Company shall issue to the holder a
number of shares of Common Stock computed using the following formula:
X= Y(A-B)
------
A
Where X= the number of shares of Common Stock to be
issued to the holder
Y= the number of shares of Common Stock
purchasable under the Warrant or, if only a
portion of the Warrant is being exercised,
under the portion of the Warrant being
exercised (on the date of exercise)
A = the Fair Market Value of one share of the
Common Stock (on the date of exercise)
B = the Exercise Price (as adjusted to the
date of exercise)
III AFFIRMATIVE COVENANTS. The Company covenants and
agrees that the Warrant Shares will, upon exercise of this Warrant and issuance
in accordance herewith, be duly authorized, validly issued, fully paid and
nonassessable. The Company further covenants and agrees that until the
Expiration Date, the Company will at all times have authorized, and reserved for
the purpose of issue upon total or partial exercise of the rights represented by
this Warrant, a sufficient number of shares of its Common Stock to provide for
the exercise of the rights represented by this Warrant. 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 this Warrant, any
modification of this Warrant or the exercise of this Warrant.
IV ADJUSTMENTS. If the Company shall, while this Warrant
remains outstanding (i) pay a stock dividend or make a distribution to holders
of Common Stock in shares of its Common Stock, (ii) subdivide its outstanding
shares of Common Stock, (iii) combine its outstanding shares of Common Stock
into a smaller number of shares or (iv) issue by reclassification of its shares
of Common Stock any shares of capital stock of the Company, then thereafter the
number of Warrant Shares shall be automatically (and without notice or further
action) increased or decreased, as the case may be, in direct proportion to the
increase or decrease in the number of shares of Common Stock by reason of such
change, and the per share Exercise Price of this Warrant after such change shall
in case of an increase in the number of shares be proportionately decreased, and
in case of a decrease in the number of shares be proportionately increased, so
that the aggregate Exercise Price of this Warrant shall be unchanged by such
change. An adjustment made pursuant to this Section 4 shall become effective
retroactively (x) in the case of any such dividend or distribution, to a date
immediately following the close of business on the record date for the
determination of holders of shares of Common Stock entitled to receive such
dividend or distribution, or (y) in the case of any such
<PAGE>
5
subdivision, combination or reclassification, to the close of business on the
date upon which such corporate action becomes effective.
V REORGANIZATION, RECLASSIFICATION, SHARE
EXCHANGE OR MERGER.
A. If at any time prior to the Expiration Date
the Company is a party to any agreement providing for (i) any capital
reorganization or reclassification of the capital stock of the Company or (ii)
any share exchange or merger of the Company with another corporation, in such a
way that holders of Common Stock shall be entitled to receive cash, shares of
stock or securities or assets (collectively, and regardless of whether received
in connection with a merger or some other form of corporate reorganization, the
"MERGER CONSIDERATION") with respect to or in exchange for Common Stock, then,
as a condition to such reorganization, reclassification, share exchange or
merger, the Holder shall be given the opportunity to elect to receive such cash,
shares of stock or securities or assets as may be issued or payable with respect
to or in exchange for the number of Warrant Shares then issuable upon the
exercise of the rights represented by this Warrant upon payment of the aggregate
Exercise Price for all of the Warrant Shares.
B. If the Holder elects to receive the Merger
Consideration, then upon Holder's actual receipt of the Merger Consideration the
Holder shall pay to the Company (i) the per share Exercise Price of this Warrant
multiplied by (ii) the number of shares of Common Stock then issuable upon the
exercise of the rights represented by this Warrant, and thereafter the parties
shall have no further rights or obligations hereunder.
C. If the Holder does not elect to receive the
Merger Consideration, the rights and obligations of the Holder and the Company
(including any successor company) under this Warrant shall remain in full force
and effect pursuant to the terms and conditions of this Warrant. In any such
case, the Company shall not effect any such reclassification, reorganization,
share exchange or merger, unless prior to the consummation thereof the successor
corporation (if other than the Company) resulting from such share exchange or
merger shall assume by written instrument the obligation to deliver to the
Holder, upon exercise of this Warrant, such cash, shares of stock or securities
or assets as the Holder would have been entitled to receive had the Holder made
the election in accordance with the provisions of this Section 5.
