EXHIBIT 10.1
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ADVISORY SERVICES AGREEMENT
between
FLUX U.S. CORPORATION
and
COM HOLDINGS, LLC
Dated as of November 13, 2003
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ADVISORY SERVICES AGREEMENT
This Advisory Services Agreement (this "Agreement") is entered into as of
November 13, 2003, between Flux U.S. Corporation, a Delaware corporation (the
"Company"), and COM Holdings, LLC, a Delaware limited liability company ("COM").
WHEREAS, COM is willing to provide advisory services to the Company on the
terms and subject to the conditions contained in this Agreement;
NOW, THEREFORE, for and in consideration of the premises, the covenants
and agreements set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are acknowledged by the execution and delivery
hereof, the parties agree as follows:
ARTICLE 1
ENGAGEMENT
The Company hereby engages COM to provide advisory services to the
Company. COM shall have no obligations other than as expressly stated in this
Agreement.
ARTICLE 2
SERVICE STANDARDS
COM shall provide its services hereunder in compliance with this Agreement
and all applicable law. In performing its obligations hereunder, COM shall act
in a manner that it reasonably believes to be in or not opposed to the best
interests of the Company consistent with the agreements and standards set forth
herein.
ARTICLE 3
SERVICES TO BE PROVIDED
Section 3.1. Duties.
Subject to the terms and conditions of this Agreement, the Company hereby
engages COM and COM hereby accepts the engagement, to provide advisory and
consulting services to the Company and its Board of Directors, at the request
and direction, from time to time, of the Company's Board of Directors, or of any
duly appointed and acting senior executive officer, including without
limitation, advice as to the development, ownership and operation of
communications services, advice concerning long-range planning and strategy for
the development and growth of the Company, advice and support in connection with
its dealings with federal, state and local regulatory authorities, advice
regarding employment, retention and compensation of employees, procurement and
maintenance of adequate insurance coverage, bookkeeping and accounting services,
and assistance in short-term and long-term financial planning.
Section 3.2. Non-Company Responsibilities.
COM and its representatives are at all times specifically permitted to
engage in any other business ventures and activities including management of
other businesses and companies and including such activities as may be deemed to
be in competition with the Company and shall have no obligation to account to
the Company for any such business ventures or activities.
Section 3.3. Restrictions on Authority.
COM shall not have any authority to enter contracts on behalf of the
Company or to otherwise bind the Company.
ARTICLE 4
COMPENSATION
Section 4.1. Reimbursement.
The Company shall reimburse COM for all out-of-pocket expenses
("Out-of-Pocket Expenses") reasonably incurred by COM for goods and services
provided by third parties to, for or on behalf of the Company (including those
out-of-pocket expenses incurred by COM in traveling to and from and visiting the
business of the Company in connection with providing services under this
Agreement and the fair market rental value of any aircraft that is owned by COM
or an affiliate of COM for the time such aircraft is used by COM for traveling
to and from and visiting the business of the Company). COM shall provide the
Company with a statement setting forth in reasonable detail (and with copies of
invoices or other supporting documentation) the Out-of-Pocket Expenses claimed,
and the Company shall pay to COM such amount within thirty (30) days of receipt
of the statement. Notwithstanding anything to the contrary contained in this
Agreement, in no event will COM be responsible for the payment from its own
funds of any expenses, obligations or liabilities of the Company, unless such
expenses, obligations or liabilities arose directly from the willful misconduct
or gross negligence of COM.
Section 4.2. Advisory Fee.
COM, in consideration of the terms of this Agreement, shall be paid,
commencing on the date hereof, an advisory fee per annum of $800,000 (the
"Advisory Fee"), payable in equal monthly installments of $66,667 due on the
first (1st) day of each month, provided that the first such payment shall be due
on the date hereof and shall be prorated to reflect the Advisory Fee
attributable to the period beginning on the date hereof and ending on the last
day of the month. The amount of the Advisory Fee shall be subject to
re-negotiation from time to time upon the agreement of the parties. As
additional consideration for the terms of this Agreement, the Company shall
issue to COM warrants (the "Warrants") to purchase One Million One Hundred
Twenty-Five Thousand (1,125,000) shares of Class A common stock of the Company,
on the terms stated in the Warrant attached hereto as Exhibit 1 (the "Incentive
Compensation"). The Company shall issue the Warrants contemporaneously with the
Company's execution of this Agreement. The Warrants may be exercised at any time
within ten (10) years of the
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issuance of the Warrants. The exercise price shall be $1.00 per share, except as
adjusted pursuant to the Warrant.
ARTICLE 5
TERM AND TERMINATION
Section 5.1. Term.
