<PAGE>
As filed with the Securities and Exchange Commission on December 31, 1997
Registration No. 333-33593
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
---------------------
PRE-EFFECTIVE
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
WORLDWIDE WIRELESS SYSTEMS, INC.
(Exact name of Small Business Issuer as specified in its Charter)
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<CAPTION>
Delaware 4841 13-3831117
<S> <C> <C>
(State of Incorporation) (Primary standard industrial I.R.S. employer identification No.
classification code)
</TABLE>
P.O. Box 470
Ascutney, VT 05030
(802) 674-2206
(Address and telephone number of Principal Offices)
Scott A. Wendel, President
P.O. Box 470
Ascutney, VT 05030
(802) 674-2206
(Name, address and telephone number of agent for service)
Copies To:
Peter S. Erly, Esq. Steven Morse, Esq.
Gravel and Shea Lester Morse, P.C.
76 St. Paul Street, 7th Floor 111 Great Neck Road
P.O. Box 369 Great Neck, NY 11021
Burlington, VT 05402-0369 Telephone: (516) 487-1446
Telephone: (802) 658-0220 Facsimile: (516) 487-1452
Facsimile: (802) 658-1456
Approximate date of commencement of proposed sale to the public: As soon
as practicable after this Registration Statement becomes effective.
If any of the securities on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 933, check
the following box: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the
Securities Act registration number of the earlier effective registration
statement for the same offering. / /
If delivery of a Prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
CALCULATION OF REGISTRATION FEE
================================================================================
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Proposed
maximum
Title of each class of Amount to be aggregate Proposed Amount of
securities to be registered Offering maximum registration
registered (1) price(2) offering price(1) fee(2)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Units ........................... 1,725,000 $12,075,000 $7.00 $3,181.50
- -------------------------------------------------------------------------------------------------------------
Redeemable Common Stock Purchase
Warrants ..................... 1,725,000 ---------- $0.10 $ 45.45
- -------------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value ... 1,725,000(3) ---------- $8.40 $3,817.80
- -------------------------------------------------------------------------------------------------------------
Totals ........................ 5,175,000 ---------- $7,044.75(4)
</TABLE>
================================================================================
(1) Total estimated solely for the purpose of determining the registration fee.
Includes 225,000 Units included in the Representative's over-allotment
option.
(2) Calculated pursuant to Rule 457(a) based on a bona fide estimate of the
maximum offering price.
(3) Issuable upon exercise of the Warrants, together with such indeterminate
number of securities as may be issuable by reason of the anti-dilution
provisions contained therein.
(4) This amendment increases the number of shares to be issued from 1,250,000
to 1,725,000. A filing fee in the amount of $5,871.21 was submitted by wire
transfer with the original filing. An additional filing fee in the amount of
$1,173.54 is submitted by wire transfer with this amendment for a total
filing fee of $7,044.75.
<PAGE>
Cross Reference Sheet Pursuant to Rule 404 (a)
Showing the Location In Prospectus of
Information Required by Items of Form SB-2
<TABLE>
<CAPTION>
Item in Form SB-2 Prospectus Caption
- ---------------------------------------------------- ---------------------------------------------------
<S> <C>
1. Front of Registration Statement and Outside Cover Page and Cover Page of
Front Cover Page of Prospectus Registration Statement
2. Inside Front and Outside Back Cover Pages of Continued Cover Page, Table of Contents
Prospectus
3. Summary Information and Prospectus Summary Prospectus Summary, Risk Factors, Financial
Information
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Cover Page, Underwriting, Risk Factors
6. Dilution Dilution
7. Selling Securityholders Not Applicable
8. Plan of Distribution Cover Page, Underwriting
9. Legal Proceedings Business
10. Directors, Executive Officers, Promoters, and Management
Certain Control Persons
11. Security Ownership of Certain Beneficial Principal Shareholders and Management
Owners and Management
12. Description of Securities Description of Securities
13. Interest of Named Experts and Counsel Legal Opinions, Experts
14. Disclosure of Commission Position on Item 24. Indemnification of Directors and Officers
Securities Act Liabilities
15. Organization Within Five Years Prospectus Summary, Business, Principal
Shareholders, Certain Relationships and Related
Transactions, Risk Factors
16. Description of Business Business
17. Management's Discussion and Analysis or Management's Discussion and Analysis of
Plan of Operation Financial Condition and Results of Operations
18. Description of Property Business
19. Certain Relationships and Related Transactions Certain Relationships and Related Transactions
20. Market for Common Equity and Related Not Applicable
Stockholder Matters
21. Executive Compensation Management
22. Financial Statements Financial Statements
23. Changes in and Disagreements with Not Applicable
Accountants and Financial Disclosure
</TABLE>
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED DECEMBER 31, 1997
WORLDWIDE WIRELESS SYSTEMS, INC.
1,500,000 Units consisting of 1,500,000 Shares of Common Stock and 1,500,000
Redeemable Common Stock Purchase Warrants
Worldwide Wireless Systems, Inc. (the "Company") hereby offers 1,500,000
units (the "Units") each consisting of one share of Common Stock, $.01 par
value ("Common Stock"), and one Redeemable Common Stock Purchase Warrant (the
"Warrant"). The Common Stock and the Warrants are being sold only together and
will be separately tradeable immediately upon issuance. It is currently
estimated that the initial public offering price will be between $6.00 and
$7.00 per Unit. Each Warrant entitles the holder to one share of Common Stock
at a price of $___ per share during the five year period commencing on the date
of this Prospectus. The Warrants are subject to redemption by the Company at
any time commencing 12 months after the date of this Prospectus at a price of
$.10 per warrant if the price per share of Common Stock equals or exceeds $9.00
for a prescribed period. See "DESCRIPTION OF SECURITIES".
Prior to this offering, there has been no public market for the Units, the
Common Stock or the Warrants. The offering price of the Units has been
arbitrarily determined by negotiation between the Company and DuPont
Securities Group, Inc. (the "Representative") and are not related to the
Company's asset value, net worth, or other established criteria of value. See
"RISK FACTORS" and "UNDERWRITING." It is anticipated that following this
offering, the shares of Common Stock and the Warrants will be quoted on the
NASDAQ Small Cap(TM) Market under the symbols "WWYD" and "WWYDW,"
respectively.
THESE ARE SPECULATIVE SECURITIES. THE SECURITIES OFFERED HEREBY INVOLVE A
HIGH DEGREE OF RISK AND SUBSTANTIAL DILUTION. SEE "RISK FACTORS" which begin at
page -- AND "DILUTION."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
================================================================================
Underwriting Discounts
Price to Public and Commissions(1) Proceeds to Company(2)
- ----------------------------------------------------------------------------
Per Unit ...... $ $ $
- --------------------------------------------------------------------------------
Total(3) ...... $ $ $
================================================================================
(1) The Company has also agreed to pay the Representative a non-accountable
expense allowance equal to 3% of the aggregate purchase price of the
securities offered hereby and to issue Warrants to the Representative for
the purchase of up to 150,000 Units at an exercise price equal to $_____ per
unit (the "Underwriter's Warrants"). For additional information, including
information regarding indemnification of the Representative and other
matters, see "UNDERWRITING."
(2) Before deducting expenses of the offering payable by the Company, estimated
at $975,000, including the Representative's non-accountable expense
allowance.
(3) The Company has granted the Representative an option, exercisable within
forty-five (45) days of the date of this Prospectus, to purchase up to
225,000 Units consisting of 225,000 additional shares of Common Stock and
225,000 additional Warrants on the same terms and conditions as set forth
above to cover over-allotments, if any. If the over allotment option is
exercised in full, the Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be increased to _____, _____ and
_____ respectively. See "UNDERWRITING" below.
-------------------------
The Units offered hereby by the Company are being offered on a "firm
commitment" basis by the several underwriters when, as and if delivered to and
accepted by them, and subject to prior sale, withdrawal or cancellation of the
offer without notice. It is expected that delivery of the certificates
representing the Units will be made available at the offices of Dupont
Securities Group, Inc., 19 Townsend Square, Oyster Bay, New York, on or about
____________, 1997.
Dupont Securities Group, Inc.
The date of this Prospectus is ______________, 1997
<PAGE>
Prior to this offering, the Company has not been subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The Company will become subject to the Exchange Act reporting
requirements upon effectiveness of the Registration Statement of which this
Prospectus is a part. The Company intends to register the securities offered
hereby under the Exchange Act simultaneously with the effectiveness of the
Registration Statement. In accordance with the Exchange Act, the Company will
file reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and
other information can be inspected and copies at the public reference
facilities of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549;
and copies of such material can be obtained from the Public Reference Section
at prescribed rates. The Commission maintains a Web site (http://www.sec.gov)
that contains reports, proxy and information statements and other information
regarding issuers that file electronically with the Commission.
The Company will furnish its shareholders with annual reports containing
audited financial statements and such interim reports as it deems appropriate.
The Company's fiscal year ends on June 30.
-------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMPANY'S COMMON
STOCK. SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT THE OFFERING, CREATING A
SYNDICATE SHORT POSITION. UNDERWRITERS MAY BID FOR AND PURCHASE UNITS, SHARES OF
COMMON STOCK AND WARRANTS IN THE OPEN MARKET TO STABILIZE THE PRICES OF SUCH
SECURITIES. THESE TRANSACTIONS MAY STABILIZE OR MAINTAIN THE MARKET PRICE OF
SECURITIES OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED
AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
All statements contained herein that are not historical facts, including
but not limited to, statements regarding the Company's plans for future
development and operation of its business, are based on current expectations.
These statements are forward looking in nature and involve a number of risks
and uncertainties. Actual results may differ materially. Among the factors that
could cause actual results to differ materially are the following: a lack of
sufficient capital to finance the Company's business plan on terms satisfactory
to the Company; pricing pressures which could affect demand for the Company's
services; changes in labor, equipment and capital costs; unavailability of
digital compression technology and equipment at reasonable prices; the
Company's inability to incorporate digital compression and other new technology
into its subscription television system in a cost efficient manner; the
Company's inability to develop and implement new services such as high-speed
Internet access and telephony; the Company's inability to obtain the necessary
authorizations from the Federal Communications Commission ("FCC") or state
regulatory authorities for such new services; competitive factors, such as the
introduction of new technologies and competitors into the wireless
communications business and a failure by the Company to attract strategic
partners; general business and economic conditions. The Company wishes to
caution readers not to place undue reliance on any such forward looking
statements, which statements speak only as of the date made.
The following summary information is qualified in its entirety by the
detailed information and financial statements (including the notes thereto)
appearing elsewhere in this Prospectus. Unless otherwise noted, the information
in this Prospectus assumes an offering price of $6.00. Unless otherwise
indicated, the information in this Prospectus does not give effect to the
exercise of (i) the Underwriter's over-allotment option; or (ii) the
Underwriter's Warrants.
THE COMPANY
Worldwide Wireless Systems, Inc. (the "Company") is a Delaware corporation
organized in 1994 to act as a holding and strategic resource company for
wireless cable systems and advanced telecommunications systems. In March 1995,
a wholly owned subsidiary of the Company, N.E.W. Acquisition Co., Inc., merged
with New England Wireless, Inc. ("NEW"), a Vermont corporation engaged in
wireless cable television activities. The Company's mission is to support,
finance, and acquire new technologies for the wireless telecommunications
markets in which it is active, now or in the future. The Company also intends
to secure and assemble rights to frequencies in other markets.
Using wireless technology, the Company intends to be one of the first
"bundled" wireless services provider in the United States, offering consumers
one-stop shopping for wireless cable television services, wireless Internet
access services, wireless data transmission services, and wireless telephony
services. The Company believes it can offer these services at substantial
savings to the traditional delivery methods employed today. By offering bundled
services, the Company believes that it can derive the greatest benefit from its
technical infrastructure, reduce the number of subscribers required to achieve
profitability, and generate increased brand recognition for each of its
services.
The Company's current wireless cable television system utilizes a delivery
system located on Mount Mansfield (the "Mount Mansfield System"), the highest
point in the state of Vermont. Currently, the Company provides wireless cable
television services for single family residences, multiple dwelling units and
commercial locations in northern Vermont and northeast New York.
In the future, the Company intends to transfer its technology to a
digital, multi-platform capability. This is expected to allow it to provide
additional services, including wireless loop telephone service and Internet
access, at lower prices than presently available through traditional providers
of these services.
The Mount Mansfield System commenced operations in August 1994. The system
currently offers 23 channels, consisting of 18 satellite channels and 5 local
broadcast channels. The wireless cable channels
3
<PAGE>
include 3 pay/premium cable channels. By employing digital compression
technology, the Company expects to be able to offer subscribers 66 or more
channels and has reserved remaining frequencies for use by Internet voice and
data services. As of May 31, 1997, the system's initial signal pattern served
an area with approximately 159,746 households. Based on information reported by
third parties to the Vermont Department of Public Service, approximately 90,033
(56%) of these households do not currently subscribe to hard-wire cable
television.
Wireless cable systems use microwave frequencies licensed by the FCC to
transmit signals over the air from a transmission tower to a microwave receiver
installed at the customer's home or business. Wireless cable systems transmit
signals over coverage areas of approximately 20 to 40 miles from their central
transmission point, although increases in transmission power and other factors
may expand the coverage area of a system to approximately 50 miles from the
central transmission point. Because microwave signals are transmitted over the
air, wireless cable technology does not require the costly infrastructure of
cable and amplifiers utilized by franchise cable operators to deliver services.
As a result, wireless cable technology has been demonstrated to be a reliable,
yet relatively low cost medium for providing cable services to customers
Wireless cable systems compete directly with hard-wire cable and satellite
pay television suppliers. Traditional hard-wire cable systems deliver the
television signal to a subscriber's location through a network of coaxial cable
and amplifiers. While traditional hard-wire systems do not require a direct
line-of-sight or an antenna at the subscriber location, they do require an
infrastructure which is often not found in rural or underdeveloped areas.
Unlike wireless cable television and hard-wire cable television providers,
satellite systems are unable to provide local off-air VHF/UHF broadcast
channels which offer local community access programming via satellite
transmission. In addition, the fees and installation costs associated with
satellite systems are considerably more expensive than those fees charged by
the Company for its wireless cable services.
Substantial portions of the areas served by the initial signal pattern of
the Mount Mansfield System are not served by hard-wire cable systems. Because
wireless cable television programming depends on line-of-sight transmission of
its signal, certain areas within the initial signal area are not able to
receive the Company's broadcast signals. In communities with dense foliage,
hilly terrain, tall buildings or other obstructions in the transmission path,
transmission may be blocked at certain locations. The Company estimates that
approximately 33% of the potential viewers in its signal areas are not able to
receive its signals. Signal repeaters known as "beam-benders" may be used to
transmit to locations outside the line-of-sight. In order to bring its signal
area coverage to 90%, the Company believes that approximately 22 beam-benders
are required. To date, the Company has purchased 3 beam-benders.
Because of continuing technological and regulatory developments within the
telecommunications industry, the Company believes that it can best accomplish
its business objectives by providing a variety of digital wireless services,
instead of traditional analog-based technology utilized by the Company to date.
Such digital wireless services could include: (i) digital video (i.e.
subscription television), (ii) high-speed Internet access, and (iii) telephony
services. A successful deployment of such service might include the full bundle
of broad band (i.e. video and high speed Internet) and narrow band (i.e.
telephony) services.
The Company is currently in the process of evaluating the possible use of
its wireless spectrum to provide telephony services. Although the development
of such telephony services is in its early stages, management believes its
wireless spectrum is capable of delivering wireless local loop ("WLL") service
in the future through means and technologies it is currently exploring. On
September 12, 1997, the Company executed an agreement with VocalTec, Inc.
("VocalTec") pursuant to which it has agreed to purchase software designed to
permit telephone conferencing, and fax services over the Internet. The VocalTec
technology to be used by the Company is intended to take advantage of the
wireless broadcast capabilities of the Company. See "BUSINESS -- Other
Technologies -- VocalTec, Inc." below. The Company has also executed a
beta-site agreement with InterDigital Communications Corporation ("IDC"). At
the present time, it is unable to predict the level of resources it will devote
to the development of services using IDC's products. See "Business -- Other
Technologies -- Local Wireless Corp. Telephone Service".
4
<PAGE>
The Company also has developed a role as a socially responsible company.
The Company's wireless cable network also provides local access channels for
community programming. The Company's involvement with Project KidCare, a
program sponsored by a joint venture between Polaroid Corporation and the
National Center for Missing and Exploited Children (see "BUSINESS"), provides
further evidence of the Company's commitment to be a socially responsible
member of the communities it serves.
The Company's executive offices are located at Route 5 South, Ascutney,
Vermont 05030 and its telephone number is (802) 674-2206.
THE OFFERING
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Securities Offered by the Company 1,500,000 Units consisting of 1,500,000 shares of
Common Stock and 1,500,000 Redeemable Com-
mon Stock Purchase Warrants. See "DESCRIP-
TION OF SECURITIES."
Common Stock Outstanding before offering 2,968,302 shares
Common Stock Outstanding after offering(4) 4,468,302 shares
Use of Proceeds The Company will use the proceeds to repay
indebtedness, to purchase additional capital equip-
ment for the Mount Mansfield System for imple-
mentation of digital compression technology, to
acquire equipment necessary to employ, and to
employ, VocalTec's technology and Internet ser-
vices in its market area, and for working capital
and other general corporate purposes. The Com-
pany has also allocated a portion of the offering
proceeds to the potential implementation of service
using IDC's products in its market area. The Com-
pany may use broad discretion in the use of pro-
ceeds. Management has the right to re-allocate use
of such proceeds. See "USE OF PROCEEDS."
Risk Factors The securities offered hereby involve a high degree
of risk including but not limited to: (i) the Compa-
ny's independent auditors indicate substantial
doubt about the Company's ability to continue as a
going concern; (ii) the Company is currently in
default under a number of agreements to which it
is a party, and such defaults could cause substan-
tial and irreparable injury through termination of
such agreements, damages, or otherwise; (iii) pur-
chasers of the Units will incur immediate and sub-
stantial dilution; and (iv) other risks such as risks
associated with the technologies to be imple-
mented by the Company. See "RISK FACTORS"
and "DILUTION."
Proposed NASDAQ SmallCap Marketsm Common Stock WWYD, and Warrants WWYDW
Symbols(5)
</TABLE>
- -------------
(4) Does not include exercise of underwriter's options.
(5) There is no assurance that a trading market will develop for the Company's
Common Stock or Warrants or that, if developed, it will be sustained.
5
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SUMMARY FINANCIAL INFORMATION
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<CAPTION>
Statement of Operations Data:
Three Months Ended
Year Ended June 30, September 30,
------------------------------------- -------------------------------
(unaudited)
1996 1997 1996 1997
----------------- ----------------- ------------- ---------------
<S> <C> <C> <C> <C>
Revenue .................................... $ 323,144 $ 354,621 $ 88,756 $ 96,810
------------- ------------- --------- ------------
Service cost .............................. 91,606 101,427 25,099 27,141
Programming and license fees ............... 799,285 850,600 202,973 231,408
Selling, general and administrative
(expenses) income......................... 384,140 641,856 157,838 1,652,389
------------- ------------- --------- ------------
(Loss) from operations ..................... (951,887) (1,239,262) (297,154) (1,814,128)
Interest expense ........................... (172,410) (401,831) (97,028) (644,681)
Miscellaneous (expense)/income ............ (6,948) (43,440) 1,258 547
------------- ------------- --------- ------------
Net (loss) ................................. $ (1,131,245) $ (1,684,533) $(392,924) $ (2,458,262)
============= ============= ========= ============
Net (loss) per share of common stock(1)..... $ (0.33) $ (0.49) $ (0.12) $ (0.72)
------------- ------------- --------- ------------
Weighted average number of shares of
Common Stock outstanding ............... 3,389,368 3,404,812 3,404,812 3,404,812
============= ============= ========= ============
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Balance Sheet Data:
<TABLE>
<CAPTION>
September 30, 1997
June 30, -----------------------------------
1997 Actual As Adjusted(2)
---------------- ---------------- ----------------
<S> <C> <C> <C>
Working capital (deficit) ..................... $ (3,581,704) $ (3,598,959) $ 4,360,997
Total assets .................................... $ 1,633,632 $ 1,544,527 $ 6,472,527
Total liabilities .............................. $ 3,728,816 $ 3,721,367 $ 884,411
Accumulated deficit ........................... $ (3,218,955) $ (5,677,217) $ (5,712,261)
(Capital deficiency)/stockholders' equity ...... $ (2,095,184) $ (2,176,840) $ 5,588,116
</TABLE>
- --------------
(1) Net loss per share is computed based upon the weighted average number of
shares of Common Stock outstanding during the periods. Pursuant to the
requirements of the Commission, all Common Stock and Common Stock
equivalents issued within the 12 months immediately preceding the initial
filing of the Registration Statement of which this Prospectus forms a
part, at a price below the assumed offering price of $6.50 per share (the
midpoint of the currently anticipated range of the initial public
offering price per share), have been included in the weighted average
number of shares outstanding for all periods presented, utilizing the
"treasury stock method."
(2) As adjusted to give effect to the sale of the 1,500,000 Units offered
hereby at an assumed price of $6.50 per share (the midpoint of the
currently anticipated range of the initial public offering price) and the
anticipated application of the estimated net proceeds therefrom. See "Use
of Proceeds."
6
<PAGE>
RISK FACTORS
The securities offered hereby involve a high degree of risk, including,
but not necessarily limited to, the risk factors described below. Each
prospective investor should carefully consider the following risk factors
inherent in, and affecting, the business of the Company and this offering
before making an investment decision.
Limited Revenues; Accumulated Deficit; Ability to Continue as a Going Concern
The Company was organized in 1994 and its subsidiary, NEW, commenced
operations, on a limited basis, in August 1994. Currently, the Company has
developed its facilities, and is seeking to expand its customer base through
the application of new technologies. To date, the Company's operations have
been limited to the development of its Mount Mansfield System through its
subsidiary, NEW. The Company has no wireless cable operations in other
markets. During the years ended June 30, 1997 and June 30, 1996, the Company
had revenues of $354,621 and $323,144 and net losses of $1,684,533 and
$1,131,245, respectively. At June 30, 1997 the Company had an accumulated
deficit of $3,218,955 and a capital deficiency of $2,095,184. During the 3
months ended September 30, 1997 and September 30, 1996, the Company had
revenues of $96,810 and $88,756, and net losses of $2,458,262 and $392,924,
respectively. At September 30, 1997, the Company had an accumulated deficit of
$5,677,217 and a capital deficiency of $2,176,840. In addition, during the
three months ended September 30, 1997 the Company incurred a charge of
$1,468,000 in connection with a stock option granted to Alan R. Ackerman. See
"CERTAIN TRANSACTIONS" below. As a result of such continuing losses and other
factors, the Company's independent auditors indicate that substantial doubt
exists about the Company's ability to continue as a going concern. The
Company's losses are attributable to the lack of a sufficient subscriber base
on the part of the Company to cover its ongoing programming, licensing and
other costs. The Company expects to continue experiencing net losses while it
develops and expands its wireless cable systems and implements other
technologies. No assurance can be given that the Company will generate
substantial revenues or that the Company's business operations will prove to
be profitable. The Company's operations are subject to all of the risks
inherent in the establishment of a new business, particularly one in the
highly competitive pay television industry. The likelihood of the success of
the Company must be considered in light of the problems, expense,
difficulties, complications, and delays frequently encountered in connection
with establishing a new business, including, without limitation, market
acceptance of the Company's services, regulatory problems, unanticipated
expenses and competition. There can be no assurances that the Company's
proposed business venture will be successful. See "BUSINESS."
Defaults Under Agreements
NEW is currently in default of a number of its agreements because of
payment arrearages including its lease of tower space on Mount Mansfield,
Vermont where its transmitter is located. In addition, NEW is in default of its
obligations under various license agreements pursuant to which it obtains
broadcasting rights for frequencies covering its broadcast channels on its
Mount Mansfield location. Termination of certain of these agreements could have
a material negative impact on the Company and its business activities. The
Company intends to cure payment defaults under these agreements with the
proceeds of the offering. See "USE OF PROCEEDS."
Unpaid Indebtedness
In connection with prior financings of the Company, a total of $732,000 in
indebtedness as of September 30, 1997 is due and payable on demand exclusive of
the Company's indebtedness to its principal shareholder, Alan R. Ackerman, and
the Company lacks assets to pay such indebtedness. Although the Company intends
to pay such indebtedness in part on completion of the offering, attempts to
compel repayment prior to that time could negatively impact the Company's
business operations. See "USE OF PROCEEDS."
Competition
The pay television industry is highly competitive. Wireless cable
television systems face or may face competition from several sources, such as
traditional hard-wire cable companies, Satellite Receivers, Direct Broadcast
Satellites ("DBS") and other alternative methods of distributing and receiving
television transmissions. Further, premium movie services offered by cable
television systems have encountered significant competition from the home video
cassette recorder industry. In areas where several local off-air VHF/UHF
broadcast signals can be received without the benefit of cable television,
cable television systems have also experienced competition from the
availability of broadcast signals generally and have found market penetration
more difficult.
7
<PAGE>
Wireless cable programming is transmitted through the air via microwave
frequencies that generally require a direct "line-of-sight" from the
transmitter facility to the subscriber's receiving antenna. In communities with
dense foliage, hilly terrain, tall buildings or other obstructions in the
transmission path, transmission is blocked at certain locations. Traditional
hard-wire cable systems deliver the signal to a subscriber's location through a
network of coaxial cable and amplifiers and do not require a direct
line-of-sight for transmission. Therefore, those systems may have a competitive
advantage over the Company in those areas where the reception of wireless cable
transmissions is difficult or impossible. In addition, in limited
circumstances, extreme adverse weather could damage wireless cable transmission
and receiving antennas as well as transmission site equipment. Such conditions
would not similarly affect hard-wire cable systems.
Wireless cable programming can only be transmitted on the frequencies made
available for wireless cable by the FCC. Currently, the number of channels of
cable television programming that can be provided to subscribers of wireless
cable systems is limited to 33. The Company plans to utilize the proceeds of
the offering to implement digital compression technology to allow it to expand
the number of channels it makes available to subscribers to 66, and thereby
compete more effectively with hard-wire cable systems. Current hard wire cable
companies in the Company's market area offer between approximately 20 and 60
channels to their subscribers compared to the 23 channels the Company currently
offers through its Mount Mansfield System. Satellite Receivers and DBS have the
capability of delivering over 100 channels of programming. The Company expects
to be capable of delivering over 100 channels of programming through digital
technology.
Unlike hard-wire operations, wireless cable operators like the Company
generally have to lease the wireless cable channels on which they transmit
their programming from channel license holders. Leases generally require the
Company to pay the lessor a fee based on a percentage of subscription revenues,
averaging approximately 5%, or, if greater, a minimum monthly fee. Although
hard-wire operators do not have to lease channels, they do have to pay
franchise fees generally on all gross revenues from cable system operations and
leasing fees for cables on telephone poles (as compared to only subscription
revenues in the case of wireless cable), typically in the range of 3% to 5%, an
expense that is not incurred by wireless operators. Programming is generally
available to traditional hard-wire and wireless operators on comparable terms,
although operators that have a smaller number of subscribers often are required
to pay higher per subscriber fees. Accordingly, operators in the initial
operating stage generally pay higher programming fees on a per subscriber
basis.
Certain hard-wire cable operators have announced their intention to
develop interactive features for use by their subscribers, such as shopping via
video catalogs and playing video games with neighbors. Interactive services are
not currently available for wireless cable without a waiver from the FCC, but
the FCC has proposed rules to allow 2-way transmission capability for the
frequencies utilized by wireless cable operators. The Company believes that the
same manufacturers who have developed digital compression converters for both
hard-wire and wireless cable will also make new developments in interactivity
available to both industry segments. The FCC has designated a return path
channel for use in connection with interactive services which may be offered by
wireless cable operators. The Company believes that, if it is economically
feasible to do so, wireless cable systems can include two-way interactivity.
There can be no assurance that interactive services will be made available for
wireless cable systems and, therefore, to the extent such services are
available on hard-wire cable systems, the Company could be at a competitive
disadvantage.
Legislative, regulatory, and technological developments may result in
additional and significant new competition, including competition from local
telephone companies. Many actual and potential competitors have greater
financial, marketing, and other resources than the Company. No assurance can be
given that the Company will compete successfully with hard-wire cable and other
pay television systems, or other companies engaged in providing the media
services provided by the Company. See "BUSINESS -- Competition."
Risks Associated with VocalTec
The provision of Internet and wireless telephony by wireless cable
operators like the Company has only occurred in limited market areas. In
successfully marketing its services, the Company will face consumer acceptance
challenges associated with the sale of services utilizing an unfamiliar
technology.
In addition, the market for Internet access services and telephone
services is intensely competitive. The Company expects competition to persist,
intensify and increase in the future. With respect to the software applications
made available to the Company by VocalTec, Inc. there are a number of other
software providers who
8
<PAGE>
are active in the Internet applications market. A number of these companies are
developing new products or enhancing existing products specifically to operate
in bandwidths compatible with that utilized by the Company. In addition, the
competition and market for Internet telephony products is intense. Many
companies distribute free Internet telephony applications offering basic
functionality. The availability of such free Internet telephony applications
may increase price pressure on the Company's products. Other established
companies including telecommunications and telephone companies active in the
Company's market area can also be expected to introduce competitive products.
Technological advances and the financial resources of certain of these
competitors could put the Company at a competitive disadvantage in its market
area.
Development of New and Enhanced Products; Risks of Rapid Technological Change
Introduction of products incorporating new technologies could render the
Company's products and services obsolete and unmarketable and could exert price
pressures on the Company's services. In particular, the market for voice and
multi-media over the Internet is characterized by evolving industry standards
and specifications. As these standards and specifications are adopted, the
Company may be required to devote substantial time and expense in order to
adapt its products. The Company's ability to anticipate changes in technology
and to successfully introduce services and products in its market area in a
cost effective and timely manner will be a critical determinant of the
Company's profitability. There could be no assurance that the Company will
successfully develop its contemplated Internet and telephony services in its
market area.
Need for Additional Financing For Growth
The growth of the Company's business will require substantial investment
on a continuing basis to finance capital expenditures and related expenses for
subscriber growth and new system development. The Company will also require
capital to construct and develop its broadcasting network to accommodate its
activities as a beta-site for IDC's digital communications system, if
ultimately implemented. The level of capital which will be required for this
purpose has not been determined. Although the Company believes that the
proceeds from this offering, together with funds expected to be generated from
operations, will be sufficient to finance the Company's working capital
requirements for at least 12 months following completion of this offering,
there can be no assurance that the Company will generate sufficient revenues to
fund its operations after that date. The Company believes that the net proceeds
from this offering will be sufficient to achieve the level of approximately
8,000 subscribers to the Mount Mansfield System over the next 5 years and to
employ digital compression technology for that system. Further significant
growth in that system or expansion into new markets will require additional
financing, which may not be available on satisfactory terms, if at all. Failure
to obtain such additional financing could adversely affect the growth of the
Company. The proceeds from this offering will not be sufficient to develop
other wireless cable systems. Although the Company believes that operating
revenues will enable it to expand the subscriber base for its existing system,
there can be no assurance that the Company will generate adequate revenues to
fund its growth. The Company does not have a bank line of credit and there can
be no assurance that any required or desired financing will be available,
through bank borrowings, debt, or equity offerings, or otherwise, on acceptable
terms. To the extent that future financing requirements are satisfied through
the issuance of equity securities, investors may experience significant
dilution in the net book value per share of Common Stock. Additional debt could
result in a substantial portion of the Company's cash flow from operations
being dedicated to the payment of principal and interest on such indebtedness
and may render the Company more vulnerable to competitive pressures and
economic downturns. The Company's future capital requirements will depend upon
a number of factors, many of which are not within the Company's control,
including programming costs, capital costs, marketing expenses, staffing
levels, subscriber growth and competitive conditions. See "USE OF PROCEEDS,"
"BUSINESS," and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND OPERATIONS."
Inception of Telephone Operations
The Company is in the preliminary stages of acquiring the permits and
negotiating the contracts necessary to implement local wireless loop telephone
service. The Company has not yet obtained the licenses or approvals necessary
to commence such activities and there can be no assurance that it will
successfully do so. In addition, it is impossible to determine at the current
time what level of profits, if any, the Company will derive from the
implementation of such service.
9
<PAGE>
Ongoing Influence of the Representative
Under the terms of its Underwriting Agreement with Dupont Securities
Group, Inc. (the "Representative"), the Representative is granted a number of
rights with respect to the future operations of the Company, including the
right to designate a director or a non-voting advisor to the Board of Directors
for 3 years from the closing of the offering, approve an independent auditing
firm acceptable to the Representative for 5 years after the closing of the
offering, purchase 150,000 Units of the Company's securities for 5 years after
the closing of the offering, as well as other rights. Such rights, especially
when considered on a cumulative basis, may afford the Representative a
significant ongoing influence over the activities of the Company. Such
influence could be exercised in a manner which conflicts with the best
interests of the Company.
Lack of Prior Experience of the Representative
Dupont Securities Group, Inc., the representative of the Underwriters, was
formed in November 1996 and commenced operations in June 1997. It has never
underwritten or participated in a public offering of securities. There can be
no assurance that the Representative will be able to assist the Company in a
successful completion of the offering.
Impediments to Proposed Expansion
The Company has adopted a business strategy which includes, in part,
growth through the development of additional wireless cable systems and the use
and acceptance of other wireless technologies and products. This may or may not
include technology developed by VocalTec or other companies. The Company's
proposed wireless cable expansion will be dependent on, among other things, the
degree of competition it encounters in its market area; its successful
implementation of digital compression technology in its market area; its
ability to incorporate technological changes into its product mix; the
availability of suitable management and other personnel; the Company's general
ability to manage growth; and the availability of adequate financing. The
Company's management will be responsible for the selection of expansion
opportunities in its sole discretion and shareholders will not be presented
with advance information regarding expansion opportunities or the ability to
approve or disapprove expansion opportunities. There can be no assurance that
the Company will be successful in its proposed business strategy. See
"BUSINESS" and "RISK FACTORS -- Need for Additional Financing for Growth."
Geographic Concentration in Vermont
The Company's business and customer base is almost entirely located in
Vermont. As a result, the Company does not have the benefit of diversification
into various geographic areas which would insulate it from economic downturns
in a particular market area. In the event of an economic reversal which
particularly affects Vermont, the Company's business could be significantly and
adversely affected.
Termination or Expiration of Channel Leases
The Company is dependent on lease agreements with third parties for its
wireless cable channels in the Mount Mansfield System (the "Lease Agreements").
As indicated above under "RISK FACTORS -- Defaults Under Agreements", the
Company is in default of several Lease Agreements which may cause their
termination. In addition, although the FCC does not have the authority to
terminate the lease of the channel licenses, the Company's ability to continue
to enjoy the benefits of the Lease Agreements will be dependent upon the
channel license holders' continuing compliance with applicable regulations.
Under the rules of the FCC, the term of a channel lease cannot exceed the term
of the license granted by the FCC to the license holder. FCC licenses for
wireless cable channels generally must be renewed every 10 years and there is
no automatic renewal of such licenses. The Lease Agreements were commenced in
1991 and 1993 and have terms (with renewal options) of 20 years. The channel
licenses leased to the Company pursuant to the Lease Agreements expire
beginning in 2001. Channel licenses are subject to non-renewal, revocation or
cancellation for violations of the Communications Act of 1934, as amended (the
"Communications Act") or the FCC's rules and policies. The termination of, or
failure to renew, a channel lease would result in the Company's inability to
deliver television programming on any such channel and would have a material
adverse effect on the Company.
10
<PAGE>
Necessary Revisions to License Agreements
Although the Company has obtained consents of its licensing companies for
the implementation of digital video services, the Company's license agreements
do not currently permit the implementation of Internet, telephone or other
non-video services. Consequently, the Company will need to negotiate amendments
to those agreements to accommodate those technologies. Because the terms and
conditions of those amendments have not been finalized, the Company is unable
to predict the additional costs which it will incur in connection with such
licensing agreements and the implementation of its contemplated new services
technologies.
No Assurance of Continued Nasdaq Small Cap Listing: Penny Stock Rules
The Board of Governors of the National Association of Securities Dealers,
Inc. has established certain standards for the initial quotation and continued
quotation of a security on Nasdaq. The standards for initial quotation require,
among other things, that an issuer have total assets of $4,000,000 and capital
and surplus of at least $2,000,000; that the minimum bid price for the listed
securities be $4.00 per share; that the minimum market value of the public
float (the shares held by non-insiders) be at least $5,000,000, and that there
be at least two market makers for the issuer's securities. While the Company
expects to be approved for listing on Nasdaq, the Company's securities may be
delisted for a variety of reasons. Nasdaq may delist the Common Stock of the
Company if it finds it is in the public interest or if the Company fails to
meet maintenance standards. The maintenance standards require, among other
things, that an issuer have net tangible assets of at least $2,000,000 or
market capitalization of at least $35,000,000 or $500,000 net revenue in 2 of
its last 3 years; that the minimum bid price for the listed securities be $1.00
per share; that the minimum market value of the "public float" be at least
$1,000,000; that the public float be at least 500,000 shares; and that there be
at least two market-makers for the issuer's securities. A deficiency in either
the market value of the public float or the bid price maintenance standard will
be deemed below the bid price maintenance standard. An issuer may remain on
Nasdaq if the market value of the public float is at least $1,000,000 and the
issuer has $2,000,000 in equity. There can be no assurance that the Company
will continue to satisfy the requirements for maintaining a Nasdaq quotation.
In addition, recent proposals which would impose more strict compliance
standards if enacted would make it more difficult to maintain Nasdaq quotation
for the Company's Units, Common Stock and Warrants. If the Company's Units,
Common Stock and Warrants were to be excluded from Nasdaq, it would adversely
affect the prices of such securities and the ability of holders to sell them,
and the Company would be required to comply with the initial listing
requirements to be relisted on Nasdaq.
If the Company is unable to satisfy Nasdaq's maintenance requirements and
the price per share were to drop below $5.00, then unless the Company satisfied
certain net asset tests, the Company's securities would become subject to
certain penny stock rules promulgated by the Securities and Exchange Commission
(the "Commission"). The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document prepared by the Commission that provides
information about penny stocks and the nature and level of risks in the penny
stock market. The broker-dealer also must provide the customer with current bid
and offer quotations for the penny stock, the compensation of the broker-dealer
and its salesperson in the transaction and monthly account statements showing
the market value of each penny stock held in the customer's account. In
addition, the penny stock rules require that prior to a transaction in a penny
stock not otherwise exempt from such rules, the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for securities that become subject to
the penny stock rules. If the Company's securities becomes subject to the
penny stock rules, investors in the offering may find it more difficult to sell
their securities.
Dependence on Key Individuals
The Company's development and success depends upon the continued
contributions of Scott A. Wendel, President and Chief Executive Officer.
The Company has no keyman insurance on its officers. The loss of the services
of Mr. Wendel could have a material, adverse effect on the Company. The Company
has not entered into an employment agreement with Mr. Wendel although it intends
to do so upon successful completion of the offering described in this
Prospectus. Mr. Wendel devotes full business time to the Company. See
"MANAGEMENT."
11
<PAGE>
Limited Number of Experienced Management; Board Composition
Of the executive officers of the Company, only Scott A. Wendel has had
extensive experience in the cable television business. In the event that the
Company were to lose the services of Mr. Wendel, the Company could experience a
material and adverse disruption in its business activities. See "MANAGEMENT."
In addition, upon completion of the offering, the Company will have 5
directors, 3 of whom will be outside directors.
Additional Management
Upon completion of the offering, the Company intends to retain a new Chief
Executive Officer and a new Chief Financial Officer. See "MANAGEMENT."
Consequently, investors will not have the opportunity to evaluate the
experience or qualifications of such persons prior to making an investment
decision as to the Units. Furthermore, the Company may experience delays in
retaining qualified individuals, and may not succeed in retaining such
individuals on favorable terms.
Conflicts of Interest
To the extent that there are insufficient revenues from operations,
officers' salaries of up to approximately $200,000 will be paid from the
proceeds of this offering within the first 12 months after the closing of the
offering, and the principal amount of $1,200,000 will be repaid, from the
proceeds of the offering, to the Company's principal stockholder who
participated in a prior financing. Conflicts of interest could arise in the
negotiation of the terms of any transaction between the Company and its
shareholders, officers, directors, or affiliates. The Company has no plans or
arrangements, including the hiring of an independent third party, for the
resolution of disputes between the Company and such persons, if they arise. The
Company and its public shareholders could be adversely affected should such
individuals choose to place their own interests before those of the Company. No
assurance can be given that conflicts of interest will not cause the Company to
lose potential opportunities, profits, or management attention. The Company
could acquire wireless cable systems or assets from management, principal
shareholders or their affiliates or from entities in which management,
principal shareholders or their affiliates may hold an interest. Such persons
or entities could derive monetary or other benefits from such transactions.
Such benefits could include, without limitation, the assumption of, or release
from, liabilities incurred by such persons or result in increased control of
the Company by such persons.
Physical Limitations of Wireless Cable Transmission
Wireless cable programming is transmitted through the air via microwave
frequencies from a transmission facility to a small, Company-owned receiving
antenna at each subscriber's location and requires "line-of-sight"
transmission. Therefore, in communities with tall trees, hilly terrain, tall
buildings, or other obstructions in the transmission path, transmission can be
difficult or impossible to receive at certain locations without the use of
signal repeaters known as "beam-benders". Traditional hard-wire cable systems
do not have a line-of-sight concern with transmission and, therefore, may have
a competitive advantage over the Company in those areas equipped with hard-wire
cable systems where the reception of wireless cable transmission is difficult
or impractical. See "BUSINESS."
Government Regulation
The business of the Company is indirectly subject to regulation by the FCC
and other regulatory agencies. The right to transmit on wireless cable channels
is regulated by the FCC and the retransmission of local off-air VHF/UHF
broadcasts is regulated by the United States Copyright Office (the "U.S.
Copyright Office") pursuant to the Copyright Act of 1976, as amended (the
"Copyright Act").
Pursuant to the Cable Television Consumer Protection and Competition Act
of 1992 (the "Cable Act"), the FCC adopted rate regulations exclusively for
traditional hard-wire cable systems which provide for, among other things,
reductions in the basic service and equipment rates charged by most hard-wire
cable operators and FCC oversight of rates for all other services and
equipment. The Cable Act also provides for rate deregulation of a traditional
hard-wire cable operator in a particular market once there is "effective
competition" in that market. Effective competition exists, among other
circumstances, when another multi-channel video provider exceeds a 15%
penetration in that market. FCC regulations continue to apply to traditional
hard-wire cable operators as to price and service absent effective competition.
While current FCC regulations are intended to promote the development of a
competitive pay television industry, the rules and regulations affecting the
wireless cable industry may change, and any future changes in FCC rules,
regulations, policies and procedures could have an adverse effect on the
industry as a whole and on the Company in particular.
12
<PAGE>
Secondary transmission of a broadcast signal is permissible only if
approved by the copyright holder or if subject to compulsory licensing under
the Copyright Act. The U.S. Copyright office has taken the position that,
effective January 1, 1995, wireless cable operators, unlike traditional
hard-wire cable operators, will not be "cable systems" entitled to a compulsory
license under the Copyright Act. Pursuant to the Cable Act, local broadcasters
may require that cable operators obtain their consent before retransmitting
local off-air VHF/UHF broadcasts. The Company has obtained such consent for 5
broadcast channels in the Mount Mansfield System that the Company is
retransmitting on a wireless cable channel. See "BUSINESS -- The Mount
Mansfield System -- Programming."
Dependence on Programming Agreements
In connection with its distribution of television programming, the Company
is dependent on fixed-term contracts with various program suppliers. If such
contracts are canceled or not renewed, the Company will have to seek program
material from other sources. There is no assurance that other program material
will be available to the Company's subscribers. The likelihood that program
material will be unavailable to the Company is significantly mitigated by the
Cable Act and various FCC regulations issued thereunder, which, among other
things, impose limits on exclusive programming contracts and generally prohibit
cable programmers in which a cable operator has an attributable interest from
discriminating against cable competitors with respect to price, terms and
conditions of sale of programming. See "BUSINESS -- The Mount Mansfield System
- -- Programming."
Unproved Basis for Company Plans
The Company's plans for implementation of its proposed business operations
and achieving profitability from the application of digital compression
technology in its intended operations are based on the industry experience and
judgment of its management, and upon certain available information concerning
the wireless cable industry in general and the Company's potential markets. No
independent market studies have been conducted concerning the extent to which
customers will subscribe to the Company's wireless cable services, as expanded
through digital technology, nor are any such studies planned. There can be no
assurance that the Company's plans will materialize. See "BUSINESS."
Voting Power of Present Management
Upon completion of this offering, Alan R. Ackerman will own approximately
36% of the outstanding Common Stock of the Company. Consequently, Mr. Ackerman
may be in a position to influence a majority of the Company's Directors and
generally to exercise control over the Company's affairs. See "MANAGEMENT" and
"PRINCIPAL STOCKHOLDERS."
Dividends Unlikely
The Company has not paid any dividends on its Common Stock and does not
intend to declare or pay cash dividends in the foreseeable future. Earnings are
expected to be retained to provide funds for operation and expansion. See
"DIVIDEND POLICY."
Risk of Future Sales of Common Stock
Upon completion of this offering, members of management and the other
existing shareholders of the Company will own 2,968,302 shares of Common Stock
of the Company, representing approximately 66% of the outstanding shares of
Common Stock immediately following the offering. Options to purchase an
additional 402,776 shares have been issued to Alan R. Ackerman, the Company's
principal shareholder. Another 393,283 shares of Common Stock are issuable by
the Company upon exercise of outstanding Warrants. All of these shares are
deemed "restricted securities" as defined by Rule 144 under the Securities Act
of 1933, as amended (the "Securities Act") and were acquired or were derived
from securities purchased prior to the date hereof. In general, under Rule 144,
a person (or persons whose shares are aggregated) who has satisfied a 1-year
holding period may, under certain circumstances, sell within any 3-month period
a number of restricted securities which does not exceed the greater of one
percent (1%) of the shares outstanding or the average weekly trading volume
during the four calendar weeks preceding the notice of sale required by Rule
144. In addition, Rule 144 permits,
13
<PAGE>
under certain circumstances, the sale of restricted securities by a person who
is not an affiliate of the Company and has satisfied a 2-year holding period
without any quantity limitations. Any sales of shares by shareholders pursuant
to Rule 144 may have a depressive effect on the price of the Common Stock. The
vast majority of shares issued prior to inception of the offering (other than
shares held by affiliates and shares not issued yet pursuant to Warrants
previously issued) may be sold pursuant to Rule 144 immediately after
completion of the offering; however, the shareholders of the Company have
agreed with the Representative not to offer or sell any shares of Common Stock
for a period of 1 year following the date of this Prospectus. See "PRINCIPAL
STOCKHOLDERS," "UNDERWRITING," and "DESCRIPTION OF SECURITIES."
No Prior Market
There has been no prior market for the Units, Common Stock or Warrants and
there is no assurance that an active public market for the securities will
develop or be sustained after completion of this offering. The public offering
price of the Common Stock and the exercise price of the Warrant have been
determined by negotiations between the Company and the Representative and does
not necessarily bear any relationship to the Company's asset value, net worth or
other generally accepted criteria of value. It is anticipated that the Common
Stock will be listed on the NASDAQ Small Cap(TM) Market upon completion of this
offering. Even if such securities are so listed, there can be no assurance that
the Company will continue to meet such listing requirements.
Dilution
Purchasers who acquire Common Stock will incur immediate and substantial
dilution from the public offering price. Giving retroactive effect to the
consummation of the offering made hereby, the Company's pro forma net tangible
book value at September 30, 1997 would have been $1.22 per share representing
an immediate increase in net tangible book value of $2.06 per share to the
present shareholders and an immediate dilution of $5.28 per share of Common
Stock, or approximately 81%, to public investors from the public offering
price. See "DILUTION."
Risk of Redemption of the Warrants
Under the terms of the Warrants, the Warrants can be redeemed for a price
of $.10 per Warrant any time commencing 12 months after the date of this
Prospectus if the price per share of the Common Stock of the Company exceeds
$9.00 per share for a period in excess of 20 consecutive trading days. Such
redemption right, if exercised, would significantly reduce the economic value
of Warrants not previously used to acquire Common Stock.
Volatility of Stock
The market prices for securities of newly public companies have
historically been highly volatile. Future announcements concerning the Company
or its competitors, including operating results, technological innovation, and
government regulations, could have a significant impact on the market price of
the Common Stock.
Risk of Market Confusion
An unaffiliated corporation has been formed with the name Worldwide
Wireless, Inc. in Delaware. The Company is not aware of any entity doing
business in the eastern United States using the name Worldwide Wireless or
using Worldwide Wireless in combination with other words in its name. However,
the Company has not taken steps to register its name as a service mark with the
United States Patent and Trademark Office. Therefore, the possibility exists
that Worldwide Wireless, Inc., a Delaware corporation or another competitor,
could enter markets in which the Company plans to operate or operates, and
materially and adversely affect the Company due to resultant market confusion.
Risk of Authorization of Preferred Stock
The Company's Certificate of Incorporation authorizes the issuance of
2,500,000 shares of "blank check" preferred stock with such designations,
rights and preferences as may be determined from time to time by the Board of
Directors. Accordingly, the Board of Directors is empowered, without
stockholder approval (but subject to applicable government regulatory
restrictions), to issue preferred stock with dividend, liquidation,
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<PAGE>
conversion, voting or other rights which could adversely affect the voting
power or other rights of the holders of the Company's Common Stock. In the
event of issuance, the preferred stock could be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company. Although the Company has no present intention to issue
any shares of preferred stock, there can be no assurance that the Company will
not do so in the future. See "DESCRIPTION OF SECURITIES."
Risk of Non-Registration of Securities in Certain Jurisdictions
The Company is required to have a current registration statement on file
with the Commission and to effect appropriate qualifications under the laws and
regulations of the states in which the holders of Warrants reside in order to
comply with applicable laws in connection with the exercise of Warrants and the
resale of the Common Stock issued upon such exercise. The Company, therefore,
will be required to file post-effective amendments to its registration
statement when subsequent events require such amendments in order to continue
the registration of the Common Stock underlying the Warrants and to take
appropriate action under state securities laws. There can be no assurance that
the Company will be able to keep its registration statement current or to
effect appropriate action under applicable state securities laws. Its failure
to do so may restrict the ability of the Warrant holders to exercise the
Warrants and resell or otherwise dispose of the underlying Common Stock.
DILUTION
As of September 30, 1997, the Company had a net tangible book value
(deficit) of $(2,507,268) or approximately $(0.84) per share of Common Stock.
Net tangible book value (deficit) per share represents the amount of the
Company's total tangible assets, less liabilities, divided by the number of
shares of Common Stock outstanding. Giving retroactive effect to the
consummation of the offering made hereby, assuming an initial public offering
price of $6.50 per share of Common Stock without giving any effect to the
value of the Warrants included in the Units (which is the mid-point of the
expected price range of the offering, less underwriting discounts and
estimated offering expenses), the pro forma net tangible book value at
September 30, 1997 should have been $1.22 per share representing an immediate
increase in net tangible book value of $2.06 per share to the present
shareholders and an immediate dilution of $5.28 per share of Common Stock, or
approximately 81%, to public investors from the public offering price.
Dilution per share represents the difference between the public offering price
and the pro forma net tangible book value per share after the offering.
The following table illustrates the dilution per share of Common Stock to
be incurred by public investors from the public offering price:
<TABLE>
<S> <C> <C>
Assumed initial public offering price ........................ $6.50
Net negative tangible book value before offering ......... ($ 0.84)
Increase attributable to public investors(1) ............... 2.06
--------
Pro forma net tangible book value after offering ............ 1.22
-----
Dilution of net tangible book value to public investors ...... 5.28
=====
</TABLE>
<PAGE>
The following table sets forth the difference between the present
shareholders and the public investors with respect to the number of shares of
Common Stock purchased from the Company, the total cash consideration paid and
the average price per share:
<TABLE>
<CAPTION>
Weighted
Shares Purchased Total Consideration Average
----------------------- ------------------------- Price
Number Percent Amount Percent Per Share
----------- --------- ------------- --------- ----------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1) ...... 2,968,302 66% $ 2,985,605 23% $1.01
Public investors(2)............. 1,500,000 34% $ 9,750,000 77% $6.50
--------- -- ----------- --
4,468,302 100% $12,735,605 100%
========= === =========== ===
</TABLE>
- ------------
(1) Includes $1,059,109 paid by shareholders of New England Wireless, Inc., the
Company's predecessor.
(2) Based on the midpoint of the currently anticipated range of the initial
public offering price.
The foregoing table assumes no exercise of the Representative's
over-allotment option. If such option is exercised in full the new investors
will have paid 11,212,500 (based on an assumed price of $6.50 per Unit, the
midpoint of the currently anticipated range of the initial public offering
price) for 1,725,000 Units, representing approximately 79% of the total
consideration for 37% of the total number of shares outstanding. In addition,
computations set forth in the above table exclude an aggregate of 796,059
shares of Common Stock reserved for issuance upon the exercise of currently
outstanding stock options and warrants and 300,000 shares of Common Stock
reserved for issuance upon the exercise of the Underwriter's Warrants. See
"DESCRIPTION OF SECURITIES" and "UNDERWRITING."
15
<PAGE>
USE OF PROCEEDS
The net proceeds (after deducting underwriting discounts and other
expenses of the offering payable by the Company) from the sale of the Units
offered hereby by the Company, are estimated to be approximately $7,850,000. The
net proceeds have been calculated using a price of $6.50, which is the midpoint
of the initial public offering price of between $6.00 and $7.00. The net
proceeds are expected to be used over approximately 12 months following the
completion of this offering for the following purposes:
<TABLE>
<CAPTION>
Approximate Percentage of
Application Amount of Net Proceeds Net Proceeds
- ---------------------------------------------- ------------------------ --------------
<S> <C> <C>
Repay indebtedness(1) ........................ $2,857,000 36.4%
Capital expenditures(2) ..................... $4,459,000 56.8%
Personnel and installation expenses(3) ...... $ 282,000 3.6%
Working capital(4) ........................... $ 252,000 3.2%
---------- -----
Total ....................................... $7,850,000 100.0%
---------- -----
</TABLE>
- ------------
(1) Consists of the repayment of (i) $862,000 on promissory notes issued in
connection with private placements of the Company's promissory notes (the
"Notes") carrying interest rates between 7.5% and 12% per annum, (ii)
repayment of indebtedness to the Company's principal shareholder of
$1,200,000, which carries an annual interest rate of 7.5% and (iii)
repayment of trade indebtedness of approximately $795,000. The Notes have
matured and are currently payable. The proceeds from the Notes were used
primarily to pay costs associated with the inception of the Company's
broadcasting activities, including compensation expenses, and to purchase
transmission and other equipment See "Capitalization".
(2) To be used to expand and upgrade transmission equipment to incorporate
digital compression technology, and digital reception equipment at
subscriber locations. This number reflects amounts anticipated to be
required to purchase equipment and implement services based on technology
to be made available by VocalTec and potentially IDC. In addition, the
Company also plans to make additional investments in analog equipment
where operating conditions or other circumstances make digital equipment
unavailable, and in other technologies where appropriate.
(3) Includes expenses for outside contract labor for subscriber installations
and salaries and benefits for Company installation, administrative, and
sales personnel. To the extent that there are insufficient revenues from
operations, officers' salaries will be paid from the proceeds of this
offering allocated to personnel and installation expenses. See
"MANAGEMENT."
(4) Proceeds allocated to working capital will be used to fund general
operations of the Company.
The foregoing represents the Company's best estimate of the allocation of
the net proceeds of this offering based upon the current status of its business
operations, its current plans and current economic conditions. Future events,
including the problems, delays, expenses and complications frequently
encountered by early stage companies as well as changes in regulatory,
political and competitive conditions affecting the Company's business and the
success or lack thereof of the Company's marketing efforts, may make shifts in
the allocation of funds necessary or desirable.
Prior to expenditure, the net proceeds will be invested in short-term,
interest bearing investment grade securities or money market funds. Any
proceeds received upon exercise of the Underwriter's over-allotment option, as
well as income from investments, will be used for working capital.
DIVIDEND POLICY
The Company has never paid a cash dividend and does not anticipate the
payment of cash dividends on its Common Stock in the foreseeable future as
earnings are expected to be retained to finance the Company's growth.
Declaration of dividends in the future will be at the discretion of the
Company's Board of Directors, which will review its dividend policy from time
to time.
16
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1997, and as adjusted to give effect to the issuance and sale of
the securities offered hereby and the initial application of the estimated net
proceeds therefrom after deducting underwriting discounts, commissions and
estimated offering expenses payable by the Company:
<TABLE>
<CAPTION>
September 30, 1997
---------------------------------
Actual As Adjusted
--------------- ---------------
<S> <C> <C>
Notes Payable, net of unamortized debt discount of $35,044(1)............. $ 2,313,013 $ 416,057
------------ ------------
Preferred Stock; $0.01 par value; 2,500,000 shares authorized; none issued
and outstanding ......................................................... -- --
Common stock, $0.01 par value, 20,000,000 shares authorized; 2,968,302
shares issued and outstanding at September 30, 1997; 4,468,302 shares
issued and outstanding at September 30, 1997 as adjusted(2).............. 29,683 44,683
Additional paid in capital ............................................. 3,470,694 11,255,694
Accumulated deficit(3).................................................... (5,677,217) (5,712,261)
------------ ------------
Total stockholders' equity (capital deficiency) ........................ (2,176,840) 5,588,116
------------ ------------
Total capitalization ................................................... $ 136,173 6,004,173
============ ============
</TABLE>
- ---------
(1) Includes $1,200,000 payable on the completion of the Offering to the
Company's principal stockholder, repayment of promissory notes outstanding
at September 30, 1997 of $732,000 and promissory notes issued subsequent
to September 30, 1997 of $130,000. See "Use of Proceeds."
(2) Excludes (i) up to 450,000 shares of Common Stock issuable upon exercise
of the underwriter's over-allotment option and underlying Warrants; (ii)
1,500,000 shares of Common Stock issuable upon exercise of the Warrants
included in the Units offered hereby; (iii) 393,283 shares of Common
Stock issuable upon exercise of Warrants issued with promissory notes
and for services; (iv) 300,000 shares of Common Stock issuable upon
exercise of the Underwriter's Warrants; (v) 402,776 shares of Common
Stock issuable upon exercise of an option granted to the Company's
Chairman. See "Certain Transactions."
(3) Gives effect to the recognition of $35,044 of expense upon the closing
of the Offering representing debt discount. See "Use of Proceeds."
17
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data are qualified in their entirety by,
and should be read in conjunction with, the Company's Financial Statements and
the notes thereto and "Management's Discussion and Analysis," included
elsewhere in this Prospectus. The selected financial data for years ended June
30, 1996 and June 30, 1997 have been derived from the Company's Financial
Statements, which have been audited by Richard A. Eisner & Company, LLP,
independent auditors, as indicated in their report included elsewhere in this
Prospectus.
Statement of Operations Data:
<TABLE>
<CAPTION>
Three Months Ended
Year Ended June 30, September 30,
------------------------------------- -------------------------------
1996 1997 1996 1997
----------------- ----------------- ------------- ---------------
<S> <C> <C> <C> <C>
Revenue .................................... $ 323,144 $ 354,621 $ 88,756 $ 96,810
------------- ------------- --------- ------------
Service cost .............................. 91,606 101,427 25,099 27,141
Programming and license fees ............... 799,285 850,600 202,973 231,408
Selling, general and administrative
expenses ................................. 384,140 641,856 157,838 1,652,389
------------- ------------- --------- ------------
(Loss) from operations ..................... (951,887) (1,239,262) (297,154) (1,814,128)
Interest expense ........................... (172,410) (401,831) (97,028) (644,681)
Miscellaneous expense ..................... (6,948) (43,440) 1,258 547
------------- ------------- --------- ------------
Net (loss) ................................. $ (1,131,245) $ (1,684,533) $(392,924) $ (2,458,262)
============= ============= ========= ============
Net (loss) per share of common stock(1) .... $ (0.33) $ (0.49) $ (0.12) $ (0.72)
------------- ------------- --------- ------------
Weighted average number of shares of
Common Stock outstanding .................. 3,389,368 3,404,812 3,404,812 3,404,812
============= ============= ========= ============
</TABLE>
Balance Sheet Data:
<TABLE>
<CAPTION>
September 30, 1997
June 30, -----------------------------------
1997 Actual As Adjusted(2)
---------------- ---------------- ----------------
<S> <C> <C> <C>
Working capital (deficit) ..................... $ (3,581,704) $ (3,598,959) $ 4,360,997
Total assets .................................... $ 1,633,632 $ 1,544,527 $ 6,472,527
Total liabilities .............................. $ 3,728,816 $ 3,721,367 $ 884,411
Accumulated deficit ........................... $ (3,218,955) $ (5,677,217) $ (5,172,261)
(Capital deficiency)/stockholders' equity ...... $ (2,095,184) $ (2,176,840) $ 5,588,116
</TABLE>
- --------------
(1) Net loss per share is computed based upon the weighted average number of
shares of Common Stock outstanding during the periods. Pursuant to the
requirements of the Commission, all Common Stock and Common Stock
equivalents issued within the 12 months immediately preceding the initial
filing of the Registration Statement of which this Prospectus Forms a
part, at a price below the assumed offering price of $6.50 per share (the
midpoint of the currently anticipated range of the initial public
offering price per share), have been included in the weighted average
number of shares outstanding for all periods presented, utilizing the
"treasury stock method."
(2) As adjusted to give effect to the sale of the 1,500,000 Units offered
hereby at an assumed price of $6.50 per share (the midpoint of the
currently anticipated range of the initial public offering price) and the
anticipated application of the estimated net proceeds therefrom. See "Use
of Proceeds."
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The discussion set forth below with regard to the Company relates to the
business operations conducted by the Company from the time of its organization
in April 1994, through September 30, 1997. The operations in which the Company
engaged prior to March 11, 1995 were conducted on a limited basis while the
Company's management devoted the bulk of their time and resources to the
development of a relationship with NEW, which it acquired in March, 1995.
Subsequent to that acquisition, the Company has devoted its efforts to the
development of its wireless cable operations in Vermont, as well as the
exploration of other technological opportunities in the wireless arena. The
Company reported using a December 31 year end for its 1994 fiscal year and
converted to a June 30 year end for the period ended June 30, 1995.
Results of Operations
Six Months Ended June 30, 1995 Compared With Year Ended June 30, 1996. The
Company generated revenues in the form of subscription revenues earned from
provision of its wireless cable television services during 1995 and 1996 in the
amount of $112,574 and $323,144, respectively. However, the Company lacked
enough subscribers to generate revenues sufficient to cover its operating
expenses which were $572,153 and $1,275,031 realized during fiscal periods 1995
and 1996. These operating expenses consisted primarily of programming and
license fees and selling, general and administrative expenses. During the
periods in question, the level of operating revenue remained at approximately
40% of programming and license fees. However, general and administrative
expenses were reduced from 238% of operating revenue in 1995 to 119% of
operating revenue in 1996. This decrease was due primarily to reductions in
operations and personnel. Nevertheless, the levels of these expenses, together
with the Company's interest expenses of $50,083 and $172,410 during the
respective periods resulted in operating losses of $517,943 and $1,131,245
during 1995 and 1996 respectively.
Year Ended June 30, 1996 Compared With Year Ended June 30, 1997. The
Company generated revenues in the form of subscription revenues earned from
provision of its wireless cable television services during 1996 and 1997 in the
amount of $323,144 and $354,621, respectively. However, the Company lacked
enough subscribers to generate revenues sufficient to cover its operating
expenses which were $1,275,031 and $1,593,883 realized during fiscal years 1996
and 1997. These operating expenses consisted primarily of programming and
license fees and selling, general and administrative expenses. During the
periods in question, the level of operating revenue remained at approximately
40% of programming and license fees. However, general and administrative
expenses increased from 119% of operating revenue in 1996 to 181% of operating
revenue in 1997.
3 Months Ended September 30, 1996 Compared with 3 Months Ended September
30, 1997. The Company generated revenues in the form of subscription revenues
earned from provision of its wireless cable television services during the 3
months ended September 30, 1996 and the 3 months ended September 30, 1997 in
the amount of $88,756 and $96,810, respectively. However, the Company lacked
enough subscribers to generate revenues sufficient to cover its operating
expenses which were $385,910 and $1,910,938 during the 3 months ended September
30, 1996 and 3 months ended September 30, 1997, respectively. These operating
expenses consisted primarily of programming and license fees and selling,
general and administrative expenses. During the 3 months ended September 30,
1996 and the 3 months ended September 30, 1997, the Company incurred net losses
of $392,924 and $2,458,262, respectively. At September 30, 1997, the Company
had an accumulated deficit of $5,677,217 and a capital deficiency of
$2,176,840. The increase in net losses for the period in 1997 over the same
period in 1996 is attributable to a charge recorded as compensation for an
option granted to the Company's principal shareholder, Alan R. Ackerman valued
at $1,468,000 and interest expense recorded on conversion of indebtedness in the
amount of approximately $383,000.
