EXHIBIT 10.1
COMMON STOCK PURCHASE AGREEMENT
Dated as of December 20, 2000
by and between
LEAP WIRELESS INTERNATIONAL, INC.
and
ACQUA WELLINGTON
NORTH AMERICAN EQUITIES FUND, LTD.
TABLE OF CONTENTS
Page
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ARTICLE I Definitions......................................................................................... 1
Section 1.1 Definitions................................................................... 1
ARTICLE II Purchase and Sale of Common Stock.................................................................. 4
Section 2.1 Purchase and Sale of Stock.................................................... 3
Section 2.2 The Shares.................................................................... 4
Section 2.3 Purchase and Closing.......................................................... 4
ARTICLE III Representations and Warranties.................................................................... 4
Section 3.1 Representations and Warranties of the Company................................. 4
Section 3.2 Representations, Warranties and Covenants of the Purchaser.................... 11
ARTICLE IV Covenants.......................................................................................... 13
Section 4.1 Securities Compliance......................................................... 13
Section 4.2 Registration and Listing...................................................... 13
Section 4.3 Registration Statement........................................................ 14
Section 4.4 Compliance with Laws.......................................................... 14
Section 4.5 Keeping of Records and Books of Account....................................... 14
Section 4.6 Limitations on Holdings and Issuances......................................... 14
Section 4.7 Non-public Information........................................................ 14
Section 4.8 Effective Registration Statement.............................................. 14
Section 4.9 No Stop Orders................................................................ 15
Section 4.10 Amendments to the Registration Statement...................................... 15
Section 4.11 Prospectus Delivery........................................................... 15
Section 4.12 Other Financing............................................................... 16
Section 4.13 Notices....................................................................... 16
ARTICLE V Conditions to Closing, Draw Downs and Call Options.................................................. 16
Section 5.1 Conditions Precedent to the Obligation of the Company to Issue a Draw Down
Notice or Grant a Call Option and Sell the Shares ......................... 16
Section 5.2 Conditions Precedent to the Obligation of the Purchaser to Close.............. 18
Section 5.3 Conditions Precedent to the Obligation of the Purchaser to Accept a Draw
Down or Call Option Grant and Purchase the Shares.......................... 18
ARTICLE VI Draw Down Terms; Call Option....................................................................... 20
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Section 6.1 Draw Down Terms................................................................ 20
Section 6.2 Purchaser's Call Option........................................................ 23
ARTICLE VII Termination........................................................................................ 24
Section 7.1 Termination by Mutual Consent.................................................. 24
Section 7.2 Company Termination............................................................ 24
Section 7.3 Other Termination.............................................................. 24
Section 7.4 Effect of Termination.......................................................... 24
ARTICLE VIII Indemnification................................................................................... 25
Section 8.1 General Indemnity.............................................................. 25
Section 8.2 Indemnification Procedures..................................................... 26
ARTICLE IX Miscellaneous....................................................................................... 27
Section 9.1 Fees and Expenses.............................................................. 27
Section 9.2 Specific Enforcement, Consent to Jurisdiction.................................. 27
Section 9.3 Entire Agreement; Amendment.................................................... 28
Section 9.4 Notices........................................................................ 28
Section 9.5 Waivers........................................................................ 29
Section 9.6 Headings....................................................................... 29
Section 9.7 Successors and Assigns......................................................... 29
Section 9.8 Governing Law.................................................................. 30
Section 9.9 Survival....................................................................... 30
Section 9.10 Counterparts................................................................... 30
Section 9.11 Publicity...................................................................... 30
Section 9.12 Severability................................................................... 30
Section 9.13 Further Assurances............................................................. 30
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COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of
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December 20, 2000 by and between Leap Wireless International, Inc., a Delaware
corporation (the "Company"), and Acqua Wellington North American Equities Fund,
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Ltd., a limited liability company organized under the laws of the Commonwealth
of The Bahamas (the "Purchaser").
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The parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.1 Definitions.
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(a) "Alternate Market" shall mean the Nasdaq Small Cap Market, the
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American Stock Exchange, the New York Stock Exchange or the OTC Bulletin Board,
whichever is at the time the principal trading exchange or market for the
Common Stock.
(b) "Call Option" shall have the meaning assigned to such term in Section
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6.2(a) hereof.
(c) "Call Option Amount" means the actual amount of proceeds received by
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the Company upon the exercise of a Call Option by the Purchaser.
(d) "Commission" shall mean the Securities and Exchange Commission.
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(e) "Commission Documents" shall mean all reports, schedules, forms,
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statements and other documents filed by the Company with the Commission pursuant
to the reporting requirements of the Exchange Act, including material filed
pursuant to Section 13(a) or 15(d) of the Exchange Act, which have been
previously filed by the Company and which shall be filed by the Company in the
future during the Investment Period, including, without limitation the Form 10-K
filed by the Company for the year ended August 31, 1999 (the "Form 10-K") and
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the Transition Report on Form 10-K filed by the Company for the period from
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September 1, 1999 to December 31, 1999 (the "Form 10-KT"), and shall include all
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information contained in such filings and all filings incorporated by reference
therein.
(f) "Commission Filings" means the Registration Statement on Form S-3 No. 333-
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45388, and all other filings made by the Company with the Commission prior
to or after the Effective Date pursuant to the Exchange Act.
(g) "Common Stock" shall have the meaning assigned to such term in Section 2.1
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hereof.
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(h) "Draw Down" means the exercise by the Company of its right to request
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the purchase of shares of Common Stock by the Purchaser.
(i) "Draw Down Amount" means the actual amount of a Draw Down up to
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$10,000,000 in any Draw Down Pricing Period or such other amount mutually
agreed upon by the Purchaser and the Company.
(j) "Draw Down Discount Percentage" means (i) 94.5% if the Market
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Capitalization is equal to or greater than $400,000,000 but less than
$500,000,000; (ii) 95% if the Market Capitalization is equal to or greater than
$500,000,000 but less than $750,000,000; (iii) 95.5% if the Market
Capitalization is equal to or greater than $750,000,000 but less than
$1,000,000,000; and (iv) 96% if the Market Capitalization is equal to or greater
than $1,000,000,000.
(k) "Draw Down Exercise Date" shall mean the date of issuance of a Draw
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Down Notice by the Company.
(l) "Draw Down Notice" shall have the meaning assigned to such term in
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Section 6.1(i) hereof.
(m) "Draw Down Pricing Period" shall mean a period of eighteen (18)
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consecutive Trading Days commencing on the first Trading Day designated as the
start date of such draw down pricing period in the Draw Down Notice, or such
other period mutually agreed upon by the Purchaser and the Company.
(n) "Effective Date" shall mean October 11, 2000, the date the
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Registration Statement of the Company covering the Shares being subscribed for
hereby was declared effective.
(o) "Investment Period" shall have the meaning assigned to such term in
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Section 7.1 hereof.
(p) "Market Capitalization" shall be equal to the product of (i) the
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closing bid price of the Common Stock and (ii) the number of outstanding shares
of Common Stock on such date, each as determined on the Draw Down Exercise Date
by Bloomberg Financial LP using the DES and HP Functions.
(q) "Material Adverse Effect" shall mean any effect on the business,
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operations or financial condition of the Company that is material and adverse to
the Company and its subsidiaries, taken as a whole and/or any condition,
circumstance, or situation that would prohibit or otherwise materially interfere
with the ability of the Company to enter into and perform any of its obligations
under this Agreement in any material respect.
(r) "Material Change in Ownership" shall mean that, as of any particular
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measurement date, the officers and significant owners of the Company shall
beneficially own in the aggregate less than 1% of the outstanding Common Stock
of the Company, except that for
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purposes of making any such calculation, Common Stock issued to the Purchaser
pursuant to this Agreement shall not be included in such calculation.
(s) "Prospectus" shall mean the prospectus in the form included in the
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Registration Statement, as supplemented by any Prospectus Supplement
(t) "Prospectus Supplement" shall mean any prospectus supplement to the
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Registration Statement filed with the Commission pursuant to Rule 424(b).
(u) "Registration Statement" shall mean the registration statement on
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Form S-3, Commission File Number 333-45388 under the Securities Act, filed with
the Commission for the registration of the Shares, as such Registration
Statement may be amended from time to time.
(v) "Section 6.1(m) Notice" shall have the meaning assigned to such term
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in Section 6.1(m) hereof.
(w) "Securities Act" shall mean the Securities Act of 1933, as amended,
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and the rules and regulations of the Commission promulgated thereunder.
(x) "Settlement Date" shall have the meaning assigned to such term in
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Section 6.1(d) hereof.
(y) "Shares" shall mean collectively the shares of Common Stock of the
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Company that may be purchased hereunder upon exercise of any Draw Down or Call
Option.
(z) "Threshold Price" is the lowest price at which the Company may set
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in the Draw Down Notice to sell Shares during a Draw Down Pricing Period (not
taking into account the Draw Down Discount Percentage during such Draw Down
Pricing Period).
(aa) "Trading Day" shall mean a day on which the Common Stock is traded
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on the Nasdaq National Market or an Alternate Market.
(bb) "Truncated Draw Down Allocation Amount" shall mean the portion of
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the Draw Down Amount Requested that is allocated to the purchase of Shares in
accordance with Section 6.1 hereof for each Trading Day in a reduced Draw Down
Pricing Period (as provided in Section 6.1(m) hereof).
(cc) "VWAP" shall mean the daily volume weighted average price (based on a
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Trading Day from 9:30 a.m. to 4:00 p.m., eastern time) of the Common Stock of
the Company on the NASDAQ National Market or an Alternate Market as reported by
Bloomberg Financial LP using the AQR function.
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ARTICLE II
Purchase and Sale of Common Stock
Section 2.1 Purchase and Sale of Stock. Subject to the terms and
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conditions of this Agreement, the Company shall issue and sell to the Purchaser
and the Purchaser shall purchase from the Company up to the greater of
$250,000,000 and the aggregate Draw Down Amounts and Call Option Amounts
permitted under this Agreement of the Common Stock, $.0001 par value per
share (the "Common Stock"), consisting of (i) an initial Draw Down, subject to
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Section 6.1 hereof, of up to $15,000,000 which may be requested at any time on
or after the Closing Date, and an initial Call Option, subject to Section 6.2
hereof, of up to $25,000,000, to be granted with the initial Draw Down, and (ii)
subsequent Draw Downs, subject to Section 6.1 hereof, of up to $10,000,000 in
any Draw Down Pricing Period and Call Options, subject to Section 6.2 hereof, of
up to the Draw Down Amount for the applicable Draw Down Pricing Period that the
Company may grant to the Purchaser in the Company's sole discretion.
