Exhibit 10.19
SPECTRUM ACQUISITION CONSULTING AGREEMENT
This AGREEMENT (this "Agreement") is made by and between Clearwire
Corporation, a Delaware corporation ("Clearwire"), and ITFS Spectrum Consultants
LLC, a Delaware limited liability company ("ISC"), as of the 1st day of
February, 2005 (the "Effective Date").
RECITALS:
A. Clearwire Corporation desires to acquire additional Spectrum Rights, which
Spectrum Rights may be acquired directly or through one or more of its
wholly owned subsidiaries,
B. ISC's members have experience in dealing with holders of Channels and ISC
is familiar with the market for Spectrum Rights and is prepared to assist
Clearwire in securing additional Spectrum Rights, and
C. Clearwire is prepared to compensate ISC for its assistance in completing
acquisitions of Spectrum Rights, all on the terms and conditions of this
Agreement.
In consideration of the premises, the mutual covenants and promises made below,
and other good and valuable consideration, the parties agree as follows:
1. ISC FACILITATED ACQUISITIONS.
(a) ISC SERVICES. ISC shall provide services to Clearwire in securing
definitive agreements for the Acquisition of spectrum capacity by Clearwire of
ITFS (now referred to as EBS), MDS (now referred to as BRS), or MMDS channels
(as they are defined by the Federal Communications Commission, and referred to
here together as "Channels") through a spectrum license purchase, lease or
sublease, or option to purchase ("Option") (access to capacity in any such form
is referred to herein as "Spectrum Rights").
(b) ACQUISITIONS OF SPECTRUM RIGHTS. In consideration of the ISC services,
ISC shall become entitled to the Consulting Compensation provided for in Section
3 upon the closing of an Acquisition of Spectrum Rights in which both of the
following apply:
(i) ISC has made an introduction to the third party whose license is the
subject of the Spectrum Rights and such party was, at the time of the
introduction listed as the holder of, or has otherwise been identified
by Clearwire as an ISC Approach Channel (defined below), and
(ii) ISC has facilitated the execution of definitive agreements and, with
respect to a license purchase, lease or sublease, the closing of the
transaction with such third party as requested by Clearwire and
through the Facilitation Process described in Section 2 below.
(x) The closing of a Spectrum license purchase, lease or sublease, as
described in the previous sentence for the acquisition of Spectrum
Rights or (y) the execution of a definitive option agreement is
referred to herein as an "Acquisition").
(c) Clearwire shall have no obligation whatsoever to negotiate or
consummate any Acquisition. Each proposed Acquisition shall be presented to
Clearwire for consideration prior to the delivery by ISC of any written
documentation to the counter party reflecting all new or modified terms of the
Acquisition. Neither ISC nor any of its members, managers, employers, or
contractors shall have any rights, power or authority to obligate Clearwire in
any way with respect to any transaction. Neither ISC nor any of its members,
managers, employers, or contractors shall hold themselves out as an agent or
representative of Clearwire in any manner except as expressly provided in this
Agreement.
2. FACILITATION PROCESS.
(a) APPROVED CHANNEL MARKETS. The parties understand that it is in their
mutual interests to approach holders of licenses of Channels in an orderly
fashion in accordance with the business plan and targeted markets of Clearwire,
as determined by Clearwire from time to time in its discretion. To such end, ISC
shall follow the "Facilitation Process," consisting of the "Approach Channel
Process" described in this subparagraph (a) and the "Procedures" described in
subparagraph (b) below. The Approach Channel Process shall be as follows:
(i) ISC is currently pursuing Acquisitions (the "Pending Transactions")
from licensees of the Channels and markets referenced on the list
attached hereto as Exhibit A. Clearwire has approved the pursuit of
such Acquisitions but has reserved the opportunity to evaluate each
Acquisition, in its sole discretion, prior to accepting or
consummating any such Acquisition.
(ii) From time to time during the Term of this Agreement, ISC may furnish
additional lists of holders and licenses for Channels in markets that
ISC intends to approach about a possible Acquisition for Clearwire
(each an "Approach List"). Within thirty (30) days from the receipt of
the Approach List, Clearwire will notify ISC in writing of the
Channels listed on such Approach List that ISC may pursue an
Acquisition to present to Clearwire for consideration. To the extent
Clearwire does not notify ISC that ISC may pursue an Acquisition with
any party listed on the Approach List, ISC shall not pursue any such
Acquisition. Clearwire may, from time to time, notify ISC that certain
Channels are no longer ISC Approach Channels, and from and after that
time ISC will not contact, negotiate or discuss an Acquisition with
such party ("Removed Channels"); provided, however that if within
thirty (30) days of such Removed Channels being removed hereunder,
Clearwire executes definitive documents for such Removed Channels on a
stand-alone basis on substantially similar terms as were proposed by
ISC prior to such Channels becoming Removed Channels, then upon the
closing of such transaction, Clearwire will pay to ISC the Consulting
Consideration, as if such Removed Channels had not been removed,
subject to the terms and conditions of this Agreement.
(iii) ISC shall not contact, approach, negotiate or discuss a possible
Acquisition by Clearwire with any party other than holders of ISC
Approach Channels.
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(iv) Only the Channels on Exhibit A or those on the Approach List which
Clearwire has approved in writing pursuant to subsection (ii) and
excluding the Removed Channels shall be referred to as "ISC Approach
Channels".
(v) If ISC has not approached a license holder or lessee on the list of
ISC Approach Channels within 60 days of approval of such Channels by
Clearwire (provided such channels are not Removed Channels), then
after that 60 day period, those Channels shall be Removed Channels and
would have to be resubmitted to Clearwire as a new Approach List
pursuant to subsection (ii).
(b) STANDARD PROCEDURES. It is understood that ISC may negotiate for the
Acquisition of Spectrum Rights on ISC Approach Channels for Clearwire directly.
In any event, such negotiations will be subject to the following Procedures:
(i) ISC will use Clearwire's standard form of lease or such other
instrument as may be specified from time to time by Clearwire
("Standard Lease").
(ii) With respect to an Acquisition that involves a purchase of or Option
to purchase or lease Channels, ISC will use the approved form of
Purchase Agreement, Option Agreement, Assignment or such other
instrument as may be specified from time to time by Clearwire
("Standard Assignment").
It is understood, that Clearwire shall be under no obligation to execute a
Standard Lease or a Standard Assignment.