During this period, the Company experienced continuing cash shortages due
to an insufficient subscriber base. The resulting cash shortages made it unable
to advertise or otherwise aggressively promote its services. It also made the
Company unable to pursue the acquisition of other cable television systems or
the implementation of new technologies which might have improved its
profitability.
Liquidity and Capital Resources
The Company has financed its initial operations, and it has been financing
the activities it has been conducting, with debt and equity capital that it has
raised through private placements of its securities during the
19
<PAGE>
period in question. The proceeds of the sale of such equity and indebtedness
have been used to defray the ongoing operating cash shortfalls experienced by
the Company. The major portion of finances have been made available through
loans from Alan R. Ackerman. As of September 30, 1997, Mr. Ackerman had made
loans to the Company with an outstanding principal balance of $1,616,057 plus
accrued but unpaid interest. The Company plans to retire $1,200,000 of such
indebtedness out of the proceeds of the offering. See "USE OF PROCEEDS."
The Company intends to devote approximately $4,459,000 of the proceeds of
the offering to the acquisition and installation of equipment necessary to
convert its broadcast system to digital technology. The Company expects that
this level of funding should be sufficient to complete such conversion. The
Company also expects to expend approximately $282,000 in personnel and
installation expenses in connection with the expansion of the system. As the
Company moves to a digital platform, the existing 50-watt analog equipment will
be modified to operate in a digital format, and used in the Burlington, Vermont
market. Any equipment that cannot be modified will be used in smaller markets
where digitally platformed environments are not economically viable, such as
rural markets with fewer than 5,000 potential subscribers. The Company expects
to enter into an employment agreement with Scott A. Wendel, its President and
CEO, which will provide for annual compensation of $100,000.
During 1995, the Company issued 40,000 shares of its stock to 3
individuals at a price of $3.00 per share.
On April 14, 1995 the Company issued a promissory note to an accredited
investor in the amount of $150,000 due on demand after 180 days. The note
carried an interest rate of 7.5%.
On August 21, 1995, the Company issued $150,000 of convertible promissory
notes to 5 accredited investors with annual interest rates of 8%. The notes
were due and payable on June 30, 1996. The notes afford the holders thereof the
right to convert into shares of the Company's common stock at $3.50, and also
afford the holders of the notes "piggy-back" registration rights with respect
to such shares as to any registration statements filed by the Company after
completion of its initial public offering.
On August 22, 1995, the Company issued a promissory note to an accredited
investor in the amount of $25,000 due on demand after 180 days. The note
carried an interest rate of 7.5%.
During December 21, 1995 through January 4, 1996, the Company issued
convertible promissory notes in an aggregate principal amount of $87,500 at an
annual interest rate of 7.5% (increasing to 12% if not timely paid) to 2
investors. These notes were converted into 25,000 shares of the Company's
common stock at a price of $3.50 per share.
In January 1996, the Company issued a promissory note to an accredited
investor in the amount of $24,500 due on demand after 180 days. The note
carried an interest rate of 7.5%
On April 4, 1996, the Company issued a promissory note to an accredited
investor in the principal amount of $100,000 with an annual interest rate of
8.5% (increasing to 12% if not timely paid) due 180 days after issuance. The
note provided for the issuance of 25,000 Warrants (issued during April 1997) to
purchase the Company's common stock at the lesser of $3.00 or 50% of the
offering price for a period from the 14th month until the 36th month after
completion of a public offering of the Company's stock.
On August 29, 1996, the Company completed a private placement of
$330,000 of promissory notes with attached Warrants to five investors. The
notes provided an annual interest rate of 10%, and for conversion into the
Company's common stock at $3.00 per share. The notes were due on March 1,
1997. The Warrants entitle the holders thereof to purchase an aggregate of
82,500 shares of the Company's common stock at the lesser of $3.00 per share
or 50% of the price per share of the Company's common stock in a public
offering of its securities.
On December 19, 1996 and January 7, 1997, the Company issued 2 promissory
notes with attached warrants to accredited investors in the aggregate principal
amount of $90,000 with an interest rate of 10%. The notes were due on March 1,
1997 and on July 7, 1997. The warrants entitle the holders thereof to purchase
an aggregate of 22,500 shares of the Company's common stock at the lesser of
$3.00 or 50% of the public offering price.
On March 31, 1997 and April 23, 1997, the Company issued an aggregate of
$30,000 in promissory notes to two investors. One note, in the principal amount
of $5,000, carries an interest rate of 7.5% per annum and is due 180 days from
issuance. The note is convertible into common stock at $3.00 per share. The
other note, in the principal amount of $25,000, carries an interest rate of
prime +1% (increasing to 12% per annum if not
20
<PAGE>
timely paid) and is due on March 31, 1998. The Company also issued warrants
to purchase an aggregate of 7,500 shares of its common stock at the lower of
$3.00 or 50% of the price per share of the Company's common stock in a public
offering of its securities exercisable during the period from the 14th month
through the 36th month after the completion of the offering.
On May 21, 1997, the Company issued a promissory note to InterDigital
Communications Corporation in the amount of $250,000. The note carries an
interest rate of prime +1% (increasing to 12% per annum if not timely paid) and
is due on March 31, 1998. The Company also issued warrants to purchase 62,000
shares of its common stock at 50% of the price per share of the Company's
common stock in a public offering of its securities exercisable during the
period from the 14th month until the 36th month after the completion of the
offering.
In May 1997, an investor converted $210,000 of indebtedness of the Company
in return for 70,000 shares of the Company's common stock and 43,500 warrants
to purchase the Company's common stock exercisable at the lesser of $3.00 per
share or 50% of the price per share of the Company's common stock in a public
offering of its securities.
In June 1997, the Company issued warrants to purchase 12,375 shares of the
Company's common stock to holders of 2 promissory notes. The warrants are
execisable at the lesser of $3.00 or 50% of the public offering price.
In July 1997, the Company issued 2 promissory notes to accredited
investors in the aggregate amount of $84,000 at an interest rate of 7.5% due in
180 days, payable on demand. The Company also issued warrants to purchase
15,000 shares of the Company's common stock at the lesser of $3.00 or 50% of
the public offering price.
In August 1997, the Company made an offer to all existing noteholders to
issue shares of its common stock in exchange for outstanding indebtedness at a
price equal to the lesser of $3.00 per share or 50% of the price per share of
the Company's common stock in a public offering of its securities. To date,
noteholders have elected to convert $299,500 in principal and $28,526 in
interest into 109,341 shares of its common stock. The Company will have to
issue pro-rated additional shares of its stock to such persons to the extent
that the per Unit price in this offering is less than $6.00.
In August 1997, in consideration of delays which it has experienced in
securing financing necessary to pursue its operations, the Company has agreed
to issue Warrants to purchase 12,908 shares of its common stock to persons who
previously elected to exchange their indebtedness of NEW for shares of the
Company's common stock in connection with the Company's acquisition of NEW
through a merger with its subsidiary in March, 1995.
In August 1997, the Company issued an option to purchase 402,776 of its
shares of common stock to Alan R. Ackerman, its principal stockholder, in
consideration of past services rendered to the Company. The option is
exercisable at the lesser of $3.00 or 50% of the public offering price for a
period commencing on the 14th month and ending on the 36th month following
completion of the contemplated offering.
In September 1997, the Company issued a promissory note to an accredited
investor in the amount of $8,000 at an interest rate of 7.5% due in 180 days on
demand.
At September 30, 1997, except for notes aggregating $364,000 (which mature
during October 1997 through March 1998), the Company is in default of its
obligations under its notes. Its noteholders could take action to enforce the
Company's obligations and such action, if taken, could materially and adversely
affect the Company.
On October 20, 1997 and November 11, 1997, the Company issued 2 promissory
notes to accredited investors in the amount of $30,000 with an interest rate of
7.5% and $100,000 with an interest rate of 8.5%, respectively. The notes are
due 10 days after receipt of payment by the Company pursuant to a public
offering of its common stock or on April 30, 1998, whichever occurs first.
On October 31, 1997, the Company issued warrants to purchase a total of
37,500 shares to holders of 5 promissory notes in consideration of delays in
repaying their indebtedness. The warrants are exercisable at the lesser of
$3.00 or 50% of the public offering price during the period commencing on the
14th month and ending on the 36th month following the contemplated offering.
21
<PAGE>
In connection with services rendered, the Company issued warrants to
purchase 72,500 shares of the Company's common stock at the lesser of $3.00 or
50% of the public offering price for a period commencing on the 14th month and
ending on the 36th month after the completion of a public offering of the
Company's common stock.
Except for transactions with Alan R. Ackerman, as noted, all of these
transactions were with unaffiliated persons.
Year 2000 Computer Problem
The Company does not anticipate any material impact on its operations,
which might arise from the year 2000 computer problems.
BUSINESS
Background
The Company is a developer, owner and operator of a wireless cable
television system in northern Vermont. Through its wholly owned subsidiary, New
England Wireless, Inc. ("NEW"), the Company has obtained wireless cable channel
(or frequency) rights in Vermont through leases of FCC licenses. Wireless cable
television is provided to subscribers by transmitting microwave frequencies
over the air to a small receiving antenna at each subscriber's location. The
Company currently operates a broadcasting system from Mount Mansfield, Vermont
(the "Mount Mansfield System").
In March 1995, a wholly owned subsidiary of the Company, N.E.W.
Acquisition Co., Inc., merged with NEW. In connection with the merger, all of
NEW's shares of outstanding common stock were exchanged for 801,156 shares of
the Company's common stock. The merger was treated for accounting purposes as a
capital transaction rather than as a business combination. Concurrent with the
merger, the Company and creditors of NEW agreed to exchange certain notes
aggregating $1,164,000 in return for 388,007 shares of the Company's common
stock. In addition, the Company issued notes payable in the amount of $680,966
to its founder, Alan R. Ackerman, in exchange for debt of NEW owed to him.
Prior to March 1, 1997, the Company's name was Worldwide Wireless, Inc. In
December 1997, effective March 1, 1997, the Company changed its name to
Worldwide Wireless Systems, Inc..
The Company commenced operations of its wireless cable system in August
1994 and, as of September 30, 1997, the Company had approximately 1,200
subscribers. There are approximately 159,746 households within the Mount
Mansfield System's signal patterns. The Company offers 23 channels in the Mount
Mansfield System, consisting of 18 satellite channels and 5 local broadcast
channels. The Company currently is offering to its subscribers in the Mount
Mansfield System network channels as well as MTV, ESPN, CNN, USA, WPIX, WTBS,
WSBK, A&E, Nickelodeon, the Discovery Channel, TNN, the Family Channel,
Lifetime, the History Channel, and the SCI-FI Channel. In addition, the Company
offers NESN, Showtime, and the Movie Channel as premium channels. In part
through the addition of digital compression technology to its broadcast
capabilities, the Company anticipates servicing approximately 8,000 subscribers
through the Mount Mansfield System within the next 5 years. The number of
future subscribers and the timing of subscriber growth, however, will depend on
a number of factors, many of which are not within the Company's control. These
factors include future capital equipment costs, marketing expenses and
effectiveness, staffing levels, competitive conditions, cash flow from
operations and the Company's ability to raise additional capital. There can be
no assurance that the Company will achieve its subscriber goals.
Business Strategy -- Wireless Cable Television
The Company's business strategy is to expand operation of its existing
Mount Mansfield System through the addition of digital compression technology.
Following completion of this offering, the Company intends to purchase
upgraded digital transmission equipment and to purchase subscriber reception
equipment which will enable the Company to install and service approximately
3,600 additional subscribers in the system within the next 12 months. The
wireless cable television business is capital intensive. Since its inception,
the Company has expended funds to acquire channel rights in the system,
construct an initial operating system and finance initial operating losses.
Transmission equipment expenditures and other start-up expenditures were made
by the Company before it could commence the delivery of programming to its
subscribers.
22
<PAGE>
A significant portion of the Company's future investments in technology
will be directed towards its purchase of digital transmission and subscriber
equipment. Digital technology offers the potential for the Company to broadcast
over 100 different television channels over its existing broadcast frequencies.
However, implementation of digital technologies will require the Company to
invest additional funds to augment its transmission facilities as well as to
equip its existing subscribers with new receptors and equipment necessary to
accommodate digital transmission technology.
Certain of the Company's expected activities in its market area will
relate to the recent termination of transmission by one of its major
competitors in the local market area, the Vermont Wireless Cooperative ("VWC").
Pursuant to an order issued by the FCC in May 1997, the VWC has ceased
broadcasting wireless cable programming. To date, the Company has added 100
subscribers formerly served by VWC. The Company expects to add more former VWC
customers through the employment of beam-benders to transmit its signals to
additional subscribers. The Company has added 176 subscribers in total since
May 31, 1997.
In connection with VWC's termination of activities, the FCC terminated
VWC's rights to utilize the ITFS broadcasting licenses formerly utilized by VWC
for its broadcasting activities. Because those licenses are within the
Company's protected broadcast area for FCC purposes, the Company believes that
those licenses will not prove attractive for third parties. If the Company is
successful in leasing those licenses, it will be able to add broadcasting sites
in North Hero and Monkton, Vermont, as well as in other areas. These additional
sites are expected to enhance the Company's broadcasting capabilities.
Although incremental equipment and labor installation costs per subscriber
are incurred after a subscriber signs up for the Company's wireless cable
service, such costs are incurred by the Company before it receives fees from
the subscribers and are only partially offset by installation charges. To
sustain subscriber growth beyond its current base of approximately 1,200
subscribers, and subscribers which it is able to add with its implementation of
digital technology with the offering proceeds, the Company will need to
generate enough operating revenues to enable it to continue to invest in
subscriber reception equipment and installation or raise additional debt or
equity capital. In addition, in order to develop and launch additional wireless
cable systems, as well as pursue other technologies as described elsewhere
herein, the Company will need to raise additional capital. There can be no
assurance that operating revenues will be sufficient to sustain subscriber
growth or that additional financing, if required, will be available on terms
acceptable to the Company, if at all.
The Company's revenues will primarily be generated by subscription fees,
pay-per-view fees and installation charges. The Company's installation fees are
$49.95 per subscriber (for one television) with $15.00 for each additional
television. The Company's subscription fees currently are $9.95 for a basic
programming package which includes 4 off-air channels and 5 cable channels,
$25.95 per month for an expanded channel line-up (comparable to a hard-wire
cable basic package) including a premium movie channel and a premium sports
channel, plus $8.95 per month for an additional movie channel. The Company
expects to modify the rates to reflect its addition of digital technology.
Expenses will consist primarily of service costs, selling, general and
administrative expenses, and depreciation and amortization. Service costs
include programming costs, channel lease payments, if any, transmitter site
rentals, cost of program guides and repair and maintenance expenditures. Of
these, programming costs, channel lease payments and costs of program guides
will be variable expenses which increase as the number of subscribers increase.
The addition of subscribers will also increase depreciation expense. The
Company expends approximately $400 to purchase and install the wireless cable
receiving antenna and related equipment necessary at each subscriber's
location. The Company estimates that it will spend approximately $600 per
subscriber to switch such equipment to digital equipment.
Profitability will be determined by the Company's ability to increase
revenue from subscribers while controlling variable expenses. Significant
increases in revenues have to come from subscriber growth. Currently, the
Company has 12 employees. In addition, the Company engages additional persons
as necessary as contract labor for installations. The Company may incur
research and development expenses for B-CDMA technology. Otherwise, the Company
does not intend to incur expenses relating to research and development during
the next 12 months, except for general market research in the ordinary course
of business.
In connection with its addition of digital capabilities, the Company
expects to offer 3 principal tiers of cable services. The highest tier,
expected to be called the "Ultra" service, is expected to offer 66 channels of
programming. The next tier, the Expanded Basic Tier, will offer 31 channels of
broadcasting, and the basic tier will offer
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9 channels of broadcasting. The growth of the Company's business beyond its
Mount Mansfield System market, and the implementation of additional cable
technologies will require a substantial investment on a continuing basis to
finance capital expenditures and related expenses for subscriber growth and new
system development. The Company does not have a bank line of credit and there
can be no assurance that any required or desired financing will be available,
through bank borrowings, debt or equity offerings, or otherwise, on acceptable
terms, if at all. See "RISK FACTORS -- Need for Additional Financing for
Growth."
The Company may consider expansion of its activities into additional
markets. In doing so, it plans to rely on the experience and knowledge of its
management as well as third-party brokers to identify wireless cable system
expansion opportunities. The Company's management will be responsible for the
selection of other expansion opportunities in its sole discretion and
shareholders will not be presented with advance information regarding expansion
opportunities or the ability to approve or disapprove system expansion
opportunities. In addition to the size of the potential market and proximity to
existing systems, the Company intends to explore markets where it can contain
system launch costs by economically acquiring channel license rights and
initially utilizing lower power transmission equipment. The Company has not
currently identified other factors that it will consider in expanding into new
markets or in implementing new technologies. The Company has no specific
expansion plans, arrangements, understandings or commitments at the present
time and there can be no assurance that the Company will be successful in
expanding its operations into other markets.
The Company intends to develop its subscriber base in the Mount Mansfield
System and, potentially, to launch new technologies in that market or in other
markets by emphasizing the price-to-value relationship of the Company's
programming and other possible services; the reliability, service, and picture
quality of wireless cable; the advanced technical features of the Company's
standard subscriber equipment; and the competitive choice afforded consumers by
wireless cable.
The Cable Television Industry in General
The cable television industry began in the late 1940's and 1950's to serve
the needs of residents in predominately rural areas. Since that time, the cable
television industry has expanded to metropolitan areas due to, among other
things, the better reception cable television often provides and increased
programming alternatives. Today, pay television systems offer various types of
programming which generally include basic service, premium service, and, in
some instances, pay-per-view service.
A cable television subscriber generally pays an initial connection charge
and a fixed monthly fee for basic service. The amount of the monthly basic
service fee varies from one area to another and is a function, in part, of the
number of channels and services included in the basic service package and the
cost of such services to the cable television system operator. In most
instances, a separate monthly fee for each premium service and certain other
specific programming is charged to subscribers, with discounts generally
available to subscribers receiving multiple premium services. Monthly service
fees for basic and premium services constitute the major source of revenue for
cable television systems. Subscribers normally are free to discontinue any
cable service at any time. Converter rentals, remote control rentals,
installation charges, and reconnect charges for subscribers who were previously
disconnected are also included in a cable television system's revenues but
generally are not a major component of such revenues.
Wireless Cable Television Systems in General
Initially, all cable systems were "hard-wire" systems, using coaxial cable
to carry television signals. Over the past several years, wireless cable has
emerged as an alternative to the traditional hard-wire cable systems in the
provision of cable television programming. Wireless cable television is a
terrestrial, microwave broadcast system. It is, in effect, analogous to a
satellite broadcasting system in which the satellite is replaced by a microwave
transmitter located on a ground-based antenna. Wireless cable programming is
transmitted through the air via microwave frequencies that generally require a
direct "line-of-sight" from the transmission facility to the subscriber's
receiving antenna. Traditional hard-wire cable systems transmit signals from a
transmission facility, but deliver the signal to a subscriber's location
through a network of coaxial cable and amplifiers. Since wireless cable systems
do not require an extensive network of coaxial cable and amplifiers, the
system's capital cost per installed subscriber can be significantly less than
for hard-wire cable systems. In addition, operating costs of wireless cable
systems can generally be lower than those of comparable hard-wire cable systems
due to lower network maintenance and depreciation expense.
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The Company believes that wireless technology can effectively compete with
conventional hard-wire cable television distribution of entertainment. Most
programming that is available for purchase and resale on hard-wire cable
systems can be distributed over a wireless cable system. The factors
contributing to the increasing growth of wireless cable systems include:
Federal laws limiting the rates and practices of the hard-wire cable industry;
improved technology, particularly in signal encryption; regulatory reforms by
the FCC to facilitate the growth and competitive impact of the wireless cable
industry; and the increasing availability of programming for wireless cable
systems. A leading consulting firm to the cable industry estimates that
wireless cable systems served approximately 866,000 subscribers at the end of
1995 and as of December 1996, served approximately 1,142,000 subscribers.
Wireless cable subscribers can generally be served by a central
transmitting antenna, and 2 or 3 fill-in or repeating antennas. Microwave
powers involved are very low. Both outlying areas and customers in close
vicinity to the transmitting antenna can be served immediately following system
turn-on, whereas cable network installations could take years to reach these
same outlying areas. Wireless cable systems have no need for time-consuming and
disruptive excavation of public thoroughfares. Labor is required only at the
transmitting site, and for installation at the repeating antennas and end-user
locations. The receiving equipment consists of a small antenna that is cabled
to a converter at the subscriber's location, which is similar to a hard-wire
cable TV converter box.
Every subscriber has a unique, computerized "address" that the system
communicates with consistently during broadcast. In this manner, service can be
activated or canceled from the main control office at the flick of a switch,
thus reducing the need for service calls. Once a wireless transmission system
has been installed, signals can be delivered to multi-unit dwellings at
substantially lower costs than even signals received directly via satellite
receivers.
Digital Video Services
Digital video is capable of delivering a significantly expanded number of
high quality channels of compressed video programming services, including
off-air programming. Digital compression allows the capacity of each wireless
cable channel to increase by 4 to 10 times. The first fully operational
commercial microwave digital video system in North America was launched in
Canada in late 1996. To date, few wireless cable operators have commercially
introduced digital video compression technology in the United States, although
a number of wireless cable operators, including the Company, have tested such
technology in their systems and have announced various plans for commercial
deployment. While management believes that the Company is generally prepared
for the introduction of digital video compression in certain of its markets,
the purchase of digital video compression transmission and receiving equipment
would involve substantial capital expenditures, which the Company is not in a
position to make at this time. In addition, although the FCC generally
authorized the use of digital technologies in 1996, further specific
authorizations must be obtained from the FCC and affected FCC licensees and
applicants on a market-by-market basis in order for the Company to begin
offering digital video service. See "REGULATION". To the extent that the
Company is able to implement digital compression technology in any of its
markets, management anticipates that this expanded channel capacity will
increase the Company's opportunities to compete with other providers of video
services. In addition, the application of digital compression may result in the
availability of channel capacity for other services, as described below.
Several equipment manufacturers have developed digital compression
technology, to allow several programs to be carried in the amount of bandwidth
where only one program is carried now. Manufacturers have projected varying
compression ratios for future equipment, in some cases as high as 16 to 1. More
conservative estimates are between 6 to 1 and 10 to 1, which could increase the
available channels for the Mount Mansfield System from 23 to over 100 channels.
Compression equipment is available to wireless cable operators and to hard-wire
cable operators.
Other Technologies - VocalTec, Inc.
VocalTec, Inc. is a subsidiary of VocalTec Communications, Ltd., a company
listed on the Nasdaq SmallCap Marketsm index. VocalTec develops and markets
software that enables voice, fax and multi-media communications over the
Internet. VocalTec also develops open systems that bridge the Internet to the
public switched telephone network.
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VocalTec's products provide multi-media communications services for the
corporate and carrier markets. The VocalTec Telephony Gateway(TM) server is
intended to bridge the gap between the traditional telephone network and
Internet to enable unlimited long distance calling and faxing. It allows
connections over the Internet from telephone to telephone, computer to
telephone and vice versa and fax machine to fax machine.
VocalTec also has technology which enables multi-party voice and data
conferencing with the objective of reducing the cost of communication and
increasing the quality and frequency of remote interaction. Pursuant to its
Agreement with VocalTec the Company has agreed to purchase $150,000 in products
from VocalTec. VocalTec and the Company have also agreed to share marketing and
sales support activities with respect to the VocalTec services provided by the
Company.
Other Technologies -- Internet Data Transmission
The Company also intends to make available access to the Internet through
its wireless broadcast capabilities. Using a wireless cable modem, a computer
user can gain access to Internet data at speeds which substantially exceed
those currently available over most ordinary telephone lines, ISDN lines, and
so-called T-1 lines. The Company intends to utilize one or more of its MMDS
channels, once its system has been digitized, to make available Internet access
capabilities.
Other Technologies - Local Wireless Loop Telephone Service
In connection with its application of technology made available to it by
VocalTec, the Company is considering using its wireless spectrum to deliver
telephony services. Although the development of such telephony services is in
its early stages, management believes that the Company's wireless spectrum may
be capable of providing "local loop" telephone service in the future.
While the Company intends to continue its development efforts with respect
to local loop telephone service, the introduction of such service in the
Company's market would involve substantial capital expenditures, which the
Company is not in a position to make at this time. The Company's ability to
commence delivery of WLL service will also depend upon successful development
of WLL technology and equipment and the availability of appropriate
transmission and reception equipment on satisfactory terms. Regulatory
approvals and changes, especially routine 2-way licensing of the radio spectrum
used by the Company, also would be required before the Company could
commercially introduce WLL telephone service.
On August 12, 1997, the Company entered into a Beta-Site Agreement with
InterDigital Communications Corporation ("IDC") pursuant to which IDC agreed to
use the Company's service territory and facilities for IDC's True L(TM)
Broadband Code Division Multiple Access(TM) (B-CDMA(TM)) Wireless Local Loop
product. Pursuant to its Beta-Site Agreement with the Company, the Company is
obligated to acquire equipment from IDC and in connection therewith will also
obtain the right to employ IDC's technologies in its market area. The Company
is seeking to renegotiate the terms of its relationship with IDC. At the
current time, it is unable to predict what level of expenditures, if any, it
will be making to implement IDC's products, and what level of revenues, if any,
it will derive therefrom. It is obligated to purchase a minimum of $80,000 in
products from IDC under the current terms of the Beta-Site Agreement.
Other Activities - Social Responsibility
The Company has developed a role as a socially responsible company. As an
initial step in such direction, the Company has agreed to a relationship with
Project KidCare, a program sponsored by a joint venture between Polaroid
Corporation and the National Center for Missing and Exploited Children. The
Company expects that its participation in the program will cost $6,000 during
the next 12 months. It plans to participate by allowing a complimentary
enrollment of one child per subscriber family into the KidCare program for any
new subscribers. The Company has no legally binding commitment or agreement as
to such participation.
Polaroid has stated that the purpose of the program is:
o To educate families about child safety, and
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o To encourage parents to obtain personal safety documents with current,
instant photographs of their child.
By pursuing these objectives, the program is intended to reduce the number
of missing children.
Government Regulation
General. The wireless cable industry is indirectly subject to regulation
by the FCC pursuant to the Communications Act of 1934, as amended (the
"Communications Act"). The Communications Act empowers the FCC, among other
things: to issue, revoke, modify and renew licenses within the spectrum
available to wireless cable; to approve the assignment and/or transfer of
control over such licenses; to determine the location of wireless cable
systems; to regulate the kind, configuration and operation of equipment used by
wireless cable systems; and to impose certain equal employment opportunity
requirements on wireless cable operators.
The FCC has determined that wireless cable systems are not "cable systems"
for purposes of the Communications Act. Accordingly, a wireless cable system
does not require a franchise from a local authority and is subject to fewer
local regulations than a hard-wire cable system. Wireless cable operators are
also not required to pay local franchise fees. In addition, utility poles and
dedicated easements are not necessary.
The FCC has authorized access for wireless cable service to a series of
channel groups, consisting of certain channel groups specifically allocated for
wireless cable ("MDS"), and other channels originally authorized for
educational purposes ("ITFS"), although excess capacity can be leased from ITFS
licensees by wireless cable providers. Currently, up to 33 total channels are
potentially available for licensing, lease or purchase by wireless cable
companies in each market. Up to 13 channels in any given market typically can
be owned by commercial operators for full-time usage without programming
restrictions. The remaining 20 channels in a given market generally are
allocated for ITFS use. FCC rules generally prohibit the ownership or leasing
of MDS and ITFS authorizations by cable companies if the MDS facility is
located within 35 miles, or the ITFS facility is located within 20 miles, of
the cable company's franchise or service areas. Pursuant to the
Telecommunications Act of 1996, the cable-MDS rule does not apply to a cable
operator in a franchise area in which the operator is subject to effective
competition.
Authorizations have been issued, or are currently pending, for the
majority of MDS wireless cable licenses in most major U.S. markets, and, as
discussed below, under the current regulatory structure, only holders of a
Basic Trading Area ("BTA") authorization may apply for available MDS
frequencies within the BTA. In a number of markets, certain ITFS frequencies
are still available. However, except as noted below, eligibility for ownership
of ITFS licenses is limited to accredited educational institutions,
governmental organizations engaged in the formal education of enrolled students
and non-profit organizations whose purposes are educational and include
providing educational and instructional television material to such accredited
institutions and governmental organizations ("qualified ITFS educational
entities"). Non-local applicants must demonstrate that they have arranged with
local educational entities to provide them with programming and that they have
established a local programming committee. On July 10, 1996, the FCC adopted an
Order in which it authorized the interim use of certain digital compression
technologies for the provision of video, voice and data services over MDS and
ITFS frequencies. Such technology may be utilized by a wireless cable operator
or an MDS or ITFS licensee, after applying for, and being granted, such an
authorization by the FCC. The FCC has begun granting digital authorizations.
Upon receiving a digital authorization, a licensee also may transmit 1-way
downstream Internet service. The Company, along with other wireless cable
industry companies, petitioned the FCC in March 1997 to expand its digital
authorizations to permit the grant of applications for 2-way transmission of
interactive services over MDS and ITFS frequencies. The petition proposes rule
changes necessary for the FCC to routinely grant wireless cable companies the
right to implement 2-way wireless services without licensing delays. There can
be no assurance that the petition will be granted, or if granted, that the
Company will be able to develop commercially successful products using 2-way
transmission.
FCC rules require ITFS operators to transmit a minimum amount of
educational programming per channel per week. If the educational programming
minimums are met, remaining air time can be leased to wireless cable operators
for profit and used to transmit non-educational programming. ITFS licensees are
now entitled to meet their minimum educational programming requirements for all
licensed channels using only one channel via "channel mapping," if desired.
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Beginning in November 1995, the FCC auctioned all available MDS rights on
the basis of BTA's, with one such authorization available per BTA. The winning
bidder acquired the right to apply to operate one or more MDS stations within
the BTA, as long as its station proposals complied with the FCC's interference
requirements and other rules. With regard to commercial ITFS channels, only the
BTA license holder may apply for available authorizations within the BTA. A BTA
licensee has a 5-year build-out period within which to expand or initiate new
service within its BTA. It may sell, trade or otherwise alienate all or part of
its rights in the BTA and may also partition its BTA along geopolitical
boundaries and contract with eligible parties to allow them to apply for MDS
authorizations within the partitioned area, and conversely, acquire such rights
from other BTA licensees. The license term for each station authorized under
these BTA procedures is 10 years, commencing on the date that the FCC announced
that the auction for the BTA had closed.
The Company is also subject to various FCC regulatory limitations relating
to ownership and control. The Communications Act and FCC rules require the
FCC's approval before a license may be assigned or control of the holder of a
license may be transferred. Moreover, the Communications Act provides that
certain types of licenses, including those for MDS stations, may not be held
directly by corporations of which non-U.S. citizens or entities ("Aliens") own
of record or vote more than 20% of the capital stock. In situations in which
such an FCC license is directly or indirectly controlled by another
corporation, Aliens may own of record or vote no more than 25% of the
controlling corporation's capital stock.
Telecommunications Act of 1996. On February 8, 1996, the
Telecommunications Act of 1996 (the "1996 Act") became law. Among other things,
the 1996 Act eliminates the cable/telephone cross-ownership restriction,
allowing a telephone company the option of providing video programming within
its telephone service area over a cable system or a video platform. Conversely,
cable companies are now permitted to provide telephone service. The 1996 Act
also limits, and in some cases eliminates, FCC regulation of cable rates
established by the Cable Television Consumer Protection and Competition Act of
1992 (the "1992 Cable Act"), depending upon the size of the cable system and
whether the system is subject to effective competition and the nature of the
rate. Specifically, regulation of upper tier rates is scheduled to end March
31, 1999. Moreover, small cable operators and systems subject to effective
competition are now exempt from rate regulation as a result of the 1996 Act.
The 1996 Act also vests the FCC with exclusive jurisdiction over the provision
of Direct Broadcast Satellite (DBS) service and preempts the authority of local
authorities to impose certain taxes on such services.
While current FCC regulations are intended to promote the development of a
competitive subscription cable television industry, there can be no assurance
that these regulations will have a favorable impact on the Company. Changes in
FCC policies or procedures could have a negative effect on the wireless cable
industry as a whole and/or the Company in particular. In addition, the FCC's
regulation of other spectrum could permit the operation of other wireless
services to interfere with MDS and ITFS frequencies.
Pending Legislation. Legislation has been introduced in several states
that would authorize state and local authorities to impose taxes on providers
of subscription television programming, including wireless cable operators,
based upon their gross receipts. Because the nature of any such legislation, if
enacted, is unknown, the Company cannot predict what impact such legislation
would have upon its operations.
Other Forms of Regulation. Federal law requires that all "cable
companies," as defined by Section 602 of the Communications Act, obtain local
or state franchises prior to constructing a subscription television
distribution system. Because wireless cable systems deliver programming to
subscribers by means of microwave facilities rather than through coaxial cable
and are not specifically defined as "cable systems" in Section 602 of the
Communications Act, the 1992 Cable Act, or in earlier statutes or FCC
regulations, they have not been considered cable companies under FCC rules in
this context. Accordingly, wireless cable companies generally are not required
to obtain franchises and are generally not subject to state regulation by
public utility or cable commissions.
Wireless cable operators also are subject to regulation by the Federal
Aviation Administration and the FCC with respect to construction of
transmission towers and certain local zoning regulations affecting construction
of such towers and other facilities. Additional restrictions may also be
imposed by local authorities, neighborhood associations and other similar
organizations limiting the use of certain types of reception equipment used by
the Company and its subscribers.
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The Mount Mansfield System
Background. The Company has entered into lease agreements which provide
for the lease of commercial channel licenses in Mount Mansfield, Vermont (the
"Mount Mansfield Lease Agreements"). The Company also has entered into channel
license agreements on which the Company makes monthly payments which currently
total $7,000. The Mount Mansfield Lease Agreements commenced in 1991 and 1993
and have terms of 10 years each. The Company has also entered into channel
license agreements which expire beginning in 2001. Channel licenses are subject
to non-renewal, revocation or cancellation for violations of the Communications
Act of 1934, as amended (the "Communications Act") or the FCC's rules and
policies. The termination of, or failure to renew, a channel lease would result
in the Company being unable to deliver television programming on any such
channel and could have a material adverse effect on the Company. The Company
has also entered into one 8 and one 10 year lease of space on a transmission
tower. The tower leases include the use of the tower, transmitter building and
electrical service.
Of the 23 channels the Company currently leases for its Mount Mansfield
System, 20 are educational ("ITFS") channels. Each ITFS channel must be used a
minimum of 12 hours per week for educational programming. The remaining "excess
air time" on an ITFS channel may be used by the Company without further
restrictions (other than the right of the ITFS license holder, at its option,
to recapture up to an additional 20 hours of air time per week for educational
programming). Certain programs (e.g., CNN and The Discovery Channel) qualify as
educational and thereby permit full-time usage of an ITFS channel.
The Market. The Mount Mansfield System began operations in August 1994 and
currently broadcasts 23 channels in the local area. The 23 channels in the
Mount Mansfield System consist of 5 broadcast channels and 18 satellite
channels. One transmitter is required to be placed in service for each channel
being broadcast. There are an estimated 159,746 households within the Company's
50-mile signal area for the Mount Mansfield System. Based upon the research of
its consulting engineers, the Company believes that its signal can be received
directly by approximately 67% of the households within the Company's signal
pattern in the local area. With the addition of beam-benders, which could be
installed at additional cost to the Company, the Company's wireless cable
signals could reach a substantial portion of the remaining households in this
market.
Programming. The Company arranges for programming from 2 sources for the
Mount Mansfield System: (i) local affiliate stations for the retransmission of
their VHF/UHF signals, and (ii) suppliers of satellite programming typically
broadcast over cable systems.
Programming from off-air broadcasters is negotiated on a case-by-case
basis and may be available for no charge or for a minimal royalty payment. The
VHF and UHF broadcasters in Burlington, Vermont (CBS, ABC, NBC, FOX and Vermont
ETV), allow the Company's customers to receive their signals through the same
high grade microwave antenna as is provided by the Company.
In addition to off-air broadcasters, the Company has agreements with
program suppliers for ESPN, MTV, CNN, USA, WPIX, WSBK, WTBS, A&E, Nickelodeon,
Discovery, TNN, the History Channel, the Family Channel, Lifetime, the Sci-Fi
Channel, NESN, the Movie Channel and Showtime for broadcasting in the Mount
Mansfield System. The program agreements generally have 3-year terms, with
provisions for automatic renewals, and are subject to termination for breach of
the agreement, including non-payment. The programming agreements generally
provide for royalty payments based upon the number of Company subscribers
receiving the programming each month. Individual program prices vary from
supplier to supplier, and more favorable pricing sometimes is afforded to
operators with larger subscriber bases; however, the Cable Act requires cable
programming to be made available for purchase by all system operators at
competitive pricing.
The likelihood that program material will be unavailable to the Company is
significantly mitigated by the Cable Act and various FCC regulations issued
thereunder which, among other things, impose limits on exclusive programming
contracts and prohibit cable programmers in which a cable operator has an
attributable interest from discriminating against cable competitors with
respect to the price, terms and conditions of sale of programming. Although the
Company has no reason to believe that any existing contracts for programming
will be canceled or will not be renewed upon expiration, if any of such
contracts are canceled or are not renewed, the Company would have to seek
program material from other sources.
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In addition to the programming alternatives described above, the Company
intends to introduce a "pay-per-view" service that enables customers to order,
and pay for, one program at a time. This pay-per-view service has been
successful for specialty events such as wrestling and heavyweight prize fights,
concerts, and early release motion pictures. This service can also be promoted
for the purchase of movies in competition with video rental stores.
Pay-per-view requires the subscriber to have an "addressable converter," which
each of the Company's subscribers already has. An addressable converter allows
the cable Company to control what the subscriber watches without having to
visit the subscriber location to change equipment. In order for customers to
more conveniently order pay-per-view events, however, an "impulse" pay-per-view
converter is required. An impulse pay-per-view converter, which has a return
line via phone or cable to the cable operator's computer system, enables a
subscriber to order pay-per-view events by pushing a button on a remote control
rather than requiring the subscriber to make a telephone call to order an
event. Subscribers in the Mount Mansfield System are equipped to take advantage
of this feature when offered by the Company.
Certain hard-wire cable operators have announced their intention to
develop interactive features for use by their subscribers, such as shopping via
video catalogs and playing video games with neighbors. Interactive services are
not currently available for wireless cable. The Company believes that the same
manufacturers who currently are developing digital compression converters for
both hard-wire and wireless cable will also make new developments in
interactivity available to both industry segments. The FCC has designated a
return path channel for use in connection with interactive services which may
be offered by wireless cable operators. The Company believes that, if it is
economically feasible to do so, wireless cable systems can include 2-way
interactivity. There can be no assurance that interactive services will be made
available for wireless cable systems and, therefore, to the extent such
services are available on hard-wire cable systems, the Company could be at a
competitive disadvantage.
Marketing and Customer Support. The Company intends to utilize media
advertising, telemarketing, direct mail, and door-to-door marketing to increase
its subscriber base in the Mount Mansfield System. The Company also intends to
run promotional pricing campaigns and take advantage of public relations
opportunities. The Company intends to emphasize the following themes in its
marketing:
1. Price/Value. The Company believes that it is offering its subscribers
competitively priced installation and subscription fees. The Company's
installation fees are $49.95 per subscriber for a single television, with
an additional $15.00 for each additional television. (The fee for
additional televisions increases to $30.00 after the initial installation).
Subscription fees start at $9.95 per month for the Company's basic
programming package, which includes 9 channels, including 4 off-air VHF/UHF
channels and 5 cable channels, and $25.95 for the Company's "expanded"
package which is comparable to commercial hard-wire cable service, which
includes 4 off-air channels, and 19 cable channels, including 1 pay-premium
channel. An additional premium channel is available for a cost of $8.95 per
month. The major hard-wire cable companies in the Burlington area currently
offer installation for $35.00 to $50.00, basic service for $9.17 to $10.99,
and premium stations range from $8.50 to $11.50. Cable customer charges are
subject to a 5% local franchise tax. Wireless cable customers do not have
to pay any franchise tax, but are required to pay a regulatory fee of
approximately $.04 per subscriber. The Company tries to focus its customers
on the value received for the price paid and believes its product/pricing
offers a competitive choice.
With the implementation of digital compression technology, the Company
expects to offer three principal tiers of cable services. The highest tier,
the "Ultra" package, is expected to offer 66 channels of programming. The
next tier, the Expanded Basic package, is expected to offer 31 channels of
broadcasting, and the basic package will offer 9 channels of broadcasting.
The rates for these services are expected to be increased for additional
fees payable on the addition of pay TV channels, extra TV sets hooked into
the service, and pay per view movies and other features.
2. Reliability, Service and Picture Quality. The Company provides
service within 24 hours of a repair request from a single subscriber call,
uniformed field personnel and flexible installation scheduling. The Company
emphasizes its picture quality and the reliability of its wireless
transmission and is able to build out systems for multiple subscribers more
quickly. The Company competes with traditional hard-wire cable systems on a
quality of service basis. Within its signal coverage pattern, the Company
believes that
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the picture quality of the Company's service is as good or better than that
received by hard-wire cable subscribers because, absent any line-of-sight
obstruction, there is less opportunity for signal degradation between
transmitter and the subscriber. Also, wireless cable service has proven
very reliable, primarily due to the absence of certain distribution system
components that can fail and thereby cause outages. The Company believes
that it has positioned itself as a reliable, cost-effective alternative to
traditional hard-wire cable operations by delivering a high quality signal
throughout its signal area and personal service to its subscribers.
3. Equipment Reliability. A number of reputable manufacturers produce
the equipment used in wireless cable systems, from transmitters to the
set-top converters which feed the signal to the television set. Because the
signal is broadcast over the air directly to a receiving antenna, wireless
cable does not experience the problems caused by amplifying signals over
long distances experienced by some hard-wire cable subscribers. This is
particularly the case for a signal delivered over longer distances.
Amplification of signals can lead to greater signal noise and, accordingly,
a grainier picture for some subscribers. Also, the transmission of wireless
signals is not subject to the problems caused by deteriorating underground
cables used in conventional systems. As a result, wireless cable is often
more reliable than conventional cable, and picture quality is generally
equal to or better than ordinary cable.
Signal security is provided by encoding each wireless cable channel and
equipping the converter with a unique decoding device that responds to a
pilot signal carrying a data stream with authorization instructions. Thus,
the system is fully "addressable." The converter boxes will not be usable
until they are authorized for service by the Company's central computer.
All channels, both basic and premium, are scrambled. Because the wireless
cable system is addressable, it can also accommodate pay-per-view service.
Competition. In its Vermont markets, 2 traditional hard-wire cable
companies are the Company's primary direct competitors. Based on information
reported by third parties to the Vermont Department of Public Service, the
Company estimates that within its expected signal pattern for Mount Mansfield,
over 44% of the households are hard-wire cable subscribers. The two hard-wire
cable companies within this same area currently offer 9 and 48 channels,
respectively, to their subscribers, compared to the 23 channels the Company
currently offers. Based on information reported by third parties to the Vermont
Department of Public Service, of the approximately 159,746 potential
subscribers within the Mount Mansfield System's signal pattern, approximately
54,020 currently are not wired for hard-wire cable and approximately 36,013 do
not subscribe to hard-wire cable service, although they have access to such
services. The Company intends to continue to direct its marketing efforts
toward potential subscribers who are either not wired for hard-wire cable or
are not presently hard-wire cable customers.
The subscription television industry is highly competitive. Currently, the
Company's existing and potential competitors consist of a broad range of
companies engaged in the communications and entertainment businesses, including
cable operators, digital satellite program providers, television networks and
home video products companies. The Company's strategy is to compete for cable
television subscribers by focusing on the price-to-value relationship of the
Company's programming services; the reliability, service and picture quality of
wireless cable; the advanced technical features of the Company's standard
equipment; and the competitive choice afforded consumers by wireless cable.
In addition to competition from traditional and established hard-wire
cable television systems, wireless cable television operators face competition
from a number of other sources. Premium movie services offered by cable
television systems have encountered significant competition from the home video
cassette recorder industry. In addition to the foregoing, wireless cable
systems face potential competition from emerging trends and technologies in the
cable television industry, including the following:
In the future, the Company expects to face intense competition from
numerous other companies offering video, audio and data products and services.
Many of the Company's existing or potential competitors have substantially
greater name recognition and financial, technical and human resources than the
Company and may be better equipped to develop and operate systems providing
subscription television service, high-speed Internet access and telephony
services. The Company's principal existing and potential competitors are
described below:
Franchise Cable Systems. Currently, the Company's principal competitors
are franchise cable companies that own local franchises to operate their
systems in the Company's markets. Cable television service is currently
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available to the vast majority of U.S. television households. In most
instances, the franchise cable operators with which the Company competes serve
more subscribers on both a local and national level than the Company. Franchise
cable companies typically offer a larger selection of programming than the
Company. The Company seeks to compete with franchise cable companies by
offering the most widely demanded programming choices at lower prices, combined
with high-quality customer service.
The Company believes that a number of franchise cable operators will be
required to significantly upgrade their coaxial systems to provide digital
programming, which will involve a substantial investment of capital. Many cable
television providers are already in the process of upgrading their systems and
other cable operators have announced their intentions to make significant
upgrades. A number of proposed technological improvements, when fully
completed, will permit cable companies to increase channel capacity, thereby
increasing programming alternatives, and to deliver a better quality signal
without significant upgrades to their systems.
Many of the largest cable systems in the United States have announced
plans to offer data and telephony service through upgraded networks, and have
entered into agreements with major telephony providers to further these
efforts. In some cases, trials of data and telephony services are underway. In
the event that these trials are successful, the cable operators who are capable
of offering both data and telephony services will have a competitive advantage
over wireless companies if consumers choose to receive both their cable and
telephone service from the same operator.
Direct Broadcast Satellite ("DBS"). DBS involves the transmission of an
encoded signal directly from a satellite to the customer's home. Because the
signal is at a higher power level and frequency than most satellite-transmitted
signals, its reception can be accomplished with a relatively small (18-inch)
dish mounted on a rooftop or in the customer's yard. The cost of constructing
and launching the satellites used to distribute DBS programming is substantial.
When first introduced, DBS reception equipment for a single television set cost
approximately $650 per customer, plus installation fees, service charges and
off-air antenna installation, where applicable. Furthermore, each additional
independent outlet requires a separate descrambling device at additional cost
to the subscriber. These prices have decreased as additional competitors have
entered the DBS market. Recent promotions have offered DBS reception equipment
for less than $150 (exclusive of installation and other charges) when the
consumer agrees to prepay a 1-year subscription fee. The Company's principal
DBS competitors are described below.
DirecTV, Inc. DirecTV, Inc. ("DirecTV"), which is substantially owned by
GM-Hughes Electronics, successfully launched its first satellite in December
1993, its second satellite in August 1994, and a third satellite as an in-orbit
spare in June 1995. The third satellite may also be operated by DirecTV to
provide additional capacity. Each of DirecTV's satellites are high power
satellites. As of December 31, 1996, according to trade publications, DirecTV
served approximately 2.3 million subscribers. Recently, AT&T Corporation
("AT&T") and DirecTV entered into an exclusive agreement for AT&T to market and
distribute DirecTV's DBS service and related equipment to AT&T's large customer
base. As part of the agreement, AT&T made an initial investment of
approximately $137.5 million to acquire 2.5% of the equity of DirecTV, with an
option to increase its investment to up to 30% over five years. This agreement
provides a significant base of potential customers for DirecTV's DBS systems
and allows AT&T and DirecTV to offer customers a package of digital
entertainment and communications services. AT&T and DirecTV have also announced
plans to jointly develop new multimedia services for DirecTV under the
agreement.
United States Satellite Broadcasting Corporation ("USSB") owns and
operates DBS spectrum on DirecTV's first satellite and offers a programming
service separate from DirecTV's service. As of December 31, 1996, this
programming service had over 25 channels of premium video programming not
available from DirecTV. USSB's selection of programming services (and its use
of transponders on the same satellite used by DirecTV, which enables
subscribers to receive both DirecTV and USSB signals with a single satellite
receiver) allows it to be marketed as a complementary service to DirecTV,
partially offsetting the competitive handicap caused by its relatively limited
channel capacity. According to trade publications, as of December 31, 1996,
approximately one-half of DirecTV's 2.3 million subscribers received USSB
programming.
PrimeStar Partners ("PrimeStar") currently offers medium power Ku-band
programming service to customers using dishes approximately 3 feet in diameter.
PrimeStar is owned by a group of franchise cable operators and provides service
nationwide. According to trade publications, PrimeStar had approximately 1.6
million subscribers as of December 31, 1996.
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<PAGE>
EchoStar Communications Corporation ("EchoStar") launched a high power
satellite in December 1995, commenced national broadcasting of programming
channels in March 1996 and, as of December 31, 1996, broadcasted approximately
150 channels of programming. EchoStar has announced plans to increase its
program offering through the launch of two additional satellites (one in each
of 1997 and 1998). As of December 31, 1996, EchoStar had approximately 350,000
subscribers, according to trade publications.
During 1996, MCI Communications Corporation ("MCI") acquired high power
DBS spectrum with the capacity to offer over 200 channels of digital video
programming for $682.5 million in an FCC auction. Thereafter, MCI entered into
a joint venture with The News Corporation ("News Corp") to build and launch a
high power digital satellite system. On February 24, 1997, EchoStar and News
Corp announced that News Corp had agreed to acquire a 50% ownership interest in
EchoStar in exchange for aggregate consideration of approximately $1.0 billion
(such consideration consisting of cash and certain DBS assets). The
EchoStar/News Corp alliance, which will do business using the "Sky" brand name,
announced that it plans to provide approximately 500 channels of digital
programming, including local broadcast signals, by the end of 1998 to a
majority of the continental United States. As a result of its alliance with
News Corp, EchoStar will have substantially greater financial and other
resources than the Company and can be expected to increase the competition that
the Company encounters in the overall market for subscription television
customers.
C-band Satellite Program Distributors. The Company also competes with
C-band satellite program distributors (also referred to as "backyard dish" or
television receive only ("TVRO") systems). C-band systems have been popular
(mostly in rural and semi-rural areas) since the late 1970s, and currently
serve approximately 2.1 million subscribers in the aggregate, according to
trade publications. The primary advantages of wireless cable systems over TVRO
systems are lower equipment costs and broader availability of local
programming. TVRO systems, on the other hand, enjoy the advantage of access to
a wider variety of satellite programming and serve areas not served by
franchise or wireless cable systems. A conventional TVRO antenna system costs
in excess of $1,000 per subscriber, and subscribers are charged monthly fees
for access to certain programming. TVRO systems typically cannot receive local
off-air broadcast channels.
Telephone Companies. Certain regional and long distance telephone
companies could become significant competitors of the Company in the future,
not only with respect to the Company's potential provision of local telephone
services, but also because they have expressed an interest in becoming
subscription television providers. The 1996 Act removes barriers to entry that
previously inhibited telephone companies from competing, or made it more
difficult for telephone companies to compete, in the provision of video
programming and information services. Certain telephone companies have received
authorization to test market video and other services in certain geographic
areas using fiber optic cable and digital compression over existing telephone
lines. Estimates for the timing of wide-scale employment of such multichannel
video service vary, as several telephone companies have pushed back originally
announced deployment schedules.
As more telephone companies begin to provide subscription television
programming and other information and communications services to their
customers, significant additional competition for subscribers is expected to
develop. Among other things, telephone companies have an existing relationship
with substantially every household in their service area, substantial financial
resources and an existing infrastructure, and may be able to subsidize the
delivery of programming through their position as the sole source of telephone
service to the home.
VHF/UHF Broadcasters. Most areas of the United States are covered by
traditional territorial over-the-air VHF/UHF broadcasters. Consumers can
receive from 3 to 10 channels of over-the-air programming in most markets.
These stations provide local, network and syndicated programming free of
charge, but each major market is generally limited in the number of programming
channels. Congress is expected to consider the release of additional digital
spectrum for use by VHF/UHF broadcasters in the delivery of high definition
television services in 1998.
Private Cable. Private cable is a multi-channel subscription television
service where the programming is received by a satellite receiver and then
transmitted via coaxial cable throughout private property, often multiple
dwelling units ("MDUs"), without crossing public rights of way. Private cable
operates under an agreement with a private landowner to service a specific MDU,
commercial establishment or hotel. The FCC recently amended its rules to allow
the provision of point-to-point delivery of video programming by private cable
operators and other video delivery systems in the 18 GHz bandwidth. Private
cable operators compete with the Company for exclusive rights of entry into
MDUs.
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Local Multi-Point Distribution Service ("LMDS"). The Company does not plan
to offer LMDS services. On March 13, 1997, the FCC released service and
competitive bidding rules for LMDS, which is located at 27.5 to 28.35 GHZ, 29.1
to 29.25 GHZ and 31.0 to 31.3 GHZ in the frequency band. There will be one 1150
MHz LMDS license and one 150 MHz LMDS license awarded for each BTA, for a total
of 986 authorizations. There will be no restrictions on the number of licenses
an entity may hold, but incumbent licensees and cable companies will not be
able to obtain the 1150 MHz licenses in-region for 3 years. Certain issues
regarding geographic partitioning and spectrum disaggregation are the subject
of a pending rulemaking. The rules for use of the spectrum are relatively
broad, but it is expected that the spectrum will be used for multichannel video
programming, telephony, video communications and data services, including 2-way
video communications.
Legal Proceedings
A former administrative assistant with NEW filed a complaint on April 25,
1997 with the Vermont Attorney General's Office alleging sexual harassment in
the workplace. The plaintiff raised the same claims with the Department of
Employment and Training when seeking unemployment compensation for constructive
discharge. After considering those claims, the Department of Employment and
Training denied her claim for unemployment compensation. NEW has indicated to
the Attorney General's Office a willingness to mediate the claims, but believes
the claims to be wholly without merit. No investigation has begun by the
Attorney General's Office except to request a response from NEW to the
Plaintiff's charges.
Employees
As of October 31, 1997, the Company had a total of 12 full-time employees
and expects to have approximately 25 full-time employees in the next 12 months.
In addition, the Company may engage up to 4 persons as contract labor for
installations in the Mount Mansfield System during the next 12 months. All of
the Company's employees are working in the Mount Mansfield System. None of the
Company's employees is subject to a collective bargaining agreement. The
Company has experienced no work stoppages and believes that it has good
relations with its employees.
Properties
The Company owns the real property where its headquarters are located in
Ascutney, Vermont. The Company's property consists of a building located on 4.6
acres which includes approximately 1,250 feet of office space. The Company
acquired the property in July 1994 for $106,000.
The Company also leases approximately 900 square feet for its executive
offices in Jericho, Vermont, for a monthly rental of $1,792. In addition to
office space, the Company leases space at the transmission site for the Mount
Mansfield System under 2 separate lease agreements for an aggregate monthly
rental of $1,728. The leases each have terms of 5 years with 2 renewal options
remaining of 5 years each. The leases include space on the top of a
transmission tower, a concrete block and brick building which houses receiving
and transmission equipment and space for an exterior pad which supports 3
satellite dish receivers. The Company expects to lease additional office and
transmitter space when it launches additional wireless cable systems.
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MANAGEMENT
Directors and Executive Officers
The following table lists certain information about the directors and
executive officers of the Company and the person who has agreed to become a
director of the Company upon the closing of this offering:
Name Age Position
- --------------------------- ----- --------------------------------------
Michael Noel Russell .. 56 Chairman of the Board
Scott A. Wendel ...... 42 President, CEO, Director
Harold Doran ......... 65 Secretary-Treasurer, CFO, Director
Jack Polak ............ 84 Director
Leonard Gartner ...... 55 Director (on completion of Offering).
On December 30, 1997, Michael Noel Russell was elected Chairman of the
Company's Board of Directors. Mr. Russell has served as Corporate Relations
Consultant for Neilson Management Limited in London, England since 1991. From
1982 to 1991, Mr. Russell was employed as a Corporate Relations executive at
Prudential-Bache Securities (UK) Inc., a subsidiary of Prudential-Bache
Insurance Company of America. From 1984 to 1991, Mr. Russell reported to the
Chairman of Prudential Bache-Capital Funding (Europe), Inc., and was responsible
for marketing and corporate communication in Europe and the Far East for
Prudential-Bache Capital Funding, Prudential-Bache Securities and the Prudential
Insurance Company of America.
Scott A. Wendel was appointed as CEO and as a Director of the Company in
August 1997. He is a founder of and has served as Chief Operating Officer of
New England Wireless, Inc.'s (NEW) since its inception in 1991. Mr. Wendel has
served as NEW's President since 1995.
Jack Polak is a member of the Board of Directors of K.T.I., Inc. of
Guttenberg, New Jersey, a waste-to-energy company, and C.C.A. Industries of
Secaucus, New Jersey, which manufactures health and beauty aid products. Mr.
Polak was knighted by Queen Beatrix of the Netherlands on December 31, 1992 for
his work as President of the Anne Frank Center, U.S.A. and for other
activities. He was appointed to the Board of Directors of the Company in August
1997.
Harold Doran has served as Chief Financial Officer of NEW since 1992 and
was appointed a Director of the Company in August 1997. Mr. Doran served as the
Vice President Finance for J.A. Sexauer Division of the Dyson-Kissner-Moran
Corporation in Scarsdale, New York from 1982 to 1992. He was employed at
Dictaphone Corporation of Rye, New York from 1971 to 1982, and served in the
position of Corporate Controller from 1979 to 1982. Mr. Doran holds an M.B.A.
in Accounting.
Leonard Gartner, age 55, is a certified public accountant and has been the
principal of Gartner and Company, an accounting firm, for the past 5 years. His
firm specializes in structuring debt and equity instruments, advising clients
on the financial and tax aspects of acquisitions, stock option plans and stock
issuance matters. Mr. Gartner will also serve as a member of the Company's
Audit Committee. Mr. Gartner also serves as a director of INSCI Corporation
which is traded on the Nasdaq SmallCap MarketSM.
Upon completion of the offering, the Company intends to hire a new Chief
Executive Officer and a new Chief Financial Officer. Mr. Russell is expected
to continue as Chairman of the Board of Directors and Mr. Wendel is expected to
assume the role of Chief Operating Officer. Mr. Russell does not devote his
full business time and attention to the Company.
Each Director of the Company holds such position until the next annual
meeting of shareholders and until his or her successor is duly elected and
qualified. The officers hold office until the first meeting of the Board of
Directors following the annual meeting of shareholders and until their
successors are chosen and qualified, subject to early removal by the Board of
Directors.
Upon completion of the offering, the Company shall appoint an audit
committee consisting of Mr. Polak and Mr. Gartner. The Company also intends to
adopt a stock option plan. Mr. Russell, Mr. Polak and Mr. Gartner are outside
directors and, as such, satisfy Nasdaq's requirement that the board of directors
include at least 2 outside directors.
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Advisory Board
In addition to its Board of Directors, the Company expects to utilize an
advisory board to consult with it regarding salient business issues and
community affairs issues. Accordingly, the Company's Advisory Board is expected
to be divided into two committees, a Business Advisory Committee and a
Community Affairs Committee. The Company expects that the advisory board will
meet on a quarterly basis.
The following persons are expected to serve on the Business Advisory
Committee of the Advisory Board:
Gerald M. Dash. Gerald M. Dash has served as the director of Marketing
and Sales of Bell Atlantic Video Services, Inc., in Chesapeake, Virginia,
since September 1996. In that capacity, he assisted in the preparation and
development of a digital television system in Hampton Roads, Virginia.
Prior to that time, he served as a consultant (from February to September
1996) and as Vice President, Sales (from 1992) of People's Choice-TV Inc.,
a wireless cable television company located in Tucson, Arizona.
Brian Kiernan. Brian Kiernan is Senior Vice President of InterDigital
Communications Corporation ("IDC") of King of Prussia, Pennsylvania with
responsibility for development of new market and product initiatives, a
position he has held since 1993. IDC is devoted to the development and use
of technologies to be employed in various communications activities. Prior
to that time, Mr. Kiernan was President of USTC World Trade Corporation, an
international sales and marketing subsidiary of IDC's predecessor company,
International Mobile Machines ("IMM") from 1991 to 1992. Prior to holding
that position, Mr. Kiernan was IMM's Vice President of Engineering and
Operations with responsibilities for areas of product development and sales
engineering, manufacture, product support and quality assurance.
William McLendon. William McLendon has been President and a director of
Sight Resources Corporation of Boston, Massachusetts, which provides eye
care products and services, since its inception in 1992 and Chief Executive
Officer since April 1994. Mr. McLendon served as Vice President and Chief
Financial Officer of IBIS Technology Corporation, a manufacturer of
silicone based materials for semi-conductors, from 1990 to 1993. Prior
thereto, Mr. McLendon was the Vice President, Chief Financial Officer and
Treasurer of Summit Technology, Inc. from 1986 to 1990 and was Vice
President and Chief Financial Officer of Zymet, Inc. from 1983 to 1985.
Robert Morris. Robert Morris serves as a principal of the Strategic
Development Group of New York, New York. In that capacity, Mr. Morris
provides consulting services including profit and loss management, business
development, strategic planning, project management, and sales and
marketing. Mr. Morris previously served as director of marketing and sales
for the media products group of Memorex Corporation. Mr. Morris has also
held director, vice-president and president positions with NameBreak, Paro
and Dimensional Visions Group.
Gregory W. Oswald. Gregory W. Oswald has served as President of
Northstar Communications, a company engaged in the wireless cable
communications business in the far western portions of the United States,
since January 1994. Mr. Oswald also serves as President of GWO Associates,
a consulting firm located in Saratoga Springs, New York, engaged in
financing, start-up and operations of broadcasting, cable television and
wireless cable television businesses. From July 1988 until September 1992,
Mr. Oswald served as President of Capital Wireless Corporation, a wireless
cable operator located in New York and Tennessee and also served as
President of Tri-Mark Communications, Ltd. a wireless cable operator with
operations in the western portion of the United States.
The members of the Community Affairs Committee of the Advisory Board are
as follows:
D. Thomas Burns. D. Thomas Burns is one of the founders of New England
Wireless, Inc. Mr. Burns is president of D. Thomas Burns Realty, Inc., a
commercial and residential real estate brokerage firm.
Nils Bonde-Henriksen. Nils Bonde-Henriksen serves as Manager of
Corporate Communications at Sight Resources Corporation of Burlington,
Massachusetts, a company which provides eye care products and services.
Prior to that time, Mr. Bonde-Henriksen served as a development consultant
in Cambridge, Massachusetts providing real estate appraisal, real estate
marketing consultation and associated services.
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<PAGE>
Albert Kalter. Albert Kalter is engaged in the private practice of law
in his own firm in New York, New York. Mr. Kalter specializes in taxation,
with particular focus on estate and gift tax issues. Mr. Kalter is also
Chairman and Professor of Taxation, Pace University Lubin School of
Business, and Adjunct Professor of Law, New York Law School.
Norman Segal. Norman Segal is a member of the Board of Directors of the
New College Library Association in Sarasota, Florida and served as Chairman
of the New College Book Fair and Reading Festival, an annual event
promoting reading skills for children and adults. He is also involved with
fundraising on behalf of Suncoast Gerontology of Tampa, Florida, which is
engaged in research activities regarding Alzheimer's Disease.
Executive Compensation
Summary Compensation Table. The following table sets forth the
compensation awarded or paid to, or earned by Alan R. Ackerman who formerly
served as the Company's President and Chief Executive Officer for the fiscal
years ended June 30, 1997, June 30, 1996 and June 30, 1995. No executive
officer of the Company received compensation in excess of $100,000 during the
Company's last completed fiscal year.
Annual Compensation
<TABLE>
<CAPTION>
Fiscal All Other
Name and Principal Position Year Salary Bonus Options Compensation
- --------------------------------- -------- -------- ------- --------- -------------
<S> <C> <C> <C> <C> <C>
Alan R. Ackerman President, CEO 1997 $ 0 0 0 0
1996 $ 0 0 0 0
1995 $ 0 0 0 0
</TABLE>
Mr. Ackerman is not currently an employee of the Company. In
August 1997, the Company issued to Mr. Ackerman for services previously
rendered, options to purchase 402,776 shares of its common stock. The options
are exercisable during either: (i) the period commencing after the thirteenth
month and ending on the thirty-sixth month following the Company's initial
public offering; or (ii) the five year period ended January 1, 2002 if the
offering has not been declared effective by the Securities and Exchange
Commission on or before December 31, 1997. The options are exercisable at the
lesser of $3.00 per share or 50% of the price per share of the Company's common
stock (determined with reference to the price per Unit of the Company's
securities if the Company's common stock is included in such Units) in a public
offering of the Company's securities registered with the Securities and
Exchange Commission.
The Company has also agreed to the issuance of stock options to members of
its Advisory Board which when issued will vest on the satisfactory completion
of the second year of service on the Advisory Board. The options are
exercisable at the lesser of $3.00 per share of the Company's common stock or
50% of the share price of the common stock in a public offering of the
Company's securities (determined with reference to the price per unit of the
Company's securities if such shares are included in such units).
