EXHIBIT 10.5
EQUITY PURCHASE AGREEMENT
THIS EQUITY PURCHASE AGREEMENT (this "AGREEMENT") is made as of May
18, 1998 by and among Interlink Communications Holding Co., Inc., a Delaware
corporation (the "COMPANY"), and each of the purchasers set forth on SCHEDULE I
attached hereto (each, a "PURCHASER" and, collectively, the "PURCHASERS").
WHEREAS, the Purchasers desire to purchase, and the Company desires
to sell, 10,500 shares of the Company's Common Stock, par value $.01 per share
(the "COMMON STOCK") and 89,500 shares of the Company's Convertible
Participating Preferred Stock, par value $.01 per share (the "PREFERRED Stock"
and together with the Common Stock, the "STOCK").
NOW THEREFORE, the parties hereto agree as follows:
Section 1. AUTHORIZATION AND CLOSING.
1A. AUTHORIZATION OF THE STOCK. As of the Closing (as defined below)
the Company shall have authorized the issuance and sale of the Common Stock and
the Preferred Stock, each having the rights and preferences set forth in the
Company's amended and restated certificate of incorporation in the form attached
hereto as EXHIBIT 1A (the "CERTIFICATE OF INCORPORATION"), to each Purchaser in
the amounts set forth opposite such Purchaser's name on SCHEDULE I attached
hereto.
1B. PURCHASE AND SALE OF THE STOCK. At the Closing, the Company
shall sell to each Purchaser and, subject to the terms and conditions set forth
herein, each Purchaser shall purchase from the Company, the Stock set forth
opposite such Purchaser's name on SCHEDULE I attached hereto at a price of $.01
per share of the Common Stock and $3,000,000 in the aggregate for all of the
shares of the Preferred Stock to be purchased hereunder.
1C. THE CLOSING. The closing of the purchase and sale of the Stock
pursuant to Section 1B (the "CLOSING") shall take place on the date of, and
contemporaneously with, the closing of the transactions contemplated by that
certain Stock Purchase Agreement of even date herewith among Telscape
International, Inc. ("TELSCAPE"), California Microwave Services Division, Inc.
("CMSD") and California Microwave, Inc. (the "SPA"), or on such other date
thereafter and at such place as may be mutually agreeable to the Company and the
Purchasers. At the Closing, the Company shall (i) deliver to the Purchasers
stock certificates evidencing the Stock to be purchased by each Purchaser at the
Closing, registered in such Purchaser's name, upon payment of the purchase price
thereof by a cashier's or certified check (or by wire transfer of immediately
available funds to such account as designated by the Company), and (ii) file and
cause to become effective the Certificate of Incorporation with the Secretary of
State of the State of Delaware. Notwithstanding any other provision of this
Agreement, if the transactions contemplated by the SPA are not consummated or if
the SPA is terminated prior to the closing, this Agreement shall be null and
void and of no further force and effect without any further action of the
parties hereto.
Section 2. CONDITIONS OF EACH PURCHASER'S OBLIGATION AT THE CLOSING.
The obligation of each Purchaser to purchase and pay for the Stock at the
Closing is subject to the satisfaction as of the Closing of the following
conditions:
2A. REPRESENTATIONS AND WARRANTIES; COVENANTS; SPA. The
representations and warranties contained in Section 3 hereof shall be true and
correct in all material respects at and as of the Closing, the Company shall
have performed in all material respects all of the covenants required to be
performed by it hereunder prior to the Closing, and the transactions
contemplated by the SPA shall be consummated contemporaneously with the Closing.
2B. COMPLIANCE WITH APPLICABLE LAWS. The purchase of the Stock by
each Purchaser hereunder shall not be prohibited by any applicable law or
governmental regulation, shall not subject such Purchaser to any penalty,
liability, other onerous condition under or pursuant to any applicable law or
governmental regulation, and shall be permitted by laws and regulations of the
jurisdictions to which such Purchaser is subject.
2C. WAIVER. Any condition specified in this Section 2 may be waived
with respect to a Purchaser only if such waiver is set forth in a writing
executed by such Purchaser.