(c) PROCESS OF APPROACH. Prior to submitting to a third party license
holder any Standard Lease or Standard Assignment for execution, (x) ISC will
present Clearwire with (i) a non-disclosure agreement, in favor of Clearwire,
executed by the third party license holder, if applicable, (ii) all due
diligence information which ISC, or its employees or contractors, is aware of
with regard to the Channels, (iii) a summary of the financial terms of such
Acquisition and (iv) any variances from the Standard Lease or Standard
Assignment for its review and consideration and (y) Clearwire shall have
notified ISC of its desire to proceed with the Acquisition, which shall be
determined in Clearwire's sole discretion.
(d) RELATIONSHIP TO ISA. The parties understand and agree that an
Acquisition shall not be deemed to include any transaction pursuant to which
ITFS Spectrum Advisors LLC, a Delaware limited liability company ("ISA") is
entitled to be issued warrants by Clearwire pursuant to the terms of that
certain Warrant Agreement, dated November 13, 2003, between ISA and Clearwire
(the "Warrant Agreement"); provided, however, during the term of this Agreement,
at ISC's request, any Acquisitions that are closed between Clearwire and
licensees introduced by Xxxxx Xxxxxx an agent of ISC, consisting of up to
25,000,000 channel points of presence ("CPOPs") will not be subject to the
Warrant Agreement and will instead be subject to this Agreement.
3. CONSULTING CONSIDERATION.
(a) AMOUNT PAYABLE UPON AN ACQUISITION. Consulting Consideration shall be
determined as provided in Section 3(b), and shall be paid when due twenty five
(25%) percent in
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cash and seventy five percent (75%) in Warrants as provided in Section 3(c). The
Consulting Consideration as so determined shall be deemed earned, and paid
promptly following, the closing of each Acquisition or with respect to an
Option, upon the execution of a definitive document for the Option.
(b) CALCULATION OF CONSULTING CONSIDERATION. The Consulting Consideration
payable shall be calculated by multiplying the number of CPOPs in the applicable
geographic service area ("GSA") times the applicable "Per CPOP ISC
Consideration" determined in accordance with the applicable table set forth
below:
(i) For markets with three hundred seventy five thousand (375,000) or more
households within the GSA:
Clearwire's Clearwire's
Acquisition Acquisition
Price With No Per CPOP ISC Price With Per CPOP ISC
Purchase Option Consideration Purchase Option Consideration
--------------- ------------- --------------- -------------
less than $0.65 $ 0.05 less than $0.70 $ 0.06
$0.65- $0.8499 $0.025 $0.70-$0.8999 $0.035
$0.85 - $.92 $ 0.01 $0.90-$.95 $ 0.02
(ii) For markets with less than 375,000 households within the GSA:
Clearwire's Clearwire's
Acquisition Acquisition
Price With No Per CPOP ISC Price With Per CPOP ISC
Purchase Option Consideration Purchase Option Consideration
--------------- ------------- --------------- -------------
less than $0.35 $ 0.05 less than $.375 $ 0.06
$0.35 - $0.4199 $0.025 $0.375-$0.4499 $0.035
$0.42 - $0.55 $ 0.01 $0.45-$0.575 $ 0.02
With respect to any Acquisition, the Per CPOP ISC Consideration shall be
defined and calculated on the following basis:
(i) The parties shall use the average number of households located within
the GSA as defined under FCC rules for each channel group (or
individual channel in the case of an Acquisition of a single channel,
either hereafter a "Channel Group") subject to the Acquisition in
determining the appropriate number of CPOPs for purposes of payment of
the Consulting Consideration for each Channel Group (as represented by
an individual FCC call sign), notwithstanding the potential of
interference thereto from neighboring channels ("the Method"). GSA
CPOP amounts for the Pending Transactions as of the effective date of
this Agreement are reflected on Exhibit A hereof.
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(ii) In the event of a dispute over the correct number of households
located within a GSA for a Channel Group other than those provided on
Exhibit A, the parties agree to determine the correct number of
households using the most up-to-date commercial engineering software
generally used by Clearwire for calculating such household numbers for
such GSAs as determined under the then current FCC rules.
(c) WARRANTS. The portion of the Consulting Consideration subject to be
paid in Warrants shall be paid in warrants (the "Warrants") to purchase shares
of Class A Common Stock of Clearwire (the "Warrant Shares") with the number of
Warrant Shares determined as provided in Section 4; provided, that, if ISC is
not an accredited investor at the time such Warrants are to be granted hereunder
then the Consulting Consideration shall be paid in immediately available funds.
(d) CONSIDERATION MAXIMUM. Except for the In-Process Consideration and the
Post-Termination Consideration, if any, payable after the expiration of the Term
or earlier termination of this Agreement, the aggregate Consulting Consideration
payable under this Agreement shall not exceed the Consideration Maximum. The
"Consideration Maximum" shall be the sum of Two Million Five Hundred Thousand
Dollars ($2,500,000), which amount will include all cash and the value of all
Warrant Shares upon the date of the issuance of the Warrants.
(e) IN-PROCESS CONSIDERATION. Clearwire will pay ISC consideration for the
In-Process Acquisitions at a rate equal to the amount determined pursuant to
Section 3(b) for such Acquisition ("In-Process Consideration"). The In-Process
Consideration shall be paid in immediately available funds upon the Closing of
the In-Process Acquisition. "In-Process Acquisitions" means Acquisitions for
which definitive agreements are executed during the Term and are closed by
Clearwire within one-hundred eighty (180) days following the expiration or
termination of this Agreement.
(f) POST TERMINATION CONSIDERATION. Upon the expiration of the Term or upon
the earlier termination of this Agreement, ISC shall cease all activities with
respect to the ISC Approved Channels; provided that if Clearwire may, in its
sole determination, after such termination or expiration of this Agreement,
approves ISC continuing its activities hereunder with respect to individual
markets and channels that are on the ISC Approved Channel list at the time of
such expiration or termination (each a "Post-Termination Acquisition"), and only
after such written approval may ISC continue its activities with respect to such
Post-Termination Acquisition(s) subject to the terms and conditions of this
Agreement. Upon the Closing of such Post-Termination Acquisition, Clearwire will
pay to ISC consideration at a rate equal to fifty percent (50%) of the amount
determined pursuant to Section 3(b) for each such Post-Termination Acquisition
("Post-Termination Consideration"). No other amounts shall be due or payable to
ISC with respect to any such Post-Termination Acquisitions. Clearwire shall have
no obligation whatsoever to approve ISC continuing its activities with respect
to any of the ISC Approved Channels upon the termination or expiration of this
Agreement, nor shall it have any obligation whatsoever to negotiate or
consummate any Post-Termination Acquisition.