Section 2.2 The Shares. The Company has or will have authorized and
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has or will have reserved and covenants to continue to reserve once reserved,
subject to Section 4.4(b) hereof, free of preemptive rights and other similar
contractual rights of stockholders, a sufficient number of its authorized but
unissued shares of its Common Stock to cover the Shares to be issued in
connection with all Draw Downs and Call Options, in any case prior to the
issuance to the Purchaser of such Shares under this Agreement.
Section 2.3 Purchase and Closing. The Company agrees to issue and
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sell to the Purchaser and, in consideration of and in express reliance upon the
representations, warranties, covenants, terms and conditions of this Agreement,
the Purchaser agrees to purchase that number of the Shares to be issued in
connection with each Draw Down and each Call Option exercised by the Purchaser.
The closing of the execution and delivery of this Agreement shall occur upon
delivery by facsimile of executed signature pages of this Agreement and all
other document, instruments and writings required to be delivered pursuant to
this Agreement to the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP, The Chrysler Building, ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ (the "Closing") at 10:00 a.m., eastern
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time, on (i) December 20, 2000, or (ii) such other time and place or on such
date as the Purchaser and the Company may agree upon (the "Closing Date"). Each
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party shall deliver all documents, instruments and writings required to be
delivered by such party pursuant to this Agreement at or prior to the Closing.
ARTICLE III
Representations and Warranties
Section 3.1 Representations and Warranties of the Company. The Company
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hereby makes the following representations and warranties to the Purchaser:
(a) Organization, Good Standing and Power. The Company is a
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corporation duly incorporated, validly existing and in good standing under the
laws of Delaware and has the requisite corporate power to own, lease and operate
its properties and assets and to conduct its
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business as it is now being conducted. As of the date hereof, the Company does
not have any subsidiaries (as defined in Section 3.1(g)) except as set forth in
the Commission Documents or the Commission Filings or on Schedule 3.1(g)
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attached hereto. The Company and each such subsidiary is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification necessary except for any jurisdiction in which the failure to be
so qualified will not have a Material Adverse Effect.
(b) Authorization; Enforcement. The Company has the requisite
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corporate power and authority to enter into and perform this Agreement and to
issue and sell the Shares in accordance with the terms hereof. The execution,
delivery and performance of this Agreement by the Company and the consummation
by it of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action, and, except as contemplated by
Sections 2.2 or 4.4(b), no further consent or authorization of the Company or
its Board of Directors or stockholders is required. This Agreement has been duly
executed and delivered by the Company. This Agreement constitutes, or shall
constitute when executed and delivered, a valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditor's
rights and remedies or by other equitable principles of general application.
(c) Capitalization. The authorized capital stock of the Company and
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the shares thereof issued and outstanding as of the date hereof are set forth
on Schedule 3.1(c) attached hereto. All of the outstanding shares of the Common
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have been duly and validly authorized, and are fully paid and non-assessable.
Except as set forth in this Agreement including Schedule 3.1(c) attached hereto
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or as set forth in the Commission Documents or the Commission Filings, as of the
date hereof no shares of Common Stock are entitled to preemptive rights or
registration rights and there are no outstanding options, warrants, scrip,
rights to subscribe to, call or commitments of any character whatsoever relating
to, or securities or rights convertible into, any shares of capital stock of the
Company. Furthermore, except as set forth in this Agreement including Schedule
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3.1(c) attached hereto or as set forth in the Commission Documents or the
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Commission Filings as of the date hereof there are no contracts, commitments,
understandings, or arrangements by which the Company is or may become bound to
issue additional shares of the capital stock of the Company or options,
securities or rights convertible into shares of capital stock of the Company.
Except for customary transfer restrictions contained in agreements entered into
by the Company in order to sell restricted securities or as set forth in
Schedule 3.1(c) attached hereto or as set forth in the Commission Documents or
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the Commission Filings as of the date hereof, the Company is not a party to any
agreement granting registration rights to any person with respect to any of its
equity or debt securities. Except as set forth in Schedule 3(c) attached hereto,
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the Company is not a party to, and it has no knowledge of, any agreement
restricting the voting or transfer of any shares of the capital stock of the
Company. Except as set forth in Schedule 3.1(c) attached hereto, the offer and
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sale of all capital stock, convertible securities, rights, warrants, or options
of the Company issued prior to the Closing complied with all applicable federal
and state securities laws, and no stockholder has a right of rescission or
damages with respect thereto which would have a Material Adverse Effect. The
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Company has furnished or made available to the Purchaser true and correct copies
of the Company's Certificate of Incorporation and in effect on the date hereof
(the "Charter"), and the Company's Bylaws as in effect on the date hereof (the
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"Bylaws").
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(d) Issuance of Shares. The Shares to be issued under this Agreement
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have been or, prior to the issuance to Purchaser hereunder, will be duly
authorized by all necessary corporate action and, when paid for and issued in
accordance with the terms hereof, the Shares shall be validly issued and
outstanding, fully paid and non-assessable, and the Purchaser shall be entitled
to all rights accorded to a holder of Common Stock.
(e) No Conflicts. The execution, delivery and performance of this
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Agreement by the Company and the consummation by the Company of the transactions
contemplated herein do not (i) violate any provision of the Company's Charter or
Bylaws, (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
material agreement, mortgage, deed of trust, indenture, note, bond, license,
lease agreement, instrument or obligation to which the Company is a party, (iii)
create or impose a lien, charge or encumbrance on any property of the Company
under any agreement or any commitment to which the Company is a party or by
which the Company is bound or by which any of its respective properties or
assets are bound, or (iv) result in a violation of any federal, state, local or
foreign statute, rule, regulation, order, judgment or decree (including federal
and state securities laws and regulations) applicable to the Company or any of
its subsidiaries or by which any property or asset of the Company or any of its
subsidiaries are bound or affected, except, in all cases (other than violations
pursuant to clauses (i) and (iv) (to the extent of federal securities law)), for
such conflicts, defaults, terminations, amendments, accelerations, cancellations
and violations as would not, individually or in the aggregate, have a Material
Adverse Effect. The Company is not required under federal, state or local law,
rule or regulation to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this Agreement, or
issue and sell the Shares in accordance with the terms hereof (other than any
filings which may be required to be made by the Company with the Commission, or
the Nasdaq National Market subsequent to the Closing, and, any registration
statement which may be filed pursuant hereto); provided that, for purpose
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of the representation made in this sentence, the Company is assuming and relying
upon the accuracy of the relevant representations and agreements of the
Purchaser herein.
(f) Commission Documents, Financial Statements. The Common Stock of
------------------------------------------
the Company is registered pursuant to Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the Company has
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timely filed all Commission Documents. The Company has delivered or made
available to the Purchaser true and complete copies of the Commission Documents
filed with the Commission since December 31, 1999 and prior to the Closing Date.
The Company has not provided to the Purchaser any information which, according
to applicable law, rule or regulation, should have been disclosed publicly by
the Company but which has not been so disclosed, other than with respect to the
transactions contemplated by this Agreement. As of its date, each of the
Form 10-K and the Form 10-KT complied in all material respects with the
requirements of the Exchange Act and the rules and
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regulations of the Commission promulgated thereunder and other federal, state
and local laws, rules and regulations applicable to such documents, and each of
the Form 10-K and the Form 10-KT, as of its date, did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of the Company included in the Commission Documents comply as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the Commission or other applicable rules and
regulations with respect thereto. Such financial statements have been prepared
in accordance with generally accepted accounting principles ("GAAP") applied
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on a consistent basis during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto or (ii) in
the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements), and fairly present in all
material respects the financial position of the Company and its subsidiaries as
of the dates thereof and the results of operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments).
(g) Subsidiaries. The Commission Documents, the Commission Filings
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or Schedule 3.1(g) attached hereto set forth each subsidiary of the Company as
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of the date hereof, showing the jurisdiction of its incorporation or
organization and showing the percentage of the Company's direct or indirect
ownership of the outstanding stock or other interests of such subsidiary. For
the purposes of this Agreement, "subsidiary" shall mean any corporation or other
entity of which at least a majority of the securities or other ownership
interest having ordinary voting power (absolutely or contingently) for the
election of directors or other persons performing similar functions are at the
time owned directly or indirectly by the Company and/or any of its other
subsidiaries. Except as set forth in the Commission Documents or the Commission
Filings, none of such subsidiaries is a "significant subsidiary" as defined in
Regulation S-X.
(h) No Material Adverse Effect. Since September 30, 2000, the Company
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has not experienced or suffered any Material Adverse Effect except continued
losses from operations.
(i) No Undisclosed Liabilities. Except as set forth on Schedule 3.1(i)
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attached hereto, the Company has no liabilities, obligations, claims or losses
(whether liquidated or unliquidated, secured or unsecured, absolute, accrued,
contingent or otherwise) that would be required to be disclosed on a balance
sheet of the Company or any subsidiary (including the notes thereto) in
conformity with GAAP not disclosed in the Commission Documents, the Commission
Filings or on Schedule 3.1(i) attached hereto, other than those incurred in the
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ordinary course of the Company's or its subsidiaries respective businesses since
September 30, 2000 and which, individually or in the aggregate, do not or would
not have a Material Adverse Effect.
(j) No Undisclosed Events or Circumstances. No event or circumstance
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has occurred or exists with respect to the Company or its subsidiaries or their
respective businesses, properties, prospects, operations or financial condition,
which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been
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so publicly announced or disclosed and which, individually or in the aggregate,
do not or would not have a Material Adverse Effect.
(k) Indebtedness. The Commission Documents, the Commission Filings
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or Schedule 3.1(k) attached hereto sets forth as of September 30, 2000 all
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outstanding secured and unsecured Indebtedness of the Company, or for which the
Company or any subsidiary has commitments. For the purposes of this Agreement,
"Indebtedness" shall mean (a) any liabilities for borrowed money or amounts owed
in excess of $1,000,000 (other than trade accounts payable incurred in the
ordinary course of business), (b) all guaranties, endorsements and other
contingent obligations in respect of Indebtedness of others, whether or not the
same are or should be reflected in the Company's balance sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business; and
(c) the present value of any lease payments in excess of $1,000,000 due under
leases required to be capitalized in accordance with GAAP. Neither the Company
or any subsidiary is in default with respect to any Indebtedness.
(l) Title to Assets. Each of the Company and its subsidiaries has
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good and marketable title to all of their real and personal property reflected
in the Commission Documents, free of any mortgages, pledges, charges, liens,
security interests or other encumbrances, except for those indicated in the
Commission Documents or the Commission Filings or on Schedule 3.1(l) attached
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hereto or those that would not cause a Material Adverse Effect. All said leases
of the Company and each of its subsidiaries are valid and subsisting and in full
force and effect in all material respects.
