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<S> <C> <C>
As filed with the Securities and Exchange Commission on May 15, 2000
Registration No.333-95341
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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PRE-EFFECTIVE AMENDMENT NO. 5 TO
FORM SB-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
WORLD WIDE WIRELESS COMMUNICATIONS, INC.
(Name of small business issuer in its charter)
-----------------
Nevada 4812 860887822
(State or jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Identification No.) Classification Code No.)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this
Registration Statement.
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 statement 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, check the following box
and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462 (d) under the Securities Act, check the following box
and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434 check the following box. / /
</TABLE>
<TABLE>
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CALCULATION OF REGISTRATION FEE
------------------------- ------------------- --------------------------- ---------------------- ----------------
Title of each class of Amount to be Proposed maximum offering Proposed maximum Amount of
securities to be registered(1) price per unit aggregate offering registration
registered price(2) fee
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<S> <C> <C> <C> <C> <C>
Common, $ .001 par per 9,680,916 $4.50 $18,000,000 $4,752
share
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<FN>
(1) Includes 5,680,916 shares owned by certain current shareholders of World Wide Wireless Communications, Inc. World Wide Wireless
Communications, Inc. will not receive any of the proceeds of such sales.
(2) Estimated pursuant to Rule 457(a) under the Securities Act of 1933, as amended, solely for purposes of calculating the
registration fee.
</FN>
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.
====================================================================================================================================
</TABLE>
<PAGE>
The information in this prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is prohibited.
Initial Public Offering Prospectus
Subject to Completion, dated May 15, 2000
World Wide Wireless
Communications, Inc.
4,000,000 shares of Common Stock
This is our initial public offering. We expect that the price at which
we will offer our shares will be between $4.00 and $5.00 per share. This price
may not reflect the market price of our shares after this offering. We intend to
directly place these shares without the use of an underwriter; however, we may
use underwriters or securities brokers to assist in the distribution. There are
no escrow arrangements pertaining to this offering and there is no minimum
amount we are required to raise in this offering before we may have access to
funds received from investors. The minimum subscription is 1,000 shares and
investors who meet the qualification requirements set forth in this prospectus
may purchase the shares from us. Our shares are currently traded on the OTC
Bulletin Board under the trading symbol WLGSE.
______________________
Investing in our common stock involves a great amount of risk.
See "Risk Factors" beginning on page 6.
______________________
Per Share Total
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Public Offering Price.............................. ______ _______
Underwriting Discounts and Commissions............. ______ _______
Proceeds Before Expenses........................... ______ _______
The proceeds before expenses are calculated before deducting estimated
expenses of $60,000, including registration fees and other offering costs, in
addition to legal and accounting fees.
In addition to these shares, certain of our shareholders are also
selling a maximum of 5,680,916 shares of their shares of our common stock at
such prices as they determine. These prices may be below that at which we sell
our shares in this offering. We will not receive any proceeds from the sale of
the shares by the selling shareholders.
Our shares will initially be sold through our executive officers who
will not receive commissions and who will be registered as sales representative
where required. We have not retained an underwriter or broker-dealer to assist
in the sale of our shares.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is _________, 2000
<PAGE>
The information in this prospectus is not complete and may be changed. Selling
shareholders may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and it is not soliciting an offer to
buy these securities in any state where the offer or sale is prohibited.
Selling Shareholder Prospectus
Subject to Completion, dated May 17, 2000
World Wide Wireless
Communications, Inc.
5,680,916 shares of Common Stock
Certain of our shareholders named on page 29 of this prospectus are
offering to sell up to 5,680,916 shares of our common stock which they presently
own. We will not receive any of the proceeds from the sale of these shares by
the selling shareholder. We will receive proceeds of $750,000 from one of the
selling shareholders from the exercise of outstanding options to purchase
securities covered by this prospectus if that selling shareholder exercises his
options in full.
The selling shareholders may offer and sell some, all or none of their
common stock under this prospectus. The selling shareholders may determine the
prices at which they will sell their shares, which may be at market prices
prevailing at the time of the sale or some other price. The selling shareholders
may use brokers or dealers to assist them in selling their shares, who may
receive compensation or commissions for such sales.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is ____________, 2000
<PAGE>
<TABLE>
TABLE OF CONTENTS
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Page Page
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Reference Data..............................2 Executive Compensation...............................27
Prospectus Summary..........................3 Principal and Selling Shareholders...................28
Summary of Financial Data...................4 Certain Transactions.................................32
Risk Factors................................6 Description of Securities............................32
Forward-Looking Statements..................11 Price Range of Common Stock..........................34
Dividend Policy.............................13 Plan of Distribution.................................36
Use of Proceeds.............................13 Legal Matters........................................37
Management's Discussion and Analysis........15 Experts..............................................37
Business....................................16 Additional Information...............................37
Management..................................25 Financial Statement..................................F-1
</TABLE>
Until 90 days after the effective 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.
You should rely only on the information contined in this prospectus. We
have not authorized any person to provide you with different information. If
anyone provides you with different or inconsistent information, you should not
rely on it. We are not making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. The information in this
document may only be accurate on the date date of this document.
REFERENCE DATA
We have filed with the Securities and Exchange Commission a
registration statement on Form SB-2 under the Securities Act with respect to
this offering. This prospectus does not contain all the information set forth in
the registration statement and the exhibits and schedules thereto, as permitted
by the rules and regulations of the Commission. We will be subject to the
informational filing requirements of the Securities Exchange Act of 1934 upon
the effectiveness of the SB-2 and the Form 8-A. We intend to furnish our
shareholders with annual reports containing financial statements audited by our
independent public accountants and quarterly reports containing unaudited
financial information for the first three quarters of each fiscal year. Our
fiscal year ends on September 30.
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<PAGE>
PROSPECTUS SUMMARY
World Wide Wireless Communications, Inc.
We provide high-speed broadband wireless Internet service in the United
States and internationally through the use of transmitting frequencies within
the multichannel multipoint distribution service, commonly known as MMDS. We are
also developing a new technology, named Distributed Wireless Call Processing
System, or the DWCP system, which we believe will significantly enhance wireless
communications in the future. We intend to license this technology to third
parties in the future.
We are incorporated under the laws of the State of Nevada. Our offices
are located at 520 Third Street, Suite 101, Oakland, CA 94607. Our telephone
number is (510) 839-6100.
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<CAPTION>
Summary of the offering
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Type of security.....................................Common stock
Common stock registered by company...................We are registering and selling 4,000,000 shares of common stock on behalf of
our company. We will also register another 5,680,916 shares of common stock
for existing shareholders with registration rights. We will not sell the
5,680,916 shares owned by the existing shareholders with registration rights.
Common stock offered for sale
by our company in this offering.................4,000,000 shares
Common stock to be outstanding after
this offering*..................................87,445,517
Use of proceeds......................................For expansion of our sales force, marketing and distribution activities,
expansion of both our domestic and international business operations, for
acquiring spectrum, and for general corporate purposes. See "Use of Proceeds"
for more information.
</TABLE>
*This does not include shares issuable upon the exercise of stock
options under our 1998 Stock Option Plan, 200,000 shares purchasable by
Continental Capital & Equity Corporation, upon the exercise of outstanding
options, 482,734 shares issuable upon the conversion of a convertible promissory
note by the receiver of Credit Bancorp, and 400,000 shares issuable to Chalmers
R. Jenkins. This also does not include shares issuable upon the exercise or
conversion of the following securities, which were or may be issued pursuant to
a Securities Purchase Agreement, dated April 14, 2000:
o 3,600,000 shares issuable upon the exercise of certain 5 year
warrants, dated April 14, 2000,
o shares issuable upon the conversion of 4% convertible
debentures with an aggregate principal amount of $3,280,000,
issued on April 14, 2000;
o 1,440,000 shares issuable upon the exercise of 5 year warrants
which may be purchased under the Securities Purchase
Agreement;
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<PAGE>
o shares issuable upon the conversion of 4% convertible
debentures with a principal amount of $1,312,000 or upon
conversion of our series A preferred stock
o 304,000 shares of common stock to be purchased by the
investors and issued to them upon the date of this prospectus.
We intend to offer all of the shares directly to the public without the
use of an underwriter. There is no minimum number of shares that must be sold.
There can be no assurance that all of the shares offered will be sold.
Accordingly, investors will bear the risk that we will accept subscriptions for
less than 4,000,000 shares and then be unable to successfully complete all of
the anticipated uses of the proceeds of this offering as expected. If fewer than
4,000,000 shares are sold, our business, financial condition and results of
operations could be adversely affected.
Funds from this offering will not be placed in an escrow or trust
account and will be available for use as the funds are received. The minimum
investment per shareholder is 1,000 shares. There is no maximum investment per
shareholder.
This offering will begin as of the effective date of this prospectus
and continue for 12 months or such earlier date as we may terminate the
offering. If this offering terminates, all subscription payments received after
termination will be promptly returned.
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<PAGE>
SUMMARY OF FINANCIAL DATA
The summary financial data for the years ended September 30, 1998 and
1999 have been derived from the Financial Statements and Notes to Financial
Statements, audited by Reuben E. Price & Co., San Francisco independent
auditors. The summary financial data for the six months ended March 31, 2000 and
1999 is derived from our unaudited financial statements which, in the opinion of
management, includes all adjustments, none of which were other than normal
recurring adjustments necessary for a fair presentation of the financial
position and results of operations for such periods. The financial information
for the six months ended March 31, 2000 and 1999 is not necessarily indicative
of the results of operations for subsequent periods or a full fiscal year. The
selected financial data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Financial Statements and Notes thereto included elsewhere in this
prospectus.
<TABLE>
Statements of Income Data:
<CAPTION>
Cumulative
from inception
Year ended Year ended on Sept 1, 1994 Six Months Ended Six Months Ended
Sept. 30, 1998 Sept. 30, 1999 to Sept. 30 1999 Mar. 31, 2000 Mar. 31, 1999
Audited Audited Audited Unaudited Unaudited
<S> <C> <C> <C> <C> <C>
Revenue $ -- $ -- $ -- $141,268 $ --
Gen. & Adm. Expenses (353,075) (2,383,330) (6,765,842) (2,345,196) (594,650)
Total Operating Expenses (353,075) (2,383,330) (6,765,842) (2,345,196) (594,650)
Operating loss (353,075) (2,383,330) (6,765,842) (2,203,928) (594,650)
Other income 6,701 0 6,701 0 0
Interest income 0 0 0 174 0
Net loss (346,374) (2,383,330) (6,759,141) (2,217,484) (594,650)
</TABLE>
<TABLE>
<CAPTION>
Sept. 30, 1999 March 31, 2000 March 31, 1999
Audited Unaudited Unaudited
<S> <C> <C> <C>
Balance Sheet Data:
Working capital (153,646) 76,215
Total assets 1,180,777 6,206,693
Long-term debt,
less current portion 328,000 740,000
Shareowners' equity 361,309 4,910,887
</TABLE>
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<PAGE>
RISK FACTORS
An investment in our common stock is very risky. You should be aware
that you could lose the entire amount of your investment. You should carefully
consider the following risks before you decide to buy our common stock.
Risks Related to Our Business
We have a history of losses and there is significant doubt about our ability to
continue as a going concern
We are a development stage company and our revenues for the foreseeable
future will not be sufficient to attain profitability. In the two years since we
began operations, we have generated no revenues and have incurred substantial
expenditures. We expect to continue to experience losses from operations while
we develop and expand our wireless Internet service system and other
technologies. In view of this fact, our auditors have stated in their report for
the period ended September 30, 1999 that our ability to meet our future
financing requirements, and the success of our future operations, cannot be
determined at this time.
We may not have enough capital to remain a going concern, especially if we do
not sell a significant amount of securities offered by this prospectus
We will require substantial outside investment on a continuing basis to
finance the acquisition of additional spectrum licenses, capital expenditures
and operations. Although we believe that the proceeds from this offering,
together with nominal funds expected to be generated from operations, will be
sufficient to finance our working capital requirements for at least twelve
months following completion of this offering, there can be no assurances that we
will generate sufficient funds from this offering to fund our operations. We do
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.
We do not know how many of the shares offered will be sold. Therefore,
investors will bear the risk that we will accept subscriptions for a nominal
number of shares and then be unable to exist as a going concern or accomplish
our plans as discussed in the Use of Proceeds in this prospectus. If no shares,
or a nominal number of shares are sold, our financial condition and our ability
to continue as a going concern could suffer.
We may not be able to obtain permission to use two-way MMDS transmission
We believe that it is important for to obtain the right to conduct
two-way transmissions through the MMDS frequencies we acquire. None of our
present channel leases in the United States allow for two-way transmissions.
Permission to conduct two-way transmissions must be obtained from the Federal
Communications Commission, and the rules of the FCC require that we file
applications with the FCC to receive permission to conduct two-way transmissions
through MMDS. The FCC has announced that the first opportunity to file these
applications will occur from July 3 through 10, 2000. The application process
will require us to engineer a network configuration and channel-use plan for
these frequencies in each market where we intend to launch a two-way system. The
applications must meet FCC interference protection rules or contain the consent
of other MMDS licensees in these markets and adjacent markets. We cannot be
certain that:
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<PAGE>
o We will be able to complete the necessary processes to enable
us to complete and file two-way applications for each of our
markets.
o We will be able to obtain the necessary cooperation and
consents from licensees in our markets or adjacent markets to
enable us to use our spectrum for two-way communication
services.
o The FCC will approve our applications.
If we do not receive the required consents from the FCC and other
licensees within a market, or we are not able to design a two-way system that
will meet the FCC's interference protection rules, we will be unable to obtain
authorization to implement a two-way system in that market.
We are subject to other substantial governmental regulations which could
adversely affect our business
Our services are subject to current regulations of the FCC with respect
to the use of our wireless access. We are required to use and maintain our
licenses for certain frequencies and file reports with the FCC. If we fail to
comply with these requirements, we may lose our licenses to operate such
frequencies. The loss of licenses to operate our frequencies could lead to
interruption of our wireless access services and materially adversely affect our
business.
In addition, changes in the regulatory environment relating to the
Internet access could affect the prices at which we may sell our services. These
include regulatory changes that, directly or indirectly, affect
telecommunications costs, limit usage of subscriber-related information or
increase the likelihood or scope of competition from the regional Bell operating
companies or other telecommunications companies. For example, regulations
recently adopted by the FCC are intended to subsidize Internet connectivity
rates for schools and libraries, which could affect demand for our services. The
FCC has also stated its intention to consider whether to regulate certain
transmission services over the Internet as "telecommunications," even though
Internet access itself would not be regulated. Additionally, a number of state
and local government officials have also asserted the right or indicated a
willingness to impose taxes on Internet-related services, including sales, use
and access taxes. We cannot predict the impact that future laws and regulations
may have on our business.
Our new technology is unproven and may not function as anticipated
Our DWCP system technology remains in the development phase and we have
not yet developed a fully functional prototype of that technology. We cannot be
certain when we will be able to complete development of DWCP and whether DWCP
will work in the manner anticipated when development is completed. Furthermore,
we cannot be certain whether DWCP will receive substantial market acceptance
assuming that it is developed. For these reasons, although we believe that DWCP
is promising, an investor should not assume that DWCP will be available or will
contribute positively to our business prospects or financial condition.
The market for Internet access is extremely competitive, which may prevent us
from being able to attract Internet access customers
There are many competitors in the market for Internet access, both
within the field of providing broadband Internet-based access as well as those
offering access through other means. Major wireless service providers include
AT&T Corporation, Hughes Network, MCI Worldwide and Sprint, all of which are
developing and investing heavily in MMDS and other wireless Internet access
distribution methods. Other competitors outside of the area of wireless
communications include the following:
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<PAGE>
o Internet Service Providers, or ISPs, which have developed
high-speed access capabilities through DSL along with their
existing services, such as through digital subscriber
services, of DSL, and T-1 lines;
o On-Line information service providers which provide basic
Internet access as well as proprietary information not
available through public Internet access, such as America
On-Line;
o Cable operators, such as Time-Warner and AT&T, who offer
Internet access through direct cable connections;
o Providers of high-speed continuous Internet access, such as
UUNET Technologies, Inc. and PSINet, Inc.; and
o Regional Bell operating companies, long-distance carriers and
competitive local exchange carriers.o
Many of our competitors are large organizations with substantially greater
financial, technical and marketing resources than we presently have. Many of
these competitors also have substantially larger subscriber bases, which will
make it difficult to compete with them and, we believe, will result in
substantial pressure on us to discount the prices of our services. In addition,
there has been substantial consolidation among Internet access providers and, in
particular, within the broadband MMDS industry. We believe that this trend will
continue and, if it does, we anticipate there will be greater price and other
competition within the industry. We cannot provide you with any assurance that
we will have sufficient financial resources, technical expertise or marketing
capabilities to compete successfully.
We have yet to obtain customers for our Internet access services
We intend to provide broadband Internet access to customers within
those geographic areas where we obtain MMDS licenses. However, we have obtained
few customers for and have derived no revenues from our services, nor have we
entered into any arrangements with other businesses under which they may provide
these services within these geographic areas. We also have not yet determined
the manner in which we will commercially exploit the MMDS licenses we obtain.
For example, we may attempt to provide services directly to Internet users or
license our rights to use the MMDS frequencies to third parties. We can provide
you with no assurance that we will be able to secure a sufficient number of
customers, strategic partners or other sources of revenues from our services to
operate profitably at any time in the foreseeable future.
We are subject to the requirements that we receive regulatory approvals from
those countries in which we do business, the delay or denial of which can reduce
our revenues and adversely affect our foreign operations.
We anticipate that a substantial percentage of our revenues will be
derived from operations outside of the United States. Our reliance on
international operations to obtain consents of local regulatory authorities,
some of which may significantly delay or deny permitting us to operate in those
jurisdictions. For example, we will not be able to generate revenues from our
operations in Argentina until such time as the governmental regulatory
authority, the CNC, approves our application to acquire MMDS licenses. In early
2000, the government of Argentina announced that it was placing a freeze on all
license transfer applications from foreign-owned firms, which has effectively
delayed consideration of our application. A denial of our application or a
significant delay in consideration of our application could either prevent us
from conducting our planned operations in Argentina or materially adversely
affect our ability to do so. Our prospective operations in Peru and other
jurisdictions are also subject to receipt of government approval, which we
cannot assure you that we will receive at this time.
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<PAGE>
Problems with telecommunications infrastructure in countries in which we do
business may substantially limit the effectiveness of our Internet services,
thereby making those services less attractive
The Internet access services we intend to conduct require that there be
a modern telecommunications infrastructure which allows for the fast and
efficient transfer of data from the source of the data to the transmission
towers we lease. Many countries in which we are conducting or intend to conduct
business lack the high speed cable, satellite or fiber optic wiring systems
necessary for high speed data transmission and in many of those countries it is
not economically viable to install that infrastructure. This limits our ability
to provide high-speed Internet services efficiently, thereby making our services
in those countries less attractive.
Because we operate internationally, our operations are subject to unexpected
political changes, changes in legal requirements and fluctuations in exchange
rates, all of which may substantially increase our operating costs or make it
difficult to do business there
In addition to these international risks, we are also subject to the
following risks in connection with our international operations that may
substantially reduce our revenues, increase our operating and capital expenses,
and otherwise materially affect our ability to conduct business:
o unexpected changes in regulatory requirements, taxes, trade
laws and tariffs, which can substantially increase the costs
of doing business in other jurisdictions;
o changes in a specific country's or region's political or
economic conditions which may make it difficult or impossible
to conduct business there;
o lack of clear rules and regulations governing the issuance of
licenses and standards for their operation; and
o fluctuating exchange rates.
By way of illustration, the regulatory authority in Ghana with
responsibility for telecommunications licenses, the National Communications
Agency, has invalidated certain license transfers which its predecessor agency
made several years earlier. These licenses include those which we wish to use
for our operations in that country. Although we intend to pursue our application
for a license to use those frequencies, there can be no assurance that we will
obtain the desired license or that the license might be subsequently revoked due
to further changes in the regulatory requirements. We cannot assure you that we
will be able to conduct our operations profitably in these jurisdictions in view
of these risks and cannot quantify the impact which these risks may have on our
operations.
We are inexperienced in operating a business internationally
We intend to expand our international sales efforts in the future. We
have very limited experience in marketing, selling and supporting our products
and services abroad. There is a risk that we will not be able to expand due to
this inexperience. If we are unable to grow our international operations
successfully and in a timely manner, our business and operating results could be
seriously harmed. This could be reflected in a loss in your investment.
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<PAGE>
If we do not develop system features in response to customer requirements,
customers may not wish to use our services, which would seriously harm our
business
The broadband wireless access industry is rapidly evolving and is
subject to technological change and innovation. These changes are requiring that
providers of broadband services adopt new technologies quickly or modify
existing technologies to maintain service and market products. Compliance with
these changes may cause us to incur unexpected expenses or lose revenues. If we
are unable to comply with diverse new or varying governmental regulations or
industry standards in each of the many worldwide markets in which we compete, we
may not be able to respond to customers in a timely manner or market our
products, which could seriously harm our business.
We are dependent on the services of key individuals and the loss of any of these
individuals could significantly affect our ability to operate our business
Our development and success is significantly dependent upon Douglas P.
Haffer, Chairman, President and Chief Executive Officer; Wayne Caldwell, Vice
President and General Counsel; and Dana Miller, Vice President of Licensing and
Systems Expansion. We do not currently have key man insurance for any of these
officers. Any loss of the services of these members of our senior management
personnel could seriously harm our business.
We also believe that our success depends in large part on our ability
to hire skilled managerial, sales, technical and administrative personnel whose
talents are necessary in allowing us to develop our services and operate our
business. We will need to hire a substantial number of additional people to
allow us to implement our business plan. Because employees with these skills are
in high demand, we anticipate encountering considerable competition in
attracting those persons. As a result, we may experience a shortage of qualified
personnel.
We may be unable to protect our intellectual property rights
Our success depends in part on our ability to protect our proprietary
technologies. We rely on a combination of patent, copyright and trademark laws,
trade secrets and confidentiality and other contractual provisions to establish
and protect our proprietary rights. We have received one patent from the United
States Patent and Trademark Office pertaining to the DWCP system and may file
for additional patents in the future. However, our patents may not be of
sufficient scope or strength, others may independently develop similar
technologies or products, duplicate any of our products or design around our
patents, and the patents may not provide us competitive advantages. Litigation,
which could result in substantial costs and diversion of effort by us, may also
be necessary to enforce any patents issued or licensed to us or to determine the
scope and validity of third-party proprietary rights. Any such litigation,
regardless of outcome, could be expensive and time consuming, and adverse
determinations in any such litigation could seriously harm our business.
We have not yet sought patent protection for the DWCP system in any
country other than the United States, nor have we sought to register our
trademarks in those countries in which we currently do or intend to do business.
The laws of other countries vary with respect to intellectual property
protection, and some jurisdictions may provide substantially less protection
than those of the United States. As a consequence, our ability to protect our
intellectual property and prevent competitors from using our intellectual
property may be much more limited.
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<PAGE>
Risks Related to this Offering
The offering price may drop below that at which our shares are trading on the
open market, which could render us unable to sell shares in this offering
We are offering to sell shares at the price on the cover page of this
prospectus, whereas the market price for our stock may vary significantly.
Furthermore, the selling shareholders may sell their shares at any price they
deem acceptable, regardless of the price at which we are offering to sell our
shares, and we have no control over the price at which they may sell their
shares. If the market price for the shares drops below the offering price, or
the selling shareholders decide to sell their shares at below our offering
price, prospective investors will likely choose to purchase shares from the
selling shareholders or on the open market rather than directly from us. If this
happens, the amount of financing we receive from this offering will be
significantly reduced and we may be unable to raise any funds from this
offering.
We arbitrarily determined the purchase price of our shares for this offering.
The trading price of our shares on the Over-the-Counter Bulletin Board may
decline below the price at which you are purchasing shares in this offering.
We arbitrarily determined the purchase price of our shares in this
offering. The price of the shares offered in this prospectus bears no
relationship to our assets, book value, or net worth. This is our initial public
offering. Currently, some of our shares that we originally sold as restricted
securities in private placement offerings are now trading on the OTCBB under the
symbol WLGSE. The price of the securities offered herein may bear no
relationship to the price of our shares traded on the OTCBB.
Our stock may not meet the requirements to continue to be listed on the
Over-the-Counter Bulletin Board, which may make it more difficult for
shareholders to sell their shares and expose us to claims for liquidated damages
This is our initial public offering. Some of our shares that we
initially sold as restricted securities are now freely trading on the OTCBB. The
National Association of Securities Dealers, Inc., or "NASD," which administers
the OTCBB, implemented regulations in 1999 which require that all companies
listed on the OTCBB have a class of securities registered under the Securities
Exchange Act of 1934 and file periodic reports with the Securities and Exchange
Commission, or SEC. The NASD has informed us that our securities will be
delisted from the OTCBB on May 17, 2000 unless we register our common stock
under the Securities Exchange Act. We have applied to the SEC to obtain such a
registration, but that registration is not yet effective. We have also requested
from the SEC and have received on May 16, 2000, an interim order staying the
delisting of our common stock from the OTCBB. However, there can be no assurance
that we will ultimately be able to prevail before the NASD or SEC and prevent
the delisting of our shares. If we do not prevail and the SEC does not approve
the registration of our common stock, our shares may be delisted from the OTCBB
and not be tradable on the OTCBB until we can obtain a registration and we file
an application to relist our shares on the OTCBB. In addition, if we are
re-listed, we will be required to continue to file our periodic reports with the
SEC in order to maintain our listing. Although trading quotations for the shares
could remain available through the "pink sheets" maintained by the National
Quotation Service Bureau, Inc., management believes that a delisting of the
shares from the OTCBB may reduce the trading volume of the shares and may result
in a reduction in the purchase price for the shares.
We may be subject to claims for liquidated damages if our shares are
delisted from the OTCBB. Under the terms of a Registration Rights Agreement into
which we entered with various investors, we will be liable for the payment of
liquidated damages equal to 2% per month of the face amount of subordinated
debentures and stated value of series A preferred stock that we sold to those
investors during that period that our shares not listed on the OTCBB. The
aggregate principal amount of the subordinated debentures is currently
$3,280,000, and we are contractually obligated to issue additional subordinated
debentures or series A preferred stock with a principal amount or stated value
of $1,312,000. If our shares are delisted, the amount of these liquidated
damages could have a material adverse affect upon our financial condition and
business prospects.