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4. CALCULATION OF WARRANT SHARES.
(a) NUMBER OF WARRANT SHARES. The number of Warrant Shares exercisable
pursuant to any Warrant delivered as all or a portion of any Consulting
Consideration shall be determined by (x) multiplying the Consulting
Consideration determined applying the table in Section 3(b) by the percentage of
the Consulting Consideration to be paid in Warrants, and dividing the resulting
number by (y) the Closing Per Share Price of a Warrant Share on the date on
which the definitive agreement for the applicable Acquisition is executed by the
last party thereto (as defined in subsection (c) below).
(b) EXERCISE PRICE. The exercise price of Warrant Shares under any Warrant
will be five cents ($.05) per Share.
(c) CLOSING PER SHARE PRICE. The "Closing Per Share Price" is the greater
of (i) the per share price of Class A Common Stock of Clearwire as determined by
the board of directors of Clearwire from time to time, as in effect at the time
the definitive agreement for applicable Acquisition is executed by the last
party thereto; or (ii) the price per share of Clearwire's common stock in the
then most recently completed funding round of Clearwire in excess of Two Million
Dollars ($2,000,000)(or, if such funding round did not include common stock but
did include preferred stock or other convertible securities, the price per share
of common stock, based on converting such preferred stock or other convertible
securities to common stock pursuant to the applicable conversion rights);
provided, however that with respect to those definitive agreements which are
executed on or prior to January 15, 2005 the Closing Per Share Price shall be
$2.00.
(d) WARRANT. The warrants issued hereunder shall be in the form attached
hereto as Appendix A.
5. TERM; TERMINATION.
This Agreement shall commence and become effective as of the Effective Date
and shall continue until the earlier of (i) December 31, 2005, (ii) such time as
the Consideration Maximum has been reached or (iii) termination for breach as
provided in this Section 5 (the "Term"). Either party may terminate this
Agreement upon fifteen (15) days written notice to the other party if the other
party breaches any term hereof and, if such breach is of a type that is capable
of being cured, fails to cure such breach with in such fifteen (15) day period.
Upon termination of this Agreement based on a breach of ISC hereunder, no
additional Consulting Consideration or In-Process Consideration, other than
those due and payable at the time of such termination or expiration and except
as provided in Sections 3(e) and 3(f), shall be paid hereunder.
6. [INTENTIONALLY DELETED].
7. MATTERS RELATED TO ISC.
(a) OWNERSHIP OF ISC AND TRANSFERS. ISC is and during the Term will be
owned 100% by Xxxx Xxxx Xxxxxxxxx and Xxxxxxx X. Xxxxx. This Agreement, and any
Warrants issued hereunder, shall not be assignable or transferable by ISC except
in strict accordance with the restrictions on transfer contained in the Warrant.
A "Permitted Transferee," for purposes of the
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Warrants issued pursuant to this Agreement, is defined as that term is defined
in that certain Amended and Restated Stockholders' Agreement of Clearwire dated
as of March 16, 2004 (the "Stockholders Agreement"). Prior to any issuance of
Warrants or any permitted assignment or transfer, ISC will provide to Clearwire
a certificate with respect to its ownership and, from time to time, with respect
to any assignment of ISC interests and new members or changes. ISC will provide
to Clearwire such further assurances with respect to its own ownership or the
ownership of any assignee or transferee entity as shall be requested by
Clearwire in its sole discretion. Upon execution of this Agreement, ISC will
also execute and be bound by the Stockholders Agreement and that certain
Registration Rights Agreement, dated as of March 16, 2003, by and among
Clearwire and certain of its stockholders (the "RRA"). Upon any transfer of
Warrants or shares issued upon exercise of a Warrant to any of the members of
ISC in accordance with the provisions of such Warrant, each such member shall
agree to execute and become bound by the Stockholders Agreement and the RRA.
(b) ISC REPRESENTATIONS AND WARRANTIES. ISC represents and warrants to
Clearwire as follows:
(i) Organization. ISC is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of
Delaware and has all requisite limited liability company power and
authority to carry on its business.
(ii) Authorization. All action on the part of ISC, necessary for the
authorization, execution and delivery of this Agreement, has been
taken.
(iii) Investment Purpose. ISC is acquiring the Warrants and the Warrant
Shares for ISC's own account (and not as a nominee or agent) for
investment only and not with a view towards, or for resale in
connection with, the public sale or distribution of the Warrants or
the Warrant Shares, except pursuant to sales registered or exempted
from registration under the Securities Act of 1933, as amended (the
"Securities Act"), and applicable state securities laws
(iv) Investor Status; Investment Risk. ISC (a) is and at all relevant times
will be an "accredited investor" as defined in Regulation D under the
Securities Act and (b) is not and at all relevant times will not be a
"broker" or "dealer" as those terms are defined in Section 3 of the
Securities Exchange Act of 1934, as amended. ISC understands that its
receipt of the Warrants and the Warrant Shares involves a high degree
of risk, and acknowledges that it is able to bear the financial risks
associated with an investment in the Warrants and the Warrant Shares,
including the loss of its entire investment. ISC has sought such
accounting, legal and tax advice as it has considered necessary to
make an informed investment decision with respect to its acquisition
of the Warrants and the Warrant Shares.
(c) DISCLOSURE. ISC acknowledges and agrees that Clearwire has made
available to ISC, or its attorneys or accountants, all other documents and
information that ISC has requested, and that Clearwire has provided answers to
all of their questions concerning ISC's receipt of the Warrants and the Warrant
Shares. ISC has requested and received all documents and other information that
ISC has deemed necessary for making an evaluation of Clearwire.
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(d) RESTRICTED SECURITIES. ISC acknowledges that the Warrant Shares
issuable upon exercise of the Warrants are "restricted securities" under the
federal securities laws and that (a) the Warrant Shares have not been and are
not being registered under the Securities Act or any state securities laws and
(b) Clearwire is not obligated to register the Warrant Shares under the
Securities Act or any state securities laws, or to comply with the terms and
conditions of any exemption under those laws.
