UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________
FORM 10-Q
_____________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended June 30, 1999
Commission file number 333-3856
__________________________________
WORLD WIRELESS COMMUNICATIONS, INC.
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(Exact name of registrant as specified in its charter)
Nevada 87-0549700
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(State of other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
2441 South 3850 West, West Valley City, Utah 84120
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(Address of principal executive offices (Zip Code)
Registrant's telephone number (801) 575-6600
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Indicate by check mark whether registrant (1) filed all reports
required to be filed by Section 13 or 15 (d) of the Exchange Act
during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No __.
As of June 30, 1999 there were 17,492,939 shares of the
Registrant's Common Stock, par value $0.001, issued and
outstanding.
<PAGE>
TABLE OF CONTENTS
PART I. Financial Information
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets - as of June 30, 1999
and December 31, 1998 . . . . . . . . . . . . . . . . . . . . . 1
Condensed Consolidated Statements of Operation -
for the three-month and six-month periods ended June 30,
1999 and June 30, 1998. . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Cash Flows - for
the six-month periods ended June 30, 1999 and June 30, 1998 . . 4
Notes to Condensed Consolidated Financial Statements. . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operation . . . . . . . . . . . . . . . . . . . . 9
Part II. Other Information
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 17
Item 2. Changes in Senior Securities. . . . . . . . . . . . . . . . . . . 18
Item 6. Exhibits and Reports on Form 10-K . . . . . . . . . . . . . . . . 19
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
WORLD WIRELESS COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
June 30, December 31,
1999 1999
----------- ----------
Current Assets
Cash and cash equivalents $ 675,916 $ 614,897
Investment in securities available-for-sale 137,648 137,648
Trade receivables, net of allowance for
doubtful accounts 193,568 327,387
Other receivables 93,698 77,005
Inventory 626,577 550,239
Prepaid expenses 20,269 18,594
----------- ----------
Total Current Assets 1,747,676 1,725,770
Equipment 2,153,035 2,085,930
Less accumulated depreciation (1,507,999) (1,047,285)
----------- -----------
Net Equipment 645,036 1,038,645
Goodwill, net of accumulated amortization 857,596 957,794
Other Assets, net of accumulated amortization 377,169 414,381
----------- -----------
Total Assets $ 3,627,477 $ 4,136,590
=========== ===========
CONTINUED)
The accompanying notes are an integral part of these condensed
consolidated financial statements.
-1-
<PAGE>
WORLD WIRELESS COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' DEFICIT
June 30, December 31,
1999 1998
----------- -----------
Current Liabilities
Trade accounts payable $ 491,877 $ 982,506
Accrued liabilities 998,554 880,638
Notes payable 2,609,857 2,992,858
Obligation under capital leases -
current portion 162,797 197,626
----------- -----------
Total Current Liabilities 4,263,085 5,053,628
Long-Term Obligation Under Capital Leases 45,281 84,968
Mandatorily Redeemable Preferred Stock
Liquidation Preference of $650,000 650,000 -
Stockholders' Deficit
Common stock - $0.001 par value; 50,000,000
shares authorized; issued and outstanding:
17,492,939 shares at June 30, 1999 and
13,920,400 shares at December 31, 1998 17,492 13,920
Additional paid-in capital 29,594,486 25,419,026
Unrealized gain on marketable equity securities 62,648 62,648
Unearned compensation (38,500) (70,518)
Receivable from shareholder (66,828) (66,828)
Accumulated deficit (30,900,187) (26,360,254)
----------- -----------
Total Stockholders' Deficit (1,330,889) (1,002,006)
Total Liabilities and Stockholders' Deficit $ 3,627,477 $ 4,136,590
=========== ===========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
-2-
<PAGE>
WORLD WIRELESS COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
------------------------ ------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales $ 639,624 $ 1,058,074 $ 1,672,999 $ 2,366,957
Cost of Sales 559,586 900,129 1,381,271 1,556,577
----------- ----------- ----------- -----------
Gross Profit 80,038 157,945 291,728 810,380
Expenses
Research and development
expense 428,805 1,272,763 670,070 1,936,512
General and administrative
expenses 1,196,978 1,269,140 2,329,736 2,654,236
Amortization of goodwill 50,099 401,495 100,198 802,990
Interest income (5,924) - (10,606) -
Interest expense 617,292 201,076 1,092,086 225,657
----------- ----------- ----------- -----------
Total Expenses 2,287,250 3,144,474 4,181,484 5,619,395
----------- ----------- ----------- -----------
Loss From Operations (2,207,212) (2,986,529) (3,889,756) (4,809,015)
Other Income - - - 319,528
----------- ----------- ----------- -----------
Net Loss $(2,207,212) $(2,986,529) $(3,889,756) $(4,489,487)
Preferred Stock Dividend 650,000 - 650,000 -
----------- ----------- ----------- -----------
Net Loss Applicable to
Common Stockholders $(2,857,212) $(2,986,529) $(4,539,756) $(4,489,487)
=========== =========== =========== ===========
Basic and Diluted Loss Per
Common Share $ (0.17) $ (0.27) $ (0.28) $ (0.42)
=========== =========== =========== ===========
Weighted Average Number of
Common Shares Used in Per
Share Calculation 17,135,024 11,141,692 16,081,399 10,807,073
=========== =========== =========== ===========
<FN>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
</FN>
</TABLE>
-3-
<PAGE>
WORLD WIRELESS COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Six
Months Ended
June 30,
-------------------------
1999 1998
----------- -----------
Cash Flows From Operating Activities
Net Loss $(3,889,756) $(4,489,487)
Adjustments to reconcile net loss
to net cash used by operating activities:
Amortization of goodwill 100,198 802,990
Depreciation and amortization 497,926 374,429
Amortization of debt discount 325,448 144,628
Purchased research and development - 300,000
Amortization of unearned compensation 57,936 -
Compensation for stock options 21,540 506,890
Stock issued for interest 93,698 -
Stock issued for services 231,616 -
Valuation allowance on inventory and
other assets - 239,066
Gain on sale of business assets - (319,528)
Changes in operating assets and liabilities:
Accounts receivable 117,126 (250,904)
Inventory (76,338) (158,647)
Prepaid expenses/other assets (1,675) (2,406)
Accounts payable (490,629) (37,055)
Accrued liabilities 117,916 207,025
----------- -----------
Net Cash and Cash Equivalents Used By
Operating Activities (2,894,994) (2,682,999)
----------- -----------
Cash Flows From Investing Activities
Payments for the purchase of property
and equipment (67,105) (141,231)
Proceeds from sale of business assets
and property - 372,499
Proceeds from receivable from shareholder - 10,000
Loan to a related company - (56,410)
----------- -----------
Net Cash and Cash Equivalents Provided
by (Used by) Investing Activities (67,105) 184,858
----------- -----------
(CONTINUED)
The accompanying notes are an integral part of these condensed consolidated
financial statements.
-4-
<PAGE>
WORLD WIRELESS COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
For the Six
Months Ended
June 30,
-------------------------
1999 1998
----------- -----------
Cash Flows From Financing Activities
Proceeds from issuance of common stock $ 2,356,083 $ 1,047,407
Proceeds from issuance of preferred stock 400,000 -
Proceeds from borrowings, net of discounts 1,600,000 2,900,000
Principal payments on notes payable (1,258,449) (389,665)
Principal payments on obligation under
capital lease (74,516) (126,634)
----------- -----------
Net Cash and Cash Equivalents Provided
By Financing Activities 3,023,118 3,431,108
----------- -----------
Net Increase In Cash and Cash Equivalents 61,019 932,967
Cash and Cash Equivalents - Beginning of Period 614,897 218,234
----------- -----------
Cash and Cash Equivalents - End of Period $ 675,916 $ 1,151,201
=========== ===========
Supplemental Cash Flow Information -
Cash paid for interest was $25,228 and $35,306 for the six months ended
June 30, 1999 and 1998, respectively.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
-5-
<PAGE>
WORLD WIRELESS COMMUNICATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Condensed Consolidated Financial Statements - The accompanying
condensed consolidated financial statements are unaudited. In the opinion
of management, all necessary adjustments (which include only normal
recurring adjustments) have been made to present fairly the financial
position, results of operations and cash flows for the periods presented.
Certain information and note disclosure normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
condensed consolidated financial statements be read in conjunction with the
financial statements and notes thereto included in the December 31, 1998
annual report on Form 10-K/A. The results of operations for the six month
period ended June 30, 1999 are not necessarily indicative of the operating
results to be expected for the full year.
NOTE 2 - COMMON STOCK
During February 1999, the Company issued 2,040,000 common shares for cash
in the amount of $2,040,000 received in a private placement offering. In
connection with the offering, the Company granted options to purchase
200,000 common shares at $1.75 per share within 5 years, and issued 8,000
shares of common stock as finder's fees. The Company also paid $163,200 as
finder's fees.
During June 1999, the Company issued 510,000 common shares for cash in the
amount of $510,000 received in a private placement offering. In connection
with this offering, the Company paid $30,000 as a finders fee.
During March 1999, note holders converted two unsecured promissory notes
totaling $800,000, together with accrued interest, into 893,698 common
shares at $1.00 per share under the terms of a conversion privilege granted
to the note holders in December 1998.
During the first and second quarter of 1999, the Company issued 120,841
restricted common shares for services valued at $231,499, or $1.92 per
share.
NOTE 3 - MANDATORILY REDEEMABLE PREFERRED STOCK AND WARRANTS
On May 14, 1999 the Company offered to issue 650 shares of senior
liquidating mandatorily redeemable 10% preferred stock with a liquidation
preference of $1,000 per share and detachable five-year warrants to purchase
3,250,000 common shares at $0.25 per share, and issued such shares of
preferred stock on July 1, 1999. The preferred shares must be redeemed on
or before May 14, 2000 at their par value plus accrued dividends. The
preferred stock cash dividend requirement is $65,000 annually. The
preferred stock was issued for $650,000 consisting of $400,000 cash and the
deemed payment of $250,000 principal amount of 1998 bridge loan notes. The
issuance of the preferred stock with warrants was accounted for as the
granting of a favorable conversion feature to the preferred stock holders.
was based on their intrinsic value but limited to the cash proceeds and the
amount of the notes converted. Since the warrants were immediately
exercisable, the resulting discount to the preferred stock of $650,000 was
recognized on the date granted as a preferred dividend. The value assigned
to the warrants
-7-
WORLD WIRELESS COMMUNICATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 4 - NOTES PAYABLE
On May 14, 1999 the Company issued $2,600,000 of senior secured 16% notes
payable which mature in one year. The notes were issued for $2,600,000
consisting of $1,600,000 in cash and the deemed payment of $1,000,000
principal amount of 1998 Bridge Loan notes. The notes payable are secured by
substantially all the Company's assets. Interest on the notes is payable
quarterly. A manditory pre-payment of principal equal to 25% of the gross
proceeds from any issuanc of the Company's securities is due upon the
closing of the issuance. The notes will be in default if the reported
loss before interest, depreciation, amortization and taxes exceeds
$1,000,000 for the quarter ended June 30, 1999 or if income as computed
above is less than $250,000 or $1,000,000 for the quarters ended September
30, 1999 and December 31, 1999 respectively. The Notes will also be in
default if the Company fails to make a manditory prepayment of principal
from the issuance of the Company's securities. If the notes are determined
to be in default for a quarter the Company could be required to issue
five-year warrants to purchase 300,000 shares of common stock at $0.25 per
share as compensation for the default with respect to such quarter. For
the quarter ended June 30, 1999, the Company accrued $431,250 of interest
expense for the potential default and issuance of warrants.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
Legal Proceedings - The Company leased computer-aided design software which
did not perform as specified; the software, which cost $550,887, was
returned to the seller. The Company requested a cancellation of the $735,207
debt including a technical support agreement in the amount of $184,320. The
software vendor, Mentor Graphics, Inc., commenced a lawsuit against the
Company seeking damages of approximately $485,000 plus interest, legal fees
and expenses arising out of the Company's alleged breach of contract for the
purchase of software and related items. The Company settled this claim for
$100,000 during the quarter ended June 30, 1999.
An investment banking firm commenced a lawsuit against the Company seeking
to recover damages of $231,129, plus legal fees and expenses. In this case,
the Company asserted a counterclaim seeking damages of approximately
$250,000. The Company anticipates that such lawsuit will be settled
although there can be no assurance of such result.
Unasserted Claim - The Company received a verbal request in 1998 from Mr.
and Mrs. Richard Austin to rescind the Company's acquisition of Austin
Antenna, Ltd., formerly known as TWC, Ltd., a Delaware corporation, by a
stock purchase which closed in 1997. In addition, Mr. Austin requested that
the Company bear the cost of (i) the legal fees and expenses in a litigation
commenced against Mr. Austin in a state court in Massachusetts brought by
Charles Rich seeking damages of approximately $50,000 for non-payment of
commissions arising out of the Company's purchase of Austin Antenna Ltd. and
(ii) the unpaid finder's fee that is the subject of the litigation. The
Company, in turn, has put Mr. and Mrs. Austin on notice of the Company's
claims that the Austins have failed to honor their agreements with Austin
Antenna and the Company by failing to make available engineering drawings
and other related data, proprietary to Austin Antenna and the Company by
virtue of the acquisition agreement, that would enable the Company to
consolidate antenna manufacture in its Salt Lake City facility. The Company
is currently in negotiation with Mr. and Mrs. Austin and is working on a
belief that the claims between the parties may be resolved amicably.
However, there is no current assurance as to the ultimate outcome of those
efforts.
Default On 1999 Notes - The Company would have been in default under a
Pledge/Security Agreement associated with the 1999 Notes on the date of
the filing of its Form 10-Q for the quarter ended June 30, 1999 because,
among other things, the Company had an operating loss in excess of that
projected for such quarter and because of its failure to make a mandatory
prepayment of principal, which failures would have each constituted an event
of default under the Loan Agreement between the Company and the holders of
the 1999 Notes. Upon the occurrence of an event of default, the holders of
the 1999 Notes have the right, among other things, to accelerate the due
date of the 1999 Notes to the date of the default and to sell the assets
of the Company securing the debt as a means of repaying the debt.
However, the Company is in the process of obtaining separate waivers of
the default for the quarter ended June 30, 1999 from the holders of the
1999 Notes. In addition, the Company anticipates obtaining a deferral of
any payment of principal on the 1999 Notes until December 31, 1999
regardless of any financing raised by the Company prior to such date
through the sale of its securities, and anticipates obtaining certain
other changes in the loan agreements. As a condition thereto, the
Company anticipates agreeing, among other things,(a) to grant the
holders of the 1999 Notes additional warrants to purchase 300,000
shares of the Company's common stock at an exercise price of $0.25 per
share, exercisable in whole or in part at any time for a period of
five years, and (b) to grant the holders of the 1999 Notes 200,000
shares of the Company's common stock, which shares would be subject
to applicable securities law restrictions. Although the Company
believes that it will obtain such waivers, there can be no assurance
of such result. Moreover, there can be no assurance that the Company
will not commit a default under the May 1999 transactions in the future.
In the event that the holders of the 1999 Notes sell the Company's
assets securing the 1999 Notes following a current or future default,
such sale would materially and adversely affect the Company's business
and financial condition.
-8-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
When used in this discussion, the words "expect(s)", "feel(s)",
"believe(s)", "will", "may", "anticipate(s)" and similar expressions are
intended to identify forward-looking statements. Such statements are
subject to certain risks and uncertainties, which could cause actual results
to differ materially from those projected. Readers are cautioned not to
place undue reliance on these forward-looking statements, and are urged to
carefully review and consider the various disclosures elsewhere in this Form
10-Q.
THREE MONTHS ENDED JUNE 30, 1999 AND THREE MONTHS ENDED JUNE 30, 1998
Sales in the three-month period ended June 30, 1999 were $639,624 compared
to $1,058,074 during the three-month period ended June 30, 1998. During the
second quarter of 1999 the Company derived its revenue as follows:
engineering services, $195,445; branded products, $124,328; and contract and
cable manufacturing, $319,851. During the second quarter of 1998 the
Company derived its revenue from engineering services, $758,738; branded
products, $219,625; and contract and cable manufacturing, $79,711. The
decrease in engineering services was due to the completion of the
development of products for Williams that will be used in their SCADA and
Automatic Meter Reading (AMR) applications. Gross profit in the three-month
period ended June 30, 1999 was $80,038 compared to $157,945 during the
comparable period during 1998, which represents 12.5% and 14.9% of sales
respectively.
The Company reduced its research and development costs by $843,958 from
$1,272,763 in the second quarter in 1998 to $428,805 in the second quarter
in 1999. Such saving was achieved primarily by the Company's reducing the
number of employees. General and administrative expenses decreased $72,162
from $1,269,140 in the second quarter of 1998 to $1,196,978 in the second
quarter of 1999. The decrease is due to cost cutting measures implemented
during the first and second quarters of 1999.
The amortization of goodwill decreased $351,396 from $401,495 for the
three-months ending June 30, 1998 to $50,099 for the three-months ending
June 30, 1999. The decrease was due to the impairment of goodwill the
Company recognized in the third quarter of 1998.
Interest income is due to the Company's investing idle cash in overnight
interest bearing accounts. Interest expense increased $416,160 from
$201,076 for the three-months ending June 30, 1999 to $617,292 for the
three-months ending June 30, 1998, primarily due to the recognition of
warrant interest expense and fees the Company bore in connection with the
obtaining of debt financing in the second quarter of 1999.
The Company issued 650 shares of senior liquidating mandatorily redeemable
10% preferred stock with a liquidation preference of $1,000 per share and
detachable five-year warrants to purchase 3,250,000 common shares at $0.25.
The issuance of the preferred stock with warrants has been accounted for as
the granting of a favorable conversion feature to the preferred
stockholders. The value assigned to the warrants was based on their
intrinsic value but limited to the cash proceeds and the amount of the notes
converted. Since the warrants were immediately exercisable, the resulting
discount to the preferred stock of $650,000 was recognized on the date
granted as a preferred dividend.
-9-
SIX MONTHS ENDED JUNE 30, 1999 AND SIX MONTHS ENDED JUNE 30, 1998
Sales in the six-month period ending June 30, 1999 were $1,672,999 compared
to $2,366,957 during the six-month period ending June 30, 1998. During the
first six months of 1999 the Company derived its revenue as follows:
engineering services, $840,263; branded products, $238,425; and contract and
cable manufacturing, $594,311. During the first six months of 1998, the
Company derived its revenue from engineering services, $1,863,672; branded
products, $219,625; and contract and cable manufacturing, $283,660. The
decrease in engineering services was due to the completion of the
development of products for Williams that will be used in their SCADA and
Automatic Meter Reading (AMR) applications. Gross profit in the first
six-month periods ending June 30, 1999 was $291,728 compared to $810,380
during the comparable period during 1998, which represents 17% and 34% of
sales respectively. The decrease was due primarily to two factors: during
the first six months of 1998, 78% of the Company's revenues were derived
from the most profitable segment of the business, engineering services,
compared to 50% in the first six months of 1999. Also, in the first six
months of 1998, the Company met certain design and development contract
milestones for efforts and costs incurred over several preceding periods.
The Company reduced its research and development costs by $1,266,442 from
$1,936,512 in the first six-months of 1998 to $670,070 in the first six
months in 1999, primarily by reducing the number of its employees. General
and administrative expenses decreased $324,500 from $2,654,236 in the first
six months of 1998 to $2,329,736 in the first six months of 1999. This
decrease was due primarily to a reduction of employees and cost cutting
measures implemented during the first half of 1999. The amortization of
goodwill decreased $702,792 from $802,990 for the first six-months ending
June 30, 1998 to $100,198 for the first six-months ending June 30, 1999.
The decrease was due to the impairment of goodwill the Company recognized
in the third quarter of 1998. Interest expense increased $866,429 from
$225,657 for the first six-months ending June 30, 1999 to $1,092,086 for the
first six-months ending June 30, 1998. In May 1998, the Company executed
certain bridge loans in the amount of $2,500,000. The 1998 bridge loans had
detachable warrants, which had been accounted for as a discount of the
related notes and was amortized to interest expense over the life of the
note. The amortization of this debt discount was $325,000 in the first half
of 1999, compared to $108,000 in the first half of 1998. Also, the Company
recognized warrant interest expense during the second quarter of 1999.
Interest income is due to the Company investing idle cash into overnight
interest bearing accounts. The Company issued 650 shares of senior
liquidating mandatorily redeemable 10% preferred stock with a liquidation
preference of $1,000 per share and detachable five-year warrants to purchase
3,250,000 common shares at $0.25. The issuance of the preferred stock with
warrants has been accounted for as the granting of a favorable conversion
feature to the preferred stockholders. The value assigned to the warrants
was based on their intrinsic value but limited to the cash proceeds and the
amount of the notes converted. Since the warrants were immediately
exercisable, the resulting discount to the preferred stock of $650,000 was
recognized on the date granted as a preferred dividend.
-11-
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity at June 30, 1999 consisting of cash and cash
equivalents was $675,916, which represented an increase of $61,019 over the
Company's cash and cash equivalents of $614,897 as of December 31, 1998.