The Company has also agreed to pay to its Board members a meeting fee of
$500 per meeting plus reimbursement of their reasonable costs and expenses of
attending the Board meetings and Committee meetings of the Board of Directors.
Employment Agreements. The Company does not currently have employment
agreements with any of its executive officers. The Company expects to enter
into an agreement with Mr. Wendel upon completion of the offering. The
Agreement with Mr. Wendel is expected to provide annual compensation of
$100,000 and continue for a term of 2 years.
Indemnification. Section 145 of the Delaware General Corporations Law
(DGCL) affords a Delaware corporation the power to indemnify its present and
former directors and officers under certain conditions. Article Tenth of the
Company's Certificate of Incorporation provides that the Company shall, to the
fullest extent permitted by the provisions of Section 145 of the DGCL,
indemnify any and all persons whom it shall have power to indemnify under such
section from and against any and all of the expenses, liabilities, or other
matters referred to in or covered by said section.
Section 102(b)(7) of the DGCL gives a Delaware corporation the power to
adopt a charter provision eliminating or limiting the personal liability of
directors to the corporation or its stockholders for breach of fiduciary
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<PAGE>
duty as directors, provided that such provision may not eliminate or limit the
liability of directors for (i) any breach of the director's duty of loyalty to
the corporation or its stockholders, (ii) any acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) any payment of a dividend or approval of a stock purchase that is illegal
under Section 174 of the DGCL, or (iv) any transaction from which the director
derived an improper personal benefit. Article Ninth of the Company's
Certificate of Incorporation states that to the maximum extent permitted by
Section 102(b)(7) of the DGCL, the personal liability of a director of the
Company shall be eliminated.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act"), may be permitted to directors,
officers and controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
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<PAGE>
CERTAIN TRANSACTIONS
Upon its incorporation in April 1994, the Company issued 1,509,235 shares
of its Common Stock to Mr. Ackerman for total consideration of $15,000. In
addition, Mr. Ackerman exchanged $250,000 of prior indebtedness of New England
Wireless, Inc. ("NEW") to him for 83,334 shares of the Company's Common Stock
on the same terms and conditions as other noteholders of NEW on March 11, 1995.
As of September 30, 1997, Mr. Ackerman has made loans to the Company of
approximately $1,646,057, as to which approximately $30,000 in principal
payments have been made to him. The loans accrue interest at an annual rate of
7.5%. The Company plans to repay $1,200,000 of such indebtedness out of the
proceeds of the offering. Mr. Ackerman has agreed to permit the repayment of
the balance of his loan over a 5 year period at an interest rate of 7.5%.
The Company has granted to Mr. Ackerman a security interest in its assets
to secure repayment of its indebtedness to him. Mr. Ackerman's security
interest is subordinated to any security interests which the Company may
provide in the future in connection with bank or institutional financing
extended to it. Mr. Ackerman has agreed to release his security interest upon
completion of the Offering.
In consideration of prior services rendered, the Company has issued to
Mr. Ackerman options to purchase 402,776 shares of the Company's common stock.
See "MANAGEMENT -- EXECUTIVE COMPENSATION" above.
Scott A. Wendel acquired all of his common stock in the Company through
his exchange of shares of common stock of NEW on the same terms and conditions
as other shareholders of NEW in connection with the merger of NEW with a
subsidiary of the Company in March 1995.
The Company also loaned $15,000 to another company in which Mr. Wendel was
an officer in 1996. The loan was repaid in full in October 1996.
As of September 30, 1997, the Company also has advanced funds to Mr.
Wendel in the aggregate amount of $23,170.
Except as set forth, there are currently no proposed transactions between
the Company and its officers, directors, shareholders, and affiliates. Although
future transactions between the Company and such parties are possible,
including a transaction relating to a business opportunity, the Board of
Directors of the Company has adopted a policy regarding transactions between
the Company and any officer, director or affiliate, including loan
transactions, requiring that all such transactions be approved by a majority of
the independent and disinterested members of the Board of Directors and that
all such transactions be for a bona fide business purpose and be entered into
on terms at least as favorable to the Company as could be obtained from
unaffiliated independent third parties.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information concerning beneficial
ownership of the Company's Common Stock by all persons known by the Company to
own beneficially 5% or more of the outstanding shares of the Company's Common
Stock, each director, and all officers and directors of the Company as a group,
as of (a) December 30, 1997 and (b) as adjusted to give effect to the sale of
the 1,500,000 units offered hereby:
<TABLE>
<CAPTION>
Percent of Outstanding Stock(2)(3)
Amount and Nature -------------------------------------------
Name of Beneficial Owner of Beneficial Ownership(1) Before Offering After Offering
- ------------------------------------- ---------------------------- --------------------- -------------------
<S> <C> <C> <C>
Alan R. Ackerman .................. 1,985,345(4) 58.9% 40.6%
Scott A. Wendel ..................... 97,638 3.3 2.2
Harold Doran ........................ 36,052 1.2 0.8
Jack Polak ........................ 12,017 0.4 0.3
Leonard Gartner ..................... 31,480(5) 1.1 0.7
Michael Noel Russell ................ 0 0 0
--------- ---- ----
All officers and directors as a group
(5) persons ........................ 177,187 5.9% 4.0%
--------- ---- ----
</TABLE>
- ------------
(1) Except as otherwise indicated, all stockholders have sole voting and
investment power with respect to the shares of Common Stock set forth
opposite their respective names.
(2) The Company has a contingent obligation to issue additional shares of its
stock to noteholders who previously elected to convert their indebtedness
in August 1997 if the per Unit price realized in this Offering is less
than $6.00. See "CERTAIN TRANSACTIONS."
(3) Percentages herein assume a base of 2,968,302 shares of Common Stock
outstanding as of the date of this prospectus and a base of 4,468,302
shares of Common Stock outstanding immediately after the consummation of
this offering.
(4) Includes 402,776 shares of Common Stock underlying stock options granted.
(5) Includes 10,000 shares of Common Stock underlying warrants issued.
UNDERWRITING
Underwriting. Subject to terms and conditions contained in an underwriting
agreement ("Underwriting Agreement"), the underwriters named below, for whom
Dupont Securities Group, Inc. is acting as a representative ("Representative")
have severally agreed to purchase the number of Units from the Company set
forth opposite their names below.
Underwriters Number of Units
- -------------- ----------------
Total ......
----------------
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase the Units are subject to the approval of certain legal
matters by counsel and to certain other conditions. If any of the Units are
purchased by the Underwriters pursuant to the Underwriting Agreement, all Units
(other than the Units covered by the over-allotment option described below)
must be so purchased.
The underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Over-allotment involves syndicate sales in excess of the offering size, which
creates a syndicate short position. Stabilizing transactions permit bids to
purchase the underlying security so long as the stabilizing bids do not exceed
a specific maximum. Syndicate covering transactions involve purchases of the
company's securities in the open market after the distribution has been
completed in order to cover syndicate short positions. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when the
securities originally sold by such syndicate member are purchased in a syndicate
covering transaction to cover syndicate short positions. Such stabilizing
transactions, syndicate covering transactions and penalty bids may cause the
price of the securities to be higher than they would otherwise be in the absence
of such transactions. These transactions may be effected on the OTC Bulletin
Board.
The Company has been advised by the Representative that the Underwriters
proposed to offer the Units to the public initially at the price set forth on
the cover page of this Prospectus and to certain dealers (who may include the
Underwriters) at such price less a concession not to exceed $------ per Unit.
The Underwriters may allow, and such dealers may re-allow, discounts not in
excess of $------ per Unit to any other Underwriter and certain other
dealers.
The Underwriting Agreement provides for reciprocal indemnification between
the Company and the Underwriters against certain liabilities in connection with
the Registration Statement, including liabilities under the Act. To the extent
that this section may purport to provide exculpation from possible liabilities
arising under the federal securities laws, it is the Commission that such
indemnification is contrary to public policy and unenforceable.
40
<PAGE>
The Company has agreed to pay to the Underwriters a non-accountable
expense allowance of 3 percent (3%) of the gross proceeds of this offering
(including any securities purchased pursuant to the Underwriter's
over-allotment option).
Upon the exercise of any Warrants and to the extent not inconsistent with
the guidelines of the National Association of Securities Dealers and the Rules
and Regulations of the Commission the Company has agreed to pay the
Underwriters a commission equal to ten percent (10%) of the gross proceeds
received by the Company from the exercise of the Warrants. No compensation will
be paid to the Underwriters in connection with the exercise of the Warrants if
(a) the market price of the Common Stock is lower than the exercise price, (b)
the Warrants were held in discretionary accounts, (c) the Warrants are
exercised in an unsolicited transaction, (d) disclosure of compensation
arrangements was not made at the time of the offering and the exercise of the
Warrant, or (e) the solicitation of the exercise of the Warrant did not comply
with Regulation M promulgated under the Securities Exchange Act of 1934.
The Company has agreed to sell to the Representative or its designees, at
nominal consideration, a total of 150,000 Warrants (the "Underwriters'
Warrants") to purchase a like number of Units of the Company. The Underwriters'
Warrants will be exercisable at a per Unit price of 120% of the public offering
price per Unit. The Underwriters' Warrants will be exercisable for a period of
5 years commencing on the date of this Prospectus. Such Warrants and their
underlying securities will not be transferable for 1 year from the date hereof
except to other underwriters and selected dealers, officers and partners
thereof. Any profit realized upon any resale of the Underwriters' Warrants or
upon any sale of the shares of Common Stock or Warrants underlying the same may
be deemed to be additional Underwriters' compensation. The Company has agreed
to register (or file a post-effective amendment with respect to any
registration statement registering) the Underwriters' Warrants and their
underlying securities under the Securities Act at its expense subject to the
rules and regulations of the National Association of Securities Dealers, Inc.
during the period commencing on the first anniversary of the effective date and
ending on the fifth anniversary of the effective date of this offering.
In addition, the Company has agreed to include the Underwriters' Warrants
and the underlying securities in any Registration Statement filed by the
Company during the period commencing one year after the effective date of the
offering and ending on the seventh anniversary of such effective date.
For the life of the Underwriters' Warrants, the holders are given, at
nominal cost, the opportunity to profit from a rise in the market price for the
Common Stock of the Company without assuming the risk of ownership, with a
resulting dilution in the interest of other security holders. As long as such
Warrants remain unexercised, the terms under which the Company could obtain
additional capital may be adversely affected. Moreover, the holder of such
Warrants might be expected to exercise them at a time when the Company would,
in all likelihood, be able to obtain any needed capital by a new offering of
its securities on terms more favorable than those provided by the Underwriters'
Warrants.
The Company has agreed to provide to the Representative the right to
designate a member of its board of directors for a period of 3 years. The
Representative has not designated any such representative to date. Prior to
this offering, there has been no public market for the Units. Accordingly, the
offering price of the Units was determined by negotiation between the Company
and the Representative. Factors considered in determining such price, in
addition to prevailing marketing conditions, included the history of and the
prospects for the industry in which the Company competes, an assessment of the
Company's management, the prospects of the Company, its capital structure, the
general condition of the securities market, and such other factors as were
deemed relevant.
The Underwriters do not intend to make sales to accounts over which they
exercise discretionary authority in excess of 2% of the Units offered hereby.
41
<PAGE>
DESCRIPTION OF SECURITIES
The Company will issue pursuant to the Offering, 1,500,000 Units each
consisting of one share of Common Stock and one Redeemable Common Stock
Purchase Warrant.
The following summaries of the terms of the Company's securities is
intended to address all material aspects of the Company's securities. With
respect to Preferred Stock and Common Stock, the discussion is qualified in all
respects by reference to the Certificate of Incorporation and By-Laws of the
Company.
Preferred Stock. The Board of Directors has the authority to issue
2,500,000 shares of Preferred Stock in one or more series and to fix the
rights, preferences, privileges and restrictions thereof, including dividend
rights, dividend rates, conversion rights, voting rights, terms of redemption,
redemption prices, liquidation preferences and the number of shares
constituting any series or the designation of such series, without further vote
or action by the stockholders. The issuance of Preferred Stock may have the
effect of delaying, deferring or preventing a change in control of the Company
without further action by the stockholders and may adversely affect the voting
and other rights of the holders of the Company's common stock. At present, the
Company has no plans to issue any of the Preferred Stock.
Common Stock
The Company is authorized to issue 20,000,000 shares of Common Stock,
$.01 par value, of which 2,968,302 shares are issued and outstanding. The
issued and outstanding shares of Common Stock are fully paid and
non-assessable. Holders of Common Stock are entitled to 1 vote for each share
held of record on all matters submitted to a vote of shareholders and may not
cumulate their votes for the election of directors. Shares of Common Stock are
not redeemable, do not have any conversion or preemptive rights and are not
subject to further calls or assessments once fully paid.
Holders of Common Stock will be entitled to share pro rata in such
dividends and other distributions as may be declared from time to time by the
Board of Directors out of funds legally available therefore, subject to any
prior rights accruing to any holders of preferred stock of the Company. Upon
liquidation or dissolution of the Company, holders of shares of Common Stock
will be entitled to share proportionately in all assets available for
distribution to such holders. As of September 30, 1997, there were 70
registered holders of the Company's Common Stock.
Common Stock Purchase Warrants
The following summary of the material provisions of the Warrants is
qualified in all respect by reference to the actual text of the Warrant
Agreement between the Company and Continental Stock Transfer & Trust Company
(the "Transfer and Warrant Agent"). A copy of the Warrant Agreement has been
filed as an exhibit to the registration statement of which this Prospectus is a
part. See "ADDITIONAL INFORMATION."
The Company is offering hereby an aggregate of 1,500,000 Warrants
(1,725,000 if the Underwriters' over-allotment option is exercised in full).
Each Warrant entitles the holder thereof to purchase, at any time from the date
of this Prospectus through the fifth anniversary of the date of this
Prospectus, one share of Common Stock at a price of $__ per share, subject to
adjustment in accordance with the anti-dilution and other provisions referred
to below.
The Warrants are subject to redemption by the Company, at any time
commencing 12 months after the date of this Prospectus, at a price of $.10 per
Warrant upon 30 days prior written notice if the closing sale or bid price per
share of the Common Stock equals or exceeds $9.00 per share for the 20
consecutive trading days ending on the fifteenth trading day prior to the
mailing of the notice of the redemption. The exercise price of the Warrants
should in no event be regarded as an indication of any future market price of
the securities offered hereby.
The exercise price and the number of shares of Common Stock purchasable
upon the exercise of the Warrants are subject to adjustment upon the occurrence
of certain events, including stock dividends, stock splits, combinations or
reclassification of the Common Stock. The Warrants do not confer upon holder
any voting or any other rights as shareholders of the Company.
42
<PAGE>
The Company is required to have a current registration statement on file
with the Commission and to effect appropriate qualifications under the laws and
regulations of the states in which the holders of Warrants reside in order to
comply with applicable laws in connection with the exercise of Warrants and the
resale of the Common Stock issued upon such exercise. The Company, therefore,
will be required to file post-effective amendments to its registration
statement when subsequent events require such amendments in order to continue
the registration of the Common Stock underlying the Warrants and to take
appropriate action under state securities laws. There can be no assurance that
the Company will be able to keep its registration statement current or to
effect appropriate action under applicable state securities laws. Its failure
to do so may restrict the ability of the Warrant holders to exercise the
Warrants and resell or otherwise dispose of the underlying Common Stock. See
"RISK FACTORS -- Non-Registration of Securities in Certain Jurisdictions."
Transfer Agent or Registrar
The Transfer Agent and Registrar for the Company is North American Transfer
Co., 147 W. Merrick Rd., Freeport, New York, 11520.
Shares Eligible for Future Sale
Upon completion of this offering, members of management and other existing
shareholders of the Company will own 2,968,302 shares of Common Stock of the
Company, representing approximately 66% of the outstanding shares of Common
Stock immediately following the offering. All of these shares are deemed
"restricted securities" as defined by Rule 144 under the Securities Act of
1933, as amended (the "Act") and were acquired or were derived from securities
purchased prior to the date hereof. In general, under Rule 144, a person (or
persons whose shares are aggregated) who has satisfied a 1-year holding period
may, under certain circumstances, sell within any 3-month period a number of
restricted securities which does not exceed the greater of one percent (1%) of
the shares outstanding or the average weekly trading volume during the 4
calendar weeks preceding the notice of sale required by Rule 144. In addition,
Rule 144 permits, under certain circumstances, the sale of restricted
securities by a person who is not an affiliate of the Company and has satisfied
a 2-year holding period without any quantity limitations. Any sales of shares
by shareholders pursuant to Rule 144 may have a depressive effect on the price
of the Common Stock. The vast majority of shares issued prior to inception of
the offering (other than shares held by affiliates and shares not issued yet
pursuant to Warrants previously issued) may be sold pursuant to Rule 144
immediately after completion of the offering; however, the shareholders of the
Company have agreed with the Underwriter not to offer or sell any shares of
Common Stock for a period of 1 year following the date of this Prospectus.
LEGAL MATTERS
The validity of the securities offered by this Prospectus will be passed
upon for the Company by Gravel and Shea, a Professional Corporation, of
Burlington, Vermont. Lester Morse, P.C. of Great Neck, New York, has served as
counsel to the Underwriter in connection with this offering.
EXPERTS
The consolidated financial statements of Worldwide Wireless Systems, Inc.
as of June 30, 1997 and for the years ended June 30, 1997 and June 30, 1996,
appearing in this Prospectus and Registration Statement have been audited by
Richard A. Eisner & Company, LLP, independent auditors, as set forth in their
report thereon (which contains an explanatory paragraph with respect to the
substantial doubt about the Company's ability to continue as a going concern,
as discussed in Note A to the Financial Statements) appearing in the
Registration Statement, and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
43
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
SB-2 under the Securities Act of 1933, as amended, with respect to the Common
Stock and Warrants to which this Prospectus relates. As permitted by the rules
and regulations of the Commission, this Prospectus does not contain all of the
information set forth in the Registration Statement. For further information
with respect to the Company and the Shares and Warrants offered hereby,
reference is made to the Registration Statement, including the exhibits
thereto, which may be copied and inspected, without charge, at the Public
Reference Section of the Commission at its principal office at 450 Fifth
Street, N.W., Washington, D.C. and at the Commission's regional offices at 1801
California Street, Suite 4800, Denver, Colorado 80202-2648 and 7 World Trade
Center, Suite 1300, New York, NY 10048.Copies of such material also may be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, NW, Washington, DC 20549, upon payment of certain fees prescribed by
the Commission. Electronic registration statements made through the Electronic
Data Gathering, Analysis and Retrieval system are publicly available through
the Commission's Web site (http://www.sec.gov).
44
<PAGE>
WORLDWIDE WIRELESS SYSTEMS, INC. AND SUBSIDIARY
Contents
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Independent Auditors' Report ............................................................ F-2
Consolidated Financial Statements
Balance sheets as of June 30, 1997 and September 30, 1997 (unaudited) .................. F-3
Statements of operations for the years ended June 30, 1997 and 1996 and for the three
month periods
ended September 30, 1997 and 1996 (unaudited) ....................................... F-4
Statements of changes in capital deficiency for the years ended June 30, 1997 and 1996
and for the
three months ended September 30, 1997 (unaudited) .................................... F-5
Statements of cash flows for the years ended June 30, 1997 and 1996 and for the three
month periods
ended September 30, 1997 and 1996 (unaudited) ....................................... F-6
Notes to financial statements ......................................................... F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Worldwide Wireless Systems, Inc.
Ascutney, Vermont
We have audited the accompanying consolidated balance sheet of Worldwide
Wireless Systems, Inc. and subsidiary (the "Company") as of June 30, 1997 and
the related consolidated statements of operations and changes in capital
deficiency and cash flows for the years ended June 30, 1997 and 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements enumerated above present fairly,
in all material respects, the consolidated financial position of Worldwide
Wireless Systems, Inc. and subsidiary as of June 30, 1997 and the consolidated
results of their operations and their consolidated cash flows for the years
ended June 30, 1997 and 1996 in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in
Note A to the financial statements, the Company has sustained operating losses
since inception, has a working capital deficiency, is unable to pay debt
currently due, and is delinquent in making certain lease payments to wireless
channel license holders and sublessors. These factors raise substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note A. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Richard A. Eisner & Company, LLP
New York, New York
August 22, 1997
F-2
<PAGE>
WORLDWIDE WIRELESS SYSTEMS, INC. AND SUBSIDIARY
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, September 30,
1997 1997
--------------- --------------
(Unaudited)
<S> <C> <C>
ASSETS
(Note A)
Current assets:
Cash ..................................................................... $ 9,028 $ 2,532
Accounts receivable ...................................................... 7,495 7,586
Advances to officer/stockholder .......................................... 22,299 23,170
Prepaid expenses and other current assets .............................. 39,004 20,365
------------ -----------
Total current assets ................................................ 77,826 53,653
Property and equipment, net (Notes B[2], C, E[4] and J) .................. 1,227,815 1,158,670
Wireless channel rights, net (Notes B[3] and D) ........................ 114,189 110,607
Installation labor, net (Note B[6]) .................................... 43,026 24,821
Deferred offering costs (Note K) ....................................... 155,000 195,000
Security deposits and other assets ....................................... 15,776 1,776
------------ -----------
$ 1,633,632 $ 1,544,527
============ ===========
LIABILITIES
Current liabilities:
Current portion of mortgages payable (Note E[4]) ........................ $ 2,322 $ 2,322
Accounts payable (Notes D and F[2]) .................................... 539,038 563,208
Accrued expenses (Notes A and I) ....................................... 612,174 739,069
Litigation settlement payable (Note J) ................................. 35,000 35,000
Notes payable (Notes A and I) .......................................... 2,470,996 2,313,013
------------ -----------
Total current liabilities .......................................... 3,659,530 3,652,612
Mortgages payable (Note E[4]) .......................................... 69,286 68,755
------------ -----------
Total liabilities ................................................... 3,728,816 3,721,367
------------ -----------
Commitments, contingencies and other matters (Notes D, E, F, J and K)
CAPITAL DEFICIENCY
Preferred stock - authorized 2,500,000 shares; none issued and outstanding
Common stock - par value $.01 per share; authorized 20,000,000 shares;
issued and outstanding, 2,858,961 and 2,968,302 at June 30, 1997 and
September 30, 1997, respectively ....................................... 28,590 29,683
Additional paid-in capital ............................................. 1,095,181 3,470,694
Accumulated deficit ...................................................... (3,218,955) (5,677,217)
------------ -----------
Total capital deficiency ............................................. (2,095,184) (2,176,840)
------------ -----------
$ 1,633,632 $ 1,544,527
============ ===========
</TABLE>
See independent auditors' report and notes to financial statements
F-3
<PAGE>
WORLDWIDE WIRELESS SYSTEMS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
Year Ended June 30, September 30,
---------------------------------- ---------------------------------
1997 1996 1997 1996
--------------- ---------------- --------------- ---------------
(Unaudited)
<S> <C> <C> <C> <C>
Service revenue ........................... $ 354,621 $ 323,144 $ 96,810 $ 88,756
------------ ------------ ------------ -----------
Costs and expenses:
Service cost .............................. 101,427 91,606 27,141 25,099
Programming and license fees ............... 850,600 799,285 231,408 202,973
Selling, general and administrative expenses 641,856 384,140 1,652,389 157,838
------------ ------------ ------------ -----------
Total costs and expenses ............... 1,593,883 1,275,031 1,910,938 385,910
------------ ------------ ------------ -----------
Operating loss before other expenses ...... (1,239,262) (951,887) (1,814,128) (297,154)
Other (expenses)/income:
Interest expense ........................... (401,831) (172,410) (644,681) (97,028)
Miscellaneous (expense)/income ............ (43,440) (6,948) 547 1,258
------------ ------------ ------------ -----------
Net loss .................................... $ (1,684,533) $ (1,131,245) $ (2,458,262) $ (392,924)
============ ============ ============ ===========
Net loss per share of common stock ......... $ (0.49) $ (0.33) $ (0.72) $ (0.12)
============ ============ ============ ===========
Weighted average number of common
shares .................................... 3,404,812 3,389,368 3,404,812 3,404,812
============ ============ ============ ===========
</TABLE>
See independent auditors' report and notes to financial statements
F-4
<PAGE>
WORLDWIDE WIRELESS SYSTEMS, INC. AND SUBSIDIARY
Consolidated Statements of Changes in Capital Deficiency
<TABLE>
<CAPTION>
Common Stock Additional
Par Value $.01
----------------------- Paid-in Accumulated
Shares Amount Capital Deficit Total
----------- --------- ------------ --------------- ----------------
<S> <C> <C> <C> <C> <C>
Balance - June 30, 1995 ........................ 2,763,398 $27,634 $ 354,613 $ (403,177) $ (20,930)
Warrants issued in connection with financing . 49,283 49,283
Net loss ....................................... (1,131,245) (1,131,245)
--------- ------- ---------- ------------ ------------
Balance - June 30, 1996 ........................ 2,763,398 27,634 403,896 (1,534,422) (1,102,892)
Litigation settlement paid by stockholders ...... 108,150 108,150
Common stock issued on conversion of debt . 95,000 950 296,550 297,500
Common stock issued on settlement of interest 563 6 1,964 1,970
Warrants issued in connection with financing . 217,377 217,377
Warrants issued for services ..................... 67,244 67,244
Net loss ....................................... (1,684,533) (1,684,533)
--------- ------- ---------- ------------ ------------
Balance - June 30, 1997 ........................ 2,858,961 28,590 1,095,181 (3,218,955) (2,095,184)
Common stock issued on conversion of debt
and interest .................................... 109,341 1,093 709,623 710,716
Warrants issued in connection with financing . 197,890 197,890
Compensation charge in connection with issu-
ance of option to officer/stockholder 1,468,000 1,468,000
Net loss ....................................... (2,458,262) (2,458,262)
--------- ------- ---------- ------------ ------------
Balance - September 30, 1997 (Unaudited) ......... 2,968,302 $29,683 $3,470,694 $ (5,677,217) $ (2,176,840)
========= ======= ========== ============ ============
</TABLE>
See independent auditors' report and notes to financial statements
F-5
<PAGE>
WORLDWIDE WIRELESS SYSTEMS, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended
Year Ended June 30, September 30,
---------------------------------- -------------------------------
1997 1996 1997 1996
---------------- ---------------- ---------------- -------------
(Unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss ................................................ $ (1,684,533) $ (1,131,245) $ (2,458,262) $ (392,924)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization ........................ 406,706 395,783 118,960 103,232
Loss on disposal of equipment ........................ 71,852 2,000
Noncash litigation settlement ........................ 108,150
Warrants issued for services ........................... 67,244
Noncash compensation charge in connection with
option issued ....................................... 1,468,000
Noncash interest charge on debt conversion ............ 382,690
Amortization of debt discount ........................ 178,588 33,503 217,415 32,744
Changes in:
Accounts receivable ................................. 912 (4,878) (91) 1,152
Prepaid expenses and other current assets ............ 8,069 6,653 18,639 12,816
Security deposits and other assets .................. 2,500 1,435 14,000
Accounts payable and accrued expenses ............... 23,176 422,432 139,591 (185,169)
------------ ------------ ------------ -----------
Net cash used in operating activities ............... (817,336) (276,317) (99,058) (426,149)
------------ ------------ ------------ -----------
Cash flows from investing activities:
Purchase of property and equipment ..................... (37,134) (797,185) (21,858) (17,009)
Proceeds from disposal of equipment ..................... 29,600
Additions to installation labor ........................ (13,890) (16,485) (6,170) (4,380)
Collections on (issuance of) notes receivable ............ 20,000 (5,000)
------------ ------------ ------------ -----------
Net cash used in investing activities ............... (1,424) (818,670) (28,028) (21,389)
------------ ------------ ------------ -----------
Cash flows from financing activities:
Repayment of debt ....................................... (2,009) (3,910) (531) (488)
Issuance of promissory notes and warrants ............... 924,700 1,097,399 121,992 459,800
Repayment of promissory notes ........................... (30,000)
Deferred offering costs ................................. (45,000)
Advances to officer/stockholder ........................ (22,299) (871)
------------ ------------ ------------ -----------
Net cash provided by financing activities ......... 825,392 1,093,489 120,590 459,312
------------ ------------ ------------ -----------
Net increase (decrease) in cash ........................... 6,632 (1,498) (6,496) 11,774
Cash at beginning of period .............................. 2,396 3,894 9,028 2,396
------------ ------------ ------------ -----------
Cash at end of period .................................... $ 9,028 $ 2,396 $ 2,532 $ 14,170
------------ ------------ ------------ -----------
Supplemental disclosures of cash flow information:
Cash paid for:
Interest ............................................. $ 35,916 $ 28,907 $ 1,219 $ 23,284
Noncash transactions:
Conversion of debt and interest into common stock . $ 297,500 $ 328,026
Deferred offering costs included in accrued expenses . $ 110,000 $ 40,000
</TABLE>
See independent auditors' report and notes to financial statements
F-6
<PAGE>
WORLDWIDE WIRELESS SYSTEMS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
(Unaudited with respect to September 30, 1997 and
for the periods ended September 30, 1997 and 1996)
NOTE A -- The Company and Basis of Presentation
Worldwide Wireless Systems Inc., a Delaware Corporation, ("Worldwide" or
the "Company"), formerly known as Worldwide Wireless, Inc., through its
wholly-owned subsidiary, is engaged in investing, leasing, and purchasing
wireless channel rights (including multi-channel, multi-point distribution
services ("MMDS") licenses and instructional television fixed services ("ITFS")
licenses) and operating wireless cable systems and intends to provide
telecommunications services (see Notes D and E[3]). Substantial financing will
be required by the Company to fund its operating activities. There is no
assurance that such financing will be available when needed or that the
Company's efforts to develop its business will be successful.
Prior to March 1995 Worldwide had no operations. In March 1995, the
Company's founder and sole stockholder approved a merger with New England
Wireless, Inc. ("NEWI"), a Vermont corporation through its wholly owned
subsidiary, N.E.W. Acquisition Co., Inc. Accordingly, NEWI is treated as a
predecessor entity and as the merger survivor, became the Company's wholly
owned operating subsidiary. In connection with the merger, all of NEWI's 10,000
shares of outstanding common stock were exchanged for 801,156 shares of the
Company's common stock. The merger was treated for accounting purposes as a
capital transaction rather than a business combination. In connection with this
recapitalization/reorganization, assets and liabilities were recorded at their
historical amounts. Concurrent with the merger, the Company and creditors of
NEWI agreed to exchange certain notes aggregating $1,164,000 in consideration
of receiving 388,007 shares of the Company's common stock. In addition,
Worldwide issued notes payable in the amount of $680,966 to its founder in
exchange for debt of NEWI owed to him.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has sustained recurring
operating losses since inception and such losses are expected to continue. As a
result, the Company has a substantial working capital deficiency and a capital
deficiency and lacks the resources to repay its indebtedness which is due and
payable on demand. In addition, the Company is delinquent in making the monthly
lease payments for its tower site and to the wireless channel license holders
and sublessors. These factors raise substantial doubt about the Company's
ability to continue as a going concern. Continuation of the Company is
dependent upon its ability to maintain its wireless channel rights under
license, obtain additional debt or equity financing and, ultimately, upon its
ability to achieve profitable operations. The financial statements do not
include any adjustments concerning the recoverability or classification of
recorded asset amounts or the amounts or classification of liabilities if the
Company is unable to continue as a going concern.
The Company is currently seeking financing and is contemplating an initial
public offering of its securities (see Note K). There is no assurance, however,
that such public offering will be consummated or that the Company's efforts
will ultimately be successful.
The Company's principal stockholder and creditor has requested a security
interest in Worldwide's assets to secure repayment of indebtedness. This
security interest will be subordinated to any security interests which the
Company may provide in the future in connection with bank or institutional
financing extended to it (see Note I).
NOTE B -- Summary of Significant Accounting Policies
[1] Basis of preparation and use of estimates:
The accompanying consolidated financial statements include the accounts of
Worldwide Wireless Systems, Inc. and New England Wireless, Inc. in a manner
similar to a pooling of interests (see Note A). Intercompany accounts and
transactions between Worldwide, the parent and NEWI, its wholly owned
subsidiary are eliminated in consolidation.
F-7
<PAGE>
WORLDWIDE WIRELESS SYSTEMS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS -- (Continued)
(Unaudited with respect to September 30, 1997 and
for the periods ended September 30, 1997 and 1996)
NOTE B -- Summary of Significant Accounting Policies -- (Continued)
[1] Basis of preparation and use of estimates: (continued)
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
[2] Property and equipment:
Property and equipment are carried at cost. Depreciation is computed on
the straight-line method over the estimated useful lives of the related assets
ranging from 5 - 7 years. The Company intends to modify certain of its equipment
to provide for digital technology transmission of television programs.
Unmodified equipment will be relocated and will continue to be used to transmit
programs using existing technology.
[3] Wireless channel rights:
Wireless channel rights are carried at cost and amortized over their
ten-year terms. Accumulated amortization at June 30, 1997 and September 30,
1997 is $44,755 and $48,337, respectively.
[4] Net (loss) per share:
Net (loss) per share has been computed based on the weighted average
number of shares outstanding during each period presented. Pursuant to
Securities and Exchange Commission rules, common shares issued and warrants
granted by the Company at prices below the anticipated public offering price
have been included in the calculation of common shares as if they were
outstanding for all periods presented (using the treasury stock method and the
anticipated public offering price). In February 1997, the Financial Accounting
Standards Board issued Statement No. 128, "Earnings Per Share" which will
provide a simplified standard for calculating basic earnings per share ("EPS").
When adopted, EPS calculations for prior periods will be restated as provided
in the pronouncement. Management believes that the effects of adoption will not
have a material effect on earnings per share.
[5] Revenue recognition:
Revenue from subscribers are recognized in the period that service is
rendered. Installation fees are recognized as revenues upon subscriber hook-up
to the extent of costs to obtain subscribers.
[6] Installation labor:
The Company capitalizes subcontractor and direct employee labor costs
incurred in connection with the installation of its television reception
equipment on subscriber premises. Amortization of such costs is based on the
subscriber turnover rate estimated to be three years.
[7] Credit and equipment concentration:
The Company's customers are primarily located in the State of Vermont.
Credit risk with respect to receivables is limited because of the number of
customers comprising the Company's customer base. All of the Company's
transmission equipment is located in the State of Vermont.
[8] Impairment of long-lived assets:
The Company adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of" ("SFAS 121"). During 1996, SFAS 121 established accounting
standards for the impairment of long-lived assets, certain identifiable assets
and goodwill related to those assets. There was no financial statement impact
from the adoption of SFAS 121. The Company periodically reviews wireless
channel rights and other long-lived assets whenever events or changes in
circumstances indicate that the carrying amount of such assets may not be
recoverable. When such circumstances occur, the Company will evaluate the
possible effects on the carrying amount of such assets.
F-8
<PAGE>
WORLDWIDE WIRELESS SYSTEMS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS -- (Continued)
(Unaudited with respect to September 30, 1997 and
for the periods ended September 30, 1997 and 1996)
NOTE B -- Summary of Significant Accounting Policies -- (Continued)
[9] Fair values of financial instruments:
The estimated fair value of financial instruments has been determined
based on available market information and appropriate valuation methodologies.
The carrying amounts of cash, accounts receivable, and other assets, accounts
payable, and accrued expenses approximate fair value at June 30, 1997 because
of the short maturity of these financial instruments. The estimated carrying
value of the mortgages payable for financial statement purposes at June 30,
1997 and September 30, 1997 approximate fair value because the interest rates
on these instruments approximate the prevailing market rate at those dates. The
fair value estimates were based on the information available to management.
[10] Recent pronouncements:
The Financial Accounting Standards Board has recently issued Statements of
Financial Accounting Standards No. 129, "Disclosure of Information about
Capital Structure," No. 130, "Reporting Comprehensive Income," and No. 131,
"Disclosures about Segments of an Enterprise and Related Information."
Management believes that the adoption of these pronouncements will not
significantly effect the information presented in the consolidated financial
statements.
[11] Interim financial information:
The financial information presented as of September 30, 1997 and for the
three-month periods ended September 30, 1997 and 1996 is unaudited, but in the
opinion of management contains all adjustments (consisting only of normally
recurring adjustments) necessary for a fair presentation of such financial
information. Results of operations for interim periods are not necessarily
indicative of those to be achieved for full fiscal years.
NOTE C -- Property and Equipment
Property and equipment consists of the following:
June 30, September 30,
1997 1997
------------ --------------
(Unaudited)
Transmission equipment ............... $1,183,809 $1,184,546
Subscriber equipment ............... 629,085 629,085
Office furniture and equipment ...... 187,754 190,541
Vehicles ........................... 28,330 46,664
Leasehold improvements ............... 65,300 65,300
Building and land .................. 127,487 127,487
---------- ----------
2,221,765 2,243,623
Accumulated depreciation ............ 993,950 1,084,953
---------- ----------
$1,227,815 $1,158,670
========== ==========
NOTE D -- Wireless Channel Rights
The Company acquired wireless channel rights through license holders and
sub-lessors of certain licenses. The Company's wireless channel rights are
principally located in the Vermont market.
The lease and sub-lease agreements frequently require initial fees
followed by certain monthly fees based on subscriber volume, subject to certain
minimum fees. Most of the agreements do not require minimum fees until the
channel starts operations. During the years ended June 30, 1997 and 1996 and
the three-month periods ended September 30, 1997 and 1996 the Company incurred
approximately $94,000, $36,000, $21,000 and
F-9
<PAGE>
WORLDWIDE WIRELESS SYSTEMS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS -- (Continued)
(Unaudited with respect to September 30, 1997 and
for the periods ended September 30, 1997 and 1996)
NOTE D -- Wireless Channel Rights -- (Continued)
$10,000 of lease fees, respectively. The Company is in arrears in paying the
monthly fees to such license holders and sub-lessors. The accounts payable
balance at June 30, 1997 includes approximately $158,000 of monthly fees
payable to the license holders and sub-lessors of the wireless channel rights.
The lease and sublease agreements contain provisions for the termination of the
agreements in the event of nonpayment.
The lease and sub-lease periods generally follow the periods corresponding
to the actual Federal Communications Commission ("FCC") license dates with
provisions for extensions upon license renewal from the FCC. The FCC licenses
are typically granted for ten-year periods. The Company, as at June 30, 1997,
is obligated to pay minimum fees to license holders or sub-lessors in future
periods for channels which have begun operations as follows:
Year Ending
June 30,
------------
1998 ............ $ 84,000
1999 ............ 60,000
2000 ............ 60,000
2001 ............ 60,000
2002 ............ 60,000
Thereafter ...... 160,000
--------
$484,000
========
NOTE E -- Commitments and Other Matters
[1] Programming contracts:
In connection with its distribution of television programming, the Company
has fixed-term contracts with various program suppliers, such as ESPN, TMC and
NESN. Contract terms range in length from one year to five years and expire at
various dates through 1999. Most contracts are subject to automatic renewal
upon expiration unless notice is given, by either party, of intent not to
renew. These contracts require the Company to pay fees to program suppliers
based on the number of subscribers and certain contracts are subject to a
minimum charge ranging from $92 to $128 per month.
[2] InterDigital Communications Corporation Agreement:
In August 1997, the Company entered into an agreement with InterDigital
Communications Corporation ("InterDigital") whereby, InterDigital will use the
Company's service territory and facilities for testing certain of its
proprietary technologies. In conjunction with the agreement, the Company is
obligated to purchase equipment from InterDigital commencing January 1998. The
estimated total cost of purchases will vary based on the number of subscriber
units purchased and installed. Each subscriber unit will cost approximately
$1,500 and related infrastructure equipment to support up to 500 subscriber
units will cost approximately $250,000. In connection therewith, InterDigital
made a bridge loan of $250,000 at an interest rate of prime (as declared by
Citibank) plus 1% and is due the earlier of March 31, 1998 (original due date
December 31, 1997) or the completion of the proposed public offering.
In connection with the loan, the Company issued warrants for the purchase
of 62,000 shares of common stock during either (i) the period commencing on the
14th month and ending on the 36th month following the completion of the
contemplated offering at 50% of the offering price or (ii) January 1, 1998
through January 1, 2002 in the event the offering has not been declared
effective by the Securities and Exchange Commission by December 31, 1997, the
warrant exercise price will be set by the Board of Directors. The warrants have
been valued at approximately $67,000 and will be accounted for as debt discount
and will be amortized over the life of the loan. The effective interest rate on
the note is 56%.
F-10
<PAGE>
WORLDWIDE WIRELESS SYSTEMS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS -- (Continued)
(Unaudited with respect to September 30, 1997 and
for the periods ended September 30, 1997 and 1996)
NOTE E -- Commitments and Other Matters -- (Continued)
[3] VocalTec, Inc. Agreement:
In September 1997, the Company entered into an agreement with Vocal Tec,
Inc. ("VocalTec") pursuant to which, the Company has agreed to purchase
approximately $150,000 of telecommunications equipment and software products
from VocalTec designed to permit telephone conferencing and facsimile services
over the Internet. The Company has also agreed to share marketing and sales
support activities with respect to the VocalTec Services provided by the
Company.
[4] Mortgages payable:
The Company has entered into a first and second mortgage for certain
property at the base of a future transmitting site. The mortgages bear interest
at 8.0% and 8.75%, respectively. Aggregate monthly principal and interest
payments total approximately $620, with the mortgages maturing in 2009 and
2023, respectively. Future principal payments on these mortgages as of June 30,
1997 are as follows:
Year Ending
June 30,
------------
1998 ............ $ 2,000
1999 ............ 3,000
2000 ............ 3,000
2001 ............ 3,000
2002 ............ 3,000
Thereafter ...... 58,000
-------
$72,000
=======
NOTE F -- Operating Leases
[1] The Company has entered into a noncancellable operating lease for
office facilities at one of its tower sites. The lease agreement is adjusted
annually for the percentage increase based on the Consumer Price Index -- All
Urban Consumers. The initial lease agreement expired in January 1997 and was
renewed for an additional five year term. The lease agreement contains renewal
options for up to two additional five-year periods on the existing terms and
conditions. The future minimum lease obligations at June 30, 1997 are as
follows:
Year Ending
June 30,
- -------------
1998 ............ $ 23,000
1999 ............ 23,000
2000 ............ 23,000
2001 ............ 23,000
2002 ............ 13,000
--------
$105,000
========
[2] The Company has entered into two operating leases with the same party
to lease space at the location which the Company uses to broadcast its signal.
The leases are adjusted annually for the percentage increase based on the
Consumer Price Index - All Urban Consumers.
The lease terms range from 8 - 10 years and the Company has the option to
renew the leases at the end of the initial terms. The future minimum lease
obligations at June 30, 1997 are as follows:
F-11
<PAGE>
WORLDWIDE WIRELESS SYSTEMS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS -- (Continued)
(Unaudited with respect to September 30, 1997 and
for the periods ended September 30, 1997 and 1996)
NOTE F -- Operating Leases -- (Continued)
Year Ending
June 30,
- -------------
1998 ............ $ 58,000
1999 ............ 58,000
2000 ............ 35,000
2001 ............ 35,000
2002 ............ 26,000
--------
$212,000
========
The Company is in arrears in making their monthly lease payments. The
accounts payable balance at June 30, 1997 includes approximately $23,000
payable on these leases. The lease agreements contain provisions for the
termination of the agreements in the event of nonpayment.
[3] The total rent expense incurred by the Company for operating leases
for the years ended June 30, 1997, and 1996 and the three-month periods ended
September 30, 1997 and 1996 was approximately $128,000, $131,000, $24,000 and
$34,000, respectively.
NOTE G -- Income Taxes
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," which
requires the Company to recognize deferred tax assets and liabilities for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases.
From inception through the date of the merger, NEWI had elected to be
treated as an S corporation for federal and state income tax purposes, whereby,
earnings and losses were included in the personal tax returns of the
stockholders and are excluded from the net operating loss carryforward
available for use by the Company to reduce future taxable income.
At June 30, 1997, the Company has net operating loss carryforwards for
income tax purposes aggregating approximately $3,008,000 which expire in the
years 2010 through 2012. The use of these carryforwards may be limited on an
annual basis pursuant to the Internal Revenue Code due to certain changes in
ownership.
The Company has provided a 100% valuation allowance for such asset since
the likelihood of realization cannot be determined.
Deferred taxes at June 30 are as follows:
1997 1996
------------ ---------
Net operating losses - deferred tax asset ...... $1,203,000 $594,000
Less valuation allowance thereon ............... 1,203,000 594,000
---------- --------
$ -0- $ -0-
========== ========
F-12
<PAGE>
WORLDWIDE WIRELESS SYSTEMS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS -- (Continued)
(Unaudited with respect to September 30, 1997 and
for the periods ended September 30, 1997 and 1996)
NOTE H -- Stock Warrants
Outstanding stock warrants issued with debt consist of the following at
September 30, 1997:
Number of Exercise Expiration
Shares Price Date
----------- ---------- --------------
(i) 37,500 (A) (A)
(ii) 25,000 3.00 (A)
(iii) 82,500 3.00 August 1998
(iv) 15,000 3.00 December 1998
(v) 7,500 3.00 January 1999
(vi) 6,250 (A) (A)
(vii) 43,500 (A) (A)
(viii) 12,375 (A) (A)
(ix) 62,000 (A) (A)
(x) 1,250 (A) (A)
(xi) 65,000 (A) (A)
(xii) 15,000 (A) (A)
(xiii) 12,908 (A) (A)
(A) The warrants are exercisable during either (i) the period commencing
on the 14th month and ending on the 36th month following the
completion of the contemplated offering at the lower of $3.00 or 50%
of the offering price or (ii) January 1, 1998 through January 1,
2001 in the event the offering has not been declared effective by
the Securities and Exchange Commission by December 31, 1997, at an
exercise price to be set by the Board of Directors.
(i) Contingent warrants were issued with convertible promissory notes
aggregating $150,000 in August 1995. The notes matured in June 1996.
These contingent warrants were valued at approximately $18,000 and
accounted for as debt discount and fully amortized over the term of
the notes. In August 1997, the Company issued 15,000 new warrants
and an additional 22,500 warrants to the same noteholders as the
contingency regarding the August 1995 warrants did not occur and
they were not issued. The Company recorded approximately $135,000 as
a charge to interest expense in the three-month periods ended
September 30, 1997 for such new warrants.
(ii) Warrants issued with a promissory note of $100,000, exercisable
during a three-year period following an initial public offering. The
note matured in October 1996 and remains unpaid. The warrants were
valued at approximately $32,000 and accounted for as debt discount
and amortized over the term of the note.
(iii) Warrants issued with promissory notes aggregating $330,000 in August
1996. The notes matured in March 1997 and remain unpaid. The
warrants were valued at approximately $68,000 and accounted for as
debt discount and amortized over the term of the notes.
(iv) Warrants issued with a promissory note of $60,000 in December 1996.
The note matured in March 1997 and remains unpaid. The warrants were
valued at approximately $12,000 and accounted for as debt discount
and amortized over the term of the note.
(v) Warrants issued with a promissory note of $30,000 in January 1997.
The note matured in July 1997 and remains unpaid. The warrants were
valued at approximately $6,000 and accounted for as debt discount
and amortized over the term of the note.
(vi) Warrants issued in connection with a promissory note for $25,000 in
April 1997. The note's due date was extended from December 1997 to
March 1998. The warrants were valued at approximately $5,000 and
accounted for as debt discount and are being amortized over the term
of the note.
F-13
<PAGE>
WORLDWIDE WIRELESS SYSTEMS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS -- (Continued)
(Unaudited with respect to September 30, 1997 and
for the periods ended September 30, 1997 and 1996)
NOTE H -- Stock Warrants -- (Continued)
(vii) Additional warrants issued upon conversion of two promissory notes
in May 1997. The warrants were valued at approximately $45,000 and
charged as interest expense in the year ended June 30, 1997.
(viii) Warrants issued in June 1997 to the holders of two promissory notes
which matured in June and July 1996. The warrants were valued at
approximately $13,000 and charged as interest expense in the year
ended June 30, 1997.
(ix) See Note E[2] - InterDigital Communications Corporation Agreement.
(x) Warrants issued with a convertible promissory note of $5,000 in
April 1997. The note matures in October 1997. The warrants have been
valued at approximately $1,000 and accounted for as debt discount
and are being amortized over the term of the note.
(xi) Warrants issued in May and June 1997 in connection with services
rendered. Recipients of such warrants included shareholders of the
Company. The warrants have been valued at approximately $67,000 and
have been included in selling, general and administrative expenses
in the year ended June 30, 1997.
(xii) Warrants issued with a promissory note for $60,000 in July 1997. The
note matures in December 1997. The warrants have been valued at
approximately $16,000 and have been accounted for as debt discount
and are being amortized over the term of the note.
(xiii) In August 1997, the Company agreed to issue warrants to purchase
12,908 shares of common stock to those NEWI noteholders who
exchanged their notes for shares of the Company's common stock
pursuant to the merger (see Note A). The warrants were issued at the
rate of one warrant for every $4 of accrued interest payable. The
warrants have been valued at approximately $47,000 and was recorded
as a charge to interest expense in the three-month period ended
September 30, 1997.
NOTE I -- Notes Payable
Notes payable are summarized as follows:
<TABLE>
<CAPTION>
June 30, September 30,
1997 1997
-------------- --------------
(Unaudited)
<S> <C> <C>
Notes payable to principal stockholder, interest at 7.5% ............... $1,586,065 $1,616,057
Notes payable to stockholders, interest at 8.5% to 10% .................. 280,000 347,000
Notes payable to third parties, interest at 7.5% to 10% ............... 479,500 335,000
Convertible promissory notes, interest at 7.5% to 8% .................. 180,000 50,000
---------- ----------
2,525,565 2,348,057
Less unamortized debt discount .......................................... (54,569) (35,044)
---------- ----------
Notes payable ......................................................... $2,470,996 $2,313,013
========== ==========
</TABLE>
Except for five notes aggregating $364,000 which mature between October
1997 and December 1997, the notes matured on various dates through July 1997
and are payable on demand. The Company lacks the resources to repay those
notes.
Certain notes payable aggregating $375,000 and $435,000 at June 30, 1997
and September 30, 1997, respectively are subject to an increased interest rate
of 12%.
F-14
<PAGE>
WORLDWIDE WIRELESS SYSTEMS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS -- (Continued)
(Unaudited with respect to September 30, 1997 and
for the periods ended September 30, 1997 and 1996)
NOTE I -- Notes Payable -- (Continued)
Interest payable to stockholders of approximately $346,000 and $385,000 at
June 30, 1997 and September 30, 1997, respectively is included in accrued
expenses. Principal of $30,000 was paid to the principal stockholder in June
1997.
Notes for $35,000, $52,500 and $210,000 were converted into 10,000 shares,
15,000 shares and 70,000 shares in October 1996, January 1997 and May 1997,
respectively.
In August 1997, the Company made an offer to all holders of its promissory
notes as of March 31,1997 to exchange the notes and accrued interest for common
stock at the lower of $3.00 or 50% of the offering price per share. Holders of
notes aggregating $299,500 plus accrued interest of $28,526 opted to convert
their notes and interest into 109,341 shares, converted using $3.00 per share.
In the event the proposed offering price (Note K) is less than $6.00 per unit,
the Company will need to issue a proportional number of additional shares. In
connection with the conversion, the Company recorded additional interest
expense of approximately $383,000 for the difference between the estimated fair
value of the common stock issued and the value of the notes and accrued
interest.
Interest incurred on debt for the years ended June 30, 1997 and 1996 and
the three-month periods ended September 30, 1997 and 1996 was approximately
$189,000, $110,000, $47,000 and $41,000, respectively, including approximately
$155,000, $82,000, $39,000 and $27,000, respectively, due to stockholders.
NOTE J -- Litigation and Contingencies
The Company's President instituted a lawsuit against an ex-employee
claiming defamation by the ex-employee. In October 1996, the ex-employee filed
a counterclaim against the Company and its President alleging wrongful
termination, misconduct by the President and violations of Securities and
Exchange Commission Regulations. Subsequent to June 30, 1997, the Company
settled the counterclaim for $155,000, $120,000 of which is covered by
insurance. The remaining $35,000 is to be borne by the Company of which $10,000
was advanced by the insurance carrier and is to be repaid by the Company and
the Company issued a noninterest bearing promissory note for $25,000, due on or
before November 10, 1997 and secured by certain real estate and the Company's
common stock owned by the Company's President. Included in selling, general and
administrative expenses for the year ended June 30, 1997, is a charge for
$35,000 related to the settlement.
In January 1997, the Company settled a claim of wrongful termination
instituted by a former employee. The settlement terms included 36,050 shares
transferred from two stockholders, including one who is an officer of the
Company and an agreement to use the plaintiff's corporation as an exclusive
marketing agency to obtain customers for the Company within the states of
Vermont and New York for years beginning March 1, 1997. During the two year
period, the Company shall pay a $45 fee for each subscriber enrolled through
the plaintiff's corporation. The shares transferred on settlement, have been
valued at approximately $108,000 and have been included in selling, general and
administrative expenses in the year ended June 30, 1997. From March 1, 1997
through September 30, 1997, the Company incurred $10,845 in fees for
subscribers enrolled through the plaintiff's corporation and the amount owed at
September 30, 1997 was $1,038.
In April 1997, the Company's President and its wholly owned subsidiary
NEWI was sued by one of the original investors and the ex-wife of another
original investor claiming that the President misrepresented material facts
about himself and NEWI and they relied on these representations when deciding
to invest in NEWI. The suit was dismissed in November 1997.
In April 1997, a former employee filed a complaint with the Vermont
Attorney General's office ("AGO") alleging sexual harassment in the workplace.
The former employee raised the same claims with the Vermont
F-15
<PAGE>
WORLDWIDE WIRELESS SYSTEMS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS -- (Continued)
(Unaudited with respect to September 30, 1997 and
for the periods ended September 30, 1997 and 1996)
NOTE J -- Litigation and Contingencies -- (Continued)
Department of Employment and Training ("DOE&T") when seeking unemployment
compensation. The DOE&T has denied the claim for unemployment compensation. The
Company believes the former employee's complaint filed with AGO to be wholly
without merit but has indicated to the AGO a willingness to mediate the claim.
The proceedings are at an early stage and the Company is not able to
determine the likelihood that it will prevail nor the likely magnitude of
damages awarded in the event it should not prevail.
NOTE K -- Proposed Public Offering
The Company is undertaking a proposed initial public offering of the
Company's securities. There is no assurance that such offering will be
consummated. In connection with the offering, the Company has incurred and
anticipates incurring additional substantial expenses which, if the offering is
not consummated, will be charged to expense.
The Company expects to offer 1,500,000 units at $6.50 per unit. Each unit
consists of one share of common stock and one redeemable warrant. Each warrant
will entitle the holder to purchase one share of common stock at an exercise
price of 120% of the offering price.
NOTE L -- Stock Option
In August 1997, the Company granted an option to purchase 402,776 shares
of common stock to the Company's principal stockholder. The option
is exercisable during the period commencing on the 14th month and ending on the
36th month following completion of the contemplated public offering at the
lower of $3.00 or 50% of the proposed offering price per share. The option has
been valued by the Company at approximately $1,468,000, using the Black-Scholes
pricing model, and has been recorded as compensation expense in the three month
period ended September 30, 1997. In estimating the value of the option pursuant
to the provisions of Statement of Financial Accounting Standards No. 123, the
Company used the following assumptions:
Risk free interest rate ...... 6.50%
Expected life ............... 3 years
Expected volatility ......... 0.40
Dividend yield ............... 0.00%
NOTE M -- Subsequent Events
In October 1997, the Company issued 7,500 warrants to an individual for
services rendered. The warrants are exercisable on the same terms as those
noted in Note H(A). The warrants have been valued at approximately $31,000 and
will be recorded as a charge to operations in the year ending June 30, 1998.
F-16
<PAGE>
================================================================================
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING CONTAINED HEREIN, AND IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER BY WORLDWIDE WIRELESS, INC. TO SELL OR
A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER. THE DELIVERY
OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION STATED IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
-----------------------------------
TABLE OF CONTENTS
Page
----
PROSPECTUS SUMMARY ............ 3
THE COMPANY ..................... 3
THE OFFERING .................. 5
SUMMARY FINANCIAL INFORMATION 6
RISK FACTORS .................. 7
DILUTION ........................ 15
USE OF PROCEEDS ............... 17
DIVIDEND POLICY ............... 17
CAPITALIZATION .................. 18
SELECTED FINANCIAL DATA ......... 19
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDI-
TION AND RESULTS OF OPERA-
TIONS 20
BUSINESS ........................ 23
MANAGEMENT ..................... 36
CERTAIN TRANSACTIONS ............ 40
PRINCIPAL STOCKHOLDERS ......... 41
UNDERWRITING .................. 41
DESCRIPTION OF SECURITIES ...... 43
LEGAL MATTERS .................. 44
EXPERTS ........................ 44
ADDITIONAL INFORMATION ......... 45
FINANCIAL STATEMENTS ............ F-1
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
================================================================================
<PAGE>
================================================================================
1,500,000 Units
WORLDWIDE WIRELESS SYSTEMS, INC.
Consisting of
1,500,000 Shares of
Common Stock
and
1,500,000 Redeemable
Common Stock
Purchase Warrants
-----------------------------------
PROSPECTUS
-----------------------------------
Dupont Securities Group, Inc.
, 1997
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 25. Other Expenses of Issuance and Distribution.
<TABLE>
<S> <C>
Registration Fee .................................... $ 7,045
NASD Filing Fee ....................................... 2,000
NASDAQ SmallCap Marketsm Fee ........................ 10,000
Printing and Engraving .............................. 100,000
Legal Fees and Expenses .............................. 200,000
Accounting Fees and Expenses ........................ 175,000
Transfer Agent Fees ................................. 10,000
State Filing Fees and Blue Sky Expenses ............... 50,000
Underwriter's non-accountable expense allowance ...... 292,500
Miscellaneous ....................................... 128,455
Total .......................................... $ 975,000(1)
</TABLE>
- ------------
(1) All Figures Estimated
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted under the Delaware General Business Law, the Company's
Certificate of Incorporation and By-Laws provide for indemnification of a
Director or Officer under certain circumstances against reasonable expenses,
including attorneys' fees, actually and necessarily incurred in connection with
the defense of an action brought against him by reason of his being a Director
or Officer. In addition, the Company's charter documents provide for the
elimination of Directors' liability to the Company or its stockholders for
monetary damages except in certain instances of bad faith, intentional
misconduct, a knowing violation of law, or illegal personal gain.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Act"), may be permitted to Directors, Officers,
and controlling persons of the Company pursuant to any charter, provision,
by-law, contract, arrangement, statute, or otherwise, the Company has been
advised that in the opinion of the Commission, such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Company of expenses incurred or paid by a Director, Officer, or
controlling person of the Company in the successful defense of any such action,
suit, or proceeding) is asserted by such Director, Officer, or controlling
person of the Company in connection with the Securities being registered
pursuant to this Registration Statement, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication by such court of such issue.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
The sales of securities of the Company described below were exempt from
registration under the Act, in reliance upon the exemptions afforded by Section
4(2) of the Act and Regulation D promulgated thereunder for transactions not
involving a public offering. All certificates evidencing such sales bear an
appropriate restrictive legend, and to the best knowledge of the Company, all
purchasers of the Company's securities, other than certain persons who acquired
such shares in exchange for shares of New England Wireless, Inc., were
accredited investors at the times of such purchases.
On March 11, 1995, the Company issued 801,156 shares of its common stock
for the common stock of 31 former shareholders of NEW in connection with the
merger of NEW into its wholly owned subsidiary. In addition, the Company issued
388,007 shares of its stock in cancellation of $1,164,000 of indebtedness of
NEW owed to its note holders, including Alan R. Ackerman.
II-1
<PAGE>
During 1995, the Company issued 40,000 shares of its stock to 3
individuals at a price of $3.00 per share.
On April 14, 1995 the Company issued a promissory note to an accredited
investor in the amount of $150,000 due on demand after 180 days. The note
carried an interest rate of 7.5%.
On August 21, 1995, the Company issued $150,000 of convertible promissory
notes to 5 accredited investors with annual interest rates of 8%. The notes
were due and payable on June 30, 1996. The notes afford the holders thereof the
right to convert into shares of the Company's common stock at $3.50, and also
afford the holders of the notes "piggy-back" registration rights with respect
to such shares as to any registration statements filed by the Company after
completion of its initial public offering.
On August 22, 1995, the Company issued a promissory note to an accredited
investor in the amount of $25,000 due on demand after 180 days. The note
carried an interest rate of 7.5%.
During December 21, 1995 through January 4, 1996, the Company issued
convertible promissory notes in an aggregate principal amount of $87,500 at an
annual interest rate of 7.5% (increasing to 12% if not timely paid) to 2
investors. These notes were converted into 25,000 shares of the Company's
common stock at a price of $3.50 per share.
In January 1996, the Company issued a promissory note to an accredited
investor in the amount of $24,500 due on demand after 180 days. The note
carried an interest rate of 7.5%
On April 4, 1996, the Company issued a promissory note to an accredited
investor in the principal amount of $100,000 with an annual interest rate of
8.5% (increasing to 12% if not timely paid) due 180 days after issuance. The
note provided for the issuance of 25,000 Warrants (issued during April 1997) to
purchase the Company's common stock at the lesser of $3.00 or 50% of the
public offering price for a period from the 14th month until the 36th month
after completion of a public offering of the Company's stock.
On August 29, 1996, the Company completed a private placement of $330,000
of promissory notes with attached Warrants to five investors. The notes
provided an annual interest rate of 10%, and for conversion into the Company's
common stock at $3.00 per share. The notes were due on March 1, 1997. The
Warrants entitle the holders thereof to purchase an aggregate of 82,500 shares
of the Company's common stock at the lesser of $3.00 per share or 50% of the
price per share of the Company's common stock in a public offering of its
securities.
On December 19, 1996 and January 7, 1997, the Company issued 2 promissory
notes with attached warrants to accredited investors in the aggregate principal
amount of $90,000 with an interest rate of 10%. The notes were due on March 1,
1997 and on July 7, 1997. The warrants entitle the holders thereof to purchase
an aggregate of 22,500 shares of the Company's common stock at the lesser of
$3.00 or 50% of the public offering price.
On March 31, 1997 and April 23, 1997, the Company issued an aggregate of
$30,000 in promissory notes to two investors. One note, in the principal amount
of $5,000, carries an interest rate of 7.5% per annum and is due 180 days from
issuance. The note is convertible into common stock at $3.00 per share. The
other note, in the principal amount of $25,000, carries an interest rate of
prime +1% (increasing to 12% per annum if not timely paid) and is due on
March 31, 1998. The Company also issued warrants to purchase an aggregate of
7,500 shares of its common stock at the lower of $3.00 or 50% of the price per
share of the Company's common stock in a public offering of its securities
exercisable during the period from the 14th month through the 36th month after
the completion of the offering.
On May 21, 1997, the Company issued a promissory note to InterDigital
Communications Corporation in the amount of $250,000. The note carries an
interest rate of prime +1% (increasing to 12% per annum if not timely paid) and
is due on March 31, 1998. The Company also issued warrants to purchase 62,000
shares of its common stock at 50% of the price per share of the Company's
common stock in a public offering of its securities exercisable during the
period from the 14th month until the 36th month after the completion of the
offering.
II-2
<PAGE>
In May 1997, an investor converted $210,000 of indebtedness of the Company
in return for 70,000 shares of the Company's common stock and 43,500 warrants
to purchase the Company's common stock exercisable at the lesser of $3.00 per
share or 50% of the price per share of the Company's common stock in a public
offering of its securities.
In June 1997, the Company issued warrants to purchase 12,375 shares of the
Company's common stock to holders of 2 promissory notes. The warrants are
execisable at the lesser of $3.00 or 50% of the public offering price.
In July 1997, the Company issued 2 promissory notes to accredited
investors in the aggregate amount of $84,000 at an interest rate of 7.5%
due in 180 days, payable on demand. The Company also issued warrants to
purchase 15,000 shares of the Company's common stock at the lesser of $3.00 or
50% of the public offering price.
In August 1997, the Company made an offer to all existing noteholders to
issue shares of its common stock in exchange for outstanding indebtedness at a
price equal to the lesser of $3.00 per share or 50% of the price per share of
the Company's common stock in a public offering of its securities. To date,
noteholders have elected to convert $299,500 in principal and $28,526 in
interest into 109,341 shares of its common stock. The Company will have to
issue pro-rated additional shares of its stock to such persons to the extent
that the per Unit price in this offering is less than $6.00.
In August 1997, in consideration of delays which it has experienced in
securing financing necessary to pursue its operations, the Company has agreed
to issue Warrants to purchase 12,908 shares of its common stock to persons who
previously elected to exchange their indebtedness of NEW for shares of the
Company's common stock in connection with the Company's acquisition of NEW
through a merger with its subsidiary in March, 1995.
In September 1997, the Company issued a promissory note to an accredited
investor in the amount of $8,000 at an interest rate of 7.5% due in 180 days on
demand.
At September 30, 1997, except for notes aggregating $389,000 (which mature
during October 1997 through March 1998), the Company is in default of its
obligations under its notes. Its noteholders could take action to enforce the
Company's obligations and such action, if taken, could materially and adversely
affect the Company.