-11-
<PAGE>
The market price for our stock has fluctuated substantially and will likely
continue to do so
Since our shares began trading on the OTCBB in 1997, the prices for our
shares have fluctuated widely. There may be many factors which may explain these
variations, but we believe that among these factors include the following:
o the demand for our common stock;
o the number of market makers for our common stock;
o developments in the market for broadband Internet access and
wireless MMDS transmission in particular; and
o changes in the performance of the stock market in general.
In recent years, the stock market has experienced extreme price and
volume fluctuations that have had a substantial effect on the market prices for
many telecommunications, Internet and emerging growth companies such as ours,
which may be unrelated to the operating performances of the specific companies.
Companies that have experienced volatility in the market price of their stock
have been the object of securities class action litigation. If we become the
object of securities class action litigation, it could result in substantial
costs and a diversion of our management's attention and resources and have an
adverse effect on our business, financial condition and results of operations.
In addition, holders of shares of our common stock could suffer substantial
losses as a result of fluctuations and declines in the stock price.
Sales of the selling shareholders' shares and and shares issued to investors
recently may depress the price of our stock
We are registering 5,680,916 shares of common stock owned by several of
our current shareholders pursuant to the exercise of their registration rights.
We also have an obligation to register shares of common stock issued to or
issuable upon the conversion of subordinated debentures, series A preferred
stock and exercise of warrants. The sale of all of these shares, especially if
the sale occurs within a short period of time, could substantially reduce the
market price for our stock.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. We intend to
identify forward-looking statements in this prospectus using words such as
"believes," "intends," "expects," "may," "will," "should," "plan," "projected,"
"contemplates," "anticipates," or similar statements. These statements are based
on our beliefs as well as assumptions we made using information currently
available to us. Because these statements reflect our current views concerning
future events, these statements involve risks, uncertainties and assumptions.
Actual future results may differ significantly from the results discussed in the
forward-looking statements. Some, but not all, of the factors that may cause
these differences include those discussed in the Risk Factors section beginning
on page 5 of this prospectus. You should not place undue reliance on these
forward-looking statements, which apply only as of the date of this prospectus.
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<PAGE>
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock
and do not intend to pay dividends in the foreseeable future. We intend to
invest our future earnings, if any, to fund our growth.
USE OF PROCEEDS
<TABLE>
If the entire offering is sold, the net proceeds from the sale of the
common stock, after deducting underwriting discounts and other expenses, are
estimated to be approximately $15,780,000. The net proceeds have been calculated
using an initial public offering price of $4.50. There is no guarantee that we
will receive any proceeds, the following table presents how we intend to use the
proceeds of 25%, 50%, 75% and 100% of the offering. We expect to use the net
proceeds over a 12-month period in approximately the following amounts and
percentages:
<CAPTION>
-------------------------------------------------------------------------------
Percentage of Offering Raised
- ----------------------------- -------------------- ------------------ ------------------ ------------------
25% 50% 75% 100%
- ----------------------------- -------------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Expansion of Mt. Diablo, $ 394,500 (10%) $1,183,500 (15%) $2,367,000 (20%) $3,945,000 (25%)
Ukiah, South Bend, Grand
Rapids and San Diego
- ----------------------------- -------------------- ------------------ ------------------ ------------------
Initiate Internet Access $ 78,900 (2%) $ 236,700 (3%) $ 591,750 (5%) $ 946,800 (6%)
- ----------------------------- -------------------- ------------------ ------------------ ------------------
Argentina Operations $1,775,250 (45%) $3,313,800 (42%) $4,734,000 (40%) $5,523,000 (35%)
- ----------------------------- -------------------- ------------------ ------------------ ------------------
Peru Operations $ 986,250 (25%) $1,972,500 (25%) $2,603,700 (22%) $3,156,000 (20%)
- ----------------------------- -------------------- ------------------ ------------------ ------------------
Working Capital $ 710,100 (18%) $1,183,500 (15%) $1,538,550 (13%) $2,209,200 (14%)
- ----------------------------- -------------------- ------------------ ------------------ ------------------
Total $3,945,000 (100%) $7,890,000 (100%) $11,835,000 (100%) $15,780,000 (100%)
- ----------------------------- -------------------- ------------------ ------------------ ------------------
</TABLE>
o We intend to expand the Mount Diablo, Ukiah, South Bend, Grand
Rapids and San Diego systems through the purchase of digital
compression equipment in order to digitize the system and to
add additional subscribers through marketing and advertising
and the upgrading of available services. The amounts allocated
to the expansion include the hiring of additional installers
and repair personnel as well as anticipated installation
costs.
o We intend to initiate and expand Internet access services
through the acquisition of Internet backbone connections, the
purchase of telecommunications equipment and outsource
services, for marketing, advertising and promotion and for the
hiring of technical support personnel.
o The amounts allocated to the Argentina operation include
acquiring spectrum, purchasing equipment, the hiring of
additional installers and repair personnel as well as
anticipated installation costs and general working capital.
o The amounts allocated to the Peru expansion include acquiring
spectrum, purchasing equipment, the hiring of additional
installers and repair personnel as well as anticipated
installation costs and general working capital.
o Proceeds allocated to working capital will be used to fund our
general operations.
-13-
<PAGE>
In addition to the proceeds we receive from the sale of our shares, one of
the selling shareholders, Continental Capital & Equity Corporation, has notified
us that it wishes for us to register 100,000 shares of common stock issuable
upon exercise of a option at a price of $3.25 per share and another 100,000
shares at a price of $4.25 per share. If Continental Capital & Equity
Corporation exercises these warrants in full, we will receive proceeds of
$750,000. We intend to allocate those proceeds among the items in the table in
accordance with the percentages set forth beside each item. We do not know at
this time whether Continental Capital & Equity Corporation will exercise any of
the warrants and therefore whether we will receive any proceeds from the
exercise of the warrants.
The above listed use of proceeds represents our best estimate of the
allocation of the net proceeds of this offering based upon the current status of
our business operations, our 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 our business and the
success or lack thereof of our 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. Management believes that the funds received
from this offering will exceed our cash flow requirements for more than twelve
months.
No proceeds from this offering will be used to acquire assets or
finance other businesses. However, we hope to continue to acquire spectrum both
nationally and internationally consistent with its corporate objectives and
mission statement.
-14-
<PAGE>
DILUTION
Our present common stockholders acquired their shares at a cost
substantially below the price at which the shares are being offered in this
offering. Investors purchasing the shares in this offering will, therefore,
incur an immediate and substantial dilution of their investment insofar as it
relates to our resulting net tangible book after completion of the offering.
Our net tangible book value as of March 31, 2000 was $0.0596 - per
share. "Net tangible book value" per share represents our total tangible assets
less total liabilities divided by the number of shares outstanding of common
stock. Our net tangible book value after the offering on a pro-forma basis will
be $0.2394 per share assuming that we sell the full number of shares we are
offering. This represents an immediate dilution in net tangible book value per
share of $4.2606 if the entire offering is sold to new investors purchasing
shares at $4.50 per share.
<TABLE>
The following table illustrates the per share dilution that you will
experience on a pro forma basis as if the shares offered herein were outstanding
as of March 31, 2000. As there is no guarantee that we will receive any
proceeds, the table presents per share dilution assuming receipt of 25%, 50% and
100% of the offering.
<CAPTION>
- ------------------------------------------------------------ -------------------- ------------------- ----------------
Percentage of offering received 25% 50% 100%
- ------------------------------------------------------------ -------------------- ------------------- ----------------
<S> <C> <C> <C>
- ------------------------------------------------------------ -------------------- ------------------- ----------------
Offering price per share $4.5000 $4.5000 $4.5000
- ------------------------------------------------------------ -------------------- ------------------- ----------------
Net tangible book value after sales of common shares $0.1056 $0.1512 $0.2394
- ------------------------------------------------------------ -------------------- ------------------- ----------------
Dilution to purchasers of shares $4.3944 $4.3488 $4.2606
- ------------------------------------------------------------ -------------------- ------------------- ----------------
</TABLE>
This information is based on pro forma shares outstanding on March 31,
2000 and excludes all shares issuable upon exercise or conversion of warrants
and convertible securities and shares reserved for issuance pursuant to our 1998
Stock Plan.
-15-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following should be read in conjunction with the "Risk Factors"
starting on page 5 of this prospectus and the "Financial Statements" and the
Notes thereto.
We did not generate any subscription revenues by providing wireless
cable services during fiscal 1998 and 1999 respectively. We did not have enough
subscribers in either period to generate revenues sufficient to cover our
operating expenses which totaled $353,075 and $2,383,330, respectively, in
fiscal 1998 and 1999. Our operating expenses included service costs, programming
and license fees, general and administrative expenses, and certain acquisition
expenses resulting from acquiring spectrum. Our expenses increased substantially
in 1999 over those in 1998 as we substantially increased the scope of our
business operations during that period.
During 1998 and 1999, we experienced continuing cash shortages due to
an insufficient subscriber base. The resulting cash shortages rendered us unable
to advertise and aggressively promote our services. Because we have received no
revenues from operations and do not anticipate receiving significant revenues
for the remainder of the year from operations, we have depended and will likely
continue to depend upon equity and debt financing to provide necessary working
capital for the foreseeable future. We have obtained financing primarily from
the following sources, and believe that our primary sources of financing during
the next 12 months will come from the following sources as well as the proceeds
from this offering.
o During the years ended September 30, 1999 and 1998, we
received equity investment of $2,614,074 and $295,000,
respectively. This investment was in the form of issuance of
our common stock in various private placements.
o In October 1999, we received financing of $740,000 from Credit
Bancorp, a Netherlands Antilles company, in the form of a
convertible subordinated debenture. Under the terms of the
debenture, we are to pay Credit Bancorp interest at a rate of
7% per annum over a period of three years. Principal and
accrued interest is convertible into common stock at the
option of Credit Bancorp. Credit Bancorp has notified us that
it has converted the debenture into common stock.
o On April 14, 2000, we entered into a Securities Purchase
Agreement with six investors, for the purchase of investment
units, consisting of common stock, common stock purchase
warrants, 4% subordinated debentures and preferred stock, all
which are described below. We refer to these investors as unit
investors in this prospectus. Pursuant to the Securities
Purchase Agreement, the unit investors have purchased 760,000
shares of common stock, warrants to purchase 3,600,000 shares
of common stock and subordinated debentures with a principal
amount of $3,280,000 for a total price of $4,800,000. The unit
investors have the option to purchase additional shares of
common stock, warrants and series A preferred stock from us
for a maximum amount of $1,920,000. The unit investors will be
required to purchase these securities if an effective
registration statement under the Securities Act is in effect
with respect to all the common stock issued and issuable upon
the exercise of the warrants and conversion of the
subordinated debentures and series A preferred stock.
-16-
<PAGE>
During the next 12 months we intend to expand our existing licensed
operations in Mount Diablo, Ukiah, South Bend, Grand Rapids and San Diego,
initiate and expand our Internet service and expand our overseas operations,
primarily in Argentina, Peru and Ghana. We anticipate that our expansion will
involve the purchase of significant equipment in Argentina and Peru, and
estimate that the expenditure will be approximately $4,000,000 to $5,000,000. We
also intend to perform additional development on the DWCP System during this
period and we anticipate that our expenditures may be as high as $7,000,000 for
research and development depending upon sources and availability of financing.
We currently have 11 full-time employees and anticipate hiring more employees as
we enter new markets. Based on our current plans, we anticipate that the number
of our employees will at least double during the next 12 months.
As of March 31, 2000, our total working capital was $764,215. Based on
our current cash projections, we anticipate that we will be able to fund our
operations with available cash, cash we receive in this offering and the proceed
of the sale of the securities described above will be sufficient to fund our
operations for the next 12 months. We do not anticipate that we will raise
significant revenues from operations during the next 12 months. If we raise
substantially less than the maximum funding in this offering, or if expenditures
are greater than those which we presently anticipate, our available cash may not
be sufficient to finance our projected operations during this period.
-17-
<PAGE>
BUSINESS
Introduction
In February of 1997, Worldwide Wireless, Inc., a Nevada corporation,
was formed to coordinate the operations of TSI Technologies, Inc., a Nevada
corporation, and National Micro Vision Systems, Inc., a Nevada corporation. Its
purpose was to complete the development of its patented advanced digital
wireless telephone and network designs and to finance, manufacture, and market
these units and systems. TSI Technologies, Inc. was the research and development
company formed for the purpose of creating and developing the DWCP system.
National Micro Vision Systems, Inc. was formed to operate a network of wireless
Internet sites. In April of 1998, World Wide Wireless, Inc, TSI Technologies and
National Micro Vision Systems, Inc. acquired Upland Properties, Inc., a Nevada
corporation, for stock and transferred their assets to Upland Properties, Inc.
Upland Properties then changed its name to World Wide Wireless Communications,
Inc. and is trading OTCBB under the symbol WLGS. Both World Wide Wireless, Inc.
and TSI Technologies, Inc. remain significant shareholders in our company, but
neither plays a role in our current operations. National Micro Vision Systems,
Inc. is now completely separate from and unrelated to us.
We have purchased and currently lease a substantial number of
high-speed wireless Internet frequencies within the MMDS spectrum in the United
States, Argentina, Peru and Ghana. We are now attempting to market to our
wireless Internet frequencies directly to consumers for use in accessing the
Internet and are considering the possibility of entering into strategic
alliances with other companies to market access to our high-speed wireless
Internet frequencies. We plan to purchase or lease additional wireless Internet
frequencies in the United States and abroad.
In addition to acquiring and developing wireless Internet frequencies,
we are also attempting to develop a new generation of wireless cellular
telephone technology that we have named Digital Wireless Call Processing System,
or DWCP. We believe that this technology may significantly enhance wireless
communications in the future by dramatically increasing cellular telephone
network capacity.
The Industry
Use of the Internet and private communications networks has expanded
and continues to expand rapidly. International Data Corporation estimates that
there were 142 million Internet subscribers at the end of 1998, and projects
that this number will grow to over 500 million subscribers by 2003. Businesses
increasingly depend upon data networks, not only for communication within the
office, but also to exchange information among corporate sites, remote
locations, telecommuting employees, business partners, suppliers and customers.
Consumers are also accessing the Internet to communicate, collect and publish
information and conduct retail purchases.
-18-
<PAGE>
The growth in data traffic is resulting in an increase in the demand
for high-speed access. In light of this demand, the FCC has taken steps to
increase the availability of frequencies and bandwidth that may be used by
wireless carriers in the United States for such data transmission. In addition,
an FCC ruling in September 1998 allowed license holders of MMDS, or various
frequencies within the band of 2.15 to 2.68 Gigahertz, or GHz, to offer two-way
broadband wireless data services. Previously, these frequencies had been
restricted to one-way video transmissions which limited their effectiveness for
data transmission. The FCC has increased the availability of various frequencies
within the bands of 24 to 40 GHz, frequencies often referred to as LMDS.
Internationally, these frequencies vary slightly, with the MMDS-type service
being proposed for frequencies from 2.5 to 4.0 GHz while LMDS-type service is
offered on frequencies similar to the United States.
The FCC has also adopted orders to allocate additional spectrum through
auctions during 2000 which can be used by high-speed data transmission service
providers. Opportunities in broadband wireless access are increasing globally as
Europe, Latin America, Asia Pacific and Canada join the United States in
promoting competition in the local communications services market by allocating
frequencies and bandwidth and issuing transmission licenses. In this regard, at
least 26 countries have allocated broadband wireless frequency bands for use or
trials in the last mile, according to Global Telephony.
Deregulation has been a significant catalyst for increased competition
in the long-haul segment of the market and massive spending on network
infrastructure, as incumbent and emerging carriers have sought to address the
growing demand for bandwidth. In the local access segment of the market,
deregulation has also been a significant catalyst for the growing interest in
providing broadband access directly to subscribers. Data services that
historically were offered only by a single provider for a region now may be
offered by a number of competing service providers. This increased competition
has given local service providers compelling incentives to improve data
transmission rates in order to offer additional value-added services to
subscribers. However, bandwidth limitations of the existing last mile
infrastructure have constrained service providers from exploiting these
opportunities. Last mile links to subscribers typically consist of copper wires
that operate at substantially lower transmission speeds than those offered in
the long-haul segment of a network, or by some available broadband alternatives.
These copper wires were originally intended to carry only analog
circuit-switched, voice signals. As a result, the last mile has become a
bottleneck that limits high-speed data transmission.
Alternative technologies for broadband access include:
o Digital subscriber line, or DSL, technology improves the data
transmission rates of a telephone company's existing copper
wire network;
o Cable modems, which are designed to provide broadband Internet
access and are targeted primarily at the residential market;
o Fiber-Based Solutions and high-capacity leased lines, which
offer the highest data transmission rate of any of the
alternative technologies for broadband access;
o Point-to-point wireless technology enables data transmission
using a dedicated radio link between two locations; and
-19-
<PAGE>
o Broadband point-to-multipoint wireless networks, which consist
of a wireless hub that communicates over radio frequencies to
transmit and receive network traffic to and from wireless
modems installed at multiple subscriber locations.
Both incumbent and emerging service providers are emphasizing broadband
wireless technologies for Internet access. Established carriers are expected to
use broadband wireless technology to reach new customers to whom they previously
could not provide access, fill coverage gaps in their existing networks and
deploy value-added services in a cost-effective manner. For example,
International Data Corporation reports that in 1999, Sprint and MCI WorldCom
spent over $1.5 billion to purchase companies holding MMDS licenses. Emerging
carriers may use this technology to bypass existing wire-based infrastructure
and to compete with incumbent carriers. In addition, this technology may be used
to deploy broadband services in regions where there is no wire-based
communications infrastructure. Estimates of the revenue which MMDS licenses will
generate vary substantially, but International Data Corporation estimates that
revenue generated by basic services delivered via fixed wireless technologies
will grow from $767 million last year to $7.4 billion in 2003.
MMDS and Other Fixed Wireless Transmission Systems
The two primary broadband frequencies generally considered for fixed
wireless transmissions are MMDS and LMDS. In certain specific circumstances,
LMDS is a very attractive alternative to wired services. Its major benefit is
its bandwidth, which is large enough to transmit large amounts of data at once.
On the other hand, LMDS has severe limitations as well including high costs of
build out, very short range (under 5 kilometers) and severe problems with
interference from weather and atmospheric conditions. Even though it has these
limitations, LMDS would appear to have its major potential in wireless local
loops, internal wireless networks, intranets, etc.
MMDS, while still considered a broadband service, has less bandwidth
than LMDS. Nonetheless, it has more than enough bandwidth for the great majority
of potential business and residential users. On the other hand, in the United
States, which allows 10 watts of power in transmitting data, the range of MMDS
is at least 50 kilometers and it is much less affected, if at all, by
atmospheric and meteorological phenomena. It is also much less expensive to
build-out than LMDS, in addition to the fact that, because of its greater range,
fewer transmitters are required.
Both LMDS and MMDS are transmitted over a limited number of licensed
frequencies that protect data from interference by other forms of radio or
microwave transmitters. It is critical, therefore, that any company operating or
attempting to develop a system of wireless Internet over either LMDS or MMDS
frequencies acquire these limited frequencies as quickly and as inexpensively as
possible and for as many locations and as many channels/bands as possible in
each location.
Because of the limitations of LMDS, and because we believe that the
more viable market for wireless high-speed services is in the small to medium
size business and residential market, we have decided to concentrate exclusively
on MMDS and other lower-frequency services. In that context, we have been
actively engaged in the acquisition of wireless Internet frequencies in the
United States and especially abroad.
One major technical problem with MMDS has traditionally been a clear
line of sight was necessary between the transmission and the receiver. This
limitation allowed MMDS to be used only in areas with even terrain and no
obstructions, insofar as buildings and hills would often disrupt MMDS
transmissions. Although MMDS continues to experience line of sight limitations,
there have been recent developments which have shown a potential for reducing
these problems. Cisco Systems, Inc. has recently announced the development of
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<PAGE>
Vector Orthogonal Frequency Division Multiplexing, which purportedly has the
ability to reassemble multi-path MMDS signals at the receiving point so that
they appear to arrive in a single stream from one location, even if obstacles
are in the path of the original MMDS signal. (Communications Daily, MMDS
Industry Gears Up on Standards Issues, Spectrum Planning, April 3, 2000). This
would have the effect of significantly reducing the line of sight problem with
MMDS and, we believe, will enhance MMDS as a medium for Internet access.
A part of the spectrum MMDS occupies consist of frequencies referred to
as Institutional Television Fixed Service, or ITFS. These frequencies are
reserved by federal law to television broadcasting by religious, educational or
other nonprofit groups. An increasing number of providers of data transmission
through MMDS are leasing transmission rights of the holders of ITFS licenses. As
we discuss below, we have leased a number of ITFS frequencies from a nonprofit
organization.
International Broadband Use
We believe that international markets offer enormous potential for
growth. Although use of the Internet has grown substantially internationally, we
believe that the combination of obsolete equipment and newly privatized systems
in many countries provide us with great opportunity. The technology we employ
allows countries such as Ghana and Argentina to establish an up-to-date,
high-speed, broadband wireless Internet system equal to any on the most
developed nations with very little infrastructural costs. The same will be true
in the many other countries throughout Asia, Latin America, Africa, the Middle
East and Europe in which we are actively seeking wireless frequencies.
We believe that our approach to providing high-speed, broadband, fixed
wireless Internet service will make our service available to a broader customer
base than is possible with certain other fixed wireless services. By
concentrating on the acquisition of relatively low-frequency spectrum, we can
provide service over a substantially larger market of customers, with enhanced
propagation properties, and for substantially lower cost than can be offered by
higher-frequency LMDS-type fixed wireless services. It is our belief that the
bandwidth and speed of our service will meet the requirements of at least 90% of
the potential high-speed wireless Internet customer base, and we hope to be able
to provide this service more economically and with greater reliability than our
competition. In the international market, we should be able to provide a quantum
leap in the quality of Internet service beyond that which currently exists and
at a price point similar to that being charged by providers of the current
service.
Our strategy
Our activities are currently divided into three categories:
o Acquisition of Wireless Internet Frequencies - Spectrum;
o Development of Wireless Frequencies - Build Out; and
o Development and Licensing of DWCP.
Acquisition of Wireless Internet Frequencies - Spectrum
We have determined that our primary target for acquisition of wireless
frequencies will be in the MMDS frequency range within the United States of
2.5GHz to 3.0GHz and in similar frequency ranges up to around 5.0GHz
internationally. With these frequency ranges we believe that we will be able to
provide the highest quality, broadest band, and fastest service and the most
reasonable costs to the largest number of potential customers. By positioning
ourselves to provide enhanced connectivity to the largest number of people, we
believe that we will play a significant role in the expansion of this remarkable
technological development in both the short and long term.
-21-
<PAGE>
Prior to 1999, we controlled MMDS and ITFS licenses in only three
locations - the East Bay region of San Francisco, California, northern San Diego
County, California, and South Bend, Indiana. Since the beginning of 1999, we
have acquired rights - either through long-term leases with options to purchase
or outright purchases - to additional spectrum both in the United States and
elsewhere. As of the date of this offering, we lease, own or possess
reversionary rights to licensed frequencies in the following additional
locations:
Location State/Country
Grand Rapids Michigan
Vail Colorado
Aspen Colorado
Key West Florida
Ukiah California
La Grande Oregon
Pierre South Dakota
Casper Wyoming
Entire nation of Ghana, West Africa Ghana, West Africa
Buenos Aires Argentina, South America
Rosario Argentina, South America
Santa Fe Argentina, South America
Corrientes Argentina, South America
Mendoza Argentina, South America
Neuquen Argentina, South America
Cordoba Argentina, South America
Bahia Blanca Argentina, South America
Lima Peru, South America
The licenses in the United States listed in the above table are
currently leased from Shekinah Networks. Pursuant to an Option Agreement with
Shekinah Networks, we paid $500,000 to lease eight ITFS channels for our
high-speed MMDS wireless Internet connections, as authorized by the FCC. This
agreement also provides us an exclusive option to lease excess capacity on
Shekinah's remaining thirty-two ITFS channels, as they become available. The
monthly minimum transmission fee to be paid to Shekinah for each license or
application leased, will be 5% of the gross system receipts or $500, whichever
is greater. Each lease has a term of five years, which may be renewed at our
election for an additional five-year term if the FCC renews the license.
All of the United States licenses described above allow us to broadcast
over MMDS frequencies using one-way transmissions only. With the exception of
certain limited provisional licenses granted in various parts of the country,
the FCC has not yet granted long-term two-way transmission licenses. The FCC
announced in March 2000 that it would begin to accept applications for two-way
MMDS licenses during the week of July 3 through July 10. We are in the process
of preparing our applications for two-way transmissions for our existing
licenses for submission to the FCC within this period.
Development of Wireless Frequencies - Build Out
As spectrum is acquired, we plan to provide high-speed Internet
services, including telephony and videoconferencing services. We plan to join
with local partners and other entities in the industry to form strategic
alliances in connection with the use and implementation of high-speed wireless
services. We may also provide services directly to users of Internet services.
As of the date of this prospectus, and except as described below, we have not
yet entered into any strategic alliances.
-22-
<PAGE>
We are currently operating a single system off of Mt. Diablo in
Concord, California, an area some thirty miles east of San Francisco. The
license at Mt. Diablo is one of only two one-channel licenses that we control,
with all the remaining ones being at least four channels. Revenue generating
service commenced in this location in December 1999. Because the high-speed
wireless component of the Mt. Diablo operations is only available in downlink
mode, we have been aware from the outset that the operations in the Concord area
would not be typical for the more conventional two-way systems. However, because
the FCC has not yet approved permit applications for two-way transmissions over
MMDS frequencies and because of the specific demographics within the potential
Mt. Diablo transmission area, we determined to commence the limited-type of
service close to our headquarters in Oakland. We intend to use this one-way
wireless system in only one additional location - San Diego, California. The
Concord and San Diego operations will use high-speed wireless transmissions to
download information from the internet and similar data sources, but will use
telephone lines, either "normal" or high-speed, for the uplink. While this
one-way service will provide users with enhanced Internet connections, it will
not offer full-time, always on, high-speed two way wireless service that our
other locations will provide.
We intend to build-out our next domestic system in the small town of
Ukiah, California, some ninety miles north of San Francisco. The FCC has already
granted digital authorization for the Ukiah license and the remaining locations.
The proximity of Ukiah to the corporate headquarters and the relatively compact
demography and geography will provide us with a convenient platform to commence
full bi-directional wireless service. After Ukiah, the domestic build-out
program will include northern San Diego County, South Bend, Indiana, Grand
Rapids, Michigan, Vail and Aspen, Colorado, Key West, Florida, Pierre, South
Dakota and Casper, Wyoming.