This Agreement shall commence on the date hereof and, unless earlier
terminated in accordance herewith, will terminate on the third (3rd) anniversary
of the date hereof (the "Term"). This Agreement will be renewed automatically
for additional one (1) year terms unless either party cancels this Agreement by
written notice to the other party given at least sixty (60) days prior to the
end of the then current term.
Section 5.2. Termination.
(a) By the Company. The Company shall have the right to terminate this
Agreement for any reason, upon not less than ninety (90) days prior written
notice to COM.
(b) By COM. COM may terminate this Agreement:
(i) if the Company has failed to make any payment pursuant to
Article 4 within thirty (30) days following COM's written notice to the
Company of such failure;
(ii) in the event of a material breach of this Agreement by the
Company (other than a payment default) which has not been cured within
thirty (30) days following notice thereof from COM;
(iii) upon the bankruptcy of the Company; or
(iv) at any time upon 120 days prior written notice to the Company.
Section 5.3. Benefits Payable Upon Termination.
Following the termination of this Agreement for any reason, COM shall be
paid all outstanding reimbursable expenses due to COM as of the date of
termination and any Advisory Fee earned, but unpaid, for services rendered to
the Company on or prior to the date of such termination, but, except for the
issuance of the Warrants in payment of the Incentive Compensation, COM shall not
otherwise be entitled to compensation in respect of its services under this
Agreement. If this Agreement terminates other than on the last day of the month,
COM shall promptly reimburse the Company for the amount of the Advisory Fee paid
with respect to such month and attributable to the period beginning on the date
of termination and ending on the last day of such month. Termination of this
Agreement shall not modify the Company's obligation to issue the Warrants in
payment of the Incentive Compensation.
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Section 5.4. Remedies.
The remedies set forth herein are not intended to be exclusive, and all
remedies shall be cumulative and may be exercised concurrently with any other
remedy available to COM or the Company at law or in equity.
Section 5.5. Continuing Obligations.
After receipt of written notice of termination from the Company, but prior
to the effective date of such termination, COM shall continue to perform under
this Agreement unless specifically instructed to discontinue such performance.
In the event of termination, COM and the Company shall remain liable for their
respective obligations accrued under this Agreement prior to the effective date
of termination.
ARTICLE 6
LIMITATIONS OF LIABILITY
Notwithstanding any other provision of this Agreement, COM shall not be
liable for any failure or delay in its performance hereunder or for any
performance which is substandard, except where such failure, delay or
substandard performance is the result of willful misconduct or gross negligence
on the part of COM. COM shall not be responsible to the Company for any
indirect, incidental, consequential or special damages to the Company, the
business of the Company or any subscriber or customer of any business of the
Company or any other person, including any damage to or loss of revenues,
business or goodwill, suffered by any person or entity for any failure of any
system or failure of performance hereunder.
ARTICLE 7
INDEMNIFICATION; EXPENSES
Section 7.1. Indemnification.
In the event COM is threatened to be made a party to any threatened,
pending, or completed action, suit, or proceeding (a "Proceeding"), whether
civil, criminal, administrative, or investigative (whether or not by or in the
right of the Company), by reason of the fact that COM is or was COM of the
Company under the terms hereof, COM shall be entitled to be indemnified by the
Company to the full extent then permitted by law against expenses (including
counsel fees and disbursements and fees and disbursements for mediation,
arbitration, trial and appeal), judgments, fines (including excise taxes
assessed on a person with respect to an employee benefit plan), and amounts paid
in settlement incurred by it in connection with such Proceeding.
Section 7.2. Advancement of Expenses.
The Company shall from time to time, reimburse or advance to COM the funds
necessary for payment of expenses, including attorneys' fees and disbursements,
incurred in connection with any Proceeding, in advance of the final disposition
of such Proceeding, provided the Company receives an undertaking by or on behalf
of COM to
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repay any such amount so advanced if it shall ultimately be determined by final
judicial decision from which there is no further right of appeal that COM is not
entitled to be indemnified for such expenses.
ARTICLE 8
MISCELLANEOUS
Section 8.1. Counterparts.
This Agreement may be executed in several counterparts, all of which taken
together shall be deemed to constitute one and the same instrument.
Section 8.2. Construction.
Each of the parties hereto acknowledges that it has reviewed this
Agreement and that the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Agreement or any amendments hereto.
Section 8.3. Benefit; Assignment.
This Agreement shall be binding upon and inure to the benefit of all
parties hereto and their respective successors and permitted assigns.
Section 8.4. Complete Agreement.
This Agreement contains the entire agreement and understanding of the
parties with respect to the subject matter hereof, and supersedes all prior
understandings, agreements, and representations written or oral, relating to
such subject matter.
Section 8.5. Amendment.
This Agreement may not be amended except by a writing signed by each of
the parties.
Section 8.6. Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS, AND NOT THE LAWS OF CONFLICT, OF THE STATE OF WASHINGTON, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
Section 8.7. Severability.