The Company's current assets were $1,747,676 as of June 30, 1999, which
represented an increase of $21,906 over the Company's current assets of
$1,725,770 as of December 31, 1998. In addition, the Company's current
liabilities were $4,263,085 as of June 30, 1999, a decrease of $790,543 from
the Company's current liabilities of $5,053,628 as of December 31, 1998. The
Company's cash and cash equivalents at June 30, 1999 of $675,916 represented
a decrease of $185,381 from the Company's cash and cash equivalents of
$861,297 as of March 31, 1999. The Company's current assets at June 30,
1999 of $1,747,676 represented a decrease of $373,502 from the Company's
current assets of $2,121,178 as of March 31, 1999. Also the Company's
current liabilities at June 30, 1999 of $4,263,085 represented an increase
of $402,772 from the Company's current liabilities of $3,860,313 as of March
31, 1999.
In order to pay off the Company's Senior Secured Notes which had a maturity
date of May 15, 1998 (the "1998 Notes"), the Company raised financing in May
1999. Such financing involved the sale of separate units consisting of
$2,600,000 principal amount of the Company's Senior Secured Notes, bearing
interest at 16% per annum, payable quarterly and maturing on May 14, 1999
(the "1999 Notes"). The 1999 Notes are secured by a first security interest
in substantially all the assets of the Company's assets, including its
machinery, equipment, automobiles, fixtures, furniture, accounts receivable
and general intangibles, including any stock in any subsidiary. Also, the
Company sold separate units consisting of 650 shares of the Company's 10%
Senior Preferred Stock(1) and detachable warrants to purchase 3,250,000
shares of the Company's Common Stock at an exercise price of $0.25 per
share, exercisable in whole or in part by the holder at any time on or
before May 14, 2004.
Such sales by the Company occurred in a private placement transaction exempt
from registration made by the Securities Act of 1933, as amended. **
____________________
* Each share of the Company's Senior Preferred Stock has the following
characteristics:
(a)has a 10% cumulative dividend;
(b)constitutes the senior series of any preferred stock the Company may
issue;
(c)is non-voting;
(d)is convertible into shares of the Company's Common Stock at the
conversion rate of 10,000 shares of Common Stock for each share of
Senior Preferred Stock (or $0.10 per share), if all the shares the
Company's Senior Preferred Stock are not redeemed by May 14, 2000 (or
up to a total of 6,500,000 shares of the Company's Common Stock based
on the 650 shares of the Company's Senior Preferred Stock which are
issued and outstanding);
(e)is mandatorily redeemable upon the earlier to occur of (i) May 14, 2000
or
(ii) the Company's raising of gross proceeds of $5,500,000 from the
closing of one or more private placement transactions or
secondary offerings of its securities; and
(f)has a first priority in liquidation of $1,000 per share, plus the amount
of unpaid cumulative dividends, payable from the Company's assets after
its payment (or its making of adequate provision for the payment) of
all claims of its creditors.
**In May 1999, Lancer Offshore Inc. and the Orbiter Fund, who are
affiliates of the Company's largest shareholder group (consisting of such
entities, Michael Lauer, Lancer Partners LLC and Lancer Partners L.P.)
purchased $1,400,000 principal amount of the 1999 Notes and also acquired at
such time separate units consisting of 350 shares of the Company's Senior
Preferred Stock and warrants to purchase 3,250,000 shares of the Company's
Common Stock, for an aggregate investment of $1,750,000.
-12-
As a result of such new financing, the Company paid off the principal amount
of the Notes of $2,395,528 outstanding and accrued interest of $96,355 in
full on or immediately after the maturity date of the 1998 Notes.
Accordingly, the Company believes that it satisfied all of its remaining
obligations under the 1998 Notes in full and it does not anticipate any
further claim with respect thereto.
The Company would have been in default under a Pledge/Security Agreement
associated with the 1999 Notes on the date of the filing of its Form 10-Q
for the quarter ended June 30, 1999 because, among other things, the Company
had an operating loss in excess of that projected for such quarter and
because of its failure to make a mandatory prepayment of principal, which
failures would have each constituted an event of default under the Loan
Agreement between the Company and the holders of the 1999 Notes. Upon the
occurrence of an event of default, the holders of the 1999 Notes have the
right, among other things, to accelerate the due date of the 1999 Notes
to the date of the default and to sell the assets of the Company securing
the debt as a means of repaying the debt.
However, the Company is in the process of obtaining separate waivers of
the default for the quarter ended June 30, 1999 from the holders of the
1999 Notes. In addition, the Company anticipates obtaining a deferral of
any payment of principal on the 1999 Notes until December 31, 1999
regardless of any financing raised by the Company prior to such date
through the sale of its securities, and anticipates obtaining certain
other changes in the loan agreements. As a condition thereto, the
Company anticipates agreeing, among other things,(a) to grant the
holders of the 1999 Notes additional warrants to purchase 300,000
shares of the Company's common stock at an exercise price of $0.25 per
share, exercisable in whole or in part at any time for a period of
five years, and (b) to grant the holders of the 1999 Notes 200,000
shares of the Company's common stock, which shares would be subject
to applicable securities law restrictions. Although the Company
believes that it will obtain such waivers, there can be no assurance
of such result. Moreover, there can be no assurance that the Company
will not commit a default under the May 1999 transactions in the future.
In the event that the holders of the 1999 Notes sell the Company's
assets securing the 1999 Notes following a current or future default,
such sale would materially and adversely affect the Company's business
and financial condition.
OUTLOOK
The statements contained in this Outlook are based on current expectation.
These statements are forward looking and actual results may differ
materially.
X-traWeb(TM) PRODUCTS
The Company commenced the shifting of its strategic direction during the
first quarter of 1999. In early 1999, the Company successfully implemented
its proprietary X-traWeb(TM) network for integrating wireless solutions with
Internet technologies. The Company's X-traWeb(TM) network allows data from
a remote wireless radio frequency (RF) system to be accessed via a secure,
encrypted Internet connection using a standard Web browser located anywhere.
As a result, the data is available at an Internet-accessible remote
location to simplify the control, access and monitoring of those devices.
The Company's existing X-traWeb products currently offered for sale are
described below:
(a) X-Node is a small (approximately 1" x 1") embedded controller suitable
for mounting in existing equipment for the purpose of remotely monitoring
and controlling the equipment over the Internet. For example, a small,
embedded computer, called a micro-controller, controls many beverage vending
machines. This embedded controller has a serial port built-in to allow a
hand-held computer to configure the machine and obtain transaction
information. This information can now be collected, remotely, by fitting an
X-Node to this serial port. Two versions of the X-Node have been developed
and are fully operational; one has a serial interface and the other a
digital interface.
(b) X-Gate is a small, rugged Internet gateway device that replaces the
more common gateway: the personal computer. The X-Gate is fully operational
at present.
(c) X-traWeb(TM) Internet Access Servers dedicated to remote monitoring
and control applications are available.
The Company formed X-traWeb, Inc. its wholly-owned Delaware subsidiary, on
May 12, 1999 to conduct the Company's X-traWeb(TM) business.
Applications for X-traWeb(TM) in addition to automatic meter reading (AMR),
include remote monitoring and control of wireless supervisory control and
data acquisition (SCADA)implementations in the oil and gas pipeline;
environmental control; water and wastewater management; and heating,
ventilation and air conditioning (HVAC) industries. Other applications
include data access and monitoring for vending machines, medical devices,
and security systems.
-13-
During the period from January 1, 1999 through June 30, 1999, the Company
received no revenues from, and had no sales of any of, its X-traWeb
products. As of July 31, 1999, the Company had submitted proposals to an
Italian telephone manufacturer, an Italian electrical utility, a California
utility and others. In addition, the Company received a purchase order for
the initial installation of an X-traWeb(TM) network for a vending machine
owner and operator in Pennsylvania and for a test site at a national fast
food chain site in Columbus, Ohio. While the Company believes that its
pending proposals will be accepted in whole or in part from these sources
and others, and that it will derive substantial revenues therefrom in 1999
and thereafter, there cannot be any assurance that any such sales will be
made or the amount thereof, although management anticipates that
X-traWeb(TM) product sales will constitute the bulk of its revenues over the
next 12-month period and thereafter.
PROPRIETARY RADIO PRODUCTS
The Company is currently offering for sale a total of four 900 MHZ and two
2.4 Ghz low speed digital radios ("LSDRs") which can be used in a variety of
industrial applications, including remote control, event detection, SCADA,
environmental monitoring, security and industrial control applications.
The Company only sold a limit quantity of these radio products to date since
the Company is awaiting Federal Communications Commission (FCC) clearance on
all of the above models (with the exception of 2.4 Ghz Hopper). The Company
expects to receive FCC approval of these LSDRs within the next 60 day
period, although there can be no assurance of such result. If such FCC
approval is obtained, the Company can then offer the LSDRs so approved for
sale in unlimited quantities for commercial application.
The Company believes that it will derive significant revenues from the sale of
its proprietary radio products in the future. However, there can be no
assurance as to the amount of such sales or when such sales will occur.
The Company had also developed for The Williams Companies, Inc. devices called
Telemetry Interfaces Modular, or TIM (TM)s, which operate at the point of
data origin and transmit date to A data collection and forwarding point
called a WinGate (TM) unit and the WinGate (TM) unit, in turn, forwards that
data to an operating center via a wide area network. These supervisory
control and data acquisition (SCADA) units use some of the Company's radio
products. However, market penetration in the automatic meter reading (AMR)
field has not occurred as anticipated, and, as a result, the Company's
contract with Williams has generated a substantially lower level of revenues
from that originally anticipated therefrom. Although there are current
negotiations in progress for firm commitments from Williams of TIM(TM)s and
WinGate (TM) for AMR and gas and oil pipeline applications, there can be no
assurance as to the outcome thereof.
CONTRACT MANUFACTURE AND ASSEMBLY; ANTENNAS
The Company is actively engaged in performing assembly and manufacturing
services for other manufacturers and vendors of medical, communications,
computer graphics and consumer electronic products at its Salt Lake City
manufacturing facility. The Company expects its level of manufacturing and
assembly activities to increase during the second half of 1999 and during
the year 2000. However, there can be no assurance as to the amounts to be
derived therefrom or the timing thereof.
In addition, while the Company is engaged in the manufacture and sales of
various antennas, it does not expect antenna products to contribute materially
to its consolidated net sales or income in the foreseeable future.
-14-
On October 15, 1998, the Company entered into a seven-year lease for a
34,000 square foot facility in West Valley City, Utah. The Company
consolidated its American Fork and Salt Lake City, Utah operations and staff
into the new facility. Management expects the new facility to provide
sufficient manufacturing and office space for the foreseeable future.
However, if additional capacity were required, management would consider
out-sourcing a portion of the manufacturing overload. If a portion of
manufacturing is out-sourced, the Company may lose some control over the
following areas: cost, timeliness of deliveries and quality. However, by
out-sourcing a portion of its manufacturing the Company could avoid delays
and costs associated with the expansion of its own facilities. The
magnitude of any expansion of the Company's manufacturing capabilities that
is required would be a direct function of the sales increase and
manufacturing overload, both of which are unknown at this time.
ENGINEERING SERVICES
While the Company does continue to provide design and development services
for various third parties, it has reduced its current level of activity
inthis area.
The Company completed development under a contract with Kyushu Matsushita
Electric Co., Ltd. (KME, which is also known as Panasonic)
that calls for royalty payments upon shipment of certain KME products.
Shipments of KME products containing the Company's technology began during
the third quarter of 1998. Management believes royalty payments from the
contract were earned during the fourth quarter of 1998, and first half of
1999, but were subject to recoupment by KME up to the first $600,000 of
royalties. Management further believes that the Company may become entitled
to royalty payments with respect to the third quarter of 1999 (which may be
paid during the fourth quarter of 1999), although there can be no assurance
of such result. The Company cannot predict the amount of the royalties to
be received from the future sale of such KME products.
SUMMARY
Management believes that the potential growth of the Company's X-traWeb(TM)
business segment, proprietary radio products and manufacturing activities
require additional financing to sustain the Company's proposed operations in
these areas. It is anticipated that additional executive and marketing
personnel will be required for the X-traWeb(TM) business in advance of the
receipt of any substantial revenues from such source. There can be no
assurance that the Company will be able to locate and hire qualified
personnel for such functions; moreover, such a task is time-consuming.
Similarly, the Company's inventory needs are expected to increase if, as and
when orders are received for these new products. Thus, the Company is
currently engaged in seeking to raise additional financing (whether through
debt, equity or a combination thereof). The Company has private placement
transactions being undertaken in implementation of its fund-raising program.
While the Company believes that such additional financing can be obtained,
there can be no assurance that such financing will be achieved, or, if made
available, on terms acceptable to the Company.
In summary, while management is optimistic about the Company's future, it is
fully aware that anticipated revenue increases from sales of X-traWeb(TM)
products, proprietary radios and manufactures activities, design and
development contracts and royalty income are by no means assured, and that
if such increases do materialize, the requirements for capital are
substantial, for which there is no present commitment.
-15-
STATEMENT REGARDING FORWARD-LOOKING DISCLOSURE
This report includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act which
represent the Company's expectations or beliefs concerning future events
that involve risks and uncertainties, including those associated with the
ability of the Company to obtain financing for its current and future
operations, to manufacture (or arrange for the manufacturing of) its
products, to market and sell its products, and the ability of the Company to
establish and maintain its sales of X-traWeb(TM) products. All statements
other than statements of historical facts included in this Report including,
without limitation, the statements under "Management's Discussion and
Analysis of Results of Operations and Financial Condition" and elsewhere
herein, are forward-looking statements. Although the Company believes that
the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to
have been correct. Important factors that could cause actual results to
differ materially from the Company's expectations ("Cautionary Statements")
are disclosed in this Report, including without limitation, in connection
with the forward-looking statements included in this report. All subsequent
written and oral forward-looking statements attributable to the Company or
persons acting on its behalf are expressly qualified in their entirety by
the Cautionary Statements.
-16-
Part II
ITEM 1. LEGAL PROCEEDINGS
Mentor Graphics, Inc. commenced a lawsuit against the Company in 1998 in a
State court in Utah, which was subsequently removed to the United States
District Court for the District of Utah, seeking damages of approximately
$485,000 plus interest, legal fees and expenses arising out of the
Company's alleged breach of contract for the purchase of software and
related items. The Company settled such action in May, 1999 by paying
$100,000 to the plaintiff.
PaineWebber Incorporated commenced a lawsuit against the Company in the
United States District Court for the Southern District of New York in which
the plaintiff seeks to recover damages of approximately $231,000, plus
legal fees and expenses of its counsel in such action. In this case, the
Company asserted a counterclaim seeking damages of approximately $250,000.
Plaintiff filed a motion for summary judgment in the case in May, 1999 and
the Company filed a reply thereto in June, 1999. The Company anticipates
that such lawsuit will be settled, although there can be no assurance of
such result.
The Company received a oral request in 1998 from Mr. and Mrs. Richard
Austin to rescind its purchase of the stock of Austin Antenna Ltd. and
related assets which closed in 1997. In addition, Mr. Austin requested that
the Company bear the cost of (i) the legal fees and expenses in a
litigation commenced against Mr. Austin in a state court in Massachusetts
brought by Charles Rich seeking damages of approximately $50,000 for
non-payment of commissions arising out of the Company=s purchase of Austin
Antenna Ltd. and related assets and (ii) the unpaid finder=s fee that is
the subject of the litigation. The Company, in turn, advised Mr. and Mrs.
Austin that Austin Antenna Ltd. has breached its agreement with the Company
by, among other things, failing to furnish the Company with proprietary
engineering drawings and related data that would enable the Company to
manufacture the antennas now produced by the Austin Antenna division. The
Company is currently negotiating with Mr. and Mrs. Austin and believes that
the claims may be resolved amicably, although there can be no assurance as
to the outcome thereof.
ITEM 2. CHANGES IN SECURITIES
During May, 1999, the Company authorized the issuance of up to 650 Senior
shares of a series of preferred stock designated as its Senior Preferred
Stock. Each share of the Company=s Senior Preferred Stock has the
following characteristics:
(a) has a 10% cumulative dividend;
(b) constitutes the senior series of any preferred stock the Company may
issue;
(c) is non-voting;
-18-
(d) is convertible into shares of the Company=s Common Stock
at the conversion rate of 10,000 shares of Common Stock for
each share of Senior Preferred Stock (or $0.10 per share), if
all the shares the Company=s Senior Preferred Stock are not
redeemed by May 14, 2000 (or up to a total of 6,500,000 shares
of the Company=s Common Stock based on the 650 shares of the
Company=s Senior Preferred Stock which are issued and
outstanding);
(e) is mandatorily redeemable upon the earlier to occur of (i)
May 14, 2000 or (ii) the Company=s raising of gross proceeds of
$5,500,000 from the closing of one or more private placement
transactions or secondary offerings of its securities; and
(f) has a first priority in liquidation of $1,000 per share,
plus the amount of unpaid cumulative dividends, payable from
the Company=s assets after its payment (or its making of
adequate provision for the payment) of all claims of its
creditors.
Thus, each share of such Senior Preferred Stock has a priority over the
shares of Common Stock in the payment of dividends and upon the liquidation
of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
1. (a) The following documents are filed as part of this report:
Financial Statements of the Company (unaudited), including Condensed
Consolidated Balance Sheets, Condensed Consolidated Statements of
Operation, Condensed Consolidated Statements of Cash Flow and Notes to
Financial Statements as at and for the period ended June 30, 1999.
(b) The Exhibits which are listed on the Exhibit Index
attached hereto:
EXHIBIT INDEX
No. Description
3.1 Articles of Incorporation of the Company and all
amendment thereto
3.2 Bylaws of the Company
4.1 Form of Common Stock Certificate
4.2 Form of Subscription Agreement used in private financing
providing for registration rights
5. Opinion of Connolly Epstein Chicco Foxman Engelmyer &
Ewing regarding the legality of securities being
registered*
10.1 1997 Stock Option Plan
10.2 DRCC Omnibus Stock Option Plan
10.3 Development and License Agreement dated April 4, 1997,
between DRCC and Kyushu Matsushita Electric Co., Ltd.
10.4 Amended and restated Technical Development and Marketing
Alliance Agreement dated September 15, 1997, between the
Company and Williams Telemetry Services, Inc.
10.5 Lease Agreement dated May 17, 1995, between DRCC and
Pracvest Partnership relating to the Company's American
Fork City offices and facility
10.6 Lease Agreement dated February 12, 1996, between the
Company the Green/Praver, et al., relating to the
Company's Salt Lake City offices
10.7 Shareholders Agreement dated May 21, 1997 between the
Company, DRCC,Philip A. Bunker and William E. Chipman,
Sr.
10.8 Asset Purchase Agreement dated October 31, 1997, between
the Company and Austin Antenna, Ltd.
10.9 Stock Exchange Agreement dated October 31, 1997, between
the Company, TWC, Ltd. and the shareholders of TWC, Ltd.
10.10 Settlement Agreement, Mutual Waiver and Release of All
Claims dated November 11, 1997 between Digital Radio
Communications Corp. and Digital Scientific, Inc.
10.11 Agreement (undated) between the Company, Xarc Corporation
and Donald J. Wallace relating to the Company's
acquisition of Xarc Corporation
10.12 Promissory Note dated December 4, 1997, by the Company,
payable to William E. Chipman, Sr. in the principal
amount of $125,000
10.13 Promissory Note dated November 13, 1997, by the Company,
payable to T. Kent Rainey in the principal amount of
$200,000
10.14 Investment Banking Services Agreement dated November 19,
1997, between The Company and PaineWebber Incorporated
10.15 $400,000 Promissory Note dated December 24, 1997, payable
to Electronic Assembly Corporation
10.16 $400,000 Promissory Note dated January 8, 1998, payable
to Tiverton Holdings Ltd.
10.17 Loan Agreement by and among the Registrant and the Bridge
Noteholders dated as of May 15, 1998
10.18 Amendment and Waiver Agreement by and among the
Registrant and the Bridge Noteholders dated August 7, 1998
10.19 Amendment and Waiver Agreement by and among the
Registrant and the Bridge Noteholders dated September
11, 1998
10.20 Loan Agreement by and among the Registrant and the Bridge
Noteholders dated as of May 15, 1998 (Previously filed),
together with the Notes, Pledge/Security Agreement,
Pledgee/Representative Agreement, Subordination, and
Registration Rights Agreement*
10.21 Separation and Mutual Release Agreement between the
Registrant and William E. Chipman, Sr. dated as of May
26, 1998*+
10.22 Registration Rights Agreement by and among the Registrant
and the purchasers of common stock issued pursuant to the
Registrants Confidential Private Placement Memorandum
dated September 9, 1998, as amended*
10.23 Employment Agreement between the Registrant and James
O'Callaghan dated May 20, 1998*+
10.24 Lease agreement between the Registrant and NP#2 dated as
of July 29, 1998 relating to the premises at 2441 South
3850 West, West Valley City, Utah 84120*
10.25 Agreement between KME and the Registrant dated October
19, 1998 relating to the Registrant's providing of
technical assistance and development relating to the
Giarange telephone*
10.26 Agreement between KME and the Registrant dated as of
March 1, 1998 relating to the Panasonic MicroCast System*
10.27 General and Mutual Release Agreement between the
Registrant and Phil Acton dated November 2, 1998*+
10.28 Agreement and Waiver Agreement by and among the
Registrant and the Bridge Noteholders dated November 25,
1998*
10.29 1998 Employee Incentive Stock Option Plan*+
10.30 1998 Non-qualified Stock Option Plan*+
10.31 Amendment of Agreement by and among the Registrant and
the Bridge Noteholders dated as of March 26, 1999*
10.32 Loan Agreement by and among the Registrant and the Senior
Secured Noteholders dated as of May 14, 1999, together
with the Notes, Pledge/Security Agreement, Pledgee
Representative Agreement, Subordination and Registration
Rights Agreement**
27 Financial Data Schedules*
-------------
** Filed herewith
* Filed previously
+ Management contract or compensatory plan or arrangement
filed previously
All other exhibits were filed previously.