We intend to commence operations in Buenos Aires, Argentina during the
first six months of 2000. Preparations have commenced to secure the necessary
backbone connections and transmitter locations in the Greater Buenos Aires
metropolitan area, which contains more than 12 million people. Our ability to
begin transmission over the frequencies is subject to approval of the Comision
Nacional de Communicaciones, or CNC, the governmental agency primarily
responsible for regulating telecommunications in Argentina. We have not yet
received approval by the CNC, and the Argentine government recently announced
that it was placing a freeze on the review of all license transfer requests.
However, we believe that the CNC will ultimately approve our applications and
allow for the transfers.
If the transfer is approved, we will commence transmitting in Buenos
Aires by as early as May 27, 2000. Shortly thereafter, commencement of service
is planned in Cordoba and Mendoza, both cities with around 2 million
inhabitants. As an initial marketing approach, we expect to establish, jointly
with a current retail establishment, an Internet Cafe in Buenos Aires where we
intend to broadly expose our services to a large number of potential customers.
In Argentina, we will operate through our majority-owned subsidiary, Infotel
Argentina, S.A. We expect to be in operation in all eight cities in which we
have obtained licenses within eighteen months and hope to expand the number of
licenses currently owned. With the current licenses, our transmission range in
Argentina will cover approximately 50% of the country's 33 million inhabitants.
We do not have Internet access or other service agreements in Argentina with any
customers at this time, however.
We intend to begin operations in Peru this year. We have acquired all
of the shares of Digital Way, S.A., which presently owns an MMDS spectrum
license in Lima/Callao and is in the process of attempting to secure additional
license in that area as well as licenses for five different cities in Peru. We
have yet to receive governmental consent in Peru for the transfer of the control
of Digital Way's licenses. We will not be able to commence our Internet service
in Peru until we obtain that consent.
-23-
<PAGE>
We intend to commence service in Ghana, West Africa this year. Although
Ghana has a much smaller economy than Argentina, fewer people and less computer
penetration, we believe that Ghana and other neighboring West African nations
provides us with significant revenue potential. Like Argentina, such public
locations for service such as Internet cafes and the country's Post Office
Department are likely starting places for revenue service. In addition, we
believe that the stable political situation in Ghana and the continuing
relatively fast-pace of economic growth bodes well for an ever-increasing demand
for Internet service. We have been informed that we need to reapply for the
licenses we acquired in Ghana on the ground that the original recipient of the
license never used the licenses. We are eligible to reapply for the license upon
the delivery of a development plan to the National Communications Authority in
Ghana and believe we will be granted the license, although we are not certain
whether we will receive that license.
We have entered into a letter of intent with El Salvador
Telecomuniciones S.A. de C.V. for the purpose of acquiring a 25% ownership
interest in that company in El Salvador. Pursuant to the terms of the letter of
intent, we have paid $1,000,000 to that company as an advance payment of the
purchase price, which was to total $3,500,000. The agreement provides that the
purchase was conditioned upon that company's acquisition of certain licenses and
the occurrence of certain other conditions which have not been met. As a result,
we beliver that it is improbable that the sale will occur and we are seeking
return of the $1,000,000 payment.
We have applied for licenses in the 3.5 GHz range in Germany and the
Czech Republic. We are awaiting a definitive response on those applications. In
addition, we are exploring additional markets in Europe - including Portugal as
well as much of Eastern Europe - for expansion of our services.
We expect that, in the case of any future acquisition of licensed
frequencies, we will operate the systems alone, do so in joint ventures with
local entities, or transfer the licenses to third parties for significant
consideration.
Development and Licensing of DWCP System
We are completing the development of our DWCP system, an acronym for
Distributed Wireless Call Processing System. The major feature of the DWCP
system is that it allows individual cell phones and other communications units
to amplify signals, thereby reducing the need for repeater stations. The DWCP
system allows every handset itself serves as a mobile, low-power repeater site,
and each unit facilitates the operation of the entire local network within a
radius of 10-20 miles. A whole continent populated with these units would
theoretically have no need for infrastructure support of any kind. In practice,
we or parties to whom we license DWCP will build widely scattered gateway sites
that will serve to introduce local signals into long lines, international and
satellite service providers and introduce data signals into destination networks
while providing a medium for our generation of an ongoing revenue stream.
It is expected that there will be a dramatic increase in total network
capacity and in individual and traffic-form capacities resulting from the use of
the DWCP system. This transmission technique, implemented in the chipsets that
are the core of the new technology, embodies very low power transmissions along
multiple routes between two mobile or stationary points on the network. The
result is a large group of transmission paths blanketing the entire cell
compared to the hub and spoke transmissions between the central node and the
multiple users of a traditional cellular system. The multiplicity of routes
between any two points that is possible with this fabric generates an aggregate
capacity for the network that far exceeds a hub and spoke system, where multiple
transmission paths converge on a single hub, quickly consuming the available
radio frequency in the cell.
-24-
<PAGE>
The low transmission powers needed for the DWCP system have the further
potential to allow this new network technology to be overlaid on existing
wireless cellular installations without interfering with existing signals in the
same frequency. As a result, the new technology has the potential to provide
overbuild capacity, incremental returns on investments in frequency, and
introduction of new, high-value data and non-voice services on cellular
franchises already in place.
This new technology is currently being engineered to operate in, among
other frequencies, the PCS frequency bands and in so-called free or unlicensed
frequency bands in the United States. It is readily adapted to other frequencies
- - military frequencies and frequencies that may be allocated by foreign
governments.
By licensing or otherwise transferring this technology to third parties
and retaining a substantial royalty interest in it, we believe that we will be
able to concentrate on our core business while retaining the potential for a
significant revenue stream.
Investors should be aware that this system is largely untested and is
not widely used, and we cannot ensure that an increase in usage will actually
result. We are currently having feasibility studies conducted on DWCP to
evaluate its capabilities and market potential.
Acquisitions
On December 1, 1999, we signed an agreement to acquire 51% of Infotel
Argentina, S.A., the owner of MMDS licenses in eight of the largest cities in
Argentina, including Buenos Aires. Under the agreement, we will appoint the
majority of Infotel's directors and will be in charge of its management. The
purchase price for Infotel Argentina S.A. consisted of $900,000 in cash and
454,545 shares of common stock. The Agreement allows us to rescind the purchase
in the event that the CNC does not approve the sale of Infotel Argentina S.A. to
us and receive repayment of the purchase price.
On February 10, 2000, we signed an agreement to purchase Digital Way,
S.A., a Peruvian telecommunications company. Digital Way currently owns licenses
for MMDS spectrum in the 2.3 to 2.5 GHz range, has national and international
long-distance concessions as well as value added licenses for services in Peru.
This acquisition requires the approval of the relevant agencies of the Peruvian
government.
Business Locations
Our business headquarters is located at 520 Third Street, Oakland,
California, 94607. We also have offices located in Concord, California and
Buenos Aires, Argentina. Our office space at One Post Street, San Francisco, was
leased on a month-to-month basis. We vacated these offices on August 31, 1999.
The actual rent paid, for the fiscal year ended September 30, 1999, was $22,341.
In April 1999, we entered into a 5-year lease for approximately 6,000
square feet of office space in Jack London Square, Oakland, California. The
lease commenced on June 5, 1999. The triple net rental agreement is for $10,038
per month during the first year. The lease provides for an annual increase based
on the indexed cost of living adjustments. Additionally, the lease provides for
the landlord's participation in partial reimbursement over the terms of the
lease to us for leasehold improvements for which we pay. We began to occupy this
space on September 1, 1999. The minimum annual rent is $120,456 for the fiscal
years ended September 30, 2000, 2001, 2002 and 2003, and $81,642 for the period
October 1, 2003 to June 4, 2004.
-25-
<PAGE>
We also entered into a lease for office space to operate its network
operation center at 2962 Treat Boulevard, Suite C, in Concord, California 94518.
The triple net rental agreement is for $1,890 per month. The lease provides for
an annual increase based on the indexed cost of living adjustments.
Additionally, the lease provides for the landlord's participation in partial
reimbursement over the terms of the lease to us for leasehold improvements we
make. We commenced its occupation of this 1680 square foot space on May 1, 1997.
The lease expired on April 30, 2000. We are now occupying the premises on a
month-to-month basis.
We have lease space by virtue of our acquisition of Infotel Argentina.
The lease is for approximately 1,500 square feet and is leased on a
month-to-month basis. The monthly rent is approximately $2,000 per month. The
lease started on January 1, 1999 and expires on December 31, 2003.
Regulation
We intend to offer our services exclusively over licensed frequencies
in each of the countries in which we operate. In the United States, our
frequencies are licensed by the Federal Communications Commission, in Argentina,
by the Comision Nacional de Comunicaciones, in Peru by the Telecommunications
Concessions Department of the Ministry of Transport, Communciations, Housing and
Construction and in Ghana by the National Communications Authority. We are
either applying directly for licenses in some countries or applying jointly with
local partners in others. Some countries require, for example, domestic control
of any entity licensed to use radio frequency within their territory.
Within the United States, we operate under MMDS and ITFS licenses
issued by the FCC. These licenses are issued in the 2.5 GHz frequency range and
can be revoked if the licensee or its assignee is in violation of any of the
operation provisions under the license. The licenses are issued in the United
States for a fixed time period and can be renewed. Yearly reports are required
to be filed with the FCC to establish that the licensee or its assignee is
complying with the requirements of the license.
Outside the United States, rules and regulations are quite varied. In
Argentina, the proposed frequencies for MMDS licenses are between 2.4 GHz and
2.6 GHz and are granted by the CNC. Licenses are granted for periods of 10
years, but may be extended for lengthier periods at the discretion of the CNC.
In Peru, frequencies for MMDS licenses are also between 2.4 GHz and 2.6 GHz and
are granted for periods of 20 years and in Ghana licenses may be of unlimited
duration. As in the United States, licenses may be revoked if the licensee
violates any of the license provisions. There are significant differences in the
clarity of regulations as well as in the consistency of their enforcement by the
regulatory authorities, and changes in governments may result in substantial
changes in the enforcement of regulations. For example, in Ghana the National
Communications Authority has taken over responsibility for the issuance of
licenses from the Ghana Frequency Registration and Control Board. Several
licenses which we have acquired in that country were originally issued by the
Frequency Registration and Control Board, which subsequently sold licenses for
the same frequencies to third parties after that agency no longer had authority
to regulate license approvals. We are attempting to limit our involvement to
countries in which, historically, such changes in administration have not
created disruptions for license holders, although our experience has shown that
it is not always possible to do so.
-26-
<PAGE>
In addition to these laws, our business operations also make us subject
to laws pertaining to transmitters of information over the Internet. The law
relating to liability of Internet service providers and online service providers
for information carried on or disseminated through their networks is currently
unsettled. A number of lawsuits have sought to impose liability for defamatory
speech and indecent materials. A recent federal statute seeks to impose
liability, in some circumstances, for transmission of obscene or indecent
materials. In one case, a court has held that an online service provider could
be found liable for defamatory matter provided through its service, on the
ground that the service provider exercised active editorial control over
postings to its service. Other courts have held that Internet service providers
and online service providers may, under certain circumstances, be subject to
damages for copying or distributing copyrighted materials. The
Telecommunications Act of 1996 prohibits, and imposes criminal penalties and
civil liability for using, an interactive computer service for transmitting
indecent or obscene communications. Although we intend to conduct our operations
in a manner which reduces the risk of liability under these laws, we cannot
assure you that we will avoid liability entirely under these laws.
Patents/Intellectual Property
We recently received from the United States Patent and Trademark Office
a patent pertaining to the DWCP system, which has been issued patent number
6,055,429. We do not have other patents pending pertaining to other
technologies.
We currently use service mark "World Wide Wireless Communications" and
have applied to register the service mark consisting of both the name itself and
a design logo with the United States Patent and Trademark Office. We presently
intend to change our corporate name from World Wide Wireless Communications,
Inc. to another name in the near future.
Litigation
On August 26, 1999, we filed suit against Credit Bancorp, in U.S.
District Court in San Francisco, regarding improprieties on the part of Credit
Bancorp relating to the August loan. The case was settled on October 11, 1999.
As part of the settlement agreement, Credit Bancorp agreed to convert the
original loans granted to us to a convertible debenture in the amount of
$740,000. On October 11, 1999, we issued a convertible unsecured debenture for
$740,000 to Credit Bancorp in settlement of this obligation. The terms of this
convertible unsecured debenture are 7% interest per annum payable, semiannually
on the last day of February and September, with the principal due September 30,
2002. All amounts of unpaid principal and accrued interest of this debenture are
convertible at any time at the conversion price of $1.60 per share of
unregistered, restricted shares of our common stock. Credit Bancorp's receiver
has agreed to convert principal and accrued interest owing on the debenture into
482,734 shares of our common stock.
In November 1999, the SEC filed suit against Credit Bancorp alleging
violations of various securities laws in connection with its actions in relation
to us and others, and seeking various forms of relief including disgorgement of
its illegal gains. A receiver has been appointed to administer the affairs of
Credit Bancorp. At this time, management believes that if the suit is
successful, certain benefits may accrue to us, including monetary remuneration.
-27-
<PAGE>
MANAGEMENT
<TABLE>
Our executive officers and directors and their ages as of April 30,
2000 are as follows:
<CAPTION>
Name Age Position Period of Service
- ---- --- -------- -----------------
<S> <C> <C> <C>
Douglas P. Haffer........................... 52 Chairman.of the board, April 1998 to present
CEO and CFO
Wayne Caldwell.............................. 48 Director, vice president November 1999 to present
and secretary
Dana Miller................................. 40 Vice.president May 1998 to present
Ramsey Sweis................................ 34 Director. May 1998 to present
Robert Klein................................ 51 Director. May 1998 to present
</TABLE>
Douglas P. Haffer has practiced law in San Francisco, Beverly Hills,
and Washington D.C. for twenty-five years. During that time he has served as
general counsel and/or vice president, and on the Board of Directors, of several
corporations, including Commercial Bank of San Francisco, Aca Joe Inc., Finet
Holdings Corporation, Worldwide Wireless Inc. and Uniprise Systems,
Incorporated. His legal practice concentrated primarily on providing legal
counseling to small or start-up businesses. In addition, a significant part of
his practice contained an international aspect involving foreign investors
seeking investment platforms in the United States. Mr. Haffer attended the
University of Wisconsin, Madison from 1965 to 1969 where he received his
Bachelor of Arts degree with honors with a major in Latin American history, and
was elected to Phi Beta Kappa. He then attended the Harvard Law School from
which he graduated in 1972 with a Juris Doctor degree. Mr. Haffer lived in Latin
America for seven years and reads, writes and speaks Spanish fluently. He has
been a lecturer and adjunct professor of law at the University of San Francisco
Law School and at the Law School at the University of California at Davis.
Wayne Caldwell has served as Vice President and General Counsel since
November 1999. Mr. Caldwell is responsible for legal, governmental and
regulatory matters. Prior to joining World Wide Wireless Communications, Inc.,
Mr. Caldwell was in private practice for two decades specializing in business
and regulatory law. Mr. Caldwell is a graduate of Stanford University in
economics and received his law degree from the University of San Francisco.
Dana Miller was Director of Licensing and Acquisition for National
Micro-Vision Systems, Inc. from 1994 to 1996. He worked extensively with the
Federal Communications Commission and FCC legal counsel and was responsible for
compliance with all FCC regulations. Mr. Miller also coordinated acquisitions of
microwave television licenses throughout the United States. He has negotiated
FCC lease agreements with educational institutions and nonprofit organizations.
From 1996 to 1998 Mr. Miller was a self-employed telecommunications consultant.
He is an expert in FCC license application, FCC petition, and license
acquisition and maintenance. His accomplishments include resolution of a recent
long-term, complex conflict between us and a second national wireless firm,
freeing us up to implement high-speed wireless Internet operations in the San
Francisco metropolitan area.
Ramsey Sweis has had extensive experience in management and in the
product design industry. He has been a leader and developer of high performance
teams by enabling, training and motivating team members. In the recent past he
has provided computer and engineering services to General Motors and Chrysler
Corporation. In connection with those activities Mr. Sweis has developed designs
between engineering, prototype models, tooling and vendor sources. Mr. Sweis
resides in Roseville, Michigan. He has extensive experience in the product
design industry. He currently serves as a Program Manager for Hanke Training &
Design of Clawson Michigan. From 1997 to 1999 Mr. Sweis served as a designer for
Computer and Engineering Services of Auburn Hills, Michigan From 1991 to 1997,
Mr. Sweis was a design leader for Megatech Engineering of Warren Michigan.
-28-
<PAGE>
Robert Klein's experience includes an active twenty-year career in the
securities industry handling a wide range of duties including management roles
and institutional trading. For the past fifteen years a major emphasis has been
placed on packaging complex transactions on behalf of corporate clients
resulting in the creation and sale of marketable securities. The past five years
has been spent on public company development. Since 1992, Mr. Klein has been
self-employed through Weissgeld Capital Group, Ltd, a company he founded. In the
past, he served as a director for three brokerage firms, including Yorkton
Securities. He is currently a director of Spectrum Oil Corp. Mr. Klein has a
degree in Applied Mathematics from the University of Waterloo, and an FCSI
designation from the Canadian Securities Institute.
Director Compensation
Directors receive no compensation for serving as directors, except that:
o Mr. Sweis received options to purchase 250,000 shares of
common stock on October 22, 1998, at an exercise price of
$0.095 per share. All of Mr. Sweis' options vested immediately
upon the date of grant. The expiration date for Mr. Sweis to
exercise the options is October 21, 2003. To date, Mr. Sweis
has not exercised any options for shares of common stock.o
o Mr. Klein received options to purchase 250,000 shares of
common stock on October 22, 1998, at an exercise price of
$0.095 per share. All of Mr. Klein's options vested
immediately upon the date of grant. The expiration date for
Mr. Klein to exercise the options is October 21, 2003. To
date, Mr. Klein has not exercised any options for shares of
common stock.
Employment Contracts
We have entered into an employment agreement with Mr. Haffer, which
provides for an initial term of three years commencing February 1, 2000 at an
initial annual base salary of $230,000 plus an annual performance bonus of not
less than $34,000. Any bonus in excess of $34,000 will be at the sole discretion
of our Board and will not be tied to a fixed set of objective criteria. Mr.
Haffer's employment agreement also contains a termination provision that
requires us to pay him his annual compensation and minimum bonus amounts
remaining on his three-year contract if he is terminated without cause.
In October of 1999, we entered into a three-year employment agreement
with Mr. Caldwell under which he will receive an annual salary of $48,000. Under
the terms of the agreement, on May 8, 2000, Mr. Caldwell's base salary will be
increased to $72,000 per year, and on November 8, 2000, Mr. Caldwell's salary
will be increased to $96,000 per year. The agreement also provides for an annual
performance bonus of not less than 5% of his base salary and not more than 100%
of his base salary. The decision to grant the bonus and the amount of the bonus
can be decided by management without the consent of our Board of Directors. We
have not established a fixed set of performance criteria on which to base Mr.
Caldwell's bonus amounts. Mr. Caldwell's employment agreement also contains a
termination provision that requires us to pay him his annual compensation and
minimum bonus amounts remaining on his three-year contract if he is terminated
without cause.
In May of 1999, we entered into a two-year employment agreement with
Mr. Miller under which he will receive an annual salary of $96,000. Mr. Miller
is not entitled to receive any bonuses. Under the terms of the employment
agreement, we issued Mr. Miller 179,000 shares of common stock in lieu of
payment of $17,000 towards a past obligation of $37,000 and the company
acknowledged that we paid Mr. Miller $20,000 for the balance of these fees. Mr.
Miller's employment agreement states that he is entitled to receive stock
options on the same terms as those granted to our management, although the
specific number of shares and other terms of the options are not specified. If
Mr. Miller is terminated without cause, he will be entitled to receive his
salary for a period of three months after termination.
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<PAGE>
EXECUTIVE COMPENSATION
<TABLE>
The following table summarizes information regarding the salary and
bonus we paid to Mr. Haffer, our Chief Executive Officer, during the fiscal year
ended September 30, 1999. Mr. Haffer was the only officer who received a salary
plus bonus that exceeded $100,000 during that period.
<CAPTION>
Summary Compensation Table
Restricted Securities
stock Underlying
Name and Principal Position Salary Bonus awards Options/SAR
- --------------------------- ------ ----- ------ -----------
<S> <C> <C> <C>
Douglas P. Haffer 106,000 0 -- 800,000
Chairman, CEO and CFO
</TABLE>
The following table sets forth information concerning grants of stock
options to our Chief Executive Officer for the fiscal year ended September 30,
1999. All options were granted under the 1998 Stock Option Plan. Shareholders
never approved our 1998 Stock Option Plan, and therefore, all incentive stock
options granted under the 1998 Stock Option Plan are classified and taxed as
non-statutory stock options.
<TABLE>
Option Grants
The following table sets forth information concerning grants of stock
options to each of the executive officers and directors named in the table above
for the fiscal year ended September 30, 1999. All options were granted under the
1998 Stock Option Plan. Shareholders never approved our 1998 Stock Option Plan,
and therefore, all incentive stock options granted under the 1998 Stock Option
Plan are classified and taxed as non-statutory stock options.
<CAPTION>
Individual Grants
Number of Percent of
Securities options Options
Fiscal Year Underlying granted to Exercise Exercised
Options Options employees Price as of Expiration
Granted Granted from 8/22/98 ($/Share) 4/30/00 Date
------- ------- ------------ --------- ------- ----
<S> <C> <C> <C> <C> <C> <C>
Douglas P. Haffer................. 1998 800,000 43% $0.095 0 10/22/03
Chairman, CEO & CFO 2000 800,000 $1.62 0 2/1/05
Wayne Caldwell.................... 1999 800,000 21% $0.63 0 10/27/05
Vice Pres. & Secretary
Dana Miller....................... 1998 800,000 21% $0.095 0 8/22/03
Vice President
Ramsey Sweis...................... 1998 250,000 7% $0.095 0 10/22/03
Director
Robert Klein...................... 1998 250,000 7% $0.095 0 10/22/03
Director
</TABLE>
In October 1998, Mr. Haffer received an option to purchase 800,000
shares of our common stock at an exercise price of $0.095 per share. All 800,000
shares vested immediately. The expiration date is 5 years from the date of
grant. The grant of shares was intended to be an incentive stock option, but our
shareholders never approved the plan and; therefore, the options are being
classified as non-statutory stock options. On February 1, 2000, Mr. Haffer
-30-
<PAGE>
received another option to purchase 800,000 shares of our common stock at an
exercise price "at the lowest price permitted under our 1998 Stock Option Plan
such that the grant or exercise of the options will not create a taxable event."
All 800,000 shares vested immediately. The expiration date of the option is 5
years from the date of grant. The option will be treated as non-statutory stock
options.
In October 1999, Mr. Caldwell was granted an option for 800,000 shares
of our common stock at an exercise price of $0.66 per share. All 800,000 shares
vested immediately. The expiration date is five years from the date of grant.
In October 1998, Mr. Miller received an option to purchase 800,000
shares of our common stock at an exercise price of $0.095 per share. All 800,000
shares vested immediately. The expiration date is five years from the date of
grant.
In October 1998, Mr. Sweis received an option to purchase 250,000
shares of our common stock at an exercise price of $0.095 per share. All 250,000
shares vested immediately. The expiration date is five years from the date of
grant.
In October 1998, Mr. Klein received an option to purchase 250,000
shares of our common stock at an exercise price of $0.095 per share. All 250,000
shares vested immediately. The expiration date is five years from the date of
grant.
1998 Stock Option Plan
Our Board of Directors adopted a 1998 Stock Incentive Plan in August
1998 reserving 3,000,000 shares for issuance. The Plan provides for the grant of
incentive stock options, as defined in Section 422 of the Internal Revenue Code,
to our officers and employees, and nonstatutory stock options to employees,
directors and consultants. It may be administered by the Board of Directors or
delegated to a committee. Shareholders never approved our 1998 Stock Option
Plan, and therefore, all incentive stock options granted under the 1998 Stock
Option Plan are classified and taxed as non-statutory stock options.
The exercise price of incentive stock options granted under the 1998
Stock Option Plan must be at least equal to the fair market value of our common
stock on the date of grant. However, for any employee holding more than 10% of
the voting power of all classes of our stock, the exercise price will be no less
than 110% of the fair market value on the date of grant. Nonstatutory stock
options granted to a person who at the time the option is granted does not hold
more than 10% of the voting power of all classes of our stock will have an
exercise price of no less than 85% of the fair market value of the stock on the
date of grant.
Options granted to our employees will become exercisable over a period
of no longer than 5 years, and no less than 20% of the shares covered will
become exercisable annually. No options will be exercisable prior to one year
from the date it is granted unless the Board specifically determines otherwise.
In no event will any option be exercisable after the expiration of 10 years from
the date it is granted, and no Incentive Stock Option granted to a holder of
more than 10% of the voting power of all classes of our stock will be
exercisable after the expiration of 5 years from the date it is granted.
If an optionee's status as an employee with us terminates for any
reason, other than death or disability, then the optionee may exercise Incentive
Stock Options in the three-month period following such cessation. The
three-month period is extended to 12-months for termination due to death or
disability. In the event of a merger or consolidation in which we are not the
surviving entity, or a sale of all or substantially all of our assets or capital
stock, if the surviving entity does not tender to the optionees stock options or
capital stock of substantially the same economic benefit as optionees
unexercised options, then the Board may grant to optionees the right to exercise
any unexpired options for a period of thirty days.
The 1998 Stock Option Plan will terminate in July 2008, unless sooner
terminated by the Board of Directors.
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<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth the beneficial ownership of our common
stock as of April 30, 2000 and as adjusted to reflect the sale of the shares of
common stock offered hereby:
o the chief executive officer, each of the executive officers
named in the summary compensation table and each of our
directors;
o all executive officers and directors as a group;
o each person or entity who we know beneficially owns more than
5% of our outstanding shares of common stock; and
o each selling shareholder. We will not be selling the 5,680,916
shares owned by those shareholders.
Except as otherwise indicated, and subject to applicable community
property laws, the persons named in the table have sole voting and investment
power with respect to all shares of common stock held by them.
Applicable ownership is based on 83,445,517 shares of common stock
outstanding as of April 30, 2000. Beneficial ownership is determined in
accordance with the rules of the SEC. Shares of common stock subject to options
or warrants that are presently exercisable or exercisable within 60 days of
April 30, 2000 are deemed outstanding for the purpose of computing the
percentage ownership of the person or entity holding options or warrants, but
are not treated as outstanding for the purpose of computing the percentage
ownership of any other person or entity. If any shares are issued upon exercise
of options, warrants or other rights to acquire our capital stock that are
presently outstanding or granted in the future or reserved for future issuance
under our stock plan, there will be further dilution to new public investors.