(e) TRANSFER OR RESALE. ISC understands that the Warrant and the Warrant
Shares may not be offered for sale, sold, assigned or transferred unless (a) the
Warrants or Warrant Shares are subsequently registered under federal and state
securities laws, or (b) ISC has delivered to Clearwire an opinion of legal
counsel, in a form reasonably acceptable to Clearwire and its legal counsel, to
the effect that the Warrants or Warrant Shares, as applicable, may be sold,
assigned or transferred pursuant to an exemption from such registration or (c)
ISC provides Clearwire with reasonable assurances that the Warrants or Warrant
Shares can be and are being sold, assigned or transferred in accordance with
Rule 144 under the Securities Act.
(f) LEGENDS. ISC hereby consents to the placement of a legend on all
certificates representing the Warrant Shares in substantially the following
form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF
COUNSEL, IN A FORM ACCEPTABLE TO THE ISSUER'S COUNSEL, THAT REGISTRATION IS
NOT REQUIRED UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS
OR UNLESS SOLD PURSUANT TO RULE 144 UNDER THE SECURITIES ACT.
(g) RELIANCE ON EXEMPTIONS. ISC understands that Clearwire (a) is issuing
the Warrants and will be issuing the Warrant Shares to ISC in reliance on
specific exemptions from the registration requirements of United States federal
and state securities laws and (b) is relying in part upon the truth and accuracy
of, and ISC's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of ISC set forth in this Agreement in order
to determine the availability of such exemptions and the eligibility of ISC to
acquire the Warrants and the Warrant Shares.
8. GENERAL PROVISIONS.
(a) AGREEMENT AUTHORIZED. Clearwire and ISC have full power and authority
to enter into and perform this Agreement, and the person(s) signing this
Agreement on behalf of each party has been properly authorized and empowered to
enter into this Agreement.
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(b) INTEGRATION. The parties acknowledge that each has read, understands,
and agrees to be bound by this Agreement including the Appendix, which is
incorporated into this Agreement by this reference, and that this Agreement is
the complete and entire agreement between the parties regarding the subject
matter described herein and supersedes all prior or contemporaneous written or
oral agreements and/or understandings by or among the parties, whether express
or implied concerning the subject matter contained herein. There are no
representations, agreements, arrangements or understandings, oral or written,
among the parties hereto relating to the subject matter contained in this
Agreement which are not fully set forth herein.
(c) NONWAIVER. Any failure or delay by any party to exercise or partially
exercise any right, power or privilege hereunder shall not be deemed a waiver of
any of the rights, powers or privileges under this Agreement. The waiver by any
party of a breach of any term, condition or provision of this Agreement shall
not operate as, or be construed as, a waiver of any subsequent breach thereof.
(d) MODIFICATIONS OR WAIVERS. No modifications or amendments to this
Agreement and no waiver of any provisions hereof shall be valid unless made in
writing signed by duly authorized representatives of the parties.
(e) APPLICABLE LAW. This Agreement shall in all respects, including all
matters of construction, validity, and performance, be governed by, and
construed and enforced in accordance with, the laws of the state of Delaware,
without reference to any rules governing conflicts of laws. However, in light of
Clearwire's presence and headquarters in the State of Washington, any dispute
arising out of this Agreement shall be resolved in a court of appropriate
jurisdiction or by an arbitration located in King County, Washington. Each party
specifically and expressly consents to the personal jurisdiction of the state
and federal courts located in Seattle, King County, Washington.
(f) SEVERABILITY. If any term, provision or part of this Agreement is to
any extent held invalid, void or unenforceable by a court of competent
jurisdiction, the remainder of this Agreement shall not be impaired or affected
thereby, and each term, provision, and part shall continue in full force and
effect and be interpreted in a manner consistent with the parties' intent.
(g) SURVIVAL. The terms, conditions and warranties contained in this
Agreement that by their sense and context are intended to survive the
performance hereof by the parties hereunder shall so survive the completion of
the performance, cancellation or termination of this Agreement.
(h) TRAVEL AND RELATED EXPENSES. Any travel and related expenses reasonably
incurred by ISC and approved in advance by Clearwire in connection with its
performance of making introductions and facilitating Acquisitions under Section
1 of this Agreement shall be paid by Clearwire upon the submittal of
documentation of such expenses satisfactory to Clearwire.
(i) ATTORNEY'S FEES. In the event any action is brought to enforce any
rights other than pursuant to an Arbitrable Dispute hereunder, or to declare a
breach of this Agreement, such
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action shall not be subject to the arbitration provisions of Section 8, and the
prevailing party shall be entitled to recover, in addition to any other amounts
awarded, reasonable legal costs including attorney's fees incurred thereby. An
"Arbitrable Dispute" is defined as (and limited to) any dispute concerning the
payment of money hereunder or to resolve an ambiguity in the drafting of this
Agreement.
(j) NOTICES. Any notice required hereunder shall be in writing and shall be
given to the parties by hand, by facsimile, by nationally recognized overnight
courier service or by express, registered or certified mail, postage prepaid,
return receipt requested, at the addresses indicated following the parties
signature below. In addition, notices may be sent by electronic transmission
(but only if suitable for retention, retrieval and reproduction of notice by the
recipient) and sent to the electronic mail (e-mail) address set forth following
the party's mailing address below; provided that, the receipt of the e- mail
notice shall be deemed received only when confirmed by return e-mail of the
addressee acknowledging receipt. Except as provided in the preceding sentence,
notices shall be deemed to have been given upon actual receipt thereof. Either
party may change its notice address by written notice to the other.
9. ARBITRATION OF ARBITRABLE DISPUTES.
(a) If the parties are unable to resolve any Arbitrable Dispute under this
Agreement, the following baseball decision rules ("Baseball Arbitration") shall
apply. Any such Arbitrable Dispute shall be resolved by a single Arbitrator. In
the event of an Arbitrable Dispute over any provision of this Agreement, either
party may request by written notice to the other party that it wishes to submit
the disputed matter for resolution by Baseball Arbitration. The parties shall
agree to submit the matter to an Arbitrator within 30 days after the requesting
party's notice has been received by the other party. Within fifteen (15) days
(the "Submission Period") after the appointment of the arbitrator (the
"Arbitrator") in accordance with the Commercial Arbitration Rules (then in
effect) of the American Arbitration Association for arbitration of commercial
disputes (the "AAA") using the Federal Rules of Civil Procedures, each party
shall submit to the Arbitrator its own proposal for the resolution of the
contested issue. Such submissions shall remain secret until after the Arbitrator
has received each party's proposal, at which time the Arbitrator shall inform
each party of the other's proposal. No such proposal may be amended after it is
submitted to the Arbitrator. The Arbitrator shall compare the proposals. The
Arbitrator shall determine which proposal he or she believes to be the
resolution most closely in accordance with the relevant provisions of this
Agreement and shall order the adoption of such proposal as the relief granted.