If any provision of this Agreement or the application thereof to any
person or circumstance shall for any reason or to any extent be invalid or
unenforceable, the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected thereby, but,
rather, shall be enforced to the extent
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permitted by law. Furthermore, in lieu of such an illegal, invalid or
unenforceable provision, there shall be added automatically as part of this
Agreement a provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid or enforceable.
Section 8.8. Further Assurances.
The parties agree that they will take all such further actions and execute
and deliver all such further instruments and documents as may be required in
order to effectuate the agreements set forth in this Agreement.
Section 8.9. Waiver.
No failure or delay on the part of the parties or either of them in
exercising any right, power or privilege hereunder, nor any course of dealing
between the parties shall operate as a waiver of any such right, power or
privilege nor shall any single or partial exercise of any such right, power or
privilege preclude the simultaneous or later exercise of any other right, power
or privilege. The rights and remedies herein expressly provided are cumulative
and are not exclusive of any rights or remedies which the parties or either of
them would otherwise have.
Section 8.10. Notices.
All notices or other communications hereunder shall be in writing and
shall be deemed to have been duly given or made (i) upon delivery if delivered
personally (by courier service or otherwise) or (ii) upon confirmation of
dispatch if sent by facsimile transmission (which confirmation shall be
sufficient if shown by evidence produced by the facsimile machine used for such
transmission), in each case to the applicable addresses set forth below (or such
other address as the recipient may specify in accordance with this Section):
to COM at:
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: President
to the Company at:
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: President
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with a copy to:
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP
2300 ▇▇▇▇▇ Fargo Tower
▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
[SIGNATURES SET FORTH ON THE FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
COMPANY:
FLUX U.S. CORPORATION
By: /s/ R. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
_____________________________________
R. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Its Vice President
COM:
COM HOLDINGS, LLC
By: EAGLE RIVER INC., a Washington
corporation, Its Manager
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
__________________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, its Vice President
[Signature Page to Advisory Services Agreement]
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EXHIBIT 1
FORM OF WARRANT
TABLE OF CONTENTS
Page
----
ARTICLE 1 Engagement............................................. 1
ARTICLE 2 Service Standards...................................... 1
ARTICLE 3 Services to be Provided................................ 1
ARTICLE 4 Compensation........................................... 2
ARTICLE 5 Term and Termination................................... 3
ARTICLE 6 Limitations of Liability............................... 4
ARTICLE 7 Indemnification; Expenses.............................. 4
ARTICLE 8 Miscellaneous.......................................... 5
EXHIBIT 1
FORM OF WARRANT AGREEMENT
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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
No. WA-1
Issued: November 13, 2003
WARRANT TO PURCHASE
SHARES OF CLASS A COMMON STOCK OF
FLUX U.S. CORPORATION
(VOID AFTER NOVEMBER 13, 2013)
This certifies that COM Holdings, LLC, a Delaware limited liability
company, (the "Holder"), for value received, is entitled to purchase from FLUX
U.S. Corporation., a Delaware corporation (the "Company"), having a place of
business at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, One Million
One Hundred Twenty Five Thousand (1,125,000) fully paid and nonassessable shares
of the Company's Class A Common Stock (the "Common Stock").
The exercise price per share of this Warrant is one dollar ($1.00) (the
"Stock Purchase Price") payable in lawful money of the United States or
otherwise as hereinafter provided. If payment is by check and the check is not a
check issued by a regulated banking or financial institution the shares to be so
issued shall not be considered issued until such check has cleared.
This Warrant may be exercised at any time or from time to time up to and
including 5:00 p.m. (Pacific Time) on the tenth anniversary of the issuance date
of this Warrant (the "Expiration Date"), upon surrender to the Company at its
principal office (or at such other location as the Company may advise the Holder
in writing) of this Warrant properly endorsed with the Subscription Form
attached hereto as Exhibit A duly filled in and signed and, if applicable, upon
payment in cash or by check of the aggregate Stock Purchase Price for the number
of shares for which this Warrant is being exercised determined in accordance
with the provisions hereof. The Stock Purchase Price and the number of shares
purchasable hereunder are subject to adjustment as provided in Section 3 of this
Warrant.
1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
1.1 GENERAL. This Warrant is exercisable at the option of the Holder of
record hereof, at any time or from time to time, up to the Expiration Date for
all or any part of the shares of Common Stock (but not for a fraction of a
share) which may be purchased hereunder.