2. No reports on Form 8-K were filed by the Registrant during the
last quarter of the period covered by this report.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: August 20, 1999 WORLD WIRELESS COMMUNICATIONS, INC.
/s/ David D. Singer
----------------------------------
David D. Singer
President and Chief Executive Officer
-20-
EXHIBIT 10.32
APPENDIX A
LOAN AGREEMENT
This Loan Agreement dated as of the 14th day of May, 1999 by and
between each party hereto making a loan pursuant to this Agreement as of the
date hereof or from time to time thereafter (individually "each Lender" and
collectively the "Lender") and World Wireless Communications, Inc., a Nevada
corporation, having an address at 2441 South 3850 West, West Valley City,
Utah 84120 (the "Borrower").
WHEREAS, each Lender is willing to lend to Borrower funds to enable
Borrower to conduct its business operations; and
WHEREAS, Borrower wishes to borrow funds from Lender in order to
conduct such operations;
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
OBLIGATIONS
1.1 Simultaneously with the execution and the delivery of this
Agreement, Lender agrees to lend to Borrower the minimum sum of $2,000,000
and, as any initial Lender (or any lender becoming a signatory hereto from
time to time) and the Company so determine, up to a maximum amount of
$3,800,000, in the amounts set forth on the signature page hereto, which
amount shall be repaid on May 14, 2000 (the "Loan") and which is to be used
by Borrower first to pay the outstanding principal amount and accrued
interest on the Notes issued by Borrower on May 15, 1998 and the balance
thereof in the operation of its business as determined by the Board of
Directors of Borrower.
1.2 The Loan shall bear simple interest at the rate of 16% per annum
payable quarterly as provided in, and shall include any additional expenses
payable hereunder or under, the Note (as defined in Section 1.3 hereof).
1.3 Simultaneously with the execution and delivery of this Agreement,
Borrower shall deliver to each Lender an executed original of the note in
the form of Exhibit A attached hereto for the amount loaned to Borrower by
such Lender (the "Note").
1.4 Simultaneously with the execution and the delivery of this
Agreement, each Lender and Borrower will execute and deliver the
Pledge/Security Agreement attached hereto as Exhibit B (the "Pledge/Security
Agreement").
1.5 Simultaneously with the execution and the delivery of this
Agreement, each Lender will execute and deliver the Pledgee Representative
Agreement attached to the Loan Agreement as Exhibit C.
1.6 Simultaneously with the execution and the delivery of this
Agreement, each Lender and Borrower will execute and deliver the
Registration Rights Agreement attached to the Loan Agreement as Exhibit D.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF EACH LENDER
Each Lender represents and warrants to Borrower that:
2.1 Power and Authority. Each Lender which is a corporation,
limited liability company or partnership is a duly organized, validly
existing entity in good standing under the laws of its respective state of
formation; each Lender has all requisite power and authority to carry on the
business in which it is engaged; each owns its assets; and each has the
power and authority
to execute and deliver this Agreement and to perform all of its respective
obligations hereunder.
2.2 Authorization. This Agreement has been duly and validly
authorized, executed and delivered by each of them; and this Agreement
constitutes the valid and binding obligation of each and is enforceable
against each in accordance with its terms except as the enforceability
thereof may be limited by bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium and other similar laws affecting creditors' rights
generally and by general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law).
2.3 No Violations. Neither the execution and delivery of this
Agreement, nor the performance of any of their respective obligations
hereunder will violate (or, with the passage of time, will violate) any
material term, covenant, condition, or provision of any contract (written or
unwritten) or any document, certificate of incorporation, by-law, judgment,
decree, order, or regulation of any court or governmental or regulatory
authority by which any Lender is bound or subject.
2.4 Brokers and Finders. Neither any Lender nor any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BORROWER
3.1 Corporate Organization; Power and Authority. Borrower is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Nevada and has full corporate power and authority to
carry on its business as it is now being conducted and to own the properties
and assets it now owns; is duly qualified or licensed to do business as a
foreign corporation in good standing in each jurisdiction in which
Borrower's failure to qualify to do business will have a material adverse
effect on the business, prospects, operations, properties, assets or
condition (financial or otherwise) of Borrower. The copies of the
Certificate of Incorporation and By-Laws of Borrower heretofore delivered
to Acquiror are complete and correct copies of such instruments as presently
in effect.
3.2 Authorization Borrower has full corporate power and authority
to enter into this Agreement and to carry out the transactions contemplated
hereby. The Board of Directors of Borrower has taken all action required by
law, Borrower's Certificate of Incorporation, its By-Laws or otherwise to be
taken by them to authorize the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby, including, without
limitation, the issuance of the Notes and the Warrants, and this Agreement
is a valid and binding agreement of Borrower enforceable in accordance with
its terms, except that such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights.
3.3 No Violations. Neither the execution and delivery of this
Agreement, nor the performance of any of their respective obligations
hereunder will violate (or, with the passage of time, will violate) any
material term, covenant, condition, or provision of any contract (written or
unwritten) or any document, certificate of incorporation, by-law, judgment,
decree, order, or regulation of any court or governmental or regulatory
authority by which Borrower is bound or subject.
3.4 Capitalization. As of the date hereof, the authorized capital
stock of Borrower consisted of 50,000,000 shares of common stock, $.001 par
value per share, of which 16,590,855 shares were issued and outstanding,
and, 1,000,000 shares of preferred stock, par value $.001 per share, of
which no shares were issued and outstanding. All issued and outstanding
shares of capital stock of Borrower are validly issued, fully paid and
nonassessable, and all securities of the Borrower have been issued in
compliance with all applicable state and federal securities laws. As of the
date hereof, Borrower had outstanding (a) securities convertible into or
exchangeable for Borrower common stock, (b) options, warrants or other
rights to purchase or subscribe for common stock or securities convertible
into or exchangeable for common stock of Borrower, or (c) contracts,
commitments, agreements, understandings or arrangements of any kind relating
to the issuance of any common stock of the Borrower, any such convertible or
exchangeable securities or any such options, warrants or rights, totalling
2,104,936 shares.
3.5 Financial Statements; SEC Filings.
(a) Borrower has
heretofore delivered to Lender an audited financial statement of the Company
and its subsidiaries for the year ended December 31, 1998 (the "Financial
Statement"). The Financial Statement and the notes thereto are true,
complete and accurate and fairly present the assets, liabilities and
financial condition of Borrower as at the date thereof, and such statement
of income and the notes thereto are true, complete and accurate and fairly
present the results of operations for the period therein referred to all in
accordance with generally accepted accounting principles consistently
applied throughout the period involved.
(b) Borrower has heretofore delivered to each Lender a copy of its
Prospectus dated February 17, 1998 filed with the Securities and Exchange
Commission and its Special Financial Report filed pursuant to Section
15(d)-2 of the Securities Exchange Act of 1934, receipt of which is
acknowledged, and each Lender has had the opportunity to review all of the
quarterly and annual reports filed by Borrower with the Securities and
Exchange Commission as of the date hereof.
3.6 Title to Properties; Encumbrances. Borrower has good, valid and
marketable title to all the properties and assets which it purports to own
(real, personal and mixed, tangible and intangible), including, without
limitation, all the properties and assets reflected in the Financial
Statement and all the properties and assets purchased by Borrower since the
date of the Financial Statement. Except as set forth in the Financial
Statement or reflected therein as a capital lease, all such properties and
assets are free and clear of all title defects or objections, liens, claims,
charges, security interests or other encumbrances of any nature whatsoever,
including, without limitation, leases, chattel mortgages, conditional sales
contracts, collateral security arrangements and other title or interest
retention arrangements, and are not, in the case of real property, subject
to any rights of way, building use restrictions, exceptions, variances,
reservations or limitations of any nature whatsoever except, with respect to
all such properties and assets, (a) liens shown on the Financial Statement
as securing specified liabilities or obligations and liens incurred in
connection with the purchase of property and/or assets, if such purchase was
effected after the date of the Financial Statement, with respect to which no
default exists; (b) minor imperfections of title, if any, none of which is
substantial in amount, materially detract from the value or impair the use
of the property subject thereto, or impair the operations of Borrower and
which have arisen only in the ordinary course of business and consistent
with past practice since the date of the Financial Statement; and (c) liens
for current taxes not yet due. With respect to the property and assets it
leases, Borrower is in compliance with such leases, and Borrower holds valid
leasehold interests in such property and assets free of any liens,
encumbrances and security interests of any party other than the lessors of
such property and assets.
3.7 Litigation. There is no action, suit, inquiry, proceeding or
investigation by or before any court or governmental or other regulatory or
administrative agency or commission pending or, to the best knowledge of
Borrower, threatened against or involving Borrower, or which challenges the
validity of this Agreement or any action taken or to be taken by Borrower
pursuant to this Agreement or in connection with the transactions
contemplated hereby; and Borrower does not know or have any reason to know
of any valid basis for any such action, proceeding or investigation.
3.8 Consents and Approvals of Governmental Authorities. No consent,
approval or authorization of, or declaration, filing or registration with,
any governmental or regulatory authority is required to be obtained or made
by Borrower in connection with the execution, delivery and performance of
this Agreement or the consummation of the transactions contemplated hereby.
3.9 Brokers and Finders. Neither Borrower nor any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated by this Agreement, except for any
liability which Borrower has to Capital Research LLC, James T. Kelly and
Sterling Technology Partners, LLC relating thereto.
3.10 Subsidiaries. Borrower does not own, directly or indirectly,
any capital stock or other equity securities of any other corporation or
have any direct or indirect equity or ownership interest in any other
business, except its wholly-owned subsidiaries and other entities listed in
Section 3.10 of the Disclosure Schedule.
3.11 Taxes. Borrower has filed all tax returns that are required to
have been filed in any jurisdiction, and has paid all taxes shown to be due
and payable on such returns and all the taxes and assessments levied upon it
or its properties, assets, income or franchises, to the extent such taxes
and assessments have become due and payable and before they have become
delinquent, except for taxes and assessments the amount, applicability or
validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which Borrower has established adequate
reserves. To the best of Borrower's knowledge, there are no tax
examinations in progress involving Borrower for any fiscal period or
periods, and no notice of any claim for taxes, whether pending or
threatened, has been received, and no requests for waivers of the time to
assess any such taxes are pending.
3.12 Affiliate Transactions. Except as set forth on Section 3.12 of
the Disclosure Schedule, Borrower is not party to any contract with any
Affiliate of Borrower. "Affiliate" shall mean, with respect to Borrower,
any person or entity that directly or indirectly controls, is controlled by,
or is under common control with Borrower. For purposes of this definition,
"control" of an entity shall mean the power, directly or indirectly, either
to (i) vote 10% or more of the securities having ordinary voting power for
the election of directors of such entity or (ii) direct or cause the
direction of the management and policies of such entity, whether through the
ownership of voting securities, by contract or otherwise. Section 3.12 of
the Disclosure Schedule sets forth a complete and accurate list of all of
the Affiliates of Borrower.
ARTICLE IV
MISCELLANEOUS PROVISIONS
4.1 Notices. All notices or other communications required or
permitted to be given pursuant to this Agreement shall be in writing and
shall be considered as duly given on (a) the date of delivery, if delivered
in person, by nationally recognized overnight delivery service or by
facsimile or (b) three days after mailing if mailed from within the
continental United States by registered or certified mail, return receipt
requested to the party entitled to receive the same, if to the Borrower,
World Wireless Communications, Inc., 2441 South 3850 West, West Valley City,
Utah 84120, with a copy to Law Offices of Stephen R. Field, 620 Fifth
Avenue, New York, New York, Attn: Stephen R. Field, Esq.; and if to a
Lender, at his or its address as set forth in the books and records of the
Lender. Any party may change his or its address by giving notice to the
other party stating his or its new address. Commencing on the 10th day
after the giving of such notice, such newly designated address shall be such
party's address for the purpose of all notices or other communications
required or permitted to be given pursuant to this Agreement.
4.2 Governing Law. This Agreement and the rights of the parties
hereunder shall be governed by and construed in accordance with the laws of
the State of Utah, without regard to its conflicts of law principles. All
parties hereto (i) agree that any legal suit, action or proceeding arising
out of or relating to this Agreement shall be instituted only in a federal
or state court in Salt Lake City, Utah or in the State of Colorado, (ii)
waive any objection which they may now or hereafter have to the laying of
the venue of any such suit, action or proceeding, and (iii) irrevocably
submit to the jurisdiction of any federal or state court in Salt Lake City,
Utah or in the State of Colorado in any such suit, action or proceeding, but
such consent shall not constitute a general appearance or be available to
any other person who is not a party to this Agreement. All parties hereto
agree that the mailing of any process in any suit, action or proceeding in
accordance with the notice provisions of this Agreement shall constitute
personal service thereof.
4.3 Entire Agreement; Waiver of Breach. This Agreement constitutes
the entire agreement among the parties and supersedes any prior agreement or
understanding among them with respect to the subject matter hereof, and it
may not be modified or amended in any manner other than as provided herein;
and no waiver of any breach or condition of this Agreement shall be deemed
to have occurred unless such waiver is in writing, signed by the party
against whom enforcement is sought, and no waiver shall be claimed to be a
waiver of any subsequent breach or condition of a like or different nature.
4.4 Binding Effect; Assignability. This Agreement and all the terms
and provisions hereof shall be binding upon and shall inure to the benefit
of the parties and their respective heirs, successors and permitted assigns.
This Agreement and the rights of the parties hereunder shall not be
assigned except with the written consent of all parties hereto.
4.5 Captions. Captions contained in this Agreement are inserted only
as a matter of convenience and in no way define, limit or extend the scope
or intent of this Agreement or any provision hereof.
4.6 Number and Gender. Wherever from the context it appears
appropriate, each term stated in either the singular or the plural shall
include the singular and the plural, and pronouns stated in either the
masculine, the feminine or the neuter gender shall include the masculine,
feminine and neuter.
4.7 Severability. If any provision of this Agreement shall be held
invalid or unenforceable, such invalidity or unenforceability shall attach
only to such provision and shall not in any manner affect or render invalid
or unenforceable any other severable provision of this Agreement, and this
Agreement shall be carried out as if any such invalid or unenforceable
provision were not contained herein.
4.8 Amendments. This Agreement may not be amended except in a
writing signed by all of the parties hereto.
4.9 Survival of Representations and Warranties. The representations
and warranties of each party hereto shall survive the execution and the
delivery of this Agreement until one year from the date hereof.
4.10 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same instrument. In addition, this Agreement
may contain more than one counterpart of the signature page and this
Agreement may be executed by the affixing of such signature pages executed
by the parties to one copy of the Agreement; all of such counterpart
signature pages shall be read as though one, and they shall have the same
force and effect as though all of the signers had signed a single signature
page.
IN WITNESS WEREOF, each of the parties has signed this Agreement as of
the date first written above.
WORLD WIRELESS COMMUNICATIONS, INC.
By: /s/ David D. Singer
--------------------------------
David Singer, President
BORROWER
LOAN AMOUNT LENDER
$800,000 LANCER OFFSHORE, INC.
By: /s/ Michael Lauer
--------------------------------
Michael Lauer, President
$600,000 ORBITER FUND LTD.
By: /s/ Michael Lauer
--------------------------------
Michael Lauer, President
$440,000 THE McCLOSKEY TRUST
By: /s/ Thomas D. McCloskey, Jr.,
------------------------------
Thomas D. McCloskey, Jr.,
Trustee
P.O. Box 7846
Aspen, CO 81612
$40,000 DPM INVESTMENT CORP.
By: /s/ Thomas D. McCloskey
------------------------------
Thomas D. McCloskey, Jr. , V.P.
P.O. Box 7846
Aspen, CO 81612
$40,000 FRYING PAN PARTNERS, LLC.
By: /s/ David L. Marrs
-----------------------------
David L. Marrs, Member
P.O. Box 7846
Aspen, CO 81612
$80,000 CJL INVESTMENTS, LLC
By: /s/ John H. Perry
----------------------------
John H. Perry, III, Managing-Member
$200,000 STERLING TECHNOLOGY PARTNERS, LLC
By: /s/ Bruce D. Cowen
-------------------------------
Mr. Bruce D. Cowen
$200,000 /s/ James T. Kelly
-------------------------------
James T. Kelly
111 Veterans Square
Media, PA 19063
$200,000 /s/ K.R. Braithwaite
-------------------------------
K.R. Braithwaite
3267 Paseo Gallita
San Clemente, CA 92672-3514
EXHIBIT A
PROMISSORY NOTE
$800,000 Salt Lake City, Utah
May 14, 1999
1. Amount; Maturity. FOR VALUE RECEIVED, the undersigned, World
Wireless Communications, Inc. (the "Maker"), promises to pay to the order
of Lancer Offshore, Inc. (the "Holder"), the principal sum of Eight
Hundred Thousand Dollars ($800,000), which principal sum shall mature on
May 14, 2000 and shall bear simple interest at the rate of 16% per annum,
payable quarterly commencing on August 15, 1999 and on November 15, 1999,
February 15, 2000 and May 14, 2000 thereafter.
2. Mode of Payment. All payments of principal and interest due
under this Note shall be made in legal tender in the United States of
America for the payment of private and public debts and delivered to the
Holder at or, at the option of the Holder, in such other manner and at
such other place as the Holder shall have designated to the Maker in writing.
3. Prepayment.
(a) This Note may be voluntarily prepaid, without penalty or
premium, in whole or in part, at any time and from time to time. Any
prepayment must include all accrued interest on the principal being
prepaid, throught he date of prepayment.
EXHIBIT A
PROMISSORY NOTE
$600,000 Salt Lake City, Utah
May 14, 1999
1. Amount; Maturity. FOR VALUE RECEIVED, the undersigned, World
Wireless Communications, Inc. (the "Maker"), promises to pay to the order
of Orbiter Fund Ltd. (the "Holder"), the principal sum of Six Hundred
Thousand Dollars ($600,000), which principal sum shall mature on May 14,
2000 and shall bear simple interest at the rate of 16% per annum, payable
quarterly commencing on August 15, 1999 and on November 15, 1999, February
15, 2000 and May 14, 2000 thereafter.
2. Mode of Payment. All payments of principal and interest due
under this Note shall be made in legal tender in the United States of
America for the payment of private and public debts and delivered to the
Holder at or, at the option of the Holder, in such other manner and at
such other place as the Holder shall have designated to the Maker in writing.
3. Prepayment.
(a) This Note may be voluntarily prepaid, without penalty or
premium, in whole or in part, at any time and from time to time. Any
prepayment must include all accrued interest on the principal being
prepaid, throught he date of prepayment.
EXHIBIT A
PROMISSORY NOTE
$440,000 Salt Lake City, Utah
May 14, 1999
1. Amount; Maturity. FOR VALUE RECEIVED, the undersigned, World
Wireless Communications, Inc. (the "Maker"), promises to pay to the order
of The McCloskey Trust (the "Holder"), the principal sum of Four Hundred
and Forty Thousand Dollars ($440,000), which principal sum shall mature on
May 14, 2000 and shall bear simple interest at the rate of 16% per annum,
payable quarterly commencing on August 15, 1999 and on November 15, 1999,
February 15, 2000 and May 14, 2000 thereafter.
2. Mode of Payment. All payments of principal and interest due
under this Note shall be made in legal tender in the United States of
America for the payment of private and public debts and delivered to the
Holder at or, at the option of the Holder, in such other manner and at
such other place as the Holder shall have designated to the Maker in writing.
3. Prepayment.
(a) This Note may be voluntarily prepaid, without penalty or
premium, in whole or in part, at any time and from time to time. Any
prepayment must include all accrued interest on the principal being
prepaid, throught he date of prepayment.
EXHIBIT A
PROMISSORY NOTE
$40,000 Salt Lake City, Utah
May 14, 1999
1. Amount; Maturity. FOR VALUE RECEIVED, the undersigned, World
Wireless Communications, Inc. (the "Maker"), promises to pay to the order
of DPM Investment Corp. (the "Holder"), the principal sum of Forty
Thousand Dollars ($40,000), which principal sum shall mature on May 14,
2000 and shall bear simple interest at the rate of 16% per annum, payable
quarterly commencing on August 15, 1999 and on November 15, 1999, February
15, 2000 and May 14, 2000 thereafter.
2. Mode of Payment. All payments of principal and interest due
under this Note shall be made in legal tender in the United States of
America for the payment of private and public debts and delivered to the
Holder at or, at the option of the Holder, in such other manner and at
such other place as the Holder shall have designated to the Maker in writing.