Section 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. As a
material inducement to each Purchaser to enter into this Agreement and purchase
the Stock, the Company hereby represents and warrants to each Purchaser that:
3A. ORGANIZATION AND CORPORATE POWER. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Company has all requisite corporate power and authority
and all material licenses, permits and authorizations necessary to own and
operate its properties, to carry on its businesses as now conducted and
presently proposed to be conducted and to carry out the transactions
contemplated by this Agreement.
3B. AUTHORIZATION: NO BREACH. The execution, delivery and
performance of this Agreement and all other agreements contemplated hereby to
which the Company is a party have been duly authorized by the Company. This
Agreement and all other agreements contemplated hereby each constitutes a valid
and binding obligation of the Company, enforceable in accordance with its terms.
The execution and delivery by the Company of this Agreement, the offering, sale
and issuance of the Stock hereunder and the fulfillment of and compliance with
the respective terms hereof and thereof by the Company, do not and shall not (i)
conflict with or result in a breach of the terms, conditions or provisions of,
(ii) constitute a default under, (iii) result in the creation of any lien,
security interest, charge or encumbrance upon the capital stock or assets of the
Company or any of its subsidiaries pursuant to, (iv) give any third party the
right to modify, terminate or accelerate any obligation under, (v) result in a
violation of, or (vi) require any authorization, consent, approval, exemption or
other action by or notice to any court or administrative or governmental body
pursuant to, the Certificate of Incorporation or by-laws of the Company or any
of its subsidiaries, or any law, statute, rule or regulation to which the
Company is subject (other than notices to be filed pursuant to applicable state
securities laws), or any agreement. instrument, order judgment or decree to
which the Company or any of its subsidiaries is a party or by which it is bound.
3C. DISCLOSURE. Neither this Agreement nor any of the schedules,
attachments written statements, documents, certificates or other items prepared
or supplied to each Purchaser by or on behalf of the Company with respect to the
transactions contemplated hereby contain any untrue statement of a material fact
or omit a material fact necessary to make each statement contained herein or
therein not misleading.
4. OPTION. The Company hereby grants to each Purchaser (other than
Telscape) (each, an "OPTIONEE") an option (the "OPTION") to purchase the maximum
number of shares of Common Stock set forth next to such Optionee's name on
SCHEDULE II attached hereto (the "MAXIMUM SHARES") for the maximum exercise
price set forth next to such Optionee's name on such SCHEDULE II (the "MAXIMUM
EXERCISE PRICE"), which Option shall be exercisable as follows:
If the Company's EBITDA Then, each Optionee shall be entitled
for the twelve months to purchase the following percentage
ending June 30, 1999 is: of such Optionee's Maximum Shares
at the following percentage of such
Optionee's Maximum Exercise Price:
Equal to or greater than $2,600,000 100%
Equal to or greater than $2,500,000
but less than $2,600,000 90%
Equal to or greater than $2,400,000
but less than $2,500,000 80%
Equal to or greater than $2,300,000
but less than $2,400,000 70%
Equal to or greater than $2,200,000
but less than $2,300,000 60%
Equal to or greater than $1,500,000
but less than $2,200,000 50%
Less than $1,500,000 0%
provided, however, that in the event of any acquisition or disposition of any
business, company or division, or any material asset, by the Company, or entry
into the ownership, active management or operation of any business other than
the Business (as defined in the SPA), including reasonable extensions thereof,
Telscape, on behalf of the Company, and the Optionees shall negotiate in good
faith to adjust the EBITDA targets specified above to give effect to such
acquisition, disposition or entering into other businesses. For purposes of this
Section 4, "EBITDA" shall mean for any specified period the consolidated net
income of the Company and its subsidiaries for such period: (a) plus (without
duplication and to the extent included in determining such net income) (i) net
interest expense, (ii) provision for income taxes, and (iii) depreciation and
amortization, and (b) minus (without duplication and to the extent included in
determining such net income) (i) any amount by which the total inventory reserve
is less than $857,114, (ii) any amount by which the total accounts receivable
reserve is less than $82,890, (iii) any gains (or plus losses), together with
any related provision for income taxes on such gains (or losses), realized in
connection with any sale of assets other than the sale of inventory in the
ordinary course of business (including without limitation dispositions pursuant
to sale and leaseback transactions), (iv) extraordinary gains (or plus losses),
together with any related provision for income taxes on such extraordinary gains
(or losses) and (v) any gains (or plus losses) from discontinued operations,
together with any related provision for income taxes on such gains (or losses)
from discontinued operations. All calculations under this definition of EBITDA
shall be determined in accordance with United States generally accepted
accounting principles.
