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Exhibit 10.17
WARRANT AGREEMENT
This AGREEMENT (this "Agreement") is made by and between FLUX
U.S.
Corporation, a Delaware corporation ("FLUX U.S.") and ITFS Spectrum
Advisors
LLC, a Delaware limited liability company ("ISA"), as of the 13th
day of
November, 2003 (the "Effective Date"). In consideration of the
mutual covenants
and promises made below, and other good and valuable consideration,
the parties
agree as follows:
1. RELATIONSHIP. FLUX U.S. and HITN, an affiliate of ISA, are
parties to
that certain Master Spectrum Acquisition Agreement dated November
__, 2003 (the
"MSA"). In connection with the MSA, ISA shall earn warrants (the
"Warrants") to
purchase shares of Class A common stock of FLUX U.S. (the "Warrant
Shares")
under this Agreement in consideration of, and based on, ISA's
facilitation of
FLUX U.S.'s acquisition of ITFS/MMDS channels (measured in CPOPs as
defined in
the MSA) from third parties after the closing of the MSA and during
the
twenty-four months following the date of this Agreement. Warrants
will be deemed
earned if ISA makes an introduction to FLUX U.S. which results in
the
"Acquisition," as defined below, of CPOPs. For purposes of this
Agreement, the
term "Acquisition" means any transaction in which FLUX U.S. makes
an acquisition
of ITFS, MDS, or MMDS channels (as they are defined by the
Federal
Communications Commission) through a spectrum license purchase,
lease or
sublease in which ISA has either (x) made an introduction to the
third party
whose CPOPs are subject to the transaction or (y) facilitated the
transaction
with the third party to closing through its efforts and assistance.
FLUX U.S.
and ISA agree to discuss appropriate consideration, if any, that
ISA may be
eligible for in connection with transactions that do not qualify as
Acquisitions
but in which FLUX U.S. purchases, sell, leases, swaps or secures an
option on
ITFS, MDS or MMDS channels and ISA has either (x) made an
introduction to the
third party whose CPOPs are subject to the transaction or (y)
facilitated the
transaction with the third party to closing through its efforts and
assistance.
FLUX U.S. shall have no obligation to negotiate or consummate
Acquisitions.
Warrants shall be earned as of the date of closing of any such
Acquisition and
shall be subject to the issuance of a Warrant in writing promptly
following such
closing.
2. WARRANTS.
2.1 TERMS: WARRANT SHARE LIMITATION. FLUX U.S. shall issue ISA
Warrants to purchase Warrant Shares up to an aggregate share value
(as
determined by the Value of Warrant Shares pursuant to Section 2.3
below) of the
sum of (i) Two Million Fifty Thousand Two Hundred and Sixty Two
Dollars
($2,050,262) plus (ii) the product of $0.05 multiplied by the
number of CPOPs
covered by Extra Spectrum Rights (as defined in the MSA) acquired
by FLUX U.S.
pursuant to Section 1.02 of the MSA (the "Share Maximum"), based on
the
respective valuations of the Warrant Shares as of each date on
which Warrants
are issued to Holder. To the extent the number of CPOPs acquired by
FLUX U.S.
pursuant to the MSA at the First Closing (as defined in the MSA) is
reduced
during the Adjustment Period (as defined below) below 28,448,074
CPOPs as a
result of the exercise of rights of first refusal ("RFRs") or other
post-closing
adjustments, the Share Maximum shall be subject to downward
adjustment by an
amount calculated as the product of $0.05 multiplied by reduction
in the number
of CPOPs as a result of the exercise of such RFRs or other
post-closing
adjustments, and any Warrant issued in excess of the Share Maximum
as adjusted
shall be automatically cancelled and replaced by
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FLUX U.S. with an amended Warrant in an appropriate amount, upon
the delivery of
which ISA or the holder of the Warrant shall immediately surrender
the cancelled
Warrant to FLUX U.S . For purposes of this paragraph, the
"Adjustment Period" is
defined as the period beginning on the closing date of the MSA (the
"Original
Closing") and ending on the day which is one hundred fifty (150)
days
thereafter. Warrants shall be issued as more particularly set forth
in Section
2.2 below. All Warrants issued under this Agreement will be in the
form of the
attached Appendix A and will be priced and issued on the day of
closing of the
Acquisition for which any such Warrant is issued. Notwithstanding
any other
terms or conditions in this Agreement, FLUX U.S. shall not be
obligated under
any circumstances to issue Warrants for more than the Share
Maximum.