If any party fails to submit its proposal by the end of the Submission Period,
the Arbitrator shall order the adoption of the other party's proposal.
(b) The arbitration hearing shall be located in neutral location agreed
upon by the parties or, if they cannot so agree, in a location in Seattle,
Washington selected by the Arbitrator or Arbitration Panel. The Federal Rules of
Evidence shall apply to the arbitration hearing. The party bringing a particular
claim or asserting an affirmative defense will have the burden of proof with
respect thereto. Each party shall bear the burden of persuasion with respect to
its proposal for resolution of the matter. The arbitration proceedings and all
testimony, filings, document and information relating to or presented during the
arbitration proceedings shall be deemed to be information subject to the
confidentiality provisions of this Agreement. The Arbitrator will have no power
or authority, pursuant to the rules of the AAA or otherwise, to
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relieve the parties from their agreement hereunder to arbitrate or otherwise to
amend or disregard any provision of this Agreement, including without limitation
the provisions of this Section 8(b).
(c) Should an Arbitrator refuse or be unable to proceed with arbitration
proceedings as called for by this Section 8, the Arbitrator shall be replaced
pursuant to the rules of the AAA. If an arbitrator is replaced after the
arbitration hearing has commenced, then a rehearing shall take place in
accordance with this Section 8 and the rules of the AAA.
(d) Within fifteen (15) days after the closing of the arbitration hearing,
the Arbitrator will prepare and distribute to the parties a writing setting
forth the Arbitrator's or Arbitration Panel's finding of facts and any relevant
conclusions of law relating to the Arbitrable Dispute, including the reasons for
the giving or denial of any award. The findings and conclusions and the award,
if any, shall be deemed to be information subject to the confidentiality
provisions of this Agreement.
(e) The Arbitrator is instructed to schedule promptly all discovery and
other procedural steps and otherwise to assume case management initiative and
control to effect an efficient and expeditious resolution of the Arbitrable
Dispute. The Arbitrator or Arbitration Panel is authorized to issue monetary
sanctions against either party if, upon a showing of good cause, such party is
unreasonably delaying the proceeding.
(f) Any award rendered by the Arbitrator will be final, conclusive and
binding upon the parties and any judgment thereon may be entered and enforced in
any court of competent jurisdiction.
(g) Each party will bear an equal one-half of all fees, costs and expenses
of the Arbitrators, and notwithstanding any law to the contrary, each party will
bear all the fees, costs and expenses of its own attorneys, experts and
witnesses; provided, however, in connection with any judicial proceeding to
compel arbitration pursuant to this Agreement or to confirm, vacate or enforce
any award rendered by the Arbitrator, the prevailing party in such a proceeding
shall be entitled to recover reasonable attorney's fees and expenses incurred in
connection with such proceedings, in addition to any other relief to which it
may be entitled.
[Balance of Page Intentionally Blank]
-11-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
ITFS Spectrum Consultants LLC
By: /s/ Xxxxxxx X. Xxxxx
------------------------------------
Xxxxxxx X. Xxxxx, a Managing Member ISC Notice Address:
0000 Xxxxx Xxxxxx
Xxxxx 000
Xxxxxx Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxxxxxx X. Xxxxx
Clearwire Corporation
By: /s/ Xxxxxxxx X. Xxxxx Clearwire Notice Address:
------------------------------------ 0000 Xxxx Xxxxxxxxxx Xxxx. NE,
Name: Xxxxxxxx X. Xxxxx Suite 300
Title: Executive Vice President Xxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxxxxxxx X. Xxxxx, EVP
-12-
APPENDIX A
Form of Warrant
(See Attached)
-13-
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
No. ___
Issued: ___________, 20__
WARRANT TO PURCHASE
SHARES OF CLASS A COMMON STOCK OF
CLEARWIRE CORPORATION
(VOID AFTER ___________, 20__)
This certifies that ITFS Spectrum Consultants LLC, a Delaware limited
liability company (the "Holder"), for value received, is entitled to purchase
from Clearwire Corporation, a Delaware corporation (the "Company"), having a
place of business at [_____________________________], ____________ (__) fully
paid and nonassessable shares of the Company's Class A Common Stock (the "Common
Stock").
The exercise price per share of this Warrant is five cents ($0.05) (the
"Stock Purchase Price") payable in lawful money of the United States or
otherwise as hereinafter provided. If payment is by check and the check is not a
check issued by a regulated banking or financial institution the shares to be so
issued shall not be considered issued until such check has cleared.
This Warrant may be exercised in whole or in part at any time or from time
to time from and after the one hundred eighty first (181st) day following the
issuance date of this Warrant up to and including the earliest to occur of (i)
5:00 p.m. (Pacific Time) on the tenth (10th) anniversary of the issuance date of
this Warrant; or (ii) a Liquidity Event, as defined herein, (the "Expiration
Date"), upon surrender to the Company at its principal office (or at such other
location as the Company may advise the Holder in writing) of this Warrant
properly endorsed with the Subscription Form attached hereto as Exhibit A duly
filled in and signed and, if applicable, upon payment in cash or by check of the
aggregate Stock Purchase Price for the number of shares for which this Warrant
is being exercised determined in accordance with the provisions hereof. The
Stock Purchase Price and the number of shares purchasable hereunder are subject
to adjustment as provided in Section 3 of this Warrant.
1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
1.1 GENERAL. This Warrant is exercisable at the option of the Holder of
record hereof, at any time or from time to time, up to the Expiration Date for
all or any part of
the shares of Common Stock (but not for a fraction of a share) which may be
purchased hereunder.
1.2 ISSUANCE OF CERTIFICATES. The Company agrees that the shares of Common
Stock purchased under this Warrant shall be and are deemed to be issued to the
Holder, as directed by Holder from time to time, as the record owner of such
shares as of the close of business on the date on which the Holder surrenders
this Warrant, properly endorsed, and the completed, executed Subscription Form
(a copy of which is attached hereto as Exhibit A), at the offices of the
Company, upon payment made for such shares as set forth in this Warrant.