On October 20, 1997 and November 11, 1997, the Company issued 2 promissory
notes to accredited investors in the amount of $30,000 with an interest rate of
7.5% and $100,000 with an interest rate of 8.5%, respectively. The notes are
due 10 days after receipt of payment by the Company pursuant to a public
offering of its common stock or on April 30, 1998, whichever occurs first.
On October 31, 1997, the Company issued warrants to purchase a total of
37,500 shares to holders of 5 promissory notes in consideration of delays in
repaying their indebtedness. The warrants are exercisable at the lesser of
$3.00 or 50% of the public offering price during the period commencing on the
14th month and ending on the 36th month following the contemplated offering.
In August 1997, the Company issued an option to purchase 402,776 of its
shares of common stock to Alan R. Ackerman, its principal stockholder, in
consideration of past services rendered to the Company. The option is
exercisable at the lesser of $3.00 or 50% of the public offering price for a
period commencing on the 14th month and ending on the 36th month following
completion of the contemplated offering.
In connection with services rendered, the Company issued warrants to
purchase 72,500 shares of the Company's common stock at the lesser of $3.00 or
50% of the public offering price for a period commencing on the 14th month and
ending on the 36th month after the completion of a public offering of the
Company's common stock.
Except for transactions with Alan R. Ackerman, as noted, all of these
transactions were with unaffiliated persons.
II-3
<PAGE>
ITEM 27. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit # Description
- ----------- -----------------------------------------------------------------------------------------
<S> <C>
1.1 Underwriting Agreement
1.2 Agreement Among Underwriters
1.3 Selected Dealers Agreement
1.4 Lock-up Agreement
+3.1 Certificate of Incorporation
+3.2 By-Laws
3.3 Certificate for Renewal and Revival of Charter
++4.1 Form of Stock Certificate
+4.2 Selected pages of Certificate of Incorporation defining number of shares of common stock
4.3 Form of Warrant Agreement and Warrant Certificate
4.4 Form of Underwriter's Unit Purchase Warrant
+5.1 Form of Opinion re: legality of securities
+10.1 MMDS Channel Lease Agreement
+10.2 Lease Agreement between Glenn Martin and Elouise Martin
+10.3 OFS Channel Lease Agreement with Ivan Nachman
+10.4 OFS Channel Lease Agreement with Blake Twedt
+10.5 OFS Channel Lease Agreement with John Dudeck
+10.6 MMDS Channel Lease Agreement with New England Wireless
+10.7 Agreement between Vermont ETV and New England Wireless
+10.8 Agreement between Vermont ETV and New England Wireless
+10.9 Commercial Lease between Kevin McGovern and New England Wireless
+10.10 Ascutney Associates, Inc. Lease Agreement
+10.11 Beta-Site Agreement with Interdigital Communications Corporation
+10.12 Note and Mortgage and Assumption Agreement
++10.13 Secured Promissory Note to Alan Ackerman
10.14 Security Agreement to Alan R. Ackerman
10.15 VocalTec, Inc. Agreement
10.16 Form of Promissory Notes Outstanding (Form C)
10.17 Form of Promissory Notes Outstanding (Form D)
10.18 Form of Promissory Notes Outstanding (Form E)
10.19 Form of Promissory Notes Outstanding (Form F)
10.20 Form of Promissory Notes Outstanding (Form G)
10.21 Form of Warrants Outstanding (Form A)
10.22 Form of Warrants Outstanding (Form B)
10.23 Form of Warrants Outstanding (Form C)
10.24 Form of Warrants Outstanding (Form D)
10.25 Form of Warrants Outstanding (Form E)
++11.1 Statement of Earnings per share
+15.1 Letter acknowledging use of interim unaudited financial statements*
++21.1 Statement of Subsidiaries
++23.1 Consent of Counsel
++23.2 Consent of Independent Auditors
+24.1 Power of Attorney
+27.1 Financial Data Schedule
</TABLE>
+ Previously filed
++ Previously filed exhibit is revised in this amendment.
II-4
<PAGE>
ITEM 28. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
1. The undersigned Registrant hereby undertakes:
(a) To file, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement;
(b) To include any Prospectus required by Section 10(a)(3) of the
Securities Act;
(c) To reflect in the Prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement; and
(d) To include any additional or changed material information with respect
to the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration
Statement.
(e) That, for the purpose of determining any liability under the Securities
Act, each post-effective amendment shall be deemed to be a new
registration statement related to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(f) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
2. The Company hereby undertakes that, if relying on Rule 430A under the
Securities Act:
(a) for determining any liability under the Securities Act, the
information omitted from the form of Prospectus filed as a part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Company under Rule 424(b)(1) or (4), or 497(h) under
the Securities Act shall be treated as part of this Registration Statement as
of the time the Commission declared it effective.
(b) for determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be treated as
a new registration statement for the securities offered in this Registration
Statement and that offering of the securities at that time shall be treated as
the initial bona fide offering of those securities.
II-5
<PAGE>
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2 and authorized this
Registration Statement to be signed on its behalf by the undersigned.
WORLDWIDE WIRELESS SYSTEMS, INC.
By: /s/ Scott A. Wendel
----------------------------------------
Scott A. Wendel
President and Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
Signature Title Date
- ---------------------- ------------------------------------------- ------------------
<S> <C> <C>
/s/ Scott A. Wendel President and Chief Executive Officer December 31, 1997
/s/ Harold Doran (Chief Financial Officer) (Chief Account- December 31, 1997
ing Officer) Secretary-Treasurer, Director
/s/ Jack Polak Director December 31, 1997
</TABLE>
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit # Description
- ----------- -----------------------------------------------------------------------------------------
<S> <C>
1.1 Underwriting Agreement
1.2 Agreement Among Underwriters
1.3 Selected Dealers Agreement
1.4 Lock-up Agreement
+3.1 Certificate of Incorporation
+3.2 By-Laws
3.3 Certificate for Renewal and Revival of Charter
++4.1 Form of Stock Certificate
+4.2 Selected pages of Certificate of Incorporation defining number of shares of common stock
4.3 Form of Warrant Agreement and Warrant Certificate
4.4 Form of Underwriter's Unit Purchase Warrant
+5.1 Form of Opinion re: legality of securities
+10.1 MMDS Channel Lease Agreement
+10.2 Lease Agreement between Glenn Martin and Elouise Martin
+10.3 OFS Channel Lease Agreement with Ivan Nachman
+10.4 OFS Channel Lease Agreement with Blake Twedt
+10.5 OFS Channel Lease Agreement with John Dudeck
+10.6 MMDS Channel Lease Agreement with New England Wireless
+10.7 Agreement between Vermont ETV and New England Wireless
+10.8 Agreement between Vermont ETV and New England Wireless
+10.9 Commercial Lease between Kevin McGovern and New England Wireless
+10.10 Ascutney Associates, Inc. Lease Agreement
+10.11 Beta-Site Agreement with Interdigital Communications Corporation
+10.12 Note and Mortgage and Assumption Agreement
++10.13 Secured Promissory Note to Alan Ackerman
10.14 Security Agreement to Alan R. Ackerman
10.15 VocalTec, Inc. Agreement
10.16 Form of Promissory Notes Outstanding (Form C)
10.17 Form of Promissory Notes Outstanding (Form D)
10.18 Form of Promissory Notes Outstanding (Form E)
10.19 Form of Promissory Notes Outstanding (Form F)
10.20 Promissory Notes Outstanding (Form G)
10.21 Form of Warrants Outstanding (Form A)
10.22 Form of Warrants Outstanding (Form B)
10.23 Form of Warrants Outstanding (Form C)
10.24 Form of Warrants Outstanding (Form D)
10.25 Form of Warrants Outstanding (Form E)
++11.1 Statement of Earnings per share
+15.1 Letter acknowledging use of interim unaudited financial statements*
++21.1 Statement of Subsidiaries
++23.1 Consent of Counsel
++23.2 Consent of Independent Auditors
+24.1 Power of Attorney
+27.1 Financial Data Schedule
</TABLE>
+ Previously filed.
++ Previously filed exhibit is revised in this amendment.
<PAGE>
WORLDWIDE WIRELESS SYSTEMS, INC.
6 East 43rd Street
New York, NY 10017
UNDERWRITING AGREEMENT
DuPont Securities Group, Inc. ___________, 1997
19 Townsend Square
Oyster Bay, New York 11771
Gentlemen:
Worldwide Wireless Systems, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to Dupont Securities Group, Inc.
("Dupont" or the "Representative") and to each of the other underwriters named
in Schedule I hereto (the "Underwriters"), for each of whom you are acting as
Representative, an aggregate of 1,500,000 Units (each Unit consisting of one
share of Common Stock, ("Common Stock"), and one Common Stock Purchase Warrant
(the "Warrants") of the Company) at a public offering price of $____ per Unit
(estimated to range from $6.00 to $7.00 per Unit). Each Warrant shall entitle
the holder to purchase one share of Common Stock for a five year period from
the Effective Date (hereinafter defined) at a price of $7.50 per share. The
Unit Warrants will be immediately detachable from the Common Stock on the
Effective Date. The Warrants may be called by the Company commencing one year
from Effective Date upon at least thirty days prior written notice at a price
of $.10 per Warrant at any time provided the closing bid for the Common Stock
is at least an average of $9.00 per share during the twenty (20) trading day
period ending five days preceding the date of the written notice. The
1,500,000 Units are hereinafter sometimes referred to as the "Firm Units."
Upon the request of the Representative, and as provided in Section 3 hereof,
the Company will also issue and sell to the Underwriters up to a maximum of an
additional 225,000 Units for the purpose of covering over-allotments. Such
additional Units are hereinafter sometimes referred to as the "Optional
Units." Both the Firm Units and the Optional Units are sometimes collectively
referred to herein as the "Units." All of the securities which are the subject
of this Agreement are more fully described in the Prospectus of the Company
described below. In the event that the Representative does not form an
underwriting group but decides to act as the sole Underwriter, then all
references to Dupont herein as Representative shall be deemed to be to it as
such sole Underwriter and Section 14 hereof shall be deemed deleted in its
entirety.
The Company understands that the Underwriters propose to make a
public offering of the Units as soon as the Representative deems advisable
after the Registration Statement hereinafter referred to becomes effective.
The Company hereby confirms its agreement with the Representative and the
other Underwriters as follows:
<PAGE>
SECTION 1. Description of Securities. The Company's authorized and
outstanding capitalization when the public offering of securities contemplated
hereby is permitted to commence, under the Securities Act of 1933, as amended
(the "Act"), and at the Closing Date (hereinafter defined) and the terms of
the Warrants will be as set forth in the Prospectus (hereinafter defined).
SECTION 2. Representations and Warranties of the Company. The Company
hereby represents and warrants to, and agrees with, the Underwriters as
follows:
(a) A Registration Statement on Form SB-2 and amendments
thereto (No. 333-________) with respect to the Units, including a form of
prospectus relating thereto, copies of which have been previously delivered to
you, have been prepared by the Company in conformity with the requirements of
the Act, and the rules and regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") thereunder, and has been
filed with the Commission under the Act. The Company, subject to the
provisions of Section 6(a) hereof, may file one or more amendments to such
Registration Statement and Prospectus. The Underwriters will receive copies of
each such amendment.
The date on which such Registration Statement is declared
effective under the Act and the public offering of the Units as contemplated
by this Agreement is therefore authorized to commence, is herein called the
"Effective Date." The Registration Statement and Prospectus, as finally
amended and revised immediately prior to the Effective Date, are herein called
respectively the "Registration Statement" and the "Prospectus." If, however, a
prospectus is filed by the Company pursuant to Rule 424(b) of the Rules and
Regulations which differs from the Prospectus, the term "Prospectus" shall
also include the prospectus filed pursuant to Rule 424(b).
(b) The Registration Statement (and Prospectus), at the time
it becomes effective under the Act, (as thereafter amended or as supplemented
if the Company shall have filed with the Commission an amendment or
supplement), and, with respect to all such documents, on the Closing Date
(hereinafter defined), will in all material respects comply with the
provisions of the Act and the Rules and Regulations, and will not contain an
untrue statement of a material fact and will not omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that none of the representations and warranties
contained in this subsection (b) shall extend to the Underwriters in respect
of any statements in or omissions from the Registration Statement and/or the
Prospectus, based upon information furnished in writing to the Company by the
Underwriters specifically for use in connection with the preparation thereof.
(c) The Company has been duly incorporated and is now, and
on the Closing Date will be, validly existing as a corporation in good
standing under the laws of the State of Delaware, having all required
corporate power and authority to own its properties and conduct its business
as described in the Prospectus. The Company is now,
2
<PAGE>
and on the Closing Date will be, duly qualified to do business as a foreign
corporation in good standing in all of the jurisdictions in which it conducts
its business or the character or location of its properties requires such
qualifications except where the failure to so qualify would not materially
adversely affect the Company's business, properties or financial condition.
The Company has no subsidiaries, except as are set forth in the Prospectus.
(d) The financial statements of the Company (audited and
unaudited) included in the Registration Statement and Prospectus present
fairly the financial position and results of operations and changes in
financial condition of the Company at the respective dates and for the
respective periods to which they apply; and such financial statements have
been prepared in conformity with generally accepted accounting principles,
consistently applied throughout the periods involved, and are in accordance
with the books and records of the Company.
(e) To the best of the Company's knowledge, Richard A.
Eisner & Company, LLP independent auditors, who have given their report on
certain financial statements which are included as a part of the Registration
Statement and the Prospectus are independent public accountants as required
under the Act and the Rules and Regulations.
(f) Subsequent to the respective dates as of which
information is given in the Prospectus and prior to the Closing Date and,
except as set forth in or contemplated in the Prospectus, (i) the Company has
not incurred, nor will it incur, any material liabilities or obligations,
direct or contingent, nor has it, nor will it have entered into any material
transactions, in each case not in the ordinary course of business; (ii) there
has not been, and will not have been, any material change in the Company's
Certificate of Incorporation or in its capital stock or funded debt; and (iii)
there has not been, and will not have been, any material adverse change in the
business, net worth or properties or condition (financial or otherwise) of the
Company whether or not arising from transactions in the ordinary course of
business.
(g) Except as otherwise set forth in the Prospectus, the
real and personal properties of the Company as shown in the Prospectus and
Registration Statement to be owned by the Company are owned by the Company by
good and marketable title free and clear of all liens and encumbrances, except
those specifically referred to in the Prospectus, and except those which do
not materially adversely affect the use or value of such assets and except the
lien for current taxes not now due, or are held by the Company by valid
leases, none of which is in default. Except as disclosed in the Prospectus and
Registration Statement, the Company in all material respects has full right
and licenses, permits and governmental authorizations required to maintain and
operate its business and properties as the same are now operated and, to its
best knowledge, none of the activities or business of the Company is in
material violation of, or causes the Company to violate any laws, ordinances
and regulations applicable thereto, the violation of which would have a
material adverse impact on the condition (financial or otherwise), business,
properties or net worth of the Company.
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(h) The Company has no material contingent obligations, nor
are its properties or business subject to any material risks, which may be
reasonably anticipated, which are not disclosed in the Prospectus.
(i) Except as disclosed in the Prospectus and Registration
Statement, there are no material actions, suits or proceedings at law or in
equity of a material nature pending, or to the Company's knowledge, threatened
against the Company which are not adequately covered by insurance, which might
result in a material adverse change in the condition (financial or otherwise),
properties or net worth of the Company, and there are no proceedings pending
or, to the knowledge of the Company, threatened against the Company before or
by any Federal or State Commission, regulatory body, or administrative agency
or other governmental body, wherein an unfavorable ruling, decision or finding
would materially adversely affect the business, properties or net worth or
financial condition or income of the Company, which are not disclosed in the
Prospectus.
(j) All of the outstanding shares of Common Stock are duly
authorized and validly issued and outstanding, fully paid, and non-assessable,
and are free of preemptive rights. The Common Stock and the shares of Common
Stock issuable upon exercise of the Warrants, when paid for, issued and
delivered in accordance with this Agreement and the Warrant Agreement between
the Company and Continental Stock Transfer & Trust Company, dated as of the
date hereof will be duly authorized, validly issued, fully paid and
non-assessable and will not be issued in violation of any preemptive rights.
The Underwriters will receive good and marketable title to the Units purchased
by them from the Company, free and clear of all liens, encumbrances, claims,
security interests, restrictions, stockholders' agreements and voting trusts
whatsoever. Except as set forth in the Prospectus, there are no outstanding
options, warrants, or other rights, providing for the issuance of, and no
commitments, plans or arrangements to issue, any shares of any class of
capital stock of the Company, or any security convertible into, or
exchangeable for, any shares of any class of capital stock of the Company. All
of the securities of the Company to which this Agreement relates conform to
the statements relating to them that are contained in the Registration
Statement and Prospectus.
(k) The certificate or certificates required to be furnished
to the Underwriters pursuant to the provisions of Section 11 hereof will be
true and correct.
(l) The execution and delivery by the Company of this
Agreement has been duly authorized by all necessary corporate action and it is
a valid and binding obligation of the Company, enforceable against it in
accordance with its terms except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws pertaining to
creditors rights generally.
(m) No default exists, and no event has occurred which, with
notice or lapse of time, or both, would constitute a default in the due
performance and observance of any material term, covenant or condition by the
Company or any other party, of any material indenture, mortgage, deed of
trust, note or any other material agreement or instrument to which the Company
is a party or by which it or its business or its properties may be bound or
affected, except (i) as disclosed in the Prospectus, (ii) such defaults as
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have been waived by all parties who would otherwise have a remedy or right
with respect thereto or (iii) such defaults which will not cause any material
adverse change in the business, net worth, properties or conditions (financial
or otherwise), of the Company. The Company has full power and lawful authority
to authorize, issue and sell the Units to be sold by it hereunder on the terms
and conditions set forth herein and in the Registration Statement and in the
Prospectus. No consent, approval, authorization or other order of any
regulatory authority is required for such authorization, issue or sale, except
as may be required under the Act or State securities laws. The execution and
delivery of this Agreement, the consummation of the transactions herein
contemplated, and compliance with the terms hereof will not conflict with, or
constitute a default under any indenture, mortgage, deed of trust, note or any
other agreement or instrument to which the Company is now a party or by which
it or its business or its properties may be bound or affected; the Certificate
of Incorporation and any amendments thereto; the by-laws of the Company, as
amended; or any law, order, rule or regulation, writ, injunction or decree of
any government, governmental instrumentality, or court, domestic or foreign,
having jurisdiction over the Company or its business or properties.
(n) No officer or director of the Company has taken, and
each officer and director has agreed that he will not take, directly or
indirectly, any action designed to stabilize or manipulate the price of the
Units, the Common Stock or the Warrants in the open market following the
Closing Date or any other type of action designed to, or that may reasonably
be expected to cause or result in such stabilization or manipulation, or that
may reasonably be expected to facilitate the initial sale, or resale, of any
of the securities which are the subject of this Agreement.
(o) The Warrants to purchase Units to be issued to the
Representative (the "Underwriters' Unit Warrants") hereunder will be, when
issued, duly and validly authorized and executed by the Company and will
constitute valid and binding obligations of the Company, legally enforceable
in accordance with their terms (except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
pertaining to creditors rights generally), and the Company will have duly
authorized, reserved and set aside the shares of its Common Stock issuable
upon exercise of the Underwriters' Unit Warrants and the underlying warrants,
and such stock, when issued and paid for upon exercise of the Underwriters'
Unit Warrants and the underlying warrants in accordance with the provisions
thereof, will be duly authorized and validly issued, fully-paid and
non-assessable.
(p) All of the aforesaid representations, agreements, and
warranties shall survive delivery of, and payment for, the Units.
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SECTION 3. Issuance, Sale and Delivery of the Firm Units, the
Optional Units and the Underwriters' Warrants.
(a) Upon the basis of the representations, warranties,
covenants and agreements of the Company herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell to the
several Underwriters, and the Underwriters, severally and not jointly, agree
to purchase from the Company, the number of the Firm Units set forth opposite
the respective names of the Underwriters in Schedule I hereto, plus any
additional Units which such Underwriter may become obligated to purchase
pursuant to the provisions of Section 14 hereof.
The purchase price of the Units to be paid by the
several Underwriters shall be $________ per Unit ($______ per Unit less a ten
percent discount).
In addition, and upon the same basis, and subject
to the same terms and conditions, the Company hereby grants an option to you
to purchase, but only for the purpose of covering over-allotments, upon not
less than two days' notice from the Representative, the Optional Units, or any
portion thereof, at the same price per Unit as that set forth in the preceding
sentence; and each Underwriter agrees, severally and not jointly, to purchase
Optional Units in the same proportion in which it has agreed to purchase Firm
Units. Notwithstanding anything contained herein to the contrary, you
individually and not as Representative may purchase all or any part of the
Optional Units and are not obligated to offer the Optional Units to the other
Underwriters. The Optional Units may be exercised at any time, and from time
to time, thereafter within a period of 45 calendar days following the
Effective Date. The time(s) and date(s) (if any) so designated for delivery
and payment for the Optional Units shall be set forth in the notice to the
Company. Such dates are herein defined as the Additional Closing Date(s).
(b) Payment for the Firm Units shall be made by certified
or official bank checks in New York Clearing House funds, payable to the order
of the Company, at the offices of the Representative, or its clearing agent, or
at such other place as shall be agreed upon by the Representative and the
Company, upon delivery of the Firm Units to the Representative for the
respective accounts of the Underwriters. In making payment to the Company, the
Representative may first deduct all sums due to it for the balance of the
non-accountable expense allowance and under the Financial Consulting Agreement
(as hereinafter defined). Such delivery and payment shall be made at 10:00
A.M., New York City Time on the third business day which may be extended by
the Representative to not later than the fifth business day following the
Effective Date (unless postponed in accordance with the provisions of Section
14 hereof) or at such other time as shall be agreed upon by the Representative
and the Company. The time and date of such delivery and payment are hereby
defined as the Closing Date. It is understood that each Underwriter has
authorized the Representative, for the account of such Underwriter, to accept
delivery of, receipt for, and make payment of the purchase price for, the Firm
Units which it has agreed to purchase. You, individually, and not as
Representative may (but shall not be obligated to) make payment of the
purchase price for the Firm Units to be purchased by any Underwriter whose
check shall not have been received by the Closing
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Date, for the account of such Underwriter, but any such payment shall not
relieve such Underwriter from its obligations hereunder.
(c) Payment for the Optional Units shall be made at the
offices of the Representative, or its clearing agent or at such other place as
shall be agreed upon by the Representative and the Company, in accordance with
the notice delivered pursuant to Section 3(a) which shall be no later than
seven business days from the expiration of the forty-five day option period.
(d) Certificates for the Firm Units and for the Optional
Units shall be registered in such name or names and in such authorized
denominations as the Representative may request in writing at least two
business days prior to the Closing Date, and the Additional Closing Date(s)
(if any). The Company shall permit the Representative to examine and package
said certificates for delivery at least one full business day prior to the
Closing Date and prior to the Additional Closing Date(s). The Company shall
not be obligated to sell or deliver any of the Firm Units except upon tender
of payment by the Underwriters for all of the Firm Units agreed to be
purchased by them hereunder. The Representative, however, shall have the sole
discretion to determine the number of Optional Units, if any, to be purchased.
(e) At the time of making payment for the Firm Units, the
Company also hereby agrees to sell to the Representative, Underwriters' Unit
Warrants to purchase 150,000 Units for an aggregate purchase price of $150.
Each Unit issuable upon exercise of the Underwriters' Unit Warrants shall be
identical to the Units sold to the public. Each Underwriters' Unit Warrant
shall entitle the owner thereof to purchase one Unit of the Company at an
exercise price of $_____ per Unit (120% of the initial public offering price
per Unit). Such Underwriters' Unit Warrants are to become exercisable
immediately after from the Effective Date, and thereafter shall remain
exercisable for a period of five years. For a period of one year after the
Effective Date, the Underwriters Unit Warrants shall not be transferable
except to co-underwriters, selling group members and their officers or
partners. The Underwriters Unit Warrants shall contain customary clauses
protecting the holders thereof in the event the Company pays stock dividends,
effects stock splits, or effects a sale of assets, merger or consolidation.
(f) On and subject to the Closing Date, the Company will
give irrevocable instructions to its transfer agent (which it agrees to
appoint) to deliver to the Representative (at the Company's expense) for a
period of five years from the Closing Date, daily advice sheets showing any
transfers of Units, shares of common stock and Warrants and from time to time
during the aforesaid period a complete stockholders' list will be promptly
furnished by the Company when requested by the Representative on not more than
two occasions per year. Furthermore, the Company will give irrevocable
instructions to Depository Trust Company for a period of five years from the
Closing Date to deliver weekly transfer sheets showing any transfers of Units,
shares of common stock and Warrants.
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SECTION 4. Public Offering. The several Underwriters agree, subject
to the terms and provisions of this Agreement, to offer the Units to the
public as soon as practicable after the Effective Date, at the initial
offering price of $_____ per Unit and upon the terms described in the
Prospectus. The Representative may, from time to time, decrease the public
offering price, after the initial public offering, to such extent as the
Representative may determine, however, such decreases will not affect the
price payable to the Company hereunder.
SECTION 5. Registration Statement and Prospectus. The Company will
furnish the Representative, without charge, two signed copies of the
Registration Statement and of each amendment thereto, including all exhibits
thereto and such amount of conformed copies of the Registration Statement and
Amendments as may be reasonably requested by the Representative for
distribution to each of the Underwriters and Selected Dealers.
The Company will furnish, at its expense, as many printed
copies of a Preliminary Prospectus and of the Prospectus as the Representative
may request for the purposes contemplated by this Agreement. If, while the
Prospectus is required to be delivered under the Act or the Rules and
Regulations, any event known to the Company relating to or affecting the
Company shall occur which should be set forth in a supplement to or an
amendment of the Prospectus in order to comply with the Act (or other
applicable law) or with the Rules and Regulations, the Company will forthwith
prepare, furnish and deliver to the Representative and to each of the other
Underwriters and to others whose names and addresses are designated by the
Representative, in each case at the Company's expense, a reasonable number of
copies of such supplement or supplements to or amendment or amendments of, the
Prospectus.
The Company authorizes the Underwriters and the selected
dealers, if any, in connection with the distribution of the Units and all
dealers to whom any of the Units may be sold by the Underwriters, or by any
Selected Dealer, to use the Prospectus, as from time to time amended or
supplemented, in connection with the offering and sale of the Units and in
accordance with the applicable provisions of the Act and the applicable Rules
and Regulations and applicable State Securities Laws.
SECTION 6. Covenants of the Company. The Company covenants and agrees
with each Underwriter that:
(a) After the date hereof, the Company will not at any time,
whether before or after the Effective Date, file any amendment to the
Registration Statement or the Prospectus, or any supplement to the Prospectus,
of which the Representative shall not previously have been advised and
furnished with a copy, or to which the Representative or the Underwriters'
counsel shall have reasonably objected in writing on the ground that it is not
in compliance with the Act or the Rules and Regulations.
(b) The Company will use its best efforts to cause the
Registration Statement to become effective (provided, however, the Company
shall not cause the Registration Statement to become effective without the
written consent of Dupont) and will
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advise the Representative, (i) when the Registration Statement shall have
become effective and when any amendment thereto shall have become effective,
and when any amendment of or supplement to the Prospectus shall be filed with
the Commission, (ii) when the Commission shall make request or suggestion for
any amendment to the Registration Statement or the Prospectus or for
additional information and the nature and substance thereof, and (iii) of the
issuance by the Commission of an order suspending the effectiveness of the
Registration Statement or of the initiation of any proceedings for that
purpose, and will use its best efforts to prevent the issuance of such an
order, or if such an order shall be issued, to obtain the withdrawal thereof
at the earliest possible moment.
(c) The Company will prepare and file with the Commission,
promptly upon the request of the Representative, such amendments, or
supplements to the Registration Statement or Prospectus, in form and substance
satisfactory to counsel to the Company, as in the reasonable opinion of Lester
Morse P.C., as counsel to the Underwriters, may be necessary or advisable in
connection with the offering or distribution of the Units, and will diligently
use its best efforts to cause the same to become effective.
(d) The Company will, at its expense, when and as requested
by the Representative, supply all necessary documents, exhibits and
information, and execute all such applications, instruments and papers as may
be required, in the opinion of the Underwriters' counsel, to qualify the Units
or such part thereof as the Representative may determine, for sale under the
so-called "Blue Sky" Laws of such states as the Representative shall
designate, and to continue such qualification in effect so long as required
for the purposes of the distribution of the Units, provided, however, that the
Company shall not be required to qualify as a foreign corporation or dealer in
securities or to file a consent to service of process in any state in any
action other than one arising out of the offering or sale of the Units.
(e) The Company will, at its own expense, file and provide,
and continue to file and provide, such reports, financial statements and other
information as may be required by the Commission, or the proper public bodies
of the States in which the Units may be qualified for sale, for so long as
required by applicable law, rule or regulation and will provide the
Representative with copies of all such registrations, filings and reports on a
timely basis.
(f) During the period of five years from the Effective Date,
the Company will deliver to the Underwriter a copy of each annual report of
the Company, and will deliver to the Underwriter (i) within 50 days after the
end of each of the Company's first three quarter-yearly fiscal periods, a
balance sheet of the Company as at the end of such quarter-yearly period,
together with a statement of its income and a statement of changes in its cash
flow for such period (Form 10-QSB), all in reasonable detail, signed by its
principal financial or accounting officer, (ii) within 105 days after the end
of each fiscal year, a balance sheet of the Company as at the end of such
fiscal year, together with a statement of its income and statement of cash
flow for such fiscal year (Form 10-KSB), such balance sheet and statement of
cash flow for such fiscal year to be in reasonable detail and to be
accompanied by a certificate or report of independent public accountants,
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(who may be the regular accountants for the Company), (iii) as soon as
available a copy of every other report (financial or other) mailed to the
stockholders, and (iv) as soon as available a copy of every non-confidential
report and financial statement furnished to or filed with the Commission or
with any securities exchange pursuant to requirements by or agreement with
such exchange or the Commission pursuant to the Securities Exchange Act of
1934, as amended (the "1934 Act"), or any regulations of the Commission
thereunder. If and for so long as the Company has one or more active
subsidiaries, the financial statements required by (i) and (ii) above shall be
furnished on a consolidated basis in respect of the Company and all of the
Company's subsidiaries. The financial statements referred to in (ii) shall
also be furnished to all of the stockholders of the Company as soon as
practicable after the 90 days referred to therein.
(g) The Company represents that with respect to the Warrants
and the shares of Common Stock, it will prepare and file a Registration
Statement with the Commission pursuant to Section 12(g) of the 1934 Act, prior
to the Effective Date with a request that such Registration Statement will
become effective on the Effective Date. The Company understands that, to
register, it must prepare and file with the Securities and Exchange Commission
a General Form of Registration of Securities (Form 8-A or Form 10). In
addition, the Company agrees to qualify its Units, Common Stock and the
Warrants for listing on the NASDAQ system on the Effective Date and will take
all reasonable and necessary and appropriate action so that the securities
continue to be listed for trading in the NASDAQ system for at least ten years
from the Effective Date provided the Company otherwise complies with the
prevailing maintenance requirements. In addition, at such time as the Company
qualifies for listing its securities on the National Market System of NASDAQ,
the Company will use its best efforts to have the Company's Units and
components thereof listed on the National Market System of NASDAQ in lieu of
listing as Small-Cap Issues on NASDAQ. For so long as the Company is a
reporting company under the 1934 Act, the Company shall comply with all
periodic reporting and proxy solicitation requirements imposed by the
Commission pursuant to the 1934 Act.
(h) The Company will make generally available to its
security holders, as soon as practicable, but in no event later than 15 months
after the Effective Date, an earnings statement of the Company (which need not
be audited) in reasonable detail, covering a period of at least twelve months
beginning after the Effective Date, which earnings statement shall satisfy the
provisions of Section 11(a) of the Act.
(i) The Company will, on or about the Effective Date, apply
for listing in Standard and Poor's Corporation Records and Standard & Poor's
Monthly Stock Guide and shall use its best efforts to have the Company listed
in such reports for a period of not less than ten (10) years from the Closing
Date. The Company will request accelerated treatment in the Daily News
Supplement of Standard and Poor's Corporation Records.
(j) The Company shall employ the services of an auditing
firm acceptable to the Representative in connection with the preparation of
the financial statements required to be included in the Registration Statement
and shall continue to
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appoint such auditors or such other auditors as are reasonably acceptable to
the Representative for a period of five (5) years following the Effective Date
of the Registration Statement. Said financial statements shall be prepared in
accordance with Regulation S-X under the Rules and Regulations. The Company
shall appoint Continental Stock Transfer & Trust Company as transfer agent for
the Common Stock (the "Transfer Agent") and as warrant agent for the Warrants.
(k) Prior to the Effective Date, the Company will enter into
employment contracts with its executive officers and directors in the form
filed with the Securities and Exchange Commission and approved by the
Representative.
(l) Within ninety (90) days subsequent to the Effective
Date, the Company will furnish "Key Man" Life Insurance in the amount of
$1,000,000 each on the lives of __________and __________ with the Company as
the beneficiary thereof and the Company shall pay the annual premiums,
therefore, for a period of not less than five years from the Effective Date.
(m) The Company will for a period of five years:
(i) Furnish to the Representative and to the Company's
shareholders annual audited financial statements contained in an annual report
and unaudited financial statements contained in quarterly reports for each of
the Company's first three quarters.
(ii) Furnish the Representative with a duplicate copy of
the daily transfer sheets prepared by the Transfer Agent and a duplicate copy of
a list of stockholders.
(iii) Designate an Audit Committee which will generally
supervise the financial affairs of the Company.
(iv) At its expense, shall cause its regularly engaged
independent certified public accountants to read and comment (but not audit) the
Company's financial statements for each of the first three (3) fiscal quarters
prior to the announcement of quarterly financial information, the filing of the
Company's 10-QSB quarterly report and the mailing of quarterly financial
information to security holders.
(n) Until such time as the securities of the Company are
listed on the New York Stock Exchange, the American Stock Exchange or
NASDAQ/NMS, the Company shall cause its legal counsel or an independent third
party acceptable to the Representative to provide the Representative with a
survey with the first one to be delivered at Closing, to be updated at least
annually, of those states in which the securities of the Company may be traded
in non-issuer transactions under the Blue Sky laws of the states and the basis
for such authority.
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(o) As soon as practicable after the Closing Date, the
Company will deliver to the Representative and its counsel a total of two
bound volumes of copies of all documents relating to the public offering which
is the subject of this Agreement.
(p) Stock certificates and Warrant certificates shall be
first submitted to the Representative for approval prior to printing. The
Company shall, as promptly as possible, after filing the Registration
Statement with the Commission, obtain a CUSIP number for the Units, Common
Stock and Unit Warrants and have each of the securities eligible for closing
through Depository Trust Company.
(q) The Company will not file a Form S-8 Registration
Statement for a period of thirteen months from the Effective Date without the
Representative's prior written consent. Further, the Company will not offer
its securities pursuant to Regulation S of the Securities Act of 1933, as
amended, for a period of three years from the Effective Date without the
Representative's prior written consent.
SECTION 7. Expenses of the Company.
The Company shall be responsible for and shall bear all expenses
directly and necessarily incurred in connection with the proposed financing,
including: (i) the preparation, printing and filing of the Offering Documents
and amendments thereto, including NASD, SEC and NASDAQ filing and/or
application fees, preliminary and final Prospectus and the printing of the
Underwriting Agreement, the Agreement Among Underwriters and the Selected
Dealers' Agreement, a Blue Sky Memorandum, material to be circulated to the
Underwriters by us and other incidental material; (ii) the issuance and
delivery of certificates representing the Common Stock and Unit Warrants,
including original issue and transfer taxes, if any; (iii) the qualifications
of the Company's Units (covered by the "firm commitment" offering) under State
Securities or Blue Sky Laws, including counsel fees of the Representative
relating thereto in the sum of Thirty Thousand ($30,000) Dollars ($_________
of which has been paid prior to the Effective Date), together with appropriate
state filing fees) plus disbursements relating to, but not limited to,
long-distance telephone calls, photocopying, messengers, excess postage,
overnight mail and courier services; (iv) the fees and disbursements of
counsel for the Company and the accountants for the Company; and (v) any other
costs of qualifying the Units and components thereof for listing on NASDAQ.
The Company shall, upon receipt of an invoice from the
Representative, reimburse the Representative for any costs of otherwise
unreimbursed postage and including mailing of preliminary and final
prospectuses incurred by or on behalf of the Representative and the
Underwriters in preparation for, or in connection with the offering and sale
and distribution of the Units on an accountable basis, and for the cost of
investigative reports (such as Bishop's Reports) of the Company's executive
officers, directors and principal shareholders. Reimbursement of the costs of
investigative reports shall not exceed the actual cost of the invoice(s) and
in no event shall exceed $___________. After closing of the public offering,
the Company shall bear the costs of tombstone announcements not to exceed
$10,000.
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SECTION 8. Payment of Underwriters' Expenses.
On the Closing Date and Additional Closing Date(s) (if any)
the Company will pay to Dupont an expense allowance equal to three (3%) percent
of the total gross proceeds derived from the public offering contemplated by
this Agreement for the fees and disbursements of counsel to the Underwriters and
for costs of otherwise unreimbursed advertising, traveling, postage, telephone
and telegraph expenses and other miscellaneous expenses incurred by or on
behalf of the Representative and the Underwriters in preparation for, or in
connection with the offering and sale and distribution of the Units; and
Dupont shall not be obligated to account to the Company for such disbursements
and expenses. In the event, however, that the Representative terminates this
Agreement pursuant to the provisions of Section 12 hereof, the Representative
shall be obligated to account for expenditures of any advance payment to
Dupont and to refund to the Company any portion of the advance not expended.
In the event that the Representative terminates this agreement pursuant to the
provisions of Section 12(b), the Representative shall be entitled to
reimbursement of expenses on an accountable basis up to $50,000.
SECTION 9. Indemnification.
(a) The Company agrees to indemnify and hold harmless each
of the Underwriters, and each person who controls each of the Underwriters
within the meaning of Section 15 of the Act, from and against any and all
losses, claims, damages, expenses, or liabilities, joint or several, to which
they or any of them may become subject under the Act or any other statute or
at common law or otherwise, and to reimburse persons indemnified as above for
any reasonable legal or other expense (including the cost of any investigation
and preparation) incurred by them (as incurred), or any of them, in connection
with investigating, defending against or appearing as a third party witness in
connection with any claim or litigation, whether or not resulting in any
liability, but only insofar as such losses, claims, liabilities, expenses or
litigation arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
the Prospectus (as amended or supplemented, if amended or supplemented), or in
any "Blue Sky" application, or arising out of or based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they are made, not misleading; provided,
however, that the indemnity agreement contained in this subsection (a) shall
not apply to amounts paid in settlement of any such claims or litigation if
such settlement is effected without the consent of the Company, nor shall it
apply to the Underwriters or any person controlling the Underwriters in
respect of any such losses, claims, damages, expenses, liabilities or
litigation arising out of, or based upon, any such untrue statement or alleged
untrue statement, or any such omission or alleged omission, if such statement
or omission was made in reliance upon and in conformity with written
information furnished in writing to the Company by such Underwriter, or on its
behalf, specifically for use in connection with the preparation of the
Registration Statement or the Prospectus or any such amendment thereof or
supplement thereto or any such blue sky application.
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(b) Each of the Underwriters severally agrees, in the same
manner and to the same extent as set forth in subsection (a) above, to
indemnify and hold harmless the Company, each of the directors and officers
who have signed the Registration Statement and each person, if any, who
controls the Company within the meaning of Section 15 of the Act, with respect
to any statement in or omission from the Registration Statement, or the
Prospectus (as amended or as supplemented, if amended or supplemented), or in
any "Blue Sky" application, if such statement or omission was made in reliance
upon and in conformity with written information furnished in writing to the
Company by such Underwriter, or on its behalf, specifically for use in
connection with the preparation of the Registration Statement or the
Prospectus or any such amendment thereof or supplement thereto, or any such
application. An Underwriter shall not be liable for amounts paid in settlement
of any such claim or litigation if such settlement was effected without its
consent.
(c) Each indemnified party shall give prompt notice to each
indemnifying party of any claim asserted against it and of any action
commenced against it in respect of which indemnity may be sought hereunder.
The omission to so notify an indemnifying party shall relieve such party of
its obligation to indemnify pursuant to this Agreement, but failure to so
notify an indemnifying party shall not relieve it from any liability which it
may have otherwise than on account of this indemnity agreement. In case any
such action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate in, and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified, to assume the defense
thereof, subject to the provisions herein stated, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified party
under this Section 9 for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation. The indemnified party shall have the right
to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall not be at the
expense of the indemnifying party if the indemnifying party has assumed the
defense of the action with counsel reasonably satisfactory to the indemnified
party; provided that the fees and expenses of such counsel shall be at the
expense of the indemnifying party if (i) the employment of such counsel has
been specifically authorized in writing by the indemnifying party or (ii) the
defendants in any such action include both the indemnified and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be a conflict between the positions of the indemnifying party
and the indemnified party in conducting the defense of any such action or that
there may be legal defenses available to it and/or other indemnified parties
which are different from or additional to those available to the indemnifying
party (in which case the indemnifying party shall not have the right to assume
the defense of such action on behalf of such indemnified party or parties), it
being understood, however, that the indemnifying party shall not, in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be
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liable for the reasonable fees and expenses of more than one separate firm of
attorneys for the indemnified party which firm shall be designated in writing
by the indemnified party.
(d) The respective indemnity agreements between the
Underwriters and the Company contained in subsections (a) and (b) above, and
the representations and warranties of the Company set forth in Section 2
hereof or elsewhere in this Agreement, shall remain operative and in full
force and effect, regardless of any investigation made by or on behalf of the
Underwriters or by or on behalf of any controlling person of the Underwriters
or the Company or any such officer or director or any controlling person of
the Company, and shall survive the delivery of the Units. Any successor of the
Company, or of the Underwriters, or of any controlling person of the
Underwriters or the Company, as the case may be, shall be entitled to the
benefit of such respective indemnity agreements.
(e) In order to provide for just and equitable contribution
under the Act in any case in which (i) any person entitled to indemnification
under this Section 9 makes claim for indemnification pursuant hereto but it is
judicially determined (by the entry of a final judgment or decree by a court
of competent jurisdiction and the expiration of time to appeal or the denial
of the last right of appeal) that such indemnification may not be enforced in
such case notwithstanding the fact that this Section 9 provides for
indemnification in such case, or (ii) contribution under the Act may be
required on the part of any such person in circumstances for which
indemnification is provided under this Section 9, then, and in each such case,
the Company and the Underwriters shall contribute to the aggregate losses,
claims, damages, expenses or liabilities to which they may be subject (after
any contribution from others) in such proportions so that the Underwriters are
responsible in the aggregate for the proportion of such losses, claims,
damages or liabilities represented by the percentage that the underwriting
discounts and commissions appearing on the cover page of the Prospectus bears
to the public offering price appearing thereon, and the Company is responsible
for the remaining portion; provided, that, in any such case, no person guilty
of a fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
Within twenty days after receipt by any party to this
Agreement (or its representative) of notice of the commencement of any action,
suit or proceeding, such party will, if a claim for contribution in respect
thereof is to be made against another party (the "contributing party"), notify
the contributing party, in writing, of the commencement thereof, but the
omission so to notify the contributing party will not relieve it from any
liability which it may have to any other party other than for contribution
hereunder. In case any such action, suit or proceeding is brought against any
party, and such party so notifies a contributing party or his or its
representative of the commencement thereof within the aforesaid twenty days, the
contributing party will be entitled to participate therein with the notifying
party and any other contributing party similarly notified. Any such contributing
party shall not be liable to any party seeking contribution on account of any
settlement of any claim, action or proceeding effected by such party seeking
contribution without the written consent of such contributing party. The
contribution provisions contained in this
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Section 9 are in addition to any other rights or remedies which either party
hereto may have with respect to the other or hereunder.
SECTION 10. Effectiveness of Agreement. This Agreement shall become
effective (i) at 10:00 A.M., New York Time, on the first full business day
after the Effective Date, or (ii) at the time of the initial public offering
by the Underwriters of the Units, whichever shall first occur. The time of the
initial public offering by the Underwriters of the Units for the purposes of
this Section 10, shall mean the time, after the Registration Statement becomes
effective, of the release by the Representative for publication of the first
newspaper advertisement which is subsequently published relating to the Units,
or the time, after the Registration Statement becomes effective, when the
Units are first released by the Representative for offering by the
Underwriters or dealers by letter or telegram, whichever shall first occur.
The Representative agrees to notify the Company immediately after it shall
have taken any action, by release or otherwise, whereby this Agreement shall
have become effective. This Agreement shall, nevertheless, become effective at
such time earlier than the time specified above, after the Effective Date, as
the Representative may determine by notice to the Company.
SECTION 11. Conditions of the Underwriters' Obligations. The
obligations of the several Underwriters to purchase and pay for the Units
which the Underwriters have agreed to purchase hereunder are subject to: the
accuracy, as of the date hereof and as of the Closing Dates, of all of the
representations and warranties of the Company contained in this Agreement; the
Company's compliance with, or performance of, all of its covenants,
undertakings and agreements contained in this Agreement that are required to
be complied with or performed on or prior to each of the Closing Dates and to
the following additional conditions:
(a) On or prior to the Closing Date, no order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceeding for that purpose shall have been instituted or be pending or, to
the knowledge of the Company, shall be threatened by the Commission; any
request for additional information on the part of the Commission (to be
included in the Registration Statement or the Prospectus or otherwise) shall
have been complied with to the satisfaction of the Commission; and neither the
Registration Statement nor any amendment thereto shall have been filed to
which counsel to the Underwriters shall have reasonably objected, in writing.
(b) The Representative shall not have disclosed in writing
to the Company that the Registration Statement or Prospectus or any amendment
or supplement thereto contained, as of the date thereof, an untrue statement
of a fact which, in the opinion of counsel to the Underwriters, is material,
or omits to state a fact which, in the opinion of such counsel, is material
and is required to be stated therein, or is necessary to make the statements
therein not materially misleading.
(c) Between the date hereof and the Closing Date, the
Company shall not have sustained any loss on account of fire, explosion,
flood, accident, calamity or other
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<PAGE>
cause, of such character as materially adversely affects its business or
property, whether or not such loss is covered by insurance.
(d) Between the date hereof and the Closing Date, there
shall be no litigation instituted or threatened against the Company, and there
shall be no proceeding instituted or threatened against the Company before or
by any federal or state commission, regulatory body or administrative agency
or other governmental body, domestic or foreign, wherein an unfavorable
ruling, decision or finding would materially adversely affect the business,
licenses, permits, operations or financial condition or income of the Company.
(e) Except as contemplated herein or as set forth in the
Registration Statement and Prospectus, during the period subsequent to the
Effective Date and prior to the Closing Date, (A) the Company shall have
conducted its business in the usual and ordinary manner as the same was being
conducted on the date of the filing of the initial Registration Statement and
(B) except in the ordinary course of its business, the Company shall not have
incurred any material liabilities or obligations (direct or contingent), or
disposed of any of its assets, or entered into any material transaction, and
(C) the Company shall not have suffered or experienced any material adverse
change in its business, affairs or in its condition, financial or otherwise.
On the Closing Date, the capital stock and surplus accounts of the Company
shall be substantially as great as at its last financial report without
considering the proceeds from the sale of the Units except to the extent that
any decrease is disclosed in or contemplated by the Prospectus.
(f) The authorization of the Units, the Common Stock and the
Warrants, the Registration Statement, the Prospectus and all corporate
proceedings and other legal matters incident thereto and to this Agreement,
shall be reasonably satisfactory in all respects to counsel to the
Underwriters.
(g) The Company shall have furnished to the Representative
the opinions, dated the Closing Date, and Additional Closing Date(s),
addressed to you, of Gravel and Shea counsel for the Company, that:
(i) The Company has been duly incorporated and is a
validly existing corporation in good standing under the laws of the State of
Delaware with full corporate power and authority to own and operate its
properties and to carry on its business as set forth in the Registration
Statement and Prospectus; it has authorized and outstanding capital as set forth
in the Registration Statement and Prospectus; and the Company is duly licensed
or qualified as a foreign corporation in all jurisdictions in which the
ownership or leasing of its properties requires such qualification or license,
except where failure to be so qualified or licensed would have no material
adverse effect on the business of the Company.
(ii) All of the outstanding shares of Common Stock are
duly authorized, validly issued, fully paid, and non-assessable, and do not have
any preemptive rights. The Company will have duly authorized, reserved and set
aside shares of Common Stock issuable upon exercise of the Warrants and any
other outstanding options, warrants or
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stock option plans and when issued in accordance with the terms contained
therein against payment therefor, will be duly and validly issued, fully paid
and non-assessable.
(iii) The Common Stock, Warrants and the Underwriter's Unit
Warrant conform to descriptions thereof under "Description of Securities"
contained in the Prospectus.
(iv) The Underwriters will receive good and marketable
title to the Units purchased by them from the Company in accordance with the
terms and provisions of this Agreement, to the best of such counsel's knowledge,
free and clear of all liens, encumbrances, claims, security interests,
restrictions, stockholders' agreements and voting trusts whatsoever.
(v) Except as set forth in the Prospectus, there are no
outstanding options, warrants, or other rights, providing for the issuance of,
and, to the best of the knowledge of such counsel, no commitments, plans or
arrangements to issue, any shares of any class of capital stock of the Company,
or any security convertible into, or exchangeable for, any shares of any class
of capital stock of the Company.
(vi) To the best of such counsel's knowledge, no
consents, approvals, authorizations or orders of agencies, officers or other
regulatory authorities are necessary for the valid authorization, issue or sale
of the Units hereunder, except such as may be required under the Act or state
securities or Blue Sky Laws.
(vii) The Registration Statement has become effective
under the Act and, to the best of the knowledge of such counsel, no order
suspending the effectiveness of the Registration Statement is in effect and no
proceedings for that purpose have been instituted or are pending before or
threatened by, the Commission;
(viii) To the best of such counsel's knowledge and based
upon the investigation described below, the Registration Statement and
Prospectus, and each amendment thereof and supplement thereto, comply as to form
in all material respects with the applicable requirements of the Act and the
Rules and Regulations (except that no opinion need be expressed as to financial
statements, notes thereto, and financial data contained in the Registration
Statement or Prospectus). Such counsel has participated in conferences with
officers and representatives of the Company and with its certified public
accountants in the preparation of the Registration Statement and the
Prospectus. At such conferences counsel has made inquiries of such officers,
representatives and accountants, and discussed the contents of the
Registration Statement and the Prospectus. Such counsel has not independently
verified, and, accordingly, does not assume any responsibility for, the
accuracy, completeness or fairness of the information contained in the
Registration Statement or the Prospectus, other than as set forth the
Prospectus insofar as such statements relate to the contents of particular
documents therein described. On the basis of the foregoing, nothing has come
to the attention of such counsel to cause such counsel to believe that the
Registration Statement, the Prospectus or any amendment or supplement thereto
contains any untrue statement of a material fact
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<PAGE>
or omits to state a material fact necessary in order to make statements
therein, in light of the circumstances under which they were made, not
misleading (except, in the case of both the Registration Statement and any
amendment thereto and the Prospectus and any supplement thereto, for the
financial statements, notes thereto and other financial and statistical data
and schedules contained therein, as to which such counsel need express no
opinion); and such counsel is familiar with all contracts referred to in the
Registration Statement or in the Prospectus and such contracts are
sufficiently summarized or disclosed therein, or filed as exhibits thereto, as
required, and such counsel does not know of any other contracts required to be
summarized or disclosed or filed; and such counsel does not know of any legal
or governmental proceedings to which the Company is a party, or in which
property of the Company is the subject, of a character required to be
disclosed in the Registration Statement or the Prospectus which are not so
disclosed therein.
(ix) The statements in the Registration Statement under
the caption Business Facilities" have been reviewed by such counsel and insofar
as they refer to descriptions of agreements, statutes, licenses, certifications,
rules or regulations or legal conclusions, are correct in all material respects.
(x) This Agreement has been duly authorized and executed
by the Company and is a valid and binding agreement of the Company enforceable
in accordance with its terms subject to bankruptcy, insolvency, reorganization,
moratorium and other laws affecting creditors rights generally and except that
no opinion need be given with regard to the enforceability of Section 9 hereof
or the availability of equitable relief.
(xi) To the best knowledge of such counsel: (a) no
default exists, and no event has occurred which, with notice or lapse of time,
or both, would constitute a default in the due performance and observance of any
material term, covenant or condition by the Company, of any indenture, mortgage,
deed of trust, note or any other agreement or instrument to which the Company is
a party or by which it or its business or its properties may be bound or
affected, except where such default would not have a material adverse effect
on the business of the Company and except as disclosed in the Prospectus; (b)
the Company has full power and lawful authority to authorize, issue and sell
the Units on the terms and conditions set forth herein and in the Registration
Statement and in the Prospectus; (c) no consent, approval, authorization or
other order of any regulatory authority is required for such authorization,
issue or sale, except as may be required under the Act or State securities
laws, clearance with the NASD and such other consent, approval, authorization
or order as has been obtained and is in full force and effect; and (d) the
execution and delivery of this Agreement, the consummation of the transactions
herein contemplated, and compliance with the terms hereof will not conflict
with, or constitute a default under, any material indenture, mortgage, deed of
trust, note or any other agreement or instrument to which the Company is now a
party or by which it or its business or its properties may be bound or
affected, the Certificate of Incorporation and any amendments thereto, the
by-laws of the Company, or any order, rule or regulation, writ, injunction or
decree of any government, governmental instrumentality, or court, domestic or
foreign, having jurisdiction over the Company or its business or properties.
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<PAGE>
(xii) Except as disclosed in the Registration Statement
and Prospectus, to the best knowledge of such counsel, there are no material
actions, suits or proceedings at law or in equity of a material nature pending,
or to such counsel's knowledge, threatened against the Company which are not
adequately covered by insurance and there are no proceedings pending or, to the
knowledge of such counsel, threatened against the Company before or by any
Federal or State Commission, regulatory body, or administrative agency or other
governmental body, wherein an unfavorable ruling, decision or finding would
materially and adversely affect the business, operation or condition
(financial or otherwise) of the Company, which are not disclosed in the
Prospectus.
(xiii) The Underwriters' Unit Warrants to be issued to
the Representative hereunder will be, when issued, duly and validly authorized
and executed by the Company and will constitute valid and binding obligations of
the Company, legally enforceable in accordance with their terms except as
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws pertaining to creditors rights generally and the
Company will have duly authorized, reserved and set aside the shares of its
Common Stock issuable upon exercise of the Underwriters' Unit Warrants and the
underlying warrants and such stock, when issued and paid for upon exercise of
the Underwriters' Unit Warrants and the underlying warrants in accordance with
the provisions thereof, will be duly and validly issued, fully-paid and
non-assessable.
Such opinion shall also cover such other matters incident to
the transactions contemplated by this Agreement as the Representative shall
reasonably request. In rendering such opinion, such counsel may rely upon
certificates of any officer of the Company or public officials as to matters
of fact.
(h) The Company shall have furnished to the Representative
certificates of the President and a Vice-President of the Company, dated as of
the Closing Date, and Additional Closing Date(s), to the effect that:
(i) Each of the representations and warranties of the
Company contained in Section 2 hereof is true and correct in all material
respects at and as of such Closing Date, and the Company has performed or
complied with all of its agreements, covenants and undertakings contained in
this Agreement and has performed or satisfied all the conditions contained in
this Agreement on its part to be performed or satisfied at the Closing Date;
(ii) The Registration Statement has become effective and
no order suspending the effectiveness of the Registration Statement has been
issued, and, to the best of the knowledge of the respective signers, no
proceeding for that purpose has been initiated or is threatened by the
Commission;
(iii) The respective signers have each carefully examined
the Registration Statement and the Prospectus and any amendments and supplements
thereto, and to the best of their knowledge the Registration Statement and the
Prospectus and any amendments and supplements thereto and all statements
contained therein are
20
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true and correct in all material respects, and neither the Registration
Statement nor the Prospectus nor any amendment or supplement thereto includes
any untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading and, since the effective date of the Registration Statement, there
has occurred no event required to be set forth in an amended or supplemented
Prospectus which has not been so set forth except changes which the
Registration Statement and Prospectus indicate might occur.
(iv) Except as set forth or contemplated in the
Registration Statement and Prospectus, since the respective dates as of which,
or periods for which, information is given in the Registration Statement and
Prospectus and prior to the date of such certificate (A) there has not been any
material adverse change, financial or otherwise, in the business, business
prospects, earnings, general affairs or condition (financial or otherwise), of
the Company (in each case whether or not arising in the ordinary course of
business), and (B) the Company has not incurred any material liabilities,
direct or contingent, or entered into any material transactions, otherwise
than in the ordinary course of business other than as referred to in the
Registration Statement or Prospectus and except changes which the Registration
Statement and Prospectus indicate might occur.
(i) The Company shall have furnished to the Representative
on the Closing Date, such other certificates of executive officers of the
Company additional to those specifically mentioned herein, as the
Representative may have reasonably requested, as to: the accuracy and
completeness of any statement in the Registration Statement or the Prospectus,
or in any amendment or supplement thereto; the representations and warranties
of the Company herein; the performance by the Company of its obligations
hereunder; or the fulfillment of the conditions concurrent and precedent to
the obligations of the Underwriters hereunder, which are required to be
performed or fulfilled on or prior to the Closing Date.
(j) At the time this Agreement is executed, and on each
Closing Date you shall have received a letter from Richard A. Eisner & Company
LLP, addressed to the Representative, as Representative of the Underwriters,
and dated, respectively, as of the date of this Agreement and as of each
Closing Date in form and substance reasonably satisfactory to the
Representative, to the effect that:
(i) They are independent public accountants within the
meaning of the Act and the applicable published Rules and Regulations of the
Commission;
(ii) In their opinion, the financial statements and related
schedules of the Company included in the Registration Statement and Prospectus
and covered by their reports comply as to form in all material respects with the
applicable accounting requirements of the Act and the published Rules and
Regulations of the Commission issued thereunder;
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(iii) On the basis of limited procedures in
accordance with standards established by the American Institute of Certified
Public Accountants, including (1) a reading of the latest available financial
statements of the Company (a copy of which shall be attached to such letter),
(2) a reading of the latest available minutes of the meetings of the
stockholders and the Board of Directors of the Company as set forth in the
minute books of the Company, officials of the Company having advised you and
them that the minutes of all such meetings through that date were set forth
therein, (3) consultations with officials of the Company responsible for
financial and accounting matters of the Company, which procedures do not
constitute an examination in accordance with generally accepted accounting
standards, and would not necessarily reveal material adverse changes in the
financial position or results of operations or inconsistencies in the
application of generally accepted accounting principles, nothing has come to
their attention which in their judgment would lead them to believe that (a) the
unaudited financial statements and related schedules of the Company included in
the Registration Statement and Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of the Act and the
published Rules and Regulations of the Commission issued thereunder, or were not
prepared in accordance with generally accepted accounting principles and
practices consistent in all material respects with those followed in the
preparation of the comparable financial statements and schedules covered by
their reports included in the Registration Statement and Prospectus, or would
require any material adjustments for a fair presentation of the information
purported to be shown thereby or (b) during the period from the date of the
Capitalization table included in the Prospectus to a specified date not more
than four business days prior to the date of such letter, there has been any
material change in the capital stock or debt of the Company, or (c) during the
period from the date of the latest balance sheet and related statements of
operations, changes in stockholders' equity and changes in financial position
included in the Prospectus and covered by their reports contained therein to the
date of the letter, there has been any material adverse change in the financial
condition, or results of operations, of the Company except as disclosed in the
registration statement; and
(iv) In addition to the examination referred to in
their reports included in the Registration Statement and the Prospectus and the
limited procedures referred to in clause (iii) above, they have carried out
certain specified procedures, not constituting an audit, with respect to certain
amounts, percentages and financial information which are derived from the
general accounting records of the Company which appear in the Prospectus under
the captions "Capitalization", "Management's Discussion and Analysis of
Financial Condition and Results of Operations", "Executive Compensation",
"Certain Transactions", "Selected Financial Data," "Dilution," and "Risk
Factors," as well as such other financial information as may be specified by
the Representative, and that they have compared such amounts, percentages and
financial information with the accounting records of the Company and have
found them to be in agreement.
All the opinions, letters, certificates and evidence
mentioned above or elsewhere in this Agreement shall be deemed to be in
compliance with the provisions hereof only if they are in form and substance
reasonably satisfactory to counsel to the Underwriters, whose approval shall not
be unreasonably withheld, conditioned or delayed.
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If any of the conditions specified in this Section shall
not have been fulfilled when and as required by this Agreement to be fulfilled,
this Agreement and all obligations of the Underwriters hereunder may be
terminated and cancelled by the Representative by notifying the Company of such
termination and cancellation in writing or by telegram at any time prior to,
or on, the Closing Date and any such termination and cancellation shall be
without liability of any party hereto to any other party, except with respect
to the provisions of Sections 7 and 8 hereof. The Representative may, of
course, waive, in writing, any conditions which have not been fulfilled or
extend the time for their fulfillment.
SECTION 12. Termination.
(a) This Agreement may be terminated by the Representative
by written or telegraphic notice to the Company at any time before it becomes
effective pursuant to Section 10.
(b) This Agreement may be terminated by the Representative
by written or telegraphic notice to the Company, at any time after it becomes
effective, in the event that the Company, after notice from the Representative
and an opportunity to cure, shall have failed or been unable to comply with
any of the terms, conditions or provisions of this Agreement on the part of
the Company to be performed, complied with or fulfilled within the respective
times herein provided for, including without limitation Section 6(g) hereof,
unless compliance therewith or performance or satisfaction thereof shall have
been expressly waived by the Representative in writing. This Agreement may
also be terminated if (i) qualifications are received or provided by the
Company's independent public accountants or attorneys to the effect of either
inabilities in furnishing certifications as to material items including,
without limitation, information contained within the footnotes to the
financial statements, or as affecting matters incident to the issuance and
sale of the securities contemplated or as to corporate proceedings or other
matters or (ii) there is any action, suit or proceeding, threatened or
pending, at law or equity against the Company, or by any Federal, State or
other commission, board or agency wherein any unfavorable result or decision
could materially adversely affect the business, property, or financial
condition of the Company which was not disclosed in the Prospectus.
(c) This Agreement may be terminated by the Representative
by written or telegraphic notice to the Company at any time after it becomes
effective, if the offering of, or the sale of, or the payment for, or the
delivery of, the Units is rendered impracticable or inadvisable because (i)
additional material governmental restriction, not in force and effect on the
date hereof, shall have been imposed upon trading in securities generally or
minimum or maximum prices shall have been generally established on the New
York Stock Exchange or trading in securities generally on such exchange shall
have been suspended or a general banking moratorium shall have been
established by Federal or New York State authorities or (ii) a war or other
national calamity shall have occurred involving the United States or (iii) the
condition of the market for securities in general shall have materially and
adversely changed, or (iv) the condition of any matter materially affecting
the Company or its business or business prospects, is such that it would be
undesirable,
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impractical or inadvisable to proceed with, or consummate, this Agreement or
the public offering of the Units.
(d) Any termination of this Agreement pursuant to this
Section 12 shall be without liability of any character (including, but not
limited to, loss of anticipated profits or consequential damages) on the part
of any party hereto, except that the Company shall remain obligated to pay the
costs and expenses provided to be paid by it specified in Sections 6, 7 and 8,
to the extent therein provided. In addition, the Underwriter shall account to
the Company for any advance and shall reimburse the Company for any portion of
the advance not expended for actual out-of-pocket expenses.
SECTION 13. Finder. The Company and the Underwriters mutually
represent that they know of no person who rendered any service in connection
with the introduction of the Company to the Underwriters and that they know of
no claim by anyone for a "finder's fee" or similar type of fee, in connection
with the public offering which is the subject of this Agreement. Each party
hereby indemnifies the other against any such claims by any person known to
it, and not known to the other party hereto, who shall claim to have rendered
services in connection with the introduction of the Company to the
Underwriters and/or to have such a claim.
SECTION 14. Substitution of Underwriters.