(m) Actions Pending. There is no action, suit, claim, investigation or
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proceeding pending or, to the knowledge of the Company, threatened against the
Company which questions the validity of this Agreement or the transactions
contemplated hereby or any action taken or to be taken pursuant hereto. Except
as set forth in the Commission Documents, the Commission Filings or on
Schedule 3.1(m) attached hereto, there is no action, suit, claim, investigation
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or proceeding pending or, to the knowledge of the Company, threatened against or
involving the Company or any subsidiary, or any of their respective properties
or assets which, if adversely determined, would result in a Material Adverse
Effect.
(n) Compliance with Law. The business of the Company has been and is
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presently being conducted in accordance with all applicable federal, state and
local governmental laws, rules, regulations and ordinances, except as such that
do not cause a Material Adverse Effect. Each of the Company and its subsidiaries
has all franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals necessary for the conduct of its
business as now being conducted unless the failure to possess such franchises,
permits, licenses, consents and other governmental or regulatory authorizations
and approvals, individually or in the aggregate, would not have a Material
Adverse Effect.
(o) Certain Fees. Except as set forth on Schedule 3.1(o) attached
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hereto, no brokers, finders or financial advisory fees or commissions will be
payable by the Company with respect to the transactions contemplated by this
Agreement.
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(p) Disclosure. To the Company's knowledge, neither this Agreement or
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the Schedules hereto nor any other documents, certificates or instruments
furnished to the Purchaser by or on behalf of the Company in connection with the
transactions contemplated by this Agreement contain any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements made herein or therein, in the light of the circumstances under which
they were made herein or therein, not misleading.
(q) Operation of Business. The Company or one or more of its
---------------------
subsidiaries owns or has a valid right to use all patents, trademarks, service
marks, trade names, copyrights, licenses and authorizations as set forth in the
Commission Documents or the Commission Filings and all rights with respect to
the foregoing, which are necessary for the conduct of its business as now
conducted without, to the Company's knowledge, any conflict with the rights of
others, except to the extent set forth in the Commission Documents or the
Commission Filings and except to the extent that a Material Adverse Effect would
not result from such conflict.
(r) Environmental Compliance. Except as disclosed in the Commission
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Filings, the Company has obtained all approvals, authorization, certificates,
consents, licenses, orders and permits or other similar authorizations of all
governmental authorities, or from any other person, that are required under any
Environmental Laws. "Environmental Laws" shall mean all applicable laws relating
to the protection of the environment including, without limitation, all
requirements pertaining to reporting, licensing, permitting, controlling,
investigating or remediating emissions, discharges, releases or threatened
releases of hazardous substances, chemical substances, pollutants, contaminants
or toxic substances, materials or wastes, whether solid, liquid or gaseous in
nature, into the air, surface water, groundwater or land, or relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of hazardous substances, chemical substances, pollutants,
contaminants or toxic substances, material or wastes, whether solid, liquid or
gaseous in nature. Except for such instances as would not individually or in the
aggregate have a Material Adverse Effect, to the best of the Company's
knowledge, there are no past or present events, conditions, circumstances,
incidents, actions or omissions relating to or in any way affecting the Company
that violate or would to violate any Environmental Law after the Closing or that
would give rise to any environmental liability, or otherwise form the basis of
any claim, action, demand, suit, proceeding, hearing, study or investigation (i)
under any Environmental Law, or (ii) based on or related to the manufacture,
processing, distribution, use, treatment, storage (including without limitation
underground storage tanks), disposal, transport or handling, or the emission,
discharge, release or threatened release of any hazardous substance.
(s) Material Agreements. Except as set forth in the Commission
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Documents, the Commission Filings or on Schedule 3.1(s) attached hereto, the
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Company is not a party to any written or oral contract, instrument, agreement,
commitment, obligation, plan or arrangement, a copy of which would be required
to be filed with the Commission as an exhibit to a registration statement on
Form S-3 or applicable form (collectively, "Material Agreements")
-------------------
if the Company was registering securities under the Securities Act. The Company
has in all material respects performed all the obligations required to be
performed by it to date under the foregoing Material Agreements, has received no
notice of default and, to the best of the Company's knowledge is
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not in default under any Material Agreement now in effect, the result of which
could reasonably be expected to cause a Material Adverse Effect.
(t) Transactions with Affiliates. Except as set forth in the
----------------------------
Commission Documents, the Commission Filings or on Schedule 3.1(t) attached
---------------
hereto, there are no loans, leases, agreements, contracts, royalty agreements,
management contracts or arrangements or other continuing transactions exceeding
$1,000,000 between (a) the Company or any subsidiary on the one hand, and (b) on
the other hand, any officer, employee, consultant or director of the Company, or
any person who would be covered by Item 404(a) of Regulation S-K or any
corporation or other entity controlled by such officer, employee, director or
person.
(u) Securities Act of 1933. The Company has complied in all material
----------------------
respects with all applicable federal and state securities laws in connection
with the offer, issuance and sale of the Shares hereunder.
(i) Each Prospectus included as part of the Registration
Statement as originally filed or as part of any amendment or supplement thereto,
or filed pursuant to Rule 424 under the Securities Act, complied when so filed
in all material respects with the provisions of the Securities Act. The
Commission has not issued any order preventing or suspending the use of any
Prospectus.
(ii) The Company meets the requirements for the use of Form S-3
under the Securities Act. The Registration Statement in the form in which it
became effective and also in such form as it may be when any post-effective
amendment thereto became effective and the Prospectus and any supplement or
amendment thereto when filed with the Commission under Rule 424(b) under the
Securities Act, complied in all material respects with the provisions of the
Securities Act and did not at any such times contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein (in the case of the Prospectus, in the
light of the circumstances under which they made) not misleading, except that
this representation and warranty does not apply to statements in or omissions
from the Registration Statement or the Prospectus made in reliance upon and in
conformity with information relating to the Purchaser furnished to the Company
in writing by or on behalf of the Purchaser expressly for use therein.
(iii) The Company has not distributed and, prior to the
completion of the sale of the Shares to the Purchaser, will not distribute any
offering material in connection with the offering and sale of the Shares other
than the Registration Statement, the Prospectus or other materials, if any,
permitted by the Securities Act.
(v) Employees. Except as set forth in the Commission Documents, the
---------
Commission Filings or on Schedule 3.1(v) attached hereto, as of the date hereof,
---------------
the Company has no collective bargaining arrangements or agreements covering any
of its employees. Except as set forth on Schedule 3.1(v) attached
---------------
hereto, as of the date hereof the Company has no employment contract or any
other similar contract or restrictive covenant, relating to the right of any
officer, key employee or consultant to be employed or engaged by the Company
whose termination individually or in the aggregate could reasonably be expected
to have a Material Adverse Effect. As of the date hereof, since September 30,
2000, no officer, consultant or key
-10-
employee of the Company whose termination, either individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect, has
terminated or, to the knowledge of the Company, has any present intention of
terminating his or her employment or engagement with the Company.
(w) Use of Proceeds. The proceeds from the sale of the Shares will
---------------
be used by the Company and its subsidiaries as set forth in the Registration
Statement.
(x) Public Utility Holding Company Act and Investment Company Act
-------------------------------------------------------------
Status. The Company is not a "holding company" or a "public utility company"
-------
as such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of and immediately upon Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
(y) ERISA. No liability to the Pension Benefit Guaranty Corporation
-----
has been incurred with respect to any Plan (as defined below) by the Company
which is or would have a Material Adverse Effect. The execution and delivery of
this Agreement and the issue and sale of the Shares will not involve any
transaction which is subject to the prohibitions of Section 406 of ERISA or in
connection with which a tax could be imposed pursuant to Section 4975 of the
Internal Revenue Code of 1986, as amended, provided that, if any of the
Purchaser, or any person or entity that owns a beneficial interest in any of the
Purchaser, is an "employee pension benefit plan" (within the meaning of Section
3(2) of ERISA) with respect to which the Company is a "party in interest"
(within the meaning of Section 3(14) of ERISA), the requirements of Sections
407(d)(5) and 408(e) of ERISA, if applicable, are met. As used in this Section
3.1(y), the term "Plan" shall mean an "employee pension benefit plan" (as
defined in Section 3 of ERISA) which is or has been established or maintained,
or to which contributions are or have been made, by the Company or by any trade
or business, whether or not incorporated, which, together with the Company, is
under common control, as described in Section 414(b) or (c) of the Code.
(z) Acknowledgment Regarding Purchaser's Purchase of Shares. The
-------------------------------------------------------
Company acknowledges and agrees that the Purchaser is acting solely in the
capacity of arm's length purchaser with respect to this Agreement and the
transactions contemplated hereunder. The Company further acknowledges that the
Purchaser is not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to this Agreement and the transactions
contemplated hereunder and any advice given by the Purchaser or any of its
representatives or agents in connection with this Agreement and the transactions
contemplated hereunder is merely incidental to the Purchaser's purchase of the
Shares.
Section 3.2 Representations, Warranties and Covenants of the Purchaser.
----------------------------------------------------------
The Purchaser hereby makes the following representations, warranties and
covenants to the Company:
(a) Organization and Standing of the Purchaser. The Purchaser is a
------------------------------------------
limited liability company duly organized, validly existing and in good standing
under the laws of the Commonwealth of the Bahamas.
-11-
(b) Authorization and Power. The Purchaser has the requisite
-----------------------
corporate power and authority to enter into and perform this Agreement and to
purchase the Shares in accordance with the terms hereof. The execution, delivery
and performance of this Agreement by Purchaser and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action, and no further consent or authorization of the Purchaser, its
Board of Directors or stockholders is required. This Agreement constitutes, or
shall constitute when executed and delivered, a valid and binding obligation of
the Purchaser enforceable against the Purchaser in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation, conservatorship,
receivership, or similar laws relating to, or affecting generally the
enforcement of, creditor's rights and remedies or by other equitable principles
of general application.
(c) No Conflicts. The execution, delivery and performance of this
------------
Agreement and the consummation by the Purchaser of the transactions contemplated
hereby and thereby or relating hereto do not and will not (i) result in a
violation of such Purchaser's charter documents or bylaws or (ii) conflict with,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of any material agreement, mortgage,
deed of trust, indenture, note, bond, license, lease agreement, instrument or
obligation to which the Purchaser is a party, (iii) create or impose a lien,
charge or encumbrance on any property of the Purchaser under any agreement or
any commitment to which the Purchaser is party or by which the Purchaser is or
by which any of its properties or assets are bound or (iv) result in a violation
of any law, rule, or regulation, or any order, judgment or decree of any court
or governmental agency applicable to the Purchaser or its properties, except for
such conflicts, defaults and violations as would not, individually or in the
aggregate, prohibit or otherwise interfere with the ability of the Purchaser to
enter into and perform its obligations under this Agreement in any material
respect. The Purchaser is not required to obtain any consent, authorization or
order of, or make any filing or registration with, any court or governmental
agency in order for it to execute, deliver or perform any of its obligations
under this Agreement or to purchase the Shares in accordance with the terms
hereof, provided that for purposes of the representation made in this sentence,
the Purchaser is assuming and relying upon the accuracy of the relevant
representations and agreements of the Company herein.