<TABLE>
Selling shareholders are under no obligation to sell all or any portion
of their shares. Particular selling shareholders may not have a present
intention of selling their shares and may sell less than the number of shares
indicated. The following table assumes that the selling shareholders will sell
all of their shares.
<CAPTION>
Number of Percentage of Number of
Shares Shares Outstanding Shares
Beneficially Prior to After Being
Named Executive Officers and Directors (1) Owned Offering Offering Offered
- ------------------------------------------ ----- -------- -------- -------
<S> <C> <C> <C> <C>
Douglas P. Haffer (2).........................................8,511,073 10.01 9.56
Wayne Caldwell (3)..............................................800,000 * *
Dana Miller (4)...............................................1,229,000 1.46 1.39
Ramsey Sweis (5)................................................250,000 * *
Robert Klein (6) ............................................. 250,000 * *
Executive Officers and Directors as a Group..................11,040,073 12.67 12.11
-32-
<PAGE>
Name of Beneficial Owners
- -------------------------
World Wide Wireless, Inc. (7) 16,120,679 19.32 18.44
c/o Lofton & Associates
3233 East Broadway
Long Beach, CA 90803
Kenn Olson (8) 6,356,260 7.54 7.20
3233 East Broadway
Long Beach, CA 90803
TSI Technologies, Inc. 6,042,020 7.24 6.91
One Post Street, Suite 2600
San Francisco, CA 94104
Albert and Francis Kutcher 5,180,300 6.21 5.92
12052 Linda Flora Drive
Ojai, CA 93023
Name of Selling Shareholder
- ---------------------------
Patrick McCleary 350,000 * * 350,000
1215 Wildwood Road
Boulder, CA 80303
Darryl Pohl 1,400,000 1.68 * 1,400,000
c/o Solomon Smith Barney
2420 NW Professional Drive, Suite 200
Corvallis, OR 97330
Ridge Capital Associates LLC 1,818,182 2.18 * 1,818,182
1688 Meridian Avenue, Suite 801
Miami Beach, FL 33139
Behrooz Sarafraz 2,182,500 2.62 1.42 1,000,000
2 Mariposa Court
Tiburon, CA 94920
Chalmers R. Jenkins 400,000 * * 400,000
10727 E. San Salvador Drive
Scottsdale, AZ 85228
Joseph W. Hubbard 20,000 * * 20,000
26573 Basswood
Rancho Palos Verdes, CA 90274
Continental Capital & Equity Corporation 210,000 * * 210,000
195 Wekiva Springs Road, Suite 200
Longwood, FL 32779
-33-
<PAGE>
482,734 * * 482,734
Credit Bancorp (9)
1144 Hooper Avenue Suite 203
Toms River, New Jersey 08753
- ------------------------------------------------------- -------------------- ------------- ----------- ---------------
<FN>
* Less than 1%.
(1) The address for each of the named executive officers and directors is
c/o World Wide Wireless Communications, Inc., 520 Third Street, Suite
101, Oakland, CA 94607.
(2) Includes 1,600,000 shares subject to options that are immediately
exercisable.
(3) Includes 800,000 shares subject to options that are immediately
exersiable.
(4) Includes 800,000 shares subject to options that are immediately
exercisable. In addition, we are informed that Mr. Miller is entitled
to receive 250,000 shares of our common stock which are presently held
by World Wide Wireless, Inc. and have included those shares in the
table.
(5) Includes 250,000 shares subject to options that are immediately
exercisable.
(6) Includes 250,000 shares subject to options that are immediately
exercisable.
(7) We believe that Michael Lynch is a majority owner of World Wide
Wireless, Inc. and TSI Technologies, Inc. Mr. Lynch is not an officer
or director of our company. No officer or director of either World Wide
Wireless, Inc. or TSI Technologies is an officer of our company.
(8) Includes 800,000 shares that Mr. Olson may be entitled to receive upon
the exercise of a stock option he was granted while he was an officer
and director.
(9) Consists of shares issuable upon conversion of principal and interest
owing under a convertible subordinated debenture. The operations of
Credit Bancorp have been suspended and a receiver has been appointed
for that corporation. The receiver has notified us that it wishes to
exercise Credit Bancorp's registration rights and thereby convert
principal and interest owing under the debenture.
</FN>
</TABLE>
Mr. Jenkins was our Chief Operating Officer from May through November
1999. Behrooz Sarafraz has acted as an independent consultant for us
periodically during the previous three years. Continental Capital & Equity
Corporation has provided public relations services for us.
-34-
<PAGE>
CERTAIN RELATED PARTY TRANSACTIONS
As of September 1999, other than employment agreements and stock option
plans, there have been no transactions to which we were a party involving
$60,000 or more and in which any director, executive officer or holder of more
than five percent of our capital stock had a material interest.
DESCRIPTION OF SECURITIES
Common Stock
Our articles of incorporation authorize us to issue a maximum of
100,000,000 shares of common stock, $0.001 par value. As of April 30, 2000,
there were 83,445,517 shares of common stock outstanding. Owners of common stock
are entitled to one vote for each share held of record on all matters to be
voted on by shareholders, except that, upon giving the legally required notice,
shareholders may cumulate their votes in the election of directors. Subject to
the rights of any holders of preferred stock, the owners of common stock are
entitled to receive dividends when, as and if declared by the Board of Directors
out of funds legally available therefore. In the event of a liquidation,
dissolution or winding up of our business, the common stock shareholders are
entitled to share ratably in all assets remaining which are available for
distribution to them after payment of liabilities and preferences to holders of
preferred stock. Holders of common stock have no conversion, preemptive or other
subscription rights, and there are no redemption provisions applicable to the
Common Stock.
We have reserved 3,000,000 shares of common stock that have been
reserved for issuance under our 1998 Stock Option Plan. In addition, we are
obligated to issue 3,600,000 shares of common stock pursuant to the terms of
common stock purchase warrants, dated April 14, 2000, 304,000 shares of common
stock pursuant to the terms of warrants to be issued as of the date of this
prospectus, and additional shares of common stock to be issued pursuant to 4%
Convertible Debentures described below to the unit investors.
Preferred Stock
Our certificate of incorporation does not presently authorize us to
issue any class of stock other than common stock. Pursuant to the terms of a
Securities Purchase Agreement, dated April 14, 2000, between us and various
investors to whom we refer as unit investors in this prospectus, we are required
to submit for shareholder approval an amendment to our certificate of
incorporation that authorizes us to issue preferred stock. The Securities
Purchase Agreement further states that our Board of Directors will authorize the
creation and issuance of a maximum of 1,310 shares of series A preferred stock
following the approval of that amendment by the shareholders and upon the our
receipt of payment of $1,000 per share from those investors listed in the
Securities Purchase Agreement. The unit investors may purchase the series A
preferred stock at any time after the date the series A preferred stock is
authorized, and must purchase the series A preferred stock after we a
registration statement is declared effective with regard to the shares of common
stock the unit investors may purchase pursuant to the Securities Purchase
Agreement. See Registration Rights.
The series A preferred stock will have a par value of $0.01 per share
and a stated value of $1,000 per share. The series A preferred stock will be
convertible at any time into a number of shares of common determined by dividing
the stated value of the series A preferred stock by the conversion price for
those shares. The conversion price shall be the lesser of 110% of the average of
the closing trading prices of the common stock per share for the five trading
days prior to the date on which the series A preferred stock was originally
issued or 85% of the average of the closing trading prices of the common stock
for five days immediately prior to the date of conversion. If any shares of
series A preferred stock have not been converted prior to April 2005, then all
remaining shares of series A preferred stock shall be automatically converted on
that date as if the holder voluntarily elected to convert those shares.
-35-
<PAGE>
Holders of the series A preferred stock shall be entitled to receive a
dividend, payable in cash at a rate of 4% per annum of the stated value of the
series A preferred stock. Dividends are payable semi-annually and accrue if not
paid. The liquidation preference on the series A preferred stock is equal to the
stated value per share. This payment shall be prior to any payment we make to
the holders of our common stock or other shares of stock which are junior to the
series A preferred stock.
We must receive approval of our shareholders before we can amend our
certificate of incorporation to allow for the creation of the series A preferred
stock. If we do not obtain that approval for any reason, the investors shall be
entitled to purchase additional 4% Convertible Debentures with an aggregate
principal amount of $1,310,000 instead of the series A preferred stock.
Warrants/Options
We have issued warrants to purchase an aggregate of 3,600,000 shares to
the unit investors. In addition, the unit investors the right to acquire
warrants to purchase an additional 1,440,000 shares of common stock as of the
date of this prospectus. The warrants allow the holders to purchase shares of
our common stock at a price equal to 120% of the market price of our common
stock as of the date the warrants were issued. The warrants allow for the
holders to exercise their warrants without the payment of cash by surrendering
shares otherwise purchasable upon exercise of the warrant with a fair market
value equal to the exercise price for the shares they are purchasing. The
exercise price is subject to adjustments if we declare a stock split or dividend
of our common stock and will be adjusted lower on a weighted average basis if we
issue shares of our common stock at below the exercise price of the warrant then
in effect. The warrants are exercisable when issued and have a term of five
years.
We have also agreed to issue to Continental Capital & Equity
Corporation an option to purchase 100,000 shares of common stock at a price of
$3.25 per share and an option to purchase 100,000 shares at a price of $4.25 per
share pursuant to a letter agreement dated March 16, 2000. Continental Capital &
Equity Corporation is one of the selling shareholders.
Subordinated Debentures
We have issued 4% Convertible Subordinated Debentures to the unit
investors with a principal amount of $1,312,000. These debentures require the
payment of interest at a rate of 4% per annum, payable semi-annually, and
principal is due and payable on April 14, 2005. The unit investors may convert
principal and interest owing under the debentures at any time at a conversion
price equal to the lesser of 110% of the average of the closing trading prices
of the common stock per share for the five trading days prior to the date on
which the debentures were issued or 85% of the average of the closing trading
prices of the common stock for five days immediately prior to the date of
conversion. During the first six months after the debentures were issued, the
conversion price may not be less than $2.00 per share and, during the following
six months, will not be less than $1.27 per share. However, if our revenues for
the 12 month period ended December 31, 2000 are less than $13,500,000, there
will be no minimum exercise price. There will be no minimum exercise price
following the end of the second six-month period in any event.
The Securities Purchase Agreement provides that we must issue
additional debentures to the investors with the same terms if the investors make
a subsequent investment and if our shareholders do not approve the amendment to
our certificate of incorporation to allow for the creation of preferred stock.
If this occurs, we could be obligated to issue notes with an aggregate principal
amount of $1,312,000 to these investors.
-36-
<PAGE>
Registration Rights
We have entered into a registration rights agreement, dated April 14,
2000, with the unit investors which requires that we file a registration
statement with the SEC to register under the Securities Act all shares of common
stock issued to them or issuable upon the conversion of the subordinated
debentures and the series A preferred stock (if any is issued) and exercise of
the common stock purchase warrants. We are obligated to file a registration
statement for the shares by May 29, 2000. The registration rights agreement
provides that we must pay all expenses incurred in the registration and certain
expenses of the selling shareholders, including up to $25,000 in the legal fees
of counsel the selling shareholders retain. We are obligated to keep the
registration statement effective with respect to those shares until those shares
are sold or until those shares may be sold pursuant to Rule 144(k) of the
Securities Act. Unless all shares are sold prior to that time, this will require
that the registration statement will need to remain effective for a period of at
least two years under present SEC rules.
The registration rights agreement provides that we must pay the unit
investors liquidated damages equal to 2% of the outstanding subordinated
debentures and series A preferred stock if certain events occur. Principal among
these events are:
o If the registration statement is not filed by the SEC by May
29, 2000
o If the SEC does not declare the registration statement for the
registration of the unit investors' shares effective by August
12, 2000;
o If our common stock is delisted from the OTCBB;
o If the shareholders do not approve of the creation of the
series A preferred stock by July 15, 2000.
We have entered into a registration rights agreement with Credit
Bancorp pursuant to which we have agreed to register shares of common stock
issuable upon the conversion of a convertible subordinated debenture issued to
Credit Bancorp. The agreement grants Credit Bancorp so-called piggy-back
registration rights only, which means that we are obligated to include their
shares in registrations which we are filing for public offerings of securities
but does not otherwise require us to register their shares under the Securities
Act. The government appointed receiver of Credit Bancorp has notified us that it
wishes to exercise these registration rights in connection with this offering
and is one of the selling shareholder.
Pursuant to a settlement agreement into which we entered with Chalmers
R. "Bud" Jenkins, one of our former officers, we agreed to register the 400,000
shares issuable to him. Mr. Jenkins is included as a selling shareholder and he
may sell his shares under this prospectus. We have entered into written or oral
agreements with all of the other selling shareholders pursuant to which we have
agreed to register the shares they own or may purchase on the exercise of
outstanding options under the Securities Act.
Transfer Agent
The transfer agent for our common stock is Manhattan Transfer Register
Co., Post Office Box 361, Holbrook, New York, 11741-0361.
-37-
<PAGE>
PRICE RANGE OF COMMON STOCK
Our common stock has been traded on the OTCBB from January 1998 to
present. The security traded under the symbol UPPI from October 1997 through
July 1998. However, there were no inside quotes reported for 1997. The market
for our common stock has often been sporadic and limited.
The following table sets forth in the periods indicated the range of
high and low bid prices per share of our common stock traded as reported by the
OTCBB.
<TABLE>
<CAPTION>
--------------------------------- -------------------------- ----------------------------
Quarter End Low Bid High Bid
--------------------------------- -------------------------- ----------------------------
<S> <C> <C>
3/31/98 0.25 1.31
--------------------------------- -------------------------- ----------------------------
6/30/98 0.25 2.05
--------------------------------- -------------------------- ----------------------------
9/30/98 0.11 0.60
--------------------------------- -------------------------- ----------------------------
12/31/98 0.09 0.51
--------------------------------- -------------------------- ----------------------------
3/31/99 0.12 0.51
--------------------------------- -------------------------- ----------------------------
6/30/99 0.25 3.99
--------------------------------- -------------------------- ----------------------------
9/30/99 0.875 1.73
--------------------------------- -------------------------- ----------------------------
12/31/99 0.62 2.01
--------------------------------- -------------------------- ----------------------------
3/31/00 1.06 7.78
--------------------------------- -------------------------- ----------------------------
</TABLE>
The trading of our shares is subject to limitations set forth in Rule
15g-9 of the Securities Exchange Act. This rule imposes sales practice
requirements on broker-dealers who sell so-called penny stocks to persons other
than established customers, accredited investors or institutional investors.
Accredited investors are generally defined to include individuals with a net
worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000
together with their spouses during the previous two years and expected annual
income of that amount during the current year. For sales of shares to other
persons broker-dealers must make special suitability determinations, must obtain
the written consent of the purchaser to the sale prior to consummating the sale
and is generally prohibited from making cold-calls or other unsolicited
inquiries to purchasers without complying with these rules. These rules may
adversely affect the ability broker-dealers and others to sell our shares or to
sell shares in the secondary market.
-38-
<PAGE>
PLAN OF DISTRIBUTION
We are offering our shares directly to the public as direct placement
or distribution. There is no minimum number of shares that must be sold. There
can be no assurance that all of the shares offered will be sold. Accordingly,
investors will bear the risk that we will accept subscriptions for less than
4,000,000 shares and then be unable to successfully complete all of the
anticipated uses of the proceeds of this offering. If fewer than 4,000,000
shares are sold, our business, financial condition, and results of operations
could be adversely affected.
Funds from this offering will not be placed in an escrow or trust
account and will be available for use as the funds are received. The minimum
investment per shareholder is $4,500 for 1,000 shares of stock. There is no
maximum investment per shareholder. In order to purchase shares, you must
represent to us in writing that the amount of your investment does not exceed
10% of your net worth and you meet one of the following requirements:
o Your income last year was at least $50,000 and your net worth
was at least $75,000, or
o You net worth was at least $150,000, excluding the value of
your home.
For the purpose of calculating your net worth, you should not take into
account the value of your home, automobiles or household furnishings.
The shares will initially be sold through our executive officers who
will not receive commissions and who will be registered as sales representatives
where required under state securities laws. We currently intend to solicit
prospective investors directly through in-person communications only. We
currently do not have a broker-dealer involved with the sale of our shares;
however, we anticipate obtaining a broker-dealer to sell our shares on a best
efforts basis. If we do determine to use a broker-dealer, we anticipate paying
that broker-dealer a commission of a maximum of 12% of the investment funds that
broker obtains. In the view of the SEC's Division of Corporation Finance, any
selected broker-dealer that sells securities in this type of an offering would
be deemed an underwriter as defined in Section 2(11) of the Securities Act.
Prior to the involvement of any broker-dealer in the offering, that broker must
obtain a no objection position from the NASD regarding the contemplated
underwriting compensation and arrangements.
This offering will begin as of the effective date of this prospectus
and continue for twelve months or such earlier date as we may terminate the
offering. If this offering terminates, all subscription payments that we have
not accepted will be promptly returned. Investors may subscribe for the shares
by executing a subscription agreement and delivering that agreement to us plus
the purchase price for the shares to World Wide Wireless Communications, Inc.
520 Third Street, Suite 101, Oakland, California 94607.
We are not participating in the offering of any of the shares which the
selling shareholders are selling. None of the selling shareholders have informed
us of any arrangements into which they have entered with respect to the sale of
their shares. The selling shareholders are not limited to selling their shares
at the offering price set forth in this prospectus, but rather may sell their
shares at such prices as they choose in their discretion. The selling
shareholders are not obligated to sell any specific number of their shares in
this offering.
The selling shareholders may effect the sale or distribution of their
shares directly to purchasers from time to time on the OTCBB at prices and at
terms prevailing at the time of sale. The shares may be sold by one or more of
the following methods:
-39-
<PAGE>
o a block trade in which the broker or dealer so engaged will
attempt to sell the shares of common stock as an agent, but
may position and resell a portion of the block as principal to
facilitate the transaction;
o purchases by a broker or dealer as principal and resales by
that broker or dealer for its own account pursuant to this
prospectus;
o an over-the-counter distribution in accordance with the rules
of the OTCBB;
o in ordinary brokerage transactions or transactions in which
the broker solicits purchasers;
o in transactions otherwise than on any stock exchange or in the
over-the-counter market; or
o pursuant to Rule 144 of the SEC.
The selling shareholders may effect any of these transactions at market
prices prevailing at the time of sale, at prices related to the prevailing
market prices, at varying prices determined at the time of sale or at negotiated
or fixed prices, in each case as the selling shareholder determines, or by
agreement between the selling shareholder and underwriters, brokers, dealers or
agents, or purchasers. We can provide you with no assurance that any of the
selling shareholders will sell any or all of the shares they offer. In effecting
sales, brokers or dealers engaged by the selling shareholders may arrange for
other brokers or dealers to participate. Brokers or dealers may receive
commissions or discounts from the selling shareholders in amounts to be
negotiated prior to the sale. The selling shareholders, and any brokers, dealers
or agents that participate in the distribution of the shares may be deemed to be
underwriters, and any profit on the sale of the common stock by them and any
discounts, concessions or commissions received by any underwriters, brokers,
dealers or agents may be deemed to be underwriting discounts and commissions
under the Securities Act. Under the securities laws of certain states, the
shares may be sold in such states only through registered or licensed brokers or
dealers. In addition, in certain states the shares may not be sold unless they
have been registered or qualified for sale in that state or an exemption from
registration or qualification is available and is met.
LEGAL MATTERS
Certain legal matters in connection with the common stock being offered
hereby will be passed upon by Evers & Hendrickson LLP, 155 Montgomery Street,
12th Floor, San Francisco, California 94104.
EXPERTS
The summary financial data for the years ended September 30, 1998 and
1999 have been derived from the Financial Statements and Notes to Financial
Statements, audited by Reuben E. Price & Co., San Francisco, independent
auditors. These financial statements are included in reliance upon the authority
of that firm as an expert in accounting and auditing.
-40-
<PAGE>
ADDITIONAL INFORMATION
A registration statement on Form SB-2, including amendments, relating
to the shares offered has been filed with the Securities and Exchange
Commission, Office of Small Business Policy, Washington, D.C. This prospectus
does not contain all of the information set forth in the registration statement
and the exhibits and schedules to the registration statement. Statements made in
this prospectus as to the contents of any contract or other document are not
necessarily complete and, in each instance, we refer you to the copy of the
contract or other document filed as an exhibit to the registration statement.
Each statement about those contracts and other documents is qualified in all
respects by that reference.
Following the offering, we will become subject to the reporting
requirements of the Securities Exchange Act of 1934. In accordance with that
law, we will be required to file reports and other information with the SEC. The
registration statement and exhibits and schedules, as well as those other
reports and other information when so filed, can be inspection without charge
and copies, at proscribed rates, at the public reference facilities maintained
by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain
information on the operation of the Public Reference Room by calling the
Securities and Exchange Commission at 1-800-SEC-0300. In addition the Commission
maintains a World Wide Web site on the Internet at http://www.sec.gov that
contains reports, proxy and information statements and other documents filed
electronically with the Commission, including the registration statement.
We intend to furnish our shareholders with annual reports containing
financial statements audited by our independent public accountants and quarterly
reports containing unaudited financial information for the first three quarters
of each fiscal year.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
REUBEN E. PRICE & CO.
REUBEN E. PRICE, C.P.A. (1904-1986) PUBLIC ACCOUNTANCY CORPORATION MEMBERS
________ FOUNDED 1942 AMERICAN INSTITUTE OF
RICHARD A. PRICE CERTIFIED PUBLIC ACCOUNTANTS
703 MARKET STREET --------
SAN FRANCISCO, CA 94103 SECURITIES AND EXCHANGE
COMMISSION PRACTICE SECTION
------- OF THE AMERICAN INSTITUTE OF
(415) 982-3556 CERTIFIED PUBLIC ACCOUNTANTS
FAX (415) 957-1178
--------
CALIFORNA SOCIETY OF
CERTIFIED PUBLIC ACCOUNTANTS
</TABLE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
World Wide Wireless Communications, Inc.
We have audited the accompanying balance sheet of World Wide Wireless
Communications Inc. (A Development Stage Company), as of September 30, 1999, and
the related statements of operations, statements of cash flows, and statements
of stockholders' equity for the years September 30,1999 and 1998, and from
inception on September 1, 1994 through September 30, 1999. 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
of the United States. 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 referred to above present fairly, in
all material respects, the financial position of World Wide Wireless
Communications, Inc. as of September 30, 1999, and the results of its
operations, cash flows, and stockholders' equity for the years September 30,
1999 and 1998, and from inception on September 1, 1994 through September 30,
1999 in conformity with generally accepted accounting principles of the United
States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2, the Company
has been in the development stage since its inception on September 1, 1994, and
has suffered recurring losses and has a net capital deficiency that raise
substantial doubt about its ability to continue as a going concern. Realization
of a major portion of the assets is dependent upon the Company's ability to meet
its future financing requirements, and the success of future operations, the
outcome of which cannot be determined at this time. Management's plans in regard
to these matters are also described in Note 2. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Reuben E. Price & Co.
January 24, 2000
Except for Note 9 SUBSEQUENT EVENTS, Affiliation in new locations, Other, as to
which the date is May 15, 2000
F-1
<PAGE>
World Wide Wireless Communications, Inc.
(A Development Stage Company)
Balance Sheet
Assets
September 30, 1999
------------------
Current Assets:
Cash and Cash Equivalents $ 275,082
Prepaid and other 62,740
----------
Total Current Assets 337,822
----------
Fixed Assets
Furniture, fixtures and equipment 74,906
Leasehold improvements 261,478
Accumulated Depreciation and amortization (13,506)
----------
Total Fixed Assets 322,878
Other Assets:
Prepaid lease expense 500,000
Rental Deposit 20,077
----------
Total Other Assets 520,077
Total Assets $1,180,777
==========
Liabilities and Stockholders' Equity
Current Liabilities:
Accrued expenses $ 491,468
----------
Total Current Liabilities 491,468
Long-Term Liabilities:
Convertible debenture Loan payable 328,000
----------
Total Long-Term Liabilities 328,000
Total Liabilities 819,468
Commitments and Contigencies
Stockholders' Equity:
Common stock, par value $ .001 per share,
100,000,000 shares authorized, 71,183,943 issued
and outstanding at September 30, 1999 71,184
Additional paid-in capital 7,049,266
Deficit accumulated during development stage (6,759,141)
----------
Total Stockholders' Equity 361,309
----------
Total Liabilities and Stockholders' Equity $1,180,777
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
<TABLE>
World Wide Wireless Communications, Inc.
(A Development Stage Company)
Statement of Operations
<CAPTION>
Cumulative
from
Inception on
For the Year For the Year September 1, 1994
Ended Ended through
September 30, September 30, September 30,
1999 1998 1999
------------- ------------- --------------
<S> <C> <C> <C>
Revenues $ -- $ -- $ --
------------- ------------- --------------
General & Administrative Expenses (2,383,330) (353,075) (6,765,842)
------------- ------------- --------------
Total Operating Expenses (2,383,330) (353,075) (6,765,842)
------------- ------------- --------------
Operating Loss (2,383,330) (353,075) (6,765,842)
Other Income 0 6,701 6,701
------------- ------------- --------------
Net Loss $ (2,383,330) $ (346,374) $ (6,759,141)
============= ============= ==============
Basic Loss Per Share $ (0.04) $ (0.01)
============= =============
Basic Weighted Average Shares Outstanding 56,113,645 39,330,520
============= =============
Diluted Loss Per Share $ (0.04) $ (0.01)
============= =============
Diluted Weighted Average Shares Outstanding 56,411,173 39,330,520
============= =============
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
F-3
<PAGE>
<TABLE>
World Wide Wireless Communications, Inc.