(a) If one or more Underwriters default in its or their
obligations to purchase and pay for Units hereunder and if the aggregate
amount of such Units which all Underwriters so defaulting have agreed to
purchase does not exceed 10% of the aggregate number of Units constituting the
Units, the non-defaulting Underwriters shall have the right and shall be
obligated severally to purchase and pay for (in addition to the Units set
forth opposite their names in Schedule I) the full amount of the Units agreed
to be purchased by all such defaulting Underwriters and not so purchased, in
proportion to their respective commitments hereunder. In such event the
Representative, for the accounts of the several non-defaulting Underwriters,
may take up and pay for all or any part of such additional Units to be
purchased by each such Underwriter under this subsection (a), and may postpone
the Closing Date to a time not exceeding seven full business days; or
(b) If one or more Underwriters (other than the
Representative) default in its or their obligations to purchase and pay for
the Units hereunder and if the aggregate amount of such Units which all
Underwriters so defaulting shall have agreed to purchase shall exceed 10% of
the aggregate number of Units, or if one or more Underwriters for any reason
permitted hereunder cancel its or their obligations to purchase and pay for
Units hereunder, the non-canceling and non-defaulting Underwriters
(hereinafter called the "Remaining Underwriters") shall have the right, but
shall not be obligated to purchase such Units in such proportion as may be
agreed among them, at the Closing Date. If the Remaining Underwriters do not
purchase and pay for such Units at such Closing Date, the Closing Date shall
be postponed for one business day and the remaining Underwriters shall have
the right to purchase such Units, or to substitute another person or persons
to
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purchase the same or both, at such postponed Closing Date. If purchasers shall
not have been found for such Units by such postponed Closing Date, the Closing
Date shall be postponed for a further two business days and the Company shall
have the right to substitute another person or persons, satisfactory to you to
purchase such Units at such second postponed Closing Date. If the Company
shall not have found such purchasers for such Units by such second postponed
Closing Date, then this Agreement shall automatically terminate and neither
the Company nor the remaining Underwriters (including the Representative)
shall be under any obligation under this Agreement (except that the Company
shall remain liable to the extent provided in Paragraph 7 hereof). As used in
this Agreement, the term "Underwriter" includes any person substituted for an
Underwriter under this Section 14. Nothing in this subparagraph (b) will
relieve a defaulting Underwriter from its liability, if any, to the other
Underwriters for damages occasioned by its default hereunder (and such damages
shall be deemed to include, without limitation, all expenses reasonably
incurred by each Underwriter in connection with the proposed purchase and sale
of the Units) or obligate any Underwriter to purchase or find purchasers for
any Units in excess of those agreed to be purchased by such Underwriter under
the terms of Sections 3 and 14 hereof.
SECTION 15. Registration of the Underwriters' Unit Warrants
and/or securities underlying the Underwriter's Unit Warrants. The Company
agrees that it will, upon request by the Representative or the holders of a
majority of the Underwriters' Unit Warrants and Underlying Securities within
the period commencing one year after the Closing Date, and for a period of
five years from the Effective Date, on one occasion only at the Company's sole
expense, cause the Underwriter's Warrants and/or the Underlying Securities
issuable upon exercise of the Underwriter's Warrants, to be the subject of a
post-effective amendment, a new Registration Statement, if appropriate
(hereinafter referred to as the "demand Registration Statement"), so as to
enable the Representative and/or its assigns to offer publicly the
Underwriter's Warrants and/or the underlying securities. The Company agrees to
register such securities expeditiously and, where possible, within forty-five
(45) business days after receipt of such requests. The Company agrees to use
its "best efforts" to cause the post-effective amendment, new Registration
Statement to become effective and for a period of nine (9) months thereafter
to reflect in the post-effective amendment, new Registration Statement,
financial statements which are prepared in accordance with Section 10(a)(3) of
the Act and any facts or events arising which, individually or in the
aggregate, represent a fundamental and/or material change in the information
set forth in such post-effective amendment or new Registration Statement. The
holders of the Underwriters' Unit Warrants may demand registration without
exercising such Warrants and, in fact, are never required to exercise same.
The Company understands and will agree that if, at any
time within the period commencing one year after the Closing Date and ending
seven years after the Effective Date of the Company's Registration Statement, it
should file a Registration Statement with the Securities and Exchange Commission
pursuant to the Securities Act, regardless of whether some of the holders of the
Underwriters' Unit Warrants and Underlying Securities shall have theretofore
availed themselves of the right provided above, the Company, at its own
expense, will offer to said holders the opportunity to
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register the Underwriters' Unit Warrants and Underlying Securities. This
paragraph is not applicable to a Registration Statement filed by the Company
with the SEC on Form S-8 or any other inappropriate form.
In addition to the rights above provided, the Company
will cooperate with the then holders of the Underwriter's Warrants and
Underlying Securities in preparing and signing a Registration Statement, on one
occasion only in addition to the Registration Statements discussed above,
required in order to sell or transfer the aforesaid Underwriter's Warrants and
underlying securities and will supply all information required therefor, but
such additional Registration Statement shall be at the then holders' cost and
expense unless the Company elects to register additional shares of the
Company's Common Stock in which case the cost and expense of such Registration
Statement will be prorated between the Company and the holders of the
Underwriter's Warrants and underlying securities according to the aggregate
sales price of the securities being issued. The holders of the Underwriter's
Warrants may include such Warrants in any such filing without exercising the
Underwriter's Warrants, and in fact, are never required to exercise same. The
Company can, at any time for any reason, withdraw any such registration except
in connection with a Registration Statement filed pursuant to the Company's
demand Registration Statement.
For purposes of this Section 15, the term "Underlying
Securities" shall refer to and include the Common Stock and underlying warrants
issuable and issued upon exercise of the Underwriters' Unit Warrants as well as
any Common Stock issued upon the exercise of the underlying warrants.
SECTION 16. Warrant Exercise Fee Agreement. Commencing
twelve months after the Effective Date, the Company will pay Dupont an amount
equal to ten (10%) percent of the aggregate exercise price of each Warrant
exercised of which a portion may be allowed to the dealer who solicited the
exercise (which may also be Dupont); provided: (1) the market price of the
Common Stock on the date the Warrant was exercised was greater than the
Warrant exercise price on that date; (2) exercise of the Warrant was solicited
by a member of the NASD; (3) the Warrant was not held in a discretionary
account; (4) disclosure of compensation arrangements was made both at the time
of the offering and at the time of exercise of the Warrant; and (5) the
solicitation of the exercise of the Warrant was not in violation of Regulation
M promulgated under the Securities Exchange Act of 1934 or Rule 2710 of the
NASD Rules of Conduct. The Warrant Exercise Fee shall be paid in accordance
with the provisions of this paragraph and the Warrant Exercise Fee Agreement
filed as an exhibit to the Registration Statement (the "Warrant Exercise Fee
Agreement"). The Company also agrees to execute and deliver the Warrant
Exercise Fee Agreement to Dupont on the Closing Date.
SECTION 17. Designation of a Director or Non-voting Advisor to the
Board: Unless waived by us, we shall have the right to designate a director or
a non-voting advisor to the Board for a period of three years after the
Effective Date. Said designee, shall attend meetings of the Board and receive
no more or less compensation than is paid to other non-management directors of
the Company and shall be entitled to receive
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reimbursement for all reasonable costs incurred in attending such meetings,
including but not limited to, food, lodging and transportation. Moreover, to
the extent permitted by law, the Company will agree to indemnify the
Representative and its designee for the actions of such designee as director
or as an advisor of the Company. In the event the Underwriter designates a
director, then the Company will utilize its best efforts to obtain officer and
director liability insurance of at least $1,000,000 dollars prior to such
person serving as a director and if obtained, to maintain such policy in
effect until five years from the Effective Date. To the extent permitted under
the policy, it will also include each of the Representative and its designee
as an insured under such policy.
SECTION 18. Restriction on Securities. All officers, directors and
present stockholders (including holders of derivative securities) as of the
Effective Date, have agreed not to sell, transfer, hypothecate or convey any
capital stock or derivative securities by registration or otherwise for a
"Lock-Up" period of thirteen months from the Effective Date without the prior
written consent of the Representative (except that, subject to compliance with
applicable securities laws, any such officer, director or stockholder may
transfer his or her stock to a member of his family or in the event of death,
by will or operation of law, provided that any such transferee shall agree, as
a condition to such transfer, to be bound by the restrictions set forth herein
and further provided that the transferor (except in the case of the
transferor's death) shall continue to be deemed the beneficial owner of such
shares in accordance with Regulation 13d-(3) of the Securities Exchange Act of
1934, as amended). An appropriate legend shall be marked on the face of stock
certificates representing all of such securities.
SECTION 19. Notice. Except as otherwise expressly provided in this
Agreement, (A) whenever notice is required by the provisions hereof to be
given to the Company, such notice shall be given in writing, by certified
mail, return receipt requested, addressed to the Company at P. O. Box 470,
Ascutney, Vermont 05030, copy to Peter S. Erly, Esq., Gravel and Shea, 76 St.
Paul Street, 7th Floor, P. O. Box 369, Burlington, Vermont 05402 and (B)
whenever notice is required by the provisions hereof to be given to the
Underwriters, such notice shall be in writing addressed to the Representative
at the address set forth on the first page of this Agreement, copy to Steven
Morse, Esq., Lester Morse P.C., 111 Great Neck Road, Suite 420, Great Neck,
New York 11021. Any party may change the address for notices to be sent by
giving written notice to the other persons.
SECTION 20. Representations and Agreements to Survive Delivery.
Except as the context otherwise requires, all representations, warranties,
covenants, and agreements contained in this Agreement shall be deemed to be
representations, warranties, covenants, and agreements as at the date hereof
and as at the Closing Date and the Additional Closing Date(s), and all
representations, warranties, covenants, and agreements of the several
Underwriters and the Company, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any of the
Underwriters or the Company or any of their respective controlling persons,
and shall survive any termination of this Agreement (whensoever made) and/or
delivery of the Firm Units and the Optional Units to the several Underwriters.
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SECTION 21. Miscellaneous. This Agreement is made solely for the
benefit of the Underwriters and the Company and their respective successors
and assigns, and no other person shall acquire or have any right under or by
virtue of this Agreement. The term "successor" or the term "successors and
assigns" as used in this Agreement shall not include any purchaser, as such,
of any of the Units.
This Agreement shall not be assignable by any party without the
other party's prior written consent. This Agreement shall be binding upon, and
shall inure to the benefit of, our respective successors and permitted assigns.
The foregoing represents the sole and entire agreement between us with respect
to the subject matter hereof and supersedes any prior agreements between us with
respect thereto. This Agreement may not be modified, amended or waived except
by a written instrument signed by the party to be charged. The validity,
interpretation and construction of this Agreement, and of each part hereof,
shall be governed by the internal laws of the State of New York, without
giving effect to the conflict of laws provisions thereof.
This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which together shall be
deemed to be one and the same instrument.
If a party signs this Agreement and transmits an electronic
facsimile of the signature page to the other party, the party who receives the
transmission may rely upon the electronic facsimile as a signed original of this
Agreement.
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If the foregoing is in accordance with your understanding
of our agreement, kindly sign and return to us a counterpart hereof, whereupon
this instrument along with all counterparts will become a binding agreement
between the Company and the Underwriters in accordance with its terms.
Very truly yours,
WORLDWIDE WIRELESS SYSTEMS, INC.
By: _______________________
Scott A. Wendel
President/CEO
CONFIRMED AND ACCEPTED, as of the
date first above written:
DUPONT SECURITIES GROUP, INC.
By:_____________________________________________
Michael F. Franzese, President
For itself and as the Representative of the
other Underwriters named in Schedule I hereto.
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SCHEDULE I
Underwriters Number of Firm Units to be
------------
Purchased
-----------------------
Dupont Securities Group, Inc. 1,500,000
Total 1 500,000
=========
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WORLDWIDE WIRELESS SYSTEMS, INC.
1,500,000 Units, Each Unit Consisting of one shares of Common
Stock and one Common Stock Purchase Warrant
AGREEMENT AMONG UNDERWRITERS
____________, 1997
To each of the Underwriters named in Schedule I
to the attached Underwriting Agreement
Dear Sirs:
1. Underwriting Agreement. Worldwide Wireless Systems, Inc., a Delaware
corporation (the "Company"), proposes to enter into an underwriting agreement
in the form of the Underwriting Agreement attached hereto as Exhibit "A" (the
"Underwriting Agreement") with the underwriters named in Schedule I to the
Underwriting Agreement (the "Underwriters"), acting severally and not jointly,
with respect to the purchase from the Company of 1,500,000 Units, each unit
consisting of one share of Common Stock and one Common Stock Purchase Warrant
(the "Firm Units"). Upon our request, and as provided in Section 3 of the
Underwriting Agreement, the Company will also issue and sell to the
Underwriters up to a maximum of an additional 225,000 Units (the "Optional
Units"). Both the Firm Units and the Optional Units are sometimes collectively
referred to herein as the "Units." All of the Units which are the subject of
this Agreement are more fully described in the Prospectus of the Company
described below. Under the terms of the Underwriting Agreement, each of the
Underwriters will agree, in accordance with the terms thereof to purchase the
aggregate number of Firm Units set forth opposite its name in said Schedule I,
subject to adjustment pursuant to Section 12 hereof and Section 14 of the
Underwriting Agreement.
2. Registration Statement and Prospectus. The Units are described in
a registration statement and related prospectus which have been filed with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Act"). An amendment to such registration statement
has been or will be filed in which you have been or will be named as one of
the Underwriters of the Units. Copies of the registration statement as filed
and as amended have been delivered to you, and you hereby authorize us to
approve on your behalf any further amendments or supplements which may be
necessary or appropriate. The registration statement, as amended at the time
it becomes effective, is called the "Registration Statement" and the
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final prospectus relating to the Units as filed by the Company with the
Commission pursuant to Rule 424(b) under the Act is referred to as the
"Prospectus."
3. Authority of Representative. You authorize us as your
Representative to execute the Underwriting Agreement with the Company in the
form attached with such insertions, deletions or other changes as we may
approve (but not as to the number of, and price of, the Units to be purchased
by you except as provided herein and therein) and to take such action as in
our discretion we may deem advisable in respect of all matters pertaining to
the Underwriting Agreement, this Agreement, the transactions for the accounts
of the several Underwriters contemplated thereby and hereby, and the purchase,
carrying, sale and distribution of the Units.
4. Public Offering. In connection with the public offering of the
Units, you authorize us, in our discretion:
(a) To determine the time and manner of the initial public
offering (after the Registration Statement become effective), the initial
public offering price, and the concessions and reallowances to dealers, to
change the public offering price and such concessions and reallowances after
the initial public offering, to furnish the Company with the information to be
included in the Registration Statement and the Prospectus (and any amendment
or supplement thereto) with respect to the terms of the public offering, and
to determine all matters relating to the public advertisement of the Units and
any communications with dealers or others;
(b) To reserve all or any part of your Units for sale to
retail purchasers (including institutions) and to dealers selected by us
("Selected Dealers") among which may be included any Underwriter (including
ourselves) and each of which shall be a member of the National Association of
Securities Dealers, Inc., and each of which shall agree that in making sales
to purchasers in the United States it will conform to the Rules of Fair
Practice of said Association (or, in the case of a foreign dealer not eligible
for membership in such Association, which shall agree not to reoffer, resell
or deliver Units in the United States, its territories or its possessions, or
to persons whom it has reason to believe are citizens thereof or residents
therein), such reservations for sales to retail purchasers to be as nearly as
practicable in proportion to the respective underwriting obligations of the
Underwriters and such reservations for sales to Selected Dealers to be in such
proportion as we determine, and from time to time to add to the reserved Units
such Units retained by you remaining unsold and to release to you any of your
Units reserved but not sold;
(c) To sell reserved Units as nearly as practicable in
proportion to the respective reservations to retail purchasers at the public
offering price, and to Selected Dealers at the public offering price less the
Selected Dealer's concession pursuant to the Selected Dealers Agreement in
substantially the form attached; and
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(d) To buy Units for your account from Selected Dealers at
the public offering price less such amount not in excess of the Selected
Dealer's concession as we may determine.
After advice from us that the Units are released for public offering,
you will offer to the public in conformity with the terms of offering set
forth in the Prospectus, or any amendment or supplement, such of your Units as
we advise you are not reserved.
You recognize the importance of a broad distribution of the Units
among bona fide investors and you agree to use your best efforts to obtain
such broad distribution and to that end, to the extent you deem practicable,
to give priority to small orders. In offering the Units to Selected Dealers we
will take such action as we deem appropriate to effect a broad distribution.
5. Repurchase of Units Not Effectively Placed for Investment. You are
requested to place for investment those of your Units which are not reserved
as aforesaid. Any Units sold by you (otherwise than through us) which may be
delivered to us against a purchase contract made by us for the account of any
Underwriter prior to termination of the provisions referred to in Section 11
of this Agreement, shall be purchased by you upon demand from us at the cost
of such purchase plus brokerage commissions and transfer taxes on redelivery.
Units delivered on such repurchase need not be identical to those purchased by
you. In lieu of demand repurchase by you we may in our discretion (i) sell for
your account the Units so purchased by us, at such price and upon such terms
as we may determine, and debit or credit your account with the loss and
expense or net profit resulting from such sale, or (ii) charge your account
with an amount not in excess of the Selected Dealer's concession with respect
to such Units plus brokerage commissions and transfer taxes paid in connection
with such purchase.
6. Payment and Delivery. We shall give you at least 24 hours prior
notice of the Closing Date. You agree to deliver to us at or before 9:00 a.m.,
New York City time, on such Closing Date and at or before 9:00 a.m. New York
City time, on the Additional Closing Date referred to in the Underwriting
Agreement if the Optional Units are purchased, at the office of Dupont
Securities Group, Inc., 19 Townsend Square, Oyster Bay, NY 11771 (or such
other office as we may direct), a certified check or bank cashier's check
payable in New York Clearing House funds to the order of Dupont Securities
Group, Inc., as Representative, for the full purchase price of the Units which
you shall have agreed to purchase from the Company less the concession to
selected dealers. If you are a member or clear through a member of the
Depository Trust Company ("DTC"), you may, in your discretion, deliver payment
and receive Units through the facilities of DTC. The proceeds shall be
delivered in the amounts required in each case for payment of the full
purchase price by us to the Company against delivery of the Units to us for
your account. We are authorized to accept that delivery and to give a receipt
therefor. We may in our discretion make such payment on your behalf with our
own funds, in which event you will reimburse us promptly upon request. You
authorize us, as your custodian, to take delivery
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of your Units, registered as we may direct in order to facilitate deliveries.
You also authorize us to hold for your account such of your Units as we have
reserved for sale to retail purchasers and to Selected Dealers, and to deliver
your reserved Units against such sales. We will deliver your unreserved Units
to you promptly and, after we receive payment for reserved Units sold by us
for your account, we will remit to you, as promptly as practicable, an amount
equal to the price paid by you for such Units. As soon as practicable after
termination of Sections 4, 5 and 9 and the first and penultimate sentences of
Section 8 of this Agreement (pursuant to Section 11 hereof) we will deliver to
you any of your Units reserved but not sold. All Units delivered to you
pursuant to this Section will be evidenced by certificates in such
denominations as you shall direct by written notice received by us not later
than the second full business day preceding the Closing Date.
7. Authority to Borrow. In connection with the purchase or carrying
of any Units purchased hereunder for your account, you authorize us, in our
discretion, to advance funds for your account, charging current interest
rates, or to arrange loans for your account, and in connection therewith to
execute and deliver any notes or other instruments and hold or pledge as
security any of your Units. Any lender may rely on our instructions in all
matters relating to any such loan. Any of your Units held by us for your
account may be delivered to you for carrying purposes only, and subject to our
further direction.
8. Stabilization and Over-Allotment. To facilitate the distribution
of the Units, you authorize us during the term of this Agreement, or for such
longer period as may be necessary in our discretion, to make purchases and
sales of the Units for your account in the open market or otherwise, for long
or short account, on such terms as we deem advisable and, in arranging sales,
to over-allot. You also authorize us to cover any short position incurred
pursuant to this Section on such terms as we deem advisable. Included in the
authority granted to us by you is the authority to exercise the over-allotment
option to purchase the Optional Units granted by Section 3 of the Underwriting
Agreement. Except with respect to the exercise of such over-allotment option,
all such purchases and sales (other than purchases and sales of the Optional
Units) shall be made for the accounts of the several Underwriters as nearly as
practicable in proportion to their respective underwriting obligations. Your
net commitment under this Section shall not, at the end of any business day,
exceed 15% of your maximum underwriting obligation. You will on our demand
take up at cost or deliver against payment any Units purchased or sold or
over-allotted for your account and, if any such other Underwriter defaults in
its corresponding obligation, you will assume your proportionate share of such
obligation without relieving the defaulting Underwriter from liability. You
will be obligated in respect to purchases and sales made for your account
hereunder whether or not the proposed purchase of the Units is consummated.
Upon request you will advise us of Units retained by you and unsold and will
sell to us for the account of one or more of the Underwriters such of your
unsold Units as we may designate, at the public offering price thereof less
such amount as we may determine, but not in excess of the Selected Dealer's
concession with respect thereto. Until the termination of this Agreement
pursuant to Section 11 hereof,
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<PAGE>
or prior notification by us, we shall have the sole right to effect
stabilizing transactions in the Units. You agree that until such time you will
not make any purchases or sales of any of such Units except as provided in
Section 9 hereof. You also agree to timely provide us with the information
required by Rule 17a-2(d) under the Securities Exchange Act of 1934, as
amended (the "1934 Act").
9. Open Market Transactions. You agree not to bid for, purchase,
attempt to induce others to purchase, or sell, directly or indirectly, any
Units, except as brokers pursuant to unsolicited orders and as otherwise
provided in this Agreement or in the Underwriting Agreement. You further agree
not to offer the Units for sale until notified by us, as the Representative of
the Underwriters, that they are released for that purpose.
10. Expenses and Settlement. We may charge your account with Selected
Dealer's concessions and all transfer taxes on sales made by us for your
account and with your proportionate share (based upon your underwriting
obligation) of all other expenses incurred by us under the terms of this
Agreement or the Underwriting Agreement, in excess of those reimbursed by the
Company pursuant to Section 8 of the Underwriting Agreement, or in connection
with the purchase, carrying, sale or distribution of the Units. Our
determination of the amount and allocation of expenses shall be conclusive. As
soon as practicable after termination of the provisions referred to in Section
11, the accounts hereunder will be settled, but we may reserve from
distribution such amount as we deem advisable to cover possible additional
expenses. We may at any time make partial distribution of credit balances or
call for payment of debit balances. Any of your funds in our hands may be held
with our general funds without accountability for interest. Notwithstanding
any settlement, you will pay (i) your proportionate share (based upon your
underwriting obligation) of any liability which may be incurred by the
Underwriters, or any of them, based on the claim that the Underwriters
constitute an association, partnership, unincorporated business or other
separate entity, and of any expenses incurred by us, or by any other
Underwriter with our approval, in contesting any such liability, and (ii) any
transfer taxes which may be assessed and paid after such settlement on account
of any sale or transfer for your account.
11. Termination and Settlement. This Agreement will terminate (a) at
the close of business on the 30th day after the date of the Underwriting
Agreement; or (b) on such earlier or later date, not more than 30 days after
the date specified in (a), as we may determine; or (c) on the date of
termination of the Underwriting Agreement, if the same shall be terminated as
provided by its terms.
Upon termination of this Agreement, all authorizations, rights and
obligations hereunder will cease, except (a) the mutual obligation to settle
accounts hereunder, (b) your obligation to pay any claims referred to in the
last paragraph of this Section, (c) the obligations with respect to indemnity
set forth in Section 15 hereof (all obligations of which will continue until
fully discharged), and (d) your obligation with respect to purchases which
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<PAGE>
may be made by us from time to time thereafter to cover any short position
with respect to the offering, all of which will continue until fully
discharged, and except our authority with respect to matters to be determined
by us, or by us and the Company, pursuant to the terms of the Underwriting
Agreement, which will survive the termination of this Agreement.
The accounts arising pursuant to this Agreement will be settled and
paid as soon as practicable after termination. The determination by us of the
amounts to be paid to or by you will be final and conclusive.
Notwithstanding any settlement upon the termination of this
Agreement, you will pay your proportionate share of any amount asserted
against and discharged by the Underwriters, or any of them, based upon the
claim that the Underwriters constitute an association, unincorporated business
or other separate entity, or based upon or arising out of a claim that this
Agreement or the Underwriting Agreement is invalid or illegal for any reason,
including any expense incurred in defending against such claim, and will pay
any transfer taxes which may be assessed thereafter on account of any sale or
transfer of Units for our account.
12. Default by Underwriters. Default by one or more Underwriters
hereunder or under the Underwriting Agreement shall not release the other
Underwriters from their obligations or affect the liability of any defaulting
Underwriter to the other Underwriters for damages resulting from such default.
In case of default under the Underwriting Agreement by one or more
Underwriters, we may arrange for the purchase by others, including
non-defaulting Underwriters, of Units not taken up by such defaulting
Underwriter and you will, at our request, increase pro rata with the other
non-defaulting Underwriters the aggregate principal amount of Units which you
are to purchase, or both, by an amount not exceeding one-ninth of your
original underwriting obligations. In the event any such arrangements are
made, the respective Units to be purchased by non-defaulting Underwriters and
by such others shall be taken as the basis for the underwriting obligations
under this Agreement.
In the event of default by one or more Underwriters in respect of
their obligations under this Agreement, each non-defaulting Underwriter shall
assume its proportionate share of the obligations under this Agreement of each
such defaulting Underwriter (other than, to the extent stated in the first
paragraph of this Section, the purchase obligation of such defaulting
Underwriter).
13. Position of Representative. We shall be under no liability to you
for any act or omission except for obligations expressly assumed by us in this
Agreement, but no obligation on our part shall be implied or inferred. Nothing
shall constitute the Underwriters, or any of them, an association,
partnership, unincorporated business or other separate entity and the rights
and liability of ourselves and each of the Underwriters are several and not
joint.
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14. Compensation to Representative. As compensation for our services
as Representative, you agree to pay us $____ per Unit out of the aggregate
underwriting discount attributable to Units which you agree to purchase from
the Company under the Underwriting Agreement. We are authorized to charge your
account with such an amount.
15. Indemnification. You will indemnify and hold harmless each other
Underwriter and each person, if any, who controls such Underwriter within the
meaning of Section 15 of the Act to the extent and upon the terms by which
each Underwriter agrees to indemnify the Company in the Underwriting
Agreement. Such indemnity agreement shall survive the termination of any of
the provisions of this Agreement.
In the event that at any time any claim shall be asserted against us
as or as a result of our having acted as Representative, or otherwise
involving the Underwriters generally, relating to the Registration Statement
or any preliminary prospectus or the Prospectus, as from time to time amended
or supplemented, the public offering of the Units or any of the transactions
contemplated by this Agreement, you authorize us to make such investigation,
to retain such counsel and to take such other action as we shall deem
necessary or desirable under the circumstances, including settlement of any
claim or claims if such course of action shall be recommended by counsel
retained by us. You agree to pay to us, on request, your proportionate share
(based upon your underwriting obligation) of all expenses incurred by us
(including, but not limited to, the disbursements and fees of counsel so
retained) in investigating and defending against such claim or claims, and
your proportionate share (based upon your underwriting obligation) of any
liability incurred by us in respect of such claim or claims, whether such
liability shall be the result of a judgment against us or as a result of any
such settlement.
16. Blue Sky Matters. We shall not have any responsibility with
respect to the right of any Underwriter or other person to sell Units in any
jurisdiction, notwithstanding any information we may furnish in that
connection. You hereby authorize us to take such action as may be necessary or
advisable to qualify the Units for offering and sale in any jurisdiction. We
have caused to be filed Further State Notices respecting the Units to be
offered to the public in New York in the form required by, and pursuant to,
the provisions of Article 23A of the General Business Law of the State of New
York.
17. Title to Units. The Units purchased for the respective accounts
of the several Underwriters shall remain the property of those Underwriters
until sold; and no title to such Units shall in any event pass to us, as
Representative, by virtue of any of the provisions of this Agreement.
18. Capital Requirements. Unless the provisions of clause (b) of the
second sentence of the last paragraph of this Agreement are applicable to you,
you confirm that your commitment hereunder will not result in any violation of
Section 8(b) or 15(c) of the 1934 Act or in any violation of any of the rules
and regulations promulgated under the
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1934 Act, including, without limitation, Rule 15c3-1, or any provision of any
applicable rules of any securities exchange to which you are subject or of any
restriction imposed upon you by such exchange.
19. Notices and Governing Laws. Any notice from you to us shall be
mailed or transmitted by any standard form of written telecommunication to us
at 19 Townsend Square, Oyster Bay, NY 11771. Any notice from us to you shall
be mailed or transmitted by any standard from of written telecommunication to
you at your address as set forth in your Underwriter's Questionnaire. This
Agreement shall be governed by and construed in accordance with the laws of
the State of New York.
We represent that we are a member in good standing of the National
Association of Securities Dealers, Inc. You represent that you are (a) a
member in good standing of such Association or (b) a foreign dealer which is
not eligible for membership in such Association, in which event you will make
sales of any Units only outside the United States and its territories and
possessions to persons who are not citizens or residents of the United States
or its territories or possessions, and that in making any such sales, you will
comply with such Association's Interpretation with respect to Free-Riding and
Withholding. You further represent that: (i) you will notify each of your
customers with respect to whose account you have investment discretion and to
whose account you intend to sell any Units that you propose to sell Units to
such account as a principal and you will obtain the customer's written consent
to such sale; and (ii) you will comply with the requirements of Rule 15c2-8
under the 1934 Act and have distributed or are distributing copies of a
Preliminary Prospectus to all persons to whom you then expected to mail
confirmations of sale, not less than 48 hours prior to the time it is expected
to mail such confirmations.
Very truly yours,
DUPONT SECURITIES GROUP, INC.
By:________________________________
As Representative of the several
Underwriters
Confirmed and accepted as of the date first above written.
- -------------------------------
Attorney-in-fact for the several
Underwriters named in Schedule I
to the Underwriting Agreement
8
<PAGE>
Dupont Securities Group, Inc.
19 Townsend Square
Oyster Bay, NY 11771
WORLDWIDE WIRELESS SYSTEMS, INC.
1,500,000 Units
SELECTED DEALER AGREEMENT
Dear Sirs: ____________, 1997
We, as the Underwriter named in the below referred to Prospectus (the
"Underwriter") have agreed, subject to the terms and conditions of the
Underwriting Agreement dated this date (the "Underwriting Agreement") to
purchase from Worldwide Wireless Systems, Inc. (the "Company") at the price
set forth on the cover of such Prospectus, 1,500,000 Units and up to an
additional 225,000 Units from the Company being called the "Units"). The Units
and certain of the terms on which they are being purchased and offered are
more fully described in the enclosed Prospectus (the "Prospectus"). Additional
copies of the Prospectus will be supplied to you, in reasonable quantities
upon request.
We, as the Underwriter, are offering to certain dealers ("Selected
Dealers"), among whom we are pleased to include you, part of the Units, at the
public offering price less a concession of $___ per Unit. The offering to
Selected Dealers is made subject to the issuance and delivery of the Units to
us and their acceptance by us, to the approval of legal matters by our
counsel, and to the terms and conditions hereof, and may be made by us on the
basis of the reservation of Units or an allotment against subscription, or
otherwise in our discretion.
The initial public offering price of the Units is set forth in the
Prospectus. With our consent, Selected Dealers may allow a discount of not in
excess of $___ per Unit in selling the Units to other dealers meeting the
requirements of the specifications set forth in the affirmation of dealers
contained in the attached Acceptance and Order. Upon our request, you will
notify us of the identity of any dealer to whom you allow such a discount and
any Selected Dealer from whom you receive such a discount.
All orders will be strictly subject to confirmation and we reserve
the right in our uncontrolled discretion to reject any order in whole or in
part, to accept or reject orders in the order of their receipt or otherwise,
and to allot. You are not authorized to give any information or make any
representation other than as set forth in the Prospectus in connection with
the sale of any of the Units. No dealer is authorized to act as agent for the
Underwriter or for the Company, when offering any of the Units. Nothing
contained herein shall constitute the Selected Dealers partners with us or
with one another.
1
<PAGE>
Upon release by us, you may offer the Units at the public offering
price, subject to the terms and conditions hereof. We may, and the Selected
Dealers may, with our consent, purchase Units from and sell Units to each
other at the public offering price less a concession not in excess of the
concession to Selected Dealers.
Payment for Units purchased by you is to be made at our office (or at
such other place as instructed) at the public offering price, on such date as
we may advise, on one day's notice to you, by certified or official bank check
in New York Clearing House funds payable to our order. Delivery to you of
certificates for Units will be made as soon as is practicable thereafter.
Unless specifically authorized by us, payment by you may not be deferred until
delivery of certificates to you. The concession payable to you will be paid as
soon as practicable after the closing.
This Agreement shall terminate at the close of business on the 45th
day after the effective date of the Registration Statement. We may terminate
this Agreement at any time prior thereto by notice to you. Notwithstanding the
termination of this Agreement, you shall remain liable for your proportionate
share of any transfer tax or any liability which may be asserted or assessed
against us or Selected Dealers based upon the claim that the Underwriter and
the Selected Dealers, or any of them, constitute a partnership, association,
unincorporated business or other entity, including in each case your
proportionate share of expenses incurred in defending against any such claim
or liability.
In the event that, prior to the termination of this Agreement we
purchase in the open market or otherwise any Units delivered to you, you agree
to repay to us for the account of the Underwriter the amount of the above
concession to Selected Dealers plus brokerage commissions and any transfer
taxes paid in connection with such purchase; which amounts can be withheld
from the concession otherwise payable to you hereunder. Certificates for Units
delivered on any such purchase need not be the identical certificates
originally issued to you.
At any time prior to the termination of this Agreement, you will,
upon our request, report to us the number of Units purchased by you under this
Agreement which then remain unsold and will, upon our request, sell to us for
the account of the Underwriter the number of such unsold Units that we may
designate, at the public offering price less an amount to be determined by us
not in excess of the concession allowed you.
We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the offering, including,
without limitation, stabilization and over-allotment. We shall be under no
liability to you except for our lack of good faith and for obligations assumed
by us in this Agreement, except that you do not waive any rights that you may
have under the Securities Act of 1933 (the "1933 Act") or the rules and
regulations thereunder.
Upon application to us, we will inform you of the states and other
jurisdictions of the United States in which it is believed that the Units are
qualified for sale under, or are exempt from the requirements of, their
respective securities laws, but we assume no
2
<PAGE>
responsibility with respect to your right to sell Units in any jurisdiction.
We have filed a Further State Notice with respect to the Units with the
Department of State of the State of New York.
You confirm that you are familiar with Rule 15c2-8 under the
Securities Exchange Act of 1934 (the "1934 Act"), relating to the distribution
of preliminary and final prospectuses, and confirm that you have complied and
will comply therewith (whether or not the Company is subject to the reporting
requirements of Section 13 or 15(d) of the 1934 Act). We will make available
to you, to the extent made available to us by the Company such number of
copies of the Prospectus as you may reasonably request for purposes
contemplated by the 1933 Act, the 1934 Act, and the rules and regulations
thereunder.
Your attention is directed to Rule 10b-6 under the 1934 Act, which
contains certain prohibitions against trading by a person interested in a
distribution until such person has completed its participation in the
distribution. You confirm that you will at all times comply with the
provisions of such Rule in connection with this offering.
Any notice from us shall be deemed to have been duly given if
telephoned, and subsequently mailed or transmitted by any standard form of
written tele-communication to you at the address to which this Agreement is
mailed, or if so mailed or transmitted in the first instance.
Please advise us promptly by telephone or any standard form of
written telecommunication of the principal amount of Units ordered by you and
confirm your agreement hereto by signing the Acceptance and Order on the
enclosed duplicate hereof and returning promptly such signed duplicate copy to
Dupont Securities Group, Inc., 19 Townsend Square, Oyster Bay, NY 11771. Upon
receipt thereof, this instrument and such signed duplicate copy will evidence
the agreement between us.
Very truly yours,
DUPONT SECURITIES GROUP, INC.
By:_________________________________
3
<PAGE>
ACCEPTANCE AND ORDER
Dupont Securities Group, Inc.
19 Townsend Square
Oyster Bay, NY 11771
Dear Sirs:
We hereby enter our order for ______ Units of Worldwide Wireless
Systems, Inc. under the terms and conditions of the foregoing Agreement.
We agree to all the terms and conditions stated in the foregoing
Agreement. We acknowledge receipt of the Prospectus relating to the above
Units and we further state that in entering this order we have relied upon
said Prospectus and no other statements whatsoever, written or oral. We affirm
that we are either (i) a member in good standing of the National Association
of Securities Dealers, Inc. (the "NASD") or (ii) a dealer with its principal
place of business located outside the United States, its territories, or
possessions and not registered under the Securities Exchange Act of 1934 and
not eligible for membership in the NASD, who hereby agrees to make no sales
within the United States, its territories or its possessions or to persons who
are nationals thereof or residents therein, and in making any sales, to comply
with the NASD's interpretation with respect to free-riding and withholding, as
well as all other pertinent interpretations of the NASD that may be applicable
to us. We also affirm and agree that we will promptly re-offer any Units
purchased by us in conformity with the terms of the offering and in conformity
with the Rules of Fair Practice of the NASD, (including, without limitation,
Sections 8, 24, 25 and 36 Article III thereof) and all applicable Rules and
Regulations promulgated under the Securities Exchange Act of 1934.
Date: , 1997
____________________________________
(Name of Selected Dealer)
By:________________________________
(Authorized Signature)
Address:___________________________
____________________________________
4
<PAGE>
_______________, 1997
Dupont Securities Group, Inc.
270 Greenwich Avenue
Greenwich, CT 06830
Gentlemen:
In consideration of Dupont Securities Group, Inc. (the "Underwriter")
undertaking the public offering of securities of Worldwide Wireless Systems,
Inc. (the "Company") pursuant to a Registration Statement on Form SB-2 filed
with the Securities and Exchange Commission and in order to induce said
Underwriter to make such public offering, the undersigned agrees with the
Underwriter that the undersigned will not sell or otherwise transfer any of
the Company's securities owned, directly or indirectly, of record or
beneficially, (as defined under the Securities Exchange Act of 1934) by the
undersigned, on the effective date of said Registration Statement for a period
of 12 (twelve) months form the effective date without the prior written
consent of the Underwriter. This lock-up agreement also covers any securities
of the Company acquired by the undersigned after the effective date except for
shares of Common Stock acquired in the open market. The undersigned hereby
acknowledges that it has agreed to permit all certificates evidencing the
undersigned's securities to be stamped with an appropriate legend reflecting
this agreement and to permit the Company to instruct its transfer agent to
note such restriction on the transfer books and records of the Company.
It is understood that the subject securities may be transferred by
operation of law to the executors, administrators, heirs and distributees of
the undersigned, provided that the transferee is subject to the same
restrictions with respect to any subsequent transfer during the aforesaid 12
(twelve) month period.
This Agreement shall terminate and be of no effect in the event that
the aforementioned public offering is not closed.
Dated:_________________________, 1997 Very truly yours,
---------------------------
(signature)
---------------------------
(Print name and address clearly)
---------------------------
---------------------------
----------------------------
(Soc. Security No. or FID No.)
----------------------------
(Telephone number)
<PAGE>
EXHIBIT 3.3
STATE OF DELAWARE
CERTIFICATE FOR RENEWAL
AND REVIVAL OF CHARTER
Worldwide Wireless, Inc., a corporation organized under the laws of
Delaware, the charter of which was voided for non-payment of taxes, now
desires to procure a restoration, renewal and revival of its charter, and
hereby certifies as follows:
1. The name of this corporation is Worldwide Wireless Systems, Inc.
(formerly known as Worldwide Wireless, Inc.)
2. Its registered office in the State of Delaware is located at 1013 Centre
Road, City of Wilmington Zip Code 19805 County of New Castle the name
and adress of its registered agent is 1013 Centre Road, Wilmington, DE
19805 (The Prentice Hall Corporation System, Inc.)
3. The date of filing of the original Certificate of Incorporation in
Delaware was April 4, 1994.
4. The date when restoration, renewal, and revival of the charter of this
company is to commence is the 1st day of March, 1997, same being prior
to the date of the expiration of the charter. This renewal and revival
of the charter of this corporation is to be perpetual.
5. This corporation was duly organized and carried on the business
authorized by its charter until the 1st day of March A.D. 1997, at which
time its charter became inoperative and void for non-payment of taxes
and this certificate for renewal and revival is filed by authority of
the duty elected directors of the corporation in accordance with the
laws of the State of Delaware.
IN TESTIMONY WHEREOF, and in compliance with the provisions of Section
312 of the General Corporation Law of the State of Delaware, as amended,
providing for the renewal, extension and restoration of charters, Scott A.
Wendel the last and acting authorized officer hereunto set his/her hand to
this certificate this day of December 1997.
BY: /s/ Scott A. Wendel
---------------------------------
TITLE OF OFFICER: President/CEO
---------------------------------
<PAGE>
INCORPORATED UNDER THE LAWS OF
THE STATE OF DELAWARE
WORLDWIDE WIRELESS SYSTEMS, INC.
Local Authorized Issue 22,500,000 2,500,000 SHARES PAR VALUE $.01
- ---------------------------------------- -------------------------------
SHARES 20,000,000 Shares Par Value $.01 EACH PREFERRED STOCK
Each Common Stock
THIS IS TO CERTIFY THAT _______________________________________________ IS
OWNER OF _____________________________________________________________________
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF
WORLDWIDE WIRELESS SYSTEMS, INC.
transferable on the books of the Corporation by the holder hereof
in person or by duly authorized Attorney upon surrender of this
Certificate properly endorsed.
witness, the seal of the Corporation and the signatures of its duly
authorized officers.
Dated
- ---------------------------- ---------------------------------
SECRETARY PRESIDENT
<PAGE>
EXHIBIT 4.3
WARRANT AGREEMENT
This Warrant Agreement (the "Agreement") is by and among WORLDWIDE
WIRELESS SYSTEMS, INC., a Delaware corporation (the "Company") and CONTINENTAL
STOCK TRANSFER & TRUST COMPANY, a New York corporation, as Warrant Agent (the
"Warrant Agent").
Background
1. In connection with a public offering of its securities (the
"Offering") through a firm commitment underwriting with Dupont Securities
Group, Inc. (the "Underwriter") pursuant to a Registration Statement filed
on Form SB-2 with the Securities and Exchange Commission under the Securities
Act of 1933 on __________, 1997 (the "Offering"), the Company proposes to
issue 1,500,000 redeemable common stock purchase warrants (the "Warrants").
2. The Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer, exchange and redemption of the Warrants, the
issuance of certificates representing the Warrants, the exercise of the
Warrants, and the rights of the holders thereof.
N O W , T H E R E F O R E ,
In consideration of the premises and the mutual covenants and
agreements herein set forth, and in reliance on the representations and
warranties contained herein, the parties hereby agree as follows:
Section 1. Definitions. As used herein, the following terms shall
have the following meanings, unless the context shall otherwise require:
(a) "Average Closing Bid Price", means the average closing bid
price of the Company's Common Stock reported by NASDAQ for
the 10 trading days immediately preceding the respective
closing of the Offering.
(b) "Common Stock" shall mean the authorized stock of the Company
of any class, whether now or hereafter authorized, which has
the right to participate in the distribution of earnings and
assets of the Company without limit as to amount or
percentage, which at the date hereof consists of 20,000,000
shares of Common Stock, $.01 par value per share.
(c) "Corporate Office" shall mean the office of the Warrant Agent
(or its successor) at which at any particular time its
principal business shall be administered, which office is
located on the date hereof at 2 Broadway, 19thFloor, New
York, New York 10004.
(d) "Exercise Date" shall mean, as to any Warrant, the date on
which the Warrant Agent shall have received both: (i) the
Warrant Certificate representing such Warrant, with the
exercise form thereon duly executed by the Registered Holder
thereof or his attorney duly authorized in writing; and (i)
payment in cash, or by official bank or certified check made
payable to the Warrant Agent, of an amount in lawful money
of the United States of America equal to the applicable
Purchase Price.
<PAGE>
(e) "Purchase Price" shall mean the price to be paid upon exercise
of each Warrant in accordance with the terms hereof, which
price shall be $_____ per share, subject to adjustment from
time to time pursuant to the provisions of Section 9 hereof,
and subject to the Company's right to reduce the Purchase
Price; upon notice to all Warrant Holders.
(f) "Redemption Price" shall mean the price at which the Company
may, at its option, redeem the Warrants, in accordance with
the terms hereof, which price shall be $.10 per Warrant,
subject to adjustment from time to time pursuant to the
provisions of Section 9.
(g) "Registered Holder" shall mean the person in whose name any
certificate representing Warrants shall be registered on the
books maintained by the Warrant Agent pursuant to Section 6.
(h) "Transfer Agent" shall mean Continental Stock Transfer & Trust
Company, as the Company's transfer agent, or its authorized
successor, as such.
(i) "Warrant Expiration Date" shall mean, with respect to each
Warrant, 3:00 p.m. (New York, New York time) on the fifth
anniversary of the date of issuance of the Warrants, or the
Redemption Date as defined in Section 8, whichever is
earlier; provided that if such date shall in the State of
New York be a holiday or a day on which banks are authorized
to close, then 3:00 p.m. (New York, New York time) on the
next following day which in the State of New York is not a
holiday nor a day on which banks are authorized to close.
Upon notice to all Warrant Holders, the Company shall have
the right to extend the Warrant Expiration Date.
Section 2. Warrants and Issuance of Warrant Certificates.
(a) Each Warrant shall initially entitle the Registered Holder
of the Warrant Certificate representing such Warrant to
purchase one (1) share of Common Stock upon the exercise
thereof, in accordance with the terms hereof, subject to
modification and adjustment as provided in Section 9.
(b) Upon execution of this Agreement, Warrant Certificates
representing the number of Warrants sold pursuant to the
Registration Statement shall be executed by the Company and
delivered to the Warrant Agent. Upon written order of the
Company signed by its President or Chairman or a Vice
President and by its Secretary or an Assistant Secretary,
the Warrant Certificates shall be countersigned, issued and
delivered by the Warrant Agent.
(c) From time to time, up to the Warrant Expiration Date, the
Transfer Agent shall countersign and deliver stock
certificates in required whole number denominations
representing the amount of shares of Common Stocks sold in
the Offering, subject to adjustment as described herein,
upon the exercise of Warrants in accordance with this
Agreement.
(d) From time to time, up to the Warrant Expiration Date, the
Warrant Agent shall countersign and deliver Warrant
Certificates in required whole number denominations to the
persons
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<PAGE>
entitled thereto in connection with any transfer or exchange
permitted under this Agreement; provided that no Warrant
Certificates shall be issued except to: (i) those initially
issued hereunder; (ii) those issued on or after the Initial
Warrant Exercise Date, upon the exercise of fewer than all
Warrants represented by any Warrant Certificate, to evidence
any unexercised Warrants held by the exercising Registered
Holder; (iii) those issued upon any transfer or exchange
pursuant to Section 6; (iv) those issued in replacement of
lost, stolen, destroyed or mutilated Warrant Certificates
pursuant to Section 7; (v) those issued pursuant to the
Placement Agents' Warrants; and (vi) at the option of the
Company, in such form as may be approved by its Board of
Directors, to reflect any adjustment or change in the
Purchase Price, the number of shares of Common Stock
purchasable upon exercise of the Warrants or the Redemption
Price therefor made pursuant to Section 9.
Section 3. Form and Execution of Warrant Certificates.
(a) The Warrant Certificates for the Warrants shall be
substantially in the form annexed hereto as Exhibit A and
may have such letters, numbers or other marks of
identification or designation and such legends, summaries or
endorsements printed, lithographed or engraved thereon as
the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement or as may be required
to comply with any law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock
exchange on which the Warrants may be listed, or to conform
to usage. The Warrant Certificates shall be dated the date
of issuance thereof (whether upon initial issuance,
transfer, exchange or in lieu of mutilated, lost, stolen, or
destroyed Warrant Certificates) and issued in registered
form. Warrants shall be numbered serially with the letter W
on the Warrants.
(b) Warrant Certificates shall be executed on behalf of the
Company by its Chairman of the Board, President or any Vice
President and by its Secretary or an Assistant Secretary, by
mutual signatures or by facsimile signatures printed
thereon, and shall have imprinted thereon a facsimile of the
Company's seal. Warrant Certificates shall be manually
countersigned by the Warrant Agent and shall not be valid
for any purpose unless so countersigned. Incase any officer
of the Company who shall have signed any of the Warrant
Certificates shall cease to be such officer of the Company
before the date of issuance of the Warrant Certificates or
before countersignature by the Warrant Agent and issue and
delivery thereof, such Warrant Certificates may nevertheless
be countersigned by the Warrant Agent, issued and delivered
with the same force and effect as though the person who
signed such Warrant Certificates had not ceased to be such
officer of the Company. After countersignature by the
Warrant Agent, Warrant Certificates shall be delivered by
the Warrant Agent to the registered Holder without further
action by the Company, except as otherwise provided by
Section 4(a).
Section 4. Exercise.
(a) Each Warrant may be exercised by the Registered Holder thereof
at any time on or after the Initial Warrant Exercise Date,
but not after the Warrant Expiration Date, upon the terms
and subject to the conditions set forth herein and in the
applicable Warrant Certificate. The Company shall not be
obligated to deliver any securities pursuant to the
- 3 -
<PAGE>
exercise of this Warrant unless a registration statement
under the Securities Act of 1933, with respect to such
securities is effective. The Company has covenanted and
agreed that it will use all reasonable efforts to keep the
Registration Statement current while any of the Warrants are
outstanding. This Warrant shall not be exercisable by a
Registered Holder in any state where such exercise would be
unlawful. A Warrant shall be deemed to have been exercised
immediately prior to the close of business on the Exercise
Date and the person entitled to receive the securities
deliverable upon such exercise shall be treated for all
purposes as the holder upon exercise thereof as of the close
of business on the Exercise Date. As soon as practicable on
or after the Exercise Date, the Warrant Agent shall deposit
the proceeds received from the exercise of a Warrant and
shall notify the Company in writing of the exercise of the
Warrants. Promptly following, and in any event within five
(5) days after the date of such notice from the Warrant
Agent, the Warrant Agent, on behalf of the Company, shall
cause to be issued and delivered to the person or persons
entitled to receive the same, a certificate or certificates
for the securities deliverable upon such exercise (plus a
Warrant Certificate for any remaining unexercised Warrants
of the Registered Holder) unless prior to the date of
issuance of such certificates the Company shall instruct the
Warrant Agent to refrain from causing such issuance of
certificates pending clearance of checks received in payment
of the Purchase Price pursuant to such Warrants. The Warrant
Agent shall notify the Underwriter of any exercise of this
Warrant within ten (10) days after the date of such
exercise.
Section 5. Reservation of Shares; Listing; Payment of Taxes; etc.
(a) The Company covenants that it will at all times reserve and
keep available out of its authorized Common Stock, solely
for the purpose of issuance upon exercise of Warrants, such
number of shares of Common Stock as shall then be issuable
upon the exercise of all outstanding Warrants. The Company
covenants that all shares of Common Stock which shall be
issuable upon exercise of the Warrants shall, at the time of
delivery, be duly and validly issued, fully paid,
nonassessable and free from all taxes, liens and charges
with respect to the issuance thereof (other than those which
the Company shall promptly pay or discharge) and that upon
issuance such shares shall be listed on each national
securities exchange, if any, on which the other shares of
outstanding Common Stock of the Company are then listed.
(b) The Company covenants that if any securities to be reserved
for the purpose of exercise of Warrants hereunder require
registration with, or approval of, any governmental
authority under any federal securities law before such
securities may be validly issued or delivered upon such
exercise, then the Company will in good faith and as
expeditiously as reasonably possible, endeavor to secure
such registration or approval. The Company will use all
reasonable efforts to obtain appropriate approvals or
registrations under state "blue sky"securities laws with
respect to any such securities. However, Warrants may not be
exercised by, or shares of Common Stock issued to, any
Registered Holder in any state in which such exercise would
be unlawful.
(c) The Company shall pay all documentary, stamp or similar taxes
and other governmental charges that may be imposed with
respect to the issuance of Warrants, or the issuance or
delivery of any shares upon exercise of the Warrants;
provided, however, that if the shares of Common Stock are to
be delivered in a name other than the name of the Registered
Holder of the Warrant Certificate representing any Warrant
being exercised, then no such
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<PAGE>
delivery shall be made unless the person requiring the same
has paid to the Warrant Agent the amount of transfer taxes
or charges incident thereto, if any.
Section 6. Exchange and Registration of Transfer.
(a) Warrant Certificates may be exchanged for other Warrant
Certificates representing an equal aggregate number of
Warrants of the same class or may be transferred in whole or
in part. Warrant Certificates to be exchanged shall be
surrendered to the Warrant Agent at its Corporate Office,
and upon satisfaction of all the terms and provisions
hereof, the Company shall execute and the Warrant Agent
shall countersign, issue and deliver in exchange therefor
the Warrant Certificate or Certificates which the Registered
Holder making the exchange shall be entitled to receive.
(b) The Warrant Agent shall keep at its office books in which,
subject to such reasonable regulations as it may prescribe,
it shall register Warrant Certificates and the transfer
thereof in accordance with its regular practice. Upon due
presentment for registration of transfer of any Warrant
Certificate at such office, the Company shall execute and
the Warrant Agent shall issue and deliver to the transferee
or transferees a new Warrant Certificate or Certificates
representing an equal aggregate number of Warrants of the
same class.
(c) With respect to all Warrant Certificates presented for
registration or transfer, or for exchange or exercise, the
subscription form on the reverse thereof shall be duly
endorsed, or be accompanied by a written instrument or
instruments of transfer and subscription, in form
satisfactory to the Company and the Warrant Agent, duly
executed by the Registered Holder or his attorney-in-fact
duly authorized in writing.
(d) A service charge may be imposed by the Warrant Agent for any
exchange or registration of transfer of Warrant
Certificates. In addition, the Company may require payment
by such holder of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection
therewith.
(e) All Warrant Certificates surrendered for exercise or for
exchange in case of mutilated Warrant Certificates shall be
promptly canceled by the Warrant Agent and thereafter
retained by the Warrant Agent until termination of this
Agreement or resignation as Warrant Agent.
(f) Prior to due presentment for registration of transfer thereof,
the Company and the Warrant Agent may deem and treat the
Registered Holder of any Warrant Certificate as the absolute
owner thereof and of each Warrant represented thereby
(notwithstanding any notations of ownership or writing
thereon made by anyone other than a duly authorized officer
of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary.
Section 7. Loss or Mutilation. Upon receipt by the Company and the
Warrant Agent of evidence satisfactory to them of the ownership of and loss,
theft, destruction or mutilation of any Warrant Certificate and (in case of
loss, theft or destruction) of indemnity satisfactory to them, and (in the
case of mutilation) upon surrender and cancellation thereof, the Company shall
execute and the Warrant Agent shall (in the
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<PAGE>
absence of notice to the Company and/or Warrant Agent that the Warrant
Certificate has been acquired by a bonafide purchaser) countersign and deliver
to the Registered Holder in lieu thereof a new Warrant Certificate of like
tenor representing an equal aggregate number of Warrants. Applicants for a
substitute Warrant Certificate shall comply with such other reasonable
regulations and pay such other reasonable charges as the Warrant Agent may
prescribe.
Section 8. Redemption.
(a) At any time after the first anniversary of the date hereof,
on not less than thirty (30) days' prior written notice, the
Warrants may be redeemed, at a price of $.10 per Warrant,
provided the average closing bid price of the Company's
Common Stock on the Nasdaq Stock Market (or the last sale
price, if quoted on a national securities exchange) for
twenty (20) consecutive trading days ending on the fifteenth
day prior to the date of the notice of redemption equals or
exceeds $9.00 per share (subject to adjustment by the
Company in accordance with Section 9 hereof). The notice of
redemption will be sent to the registered address of the
registered holder of the Warrant. All Warrants must be
redeemed if any are redeemed.
(b) In case the Company shall desire to exercise its right to so
redeem the Warrants, it shall request the Warrant Agent to
mail a notice of redemption to each of the Registered
Holders of the Warrants to be redeemed, first class, postage
prepaid, not later than the thirtieth (30th) day before the
date fixed for redemption, at their last address as shall
appear on the records of the Warrant Agent. Any notice
mailed in the manner provided herein shall be conclusively
presumed to have been duly given whether or not the
Registered Holder receives such notice.
(c) The notice of redemption shall specify: (i) the Redemption
Price; (ii) the date fixed for redemption; (iii) the place
where the Warrant Certificates shall be delivered and the
redemption price paid; and (iv) that the right to exercise
the Warrant shall terminate at 3:00 p.m. (New York, New York
time) on the business day immediately preceding the date
fixed for redemption. No failure to mail such notice nor any
defect therein or in the mailing thereof shall affect the
validity of the proceedings for such redemption except as to
a holder (i) to whom notice was not mailed; or (ii) whose
notice was defective. An affidavit of the Warrant Agent or
of the Secretary or the Company that notice of redemption
has been mailed shall, in the absence of fraud, be prima
facie evidence of the facts stated therein.
(d) Any right to exercise a Warrant that has been called for
redemption shall terminate at 3:00 p.m. (New York, New York
time) on the business day immediately preceding the
Redemption Date. On and after the Redemption Date, Holders
of the redeemed Warrants shall have no further rights except
to receive, upon surrender of the redeemed Warrant, the
Redemption Price.
(e) From and after the date specified for redemption, the Company
shall, at the place specified in the notice of redemption,
upon presentation and surrender to the Company by or on
behalf of the Registered Holder thereof of one or more
Warrants to be redeemed, deliver or cause to be delivered to
or upon the written order of such Holder a sum in cash equal
to the Redemption Price of each such Warrant. From and after
the date fixed for redemption and upon the depositor setting
aside by the Company of a sum sufficient to
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<PAGE>
redeem all the Warrants called for redemption, such Warrants
shall expire and become void and all rights hereunder and
under the Warrant Certificates, except the right to receive
payment of the Redemption Price, shall cease.
(f) In case the Company shall desire to exercise its right to so
redeem the Warrants before the Warrants are exercisable, the
Warrants shall become immediately exercisable upon receipt
of written notice of the Company's intent to redeem.
Section 9. Adjustment of Purchase Price and Number of Shares of Common
Stock or Warrants.
(a) Subject to the exceptions referred to in Section 9 (g), in the
event the Company shall, at any time or from time to time
after the date hereof, subdivide or combine the outstanding
shares of Common Stock into a greater or lesser number of
shares (any such subdivision or combination being herein
called a "Change of Shares") , then, and thereafter upon
each further Change of Shares, the applicable Purchase Price
in effect immediately prior to such Change of Shares shall
be changed to a price (including any applicable fraction of
a cent) determined by multiplying the Purchase Price in
effect immediately prior thereto by a fraction, the
numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such Change of
Shares and the denominator of which shall be the total
number of shares of Common Stock outstanding immediately
after such Change of Shares. Upon each adjustment of the
applicable Purchase Price pursuant to this Section 9, the
total number of shares of Common Stock purchasable upon the
exercise of each Warrant shall (subject to the provisions
contained in Section9(b)) be such number of shares
(calculated to the nearest tenth) purchasable at the
applicable Purchase Price immediately prior to such
adjustment multiplied by a fraction, the numerator of which
shall be the applicable Purchase Price in effect immediately
prior to such adjustment and the denominator of which shall
be the applicable Purchase Price in effect immediately after
such adjustment.
(b) In case of any reclassification, capital reorganization or
other change of outstanding shares of Common Stock, or in
case of any consolidation or merger of the Company with or
into another corporation (other than a consolidation or
merger in which the Company is the continuing corporation
and which does not result in any reclassification, capital
reorganization or other change of outstanding shares of
Common Stock), or incase of any sale or conveyance to
another corporation of the property of the Company as, or
substantially as, an entirety (other than a sale/leaseback,
mortgage or other financing transaction), the Company shall
cause effective provision to be made so that each holder of
a Warrant then outstanding shall have the right thereafter,
by exercising such Warrant, to purchase the kind and number
of shares of stock or other securities or property
(including cash) receivable upon such reclassification,
capital reorganization or other change, consolidation,
merger, sale or conveyance by a holder of the number of
shares ofCommon Stock that might have been purchased upon
exercise of such Warrant, immediately prior to such
reclassification, capital reorganization or other change,
consolidation, merger, sale or conveyance. Any such
provision shall include provision for adjustments that shall
be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 9. The foregoing
provisions, shall similarly apply to
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<PAGE>
successive reclassifications, capital reorganizations and
other changes of outstanding shares of Common Stock and to
successive consolidations, mergers, sales or conveyances.
(c) Irrespective of any adjustments or changes in the Purchase
Price or the number of shares of Common Stock purchasable
upon exercise of the Warrants, the Warrant Certificates
theretofore and thereafter issued shall, unless the Company
shall exercise its option to issue new Warrant Certificates
pursuant to Section 2 (e), continue to express the
applicable Purchase Price per share, the number of shares
purchasable thereunder as the Purchase Price per share, and
the number of shares purchasable thereunder as were
expressed in the Warrant Certificates when the same were
originally issued.
(d) After each adjustment of the Purchase Price pursuant to this
Section 9, the Company will promptly prepare a certificate
signed by the Chairman or President, and by the Treasurer or
an Assistant Treasurer or the Secretary or an Assistant
Secretary, of the Company setting forth: (i) the applicable
Purchase Price as so adjusted; (ii) the number of shares of
Common Stock purchasable upon exercise of each Warrant after
such adjustment, and the number of Warrants to which the
registered holder of each Warrant shall then be entitled;
and (iii) a brief statement of the facts accounting for such
adjustment. The Company will promptly file such certificate
with the Warrant Agent and cause a brief summary thereof to
be sent by ordinary first class mail to the Placement Agents
and to each registered holder of Warrants at his last
address as it shall appear on the registry books of the
Warrant Agent. No failure to mail such notice nor any defect
therein or in the mailing thereof shall affect the validity
thereof except as to the holder to whom the Company failed
to mail such notice, or except as to the holder whose notice
was defective. The affidavit of an officer of the Warrant
Agent or the Secretary or an Assistant Secretary of the
Company that such notice has been mailed shall, in the
absence of fraud, be prima facie evidence of the facts
stated therein.
(e) For purposes of Section 9(a) and 9(b) hereof, the following
provisions (i) and (ii) shall also be applicable:
(i) The number of shares of Common Stock outstanding at
any given time shall include shares of Common Stock
owned or held by or for the account of the Company
and the sale or issuance of such treasury shares or
the distribution of any such treasury shares shall
not be considered a Change of Shares for purposes
of said Sections.
(ii) No Adjustment of the Purchase Price shall be made
unless such adjustment would require an increase or
decrease of at least five cents ($.05) in such
price; provided that any adjustments which by
reason of this clause (ii) are not required to be
made shall be carried forward and shall be made at
the time of and together with the next subsequent
adjustment which, together with any adjustments so
carried forward, shall require an increase or
decrease of at least $0.05 in the Purchase Price
then in effect hereunder.
(f) No Adjustment of Purchase Price in Certain Cases.
Notwithstanding any provision to the contrary contained
herein, no adjustment of the Purchase Price shall be made:
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<PAGE>
(i) Upon the issuance or sale of: (i) the Underwriters'
Warrants or the securities underlying the
Underwriters' Warrants; (ii) the shares issuable
pursuant to the options, warrants, rights, stock
purchase agreements or convertible or exchangeable
securities outstanding or in effect on the date
hereof as described in the Prospectus; (iii) any
shares of Common Stock to be issued upon exercise
of options granted by the Company under stock
option plans subsequently adopted by the Company;
(iv) securities issued in connection with the
acquisition of, or merger with, any entity by the
Company; and (v) any Shares issued in connection
with the Offering.
(ii) If the amount of said adjustments shall aggregate
less than five cents ($.05) for one (1) share of
Common Stock; provided, however, that in such case
any adjustment that would otherwise be required
then to be made shall be carried forward and shall
be made at the time of and together with the next
subsequent adjustment which, together with any
adjustment so carried forward, shall aggregate at
least five cents ($.05) for one (1) share of Common
Stock.
(g) As used in this Section 9, the term "Common Stock" shall mean
and include the Company's Common Stock authorized on the
date of the Offering of the Units and shall also include any
capital stock of any class of the Company thereafter
authorized which shall not be limited to a fixed sum or
percentage in respect of the rights of the holders thereof
to participate in dividends and in the distribution of
assets upon the voluntary liquidation, dissolution or
winding up of the Company; provided, however, that the
shares issuable upon exercise of the Warrants shall include
only shares of such class designated in the Company's
Certificate of Incorporation as Common Stock on the date of
the Offering or: (i) in the case of any reclassification,
change, consolidation, merger, sale or conveyance of the
character referred to in Section 9(c) hereof, the stock,
securities or property provided for in such Section; or (ii)
in the case of any reclassification or change in the
outstanding shares of Common Stock issuable upon exercise of
the Warrants as a result of a subdivision or combination or
consisting of a change in par value, or from par value to no
par value, or from no par value to par value, such shares of
Common Stock as so reclassified or changed.
(h) Any determination as to whether an adjustment in the Purchase
Price in effect hereunder is required pursuant to Section 9,
or as to the amount of any such adjustment, if required,
shall be binding upon the holders of the Warrants and the
Company if made in good faith by the Board of Directors of
the Company.
Section 10. Fractional Warrants and Fractional Shares.
