Exhibit 10.15
SECURITIES PURCHASE AGREEMENT
Agreement made as of May 6, 1999 ("Effective Date"), by and between
ZipLink, LLC, a Delaware limited liability company (the "Company"), and Xxxxxxxx
Communications, Inc., a Delaware corporation (the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Company and Purchaser have entered into that certain
Carrier Services Agreement for Purchase and Sale of Services of even date
herewith (the "Services Agreement") which provides, among other things, that the
Company will purchase a minimum amount of ATM Services and Collocation Services
from the Purchaser (the "Revenue Commitment") and that the Purchaser will grant
to the Company, subject to certain conditions and adjustments, $2.7 million of
ATM Services and Collection Services credits (the "Service Credits") to be
applied against such Revenue Commitment in exchange for the Company issuing
certain equity interests to the Purchaser; and
WHEREAS, the Company has filed a registration statement under the
Securities Act of 1933 with the Securities and Exchange Commission (the "SEC")
and contemplates an initial public offering of its securities (the "IPO")
pursuant to such registration statement, as amended (the "Registration
Statement"); and
WHEREAS, immediately prior to the effectiveness of the IPO (the date
thereof being referred to as the "IPO Effective Date"), the Company intends to
convert its business form from a limited liability company to a corporation (the
"Reorganization") and the securities offered in the IPO and issued to the
Purchaser hereunder will consist of common stock of the resulting corporation
("Common Stock"); and
WHEREAS, if the Reorganization is not consummated, the equity interests
of the Company will consist of units of ownership interest ("Units") and the
Purchaser will be issued Units hereunder.
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements herein contained, the parties hereto, intending to be legally bound,
do hereby agree as follows:
ARTICLE I
ISSUE AND SALE OF SECURITIES
1.1 Purchase and Sale of Stock. Subject to the terms and conditions of
this Agreement, the Company hereby agrees to sell and deliver to the Purchaser,
and the Purchaser hereby agrees to purchase from the Company the following
equity interests:
(a) In the event the Reorganization is consummated and the IPO occurs,
a number of shares of Common Stock equal to the product of $3,037,500 divided by
the IPO Price Per Share.
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The "IPO Price Per Share" shall mean the price per share of Common Stock sold in
the IPO as set forth on the cover page of the final prospectus for the IPO; and
(b) In the event that the Reorganization is consummated on or before
May 31, 1999, and the IPO does not occur within 61 days thereafter, a number of
shares of Common Stock equal to the product of the Revenue Commitment times
.28125 divided by the Assumed IPO Price Per Share. The "Assumed IPO Price Per
Share" shall mean the price per share of Common Stock stated on the outside
front cover of the prospectus included in the latest filed Registration
Statement of the Company, or, if there shall be no stated price per share, the
midpoint of the range of prices per share stated on the outside front cover of
the prospectus included in such Registration Statement; and
(c) In the event that the Reorganization is not consummated on or prior
to August 1, 1999, a number of Units equal to the product of the Revenue
Commitment times .28125 divided by the Assumed IPO Price Per Share.
A numerical example of the above-described calculations is set forth for
purposes of illustration only on Schedule A to this Agreement. All calculations
of Common Stock or Shares shall be rounded up to the next whole number.
The equity interests sold to the Purchaser hereunder, whether consisting of
Common Stock or Units, are from time to time referred to herein as "Purchaser
Shares."
1.2 Delivery of Purchaser Shares. The Company shall duly authorize,
issue and deliver the Purchaser Shares to the Purchaser on the earlier to occur
of (a) the date which is three business days after the IPO Effective Ddate, (b)
August 1, 1999 and (c) the date of the closing of any sale or transfer of all or
substantially all of the the assets or equity interests of the Company other
than in connection with the Reorganization.
1.3 Purchase Price. In consideration for the Purchaser Shares, the
Purchaser shall grant to the Company, on the terms and conditions set forth in
this Agreement and in the Services Agreement, the Service Credits described
above upon receipt of the Purchaser Shares. If the Company does not comply with
all of the material obligations hereunder related to proper issuance and
delivery of the Purchaser Shares to Purchaser, then the Purchaser shall have no
obligation to issue any Service Credits to the Company and any Service Credits
previously issued shall be canceled in their entirety.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Purchaser that the statements
contained in this
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Article II are true and correct as of the date hereof.