(A Development Stage Company)
Statements of Cash Flows
<CAPTION>
Cumulative
from
For the Year For the Year Inception on
Ended Ended September 1, 1994
September 30, September 30, through
1999 1998 September 30, 1999
--------------- --------------- --------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (2,383,330) $ (346,374) $ (6,759,141)
Adjustments to reconcile net loss from operations
to net cash used by operating activities:
Common stock issued for services 615,996 30,400 646,396
Depreciation and amortization expense 13,506 0 13,506
Changes in operating assets and liabilities:
(Increase) in prepaid and other (62,740) 0 (62,740)
(Increase) in prepaid lease expense (500,000) 0 (500,000)
(Increase) in other assets (20,077) 0 (20,077)
Increase in accrued expenses 4,321 1,194 491,468
--------------- --------------- --------------------
Net Cash (Used) by Operating Activities (2,332,324) (314,780) (6,190,588)
--------------- --------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES: 0 0 0
--------------- --------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Increase) in fixed assets (336,384) 0 (336,384)
Proceeds from loan 328,000 0 328,000
Proceeds from issuance of common stock 2,614,074 316,451 6,474,054
--------------- --------------- --------------------
Net Cash Provided by Financing Activities 2,605,690 316,451 6,465,670
--------------- --------------- --------------------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 273,366 1,671 275,082
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 1,716 45 0
--------------- --------------- --------------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 275,082 $ 1,716 $ 275,082
=============== =============== ====================
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Interest paid $ - $ - $ -
Income taxes paid $ - $ - $ -
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
F-4
<PAGE>
World Wide Wireless Communications, Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The financial statements presented are those of World Wide Wireless
Communications, Inc., (the Company) (a development stage company). The
Company is engaged in activities related to advanced wireless
communications, including the acquisition of radio-frequency spectrum
both in the United States and internationally. The Company also plans
to license its Distributed Wireless Call Processing System technology.
Basic And Diluted Net Loss Per Share
The calculation of basic and diluted net loss per share is in
accordance with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share".
The following data show the amounts used in computing loss per share
and the effect on loss and the weighted average number of shares of
dilutive potential common stock.
Loss from continuing operations $ 2,383,330
===========
Weighted average number of common
shares used in basic loss per share 56,113,645
Effect of dilutive securities:
Stock options 297,528
-----------
Weighted average number of common
shares and dilutive potential
common stock used in diluted
loss per share 54,411,173
===========
The following transactions occurred after fiscal years ended september
30, 1999 and 1998, which, had they taken place during fiscal 1999 and
1998, would have changed the number of shares used in the computations
of loss per share:
1999 1998
---- ----
Common shares issued in
private placement 5,964,502 19,303,950
Common shares issued
for services 4,438,000
Debenture convertible into shares
issued in exchange for a
loan payable 462,250
Options 3,200,000
Cash Equivalents
For purposes of the Statement of Cash Flows, the Company considers all
highly liquid investments with an original maturity of three months or
less to be cash equivalents. Balances in bank accounts may, from time
to time, exceed federal insured limits. The Company has never
experienced any loss, and believes its credit risk to be limited.
F-5
<PAGE>
World Wide Wireless Communications, Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Comprehensive Income, Statement of Financial Accounting Standards No.
130
The Company has no material components of other comprehensive income.
Income Taxes
The Company accounts for income taxes using Statement of Financial
Accounting Standards No.109, "Accounting for Income Taxes". Under this
statement, the liability method is used in accounting for income taxes.
Fixed Assets
Furniture, fixtures and equipment are depreciated over their useful
lives of 5 to 10 years, using the straight-line method of depreciation.
Leasehold improvements are amortized over a 5-year period that
coincides with the initial period of the lease, using the straight-line
method of amortization.
Long-Lived Assets
The Company reviews its long-lived assets on an annual basis to
determine any impairment in accordance with Statement of Financial
Accounting Standards No. 121.
Estimates
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.
Fair Value of Financial Instruments
For cash and cash equivalents and accrued expenses, the carrying
amounts in the Balance Sheet represent their fair market value. The
carrying amount of the loan payable approximates fair value because of
similar current rates at which the Company could borrow funds with
consistent remaining maturities.
F-6
<PAGE>
World Wide Wireless Communications, Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 1999
NOTE 2 - REORGANIZATION
On May 7, 1998, the Company entered into a reverse merger transaction,
whereby it acquired control of a public shell. The reorganization
resulted in the issuance of 36,999,993 shares of common stock,
representing 82.2% of the total shares outstanding. The value of
$21,451 assigned to the 8,024,000 shares, or 17.8% retained by the
public shell shareholders, represents the net assets acquired from the
public shell. The reorganization was accounted for as a reverse merger
under the purchase method.
The Company has been in the development stage since its formation on
September 1, 1994. It is primarily engaged in activities related to
advanced wireless communications, including the acquisition of
radio-frequency spectrum both in the United States and internationally.
The Company also plans to license its Distributed Wireless Call
Processing System technology.
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern which
contemplates the realization of assets and liquidation of liabilities
in the normal course of business.
The Company has experienced losses since inception, and had an
accumulated deficit of $6,759,141 at September 30, 1999. Net losses are
expected for the foreseeable future. Management plans to continue the
implementation of its business plan to place the company's assets in
service to generate related revenue. Simultaneously, the Company is
continuing to secure the additional required capital through sales of
common stock through the current operating cycle.
NOTE 3 - COMMITMENTS AND CONTIGENCIES
Litigation
On April 12, 1999, the Company, under terms of a Settlement and General
Release, issued 825,000 shares of common stock to a former director and
a former employee for compensation, approximating $81,000, at a per
share price of $0.098. This per share price is in line with the sale of
common stock for cash at this period of time.
On May 25, 1999, the Company, under terms of a Compromise and
Settlement Agreement, issued 750,000 shares of common stock to cover
approximately $310,000 of various outstanding obligations of the
Company to Corporate Solutions, LLC for services rendered, at a per
share price of $0.40. This per share price is in line with the sale of
common stock for cash at this period of time.
F-7
<PAGE>
World Wide Wireless Communications, Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 1999
NOTE 3 - COMMITMENTS AND CONTIGENCIES (CONTINUED)
Litigation (Continued)
In November 1998, the Company and its predecessor affiliates filed an
action against the lessor of its leases for the Concord and San Marcos,
California multipoint distribution service (MDS) channels. The
complaint alleged breach of contract as well as intentional and
negligent interference with prospective economic advantage. The Company
also sought a preliminary injunction as a result of the lessor's
assertion that the predecessor companies and the Company were in
default on said leases. The Superior Court of California for the County
of Los Angeles issued a preliminary injunction against the lessor to
restrain it from taking any further action against the Company and its
predecessors. Thereafter, the lessor cross-complained against the
Company and its predecessors alleging breach of contract. The
preliminary injunction of the Company against the lessor remained in
effect until December 9, 1999, when a settlement agreement was signed.
The settlement provided for the Company to pay $27,375 to the lessor,
relating to lease obligations. This amount is recorded as an expense in
the financial statements for the fiscal years ended September 30 1998
and 1999. The Company further agreed to sign a consulting agreement
with the lessor for one year, whereby the Company will issue the
equivalent of $20,000 of its restricted common stock, the value of
which is to be computed at 80% of the market value of the Company's
unrestricted shares. Additionally, under this consulting agreement, the
Company agreed to execute a promissory note in favor of the lessor in
the amount of $40,000, payable at $1,000 per month, commencing December
1, 1999, with a final payment of $28,000 on December 1, 2000.
The Company borrowed from Credit Bancorp $328,000 in August 1999 and
$412,000 in October 1999. The terms of this loan are 7% interest per
annum payable, semiannually on the last day of February and September,
with the principal due September 30, 2002. On August 26, 1999, the
Company filed suit against Credit Bancorp, in U.S. District Court in
San Francisco, regarding improprieties on the part of Credit Bancorp
relating to the August 1999 loan. The case was settled on October 11,
1999. As part of the settlement agreement, Credit Bancorp agreed to
convert the original loans granted to the Company to a convertible
debenture in the amount of $740,000. On October 11, 1999, the Company
issued a convertible unsecured debenture for $740,000 to Credit Bancorp
in settlement of this obligation. The terms of this convertible
unsecured debenture are 7% interest per annum payable semiannually on
the last day of February and September, with the principal due
September 30, 2002. All amounts of unpaid principal and accrued
interest of this debenture are convertible at any time at the
conversion price of $1.60 per share of unregistered, restricted shares
of the Company's stock, adjusted for any stock splits.
F-8
<PAGE>
World Wide Wireless Communications, Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 1999
NOTE 3 - COMMITMENTS AND CONTIGENCIES (CONTINUED)
Litigation (Continued)
In November 1999, the Securities and Exchange Commission (SEC) filed
suit against Credit Bancorp alleging violations of various securities
laws in connection with its actions in relation to the Company (and
others), and seeking various forms of relief including disgorgement of
its illegal gains. At this time, management believes that if the suit
is successful, certain benefits may accrue to the Company, including
the cancellation of the $740,000 convertible debenture.
Operating Leases
The Company's office space at One Post Street, San Francisco, was
leased on a month to month basis. The Company vacated these offices on
August 31, 1999. The actual rent paid, for the fiscal year ended
September 30, 1999, was $22,341.
In April 1999, the Company entered into a 5-year lease for
approximately 6,000 square feet of office space in Jack London Square,
Oakland, California. The lease commenced on June 5, 1999. The triple
net rental agreement is for $10,038 per month during the first year,
with a rental deposit of $20,077 shown as an Other Asset on the
financial statements. The lease provides for an annual increase based
on the indexed cost of living adjustments. Additionally, the lease
provides for the landlord's participation in partial reimbursement over
the terms of the lease to the Company for leasehold improvements paid
by the Company. The Company commenced its occupancy of this space on
September 1, 1999. The minimum annual rent is $120,456 for the fiscal
years ended September 30, 2000, 2001, 2002 and 2003, and $81,642 for
the period October 1, 2003 to June 4, 2004.
The Company leases (under assignment) all of the channel capacity for
certain multipoint distribution service (MDS) and multi-channel
multipoint distribution service (MMDS) channels from three carriers
that are licensed by the FCC as specified in 47 C.F.R. Paragraph
21.901(b). These MDS/MMDS leases provide for a monthly lease fee of 2%
of gross subscriber revenue or a minimum monthly rental aggregating
approximately $1,150. The minimum aggregate annual rent is $13,800 for
1999, $67,160 for 2000, and $9,500 for 2001, adjusted annually by
changes in the Consumer Price Index. Each of the leases contain three
ten-year renewal options, and an option to purchase each license for
$225,000, adjusted upon changes in the Consumer Price Index since lease
inception.
In conjunction with the MDS/MMDS licenses, the Company has acquired
(under assignment) transmission sites in the geographical areas covered
by the licenses. These site leases have varying terms and conditions,
and at September 30, 1999, the minimum annual rental is $42,000 per
fiscal year ending September 30, 2000 through 2004.
F-9
<PAGE>
World Wide Wireless Communications, Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 1999
NOTE 3 - COMMITMENTS AND CONTIGENCIES (CONTINUED)
Operating Leases (Continued)
Rents paid for fiscal years ended September 30, 1999 and 1998 are as
follows:
1999 1998
-------- -------
Former office location, San Francisco $ 22,341 $10,163
Current office location, Oakland 38,814 0
Distribution service channel leases 21,300 2,859
Transmission sites 42,000 10,406
-------- -------
Total $124,455 $23,428
======== =======
<TABLE>
The minimum annual rentals under current lations for future fiscal years ended
September 30 are as follows:
<CAPTION>
2000 2001 2002 2003 2004 Remainder
---- ---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
Current office location, Oakland $120,456 $120,456 $120,456 $120,456 $81,842 None
Distribution service channel leases 67,160 9,500 0 0 0 None
Transmission sites 42,000 42,000 42,000 42,000 42,000 None
-------- -------- -------- -------- -------- ----
Total $229,616 $171,956 $164,456 $164,456 $123,842 None
======== ======== ======== ======== ======== ====
</TABLE>
NOTE 4 - STOCKHOLDERS EQUITY
During the fiscal year ended September 30, 1999, the Company sold
19,303,950 shares of its common stock for net cash proceeds of
$2,614,074 and issued 4,538,000 shares of its common stock for services
at an aggregate value of $615,996. Stock issued for services was at the
cash price for the shares at the time of issuance.
During the fiscal year ended September 30, 1998, the Company sold
2,100,000 shares of its common stock for net cash proceeds of $295,000
and issued 218,000 shares of its common stock for services at an
aggregate value of $30,400. Stock issued for services was at the cash
price for the shares at the time of issuance.
NOTE 5 - PREPAID LEASE EXPENSE
On November 25, 1998, the Company entered into an option agreement with
Shekinah Network to pay $500,000 to lease eight Instructional
Television Fixed Service (ITFS) channels for the Company's high-speed
wireless internet connections, as authorized by the Federal
Communication Commission (FCC). This agreement also provides the
Company an exclusive option to lease excess capacity on Shekinah's
remaining thirty-two ITFS channels, as they become available. The
monthly minimum transmission fee to be paid to Shekinah for each
license or application optioned, will be five percent (5%) of the gross
system receipts or five hundred dollars, whichever is greater.
Amortization of the licenses will begin when the available channels are
placed in service, which management expects to begin in approximately
April 2000.
F-10
<PAGE>
World Wide Wireless Communications, Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 1999
NOTE 5 - PREPAID LEASE EXPENSE (CONTINUED)
ITFS licenses can only be owned by FCC approved educational, religious
or non-profit entities. In the event FCC rules and regulations change
to allow commercial companies to own these licenses or the Company
establishes an educational, religious or non-profit affiliate, the
agreement also provides the Company an option to pay Shekinah $150,000
per-market or channel group on an individual basis or $3,500,000 for
all forty channels. The option period extends for ten years, with three
additional ten-year term renewals.
NOTE 6 - INCOME TAXES
A reconciliation between the actual income tax benefit and the federal
statutory rate follows:
Fiscal years ended September 30,
1999 1998
Amount % Amount %
Computed income tax benefit at
statutory rate $810,332 34% $117,767 34%
Operating loss with no current
tax benefit -810,332 -34% -117,767 -34%
-------------------------------
Income tax benefit None None
---- ----
At September 30 1999, the Company had a net operating loss carryforward
for federal tax purposes of approximately $6,760,000 which if unused to
offset future taxable income, will expire between the years 2010 to
2019, and approximately $2,154,000 for state tax purposes, which will
expire if unused in 2004 and 2005. A valuation allowance has been
recognized to offset the related deferred tax assets due to the
uncertainty of realizing any benefit therefrom. During 1999 and 1998,
no changes occurred in the conclusions regarding the need for a 100%
valuation allowance in all tax jurisdictions.
Under section 382 of the Internal Revenue Code, the utilization of net
operating loss carryforwards is limited after an ownership change, as
defined, to an annual amount equal to the market value of the loss
corporation's outstanding stock immediately before the date of the
ownership change multiplied by the highest Federal long-term tax exempt
rate in effect for any month in the 3 calendar month period ending in
the calendar month in which the ownership change occurred. Due to the
ownership changes as a result of the May 1998 reorganization and
subsequent stock issuances, any future realization of the Company's net
operating losses will be severely limited.
Significant components of the Company's deferred tax assets are as
follows:
Fiscal years ended September 30,
1999 1998
---- ----
Net operating loss carryforwards $2,383,330 $346.374
Valuation allowance (2,383,330) (346,374)
--------------- -----------
Net deferred tax assets None None
--------------- -----------
NOTE 7 - ACCRUED EXPENSES
Accrued expenses consist of the following:
F-11
<PAGE>
World Wide Wireless Communications, Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 1999
Professional fees $191,601
Payroll and related payroll taxes 104,986
Leasehold Improvements 55,288
Other 139,593
--------
Total $491,468
========
NOTE 8 - STOCK OPTION PLANS
Nonstatutory Stock Options
The Company has issued stock options under nonstatutory stock option
agreements. The options are granted at the fair market value of the
shares at the date the option is granted. The options are granted for a
period of 5 years, and are fully exercisable during the term of the
option period or within thirty (30) days of the participant's
resignation or termination.
Combined transactions in non-employee options for the fiscal years
ended September 30, 1999 and 1998 are as follows:
1999 1998
------------------------------------
Number Average Number Average
of Exercise of Exercise
Shares Price Shares Price
Options outstanding October 1 - - - -
Granted 500,000 0.095 - -
Cancelled - - - -
Exercised - - - -
------------------------------------
Options outstanding September 30 500,000 0.095 - -
======= ===== ======= =====
Combined transactions in employee options for the fiscal years ended
September 30, 1999 and 1998 are as follows:
1999 1998
------------------------------------
Number Average Number Average
of Exercise of Exercise
Shares Price Shares Price
Options outstanding October 1 - - - -
Granted 2,700,000 0.095 - -
Cancelled - - - -
Exercised - - - -
------------------------------------
Options outstanding September 30 2,700,000 0.095 - -
========= ===== ======== =====
F-12
<PAGE>
World Wide Wireless Communications, Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 1999
NOTE 8 - STOCK OPTION PLANS (CONTINUED)
Incentive Stock Plan
The Company adopted an incentive stock plan on August 5, 1998, which
has not yet been approved by the shareholders. The options are granted
at the fair market value of the shares at the date that the option is
granted. The options are granted for a period of 10 years, and are
exercisable after one year from the date of grant, at a vested rate of
20% per year during the term of the option period or within thirty (30)
days of the participant's resignation or termination. The Company has
limited the number of shares under this plan to 3,000,000 shares of its
capital stock for this plan. The number of shares of stock covered by
each outstanding option, and the exercise price per share thereof set
forth in each such option, shall be proportionately adjusted for any
stock split, and or, stock dividend. As of September 30, 1999, the
Company did not issue any options under this plan; however, subsequent
to the date of this financial statement, options, for 800,000 shares of
common stock, were granted under the incentive stock plan to an
employee within his employment agreement, but are being treated as
nonstatutory stock options until the incentive stock plan is approved
by the shareholders.
Compensation Costs
The Company applies APB Opinion 25 in accounting for its stock
compensation plans discussed above. Accordingly, no compensation costs
have recognized for these plans in 1999 or 1998. Had compensation costs
been determined on the basis of fair value pursuant to FASB Statement
No. 123, net loss and loss per share would have been increased as
follows:
1999 1998
------------ ----------
Net loss:
As reported $(2,383,330) $(346,374)
============ ==========
Pro forma $(2,441,575) $(346,374)
============ ==========
Basic loss per share:
As reported $(0.04) $(0.01)
======= =======
Pro forma $(0.04) $(0.01)
======= =======
Diluted loss per share:
As reported $(0.04) $(0.01)
======= =======
Pro forma $(0.04) $(0.01)
======= =======
The fair value of each option granted is estimated on the grant date
using the Black-Scholls model. The following assumptions were made in
estimating fair value.
F-13
<PAGE>
World Wide Wireless Communications, Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 1999
NOTE 8 - STOCK OPTION PLANS (CONTINUED)
Compensation Costs (Continued)
Assumption Plans
Dividend yield 0 %
Risk-free interest rate 7 %
Expected life 5 years
Expected volatility 97 %
NOTE 9 - SUBSEQUENT EVENTS
Affiliations in new locations
Argentina
On December 31, 1999, the Company acquired a 51% interest in Infotel
Argentina S.A., a Buenos Aires based company which owns multi-channel
multipoint distribution service licenses in eight of the largest
Argentine cities including Buenos Aires. The purchase price was
$1,500,000, of which $600,000 was paid in cash and $600,000 was paid in
454,545 shares of restricted stock of the Company. The final $300,000
was paid during February 2000.
Peru
On February 29, 2000, the Company purchased 100% of Digital Way S.A. a
Peruvian telecommunications company. The purchase price was $1,300,000,
of which $400,000 was paid in cash and $900,000 was paid in 181,100
shares of restricted stock of the Company.
El Salvador
On March 11, 2000, the Company entered into a letter of intent with El
Salvador Telecomuniciones S.A. de C.V. for the purpose of acquiring a
25% ownership interest in that company in El Salvador. Pursuant to the
terms of the letter of intent the Company paid $1,000,000 to that
company as an advance payment of the purchase price, which was to total
$3,500,000. The agreement provides that the purchase was conditioned
upon that company's acquisition of certain licenses and the occurrence
of certain other condition which have not been met. As a result the
Company believes that it is improbable that the sale will occur and is
seeking return of the $1,000,000 payment.
F-14
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders of Infotel S.A.
We have audited the accompanying balance sheet of Infotel Argentina S.A. as of
June 30, 1999 and the related statements of income, retained earnings, and cash
flows for the year then ended. Theses financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit 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 statements presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Infotel Argentina S.A. as of
June 30, 1999, and the results of its operations and its cash flows for the year
then ended in conformity with generally accepted accounting principles.
Reinaldo Pietrantonio, Contador Publico Nacional
Buenos Aires, July 30, 1999
F-15
<PAGE>
INFOTEL ARGENTINA S.A.
Balance Sheet
As of June 30, 1999
ASSETS
CURRENT ASSETS
Cash $110,861
Accounts receivable 30,707
Prepaid taxes 158,628
-------
Total Current Assets 300,196
PROPERTY AND EQUIPMENT, net of depreciation 131,590
-------
Total Assets $431,786
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable $249,642
Taxes payable 28,219
Total Current Liabilities 131,100
-------
STOCKHOLDERS' EQUITY
Common stock; $1 par value, issued and outstanding 12,000 shares 12,000
Additional paid-in capital 116,879
Retained Earnings 25,046
-------
Total Stockholders' Equity 153,925
-------
Total Liabilities and Stockholders' Equity $431,786
=======
The accompanying notes are an integral part of the financial statements.
F-16
<PAGE>
INFOTEL ARGENTINA S.A
Statement of Operations
From Inception, February 3, 1999, through June 30, 1999
REVENUE $ 214,203
COST OF GOODS SOLD 127,599
----------
GROSS PROFIT
86,604
----------
EXPENSES:
Sales and marketing 16,614
General and administrative 31,257
Financing 200
----------
Total Expenses 48,071
----------
INCOME FROM OPERATIONS 38,533
Less - Income tax 13,487
----------
NET INCOME $ 25,046
==========
NET INCOME PER SHARE, BASIC AND DILUTED $ 2.09
==========
WEIGHTED AVERAGE OF SHARES OUTSTANDING 12,000
==========
The accompanying notes are an integral part of the financial statements.
F-17
<PAGE>
INFOTEL ARGENTINA S.A.
Statement of Cash Flows
From Inception, February 3, 1999, through June 30, 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 25,046
Adjustments to reconcile net income to net cash used by
operating activities:
Changes in:
Receivables (30,707)
Prepaid expenses (158,628)
Accounts payable 249,642
Taxes payable 28,219
---------
Net cash provided by operating activities 113,572
---------
CASH FLOWS FROM INVESTING ACTIVITES
Purchase of equipment (131,590)
---------
Net cash provided by (used for) investing activities (131,590)
---------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock, net of stock offering costs 12,000
Proceeds from sale of stock in excess of par 116,879
---------
Net cash provided by financing activities 128,879
---------
NET INCREASE IN CASH 110,861
CASH, beginning of period -
---------
CASH, end of period $ 110,861
=========
The accompanying notes are an integral part of the financial statements
F-18
<PAGE>
INFOTEL ARGENTINA S.A.
Statement of Shareowners' Equity
From Inception, February 3, 1999, through June 30, 1999
Common Stock
Balance at beginning of period $ -
Issuance of shares 12,000
----------
Balance at end of period 12,000
----------
Capital in Excess of Par
Balance at beginning of period -
Issuance of shares 116,879
----------
Balance at end of period 116,879
----------
Retained Earnings
Balance at beginning of -
Net Income 25,046
----------
Balance at end of period 25,046
----------
Stockholders' Equity at end of period $ 153,925
==========
The accompanying notes are an integral part of the financial statements.
F-19
<PAGE>
INFOTEL ARGENTINA S.A.
Notes to Financial Statements
June 30, 1999
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Infotel Argentina was formed on January 18, 1999, and began operation
on February 3, 1999.
Cash Equivalents
For purposes of the Statement of Cash Flows, the Company considers all
highly liquid investments with an original maturity of three months or
less to be cash equivalents.
Comprehensive Income, Statement of Financial Accounting Standards No.
130
The Company has no material components of other comprehensive income.
Income Taxes
The Company accounts for income taxes using Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". Under this
statement, the liability method is used in accounting for income taxes.
Fixed Assets
Fixed assets are recorded at cost. Depreciation is taken over the
estimated useful life of the assets.
Long-Lived Assets
The Company reviews its long-lived assets on an annual basis to
determine any impairment in accordance with Statement of Financial
Accounting Standards No. 121.
Estimates
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 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.
Fair Value of Financial Instruments
For cash and cash equivalents and accrued expenses, the carrying
amounts in the Balance Sheet represent their fair market value.
F-20
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders of Digital Way S.A.
We have audited the accompanying balance sheet of Digital Way S.A.. as of
December 31, 1999 and the related statements of income, retained earnings, and
cash flows for the year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards
of the United States. 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 statements
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Infotel Argentina S.A. as of
December 31 1999, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles of
the United States.
Chavez y R.G. Auditores, Asociados S. Civil
April 19, 2000
F-21
<PAGE>
<TABLE>
Digital Way S.A.
Balance Sheet
As of December 31, 1999
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS
Cash $ 163
Receivable from officer 21,000
Prepaid taxes 876
Other prepaid expenses and deposits 10,050
---------
Total Current Assets 32,089
PROPERTY AND EQUIPMENT, at cost 1,454
---------
Total Assets $ 33,543
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable $ 32,965
---------
Total Liabilities 32,965
---------
STOCKHOLDERS' EQUITY
Common stock; $0.302 par value, issued and outstanding 35,800 shares 10,826
Accumulated deficit (10,278)
---------
Total Stockholders' Equity 548
---------
Total Liabilities and Stockholders' Equity $ 33,543
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-22
<PAGE>
Digital Way S.A.
Statement Of Operations
From Inception, March 28, 1999, through December 31, 1999
REVENUE $ -
EXPENSES
General and administrative 9,445
Miscellaneous 833
--------
Total Expenses 10,278
--------
INCOME (LOSS) FROM OPERATIONS $(10,278)
========
NET INCOME (LOSS) PER SHARE, BASIC
AND DILUTED $ (0.29)
========
WEIGHTED AVERAGE OF SHARES
OUTSTANDING 35,800
========
The accompanying notes are an integral part of the financial statements.
F-23
<PAGE>
Digital Way S.A.
Statement of Cash Flows
From Inception, March 28, 1999, through December 31, 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (10,278)
Adjustments to reconcile net loss to net cash used by
operating activities:
Changes in:
Receivables from officer (21,000)
Prepaid taxes (876)
Other prepaid expenses (10,050)
Accounts payable 32,995
--------------
Net cash used by operating activities (9,209)
--------------
CASH FLOWS FROM INVESTING ACTIVITES:
Purchase of equipment (1,454)
--------------
Net cash provided by (used for) investing
activities (1,454)
--------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock, net of stock offering costs 10,826
--------------
Net cash provided by financing activities 10,826
--------------
INCREASE IN CASH 163
CASH, beginning of period -
--------------
CASH, end of period $ 163
==============
The accompanying notes are an integral part of the financial statements
F-24
<PAGE>
Digital Way S.A.