EBITDA shall be determined by the Company not later than July 15, 1999,
and each Optionee must exercise his Option no later than September 15, 1999 (the
"OPTION PERIOD"). Any Option not exercised during the Option Period shall expire
and no longer be exercisable. The Company shall accept a note from any Optionee
for up to 80% of the applicable exercise price payable upon exercise of an
Option, which note shall be substantially in the form attached hereto as EXHIBIT
4(A)(I) or 4(A)(II). In addition, the Company shall, at the request of an
Optionee, lend such Optionee an amount equal to such Optionee's federal and
state tax liability arising by virtue of such Optionee's exercise of this Option
not later than the date on which such tax liability is due and payable, and such
amount shall be represented by a note similar to the notes attached hereto as
EXHIBIT 4(A)(I) and 4(A)(II). Any such notes shall be secured by a pledge of the
Common Stock that is the subject of the exercised Option pursuant to a pledge
agreement which shall be substantially in the form attached hereto as EXHIBIT
4(B). The Company shall reserve for issuance the aggregate number of Maximum
Shares issuable upon exercise of the Options until expiration of the Option
Period.
5. MISCELLANEOUS.
5A. REMEDIES. Each holder of the Stock purchased hereunder shall
have all rights and remedies set forth in this Agreement and the Certificate of
Incorporation and all rights and remedies which such holders have been granted
at any time under any other agreement or contract and all of the rights which
such holders have under any law. Any person or entity having any rights under
any provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.
5B. STOCKHOLDER INVESTMENT REPRESENTATIONS. Each Purchaser hereby
represents with respect to such Purchaser (and not with respect to any other
Purchaser) that such Purchaser: (i) is an "accredited investor" within the
meaning of Rule 501 of Regulation D of the Securities Act of 1933, as amended
(the "SECURITIES ACT"), and that such Purchaser has made such inquiry and has
had access to and has received and considered such information as such Purchaser
has deemed appropriate in making the decision to purchase the Stock purchased
hereunder; (ii) is acquiring the Stock purchased hereunder or acquired pursuant
hereto for such Purchaser's own account with the present intention of holding
such securities for purposes of investment only; and (iii) has no intention of
selling such securities in a public distribution in violation of the federal
securities laws or any applicable state securities laws; PROVIDED that nothing
contained herein shall prevent such Purchaser and subsequent holders of the
Stock from transferring such securities in compliance with the provisions of the
Stockholders Agreement of even date herewith among the Company, such Purchaser
and certain other stockholders of the Company (as amended from time to time
after the Closing in accordance with its terms, the "STOCKHOLDERS AGREEMENT").
Each certificate for Stock purchased hereunder shall be imprinted with a legend
in accordance with the provisions of the Stockholders Agreement.
5C. CONSENT TO AMENDMENTS. Except as otherwise expressly provided
herein, no amendment, modification or waiver of any of the provisions of this
Agreement shall be effective against any Purchaser unless such Purchaser has
consented to such amendment, modification or waiver in writing. No other course
of dealing between the Company and any Purchaser or any delay in exercising any
rights hereunder or under the Certificate of Incorporation shall operate as a
waiver of any rights.
5D. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties contained herein or made in writing by any party in connection
herewith shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, regardless of any
investigation made by any Purchaser, the Company or on their behalf.