D. In connection with any capital
reorganization or reclassification of the capital stock of the Company or any
share exchange or merger of the Company with another corporation, if the Company
shall fix a record date for the making of a distribution to holders of Common
Stock of (i) assets (other than cash dividends or cash distributions payable out
of consolidated net income or earned surplus or dividends payable in Common
Stock), (ii) evidences of indebtedness or other securities of the Company, or of
any corporation other than the Company (except for the Common Stock of the
Company) or (iii) subscription rights, options or warrants to purchase any of
the foregoing assets or securities, whether or not such rights, options or
warrants are immediately exercisable, to the extent such rights, options or
warrants have not expired, then the Company shall make provisions for the Holder
to receive, and the Holder shall be entitled upon exercise of this Warrant,
evidences of indebtedness, securities or such
<PAGE>
6
other rights, options or warrants, as if the Holder had exercised this Warrant
on or before such record date.
VI DILUTING ISSUANCES.
A. UPON ISSUANCE OF COMMON STOCK. Except as
hereinafter provided in this Section 6, if the Company shall issue or sell any
shares of Common Stock, including any treasury shares, or any Derivative
Securities, for consideration per share (determined, with respect to Derivative
Securities, as set forth in Section 1.6 hereof) less than the greater of (i) the
Current Market Price for the most recent trading day that is able to be
determined as of the time of such issuance (before deducting underwriting
discounts and commissions) or (ii) the then current Exercise Price, then a
"Diluting Issuance" shall have occurred and the Exercise Price and number of
Warrant Shares shall be adjusted as provided in Section 6.4.
B. UPON GRANTING OF CERTAIN RIGHTS.
(1) If the Company shall in any manner
grant, issue or sell any rights to subscribe for or to purchase, or any options
for the purchase of, Common Stock, Convertible Securities or Derivative
Securities, whether or not such rights or options or the right to convert or
exchange any such Convertible Securities are immediately exercisable, and the
price per share for which shares of Common Stock or Derivative Securities
(determined, as to Derivative Securities, in accordance with Section 1.6 hereof)
are issuable upon the exercise of such rights or options or upon conversion or
exchange of such Convertible Securities, before deducting underwriting discounts
and commissions, shall be less than the greater of (i) the Current Market Price
for the most recent trading day that is able to be determined as of the time of
the granting of such rights or options (before deducting underwriting discounts
and commissions) or (ii) the then current Exercise Price, then a Diluting
Issuance shall have occurred and the Exercise Price and number of Warrant Shares
shall be adjusted as provided in Section 6.4. For the purposes of such
adjustment as provided in Section 6.4 the maximum number of shares of Common
Stock issuable upon the exercise of such rights or options or upon conversion or
exchange of Convertible Securities shall be deemed to be outstanding and to have
been issued for such price per share, before deducting underwriting discounts
and commissions. No further adjustments of the Exercise Price or number of
Warrant Shares shall be made upon the actual issuance of Common Stock,
Derivative Securities or Convertible Securities upon the exercise of any such
warrant, right or option or the actual issuance of Common Stock upon the
conversion or exchange of any such Convertible Securities.
(2) The price per share for which
shares of Common Stock are issuable upon the exercise of such rights or options
or upon conversion or exchange of such Convertible Securities, and the
consideration deemed to be received by the Company, shall be determined by
dividing (i) the total amount, if any, received or receivable by the Company as
consideration for the granting, issuance or sale of such rights or options or
Convertible Securities, before deducting underwriting discounts and commissions,
plus the minimum aggregate amount of additional consideration payable to the
Company upon the exercise of such rights or options, plus, in the case of such
<PAGE>
7
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the conversion or exchange thereof, plus the
net amount received or receivable upon the issuance of such Convertible
Securities, before deducting underwriting discounts and commissions (in each
case without double counting), by (ii) the total maximum number of shares of
Common Stock issuable upon the exercise of such rights or options or upon the
conversion or exchange of all such Convertible Securities issuable upon the
exercise of such rights or options. The price per share for which Derivative
Securities are issuable upon the exercise of such rights or options or upon
conversion or exchange of such Convertible Securities, and the consideration
deemed to be received by the Company, shall be determined in accordance with
Section 1.6.
C. ISSUANCE OF CONVERTIBLE SECURITIES.
(1) Except as provided in the last
sentence of this Section 6.3(a), if the Company shall in any manner grant, issue
or sell any Convertible Securities, whether or not the rights to convert or
exchange thereunder are immediately exercisable, and the price per share for
which shares of Common Stock are issuable upon such conversion or exchange shall
be less than the greater of (i) the Current Market Price for the most recent
trading day that is able to be determined as of the time of such issuance
(before deducting underwriting discounts and commissions) or (ii) the then
current Exercise Price, then a Diluting Issuance shall have occurred and the
Exercise Price and number of Warrant Shares shall be adjusted as provided in
Section 6.4. For the purposes of such adjustment as provided in Section 6.4, the
maximum number of shares of Common Stock issuable upon conversion or exchange of
all such Convertible Securities shall as of the date for adjustment be deemed to
be outstanding and to have been issued for such price per share, before
deducting underwriting discounts and commissions. No further adjustments of the
Exercise Price and number of Warrant Shares shall be made upon the conversion or
exchange of the Convertible Securities. If any such issue or sale of such
Convertible Securities is made upon exercise of any rights to subscribe for or
to purchase or any option to purchase any such Convertible Securities for which
adjustments of the Exercise Price and number of Warrant Shares was made pursuant
to Section 6.2, no further adjustment shall be made by reason of such issue or
sale.