Statement of Shareowners' Equity
From Inception, March 28, 1999, through December 31, 1999
COMMON STOCK
Balance at beginning of period $ -
Issuance of shares 10,826
------------
Balance at end of period 10,826
------------
CAPTIAL IN-EXCESS OF PAR
Balance at beginning of period -
Issuance of shares -
------------
Balance at end of period -
------------
RETAINED EARNINGS
Balance at beginning of period -
Net income (loss) (10,278)
------------
Balance at end of period (10,278)
------------
Stockholders' Equity at end of period $ 153,925
============
The accompanying notes are an integral part of the financial statements.
F-25
<PAGE>
DIGITAL WAY, S.A.
Notes to Financial Statements
December 31, 1999
NOTE 1 - SUMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Digital Way, S.A. (the Company) was formed on March 3, 1998, in order
to provide public telecommunication service as authorized by the
Peruvian Ministry of Transportation and Communication. The Company
became active on March 28, 1999. The Company is of indefinite duration.
Cash Equivalents
For purposes of the Statement of Cash Flows, the Company considers all
highly liquid investments with an original maturity of three months or
less to be cash equivalents.
Comprehensive Income, Statement of Financial Accounting Standards No.
130
The Company has no material components of other comprehensive income.
Income Taxes
The Company accounts for income taxes using Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". Under this
statement, the liability method is used in accounting for income taxes.
Fixed Assets
No depreciation has been taken due to the fact that assets have not
been placed in service as of December 31, 1999.
Long-Lived Assets
The Company reviews its long-lived assets on an annual basis to
determine any impairment in accordance with Statement of Financial
Accounting Standards No. 121.
Estimates
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 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.
Fair Value of Financial Instruments
For cash and cash equivalents and accrued expenses, the carrying
amounts in the Balance Sheet represent their fair market value.
F-26
<PAGE>
World Wide Wireless Communications, Inc. & Subsidiaries
(A Development Stage Company)
Balance Sheet
March 31, 2000
UNAUDITED
Assets
Current Assets:
Cash and cash equivalents $ 980,083
Prepaid and other 339,938
----------
Total Current Assets 1,320,021
----------
Fixed Assets:
Furniture, fixtures and equipment 299,502
Leasehold improvements 343,542
Accumulated depreciation and amortization (60,163)
Frequency licenses 2,783,064
----------
Total Fixed Assets 3,365,945
----------
Other Assets:
Prepaid lease expense 500,000
Deposit in acquisition 1,000,000
Rental deposit 20,727
----------
Total Other Assets 1,520,727
----------
Total Assets $6,206,693
==========
Liabilities and Stockholders' Equity
Current Liabilities:
Accrued expenses $499,903
Accounts payable 55,903
----------
Total Current Liabilities 555,806
----------
Long-Term Liabilities:
Loan payable 740,000
----------
Total Long-Term Liabilities 740,000
----------
Total Liabilities 1,295,806
----------
Stockholders' Equity:
Common stock, par value $.001 per share 82,444
100,000,000 shares authorized, 82,443.816 issued
and outstanding at March 31, 2000
Additional paid-in capital 13,702,744
Deficit accumulated during development stage (8,874,301)
----------
Total Stockholders Equity 4,910,887
----------
Total Liabilities and Stockholders' Equity $6,206,693
==========
F-27
<PAGE>
<TABLE>
World Wide Wireless Communications, Inc. & Subsidiaries
(A Development Stage Company)
Statement of Operations
March 31, 2000
UNAUDITED
<CAPTION>
Cumulative
For 6 Months For 6 Months from Inception on
Ended Ended September 1, 1994
March 31, 2000 March 31, 1999 to March 31, 2000
<S> <C> <C> <C>
Revenues $ 141,268 $ 0 $ 141,268
------------- ------------ ---------------
General & Administrative Expense (2,345,196) (594,650) (9,002,012)
------------- ------------ ---------------
Total Operating Expense (2,203,928) (594,650) (8,860,744)
------------- ------------ ---------------
Operating Income (Loss) (2,203,928) (594,650) (8,860,744)
Interest Income 174 0 174
------------- ------------ ---------------
Tax Expense (13,731) 0 (13,731)
------------- ------------ ---------------
Net Profit (Loss) $ (2,217,484) $ (594,650) $ (8,874,301)
============= ============ ===============
Basic Loss Per Share $ (0.01)
=============
Basic Weighted Average
Shares Outstanding 82,443,816
=============
Diluted Loss Per Share $ (0.01)
=============
Diluted Weighted Average
Shares Outstanding 85,993,816
=============
</TABLE>
F-28
<PAGE>
<TABLE>
World Wide Wireless Communications, Inc. & Subsidiaries
(A Development Stage Company)
Statements of Cash Flow
March 31, 2000
UNAUDITED
<CAPTION>
Cumulative from
Inception on
For 6 Months For 6 Months September 1, 1994
Ended Ended through
March 31,2000 March 31,1999 March 31,2000
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(2,217,485) $ (845,537) $ (8,976,626)
Adjustments to reconcile net loss from operations
to net cash used by operating activities:
Common stock issued for services 15,910 0 662,306
Depreciation and amortization expense 53,237 0 66,743
Changes in operating assets and liabilities:
(Increase)/decrease in prepaid and other (107,951) 0 (170,691)
(Increase)/decrease in prepaid lease expense (500,000) (500,000)
(Increase)/decrease in other assets (650) 0 (20,727)
Increase/(decrease) in accrued expenses (114,387) 272,219 377,081
------------- ------------- ---------------
Net Cash (Used) by Operating Expenses (2,371,326) (1,073,318) (8,561,914)
------------- ------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) in investments (2,279,699) 0 (2,279,699)
------------- ------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Increase) in fixed assets (241,456) 0 (577,840)
Proceeds from loan 740,000 0 740,000
Proceeds from issuance of common stock 4,857,482 5,492,672 11,659,536
------------- ------------- ---------------
Net Cash Provided by Financing Activities 5,356,026 5,492,672 11,821,696
------------- ------------- ---------------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 705,001 4,419,354 980,083
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 275,082 1,716 0
------------- ------------- ---------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 980,083 $ 4,421,070 $ 980,083
============= ============= ===============
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Interest paid $ 0 $ 0 $ 0
Income taxes paid $ 0 $ 0 $ 0
<FN>
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
F-29
<PAGE>
World Wide Wireless Communications, Inc. & Subsidiaries
(A Development Stage Company)
Notes to Financial Statements
March 31, 2000
Unaudited
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The financial statements presented are those of World Wide Wireless
Communications, Inc., (the Company) (A Development Stage Company)and
its subsidiaries. The Company is engaged in activities related to
advanced wireless communications, including the acquisition of
radio-frequency spectrum both in the United States and internationally.
The Company also plans to license its Distributed Wireless Call
Processing System technology.
On December 31, 1999, The Company acquired a 51% interest in Infotel
Argentina S.A., a Buenos Aires based company which owns multi-channel
multipoint distribution service licenses in eight of the largest
Argentine cities including Buenos Aires. The purchase price was
$1,500,000, of which $600,000 was paid in cash and $600,000 was paid in
454,545 shares of restricted stock of the Company on December 31, 1999.
The final $300,000 was paid during February 2000.
On February 29, 2000, the Company purchased 100% of Digital Way S.A. a
Peruvian telecommunications company. The purchase price was $1,300,000,
of which $400,000 was paid in cash and $900,000 was paid in 181,100
shares of restricted stock of the Company.
Basic And Diluted Net Loss Per Share
The calculation of basic and diluted net loss per share is in
accordance with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share".
The following data show the amounts used in computing loss per share
and the effect on loss and the weighted average number of shares of
dilutive potential common stock.
Loss from continuing operations $ 2,217,484
===========
Weighted average number of common
Shares used in basic loss per share 82,443,816
Effect of dilutive securities:
Stock options 3,200,000
Convertible debentures 350,000
Weighted average number of common
Shares and dilutive potential
Common stock used in diluted
Loss per share 85,993,816
===========
F-30
<PAGE>
World Wide Wireless Communications, Inc. & Subsidiaries
(A Development Stage Company)
Notes to Financial Statements
March 31, 2000
Unaudited
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONT'D)
The following transactions occurred after quarters ended march 31, 2000
and 1999, which, had they taken place during the 6 months ended march
31, 2000 and 1999, would have changed the number of shares used in the
computations of loss per share:
2000 1999
---- ----
Common shares issued in
private placement 760,000 3,259,742
Common shares issued
for services 0 0
Debentures/warrants convertible into
shares issued in exchange for a
loan payable 3,600,000 350,000
Options 0 3,200,000
Cash Equivalents
For purposes of the Statement of Cash Flows, the Company considers all
highly liquid investments with an original maturity of three months or
less to be cash equivalents. Balances in bank accounts may, from time
to time, exceed federal insured limits. The Company has never
experienced any loss, and believes its credit risk to be limited.
Comprehensive Income, Statement of Financial Accounting Standards No.
130
The Company has no material components of other comprehensive income.
Income Taxes
The Company accounts for income taxes using Statement of Financial
Accounting Standards No.109, "Accounting for Income Taxes". Under this
statement, the liability method is used in accounting for income taxes.
Fixed Assets
Furniture, fixtures and equipment are depreciated over their useful
lives of 5 to 10 years, using the straight-line method of depreciation.
Leasehold improvements are amortized over a 5-year period that
coincides with the initial period of the lease, using the straight-line
method of amortization.
Long-Lived Assets
The Company reviews its long-lived assets on an annual basis to
determine any impairment in accordance with Statement of Financial
Accounting Standards No. 121.
F-31
<PAGE>
World Wide Wireless Communications, Inc. & Subsidiaries
(A Development Stage Company)
Notes to Financial Statements
March 31, 2000
Unaudited
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONT'D)
Estimates
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.
Fair Value of Financial Instruments
For cash and cash equivalents and accrued expenses, the carrying
amounts in the Balance Sheet represent their fair market value. The
carrying amount of the loan payable approximates fair value because of
similar current rates at which the Company could borrow funds with
consistent remaining maturities.
Segment Information
The Company adopted Statement of Financial Accounting Standards No.
131, "Disclosures about Segments of an Enterprise and Related
information" (SFAS No. 131) in 1999. This statement establishes
standards for the reporting of information about operating segments in
annual and interim financial statements and requires restatement of
prior year information. Operating segments are defined as components of
an enterprise for which separate financial information is available
that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance. SFAS
No. 131 also requires disclosures about products and services,
geographic areas and major customers.
Consolidated Financial Statements
The accounts of the Company and its consolidated subsidiaries are
included in the consolidated financial statements after elimination of
significant intercompany accounts and transactions.
Foreign Currency Transaction
The financial statements of the Company's foreign subsidiaries are
measured using the local currency as the functional currency. Assets
and liabilities of these subsidiaries are translated at exchange rates
as of the balance sheet date. Revenues and expenses are translated at
average rates of exchange in effect during the year. The resulting
cumulative translation adjustments have been recorded as a separate
component of stockholder's equity. Foreign currency transaction gains
and losses are included in consolidated net income (loss).
F-32
<PAGE>
World Wide Wireless Communications, Inc. & Subsidiaries
(A Development Stage Company)
Notes to Financial Statements
March 31, 2000
Unaudited
NOTE 2 - REORGANIZATION
On May 7, 1998, the Company entered into a reverse merger transaction,
whereby it acquired control of a public shell. The reorganization
resulted in the issuance of 36,999,993 shares of common stock,
representing 82.2% of the total shares outstanding. The value of
$21,451 assigned to the 8,024,000 shares, or 17.8% retained by the
public shell shareholders, represents the net assets acquired from the
public shell. The reorganization was accounted for as a reverse merger
under the purchase method.
The Company has been in the development stage since its formation on
September 1, 1994. It is primarily engaged in activities related to
advanced wireless communications, including the acquisition of
radio-frequency spectrum both in the United States and internationally.
The Company also plans to license its Distributed Wireless Call
Processing System technology.
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern which
contemplates the realization of assets and liquidation of liabilities
in the normal course of business.
The Company has experienced losses since inception, and had an
accumulated deficit of $8,874,301 at March 31, 2000. Net losses are
expected for the foreseeable future. Management plans to continue the
implementation of its business plan to place the company's assets in
service to generate related revenue. Simultaneously, the Company is
continuing to secure the additional required capital through sales of
common stock through the current operating cycle.
NOTE 3 - COMMITMENTS AND CONTIGENCIES
Litigation
In November 1998, the Company and its predecessor affiliates filed an
action against the lessor of its leases for the Concord and San Marcos,
California multipoint distribution service channels. The complaint
alleged breach of contract as well as intentional and negligent
interference with prospective economic advantage. The Company also
sought a preliminary injunction as a result of the lessor's assertion
that the predecessor companies and the Company were in default on said
leases. The Superior Court of California for the County of Los Angeles
issued a preliminary injunction against the lessor to restrain it from
taking any further action against the Company and its predecessors.
Thereafter, the lessor cross-complained against the Company and its
predecessors alleging breach of contract. The preliminary injunction of
the Company against the lessor remained in effect until December 9,
1999, when a settlement agreement was signed.
F-33
<PAGE>
World Wide Wireless Communications, Inc. & Subsidiaries
(A Development Stage Company)
Notes to Financial Statements
March 31, 2000
Unaudited
NOTE 3 - COMMITMENTS AND CONTIGENCIES (CONTINUED)
The settlement provided for the Company to pay $27,375 to the lessor,
relating to lease obligations. This amount is recorded as an expense in
the financial statements for the fiscal years ended September 30 1998
and 1999. The Company further agreed to sign a consulting agreement
with the lessor for one year, whereby the Company will issue the
equivalent of $20,000 of its restricted common stock, the value of
which is to be computed at 80% of the market value of the Company's
unrestricted shares. Additionally, under this consulting agreement, the
Company agreed to execute a promissory note in favor of the lessor in
the amount of $40,000, payable at $1,000 per month, commencing December
1, 1999, with a final payment of $28,000 on December 1, 2000.
The Company borrowed from Credit Bancorp $328,000 in August 1999 and
$412,000 in October 1999. The terms of this loan are 7% interest per
annum payable, semiannually on the last day of February and September,
with the principal due September 30, 2002. On August 26, 1999, the
Company filed suit against Credit Bancorp, in U.S. District Court in
San Francisco, regarding improprieties on the part of Credit Bancorp
relating to the August 1999 loan. The case was settled on October 11,
1999. As part of the settlement agreement, Credit Bancorp agreed to
convert the original loans granted to the Company to a convertible
debenture in the amount of $740,000. On October 11, 1999, the Company
issued a convertible unsecured debenture for $740,000 to Credit Bancorp
in settlement of this obligation. The terms of this convertible
unsecured debenture are 7% interest per annum payable semiannually on
the last day of February and September, with the principal due
September 30, 2002. All amounts of unpaid principal and accrued
interest of this debenture are convertible at any time at the
conversion price of $1.60 per share of unregistered, restricted shares
of the Company's stock, adjusted for any stock splits.
In November 1999, the Securities and Exchange Commission (SEC) filed
suit against Credit Bancorp alleging violations of various securities
laws in connection with its actions in relation to the Company (and
others), and seeking various forms of relief including disgorgement of
its illegal gains. At this time, the suit remains pending.
Operating Leases
The Company's office space at One Post Street, San Francisco, was
leased on a month-to-month basis. The Company vacated these offices on
August 31, 1999. The actual rent paid, for the fiscal year ended
September 30, 1999, was $22,341.
F-34
<PAGE>
World Wide Wireless Communications, Inc. & Subsidiaries
(A Development Stage Company)
Notes to Financial Statements
March 31, 2000
Unaudited
NOTE 3 - COMMITMENTS AND CONTIGENCIES (CONTINUED)
In April 1999, the Company entered into a 5-year lease for
approximately 6,000 square feet of office space in Jack London Square,
Oakland, California. The lease commenced on June 5, 1999. The triple
net rental agreement is for $10,038 per month during the first year.
The lease provides for an annual increase based on the indexed cost of
living adjustments. Additionally, the lease provides for the landlord's
participation in partial reimbursement over the terms of the lease to
the Company for leasehold improvements paid by the Company. The Company
commenced its occupancy of this space on September 1, 1999. The minimum
annual rent is $120,456 for the fiscal years ended September 30, 2000,
2001, 2002 and 2003, and $81,642 for the period October 1, 2003 to June
4, 2004.
The Company leases (under assignment) all of the channel capacity for
certain multipoint distribution service and multi-channel multipoint
distribution service channels from three carriers that are licensed by
the FCC as specified in 47 C.F.R. Paragraph 21.901(b). These service
leases provide for a monthly lease fee of 2% of gross subscriber
revenue or a minimum monthly rental aggregating approximately $1,150.
The minimum aggregate annual rent is $13,800 for 1999, $67,160 for
2000, and $9,500 for 2001, adjusted annually by changes in the Consumer
Price Index. Each of the leases contain three ten-year renewal options,
and an option to purchase each license for $225,000, adjusted upon
changes in the Consumer Price Index since lease inception.
In conjunction with the multipoint distribution service and
multi-channel multipoint distribution service licenses, the Company has
acquired (under assignment) transmission sites in the geographical
areas covered by the licenses. These site leases have varying terms and
conditions, and at September 30, 1999, the minimum annual rental is
$42,000 per fiscal year ending September 30, 2000 through 2004.
<TABLE>
Rents paid for 6 months ended March 31, 2000 and 1999 are as follows:
<CAPTION>
6 Months 6 Months
March 31, 2000 March 31, 1999
--------------- --------------
<S> <C> <C>
Former office location, San Francisco $ 0 $11,080
Current office location, Oakland 62,229 0
Distribution service channel leases 43,433 0
Transmission sites 61,000 13,125
-------- -------
Total $166,662 $24,205
======== =======
</TABLE>
<TABLE>
The minimum annual rentals under current lease obligations for future
fiscal years ended September 30 are as follows:
<CAPTION>
2000 2001 2002 2003 2004 Remainder
---- ---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
Current office location, Oakland $120,456 $120,456 $120,456 $120,456 $81,842 None
Distribution service channel leases 67,160 9,500 0 0 0 None
Transmission sites 42,000 42,000 42,000 42,000 42,000 None
------- ------- ------- ------- ------- ----
Total $229,616 $171,956 $164,456 $164,456 $123,842 None
======== ======== ======== ======== ======== ====
</TABLE>
F-35
<PAGE>
World Wide Wireless Communications, Inc. & Subsidiaries
(A Development Stage Company)
Notes to Financial Statements
March 31, 2000
Unaudited
NOTE 4 - STOCKHOLDERS EQUITY
During the 6 months ended March 31, 2000, the Company sold 10,069,683
shares of its common stock for net cash proceeds of $4,857,482. The
Company also issued 635,645 shares of its common stock for an aggregate
value of $1,500,000 as a partial payment for investments in other
telecommunications companies. The Company issued 100,000 shares of its
common stock for services at an aggregate value of $15,910. Stock
issued for the investments was at the market price on the day of
issuance. Stock issued for services was at the cash price for the
shares at the time of issuance.
During the 6 months ended March 31, 1999, the Company sold 11,142,950
shares of its common stock for net cash proceeds of $4,442,409.
NOTE 5 - PREPAID LEASE EXPENSE
On November 25, 1998, the Company entered into an option agreement with
Shekinah Network to pay $500,000 to lease eight Instructional
Television Fixed Service channels for the Company's high-speed wireless
internet connections, as authorized by the Federal Communication
Commission. This agreement also provides the Company an exclusive
option to lease excess capacity on Shekinah's remaining thirty-two
Instructional Television Fixed Service channels, as they become
available. The monthly minimum transmission fee to be paid to Shekinah
for each license or application optioned, will be five percent (5%) of
the gross system receipts or five hundred dollars, whichever is
greater. Amortization of the licenses will begin when the available
channels are placed in service, which management expects to begin in
approximately June 2000.
Instructional Television Fixed Service licenses can only be owned by
Federal Communication Commission approved educational, religious or
non-profit entities. In the event that the Federal Communication
Commission rules and regulations change to allow commercial companies
to own these licenses or the Company establishes an educational,
religious or non-profit affiliate, the agreement also provides the
Company an option to pay Shekinah $150,000 per-market or channel group
on an individual basis or $3,500,000 for all forty channels. The option
period extends for ten years, with three additional ten-year term
renewals.
NOTE 6 - INCOME TAXES
A reconciliation between the actual income tax benefit and the federal
statutory rate follows:
6 Months ended March 31,
------------------------
2000 1999
Amount % Amount %
Computed income tax benefit at
statutory rate 753,945 34% 204,704 34%
Operating loss with no current
tax benefit -753,945 -34% -204,704 -34%
------------- -------------
Income tax benefit None None
----- ----
F-36
<PAGE>
World Wide Wireless Communications, Inc. & Subsidiaries
(A Development Stage Company)
Notes to Financial Statements
March 31, 2000
Unaudited
NOTE 6 - INCOME TAXES (CONTINUED)
At March 31 1999, the Company had a net operating loss carryforward for
federal tax purposes of approximately $8,874,301 which if unused to
offset future taxable income, will expire between the years 2010 to
2020, and approximately $2,860,000 for state tax purposes, which will
expire if unused in 2004 and 2006. A valuation allowance has been
recognized to offset the related deferred tax assets due to the
uncertainty of realizing any benefit therefrom. During 2000 and 1999,
no changes occurred in the conclusions regarding the need for a 100%
valuation allowance in all tax jurisdictions.
Under section 382 of the Internal Revenue Code, the utilization of net
operating loss carryforwards is limited after an ownership change, as
defined, to an annual amount equal to the market value of the loss
corporation's outstanding stock immediately before the date of the
ownership change multiplied by the highest Federal long-term tax exempt
rate in effect for any month in the 3 calendar month period ending in
the calendar month in which the ownership change occurred. Due to the
ownership changes as a result of the May 1998 reorganization and
subsequent stock issuances, any future realization of the Company's net
operating losses will be severely limited.
Significant components of the Company's deferred tax assets are as
follows:
6 Months ended March 31,
2000 1999
---- ----
Net operating loss carryforwards $8,874,301 $602,071
Valuation allowance (8,874,301) (602,071)
------------- -----------
Net deferred tax assets None None
==== ====
NOTE 7 - DEPOSIT IN ACQUISITIONS
El Salvador
On March 11, 2000, the Company entered into a letter of intent with El
Salvador Telecomuniciones S.A. de C.V. for the purpose of acquiring a
25% ownership interest in that company in El Salvador. Pursuant to the
terms of the letter of intent the Company paid $1,000,000 to that
company as an advance payment of the purchase price, which was to total
$3,500,000. The agreement provides that the purchase was conditioned
upon that company's acquisition of certain licenses and the occurrence
of certain other conditions which have not been met. As a result, the
Company believes that it is improbable that the sale will occur and is
seeking return of the $1,000,000 payment.
F-37
<PAGE>
World Wide Wireless Communications, Inc. & Subsidiaries
(A Development Stage Company)
Notes to Financial Statements
March 31, 2000
Unaudited
NOTE 8 - SUBSEQUENT EVENTS
On April 14, 2000, the Company entered into a Securities Purchase
Agreement with six investors, for the purchase of investment units,
consisting of common stock, common stock purchase warrants, 4%
subordinated debentures and preferred stock. Pursuant to the Securities
Purchase Agreement, the investors have purchased 760,000 shares of
common stock, warrants to purchase 3,600,000 shares of common stock,
and subordinated debentures with a principal amount of $3,280,000, for
a total price of $4,800,000. The investors have the option to purchase
additional shares of common stock, warrants and series A preferred
stock (when authorized) from the Company for a maximum amount of
$1,920,000. The investors will be required to purchase these securities
if an effective registration statement under the Securities Act is in
effect with respect to all the common stock issued and issuable upon
the exercise of the warrants and conversion of the subordinated
debentures and series A preferred stock.
F-38
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our Bylaws provide that we may indemnify any director, officer, agent or
employee against all expenses and liabilities, including counsel fees,
reasonably incurred by or imposed upon them in connection with any proceeding to
which they may become involved by reason of their being or having been a
director, officer, employee or agent of our Company. Moreover, our Bylaws
provide that we shall have the right to purchase and maintain insurance on
behalf of any such persons whether or not we would have the power to indemnify
such person against the liability insured against. Insofar as indemnification
for liabilities arising under the Securities Act, we have been informed 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.
Item 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Expenses of the Registrant in connection with the issuance and distribution of
the securities being registered are estimated as follows, assuming the Maximum
offering amount is sold:
Securities and Exchange Commission filing fee $ 4,752
Accountant's fees and expenses $10,000
Legal fees and expenses $25,000
Printing $ 5,000
Marketing expenses $10,000
Postage $ 5,000
Miscellaneous $ 1,000
-------
Total $60,752
The Registrant will bear all expenses shown above.
Item 26. Recent Sales of Unregistered Securities
The following is a list of our sales of our common stock during the
past three years which were not registered under the Securities Act. None of
these sales involved the use of or payments to an underwriter.
On July 21, 1998, as part of a corporate reorganization, we issued
1,724,138 shares of our common stock to TSI Technologies, Inc. and 5,275,662
shares to Worldwide Wireless, Inc., both at a per share price of $0.0947. We
raised $662,933 in this transaction. These shares were issued in reliance upon
the exemption from registration provided by Section 4(2) of the Securities Act.
No underwriters were involved in the issuance and no commissions were paid.
On October 15, 1998, under terms of a Settlement and General Release,
we issued 50,000 shares of common stock to a former consultant in compensation
for services rendered, approximating $2,450, at a per share price of $0.050. The
shares were issued in reliance upon the exemption from registration provided by
Section 4(2) of the Securities Act.
Also on October 15, 1998, as part of a corporate reorganization, we
issued 1,724,138 shares of our common stock to TSI Technologies, Inc. and
5,275,662 shares to Worldwide Wireless, Inc., both at a per share price of
$0.0947. We raised $662,933 in this transaction. These shares were issued in
reliance upon the exemption from registration provided by Section 4(2) of the
Securities Act.