3. Prepayment.
(a) This Note may be voluntarily prepaid, without penalty or
premium, in whole or in part, at any time and from time to time. Any
prepayment must include all accrued interest on the principal being
prepaid, throught he date of prepayment.
EXHIBIT A
PROMISSORY NOTE
$40,000 Salt Lake City, Utah
May 14, 1999
1. Amount; Maturity. FOR VALUE RECEIVED, the undersigned, World
Wireless Communications, Inc. (the "Maker"), promises to pay to the order
of Frying Pan Partners, LLC (the "Holder"), the principal sum of Forty
Thousand Dollars ($40,000), which principal sum shall mature on May 14,
2000 and shall bear simple interest at the rate of 16% per annum, payable
quarterly commencing on August 15, 1999 and on November 15, 1999, February
15, 2000 and May 14, 2000 thereafter.
2. Mode of Payment. All payments of principal and interest due
under this Note shall be made in legal tender in the United States of
America for the payment of private and public debts and delivered to the
Holder at or, at the option of the Holder, in such other manner and at
such other place as the Holder shall have designated to the Maker in writing.
3. Prepayment.
(a) This Note may be voluntarily prepaid, without penalty or
premium, in whole or in part, at any time and from time to time. Any
prepayment must include all accrued interest on the principal being
prepaid, throught he date of prepayment.
EXHIBIT A
PROMISSORY NOTE
$80,000 Salt Lake City, Utah
May 14, 1999
1. Amount; Maturity. FOR VALUE RECEIVED, the undersigned, World
Wireless Communications, Inc. (the "Maker"), promises to pay to the order
of CJL Investments, LLC (the "Holder"), the principal sum of Eighty
Thousand Dollars ($80,000), which principal sum shall mature on May 14,
2000 and shall bear simple interest at the rate of 16% per annum, payable
quarterly commencing on August 15, 1999 and on November 15, 1999, February
15, 2000 and May 14, 2000 thereafter.
2. Mode of Payment. All payments of principal and interest due
under this Note shall be made in legal tender in the United States of
America for the payment of private and public debts and delivered to the
Holder at or, at the option of the Holder, in such other manner and at
such other place as the Holder shall have designated to the Maker in writing.
3. Prepayment.
(a) This Note may be voluntarily prepaid, without penalty or
premium, in whole or in part, at any time and from time to time. Any
prepayment must include all accrued interest on the principal being
prepaid, through the date of prepayment.
EXHIBIT A
PROMISSORY NOTE
$200,000 Salt Lake City, Utah
May 14, 1999
1. Amount; Maturity. FOR VALUE RECEIVED, the undersigned, World
Wireless Communications, Inc. (the "Maker"), promises to pay to the order
of Sterling Technology Partners, LLC (the "Holder"), the principal sum of
Two Hundred Thousand Dollars ($200,000), which principal sum shall mature
on May 14, 2000 and shall bear simple interest at the rate of 16% per
annum, payable quarterly commencing on August 15, 1999 and on November 15,
1999, February 15, 2000 and May 14, 2000 thereafter.
2. Mode of Payment. All payments of principal and interest due
under this Note shall be made in legal tender in the United States of
America for the payment of private and public debts and delivered to the
Holder at or, at the option of the Holder, in such other manner and at
such other place as the Holder shall have designated to the Maker in writing.
3. Prepayment.
(a) This Note may be voluntarily prepaid, without penalty or
premium, in whole or in part, at any time and from time to time. Any
prepayment must include all accrued interest on the principal being
prepaid, through the date of prepayment.
EXHIBIT A
PROMISSORY NOTE
$200,000 Salt Lake City, Utah
May 14, 1999
1. Amount; Maturity. FOR VALUE RECEIVED, the undersigned, World
Wireless Communications, Inc. (the "Maker"), promises to pay to the order
of James T. Kelly (the "Holder"), the principal sum of Two Hundred
Thousand Dollars ($200,000), which principal sum shall mature on May 14,
2000 and shall bear simple interest at the rate of 16% per annum, payable
quarterly commencing on August 15, 1999 and on November 15, 1999, February
15, 2000 and May 14, 2000 thereafter.
2. Mode of Payment. All payments of principal and interest due
under this Note shall be made in legal tender in the United States of
America for the payment of private and public debts and delivered to the
Holder at or, at the option of the Holder, in such other manner and at
such other place as the Holder shall have designated to the Maker in writing.
3. Prepayment.
(a) This Note may be voluntarily prepaid, without penalty or
premium, in whole or in part, at any time and from time to time. Any
prepayment must include all accrued interest on the principal being
prepaid, throught he date of prepayment.
EXHIBIT A
PROMISSORY NOTE
$200,000 Salt Lake City, Utah
May 14, 1999
1. Amount; Maturity. FOR VALUE RECEIVED, the undersigned, World
Wireless Communications, Inc. (the "Maker"), promises to pay to the order
of K.R. Braithwaite (the "Holder"), the principal sum of Two Hundred
Thousand Dollars ($200,000), which principal sum shall mature on May 14,
2000 and shall bear simple interest at the rate of 16% per annum, payable
quarterly commencing on August 15, 1999 and on November 15, 1999, February
15, 2000 and May 14, 2000 thereafter.
2. Mode of Payment. All payments of principal and interest due
under this Note shall be made in legal tender in the United States of
America for the payment of private and public debts and delivered to the
Holder at or, at the option of the Holder, in such other manner and at
such other place as the Holder shall have designated to the Maker in writing.
3. Prepayment.
(a) This Note may be voluntarily prepaid, without penalty or
premium, in whole or in part, at any time and from time to time. Any
prepayment must include all accrued interest on the principal being prepaid,
through the date of prepayment.
(b) Notwithstanding anything contained herein to the contrary,
this Note shall be mandatorily prepaid in an amount equal to 25% of the
gross proceeds received by the Maker from any and all closings of an
offering of its securities, whether through one or more private placement
or secondary public offerings, which prepayment shall be made upon the
closing of any such offering.
4. Acceleration upon Event of Default. This Note may be
accelerated at the option of the Holder, upon the occurrence of any event
of default as described below:
(a) any default, whether in whole or in part, shall occur in the
payment to the Holder of principal, interest or other item comprising the
Note as and when due which shall continue for a period of 10 days after
the receipt of written notice by the Maker thereof;
(b) any default, whether in whole or in part, shall occur in the
due observance or performance of any other covenant, term or provision
to be performed under the Loan Agreement by the Maker dated as of May
14, 1999 and all the exhibits thereto (the "Loan Agreement"), which
default is not described in any other subsection of this Section, and
such default shall continue for a period of 10 days after the receipt
of written notice by the Maker; provided, however, that if the Maker
shall have commenced to cure such default within such 10-day period and
shall proceed continuously in good faith and with due diligence to cure
such default, then such period instead shall be 30 days;
(c) the Maker shall (1) make a general assignment for the benefit
of its creditors, (2) apply for or consent to the appointment of a
receiver, trustee, assignee, custodian, sequestrator, liquidator or
similar official for itself or any of its assets and properties, (3)
commence a voluntary case for relief as a debtor under the United States
Bankruptcy Code, (4) file with or otherwise submit to any
governmental authority any petition, answer or other document seeking
(A) reorganization, (B) an arrangement with creditors or (C) to take
advantage of any other present or future applicable law respecting
bankruptcy, reorganization, insolvency, readjustment of debts, relief of
debtors, dissolution or liquidation, (5) file or otherwise submit any
answer or other document admitting or failing to contest the material
allegations of a petition or other document filed or otherwise submitted
against it in any proceeding under any such applicable law, or (6) be
adjudicated a bankrupt or insolvent by a court of competent jurisdiction;
(d) any case, proceeding or other action shall be commenced
against the Maker for the purpose of effecting, or an order, judgment or
decree shall be entered by any court of competent jurisdiction approving
(in whole or in part) anything specified in of Section 4(d) hereof, or
any receiver, trustee, assignee, custodian, sequestrator, liquidator or
other official shall be appointed with respect to the Maker, or shall be
appointed to take or shall otherwise acquire possession or control of all
or a substantial part of the assets and properties of the Maker, and any
of the foregoing shall continue unstayed and in effect for any period of
60 days; or
(e) the Maker's income before interest, depreciation,
amortization and taxes reflected on its financial statements filed with
the Securities and Exchange Commission for any quarter while the
Obligations under the Loan Agreement remain outstanding exceed the loss
or are less than the income projected for such quarter as set forth
below:
(i) for the quarter ending June 30, 1999, a loss of
$1,000,000,
(ii) for the quarter ending September 30, 1999, income of
$250,000, and
(iii) for the quarter ending December 31, 1999, income of
$1,000,000, in each case, as computed as set forth above.
5. Delay in Exercise of Rights. No delay on the part of the
Holder in exercising any of its options, powers or rights nor any
partial or single exercise of its options, powers or rights shall
constitute a waiver thereof or of any other option, power or right, and
no waiver on the part of the Holder of any of its options, powers or
rights shall constitute a waiver of any other option, power or right.
6. Waiver of Presentment; No Offsets. The Maker hereby waives
presentment for payment, dishonor, protest, notice of protest and any
demand whatsoever with respect to this Note and the right to interpose
any defense based upon any statute of limitation or any claim of laches
and any set-off or counterclaim of any nature or description.
7. Collection Costs; Maximum Interest Limitations.
(a) The Maker agrees to pay all reasonable costs, including all
attorneys' fees and disbursements incurred by the Holder in collecting
or enforcing payment of this Note in accordance with its terms.
(b) After this Note becomes due, at stated maturity or on
acceleration, any unpaid balance hereof shall thereafter bear interest
until paid at a rate of 16% simple interest per annum, but such interest
rate shall not exceed at any time the maximum interest rate allowable
under applicable state usury laws.
8. Governing Law.
(a) This Note and the rights of the parties hereunder shall be
governed by and construed in accordance with the laws of the State of
Utah, without regard to its conflicts of law principles. All parties
hereto (i) agree that any legal suit, action or proceeding arising out
of or relating to this Note shall be instituted only in a federal or
state court in Salt Lake City, Utah or in the State of Colorado, (ii)
waive any objection which they may now or hereafter have to the laying
of the venue of any such suit, action or proceeding, and (iii)
irrevocably submit to the jurisdiction of such federal or state court
in Utah or in the State of Colorado in any such suit, action or
proceeding, but such consent shall not constitute a general
appearance or be available to any other person who is not a
party to this Note. All parties hereto agree that the mailing
of any process in any suit, action or proceeding in accordance
with the notice provisions of this Note shall
constitute personal service thereof.
(b) THE MAKER HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN
ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS NOTE.
9. Notices. All notices or other communications
required or permitted to be given pursuant to this Note shall be
in writing and shall be considered as duly given on (a) the date
of delivery, if delivered in person, by nationally recognized
overnight delivery service or by facsimile or (b) five days
after mailing if mailed by registered or certified mail, return
receipt requested to the party entitled to receive the same, if
to the Holder, at his or its address on the books and records of
the Maker; and if to the Maker, c/o World Wireless
Communications, Inc., 2441 South 3850 West, West Valley City,
Utah 84120, with a copy to Law Offices of Stephen R. Field, 620
Fifth Avenue, Third Floor, New York, New York, Attn: Stephen R.
Field, Esq., facsimile number (212) 332-6055. Any party may
change his or its address by giving notice to the other party
stating its new address. Commencing on the 10th day after the
giving of such notice, such newly designated address shall be
such party's address for the purpose of all notices or other
communications required or permitted to be given pursuant to
this Note.
10. Severability. If any provision of this Note shall
be held invalid or unenforceable, such invalidity or unenforceability
shall attach only to such provision and shall not in any manner affect
or render invalid or unenforceable any other severable provision of
this Note, and this Note shall be carried out as if any such invalid
or unenforceable provision were not contained herein.
11. Amendment. This Note shall not be amended without
the prior written consent of the Holder.
WORLD WIRELESS
COMMUNICATIONS, INC.
By: /s/ David D. Singer
-------------------------
David D. Singer, President
MAKER
<PAGE>
EXHIBIT B
PLEDGE/SECURITY AGREEMENT
THIS PLEDGE/SECURITY AGREEMENT, dated as of the 14th day of May,
1999, by and between World Wireless Communications, Inc., a Nevada
corporation ("Pledgor"), and each of the holders of the Senior Secured Notes
(the "Notes") purchased pursuant to the Confidential Private Placement
Memorandum of Pledgor dated May 14, 1999 (the "Memorandum") who is listed on
Schedule 1 and whose separate signature page is attached hereto, as the same
may be amended from time to time (collectively known as "Pledgee" or the
"Holders").
WHEREAS, Pledgor wishes to raise a minimum of $2,500,000 and a maximum
of $4,750,000 through a sale of the two different classes of securities
consisting of the Notes, on the one hand, and shares of Senior Preferred
Stock and warrants to purchase Common Stock of the Company, on the other
hand (the "Units") pursuant to the Memorandum;
WHEREAS, Pledgee desires to obtain a security interest in certain
property owned by Pledgor; and
WHEREAS, as an inducement to Pledgee's purchase of the Units from
Pledgor, Pledgor has agreed to grant to Pledgee a security interest in and
to the Pledged Collateral (as hereinafter defined).
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and for other good and valuable consideration,
the adequacy and receipt for which are hereby acknowledged, the parties
hereto hereby agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATIONS
Section 1.1 Interpretations. Nothing herein expressed or implied is
intended or shall be construed to confer upon any person other than Pledgee
any right, remedy or claim under or by reason hereof. All covenants,
stipulations and agreements herein contained by or on behalf of Pledgee
shall be for the sole and exclusive benefit of Pledgee.
Section 1.2 Obligations Secured. The obligations secured hereby are
the obligations of Pledgor to Pledgee under the Notes sold by Pledgor to
Pledgee pursuant to the Memorandum, in the maximum principal amount thereof
outstanding from time to time, up to a maximum amount of $3,800,000
thereunder, and any additional amounts payable by or chargeable to Pledgor
thereunder or hereunder (the "Obligations").
ARTICLE II
PLEDGE AND ADMINISTRATION OF PLEDGED COLLATERAL
Section 2.1 Pledged Collateral.
(a) Pledgor hereby pledges to Pledgee, and creates in Pledgee for its
benefit, a security interest, for such time as the Obligations shall remain
outstanding, in and to all of Pledgor's right, title and interest in and to
(i) the property listed in Exhibit 1 attached hereto (and
signed by Pledgor), including, without limitation, any securities described
therein (which securities are collectively referred to as the "Pledged
Securities"), now owned by Pledgor, and all machinery, equipment,
automobiles, accounts receivable, inventory, securities of any kind, and
general intangibles acquired by Borrower on or after the date of this
Agreement; and
(ii) all products and proceeds from the pledged property.
The property pledged in Section 2.1(a)(i) hereof, the Pledged
Securities and the products thereof and the proceeds of all such items are
hereinafter collectively referred to as the "Pledged Collateral." The
security interest granted by Pledgor to Pledgee in and to the Pledged
Collateral shall be free and clear of all security interests and
restrictions on transfer of any kind except as provided in this Agreement or
as may be imposed by applicable law.
(b) Simultaneously with the execution and delivery of this Agreement,
Pledgor shall make, execute, acknowledge, file, record and deliver to
Pledgee any documents reasonably requested by Pledgee to perfect its
first-in-priority security interest in the Pledged Collateral.
Simultaneously with the execution and delivery of this Agreement, Pledgor
shall make, execute, acknowledge, file, record and deliver to Pledgee such
documents and instruments, including, without limitation, financing
statements, certificates, affidavits and forms as may, in the reasonable
opinion of Pledgee, be necessary to effectuate, complete or perfect, or to
continue and preserve, the first-in-priority security interest of Pledgee in
the Pledged Collateral, and Pledgee shall hold such documents and
instruments as secured party, subject to the terms and conditions contained
herein.
Section 2.2 Rights; Interests; Etc. (a) So long as no Event of
Default (as hereinafter defined) shall have occurred and be continuing:
(i) Pledgor shall be entitled to exercise any and all rights
pertaining to the Pledged Collateral or any part thereof for any purpose not
inconsistent with the terms hereof; and
(ii) Pledgor shall be entitled to receive and retain any and all
payments paid or made in respect of the Pledged Collateral.
(b) Upon the occurrence and during the continuance of an Event in
Default:
(i) Subject to Section 2.2 (b) (iii) hereof, all rights of
Pledgor to exercise the rights which it would otherwise be entitled to
exercise pursuant to Section 2.2 (a) (i) hereof and to receive payments
which it would otherwise be authorized to receive and retain pursuant to
Section 2.2 (a) (ii) hereof shall be suspended, and all such rights shall
thereupon become vested in Pledgee who shall thereupon have the sole right
to exercise such rights and to receive and hold as Pledged Collateral such
payments; provided, however, that if Pledgee shall become entitled and shall
elect to exercise its right to realize on the Pledged Collateral pursuant to
Article V hereof, then all cash sums received by Pledgee, or held by Pledgor
for the benefit of Pledgee and paid over pursuant to Section 2.2 (b) (ii)
hereof, shall be applied against any outstanding Obligations.
(ii) All interest, dividends, income and other payments and
distributions which are received by Pledgor contrary to the provisions of
Section 2.2(b)(i) hereof shall be received in trust for the benefit of
Pledgee, shall be segregated from other property of Pledgor and shall be
forthwith paid over to Pledgee;
(iii) notwithstanding anything contained herein to the contrary.
Pledgor shall retain any voting rights it may have with respect to any of
the Pledged Securities until such time as Pledgee is entitled and elects to
exercise its rights to realize on the Pledged Securities pursuant to Article
V hereof.
(c) Each of the following events shall constitute a default under
this Agreement (each an "Event of Default"):
(i) any default, whether in whole or in part, shall occur in
the payment to Pledgee of principal, interest or other item comprising the
Obligations as and when due, which default shall continue for a period of 10
days after the receipt of written notice thereof by Pledgor;
(ii) any default, whether in whole or in part, shall occur in
the due observance or performance of any other covenant, term or provision
to be performed under this Agreement by Pledgor, or the Loan Agreement, and
all exhibits thereto, of even date herewith, which default is not described
in any other subsection of this Section, and such default shall continue for
a period of 10 days after the receipt of written notice thereof by Pledgor;
provided, however, that if Pledgor shall have commenced to cure such default
within such 10-day period and shall proceed continuously in good faith and
with due diligence to cure such default, then such period instead shall be
thirty (30) days;
(iii) Pledgor shall (1) make a general assignment for the benefit
of its creditors, (2) apply for or consent to the appointment of a receiver,
trustee, assignee, custodian, sequestrator, liquidator or similar official
for itself or any of its assets and properties, (3) commence a voluntary
case for relief as a debtor under the United States Bankruptcy Code, (4)
file with or otherwise submit to any governmental authority any petition,
answer or other document seeking (A) reorganization, (B) an arrangement with
creditors or (C) to take advantage of any other present or future applicable
law respecting bankruptcy, reorganization, insolvency, readjustment of
debts, relief of debtors, dissolution or liquidation, (5) file or otherwise
submit any answer or other document admitting or failing to contest the
material allegations of a petition or other document filed or otherwise
submitted against it in any proceeding under any such
applicable law, or (6) be adjudicated a bankrupt or insolvent by a court of
competent jurisdiction;
(iv) any case, proceeding or other action shall be commenced
against Pledgor for the purpose of effecting, or an order, judgment or
decree shall be entered by any court of competent jurisdiction approving (in
whole or in part) anything specified in of Section 2.2(c) (iii) hereof, or
any receiver, trustee, assignee, custodian, sequestrator, liquidator or
other official shall be appointed with respect to Pledgor, or shall be
appointed to take or shall otherwise acquire possession or control of all or
a substantial part of the assets and properties of Pledgor, and any of the
foregoing shall continue unstayed and in effect for any period of 60 days; or
(v) Pledgor's income before interest, depreciation,
amortization and taxes reflected on its financial statements filed with the
Securities and Exchange Commission for any quarter while the Obligations
under the Loan Agreement remain outstanding exceed the loss or are less than
the income projected for such quarter as set forth below:
(i) for the quarter ending June 30, 1999, a loss of $1,000,000,
(ii) for the quarter ending September 30, 1999, income of
$250,000, and
(iii) for the quarter ending December 31, 1999, income of
$1,000,000 in each case, as computed as set forth above.
ARTICLE III
ATTORNEY-IN-FACT; PERFORMANCE
Section 3.1 Pledgee Appointed Attorney-in-Fact. Upon the occurrence
of an Event of Default and only as long as such Event of Default shall be
continuing, Pledgor hereby appoints Pledgee Pledgor's attorney-in-fact, with
full authority in the place and stead of Pledgor and in the name of Pledgor
or otherwise, from time to time in Pledgee's discretion to take any action
and to execute any instrument which Pledgee reasonably may deem necessary to
accomplish the purposes of this Agreement, including, without limitation, to
receive and collect all instruments made payable to Pledgor representing any
payment in respect of the Pledged Collateral or any part thereof and to give
full discharge for the same.