(2) The price per share for which
shares of Common Stock are issuable upon such conversion or exchange, and the
consideration deemed to be received by the Company, shall be determined by
dividing (i) the total amount received or receivable by the Company as
consideration for the issue or sale of such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if any, payable to the
Company upon the conversion or exchange thereof, in each case before deducting
underwriting discounts and commissions, by (ii) the total maximum number of
shares of Common Stock issuable upon the conversion or exchange of all such
Convertible Securities.
D. EFFECT ON WARRANT EXERCISE RIGHTS. Upon
the occurrence of a Diluting Issuance:
<PAGE>
8
(1) the Exercise Price shall be
reduced to the Exercise Price equal to the following fraction:
(A+B)
-----
C
where:
A = the number of shares of Common Stock outstanding
immediately prior to such grant, issue or sale multiplied by
the greater of (i) the Exercise Price or (ii) the Current
Market Price, in each case immediately prior to such grant,
issue or sale,
B = the aggregate consideration, if any, received or deemed to
be received by the Company upon such grant, issue or sale
(determined, with respect to issuances of Derivative
Securities, as set forth in Section 1.6 hereof), and
C = the total number of shares of Common Stock outstanding
immediately after such grant, issue or sale;
(2) any Common Stock issuable upon the
exercise of any warrants, rights or options or the conversion or the exchange of
any Convertible Securities, and any Derivative Equivalent Shares shall be deemed
to be outstanding for purposes of this Section 6.4; and
(3) the Holder shall thereafter be
entitled to purchase hereunder as a part of the Warrant Shares, at the Exercise
Price in effect immediately after such issue or sale, the positive number of
shares of Common Stock which, when multiplied by the Exercise Price in effect
immediately after such issue or sale (as determined under Section 6.4), will
equal the product of (i) the Exercise Price in effect immediately prior to such
issue or sale and (ii) the number of shares of Common Stock issuable pursuant to
this Warrant immediately prior to such issue or sale.
E. OTHER DISTRIBUTIONS. If the Company
distributes to any holder of shares of its Common Stock (including any
distribution made in connection with a consolidation or merger in which the
Company is the resulting or surviving corporation and the Common Stock is not
changed or exchanged) cash, evidences of indebtedness of the Company or another
issuer, securities of the Company or another issuer or other assets or rights or
warrants to subscribe for or purchase securities of the Company (excluding those
in respect of which adjustments in the Exercise Price is made pursuant to
Section 6.1, 6.2 or 6.3, then, and in each such case, the Exercise Price then in
effect shall be adjusted by multiplying the Exercise Price in effect immediately
prior to the date of such distribution by a fraction (x) the numerator of which
shall be the Current Market Price per share of Common Stock on the record date
referred to below and (y) the denominator of which shall be such Current Market
Price per share of Common Stock less the then Fair Market Value of the portion
of the cash, evidences of indebtedness, securities or other assets so
distributed or of such
<PAGE>
9
subscription rights or warrants applicable to one share of Common Stock (but
such denominator shall in no event be zero). Such adjustment shall be made
whenever any such distribution is made and shall become effective retroactively
to a date immediately following the close of business on the record date for the
determination of stockholders entitled to receive such distribution.
F. ADJUSTMENT. An adjustment pursuant to
Section 6.4 shall be made whenever such shares, securities, options, warrants or
other rights are issued, and shall become effective retroactively to a date
immediately following the close of business (x) in the case of an issuance to
the stockholders of the Company, as such on the record date for the
determination of stockholders entitled to receive such shares, securities,
options, warrants or other rights and (y) in all other cases, on the date of
such issuance.
G. LIMITATIONS ON DILUTING ISSUANCE
ADJUSTMENTS. Notwithstanding the foregoing provisions of this Section 6, no
adjustment of the Exercise Price or the number of Warrant Shares shall be made
as a result of or in connection with the subdivision of outstanding shares of
Common Stock or combination of outstanding shares of Common Stock as to which
adjustments to the Exercise Price or the number of Warrant Shares have been made
pursuant to Section 4, it being the parties' intent that this Section 6 shall
not be deemed to require additional adjustments to those already provided by
Section 4.