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1.2 ISSUANCE OF CERTIFICATES. The Company agrees that the shares of Common
Stock purchased under this Warrant shall be and are deemed to be issued to the
Holder hereof as the record owner of such shares as of the close of business on
the date on which the Holder surrenders this Warrant, properly endorsed, and the
completed, executed Subscription Form (a copy of which is attached hereto as
Exhibit A), at the offices of the Company, upon payment made for such shares as
set forth in this Warrant. Certificates for the shares of Common Stock so
purchased, together with any other securities or property to which the Holder
hereof is entitled upon such exercise, shall be delivered to the Holder hereof
by the Company at the Company's expense within a reasonable time (not to exceed
ten (10) business days) after the rights represented by this Warrant have been
so exercised. Each stock certificate so delivered shall be in such denominations
of Common Stock as may be requested by the Holder hereof and shall be registered
in the name of such Holder or, subject to the provisions of Section 7, such
Holder's designee. In case of a purchase of less than all the shares which may
be purchased under this Warrant, the Company shall cancel this Warrant and
execute and deliver a new Warrant or Warrants of like tenor for the balance of
the shares purchasable under the Warrant surrendered upon such purchase to the
Holder hereof within a reasonable time (not to exceed ten (10) business days).
1.3 CASHLESS EXERCISE. Notwithstanding any provisions herein to the
contrary, in lieu of exercising this Warrant for cash (x) the Holder may pay the
exercise price by surrendering shares of Common Stock or other equity securities
of the Company with an aggregate fair market value equal to the aggregate Stock
Purchase Price, or (y) if the fair market value of one share of the Company's
Common Stock is greater than the Stock Purchase Price (at the date of
calculation as set forth below), the Holder may elect to receive shares equal to
the value (as determined below) of this Warrant (or the portion thereof being
canceled) by surrender of this Warrant at the principal office of the Company
together with the properly endorsed Form of Subscription and notice of such
election in which event the Company shall issue to the Holder a number of shares
of Common Stock computed using the following formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Common Stock to be issued to the Holder
Y = the number of shares of Common Stock purchasable under the
Warrant or, if only a portion of the Warrant is being exercised,
the portion of the Warrant being canceled (at the date of such
calculation)
A = the Fair Market Value, defined below, of one share of the
Company's Common Stock (at the date of such calculation)
B = Stock Purchase Price (as adjusted to the date of such
calculation)
For purposes of the above calculation, the Fair Market Value of one share of
Common Stock shall be determined by the Company's Board of Directors in good
faith; provided,
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however, that where there exists a public market for the Company's Common Stock
at the time of such exercise, the Fair Market Value per share shall be the
average of the closing bid and ask prices of the Common Stock quoted in the
Over-The-Counter Market Summary or the last reported sale price of the Common
Stock or the closing price quoted on the Nasdaq National Market or on any
exchange on which the Common Stock is listed, whichever is applicable, as
published in the Western Edition of The Wall Street Journal for the five (5)
trading days prior to the date of calculation of Fair Market Value.
Notwithstanding the foregoing, in the event the Warrant is exercised in
connection with the Company's initial public offering of Common Stock, the Fair
Market Value per share shall be the per share offering price to the public of
the Company's Common Stock.
2. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company covenants and
agrees that all shares of Common Stock that may be issued upon the exercise of
the rights represented by this Warrant will, upon issuance, be duly authorized,
validly issued, fully paid and nonassessable and free from all preemptive rights
of any stockholder and free of all taxes, liens and charges with respect to the
issue thereof. The Company further covenants and agrees that, during the period
within which the rights represented by this Warrant may be exercised, the
Company will at all times have authorized and reserved or, shall upon request of
the Holder authorize and reserve, for the purpose of issue or transfer upon
exercise of the subscription rights evidenced by this Warrant, a sufficient
number of shares of authorized but unissued Common Stock, or other securities
and property, when and as required to provide for the exercise of the rights
represented by this Warrant. The Company will take all such action as may be
necessary to assure that such shares of Common Stock may be issued as provided
herein without violation of any applicable law or regulation, or of any
requirements of any domestic securities exchange upon which the Common Stock may
be listed, including, but not limited to, amending its Certificate of
Incorporation to provide sufficient reserves of shares of Common Stock;
provided, however, that the Company shall not be required to effect a
registration under Federal or State securities laws with respect to such
exercise. The Company will not take any action that would result in any
adjustment of the Stock Purchase Price (as set forth in Section 3 hereof) if the
total number of shares of Common Stock issuable after such action upon exercise
of all outstanding warrants and options, together with all shares of Common
Stock then outstanding, would exceed the total number of shares of Common Stock
then authorized by the Company's Certificate of Incorporation.
3. ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES. The Stock Purchase
Price and the number of shares purchasable upon the exercise of this Warrant
shall be subject to adjustment from time to time upon the occurrence of certain
events described in this Section 3. Upon each adjustment of the Stock Purchase
Price, the Holder of this Warrant shall thereafter be entitled to purchase, at
the Stock Purchase Price resulting from such adjustment, the number of shares
obtained by multiplying the Stock Purchase Price in effect immediately prior to
such adjustment by the number of shares purchasable pursuant hereto immediately
prior to such adjustment, and dividing the product thereof by the Stock Purchase
Price resulting from such adjustment.