Section 3.2 Pledgee May Perform. If Pledgor fails to perform any
agreement contained herein, Pledgee, at its option, may itself perform, or
cause performance of, such agreement, and the reasonable expenses of Pledgee
incurred in connection therewith shall be payable by Pledgor under Section 8.3.
Section 3.3 Appointment of Agent. The Holders shall appoint from time
to time by a Pledgee Representative Agreement, in the form attached to the
Loan Agreement between the parties hereto as Exhibit C, one Pledgee to act
as their authorized representative for the benefit of all of the Holders
(the "Pledgee Representative"), and to perform all of the acts of Pledgee
permitted or required hereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Authorization; Enforceability. Each of the parties hereto
represents and warrants that it has taken all action necessary to authorize
the execution, delivery and performance of this Agreement and the
transactions contemplated hereby; and upon execution and delivery, this
Agreement shall constitute a valid and binding obligations of the respective
party, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights or by the principles
governing the availability of equitable remedies.
Section 4.2 Ownership of Pledged Collateral. Pledgor warrants and
represents that Pledgor is the legal and beneficial owner of the Pledged
Collateral free and clear of any lien, security interest, option or other
charge or encumbrance except for the security interest created by this
Agreement.
Section 4.3 Validity of Security Interest. Pledgor warrants and
represents that the pledge of the Pledged Collateral pursuant to this
Agreement creates a valid and perfected first priority pledge and security
interest in the Pledged Collateral.
Section 4.4 Due Organization. Pledgor warrants and represents that it
(i) is a corporation duly organized, validly existing and in good standing
under the laws of the State of Nevada, (ii) has the corporate power and
authority necessary to entitle it to use its corporate name and to own,
lease or otherwise hold its properties and assets and to carry on its
business as presently conducted or proposed to be conducted; (iii) is duly
qualified and in good standing to do business as presently conducted or
proposed to be conducted; and (iv) is duly qualified and in good standing to
do business in every jurisdiction where the nature of the business conducted
or the property owned or leased by it requires such qualification, except
where the failure to so qualify would not have a material adverse effect on
the business or financial condition of such corporation.
ARTICLE V
DEFAULT; REMEDIES; SUBSTITUTE COLLATERAL
Section 5.1 Event Default and Remedies.
(a) If an Event of Default described in Section 2.2(c)(i), (ii) and
(v) occurs and is continuing, then in each such case the Pledgee
Representative or the Holders of not less than a majority in principal
amount of the Notes may declare the principal amount to be due and payable
immediately, by a notice in writing to the Company, and upon any such
declaration, such principal amount shall become immediately due and payable.
If an Event of Default described in Sections 2.2(c)(iii) or (iv) occurs and
is continuing, then the principal amount of all the Notes shall
automatically become immediately due and payable without declaration or
other act on the part of any Holder.
(b) Upon the occurrence of an Event of Default, the Pledgee
Representative, in its sole discretion shall be entitled to receive all
distributions with respect to the Pledged Collateral, to cause the Pledged
Collateral to be transferred into the name of Pledgee or its nominee, to
dispose of the Pledged Collateral, and to realize upon any and all rights in
the Pledged Collateral then held by Pledgee.
Section 5.2 Method of Realizing Upon the Pledged Collateral;
Other Remedies. Upon the occurrence of an Event of Default, in addition to
any rights and remedies available at law or in equity, the following
provisions shall govern Pledgee's right to realize upon the Pledged
Collateral:
(a) Any item of the Pledged Collateral may be sold for cash or other
value in any number of lots at brokers board, public auction or private sale
and may be sold without demand, advertisement or notice (except that Pledgee
shall give Pledgor ten (10) business days prior written notice of the time
and place or of the time after which a private sale may be made (the "Sale
Notice"), which notice shall be in any event commercially reasonable. At
any sale or sales of the Pledged Collateral, Pledgor may bid for and
purchase the whole or any part of the Pledged Collateral and, upon
compliance with the terms of such sale, may hold, exploit and dispose of the
same without further accountability to Pledgee. Pledgor will execute and
deliver, or cause to be executed and delivered, such instruments, documents,
assignments, waivers, certificates, and affidavits and supply or cause to be
supplied such further information and take such further action as Pledgee
reasonably shall require in connection with any such sale.
(b) Any cash being held by Pledgee as Pledged Collateral and all cash
proceeds received by Pledgee in respect of, sale of, collection from, or
other realization upon all or any part of the Pledged Collateral shall be
applied as follows:
(i) to the payment of all amounts due the Pledgee
Representative and the Holders for the expenses reimbursable to it or them
hereunder or owed to it pursuant to Section 8.3 hereof;
(ii) to the payment of the amounts then due and unpaid for
principal of and interest on the Notes in respect of which or for the
benefit of which such money has been collected, ratably among all the
Holders in accordance with the ratio of the principal amount of the Notes
held by a Holder to the total principal amount of all of the Notes then
outstanding, without preference or priority of an kind, according to the
amounts due and payable on such for principal and interest, respectively;
and
(iii) the balance, if any, to the person or persons entitled
thereto, including, without limitation, Pledgor.
(c) It is understood that if all or any part of the Pledged
Collateral is sold as a private sale, Pledgee will sell such Collateral to
the person making the highest bid for such Pledged Collateral, provided that
Pledgee shall not be required to conduct an auction or otherwise solicit any
specific number of offers for the Pledged Collateral or any part thereof.
(d) In addition to all of the rights and remedies which Pledgor and
Pledgee may have pursuant to this Agreement, Pledgor and Pledgee shall have
all of the rights and remedies provided by law, including, without
limitation, those under the Uniform Commercial Code and as set forth in
Section 5(e) hereof.
(e) (i) If Pledgor fails to pay such amounts due upon the
occurrence of an Event of Default which is continuing, then forthwith upon
the Pledgee Representative's demand the Pledgee Representative, in any
capacity as it may determine, may institute a judicial proceeding for the
collection of the sums so due and unpaid, may prosecute such proceeding to
judgment or final decree and may enforce the same against Pledgor or any
other obligor upon the Notes and collect the monies adjudged or decreed to
be payable in the manner provided by law out of the property of Pledgor or
any other obligor upon such Notes, wherever situated.
(ii) Pledgor agrees that it shall be liable for any expenses
incurred by the Pledgee Representative and the Holders in connection with
enforcement, collection and preservation of the Notes, including, without
limitation, legal fees and expenses, and such amounts shall be deemed
included under Section 8.3 hereof.
(iii) All rights of action and claims under this Agreement may be
prosecuted and enforced by the Pledgee Representative without the possession
of any of the Notes or the production thereof in any proceeding relating
thereto, any such proceeding instituted by the Pledgee Representative may be
brought in any capacity as it may determine and any recovery of judgment
shall, after provision for the payment of the legal fees and expenses and
other expenses paid or incurred by the Pledgee Representative as permitted
hereunder, be for the ratable benefit of the Holders of the Notes in respect
of which such judgment has been recovered.
Section 5.3 Proofs of Claim.
(a) In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment,
composition or other judicial proceeding relating to Pledgor or any other
obligor upon the Notes or the property of Pledgor or of such other obligor
or their creditors, the Pledgee Representative (irrespective of whether the
principal of the Notes shall then be due and payable as therein expressed or
by declaration or otherwise and irrespective of whether the Pledgee
Representative shall have made any demand on Pledgor for the payment of
overdue principal, if any, or interest) shall be entitled and empowered, by
intervention in such proceeding or otherwise,
(i) to file and prove a claim for the whole amount of principal
of the Notes and interest owing and unpaid in respect of the Notes and to
file such other papers or documents as may be necessary or advisable in
order to have the claims of the Holders (including any claim for the legal
fees and expenses and other expenses paid or incurred by the Pledgee
Representative permitted hereunder and of the holders allowed in such
judicial proceeding), and
(ii) to collect and receive any monies or other property payable
or deliverable on any such claims and to distribute the same; and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Pledgee Representative and, in the
event that the Pledgee Representative shall consent to the making of such
payments directly to the Holders, to pay to the Agent any amounts for
expenses due it hereunder.
(b) Nothing herein contained shall be deemed to authorize the Pledgee
Representative to authorize or consent to or accept or adopt on behalf of
any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the rights of any holder thereof or to authorize the
Pledgee Representative to vote in respect of the claim of any Holder in any
such proceeding.
Section 5.4 Duties Regarding Pledged Collateral. Pledgee shall have
no duty as to the collection or protection of the Pledged Collateral or any
income thereon or as to the preservation of any rights pertaining thereto,
beyond the safe custody and reasonable care of any of the Pledged Collateral
actually in Pledgee's possession.
Section 5.5 Limitation on Suits.
(a) No holder of the Notes shall have any right to institute any
proceeding, judicial or otherwise, with respect to the Notes for any other
remedy hereunder, if the Pledgee Representative has instituted a proceeding
pursuant to Section 5.2(e) hereof.
(b) Except as otherwise provided herein, every right and remedy given
by this Agreement or by law to the Pledgee Representative or to the Holders
may be exercised from time to time, and as often as may be deemed expedient,
by the Pledgee Representative or by the Holders, as the case may be.
Section 5.6 Additional Remedies upon Certain Defaults.
Notwithstanding anything contained in this Agreement to the contrary, if
there is an event of default under Section 2.2(c)(v) hereof, Pledgor shall
grant to each Pledgee his pro rata share (computed based on the ratio of the
principal amount of his Note to the principal amount of all Notes originally
issued) of additional warrants, substantially in the form attached hereto as
Exhibit 2, to purchase additional shares of the common stock of Pledgor (the
"Default Warrant Shares") at the rate of Three Hundred Thousand (300,000)
Default Warrant Shares for each such event of default under Section
2.2(c)(v) hereof; provided, however, that the number of Default Warrant
Shares shall not exceed Nine Hundred Thousand (900,000) of such shares in
the aggregate. The representations and warranties of each Pledgee set forth
in Section 3 of such Pledgee's Subscription Agreement shall be true and
correct with respect to such Default Warrant Shares on the date of such grant.
ARTICLE VI
AFFIRMATIVE COVENANTS
Pledgor covenants and agrees that, from the date hereof and until the
Obligations have been fully paid and satisfied, unless Pledgee shall consent
otherwise in writing (as provided in Section 8.4 hereof):
Section 6.1 Existence, Properties, Etc.
(a) Pledgor shall do, or cause to be done, all things, or proceed
with due diligence with any actions or courses of action, that may be
necessary (i) to maintain its due organization, valid existence and good
standing under the laws of its state of incorporation, and (ii) to preserve
and keep in full force and effect all qualifications, licenses and
registrations in those jurisdictions in which the failure to do so could
have a Material Adverse Effect (as defined in this Section 6.1(a)); and (b)
Pledgor shall not do, or cause to be done, any act impairing its corporate
power or authority (i) to carry on its business as now conducted, and (ii)
to execute or deliver this Agreement, or any other loan instrument delivered
pursuant to the Confidential Private Placement Memorandum of Pledgor dated
May 14, 1999 (which other loan instruments collectively shall be referred to
the "Loan Instruments") to which it is or will be a party, or perform any of
its obligations hereunder or thereunder. For purposes of this Agreement,
the term "Material Adverse Affect" shall mean any material and adverse
affect, whether individually or in the aggregate, upon (a) Pledgor's assets,
business, operations, properties or condition, financial or otherwise, (b)
the ability of Pledgor to make payment as and when due of all or any part of
the Obligations, or (c) the Pledged Collateral.
Section 6.2 Payment of Debts, Taxes, Etc. Pledgor shall pay, or cause
to be paid, all of its indebtedness and other liabilities and perform, or
cause to be performed, all of its obligations in accordance with the
respective terms thereof, and pay and discharge, or cause to be paid or
discharged, all taxes, assessments and other governmental charges and levies
imposed upon it, upon its income or receipts or upon any of its assets and
properties on or before the last day on which the same may be paid without
penalty, as well as pay all other lawful claims (whether for services,
labor, materials, supplies or otherwise) as and when due; provided, however,
that it shall not constitute a breach of this Section if Pledgor fails to
perform any such obligation or to pay any such indebtedness or other
liability (except for the Obligations), tax, assessment, or governmental or
other charge, levy or claim (i) that is being contested in good faith and by
proper proceedings diligently pursued and (ii) if the effect of such failure
to pay or perform will not (A) accelerate the maturity thereof, or of any
other debt or obligation of Pledgor, or (B) subject any part of the assets
and properties of Pledgor to sale or forfeiture.
Section 6.3 Accounts and Reports. Pledgor shall maintain a standard
system of accounting in accordance with generally accepted accounting
principles consistently applied and provide, at its sole expense, to Pledgee
the following:
(a) as soon as available and in any event within 90 days after the
end of each fiscal year of Pledgor, commencing with the fiscal
year ending December 31, 1999, a balance sheet of Pledgor as at
the end of that fiscal year and the related statements of
earnings, shareholders' equity and cash flow for such fiscal
year, all with accompanying notes, in reasonable detail and
stating in comparative form the figures as at the end of and for
the previous fiscal year, prepared in accordance with generally
accepted accounting principles consistently applied, and audited
by a firm of independent certified public accountants of
recognized standing designated by Pledgee in writing (including,
without limitation, Hansen, Barnett & Maxwell) to audit Pledgor's
books;
(b) as soon as available, and in any event within 60 days after
the end of each three-month period of each of its fiscal
years (commencing with the quarter ending June 30, 1999), a
balance sheet of Pledgor as at the end of such three-month
period and the related statements of earnings,
shareholders' equity and cash flow for such period, all
with accompanying notes, in reasonable detail and stating
in comparative form the figures as at the end of and for
the previous fiscal year's applicable period, prepared in
accordance with generally accepted accounting principles
consistently applied, and compiled by a firm of independent
certified public accountants of recognized standing
designated by Pledgee in writing (including, without
limitation, Hansen, Barnett & Maxwell) to review Pledgor's
books;
(c) as soon as available, a copy of any notice or other
communication alleging any nonpayment or other material
breach or default, or any foreclosure or other action
respecting any material portion of its assets and
properties, received respecting any of the indebtedness of
Pledgor in excess of $25,000 (other than the Obligations),
or any demand or other request for payment under any
guaranty, assumption, purchase agreement or similar
agreement or arrangement respecting the indebtedness or
obligations of others in excess of $25,000, including any
received from any person acting on behalf of the holder or
beneficiary thereof; and
(d) within 30 days after the making of each submission or
filing, a copy of any report, registration statement, proxy
statement, financial statement, notice or other document,
whether periodic or otherwise, submitted to the
shareholders of Pledgor, or submitted to or filed by
Pledgor with any governmental authority involving or
affecting (i) any registration of Pledgor or its
securities, (ii) Pledgor that could have a Material Adverse
Effect, (iii) the Obligations, (iv) any part of the Pledged
Collateral or (v) any of the transactions contemplated in
this Agreement or the Loan Instruments, including, without
limitation, those submitted or filed pursuant to the
Securities Act of 1933, as amended, and the Securities
Exchange Act of 1934, as amended.
Section 6.4 Compliance with Applicable Laws; Operations. Pledgor
promptly and fully shall comply with, conform to and obey all current
applicable laws and all future applicable laws in all material respects as
the same shall take effect, the non-compliance with or violation of which
could have a Material Adverse Effect. In any event, Pledgor shall procure,
store, manufacture, distribute and dispose of all inventory and use and
operate all machinery, equipment and real estate in full compliance with and
conformity to all applicable laws in all material respects, including,
without limitation, (i) all applicable permits, license, authorizations,
consents or approvals of authorities and (ii) all applicable laws pertaining
to employment, zoning, pollution, hazardous materials, toxic substances,
public health or safety, occupational health or safety or the environment.
Section 6.5 Maintenance and Insurance.
(a) Pledgor shall maintain or cause to be maintained, at its own
expense, all of its assets and properties in good working order and
condition, making all necessary repairs thereto and renewals and
replacements thereof.
(b) Pledgor shall maintain or cause to be maintained, at its own
expense, insurance in form, substance and amounts (including deductibles),
which Pledgor deems reasonably necessary to Pledgor's business, (i)
adequate to insure all assets and properties of Pledgor, which assets and
properties are of a character usually insured by persons engaged in the same
or similar business against loss or damage resulting from fire, flood,
hurricanes or other risks included in an extended coverage policy, (ii)
against public liability and other tort claims that may be incurred by
Pledgor, (iii) as may be required by the Loan Instruments or applicable law
and (iv) as may be reasonably requested by Pledgee, all with adequate,
financially sound and reputable insurers, and all naming Pledgee as an
additional insured and loss payee under a standard mortgagee's endorsement
as Pledgee's interest may appear.
Section 6.6 Contracts and Other Collateral. Pledgor shall perform all
of its obligations under or with respect to each instrument, receivable,
contract and other intangible included in the Pledged Collateral to which
Pledgor is now or hereafter will be party on a timely basis and in the
manner therein required, including, without limitation, this Agreement; and
Pledgor shall enforce all of its rights under all such instruments,
agreements and other receivable on a timely basis to the full extent
permitted by applicable law.
Section 6.7 Defense of Collateral, Etc. Pledgor shall defend and
enforce its right, title and interest in and to any part of (a) the Pledged
Collateral, and (b) if not included within the Pledged Collateral, those
assets and properties whose loss could have a Material Adverse Effect,
Pledgor shall defend Pledgee's right, title and interest in and to each and
every part of the Pledged Collateral, each against all manner of claims and
demands on a timely basis to the full extent permitted by applicable law.
ARTICLE VII
NEGATIVE COVENANTS
Pledgor covenants and agrees that, from the date hereof until the
Obligations have been fully paid and satisfied, unless Pledgee shall consent
otherwise in writing (as provided in Section 8.4 hereof):
Section 7.1 Indebtedness. Pledgor shall not directly or indirectly
permit, create, incur, assume, permit to exist, increase, renew or extend on
or after the date hereof any indebtedness on its part, including
commitments, contingencies and credit availabilities, or apply for or offer
or agree to do any of the foregoing, except that Pledgor may incur or permit
to exist: (a) indebtedness owed to Pledgee; (b) indebtedness incurred in
the ordinary course of business, including, without limitation, to
suppliers, distributors, carriers, materialmen, laborers, counsel,
accountants, advisors, sellers or lessors of machinery and equipment and
real estate acquired or leased in connection with Pledgor's business; and
(c) other indebtedness expressly subordinated to the Obligations by such
creditor executing the standard form subordination agreement of the Pledgee
attached hereto as Exhibit 3 (the "Subordination Agreement"), or otherwise
as may be acceptable to Pledgee in its sole discretion and as to which it
consents in writing. Pledgor shall not prepay or acquire, in whole or in
part, any of its indebtedness except to Pledgee as permitted by agreement or
consent or where any prepayments do not exceed the sum of $100,000 in any
calendar year of Pledgor. The indebtedness permitted under clauses (b) and
(c) hereof incurred after the date of this Agreement shall not exceed in the
aggregate $3,800,000.
Section 7.2 Liens and Encumbrances. Pledgor shall not directly or
indirectly make, create, incur, assume or permit to exist any assignment,
pledge, mortgage, security interest
or other lien or encumbrance of any nature in, to or against any part of the
Pledged Collateral, or offer or agree to do so, or own or acquire or agree
to acquire any asset or property of any character subject to any of the
foregoing encumbrances (including any conditional sale contract or other
title retention agreement), or assign, pledge or in any way transfer or
encumber its right to receive any income or other distribution or proceeds
from any part of the Pledged Collateral, or enter into any sale-leaseback
financing respecting any part of the Pledged Collateral as lessee, or cause
or assist the inception or continuation of any of the foregoing; provided,
however, that the foregoing restrictions shall not prohibit (to the extent
otherwise not prohibited by this Agreement):
(a) liens for taxes, assessments, governmental charges, levies or
claims described in Section 6.2, if payment thereof shall not then be
required to be made by this Section 7.2;
(b) liens of carriers, warehousemen, mechanics, laborers and
materialmen incurred in the ordinary course of business for sums not then
required to be paid under Section 6.2, so long as there shall have been set
aside on the books of Pledgor such reserve, if any, as shall be required by
generally accepted accounting principles;
(c) liens incurred in the ordinary course of business in connection
with worker's compensation, unemployment insurance, statutory obligation or
social security legislation, or for any purpose at the time required by law
as a condition precedent to the transaction of business or the exercise of
any of the privileges or licenses of Pledgor;
(d) liens incurred in respect of attachments discharged within 30
days from the making thereof or judgments or awards in force for less than
30 days or with respect to which Pledgor in good faith shall be prosecuting
an appeal or proceeding for review and with respect to which a stay of
execution upon appeal or proceeding for review shall have been secured if
required;
(e) the security interests and other liens and encumbrances granted
from time to time to Pledgee;
(f) with respect to indebtedness permitted under Section 7.1, liens
incurred in respect of any financing of Pledgor's inventory, accounts
receivable, machinery, equipment and automobiles with a bank or other
financial institution, provided that the loan instruments evidencing such
financing expressly provide that any lien arising from such financing is
subordinate to the first security interest hereunder and, in the event of a
default thereunder, no collection of the principal, interest and other
charges and expenses thereunder will be made until the full payment of the
Obligations, or otherwise as may be acceptable to Pledgee in its sole
discretion and as to which it consents in writing;
(g) liens incurred in respect of indebtedness on the Pledged
Collateral which are subordinated to the Obligations by such creditor(s)
executing the Subordination Agreement; and which are subordinated to the
Obligations, or otherwise as may be acceptable to Pledgee in its sole
discretion and as to which it consents in writing; and
(h) with respect to indebtedness permitted under section 7.1, liens
incurred in respect of indebtedness on machinery, equipment and automobiles
purchased or leased by Pledgor after the date of the execution and delivery
of this Agreement by Pledgor at the closing of the offering made pursuant to
the Memorandum.