(d) Information. The Purchaser and its advisors, if any, have been
-----------
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Shares which
have been requested by the Purchaser. The Purchaser and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. The
Purchaser 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 Shares. Purchaser understands that it (and not the Company)
shall be responsible for its own tax liabilities that may arise as a result of
this investment or the transactions contemplated by this Agreement.
(e) Selling Restriction. The Purchaser has the right to sell that
-------------------
number of Shares equal in number to the number of Shares to be purchased
pursuant to this Agreement during the Investment Period. The Purchaser
covenants, however, that prior to and during the
-12-
Investment Period and for a period of three (3) months after any termination of
this Agreement in accordance with Article VII hereof, neither the Purchaser nor
any of its affiliates nor any entity managed by the Purchaser will ever sell any
securities of the Company (including, without limitation, any grant of any
option to purchase or acquire any right to dispose or otherwise dispose for
value, any shares of Common Stock or any securities convertible into, or
exchangeable for, or warrants to purchase any shares of Common Stock or any
swap, short sale, hedge or other agreement that transfers, in whole or in part,
the economic risk of ownership of the Common Stock) or be in a short position
with respect to shares of Common Stock of the Company in any account directly or
indirectly managed by the Purchaser, or any affiliates of the Purchaser, or any
entity managed by the Purchaser, except that during the Investment Period the
Purchaser shall have the right to sell those Shares that the Purchaser has
purchased or has accumulated for purchase during each Trading Day of a Draw Down
Pricing Period pursuant to the terms and conditions described in this Agreement
or any other similar agreement between the Company and the Purchaser. In
addition, on a daily Trading Day basis, the Purchaser agrees to restrict the
volume of sales of Shares by the Purchaser, its affiliates and any entity
managed by the Purchaser to no more than thirty percent (30%) of the total
trading volume of the Common Stock, as reported on Bloomberg Financial LP using
the HP function, for such Trading Day.
ARTICLE IV
Covenants
The Company covenants with the Purchaser as follows, which covenants are
for the benefit of the Purchaser and its permitted assignees, that during the
term of this Agreement:
Section 4.1 Securities Compliance. The Company shall notify the
---------------------
Commission and the Nasdaq National Market or an Alternate Market, if applicable,
in accordance with their rules and regulations, of the transactions contemplated
by this Agreement, and shall take all other necessary action and proceedings as
may be required and permitted by applicable law, rule and regulation, for the
legal and valid issuance of the Shares to the Purchaser or subsequent holders.
Section 4.2 Registration and Listing. The Company will take all action
------------------------
necessary to cause its Common Stock to continue to be registered under Sections
12(b) or 12(g) of the Exchange Act, will comply in all respects with its
reporting and filing obligations under the Exchange Act, and will not take any
action or file any document (whether or not permitted by the Securities Act or
the rules promulgated thereunder) to terminate or suspend such registration or
to terminate or suspend its reporting and filing obligations under the Exchange
Act or Securities Act, except as permitted herein. The Company will take all
action necessary to continue the listing or trading of its Common Stock and the
listing of the Shares purchased by Purchaser hereunder on the Nasdaq National
Market or an Alternate Market and will comply in all respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the Nasdaq
National Market or an Alternate Market.
-13-
Section 4.3 Registration Statement. Before the Company shall issue a
----------------------
Draw Down Notice, the Company shall have caused a sufficient number of shares of
Common Stock to be authorized and registered to cover the Shares to be issued in
connection with this Agreement.
Section 4.4 Compliance with Laws.
--------------------
(a) The Company shall comply with all applicable laws, rules,
regulations and orders, noncompliance with which could reasonably be
expected to have a Material Adverse Effect.
(b) The Company will not be obligated to issue and the Purchaser will
not be obligated to purchase any shares of the Common Stock which would
result in the issuance under this Agreement of more than nineteen and nine-
tenths percent (19.9%) of the issued and outstanding shares of the Common
Stock, unless such issuance has been duly approved by the shareholders of
the Company.
Section 4.5 Keeping of Records and Books of Account. The Company
---------------------------------------
shall keep adequate records and books of account, in which complete entries will
be made in accordance with GAAP consistently applied, reflecting all financial
transactions of the Company and its subsidiaries, and in which, for each fiscal
year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other purposes in connection with its
business shall be made.
Section 4.6 Limitations on Holdings and Issuances. At no time during
-------------------------------------
the term of this Agreement shall the Purchaser directly or indirectly own more
than nine and nine-tenths percent (9.9%) of the issued and outstanding shares of
Common Stock unless the Company and Purchaser have complied with applicable
waiting period requirements under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act. The Company will not be obligated to issue and the Purchaser will not be
obligated to purchase any shares of the Common Stock which would result in the
issuance under this Agreement to Purchaser at any time of more than nine and
nine-tenths percent (9.9%) of the issued and outstanding shares of the Common
Stock unless the Company and Purchaser have complied with applicable waiting
period requirements under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act.
Section 4.7 Non-public Information. Neither the Company nor any of its
----------------------
officers or agents shall disclose any material non-public information about the
Company to the Purchaser and neither the Purchaser nor any of its affiliates,
officers or agents will solicit any material non-public information from the
Company.
Section 4.8 Effective Registration Statement. If it is necessary for
--------------------------------
a post-effective amendment to the Registration Statement to be filed and
declared effective before the offering of any Shares may commence, the Company
will endeavor to cause such post-effective amendment to be filed and declared
effective as soon as reasonably practicable and will advise the Purchaser
promptly and, if requested by the Purchaser, will confirm such advice in
writing, when it receives notice that the Registration Statement or such post-
effective amendment has become effective.
-14-
Section 4.9 No Stop Orders. The Company will advise the Purchaser
--------------
promptly and, if requested by the Purchaser, will confirm such advice in
writing: (i) of its receipt of notice of any request by the Commission for
amendment of or a supplement to the Registration Statement, any Prospectus or
for additional information; (ii) of its receipt of notice of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or of the suspension of qualification of the Shares for offering or
sale in any jurisdiction or the initiation of any proceeding for such purpose;
and (iii) of its becoming aware of the happening of any event, which makes any
statement of a material fact made in the Registration Statement or the
Prospectus (as then amended or supplemented) untrue or which requires the making
of any additions to or changes in the Registration Statement or the Prospectus
(as then amended or supplemented) in order to state a material fact required by
the Securities Act or the regulations thereunder to be stated therein or
necessary in order to make the statements therein not misleading, or of the
necessity to amend or supplement the Prospectus (as then amended or
supplemented) to comply with the Securities Act or any other law. If at any time
the Commission shall issue any stop order suspending the effectiveness of the
Registration Statement, the Company will make all reasonable efforts to obtain
the withdrawal of such order at the earliest possible time.
Section 4.10 Amendments to the Registration Statement. The Company
----------------------------------------
will not (i) file any amendment to the Registration Statement that relates to
the Purchaser, this Agreement or the transactions contemplated hereby in any
manner whatsoever or make any amendment or supplement to the Prospectus that
relates to the Purchaser, this Agreement or the transactions contemplated hereby
in any manner whatsoever of which, in either case, the Purchaser shall not
previously have been advised or to which the Purchaser shall reasonably object
after being so advised or (ii) so long as, in the reasonable opinion of counsel
for the Purchaser, a Prospectus is required to be delivered in connection with
any purchase of Shares by the Purchaser, file any information, documents or
reports pursuant to the Exchange Act without delivering a copy of such
information, documents or reports to the Purchaser, promptly following such
filing.
Section 4.11 Prospectus Delivery. The Company shall file with the
-------------------
Commission a Prospectus Supplement on the first Trading Day immediately
following the end of each Draw Down Pricing Period, and will deliver to the
Purchaser, without charge, in such quantities as reasonably requested by the
Purchaser, copies of each form of Prospectus and Prospectus Supplement on each
Settlement Date. The Company consents to the use of the Prospectus (and of any
amendment or supplement thereto) in accordance with the provisions of the
Securities Act and with the securities or Blue Sky laws of the jurisdictions in
which the Shares may be sold by the Purchaser, in connection with the offering
and sale of the Shares and for such period of time thereafter as the Prospectus
is required by the Securities Act to be delivered in connection with sales of
the Shares. If during such period of time any event shall occur that in the
judgment of the Company and its counsel or in the opinion of counsel for the
Purchaser is required to be set forth in the Prospectus (as then amended or
supplemented) or should be set forth therein in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or if it is necessary to supplement or amend the Prospectus to
comply with the Securities Act or any other law, the Company will forthwith
prepare and, subject to the provisions of Section 4.10 above, file with the
Commission
-15-
an appropriate supplement or amendment thereto, and will expeditiously furnish
to the Purchaser a reasonable number of copies thereof.
Section 4.12 Other Financing. If the Company enters into any definitive
---------------
financing agreement, the primary purpose of which would be to obtain equity
financing for the Company (an "Other Financing"), during the Draw Down Pricing
---------------
Period, the Company shall promptly notify the Purchaser of such Other Financing.
If the Company enters into an Other Financing, including, without limitation, an
underwritten public offering, during a Draw Down Pricing Period, the Purchaser
shall have the options set forth in Section 6.1(k) hereof. If between Draw Down
Pricing Periods the Company enters into (x) an Other Financing which provides
for the issuance of Common Stock or securities convertible, exercisable or
exchangeable for Common Stock at a net discount (after all fees and discounts
associated with the transaction) to the then current market price of the Common
Stock) or (y) the issuance of Common Stock with warrants, which have an exercise
price such that together with the price of the Common Stock would result in the
issuance of shares of Common Stock at a per share price below the then current
market price of the Common Stock, which Common Stock the Company is obligated to
register (in either case, a "PIPE Financing"), the Purchaser shall have the
--------------
option, which option shall be exercised no later than five (5) Trading Days
after receipt by the Purchaser of the notice of such Other Financing, to
purchase (x) up to the maximum Draw Down Amount that would be applicable under
this Agreement based on the Threshold Price equal to the price per share to be
paid for the Common Stock in the Other Financing or (y) such other amount
mutually agreed upon by the Company and the Purchaser. As used herein, "Other
Financing" shall not include the Company (i) issuing shares of Common Stock in
connection with the Company's current or future option plans, stock purchase
plans, 401K plan and stockholder rights plans, including additional shares
authorized for issuance under any such plans from time to time in the future
(the primary purpose of which is not to raise equity) or upon exercise of any
currently outstanding warrants or options, (ii) issuing shares of Common Stock,
securities convertible into Common Stock or warrants to purchase shares of
Common Stock issued for the purposes of licensing agreements, strategic
agreements and/or collaborative agreements with third parties, (iii) issuing
shares of capital stock and/or warrants in connection with the formation and
maintenance of strategic partnerships, alliances or joint ventures or for the
acquisition of products, licenses, businesses (including divisions thereof) or
other assets, (iv) issuing securities by any subsidiary of the Company, (v)
issuing the securities which are set forth on Schedule 4.12 and (vi) issuing
warrants to purchase Common Stock in connection with equipment financing or
leasing arrangements (each a "Permitted Transaction").