<PAGE>
On December 8, 1998, we completed a private placement of 16,285,000
shares of our common stock to a group of accredited investors. Our common stock
was sold for between $0.0027 and $0.1394 per share. In addition, approximately
1,543,000 shares of the total number of shares issued were granted to one
individual in consideration of consulting services. We raised approximately
$736,380. No underwriters were used in completing these transactions. We believe
that we have satisfied the exemption from the securities registration
requirements provided by Section 3(b) of the Securities Act and Rule 504 of
Regulation D promulgated thereunder in that offering. The aggregate offering
price received in the offering did not exceed $1,000,000 within the twelve
months before the start of and during the offering. The securities were sold in
a private placement to only accredited investors, all of whom had a pre-existing
personal or business relationship with us or our officers or directors and each
of whom provided representations that they were accredited investors and were
purchasing for investment and not with a view to resale in connection with a
public offering.
On April 2, 1999, under terms of a Settlement and General Release, we
issued 800,000 shares of common stock to a former employee in compensation for
services rendered, approximating $75,200, at a per share price of $0.095. This
per share price is in line with the sale of common stock for cash at this period
of time. The shares were issued in reliance upon the exemption from registration
provided by Section 4(2) of the Securities Act.
On April 2, 1999, under terms of a Settlement and General Release, we
issued 25,000 shares of common stock to another former employee in compensation
for services rendered, approximating $2,350, at a per share price of $0.095.
This per share price is in line with the sale of common stock for cash at this
period of time. The shares were issued in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act. No underwriters
were involved in the issuance and no commissions were paid.
On April 12, 1999, under terms of a Settlement and General Release, we
issued 825,000 shares of common stock to a former director and a former employee
in compensation for services rendered, approximating $81,000, at a per share
price of $0.098. This per share price is in line with the sale of common stock
for cash at this period of time. The shares were issued in reliance upon the
exemption from registration provided by Section 4(2) of the Securities Act. No
underwriters were involved in the issuance and no commissions were paid.
On May 6, 1999, as part of a corporate reorganization, we issued
2,593,744 shares of our common stock to TSI Technologies, Inc. and 8,969,355
shares to Worldwide Wireless, Inc., both at a per share price of $0.0947. We
raised $1,095,112 in this transaction. These shares were issued in reliance upon
the exemption from registration provided by Section 4(2) of the Securities Act.
No underwriters were involved in the issuance and no commissions were paid.
On May 14, 1999, under terms of a Compromise and Settlement Agreement,
we issued 600,000 shares of common stock to cover approximately $56,400 of
various outstanding obligations to Corporate Architects for consulting services
rendered, at a per share price of $0.095. The shares were issued in reliance
upon the exemption from registration provided by Section 4(2) of the Securities
Act. No underwriters were involved in the issuance and no commissions were paid.
On May 25, 1999, under terms of a Compromise and Settlement Agreement,
we issued 750,000 shares of common stock as settlement of obligations owing to
Corporate Solutions, LLC for consulting services rendered. The amount of the
outstanding claims was approximately $310,000, at a per share price of $0.40.
The shares were issued in reliance upon the exemption from registration provided
by Section 4(2) of the Securities Act.
On December 31, 1999, we completed a private placement of 19,164,452
shares of our common stock to a group of accredited purchasers as defined under
Rule 502 of Regulation D. Our common stock was sold for between $0.05 and $0.435
per share. No underwriters were used in completing these transactions. We raised
approximately $4,310,505. In addition, approximately 2,377,340 shares of the
total number of shares issued were granted to one individual in consideration of
consulting services. The shares were issued in reliance upon the
<PAGE>
exemption to registration provided by section 4(2) of the Securities Act and
Rule 506 of Regulation D promulgated thereunder.
On March 1, 2000, we issued 181,100 shares of common stock to four
individuals in connection with the purchase of all outstanding shares of Digital
Way, S.A., a Peruvian company. These shares were issued in reliance upon the
exemption from registration provided by Section 4(2) of the Securities Act.
On March 17, 2000, we issued 1,763,372 shares of common stock to
Douglas Haffer. Mr. Haffer was entitled to receive a similar number of shares
for services rendered to Worldwide Wireless, Inc. in 1998. Mr. Haffer
transferred his right to receive those shares from Worldwide Wireless, Inc. to
us in exchange for the 1,763,372 shares of common stock we issued to him. We
retain the right to receive shares from Worldwide Wireless, Inc. - Worldwide
Wireless, Inc. has yet to satisfy this obligation. The shares we issued to Mr.
Haffer were issued in reliance upon the exemption from registration provided by
Section 4(2) of the Securities Act.
On March 21, 2000, we completed a private placement of 3,687,000 shares
of our common stock to a group of accredited investors. Our common stock was
sold for between $0.30 and $3.20 per share. We raised $3,861,280. We believe
that we have satisfied the exemption from the securities registration
requirements provided by section 4(2) of the Securities Act and Rule 506 of
Regulation D promulgated thereunder in this offering. The securities were sold
in a private placement to only accredited investors.
On April 14, 2000, we sold $1,312,000 of 4% convertible subordinated
debentures and related warrants to seven investors pursuant to the exemption
from the securities regulation requirement provided by section 4(2) of the
Securities Act. The convertible debentures are convertible at the election of
the holders into shares of common stock. In connection with this offering, the
seven investors also received warrants to purchase a total of 3,600,000 shares
of our common stock at an exercise price equal to 120% of the market price of
our common stock as of the date the warrants were issued. The warrants are
exercisable when issued and have a term of five years. The securities were sold
in a private placement to only accredited investors pursuant to 4(2) of the
Securities Act.
During the period from our incorporation through the present we have
granted options to purchase options to purchase common stock to our employees,
officers and consultants pursuant to our 1998 stock option plan. These options
were granted pursuant to the exemption from the registration requirements set
forth in Section 3(b) of the Securities Act and Rule 701 promulgated thereunder.
The option share exercise prices between $0.095 and $1.62 per share. No payment
was received by the company in connection with the grant of the options.
<PAGE>
<TABLE>
Item 27. EXHIBITS
<CAPTION>
ITEM (601) DOCUMENT
- ---------- --------
<S> <C>
3.1 Articles of Incorporation
3.2 Amendment to Articles of Incorporation filed
3.3 Amendment to Articles of Incorporation filed
3.4 By-laws
4.1.1 Form of Certificate Evidencing shares of Common Stock of World Wide Wireless Communications, Inc.
4.2 Convertible Unsecured Debenture for $740,000 issued by World Wide Wireless
Communications, Inc. to Credit Bancorp
5.1 Opinion of Evers & Hendrickson, LLP with respect to the legality of the shares being registered
10.1 Lease Agreement Between World Wide Wireless Communications, Inc. and Shekinah Network
10.2 South Bend MMDS Lease Agreement
10.3 Lease Agreement Between World Wide Wireless Communications, Inc. and Shekinah Network Vail, Colorado
10.4 Lease Agreement Between World Wide Wireless Communications, Inc. and Shekinah Network Aspen, Colorado
10.5 Lease Agreement Between World Wide Wireless Communications, Inc. and Shekinah Network Casper, Wyoming
10.6 Lease Agreement Between World Wide Wireless Communications, Inc. and Shekinah Network Grand Rapids,
Michigan
10.7 Lease Agreement Between World Wide Wireless Communications, Inc. and Shekinah Network La Grande, Oregon
10.8 Lease Agreement Between World Wide Wireless Communications, Inc. and Shekinah Network Pierre, South
Dakota
10.9 Lease Agreement Between World Wide Wireless Communications, Inc. and Shekinah Network Ukiah, California
10.10 Lease Agreement Between World Wide Wireless Communications, Inc. and Shekinah Network Key West, Florida
10.11 Stock Purchase Agreement dated November 30, 1999 Between Infotel Argentina S.A. and World Wide Wireless
Communications, Inc.
10.12 Agreement for Purchase of All Outstanding Shares of Digital Way, S.A. by World Wide Wireless
Communications, Inc., dated February 29, 2000
10.13 Letter of Intent dated March 11, 2000 Between SALTEL and World Wide Wireless Communications, Inc.
<PAGE>
10.14 Security Purchase Agreement Among World Wide Wireless Communications, Inc. and the Purchasers Named
Therein
10.15 Registration Rights Agreements Among World Wide Wireless Communications, Inc. and the Purchasers Named
Therein
10.16 Escrow Agreement Among the Purchasers Named Therein, the Representative of the Purchasers and the Escrow
Agent
10.17 Form of Debenture of World Wide Wireless Communications, Inc. with Respect to the 4% Convertible
Debenture Due 2005
10.18 Form of Warrant to Purchase Shares of World Wide Communications, Inc. Issued in the Offering
21.1 Subsidiaries
23.1 Consent of Evers & Hendrickson, LLP
23.2 Consent of Reuben E. Price & Co.
27.1 Financial Data Schedule
99.1 Form of Subscription Agreement
</TABLE>
Item 28. UNDERTAKINGS
a) The Registrant hereby undertakes that it will:
1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3)
of the Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental
change in the information in the registration
statement; and
(iii) Include any additional or changed material
information on the plan of distribution.
2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the bona fide
offering.
3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the Offering.
e) 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 Securities and Exchange 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 small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
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 small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate
<PAGE>
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.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe the registrant
meets all of the requirements of filing on Form SB-2 and authorized this
registration statement (pre-effective amendment no. 5) to be signed on its
behalf by the undersigned on May 17, 2000.
World Wide Wireless Communications, Inc.
By: Wayne Caldwell By: Douglas P. Haffer
----------------------------- --------------------------------------
Wayne Caldwell Douglas P. Haffer
Vice President President and Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
registration statement (pre-effective amendment no. 5) has been signed by the
following persons in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
Douglas P. Haffer President & CEO & Chairman May 17, 2000
- -------------------------
Douglas P. Haffer
Wayne Caldwell Vice President and Director May 17, 2000
- -------------------------
Wayne Caldwell
EXHIBIT 3.1
Articles of Incorporation
(PURSUANT TO NRS 78)
STATE OF NEVADA
Secretary of State
1. NAME OF CORPORATION: TAX ENCOUNTERS, INC.
2. RESIDENT AGENT:
Name of Resident Agent: The Corporation Trust Company of Nevada
Street Address: One East First Street, Reno, Nevada 89501
3. SHARES:
Number of shares with par value: 100,000,000 Par Value: $0.001
Number of shares without par value:
4. GOVERNING BOARD: Shall be styled as Directors
The FIRST BOARD OF DIRECTORS shall consist of 2 members and the names and
addresses are as follows:
Cindy Robison 3157 E. Linden, Tuscon, AZ 85716
Joel Watkins 3653 E. 2nd, #205, Tuscon, AZ 85716
5. PURPOSE: The purpose of the corporation shall be:
6. FURTHER MATTERS:
7. SIGNATURES OF INCORPORATORS:
The names and addresses of the incorporators signing the articles:
Candice Maerz Terrie L. Bates
3225 N. Central Ave. 3225 N. Central Ave.
Phoenix, AZ 85012 Phoenix, AZ 85012
/s/ Candice Maerz /s/ Terrie L. Bates
----------------------- ----------------------
Signature Signature
State of Arizona County of Maricopa State of Arizona County of Maricopa
This instrument was acknowledged This instrument was acknowledged
before me on September 10, 1996, before me on September 10, 1996,
by Candice Maerz as by Terrie L. Bates as
incorporator of TAX ENCOUNTERS, INC. incorporator of TAX ENCOUNTERS, INC.
/s/ /s/
----------------------- -----------------------
8. CERTIFICATE OF ACCEPTANCE OF APPOINTMENT OF RESIDENT AGENT
The Corporation Trust Company of Nevada hereby accepts appointment as
Resident Agent for the above name corporation.
The Corporation Trust Company of Nevada By:
/s/ 9/11/96
---------------------- --------------
Signature of Resident Agent Date
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
OF
UPLAND PROPERTIES, INC.
We the undersigned President and Secretary of UPLAND PROPERTIES, INC.
do hereby certify as follows:
That the Board of Directors of said corporation at a meeting duly
convened, held on May 16, 1998, adopting a resolution to record the Amended
Articles of Incorporation filed on September 12, 1996 as follows:
ARTICLE I is hereby amended to read as follows:
That the name of the corporation is:
WORLD WIDE WIRELESS COMMUNICATIONS, INC.
The number of shares of the corporation outstanding and entitled to
vote on as amendment to the articles of incorporation 8,024,000, that said
amendment has been consented to and approved by a majority vote of the
stockholders holding at least a majority of each class of stock outstanding and
entitled to vote thereon pursuant to an action by written consent of the
shareholders of UPLAND PROPERTIES, INC.
/s/ Douglas Haffer
------------------
DOUGLAS HAFFER
President
/s/
------------------
Secretary
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
Candice Maerz and Terrie L. Bates certify that:
1. They constitute at least two-thirds of the original incorporators of
the directors of TAX ENCOUNTERS, INC., a Nevada corporation.
2. The original Articles were filed in the Office of the Secretary of
State on September 12, 1996.
3. As of the date of this certificate, no stock of the corporation has
been issued.
4. They hereby adopt the following amendments to the articles of
incorporation of this corporation: Article 1 is amended to read as follows:
NAME OF CORPORATION: UPLAND PROPERTIES, INC.
/s/ Candice Maerz
-------------------
Signature
/s/ Terrie L. Bates
-------------------
Signature
>
BY LAWS
OF
TAX ENCOUNTERS, INC.
ARTICLE I. OFFICERS
The principle office of the Corporation in the State of Nevada shall be
located in Tucson, Arizona, County of Pima. The Corporation may have such
offices, either within or without the State of Arizona, as the Board of
Directors may designate or as the business of the Corporation may require from
time to time.
ARTICLE II. SHAREHOLDERS
SECTION 1. Annual Meeting. The annual meeting of the shareholders shall
be held on the 15th day of the month of January in each year, beginning with the
year 1996, at the hour of 10:00 a.m., for the purpose of electing Directors and
for the transaction of such other business as may come before the meeting. If
the day fixed for the annual meeting shall be a legal holiday in the State of
Arizona, such meeting shall be held on the next succeeding business day. If the
election of Directors shall not be held on the day designated herein for any
annual meeting of the shareholders, or at any adjournment thereof, the Board of
Directors shall cause the election to be held at a special meeting of the
shareholders as soon thereafter as conveniently may be.
SECTION 2. Special Meetings. Special meetings of the shareholders, for
any purpose, unless otherwise prescribed by statute, may be called by the
President of the Board of Directors, and shall be called by the President at the
request of the holders of not less than twenty-five percent (25%) of all
outstanding shares of the Corporation entitled to vote at the meeting.
SECTION 3. Place of the Meeting. The Board of Directors may designate
any place, either within or without the State of Arizona, unless otherwise
prescribed by statute, as the place of meeting for any annual meeting or for any
special meeting. A waiver of notice signed by all shareholders entitled to vote
at a meeting may designate any place, either within or without the State of
Arizona, unless otherwise prescribed by statute, as the place for the holding of
such meeting. If no designation is made, the place of the meeting shall be the
principal office of the Corporation.
SECTION 4. Notice of Meeting. Written notice stating the place, day and
hour of the meeting and, in case of a special meeting, the purpose or purposes
of which the meeting is called, shall unless otherwise prescribed by statute, be
delivered not less than 15 days nor more than 45 days before the date of the
meeting, to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail, addressed to the shareholder at his address as it appears on the
stock transfer book of the corporation, with postage thereon prepaid.
SECTION 5. Closing of Transfer Books of Fixing of Record. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders of any adjournment thereof, of shareholders entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors of the
Corporation may provide that the stock transfer books shall be closed for a
stated period, but not to exceed in any case fifty days. If the stock transfer
books shall be closed for the purpose of determining shareholders entitled to
notice of or to vote at a meeting of shareholders, such books
<PAGE>
shall be closed for at least 45 days immediately preceding such meeting. In lieu
of closing the stock transfer books, the Board of Directors may fix in advance a
date as the record date for any such determination of shareholders, such date in
any case to be not more than 60 days and, in particular action requiring such
determination of shareholders is to be taken. IF the stock transfer books are
not closed and no record date is fixed for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders, or shareholders
entitled to receive payment of a dividend, the date on which notice of the
meeting is mailed of the date on which the resolution of the Board of Directors
declaring such dividend is adopted, as the case my be, shall be the record date
for such determination of shareholders. When a determination of shareholders
entitled to vote at any meeting of shareholders has been made as provided in
this section, such determination shall apply to any adjournment thereof.
SECTION 6. Voting List. The officer or agent having charge of the stock
transfer books for shares of the corporation shall make a complete list of the
shareholders entitled to vote at each meeting of shareholders or any adjournment
thereof, arranged in alphabetical order, with the address of and the number of
shares held by each. Such list shall be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any shareholder
during the whole time of the meeting for the purpose thereof.
SECTION 7. Quorum. A majority of the outstanding shares of the
corporation entitled to vote, represented in person or proxy, shall constitute a
quorum at a meeting of shareholders. If less than a majority of the outstanding
shares are represented at a meeting, a majority of the shares so represented may
adjourn the meeting from time to time without further notice. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed. The shareholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
SECTION 8. Proxies. At all meetings of shareholders, a shareholder may
vote in person or by proxy executed in wiring by the shareholder or by his or
her duly authorized attorney-in-fact. Such proxy shall be filed with the
secretary of the Corporation before or at the time of the meeting. A meeting of
the Board of Directors may be had by means of a telephone conference or similar
communication equipment by which all persons participating in the meeting can
hear each other, and participation in a meeting under such circumstances shall
constitute presence at the meeting.
SECTION 9. Voting of Shares. Each outstanding share entitle to vote
shall be entitled to one vote upon each matter submitted to a vote at a meeting
of shareholders.
SECTION 10. Voting of Shares by Certain Holders. Shares standing in the
name of another corporation may be voted by such officer, agent or proxy as the
Bylaws of such Corporation may prescribe or, in the absence of such provision,
as the Board of Directors of such Corporation may determine.
Shares held by an administrator, executor, guardian or conservator may
be voted by him either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote share
held by him without a transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into his name, if authority to do so
be contained in an appropriate order of the court by which receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to the Corporation shall not be voted
directly or indirectly, at any meeting, and shall not be counted in determining
the total number of outstanding shares at any given time.
<PAGE>
SECTION 11. Informal Action by Shareholders. Unless otherwise provided
by law, any action required to be taken at a meeting of the shareholders, or any
other action which may be taken at a meeting of the shareholders, may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the shareholders entitled to vote with respect to the
subject matter thereof.
ARTICLE III. BOARD OF DIRECTORS
SECTION 1. General Powers. The business and affairs of the Corporation
shall be managed by its Board of Directors.
SECTION 2. Number, Tenure and Qualifications. The number of Directors
of the Corporation shall be fixed by the Board of Directors, but in no event
shall be less than one (1) of more than fifteen (15). Each Director shall hold
office until the next annual meeting of shareholders and until his successor
shall have been elected and qualified.
SECTION 3. Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than this Bylaw immediately after,
and at he same place as, the annual meeting of shareholders. The Board of
Directors may provide, by resolution, the time and place for the holding of
additional regular meetings without notice other than such resolution.
SECTION 4. Special Meetings. Special Meetings of the Board of Directors
may be called by or at the request of the President or any two Directors. The
person or persons authorized to call special meetings of the Board of Directors
may fix the place for holding any special meeting of the Board of Directors
called by them.
SECTION 5. Notice. Notice of any special meeting shall be given at
least one (1) day previous thereto by written notice delivered personally or
mailed to each Director at his business address, or by telegram. If mailed, such
notice shall be deemed to be delivered when deposited in the United States Mail
so addressed, with postage thereon prepaid. If notice be given by telegram, such
notice shall be deemed to be delivered when the telegram is delivered to the
telegraph company. Any Directors may waive notice of any meeting. The Attendance
of a Director at a meeting shall constitute a waiver of notice of such meeting,
except where a Director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened.
SECTION 6. Quorum. A majority of the number of Directors fixed by
Section 2 of this Article III shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors, but if less than such
majority is present at a meeting, a majority of the Directors present may
adjourn the meeting from time to time without further notice.
SECTION 7. Manner of Acting. The act of the majority of the Directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.
SECTION 8. Action Without a Meeting. Any action that may be taken by
the Board of Directors at a meeting may be taken without a meeting if consent in
writing, setting forth the action so to be taken, shall be signed before such
action by all of the Directors.
SECTION 9. Vacancies. Any vacancy occurring in the Board of Directors
may be filled by the affirmative vote of a majority of the remaining Directors
though less than a quorum of the Board of Directors, unless otherwise provided
by law. A Director elected to fill a vacancy shall be elected for the unexpired
term of his predecessor in office. Any Directorship to be filled by reason of an
increase in the number of Directors may be filled by election by the Board of
Directors for a term of office continuing only until the next election of
Directors by the shareholders.
<PAGE>
SECTION 10. Compensation. By resolution of the Board of Directors, each
Director may be paid his expenses, if any, of attendance at each meeting of the
Board of Directors, and may be paid a stated salary as Director a fixed sum of
attendance each meeting of the Board of Directors or both. No such payment shall
preclude any Director from serving the Corporation in any other capacity and
receiving compensation thereof.
SECTION 11. Presumption of Assent. A Director of the Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent shall be entered in the minutes of the meeting or unless he shall
file his written dissent to such action with the person acting as the Secretary
of the meeting before the adjournment thereof, or shall forward such dissent by
registered mail to the Secretary of the Corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a Director
who voted in favor of such action.
ARTICLE IV: OFFICERS
SECTION 1. Number. The Officers of the Corporation shall be a
President, one or more Vice Presidents, a Secretary and a Treasurer, each of
whom shall be elected by the Board of Directors. Such other officers and
assistant officers as may be deemed necessary may be elected or appointed by the
Board of Directors, including a Chairman of the Board. In its discretion, the
Board of Directors may leave unfilled for any such period as it may determine
any office except those of President and Secretary. Any two or more offices may
beheld by the same person, except for the offices of President and Secretary
which may not be held by the same person. Officers may be Directors or
shareholders of the Corporation.
SECTION 2. Election and term of Officer. The officers of the
Corporation to be elected by the Board of Directors shall be elected annually by
the Board of Directors at the first meeting of the Board of Directors held after
each annual meeting of the shareholders. If the election of officers shall not
be held at such meeting, such election shall be held as soon thereafter as
conveniently may be. Each officer shall hold office until his successor shall
have been duly elected and shall have qualified, or until his
SECTION 3. Removal. Any officer or agent may be removed by the Board of
Directors whenever, in its judgment, the best interests of the Corporation will
be served thereby, but such removal shall be without prejudice to the contract
rights, if any, ofd the person so removed. Election or appointment of an officer
or agent shall not of itself create contract rights, and such appointment shall
be terminable at will.
SECTION 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.
SECTION 5. President. The President shall be the principal executive
officer of the Corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the Corporation. He shall, when present, preside at all meetings of
the shareholders and of the Board of Directors, unless there is a Chairman of
the Board, in which case the Chairman shall preside. He may sign, with the
Secretary or any other proper officer of the Corporation thereunto authorized by
the Board of Directors, certificates for shares of the Corporation, any deeds,
mortgages, bonds, contracts, or other instruments which the Board of Directors
has authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors or by these
Bylaws to some other officer or agent of the Corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the office of the President and such other duties as may be
prescribed by the Board of Directors from time to time.
SECTION 6. The Vice President. In the absence of the President or in
the event of his death, inability or refusal to act, the Vice President shall
perform the duties of the President, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the President. The Vice
President shall perform such other duties as from time to time may be assigned
to him by the President of the Board of Director. If there is more than one Vice
President, each Vice President shall succeed to the duties of the President in
order of rank as determined by the Board of Director. If no rank has been
determined, then each Vice President shall succeed to the duties of the
President in order of date of election, the earliest date having the first rank.
<PAGE>
SECTION 7. Secretary. The Secretary shall: (a) keep the minutes of the
proceedings of the shareholders and of the Board of Directors in one or more
minute books provided for that purpose; (b) see that all notices are duly given
in accordance with the provisions of the Bylaws or required by law; (c) be
custodian of the corporate records and of the seal of the Corporation and see
that the seal of the Corporation is affixed to all documents, the execution of
which on behalf of the Corporation under its seal is duly authorized; (d) keep a
register of the post office address of each shareholder which shall be furnished
to the Secretary by such shareholder; (e) sign with the President certificates
of shares of the Corporation, the issuance of which shall have been authorized
by resolution of the Board of Directors; (f) have general charge of the stock
transfer books of the Corporation; and (g) in general perform all duties
incident to the office of the Secretary and such other duties as from time to
time may be assigned him by the President or by the Board of Directors.
SECTION 8. Treasurer. The Treasurer shall: (a) have charge and custody
of and be responsible for all funds and securities of the Corporation; (b)
receive and give receipts for money due and payable to the Corporation from any
source whatsoever, and deposit all such monies in the name of the Corporation in
such banks, trust companies or other depositories as shall be selected in
accordance with the provisions of Article VI of these Bylaws; and (c) in general
perform all of the duties as from time tot time may be assigned to him by the
President or by the Board of Directors. If required by the Board of Directors,
the Treasurer shall give a bond for the faithful discharge of his duties in such
sum and with such sureties as the Board of Directors shall determine.
SECTION 9. The salaries of the officers shall be fixed from time to
time by the Board of Directors, and no officer shall be prevented from receiving
such salary by reason of the fact that he is also a Director of the Corporation.
ARTICLE V: INDEMNITY
The Corporation shall indemnify its Directors, officers and employees
as follows:
A. Every Director, officer, or employee of the Corporation shall be
indemnified by the Corporation against all expenses and liabilities, including
counsel fees, reasonably incurred by or imposed upon him in connection with any
proceeding to which he may become involved, by reason of his being or having
been a Director, officer, employee or agent of the Corporation or is or was
serving at the request of the Corporation as a Director, officer, employee or
agent of the corporation, partnership, joint venture, trust, or enterprise, or
any settlement thereof, whether or not he is a Director, officer, employee or
agent at the time such expenses are incurred, except in such cases wherein the
Director, officer, or employee is adjudged guilty of willful misfeasance or
malfeasance in the performance of his duties; provided that in the event of a
settlement the indemnification herein shall apply only when the Board of
Directors approves such settlement and reimbursement as being for the best
interest of the Corporation.
B. The Corporation shall provide to any person who is or was a
director, officer, employee, or agent of the Corporation or is or was serving at
the request of the Corporation as a director, officer, employee, or agent of the
corporation, partnership, joint venture, trust or enterprise, the indemnity
against expenses of suit, litigation or other proceedings which is specifically
permissible under applicable law.
C. The Board of Directors may, in its discretion, direct the purchase
of liability insurance by way of implementing the provisions of this Article V.