Section 7.3 Securities Issuance. Pledgor shall not issue any of its
stock for $0.25 per share or less, nor shall Pledgor issue any note,
warrant, debenture or other security which may convert or be exercised to
acquire Pledgor's stock for $0.25 per share or less, except as reflected in
the securities issued pursuant to the Memorandum.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Notices. All notices or other communications
required or permitted to be given pursuant to this Agreement shall be in
writing and shall be considered as duly given on (a) the date of delivery,
if delivered in person, by nationally recognized overnight delivery service
or by facsimile or (b) three days after mailing if mailed from within the
continental United States by registered or certified mail, return receipt
requested to the party entitled to receive the same, if to Pledgor, World
Wireless Communications, Inc., 2441 South 3850 West, West Valley City, Utah
84120, with a copy to Law Offices of Stephen R. Field, 620 Fifth Avenue, 3rd
Floor, New York, New York 10020, Attn: Stephen R. Field, Esq., and if to
Pledgee, at the addresses shown on the books of Pledgor. Any party may
change its address by giving notice to the other party stating its new
address. Commencing on the 10th day after the giving of such notice, such
newly designated address shall be such party's address for the purpose of
all notices or other communications required or permitted to be given
pursuant to this Agreement.
Section 8.2 Severability. If any provision of this Agreement shall
be held invalid or unenforceable, such invalidity or unenforceability shall
attach only to such provision and shall not in any manner affect or render
invalid or unenforceable any other severable provision of this Agreement,
and this Agreement shall be carried out as if any such invalid or
unenforceable provision were not contained herein.
Section 8.3 Expenses. In the event of an Event of Default, Pledgor
will pay to Pledgee the amount of any and all reasonable expenses, including
the reasonable fees and expenses of its counsel, which Pledgee or the
Pledgee Representative may incur in connection with (i) the custody or
preservation of, or the sale, collection from, or other realization upon,
any of the Pledged Collateral, (ii) the exercise or enforcement of any of
the rights of Pledgee hereunder or (iii) the failure by Pledgor to perform
or observe any of the provisions hereof.
Section 8.4 Waivers, Amendments, Etc.. Pledgee's delay or failure at
any time or times hereafter to require strict performance by Pledgor of any
undertakings, agreements or covenants shall not waive, affect, or diminish
any right of Pledgee under this Agreement to demand strict compliance and
performance herewith. Any waiver by Pledgee of any Event of Default shall
not waive or affect any other Event of Default, whether such Event of
Default is prior or subsequent thereto and whether of the same or a
different type. None of the undertakings, agreements and covenants of
Pledgor contained in this Agreement, and no Event of Default, shall be
deemed to have been waived by Pledgee, nor may this Agreement be amended,
changed or modified, unless such waiver, amendment, change or modification
is evidenced by an instrument in writing specifying such waiver, amendment,
change or modification and signed by the Holders of at least 75% of the
principal amount of the Notes then outstanding.
Section 8.5 Continuing Security Interest. This Agreement shall create
a continuing security interest in the Pledged Collateral and shall (i)
remain in full force and effect until payment in full of the Obligations or
the conversion of all of the Notes as provided therein, and (ii) be binding
upon Pledgor and its successors and (iii) inure to the benefit of Pledgee
and its successors and permitted assigns. Upon the payment or satisfaction
in full of the Obligations, or such conversion of the Notes, Pledgor shall
be entitled to the return, at its expense, of such of the Pledged Collateral
as shall not have been sold, returned in accordance with Section 5.2 hereof
or otherwise applied pursuant to the terms hereof.
Section 8.6 Applicable Law; Jurisdiction. This Agreement and the
rights of the parties hereunder shall be governed by and construed in
accordance with the laws of the State of Utah, without regard to its
conflicts of law principles. Pledgee and Pledgor hereto (i) agree that any
legal suit, action or proceeding arising out of or relating to this
Agreement shall be instituted only in a federal or state court in Salt Lake
City, Utah or in the State of Colorado, (ii) waive any objection which they
may now or hereafter have to the laying of the venue of any such suit,
action or proceeding, and (iii) irrevocably submit to the jurisdiction of
any federal or state court in Salt Lake City, Utah or in the State of
Colorado, in any such suit, action or proceeding, but such consent shall not
constitute a general appearance or be available to any other person who is
not a party to this Agreement. Pledgee and Pledgor hereto agree that the
mailing of any process in any suit, action or proceeding in accordance with
the notice provisions of this Agreement shall constitute personal service
thereof.
Section 8.7 Entire Agreement. This Agreement constitutes the entire
agreement among the parties and supersedes any prior agreement or
understanding among them with respect to the subject matter hereof.
Section 8.8 Number and Gender. Wherever from the context it appears
appropriate, each term stated in either the singular or the plural shall
include the singular and the plural, and pronouns stated in either the
masculine, the feminine or the neuter gender shall include the masculine,
feminine and neuter.
Section 8.9 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same instrument. In addition, this Agreement
may contain more than one counterpart of the signature page and this
Agreement may be executed by the affixing of such signature pages executed
by the parties to one copy of the Agreement; all of such counterpart
signature pages shall be read as though one, and they shall have the same
force and effect as though all of the
signers had signed a single signature page.
Section 8.10 Rights to Participate in Board and Committee
Meetings. Commencing with the date of the Closing, Borrower shall give
Bruce D. Cowen full visitation rights at all meetings of the Board of
Directors of Borrower and at all meetings of any committee thereof whether
held in person or by conference call. Pledgor agrees to provide Bruce D.
Cowen with the same notice and information that it gives to its directors in
connection with any such meeting.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
WORLD WIRELESS COMMUNICATIONS, INC.
PLEDGOR
By: /s/ David D. Singer
---------------------------
David Singer, President
PLEDGEE:
Each Holder listed on Schedule 1
attached hereto as reflected in the
signature pages attached hereto
from time to time at the end of
such Schedule
IN WITNESS WHEREOF, the undersigned Pledgee has signed this Agreement
as of the date first above written.
PLEDGEE:
Signature of Individual Pledgee
__________________________
Print Name of Individual
or, if applicable,
/s/ The Orbiter Fund
---------------------------------------
Name of Partnership, Corporation, Trust
or other Entity
By: /s/ Michael Lauer
-----------------------------------
Authorized Person
Michael Lauer
-----------------------------------
Print Name of Signer
I
Investment Manager
------------------------------------
Title
Kaya Flamboyan 9
------------------------------------
Street or Mailing Address
Curacao, Netherlands Antilles
------------------------------------
City, State, Zip Code
IN WITNESS WHEREOF, the undersigned Pledgee has signed this Agreement
as of the date first above written.
PLEDGEE:
Signature of Individual Pledgee
____________________________
Print Name of Individual
or, if applicable,
/s/ Lancer Offshore Inc.
---------------------------------------
Name of Partnership, Corporation, Trust
or other Entity
By: /s/ Michael Lauer
---------------------------------------
Authorized Person
Michael Lauer
--------------------------------------
Print Name of Signer
Investment Manager
-------------------------------------
Title
Kaya Flamboyan 9
-------------------------------------
Street or Mailing Address
Curacao, Netherlands Antilles
--------------------------------------
City, State, Zip Code
PLEDGEE:
Signature of Individual Pledgee
--------------------------------------
Print Name of Individual
or, if applicable,
The McCloskey Trust
---------------------------------------
Name of Partnership, Corporation, Trust
or other Entity
By: /s/ Thomas D. McCloskey, Jr.
---------------------------------------
Authorized Person
Thomas D. McCloskey, Jr.
--------------------------------------
Print Name of Signer
Trustee
--------------------------------------
Title
132 West Main Street, Suite A
--------------------------------------
Street or Mailing Address
Aspen, CO 81611
--------------------------------------
City, State, Zip Code
PLEDGEE:
Signature of Individual Pledgee
_______________________
Print Name of Individual
or, if applicable,
Frying Pan Partners, LLC
------------------------------------
Name of Partnership, Corporation, Trust
or other Entity
By: /s/ David Marrs
------------------------------------
Authorized Person
David Marrs
------------------------------------
Print Name of Signer
Member
------------------------------------
Title
132 W. Main St.
------------------------------------
Street or Mailing Address
Aspen, CO. 81611
------------------------------------
City, State, Zip Code
PLEDGEE:
Signature of Individual Pledgee
__________________________
Print Name of Individual
or, if applicable,
CJL Investments LLC
-------------------------------------
Name of Partnership, Corporation, Trust
or other Entity
By: /s/ John H. Perry
-------------------------------------
Authorized Person
John H. Perry, III
-------------------------------------
Print Name of Signer
Managing Member
-------------------------------------
Title
564 Toro Cyn Rd.
-------------------------------------
Street or Mailing Address
Santa Barbara, CA 93108
-------------------------------------
City, State, Zip Code
PLEDGEE:
James T. Kelly
-------------------------------------
Signature of Individual Pledgee
James T. Kelly
------------------------------------
Print Name of Individual
or, if applicable,
-------------------------------------
Name of Partnership, Corporation, Trust
or other Entity
By:________________________
Authorized Person
__________________________
Print Name of Signer
___________________
Title
_____________________
Street or Mailing Address
_______________________
City, State, Zip Code
PLEDGEE:
Signature of Individual Pledgee
______________________
Print Name of Individual
or, if applicable,
Sterling Technology Partners, LLC
-------------------------------------
Name of Partnership, Corporation, Trust
or other Entity
By: /s/ Bruce D. Cowen
-------------------------------------
Authorized Person
Bruce D. Cowen
-------------------------------------
Print Name of Signer
Chairman & CEO
-------------------------------------
Title
27241 Paseo Peregrino
-------------------------------------
Street or Mailing Address
San Juan Capistrano, CA 92675
-------------------------------------
City, State, Zip Code
PLEDGEE:
/s/ Kathyrn Braithwaite
-------------------------------------
Signature of Individual Pledgee
Kathryn Braithwaite
-------------------------------------
Print Name of Individual
or, if applicable,
Name of Partnership, Corporation, Trust
---------------------------------------
or other Entity
By:___________________
Authorized Person
________________________
Print Name of Signer
_________________
Title
______________
Street or Mailing Address
_________________________
City, State, Zip Code
<PAGE>
EXHIBIT C
PLEDGEE REPRESENTATIVE AGREEMENT
This Agreement is entered into effective as of the 14th day of May,
1999 by and among the parties set forth below (individually a "Noteholder,"
and collectively the "Noteholders").
1. RECITALS. The Noteholders each hold an interest in the Promissory Note
from World Wireless Communications, Inc., a Nevada corporation (the
"Borrower"), in the original principal amount of $2,000,000 of even date
herewith (the "Note"). The Note is secured by a security interest in
certain assets of the Borrower pursuant to a Pledge/Security Agreement of
even date herewith (the "Pledge Agreement"). The parties desire to appoint
and authorize one Noteholder to enforce their rights under the Note and/or
the Pledge Agreement in accordance with the terms and conditions set forth
herein.
2. APPOINTMENT. Sterling Technology Partners, LLC, is hereby
appointed as the Noteholders' "Pledgee Representative," as defined and
identified in the Pledge Agreement. By the execution and delivery of this
Agreement, each Noteholder appoints Sterling Technology Partners, LLC, as
its true and lawful attorney-in-fact in connection with all matters relating
to the Notes and/or the Pledge Agreement. This appointment is coupled with
an interest and is irrevocable.
3. AUTHORITY. The Pledgee Representative shall have the following
powers and authority:
a. all rights, powers and authority as expressly set forth in the
Pledge Agreement;
b. the right to institute any action to enforce the Noteholders'
rights under the Pledge Agreement and/or the Notes, as the trustee of an
express trust for all of the Noteholders, individually and as the agent of
the Noteholders, or in such other capacity as Pledgee Representative may
determine;
c. the right to negotiate and settle any dispute arising under or
relating to the Note and/or the Pledge Agreement, and the enforcement
thereof, on such terms and conditions as the Pledgee Representative deems
proper; and
d. the right to negotiate, enter into and enforce the Noteholders'
rights under any Subordination Agreement in favor of the Noteholders with
other creditors of the Borrower.
4. OBLIGATIONS. Any amounts which the Pledgee Representative
collects on behalf of the Noteholders shall be distributed to each
Noteholder in portion to each Noteholder's interest in the principal
outstanding under the Notes. The Pledgee Representative shall distribute
all amounts collected under the Notes and/or the Pledge Agreement within
five business days of collecting such amounts.
5. EXPENSES; INDEMNIFICATION. Each Noteholder, severally but not
jointly, agrees to reimburse the Pledgee Representative for any expenses
incurred in enforcing the Noteholders' rights under the Notes and/or the
Pledge Agreement, including reasonably attorney fees, which reimbursements
may be offset against amounts distributable to the Noteholders. Each
Noteholder, severally but not jointly, agrees to indemnify and hold harmless
the Pledgee Representative from any and all actions taken under this
Agreement, provided that the Pledgee Representative is not acting
intentionally, fraudulently or with gross negligence. Any indemnification
obligation may be offset against the amounts collected under the Note and/or
the Pledge Agreement.
6. RESIGNATION OR REPLACEMENT OF THE PLEDGEE REPRESENTATIVE. The
Pledgee Representative may resign at any time by giving the Noteholders at
least 20 days prior written notice of such resignation. The Noteholders may
remove the Pledgee Representative upon a vote of the holders of a majority
of the principal balance then owed under the Notes. A replacement Pledgee
Representative shall be appointed upon a vote of the holders of a majority
of the principal balance then owed under the Notes. The Pledgee
Representative, its affiliates and assigns, may vote on the same basis as
all the other Noteholders in any such vote. Upon such resignation or
removal, the Pledge Representative shall be released and discharged from all
further obligations and liabilities hereunder.
7. MISCELLANEOUS.
a. Notices. All notices or other communications required or
permitted to be given pursuant to this Agreement shall be in writing and
shall be considered as duly given on (i) the date of delivery, if delivered
in person, by nationally recognized overnight delivery services or by
facsimile or (ii) three days after mailing if mailed from within the
continental United States by registered or certified mail, return receipt
requested to the party entitled to receive the same, if to the Borrower,
World Wireless Communications, Inc., 2441 South 3850 West, West Valley City,
Salt Lake City, Utah 84120, with a copy to Law Offices of Stephen R. Field,
620 Fifth Avenue, New York, New York 10020, Attn: Stephen R. Field, Esq.;
and if to a Lender, at his or its address as set forth in the books and
records of the Lender. Any party may change his or its address by giving
notice to the other party stating his or its new address. Commencing on the
10th day after the giving of such notice, such newly designated address
shall be such party's address for the purpose of all notices or other
communications required or permitted to be given pursuant to this Agreement.
b. Governing Law. This Agreement and the rights of the parties
hereunder shall be governed by and construed in accordance with the laws of
the State of Utah, without regard to its conflicts of law principles. All
parties hereto (i) agree that any legal suit, action or proceeding arising
out of or relating to this Agreement shall be instituted only in a federal
or state court in Salt Lake City, Utah or in the State of Colorado; (ii)
waive any objection which they may now or hereafter have to the laying of
the venue of any such suit, action or proceeding; and (iii) irrevocably
submit to the jurisdiction of any federal or state court in Salt Lake City,
Utah or in the State of Colorado in any such suit, action or proceeding, but
such consent shall not constitute a general appearance or be available to
any other person who is not a party to this Agreement. All parties hereto
agree that the mailing of any process in any suit, action or proceeding in
accordance with the notice provisions of this Agreement shall constitute
personal service thereof.
c. Entire Agreement; Waiver of Breach. This Agreement constitutes
the entire agreement among the parties and supersedes any prior agreement or
understanding among them with respect to the subject matter hereof, and it
may not be modified or amended in any manner other than as provided herein;
and no waiver of any breach or condition of this Agreement shall be deemed
to have occurred unless such waiver is in writing, signed by the party
against whom enforcement is sought, and no waiver shall be claimed to be a
waiver of any subsequent breach or condition of a like or different nature.
d. Binding Effect; Assignability. This Agreement and all the terms
and provisions hereof shall be binding upon and shall insure to the benefit
of the parties and their respective heirs, successors and permitted assigns.
This Agreement and the rights of the parties hereunder shall not be
assigned except with the written consent of all parties hereto.
e. Captions. Captions contained in this Agreement are inserted only
as a matter of convenience and in no way define, limit or extend the scope
or intent of this Agreement or any provision hereof.
f. Number and Gender. Wherever from the context it appears
appropriate, each term stated in either the singular or the plural shall
include the singular and the plural, and pronouns stated in either the
masculine, the feminine or the neuter gender shall include the masculine,
feminine and neuter.
g. Severability. If any provision of this Agreement shall be held
invalid or unenforceable, such invalidity or unenforceability shall attach
only to such provision and shall not in any manner affect or render invalid
or unenforceable any other severable provision of this Agreement, and this
Agreement shall be carried out as if any such invalid or unenforceable
provision were not contained herein.
h. Amendments. This Agreement may not be amended except in a
writing signed by all of the parties hereto.
i. Survival of Representations and Warranties. The representations
and warranties of each party hereto shall survive the execution and the
delivery of this Agreement until one year from the date hereof.
j. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same instrument. In addition, this Agreement
may contain more than one counterpart of the signature page and this
Agreement may be executed by the affixing of such signature pages executed
by the parties to one copy of the Agreement; all of such counterpart
signature pages shall be read as though one, and they shall have the same
force and effect as though all of the signers had signed a single signature
page.
IN WITNESS WHEREOF, the parties have read and executed this Agreement
effective as of the date first above written.
LANCER OFFSHORE, INC. STERLING TECHNOLOGY PARTNERS, LLC
By: /s/ Michael Lauer By: /s/ Bruce D. Cowen
------------------------- -------------------------
Michael Lauer, President Bruce D. Cowen
THE McCLOSKEY TRUST
/s/ James T. Kelly
-------------------------
By: /s/ Thomas D. McCloskey, Jr. James T. Kelly
---------------------------------
Thomas D. McCloskey, Jr.
DPM INVESTMENT CORP. /s/ K.R. Braithwaite
-------------------------
K.R. Braithwaite
By: /s/ Thomas D. McCloskey, Jr.
------------------------------
Thomas D. McCloskey, Jr.
FRYING PAN PARTNERS, LLC ORBITER FUND LTD.
By: /s/ David L. Marrs By: /s/ Michael Lauer
---------------------------- -----------------------
David L. Marrs, Member Michael Lauer, President
CJL INVESTMENTS, LLC
By: /s/ John H. Perry, III
-----------------------------
John H. Perry, III,
Managing-Member
<PAGE>
EXHIBIT 3
SUBORDINATION AGREEMENT
This Subordination Agreement (this "Agreement"), dated as of
_____________, _____ is made among World Wireless Communications, Inc.,
a Nevada corporation ("Borrower"), ____________________________ as the
Pledgee Representative of the creditors (the "Lender") under the
promissory note evidencing the Senior Debt (as hereafter defined), and
___________________ ("Subordinated Creditor"). The defined term
"Lenders" shall include any successor or replacement senior lender or
lenders of the Borrower.
In order to induce Lenders to lend money to Borrower in such
amounts, for such periods and such terms as Lenders and Borrower may
agree upon, as a condition to such loans, and in consideration of any
loan so made, Lenders, Borrower, and Subordinated Creditor agree as
follows:
1. As used herein, and unless otherwise defined herein, the
following terms shall have the following respective meanings (such
meanings to be equally applicable to both the singular and plural forms
of the terms defined) except as the context shall otherwise require:
"Event of Default" shall mean an event which, with notice or
lapse of time or both, automatically accelerates the maturity of
the Senior Debt, or which permits either of the Lenders to
accelerate the maturity of the Senior Debt.
"Indefeasibly Paid in Full" or any similar term or phrase when
used in this Agreement with respect to Senior Debt shall mean the
final payment in full of all Senior Debt in cash.
"Insolvency Proceeding" shall mean (i) any assignment for the
benefit of creditors by Borrower or any other marshaling of the
assets and liabilities of Borrower; or (ii) the institution by or
against Borrower of any proceedings in insolvency, bankruptcy,
receivership, liquidation, arrangement, reorganization,
dissolution, winding up or other similar case or proceeding
whether voluntary or involuntary.
"Senior Agreement" shall mean the Note and Warrant Purchase
Agreement dated as of May 14, 1999, between Borrower and Lenders
as such agreement may be modified, amended, supplemented,
restated, replaced, exchanged or refinanced from time to time in
accordance with the terms thereof; in connection with any such
replacement or refinancing, "Senior Agreement" shall mean the
agreement(s) evidencing the obligations to the successor or
replacement senior lender(s) thereunder and "Lenders" shall mean
such successor or replacement senior lender(s). The Senior
Agreement shall be deemed to be in effect hereunder for so long as
Borrower has any obligation to Lenders thereunder or Lenders have
any unexpired commitment to Borrower thereunder.