---------------------
Section 4.13 Notices. The Company shall immediately notify the
-------
Purchaser that (i) a Material Adverse Effect or Material Change in Ownership has
occurred or (ii) the Company has entered into an Other Financing (as defined in
Section 4.12 hereof).
ARTICLE V
Conditions to Closing, Draw Downs and Call Options
Section 5.1 Conditions Precedent to the Obligation of the Company to
--------------------------------------------------------
Issue a Draw Down Notice or Grant a Call Option and Sell the Shares. The
-------------------------------------------------------------------
obligation hereunder of the
-16-
Company to enter into this Agreement and to issue a Draw Down Notice or grant a
Call Option and sell the Shares to the Purchaser is subject to the satisfaction
or waiver, at or before each Draw Down or Call Option request (the "Draw Down
---------
Exercise Date"), of each of the conditions set forth below. These conditions
--------------
are for the Company's sole benefit and may be waived by the Company at any time
in its sole discretion.
(a) Accuracy of the Purchaser's Representations and Warranties. The
----------------------------------------------------------
representations and warranties of the Purchaser in this Agreement shall be true
and correct in all material respects as of the date when made and as of each
Draw Down Exercise Date and each Settlement Date as though made at that time,
except for representations and warranties that are expressly made as of a
particular date.
(b) Registration Statement. The Company shall have a dollar amount of
----------------------
Shares registered under the Registration Statement which are in a dollar amount
equal to or in excess of the number of Shares issuable pursuant to such Draw
Down Notice or Call Option. The Registration Statement registering the Shares
shall have been declared effective by the Commission and shall have been amended
or supplemented, as required, to disclose the sale of the Shares prior to each
Draw Down Exercise Date or each Settlement Date, as applicable, and there shall
be no stop order suspending the effectiveness of the Registration Statement.
(c) Performance by the Purchaser. The Purchaser shall have performed,
----------------------------
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Purchaser at or prior to each Draw Down Exercise Date or each
Settlement Date, as applicable.
(d) No Injunction. No statute, regulation, executive order, decree,
-------------
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement.
(e) No Suspension, Etc. Trading in the Common Stock shall not have
-------------------
been suspended by the Commission or the Nasdaq National Market or an Alternate
Market (except for any suspension of trading of limited duration agreed to by
the Company, which suspension shall be terminated prior to such Draw Down
Exercise Date and applicable Settlement Date), and, at any time prior to each
Draw Down Exercise Date, trading in securities generally as reported on the
Nasdaq National Market or an Alternate Market shall not have been suspended or
limited, or minimum prices shall not have been established on securities whose
trades are reported by the Nasdaq National Market or an Alternate Market, nor
shall a banking moratorium have been declared either by the United States or New
York State authorities, nor shall there have occurred any material outbreak or
escalation of hostilities or other national or international calamity or crisis
of such magnitude in its effect on, or any material adverse change in any
financial market which, in each case, in the judgment of the Company, makes it
impracticable or inadvisable to issue the Shares.
(f) No Proceedings or Litigation. No action, suit or proceeding before
----------------------------
any arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company, or any of the
-17-
officers, directors or affiliates of the Company seeking to restrain, prevent or
change the transactions contemplated by this Agreement, or seeking damages in
connection with such transactions.
Section 5.2 Conditions Precedent to the Obligation of the Purchaser to
----------------------------------------------------------
Close. The obligation hereunder of the Purchaser to enter this Agreement is
------
subject to the satisfaction or waiver, at or before the Closing, of each of the
conditions set forth below. These conditions are for the Purchaser's sole
benefit and may be waived by the Purchaser at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties. Each of
--------------------------------------------------------
the representations and warranties of the Company shall be true and correct in
all material respects as of the date when made and as of the Closing Date, as
though made at that time, except for representations and warranties that speak
as of a particular date.
(b) Performance by the Company. The Company shall have performed,
--------------------------
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing.
(c) Effective Registration Statement. The Registration Statement
--------------------------------
registering the Shares shall have been declared effective by the Commission
prior to the Closing Date and there shall be no stop order suspending the
effectiveness of the Registration Statement.
(d) No Injunction. No statute, rule, regulation, executive order,
-------------
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(e) No Proceedings or Litigation. No action, suit or proceeding before
----------------------------
any arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company, or any of the officers, directors or affiliates of the Company
seeking to restrain, prevent or change the transactions contemplated by this
Agreement, or seeking damages in connection with such transactions.
(f) Opinion of Counsel, Etc. At the Closing, the Purchaser shall have
------------------------
received an opinion of counsel to the Company, dated the Closing Date, in the
form of Exhibit A hereto, a Secretary's Certificate, dated the Closing Date, in
the form of Exhibit B hereto and a Compliance Certificate, dated the Closing
Date, in the form of Exhibit C hereto.
Section 5.3 Conditions Precedent to the Obligation of the Purchaser to
-----------------------------------------------------------
Accept a Draw Down or Call Option Grant and Purchase the Shares. The obligation
---------------------------------------------------------------
hereunder of the Purchaser to accept a Draw Down or Call Option grant and to
acquire and pay for the Shares on the Settlement Date is subject to the
satisfaction or waiver, at or before each Draw Down Exercise Date and each
Settlement Date, as applicable, of each of the conditions set forth below.
-18-
The conditions are for the Purchaser's sole benefit and may be waived by the
Purchaser at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties. Each of
--------------------------------------------------------
the representations and warranties of the Company shall be true and correct in
all material respects as of the date when made and as of the Draw Down Exercise
Date and Settlement Date, as applicable, as though made at that time, except for
representations and warranties that speak as of a particular date.
(b) Registration Statement. The Company shall have a dollar amount of
----------------------
Shares registered under the Registration Statement which are in a dollar amount
equal to or in excess of the number of Shares issuable pursuant to such Draw
Down Notice or Call Option. The Registration Statement registering the offer and
sale of the Shares shall have been declared effective by the Commission and
shall have been amended or supplemented, as required, to disclose the sale of
the Shares prior to each Draw Down Exercise Date or each Settlement Date, as
applicable, and there shall be no stop order suspending the effectiveness of the
Registration Statement.
(c) No Suspension, Etc. Trading in the Common Stock shall not have
-------------------
been suspended by the Commission or the Nasdaq National Market or an Alternate
Market (except for any suspension of trading of limited duration agreed to by
the Company, which suspension shall be terminated prior to each Draw Down
Exercise Date), and, at any time prior to such Draw Down Exercise Date or such
Settlement Date, trading in securities generally as reported by the Nasdaq
National Market or an Alternate Market shall not have been suspended or limited,
or minimum prices shall not have been established on securities whose trades are
reported by the Nasdaq National Market or an Alternate Market, nor shall a
banking moratorium have been declared either by the United States or New York
State authorities, nor shall there have occurred any material outbreak or
escalation of hostilities or other national or international calamity or crisis
of such magnitude in its effect on, or any material adverse change in any
financial market which, in each case, in the reasonable judgment of the
Purchaser, makes it impracticable or inadvisable to purchase the Shares. The
Common Stock shall be listed on Nasdaq or an Alternate Market.
(d) Performance by the Company. The Company shall have performed,
--------------------------
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Draw Down Exercise Date and the
Settlement Date and shall have delivered the Compliance Certificate
substantially in the form attached hereto as Exhibit C.
(e) No Injunction. No statute, rule, regulation, executive order,
-------------
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(f) No Proceedings or Litigation. No action, suit or proceeding
----------------------------
before any arbitrator or any governmental authority shall have been commenced,
and no investigation by any governmental authority shall have been threatened,
against the Company, or any of the
-19-
officers, directors or affiliates of the Company seeking to restrain, prevent or
change the transactions contemplated by this Agreement, or seeking damages in
connection with such transactions.
(g) No Material Adverse Effect; No Material Change in Ownership. No
-----------------------------------------------------------
Material Adverse Effect except continued losses from operations or Material
Change in Ownership shall have occurred.
ARTICLE VI
Draw Down Terms; Call Option
Section 6.1 Draw Down Terms. Subject to the satisfaction of the
---------------
conditions set forth in this Agreement, the parties agree as follows:
(a) The Company, may, in its sole discretion, issue a Draw Down Notice
with respect to a Draw Down during each Draw Down Pricing Period of up to (i)
$10,000,000 if the Threshold Price is equal to or greater than $30.00 and less
than $33.00, and (ii) an additional $1,000,000 for every $3.00 increase in the
Threshold Price above $30.00 up to $75.00; provided, that if the Threshold Price
--------
equal to or greater than $75.00, then the Draw Down Amount shall be $25,000,000;
provided, however, that for every $3.00 decrease in the Threshold Price below
-------- -------
$30.00 to $15.00, the Draw Down Amount shall be decreased by $1,000,000,
incrementally; provided, further, that the Company may, in its sole discretion,
-------- -------
issue a Draw Down Notice with respect to any Draw Down Amount at any Threshold
Price or any Draw Down Discount Percentage pursuant to terms mutually agreed
upon by the Purchaser and the Company, which Draw Down the Purchaser will be
obligated to accept. Prior to issuing any Draw Down Notice, the Company shall
have Shares registered under the Registration Statement which are valued in a
dollar amount equal to or in excess of the Draw Down Amount.
(b) The number of Shares to be issued in connection with each Draw
Down shall be equal to the sum of the quotients (for each Trading Day of the
Draw Down Pricing Period for which the VWAP equals or exceeds the Threshold
Price) of (x) 1/18th (or such other fraction the denominator of which equals the
number of Trading Days during the Draw Down Pricing Period) of the Draw Down
Amount divided by (y) the applicable Draw Down Discount Percentage (or such
other percentage mutually agreed upon by the parties) multiplied by the VWAP of
the Common Stock for such Trading Day.
(c) Only one Draw Down shall be allowed in each Draw Down Pricing
Period.