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3.1 SUBDIVISION OR COMBINATION OF STOCK. In case the Company shall at any
time split or subdivide its outstanding shares of Common Stock into a greater
number of shares, the Stock Purchase Price in effect immediately prior to such
split or subdivision shall be proportionately reduced, and conversely, in case
the outstanding shares of Common Stock of the Company shall be combined into a
smaller number of shares, the Stock Purchase Price in effect immediately prior
to such combination shall be proportionately increased.
3.2 DIVIDENDS IN COMMON STOCK, OTHER STOCK, PROPERTY, RECLASSIFICATION. If
at any time or from time to time the Holders of Common Stock (or any shares of
stock or other securities at the time receivable upon the exercise of this
Warrant) shall have received or become entitled to receive, without payment
therefor:
3.2.1 Common Stock or any shares of stock or other securities that
are at any time directly or indirectly convertible into or exchangeable for
Common Stock, or any rights or options to subscribe for, purchase or otherwise
acquire any of the foregoing by way of dividend or other distribution;
3.2.2 Any cash paid or payable otherwise than as a cash dividend out
of current earnings; or
3.2.3 Common Stock or additional stock or other securities or
property (including cash) by way of spin-off, split-up, reclassification,
combination of shares or similar corporate rearrangement (other than (i) shares
of Common Stock issued as a stock split, adjustments in respect of which shall
be covered by the terms of Section 3.1 above or (ii) an event for which
adjustment is otherwise made pursuant to Section 3.3 below);
then in each such case, the Holder hereof shall, upon the exercise of this
Warrant, be entitled to receive, in addition to the number of shares of Common
Stock receivable thereupon, and without payment of any additional consideration
therefor, the amount of stock and other securities and property (including cash
in the cases referred to in clauses 3.2.2 and 3.2.3 above) which such Holder
would hold on the date of such exercise had he or it been the holder of record
of such Common Stock as of the date on which holders of Common Stock received or
became entitled to receive such shares or all other additional stock and other
securities and property.
3.3 REORGANIZATION, RECLASSIFICATION OR RECAPITALIZATION. If any
recapitalization, reclassification or capital reorganization of the capital
stock of the Company shall be effected in such a way that holders of Common
Stock shall be entitled to receive stock, securities, or other assets or
property (a "Restructuring"), then, as a condition of such Restructuring, lawful
and adequate provisions shall be made whereby the Holder hereof shall thereafter
have the right to purchase and receive (in lieu of or in addition to the shares
of the Common Stock of the Company immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby) such shares of
stock, securities or other assets or property as may be issued or payable with
respect to or in exchange for a number of outstanding shares of such Common
Stock equal to the number of shares of such stock immediately
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theretofore purchasable and receivable upon the exercise of the rights
represented hereby and appropriate provision shall be made with respect to the
rights and interests of the Holder of this Warrant to the end that the
provisions hereof (including, without limitation, provisions for adjustments of
the Stock Purchase Price and of the number of shares purchasable and receivable
upon the exercise of this Warrant) shall thereafter be applicable, as nearly as
may be, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise hereof.
3.4 NOTICE OF ADJUSTMENT. Upon any adjustment of the Stock Purchase Price,
any increase or decrease in the number of shares purchasable upon the exercise
of this Warrant or any change in the securities or other property deliverable
upon exercise of this Warrant, the Company shall give written notice thereof, by
first class mail, postage prepaid, addressed to the registered Holder of this
Warrant at the address of such Holder as shown on the books of the Company. The
notice shall be signed by the Company's President and shall state the Stock
Purchase Price resulting from such adjustment, the increase or decrease, if any,
in the number of shares purchasable at such price upon the exercise of this
Warrant or the amount of securities or other property deliverable upon such
exercise, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based.
3.5 OTHER NOTICES. If at any time:
3.5.1 the Company shall declare any cash dividend upon its Common
Stock;
3.5.2 the Company shall declare any dividend upon its Common Stock
payable in stock or make any special dividend or other distribution to the
holders of its Common Stock;
3.5.3 there shall be any Restructuring;
3.5.4 there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company; or
3.5.5 there shall be an initial public offering of Company
securities;
then, in any one or more of said cases, the Company shall give, by first class
mail, postage prepaid, overnight courier or facsimile, addressed to the Holder
of this Warrant at the address of such Holder as shown on the books of the
Company, (a) at least fifteen (15) days prior written notice of the date on
which the books of the Company shall close or a record shall be taken for such
dividend, distribution or subscription rights or for determining rights to vote
in respect of any such Restructuring, dissolution, liquidation or winding-up,
and (b) in the case of any such Restructuring, dissolution, liquidation,
winding-up or public offering, at least fifteen (15) days prior written notice
of the date when the same shall take place; provided, however, that if any
response on the part of the Holder is otherwise required, the Holder shall make
its best efforts to respond to such notice as early as possible after the
receipt thereof. Any notice given in accordance with the foregoing clause (a)
shall also specify, in the case of any such dividend, distribution or
subscription rights, the date on which the holders of Common
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Stock shall be entitled thereto. Any notice given in accordance with the
foregoing clause (b) shall also specify the date on which the holders of Common
Stock shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such Restructuring, dissolution, liquidation,
winding-up or public offering, as the case may be.