(a) If the number of shares of Common Stock purchasable upon the
exercise of each Warrant is adjusted pursuant to Section 9
hereof, the Company shall nevertheless not be required to
issue fractions of shares, upon exercise of the Warrants or
otherwise, or to distribute certificates that evidence
fractional shares. With respect to any fraction of a share
called for upon any exercise hereof, the Company shall pay
to the Holder an amount in cash equal to such fraction
multiplied by the current market value of such fractional
share, determined as follows:
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<PAGE>
(i) If the Common Stock is listed on a National
Securities Exchange or admitted to unlisted trading
privileges on such exchange or listed for trading
on the Nasdaq National Market, the current value
shall be the last reported sale price of the Common
Stock on such exchange on the last business day
prior to the date of exercise of the Warrant, or if
no such sale is made on such day, the average of
the closing bid and asked prices for such day on
such exchange; or
(ii) If the Common Stock is not listed or admitted to
unlisted trading privileges, the current value
shall be the mean of the last reported bid and
asked prices reported by the National Quotation
Bureau, Inc. on the last business day prior to the
date of the exercise of the Warrant; or
(iii) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked
prices are not so reported, the current value shall
be an amount determined in such reasonable manner
as may be prescribed by the Board of Directors of
the Company.
Section 11. Warrant Holders Not Deemed Stockholders. No holder of
Warrants shall, as such, be entitled to vote or to receive dividends or be
deemed the holder of Common Stock that may at any time be issuable upon
exercise of such Warrants for any purpose whatsoever, nor shall anything
contained herein be construed to confer upon the holder of Warrants, as such,
any of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action
(whether upon any recapitalization, issuance or reclassification of stock,
change of par value or change of stock to no par value, consolidation, merger
o conveyance or otherwise), or to receive notice of meetings, or to receive
dividends or subscription rights, until such Holder shall have exercised such
Warrants and been issued shares of Common Stock in accordance with the
provisions hereof.
Section 12. Rights of Action. All rights of action with respect to
this Agreement are vested in the respective Registered Holders of the
Warrants, and any Registered Holder of a Warrant, without consent of the
Warrant Agent or of the holder of any other Warrant, may, in his own behalf
and for his own benefit, enforce against the Company his right to exercise his
Warrants for the purchase of shares of Common Stock in the manner provided in
the Warrant Certificates and this Agreement.
Section 13. Agreement of Warrant Holders. Every holder of a Warrant,
by his acceptance thereof, consents and agrees with the Company, the Warrant
Agent and every other holder of a Warrant that:
(a) The Warrants are transferable only on the registry books of
the Warrant Agent by the Registered Holder thereof in person
or by his attorney duly authorized in writing and only if
the Warrant Certificates representing such Warrants are
surrendered at the office of the Warrant Agent, duly
endorsed or accompanied by a proper instrument of transfer
satisfactory to the Warrant Agent and the Company in their
sole discretion, together with payment of any applicable
transfer taxes; and
(b) The Company and the Warrant Agent may deem and treat the
person in whose name the Warrant Certificate is registered
as the holder and as the absolute, true and lawful owner of
the Warrants represented thereby for all purposes, and
neither the Company nor the
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<PAGE>
Warrant Agent shall be affected by any notice or knowledge
to the contrary, except as otherwise expressly provided in
Section 7 hereof.
Section 14. Cancellation of Warrant Certificates. If the Company
shall purchase or acquire any Warrant or Warrants, the Warrant Certificate or
Warrant Certificates evidencing the same shall thereupon be delivered to the
Warrant Agent and canceled by it and retired. The Warrant Agent shall also
cancel Common Stock following exercise of any or all of the Warrants
represented thereby or delivered to it for transfer, split-up, combination or
exchange.
Section 15. Concerning the Warrant Agent. The Warrant Agent acts
hereunder as agent and in a ministerial capacity for the Company, and its
duties shall be determined solely by the provisions hereof. The Warrant Agent
shall not, by issuing and delivering Warrant Certificates or by any other act
hereunder be deemed to make any representations as to the validity, value or
authorization of the Warrant Certificates or the Warrants represented thereby
or of any securities or other property delivered upon exercise of any Warrant
or whether any stock issued upon exercise of any Warrant is fully paid and
nonassessable.
The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of Warrant Certificates to make or cause to be
made any adjustment of the Purchase Price or the Redemption Price provided in
this Agreement, or to determine whether any fact exists which may require any
such adjustments, or with respect to the nature or extent of any such
adjustment, when made, or with respect to the method employed in making the
same. It shall not: (i) be liable for any recital or statement of facts
contained herein or for any action taken, suffered or omitted by it in
reliance on any Warrant Certificate or other document or instrument believed
by it in good faith to be genuine and to have been signed or presented by the
proper party or parties; (ii) be responsible for any failure on the part of
the Company to comply with any of its covenants and obligations contained in
this Agreement or in any Warrant Certificate; or (iii) be liable for any act
or omission in connection with this Agreement except for its own negligence or
willful misconduct. The Warrant Agent may at any time consult with counsel
satisfactory to it (who may be counsel for the Company) and shall incur no
liability or responsibility for any action taken, suffered or omitted by it in
good faith in accordance with the opinion or advice of such counsel. Any
notice, statement, instruction, request, direction, order or demand of the
Company shall be sufficiently evidenced by an instrument signed by the
Chairman of the Board, President, any Vice President, its Secretary, or
Assistant Secretary, (unless other evidence in respect thereof is herein
specifically prescribed). The Warrant Agent shall not be liable for any action
taken, suffered or omitted by it in accordance with such notice, statement,
instruction, request, direction, order or demand believed by it to be genuine.
The Company agrees to pay the Warrant Agent reasonable compensation
for its services hereunder and to reimburse it for its reasonable expenses
hereunder; it further agrees to indemnify the Warrant Agent and save it
harmless against any and all losses, expenses and liabilities, including
judgments, costs and counsel fees, for anything done or omitted by the Warrant
Agent in the execution of its duties and powers hereunder except losses,
expenses and liabilities arising as a result of the Warrant Agent's negligence
or willful misconduct.
In the event of a dispute under this Agreement between the Company
and the Underwriter regarding proceeds received by the Warrant Agent from the
exercise of the Warrants, the Warrant Agent shall have the right, but not the
obligation, to bring an interpleader action to resolve such dispute.
- 11 -
<PAGE>
The Warrant Agent may resign its duties and be discharged from all
further duties and liabilities hereunder (except liabilities arising as a
result of the Warrant Agent's own negligence or willful misconduct), after
giving 30 days' prior written notice to the Company. At least 15 days prior to
the date such resignation is to become effective, the Warrant Agent shall
cause a copy of such notice of resignation to be mailed to the Registered
Holder of each Warrant Certificate at the Company's expense. Upon such
resignation, or any inability of the Warrant Agent to act as such hereunder,
the Company shall appoint a new warrant agent in writing. If the Company shall
fail to make such appointment within a period of 15 days after it has been
notified in writing of such resignation by the resigning Warrant Agent, then
the Registered Holder of any Warrant Certificate may apply to any court of
competent jurisdiction for the appointment of a new warrant agent. Any new
warrant agent, whether appointed by the Company or by such a court shall be a
bank or trust company having a capital and surplus as shown by its last
published report to its stockholders, of not less than Ten Million Dollars
($10,000,000.00), or a stock transfer company. After acceptance in writing of
such appointment by the new warrant agent is received by the Company, such new
warrant agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named herein as the Warrant
Agent, without any further assurance, conveyance, act or deed; but if for any
reason it shall be necessary or expedient to execute and deliver any further
assurance conveyance, act or deed, the same shall be done at the expense of
the Company and shall be legally and validly executed and delivered by the
resigning Warrant Agent. Not later than the effective date of any such
appointment the Company shall file notice thereof with the resigning Warrant
Agent and shall forthwith cause a copy of such notice to be mailed to the
Registered Holder of each Warrant Certificate.
Any corporation into which the Warrant Agent or any new warrant agent
may be converted or merged or any corporation resulting from any consolidation
to which the Warrant Agent or any new warrant agent shall be a party or any
corporation succeeding to the trust business of the Warrant Agent shall be a
successor warrant agent under this Agreement without any further act, provided
that such corporation is eligible for appointment as successor to the Warrant
Agent under the provisions of the preceding paragraph. Any such successor
warrant agent shall promptly cause notice of its succession as warrant agent
to be mailed to the Company and to the Registered Holder of each Warrant
Certificate. The Warrant Agent, its subsidiaries and affiliates, and any of
its or their officers or directors, may buy and hold or sell Warrants or other
securities of the Company and otherwise deal with the Company in the same
manner and to the same extent and with like effects as though it were not
Warrant Agent. Nothing herein shall preclude the Warrant Agent from acting in
any other capacity for the Company or for any other legal entity.
Section 16. Modification of Agreement. The Warrant Agent and the
Company may by supplemental agreement make any changes or corrections in this
Agreement: (i) that they shall deem appropriate to cure any ambiguity or to
correct any defective or inconsistent provision or manifest mistake or error
herein contained; or (ii) that they may deem necessary or desirable and which
shall not adversely affect the interests of the holders of Warrant
Certificates; provided, however, that this Agreement shall not otherwise be
modified, supplemented or altered in any respect except with the consent in
writing of the Registered Holders of Warrant Certificates representing not
less than 50% of the Warrants then outstanding; and provided, further, that no
change in the number or nature of the securities purchasable upon the exercise
of any Warrant, or the Purchase Price therefor, or the acceleration of the
Warrant Expiration Date, shall be made without the consent in writing of the
Registered Holder of the Warrant Certificate representing such Warrant, other
than such changes as are specifically prescribed by this Agreement as
originally executed.
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<PAGE>
Section 17. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
made when delivered or mailed first class registered or certified mail,
postage prepaid as follows: if to the Registered Holder of a Warrant
Certificate, at the address of such holder as shown on the registry books
maintained by the Warrant Agent; if to the Company, at P.O. Box 470, Ascutney,
VT 05030, Attention: President, with a copy to Gravel and Shea, 76 St. Paul
Street, Burlington, Vermont 05401, attention Peter S. Erly, Esq., or at such
other address as may have been furnished to the Warrant Agent in writing by
the Company; if to the Warrant Agent, at Continental Stock Transfer & Trust
Company, 2 Broadway, 19th Floor, New York, New York 10004.
Section 18. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
reference to principles of conflict of laws.
Section 19. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Company and the Warrant Agent and their respective
successors and assigns, and the holders from time to time of the Warrant
Certificates. Nothing in this Agreement is intended or shall be construed to
confer upon any other person any right, remedy or claim, in equity or at law,
or to impose upon any other person any duty, liability or obligation.
Section 20. Termination. This Agreement shall terminate at the close
of business on the Expiration Date of all the Warrants of such earlier date
upon which all warrants have been exercised, except that the Warrant Agent
shall account to the Company for cash held by it and the provisions of Section
15hereof shall survive such termination.
Section 21. Counterparts. This Agreement may be executed in several
counterparts which taken together shall constitute a single document.
IN WITNESS WHEREOF, the parties have executed or caused this
Agreement to be executed as of the _____ day of ______________, 1997.
WORLDWIDE WIRELESS SYSTEMS, INC.
By:___________________________________
Duly Authorized Agent
CONTINENTAL STOCK TRANSFER
& TRUST COMPANY
By:___________________________________
Duly Authorized Agent
Countersigned:
Dated:________________________ CONTINENTAL STOCK TRANSFER
& TRUST COMPANY
SEAL By:___________________________________
Duly Authorized Agent
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<PAGE>
Exhibit "A"
FORM OF FACE OF WARRANT CERTIFICATE
No. _____ _______ (______) Warrants
VOID AFTER January 31, 2000
CLASS A REDEEMABLE COMMON STOCK WARRANT CERTIFICATE
FOR PURCHASE OF COMMON STOCK OF
WORLDWIDE WIRELESS SYSTEMS, INC.
This certifies that FOR VALUE RECEIVED or registered assigns
(the"Registered Holder") is the owner of the number of Redeemable Common Stock
purchase Warrants (the "Warrants") specified above. Each Warrant entitles the
Registered Holder to purchase, subject to the terms and conditions set forth
in this Certificate and the Warrant Agreement (as hereinafter defined), one
fully paid and nonassessable share of Common Stock, $.01 par value, of
Worldwide Wireless Systems, Inc., a Delaware corporation (the "Company"), at
any time between one year from __________ and the Expiration Date (as
hereinafter defined), upon the presentation and surrender of this Warrant
Certificate with the Subscription Form on the reverse hereof duly executed, at
the corporate office of Continental Stock Transfer & Trust Company as Warrant
Agent, or its successor (the "Warrant Agent"), accompanied by payment of
$_____ per share (the "Purchase Price") in lawful money of the United States
of America in cash or by official bank or certified check made payable to the
Warrant Agent.
This Warrant Certificate and each Warrant represented hereby are
issued pursuant to and are subject in all respects to the terms and conditions
set forth in the Warrant Agreement (the "Warrant Agreement"), dated as of
__________, 1997, by and among the Company and the Warrant Agent.
In the event of certain events provided for in the Warrant Agreement,
the Purchase Price and the number of shares of Common Stock subject to
purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional shares of Common Stock will be issued. In
the case of the exercise of less than all the Warrants represented hereby, the
Company shall cancel this Warrant Certificate upon the surrender hereof and
shall execute and deliver a new Warrant Certificate or Warrant Certificates of
like tenor, which the Warrant Agent shall countersign, for the balance of such
Warrants.
The term "Expiration Date" shall mean 3:00 p.m. (New York, New York
time) on __________, 2002, or such earlier date as the Warrants shall be
redeemed. If such date shall in the State of New York be a holiday or a day on
which the banks are authorized to close, then the Expiration Date shall be
3:00 p.m. (New York, New York time) the next day which in the State of New
York is not a holiday nor a day in which banks are authorized to close.
The Company shall not be obligated to deliver any securities pursuant
to the exercise of this Warrant unless a registration statement under the
Securities Act of 1933, with respect to such securities is effective. The
Company has covenanted and agreed that it will file a registration statement
and will use all reasonable efforts to cause the same to become effective and
to keep such registration statement current
<PAGE>
while any of the Warrants are outstanding. This Warrant shall not be
exercisable by a Registered Holder in any state where such exercise would be
unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof
by the Registered Holder at the corporate office of the Warrant Agent, for a
new warrant Certificate or Warrant Certificates of like tenor representing an
equal aggregate number of Warrants, each of such new Warrant Certificates to
represent such number of Warrants as shall be designated by such Registered
Holder at the time of such surrender. Upon due presentment together with any
tax or other governmental charge imposed in connection therewith, for
registration or transfer of this Warrant Certificate at such office, a new
Warrant Certificate or Warrant Certificates representing an equal aggregate
number of Warrants will be issued to the transferee in exchange therefor,
subject to the limitations provided in the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the
Registered Holder shall not be entitled to any rights of a stockholder of the
Company, including, without limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided in the Warrant
Agreement.
This Warrant may be redeemed at the option of the Company, at a
Redemption Price of $.10 per Warrant, provided that (a) the closing price of
the Company's Common Stock on the Nasdaq Small Cap Market as reported by the
National Quotation Bureau, Incorporated (or the last sale price, if quoted on
a national securities exchange) equals or exceeds $9.00 for at least 20
consecutive trading days ending on the fifteenth (15th) business day prior to
the date of the notice of redemption. Notice of redemption shall be given not
later than the thirtieth (30th) day before the date fixed for redemption, all
as provided in the Warrant Agreement. On and after the date fixed for
redemption, the Registered Holder shall have no rights with respect to this
Warrant except to receive the $.10 per Warrant upon surrender of this
Certificate.
Prior to due presentment for registration of transfer hereof, the
Company and the Warrant Agent may deem and treat the Registered Holder as the
absolute owner hereof and of each Warrant represented hereby (notwithstanding
any notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York.
This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate
to be duly executed, manually or in facsimile by two (2) of its officers
thereunto duly authorized and a facsimile of its corporate seal to be
imprinted hereon.
Dated: _______________________ WORLDWIDE WIRELESS SYSTEMS, INC.
SEAL By:___________________________________
President
By:___________________________________
Secretary
<PAGE>
FORM OF REVERSE OF WARRANT CERTIFICATE
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably elects to exercise
(_____) Warrants represented by this Warrant Certificate, and to purchase the
securities issuable upon the exercise of such Warrants, and requests that
certificates for such securities shall be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
------------------
------------------
------------------
------------------
please print or type name and address
and be delivered to
------------------
------------------
------------------
------------------
please print or type name and address
and if such number of Warrants shall not be all the Warrants evidenced by This
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
Dated:________________________ ______________________________________
Signature
----------------------
Street Address
----------------------
City, State and Zip Code
----------------------
Taxpayer ID Number
----------------------
Signature Guaranteed
<PAGE>
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
------------------
------------------
------------------
------------------
please print or type name and address
_____ (_____) of the Warrants represented by this __________Warrant
Certificate, and hereby irrevocably constitutes and appoints ____________
Attorney to transfer This Warrant Certificate on the books of the Company,
with full power of substitution in the premises.
Dated:________________________ ______________________________________
Signature Guaranteed
THE SIGNATURE MUST BE GUARANTEED BY A MEDALLION BANK
<PAGE>
No sale, offer to sell or transfer of the securities represented by this
certificate or any interest therein shall be made unless a registration
statement under the Federal Securities Act of 1933, as amended (the "Act"),
with respect to such transaction is then in effect, or the issuer has received
an opinion of counsel satisfactory to it that such transfer does not require
registration under that Act.
This Warrant will be void after 5:00 p.m. New York time on
___________, 2002 (i.e. five years from the effective date of the Registration
Statement).
Warrant No. 1
UNDERWRITER'S UNIT WARRANT
To Subscribe for and Purchase Units of
WORLDWIDE WIRELESS SYSTEMS, INC.
(Transferability Restricted as Provided in Paragraph 2 Below)
THIS CERTIFIES THAT, for value received, ______________
__________________ or registered assigns, is entitled to subscribe for and
purchase from Worldwide Wireless Systems, Inc., incorporated under the laws of
the State of Delaware (the "Company"), up to ________ fully paid and
non-assessable Units (the "Underwriter's Warrant") consisting of one fully
paid and non-assessable share of Common Stock of the Company and one Common
Stock Purchase Warrant at the "Unit Warrant Price" and during the period
hereinafter set forth, subject, however, to the provisions and upon the terms
and conditions hereinafter set forth. This Warrant is one of an issue of the
Company's Underwriter's Unit Warrants identical in all respects except as to
the names of the holders thereof and the number of Units purchasable
thereunder, representing on the original issue thereof rights to purchase up
to 150,000 Units.
1. As used herein:
(a) "Common Stock" or "Common Shares" shall initially refer
to the Company's common stock as more fully set forth in Section 5 hereof.
(b) The "Warrant Agreement" shall refer to the Warrant
Agreement dated as of ___________, 1997 between Continental Stock Transfer &
Trust Co. and the Company.
(c) Warrants shall refer to the Warrant(s) included in the
Units offered to the public by the Company through DUPONT SECURITIES GROUP,
INC. pursuant to a Registration Statement declared effective by the Securities
and Exchange Commission ("SEC") on __________, 1997 and issued or to be issued
subject to terms and conditions of the Warrant Agreement.
<PAGE>
(d) "Underwriter's Warrants" shall refer to the Warrants
issuable upon exercise of this Warrant to the holder thereof and shall be
identical in all respects to the Warrants issued in the public offering.
(e) "Units" shall consist of one share of Common Stock and
one Warrant. The Common Stock included in the Units and issuable upon the
exercise of the Warrant are subject to adjustment pursuant to Section 4 hereof
and the Warrant Agreement.
(f) "Effective Date" shall mean the date that the Securities
and Exchange Commission declares effective form SB-2, File No. 333-33593.
(g) "Unit Warrant Price" shall be $____ which is subject to
adjustment pursuant to Section 4 hereof.
(h) "Underwriter" shall refer to DUPONT SECURITIES GROUP,
INC.
(i) "Underwriting Agreement" shall refer to the Underwriting
Agreement dated ___________, 1997 between the Company and the Underwriter.
(j) "Underwriter's Unit Warrants" shall refer to Warrants to
purchase an aggregate of up to 150,000 Units issued to the Underwriter or its
designees by the Company pursuant to the Underwriting Agreement (including the
Warrants represented by this Certificate), as such may be adjusted from time
to time pursuant to the terms of Section 4 hereof (and including any Warrants
represented by any certificate issued from time to time in connection with the
transfer, partial exercise, exchange of any Warrants or in connection with a
lost, stolen, mutilated or destroyed Warrant certificate, if any, or to
reflect an adjusted number of Units).
(k) "Underlying Securities" shall refer to and include the
Common Shares and Underwriter's Warrants issuable or issued upon exercise of
the Underwriter's Unit Warrants as well as any Common Shares issued upon the
exercise of the Underwriter's Warrants.
(l) "Holders" shall mean the registered holder of the
Underwriter's Warrants or any issued Underlying Securities.
2. The purchase rights represented by this Warrant may be exercised
by the holder hereof, in whole or in part at any time, and from time to time,
during the period commencing on the Effective Date and expiring on
___________, 2002 (the "Expiration Date"), by the surrender of this Warrant,
with the purchase form attached duly executed, at the Company's office (or
such office or agency of the Company as it may designate in writing to the
Holder hereof by notice pursuant to Section 14 hereof), and upon payment by
the Holder to the Company in cash, or by certified check or bank draft of the
Unit Warrant Price for such Units. The Company agrees that the Holder hereof
shall be deemed the record owner of such Underlying Securities as of the close
of business on the date on which this Warrant shall have been presented and
payment made for such Units
2
<PAGE>
as aforesaid. Certificates for the Underlying Securities so purchased shall be
delivered to the Holder hereof within a reasonable time, not exceeding five
(5) days, after the rights represented by this Warrant shall have been so
exercised. If this Warrant shall be exercised in part only, the Company shall,
upon surrender of this Warrant for cancellation, deliver a new Underwriter's
Unit Warrant evidencing the rights of the Holder hereof to purchase the
balance of the Units which such Holder is entitled to purchase hereunder.
Exercise in full of the rights represented by this Warrant shall not
extinguish the rights granted under Section 9 hereof.
In the event that the Underwriter's Unit Warrants have expired, this
Warrant will entitle the holder to purchase only the shares of Common Stock
included in the Units, subject to adjustment as provided for herein.
3. Subject to the provisions of Section 8 hereof, (i) this Warrant is
exchangeable at the option of the Holder at the aforesaid office of the
Company for other Underwriter's Unit Warrants of different denominations
entitling the Holder thereof to purchase in the aggregate the same number of
Units as are purchasable hereunder; and (ii) this Warrant may be divided or
combined with other Underwriter's Unit Warrants which carry the same rights,
in either case, upon presentation hereof at the aforesaid office of the
Company together with a written notice, signed by the Holder hereof,
specifying the names and denominations in which new Underwriter's Unit
Warrants are to be issued, and the payment of any transfer tax due in
connection therewith.
4. Subject and pursuant to the provisions of the Warrant Agreement,
the Unit Warrant Price, the exercise price per share of the Underwriter's Unit
Warrants and number of shares of Common Stock included in and issuable in
connection with the Units and the exercise of the Underwriter's Warrants
subject to this Warrant shall be subject to adjustment from time to time as
set forth in the Warrant Agreement.
5. For the purposes of this Warrant, the terms "Common Shares" or
"Common Stock" shall mean (i) the class of stock designated as the common
stock of the Company on the date set forth on the first page hereof or (ii)
any other class of stock resulting from successive changes or
re-classifications of such Common Stock consisting solely of changes in par
value, or from no par value to par value, or from par value to no par value.
If at any time, as a result of an adjustment made pursuant to Section 4, the
securities or other property obtainable upon exercise of this Warrant shall
include shares or other securities of the Company other than Common Shares or
securities of another corporation or other property, thereafter, the number of
such other shares or other securities or property so obtainable shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Common Shares
contained in Section 4 and all other provisions of this Warrant with respect
to Common Shares shall apply on like terms to any such other shares or other
securities or property. Subject to the foregoing, and unless the context
requires otherwise, all references herein to Common Shares shall, in the event
of an adjustment pursuant to Section 4, be deemed to refer also to any other
securities or property then obtainable as a result of such adjustments.
3
<PAGE>
6. The Company covenants and agrees that:
(a) During the period within which the rights represented by
this Warrant may be exercised, the Company shall, at all times, reserve and
keep available out of its authorized capital stock, solely for the purposes of
issuance upon exercise of this Warrant, such number of its Common Shares as
shall be issuable upon the exercise of this Warrant and the exercise of the
Underwriter's Warrants and at its expense will obtain the listing thereof on
all national securities exchanges on which the Warrants are then listed; and
if at any time the number of authorized Common Shares shall not be sufficient
to effect the exercise of this Warrant and the exercise of the Underwriter's
Warrants included therein, the Company will take such corporate action as may
be necessary to increase its authorized but unissued Common Shares to such
number of shares as shall be sufficient for such purpose; the Company shall
have analogous obligations with respect to any other securities or property
issuable upon exercise of this Warrant.
(b) All Common Shares which may be issued upon exercise of
the rights represented by this Warrant or upon the exercise of the
Underwriter's Warrants will, upon issuance and payment be validly issued,
fully paid, nonassessable and free from all taxes, liens and charges with
respect to the issuance thereof (except as may be concurrently discharged by
the Company or the Holder); and,
(c) All original issue taxes payable in respect of the
issuance of Common Shares upon the exercise of the rights represented by this
Warrant or the Underwriter's Warrants shall be borne by the Company but in no
event shall the Company be responsible or liable for income taxes or transfer
taxes upon the transfer of any Underwriter's Unit Warrants.
7. Until exercised, this Warrant shall not entitle the Holder hereof
to any voting rights or other rights as a shareholder of the Company, except
that the Holder of this Warrant shall be deemed to be a shareholder of this
Company for the purpose of bringing suit on the ground that the issuance of
shares of stock of the Company is improper under the laws of the Company's
state of incorporation.
8. This Warrant shall not be sold, transferred, assigned or
hypothecated for a period of twelve (12) months from the effective date of the
Company's public offering with respect to which this Warrant has been issued,
except to officers of the Underwriter, and/or the other underwriters and/or
selected dealers who participated in such offering, or the officers or
partners of such underwriters and/or selected dealers. In no event shall this
Warrant be sold, transferred, assigned or hypothecated except in conformity
with the applicable provisions of the Securities Act of 1933, as then in force
(the "Act"), or any similar Federal statute then in force, and all applicable
"Blue Sky" laws.
9. The Holder of this Warrant, by acceptance hereof, agrees that,
prior to the disposition of this Warrant or of any Underlying Securities
theretofore purchased upon the exercise hereof, under circumstances that might
require registration of such securities under the Act, or any similar Federal
statute then in force, such Holder will give written
4
<PAGE>
notice to the Company expressing such Holder's intention of effecting such
disposition, and describing briefly such Holder's intention as to the
disposition to be made of this Warrant and/or the Underlying Securities
theretofore issued upon exercise hereof. Promptly upon receiving such notice,
the Company shall present copies thereof to its counsel and the provisions of
the following subdivisions shall apply:
(a) If, in the opinion of such counsel, the proposed
disposition does not require registration under the Act, or any similar
Federal statute then in force, of this Warrant and/or the securities issuable
or issued upon the exercise of this Warrant, the Company shall, as promptly as
practicable, notify the Holder hereof of such opinion, whereupon such holder
shall be entitled to dispose of this Warrant and/or such Underlying Securities
theretofore issued upon the exercise hereof, all in accordance with the terms
of the notice delivered by such Holder to the Company.
(b) If, in the opinion of such counsel, such proposed
disposition requires such registration or qualification under the Act, or
similar Federal statute then in effect, of this Warrant and/or the Underlying
Securities issuable or issued upon the exercise of this Warrant, the Company
shall promptly give written notice of such opinion to the Holder hereof and to
the then holders of the securities theretofore issued upon the exercise of
this Warrant at the respective addresses thereof shown on the books of the
Company. Section 15 of the Underwriting Agreement provides for certain
registration rights which are incorporated herein by reference as if set forth
herein in its entirety.
10. Whenever, pursuant to Section 9 hereof, a registration statement
relating to the Underwriter's Unit Warrant or Underlying Securities is filed
under the Act, the Company agrees to indemnify and hold harmless the holder of
this Warrant, or of securities issuable or issued upon the exercise hereof,
from and against any claims and liabilities arising out of or based upon any
untrue statement of a material fact, or omission to state a material fact
required to be stated, in any such registration statement or prospectus,
except insofar as such claims or liabilities are caused by any such untrue
statement or omission based on information furnished in writing to the Company
by such holder, or by any other such holder affiliated with the holder who
seeks indemnification, as to which the holder hereof, by acceptance hereof,
agrees to indemnify and hold harmless the Company, in the same manner as set
forth herein.
11. If this Warrant, or any of the securities issuable pursuant
hereto, require qualification or registration with, or approval of, any
governmental official or authority (other than registration under the Act, or
any similar Federal statute at the time in force), before such shares may be
issued on the exercise hereof, the Company, at its expense, will take all
requisite action in connection with such qualification, and will use its best
efforts to cause such securities and/or this Warrant to be duly registered or
approved, as may be required.
12. This Warrant is exchangeable, upon its surrender by the
registered holder at such office or agency of the Company as may be designated
by the Company, for new Underwriter's Unit Warrants of like tenor,
representing, in the aggregate, the right to
5
<PAGE>
subscribe for and purchase the number of Units or Common Shares as the case
may be that may be subscribed for and purchased hereunder, each of such new
Underwriter's Unit Warrants to represent the right to subscribe for and
purchase such number of Units or Common Shares as the case may be as shall be
designated by the registered holder at the time of such surrender. Upon
receipt of evidence satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant, and, in the case of any such loss,
theft or destruction, upon delivery of a bond of indemnity satisfactory to the
Company, or in the case of such mutilation, upon surrender or cancellation of
this Warrant, the Company will issue to the registered holder a new
Underwriter's Unit Warrant of like tenor, in lieu of this Warrant,
representing the right to subscribe for and purchase the number of Units or
Common Shares as the case may be that may be subscribed for and purchased
hereunder. Nothing herein is intended to authorize the transfer of this
Warrant except as permitted under Section 8.
13. Every holder hereof, by accepting the same, agrees with any
subsequent holder hereof and with the Company that this Warrant and all rights
hereunder are issued and shall be held subject to all of the terms,
conditions, limitations and provisions set forth in this Warrant, and further
agrees that the Company and its transfer agent may deem and treat the
registered holder of this Warrant as the absolute owner hereof for all
purposes and shall not be affected by any notice to the contrary.
14. All notices required hereunder shall be given by first-class
mail, postage prepaid; if given by the holder hereof, addressed to the Company
at Route 5 South, Ascutney, VT 05030; or such other address as the Company may
designate in writing to the holder hereof; and if given by the Company,
addressed to the holder at the address of the holder shown on the books of the
Company.
15. The Company will not merge or consolidate with or into any other
corporation, or sell or otherwise transfer its property assets and business
substantially as an entirety to another corporation, unless the corporation
resulting from such merger or consolidation (if not the Company), or such
transferee corporation, as the case may be, shall expressly assume, by
supplemental agreement satisfactory in form to the Underwriter, the due and
punctual performance and observance of each and every covenant and condition
of this Warrant to be performed and observed by the Company.
6
<PAGE>
16. The validity, construction and enforcement of this Warrant shall
be governed by the laws of the State of New York without giving effect to the
conflict of laws provisions thereof and jurisdiction is hereby vested in the
Courts of said State in the event of the institution of any legal action under
this Warrant.
IN WITNESS WHEREOF, WORLDWIDE WIRELESS SYSTEMS, INC. has caused this
Warrant to be signed by its duly authorized officers under its corporate seal,
to be dated _____________, 1997.
WORLDWIDE WIRELESS SYSTEMS, INC.
By:________________________
Attest:
_____________________
(Corporate Seal)
7
<PAGE>
PURCHASE FORM
To Be Executed
Upon Exercise of Warrant
The undersigned hereby exercises the right to purchase Common Shares and
__________ Underwriter's Warrants evidenced by the within Warrant, according
to the terms and conditions thereof, and herewith makes payment of the
purchase price in full. The undersigned requests that certificates for such
shares and warrants shall be issued in the name set forth below.
Dated: ,19
____________________________________
Signature
____________________________________
Print Name of Signatory
____________________________________
Name to whom certificates are to
be issued if different from above
Address:___________________________
____________________________________
____________________________________
Social Security No. or other
identifying number
If said number of shares and warrants shall not be all the shares and
warrants purchasable under the within Warrant, the undersigned requests that a
new Warrant for the unexercised portion shall be registered in the name of:
____________________________________
Please Print
Address:____________________________
____________________________________
____________________________________
Social Security No. or other
identifying number
____________________________________
Signature
8
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED , hereby
sells assigns and transfers to , Soc. Sec. No.
[ ] the within Warrant, together with all rights, title and interest
therein, and does hereby irrevocably constitute and appoint
attorney to transfer such Warrant on the register of the within named Company,
with full power of substitution.
____________________________________
Signature
Dated: , 19
Signature Guaranteed:
__________________________
9
<PAGE>
EXHIBIT 10.13
SECURED PROMISSORY NOTE
$1,616,057 Ascutney, Vermont
______________, 1997
FOR VALUE RECEIVED, WORLDWIDE WIRELESS SYSTEMS, INC., a Delaware
corporation, having an office and place of business in Ascutney, Vermont
(hereinafter referred to as "Maker") promises to pay to the order of ALAN R.
ACKERMAN (hereinafter referred to as "Holder") the sum of One Million Six
Hundred Sixteen Thousand Fifty-seven and 00/100 Dollars ($1,616,057) plus
accrued but unpaid interest at the rate of seven and one half percent (7.5%)
per annum (the "Indebtedness"). Principal and interest shall be paid as
follows:
(a) Within ten (10) days of the initial public offering (IPO) of
shares of Maker, Maker shall pay an installment of principal
and interest in the amount of One Million Two Hundred
Thousand Dollars ($1,200,000), or such lesser amount as is
available to the Maker after paying all of its other
obligations as of the date of the IPO; and
(b) On the first day of each and every month thereafter for
fifty-nine (59) consecutive months, Maker shall pay an equal
installment of principal and interest calculated by
amortizing the remaining principal balance on the basis of a
365-day year; and
(c) The entire remaining principal balance outstanding, with
accrued interest, shall be paid on the first day of the
sixtieth (60th) month.
In the event the IPO does not occur within one (1) year after the
date hereof, the Indebtedness shall be due and payable in full, with interest
on the first anniversary of this Note.
This Note is secured by a Security Agreement of even date by which
the Maker's wholly owned subsidiary, New England Wireless, Inc. (hereinafter
referred to as "Subsidiary") grants a security interest in favor of Holder to
secure the Indebtedness incurred by Maker, for the benefit of Maker and
Subsidiary.
Maker agrees to pay all costs and expenses, including reasonable
attorneys' fees, for the collection of this Note upon default, and to pay
interest on all amounts not paid when due (pursuant to the terms hereof, by
acceleration or otherwise) at the rate of fifteen percent (15%) per annum
until paid in full. All payments shall be made to the holder c/o Adley
Sampson, Esq., Joel Isaacson & Co., Inc., 516 Fifth Avenue, New York, NY
10036, or at such other place as the holder hereof may from time to time
designate in writing.
Maker's default in the payment of any sums due hereunder for fifteen
(15) days shall render the principal balance of this Note, together with
accrued interest, immediately due and payable at the option of the holder.
Maker and all parties who at any time may be liable hereon in any
capacity, jointly and severally, hereby waive presentment, demand, notice of
dishonor and protest and all surety defenses in the nature thereof.
<PAGE>
No delay or omission on the part of the holder in exercising any
right hereunder shall operate as a waiver of such right or of any other right
of such holder, nor shall any delay, omission or waiver on any one occasion be
deemed a bar to or waiver of the same or any other right on any future
occasion.
IN PRESENCE OF: WORLDWIDE WIRELESS SYSTEMS, INC.
___________________________________ By:_____________________________
Witness
<PAGE>
EXHIBIT 10.14
SECURITY AGREEMENT
This Security Agreement (the "Security Agreement"), is by and between
NEW ENGLAND WIRELESS SYSTEMS, INC., a Vermont corporation with its principal
place of business in Ascutney, Vermont (the "Borrower"), and ALAN R. ACKERMAN,
an individual residing in New York, New York (the "Lender").
Background
1. The Lender made a number of cash advances and loans to the
Borrower's parent company, Worldwide Wireless Systems, Inc. (the "Company").
As of September 30, 1997, the total principal amount due to the Lender was
$1,616,057. This amount plus interest thereon has been reflected in a
promissory note from the Company dated as of _______, 1997 (the "Note").
2. The loans made to the Company by Lender have been used to fund the
Borrower.
3. In consideration of the loans made by Lender and the Lender's
agreement to the terms of the Note, the Borrower has agreed to grant to the
Lender a security interest in its assets as described below.
N O W , T H E R E F O R E ,
In consideration of the premises and the mutual covenants and
agreements herein set forth, the parties hereby agree as follows:
ARTICLE 1
Security Interest
Section 1.1. Grant of Security Interest. The Borrower hereby grants
to the Lender, on the terms and conditions hereinafter set forth, a continuing
security interest in all of the Borrower's right, title and interest in and to
all tangible and intangible assets of the Borrower, including, without
limitation, all equipment, machinery, furnishings, supplies, inventory, books,
records, customer lists, goods, agreements, documents, contracts, instruments,
goodwill, general intangibles, accounts, accounts receivable, cash, chattel
paper, computer hardware and software, contracts, contract rights, vehicles,
and the proceeds and products thereof, whether now owned or hereafter acquired
and wherever located (the "Collateral"), and payments under insurance (whether
or not the Lender is the loss payee) payable by reason of loss or damage to
any of the foregoing Collateral.
Section 1.2. Security for Obligations. This Security Agreement
secures the payment and performance of all obligations of the Borrower now or
hereafter existing under the Note, whether for principal, interest, costs,
fees, expenses or otherwise and all obligations of the Borrower under this
Agreement (the "Obligations").
Section 1.3. Continuing Security Interest. This Security Agreement
shall create a continuing security interest in the Collateral and shall (i)
remain in full force and effect until payment in full of all
<PAGE>
Obligations, (ii) be binding upon the Borrower, its successors, transferees
and assigns, and (iii) inure, together with the rights and remedies of the
Lender hereunder, to the benefit of the Lender and its transferees and
assigns.
Section 1.4. The Borrower Remains Liable. Anything herein to the
contrary notwithstanding:
(a) The Borrower shall remain liable under the contracts and
agreements included in the Collateral to the extent set
forth therein, and shall perform all of its duties and
obligations under such contracts and agreements to the same
extent as if this Security Agreement had not been executed;
(b) The exercise by the Lender of any of its rights hereunder
shall not release the Borrower from any of its duties or
obligations under any such contracts or agreements included
in the Collateral; and
(c) The Lender shall not have any obligation or liability under
any such contracts or agreements included in the Collateral
by reason of this Security Agreement, nor shall the Lender
be obligated to perform any of the obligations or duties of
the Borrower thereunder or to take any action to collect or
enforce any claim for payment assigned hereunder.
Section 1.5. Security Interest Absolute. All rights of the Lender and
the security interests granted to the Lender hereunder shall be absolute and
unconditional, irrespective of:
(a) Any lack of validity or enforceability of the Note, or any
other document or instrument relating to any of them;
(b) Any change in the time, manner or place of payment of, or in
any other term of, all or any part of the Obligations or any
other amendment to or waiver of or any consent to any
departure from the Note, this Agreement or any other
document or instrument relating to any of them;
(c) Any exchange, release or non-perfection of any collateral
(including the Collateral) or any release of or amendment to
or waiver of or consent to or departure from any guaranty,
for all or any of the Obligations; or
(d) Any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Borrower or a
third party grantor of a security interest.
Section 1.6. Release of Security The security interest granted to the
Lender hereunder shall be released by the Lender upon the Lender's receipt of
payment in the amount of One Million Two Hundred Thousand Dollars ($1,200,000)
toward payment of the total indebtedness described in the Note.
ARTICLE 2
Representations and Warranties
The Borrower hereby represents and warrants to the Lender as follows:
- 2 -
<PAGE>
Section 2.1. Truthfulness and Completeness. All information with
respect to the Collateral and all other written information hereafter
furnished by the Borrower to the Lender, is or will be true and correct as of
the date furnished.
Section 2.2. Validity, etc. This Agreement creates a valid security
interest in the Collateral, securing the payment of the Obligations, and all
filings and other actions necessary or desirable to perfect and protect such
security interest have been duly taken.
Section 2.3. Subordination. The security interest of the Lender
created by this Agreement shall be subject and subordinate in all respects to
the terms and conditions of any security interest that may be granted by the
Borrower in connection with any future financing or extension of credit by a
bank or institutional lender. The Lender agrees to promptly execute and
deliver such instruments and documents, and take all further actions that may
be necessary or desirable to evidence the continued subordination of the
Lender's interest to the security interest of any bank or institutional lender
pursuant to a future financing or extension of credit as described above.
ARTICLE 3
Covenants
The Borrower covenants and agrees, so long as any portion of the
Obligations shall remain unpaid, unless the Lender shall otherwise consent in
writing, to perform the obligations set forth below:
Section 3.1. Maintenance of Collateral. The Borrower will keep the
Collateral in good order and repair, ordinary wear and tear excepted, and will
not waste or destroy the same or any portion thereof.
Section 3.2. Payment of Taxes, etc. The Borrower will pay when due
all existing or future charges, liens or encumbrances on the Collateral and
all taxes and assessments now or hereafter imposed on or affecting it, except
to the extent the validity thereof is being contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with
generally accepted accounting principles have been set aside.
Section 3.3. Location of Books and Records. The Borrower will keep
its records concerning the Collateral at the address of the Borrower set forth
in the preamble. Such records will be of such character as to enable the
Lender or its representatives to determine at any time the status thereof, and
the Borrower will not maintain or keep a copy of any such record at any other
address or location; provided, however, that the Borrower may keep a duplicate
copy of any such records at the business office of its professional advisors,
or in a safety deposit box at a local banking institution.
Section 3.4. Reports. The Borrower will furnish the Lender such
information concerning the Borrower, the Collateral and any of the Borrower's
account debtors as the Lender may at any time reasonably request.
Section 3.5. Transfers and Other Liens. The Borrower shall not (i)
sell, assign (by operation of law or otherwise) or otherwise dispose of all or
any of the Collateral, except in the ordinary course of business, or (ii)
create or suffer to exist any lien, charge or encumbrance upon or with respect
to any of the Collateral to secure indebtedness of any person or entity,
except for the security interest created by this Security Agreement.
- 3 -
<PAGE>
ARTICLE 4
The Lender
Section 4.1. The Lender May Perform. If the Borrower fails to perform
any agreement contained herein, at the Lender's option, the Lender may itself
perform, or cause performance of, such agreement. The Borrower agrees to
reimburse the Lender on demand for any payment made or any expense incurred by
the Lender pursuant to the foregoing authorization. Until default under the
Loan Agreement or under this S ecurity Agreement, the Borrower may have
possession of the Collateral and use it in any lawful manner not inconsistent
with this Security Agreement and not inconsistent with any policy of insurance
thereon.
Section 4.2. The Lender has No Duty. The powers conferred on the
Lender hereunder are solely to protect its interest in the Collateral and
shall not impose any duty on the Lender to exercise any such powers. Except
for the safe custody of any Collateral in its possession and the accounting of
monies actually received by it hereunder and any other duties imposed by the
Uniform Commercial Code as in effect in the State of Vermont (the "UCC"), the
Lender shall have no duty as to the Collateral or as to the taking of any
necessary steps to preserve rights against prior parties or any other rights
pertaining to the Collateral.
ARTICLE 5
Remedies
Section 5.1. Certain Remedies.
(a) In the event of any default by the Borrower under this
Security Agreement, the Note, or any document or instrument
relating to any of them, the Lender may declare the
Obligations immediately due and payable and shall have the
remedies of a Lender under the UCC. The Lender may require
the Borrower to assemble the Collateral and make it
available to the Lender at a place to be designated by the
Lender which is reasonably convenient to the parties. Unless
the Collateral is perishable or threatens to decline
speedily in value or is of a type customarily sold on a
recognized market, the Lender will give the Borrower
reasonable notice of the time and place of any public sale
thereof or of the time after which any private sale or any
other intended disposition thereof is to be made. The
requirements of reasonable notice shall be met if such
notice is mailed to the Borrower via registered or certified
mail, postage prepaid, at least ten (10) days before the
time of sale or disposition. Expenses of retaking, holding,
preparing for sale, selling or the like shall include the
Lender's reasonable attorneys' fees and legal expenses.
(b) All cash proceeds received by the Lender in respect of any
sale of, collection from or other realization upon all or
any part of the Collateral may, in the discretion of the
Lender, be held by the Lender as collateral for, and/or then
or at any time thereafter applied (after payment of any
amounts payable to the Lender pursuant to Section 5.3) in
whole or in part by the Lender against, all or any
Obligations in such order as the Lender shall elect. Any
surplus of such cash or cash proceeds held by the Lender and
remaining after payment in full of all the Obligations shall
be paid over to the Borrower or to whomsoever may be
lawfully entitled to receive such surplus.
- 4 -
<PAGE>
(c) Lender's remedies shall be subject and subordinate to the
terms and conditions of any future security interest that
may be granted by the Borrower in connection with any future
financing or extension of credit by a bank or institutional
lender.
Section 5.2. Further Assurances. The Borrower agrees that, from time
to time at its own expense, the Borrower will promptly execute and deliver all
further instruments and documents, and take all further action, that may be
necessary or desirable or that the Lender may request, in order to perfect,
preserve and protect the Collateral and any security interest granted or
purported to be granted hereby or to enable the Lender to exercise and enforce
its rights and remedies hereunder with respect to the Collateral.
Section 5.3. Indemnity and Expenses.
(a) The Borrower agrees to indemnify the Lender from and against
any and all claims, losses and liabilities arising out of or
resulting from the failure by the Borrower to perform or
observe any of the provisions of this Security Agreement
(including, without limitation, enforcement of this Security
Agreement), except claims, losses or liabilities resulting
from the Lender's gross negligence or wilful misconduct.
(b) Except as set forth in subsection (a) above, if either party
resorts to suit or other legal proceedings to enforce any
right or remedy hereunder, the non-prevailing party agrees
to pay the prevailing party's costs of suit and enforcement,
including reasonable attorneys' fees.
Section 5.4. Records Accessibility by the Borrower. In the event the
Lender takes possession of the Collateral in accordance with this Agreement,
the Lender shall provide the Borrower and the Borrower's professional
advisers, with reasonable access to such records as may be the basis of any
claim, action, suit or proceeding, at the Borrower's sole cost and expense.
ARTICLE 6
Miscellaneous
Section 6.1. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Vermont.
Section 6.2. Counterparts. This Agreement may be executed in any
number of counterparts, each of which will be deemed an original, but all of
which together shall constitute one and the same instrument.
Section 6.3. Notices. Any notice or other communication to be given
hereunder shall be in writing and mailed to such party at its principal
business address.
Section 6.4. Remedies Cumulative. The rights and remedies herein are
cumulative, and not exclusive of other rights and remedies which may be
granted or provided by law.
Section 6.5. Entire Agreement; Amendment. This Security Agreement
embodies the entire agreement and understanding between the parties relating
to the subject matter hereof and there are no covenants, promises, agreements,
conditions or understandings, oral or written, except as herein set forth.
This Security Agreement may not be amended, waived or discharged except by an
instrument in writing executed by the party against whom such amendment,
waiver or discharge is to be enforced.
- 5 -
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Security Agreement
as of the ___ day of ____________, 1997.
IN PRESENCE OF: NEW ENGLAND WIRELESS, INC.
____________________________ By:___________________________________
Witness Duly Authorized Agent
____________________________ ______________________________________
Witness Alan R. Ackerman
- 6 -
<PAGE>
EXHIBIT 10.15
September 12, 1997
Scott Wendel
Worldwide Wireless
P.O. Box 470 Route 5 South
Ascutney, VT 05030-2751
Dear Scott:
This letter summarizes and confirms VocalTec's third quarter custom sales and
marketing plan for Worldwide Wireless. The Picaso Q3 program:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
VocalTec Commitment Worldwide Wireless Commitment
- --------------------------------------------------------------------------------------------------------------
<S> <C>
Discount Level -- 40% off of VocalTec SRP Agrees to purchase a Q3 1997 minimum of
of $1350.00 per line. (Gateway Only) $150,000 of products from VocalTec with
purchase order for above stated minimum
Per Line Infrastructure Rebate -- $50 received by VocalTec for immediate
(representing 7% delta). To be paid based on shipment no later than September 30, 1997.
twice monthly Point of Sale (POS*) reports. With Net 90 day payments.
- --------------------------------------------------------------------------------------------------------------
Salary Offset of $4500 per quarter or $1500 Provide twice monthly Point of Sale (POS*)
per month for dedicated VocalTec Product reports, identify program strengths and
Sales Support employed by Worldwide weaknesses, applications intelligence and log
Wireless. To be payable DFI (Deduct From of lost business opportunities.
Invoice).
- --------------------------------------------------------------------------------------------------------------
Quarterly marketing allowance of $7000 for Joint agree on Seminar events in Advance
seminars and field promotions. To be from a logistical and attendee recruitment
payable DFI (Deduct From Invoice). perspective, as well as contribute to content,
as dictated by market opportunity.
- --------------------------------------------------------------------------------------------------------------
Preferred sales lead dispersal. Provide twice monthly referred sales lead
status reports.
- --------------------------------------------------------------------------------------------------------------
Advanced new product cooperation. Maintains full pre-sales and post-sale phone
support on an ongoing basis for VocalTec
products.
- --------------------------------------------------------------------------------------------------------------
Agrees to treat as confidential all Agrees to treat as confidential all
marketplace and customer information marketplace and product development
provided by Worldwide Wireless. information provided by VocalTec.
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
POS -- can correspond to lines you have installed for your use as an TTSP or to
those you have resold.
Regards, Agreed,
Michael M. Anderson Scott Wendel
Director Corporate Sales President/CEO
VocalTec, Inc. Worldwide Wireless Systems, Inc.
_______________________________________________________________________________
VocalTec, Inc. o 35 Industrial Parkway o Northvale, NJ 07647
telephone o 201 768-9400 fax o 201 768-8893 o WWW o http:\\www.vocaltec.com
<PAGE>
Exhibit 10.16
PROMISSORY NOTE
$25,000.00 Bellows Falls, Vermont
June 23, 1994
FOR VALUE RECEIVED, NEW ENGLAND WIRELESS, INC., having an office and
place of business at 56 Green Street, Bellows Falls, Vermont 05101 ("Maker")
promises to pay to the order of _____________, the sum of Twenty five thousand
Dollars ($25,000.00) with interest from date at the rate of seven and one-half
percent (7.5%) per annum. Principal and interest shall be due and payable in
full at any time more than one hundred (180) days after the date hereof upon
demand by the holder.
Maker agrees to pay all costs and expenses, including reasonable
attorneys' fees, for the collection of this Note upon default, and to pay
interest on all amounts not paid when due (pursuant to the terms hereof, by
acceleration or otherwise) at the rate of twelve percent (12%) per annum until
paid in full. All payments shall be made to the holder at 441 West Ferry
Detroit, MI 48202 or at such other place as the holder hereof from time to
time may designate in writing.
This Note may be prepaid at any time, in whole or in part, without
penalty.
Maker hereby irrevocably submits to the non-exclusive jurisdiction of
any State or Federal court sitting in Detroit, MI, in any action or proceeding
arising out of or relating to this Note, and the Maker hereby irrevocably
agrees that all claims in respect of such action or proceeding may be heard
and determined in such State or Federal court. The Maker irrevocably consents
to the service of any and all process in any such action or proceeding by the
mailing via certified mail of copies of such process to the Maker as its
address set forth for the giving of notices, above, or at such other address
as shall be designated by the Maker in writing to the holder. In the event
that, for any reason, service of legal process cannot be made in the manner
described above, such service may be made in the manner set forth in
paragraphs (3) and (4) of section 1608 (a) of Title 28 of the United States
Code. The Maker agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this paragraph
shall affect the right of the holder to serve legal process in any other
manner permitted by law against the Maker or the Maker's property in the
courts of other jurisdictions. To the extent that the Maker has nay immunity
from jurisdiction of any court or from any legal process (whether through
service of notice, attachment prior to judgment, attachment in aid or
execution or otherwise) with respect to it or its property, the Maker hereby
irrevocably waives such immunity in respect of its obligations under this Note
to the fullest extent permitted by applicable laws in any jurisdiction where
any action or proceeding referred to in this paragraph may be brought.
<PAGE>
Maker may, with the consent of the holder, pay the amount due under
this note by causing to be issued to the holder shares of the capital stock of
World Wide Wireless, Inc., a Delaware corporation. Stock in World Wide
Wireless, Inc., will be issued at Three Dollars ($3.00) per share.
Maker hereby waives presentment, demand, notice of dishonor and protest and
all surety defenses in the nature thereof.
No delay or omission on the part of the holder in exercising any
right hereunder shall operate as a waiver of such right or such holder, nor
shall any delay, omission or waiver on any one occasion be deemed a bar to or
waiver of the same or any other right on any future occasion.
IN PRESENCE OF: New England Wireless, Inc.
_______________________ By:________________________
_______________________
<PAGE>
Exhibit 10.17
Form of Promissory Notes Outstanding (Form D):
---------------------------------------------
Date Amount
---------------------------------------------
8/29/96 $30,000
---------------------------------------------
1/7/97 $30,000
---------------------------------------------
<PAGE>
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED ("ACT"), AND MAY NOT BE SOLD, ASSIGNED OR TRANSFERRED EXCEPT (i)
PURSUANT TO A REGISTRATION STATEMENT UNDER THE ACT WHICH HAS BECOME EFFECTIVE
AND IS CURRENT WITH RESPECT TO THESE SECURITIES, OR (ii) PURSUANT TO A SPECIFIC
EXEMPTION FROM REGISTRATION UNDER THE ACT BUT ONLY UPON A HOLDER HEREOF FIRST
HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL TO THE CORPORATION, OR OTHER
COUNSEL ACCEPTABLE TO THE CORPORATION, THAT THE PROPOSED DISPOSITION IS
CONSISTENT WITH ALL APPLICABLE PROVISIONS OF THE ACT AS WELL AS ANY APPLICABLE
"BLUE SKY" OR SIMILAR SECURITIES LAW.
WORLDWIDE WIRELESS, INC.
(Incorporated under the laws of the State of Delaware)
$30,000 Dated: August 29, 1996
10% Note due, March 1, 1997
FOR VALUE RECEIVED, WORLDWIDE WIRELESS, INC., a Delaware corporation
(the "Company") promises to pay to ____________ or assigns (the "Holder"), the
principal amount of Thirty Thousand ($30,000) Dollars (the "Principal Amount")
in such coin or currency of the United States of America as at the time of
Payment shall be legal tender for the payment of public and private debts,
together with simple interest thereon at the rate of ten (10%) percent per
annum, at the principal office of the Company, upon the closing of the Company's
initial public offering (the "Closing"). If the Closing does not occur by the
maturity date of this Note, the Company shall then pay to the Holder the
principal amount due hereon, together with simple interest thereon at a rate of
ten (10%) percent per annum.
Notwithstanding anything to the contrary herein contained, the
Principal Amount of this Note or any interest hereon may be prepaid at any time
or from time to time, prior to
<PAGE>
the maturity date of this Note, in whole or in part, without prior notice and
without penalty or premium. Prepayments shall be applied first to interest due
and then to principal.
1. Restrictions Upon Transferability.
1.1 Restrictions Upon Transferability. This Note has not been
registered under the Securities Act of 1933, as amended (the "Act"), and may not
be sold or transferred in whole or in part unless the Holder shall have first
given notice to the Company describing such sale or transfer and furnished to
the Company either (a) an opinion, reasonably satisfactory to counsel for the
Company, of counsel selected by such Holder, to the effect that the proposed
sale or transfer may be made without registration under the Act or (b) an
interpretive letter form the Securities and Exchange Commission to the effect
that no enforcement action will be recommended if the proposed sale or transfer
is made without registration under the Act; provided, however, that the
foregoing shall not apply if there is in effect a registration statement with
respect to this Note at the time of the proposed sale or transfer.
2. Events of Default and Remedies. An "Event of Default" shall occur
if:
2.1 Payment of Notes. The Company defaults in the payment of
principal or interest of this Note, when and as the same shall become due and
payable whether at maturity thereof, or by acceleration or otherwise, which
default shall continue for a period of thirty (30) days from the date thereof;
or
2.2 Bankruptcy, Insolvency, etc. The Company shall file or
consent by answer or otherwise to the entry of an order for relief or approving
a petition for relief
<PAGE>
or reorganization or arrangement or any other petition in bankruptcy, for
liquidation or to take advantage of any bankruptcy or insolvency law of any
jurisdiction, or shall make an assignment for the benefit of its creditors, or
shall consent to the appointment of a custodian, receiver, trustee or other
officer with similar powers of itself or of any substantial part of its
property, or shall be adjudicated a bankrupt or insolvent, or shall take
corporate action for the purpose of any of the foregoing, or if a court or
governmental authority of competent jurisdiction shall enter an order appointing
a custodian, receiver, trustee or other officer with similar powers with respect
to the Company or any substantial part of its property, or constituting an order
for relief or approving a petition for relief or reorganization or any other
petition in bankruptcy or for liquidation or to take advantage of any bankruptcy
or insolvency law of any jurisdiction, or ordering the dissolution, winding up
or liquidation of the Company, or if any such petition shall be filed against
the Company and such petition shall not be dismissed within sixty (60) days.
In case an Event of Default (other than an Event of Default resulting
from the Company's failure to pay the principal of, or any interest upon, this
Note when the same shall be due and payable in accordance with the terms hereof
(after giving effect to applicable "cure" provisions herein) or bankruptcy,
insolvency or reorganization) shall occur and be continuing, the holders of at
least a majority in aggregate principal amount of the Notes then outstanding by
notice in writing to the Company may declare all unpaid principal and accrued
interest on all of the Notes then outstanding to be due and payable immediately.
In case and Event of Default resulting from the Company's nonpayment of
principal of, or interest upon, this Note shall occur, the Holder may declare
all unpaid
<PAGE>
principal and accrued interest on the Notes held by such Holder to be due and
payable immediately. In case and Event of Default resulting from certain events
of bankruptcy, insolvency or reorganization shall occur, all unpaid principal
and accrued interest on the Notes held by each such Holder shall be due and
payable immediately without any declaration or other act on the part of the
holders of the Notes. Such acceleration may be annulled and past defaults
(except, unless theretofore cured, a default in payment of principal or interest
on the Notes) may be waived by the holders of a majority in aggregate principal
amount of the Notes then outstanding.
3. Waiver and Amendments. This Note hereunder may be amended,
modified, supersede, canceled, renewed or extended, and the terms hereof may be
waived, only by a written instrument signed by the Company and holders of at
least a majority in aggregate principal amount of the Notes at the time
outstanding; provided, however, that consent by a Holder shall be required to
modify the terms of this Note affecting the payment of principal of, or interest
on, such Holder's Notes. No delay on the part of any party in exercising any
right, power or privilege hereunder shall operate as a waiver hereof, nor shall
any waiver on the part of any party of any right, power or privilege hereunder,
nor any single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise hereof or the exercise of any other
right, power or privilege hereunder. The rights and remedies provided herein are
cumulative and are not exclusive of any rights or remedies which any party may
otherwise have at law or in equity.
4. Loss, Theft, Destruction or Mutilation of Note. Upon
receipt by the Company of evidence reasonably satisfactory to the Company of the
loss, theft, destruction
<PAGE>
or mutilation of this Note, and of indemnity or security reasonably satisfactory
to the Company, and upon reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of this Note, if
mutilated, the Company will make and deliver a new note of like tenor and of the
same series, in lieu of this Note. Any Note made and delivered in accordance
with the provisions of this Article shall be dated as of the date to which
interest has been paid on this Note, or if no interest has theretofore been paid
on this Note, then dated the date hereof
5. Notice. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally,
telegraphed or sent by certified, registered, or express mail, postage prepaid,
and shall be deemed given when so delivered personally, telegraphed or, if
mailed, five days after the date of deposit in the United States mails, as
follows:
(i) if to the Company, to:
Worldwide Wireless, Inc.
6 East 43rd Street
New York, NY 10017
(ii) if to the Holder, to:
his address specified on the records of the Company.
6. Governing, Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
conflict of law principles.
7. Successors and Assigns. All the covenants, stipulations, promises
and agreements in this Note contained by or on behalf of the Company shall bind
its successors and assigns, whether or not so expressed.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be signed in
its corporate name by a duly authorized officer and to be dated as of the date
first above written.
WORLDWIDE WIRE-LESS, INC.
By:____________________________
<PAGE>
Exhibit 10.18
Form of Promissory Notes Outstanding (Form E):
------------------------------------------------------------------
Date Maturity Date Amount Conversion Price
------------------------------------------------------------------
8/21/95 6/30/96 $25,000 $3.50
------------------------------------------------------------------
8/21/95 6/30/96 $25,000 $3.50
------------------------------------------------------------------
12/19/97 6/30/98 $25,000 The lesser of:
$3.00 or 50% of the
price per share of
the Company's common
stock in a public
offering.
------------------------------------------------------------------
<PAGE>
THE SECURITIES REPRESENTED BY THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR REGISTERED OR
QUALIFIED UNDER THE SECURITIES LAWS OF OTHER JURISDICTIONS. THESE SECURITIES
HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR
RESALE AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED ENCUMBERED,
ASSIGNED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF REGISTRATION UNDER THE
SECURITIES ACT AND REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY JURISDICTION WHICH MAY BE APPLICABLE OR UNLESS THE COMPANY RECEIVES AN
OPINION OF COUNSEL SATISFACTORY IN FORM AND SUBSTANCE STATING THAT EXEMPTIONS
ARE AVAILABLE FROM SUCH REGISTRATION AND QUALIFICATION REQUIREMENTS.
CONVERTIBLE PROMISSORY NOTE
August 21, 1995
$25,000.00 New York, New York
FOR VALUE RECEIVED, WORLDWIDE WIRELESS, INC., a Delaware
corporation ("Maker"), promises to pay to the order of ________________________
_____ ("Payee"), at Worldwide Wireless, Inc., Suite 1900, 6 East 43rd St., New
York, NY 10017, or at such other place as Payee may designate in writing from
time to time, in legal tender of the United States of America, the principal
sum of Twenty-Five Thousand Dollars ($25,000.00), plus interest at the rate of
eight percent (8%) per annum on the unpaid principal balance from time to time
outstanding from the date of this Convertible Promissory Note (this "Note") in
accordance with the following terms and conditions:
1. All unpaid principal and accrued but unpaid interest shall be due
and payable upon the earlier to occur of (a) Maker's consummating an initial
public offering of securities pursuant to an effective registration statement
under the Securities Act of 1933, as amended, ("IPO") or (b) June 30, 1996
("Maturity Date").
2. Maker may prepay all of the amounts due under this Note at any
time without penalty or premium; provided that Maker shall give Payee at least
ten (10) days' prior written notice before prepayment in order to allow Payee
such time in which to convert all amounts then unpaid.
3. Any payment shall be credited first to accrued but unpaid interest
and then to unpaid principal, and interest upon the principal so paid shall
then cease.
4. At any time before the Maturity Date or before Maker's prepayment
of this Note, Payee may, by written notice to Maker, convert all, but not less
than all, unpaid principal and accrued but unpaid interest into shares of
common stock of Maker at a conversion price of $3.50 per share in accordance
with the terms set forth on Exhibit A attached hereto and incorporated herein
by reference. At the time of conversion, Payee shall be entitled to receive
and Maker shall issue warrants to purchase that number of shares of Maker's
common stock equal to one share for each $10 of the principal amount of this
Note, which warrants shall be
<PAGE>
exercisable for three years from the date of issuance at an exercise price of
$3.50 per share. If the amounts due under this Note are not converted into
Maker's common stock prior to the effective date of Maker's IPO, then Maker
shall pay Payee all unpaid principal and accrued but unpaid interest from the
proceeds of the IPO and shall issue to Payee warrants to purchase that number
of shares of Maker's common stock equal to one share for each $10 unpaid
principal amount of the Note, which warrants shall be effective for three
years from the date of issuance, at an exercise price equivalent to the IPO
offering price. If this Not is not converted and there is no IPO, Payee shall
not be entitled to and Maker shall not issue any warrants.
5. Maker hereby waives diligence, demand, presentment for payment,
notice of nonpayment, protest and notice of protest, notice of dishonor,
bringing of suit, and diligence in taking any action to collect any amounts
called for under this Note and specifically consents to and waives notice of
any renewals or extensions of this Note.
6. The terms of this Note apply to and bind Maker, its successors and
assigns and inure to the benefit of Payee, its successor and assigns. Payee in
its sole discretion may sell or assign this Note or any interest therein only
in compliance with applicable federal and state securities laws.
7. Additional terms and conditions of this Note are set forth in the
attached Exhibit A, which is incorporated herein by reference. The terms of
this Note may not be modified orally or in any other manner except by a
written agreement signed by Maker and Payee.
8. Maker shall pay all costs and expenses, including reasonable
attorneys' fees and expenses, incurred in connection with the collection and
enforcement of this Note.
9. This Note shall be governed by and construed and interpreted in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the Company has caused this Note to be
signed by its duly authorized officer.
WORLDWIDE WIRELESS, INC.
By__________________________
Name:_______________________
Title:______________________
<PAGE>
EXHIBIT A
WORLDWIDE WIRELESS, INC.