H. EFFECT OF CANCELLATIONS OF DILUTIVE
SECURITIES. Any adjustments of the Exercise Price or the Warrant Shares made
pursuant to Sections 6.2 or 6.3 shall be disregarded if, as, when and to the
extent that the rights, options or Convertible Securities giving rise to such
adjustments expire or are canceled without being exercised, converted or
exchanged. In such event, the Exercise Price and number of Warrant Shares
effective immediately upon such cancellation or expiration shall be equal to the
Exercise Price and number of Warrant Shares in effect at the time of the
issuance or sale of the rights, options or Convertible Securities which expire
or are canceled without being exercised, converted or exchanged, with such
additional adjustments as would have otherwise been made pursuant to Section 4.
I. OUTSTANDING SECURITIES. Notwithstanding
anything else to the contrary contained in this Warrant, no Dilutive Issuance
will have occurred and no adjustment of the per share Exercise Price or the
number of Warrant Shares shall be made as a result of or in connection with the
issuance of Common Stock pursuant to the conversion of Convertible Securities
outstanding as of the date of this Warrant or pursuant to the exercise of
options, warrants or other similar securities outstanding as of the date of this
Warrant.
VII NOTIFICATION TO HOLDER.
(1) Upon each adjustment pursuant to Section 6,
the Company shall give written notice thereof to the Holder within ten days
after the date of such adjustment, which notice shall set forth the calculation
of the number of shares of
<PAGE>
10
Common Stock issuable upon exercise of the rights represented by this Warrant
before and after such adjustment and the facts upon which such calculations are
based.
(2) If at any time:
(A) the Company shall offer for
subscription pro rata to the holders of its Common Stock any additional shares
of stock of any class or other rights;
(B) the Board of Directors (or any
committee thereof) shall authorize or approve any capital reorganization, or
reclassification of the capital stock of the Company, or share exchange or
merger of the Company with, or sale, disposition or other conveyance of all or
substantially all of its assets to, any Person;
(C) the Company (or any other party)
shall institute any proceeding seeking an order for relief under the Federal
bankruptcy laws or seeking to adjudicate the Company as bankrupt or insolvent,
or seeking dissolution, liquidation or winding up of the Company or seeking
reorganization under any law relating to bankruptcy or insolvency;
then, within ten days of the date of any such occurrence, the Company shall give
the Holder written notice describing in reasonable detail such occurrence.
VIII SPECIAL DISTRIBUTIONS. If the holder so elects by
sending a notice to the Company, in the event that the Company shall declare a
dividend or make any other distribution (including, without limitation, in cash,
in capital stock (which shall include, without limitation, any options, warrants
or other rights to acquire capital stock) of the Company, whether or not
pursuant to a shareholder rights plan, "poison pill" or similar arrangement) in
other property or assets, to holders of Common Stock (a "SPECIAL DISTRIBUTION"),
then the Board of Directors shall set aside the amount of such dividend or
distribution that any holder of a Warrant would have been entitled to receive
had it exercised such Warrant prior to the record date for such dividend or
distribution. Upon the exercise of this Warrant, the holder shall be entitled to
receive, such dividend or distribution that such holder would have received had
such Warrant been exercised immediately prior to the record date for such
dividend or distribution. Prior to any Special Distribution described in this
Section 8, the Company shall notify each holder (not less than ten Business Days
prior to the occurrence of each Special Distribution) of its intent to make such
Special Distribution and the holder, if it elects to have such distribution set
aside the amount thereof rather than have an adjustment to the Exercise Price as
provided in Section 6, shall notify the Company by sending a notice prior to the
date of any such Special Distribution.
IX CERTAIN EVENTS. If any event occurs as to which the
provisions of this Warrant are not strictly applicable or, if strictly
applicable would not fairly protect the rights of the Holder in accordance with
the essential intent and principles of such provisions, then the Company and the
Holder shall make an adjustment in the application of such provisions, in
accordance with such essential intent and principles, so as to protect the
Holder's rights as aforesaid.
<PAGE>
11
X The Company shall prepare and file, and cooperate
with the holder of this Warrant so that it may prepare and file, in each case
within five Business Days of a request by such holder, notification and report
forms in compliance with the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), and shall otherwise fully comply with the
requirements of the HSR Act, to the extent required in connection with the
exercise of the Warrant. The Company shall bear all of its own expenses and all
of its own out-of-pocket expenses (including reasonable legal fees) and any fees
and expenses of the holder.