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(d) The number of Shares purchased by the Purchaser with respect to
each Draw Down shall be determined on a daily basis during each Draw Down
Pricing Period and settled on the second Trading Day following the end of each
Draw Down Pricing Period (the "Settlement Date").
---------------
(e) There shall be a minimum of five (5) Trading Days between Draw
Downs, unless otherwise mutually agreed upon between the Purchaser and the
Company.
(f) There shall be a maximum of twenty-four (24) monthly Draw Downs
during the term of this Agreement.
(g) Each Draw Down will expire on the end of the last Trading Day of
each Draw Down Pricing Period.
(h) If the VWAP on a given Trading Day in a Draw Down Pricing Period
is less than the Threshold Price, then the total amount of the Draw Down for the
relevant Draw Down Pricing Period will be reduced by 1/18th (or such other
fraction the denominator of which equals the number of Trading Days during the
Draw Down Pricing Period). At no time shall the Threshold Price be set below
$15.00, unless mutually agreed upon by the Company and the Purchaser. If trading
in the Common Stock is suspended for any reason for more than three (3) hours in
any Trading Day, at the Purchaser's option, the price of the Common Stock shall
be deemed to be below the Threshold Price for that Trading Day and the Draw Down
for the relevant Draw Down Pricing Period shall be reduced by 1/18th (or such
other fraction the denominator of which equals the number of Trading Days during
the Draw Down Pricing Period). Notwithstanding anything in the foregoing to the
contrary, for each Trading Day during the Draw Down Pricing Period that the VWAP
is less than the Threshold Price or is deemed to be below the Threshold Price
pursuant to the immediately preceding sentence, the Purchaser may elect in its
sole discretion to purchase Shares at a price equal to the Threshold Price
multiplied by the Draw Down Discount Percentage at the end of such Draw Down
Pricing Period. The Purchaser will inform the Company via facsimile transmission
no later than 8:00 p.m. (eastern time) on the last Trading Day of such Draw Down
Pricing Period as to the number of Shares, if any, the Purchaser chooses to
purchase under such circumstances set forth in this Section 6.1(h).
(i) The Company must inform the Purchaser via facsimile transmission
before 9:30 a.m. (eastern time) on the first Trading Day of the Draw Down
Pricing Period in substantially in the form attached hereto as Exhibit D (the
"Draw Down Notice") of the Draw Down Amount the Company wishes to exercise. In
-----------------
addition to the Draw Down Amount, the Company shall set the Threshold Price with
each Draw Down Notice and shall designate the first Trading Day of the Draw Down
Pricing Period. Notwithstanding anything in the foregoing to the contrary, if
the Company wishes the Draw Down Exercise Date to be the first day of the Draw
Down Pricing Period, the Draw Down Notice must be delivered to the Purchaser and
receipt of such Draw Down Notice confirmed by the Purchaser prior to 9:30 a.m.
(eastern time) on the date of such Draw Down Exercise Date.
(j) On each Settlement Date, the Company shall deliver the Shares
purchased by the Purchaser to the Purchaser or to The Depositary Trust Company
("DTC") on the Purchaser's behalf via the Deposit Withdrawal Agent Commission
---
system ("DWAC"), and upon
----
-21-
receipt of the Shares, the Purchaser shall cause payment therefor to be made to
the account designated by the Company by wire transfer of immediately available
funds provided that the Shares are received no later than 1:00 p.m., eastern
time, or next day available funds if the Shares are received thereafter.
(k) If during any Draw Down Pricing Period the Company shall enter
into an Other Financing (other than shares of Common Stock issued under this
Agreement or pursuant to a Permitted Transaction), the Purchaser may in its sole
discretion (i) purchase the Draw Down Amount of shares of Common Stock and/or
exercise Call Options granted during such Draw Down Pricing Period on the terms
at which the Company issued shares of Common Stock in the Other Financing during
such Draw Down Pricing Period, net of any third party's discount and fees, (ii)
purchase the Draw Down Amount of shares of Common Stock and/or exercise Call
Options granted during such Draw Down Pricing Period at the applicable Draw Down
Discount Percentage times the VWAP for such Draw Down Pricing Period, or (iii)
elect not to purchase any Shares during such Draw Down Pricing Period. The
Purchaser shall notify the Company of its election on the Trading Day preceding
the Settlement Date.
(l) If on the Settlement Date, the Company fails to deliver the Shares
to be purchased by the Purchaser, and such failure continues for ten (10)
Trading Days, the Company shall pay, in cash, as liquidated damages and not as a
penalty to the Purchaser an amount equal to two percent (2%) of the Draw Down
Amount for the initial thirty (30) days and each additional thirty (30) day
period thereafter until such failure has been cured, which shall be pro rated
for such periods less than thirty (30) days (the "Periodic Amount"). Cash
----------------
payments to be made pursuant to this clause (1) shall be due and payable
immediately upon demand in immediately available cash funds.
(m) If during any Draw Down Pricing Period the Company reasonably
believes an event may occur which would require the suspension of the
Registration Statement, the Company shall notify the Purchaser before
commencement of trading on any Trading Day (a "Section 6.1(m) Notice") and
---------------------
reduce the number of Trading Days in such Draw Down Pricing Period. The last
Trading Day of such Draw Down Pricing Period shall be the Trading Day preceding
the receipt of the Section 6.1(m) Notice; provided, however, that if the
-------- -------
Company delivers the Section 6.1(m) Notice during trading hours on a Trading
Day, then the last Trading Day of such Draw Down Pricing Period shall be the
Trading Day on which the Section 6.1(m) Notice was received by the Purchaser.
The Purchaser will purchase the Truncated Draw Down Allocation for
each of the Trading Days prior to receipt of the Section 6.1(m) Notice, for an
aggregate purchase price determined in accordance with clauses (b) and (i) of
this Section 6.1.
In addition, the Purchaser may, at its option, elect to purchase Shares
in an additional dollar amount equal to the product of the Draw Down Amount
Requested, first multiplied by (x) a fraction, the numerator of which equals one
(1) and the denominator of which equals eighteen (18) or such other number of
Trading Days in such Draw Down Pricing Period as the parties may have mutually
agreed upon with respect to such Draw Down Pricing Period (eighteen or such
other mutually agreed upon number being referred to herein as the "Trading Day
-----------
Number"), and next multiplied by (y) that number that is equal to the Trading
-------
Day Number
-22-
minus the number of Trading Days in the reduced Draw Down Pricing Period. The
price per share for such additional dollar amount shall equal (i) the aggregate
total of Truncated Draw Down Allocation Amounts during the reduced Draw Down
Pricing Period divided by (ii) the number of Shares to be purchased during such
reduced Draw Down Pricing Period.
Upon receipt of the Section 6.1(m) Notice, the Purchaser may (x) elect
to purchase the Common Stock at the Threshold Price for any Trading Day that the
VWAP was below the Threshold Price during the reduced Draw Down Pricing Period
in accordance with Section 6.1(i) hereof, (y) elect to purchase the Common Stock
in the additional amount as set forth in the preceding paragraph of this Section
6.1(m), and (z) elect to exercise any unexercised Call Options (for a Call
Option Amount not to exceed $1,000,000) by issuing a Call Option Notice to the
Company, in each such case, no later than 10:00 a.m. (eastern time) on the first
Trading Day after the end of the reduced Draw Down Pricing Period. The exercise
price of the Call Option shall be based on the VWAP on the last Trading Day of
the reduced Draw Down Pricing Period (in lieu of the VWAP as specified in clause
(A) of Section 6.2(b) hereof) and otherwise determined in accordance with
Section 6.2(b) hereof.
The Settlement Date for the Truncated Draw Down Amount exercised during
an effected Draw Down Pricing Period shall be the second Trading Day after
receipt of the Section 6.1(m) Notice.
Section 6.2 Purchaser's Call Option.
-----------------------
(a) During each Draw Down Pricing Period, the Company at its sole
discretion may grant to the Purchaser the right to exercise multiple call
options of up to the applicable Draw Down Amount (a "Call Option"). The amount
-----------
of the Call Option shall be set forth in the Draw Down Notice. For each Trading
Day during a Draw Down Pricing Period, the Purchaser may exercise a Call Option
by providing notice to the Company of the exercise of a Call Option (the "Call
----
Option Notice"), substantially in the form attached hereto as Exhibit E.
--------------
(b) The number of shares of Common Stock to be issued in connection
with each Call Option shall equal the quotient of (i) the Call Option Amount and
(ii) the product of the applicable Draw Down Discount Percentage and the greater
of (A) the VWAP for the Common Stock on the day the Purchaser issues its Call
Option Notice and (B) the Threshold Price.
(c) Each Call Option exercised shall be settled on the applicable
Settlement Date.
(d) The Threshold Price designated by the Company in its Draw Down
Notice shall apply to each Call Option.
(e) For each Call Option that the Purchaser exercises pursuant to this
Section 6.2, the Purchaser must issue via facsimile a Call Option Notice to the
Company no later than 8:00 p.m. (eastern time) on the day such Call Option is
exercised. If the Purchaser does not exercise a Call Option by 8:00 p.m.
(eastern time) on the last Trading Day of the applicable
-23-
Draw Down Pricing Period, the Purchaser's Call Options with respect to that Draw
Down Pricing Period shall terminate.
ARTICLE VII
Termination
Section 7.1 Termination by Mutual Consent. The term of this Agreement
-----------------------------
shall expire on the earlier of (i) twenty-eight (28) months from the date of
execution of this Agreement (the "Investment Period") and (ii) the date that all
-----------------
of the shares of Common Stock registered under the Registration Statement have
been issued and sold. This Agreement may be terminated at any time by mutual
consent of the parties.
Section 7.2 Company Termination. The Company may terminate this
-------------------
Agreement effective upon thirty (30) days' written notice; provided, however,
that such termination does not occur during a Draw Down Pricing Period or prior
to a Settlement Date.
Section 7.3 Other Termination. The Company shall inform the Purchaser,
-----------------
and the Purchaser shall have the right to terminate this Agreement within the
subsequent thirty (30) days (the "Event Period"), if (x) the Company enters into
------------
an Other Financing (other than an underwritten public offering), including,
without limitation, an equity line of credit transaction and a PIPE Financing
which provides for (i) the issuance of Common Stock or securities convertible,
exercisable or exchangeable into Common Stock or the issuance of Common Stock
with warrants, which have an exercise price such that together with the price of
the Common Stock would result in the issuance of shares of Common Stock at a
discount to the then current market price of the Common Stock; provided,
--------
however, that the Purchaser's termination right shall not apply if, after the
-------
eight month anniversary of the Closing Date, the Company enters into a PIPE
Financing at a discount of up to seven percent (7%) of the then current market
price of the Common Stock, or (ii) a mechanism for the reset of the purchase
price of the Common Stock to below the then current market price of the Common
Stock, (y) a non-curable event resulting in a Material Adverse Effect except
continued losses from operations or Material Change in Ownership has occurred,
or (z) an event resulting in a Material Adverse Effect has occurred and such
event has not been cured within sixty (60) days of its occurrence. The
Purchaser may terminate this Agreement upon one (1) day's notice during the
Event Period. Notwithstanding anything to the contrary contained herein, the
Purchaser may not terminate this Agreement if the Company enters into an Other
Financing which provides for the issuance of Common Stock at the then current
market price of the Common Stock.