3.6 CERTAIN EVENTS. If any change in the outstanding Common Stock of the
Company or any other event occurs as to which the other provisions of this
Section 3 are not strictly applicable or if strictly applicable would not fairly
protect the purchase rights of the Holder of the Warrant in accordance with such
provisions, the Board of Directors of the Company shall make an adjustment in
the number and class of shares available under the Warrant, the Stock Purchase
Price or the application of such provisions, so as to protect such purchase
rights as aforesaid. The adjustment shall be such as will give the Holder of the
Warrant upon exercise for the same aggregate Stock Purchase Price the total
number, class and kind of shares as it would have owned had the Warrant been
exercised prior to the event and had it continued to hold such shares until
after the event requiring adjustment.
4. ISSUE TAX. The issuance of certificates for shares of Common Stock upon the
exercise of the Warrant shall be made without charge to the Holder of the
Warrant for any issue tax (other than any applicable income taxes) in respect
thereof; provided, however, that the Company shall not be required to pay any
tax that may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the then Holder of the
Warrant being exercised.
5. CLOSING OF BOOKS. The Company will at no time close its transfer books
against the transfer of any warrant or of any shares of Common Stock issued or
issuable upon the exercise of any warrant in any manner that interferes with the
timely exercise of this Warrant.
6. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Nothing contained in
this Warrant shall be construed as conferring upon the Holder hereof the right
to vote or to consent or to receive notice as a stockholder of the Company or
any other matters or any rights whatsoever as a stockholder of the Company. No
dividends or interest shall be payable or accrued in respect of this Warrant or
the interest represented hereby or the shares purchasable hereunder until, and
only to the extent that, this Warrant shall have been exercised. No provision
hereof in the absence of affirmative action by the Holder to purchase shares of
Common Stock, and no mere enumeration herein of the rights or privileges of the
Holder hereof, shall give rise to any liability of such Holder for the Stock
Purchase Price or as a stockholder of the Company, whether such liability is
asserted by the Company or by its creditors.
7. TRANSFER RESTRICTIONS. Subject to (i) delivery of a written acknowledgement
by a transferee of this Warrant or any rights under this Warrant, that the
transferee is bound by the terms of this Warrant and will be, upon exercise of
this Warrant, bound by the terms of that certain Stockholders' Agreement dated
November 13, 2003 between the Company and certain shareholders and (ii)
compliance with applicable federal and state securities laws, this Warrant and
all rights hereunder are transferable, in whole or
8
in part, without charge to the Holder hereof (except for transfer taxes), upon
surrender of this Warrant properly endorsed and in compliance with such
provisions. The Company will maintain a register (the "Warrant Register")
containing the names and addresses of the Holder or Holders. Any Holder of this
Warrant or any portion thereof may change its address as shown on the Warrant
Register by written notice to the Company requesting such change. Any notice or
written communication required or permitted to be given to the Holder may be
delivered or given by mail to such Holder as shown on the Warrant Register and
at the address shown on the Warrant Register. Until this Warrant is transferred
on the Warrant Register of the Company, the Company may treat the Holder as
shown on the Warrant Register as the absolute owner of this Warrant for all
purposes, notwithstanding any notice to the contrary. This Warrant may not be
transferred or assigned without compliance with all applicable federal and state
securities laws by the transferor and the transferee. The Holder further agrees
not to make any disposition of all or any portion of this Warrant or any shares
of Common Stock or any security into or for which such Common Stock is exchanged
unless and until the transferee has agreed in writing for the benefit of the
Company to be bound by this Section 7 to the extent such section is then
applicable, and:
(A) There is then in effect a registration statement under the 1933
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(B) (i) the Holder shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition and (ii) if reasonably
requested by the Company, the Holder shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such securities under the 1933 Act.
8. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights and
obligations of the Company, of the holder of this Warrant and of the holder of
shares of Common Stock issued upon exercise of this Warrant, referred to in
Section 7, shall survive the exercise of this Warrant.