2.1. Organization, Qualification and Corporate Power. The Company is
currently a limited liability company duly organized, validly existing
and in good standing under the laws of the State of Delaware. The
Company is duly qualified to conduct business as a foreign limited
liability company and is in good standing under the laws of each
jurisdiction in which the nature of its businesses or the ownership or
leasing of its properties requires such qualification except where the
failure to be so qualified would not have a material adverse effect.
The Company has all requisite power and authority to carry on the
businesses in which it is engaged and to own and use the properties
owned and used by it. The Company has delivered to Purchaser copies of
the Articles of Organization, as amended, the Operating Agreement and
other charter documents, as amended, of the Company, in effect as of
the date hereof (the "Charter Documents").
2.2. Capitalization. The issued and outstanding Units as of the date
of this Agreement consist of 9,899,083 Units. As of the date of this
Agreement, there are outstanding warrants and options to purchase
517,412_ Units and convertible debentures in the face amount of
$7,500,000 convertible into Units (the "Convertible Securities"). All
of the issued and outstanding Units are, and all Units that may be
issued upon exercise or conversion of Convertible Securities will be,
duly authorized, validly issued and free of all preemptive rights. Upon
the issuance of Purchaser Shares in accordance herewith, such Purchaser
Shares will be duly authorized, validly issued and free of all
preemptive rights and, if such Purchaser Shares consist of Common
Stock, fully paid and nonassessable. All of the issued and outstanding
Units were issued in compliance with applicable federal and state
securities laws and upon consummation of the Reorganization, all of the
Common Stock issued by the Company will be issued in compliance with
applicable state and federal securities laws. Upon issuance of the
Purchaser Shares in accordance herewith, the Purchaser Shares will be
issued in compliance with applicable federal and state securities laws.
In addition to the rights provided under statute and common law, the
rights of the Purchaser Shares will be stated in the Company's
Operating Agreement or Certificate of Incorporation, as the case may
be. There are no outstanding or authorized options, warrants, rights,
agreements or commitments to which the Company is a party or which are
binding upon the Company providing for the issuance, disposition or
acquisition of any of its equity interests, other than the Convertible
Securities. There are no outstanding or authorized unit appreciation,
phantom unit or any similar rights with respect to the Company.
2.3. Authorization. The Company has all requisite power and authority
to execute and deliver this Agreement, to authorize, issue and deliver
the Purchaser Shares in accordance with the terms of this Agreement and
to perform its obligations hereunder. The execution and delivery of
this Agreement and the performance by the Company of this Agreement and
the consummation by the Company of the transactions contemplated by
this Agreement have been duly and validly authorized by all necessary
action on the part of the Company and its members. This Agreement has
been duly and validly executed and delivered by the Company and this
Agreement constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except
(i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement
of creditors' rights and (ii) general principles of equity that
restrict the availability of equitable
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remedies.
2.4. Noncontravention. The execution and delivery of this Agreement by
the Company, and/or the consummation by the Company of the transactions
contemplated by this Agreement will not (a) conflict with or violate
any provision of its Certificate of Organization or Operating
Agreement, (b) require on the part of the Company any filing with, or
any permit, authorization, consent or approval of, any court,
administrative agency or commission or other governmental or regulatory
authority or agency (each a "Governmental Entity") except for any
filing, notice, approval, authorization or consent required under
applicable securities laws, or (c) conflict with, result in a breach
of, constitute (with or without due notice or lapse of time or both) a
default under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify or cancel, or require any
notice, consent or waiver under, any material agreement, instrument,
commitment or other obligation (including any obligation under any
offer to acquire the Company, its Units or material assets through
merger or otherwise) to which the Company is a party or by which the
Company is bound.
2.5. Subsidiaries. The Company has no wholly-owned or partially-owned
subsidiaries other than ZipLink, Inc., a wholly-owned subsidiary formed
for the purposes of effecting the Reorganization.