Section 7.4 Effect of Termination. In the event of termination by the
---------------------
Company or the Purchaser, written notice thereof shall forthwith be given to the
other party and the transactions contemplated by this Agreement shall be
terminated without further action by either party. If this Agreement is
terminated as provided in Section 7.1, 7.2 or 7.3 herein, this Agreement shall
become void and of no further force and effect, except as provided in Section
9.9 hereof. Nothing in this Section 7.4 shall be deemed to release the Company
or the Purchaser from any liability for any breach under this Agreement, or to
impair the rights of the Company
-24-
and the Purchaser to compel specific performance by the other party of its
obligations under this Agreement.
ARTICLE VIII
Indemnification
Section 8.1 General Indemnity.
-----------------
(a) Indemnification by the Company. The Company will indemnify and
------------------------------
hold harmless the Purchaser, each of its directors, fund managers and officers,
and each person, if any, who controls the Purchaser within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Exchange Act from and
against any losses, claims, damages, liabilities and expenses (including
reasonable costs of defense and investigation and all reasonable attorneys'
fees) to which the Purchaser, each of its directors, fund managers and officers,
and each person, if any, who controls the Purchaser may become subject, under
the Securities Act or otherwise, insofar as such losses, claims, damages,
liabilities and expenses (or actions in respect thereof) arise out of or are
based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained, or incorporated by reference, in the Registration Statement
relating to Common Stock being sold to the Purchaser (including any Prospectus
Supplement filed in connection with the transactions contemplated hereunder
which are a part of it), or any amendment or supplement to it, or (ii) the
omission or alleged omission to state in that Registration Statement or any
document incorporated by reference in the Registration Statement, a material
fact required to be stated therein or necessary to make the statements therein
not misleading, provided that the Company shall not be liable under this
--------
Section 8.1(a) to the extent that a court of competent jurisdiction shall have
determined by a final judgment (with no appeals available) that such loss,
claim, damage, liability or action resulted directly from any such acts or
failures to act, undertaken or omitted to be taken by the Purchaser or such
person through its bad faith or willful misconduct; provided further, that the
----------------
foregoing indemnity shall not apply to any loss, claim, damage, liability or
expense to the extent, but only to the extent, arising out of or based upon any
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with written information furnished to
the Company by the Purchaser expressly for use in the Registration Statement,
any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto); and provided further, that with respect to the Prospectus, the
----------------
foregoing indemnity shall not inure to the benefit of the Purchaser or any such
person from whom the person asserting any loss, claim, damage, liability or
expense purchased Common Stock, if copies of the Prospectus were timely
delivered to the Purchaser pursuant hereto and a copy of the Prospectus (as then
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of the Purchaser or
any such person to such person, if required by law so to have been delivered, at
or prior to the written confirmation of the sale of the Common Stock to such
person, and if the Prospectus (as so amended or supplemented) would have cured
the defect giving rise to such loss, claim, damage, liability or expense.
The Company will reimburse the Purchaser and each such controlling person
promptly upon demand for any legal or other costs or expenses reasonably
incurred by the Purchaser or
-25-
any controlling person in investigating, defending against, or preparing to
defend against any such claim, action, suit or proceeding, except that the
Company will not be liable to the extent a claim or action which results in a
loss, claim, damage, liability or expense arises out of, or is based upon, an
untrue statement, alleged untrue statement, omission or alleged omission,
included in any Registration Statement, Prospectus or Prospectus Supplement or
any amendment or supplement to the thereto in reliance upon, and in conformity
with, written information furnished by the Purchaser to the Company for
inclusion in the Registration Statement, Prospectus or Prospectus Supplement.
(b) Indemnification by the Purchaser. The Purchaser will indemnify
--------------------------------
and hold harmless the Company, each of its directors and officers, and each
person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act from and against any
expenses (including reasonable costs of defense and investigation and all
attorneys' fees) to which the Company and each director, officer and person, if
any, who controls the Company may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages, liabilities and expenses (or
actions in respect thereof) arise out of or are based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or any Prospectus or Prospectus Supplement or any
amendment or supplement to it or (ii) the omission or alleged omission to state
in the Registration Statement or any Prospectus or Prospectus Supplement or any
amendment or supplement to it a material fact required to be stated therein or
necessary to make the statements therein not misleading, to the extent, but only
to the extent, the untrue statement, alleged untrue statement, omission or
alleged omission was made in reliance upon, and in conformity with, written
information furnished by the Purchaser to the Company for inclusion in the
Registration Statement, the Prospectus or Prospectus Supplement or an amendment
or supplement thereto, and the Purchaser will reimburse the Company and each
such director, officer or controlling person promptly upon demand for any legal
or other costs or expenses reasonably incurred by the Company or the other
person in investigating, defending against, or preparing to defend against any
such claim, action, suit or proceeding.
Section 8.2 Indemnification Procedures. Promptly after a person
--------------------------
receives notice of a claim or the commencement of an action for which the person
intends to seek indemnification under paragraph (a) or (b) of Section 8.1, the
person will notify the indemnifying party in writing of the claim or
commencement of the action, suit or proceeding, but failure to notify the
indemnifying party will not relieve the indemnifying party from liability under
paragraph (a) or (b) of Section 8.1, except to the extent it has been materially
prejudiced by the failure to give notice. The indemnifying party will be
entitled to participate in the defense of any claim, action, suit or proceeding
as to which indemnification is being sought, and if the indemnifying party
acknowledges in writing the obligation to indemnify the party against whom the
claim or action is brought, the indemnifying party may (but will not be required
to) assume the defense against the claim, action, suit or proceeding with
counsel satisfactory to it. After an indemnifying party notifies an indemnified
party that the indemnifying party wishes to assume the defense of a claim,
action, suit or proceeding the indemnifying party will not be liable for any
legal or other expenses incurred by the indemnified party in connection with the
defense against the claim, action, suit or proceeding except that if, in the
opinion of counsel to the indemnifying party, one or more of the indemnified
parties should be represented separately from the
-26-
indemnifying party in connection with a claim, action, suit or proceeding
because there may be one or more legal defenses available to it and/or other
indemnified parties that are different from or additional to those available to
the indemnifying party, the indemnifying party will pay the reasonable fees and
expenses of one separate counsel for the indemnified parties. Each indemnified
party, as a condition to receiving indemnification as provided in Paragraph (a)
or (b) or Section 8.1, will cooperate in all reasonable respects with the
indemnifying party in the defense of any action or claim as to which
indemnification is sought. No indemnifying party will be liable for any
settlement of any action effected without its prior written consent. No
indemnifying party will, without the prior written consent of the indemnified
party, effect any settlement of a pending or threatened action with respect to
which an indemnified party is, or is informed that it may be, made a party and
for which it would be entitled to indemnification, unless the settlement
includes an unconditional release of the indemnified party from all liability
and claims which are the subject matter of the pending or threatened action.
If for any reason the indemnification provided for in this Agreement is not
available to, or is not sufficient to hold harmless, an indemnified party in
respect of any loss or liability referred to in paragraph (a) or (b) of Section
8.1, each indemnifying party will, in lieu of indemnifying the indemnified
party, contribute to the amount paid or payable by the indemnified party as a
result of the loss or liability, (i) in the proportion which is appropriate to
reflect the relative benefits received by the indemnifying party on the one hand
and by the indemnified party on the other from the sale of stock which is the
subject of the claim, action, suit or proceeding which resulted in the loss or
liability or (ii) if that allocation is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits of the
sale of stock, but also the relative fault of the indemnifying party and the
indemnified party with respect to the statements or omissions which are the
subject of the claim, action, suit or proceeding that resulted in the loss or
liability, as well as any other relevant equitable considerations.
ARTICLE IX
Miscellaneous
Section 9.1 Fees and Expenses. Each party shall bear its own fees
-----------------
and expenses related to the transactions contemplated by this Agreement;
provided, however, that the Company shall pay, at the Closing, all reasonable
-----------------
attorneys fees and expenses (exclusive of disbursements and out-of-pocket
expenses) incurred by the Purchaser of up to $50,000 in connection with the
preparation, negotiation, execution and delivery of this Agreement. In addition,
the Company shall pay all reasonable fees and expenses incurred by the Purchaser
in connection with any amendments, modifications or waivers of this Agreement or
incurred in connection wi th the enforcement of this Agreement, including,
without limitation, all reasonable attorneys' fees and expenses.
Section 9.2 Specific Enforcement, Consent to Jurisdiction.
----------------------------------------------
-27-
(a) The Company and the Purchaser acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity.
(b) Each of the Company and the Purchaser (i) hereby irrevocably
submits to the jurisdiction of the United States District Court and other courts
of the United States sitting in the State of New York for the purposes of any
suit, action or proceeding arising out of or relating to this Agreement and (ii)
hereby waives, and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper. Each of the Company and
the Purchaser consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing in this
Section shall affect or limit any right to serve process in any other manner
permitted by law.
Section 9.3 Entire Agreement; Amendment. This Agreement contains the
---------------------------
entire understanding of the parties with respect to the matters covered hereby
and, except as specifically set forth herein, neither the Company nor the
Purchaser makes any representations, warranty, covenant or undertaking with
respect to such matters. The parties hereto may not amend this Agreement or any
rights or obligations hereunder without the prior written consent of the Company
and each Purchaser to be affected by the amendment.
Section 9.4 Notices. Any notice, demand, request, waiver or other
-------
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery, by telecopy or facsimile at the
address or number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the second
business day following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The addresses for such communications shall be:
If to the Company: Leap Wireless International, Inc.
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Attention:
With copies to: ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
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Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
If to the Purchaser: Acqua Wellington North American
Equities Fund, Ltd.
c/o Fortis Fund Services (Bahamas) Ltd.
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East Bay Street, P. O. Box SS-6238
Nassau, Bahamas
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Attention: ▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇
With copies to: ▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP
The Chrysler Building
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Any party hereto may from time to time change its address for notices by
giving at least ten (10) days written notice of such changed address to the
other party hereto.
Section 9.5 Waivers. No provision of this Agreement may be waived other
-------
than by a written instrument signed by the party against whom enforcement of any
such waiver is sought. No waiver by either party of any default with respect to
any provision, condition or requirement of this Agreement shall be deemed to be
a continuing waiver in the future or a waiver of any other provisions, condition
or requirement hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such right accruing
to it thereafter.