9. MODIFICATION AND WAIVER. The terms of this Warrant may be amended, or the
observance of any term of this Warrant may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holder of this Warrant.
10. NOTICES. Any notice, request or other document required or permitted to be
given or delivered to the Holder hereof or the Company shall be delivered or
shall be sent by first-class mail, postage prepaid, to the Holder at its address
as shown on the Warrant Register or to the Company at the address indicated
therefor in the first paragraph of this Warrant, or such other address as either
may from time to time provide to the other.
11. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings of the
several sections and paragraphs of this Warrant are inserted for convenience
only and
9
do not constitute a part of this Warrant. This Warrant shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by,
the laws of the State of Washington.
12. LOST WARRANTS. The Company represents and warrants to the Holder hereof that
upon receipt of evidence reasonably satisfactory to the Company of the loss,
theft, destruction, or mutilation of this Warrant and, in the case of any such
loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory
to the Company, or in the case of any such mutilation upon surrender and
cancellation of such Warrant, the Company, at its expense, will make and deliver
a new Warrant, of like tenor, in lieu of the lost, stolen, destroyed or
mutilated Warrant.
13. FRACTIONAL SHARES. No fractional shares shall be issued upon exercise of
this Warrant. The Company shall, in lieu of issuing any fractional share, pay
the Holder entitled to such fraction a sum in cash equal to such fraction
multiplied by the then effective Fair Market Value of the Common Stock.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its President, thereunto duly authorized as of the date first
written above.
FLUX U.S. CORPORATION
a Delaware corporation
By: ____________________________________________
R. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Vice President
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EXHIBIT A
SUBSCRIPTION FORM
Date:______________, 20___
FLUX U.S. Corporation
_____________________
_____________________
Ladies and Gentlemen:
[ ] The undersigned hereby elects to exercise the warrant issued to it by FLUX
U.S. Corporation (the "Company") and dated ______________, 200_, Warrant
No. ___ (the "Warrant") and to purchase thereunder __________ shares of
the Class A Common Stock of the Company (the "Shares") at a purchase price
of $1.00 per Share, or an aggregate purchase price of
_______________________ ($__________) (the "Purchase Price").
[ ] The undersigned hereby elects to convert ___________________ percent
(___%) of the value of the Warrant pursuant to the provisions of Section
1.3 of the Warrant.
Pursuant to the terms of the Warrant the undersigned has delivered the
Purchase Price herewith in full in cash or by certified check or wire transfer.
The undersigned also makes the representations set forth on the attached Exhibit
B of the Warrant.
Very truly yours,
_______________________________________
By:____________________________________
Title:_________________________________
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EXHIBIT B
INVESTMENT REPRESENTATIONS
THIS AGREEMENT MUST BE COMPLETED, SIGNED AND RETURNED TO FLUX U.S. CORPORATION
ALONG WITH THE SUBSCRIPTION FORM BEFORE THE COMMON STOCK ISSUABLE UPON EXERCISE
OF THE WARRANT DATED __________________, 200__, WILL BE ISSUED.
_____________________
FLUX U.S. Corporation
_______________________
_______________________
Ladies and Gentlemen:
The undersigned, _________________________ ("Purchaser"), intends to
acquire up to ______________ shares of the Class A Common Stock (the "Common
Stock") of FLUX U.S. Corporation (the "Company") from the Company pursuant to
the exercise or conversion of certain Warrants to purchase Common Stock held by
Purchaser. The Common Stock will be issued to Purchaser in a transaction not
involving a public offering and pursuant to an exemption from registration under
the Securities Act of 1933, as amended (the "1933 Act") and applicable state
securities laws. Purchaser has been advised that the Common Stock has not been
registered under the 1933 Act or state securities laws on the ground that this
transaction is exempt from registration, and that reliance by the Company on
such exemptions is predicated in part on Purchaser's representations set forth
in this letter. Accordingly, Purchaser represents, warrants and agrees as
follows:
1. Purchaser is acquiring the Common Stock for its own account and
beneficial interest to hold for investment and not for sale or with a view to
distribution of the Common Stock or any part thereof. Purchaser has no present
intention of selling (in connection with a distribution or otherwise), granting
any participation in, or otherwise distributing the same, and does not presently
have reason to anticipate a change in such intention.
2. Purchaser acknowledges that it has received all the information it has
requested from the Company and considers necessary or appropriate for deciding
whether to acquire the Common Stock. Purchaser represents that it has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the offering of the Common Stock and to obtain any
additional information necessary to verify the accuracy of the information given
the Purchaser. Purchaser further represents that it has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risk of this investment.
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3. Purchaser is an "accredited investor" as such term is defined in Rule
501 under the ▇▇▇▇ ▇▇▇.