"Senior Debt" shall mean all indebtedness, obligations, and
liabilities of every nature of Borrower, including any subsidiary
guarantees for the benefit of Lenders (including any successor or
replacement senior lender), whether now existing or hereafter
incurred, direct, indirect, or acquired, absolute or contingent,
secured or unsecured, together with any extensions, renewals or
modifications of any thereof, and shall include without limitation
all obligations and liabilities of Borrower for the payment of
principal, interest, penalties, fees (including without limitation
reasonable attorneys' fees and disbursements and fees of in-house
counsel) and other amounts under or in respect of the Senior
Credit Agreement, including without limitation interest payments
arising after the initiation of any Insolvency Proceeding whether
or not such interest is an allowed claim in any Insolvency
Proceeding.
"Standstill Notice" shall mean a written notice given by the
either of the Lenders to Subordinated Creditor of the occurrence
of an Event of Default.
"Subordinated Debt" shall mean all indebtedness, obligations, and
liabilities of Borrower to Subordinated Creditor, whether now
existing or hereafter incurred, direct, indirect, or acquired,
absolute or contingent, secured or unsecured, together with all
modifications, amendments, extensions, renewals, and refundings
thereof or of any part of any thereof, and shall include without
limitation the principal amount of indebtedness under the
Subordinated Note, any right to interest from Borrower on account
thereof, and any other charges and claims provided for thereunder.
"Subordinated Note" shall mean the Promissory Note dated
____________, executed by Borrower in favor of Subordinated
Creditor in the original principal amount of $________________.
2. Subordinated Creditor represents and warrants to the Lenders
that: (i) as of the date of this Agreement, Borrower is indebted to
Subordinated Creditor under the Subordinated Note in the aggregate
principal amount of $________ and that there is no other Subordinated
Debt currently outstanding between Borrower and Subordinated Creditor;
(ii) it has not, either singly or collectively, sold, assigned,
transferred or otherwise disposed of any right it or they may have to
repayment of the Subordinated Debt or any security thereof; (iii)
Subordinated Creditor is a duly organized ______________, formed and
existing under the laws of ___________, having full power and authority
to own its properties and to carry on its business as now conducted;
(iv) Subordinated Creditor has the requisite power and authority to
enter into and perform its obligations under this Agreement; (v) this
Agreement has been duly executed and delivered by Subordinated Creditor
and is a valid, legal and binding obligation of Subordinated Creditor,
subject to principles of equity and rights applicable to the rights of
creditors generally, including bankruptcy laws; and (vi) the officer or
officers who have executed this Agreement on behalf of such
Subordinated Creditor are duly empowered and authorized to do so.
3. To the extent and in the manner set forth in this Agreement,
notwithstanding anything to the contrary contained in the Subordinated
Note and any related loan agreement, the Subordinated Debt and all
rights and remedies of Subordinated Creditor with respect thereto
(including without limitation any lien securing payment thereof) is and
shall continue to be subject and subordinate to the Senior Debt.
4. Borrower and Subordinated Creditor hereby covenant and agree as
follows:
(a) Borrower shall not make and Subordinated Creditor shall not
receive, directly or indirectly, any payment, advance, credit, security
or new or further evidence of any kind whatsoever on account of or with
respect to the Subordinated Debt or any part thereof; provided,
however, that Subordinated Creditor may receive from Borrower regularly
scheduled installments of interest under the Subordinated Note (but no
prepayments) on the stated dates of payment thereof so long as no
Standstill Notice is then in effect.
(b) Upon the maturity of any Senior Debt, whether by lapse of
time, acceleration or otherwise, all amounts due or to become due in
connection therewith shall first be Indefeasibly Paid in Full before
any direct or indirect payment is made by or on behalf of Borrower or
received by Subordinated Creditor on account of any Subordinated Debt.
(c) Upon the occurrence of an Event of Default and during any
period that a Standstill Notice is in effect, no direct or indirect
payment shall be made on behalf of Borrower or received by Subordinated
Creditor on account of the Subordinated Debt. A Standstill Notice
issued upon any payment default or acceleration of the Senior Debt
shall remain in effect until Lenders receive Indefeasible Payment in
Full, as provided in paragraph 4(b) above. The Lenders will use
commercially reasonable efforts to give Subordinated Creditor written
notice upon the waiver and/or cure of the Event(s) of Default that gave
rise to a Standstill Notice (without liability or penalty incurred by
either of the Lenders for any failure to give such notice). After the
Subordinated Creditor receives written notice of waiver and/or cure of
the Event(s) of Default from the Lenders, the Borrower shall be free to
continue to make regular interest payments to Subordinated Creditor as
they come due, including those payments that are in arrears.
(d) In the event that all or any portion of the Subordinated
Debt shall have been declared to be due and payable by Subordinated
Creditor, such declaration shall not be effective without both of the
Lenders' written consent until the earliest to occur of: (i) an
Insolvency Proceeding; or (ii) the default at scheduled maturity of, or
the acceleration of the maturity of, any Senior Debt.
(e) Subordinated Creditor may not commence suit or take any
other action to seek or enforce collection of any Subordinated Debt
after the Subordinated Creditor gives Lenders written notice that
Subordinated Creditor has declared the Subordinated Debt to be due and
payable. Any and all proceeds of or recoveries from enforcement
proceedings by Subordinated Creditor shall be subject to all the
provisions of this Agreement, including without limitation the
provision of paragraph 9 hereof. The terms of this paragraph 4(e) are
subject to the limitations contained in paragraph 6 herein.
(f) Subordinated Creditor may not initiate or cooperate in the
commencement of any Insolvency Proceeding.
(g) Subordinated Creditor may not purchase, and shall not permit
any affiliate of Subordinated Creditor to purchase, any goods or
services from Borrower except for cash and without incurring trade debt.
(h) Subordinated Creditor may not exercise, and shall not permit
any affiliate of Subordinated Creditor to exercise, any right of offset
against Borrower, until after the withdrawal of the Standstill Notice,
and then subject to the requirements of paragraph 9 hereof.
(i) Subordinated Creditor shall immediately notify Lenders of
any default or breach of the Subordinated Debt.
(j) The provisions of paragraph 4 shall continue to be effective
until such time (if any) as the Senior Debt has been Indefeasibly Paid
in Full.
5. Borrower and Subordinated Creditor agree as follows:
(a) Upon any distribution of assets of Borrower and its
subsidiaries to creditors of Borrower upon or in connection with an
Insolvency Proceeding, any payment or distribution of any kind (whether
in cash, property, or securities) which otherwise would be payable or
deliverable upon or with respect to the Subordinated Debt shall be paid
or delivered directly to the Lenders for application (in case of cash)
to, or as collateral (in case of non-cash property or securities) for,
the payment or prepayment of the Senior Debt until the Senior Debt has
been Indefeasibly Paid in Full.
(b) If any Insolvency Proceeding is commenced by or against
Borrower, Lenders are hereby irrevocably authorized and empowered, but
shall have no obligation, to: (i) demand, sue for, collect and receive
every payment or distribution referred to in paragraph 5.1 above and
give acquittance therefor; and (ii) file claims and proofs of claim and
take such other action (including without limitation any voting rights
in the Insolvency Proceeding related to the Subordinated Debt and
enforcing any security interest or other lien securing payment of the
Subordinated Debt) as it may deem necessary or advisable for the
exercise of any of the rights or interests of Lenders hereunder.
(c) If any Insolvency Proceeding is commenced by or against
Borrower, Subordinated Creditor shall duly and promptly take such
action as Lenders may request to: (i) collect the Subordinated Debt
for account of Lenders, and file appropriate claims or proofs of claim
in respect of the Subordinated Debt; (ii) execute and deliver to
Lenders such powers of attorney, assignments or other instruments as
Lenders may request in order to enable it to enforce any and all claims
with respect to the Subordinated Debt and any security interests and
other liens securing payment of the Subordinated Debt; and (iii)
collect and receive any and all payments and distributions which may be
payable or deliverable upon or with respect to the Subordinated Debt.
(d) If any Insolvency Proceeding is commenced by or against
Borrower or otherwise, Subordinated Creditor agrees not to: (i)
contest, or join in any proceeding contesting, the creation, existence,
validity, priority or perfection of any lien or security interest
securing payment of the Senior Debt; (ii) without the prior written
consent of Lenders, assert any rights or claims to adequate protection
payments for the Subordinated Debt in any Insolvency Proceeding; (iii)
object to or contest, or join in any proceeding objecting to or
contesting, any "post petition financing" arrangement or agreement
between the Lenders and Borrower, including without limitation,
Borrower's use of "cash collateral" in any Insolvency Proceeding; (iv)
assert any position or claim that is adverse to the interests of the
Lenders in connection with any rights in or payments under the Senior
Debt; (v) waive any rights to make an election under 11 U.S.C. Section
1111(b); (vi) seek participation or membership in any creditor's
committee in any Insolvency Proceeding without the both of the Lenders'
prior written consent; or (vii) oppose, or join in any proceeding
opposing the sale or disposition of any property or collateral of the
Borrower, if the Lenders have both consented to such sale or disposition.
6. To the extent that Subordinated Creditor now has or
hereafter obtains a lien or security interest in any assets of Borrower:
(a) Such lien or security interest shall be at all times subject
and subordinate to any lien or security interest which Lenders now has
or hereafter obtains in such assets of Borrower without regard to the
time or manner in which the respective liens and security interests of
the parties hereto may have been created or perfected; and
(b) Except upon the written consent of the Lenders, Subordinated
Creditor may not at any time exercise any rights or remedies with
respect to or otherwise enforce any lien or security interest it now
has or hereafter obtains in Borrower's assets, or apply any assets
covered by any such lien or security interest to any claim now or
hereafter existing against Borrower.
7. Borrower and Subordinated Creditor waive notice of
acceptance of this Agreement by Lenders, and Subordinated Creditor
waives notice of and consents to the making of: (i) any loans or other
extensions of credit which Lenders (or any successor or replacement
senior lender(s)) may make to Borrower from time to time; (ii) any
renewal, replacement, refinancing or extension thereof; and (iii) any
action which Lenders (or any successor or replacement senior lender(s))
may take or omit in its sole and absolute discretion with respect thereto.
8. This Subordination Agreement shall constitute a continuing
agreement of subordination and Lenders (or any successor or replacement
senior lender(s)) may, from time to time and without notice to
Subordinated Creditor, lend money to or make other financing
arrangements with Borrower in reliance hereon.
9. In the event that any payment or distribution, or any
security, proceeds thereof or property or funds payable as adequate
protection for use, sale or lease of such security, is received by
Subordinated Creditor (other than those payments that Subordinated
Creditor is entitled to receive pursuant to the provisions of and under
the conditions specified by paragraph 4(a) of this Agreement), such
property shall be received and held in trust for the benefit of
Lenders, shall be segregated from other funds and property held by
Subordinated Creditor, and shall be immediately paid over to Lenders in
the form received (together with any endorsements or documents as may
be necessary to effectively negotiate or transfer such property) for
application (in case of cash) to, or as collateral (in case of non-cash
property or securities) for, the payment or prepayment of the Senior Debt.
10. Subordinated Creditor authorizes Lenders (or any successor
or replacement senior lender(s)), without notice or demand and without
affecting or impairing Subordinated Creditor's obligations hereunder,
from time to time to: (i) renew, compromise, extend, increase,
accelerate or otherwise change the time for payment of, or otherwise
change any of the other terms of the Senior Debt or any part thereof,
including without limitation to increase or decrease the rate of
interest thereon; (ii) take and hold security for the payment of the
Senior Debt and exchange, enforce, waive, release, and fail to perfect
any such security; (iii) apply such security and direct the order or
manner of sale thereof as Lenders (or any successor or replacement
senior lender(s)) in its sole discretion may determine; (iv) release
and substitute any one or more endorsers, warrantors, Borrower, or
other obligor. Lenders may assign their respective rights under this
Agreement in whole or in part.
11. Subordinated Creditor acknowledges and agrees that it shall
have the sole responsibility for obtaining from Borrower such
information concerning Borrower's financial condition or business
operations as Subordinated Creditor may require, and that Lenders have
no duty at any time to disclose to Subordinated Creditor any
information relating to the business, operations, or financial
condition of Borrower. Borrower acknowledges and agrees that
Subordinated Creditor and Lenders may freely share any information
regarding Borrower.
12. Subordinated Creditor shall deliver to Lenders a copy of the
executed Senior Subordinated Note which shall bear a conspicuous legend
reading substantially as follows:
THIS PROMISSORY NOTE IS SUBORDINATED TO ANY PRESENT OR
FUTURE DEBT OWING FROM THE MAKER TO THE HOLDERS OF THE
MAKER'S PROMISSORY NOTE DATED MAY 14, 1999 IN THE ORIGINAL
PRINCIPAL AMOUNT OF $2,000,000 (THE "SENIOR NOTE") AND MAY
BE ENFORCED ONLY IN ACCORDANCE WITH THAT CERTAIN
SUBORDINATION AGREEMENT DATED ____________, _______ AMONG
___________________________________, THE PLEDGEE
REPRESENTATIVE OF THE SENIOR NOTE AND WORLD WIRELESS
COMMUNICATIONS, INC.
Such copy shall be certified in writing as being a true, current, and
complete copy of the original by a responsible officer of Subordinated
Creditor. Any replacement or substituted note shall bear the foregoing
legend.
13. Lenders may notify any assignee, trustee or interest trustee
in bankruptcy, receiver, debtor in possession or other person or
persons of their rights under this Agreement.
14. Neither Subordinated Creditor nor Borrower shall amend,
extend or otherwise change the term of any Subordinated Debt without
the consent of Lenders if the effect of such amendment would be to:
(i) increase the principal amount of the Subordinated Debt; (ii)
increase the rate of interest payable on the Subordinated Debt; or
(iii) change the maturity date of the Subordinated Debt or accelerate
the time for making any payment on the Subordinated Debt.
15. Any notice relating to this Agreement shall be in writing
and shall be personally served, sent by certified mail, return receipt
requested, with postage prepaid or sent by telecopy to the address of
such party set forth on the signature page of this Agreement. Such
notice shall be deemed given and received on the date so served, mailed
or telecopied.
16. This Agreement is intended solely for the purpose of
defining the relative rights of the Lenders and the Subordinated
Creditor. Nothing contained in this Agreement is intended to or shall
affect or impair: (i) as between Borrower, its creditors (other than
Lenders) and Subordinated Creditor, the obligation of Borrower (which
is absolute and unconditional) to pay the Subordinated Debt in
accordance with the terms thereof; and (ii) the relative rights of
Subordinated Creditor and creditors of Borrower other than Lenders.
17. Subordinated Creditor and Borrower agree to execute and
deliver to Lenders any additional agreements reasonably deemed
necessary by Lenders to effect or confirm the agreement set forth
herein and to effect collection of any payments which may be made at
any time on account of the Subordinated Debt.
18. After the Senior Debt has been Indefeasibly Paid in Full,
the holders of Subordinated Debt shall be subrogated to the rights of
holders of Senior Debt to receive payments or distributions applicable
to Senior Debt, to the extent that distributions otherwise payable to
the holders of Subordinated Debt have been applied to the payment of
Senior Debt. Subordinated Creditor agrees that this Agreement shall
not be affected by any action, or failure to act, by Lenders which
results or may result, in impairing or extinguishing any right of
reimbursement, subrogation or other right or remedy of Subordinated
Creditor.
19. This Agreement shall be governed by the laws of the State of
Colorado, and the parties hereto consent to the jurisdiction of the
state and federal courts in and for the state of Colorado in connection
with any dispute arising under or relating to this Agreement. The
provisions of this Agreement are independent of and separable from each
other. If any provision of this Agreement shall for any reason be held
by any court or other authority of competent jurisdiction to be invalid
or unenforceable, it is the intent of the parties that such invalidity
or unenforceability shall not affect the validity or enforceability of
any other provision hereof, and that this Agreement shall be construed
as if such invalid or unenforceable provision had never been contained
herein.
20. This Agreement constitutes and expresses the entire
understanding between the parties hereto with respect to the subject
matter hereof, and supersedes all prior and contemporaneous agreements
and understandings, inducements, or conditions, whether express,
implied, oral or written. This Agreement shall extend to and be
binding upon the successors, assigns, heirs and legal representative of
each of the parties hereto; provided, however, that Subordinated
Creditor may not assign, transfer, pledge, hypothecate, encumber, or
endorse the Subordinated Debt or any part or evidence thereof unless
such transaction is made expressly subject to the terms hereof.
21. In the event Subordinated Creditor or Borrower breaches any
of their obligations hereunder to Lenders, the Lenders shall be
entitled to recover their damages, costs and reasonable attorney fees
which result from such breach.
22. Neither this Agreement nor any portion or provisions hereof
may be changed, waived, or amended or in any manner other than by an
agreement in writing signed by the parties to this Agreement. This
Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one agreement, and any party hereto may
execute this Agreement by signing any such counterparts.
23. Borrower agrees to use commercially reasonable efforts to
give Subordinated Creditor copies of any written notice of an Event of
Default that Lenders may provide to Borrower under the Senior Agreement.
24. Subordinated Creditor and any assignee of Lenders, successor
or replacement lender shall reaffirm or reconfirm the provisions of
this Agreement and acknowledge the substitution of parties in writing.
25. Whenever Lenders' consent is required hereunder, such
consent may be given or withheld in the sole and absolute direction of
Lender, unless otherwise noted herein.
26. To the extent that Lenders have any liability hereunder,
such liability shall be several and not joint. Any payments to the
Lenders hereunder shall be divided between the Lenders in proportion to
their respective amounts of the Senior Debt or on such other basis as
the Lenders may mutually agree in writing.
IN WITNESS WHEREOF, the parties have read and executed this
Agreement is executed as of the date stated at the top of the first page.
STERLING TECHNOLOGY PARTNERS, LLC. WORLD WIRELESS COMMUNICATIONS, INC.
By: ________________________________ By: _____________________________
Bruce D. Cowen, Chairman and CEO Name:______________________________
Title: ____________________________
Address where notices are to be sent: Address where notices are to be
sent:
27241 Paseo Peregrino _______________________
San Juan Capistrano, CA 92675-5041 _______________________
_______________________
__________________________________
[Subordinated Creditor]
By: _____________________________
Name: ___________________________
Title: __________________________
Address where notices to are to be sent:
_______________________
_______________________
_______________________
EXHIBIT D
REGISTRATION RIGHTS AGREEMENT
OF
WORLD WIRELESS COMMUNICATIONS, INC.
Agreement made as of the 14th day of May 1999, by and among
World Wireless Communications, Inc., a Nevada corporation currently
having its office and principal place of business at 2441 South 3850
West, West Valley City, Utah 84120 (the "Corporation"), and each
party hereto making a loan to the Corporation (each of the last
named persons shall hereinafter be referred to individually as a
"Noteholder" and collectively as the "Noteholders").
WHEREAS, upon the closing of the offering of up to $3,800,000
principal amount of Senior Secured Notes of the Company (the "Notes"), up
to 950 shares of the Corporation's Preferred Stock and the Warrants (as
defined below) pursuant to the Confidential Private Placement Memorandum
dated May 14, 1999 (the "Offering") (the "Effective Date"), as defined in
the Offering, the Noteholders will collectively own warrants to purchase up
to 4,750,000 shares of common stock, $.001 par value per share, of the
Corporation (shares of such common stock, together with share of
common subsequently acquired by the parties, being referred
to as the "Shares" and collectively as the "Stock") at an exercise price of
$0.25 per share exercisable during a period of five years from the date of
the Effective Date (the "Warrants");
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WHEREAS, upon the Effective Date, the Corporation and the Noteholders
desire to provide for certain registration rights for the Stock of the
Corporation or any interest therein now or hereafter owned by the
Noteholders;
NOW, THEREFORE, effective upon the Effective Date, in consideration
of the mutual covenants and conditions herein contained, each of the
parties hereby agrees as follows:
1. Piggyback and Demand Registration Rights.
1.1 (a) If the Corporation shall propose to file a registration
statement under the Securities Act of 1933, as amended (the "Securities
Act"), at any time during the 24-month period after the Effective Date,
either on its own behalf or that of any of its shareholders for an offering
of shares of the capital stock of the Corporation (including shares to be
issued pursuant to the exercise of any warrants, including the Warrants)
for cash or securities, the Corporation shall give written notice
as promptly as possible of such proposed registration to each Noteholder
and shall use reasonable efforts to include such number or amount of shares
of the Stock owned by such Noteholders (including shares to be issued
pursuant to the exercise of any warrants, including the Warrants) (each a
"Seller" or "Registering Noteholder" and collectively, the "Sellers" or
"Registering Noteholders") in such registration statement as such Seller or
Sellers shall request within 10 days after receipt of such notice from the
Corporation, provided, that (A) each Seller furnishes the Company with a
written notice of its irrevocable exercise of the Warrants in whole or in
part within 10 days after the receipt of such notice from the Corporation,
(B) if shares of the Stock are being offered by the Corporation in an
underwritten offering, any shares of the Stock proposed to be included in
the registration statement on behalf of such Seller(s) shall be included in
the underwriting offering on the same terms and conditions as the Stock
being offered by the Corporation, and (C) each Seller shall be entitled to
include such number of shares of the Stock owned by such Seller in such
registration statement, one time only during the applicable period set
forth herein, so that the proportion of shares of the Stock of each Seller
to be included in such registration statement to the total number of shares
of the Stock owned by him is equal to the proportion that the number of
shares of the Stock of all Sellers to be included in such registration
statement bears to the total number of shares of the Stock owned by all
Sellers (except that each Seller shall have the right not to exercise such
piggyback registration right set forth herein once, in which case such
Seller shall have the right set forth in this Section 1.1 with respect to
the next succeeding registration statement described in this Section 1.1
proposed to be filed by the Corporation during such 24-month period); and
provided further, that (i) the Corporation shall not be required to include
such number or amount of shares owned by such Seller(s) in any such
registration statement if it relates solely to securities of the
Corporation to be issued pursuant to a stock option or other employee
benefit plan, (ii) the Corporation may, as to an offering of securities of
the Corporation by the Corporation, withdraw such registration statement at
its sole discretion and without the consent of any Seller and abandon such
proposed offering and (iii) the Corporation shall not be required to
include such number of shares of the Stock owned by such Seller in such
registration statement if the Corporation is advised in writing by its
underwriter or investment banking firm that it reasonably believes that the
inclusion of such Seller's shares would have an adverse effect on the
offering, provided that if such limitation is imposed, the effects of such
limitation shall be allocated among the Sellers pro rata in proportion to
the number of shares of the Stock as to which such Sellers have requested
inclusion therein.