CONVERTIBLE PROMISSORY NOTE
(1) Conversion.
(a) Conversion Price. The holder of this Note is entitled, at its,
his or her option and at any time prior to prepayment or the Maturity Date, to
convert the total, but not less than the total, of the unpaid principal
balance and all accrued but unpaid interest of this Note, into fully paid and
nonassessable shares of the Common Stock of Worldwide Wireless, Inc. (the
"Company"), at an initial conversion price of $3.50 per share of Common Stock
(the "Conversion Price"). The Conversion Price may be adjusted from time to
time as provided herein.
(b) Exercise of Conversion. To exercise the conversion right, the
holder of this Note shall surrender this Note to the Company at its principal
executive office during normal business hours, accompanied by a duly-executed
written notice by the holder electing to convert. Shares of Common Stock
issuable upon conversion shall promptly be issued in the name of the holder as
set forth in this Note and delivered to the address set forth in the
conversion election. Such certificates shall bear a legend similar to that set
forth above.
(c) Adjustments.
(i) The Conversion Price may be adjusted from time to time
as provided herein. If the Company declares a stock dividend, subdivides the
outstanding Common Stock, combines the outstanding Common Stock or issues any
shares of its Common Stock in a reclassification in connection with a
consolidation or merger, the Conversion Price in effect on the record date for
such dividend, subdivision, combination or reclassification shall be adjusted
so that the holder of this Note upon conversion shall be entitled to receive
the aggregate number and kind of shares of stock which, if this Note had been
converted immediately prior to such record date, the holder would have owned
or been entitled to receive upon such dividend, subdivision, combination or
reclassification.
(ii) If before the payment or conversion of this Note the
Company shall consolidate with or merge into another corporation, the holder
of this Note shall thereafter be entitled to receive upon conversion the
securities to which the holder of the number of shares of Common Stock then
deliverable upon the conversion of this Note would have been entitled upon
such consolidation or merger, and the Company shall take such steps in
connection with such consolidation or merger as may be necessary to assure
that the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to any securities or property thereafter
deliverable upon the exercise or conversion of this Note. A sale of all or
substantially all the assets of the Company for a consideration (apart from
the assumption of obligations) consisting primarily of securities shall be
deemed a consolidation or merger for the foregoing purposes.
<PAGE>
(d) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least one percent
(1%) in such price.
(2) Defaults. An Event of Default occurs if:
(a) The Company defaults in the payment of interest or principal on
this Note as and when the same shall become due and payable, and such default
continues for a period of ten days; or
(b) The Company liquidates or dissolves; or
(c) Proceedings shall have been commenced by or against the Company
under any bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation law or statute of the federal government, or
any state government and, if such proceedings shall have been instituted
against the Company, or the Company by any action or failure to act shall have
indicated its approval of, consent to, or acquiescence therein, or an order
shall have been entered approving the petition in such proceedings, and within
60 days after the entry thereof, such order shall not have been vacated or
stayed on appeal or otherwise, or shall not otherwise have ceased to continue
in effect.
(3) No Recourse Against Others. No director, officer, employee, stockholder or
incorporator, as such, of the Company shall have any liability for any
obligations of the Company under this Note or for any claim based on, in
respect of or by reason of such obligations or their creation. Each holder by
accepting this Note waives and releases all such liability. Such waiver and
releases are part of the consideration for the issuance of this Note.
<PAGE>
Exhibit 10.19
Form of Promissory Notes Outstanding (Form F):
-----------------------------------------------------
Date Amount
-----------------------------------------------------
8/22/95 $25,000
-----------------------------------------------------
4/23/97 $ 5,000
-----------------------------------------------------
<PAGE>
WORLDWIDE WIRELESS, INC.
7.5% Convertible Bridge Promissory Note Due ___
August 22, 1995
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
UNDER APPLICABLE STATE SECURITIES LAWS. IT MAY NOT BE SOLD OR OFFERED FOR SALE
UNLESS: (1) AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS COVERS THE PROPOSED TRANSFER; (2) THE HOLDER
HAS NOTIFIED THE COMPANY OF THE PROPOSED TRANSFER AND, IF REQUESTED BY THE
COMPANY, THE HOLDER HAS FURNISHED THE COMPANY WITH AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT THE PROPOSED
TRANSFER WILL NOT REQUIRE REGISTRATION UNDER SUCH ACT OR UNDER APPLICABLE
STATE SECURITIES LAWS; OR (3) THE NOTE IS SOLD PURSUANT TO RULE 144 OR ANOTHER
EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND UNDER AN AVAILABLE EXEMPTION
FROM REGISTRATION UNDER APPLICABLE STATE SECURITIES LAWS.
WORLDWIDE WIRELESS, INC., a corporation duly organized and existing
under the laws of the State of Delaware (herein called the "Company"), for
value received hereby promises to pay to ___________, or registered assigns,
in lawful money of the United States of America, the principal sum of
$25,000.00, together with interest as provided below. The principal sum hereof
shall be due and payable on the first to occur of: (i) thirty (30) days after
receipt of payment by the Company pursuant to an offering of its common stock
registered under the Securities Act of 1933 (a "Public Offering"), or (ii) one
hundred eighty (180) days after the date of issuance of this Note. This Note
shall bear simple interest from the date hereof at the rate of seven and
one-half percent (7.5%) per annum payable in arrears on the date of maturity.
All payments shall be made to the holder at such place as the holder may
specify in writing.
ARTICLE 1
The Notes
Section 1.1 Registration, Transfer and Exchange. The Company shall
keep at its principal office a register (herein sometimes referred to as the
"Register") in which the Company shall provide for the registration of Notes
and the registration of transfer of Notes. Upon surrender for registration of
transfer of any Note at its principal office, the Company shall execute and
deliver, in the name of the designated transferee or transferees, one or more
new Notes of any authorized denominations of a like aggregate principal
amount. Each holder of a Note may exchange the same for other Notes of any
authorized denominations, of a like aggregate principal amount, upon surrender
of the Notes to be exchanged at the principal office of the Company. Whenever
any Notes are so surrendered for exchange, the Company shall execute and
deliver the Notes which the Note holder making the exchange is entitled to
receive.
Section 1.2. Mutilated, Destroyed, Lost and Stolen Notes. If: (i) any
mutilated Note is surrendered to the Company or if satisfactory evidence of
the destruction, loss or theft of any Note is presented to the Company; and
(ii) there is delivered to the Company such security or indemnity as may be
required or desired to save it harmless, then, in the absence of notice to the
Company that such Note has been acquired by a bona fide purchaser, the Company
shall execute
<PAGE>
and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost
or stolen Note, a new Note of like tenor and principal amount.
Section 1.3. Persons Deemed Owners. Prior to the presentation for
registration of transfer of any Note, the Company may treat the registered
holder thereof as the owner of such Note for the purpose of receiving payment
of principal of, premium, if any, and interest on such Note, for the purpose
of conversion, and for all other purposes whatsoever, whether or not such Note
shall be overdue, and the Company shall not be affected by notice to the
contrary.
Section 1.4. Notice of Completion. The Company will provide to all
holders of the Notes notice of completion of a Public Offering within thirty
(30) days thereafter.
ARTICLE 2
Conversion of Notes
Section 2.1. Conversion Privilege. The holder of any Notes shall have
the right at its option at any time (except that, with respect to any Note or
portion thereof which shall be called for redemption, such right shall
terminate at the close of business on the redemption date of such Note or
portion thereof, unless the Company shall default in payment due upon
redemption thereof), to convert, subject to the terms and provisions hereof,
the principal of such Note or any portion of the principal amount thereof into
shares of common stock of the Company, $.01 per value per share, at a
conversion price equal to $3.50 aggregate principal amount of Notes for each
share of Common Stock or, in case an adjustment of such price has taken place
pursuant to the provisions hereof, then at the price as last adjusted
(referred to herein as the "Conversion Price").
Section 2.2. Exercise of Conversion Privilege. The Conversion
Privilege shall be exercised, if at all, by surrender of a Note to the Company
at its principal office, together with written notice of election executed by
the holder of such Note, which may be in the form which is included with this
Note (hereinafter referred to as the "Conversion Notice") to convert such Note
or a specified portion thereof. The Conversion Notice shall specify the name
or names in which the shares of Common Stock deliverable upon such conversion
shall be registered, with the addresses of the persons (and taxpayer
identification numbers, if applicable) so named, and, if so required by the
Company, accompanied by a written instrument or instruments of transfer in
form satisfactory to the Company duly executed by the holder or his attorney
duly authorized in writing.
As promptly as practicable after surrender as herein provided of any
Note for conversion and the receipt of the Conversion Notice relating thereto,
the Company shall deliver or cause to be delivered to or upon the written
order of the holder of the Note so surrendered, a certificate of certificates
representing the number of fully paid and non-assessable shares of Common
Stock into which such Note is to be converted in accordance with the
provisions hereof, registered in such name or names as are specified in the
Conversion Notice, together with any cash payable in respect of a fractional
share, and a cash payment in the amount of the accrued and unpaid interest on
the Note, or such portion thereof as has been converted, to the conversion
date. In case any Note shall be surrendered for partial conversion, the
Company shall execute and deliver to or upon the written order of the holder
of the Note so surrendered, without charge to such holder, a new Note or Notes
in authorized denominations in an aggregate principal amount equal to the
unconverted portion of the surrendered Note. Except as otherwise provided in
the immediately following sentence, such conversion shall be deemed to have
been effected at the close of business on the date when such Note shall have
been surrendered for conversion together with the
<PAGE>
Conversion Notice, so that the rights of the holder of such Note as such
holder shall cease at such time and the person or persons entitled to receive
the shares of Common Stock upon conversion of such Note shall be treated for
all purposes as having become the record holder or holders of such shares of
Common Stock at such time, and such conversion shall be at the Conversion
Price in effect at such time. Holders of Notes shall have the right to
condition any surrender of Notes for conversion during the 45-day period
between the date of notice from the Company based on a proposed public
offering, upon the successful completion of such offering, such that if the
offering is not completed, the Conversion Notice shall be disregarded and the
Company shall execute and deliver to the holder thereof a new Note or Notes in
the same aggregate principal amount as those surrendered for conversion.
Section 2.3. Adjustment of Conversion Price. If and whenever the
Company shall issue or sell any shares of its Common Stock for a consideration
per share less than the Conversion Price in effect immediately prior to the
time of such issue or sale, then, forthwith upon such issue or sale, the
Conversion Price shall be reduced to the price (calculated to the nearest
$.001) determined by dividing: (a) an amount equal to the sum of (x) the
number of shares of Common Stock outstanding immediately prior to such issue
or sale (including as outstanding all shares of Common Stock issuable upon
conversion of the Notes immediately prior to such issue or sale) multiplied by
the then existing Conversion Price, and (y) the consideration, if any,
received by the Company upon such issue or sale; by (b) the total number of
shares of Common Stock outstanding immediately after such issue or sale
(including as outstanding all shares of Common Stock issuable upon conversion
of the Notes immediately prior to such issue or sale). No adjustments of the
Conversion Price, however, shall be made in an amount less than $.001 per
share, but any such lesser adjustment shall be carried forward and shall be
made at the time and together with the next subsequent adjustment which
together with any adjustments so carried forward shall amount to $.001 per
share or more.
For purposes of this Section 2.3, the following subparagraphs (a) to
(g), inclusive, shall also be applicable:
(a) Issuance of Rights or Options. In case at any time the Company
shall in any manner grant (whether directly or by assumption in a
merger or otherwise) any rights to subscribe for or to purchase,
or any options for the purchase of, Common Stock or any stock or
securities convertible into or exchangeable for Common Stock
(such rights or options being herein called "Options" and such
convertible or exchangeable stock or securities being herein
called "Convertible Securities"), whether or not such Options or
the right to convert or exchange any such Convertible Securities
are immediately exercisable, and the price per share for which
Common Stock is issuable upon the exercise of such Options or
upon conversion or exchange of such Convertible Securities
(determined by dividing: (i) the total amount, if any, received
or receivable by the Company as consideration for the granting of
such Options, plus the minimum aggregate amount of additional
consideration payable to the Company upon the exercise of all
such Options, plus, in the case of such Options which relate to
Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable upon the issue or sale
of such Convertible Securities and upon the conversion or
exchange thereof; by (ii) the total maximum number of shares of
Common Stock issuable upon the exercise of such Options or upon
the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options) shall be less than
the Conversion Price in effect immediately prior to the time of
the granting of such
<PAGE>
Options, then the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon conversion or
exchange or the total maximum amount of such Convertible
Securities issuable upon the exercise of such Options shall be
deemed to have been issued for such price per share as of the
date of granting of such Options and thereafter shall be deemed
to be outstanding. Except as otherwise provided in subparagraph
(c), no adjustment of the Conversion Price shall be made upon the
actual issue of such Common Stock or of such Convertible
Securities upon exercise of such Options or upon the actual issue
of such Common Stock upon conversion or exchange of such
Convertible Securities.
(b) Issuance of Convertible Securities. In case the Company shall in
any manner issue (whether directly or by assumption in a merger
or otherwise) or sell any Convertible Securities, whether or not
the rights to exchange or convert thereunder are immediately
exercisable, and the price per share for which Common Stock is
issuable upon such conversion or exchange (determined by
dividing: (i) the total amount received or receivable by the
Company as consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the
conversion or exchange of all such Convertible Securities; by
(ii) the total maximum number of shares of Common Stock issuable
upon the conversion or exchange of all such Convertible
Securities) shall be less than the Conversion Price in effect
immediately prior to the time of such issue or sale, then the
total maximum number of shares of Common Stock issuable upon
conversion or exchange of all such Convertible Securities shall
be deemed to have been issued for such price per share as of the
date of the issue or sale of such Convertible Securities and
thereafter shall be deemed to be outstanding, provided that: (i)
except as otherwise provided in subparagraph (c), below, no
adjustment of the Conversion Price shall be made upon the actual
issue of such Common Stock upon conversion or exchange of such
Convertible Securities; and (ii) if any such issue or sale of
such Convertible Securities is made upon exercise of any Option
to purchase any such Convertible Securities for which adjustments
of the Conversion Price have been or are to be made pursuant to
other provisions of this Section 2.3, no further adjustment of
the Conversion Price shall be made by reason of such issue or
sale.
(c) Change in Option Price or Conversion Rate. Upon the happening of
any of the following events, namely, if the purchase price
provided for in any Option referred to in subparagraph (a), the
additional consideration, if any, payable upon the conversion or
exchange of any Convertible Securities referred to in
subparagraph (a) or (b), or the rate at which any Convertible
Securities referred to in subparagraph (a) or (b) are convertible
into or exchangeable for Common Stock shall change at any time
(other than under or by reason of provisions designed to protect
against dilution), the Conversion Price in effect at the time of
such event shall forthwith be readjusted to the Conversion Price
which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or conversion
rate, as the case may be, at the time initially granted, issued
or sold; and on the expiration of any such Option or the
termination of any such right to convert or exchange such
Convertible Securities, the Conversion Price then in effect
hereunder shall forthwith be increased to the Conversion Price
which would have been in effect at the time of such expiration or
termination had such Option or Convertible
<PAGE>
Securities, to the extent outstanding immediately prior to such
expiration or termination, never been issued, and the Common
Stock issuable thereunder shall no longer be deemed to be
outstanding.
(d) Stock Dividends. In case the Company shall declare a dividend or
make any other distribution upon any stock of the Company payable
in Common Stock, Options or Convertible Securities, any Common
Stock, Options or Convertible Securities, as the case may be,
issuable in payment of such dividend or distribution shall be
deemed to have been issued in a subdivision of outstanding shares
as provided in Section 2.5 below.
(e) Consideration for Stock. In case any shares of Common Stock,
Options or Convertible Securities shall be issued or sold for
cash, the consideration received therefor shall be deemed to be
the amount received by the Company therefor, without reduction
therefrom of any expenses incurred or any underwriting
commissions or concessions paid or allowed by the Company in
connection therewith. In case any shares of Common Stock, Options
or Convertible Securities shall be issued or sold for a
consideration other than cash, the amount of the consideration
other than cash received by the Company shall be deemed to be the
fair value of such consideration as determined in good faith by
the Board of Directors of the Company, without deduction of any
expenses incurred or any underwriting commissions or concessions
paid or allowed by the Company in connection therewith. The
amount of consideration deemed to be received by the Company
pursuant to the foregoing provisions of this subparagraph (e)
upon any issue or sale, pursuant to an established compensation
plan of the Company to directors, officers or employees of the
Company in connection with their employment, of shares of Common
Stock, Options or Convertible Securities shall be increased by
the amount of any tax benefit realized by the Company as a result
of such issue or sale, the amount of such tax benefit being the
amount by which the Federal and/or State income or other tax
liability of the Company shall be reduced by reason of any
deduction or credit in respect of such issue or sale. In case any
Options shall be issued in connection with the issue and sale of
other securities of the Company, together comprising one integral
transaction in which no specific consideration is allocated to
such Options by the parties thereto, such Options shall be deemed
to have been issued without consideration. In case any shares of
Common Stock, Options or Convertible Securities shall be issued
in connection with any merger or consolidation in which the
Company is the surviving corporation, the amount of consideration
therefor shall be deemed to be the fair value as determined in
good faith by the Board of Directors of the Company of such
portion of the assets and business of the non-surviving
corporation as such Board shall determine to be attributable to
such Common Stock, Options or Convertible Securities, as the case
may be. In the event of any consolidation or merger of the
Company in which the Company is not the surviving corporation or
in the event of any sale of all or substantially all the assets
of the Company for stock or other securities of any corporation,
the Company shall be deemed to have issued a number of shares of
its Common Stock for stock or securities of the other corporation
computed on the basis of the actual exchange ratio on which the
transaction was predicated and for a consideration equal to the
fair market value on the date of such transaction of such stock
or securities of the other corporation, and, if any such
calculation results in adjustment of the Conversion Price, the
<PAGE>
determination of the number of shares of Common Stock receivable
upon conversion of the Notes immediately prior to such merger,
consolidation or sale, for purposes of Section 2.7, shall be made
after giving effect to such adjustment of the Conversion Price.
(f) Record Date. In case the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them:
(i) to receive a dividend or other distribution payable in Common
Stock, Options or Convertible Securities; or (ii) to subscribe
for or purchase Common Stock, Options or Convertible Securities,
then such record date shall be deemed to be the date of the issue
or sale of the shares of Common Stock deemed to have been issued
or sold upon the declaration of such dividend or the making of
such other distribution or the date of the granting of such right
of subscription or purchase, as the case may be.
(g) Treasury Shares. The number of shares of Common Stock outstanding
at any given time shall not include shares owned or held by or
for the account of the Company. The disposition of any such
shares, however, shall be considered an issue or sale of Common
Stock for the purposes of this Section 2.3.
Section 2.4. Certain Issues of Stock Excepted. Anything herein to the
contrary notwithstanding, the Company shall not be required to make any
adjustment of the Conversion Price in the case of the issuance to directors,
officers or employees of the Company, in connection with their services to the
Company, of up to an aggregate number of shares of the Company's Common Stock
as is equal to 15% of the aggregate number of outstanding shares of the
Company's Common Stock, determined on a fully-diluted basis (including any
dilution resulting from the issuance of such shares).
Section 2.5 Subdivision or Combination of Stock. In case the Company
shall at any time subdivide its outstanding shares of Common Stock into a
greater number of shares, the Conversion Price in effect immediately prior to
such subdivision shall be proportionately reduced, i.e., the holder shall be
entitled to purchase after such subdivision, for the same consideration as
applicable prior to such subdivision, the same percentage of outstanding
Common Stock that such holder was entitled to purchase prior to such
subdivision, and conversely, in case the outstanding shares of Common Stock of
the Company shall be combined into a smaller number of shares, the Conversion
Price in effect immediately prior to such combination shall be proportionately
increased.
Section 2.6. Fractional Shares. No fractional shares or scrip
representing fractional shares shall be issued upon the conversion of any
Note. If any fractional interest in a share of Common Stock would, except for
the provision of this Section be delivered upon the conversion of any Note,
the Company shall, in lieu of delivering a fractional share therefor, pay the
holder of such surrendered Note an amount in cash determined by multiplying
such fractional interest by the per share Conversion Price.
Section 2.7. Reorganization, Reclassification, Consolidation, Merger
or Sale. If any capital reorganization or reclassification of the capital
stock of the Company or any consolidation or merger of the Company with
another corporation, or the sale of all or substantially all its assets to
another corporation shall be effected in such a way that holders of Common
Stock shall be entitled to receive stock, securities or assets with respect to
or in exchange for Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful
<PAGE>
and adequate provisions shall be made whereby each holder of the Notes shall
thereafter have the right to receive upon the basis and upon the terms and
conditions specified herein and in lieu of the shares of Common Stock of the
Company immediately theretofore receivable upon the conversion of the Notes,
such shares of stock, securities or assets (including cash) as may be issued
or payable with respect to or in exchange for a number of outstanding shares
of Common Stock equal to the number of shares of such stock immediately
theretofore so receivable had such reorganization, reclassification,
consolidation, merger or sale not taken place, and in any such case
appropriate provision shall be made with respect to the rights and interests
of such holder to the end that the provisions hereof (including, without
limitation, provisions for adjustments of the Conversion Price) shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the conversion of such
Notes (including an immediate adjustment, by reason of such consolidation or
merger, of the Conversion Price to the value for the Common Stock reflected by
the terms of such consolidation or merger if the value so reflected is less
than the Conversion Price in effect immediately prior to such consolidation or
merger). In the event of a merger or consolidation of the Company as a result
of which a greater or lesser number of shares of common stock of the surviving
corporation are issuable to holders of Common Stock of the Company outstanding
immediately prior to such merger or consolidation, the Conversion Price in
effect immediately prior to such merger or consolidation shall be adjusted in
the same manner as though there were a subdivision or combination of the
outstanding shares of Common Stock of the Company. The Company will not effect
any such consolidation, merger or sale, unless prior to the consummation
thereof the successor corporation (if other than the Company) resulting from
such consolidation or merger or the corporation purchasing such assets shall
assume, by written instrument executed and mailed or delivered to each holder
of the Notes at the last address of such holder appearing on the books of the
Company, the obligation to deliver to such holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
holder may be entitled to receive upon conversion of such Notes.
Section 2.8. Notice of Adjustments. Whenever the Conversion Price is
adjusted as herein provided, the Company shall forthwith cause to be mailed to
each holder of the Notes a notice stating that the Conversion Price has been
adjusted and setting forth the adjusted Conversion Price.
Section 2.9. Company to Reserve Common Stock; Listing. The Company
covenants that it will at all times reserve and keep available, free from
preemptive rights, out of the aggregate of its authorized but unissued Common
Stock or its issued Common Stock held in its treasury, or both, for the
purpose of effecting conversions of Notes, the full number of shares of Common
Stock then deliverable upon the conversion of all outstanding Notes not
theretofore converted; and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the
conversion of all said outstanding Notes, the Company will take such corporate
action as may in the opinion of its counsel be necessary to increase its
authorized but unissued Common Stock to such number of shares as shall be
sufficient for that purpose.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value (if any) of the shares of Common
Stock issuable upon conversion of the Notes, the Company will take any
corporate action which may, in the opinion of its counsel, be necessary in
order that the Company may validly and legally issue fully-paid and
non-assessable shares of such Common Stock at such adjusted Conversion Price.
<PAGE>
The Company covenants that if any shares of Common Stock reserved for
conversion of Notes require listing upon any national securities exchange
before such shares may be delivered upon conversion, the Company will in good
faith, and as expeditiously as possible, endeavor to cause such shares to be
duly listed.
Section 2.10. Taxes on Conversions. The Company will pay any and all
documentary, stamp or similar issue or transfer taxes payable in respect of
the issue or delivery of shares of Common Stock on conversion of Notes
pursuant hereto; provided, however, that the Company shall not be required to
pay any tax which may be payable in respect of any registration of transfer
involved in the issue or delivery of Common Stock in a name other than that of
the holder of the Notes to be converted, and no such issue or delivery shall
be made unless and until the person requesting such issue has paid to the
Company the amount of any such tax or has established to the satisfaction of
the Company that such tax has been paid.
Section 2.11. Closing of Books. The Company will at no time close its
transfer books against the transfer of the shares of Common Stock issued or
issuable upon the conversion of the Notes in any manner which interferes with
the timely conversion of the Notes.
ARTICLE 3
Registration and Sale Rights
Section 3.1. Opportunity to Register and Sell. After completion of a
Public Offering of its stock, if at any time the Company determines to
register any shares of its Common Stock by filing a registration statement in
compliance with the Securities Act, holders of the Notes or shares issued on
conversion of the Notes (the "Shares") will be given 45 days prior notice
thereof and will be afforded the opportunity to include in the same
registration and to sell as part of any related offering of such shares, a
percentage of the Shares equal to the highest percentage of shares owned by
any then current shareholder (or holder of rights to acquire or convert into
shares) which such shareholder had the right to include in such registration
and sale, subject to usual and customary cutbacks and limitations which may be
imposed by the Company and its underwriters; provided, however, that in any
case the holders of the Notes or the Shares shall be permitted to register and
sell at least the same percentage of shares (including in such calculation all
rights to acquire shares or to convert into shares) that are actually
registered and sold by any other shareholder. Such right shall apply to each
registration and sale of shares effected by the Company for the period set
forth in Section 3.6 below.
Section 3.2. Indemnification. No shares to be issued on conversion of
Notes shall be included in any registration unless the holders thereof furnish
to the Company and the underwriter or selling agent all reasonable information
requested by them and agree to indemnify the Company and the underwriter or
selling agent against liability arising out of information furnished by the
holder for inclusion in the registration statement (at which time the holders
will receive a similar cross-indemnification from the Company and the
underwriter).
Section 3.3. No Requirement to File or Prosecute Registration. The
Company shall not be required at any time to file a registration statement or
to prosecute a filing to effectiveness, may determine not to file even though
notice has been given pursuant to Section 3.1 or may withdraw a registration
after it has been filed.
<PAGE>
Section 3.4. Rule 144 Information. If the Company effects a
registration of shares, it will thereafter make timely all filings required
under the Securities Exchange Act of 1934 so as to enable the holders of
shares into which the Notes may be or may have been converted to sell such
shares under SEC Rule 144 to the extent that the benefits of that rule are
otherwise available to them.
Section 3.5. Underwriter's Commissions. If shares into which the
Notes are convertible are included in any underwriting hereunder, the holders
thereof shall pay their proportionate share of the underwriter's commissions
or discounts, but shall not be responsible for legal fees, printing costs and
other fees and expenses except to the extent the same demonstrably increase by
reason of inclusion of such shares in the underwriting.
Section 3.6. Termination of Registration and Sale Rights. The
registration and sale rights provided for in this Article III shall expire and
terminate on June 30, 2006.
ARTICLE 4
Defaults and Remedies
Section 4.1 Events of Default. "Event of Default", wherever used
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be
effected by operation of law, pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body):
(a) default in the payment of any interest, principal, or redemption
price when the same becomes due and payable, and continuance of
such default for a period of 15 days after written notice
thereof; or
(b) default in the performance, or breach, of any covenant or
warranty of the Company herein (other than a covenant or warranty
a default in whose performance or whose breach is elsewhere in
this Section specifically dealt with), and continuance of such
default or breach for a period of 30 days after there has been
given, by registered or certified mail, to the Company by the
holder of an outstanding Note, a written notice specifying such
default or breach and requiring it to be remedied and stating
that such notice is a "Notice of Default" hereunder; or
(c) the entry of a decree or order by a court having jurisdiction in
the premises adjudging the Company a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the
Company under the Federal Bankruptcy Act or any other applicable
Federal or State law, or appointing a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of
the Company or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order unstayed and in effect
for a period of 60 consecutive days; or
(d) the institution by the Company of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of
bankruptcy or insolvency proceedings against it, or the filing by
it for relief under the Federal Bankruptcy Act or any other
applicable Federal or State law, or the consent by it to the
filing
<PAGE>
of any such petition or to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or of any substantial part of its
property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to
pay its debts generally as they become due, or the taking of
corporate action by the Company in furtherance of any such
action.
Section 4.2. Acceleration. If an Event of Default occurs and is
continuing, then and in every such case the holder of any outstanding Note may
declare the principal of all the Notes held by it to be immediately due and
payable, by a notice in writing to the Company, and upon any such declaration
such principal shall become immediately due and payable. At any time after
such a declaration of acceleration has been made and before a judgment or
decree for payment of the money due has been obtained, any holder of a Note,
by written notice to the Company, may rescind and annul such declaration, and
its consequences, as to the Notes so held.
Section 4.3. Rights and Remedies Cumulative. No right or remedy
herein conferred is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative
and in addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate right or
remedy.
Section 4.4. Delay or Omission Not a Waiver. No delay or omission of
any holder of any Note to exercise any right or remedy accruing upon any Event
of Default shall impair any such right or remedy or constitute a waiver of any
such Event of Default or an acquiescence therein. Every right and remedy given
by this Note or by law to any holder of a Note may be exercised from time to
time, and as often as may be deemed expedient, by each such holder.
Section 4.5. Costs. In case any one or more Events of Default shall
occur and be continuing, and the holder of a Note then outstanding proceeds to
protect and enforce its rights by an action at law, suit in equity or other
appropriate proceeding, whether for the specific performance of any agreement
contained herein or in such Note or for an injunction against a violation of
any of the terms hereof or thereof, or in aid of the exercise of any power
granted hereby or thereby or by law, the Company will pay to the holder
thereof such further amount as shall be sufficient to cover the cost and
expenses of collection or other litigation, including, without limitation,
reasonable attorney's fees, expenses and disbursements.
ARTICLE 5
Miscellaneous
Section 5.1. Notices. Any notice or other communication to be given
hereunder shall be in writing and mailed or telecopied to such party at the
address or number set forth below:
If to a holder of a Note: at such address as shall appear on the
Register
If to the Company: Worldwide Wireless, Inc.
6 East 43rd Street
Suite 1900
New York, NY 10017
Telecopier No.: 802-674-2751
<PAGE>
or to such other person, address or number as the party entitled to such
notice or communication shall have specified by notice to the other party
given in accordance with the provisions of this Section. Any such notice or
other communication shall be deemed given: (i) if mailed, when deposited in
the mail, properly addressed and with postage prepaid; or (ii) if sent by
telecopy, when transmitted.
Section 5.2. Successors and Assigns. This Note hall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns.
Section 5.3. Captions; Headings. The captions and section numbers
appearing in this Note are inserted only as a matter of convenience. They do
not define, limit, construe or describe the scope or intent of such sections,
nor in any way affect this Note or have any substantive effect.
Section 5.4. Governing Law. This Note shall be governed by and
construed in accordance with the laws of the State of Vermont, without giving
effect to such jurisdiction's principles of conflict of laws.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
WORLDWIDE WIRELESS, INC.
By:___________________________
Chief Operating Officer
<PAGE>
CONVERSION NOTICE
To: Worldwide Wireless, Inc.
The undersigned owner of this Note hereby exercises the option to
convert this Note or portion hereof below designated into shares of Common
Stock of Worldwide Wireless, Inc., all in accordance with, and subject to, the
terms of the Note, and directs that the shares issuable and deliverable upon
the conversion, together with any check in payment for fractional shares, be
issued in the name of and delivered to the undersigned or, if so specified, to
the person or entity named below. If shares are to be issued in the name of a
person other than the undersigned, the undersigned will pay any transfer taxes
payable with respect thereto.
Dated:_____________________
If shares are to be issued other than to holder:
- --------------------------------------
- -------------------------------------- --------------------------------
Name Signature
- --------------------------------------
Address
- --------------------------------------
Please Furnish Taxpayer Identification Number:______________________
Portion to be converted: $________________________
<PAGE>
EXHIBIT 10.20
Form of Promissory Notes Outstanding (Form G)
Date Amount Interest Rate
----------------------------------------------------
10/20/97 30,000 7.5%
----------------------------------------------------
11/07/97 100,000 8.5%
----------------------------------------------------
5/21/97 250,000 prime plus 1%
----------------------------------------------------
<PAGE>
WORLD WIDE WIRELESS, INC.
7.5% Convertible Bridge Promissory Note Due April 30, 1998
$30,000 October 20, 1997
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
UNDER APPLICABLE STATE SECURITIES LAWS. IT MAY NOT BE SOLD OR OFFERED FOR SALE
UNLESS: (1) AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS COVERS THE PROPOSED TRANSFER; (2) THE HOLDER
HAS NOTIFIED THE COMPANY OF THE PROPOSED TRANSFER AND, IF REQUESTED BY THE
COMPANY, THE HOLDER HAS FURNISHED THE COMPANY WITH AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT THE PROPOSED
TRANSFER WILL NOT REQUIRE REGISTRATION UNDER SUCH ACT OR UNDER APPLICABLE
STATE SECURITIES LAWS; OR (3) THE NOTE IS SOLD PURSUANT TO RULE 144 OR ANOTHER
EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND UNDER AN AVAILABLE EXEMPTION
FROM REGISTRATION UNDER APPLICABLE STATE SECURITIES LAWS.
WORLDWIDE WIRELESS, INC., a corporation duly organized and existing
under the laws of the State of Delaware (herein called the "Maker"), its
successors and assigns, for value received/in consideration of a loan to
Company's wholly-owned subsidiary, New England Wireless Inc., the benefit and
value of which is acknowledged by the Maker to insure to the Maker, hereby
promises to pay to _______________________ ("Holder"), or its successors and
assigns, in lawful money of the United States of American, the principal sum
of Thirty Thousand Dollars ($30,000), together with interest as provided
below. The principal sum hereof shall be due and payable on the first to occur
of: (i) ten (10) business days after receipt of payment by the Company
pursuant to an offering of its common stock registered under the Securities
Act of 1933 (a "Public Offering"), or (ii) April 30, 1998. This Note shall
bear interest (determined on the basis of a 365 day year) from the date hereof
at 7.5%.
Payments shall be deemed made when received by the Holder at 69-10B,
215th St., Bayside, NY 11364, or at such other place as Holder may designate
in writing from time to time.
In the event of Maker's default in any obligation of Maker expressed
in this Note or in any instrument securing this Note, which default is not
cured within fifteen (15) days of written notice of such default given to
Maker by the Holder hereof, the Holder may, at the Holder's sole option,
declare the unpaid principal and all accrued and unpaid interest due under
this Note immediately due and payable. Maker agrees to pay all costs for the
collection of this Note, including reasonable attorneys' fees, and to pay
interest on all amounts not paid when due (pursuant to the terms hereof, by
acceleration or otherwise), at the greater of twelve percent (12%) per annum
or at the rate specified in the first paragraph of this Note plus two percent
(2%) until such amounts are paid in full.
Each party who is, or may become, liable on this Note in any
capacity, hereby waives presentment, demand, notice of dishonor and protest,
notice of extensions, modifications or alterations of the date or terms of
payment hereof, right to trial by jury, and all surety defenses in the nature
thereof and further consents to all extensions or modifications of the due
date and terms of payment of this Note. No delay
- 1 -
<PAGE>
or omission on the part of the Holder shall operate as a waiver of such right
or of any other right of such party, nor shall any delay, omission or waiver
on any one occasion be deemed a bar to or a waiver of the same or any other
right on any future occasion.
This Note may be prepaid in whole or in part at any time without
penalty. Any sums paid before the due date thereof shall not postpone or delay
the due date of any payment subsequently due.
This Note shall be construed in accordance with and governed by the
laws of the State of New York. Any action arising out of this Note shall be
subject to the jurisdiction and venue of the courts of the State of New York
in Queens County and the U.S. District Court for the District of New York,
with respect to which each party hereby consents.
IN WITNESS WHEREOF, the Maker has executed this Note on the date
written above.
IN PRESENCE OF: WORLDWIDE WIRELESS, INC.
By:
- ---------------------------- ------------------------------------
Witness Scott A. Wendel
Chief Executive Officer
- 2 -
<PAGE>
Exhibit 10.21
Form of Warrants Outstanding
Date (as of) No. of Shares
4/21/97 6,250
5/1/97 61,000
8/10/97 4,824
8/10/97 655
8/10/97 394
8/10/97 236
8/10/97 142
8/10/97 1,152
8/10/97 279
8/10/97 272
8/10/97 337
8/10/97 337
8/10/97 337
8/10/97 2,338
8/10/97 655
8/10/97 320
8/10/97 302
8/10/97 328
10/31/97 6,250
10/31/97 6,250
10/31/97 6,250
10/31/97 12,500
10/31/97 6,850
10/31/97 7,500
<PAGE>
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 NOR UNDER APPLICABLE STATE SECURITIES LAWS
AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS IT HAS BEEN REGISTERED UNDER SUCH LAWS OR AN
EXEMPTION FROM REGISTRATION IS AVAILABLE
As of May 1, 1997
STOCK PURCHASE WARRANT
To Subscribe for and Purchase Common Stock of
Worldwide Wireless, Inc.
THIS CERTIFIES that ___________________, for value received, or his
or her registered assigns, is entitled, subject to the terms of Section 1
hereof, to subscribe for and purchase from WORLDWIDE WIRELESS, INC., a
Delaware corporation (hereinafter called the "Company"), at the lesser of (i)
$3.00 or (ii)at the price equal to fifty percent (50%) of the price per share
of the Company's common stock, $.01 par value (the "Common Stock"), issued
pursuant to a public offering (the "Public Offering") pursuant to an effective
Registration Statement filed with the Securities and Exchange Commission (such
exercise price, as from time to time to be adjusted as hereinafter provided,
being hereinafter called the "Warrant Price") as such initial public offering
price is set forth on the cover page of the final prospectus to such Public
Offering. This Warrant may be exercised, in whole or in part,, at any time
Monday through Friday, 9:00 a.m. through 4:00 p.m., EST, after the end of the
thirteenth (13th) month but not later than the end of the thirty sixth (36th)
month following the month during which the Company receives payment of the
last proceeds from the sale of its common stock pursuant to the Public
Offering, up to fully paid, nonassessable shares of Common Stock, $.01 par
value, of the Company, subject, however, to the provisions and upon the terms
and conditions hereinafter set forth, including, without limitation, the
provisions of Section 1, Section 3 and Section 4 hereof and provided, however,
that this Warrant shall become exercisable on January 1, 1998 and shall expire
on January 1, 2001 in the event the Public Offering has not been declared
effective by the Securities and Exchange Commission on or before December 31,
1997.
Section 1. Exercise of Warrant.
(a) This Warrant may be exercised by the holder hereof, in whole
or in part (but not as to a fractional share of Common
Stock), by the completion of the subscription form attached
hereto and by the surrender of this Warrant (properly
endorsed) at the office of the Company in New York, New York
(or at such other agency or office of the Company in the
United States as it may designate by notice in writing to
the holder hereof at the address of the holder hereof
appearing on the books of the Company). Payment for said
shares may be made either by (i) cash or check payable to
the Company, accompanying the notice of the exercise, or
(ii) by surrendering to the Company shares of Common Stock
having a Market Value equal to the Warrant Price for shares
being purchased upon exercise, in each case accompanied by
the notice of exercise. In the event of any exercise of the
rights represented
<PAGE>
by this Warrant, a certificate or certificates for the
shares of Common Stock so purchased, registered in the name
of the holder hereof, shall be delivered to the holder
hereof within a reasonable time, not exceeding five business
days, after the rights represented by this Warrant shall
have been so exercised; and, unless this Warrant has expired
or been exercised in full, a new Warrant representing the
number of shares (except a remaining fractional share), if
any, with respect to which this Warrant shall not then have
been exercised shall also be issued to the holder hereof
within such time. With respect to any such exercise, the
holder hereof shall for all purposes be deemed to have
become the holder of record of the number of shares of
Common Stock evidenced by such certificate or certificates
from the date on which this Warrant was surrendered and
payment of the Warrant Price was made irrespective of the
date of delivery of such certificate, except that, if the
date of such surrender and payment is a date on which the
stock transfer books of the Company are closed, such person
shall be deemed to have become the holder of such shares at
the close of business on the next succeeding date on which
the stock transfer books are open. No fractional shares
shall be issued upon exercise of this Warrant. If any
fractional interest in a share of Common Stock would, except
for the provisions of this Section 1, be delivered upon any
such exercise, the Company, in lieu of delivering the
fractional share thereof, shall pay to the holder hereof an
amount in cash equal to the current market price of such
frac tional interest as determined in good faith by the
Board of Directors of the Company. Unless the exercise of
the Warrants shall occur when the shares have not been
registered pursuant to the Public Offering, the shares shall
bear a restrictive legend in substantially the following
form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 ("THE ACT") AND
ARE "RESTRICTED SECURITIES" AS THAT TERM IS DEFINED IN RULE
144 UNDER THE ACT. THE SHARES MAY NOT BE OFFERED FOR SALE,
SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR PURSUANT
TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT, THE
AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE
SATISFACTION OF THE COMPANY."
(b) In lieu of exercising this Warrant pursuant to Paragraph
1(a) hereof, the holder may elect to receive shares of
Common Stock equal to the value of this Warrant determined
in the manner described below (or any portion thereof
remaining unexercised) upon delivery of this Warrant at the
offices of the Company or at such other address as the
Company may designate by notice in writing to the registered
holder hereof with the Notice of Cashless Exercise Form to
be provided on request by the Company duly executed. In such
event, the Company shall issue to the holder a number of
shares of the Company's Common Stock computed using the
following formula:
X = Y (A-B)
------
A
Where X = the number of shares of Common Stock to be issued
to the holder.
Y = the number of shares of Common Stock purchasable under
this Warrant (at the date of such calculation).
- 2 -
<PAGE>
A = the Market Value of the Company's Common Stock on the
business day immediately preceding the day on which the
Notice of Cashless Exercise is received by the Company.
B = Warrant Price (as adjusted to the date of such
calculation).
(c) For purposes of this Warrant:
(i) the Market Value of a share of Common Stock or
other equity security of the Company on any date
shall be equal to:
(A) the closing sale price per share (or other
unit in which such security is
denominated) as published by a national
securities exchange on which shares of
Common Stock (or other units of the
security) are traded (an "Exchange") on
such date or, if there is no sale of
Common Stock (or other units) on such
date, the average of the bid and asked
prices on such exchange at the close of
trading on such date, or
(B) if shares of Common Stock (or other unit)
are not listed on a national securities
exchange on such date, the closing price
per share (or other unit) as published on
the National Association of Securities
Dealers Automatic Quotation System
("NASDAQ") National Market System if the
shares (or other units) are quoted on such
system on such date, or
(C) the average of the bid and asked prices in
the over-the-counter market at the close
of trading on such date if the shares (or
other units) are not traded on an exchange
or listed on the NASDAQ National Market
System, or
(D) if the security is not traded on a
national securities exchange or in the
over-the-counter market, the fair market
value of a share of Common Stock (or other
unit) on such date as determined in good
faith by the Board of Directors.
Notwithstanding the foregoing, a regional
stock exchange shall not be deemed to be a
national securities exchange unless the
trading volume of the Common Stock on such
exchange exceeds the trading volume on
NASDAQ or the over-the-counter market for
the thirty-day period ended on the date
immediately preceding the date this
Warrant is exercised.
(ii) If the Holder disagrees with the determination of
the Market Value of any securities of the Company
determined by the Board of Directors under
subparagraph 1(c)(i)(D), the Market Value of such
securities shall be determined by an independent
appraiser acceptable to the Company and the holder
(or, if they cannot agree on such an appraiser, by
an independent appraiser selected by each of them,
and Market Value shall be the median of the
appraisals made by such appraisers). If there is
one appraiser, the cost of the appraisal shall be
shared equally between the Company and the holder.
If there are two appraisers, each of the Company
and the holder shall pay for its own appraisal.
- 3 -
<PAGE>
Section 2. Adjustment of Number of Shares. Upon each adjustment of
the Warrant Price as provided herein (other than an adjustment pursuant to
Section 4 of this Warrant, which shall not result in any adjustment to the
number of shares purchasable pursuant hereto), the holder of this Warrant
shall thereafter be entitled to purchase, at the Warrant Price resulting from
such adjustment, the number of shares (calculated to the nearest tenth of a
share) obtained by multiplying the Warrant Price in effect immediately prior
to such adjustment by the number of shares purchasable pursuant hereto
immediately prior to such adjustment and dividing the product thereof by the
Warrant Price resulting from such adjustment.
Section 3. Adjustment of Price Upon Issuance of Common Stock. If and
whenever the Company shall issue or sell any shares of its Common Stock (as
defined in paragraph 3(h)) in a transaction described in paragraphs (a), (b)
or (c) of this Section 3, for a consideration per share less than the Warrant
Price in effect immediately prior to the time of such issue or sale, then,
forthwith upon such issue or sale, the Warrant Price shall be reduced to the
price (calculated to the nearest $.001) determined by dividing: (a) an amount
equal to the sum of (x) the number of shares of Common Stock outstanding
immediately prior to such issue or sale (including as outstanding all shares
of Common Stock issuable upon exercise of this Warrant immediately prior to
such issue or sale) multiplied by the then existing Warrant Price, and (y) the
consideration, if any, received by the Company upon such issue or sale; by (b)
the total number of shares of Common Stock outstanding immediately after such
issue or sale (including as outstanding all shares of Common Stock issuable
upon exercise of this Warrant immediately prior to such issue or sale). No
adjust ments of the Warrant Price, however, shall be made in an amount less
than $.001 per share, but any such lesser adjustment shall be carried forward
and shall be made at the time and together with the next subsequent adjustment
which together with any adjustments so carried forward shall amount to $.001
per share or more. Notwithstanding any other provisions of this Section, no
adjustments to the Warrant Price shall be made prior to the date that the
exercise price of the Warrant is established pursuant to the completion of the
Public Offering by the Company, as defined above.
For purposes of this Section 3, the following paragraphs (a) to (h),
inclusive, shall be applicable:
(a) Stock Dividends. If the Company shall declare a dividend or
make any other distribution upon any stock of the Company
payable in Common Stock, or any options for the purchase of
Common Stock or any stock or securities convertible into or
exchangeable for Common Stock (such rights or options being
herein called "Options" and such convertible or exchangeable
stock or securities being herein called "Convertible
Shares") any Common Stock, Options or Convertible
Securities, as the case may be, issuable in payment of such
dividend or distribution shall be deemed to have been issued
in a subdivision of outstanding shares as provided in
paragraph 3(h) below.
(b) Subdivision or Combination of Stock. If the Company shall at
any time subdivide its outstanding shares of Common Stock
into a greater number of shares, the Warrant Price in effect
immediately prior to such subdivision shall be
proportionately reduced, i.e., the holder shall be entitled
to purchase after such subdivision, for the same
consideration as applicable prior to such subdivision, the
same percentage of outstanding Common Stock that such holder
was entitled to purchase prior to such subdivision, and
conversely, in case the outstanding shares of Common Stock
of the Company shall be combined into a smaller number of
shares, the Warrant Price in effect immediately prior to
such combination shall be proportionately increased.
- 4 -
<PAGE>
(c) Reorganization, Reclassification, Consolidation, Merger or
Sale. If any capital reorganization or reclassification of
the capital stock of the Company or any consolidation or
merger of the Company with another corporation, or the sale
of all or substantially all its assets to another
corporation shall be effected in such a way that holders of
Common Stock shall be entitled to receive stock, securities
or assets with respect to or in exchange for Common Stock,
then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and
adequate provisions shall be made whereby each holder of the
Warrants shall thereafter have the right to receive upon the
basis and upon the terms and conditions specified herein and
in lieu of the shares of Common Stock of the Company
immediately theretofore receivable upon the exercise of such
Warrant or Warrants, such shares of stock, securities or
assets (including cash) as may be issued or payable with
respect to or in exchange for a number of outstanding shares
of Common Stock equal to the number of shares of such stock
immediately theretofore so receivable had such
reorganization, reclassification, consolidation, merger or
sale not taken place, and in any such case appropriate
provision shall be made with respect to the rights and
interests of such holder to the end that the provisions
hereof (including, without limitation, provisions for
adjustments of the Warrant Price) shall thereafter be
applicable, as nearly as may be, in relation to any shares
of stock, securities or assets thereafter deliverable upon
the exercise of such Warrants (including an immediate
adjustment, by reason of such consolidation or merger, of
the Warrant Price to the value for the Common Stock
reflected by the terms of such consolidation or merger if
the value so reflected is less than the Warrant Price in
effect immediately prior to such consolidation or merger).
In the event of a merger or consoli dation of the Company as
a result of which a greater or lesser number of shares of
common stock of the surviving corporation are issuable to
holders of Common Stock of the Company outstanding
immediately prior to such merger or consolidation, the
Warrant Price in effect immediately prior to such merger or
consolidation shall be adjusted in the same manner as though
there were a subdivision or combination of the outstanding
shares of Common Stock of the Company. The Company will not
effect any such consolidation, merger or sale, unless prior
to the consummation thereof the successor corporation (if
other than the Company) resulting from such consolidation or
merger or the corporation purchasing such assets shall
assume, by written instrument executed and mailed or
delivered to each Warrant holder at the last address of such
holder appearing on the books of the Company, the obligation
to deliver to such holder such shares of stock, securities
or assets as, in accordance with the foregoing provisions,
such holder may be entitled to receive upon exercise of such
Warrants.
(d) Notice of Adjustment. Upon any adjustment of the Warrant
Price, then and in each such case the Company shall give
written notice thereof, by first class mail, postage
prepaid, addressed to each Warrant holder at the address of
such holder as shown on the books of the Company, which
notice shall state the Warrant Price resulting from such
adjustment, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is
based.
(e) Stock to Be Reserved. The Company will at all times reserve
and keep available out of its authorized Common Stock or its
treasury shares, solely for the purpose of issuance upon the
exercise of this Warrant as herein provided, such number of
shares of Common Stock as shall then be issuable upon the
exercise of this Warrant. The Company covenants that all
shares of Common Stock which shall be so issued shall be
duly and validly issued and fully paid and nonassessable and
free from all taxes, liens and charges with respect to the
- 5 -
<PAGE>
issue thereof, and, without limiting the generality of the
foregoing, the Company covenants that it will from time to
time take all such action as may be requisite to assure that
the par value per share of the Common Stock is at all times
equal to or less than the effective Warrant Price. The
Company will take all such action as may be necessary to
assure that all such shares of Common Stock may be so issued
without violation of any applicable law or regulation, or of
any requirements of any national securities exchange upon
which the Common Stock of the Company may be listed. The
Company will not take any action which results in any
adjustment of the Warrant Price if the total number of
shares of Common Stock issued and issuable after such action
upon exercise of this Warrant would exceed the total number
of shares of Common Stock then authorized by the Company's
Certificate of Incorporation. The Company has not granted
and will not grant any right of first refusal with respect
to shares issuable upon exercise of this Warrant, and there
are no preemptive rights associated with such shares.
(f) Issue Tax. The issuance of certificates for shares of Common
Stock upon exercise of this Warrant shall be made without
charge to the holder hereof for any issuance tax in respect
thereof, provided that the Company shall not be required to
pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any certificate in
a name other than that of the Warrantholder.
(g) Closing of Books. The Company will at no time close its
transfer books against the transfer of the shares of Common
Stock issued or issuable upon the exercise of this Warrant
in any manner which interferes with the timely exercise of
this Warrant.
(h) Definition of Common Stock. As used herein the term "Common
Stock" shall mean and include the 20,000,000 shares of
common stock, par value $.01 per share, as authorized on the
date hereof and also any capital stock of any class of the
Company hereinafter authorized which shall not be limited to
a fixed sum or percentage in respect of the rights of the
holders thereof to participate in dividends or in the
distribution of assets upon the voluntary or involuntary
liquidation, dissolution or winding up of the Company;
provided, however, that the shares purchasable pursuant to
this Warrant shall include only shares designated as Common
Stock, $.01 par value, of the Company on the date hereof, or
shares of any class or classes resulting from any
reclassification or reclassifications thereof and in case at
any time there shall be more than one such resulting class,
the shares of each class then so issuable shall be
substantially in the proportion which the total number of
shares of such class resulting from all such
reclassifications bears to the total number of shares of all
such classes resulting from all such reclassifications.
Section 4. Notices of Record Dates. In the event of:
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the
holders thereof who are entitled to receive any dividend or
other distribution (other than cash dividends out of earned
surplus), or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any
other securities or property, or to receive any right to
sell shares of stock of any class or any other right; or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of
the Company or any transfer of all or substantially all the
assets of the Company to or consolidation or merger of the
Company with or into any other corporation or entity; or
- 6 -
<PAGE>
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, then and in each such event the
Company will give notice to the holder of this Warrant
specifying: (i) the date on which any such record is to be
taken for the purpose of such dividend, distribution or
right and stating the amount and character of such dividend,
distribution or right; and (ii) the date on which any such
reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be
fixed, as of which the holders of record of Common Stock
will be entitled to exchange their shares of Common Stock
for securities or other property deliverable upon such
reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or
winding-up. Such notice shall be given at least 20 days and
not more than 90 days prior to the date therein specified,
and such notice shall state that the action in question or
the record date is subject to (x) the effectiveness of a
registration statement under the Securities Act of 1933 and
applicable state securities laws, or (y) a favorable vote of
stockholders, if either is required.
Section 5. No Stockholder Rights or Liabilities.
(a) Except as set forth in paragraph 5(b), this Warrant shall
not entitle the holder hereof to any voting rights or other
rights as a stockholder of the Company. No provision hereof,
in the absence of affirmative action by the holder hereof to
purchase shares of Common Stock, and no mere enumeration
herein of the rights or privileges of the holder hereof
shall give rise to any liability of such holder for the
Warrant Price or as a stockholder of the Company, whether
such liability is asserted by the Company or by creditors of
the Company.
(b) At any time while this Warrant is outstanding, the Company
shall, prior to making any distribution of its property or
assets to the holders of its Common Stock as a dividend in
liquidation or partial liquidation or by way of return of
capital or any dividend payable out of funds legally
available for dividends under the laws of the State of
Delaware, give to the holder of this Warrant, not less than
20 days prior written notice of any such distribution. If
such holder shall exercise this Warrant on or prior to the
date of such distribution set forth in such notice, such
holder shall be entitled to receive, upon such exercise: (i)
the number of shares of Common Stock receivable pursuant to
such exercise; and (ii) without payment of any additional
consideration, a sum equal to the amount of such property or
assets as would have been payable to the holder hereof as an
owner of the shares described in clause (i) of this
paragraph 5(b) had the holder hereof been the holder of
record of such shares on the record date for such
distribution; and an appropriate provision with respect to
such payment to such holder as described in this paragraph
5(b) shall be made a part of any such distribution.
Section 6. Lost, Stolen, Mutilated or Destroyed Warrant. If this
Warrant is lost, stolen, mutilated or destroyed, the Company may, on such
terms as to indemnity or otherwise as it may in its discretion reasonably
impose (which shall, in the case of a mutilated Warrant, include the surrender
thereof), issue a new Warrant of like denomination and tenor as the Warrant so
lost, stolen, mutilated or destroyed. Any such new Warrant shall constitute an
original contractual obligation of the Company, whether or not the allegedly
lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable
by anyone.
- 7 -
<PAGE>
Section 7. Most Favored Holder. The Company agrees that if a Warrant
is issued to any other person, firm or entity on or before the filing of the
Public Offering on terms more favorable, in whole or in part, than the terms
of this Warrant, that the registered holder shall be entitled to have this
Warrant amended and modified to provide for the same more favorable terms.
Section 8. Transfer of Warrants. The Warrants shall be transferable
only on the Warrant Register upon delivery thereof duly endorsed by the Holder
or by his duly authorized attorney or representative, or accompanied by proper
evidence of succession, assignment or authority to transfer. In all cases of
transfer by an attorney, the original power of attorney , duly approved, or an
official copy thereof, duly certified, shall be deposited with the Company. In
case of transfer by executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited with the Company in its
discretion. Upon any registration of transfer, the Company shall deliver a new
Warrant certificate or certificates to the person entitled thereto.
Notwithstanding the foregoing, the Company shall have no obligation to cause
Warrants to be transferred on the Warrant Register to any person, unless the
Holder of such Warrants shall furnish to the Company evidence of compliance
with the Securities Act of 1933, as amended (the "Act"), in accordance with
the provisions of Section 12 below.
Section 9. Registration Rights.
(a) The Company agrees that at any time, and from time to time,
that it proposes to register any of its Common Stock under
the Act on Form S-1 or any other form of registration
statement then available for the registration under the Act
of securities of the Company and which is appropriate for
the inclusion therein of the shares purchasable upon
exercising this Warrant (the "Warrant Shares"), it will give
written notice to the holder of this Warrant of its
intention so to do and upon the written request of the
holder of this Warrant (which request shall state the
intended method of disposition or sale of such shares) who
intends to exercise or transfer this Warrants upon the
effectiveness of such registration, given within 20 days
after receipt of any such notice from the Company (a "Holder
Request"), the Company will in each instance use all
reasonable efforts to cause all Warrant Shares relating to
this Warrant held by any such requesting holder to be
registered under the Act and registered, qualified or
exempted under any state securities law, all to the extent
reasonably necessary to permit the sale or other disposition
thereof in the manner stated in such request by such holder,
the Company shall use all reasonable efforts to maintain the
effectiveness of such registrations, qualifications and/or
exemptions for a period of at least three (3) years;
provided, however, that the Company shall have the right to
postpone or withdraw any registration effected pursuant to
this Section 9 without obligation to the holder of this
Warrant and the obligation to give such notice and to use
all reasonable efforts shall not apply to any proposal of
the Company to register any of its securities under the Act:
(i) on Form S-8 (or any successor form),
(ii) in connection with any stock option, stock purchase
or other benefit plan,
(iii) for the purpose of offering such securities to
another business entity or the shareholders of such
entity in connection with the acquisition of assets
or shares of capital stock, respectively, of such
entity, or
(iv) more than two years after the date on which the
Warrant is exercised in full.
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<PAGE>
(b) In connection with any offering under this Section 9
involving an underwriting, the Company shall not be required
to include any Warrant Shares in such offering unless the
holders thereof accept the terms of the underwriting as
agreed upon between the Company and the underwriters
selected by it (provided that such terms must be consistent
with this Agreement) and that the holder may withdraw from
the offering without prejudice to its rights hereunder in
the event the holder does not agree to such terms, and then
only in such quantity as will not, in the opinion of the
underwriters, jeopardize the success of the offering by the
Company, provided, however, that the holder may not be
subject to any lockup agreement for a period longer than any
principal shareholder or officer or director of the Company.
If in the opinion of the managing underwriter, the
registration of all, or part of, the Warrant Shares that the
holder have requested to be in included would materially and
adversely affect such public offering, then the Company
shall be required to include in the underwriting only that
number of warrant Shares, if any, that the managing
underwriter believes may be sold without causing such
adverse effect. If the number of Warrant Shares to be
included in the underwriting in accordance with the
foregoing is less than the total number of shares that the
holders of Warrant Shares have requested to be included,
then the holders of Warrant Shares who have requested
registration and other holders of shares of Common Stock
entitled to include shares of Common Stock in such
registration shall participate in the underwriting pro rata
based upon their total ownership of shares of Common Stock
of the Company (giving effect tot he exercise of the
Warrant, if no previously exercised, and conversion into
Common Stock of all securities convertible there into). If
any holder would thus be entitled to include more shares
than such holder requested to be registered, the excess
shall be allocated among other requesting holders pro rata
based upon their total ownership of shares of Common Stock
registrable in the offering.
Section 10. Notices. Any notice or other communication to be given
hereunder shall be in writing and mailed or telecopied to such party at the
address or number set forth below:
If to the Company: Worldwide Wireless, Inc.
P.O. Box 470
Ascutney, VT 05030
Attention: Mr. Scott Wendel
Telephone No.: (802) 674-2206
Telecopier No.: (802) 674-2751
If to the Holder: To the address set forth in the
records of the Company
or to such other person, address or number as the party entitled to such
notice or communication shall have specified by notice to the other party
given in accordance with the provisions of this Section. Any such notice or
other communication shall be deemed given: (i) if mailed, when deposited in
the mail, properly addressed and with postage prepaid; or (ii) if sent by
telecopy, when transmitted.
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<PAGE>
Section 11. Governing Law. This Warrant shall be governed by and
construed in accordance with the laws of the State of Delaware, without giving
effect to such jurisdiction's principles of conflict of laws.
IN WITNESS WHEREOF, the duly authorized agent of WORLDWIDE WIRELESS,
INC. has executed this Warrant as of the 1st day of May, 1997.
WORLDWIDE WIRELESS, INC.
By: /s/
------------------------------------
Chief Executive Officer
- 10 -
<PAGE>
SUBSCRIPTION FORM TO BE EXECUTED
UPON EXERCISE OF THE WARRANT
Date: ____________
To: Worldwide Wireless, Inc.
The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to subscribe for and purchase _____ shares of Common
Stock covered by such Warrant, and herewith tenders __________ in full payment
of the purchase price for such shares.
Name of Holder:
____________________________________________
Address: __________________________
__________________________
__________________________
- 11 -
<PAGE>
ASSIGMENT OF OPTION
Ther undersigned hereby transfers, assigns and covneys to Elizabeth
Valente his rights to acquire 25,000 shares of the stock of Worldwide
Wireless, Inc. pursuant to a non-qualified stock option issue to the
undersigned as of November 10, 1997.
--------------------------------------------
Alan R. Ackerman
CONSENT
On behalf of Worldwide Wireless, Inc. the undersigned hereby consents
to the above described assignment.
Dated: As of November 10, 1997
WORLDWIDE WIRELESS, INC.
By:__________________________________________
Scott A. Wendel, Chief Executive Officer
<PAGE>
EXHIBIT 10.22
WORLDWIDE WIRELESS, INC.
Form of Warrants Outstanding (Form B)
Date (as of) No. of Shares
------------ -------------
8/29/96 37,500
8/29/96 7,500
8/29/96 15,000
TOTAL: 60,000
<PAGE>
EXHIBIT 10.22
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, MAY NOT BE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM
UNDER SUCH ACT, EXCEPT UNDER CIRCUMSTANCES WHERE NEITHER SUCH REGISTRATION NOR
SUCH AN EXEMPTION IS REQUIRED BY LAW, AND ARE SUBJECT TO THE RESTRICTIONS ON
TRANSFER SET FORTH IN SECTION 3 OF THIS WARRANT.
WORLDWIDE WIRELESS, INC.
WARRANT
to Purchase 7,500 shares of Common Stock
Dated as of: August 29, 1996
Worldwide Wireless, Inc., a Delaware corporation with offices located
at 6 East 43rd Street, New York, New York 10017 (the "Company"), for value
received, hereby certifies that ___________________, or registered assigns, is
entitled to purchase from the Company, during the two-year period commencing
on the date hereof, 7,500 duly authorized, validly issued, fully paid and
nonassessable shares of common stock of the Company, par value $.01 per share
(the "Common Stock"), at a purchase price of $3.00 per share (the "Initial
Warrant Price"), subject to the terms, conditions and adjustments set forth
below in this Warrant.
This Warrant is one of the warrants to purchase Common Stock (the
"Warrants") issued by the Company in connection with the issuance and sale by
the Company in a private placement to accredited investors (the "Private
Placement") of $330,000 principal amount of 10% promissory notes of the
Company and Warrants to purchase 82,500 shares of Common Stock.
Certain capitalized terms used in this Warrant are defined in Section
6.
1. Exercise of Warrant.
1.1 Manner of Exercise. This Warrant may be exercised by the holder
hereof, from time to time in whole or in part, during normal business hours on
any business day by surrender of this Warrant to the Company at the office of
the Company listed above, accompanied by a subscription in substantially the
form annexed hereto duly executed by such holder and by payment, in cash or
certified or official bank check payable to the order of the Company (or by
any combination such methods) in the amount obtained by multiplying (a) the
number of shares of Common Stock (without giving effect to any adjustment
therein) designated in such subscription by (b) the Warrant Price.
1.2 When Exercise Effective. Each exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
business day on which this Warrant shall have been surrendered to the Company
as provided in Section 1.1; and at such time the Person or Persons in whose
name or names any certificate or certificates for shares of Common Stock shall
be issuable upon such exercise as provided in Section 1.3 shall be deemed to
have become the holder or holders of record thereof.
1.3 Delivery of Stock Certificates, etc. As soon as practicable after
the exercise of this Warrant, in whole or in part, and in any event within ten
business days thereafter, the Company at its expense
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<PAGE>
(including the payment by it of any applicable issuance taxes) will cause to
be issued in the name of and delivered to the holder hereof or, subject to
Section 3, to such Person as such holder (upon payment by such holder of any
applicable transfer taxes) may direct,
(a) a certificate or certificates of the number of duly
authorized, validly issued, fully paid and nonassessable
shares of Common Stock to which such holder shall be
entitled upon such exercise, as the case may be, plus, in
lieu of any fractional share to which such holder would
otherwise be entitled upon such exercise, cash in an amount
equal to the same fraction of the Market Price per share on
the business day next preceding the date of such exercise,
and
(b) in case such exercise is only in part, a new Warrant or
Warrants of like tenor, calling in the aggregate on the face
or faces thereof for issuance of the number of shares of
Common Stock equal (without giving effect to any adjustment
therein) to the number of such shares called for on the face
of this Warrant minus the number of such shares so
designated by such holder upon such exercise as provided in
Section 1.1.