Section 9.6 Headings. The article, section and subsection headings in
--------
this Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
Section 9.7 Successors and Assigns. The Purchaser may not assign this
-----------------------
Agreement to any person without the prior consent of the Company, which consent
will not be unreasonably withheld. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. After
Closing, the assignment by a party to this Agreement of any rights hereunder
shall not affect the obligations of such party under this Agreement.
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Section 9.8 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws of the State of New York, without
giving effect to the choice of law provisions.
Section 9.9 Survival. The representations and warranties of the
--------
Company and the Purchaser contained in Article III and the covenants contained
in Article IV shall survive the execution and delivery hereof and the Closing
until the termination of this Agreement, and the agreements and covenants set
forth in Article VIII of this Agreement shall survive the execution and delivery
hereof and the Closing hereunder.
Section 9.10 Counterparts. This Agreement may be executed in any
------------
number of counterparts, all of which taken together shall constitute one and the
same instrument and shall become effective when counterparts have been signed by
each party and delivered to the other parties hereto, it being understood that
all parties need not sign the same counterpart. In the event any signature is
delivered by facsimile transmission, the party using such means of delivery
shall cause four additional executed signature pages to be physically delivered
to the other parties within five days of the execution and delivery hereof.
Section 9.11 Publicity. The Company shall not issue any press release
---------
or otherwise make any public statement or announcement with respect to this
Agreement or the transactions contemplated hereby or the existence of this
Agreement without the prior written consent of the Purchaser which consent shall
not be unreasonably withheld. In the event the Company is required by law or
regulation to issue a press release or otherwise make a public statement or
announcement with respect to this Agreement or the transaction contemplated
hereby prior to or after the Closing, the Company shall consult with the
Purchaser on the form and substance of such press release or other disclosure.
Section 9.12 Severability. The provisions of this Agreement are
------------
severable and, in the event that any court of competent jurisdiction shall
determine that any one or more of the provisions or part of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement, and this Agreement shall be reformed and construed as if such
invalid or illegal or unenforceable provision, or part of such provision, had
never been contained herein, so that such provisions would be valid, legal and
enforceable to the maximum extent possible.
Section 9.13 Further Assurances. From and after the date of this
------------------
Agreement, upon the request of the Purchaser or the Company, each of the Company
and the Purchaser shall execute and deliver such instrument, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement.
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[END OF PAGE]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officer as of the date first above
written.
LEAP WIRELESS INTERNATIONAL, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Senior Vice President,
Finance and Treasurer
ACQUA WELLINGTON NORTH
AMERICAN EQUITIES FUND, LTD.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Secretary
EXHIBIT A TO THE
COMMON STOCK PURCHASE AGREEMENT
OPINION OF COUNSEL
EXHIBIT B
TO THE COMMON STOCK PURCHASE AGREEMENT
SECRETARY'S CERTIFICATE
___________, 2000
The undersigned, ______________________, Secretary of Leap Wireless
International, Inc., a Delaware corporation (the "Company"), delivers this
certificate in connection with the issuance and sale of shares of common stock
of the Company in an aggregate amount of $__________ to Acqua Wellington North
American Equities Fund, Ltd. (the "Purchaser") pursuant to the Common Stock
Purchase Agreement, dated December 20, 2000 (the "Agreement"), by and among the
Company and the Purchaser, and hereby certifies on the date hereof, that
(capitalized terms used herein without definition have the meanings assigned to
them in the Agreement):
1. Attached hereto as Exhibit A is a true, complete and correct copy of
the Certificate of Incorporation of the Company as filed with the Secretary of
State of the State of Delaware. The Certificate of Incorporation of the Company
has not been further amended or restated, and no document with respect to any
amendment to the Certificate of Incorporation of the Company has been filed in
the office of the Secretary of State of the State of Delaware since ______ __,
2000, the date shown on the face of the state certification relating to the
Company's Certificate of Incorporation, which is in full force and effect on the
date hereof, and no action has been taken by the Company in contemplation of any
such amendment or the dissolution, merger or consolidation of the Company.
2. Attached hereto as Exhibit B is a true and complete copy of the Bylaws
of the Company, as amended and restated through, and as in full force and effect
on, the date hereof, and no proposal for any amendment, repeal or other
modification to the Bylaws of the Company has taken or is currently pending
before the Board of Directors or stockholders of the Company.
3. The Board of Directors of the Company has approved the transactions
contemplated by the Agreement; said approval has not been amended, rescinded or
modified and remains in full force and effect as of the date hereof.
4. Each person who, as an officer of the Company, or as attorney-in-fact
of an officer of the Company, signed (A) the Agreement, (B) the Registration
Statement and (C) any other document delivered prior hereto or on the date
hereof in connection with the transactions contemplated by the Agreement, was
duly elected, qualified and acting as such officer or duly appointed and acting
as such attorney-in-fact, and the signature of each such person appearing on any
such document is his genuine signature.
5. ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ is entitled to rely on this certificate in connection
with the opinion that such firm is rendering pursuant to Section 5.2(f) of the
Agreement.
IN WITNESS WHEREOF, I have signed my name as of the date first above
written.
By:
---------------------------------
Name:
Title: Secretary
I, __________________, Chief Executive Officer of Leap Wireless
International, Inc., do hereby certify that ______________________ is the duly
elected, qualified and acting Secretary of the above mentioned company, and that
the signature set forth above is his true and genuine signature.
IN WITNESS WHEREOF, I have hereunto signed my name as of the date first
above written.
By:
---------------------------------
Name:
Title: Chief Executive Officer
EXHIBIT C
TO THE COMMON STOCK PURCHASE AGREEMENT
COMPLIANCE CERTIFICATE
In connection with the issuance of shares of common stock of Leap
Wireless International, Inc., a Delaware corporation (the "Company"), pursuant
to the Draw Down Notice, dated ___________ delivered by the Company to Acqua
Wellington North American Equities Fund, Ltd. (the "Purchaser") pursuant to
Article VI of the Common Stock Purchase Agreement dated December 20, 2000, by
and between the Company and Acqua Wellington North American Equities Fund, Ltd.
(the "Agreement"), the undersigned hereby certifies as follows:
1. The undersigned is the duly elected Chief [Executive/Financial] Officer
of the Company.
2. The representations and warranties of the Company set forth in Section
3.1 of the Agreement are true and correct in all material respects as though
made on and as of the date hereof, except as set forth in the attached Schedules
and for such representations and warranties that speak as of a particular date.
3. The Company has performed in all material respects all covenants and
agreements to be performed by the Company on or prior to the Draw Down Exercise
Date and the Settlement Date related to the Draw Down Notice and has complied in
all material respects with all obligations and conditions contained in Section
5.3 of the Agreement.
Capitalized terms used but not otherwise defined herein shall have the
meanings assigned to them in the Agreement.
The undersigned has executed this Certificate this _____ day of
_________, 2000.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
EXHIBIT D
TO THE COMMON STOCK PURCHASE AGREEMENT
FORM OF DRAW DOWN NOTICE
Reference is made to the Common Stock Purchase Agreement dated as of
December 20, 2000 (the "Purchase Agreement") between Leap Wireless
International, Inc., a Delaware corporation (the "Company"), and Acqua
Wellington North American Equities Fund, Ltd. Capitalized terms used and not
otherwise defined herein shall have the meanings given such terms in the
Purchase Agreement.
In accordance with and pursuant to Section 6.1 of the Purchase Agreement,
the Company hereby issues this Draw Down Notice to exercise a Draw Down request
for the Draw Down Amount indicated below.
Draw Down Amount:
----------------------------------------
Call Option Amount:
--------------------------------------
Draw Down Pricing Period start date:
---------------------
Draw Down Pricing Period end date:
-----------------------
Settlement Date:
-----------------------------------------
Threshold Price:
-----------------------------------------
Minimum Threshold Price: $15.00
---------------------------------
Market Capitalization:
-----------------------------------
Dollar Amount of Common Stock
Currently Unissued under the
Registration Statement:
----------------------------------
Dated:
--------------------
---------------------------------
By:
------------------------------
Name:
Title:
Address:
Facsimile No.:
Wire Instructions:
---------------
Contact Name:
--------------------
Receipt Acknowledged:
Acqua Wellington North American Equities Fund, Ltd.
By:
--------------------------------
Name:
Title:
EXHIBIT E
TO THE COMMON STOCK PURCHASE AGREEMENT
FORM OF CALL OPTION NOTICE
To: ______________
Fax #:
Reference is made to the Common Stock Purchase Agreement dated as of
December 20, 2000 (the "Purchase Agreement") between Leap Wireless
International, Inc., a Delaware corporation (the "Company"), and Acqua
Wellington North American Equities Fund, Ltd. Capitalized terms used and not
otherwise defined herein shall have the meanings given such terms in the
Purchase Agreement.
In accordance with and pursuant to Section 6.2 of the Purchase Agreement,
the Purchaser hereby issues this Call Option Notice to exercise a Call Option
for the Call Option Amount indicated below.
Call Option Amount Exercised:
---------------------------
Number of Shares to be purchased:
-----------------------
VWAP on the date hereof:
--------------------------------
Draw Down Discount Percentage:
--------------------------
Settlement Date:
----------------------------------------
Threshold Price:
----------------------------------------
Minimum Threshold Price: $15.00
--------------------------------
Dated:
----------------
Acqua Wellington North American Equities Fund, Ltd.
By:
------------------------------
Name:
Title:
DISCLOSURE SCHEDULES
RELATING TO THE COMMON STOCK
PURCHASE AGREEMENT, DATED AS OF DECEMBER 20, 2000
BETWEEN LEAP WIRELESS INTERNATIONAL, INC. AND
ACQUA WELLINGTON NORTH AMERICAN EQUITIES FUND, LTD.
ALL SECTION AND SUBSECTION NUMBERS AND LETTERS RELATE AND COINCIDE TO SUCH
NUMBERS AND LETTERS AS SET FORTH IN THE COMMON STOCK PURCHASE AGREEMENT (THE
"AGREEMENT"). ANY TERMS REQUIRING DEFINITION HEREIN ARE DEFINED IN THE
AGREEMENT.
ALL REPRESENTATIONS AND WARRANTIES SET FORTH IN THE AGREEMENT ARE MODIFIED
IN THEIR ENTIRETY BY THESE DISCLOSURE SCHEDULES. THE DISCLOSURES CONTAINED IN
THESE DISCLOSURE SCHEDULES SHALL BE READ IN THEIR ENTIRETY, AND ALL THE
DISCLOSURES SHALL BE READ TOGETHER.