Certificates for the shares of Common Stock so purchased, together with any
other securities or property to which the Holder hereof is entitled upon such
exercise, shall be delivered to the Holder hereof by the Company at the
Company's expense within a reasonable time (not to exceed ten (10) business
days) after the rights represented by this Warrant have been so exercised. Each
stock certificate so delivered shall be in such denominations of Common Stock as
may be requested by the Holder hereof and shall be registered in the name of
such Holder or, subject to the provisions of Section 7, such Holder's designee.
In case of a purchase of less than all the shares which may be purchased under
this Warrant, the Company shall cancel this Warrant and execute and deliver a
new Warrant or Warrants of like tenor for the balance of the shares purchasable
under the Warrant surrendered upon such purchase to the Holder hereof within a
reasonable time (not to exceed ten (10) business days).
2. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company covenants and
agrees that all shares of Common Stock that may be issued upon the exercise of
the rights represented by this Warrant will, upon issuance, be duly authorized,
validly issued, fully paid and nonassessable and free from all preemptive rights
of any stockholder and free of all taxes, liens and charges with respect to the
issue thereof. The Company further covenants and agrees that, during the period
within which the rights represented by this Warrant may be exercised, the
Company will at all times have authorized and reserved or, shall upon request of
the Holder authorize and reserve, for the purpose of issue or transfer upon
exercise of the subscription rights evidenced by this Warrant, a sufficient
number of shares of authorized but unissued Common Stock, or other securities
and property, when and as required to provide for the exercise of the rights
represented by this Warrant. The Company will take all such action as may be
necessary to assure that such shares of Common Stock may be issued as provided
herein without violation of any applicable law or regulation, or of any
requirements of any domestic securities exchange upon which the Common Stock may
be listed, including, but not limited to, amending its Certificate of
Incorporation to provide sufficient reserves of shares of Common Stock;
provided, however, that the Company shall not be required to effect a
registration under Federal or State securities laws with respect to such
exercise. The Company will not take any action that would result in any
adjustment of the Stock Purchase Price (as set forth in Section 3 hereof) if the
total number of shares of Common Stock issuable after such action upon exercise
of all outstanding warrants and options, together with all shares of Common
Stock then outstanding, would exceed the total number of shares of Common Stock
then authorized by the Company's Certificate of Incorporation.
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3. ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES. The Stock Purchase
Price and the number of shares purchasable upon the exercise of this Warrant
shall be subject to adjustment from time to time upon the occurrence of certain
events described in this Section 3. Upon each adjustment of the Stock Purchase
Price, the Holder of this Warrant shall thereafter be entitled to purchase, at
the Stock Purchase Price resulting from such adjustment, the number of shares
obtained by multiplying the Stock Purchase Price in effect immediately prior to
such adjustment by the number of shares purchasable pursuant hereto immediately
prior to such adjustment, and dividing the product thereof by the Stock Purchase
Price resulting from such adjustment.
3.1 SUBDIVISION OR COMBINATION OF STOCK. In case the Company shall at any
time split or subdivide its outstanding shares of Common Stock into a greater
number of shares, the Stock Purchase Price in effect immediately prior to such
split or subdivision shall be proportionately reduced, and conversely, in case
the outstanding shares of Common Stock of the Company shall be combined into a
smaller number of shares, the Stock Purchase Price in effect immediately prior
to such combination shall be proportionately increased.
3.2 DIVIDENDS IN COMMON STOCK, OTHER STOCK, PROPERTY, RECLASSIFICATION. If
at any time or from time to time the Holders of Common Stock (or any shares of
stock or other securities at the time receivable upon the exercise of this
Warrant) shall have received or become entitled to receive, without payment
therefor:
3.2.1 Common Stock or any shares of stock or other securities that are
at any time directly or indirectly convertible into or exchangeable for Common
Stock, or any rights or options to subscribe for, purchase or otherwise acquire
any of the foregoing by way of dividend or other distribution;
3.2.2 Any cash paid or payable otherwise than as a cash dividend out
of current earnings; or
3.2.3 Common Stock or additional stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification, combination of
shares or similar corporate rearrangement (other than (i) shares of Common Stock
issued as a stock split, adjustments in respect of which shall be covered by the
terms of Section 3.1 above or (ii) an event for which adjustment is otherwise
made pursuant to Section 3.3 below);
then in each such case, the Holder hereof shall, upon the exercise of this
Warrant, be entitled to receive, in addition to the number of shares of Common
Stock receivable thereupon, and without payment of any additional consideration
therefor, the amount of stock and other securities and property (including cash
in the cases referred to in clauses 3.2.2 and 3.2.3 above) which such Holder
would hold on the date of such exercise had he or it been the holder of record
of such Common Stock as of the date on which holders of Common Stock received or
became entitled to receive such shares or all other additional stock and other
securities and property.
3
3.3 REORGANIZATION, RECLASSIFICATION OR RECAPITALIZATION. If any
recapitalization, reclassification or capital reorganization of the capital
stock of the Company shall be effected in such a way that holders of Common
Stock shall be entitled to receive stock, securities, or other assets or
property (a "Restructuring"), then, as a condition of such Restructuring, lawful
and adequate provisions shall be made whereby the Holder hereof shall thereafter
have the right to purchase and receive (in lieu of or in addition to the shares
of the Common Stock of the Company immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby) such shares of
stock, securities or other assets or property as may be issued or payable with
respect to or in exchange for a number of outstanding shares of such Common
Stock equal to the number of shares of such stock immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby
and appropriate provision shall be made with respect to the rights and interests
of the Holder of this Warrant to the end that the provisions hereof (including,
without limitation, provisions for adjustments of the Stock Purchase Price and
of the number of shares purchasable and receivable upon the exercise of this
Warrant) shall thereafter be applicable, as nearly as may be, in relation to any
shares of stock, securities or assets thereafter deliverable upon the exercise
hereof.