2. No Dilution or Impairment. The Company will not, by amendment of
its certificate of incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issuance or sale of
securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in carrying out all of such terms and in taking of
all such reasonable action as may be necessary or appropriate in order to
protect the rights of the holder of a Warrant against dilution or other
impairment. Without limiting the generality of the foregoing, the Company (a)
will not permit the par value of any shares of stock receivable upon the
exercise of this Warrant to exceed the amount payable therefor upon such
exercise, (b) will take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of stock on the exercise of this Warrant from time to
time outstanding, (c) will not take any action which results in any adjustment
of the Warrant Price if the total number of shares of Common Stock issuable
after such action, would exceed the total number of shares of Common Stock
then authorized by the Company's certificate of incorporation and available
for the purpose of issuance upon such exercise, and (d) will not issue any
capital stock of any class which is preferred as to dividends or as to the
distribution of assets upon voluntary or involuntary dissolution, liquidation
or winding-up, unless the rights of the holders thereof shall be limited to a
fixed sum or percentage of par value in respect of participation in dividends
and in any such distribution of assets.
3. Restrictions on Transfer.
3.1 Restrictive Legends. Except as otherwise permitted by this
Section 3, this Warrant and each Warrant issued upon direct or indirect
transfer or in substitution for this Warrant pursuant to Section 6 shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM, UNDER SUCH ACT, EXCEPT UNDER
CIRCUMSTANCES WHERE NEITHER SUCH REGISTRATION NOR SUCH AN EXEMPTION
IS REQUIRED BY LAW; AND ARE SUBJECT TO THE RESTRICTIONS ON TRANSFER
SET FORTH IN SECTION 3 OF THIS WARRANT."
- 2 -
<PAGE>
Except as otherwise permitted by this Section 3, each certificate for Common
Stock issued upon the exercise of this Warrant, and each certificate issued
upon the direct or indirect transfer of any such Common Stock, shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SUCH ACT, EXCEPT UNDER CIRCUMSTANCES WHERE NEITHER
SUCH REGISTRATION NOR SUCH AN EXEMPTION IS REQUIRED BY LAW."
3.2 Notice of Proposed Transfer; Opinions of Counsel.
(a) Subject to the provisions of clause (b) of this Section
3.2, prior to any transfer of any Restricted Securities (as
defined in Rule 144 of the Securities Act) which are not
registered under an effective registration statement under
the Securities Act) other than a transfer pursuant to Rule
144, Rule 144A or any comparable rule under such Act), the
holder thereof shall designate counsel for the holder in
connection with such disposition and such holder will be
entitled to transfer such Restricted Securities free of the
restrictions imposed by this Section 3 upon the issuance to
the Company of the opinion of such counsel, provided that
such opinion is acceptable to the Company and its counsel
and to the effect that the proposed distribution would not
be in violation of the Securities Act or any applicable
state securities or blue sky law. Each certificate and/or
Warrant, if any, issued upon or in connection with any such
transfer shall bear the applicable restrictive legend set
forth in Section 3.1 of this Section 3, unless in the
opinion of such counsel such legend is no longer required
to ensure compliance with the Securities Act or applicable
state securities or blue sky laws.
(b) The Purchaser (or its nominee) or any institutional
investor (or its nominee) which shall be the holder thereof
shall be permitted to transfer any Restricted Securities to
one or more institutional investor transferees, provided
that (i) each such transferee represents in writing that it
is acquiring such Restricted Securities for investment and
not with a view to the distribution thereof (subject,
however, to any requirement of law that the disposition
thereof shall at all times be within the control of such
transferee) and (ii) each such transferee agrees in writing
to be bound by all the restrictions on transfer of such
Restricted Securities contained in this Section 3.
3.3 Termination of Restrictions. The restrictions imposed by this
Section 3 upon the transferability of Restricted Securities shall ceased and
terminate as to any particular Restricted Securities (a) when such securities
shall have been effectively registered under the Securities Act and disposed
of in accordance with the registration statement covering such Restricted
Securities, or (b) when, in the opinions of both counsel for the holder
thereof and counsel for the Company, such restrictions are no longer required
in order to insure compliance with the Securities Act.
4. Reservation of Stock, etc. The Company will at all times reserve
and keep available, solely for issuance and delivery upon the exercise of the
Warrants, the number of shares of Common Stock from time to time issuable upon
the exercise of all Warrants at the time outstanding. All such securities
shall be duly authorized and, when issued upon such exercise or purchase, as
the case may be, shall be validly
- 3 -
<PAGE>
issued and, in the case of shares, fully paid and nonassessable with no
liability on the part of the holders thereof.
5. Listing on Securities Exchange. At any time, if at all, after any
of the Common Stock is registered under the Exchange Act, the Company will, at
its expense, use reasonable efforts to obtain and maintain the approval for
listing on a national securities exchange or NASDAQ upon official notice of
issuance of all shares of Common Stock receivable upon the exercise of the
Warrants at the time outstanding and to maintain the listing of such shares
after their issuance on any national securities exchange or NASDAQ upon which
other shares of Common Stock are traded or quoted.
6. Ownership, Transfer and Substitution of Warrants.
6.1 Ownership of Warrants. The Company may treat the Person in whose
name any Warrant is registered on the register kept at the principal office of
the Company as the owner and holder thereof for all purposes, notwithstanding
any notice to the contrary, except that, if and when any Warrant is properly
assigned in blank, the Company may (but shall not be obligated to) treat the
bearer thereof as the owner of such Warrant for all purposes, notwithstanding
any notice to the contrary. Subject to Section 3, a Warrant, if properly
assigned, may be exercised by a new holder without first having a new Warrant
issued.
6.2 Officer; Transfer and Exchange of Warrants.
(a) The Company may designate from time to time by notice to
the registered holder of this warrant an office or agency
of the Company (which may be an agency maintained at a
bank) in the Borough of Manhattan in the State of New York
where such notices, presentations and demands in respect of
this Warrant may be made in lieu of the Company's office in
New York City.
(b) Upon the surrender of any Warrant, properly endorsed, for
registration of transfer or for exchange at the principal
office of the Company or any other office or agency of the
Company designated to Section 6.2(a), the Company will
(subject to compliance with Section 3, if applicable)
execute and deliver to or upon the order of the holder
thereof a new Warrant or Warrants of like tenor, in the
name of such holder or as such holder (upon payment by such
holder of any applicable transfer taxes) may direct,
calling in the aggregate on the face or faces thereof for
the number of shares of Common Stock called for on the face
or faces of the Warrant or Warrants so surrendered.
6.3 Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
any Warrant (which, in the case of the Purchaser or any institutional holder
of a Warrant, may be a written statement as to such loss, theft, destruction
or mutilation) and, (a) in the case of any such loss, theft or destruction of
any Warrant held by (i) a Person other than the Purchaser or any institutional
investor, upon delivery of indemnity satisfactory to the Company in form and
amount and (ii) the Purchaser or any institutional investor, upon delivery of
such holder's unsecured written agreement to indemnify the Company or (b) in
the case of any such mutilation, upon surrender of such Warrant for
cancellation at the principal officer of the Company or any other office or
agency of the Company designated pursuant to Section 6.2(a), the Company at
its expense will execute and deliver, in lieu thereof, a new Warrant of like
tenor.
- 4 -
<PAGE>
7. Definitions. As used herein, unless the context otherwise requires
the following terms have the following respective meanings:
Commission: shall mean the Securities and Exchange Commission or any
other Federal agency at the time administering the Securities Act.
Exchange Act: shall mean the Securities Exchange Act of 1934, or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
Market Price: shall mean, per share of Common Stock, on any date
specified herein, (a) the last sale price on such date of such class of Common
Stock or, if no such sale takes place on such date, the average of the closing
bid and asked prices thereof on such date, in each case as officially reported
on the principal national securities exchange on which such class of the
Common Stock is then listed or admitted to trading, or (b) if the Common Stock
is not then listed or admitted to trading on any national securities exchange
but is designated as a national market system security by the NASD, the last
trading price of the Common Stock on such date, or (c) if there shall have
been no trading on such date or if such class of the Common Stock is not so
designated, the average of the reported closing bid and asked prices of the
Common Stock on such date as shown by NASDAQ and reported by any member firm
of the New York Stock Exchange selected by the Company, or (d) if neither
clause (a), (b) nor (c) of this definition is applicable, a price per share
thereof equal to the higher of (x) the book value thereof as of the last day
of any month ending within sixty days preceding the date as of which the
determination is to be made and (y) the fair value thereof as of the date
which is within fifteen days of the date as of which the determination is to
be made, in each case, as determined by the Board of Directors of the Company
on the basis of a written opinion furnished to such Board (with a copy to each
holder of a Warrant) of an investment banking firm selected by such Board and
acceptable to the holder of the Warrant.
NASD: shall mean the National Association of Securities Dealers.
NASDAQ: shall mean the National Association of Securities Dealers
Automated Quotation System.
Person: shall mean a corporation, an association, a partnership, an
organization or business, an individual, a government or political subdivision
thereof or a governmental agency.
8. Remedies. The company stipulated that the remedies at law of the
holder of this Warrant in the event of any default or threatened default by
the Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that, to the extent permitted by
applicable law, such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
9. No Rights or Liabilities as Stockholder. Nothing contained in this
Warrant shall be construed as conferring upon the holder hereof any rights as
a stockholder of the Company or as imposing any obligation on such holder to
purchase any securities or as imposing any liabilities on such holder as a
stockholder of the Company, whether such obligation or liabilities are
asserted by the Company or by creditors of the Company.
10. Notices. All notices and other communications provided for herein
shall be delivered by first class mail, postage prepaid or by overnight
courier, addressed (a) if to any holder of any Warrant, at the
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<PAGE>
registered address of such holder as set forth in the register kept by the
Company, or (b) if to the Company, to the attention of its President at its
office referred to in the opening paragraph hereof or at the address of such
other office of the Company as the Company shall have furnished to each holder
of this Warrant in writing; provided, however, that the exercise of any
Warrant shall be effective in the manner provided in Section 1.
11. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by
the party against which enforcement of such change, waiver, discharge or
termination is sought. Any provision of this Warrant which shall be prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, the Company waives any provision of law which
shall render any provision hereof prohibited or unenforceable in any respect.
The headings of this Warrant are inserted for convenience only and shall not
be deemed to constitute a part hereof.
12. Governing Law. This Warrant shall be governed by, and construed
in accordance with, the laws of the State of New York applicable to contracts
made and to be performed in the State of New York.
WORLDWIDE WIRELESS, INC.
By:
-----------------------------------
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<PAGE>
EXHIBIT 10.23
WORLDWIDE WIRELESS, INC.
Form of Warrants Outstanding (Form C)
Date (as of) No. of Shares
------------ -------------
8/29/96 10,000
<PAGE>
EXHIBIT 10.23
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, MAY NOT BE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM
UNDER SUCH ACT, EXCEPT UNDER CIRCUMSTANCES WHERE NEITHER SUCH REGISTRATION NOR
SUCH AN EXEMPTION IS REQUIRED BY LAW, AND ARE SUBJECT TO THE RESTRICTIONS ON
TRANSFER SET FORTH IN SECTION 3 OF THIS WARRANT.
WORLDWIDE WIRELESS, INC.
WARRANT
to Purchase 10,000 shares of Common Stock
Dated as of: August 29, 1996
Worldwide Wireless, Inc., a Delaware corporation with offices located
at 6 East 43rd Street, New York, New York 10017 (the "Company"), for value
received, hereby certifies that _______________, or registered assigns, is
entitled to purchase from the Company, during the two-year period commencing
on the date hereof, 10,000 duly authorized, validly issued, fully paid and
nonassessable shares of common stock of the Company, par value $.01 per share
(the "Common Stock"), at a purchase price of $3.00 per share (the "Initial
Warrant Price"), subject to the terms, conditions and adjustments set forth
below in this Warrant.
Certain capitalized terms used in this Warrant are defined in Section
6.
1. Exercise of Warrant.
1.1 Manner of Exercise. This Warrant may be exercised by the holder
hereof, from time to time in whole or in part, during normal business hours on
any business day by surrender of this Warrant to the Company at the office of
the Company listed above, accompanied by a subscription in substantially the
form annexed hereto duly executed by such holder and by payment, in cash or
certified or official bank check payable to the order of the Company (or by
any combination such methods) in the amount obtained by multiplying (a) the
number of shares of Common Stock (without giving effect to any adjustment
therein) designated in such subscription by (b) the Warrant Price.
1.2 When Exercise Effective. Each exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
business day on which this Warrant shall have been surrendered to the Company
as provided in Section 1.1; and at such time the Person or Persons in whose
name or names any certificate or certificates for shares of Common Stock shall
be issuable upon such exercise as provided in Section 1.3 shall be deemed to
have become the holder or holders of record thereof.
1.3 Delivery of Stock Certificates, etc. As soon as practicable after
the exercise of this Warrant, in whole or in part, and in any event within ten
business days thereafter, the Company at its expense (including the payment by
it of any applicable issuance taxes) will cause to be issued in the name of
and delivered to the holder hereof or, subject to Section 3, to such Person as
such holder (upon payment by such holder of any applicable transfer taxes) may
direct,
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<PAGE>
(a) a certificate or certificates of the number of duly
authorized, validly issued, fully paid and nonassessable
shares of Common Stock to which such holder shall be
entitled upon such exercise, as the case may be, plus, in
lieu of any fractional share to which such holder would
otherwise be entitled upon such exercise, cash in an amount
equal to the same fraction of the Market Price per share on
the business day next preceding the date of such exercise,
and
(b) in case such exercise is only in part, a new Warrant or
Warrants of like tenor, calling in the aggregate on the face
or faces thereof for issuance of the number of shares of
Common Stock equal (without giving effect to any adjustment
therein) to the number of such shares called for on the face
of this Warrant minus the number of such shares so
designated by such holder upon such exercise as provided in
Section 1.1.
2. No Dilution or Impairment. The Company will not, by amendment of
its certificate of incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issuance or sale of
securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in carrying out all of such terms and in taking of
all such reasonable action as may be necessary or appropriate in order to
protect the rights of the holder of a Warrant against dilution or other
impairment. Without limiting the generality of the foregoing, the Company (a)
will not permit the par value of any shares of stock receivable upon the
exercise of this Warrant to exceed the amount payable therefor upon such
exercise, (b) will take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of stock on the exercise of this Warrant from time to
time outstanding, (c) will not take any action which results in any adjustment
of the Warrant Price if the total number of shares of Common Stock issuable
after such action, would exceed the total number of shares of Common Stock
then authorized by the Company's certificate of incorporation and available
for the purpose of issuance upon such exercise, and (d) will not issue any
capital stock of any class which is preferred as to dividends or as to the
distribution of assets upon voluntary or involuntary dissolution, liquidation
or winding-up, unless the rights of the holders thereof shall be limited to a
fixed sum or percentage of par value in respect of participation in dividends
and in any such distribution of assets.
3. Restrictions on Transfer.
3.1 Restrictive Legends. Except as otherwise permitted by this
Section 3, this Warrant and each Warrant issued upon direct or indirect
transfer or in substitution for this Warrant pursuant to Section 6 shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM, UNDER SUCH ACT, EXCEPT UNDER
CIRCUMSTANCES WHERE NEITHER SUCH REGISTRATION NOR SUCH AN EXEMPTION
IS REQUIRED BY LAW; AND ARE SUBJECT TO THE RESTRICTIONS ON TRANSFER
SET FORTH IN SECTION 3 OF THIS WARRANT."
Except as otherwise permitted by this Section 3, each certificate for Common
Stock issued upon the exercise of this Warrant, and each certificate issued
upon the direct or indirect transfer of any such Common Stock, shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
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"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SUCH ACT, EXCEPT UNDER CIRCUMSTANCES WHERE NEITHER
SUCH REGISTRATION NOR SUCH AN EXEMPTION IS REQUIRED BY LAW."
3.2 Notice of Proposed Transfer; Opinions of Counsel.
(a) Subject to the provisions of clause (b) of this Section 3.2,
prior to any transfer of any Restricted Securities (as
defined in Rule 144 of the Securities Act) which are not
registered under an effective registration statement under
the Securities Act) other than a transfer pursuant to Rule
144, Rule 144A or any comparable rule under such Act), the
holder thereof shall designate counsel for the holder in
connection with such disposition and such holder will be
entitled to transfer such Restricted Securities free of the
restrictions imposed by this Section 3 upon the issuance to
the Company of the opinion of such counsel, provided that
such opinion is acceptable to the Company and its counsel
and to the effect that the proposed distribution would not
be in violation of the Securities Act or any applicable
state securities or blue sky law. Each certificate and/or
Warrant, if any, issued upon or in connection with any such
transfer shall bear the applicable restrictive legend set
forth in Section 3.1 of this Section 3, unless in the
opinion of such counsel such legend is no longer required to
ensure compliance with the Securities Act or applicable
state securities or blue sky laws.
(b) The Purchaser (or its nominee) or any institutional investor
(or its nominee) which shall be the holder thereof shall be
permitted to transfer any Restricted Securities to one or
more institutional investor transferees, provided that (i)
each such transferee represents in writing that it is
acquiring such Restricted Securities for investment and not
with a view to the distribution thereof (subject, however,
to any requirement of law that the disposition thereof shall
at all times be within the control of such transferee) and
(ii) each such transferee agrees in writing to be bound by
all the restrictions on transfer of such Restricted
Securities contained in this Section 3.
3.3 Termination of Restrictions. The restrictions imposed by this
Section 3 upon the transferability of Restricted Securities shall ceased and
terminate as to any particular Restricted Securities (a) when such securities
shall have been effectively registered under the Securities Act and disposed
of in accordance with the registration statement covering such Restricted
Securities, or (b) when, in the opinions of both counsel for the holder
thereof and counsel for the Company, such restrictions are no longer required
in order to insure compliance with the Securities Act.
4. Reservation of Stock, etc. The Company will at all times reserve
and keep available, solely for issuance and delivery upon the exercise of the
Warrants, the number of shares of Common Stock from time to time issuable upon
the exercise of all Warrants at the time outstanding. All such securities
shall be duly authorized and, when issued upon such exercise or purchase, as
the case may be, shall be validly issued and, in the case of shares, fully
paid and nonassessable with no liability on the part of the holders thereof.
5. Listing on Securities Exchange. At any time, if at all, after any
of the Common Stock is registered under the Exchange Act, the Company will, at
its expense, use reasonable efforts to obtain and
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maintain the approval for listing on a national securities exchange or NASDAQ
upon official notice of issuance of all shares of Common Stock receivable upon
the exercise of the Warrants at the time outstanding and to maintain the
listing of such shares after their issuance on any national securities
exchange or NASDAQ upon which other shares of Common Stock are traded or
quoted.
6. Ownership, Transfer and Substitution of Warrants.
6.1 Ownership of Warrants. The Company may treat the Person in whose
name any Warrant is registered on the register kept at the principal office of
the Company as the owner and holder thereof for all purposes, notwithstanding
any notice to the contrary, except that, if and when any Warrant is properly
assigned in blank, the Company may (but shall not be obligated to) treat the
bearer thereof as the owner of such Warrant for all purposes, notwithstanding
any notice to the contrary. Subject to Section 3, a Warrant, if properly
assigned, may be exercised by a new holder without first having a new Warrant
issued.
6.2 Officer; Transfer and Exchange of Warrants.
(a) The Company may designate from time to time by notice to the
registered holder of this warrant an office or agency of the
Company (which may be an agency maintained at a bank) in the
Borough of Manhattan in the State of New York where such
notices, presentations and demands in respect of this
Warrant may be made in lieu of the Company's office in New
York City.
(b) Upon the surrender of any Warrant, properly endorsed, for
registration of transfer or for exchange at the principal
office of the Company or any other office or agency of the
Company designated to Section 6.2(a), the Company will
(subject to compliance with Section 3, if applicable)
execute and deliver to or upon the order of the holder
thereof a new Warrant or Warrants of like tenor, in the name
of such holder or as such holder (upon payment by such
holder of any applicable transfer taxes) may direct, calling
in the aggregate on the face or faces thereof for the number
of shares of Common Stock called for on the face or faces of
the Warrant or Warrants so surrendered.
6.3 Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
any Warrant (which, in the case of the Purchaser or any institutional holder
of a Warrant, may be a written statement as to such loss, theft, destruction
or mutilation) and, (a) in the case of any such loss, theft or destruction of
any Warrant held by (i) a Person other than the Purchaser or any institutional
investor, upon delivery of indemnity satisfactory to the Company in form and
amount and (ii) the Purchaser or any institutional investor, upon delivery of
such holder's unsecured written agreement to indemnify the Company or (b) in
the case of any such mutilation, upon surrender of such Warrant for
cancellation at the principal officer of the Company or any other office or
agency of the Company designated pursuant to Section 6.2(a), the Company at
its expense will execute and deliver, in lieu thereof, a new Warrant of like
tenor.
7. Definitions. As used herein, unless the context otherwise requires
the following terms have the following respective meanings:
Commission: shall mean the Securities and Exchange Commission or any
other Federal agency at the time administering the Securities Act.
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Exchange Act: shall mean the Securities Exchange Act of 1934, or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
Market Price: shall mean, per share of Common Stock, on any date
specified herein, (a) the last sale price on such date of such class of Common
Stock or, if no such sale takes place on such date, the average of the closing
bid and asked prices thereof on such date, in each case as officially reported
on the principal national securities exchange on which such class of the
Common Stock is then listed or admitted to trading, or (b) if the Common Stock
is not then listed or admitted to trading on any national securities exchange
but is designated as a national market system security by the NASD, the last
trading price of the Common Stock on such date, or (c) if there shall have
been no trading on such date or if such class of the Common Stock is not so
designated, the average of the reported closing bid and asked prices of the
Common Stock on such date as shown by NASDAQ and reported by any member firm
of the New York Stock Exchange selected by the Company, or (d) if neither
clause (a), (b) nor (c) of this definition is applicable, a price per share
thereof equal to the higher of (x) the book value thereof as of the last day
of any month ending within sixty days preceding the date as of which the
determination is to be made and (y) the fair value thereof as of the date
which is within fifteen days of the date as of which the determination is to
be made, in each case, as determined by the Board of Directors of the Company
on the basis of a written opinion furnished to such Board (with a copy to each
holder of a Warrant) of an investment banking firm selected by such Board and
acceptable to the holder of the Warrant.
NASD: shall mean the National Association of Securities Dealers.
NASDAQ: shall mean the National Association of Securities Dealers
Automated Quotation System.
Person: shall mean a corporation, an association, a partnership, an
organization or business, an individual, a government or political subdivision
thereof or a governmental agency.
8. Remedies. The company stipulated that the remedies at law of the
holder of this Warrant in the event of any default or threatened default by
the Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that, to the extent permitted by
applicable law, such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
9. No Rights or Liabilities as Stockholder. Nothing contained in this
Warrant shall be construed as conferring upon the holder hereof any rights as
a stockholder of the Company or as imposing any obligation on such holder to
purchase any securities or as imposing any liabilities on such holder as a
stockholder of the Company, whether such obligation or liabilities are
asserted by the Company or by creditors of the Company.
10. Notices. All notices and other communications provided for herein
shall be delivered by first class mail, postage prepaid or by overnight
courier, addressed (a) if to any holder of any Warrant, at the registered
address of such holder as set forth in the register kept by the Company, or
(b) if to the Company, to the attention of its President at its office
referred to in the opening paragraph hereof or at the address of such other
office of the Company as the Company shall have furnished to each holder of
this Warrant in writing; provided, however, that the exercise of any Warrant
shall be effective in the manner provided in Section 1.
- 5 -
<PAGE>
11. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by
the party against which enforcement of such change, waiver, discharge or
termination is sought. Any provision of this Warrant which shall be prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, the Company waives any provision of law which
shall render any provision hereof prohibited or unenforceable in any respect.
The headings of this Warrant are inserted for convenience only and shall not
be deemed to constitute a part hereof.
12. Governing Law. This Warrant shall be governed by, and construed
in accordance with, the laws of the State of New York applicable to contracts
made and to be performed in the State of New York.
WORLDWIDE WIRELESS, INC.
By:
------------------------------
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EXHIBIT 10.24
WORLDWIDE WIRELESS, INC.
Form of Warrants Outstanding (Form D)
Date (as of) No. of Shares
------------ -------------
08/29/96 15,000
12/19/96 15,000
01/07/97 7,500
TOTAL: 37,500
<PAGE>
EXHIBIT 10.24
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, MAY NOT BE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM
UNDER SUCH ACT, EXCEPT UNDER CIRCUMSTANCES WHERE NEITHER SUCH REGISTRATION NOR
SUCH AN EXEMPTION IS REQUIRED BY LAW, AND ARE SUBJECT TO THE RESTRICTIONS ON
TRANSFER SET FORTH IN SECTION 3 OF THIS WARRANT.
WORLDWIDE WIRELESS, INC.
WARRANT
to Purchase 15,000 shares of Common Stock
Dated as of: December 19, 1996
Worldwide Wireless, Inc., a Delaware corporation with offices located
at 6 East 43rd Street, New York, New York 10017 (the "Company"), for value
received, hereby certifies that _________________, or registered assigns, is
entitled to purchase from the Company, during the two-year period commencing
on the date hereof, 15,000 duly authorized, validly issued, fully paid and
nonassessable shares of common stock of the Company, par value $.01 per share
(the "Common Stock"), at a purchase price of $3.00 per share (the "Initial
Warrant Price"), subject to the terms, conditions and adjustments set forth
below in this Warrant.
This Warrant is one of the warrants to purchase Common Stock (the
"Warrants") issued by the Company in connection with the issuance and sale by
the Company in a private placement to accredited investors (the "Private
Placement") of $300,000 principal amount of 10% promissory notes of the
Company and Warrants to purchase 75,000 shares of Common Stock.
Certain capitalized terms used in this Warrant are defined in Section
6.
1. Exercise of Warrant.
1.1 Manner of Exercise. This Warrant may be exercised by the holder
hereof, from time to time in whole or in part, during normal business hours on
any business day by surrender of this Warrant to the Company at the office of
the Company listed above, accompanied by a subscription in substantially the
form annexed hereto duly executed by such holder and by payment, in cash or
certified or official bank check payable to the order of the Company (or by
any combination such methods) in the amount obtained by multiplying (a) the
number of shares of Common Stock (without giving effect to any adjustment
therein) designated in such subscription by (b) the Warrant Price.
1.2 When Exercise Effective. Each exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
business day on which this Warrant shall have been surrendered to the Company
as provided in Section 1.1; and at such time the Person or Persons in whose
name or names any certificate or certificates for shares of Common Stock shall
be issuable upon such exercise as provided in Section 1.3 shall be deemed to
have become the holder or holders of record thereof.
1.3 Delivery of Stock Certificates, etc. As soon as practicable after
the exercise of this Warrant, in whole or in part, and in any event within ten
business days thereafter, the Company at its expense
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(including the payment by it of any applicable issuance taxes) will cause to
be issued in the name of and delivered to the holder hereof or, subject to
Section 3, to such Person as such holder (upon payment by such holder of any
applicable transfer taxes) may direct,
(a) a certificate or certificates of the number of duly
authorized, validly issued, fully paid and nonassessable
shares of Common Stock to which such holder shall be
entitled upon such exercise, as the case may be, plus, in
lieu of any fractional share to which such holder would
otherwise be entitled upon such exercise, cash in an amount
equal to the same fraction of the Market Price per share on
the business day next preceding the date of such exercise,
and
(b) in case such exercise is only in part, a new Warrant or
Warrants of like tenor, calling in the aggregate on the face
or faces thereof for issuance of the number of shares of
Common Stock equal (without giving effect to any adjustment
therein) to the number of such shares called for on the face
of this Warrant minus the number of such shares so
designated by such holder upon such exercise as provided in
Section 1.1.
2. No Dilution or Impairment. The Company will not, by amendment of
its certificate of incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issuance or sale of
securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in carrying out all of such terms and in taking of
all such reasonable action as may be necessary or appropriate in order to
protect the rights of the holder of a Warrant against dilution or other
impairment. Without limiting the generality of the foregoing, the Company (a)
will not permit the par value of any shares of stock receivable upon the
exercise of this Warrant to exceed the amount payable therefor upon such
exercise, (b) will take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of stock on the exercise of this Warrant from time to
time outstanding, (c) will not take any action which results in any adjustment
of the Warrant Price if the total number of shares of Common Stock issuable
after such action, would exceed the total number of shares of Common Stock
then authorized by the Company's certificate of incorporation and available
for the purpose of issuance upon such exercise, and (d) will not issue any
capital stock of any class which is preferred as to dividends or as to the
distribution of assets upon voluntary or involuntary dissolution, liquidation
or winding-up, unless the rights of the holders thereof shall be limited to a
fixed sum or percentage of par value in respect of participation in dividends
and in any such distribution of assets.
3. Restrictions on Transfer.
3.1 Restrictive Legends. Except as otherwise permitted by this
Section 3, this Warrant and each Warrant issued upon direct or indirect
transfer or in substitution for this Warrant pursuant to Section 6 shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM, UNDER SUCH ACT, EXCEPT UNDER
CIRCUMSTANCES WHERE NEITHER SUCH REGISTRATION NOR SUCH AN EXEMPTION
IS REQUIRED BY LAW; AND ARE SUBJECT TO THE RESTRICTIONS ON TRANSFER
SET FORTH IN SECTION 3 OF THIS WARRANT."
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<PAGE>
Except as otherwise permitted by this Section 3, each certificate for Common
Stock issued upon the exercise of this Warrant, and each certificate issued
upon the direct or indirect transfer of any such Common Stock, shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SUCH ACT, EXCEPT UNDER CIRCUMSTANCES WHERE NEITHER
SUCH REGISTRATION NOR SUCH AN EXEMPTION IS REQUIRED BY LAW."
3.2 Notice of Proposed Transfer; Opinions of Counsel.
(a) Subject to the provisions of clause (b) of this Section 3.2,
prior to any transfer of any Restricted Securities (as
defined in Rule 144 of the Securities Act) which are not
registered under an effective registration statement under
the Securities Act) other than a transfer pursuant to Rule
144, Rule 144A or any comparable rule under such Act), the
holder thereof shall designate counsel for the holder in
connection with such disposition and such holder will be
entitled to transfer such Restricted Securities free of the
restrictions imposed by this Section 3 upon the issuance to
the Company of the opinion of such counsel, provided that
such opinion is acceptable to the Company and its counsel
and to the effect that the proposed distribution would not
be in violation of the Securities Act or any applicable
state securities or blue sky law. Each certificate and/or
Warrant, if any, issued upon or in connection with any such
transfer shall bear the applicable restrictive legend set
forth in Section 3.1 of this Section 3, unless in the
opinion of such counsel such legend is no longer required to
ensure compliance with the Securities Act or applicable
state securities or blue sky laws.
(b) The Purchaser (or its nominee) or any institutional investor
(or its nominee) which shall be the holder thereof shall be
permitted to transfer any Restricted Securities to one or
more institutional investor transferees, provided that (i)
each such transferee represents in writing that it is
acquiring such Restricted Securities for investment and not
with a view to the distribution thereof (subject, however,
to any requirement of law that the disposition thereof shall
at all times be within the control of such transferee) and
(ii) each such transferee agrees in writing to be bound by
all the restrictions on transfer of such Restricted
Securities contained in this Section 3.
3.3 Termination of Restrictions. The restrictions imposed by this
Section 3 upon the transferability of Restricted Securities shall ceased and
terminate as to any particular Restricted Securities (a) when such securities
shall have been effectively registered under the Securities Act and disposed
of in accordance with the registration statement covering such Restricted
Securities, or (b) when, in the opinions of both counsel for the holder
thereof and counsel for the Company, such restrictions are no longer required
in order to insure compliance with the Securities Act.
4. Reservation of Stock, etc. The Company will at all times reserve
and keep available, solely for issuance and delivery upon the exercise of the
Warrants, the number of shares of Common Stock from time to time issuable upon
the exercise of all Warrants at the time outstanding. All such securities
shall be duly authorized and, when issued upon such exercise or purchase, as
the case may be, shall be validly
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<PAGE>
issued and, in the case of shares, fully paid and nonassessable with no
liability on the part of the holders thereof.
5. Listing on Securities Exchange. At any time, if at all, after any
of the Common Stock is registered under the Exchange Act, the Company will, at
its expense, use reasonable efforts to obtain and maintain the approval for
listing on a national securities exchange or NASDAQ upon official notice of
issuance of all shares of Common Stock receivable upon the exercise of the
Warrants at the time outstanding and to maintain the listing of such shares
after their issuance on any national securities exchange or NASDAQ upon which
other shares of Common Stock are traded or quoted.
6. Ownership, Transfer and Substitution of Warrants.
6.1 Ownership of Warrants. The Company may treat the Person in whose
name any Warrant is registered on the register kept at the principal office of
the Company as the owner and holder thereof for all purposes, notwithstanding
any notice to the contrary, except that, if and when any Warrant is properly
assigned in blank, the Company may (but shall not be obligated to) treat the
bearer thereof as the owner of such Warrant for all purposes, notwithstanding
any notice to the contrary. Subject to Section 3, a Warrant, if properly
assigned, may be exercised by a new holder without first having a new Warrant
issued.
6.2 Officer; Transfer and Exchange of Warrants.
(a) The Company may designate from time to time by notice to the
registered holder of this warrant an office or agency of the
Company (which may be an agency maintained at a bank) in the
Borough of Manhattan in the State of New York where such
notices, presentations and demands in respect of this
Warrant may be made in lieu of the Company's office in New
York City.
(b) Upon the surrender of any Warrant, properly endorsed, for
registration of transfer or for exchange at the principal
office of the Company or any other office or agency of the
Company designated to Section 6.2(a), the Company will
(subject to compliance with Section 3, if applicable)
execute and deliver to or upon the order of the holder
thereof a new Warrant or Warrants of like tenor, in the name
of such holder or as such holder (upon payment by such
holder of any applicable transfer taxes) may direct, calling
in the aggregate on the face or faces thereof for the number
of shares of Common Stock called for on the face or faces of
the Warrant or Warrants so surrendered.
6.3 Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
any Warrant (which, in the case of the Purchaser or any institutional holder
of a Warrant, may be a written statement as to such loss, theft, destruction
or mutilation) and, (a) in the case of any such loss, theft or destruction of
any Warrant held by (i) a Person other than the Purchaser or any institutional
investor, upon delivery of indemnity satisfactory to the Company in form and
amount and (ii) the Purchaser or any institutional investor, upon delivery of
such holder's unsecured written agreement to indemnify the Company or (b) in
the case of any such mutilation, upon surrender of such Warrant for
cancellation at the principal officer of the Company or any other office or
agency of the Company designated pursuant to Section 6.2(a), the Company at
its expense will execute and deliver, in lieu thereof, a new Warrant of like
tenor.
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<PAGE>
7. Definitions. As used herein, unless the context otherwise requires
the following terms have the following respective meanings:
Commission: shall mean the Securities and Exchange Commission or any
other Federal agency at the time administering the Securities Act.
Exchange Act: shall mean the Securities Exchange Act of 1934, or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
Market Price: shall mean, per share of Common Stock, on any date
specified herein, (a) the last sale price on such date of such class of Common
Stock or, if no such sale takes place on such date, the average of the closing
bid and asked prices thereof on such date, in each case as officially reported
on the principal national securities exchange on which such class of the
Common Stock is then listed or admitted to trading, or (b) if the Common Stock
is not then listed or admitted to trading on any national securities exchange
but is designated as a national market system security by the NASD, the last
trading price of the Common Stock on such date, or (c) if there shall have
been no trading on such date or if such class of the Common Stock is not so
designated, the average of the reported closing bid and asked prices of the
Common Stock on such date as shown by NASDAQ and reported by any member firm
of the New York Stock Exchange selected by the Company, or (d) if neither
clause (a), (b) nor (c) of this definition is applicable, a price per share
thereof equal to the higher of (x) the book value thereof as of the last day
of any month ending within sixty days preceding the date as of which the
determination is to be made and (y) the fair value thereof as of the date
which is within fifteen days of the date as of which the determination is to
be made, in each case, as determined by the Board of Directors of the Company
on the basis of a written opinion furnished to such Board (with a copy to each
holder of a Warrant) of an investment banking firm selected by such Board and
acceptable to the holder of the Warrant.
NASD: shall mean the National Association of Securities Dealers.
NASDAQ: shall mean the National Association of Securities Dealers
Automated Quotation System.
Person: shall mean a corporation, an association, a partnership, an
organization or business, an individual, a government or political subdivision
thereof or a governmental agency.
8. Remedies. The company stipulated that the remedies at law of the
holder of this Warrant in the event of any default or threatened default by
the Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that, to the extent permitted by
applicable law, such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
9. No Rights or Liabilities as Stockholder. Nothing contained in this
Warrant shall be construed as conferring upon the holder hereof any rights as
a stockholder of the Company or as imposing any obligation on such holder to
purchase any securities or as imposing any liabilities on such holder as a
stockholder of the Company, whether such obligation or liabilities are
asserted by the Company or by creditors of the Company.
10. Notices. All notices and other communications provided for herein
shall be delivered by first class mail, postage prepaid or by overnight
courier, addressed (a) if to any holder of any Warrant, at the
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<PAGE>
registered address of such holder as set forth in the register kept by the
Company, or (b) if to the Company, to the attention of its President at its
office referred to in the opening paragraph hereof or at the address of such
other office of the Company as the Company shall have furnished to each holder
of this Warrant in writing; provided, however, that the exercise of any
Warrant shall be effective in the manner provided in Section 1.
11. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by
the party against which enforcement of such change, waiver, discharge or
termination is sought. Any provision of this Warrant which shall be prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, the Company waives any provision of law which
shall render any provision hereof prohibited or unenforceable in any respect.
The headings of this Warrant are inserted for convenience only and shall not
be deemed to constitute a part hereof.
12. Governing Law. This Warrant shall be governed by, and construed
in accordance with, the laws of the State of New York applicable to contracts
made and to be performed in the State of New York.
WORLDWIDE WIRELESS, INC.
By:
-------------------------------
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<PAGE>
EXHIBIT 10.25
WORLDWIDE WIRELESS, INC.
Form of Warrants Outstanding (Form E)
Date
(as of) Exercise Price No. of Shares
------- -------------- -------------
4/7/97 $3.00 per share 25,000
4/__/97 $3.00 per share 1,250
5/1/97 50% of public offering 62,000
price
6/9/97 $3.00 per share 20,000
6/9/97 $3.50 per share 5,000
6/9/97 $3.00 per share 20,000
7/21/97 $3.00 per share 15,000
TOTAL: 148,250
<PAGE>
EXHIBIT 10.25
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 NOR UNDER APPLICABLE STATE SECURITIES LAWS
AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS IT HAS BEEN REGISTERED UNDER SUCH LAWS OR AN
EXEMPTION FROM REGISTRATION IS AVAILABLE
As of July 21, 1997
STOCK PURCHASE WARRANT
To Subscribe for and Purchase Common Stock of
Worldwide Wireless, Inc.
THIS CERTIFIES that, for value received, ________________, or his or
her registered assigns, is entitled, subject to the terms of Section 1 hereof,
to subscribe for and purchase from WORLDWIDE WIRELESS, INC., a Delaware
corporation (hereinafter called the "Company"), at $3.00 issued pursuant to a
public offering (the "Public Offering") or half the offering price, pursuant
to an effective Registration Statement filed with the Securities and Exchange
Commission (such exercise price, as from time to time to be adjusted as
hereinafter provided, being hereinafter called the "Warrant Price") as such
initial public offering price is set forth on the cover page of the final
prospectus to such Public Offering. This Warrant may be exercised, in whole or
in part,, at any time Monday through Friday, 9:00 a.m. through 4:00 p.m., EST,
after the end of the thirteenth (13th) month but not later than the end of the
thirty sixth (36th) month following the month during which the Company
receives payment of the last proceeds from the sale of its common stock
pursuant to the Public Offering, up to 15,000 fully paid, nonassessable shares
of Common Stock, $.01 par value, of the Company, subject, however, to the
provisions and upon the terms and conditions hereinafter set forth, including,
without limitation, the provisions of Section 1, Section 3 and Section 4
hereof and provided, however, that this Warrant shall become exercisable on
January 1, 1998 and shall expire on January 1, 2001 in the event the Public
Offering has not been declared effective by the Securities and Exchange
Commission on or before December 31, 1997 in which event it shall be priced
pursuant to Sections 1(c)(i)(d) and 1(c)(ii) herein.
Section a. Exercise of Warrant.
i. This Warrant may be exercised by the holder hereof, in whole
or in part (but not as to a fractional share of Common
Stock), by the completion of the subscription form attached
hereto and by the surrender of this Warrant (properly
endorsed) at the office of the Company in New York, New York
(or at such other agency or office of the Company in the
United States as it may designate by notice in writing to
the holder hereof at the address of the holder hereof
appearing on the books of the Company). Payment for said
shares may be made either by (i) cash or check payable to
the Company, accompanying the notice of the exercise, or
(ii) by surrendering to the Company shares of Common Stock
having a Market Value equal to the Warrant Price for shares
being purchased upon exercise, in each case accompanied by
the notice of exercise. In the event of any exercise of the
rights represented
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<PAGE>
by this Warrant, a certificate or certificates for the
shares of Common Stock so purchased, registered in the name
of the holder hereof, shall be delivered to the holder
hereof within a reasonable time, not exceeding five business
days, after the rights represented by this Warrant shall
have been so exercised; and, unless this Warrant has expired
or been exercised in full, a new Warrant representing the
number of shares (except a remaining fractional share), if
any, with respect to which this Warrant shall not then have
been exercised shall also be issued to the holder hereof
within such time. With respect to any such exercise, the
holder hereof shall for all purposes be deemed to have
become the holder of record of the number of shares of
Common Stock evidenced by such certificate or certificates
from the date on which this Warrant was surrendered and
payment of the Warrant Price was made irrespective of the
date of delivery of such certificate, except that, if the
date of such surrender and payment is a date on which the
stock transfer books of the Company are closed, such person
shall be deemed to have become the holder of such shares at
the close of business on the next succeeding date on which
the stock transfer books are open. No fractional shares
shall be issued upon exercise of this Warrant. If any
fractional interest in a share of Common Stock would, except
for the provisions of this Section 1, be delivered upon any
such exercise, the Company, in lieu of delivering the
fractional share thereof, shall pay to the holder hereof an
amount in cash equal to the current market price of such
frac tional interest as determined in good faith by the
Board of Directors of the Company. Unless the exercise of
the Warrants shall occur when the shares have not been
registered pursuant to the Public Offering, the shares shall
bear a restrictive legend in substantially the following
form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 ("THE ACT") AND
ARE "RESTRICTED SECURITIES" AS THAT TERM IS DEFINED IN RULE
144 UNDER THE ACT. THE SHARES MAY NOT BE OFFERED FOR SALE,
SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR PURSUANT
TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT, THE
AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE
SATISFACTION OF THE COMPANY."
ii. In lieu of exercising this Warrant pursuant to Paragraph
1(a) hereof, the holder may elect to receive shares of
Common Stock equal to the value of this Warrant determined
in the manner described below (or any portion thereof
remaining unexercised) upon delivery of this Warrant at the
offices of the Company or at such other address as the
Company may designate by notice in writing to the registered
holder hereof with the Notice of Cashless Exercise Form to
be provided on request by the Company duly executed. In such
event, the Company shall issue to the holder a number of
shares of the Company's Common Stock computed using the
following formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Common Stock to be issued
to the holder.
Y = the number of shares of Common Stock purchasable under
this Warrant (at the date of such calculation).
A = the Market Value of the Company's Common Stock on the
business day immediately preceding the day on which the
Notice of Cashless Exercise is received by the Company.
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<PAGE>
B = Warrant Price (as adjusted to the date of such
calculation).
iii. For purposes of this Warrant:
(1) the Market Value of a share of Common Stock or
other equity security of the Company on any date
shall be equal to:
(a) the closing sale price per share (or other
unit in which such security is
denominated) as published by a national
securities exchange on which shares of
Common Stock (or other units of the
security) are traded (an "Exchange") on
such date or, if there is no sale of
Common Stock (or other units) on such
date, the average of the bid and asked
prices on such exchange at the close of
trading on such date, or
(b) if shares of Common Stock (or other unit)
are not listed on a national securities
exchange on such date, the closing price
per share (or other unit) as published on
the National Association of Securities
Dealers Automatic Quotation System
("NASDAQ") National Market System if the
shares (or other units) are quoted on such
system on such date, or
(c) the average of the bid and asked prices in
the over-the-counter market at the close
of trading on such date if the shares (or
other units) are not traded on an exchange
or listed on the NASDAQ National Market
System, or
(d) if the security is not traded on a
national securities exchange or in the
over- the-counter market, the fair market
value of a share of Common Stock (or other
unit) on such date as determined in good
faith by the Board of Directors.
Notwithstanding the foregoing, a regional
stock exchange shall not be deemed to be a
national securities exchange unless the
trading volume of the Common Stock on such
exchange exceeds the trading volume on
NASDAQ or the over-the-counter market for
the thirty-day period ended on the date
immediately preceding the date this
Warrant is exercised.
(2) If the Holder disagrees with the determination of
the Market Value of any securities of the Company
determined by the Board of Directors under
subparagraph 1(c)(i)(D), the Market Value of such
securities shall be determined by an independent
appraiser acceptable to the Company and the holder
(or, if they cannot agree on such an appraiser, by
an independent appraiser selected by each of them,
and Market Value shall be the median of the
appraisals made by such appraisers). If there is
one appraiser, the cost of the appraisal shall be
shared equally between the Company and the holder.
If there are two appraisers, each of the Company
and the holder shall pay for its own appraisal.
Section b. Adjustment of Number of Shares. Upon each adjustment of
the Warrant Price as provided herein (other than an adjustment pursuant to
Section 4 of this Warrant, which shall not result in any adjustment to the
number of shares purchasable pursuant hereto), the holder of this Warrant
shall thereafter be entitled to purchase, at the Warrant Price resulting from
such adjustment, the number of shares (calculated to the nearest tenth of a
share) obtained by multiplying the Warrant Price in effect immediately prior
to such adjustment by the number of shares purchasable pursuant hereto
immediately prior to such adjustment and dividing the product thereof by the
Warrant Price resulting from such adjustment.
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<PAGE>
Section c. Adjustment of Price Upon Issuance of Common Stock. If and
whenever the Company shall issue or sell any shares of its Common Stock (as
defined in paragraph 3(h)) in a transaction described in paragraphs (a), (b)
or (c) of this Section 3, for a consideration per share less than the Warrant
Price in effect immediately prior to the time of such issue or sale, then,
forthwith upon such issue or sale, the Warrant Price shall be reduced to the
price (calculated to the nearest $.001) determined by dividing: (a) an amount
equal to the sum of (x) the number of shares of Common Stock outstanding
immediately prior to such issue or sale (including as outstanding all shares
of Common Stock issuable upon exercise of this Warrant immediately prior to
such issue or sale) multiplied by the then existing Warrant Price, and (y) the
consideration, if any, received by the Company upon such issue or sale; by (b)
the total number of shares of Common Stock outstanding immediately after such
issue or sale (including as outstanding all shares of Common Stock issuable
upon exercise of this Warrant immediately prior to such issue or sale). No
adjust ments of the Warrant Price, however, shall be made in an amount less
than $.001 per share, but any such lesser adjustment shall be carried forward
and shall be made at the time and together with the next subsequent adjustment
which together with any adjustments so carried forward shall amount to $.001
per share or more. Notwithstanding any other provisions of this Section, no
adjustments to the Warrant Price shall be made prior to the date that the
exercise price of the Warrant is established pursuant to the completion of the
Public Offering by the Company, as defined above.
For purposes of this Section 3, the following paragraphs (a) to (h),
inclusive, shall be applicable:
i. Stock Dividends. If the Company shall declare a dividend or
make any other distribution upon any stock of the Company
payable in Common Stock, or any options for the purchase of
Common Stock or any stock or securities convertible into or
exchangeable for Common Stock (such rights or options being
herein called "Options" and such convertible or exchangeable
stock or securities being herein called "Convertible
Shares") any Common Stock, Options or Convertible
Securities, as the case may be, issuable in payment of such
dividend or distribution shall be deemed to have been issued
in a subdivision of outstanding shares as provided in
paragraph 3(h) below.
ii. Subdivision or Combination of Stock. If the Company shall at
any time subdivide its outstanding shares of Common Stock
into a greater number of shares, the Warrant Price in effect
immediately prior to such subdivision shall be
proportionately reduced, i.e., the holder shall be entitled
to purchase after such subdivision, for the same
consideration as applicable prior to such subdivision, the
same percentage of outstanding Common Stock that such holder
was entitled to purchase prior to such subdivision, and
conversely, in case the outstanding shares of Common Stock
of the Company shall be combined into a smaller number of
shares, the Warrant Price in effect immediately prior to
such combination shall be proportionately increased.
iii. Reorganization, Reclassification, Consolidation, Merger or
Sale. If any capital reorganization or reclassification of
the capital stock of the Company or any consolidation or
merger of the Company with another corporation, or the sale
of all or substantially all its assets to another
corporation shall be effected in such a way that holders of
Common Stock shall be entitled to receive stock, securities
or assets with respect to or in exchange for Common Stock,
then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and
adequate provisions shall be made whereby each holder of the
Warrants shall thereafter have the right to receive upon the
basis and upon the terms and conditions specified herein and
in lieu of the shares of Common Stock of the Company
immediately theretofore receivable upon the exercise of such
Warrant or Warrants, such shares of stock, securities or
assets (including cash) as may be issued or payable with
respect to or in exchange for a number of outstanding shares
of Common Stock equal to the number
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<PAGE>
of shares of such stock immediately theretofore so
receivable had such reorganization, reclassification,
consolidation, merger or sale not taken place, and in any
such case appropriate provision shall be made with respect
to the rights and interests of such holder to the end that
the provisions hereof (including, without limitation,
provisions for adjustments of the Warrant Price) shall
thereafter be applicable, as nearly as may be, in relation
to any shares of stock, securities or assets thereafter
deliverable upon the exercise of such Warrants (including an
immediate adjustment, by reason of such consolidation or
merger, of the Warrant Price to the value for the Common
Stock reflected by the terms of such consolidation or merger
if the value so reflected is less than the Warrant Price in
effect immediately prior to such consolidation or merger).
In the event of a merger or consoli dation of the Company as
a result of which a greater or lesser number of shares of
common stock of the surviving corporation are issuable to
holders of Common Stock of the Company outstanding
immediately prior to such merger or consolidation, the
Warrant Price in effect immediately prior to such merger or
consolidation shall be adjusted in the same manner as though
there were a subdivision or combination of the outstanding
shares of Common Stock of the Company. The Company will not
effect any such consolidation, merger or sale, unless prior
to the consummation thereof the successor corporation (if
other than the Company) resulting from such consolidation or
merger or the corporation purchasing such assets shall
assume, by written instrument executed and mailed or
delivered to each Warrant holder at the last address of such
holder appearing on the books of the Company, the obligation
to deliver to such holder such shares of stock, securities
or assets as, in accordance with the foregoing provisions,
such holder may be entitled to receive upon exercise of such
Warrants.
iv. Notice of Adjustment. Upon any adjustment of the Warrant
Price, then and in each such case the Company shall give
written notice thereof, by first class mail, postage
prepaid, addressed to each Warrant holder at the address of
such holder as shown on the books of the Company, which
notice shall state the Warrant Price resulting from such
adjustment, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is
based.
v. Stock to Be Reserved. The Company will at all times reserve
and keep available out of its authorized Common Stock or its
treasury shares, solely for the purpose of issuance upon the
exercise of this Warrant as herein provided, such number of
shares of Common Stock as shall then be issuable upon the
exercise of this Warrant. The Company covenants that all
shares of Common Stock which shall be so issued shall be
duly and validly issued and fully paid and nonassessable and
free from all taxes, liens and charges with respect to the
issue thereof, and, without limiting the generality of the
foregoing, the Company covenants that it will from time to
time take all such action as may be requisite to assure that
the par value per share of the Common Stock is at all times
equal to or less than the effective Warrant Price. The
Company will take all such action as may be necessary to
assure that all such shares of Common Stock may be so issued
without violation of any applicable law or regulation, or of
any requirements of any national securities exchange upon
which the Common Stock of the Company may be listed. The
Company will not take any action which results in any
adjustment of the Warrant Price if the total number of
shares of Common Stock issued and issuable after such action
upon exercise of this Warrant would exceed the total number
of shares of Common Stock then authorized by the Company's
Certificate of Incorporation. The Company has not granted
and will not grant any right of first refusal with respect
to shares issuable upon exercise of this Warrant, and there
are no preemptive rights associated with such shares.
- 5 -
<PAGE>
vi. Issue Tax. The issuance of certificates for shares of Common
Stock upon exercise of this Warrant shall be made without
charge to the holder hereof for any issuance tax in respect
thereof, provided that the Company shall not be required to
pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any certificate in
a name other than that of the Warrantholder.
vii. Closing of Books. The Company will at no time close its
transfer books against the transfer of the shares of Common
Stock issued or issuable upon the exercise of this Warrant
in any manner which interferes with the timely exercise of
this Warrant.
viii. Definition of Common Stock. As used herein the term "Common
Stock" shall mean and include the 20,000,000 shares of
common stock, par value $.01 per share, as authorized on the
date hereof and also any capital stock of any class of the
Company hereinafter authorized which shall not be limited to
a fixed sum or percentage in respect of the rights of the
holders thereof to participate in dividends or in the
distribution of assets upon the voluntary or involuntary
liquidation, dissolution or winding up of the Company;
provided, however, that the shares purchasable pursuant to
this Warrant shall include only shares designated as Common
Stock, $.01 par value, of the Company on the date hereof, or
shares of any class or classes resulting from any
reclassification or reclassifications thereof and in case at
any time there shall be more than one such resulting class,
the shares of each class then so issuable shall be
substantially in the proportion which the total number of
shares of such class resulting from all such
reclassifications bears to the total number of shares of all
such classes resulting from all such reclassifications.
Section d. Notices of Record Dates. In the event of:
i. any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the
holders thereof who are entitled to receive any dividend or
other distribution (other than cash dividends out of earned
surplus), or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any
other securities or property, or to receive any right to
sell shares of stock of any class or any other right; or
ii. any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of
the Company or any transfer of all or substantially all the
assets of the Company to or consolidation or merger of the
Company with or into any other corporation or entity; or
iii. any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, then and in each such event the
Company will give notice to the holder of this Warrant
specifying: (i) the date on which any such record is to be
taken for the purpose of such dividend, distribution or
right and stating the amount and character of such dividend,
distribution or right; and (ii) the date on which any such
reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be
fixed, as of which the holders of record of Common Stock
will be entitled to exchange their shares of Common Stock
for securities or other property deliverable upon such
reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or
winding-up. Such notice shall be given at least 20 days and
not more than 90 days prior to the date therein specified,
and such notice shall state that the action in question or
the record date is subject to (x) the effectiveness of a
registration statement under the Securities Act of 1933 and
applicable state securities laws, or (y) a favorable vote of
stockholders, if either is required.
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<PAGE>
Section e. No Stockholder Rights or Liabilities.
i. Except as set forth in paragraph 5(b), this Warrant shall
not entitle the holder hereof to any voting rights or other
rights as a stockholder of the Company. No provision hereof,
in the absence of affirmative action by the holder hereof to
purchase shares of Common Stock, and no mere enumeration
herein of the rights or privileges of the holder hereof
shall give rise to any liability of such holder for the
Warrant Price or as a stockholder of the Company, whether
such liability is asserted by the Company or by creditors of
the Company.
ii. At any time while this Warrant is outstanding, the Company
shall, prior to making any distribution of its property or
assets to the holders of its Common Stock as a dividend in
liquidation or partial liquidation or by way of return of
capital or any dividend payable out of funds legally
available for dividends under the laws of the State of
Delaware, give to the holder of this Warrant, not less than
20 days prior written notice of any such distribution. If
such holder shall exercise this Warrant on or prior to the
date of such distribution set forth in such notice, such
holder shall be entitled to receive, upon such exercise: (i)
the number of shares of Common Stock receivable pursuant to
such exercise; and (ii) without payment of any additional
consideration, a sum equal to the amount of such property or
assets as would have been payable to the holder hereof as an
owner of the shares described in clause (i) of this
paragraph 5(b) had the holder hereof been the holder of
record of such shares on the record date for such
distribution; and an appropriate provision with respect to
such payment to such holder as described in this paragraph
5(b) shall be made a part of any such distribution.
Section f. Lost, Stolen, Mutilated or Destroyed Warrant. If this
Warrant is lost, stolen, mutilated or destroyed, the Company may, on such
terms as to indemnity or otherwise as it may in its discretion reasonably
impose (which shall, in the case of a mutilated Warrant, include the surrender
thereof), issue a new Warrant of like denomination and tenor as the Warrant so
lost, stolen, mutilated or destroyed. Any such new Warrant shall constitute an
original contractual obligation of the Company, whether or not the allegedly
lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable
by anyone.
Section g. Most Favored Holder. The Company agrees that if a Warrant
is issued to any other person, firm or entity on or before the filing of the
Public Offering on terms more favorable, in whole or in part, than the terms
of this Warrant, that the registered holder shall be entitled to have this
Warrant amended and modified to provide for the same more favorable terms.
Section h. Transfer of Warrants. The Warrants shall be transferable
only on the Warrant Register upon delivery thereof duly endorsed by the Holder
or by his duly authorized attorney or representative, or accompanied by proper
evidence of succession, assignment or authority to transfer. In all cases of
transfer by an attorney, the original power of attorney , duly approved, or an
official copy thereof, duly certified, shall be deposited with the Company. In
case of transfer by executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited with the Company in its
discretion. Upon any registration of transfer, the Company shall deliver a new
Warrant certificate or certificates to the person entitled thereto.
Notwithstanding the foregoing, the Company shall have no obligation to cause
Warrants to be transferred on the Warrant Register to any person, unless the
Holder of such Warrants shall furnish to the Company evidence of compliance
with the Securities Act of 1933, as amended (the "Act"), in accordance with
the provisions of Section 12 below.
Section i. Registration Rights.
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<PAGE>
i. The Company agrees that at any time, and from time to time,
that it proposes to register any of its Common Stock under
the Act on Form S-1 or any other form of registration
statement then available for the registration under the Act
of securities of the Company and which is appropriate for
the inclusion therein of the shares purchasable upon
exercising this Warrant (the "Warrant Shares"), it will give
written notice to the holder of this Warrant of its
intention so to do and upon the written request of the
holder of this Warrant (which request shall state the
intended method of disposition or sale of such shares) who
intends to exercise or transfer this Warrants upon the
effectiveness of such registration, given within 20 days
after receipt of any such notice from the Company (a "Holder
Request"), the Company will in each instance use all
reasonable efforts to cause all Warrant Shares relating to
this Warrant held by any such requesting holder to be
registered under the Act and registered, qualified or
exempted under any state securities law, all to the extent
reasonably necessary to permit the sale or other disposition
thereof in the manner stated in such request by such holder,
the Company shall use all reasonable efforts to maintain the
effectiveness of such registrations, qualifications and/or
exemptions for a period of at least three (3) years;
provided, however, that the Company shall have the right to
postpone or withdraw any registration effected pursuant to
this Section 9 without obligation to the holder of this
Warrant and the obligation to give such notice and to use
all reasonable efforts shall not apply to any proposal of
the Company to register any of its securities under the Act:
(1) on Form S-8 (or any successor form),
(2) in connection with any stock option, stock purchase
or other benefit plan,
(3) for the purpose of offering such securities to
another business entity or the shareholders of such
entity in connection with the acquisition of assets
or shares of capital stock, respectively, of such
entity, or
(4) more than two years after the date on which the
Warrant is exercised in full.
ii. In connection with any offering under this Section 9
involving an underwriting, the Company shall not be required
to include any Warrant Shares in such offering unless the
holders thereof accept the terms of the underwriting as
agreed upon between the Company and the underwriters
selected by it (provided that such terms must be consistent
with this Agreement) and that the holder may withdraw from
the offering without prejudice to its rights hereunder in
the event the holder does not agree to such terms, and then
only in such quantity as will not, in the opinion of the
underwriters, jeopardize the success of the offering by the
Company, provided, however, that the holder may not be
subject to any lockup agreement for a period longer than any
principal shareholder or officer or director of the Company.
If in the opinion of the managing underwriter, the
registration of all, or part of, the Warrant Shares that the
holder have requested to be in included would materially and
adversely affect such public offering, then the Company
shall be required to include in the underwriting only that
number of warrant Shares, if any, that the managing
underwriter believes may be sold without causing such
adverse effect. If the number of Warrant Shares to be
included in the underwriting in accordance with the
foregoing is less than the total number of shares that the
holders of Warrant Shares have requested to be included,
then the holders of Warrant Shares who have requested
registration and other holders of shares of Common Stock
entitled to include shares of Common Stock in such
registration shall participate in the underwriting pro rata
based upon their total ownership of shares of Common Stock
of the Company (giving effect tot he exercise of the
Warrant, if no previously exercised, and conversion into
Common Stock of all securities convertible there
- 8 -
<PAGE>
into). If any holder would thus be entitled to include more
shares than such holder requested to be registered, the
excess shall be allocated among other requesting holders pro
rata based upon their total ownership of shares of Common
Stock registrable in the offering.
Section j. Notices. Any notice or other communication to be given
hereunder shall be in writing and mailed or telecopied to such party at the
address or number set forth below:
If to the Company: Worldwide Wireless, Inc.
P.O. Box 470
Ascutney, VT 05030
Attention: Mr. Scott Wendel
Telephone No.: (802) 674-2206
Telecopier No.: (802) 674-2751
If to the Holder:
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--------------------------
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Telephone No.:
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Telecopier No.:
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or to such other person, address or number as the party entitled to such
notice or communication shall have specified by notice to the other party
given in accordance with the provisions of this Section. Any such notice or
other communication shall be deemed given: (i) if mailed, when deposited in
the mail, properly addressed and with postage prepaid; or (ii) if sent by
telecopy, when transmitted.
Section k. Governing Law. This Warrant shall be governed by and
construed in accordance with the laws of the State of Delaware, without giving
effect to such jurisdiction's principles of conflict of laws.
IN WITNESS WHEREOF, the duly authorized agent of WORLDWIDE WIRELESS,
INC. has executed this Warrant as of the 21 day of July, 1997.
WORLDWIDE WIRELESS, INC.
By:
---------------------------------
Chief Operating Officer
- 9 -
<PAGE>
SUBSCRIPTION FORM TO BE EXECUTED
UPON EXERCISE OF THE WARRANT
Date:
-----------------
To: Worldwide Wireless, Inc.
The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to subscribe for and purchase _____ shares of Common
Stock covered by such Warrant, and herewith tenders __________ in full payment
of the purchase price for such shares.
Name of Holder:
----------------------------------------
Address:
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<PAGE>
EXHIBIT 11.1
WORLDWIDE WIRELESS SYSTEMS, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
Three Months Ended
Year Ended June 30, September 30,
----------------------------------- ---------------------------------
1996 1997 1996 1997
---------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C>
Net (loss) ................................. $ (1,131,245) $ (1,684,533) $ (392,924) $ (2,458,262)
============ ============ ========== ============
Weighted average number of common
shares outstanding (1) .................. 2,942,739 2,968,302 2,968,302 2,968,302
Shares issuable upon the conversion of
debt (including interest converted) ...... 24,405 14,286 14,286 14,286
Incremental shares issuable upon the
exercise of warrants (1) .................. 788,559 788,559 788,559 788,559
Less shares assumed repurchased ......... (366,335) (366,335) (366,335) (366,335)
------------ ------------ ---------- ------------
Shares .................................... 3,389,368 3,404,812 3,404,812 3,404,812
============ ============ ========== ============
(Loss) per share ........................... $ (0.33) $ (0.49) $ (0.12) $ (0.72)
============ ============ ========== ============
</TABLE>
- ------------
(1) In accordance with the Securities and Exchange Commission's requirements,
securities issued during the twelve-month period prior to the filing of
the initial public offering have been included in the calculation, using
the treasury stock method, as if they were outstanding for all periods
prior to the offering.
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF WORLDWIDE WIRELESS SYSTEMS, INC.
The following entity is a wholly owned subsidiary of the Registrant:
New England Wireless, Inc., a Vermont corporation formed on June 27, 1992. New
England Wireless, Inc. does business as New England Wireless, Inc.
<PAGE>
EXHIBIT 23.1
CONSENT OF COUNSEL
WORLDWIDE WIRELESS SYSTEMS, INC.
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We consent to the use of our firm's name and to the statements made
with respect to our firm, as they appear under the heading "Legal Matters" in
the prospectus for Worldwide Wireless, Inc. which is included in Part 1 of
this Registration Statement.
GRAVEL AND SHEA
/s/ Peter S. Erly
----------------------------
Peter S. Erly
Burlington, Vermont
, 1997
- --------------------------
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in this Registration Statement on Form SB-2
(registration number 333-33593) of our report dated August 22, 1997 on our
audits of the consolidated financial statements of Worldwide Wireless Systems,
Inc. and subsidiary. We also consent to the reference to our firm under the
captions "Selected Financial Data" and "Experts".
Richard A. Eisner & Company, LLP
New York, New York
December 30, 1997