2.6. Financial Statements. The Company has furnished to the Purchaser
an audited balance sheet and income statement, changes in equity and
cash flows of the Company for the fiscal year ending December 31, 1998
and an unaudited balance and income statement for the year-to-date
through March 31, 1999 (such financial statements being collectively
referred to herein as the "Financial Statements"). The Financial
Statements fairly present, in all material respects, the financial
position of the Company in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout
the periods indicated, for the periods then indicated (subject to
normal year-end adjustments in the case of the March 31, 1999 Financial
Statements).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Purchaser hereby represents and warrants to the Company as follows:
3.1. Authorization. Purchaser has all necessary power and authority under
all applicable provisions of law to execute and deliver this Agreement
and to carry out its provisions. All action on Purchaser's part
required for the lawful execution and delivery of this Agreement has
been or will be effectively taken prior to the Closing. Upon its
execution and delivery, this Agreement will be a valid and binding
obligation of Purchaser, enforceable in accordance with its terms,
except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium
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or other laws of general application affecting enforcement of
creditors' rights and (ii) general principles of equity that restrict
the availability of equitable remedies.
3.2. Consents. All consents, approvals, orders, authorizations,
registrations, qualifications, designations, declarations or filings
with any governmental or banking authority on the part of Purchaser
required in connection with the consummation of the transactions
contemplated in this Agreement have been or shall have been obtained
prior to and be effective as of the Closing.
3.3. Investment Representations. Purchaser understands that the
Purchaser Shares have not been registered under the Securities Act.
Purchaser also understands that the Purchase Shares are being offered
and sold pursuant to an exemption from registration contained in the
Securities Act based in part upon Purchaser's representations contained
in the Agreement. Purchaser hereby represents and warrants as follows:
(a) Purchaser Bears Economic Risk. Purchaser has substantial
experience in evaluating and investing in private placement
transactions of securities in companies similar to the Company so that
it is capable of evaluating the merits and risks of its investment in
the Company and has the capacity to protect its own interests.
Purchaser must bear the economic risk of this investment indefinitely
unless the Purchaser Shares issuable to the Purchaser are registered
pursuant to the Securities Act, or an exemption from registration is
available. Purchaser understands that the Company has no present
intention of registering the Purchaser Shares. Purchaser also
understands that there is no assurance that any exemption from
registration under the Securities Act will be available and that, even
if available, such exemption may not allow Purchaser to transfer all or
any portion of the Purchaser Shares, in the amounts or at the times
Purchaser might propose.
(b) Purchaser Can Protect Its Interest. Purchaser represents that by
reason of its, or of its management's, business or financial
experience, Purchaser has the capacity to protect its own interests in
connection with the transactions contemplated in this Agreement.
Further, Purchaser is aware of no publication of any advertisement in
connection with the transactions contemplated in the Agreement.
(c) Accredited Investor. Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the
Securities Act.
(d) Investment. Purchaser is acquiring the Purchaser Shares for
investment for its own account and not with a view to, or for resale in
connection with, any distribution thereof, and Purchaser has no present
intention of selling or distributing the Purchaser Shares. Purchaser
understands that the Purchaser Shares have not been registered under
the Securities Act which depends upon, among other things, the bona
fide nature of the investment intent as expressed herein.
(e) Company Information. Purchaser has received and read the
Financial Statements, the Registration Statement and amendments thereto
as filed with the SEC prior to the date hereof, and has had an
opportunity to discuss the Company's business, management and financial
affairs with directors, officers and management of the Company and has
had the opportunity to review
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the Company's operations and facilities. Purchaser has also had the
opportunity to ask questions of and receive answers from, the Company
and its management regarding the terms and conditions of this
investment and has had full access to such other information concerning
the Company as it has requested.
(f) Restricted Securities. Purchaser acknowledges and agrees that the
Purchaser Shares issuable to the Purchaser must be held indefinitely
unless they are subsequently registered under the Securities Act or an
exemption from such registration is available. Purchaser has been
advised or is aware of the provisions of Rule 144 promulgated under the
Securities Act, which permits limited resale of securities purchased in
a private placement subject to the satisfaction of certain conditions,
including, among other things: the availability of certain current
public information about the Company, the resale occurring not less
than one year after a party has purchased and paid for the security to
be sold, the sale being through an unsolicited "broker's transaction"
or in transactions directly with a market maker (as said term is
defined under the Securities Exchange Act of 1934) and the number of
securities being sold during any three-month period not exceeding
specified limitations.
3.4. Transfer Restrictions. Purchaser acknowledges and agrees that the
Purchaser Shares are subject to restrictions on transfer as set forth
in Article IV below.
3.5. No Brokers. Purchaser has no liability or obligation to pay any
fees or commissions to, and has not been solicited or contacted by, any
broker, finder or agent with respect to the transactions contemplated
by this Agreement.