4. Purchaser acknowledges that investment in the Common Stock involves a
high degree of risk, and represents that it is able, without materially
impairing its financial condition, to hold the Common Stock for an indefinite
period of time and to suffer a complete loss of its investment.
5. Purchaser has been informed that under the 1933 Act, the Common Stock
must be held indefinitely unless it is subsequently registered under the 1933
Act or unless an exemption from such registration (such as Rule 144) is
available with respect to any proposed transfer or disposition by Purchaser of
the Common Stock. Purchaser further agrees that the Company may refuse to permit
Purchaser to sell, transfer or dispose of the Common Stock (except as permitted
under Rule 144) unless there is in effect a registration statement under the
1933 Act and any applicable state securities laws covering such transfer, or
unless Purchaser furnishes an opinion of counsel reasonably satisfactory to
counsel for the Company, to the effect that such registration is not required.
Purchaser shall not make any sale, transfer or other disposition of the Common
Stock in violation of the 1933 Act or the General Rules and Regulations
promulgated thereunder by the Securities and Exchange Commission or in violation
of any applicable state securities law.
6. Purchaser also understands and agrees that there will be placed
on the certificate(s) for the Common Stock, or any substitutions therefor, a
legend stating in substance:
"The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended (the "1933 Act"), or any state
securities laws. These shares have been acquired for investment and may
not be sold or otherwise transferred in the absence of an effective
registration statement for these shares under the 1933 Act and applicable
state securities laws, or, if requested by the Company, an opinion of
counsel satisfactory to the Company that registration is not required and
that an applicable exemption is available."
Purchaser has carefully read this letter and has discussed its
requirements and other applicable limitations upon Purchaser's resale of the
Common Stock with Purchaser's counsel.
Very truly yours,
___________________________________
By: _______________________________
Title: ____________________________
ii
ASSIGNMENT OF ADVISORY SERVICES AGREEMENT
THIS ASSIGNMENT (this "Assignment") is made and delivered on this ___ day
of ____________ , 2003 by and between COM Holdings, LLC, a Washington limited
liability company ("Assignor") and Eagle River, Inc., a Washington corporation
("Assignee").
RECITALS
A. Assignor has agreed to provide advisory services to Flux U.S.
Corporation, a Delaware corporation ("FUS"), pursuant to that certain Advisory
Services Agreement dated November 13, 2003 by and between Assignor and FUS (as
the same may be amended, the "Agreement").
B. Assignor desires to assign to Assignee all of Assignor's right, title
and interest in and under the Agreement with the exception of warrants
previously granted to Assignor under the Agreement; and Assignee desires to
accept such assignment and assume all of Assignor's duties and obligations
thereunder.
Assignor and Assignee hereby agree as follows:
1. Assignment. Assignor does hereby assign, grant, transfer, convey, and
set over unto Assignee all of Assignor's rights, title and interest in and to
the Agreement, with the exception of warrants previously granted under the
Agreement, free and clear of all encumbrances, together with such other rights,
causes of action and remedies as may arise by operation of law, in law or
equity, in connection with the Agreement.
2. Acceptance. Assignee hereby accepts such assignment and assumes and
agrees to perform all of Assignor's duties and obligations arising under the
Agreement.
3. No Amendment. This Assignment and Assumption is made subject to and
with the benefit of the respective representations and warranties, covenants,
terms, conditions and other provisions of the Agreement, which shall survive the
execution and delivery of this Assignment. This Assignment shall not in any way
supersede, modify, alter or amend the Agreement, which remains in full force and
effect and the parties thereto shall have the rights, duties and obligations
provided for thereunder, nor shall it subject Assignee to any greater
liabilities, obligations or duties in connection therewith than would have been
enforceable against Assignor. In the event of any conflict or other
inconsistency between this Assignment and the Agreement, the Agreement shall be
the controlling agreement.
4. Binding Effect. This Assignment and Assumption shall be binding upon
and shall inure to the benefit of the parties thereto and their respective
successors and assigns.
5. Governing Law. This Assignment and Assumption shall be governed by
and interpreted in accordance with the laws of the State of Washington.
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This Assignment and Assumption may be executed in any number of
counterparts, each of which shall be an original, and all of which shall
together constitute one and the same agreement.
IN WITNESS WHEREOF, Assignee and Assignor have caused this Assignment to
be executed in their names and on their behalf by their duly authorized
officers, on the date first written above.
ASSIGNOR: COM HOLDINGS, LLC, a Washington limited
liability company
By: EAGLE RIVER, INC., a Washington
corporation, Its Manager
By: ______________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Vice President
ASSIGNEE: EAGLE RIVER, INC., a Washington corporation
By: ____________________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Vice President
The undersigned hereby acknowledges and consents to the above-referenced
Assignment.
FLUX U.S. CORPORATION., a Delaware
corporation
By: ____________________________________
R. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Vice President
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