3.4 NOTICE OF ADJUSTMENT. Upon any adjustment of the Stock Purchase Price,
any increase or decrease in the number of shares purchasable upon the exercise
of this Warrant or any change in the securities or other property deliverable
upon exercise of this Warrant, the Company shall give written notice thereof, by
first class mail, postage prepaid, addressed to the registered Holder of this
Warrant at the address of such Holder as shown on the books of the Company. The
notice shall be signed by the Company's President and shall state the Stock
Purchase Price resulting from such adjustment, the increase or decrease, if any,
in the number of shares purchasable at such price upon the exercise of this
Warrant or the amount of securities or other property deliverable upon such
exercise, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based.
3.5 OTHER NOTICES. If at any time:
3.5.1 the Company shall declare any cash dividend upon its Common
Stock;
3.5.2 the Company shall declare any dividend upon its Common Stock
payable in stock or make any special dividend or other distribution to the
holders of its Common Stock;
3.5.3 there shall be any Restructuring;
3.5.4 there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company; or
4
3.5.5 there shall be an initial public offering of Company securities;
then, in any one or more of said cases, the Company shall give, by first class
mail, postage prepaid, overnight courier or facsimile, addressed to the Holder
of this Warrant at the address of such Holder as shown on the books of the
Company, (a) at least fifteen (15) days prior written notice of the date on
which the books of the Company shall close or a record shall be taken for such
dividend, distribution or subscription rights or for determining rights to vote
in respect of any such Restructuring, dissolution, liquidation or winding-up,
and (b) in the case of any such Restructuring, dissolution, liquidation,
winding-up or public offering, at least fifteen (15) days prior written notice
of the date when the same shall take place; provided, however, that if any
response on the part of the Holder is otherwise required, the Holder shall make
its best efforts to respond to such notice as early as possible after the
receipt thereof. Any notice given in accordance with the foregoing clause (a)
shall also specify, in the case of any such dividend, distribution or
subscription rights, the date on which the holders of Common Stock shall be
entitled thereto. Any notice given in accordance with the foregoing clause (b)
shall also specify the date on which the holders of Common Stock shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such Restructuring, dissolution, liquidation, winding-up or
public offering, as the case may be.
3.6 CERTAIN EVENTS. If any change in the outstanding Common Stock of the
Company or any other event occurs as to which the other provisions of this
Section 3 are not strictly applicable or if strictly applicable would not fairly
protect the purchase rights of the Holder of the Warrant in accordance with such
provisions, the Board of Directors of the Company shall make an adjustment in
the number and class of shares available under the Warrant, the Stock Purchase
Price or the application of such provisions, so as to protect such purchase
rights as aforesaid. The adjustment shall be such as will give the Holder of the
Warrant upon exercise for the same aggregate Stock Purchase Price the total
number, class and kind of shares as it would have owned had the Warrant been
exercised prior to the event and had it continued to hold such shares until
after the event requiring adjustment.
4. ISSUE TAX. The issuance of certificates for shares of Common Stock upon the
exercise of the Warrant shall be made without charge to the Holder of the
Warrant for any issue tax (other than any applicable income taxes) in respect
thereof; provided, however, that the Company shall not be required to pay any
tax that may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the then Holder of the
Warrant being exercised.
5. CLOSING OF BOOKS. The Company will at no time close its transfer books
against the transfer of any warrant or of any shares of Common Stock issued or
issuable upon the exercise of any warrant in any manner that interferes with the
timely exercise of this Warrant.
6. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Nothing contained in
this Warrant shall be construed as conferring upon the Holder hereof the right
to vote or
5
to consent or to receive notice as a stockholder of the Company or any other
matters or any rights whatsoever as a stockholder of the Company. No dividends
or interest shall be payable or accrued in respect of this Warrant or the
interest represented hereby or the shares purchasable hereunder until, and only
to the extent that, this Warrant shall have been exercised. No provision hereof
in the absence of affirmative action by the Holder to purchase shares of Common
Stock, and no mere enumeration herein of the rights or privileges of the Holder
hereof, shall give rise to any liability of such Holder for the Stock Purchase
Price or as a stockholder of the Company, whether such liability is asserted by
the Company or by its creditors.
7. TRANSFER RESTRICTIONS. Subject to (i) restrictions on who may be a Permitted
Transferee pursuant to the Amended and Restated Stockholders Agreement of
Clearwire Corporation dated March 16, 2004 (the "Stockholders Agreement"), and
(ii) compliance with applicable federal and state securities laws, this Warrant
and all rights hereunder are transferable, in whole or in part, without charge
to the Holder hereof (except for transfer taxes), upon surrender of this Warrant
properly endorsed and in compliance with such provisions. The Company will
maintain a register (the "Warrant Register") containing the names and addresses
of the Holder or Holders. Any Holder of this Warrant or any portion thereof may
change its address as shown on the Warrant Register by written notice to the
Company requesting such change. Any notice or written communication required or
permitted to be given to the Holder may be delivered or given by mail to such
Holder as shown on the Warrant Register and at the address shown on the Warrant
Register. Until this Warrant is transferred on the Warrant Register of the
Company, the Company may treat the Holder as shown on the Warrant Register as
the absolute owner of this Warrant for all purposes, notwithstanding any notice
to the contrary. This Warrant may not be transferred or assigned without
compliance with all applicable federal and state securities laws by the
transferor and the transferee. The Holder further agrees not to make any
disposition of all or any portion of this Warrant or any shares of Common Stock
or any security into or for which such Common Stock is exchanged unless and
until the transferee has agreed in writing for the benefit of the Company to be
bound by the Stockholders Agreement and this Section 7 to the extent such
section is then applicable, and:
(A) There is then in effect a registration statement under the 1933
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(B) (i) the Holder shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition and (ii) if reasonably
requested by the Company, the Holder shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such securities under the 1933 Act.
8. LIQUIDITY EVENT: A Liquidity Event, for purposes of this Agreement, shall be
defined as any one or more of the following: (a) the closing of an IPO that
yields net
6
proceeds to the Company of not less than Thirty-Five Million Dollars
($35,000,000); or (b) a transaction in which all of the shares of the Company's
Class A Common Stock is exchanged for unrestricted securities that are listed on
a recognized securities exchange or NASDAQ National Market; or (c) a Change of
Control of the Company not otherwise included in (a) or (b). The Company shall,
if practicable, give the Holder at least fifteen (15) days prior written notice
of a Liquidity Event in accordance with the provisions of Section 3.5. Terms not
otherwise defined in this Agreement, for purposes of this section shall be as
defined in the Stockholders Agreement.
9. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights and
obligations of the Company, of the holder of this Warrant and of the holder of
shares of Common Stock issued upon exercise of this Warrant, referred to in
Section 7, shall survive the exercise of this Warrant.
10. MODIFICATION AND WAIVER. The terms of this Warrant may be amended, or the
observance of any term of this Warrant may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holder of this Warrant.
11. NOTICES. Any notice, request or other document required or permitted to be
given or delivered to the Holder hereof or the Company shall be delivered or
shall be sent by first-class mail, postage prepaid, to the Holder at its address
as shown on the Warrant Register or to the Company at the address indicated
therefor in the first paragraph of this Warrant, or such other address as either
may from time to time provide to the other.
12. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings of the
several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of Delaware.
13. LOST WARRANTS. The Company represents and warrants to the Holder hereof that
upon receipt of evidence reasonably satisfactory to the Company of the loss,
theft, destruction, or mutilation of this Warrant and, in the case of any such
loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory
to the Company, or in the case of any such mutilation upon surrender and
cancellation of such Warrant, the Company, at its expense, will make and deliver
a new Warrant, of like tenor, in lieu of the lost, stolen, destroyed or
mutilated Warrant.
14. FRACTIONAL SHARES. No fractional shares shall be issued upon exercise of
this Warrant. The Company shall, in lieu of issuing any fractional share, pay
the Holder entitled to such fraction a sum in cash equal to such fraction
multiplied by the then effective Fair Market Value of the Common Stock.
7
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
by its President, thereunto duly authorized as of the date first written above.
CLEARWIRE CORPORATION
a Delaware corporation
By:
------------------------------------
Title:
---------------------------------
8
EXHIBIT A
SUBSCRIPTION FORM
Date: _____________, 20___
Clearwire Corporation
_________________________
_________________________
Ladies and Gentlemen:
The undersigned hereby elects to exercise the warrant issued to it by
Clearwire. Corporation (the "Company") and dated ______________, 200_,
Warrant No. ___ (the "Warrant") and to purchase thereunder __________
shares of the Class A Common Stock of the Company (the "Shares") at a
purchase price of $0.001 per Share, or an aggregate purchase price of
_______________________ ($__________) (the "Purchase Price").
Pursuant to the terms of the Warrant the undersigned has delivered the
Purchase Price herewith in full in cash or by certified check or wire
transfer. The undersigned also makes the representations set forth on the
attached Exhibit B of the Warrant.
Very truly yours,
----------------------------------------
By:
------------------------------------
Title:
---------------------------------
1
EXHIBIT B
INVESTMENT REPRESENTATIONS
THIS AGREEMENT MUST BE COMPLETED, SIGNED AND RETURNED TO CLEARWIRE CORPORATION
ALONG WITH THE SUBSCRIPTION FORM BEFORE THE COMMON STOCK ISSUABLE UPON EXERCISE
OF THE WARRANT DATED __________________, 200__, WILL BE ISSUED.
____________________
Clearwire Corporation
_________________________
_________________________
Ladies and Gentlemen:
The undersigned, _________________________ ("Purchaser"), intends to
acquire up to ______________ shares of the Class A Common Stock (the "Common
Stock") of Clearwire Corporation (the "Company") from the Company pursuant to
the exercise or conversion of certain Warrants to purchase Common Stock held by
Purchaser. The Common Stock will be issued to Purchaser in a transaction not
involving a public offering and pursuant to an exemption from registration under
the Securities Act of 1933, as amended (the "1933 Act") and applicable state
securities laws. Purchaser has been advised that the Common Stock has not been
registered under the 1933 Act or state securities laws on the ground that this
transaction is exempt from registration, and that reliance by the Company on
such exemptions is predicated in part on Purchaser's representations set forth
in this letter. Accordingly, Purchaser represents, warrants and agrees as
follows:
1. Purchaser is acquiring the Common Stock for its own account and
beneficial interest to hold for investment and not for sale or with a view to
distribution of the Common Stock or any part thereof. Purchaser has no present
intention of selling (in connection with a distribution or otherwise), granting
any participation in, or otherwise distributing the same, and does not presently
have reason to anticipate a change in such intention.
2. Purchaser acknowledges that it has received all the information it has
requested from the Company and considers necessary or appropriate for deciding
whether to acquire the Common Stock. Purchaser represents that it has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the offering of the Common Stock and to obtain any
additional information necessary to verify the accuracy of the information given
the Purchaser. Purchaser further represents that it has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risk of this investment.
3. Purchaser is an "accredited investor" as such term is defined in Rule
501 under the 1933 Act.
1
4. Purchaser acknowledges that investment in the Common Stock involves a
high degree of risk, and represents that it is able, without materially
impairing its financial condition, to hold the Common Stock for an indefinite
period of time and to suffer a complete loss of its investment.
5. Purchaser has been informed that under the 1933 Act, the Common Stock
must be held indefinitely unless it is subsequently registered under the 1933
Act or unless an exemption from such registration (such as Rule 144) is
available with respect to any proposed transfer or disposition by Purchaser of
the Common Stock. Purchaser further agrees that the Company may refuse to permit
Purchaser to sell, transfer or dispose of the Common Stock (except as permitted
under Rule 144) unless there is in effect a registration statement under the
1933 Act and any applicable state securities laws covering such transfer, or
unless Purchaser furnishes an opinion of counsel reasonably satisfactory to
counsel for the Company, to the effect that such registration is not required.
Purchaser shall not make any sale, transfer or other disposition of the Common
Stock in violation of the 1933 Act or the General Rules and Regulations
promulgated thereunder by the Securities and Exchange Commission or in violation
of any applicable state securities law.
6. Purchaser also understands and agrees that there will be placed on the
certificate(s) for the Common Stock, or any substitutions therefor, a legend
stating in substance:
"The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended (the "1933 Act"), or any state
securities laws. These shares have been acquired for investment and may not
be sold or otherwise transferred in the absence of an effective
registration statement for these shares under the 1933 Act and applicable
state securities laws, or, if requested by the Company, an opinion of
counsel satisfactory to the Company that registration is not required and
that an applicable exemption is available."
Purchaser has carefully read this letter and has discussed its requirements
and other applicable limitations upon Purchaser's resale of the Common Stock
with Purchaser's counsel.
Very truly yours,
----------------------------------------
By:
------------------------------------
Title:
---------------------------------
2