ARTICLE IV
COVENANTS
The parties hereby covenant and agree as follows:
4.1. Basic Financial Information and Reporting.
(a) The Company will furnish to Purchaser as soon as practicable
after the end of each fiscal year of the Company, and in any event
within 90 days thereafter, a balance sheet of the Company, as at the
end of such fiscal year, and a consolidated statement of income and a
consolidated statement of cash flows of the Company, for such year, all
prepared in accordance with GAAP and setting forth in each case in
comparative form the figures for the previous fiscal year, all in
reasonable detail. Such financial statements shall be accompanied by a
report and opinion thereon by independent public accountants of
national standing selected by the Company's Manager or Managers, as the
case may be.
(b) The Company will furnish to Purchaser (i) at least thirty (30)
days prior to the beginning of each fiscal year an annual budget of
sales and expenses for such fiscal year; and (ii) within
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thirty (30) days after the end of each quarter, an unaudited balance
sheet and statements of income and cash flows, prepared in accordance
with GAAP, with the exception that no notes need be attached to such
statements and year-end audit adjustments may not have been made, but
such statement shall set forth applicable budget figures and variances
from budget.
4.2. Inspection Rights. For legitimate business purposes solely in
connection with its investment and provided Purchaser is not a
competitor to or competitive with the Company, Purchaser shall have the
right to visit and inspect any of the properties of the Company, and to
discuss the affairs, finances and accounts of the Company with its
officers, all at such reasonable times and as often as may be
reasonably requested after notice and during normal business hours
provided Purchaser does not interfere with the Company's ongoing
business operations; provided, however, that the Company shall not be
obligated under this Section 4.2 with respect to a competitor of the
Company or with respect to information which the Company determines in
good faith is confidential and should not, therefore, be disclosed.
4.3. Observer Rights. For legitimate business purposes solely in
connection with its investment and provided Purchaser is not a
competitor to or competitive with the Company, the Purchaser shall have
the right to have a representative (the "Representative") reasonably
acceptable to the Company attend all formal proceedings and meetings of
the Company (the "Proceedings") relating to the governance thereof in a
nonvoting observer capacity, to receive notice of such Proceedings, and
to receive the written information provided by the Company to voting
participants (the "Participants") in connection with such Proceedings;
provided, however, that the Representative and each person having
access to any of the information provided by the Company to the
Participants must agree, in writing, to hold in confidence and trust
and to act in a fiduciary manner with respect to all information so
received during such Proceedings or otherwise (which agreement shall be
presumed by their attendance at any such Proceedings or their
acceptance of any such information); provided, further, that the
Company reserves the right not to provide information and to exclude
the Representative from any Proceeding or portion thereof if delivery
of such information or attendance at such meeting by such
Representative would result in disclosure of trade secrets to such
Representative or would adversely affect the attorney-client privilege
between the Company and its counsel.
4.4. Termination of Rights Upon IPO. Upon an IPO, the Company's
obligations under Sections 4.1, 4.2 and 4.3 shall terminate.
4.5 Confidentiality; Announcements.
(a) The Company and Purchaser shall not use or disclose to others, or
permit the use or disclosure of, any and all existing and hereafter
obtained non-public information furnished by each to the other
(including confidential information transmitted by each to its
managers, officers, directors, representatives, accountants, counsel,
advisors or bankers) except as required by law or to the extent that
any such information may become generally available to the public other
than through the actions of the parties or any other person under a
duty of confidentiality. The parties may, as reasonably necessary,
disclose the terms of the Agreement herein for purposes of due
diligence relating to acquisition transactions and financings.
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Neither party shall issue any press release or make any public
announcement relating to the subject matter of this Agreement without the prior
written approval of the other party; provided, however, that after the Closing
the parties may (i) make appropriate announcements to customers, and (ii) make a
public announcement to the effect that the transaction has occurred (without any
financial information), each after consultation with the other party; and
provided further that either party may make any public disclosure it believes in
good faith is required by applicable law.
4.6 Registration Statement. The Company has provided the Purchaser
with copies of the Registration Statement and all amendments thereto
filed by the Company with the SEC prior to the date hereof and shall
provide to the Purchaser a copy of each amendment thereto as filed by
the Company hereafter. The Company acknowledges and agrees that
Purchaser is relying upon the information set forth in such
Registration Statement in entering into this Agreement and performing
its obligations hereunder.