-2-
(b) A registration filed pursuant to this Section 1.1(a) shall not
be deemed to have been effected unless the registration statement related
thereto (i) has become effective under the Securities Act and (ii) has
remained effective for a period of at least nine months (or such shorter
period of time in which all of the Stock registered thereunder has actually
been sold thereunder); provided, however, that if, after any registration
statement filed pursuant to Section 1.1(a) becomes effective and prior to
the time the registration statement has been effective for a period of at
least nine months, such registration statement is interfered with by any
stop order, injunction or other order or requirement of the Commission or
other governmental agency or court solely due to actions or omissions to
act of the Corporation, such registration statement shall not be considered
one of the registrations applicable pursuant to Section 1.1(a).
1.2 (a) (i) If the Corporation fails to prepare and file a
registration statement under Section 1.1 hereof within 24 months after the
Effective Date which has become effective under the Securities Act and has
remained effective for a period of at least six months (or such shorter
period of time in which shares registered thereunder have been sold
thereunder), then in the event that the Noteholders owning in the aggregate
at least $1,500,000 original principal amount of the Notes acting jointly
desire to sell, transfer or otherwise dispose of at least 33% of their
Shares pursuant to an offering registered under the Securities Act, such
Noteholder or Noteholders shall have the right, once during such three-year
period commencing with the expiration of 24 months after the Effective Date and
continuing until the expiration of 60 months after the Effective
Date, to deliver a notice to the Corporation (the "Registration
Notice") on behalf of all of the Noteholders (A) specifying the
number of shares proposed to be sold or otherwise transferred by
all the Noteholders (collectively the "Registration Shares")
(which shall not be less than 1,082,250 Shares (the "Minimum
Number")), (B) describing the proposed manner of sale or other
transfer thereof and (C) requesting the registration of the
Registration Shares under the rules and regulations of the
Securities and Exchange Commission (the "Commission") pursuant to
the Securities Act, provided that each Noteholder furnishes the
Corporation with a written notice of its irrevocable exercise of
the Warrants in at least the amount of the Minimum Number
simultaneously with its delivery of the demand registration notice
set forth herein. As promptly as practicable following its
receipt of a Registration Notice, the Corporation shall prepare
and file with the Commission a registration statement with respect
to the Registration Shares pursuant to the rules and regulations
of the Commission and use its reasonable best efforts to effect
the registration under the Securities Act of any Registration
Shares requested to be so registered by the Noteholder or
Noteholders to the extent required to permit the sale or other
transfer of the Registration Shares in the manner described in the
Registration Notice. Notwithstanding the foregoing demand (but
subject to the penultimate sentence of Section 1.2 (b)), the Corporation
shall not be obligated to effect more than one registration pursuant to this
Section 1.2(a) using the then applicable registration forms of the
Commission, and the Noteholder or Noteholders shall not be
entitled to request registration of the Registration Shares more
than once under Section 1.2. A registration requested pursuant to
this Section 1.2(a) shall not be deemed to have been effected
unless the registration statement related thereto (i) has become
effective under the Securities Act and (ii) has remained effective
for a period of at least nine months (or such shorter period of
time in which all Registration Shares registered thereunder have
actually been sold thereunder); provided, however, that if, after
any registration statement requested pursuant to this Section
1.2(a) becomes effective and prior to the time the registration
statement has been effective for a period of at least nine months,
such registration statement is interfered with by any stop order,
injunction or other order or requirement of the Commission or
other governmental agency or court solely due to actions or
omissions to act of the Corporation, such registration statement
shall not be considered one of the registrations which may be
requested pursuant to this Section 1.2(a).
-3-
(ii) Notwithstanding anything contained in this
Section 1.2 to the contrary, in the event that the Corporation
defaults in the payment of principal or interest on any Note at
the maturity date of any Note, then the Noteholders owning in the
aggregate at least $1,500,000 original principal amount of the
Notes shall have the right to exercise their demand registration
right set forth in Section 1.2(a)(i) hereof, at their option,
within 60 days after the occurrence of such default by delivering
to the Corporation the written notice described in Section
1.2(a)(i) hereof.
(b) Delay or Suspension of Registration. Notwithstanding
any other provision of this Section 1.2 to the contrary, if the
Corporation shall furnish to the Noteholder or Noteholders:
(i) a certificate signed by the President of the
Corporation stating that, in the good faith judgment of a
majority of the members of the entire Board of Directors of
the Corporation, it would adversely and materially affect the
Corporation's ability to enter into an agreement with respect
to, or to consummate, a bona fide material transaction to
which it is or would be a party, or the Corporation has a
plan to register Stock to be sold for its own account within
a 90-day period after the receipt of the demand request under
Section 1.2(a), for the Corporation to use its reasonable
best efforts to effect the registration of the Registration
Shares (following a demand therefor by the Noteholder or
Noteholders pursuant to Section 1.2(a)); or
(ii) both (A) a certificate signed by the President of
the Corporation stating that, in the good faith judgment of a
majority of the members of the entire Board of Directors of
the Corporation, a material fact exists which the Corporation
has a bona fide business purpose for preserving as
confidential and (B) an opinion of counsel to the Corporation
to the effect that the registration by the Corporation
(following a demand for registration by the Noteholder or
Noteholders pursuant to Section 1.2(a)) or the offer or sale
by the Noteholder or Noteholders of the Registration Shares
pursuant to an effective registration statement would require
disclosure of the material fact which is referenced in the
President's certificate required under Section 1.2(b)(ii)(A)
and which, in such counsel's opinion, is not otherwise
required to be disclosed, then the Corporation's obligations pursuant
to Section 1.2(a) with respect to any such demand for registration shall
be deferred or offers and sales of Registration Shares by the Noteholder
or Noteholders shall be suspended, as the case may be, until the
earliest of: (1) the date on which, as applicable (a) the
Corporation's use of reasonable best efforts to effect the
registration of the Registration Shares would no longer have such
a material adverse effect or (b) the material fact is disclosed to
the public or ceases to be material; (2) 135 days from the date of
receipt by the Noteholder or Noteholders of the materials referred
to in Section 1.2(b) (i) and (ii) above; and (3) such time as the
Corporation notifies the Noteholder or Noteholders that it has
resumed use of its reasonable best efforts to effect registration
of the Registration Shares or that offers and sales of
Registration Shares pursuant to an effective registration
statement may be resumed, as the case may be. If the Noteholder
or Noteholders receives the materials referred to in Section
1.2(b)(ii) above while a registration statement for the offer and
sale of the Registration Shares is in effect, the Noteholder or
Noteholders agree to terminate immediately any offer or sale of
Registration Shares. If offers and sales of the Registration
Shares are suspended and resumed following the effectiveness of a
registration statement within the 135-day period set forth in
clause (2) of the second preceding sentence, the six-month period
set forth in Section 1.2(a) shall be extended for a number of days
equal to the number of days for which offers and sales of
Registration Shares were suspended. If offers and sales of the
Registration Shares are suspended but not resumed within the
135-day period, the Corporation shall, at the request of the
Noteholder or Noteholders, withdraw such registration and the
Noteholder or Noteholders shall be entitled to one additional
demand registration right under this Section 1.2(a). A particular
material transaction to which the Corporation is or would be a
party or a particular material fact shall not give rise to more
than one deferral or suspension notice by the Corporation pursuant
to the provisions of this Section 1.2(b).
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1.3 In connection with any registration or qualification
pursuant to the provisions of this Article I, all Sellers, and the
Corporation shall, except as prohibited under the blue sky or
securities laws of any jurisdiction under which a registration or
qualification is being effected, pay (pro rata based on the
relative number of shares included in such registration) all of
the fees and expenses, which shall not include fees and expenses
of legal counsel for any Seller and any underwriting or selling
discounts, fees, commissions or similar charges with respect to
the shares of Stock as to which registration is requested;
provided, however, that in the event the Corporation shall have
incurred out-of-pocket expenses in connection with the preparation
of any registration statement which shall be withdrawn prior to
its effective date at the request of a Seller, such Seller shall
promptly reimburse the Corporation for all out-of-pocket expenses
including, without limitation, attorneys' fees and expenses,
accounting costs and all fees and expenses relating to blue sky
filings incurred by the Corporation in connection with such
preparation (including any filing thereof); and provided further,
however, that the Corporation shall not be required in the case of
any registration hereunder to make blue sky filings in more than
10 states.
1.4 (a) In each case of registration of shares of Stock
under the Securities Act pursuant to these registration
provisions, the Corporation shall unconditionally indemnify and
hold harmless each of the Sellers, each underwriter (as defined in
the Securities Act), and each person who controls any such
underwriter within the meaning of Section 15 of the Securities Act
or Section 20(a) of the Securities Exchange Act of 1934 (the
Sellers and each such underwriter, and each such person who
controls any such underwriter being referred to for purposes of
this Section 1.4, as an "Indemnified Person") from and against any
and all losses, claims, damages, liabilities and expenses arising
out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in any registration
statement under which such shares of the Stock were registered
under the Securities Act, any prospectus or preliminary prospectus
contained therein or any amendment or supplement thereto
(including, in each case, any documents incorporated by reference
therein), or arising out of any omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages, liabilities or expenses
arise out of any such untrue statement or omission or alleged
untrue statement or omission based upon information relating to
any of the Sellers or any underwriter and furnished to the
Corporation or the Registering Noteholder, as the case may be, in
writing by any of the Sellers or such underwriter expressly for
use therein; provided that the foregoing indemnification with
respect to a preliminary prospectus shall not inure to the benefit
of any underwriter (or to the benefit of any person controlling
such underwriter) from whom the person asserting any such losses,
claims, damages, liabilities or expenses purchased shares of the
Stock to the extent such losses, claims, damages or liabilities
result from the fact that a copy of the final prospectus had not
been sent or given to such person at or prior to written
confirmation of the sale of such shares to such person.
-5-
(b) In each case of a registration of shares of the Stock
under the Securities Act pursuant to these registration
provisions, each of the Sellers participating in the registration,
severally and not jointly, shall unconditionally indemnify and
hold harmless the Corporation (and its directors and officers)
each underwriter and each person, if any, who controls the
Corporation or such underwriter within the meaning of Section 15
of the Securities Act of Section 20(a) of the Securities Exchange
Act of 1934, to the same extent as the foregoing indemnity from
the Corporation to the Sellers but only with reference to
information relating to such Seller and furnished to the
Corporation by such Seller for use in the registration statement,
any prospectus or preliminary prospectus contained therein or any
amendment or supplement thereto. Each Seller will use all
reasonable efforts to cause any underwriters of shares of Stock to
be sold by any of the Sellers to indemnify the Corporation on the
same terms as the Sellers agree to indemnify the Corporation or
the Registering Noteholder, as the case may be, but only with
reference to information furnished in writing by such underwriter
for use in the registration statement.
(c) In case any action or proceeding shall be brought
against or instituted which involves any Indemnified Person, such
Indemnified Person shall promptly notify the person against whom
such indemnity may be sought (the "Indemnifying Person") in
writing and the Indemnifying Person shall retain counsel
reasonably satisfactory to the Indemnified Person to represent the
Indemnified Person and any others the Indemnifying Person may
designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any
such action or proceeding, any Indemnified Person shall have the
right to obtain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Person unless
(i) the Indemnifying Person has agreed to the retention of such
counsel at its expense or (ii) the named parties to any such
action or proceeding include both the Indemnifying Person and the
Indemnified Person, and the Indemnified Person has been advised by
counsel that there may be one or more defenses available to such
Indemnified Person which are different from or additional to those
available to the Indemnifying Person (in which case, if the
Indemnified Person notifies the Indemnifying Person that it wishes
to employ separate counsel at the expense of the Indemnifying
Person, the Indemnifying Person shall not have the right to assume
the defense of such action or proceeding on behalf of such
Indemnified Person). It is understood that the Indemnifying Person
shall not be liable for the fees and expenses of more than one
separate firm of attorneys at any time for all such similarly
situated Indemnified Persons. The Indemnifying Person shall not be
liable for any settlement of any action or proceeding effected
without its written consent.
-6-
(d) In the event the indemnifications provided for in this
Article V are unavailable or insufficient, then the Sellers shall
each contribute to the amount paid or payable as a result of such
losses, claims, damages, liabilities, actions and expenses in such
proportion as is appropriate to reflect (A) the relative benefits
received by each Seller and (B) the relative fault of each Seller.
(e) Notwithstanding anything in this Article V to the
contrary, the Corporation shall not be liable to any Seller for
any losses, claims, damages or liabilities arising out of or
caused by (A) any reasonable delay (1) in filing or processing any
registration statement or any preliminary or final prospectus,
amendment or supplement thereto after the inclusion of such
Seller's Stock in such registration statement, or (2) in
requesting such registration statement be declared effective by
the Commission and (B) the failure of the Commission for any
reason to declare effective any registration statement.
2. MISCELLANEOUS.
2.1 Notices. All notices or other communications required or
permitted to be given pursuant to this Agreement shall be in writing and
shall be considered as duly given on (a) the date of delivery, if delivered
in person, by nationally recognized
overnight delivery service or by facsimile or (b) three days after
mailing if mailed from within the continental United States by
registered or certified mail, return receipt requested to the
party entitled to receive the same, if to the Corporation, World
Wireless Communications Corporation,2441 South 3850 West, West
Valley City, Utah 84120, with a copy to Law Offices of Stephen R.
Field, 620 Fifth Avenue, New York, New York, Attn: Stephen R.
Field, Esq.; and if to any Noteholder, at his or its address as
set forth in the books and records of the Corporation. Any party
may change his or its address by giving notice to the other party
stating his or its new address. Commencing on the 10th day after
the giving of such notice, such newly designated address shall be
such party's address for the purpose of all notices or other
communications required or permitted to be given pursuant to this
Agreement.
-7-
2.2 Governing Law. This Agreement and the rights of the parties
hereunder shall be governed by and construed in accordance with the laws of
the State of Utah, without regard to its conflicts of law principles. All
parties hereto (i) agree that any legal suit, action or proceeding arising
out of or relating to this Agreement shall be instituted only in a federal
or state court in Salt Lake City, Utah or in the State of Colorado, (ii)
waive any objection which they may now or hereafter have to the laying of
the venue of any such suit, action or proceeding, and (iii) irrevocably
submit to the jurisdiction of any federal or state court in Salt Lake City,
Utah or in the State of Colorado, in any such suit, action or proceeding, but
such consent shall not constitute a general appearance or be available to any
other person who is not a party to this Agreement. All parties hereto agree
that the mailing of any process in any suit, action or proceeding in accordance
with the notice provisions of this Agreement shall constitute personal service
thereof.
2.3 Entire Agreement; Waiver of Breach. This Agreement constitutes
the entire agreement among the parties and supersedes any prior agreement
or understanding among them with respect to the subject matter hereof, and
it may not be modified or amended in any manner other than as provided
herein; and no waiver of any breach or condition of this Agreement shall be
deemed to have occurred unless such waiver is in writing, signed by the
party against whom enforcement is sought, and no waiver shall be claimed to
be a waiver of any subsequent breach or condition of a like or different
nature.
2.4 Binding Effect; Assignability. This Agreement and all the terms
and provisions hereof shall be binding upon and shall inure to the benefit
of the parties and their respective heirs, successors and permitted
assigns. This Agreement and the rights of the parties hereunder shall not
be assigned except with the written consent of all parties hereto.
2.5 Captions. Captions contained in this Agreement are inserted only
as a matter of convenience and in no way define, limit or extend the scope
or intent of this Agreement or any provision hereof.
2.6 Number and Gender. Wherever from the context it appears
appropriate, each term stated in either the singular or the plural shall
include the singular and the plural, and pronouns stated in either the
masculine, the feminine or the neuter gender shall include the masculine,
feminine and neuter.
2.7 Severability. If any provision of this Agreement shall be held
invalid or unenforceable, such invalidity or unenforceability shall attach
only to such provision and shall not in any manner affect or render invalid
or unenforceable any other severable provision of this Agreement, and this
Agreement shall be carried out as if any such invalid or unenforceable
provision were not contained herein.
-8-
2.8 Amendments. This Agreement may not be amended except in a
writing signed by all of the parties hereto.
2.9 Compliance with Securities Laws. Commencing with the Effective
Date, the Corporation will use its best efforts to comply thereafter with
the applicable provisions of the Securities Act and the Securities Exchange
Act of 1934.
2.10 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same instrument. In addition, this Agreement
may contain more than one counterpart of the signature page and this
Agreement may be executed by the affixing of such signature pages executed
by the parties to one copy of the Agreement; all of such counterpart
signature pages shall be read as though one, and they shall have the same
force and effect as though all of the signers had signed a single signature
page.
-9-
IN WITNESS WHEREOF, the undersigned have executed this Agreement on
the date first above written.
WORLD WIRELESS COMMUNICATIONS, INC.
By: /s/ David D. Singer
---------------------------
David D. Singer, President
BORROWER
LOAN AMOUNT WARRANTS LENDER
----------- -------- ------
$800,000 1,750,000 LANCER OFFSHORE, INC.
By: /s/ Michael Lauer
----------------------------
Michael Lauer, President
$600,000 -0- ORBITER FUND LTD.
By: /s/ Michael Lauer
---------------------------
Michael Lauer, President
$440,000 550,000 THE McCLOSKEY TRUST
By: /s/ Thomas D. McCloskey, Jr.
------------------------------
Thomas D. McCloskey, Jr.,
Trustee
P.O. Box 7846
Aspen, CO 81612
$40,000 50,000 DPM INVESTMENT CORP.
By: /s/ Thomas D. McCloskey, Jr.
-------------------------------
Thomas D. McCloskey, Jr. , V.P.
P.O. Box 7846
Aspen, CO 81612
$ 40,000 50,000 FRYING PAN PARTNERS, LLC.
By: /s/ David L. Marrs
--------------------------------
David L. Marrs, Member
P.O. Box 7846
Aspen, CO 81612
$80,000 100,000 CJL INVESTMENTS, LLC
By: /s/ John H. Perry, III
-----------------------------------
John H. Perry, III, Managing-Member
$200,000 250,000 STERLING TECHNOLOGY PARTNERS, LLC
By: /s/ Bruce D. Cowan
-----------------------------------
Mr. Bruce D. Cowan
$200,000 250,000 /s/ James T. Kelly
-----------------------------------
James T. Kelly
111 Veterans Square
Media, PA 19063
$ 200,000 250,000 /s/ K.R. Braithwaite
-----------------------------------
K.R. Braithwaite
3267 Paseo Gallita
San Clemente, CA 92672-3514
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet as of June 30, 1999, and statements of operations for the six months ended
June 30, 1999, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 675,916
<SECURITIES> 137,648
<RECEIVABLES> 193,568
<ALLOWANCES> 0
<INVENTORY> 626,577
<CURRENT-ASSETS> 1,747,676
<PP&E> 2,153,035
<DEPRECIATION> 1,507,999
<TOTAL-ASSETS> 3,627,477
<CURRENT-LIABILITIES> 4,263,085
<BONDS> 45,281
650,000
0
<COMMON> 17,492
<OTHER-SE> (1,348,381)
<TOTAL-LIABILITY-AND-EQUITY> 3,627,477
<SALES> 1,672,999
<TOTAL-REVENUES> 1,672,999
<CGS> 1,381,271
<TOTAL-COSTS> 1,381,271
<OTHER-EXPENSES> 3,089,398
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,092,086
<INCOME-PRETAX> (3,889,756)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,889,756)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,889,756)
<EPS-BASIC> (0.28)
<EPS-DILUTED> (0.28)
</TABLE>