5E. REVERSION OF CERTAIN COMMON STOCK. In the event Xxxxxxxx Xxxxxx
does not (i) enter into a Consulting Agreement with the Company of even date
herewith; (ii) enter, on or before July 15, 1999, into an Employment Agreement
with the Company substantially in the form of Employment Agreements with the
Company entered into by E. Xxxxxxx Xxxxx, Xxxxxxx X. Xxxxxxxx and Xxxxx X. Xxxxx
(other than with respect to the bonus payable with respect to the twelve month
period ending June 30, 1999); and (iii) commence employment with the Company on
or before July 15, 1999, then the shares set forth on Schedule I hereto to be
issued to Xxxxxxxx Xxxxxx under this Equity Purchase Agreement on the Closing
Date shall revert (a) on the Closing Date in the event Xxxxxxxx Xxxxxx does not
enter into a Consulting Agreement with the Company of even date herewith or (b)
on July 15, 1999 in the event of (ii) or (iii) above, one-third (1/3) each to E.
Xxxxxxx Xxxxx, Xxxxxxx Xxxxxxxx and Xxxxx X. Xxxxx as if they had been
originally issued or obligated to be issued to them on the date on which E.
Xxxxxxx Xxxxx, Xxxxxxx Xxxxxxxx and Xxxxx X. Xxxxx entered into this Equity
Purchase Agreement and any obligation of Xxxxxxxx Xxxxxx hereunder shall
terminate.
5F. SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto shall bind and inure to the benefit of the
respective successors and permitted assigns of the parties hereto.
5G. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
5H. COUNTERPARTS. This Agreement may be executed simultaneously in
separate counterparts, any one of which need not contain the signatures of more
than one party, but all such counterparts taken together shall constitute one
and the same Agreement.
5I. DESCRIPTIVE HEADINGS: INTERPRETATION. The descriptive headings
of this Agreement are inserted for convenience only and do not constitute a part
of this Agreement. The use of the word "including" in this Agreement shall be by
way of example rather than by limitation.
5J. GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the internal. substantive laws of the State of
Delaware without giving effect to the conflict of laws rules thereof.
5K. NOTICES. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be made as set forth in the Stockholders Agreement.
5L NO STRICT CONSTRUCTION. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement.
5M ARBITRATION. Any dispute among the parties arising out of or
relating to this Agreement or breach hereof, shall be settled by arbitration in
accordance with the Rules of the American Arbitration Association. The
arbitration shall be conducted by three (3) neutral arbitrators who sit in San
Jose, California. Any award made by such arbitrators shall be binding
and conclusive for all purposes hereof, may include injunctive relief, as well
as orders for specific performance and may be entered as a final judgement in
any court of competent jurisdiction. No arbitration arising out of or relating
to this Agreement shall include, by consolidation or joinder or in any other
manner, parties other than the parties hereto and other persons substantially
involved in common questions of fact or law whose presence is required if
complete relief is to be afforded in arbitration. The costs and expense of such
arbitration shall be born in accordance with the determination of the
arbitrators and may include reasonable attorney fees. Each party hereunder
further agrees that service of process may be made upon it by registered or
certified mail or personal service at the address for notices provided herein.
IN WITNESS WHEREOF, the parties hereto have executed this Equity
Purchase Agreement on the day and year first above written.
COMPANY:
INTERLINK COMMUNICATIONS
HOLDING CO., INC.
By:________________________
Name:
Title:
PURCHASERS:
TELSCAPE INTERNATIONAL, INC.
By:___________________________
Name:
Title:
________________________________
E. Xxxxxxx Xxxxx
________________________________
Xxxxxxx Xxxxxxxx
________________________________
Xxxxx X. Xxxxx
________________________________
Xxxxxxxx Xxxxxx
SCHEDULE I
PURCHASER COMMON STOCK PREFERRED STOCK
--------- ------------ ---------------
Telscape International, Inc. -0- 89,500
E. Xxxxxxx Xxxxx 3,000 -0-
Xxxxxxx Xxxxxxxx 3,000 -0-
Xxxxx X. Xxxxx 3,000 -0-
Xxxxxxxx Xxxxxx 1,500 -0-
SCHEDULE II
PURCHASER MAXIMUM MAXIMUM
--------- SHARES EXERCISE PRICE
------ --------------
E. Xxxxxxx Xxxxx 3,393.00 271,440.00
Xxxxxxx Xxxxxxxx 3,393.00 271,440.00
Xxxxx X. Xxxxx 3,393.00 271,440.00
Xxxxxxxx Xxxxxx 1,696.00 135,680.00
--------- ----------
11,875.00 950,000.00