2.2 CONDITIONS TO EARNING WARRANTS; WARRANT SHARES CALCULATION.
During the Term (as defined in Section 3 below) and subject to
the Share Maximum, ISA shall earn Warrants and FLUX U.S. shall
issue a Warrant
upon the closing of an Acquisition after the Original Closing and
the transfer
of any CPOPs in connection with the Original Closing. The number of
Warrant
Shares subject to each such Warrant shall be calculated as follows:
The price
paid per CPOP (the "CPOP Price") shall be calculated by FLUX U.S.
for each such
Acquisition. The number of CPOPs acquired by FLUX U.S. in each
Acquisition shall
be multiplied by an amount which is fifty per cent (50%) of the
difference (if
any), between the CPOP Price and Fifty-two cents ($0.52), assuming
the CPOP
Price is less than Fifty-two cents ($0.52). The resulting product
of that
multiplication shall be divided by the Value of the Warrant Shares
(as defined
in Section 2.3 below) as of the date the Acquisition is closed. The
quotient of
that division shall be the number of Warrant Shares earned by ISA
as a result of
that Acquisition, and shall be evidenced in the Warrant issued in
connection
with that Acquisition.
2.3 VALUE OF WARRANT SHARE. The Value of the Warrant Shares shall
be
defined as the greater of (i) the value per Class A common share as
determined
by the board of directors of FLUX U.S. from time to time, as in
effect on the
respective date the Warrant is issued; or (ii) the price per share
of FLUX
U.S.'s common stock in the then most recently completed funding
round of FLUX
U.S. in excess of Two Million Dollars ($2,000,000), or, if such
funding round
did not include common stock but did include preferred stock or
other
convertible securities, the price per share of common stock, based
on converting
such preferred stock or other convertible securities to common
stock pursuant to
the applicable conversion rights.
2.4 CPOP CALCULATION. The CPOP and household numbers listed on
Schedule I hereto shall be controlling with respect to all
calculations of CPOPs
for purposes of this Agreement. For calculations of CPOPs with
respect to
Acquisitions made by Flux that are the subject of this Agreement
for markets
that are other than those listed on Schedule I, the number of CPOPs
will equal
the number of total households within the protected or exclusive
service area
specified in the then current FCC Rules ("Service Area") times the
number of
ITFS, MMDS or MDS Channels licensed to the applicable entity within
such Service
Area. The geographic area encompassed within a Service Area shall
define the
limits of a Market Area for purposes of this Agreement. In the
event of a
dispute over the correct number of households located within a
Service Area for
those markets not listed on Schedule I, the parties agree to
2
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determine the correct number of households using the most
up-to-date commercial
engineering software available for calculating such household
numbers.
2.5 ADJUSTMENTS. The number of Warrant Shares for which
Warrants
become issuable under this Agreement, the Share Maximum, and the
per share
exercise price of the Warrants, shall be subject to proportionate
adjustment
from time to time in the event of any stock split, stock dividend,
combination,
recapitalization or the like, as set forth in the form of Warrant
attached as
Appendix A.
2.6 CPOP PRICE. With respect to any Acquisition, the CPOP Price
shall
be defined and calculated on the same basis as the CPOPs acquired
pursuant to
the MSA.
3. TERM; TERMINATION. This Agreement shall commence and become
effective on
the Effective Date and continue until termination of the MSA and
all other
agreements between FLUX U.S. and an ISA, provided that this
Agreement shall
terminate immediately and without notice at such time as FLUX U.S.
has issued
ISA Warrants under this Agreement for the Share Maximum.
4. OWNERSHIP OF ISA; RESTRICTIONS ON ASSIGNMENT AND TRANSFER;
REPRESENTATIONS AND WARRANTIES.
4.1 OWNERSHIP OF ISA AND TRANSFER. ISA will initially be owned
jointly
by Hispanic Information and Telecommunications Network, Inc.
("HITN") and a
limited liability company wholly owned by Rudolph J. Geist
("Geist"). This
Agreement, and any Warrants issued hereunder, shall not be
assignable or
transferable by ISA except in strict accordance with the
restrictions on
transfer contained in the Warrant. A "Permitted Transferee," for
purposes of the
Warrants issued pursuant to this Agreement, is defined as that term
is defined
in that certain Stockholders' Agreement of FLUX U.S. dated as of
November __,
2003 (the "Stockholders Agreement"). Prior to any issuance of
Warrants or any
permitted assignment or transfer, ISA will provide to FLUX U.S.
copies of its
own organizational documents, and with respect to any assignees or
transferees,
the organizational documents of any such assignee or transferee
entity,
including corporate articles and bylaws, LLC operating agreements,
partnership
agreements, voting or member agreements, and other governance
documents, as
applicable. ISA will provide to FLUX U.S. such further assurances
with respect
to its own ownership or the ownership of any assignee or transferee
entity as
shall be requested by FLU
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