XI TERM OF WARRANT. This Warrant shall remain
outstanding and exercisable until the Expiration Date. To the extent not
previously exercised, the rights represented by this Warrant shall thereupon
terminate.
XII ISSUE TAX. The issuance of certificates for shares of
Common Stock upon the total or partial exercise of this Warrant shall be made
without charge to the Holder for any issuance tax in respect thereof.
XIII CLOSING OF BOOKS. The Company will at no time close
its transfer books in any manner which interferes with the timely exercise of
the rights represented by this Warrant.
XIV NO VOTING RIGHTS. This Warrant shall not entitle the
Holder to any voting rights as a shareholder of the Company.
XV NOTICES. All notices and communications provided for
herein or made hereunder shall be delivered, or mailed first class with postage
prepaid, or telecopied, addressed in each case as follows, until some other
address shall have been designated in a written notice given in like manner, and
shall be deemed to have been given or made when so delivered or mailed or
telecopied:
<TABLE>
<S> <C>
(1) if to the Company: Z-Tel Technologies, Inc.
Suite 220
601 S. Harbour Island Boulevard
Tampa, FL 33602
Attn: D. Gregory Smith
Chief Executive Officer
Facsimile No.: (813) 233-4623
(2) with a copy to: Jeffrey H. Kupor
General Counsel
Z-Tel Technologies, Inc.
Suite 220
601 S. Harbour Island Boulevard
Tampa, FL 33602
Facsimile No.: (813) 277-9753
</TABLE>
(3) if to the Holder, at such holder's last
known address appearing on the books of the
Company:
<PAGE>
12
Or to such other person or address as the party entitled to notice hereunder
shall designate by notice in accordance with this Warrant.
XVI REPLACEMENT OF WARRANT. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant, and upon receipt of written indemnification of the Company by the
Holder in form and substance satisfactory to the Company, the Company shall
execute and deliver to the Holder a new Warrant of like date, tenor and
denomination.
XVII GOVERNING LAW. This Warrant shall be construed and
interpreted in accordance with the internal laws of the State of New York
applicable to agreements made and to be performed entirely within such State.
XVIII SUCCESSORS AND ASSIGNS. The provisions of this
Warrant shall be binding upon and inure to the benefit of the parties hereto and
their respective successors, assigns and transferees.
XIX FURTHER ASSURANCES. The Company agrees that it will
execute and record such documents as the Holder shall reasonably request to
secure for the Holder any of the rights represented by this Warrant.
XX AMENDMENT AND MODIFICATIONS. This Warrant may be
amended, modified or supplemented only by written agreement of the Company and
the Holder.
XXI TRANSFER OF WARRANTS. Any transfer of the rights
represented by this Warrant Certificate shall be effected by the surrender of
this Warrant Certificate, along with the form of assignment attached hereto,
properly completed and executed by the registered holder hereof, at the
principal executive office of the Company in the United States of America,
together with an appropriate investment letter, if deemed reasonably necessary
by counsel to the Company to assure compliance with applicable securities laws.
Thereupon, the Company shall issue in the name or names specified by the
registered holder hereof and, in the event of a partial transfer, in the name of
the registered holder hereof, a new Warrant Certificate or Certificates
evidencing the right to purchase such number of shares of Common Stock as shall
be equal to the number of shares of Common Stock then purchasable hereunder.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed by its duly authorized officers and this Warrant to be dated as of the
13th day of November, 2000.
Z-TEL TECHNOLOGIES, INC.
By: /s/ D. Gregory Smith
---------------------------------------
D. Gregory Smith
President and Chief Executive Officer
<PAGE>
EXHIBIT A
---------
EXERCISE NOTICE
To:
The undersigned Holder, pursuant to the terms and conditions
of that certain Warrant, issued by Z-Tel Technologies, Inc., a Delaware
corporation, and dated as of November 13, 2000, hereby exercises such Warrant to
the extent of _____________________________________________ (_________________)
shares of the Common Stock covered by such Warrant, and hereby agrees to make
payment in full for each of such shares at the per share exercise price provided
by such Warrant.
Date:
____________________
Signature:_________________________
Address: _________________________
_________________________
<PAGE>
[Form of Assignment Form]
[To be executed upon assignment of Warrants]
The undersigned hereby assigns and transfers this Warrant
Certificate to ____________________ whose Social Security Number or Tax ID
Number is _________________ and whose record address is _______________________
__________________, and irrevocably appoints ________________ as agent to
transfer this security on the books of the Company. Such agent may substitute
another to act for such agent.
Signature:
_________________________________
Date:____________________________