4.7 Restrictions on Sale. The maximum number of Purchaser Shares
which may be sold during each one-year period following receipt of the
Purchaser Shares shall be the greater of:
(a) the number of Purchaser Shares having a
value, based on the IPO Price Per Share (or the
Assumed IPO Price Per Share if issued pursuant to
Section 1.1(b) or (c)) , equal to the total value of
Service Credits utilized by Company as of the date of
such sale, or
(b) one-third (1/3) of the Purchaser Shares.
The restrictions in this Section 4.7 shall terminate three years from the date
of delivery of the Purchaser Shares.
ARTICLE V
MISCELLANEOUS
5.1. Governing Law. This Agreement will be governed in all respects by
the laws of the State of New York as such laws are applied to
agreements between New York residents entered into and to be performed
entirely within New York.
5.2. Survival. The representations, warranties, covenants and
agreements made herein will survive the execution of this Agreement and
the Closing of the transactions contemplated hereby.
5.3. Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof will inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and
administrators of the parties hereto, including, without limitation the
corporation into which
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the Company may be converted. Purchaser may not assign its rights to
purchase the Purchase Shares (except to the direct or indirect parents,
subsidiaries and affiliates of Purchaser) and the Company may not
assign its rights to receive the Service Credits, except to the
corporation into which the Company may be converted.
5.4. Entire Agreement. This Agreement, the exhibits to this Agreement
and the other documents delivered pursuant hereto or incorporated by
reference herein constitute the full and entire understanding and
agreement among the parties with regard to the subjects hereof and
thereof and supersede all prior oral and written understandings,
agreements and commitments with regard to such subjects by or among the
parties hereto.
5.5. Notices, etc. All notices and other communications required or
permitted hereunder will be in writing and will be mailed by nationally
recognized overnight courier, addressed, if to
the Purchaser: Xxxxxxxx Communications, Inc.
Xxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxx, Xxxxxxxx 00000
Attention: General Counsel
the Company: ZipLink LLC
00 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxx
with a copy each to:
ZipLink LLC
000 Xxxxxxxxxx Xxxxxx
Tower One, Xxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: President
Xxxxxxx, Xxxxxxxx & Xxxxxxx, LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
5.6. No Waivers. No failure on the part of any party to exercise or
delay in exercising any right hereunder will be deemed a waiver
thereof, nor will any such failure or delay, or any single or partial
exercise of any such right, preclude any further or other exercise of
such right or any other right.
5.7. Separability. If any provision of this Agreement, or the
application thereof, is for any reason and to any extent determined by
a court of competent jurisdiction to be invalid or unenforceable, the
remainder of this Agreement and the application of such provision to
other
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persons or circumstances will be interpreted so as best to reasonably
effect the intent of the parties hereto. The parties agree to use their
best efforts to replace such void or unenforceable provision of this
Agreement with a valid and enforceable provision which will achieve, to
the extent greatest possible, the economic, business and other purposes
of the void or unenforceable provision.
5.8. Expenses. The Company and the Purchaser shall each bear its
respective expenses and legal fees incurred with respect to this
Agreement and the transactions contemplated hereby.
5.9. Titles and Subtitles. The titles of the sections and subsections
of this Agreement are for convenience of reference only and are not to
be considered in construing this Agreement.
5.10. Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be an original, but all of which
together will constitute one instrument.
The parties have executed this Agreement as of the day and year
first above written.
ZIPLINK, LLC
By: /s/ Xxxxxxxxxxx Xxxxxxx
-------------------------------
Xxxxxxxxxxx Xxxxxxx, President
XXXXXXXX COMMUNICATIONS, INC.
By: /s/ Xxxxx X. Xxxxxx
-------------------------------
Xxxxx X. Xxxxxx
Vice President
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SCHEDULE A
NUMERICAL EXAMPLE
1.1(a) If the IPO Price is $13.00 per share then Purchaser shall receive 233,
654 shares of Common Stock of ZipLink, Inc.
1.1(b) If the Revenue Commitment is $4,000,000 and the Assumed IPO Price Per
Share is $13.00 then Purchaser shall receive 86,539 shares of Common Stock of
Ziplink, Inc.
1.1(c) If the Revenue Commitment is $4,000,000 and the Assumed IPO Price Per
Share is $13.00 but the Reorganization has not occurred, then Purchaser shall
receive 86,539 Units of membership interest in Ziplink LLC.
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