<PAGE>
ARTICLE VI: CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. Contracts. The Board of Directors may authorize any officer
of officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances.
SECTION 2. Loans. No loans shall be contracted on behalf of the
Corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
SECTION 3. Checks, Drafts, Etc. All checks, drafts or other orders for
the payment of money, notes, or other evidences of indebtedness issued in the
name of the Corporation, shall be signed by such officers or officers, agent or
agents of the Corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.
SECTION 4. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board of Directors
may select.
ARTICLE VII: CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. Certificates for Shares. Certificates representing shares of
the Corporation shall be in form as shall be determined by the Board of
Directors. Such certificates shall be signed by the P resident and by the
Secretary or by such other officers authorized by law and by the Board of
Directors so to do, and sealed with the corporate seal. All certificates for
shares shall be consecutively numbered or otherwise indemnified The name and
address of the person to whom the shares represented thereby are issued, with
the number of shares and date of issue, shall be entered on the stock transfer
books of the Corporation. All certificates surrendered to the Corporation for
transfer shall be canceled and no new certificates shall be issued until the
former certificates for a like number of shares shall have been surrendered and
canceled, except that in case of a lost, destroyed or mutilated certificate a
new one may be issued therefore upon such terms and indemnity to the Corporation
as the Board of Directors may prescribe.
SECTION 2. Transfer of Shares. Transfer of shares of the Corporation
shall be made only on the stock transfer books of the Corporation by the holder
of record thereof or by his legal representative, who shall furnish proper
evidence of authority to transfer, or by his attorney thereunto authorized by
power of attorney duly executed and filed with the Secretary of the Corporation,
and on surrender for cancellation of the certificate for such shares. The person
on whose name shares stand on the books of the Corporation shall be deemed by
the Corporation to be the owner thereof for all purposes. Provided, however,
that upon any action undertaken by the shareholders to elect S Corporation
Status pursuant to Section 1362 of the Internal Revenue Code and upon any
shareholders agreement thereto restricting the transfer of said shares so as to
disqualify said S Corporation Status, said restriction or transfer shall be made
a part of the Bylaws so long as said agreement is in force and effect.
ARTICLE VIII: FISCAL YEAR
The fiscal year of the Corporation shall begin on the 1st day of
January and end on the 31st day of December of each year.
<PAGE>
ARTICLE IX: DIVIDENDS
The Board of Directors may from time to time declare, and the
Corporation may pay, d dividends on its outstanding shares in the manner and
upon the terms and conditions provided by law and its Articles of Incorporation.
ARTICLE X: CORPORATE SEAL
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the Corporation
and the State of the incorporation and the words, "Corporate Seal."
ARTICLE XI: WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice is required to be
given to any shareholder or director of the Corporation under the provisions of
these Bylaws or under the provisions of the Articles of Incorporation or under
the provisions of the applicable Business Corporation Act, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether before
or after the time stated therein, shall be deemed equivalent to the giving of
such notice.
ARTICLE XII: AMENDMENTS
These Bylaws may be altered, amended or repealed and new Bylaws may be
adopted by the Board of Directors at any regular or special meeting of the Board
of Directors.
The above Bylaws are certified to have been adopted by the Board of
Directors of the Corporation on the 12th day of September 1996.
---------------------------------
Secretary
WWW
NUMBER SHARES
WW 2847
WORLD WIDE WIRELESS COMMUNICATIONS, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
COMMON STOCK
SEE REVERSE SIDE FOR CERTAIN DEFINITIONS
THIS CERTIFIES THAT CUSIP 981550 10 9
SPECIMEN CERTIFICATE
SPECIMEN CERTIFICATE SPECIMEN CERTIFICATE
to the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF THE PAR VALUE OF
$.001 PER SHARE OF
WORLD WIDE WIRELESS COMMUNICATIONS, INC.
(hereinafter called the "Corporation") transferable on the books of the
Corporation in person or by duly authorized attorney upon surrender of this
Certificate properly endorsed. This Certificate and the shares represented
hereby are issued and shall be held subject to all the provisions of the
Certificate of Incorporation and By-Laws of the Corporation and the amendments
from time to time made thereto, copies of which are or will be on file at the
principal office of the Corporation, to all of which the holder by acceptance
hereof assents. This Certificate is not valid unless countersigned by the
Transfer Agent and registered by the Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
?????????????????????? ????????????????????
SECRETARY PRESIDENT
[SEAL]
Countersigned and Registered:
MANHATTAN TRANSFER REGISTRAR CO.
(HOLBROOK, N.Y)
Transfer Agent
and Registrar
By
Authorized Signature
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 ("ACT"). ANY TRANSFER OF SUCH SECURITIES WILL BE INVALID UNLESS A
REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO SUCH TRANSFER OR IN THE
OPINION OF COUNSEL FOR THE COMPANY REGISTRATION UNDER THE ACT IS UNNECESSARY IN
ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT.
World Wide Wireless Communications, Inc.
CONVERTIBLE UNSECURED DEBENTURE
$740,000 SEPTEMBER 30, 1999
FOR VALUE RECEIVED, subject to the terms and conditions set
forth below, World Wide Wireless Communications, Inc., a Nevada corporation (the
"Company"), whose address is 520 Third Street, Suite 101, Oakland, California
hereby promises to pay to the order of Credit Bancorp, Netherland Antilles
Corporation, (the "Payee"), the principal sum of SEVEN HUNDRED FORTY THOUSAND
DOLLARS ($740,000), together with interest on the outstanding principal balance
remaining unpaid from time to time from and after the date hereof until paid in
full at the rate of seven percent (7%) per annum, payable semiannually in
arrears on the last day of each February and each September 30, commencing
September 30, 1999 and on the maturity date hereof, computed on actual days
elapsed in a 365 day year. The outstanding principal balance, together with all
accrued and unpaid interest, will be due and payable on September 30, 2002.
All payments on account of principal and interest will be made
in lawful money of the United States of America to the address of the Payee set
forth on the Schedule of Purchasers attached to the Purchase Agreement (as
defined herein), or at such other place as the holder hereof may from time to
time designate in writing to the Company.
The Payee and each subsequent holder or holders hereof (any such
person being referred to herein as the "Holder" and all holders being referred
to herein as "Holders") by acceptance of the Debenture each agree to the
following terms and conditions:
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<PAGE>
1. PRINCIPAL PAYMENTS.
1.1. Pro Rata Payments. Any and all payments under the Debenture, whether
at the election of the Company, upon maturity or following an Event
of Default (as defined in Section 3), will be made by the Company
prorata to all Holders.
1.2. Optional Prepayments. The Company may prepay the Debenture in whole
or in part without penalty. Prepayments will be applied first toward
repayment of accrued interest first, and any amount remaining
thereafter toward the repayment of principal. If a prepayment is
made other than on a dat when interest payments are due, the
semi-annual interest payment for the period in which the prepayment
was made will be prorated through the date of prepayment. If the
Holder has exercised its right to convert some or all of the
principal or interest into Common Stock before payment is made, the
Company may not prepay those amounts but, instead, will issue shares
of Common Stock for the amount converted in accordance with this
Debenture.
1.3. Procedures. Upon receipt of any prepayment of principal, the Holder
will promptly endorse and surrender this Debenture to the Company
for cancellation. If the Company prepays some but not all of the
principal, the Company will without charge to the Holder promptly
execute and deliver to the Holder a debenture for the unpaid balance
of the principal. Following the date of prepayment, interest will be
payable only on the portion of the principal which was not prepaid.
2. CONVERTIBILITY.
2.1. Right to Convert. Subject to the provisions of this Debenture, all
amounts of unpaid principal and accrued interest are convertible
into Common Stock at any time at the election of the Holder.
2.2. Conversion - Public Offering. All amounts of unpaid principal and
interest will be converted following five (5) days notice thereof to
the Company, into Common Stock of the Company (the "Common Stock")
at a conversion price of $1.60 per share (the "Conversion Price").
The Conversion Price will be subject to adjustments pursuant to
Section 2.6.
2.3. Mechanics of Conversion. This Debenture may be converted in full or
in part by the Holder, pursuant to Section 2.1-2.2, by surrender of
this Debenture to the Company at the address set forth
2
<PAGE>
above, with a notice of conversion in the form of Exhibit A hereto
duly executed by the Holder (specifying the portion of the principal
amount and the accrued and unpaid interest, if any, to be converted
in the case of a partial conversion).
2.3.1. Surrender of Debenture. To convert any amount owing under
this Debenture into Common Stock, the Holder must surrender
this Debenture at the principal executive office of the
Company, accompanied by a written notice setting forth the
amount of principal and interest being converted. If less
than the entire principal is being converted, the Company
will issue to the Holder a replacement Debenture setting
forth the amount of unpaid principal and otherwise containing
the same terms and conditions as this Debenture.
2.3.2. Issuance of Shares. Following compliance with the procedures
set forth in Section 2.3.1, the Company will issue to the
Holder a certificate evidencing the number of shares of
Common Stock to which the Holder is entitled.
2.3.3. Fractional Shares. In lieu of issuing any fractional shares,
the Company may at its option pay to the Holder cash equal to
the market price for the shares if there is a public market
for the Common Stock.
2.4. Early Termination of Conversion Option. The right of the Holder to
convert any interest or principal into Common Stock will terminate
immediately, notwithstanding the fact that such right could
otherwise be exercised, two (2) business days prior to the
occurrence of any of the following events (hereafter defined as
"Events"):
(i) the merger or consolidation of the Corporation, whether or
not the Corporation is the surviving entity, if the
beneficial owners of the outstanding voting securities of the
Corporation immediately prior to the merger or consolidation
as a group are the beneficial owners of less than 50% of the
surviving entity's outstanding voting securities immediately
after the merger or consolidation;
(ii) the sale, exchange or transfer of all or substantially all of
the assets of the Issuer other than in the ordinary course of
business; or
(iii) the dissolution or liquidation of the Issuer.
3
<PAGE>
The Company will provide the Holder with notice of any Event no
later than ten (10) business days before that Event occurs. The
right of the Holder to convert principal or interest into Common
Stock will not be canceled if the party acquiring the Company's
stock or assets was an affiliate of the Company immediately prior to
an Event or is a person, group or other entity which beneficially
owned more than twenty percent (20%) of the Issuer's outstanding
voting securities immediately prior to that Event.
2.5. Adjustments to Conversion Price. The Conversion Price will be $1.60
per share subject to an adjustment in the case of stock splits,
reverse stock splits, stock dividends, or the reclassification of
securities.
2.5.1. Notice of Adjustment. Whenever the Conversion Price or the
number of shares of Common Stock issuable upon conversion of
the Debenture will be adjusted as provided in this Section
2.5, the Company will forthwith file, at its principal office
or at such other place as may be designated by the Company, a
statement, signed by its chief executive officer or chief
financial officer, showing in detail the facts requiring such
adjustment and the Conversion Price and/or the number of
shares of Common Stock issuable upon Conversion of the
Debenture, as the case may be, that will be in effect after
such adjustment. The Company will within 15 days of any
adjustment to the Debentures cause a copy of such statement
to be sent by first-class, certified mail, return receipt
requested, postage prepaid, to each Holder of Debentures at
such Holder's address appearing in the Company's records.
2.5.2. Stock Splits and Combinations. In the event the outstanding
Common Stock will be subdivided into a greater number of
shares of Common Stock, the Current Conversion Price will,
simultaneously with the effectiveness of such subdivision, be
proportionately reduced, and conversely, in case the
outstanding Common Stock will be combined into a smaller
number of shares of Common Stock, the Current Conversion
Price will, simultaneously with the effectiveness of such
combination, be proportionately increased. In addition, if
the Company declares a stock dividend payable in the form of
common stock, the conversion price will be reduced by an
amount equal to the percentage increase in the total
outstanding shares of the company resulting from that stock
dividend.
4
<PAGE>
2.5.3. Reclassification of Securities. In the event that the
Company's Common Stock is reclassified or exchanged for
another type or class of security without payment of
consideration or otherwise changed, the Holder may convert
this Debenture into the same type and class of security as
the holders of the Common Stock received as a result of that
reclassification, exchange or change. The Conversion Price
for such security will be proportionally adjusted to reflect
the increase or decrease in the number of shares outstanding
as a result of that reclassification, exchange or change.
2.6. Reservation of Stock. The Company will at all times reserve and keep
available out of its authorized but unissued shares of Common Stock,
solely for the purpose of effecting the conversion of the principal
amount and accrued and unpaid interest of this Debenture, such
number of shares of Common Stock as will from time to time be
sufficient to effect such conversion. If at any time the number of
authorized but unissued shares of Common Stock will not be
sufficient to effect such conversion, the Company promptly will take
all such corporate action as will be necessary and appropriate to
increase such number to the number sufficient for such purpose.
3. SUBORDINATION.
The right of the Holder to receive payment of any principal or interest is
subject and subordinate to the prior payment of any other indebtedness
currently owed by or hereafter incurred by the Company other than any
indebtedness currently or hereafter owed to any director or officer of the
Company (hereafter "Senior Indebtedness"). During the continuance of any
default in the payment of principal or interest on any Senior Indebtedness,
no payment of principal or interest will be made on or with respect to this
Debenture if written notice of such default has been given to the Company by
any holder or holders of any Senior Indebtedness. In the event of any
insolvency, bankruptcy, receivership, or liquidation involving the Company,
the holders of Senior Indebtedness will be entitled to receive payment in
full of all principal and interest on all Senior Indebtedness before the
Holder will be entitled to receive any payment of principal or interest.
4. EVENTS OF DEFAULT.
If any of the following events occur ("Events of Default"), all unpaid
principal and accrued interest will become immediately due and payable:
5
<PAGE>
(i) Voluntary Bankruptcy. The Company files a petition for
bankruptcy;
(ii) Involuntary Bankruptcy. A creditor of the Company files a
petition for bankruptcy with respect to the Company and that
petition is not discharged within 90 days of the date of
filing;
(iii) Assignment for Benefit of Creditors. The Company makes an
assignment for the benefit of creditors or a receiver is
appointed with respect to the Company;
(iv) Dissolution. The Company dissolves or commences the
liquidation of its entire business; or
(v) Sale of Assets. The Company sells, assigns or transfers all
or substantially all of its assets other than in the ordinary
course of business, provided that it will not be considered
an Event of Default if the purchaser of those assets agrees
to assume all obligations of the Company with respect to the
payment of principal and interest under this Debenture.
5. MISCELLANEOUS.
5.1. Securities Laws Compliance. This Debenture and the shares of Common
Stock to be issued hereunder have not been registered under the
Securities Act of 1933 (the "Act") pursuant to an exemption to the
registration requirements contained in Section 4(2) of the Act, nor
have they been registered or qualified under any state securities
laws. The Compan reserves the right to condition the issuance of any
shares under this Debenture upon the receipt of such information
from the Holder so as to allow the Company to verify that the
exemption i available as of the date of conversion. The Holder of
this Debenture acknowledges that it is acquiring this Debenture for
investmen only and not with a view toward the resale or distribution
of this Debenture or the Common Stock issuable upon conversion
hereof.
5.2. Restrictive Legend. Each certificate for the securities issued upon
conversion of all or a portion of the principal amount and accrued
and unpaid interest of this Debenture and the Common Stock issued
upon conversion thereof will bear a legend on its face substantially
in the following form:
THIS DEBENTURE AND THE SHARES TO BE ISSUED
6
<PAGE>
HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT
IN EFFECT WITH RESPECT TO THE SECURITIES UNDER THAT ACT OR AN
OPINION OF COUNSEL OR OTHER EVIDENCE SATISFACTORY TO THE COMPANY
THAT REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE
144 UNDER THE ACT.
5.3. Replacement. Upon receipt by the Company of evidence satisfactory to
it of the loss, theft, destruction or mutilation of this Debenture
(provided that an affidavit of the Holder will be satisfactory for
such purpose), and of indemnity satisfactory to it, and upon
surrender and cancellation of this Debenture, if mutilated, the
Company will make and deliver a new Debenture of like tenor in a
principal amount equal to the outstanding principal balance of this
Debenture. Any Debenture so issued will be dated as of the last date
at which principal or interest has been paid upon this Debenture.
5.4. Cancellation. Upon payment in full of all principal and interest
payable hereunder, or in the event the Holder converts the entire
principal and interest amount hereof into Stock, this Debenture will
be surrendered to the Company for cancellation.
5.5. Transferability of Debenture. This Debenture may be sold, assigned,
or otherwise transferred, provided that such transfer is conducted
in accordance of Rule 144 of the Securities and Exchange Commission,
is otherwise exempt from the registration requirements of the Act or
if this Debenture is registered under the Act.
5.6. Governing Law/Forum. This Agreement will be governed by and
construed under the laws of the State of California, exclusive of
any conflicts of laws principles which would apply the laws of any
other jurisdiction. The parties agree that any action to enforce or
construe this Agreement will be brough in the state courts in the
County of San Francisco, State of California, or in the Federal
Courts of the Northern District of California. Each party waives all
objections to the bringing of such an action in that forum based on
lack of personal jurisdiction, improper venue or forum
non-conveniens.
7
<PAGE>
5.7. Amendment and Waiver. Any provision of the Debenture ma be amended
or waived by a writte instrument signed by the Company and by
Holders of at least 66-2/3 of the then outstanding aggregate
principal amount of Debentures, such amendment or waiver to be
effective with respect to all of the Debentures but only in the
specific instance and for the specific purpose for which the
amendment or waiver is made or given; provided, however, tha no such
amendment or waiver will without the prior written consent of the
Holders of all of the then outstanding aggregate principal amount of
Debentures, modify the principal amount, rate of interest, form and
place of payment, conversion or maturity of the Debenture, or the
percentage required to effect amendment of the Debenture.
5.8. No Rights as a Shareholder. This Debenture will not give the Holder
any right to vote in any matter submitted for consideration by the
shareholders or any other right of a shareholder of the company.
5.9. Market Standoff Agreement. The Compan and the Shareholders agree
that, in connection with any public offering of the Company's stock
(regardless of whether the offering is registered under the
Securities Act of 1933, as amended (the "Act") or exempt from
registration) the Shareholders will not sell or otherwise dispose of
any of their Stoc without the prior written consent of the Company
or the underwriter dispose of any of their Stock without the prior
written consen of the Company or the underwriter may specify;
provided that such period will not exceed 180 days after the
completion of the offering.
5.10. Waiver. No delay on the part of the Holder in exercising any right
hereunder will operate as a waiver of such right under this
Debenture.
5.11. Presentment. Presentment, protest, notice of protest, notice of
dishonor, and notice of nonpayment are waived by the Company with
respect to any amounts due hereunder, and any rights to direct the
Company hereunder, and any right t require proceedings against
others or to require exhaustio of security, are waived.
5.12. Notice. Notices and other communications required or permitted to be
given hereunder will be in writing and will be conclusively deemed
effectively given upon personal delivery or confirmed facsimile
transmission, or five days after deposit in United States Mail, by
registered or certified mail, postage prepaid, or one day
8
<PAGE>
after forwarding through a nationally recognized air courier
service, addressed
(i) if to the Company, at [ADDRESS TO BE PROVIDED]
(ii) if to Payee at, [ADDRESS TO B PROVIDED], Payee's address as
set forth in the Schedule of Purchasers attached to the
Purchase Agreement, or at such other address as the Company
or Payee may designate by ten (10) days, advance written
notice to the other party given in the manner herein
provided.
World Wide Wireless Communications, Inc.
- -----------------------------
By: Douglas P. Haffer
Title: President
9
<PAGE>
EXHIBIT A
Notice of Conversion
TO: World Wide Wireless Communications, Inc.
The undersigned, being the holder of the Convertible Debenture, dated September
30, 1999 made by you for the principal amount of $740,000 (the "Debenture"),
hereby surrenders the Debenture to you for conversion into shares of Common
Stock issued by you ("Stock"), such conversion to be in accordance with the
terms and provisions of Section 2 of the Debenture. The principal amount to be
converted upon surrender of the Debenture is $____________ and the accrued and
unpaid interest amount to be converted upon the surrender of the Debenture
(unless paid within five days after this Notice) is $___________. The
undersigned hereby requests that a certificate evidencing the shares of Common
Stock to be issued upon such conversion be issued in the name of
Dated: , 1999
--------------
- ---------------------------
(Name of Holder)
By:
-----------------------
(Name)
- ---------------------------
(Title)
(Address)
----------------------
----------------------
----------------------
C:\TEMP\WWW Communications Inc. - Convertible Debenture(2).WPD
10
Evers &
Hendrickson, LLP
Lawyers and Counselors At Law
- ------------------------------------
March 23, 2000
Securities and Exchange Commission
Division of Corporate Finance
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: World Wide Wireless Communications, Inc., Legality of Shares
Dear Madam/Sirs:
We have made reasonable inquiry and are of the opinion that the
securities being offered, will, when sold, be legally issued, fully paid and
non-assessable.
We are not opining as to any other statements contained in the Form
SB-2 registration statement, nor as to matters that occur after the date
thereof.
Very truly yours,
EVERS & HENDRICKSON, LLP
/s/ William D. Evers
-----------------------------
By: William D. Evers, Partner
LEASE AGREEMENT
BETWEEN
WORLD WIDE WIRELESS COMMUNICATIONS, INC.
AND
SHEKINAH NETWORK
THIS AGREEMENT is made this 25th day of November 1998 (the "Effective
Date"), by and between World Wide Wireless Communications, Inc. a Nevada
Corporation, and Shekinah Network, a California non-profit Corporation and World
Wide Communications, Inc. and Shekinah Network shall hereinafter be individually
referred to as a "Party" or collectively as the "Parties."
WHEREAS, the Federal Communications Commission ("FCC") has authorized
licenses for Instructional Television Fixed Service ("ITFS") channels and has
authorized the licensee to lease excess capacity to non-ITFS users for the
transmission of commercial programming;
WHEREAS, Shekinah Network has received licenses from the FCC License to
construct and operate ITFS systems on the channels and in the markets listed in
Exhibit A, attached hereto and incorporated by reference herein (the "Licenses")
for the transmission of educational and instructional video programming;
WHEREAS, Shekinah Network has filed applications at the FCC to
construct and operate ITFS systems on the channels and in the markets listed in
exhibit B, attached hereto and incorporated by reference herein (the
"Applications") for the transmission of educational and instructional video
programming (the channels listed in Exhibit A and Exhibit B are hereinafter
referred to as the "Channels");
WHEREAS, with respect to the Licenses and the Applications, Shekinah
Network has entered into the Excess Capacity Lease Airtime Agreements listed in
Exhibit C, attached hereto and incorporated by reference herein (the "Existing
Lease Agreements"), pursuant to which certain non-ITFS users ("Existing
Lessees") are not providing, or will provide, access to satellite reception
equipment, transmission and reception equipment, operational support and
royalties in exchange for access to capacity on the channels covered by the
Licenses and the Applications, consistent with the rules and regulations of the
FCC;
WHEREAS, subject to the terms and conditions set forth herein, Shekinah
Network desires to grant to World Wide Wireless Communications, Inc. an
exclusive and irrevocable option to lease excess capacity on the Channels, and
potentially to acquire the Channels;
WHEREAS, subject to the terms and conditions set forth herein, World
Wide Wireless Communications, Inc. desires to acquire from Shekinah Network an
exclusive and irrevocable option to lease excess capacity on the Channels and
potentially to acquire the Channels;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, representations, warranties, covenants and promises contained
herein, the Parties, intending to be legally bound, hereby agree as follows:
<PAGE>
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, representations, warranties, covenants and promises contained
herein, the Parties, intending to be legally bound, hereby agree as follows:
ARTICLE 1
OPTION
1.1. Grant of option. Subject to the terms and conditions herein, Shekinah
Network hereby grants to World Wide Wireless Communications, Inc. the exclusive,
irrevocable right and option to lease from Shekinah Network excess capacity
under each License and Application, and the exclusive, irrevocable right and
option to acquire from Shekinah Network each License and Application (the
"Option") as follows:
1.1.1. Within sixty days (60) days following the exercise of the
Option with respect to any License or Application pursuant to Section 1.5
hereof, subject to Sections 1.1.2 and 1.1.3 hereof, Shekinah Network and World
Wide Wireless Communications, Inc. shall enter into an Excess Capacity Lease
Airtime Agreement ("World Wide Wireless Communications, Inc. Lease Agreement")
for such License or Application substantially in the form of Exhibit D, attached
hereto and incorporated by reference herein. The World Wide Wireless
Communications, Inc. Lease Agreement shall specify a consideration to Shekinah
Network of the amount of a One Dollar ($1) Signing Fee, and a monthly minimum
Transmission Fee of Five percent (5%) of the Gross system receipts or Five
Hundred Dollars whichever is greater.
1.1.2. In the event that the FCC's rules and regulations change such
that World Wide Wireless Communications, Inc. is permitted to acquire the
Channels outright and to utilize the Channels for purposes other than the
transmission of educational and commercial programming, and Shekinah Network
desires to sell its Channels and World Wide Wireless Communications, Inc.
desires to so acquire the Channels, then upon the exercise of the Option with
respect to the Channels covered by any License or Application pursuant to
Section 1.5 hereof, World Wide Wireless Communications, Inc. shall notify
Shekinah Network in writing within sixty (60) days of its intention to acquire
such Channels, and Shekinah Network and World Wide Wireless Communications, Inc.
shall enter into an Asset Purchase Agreement for the purchase and sale of such
Channels ("Purchase Agreement"). The Purchase Agreement shall contain terms and
conditions which are reasonable and customary for purchase agreements of such
Channels and shall specify a consideration to Shekinah Network of One Hundred
and Fifty Thousan Dollars ($150,000) per-market or channel Group on and
individual basis, or all markets or channel groups can be purchased for the sum
of Three Million Five Hundred Thousand Dollars ($3,500,000). This would apply to
World Wide Wireless Communications, Inc. or a FCC approved educational
non-profit entity designated in writing by World Wide Wireless Communications,
Inc..
1.2 Term of Option. The Option shall have a term of ten (10) years from the
date hereof (the "Option Term"). World Wide Wireless Communications, Inc. shall
have a right to renew this option for three (3) additional terms of ten years
each, following the other provisions of this Agreement.
1.3. Payment. In consideration for the grant of the Option, World Wide
Wireless Communications, Inc. hereby agrees to pay to Shekinah Network Five
Hundred Thousan Dollars ($500,000.00), payable in cash by World Wide Wireless
Communications, Inc. by certified or cashier's check or by wire or interbank
transfer as follows:
1.3.1. The non-refundable sum of Fifty-Thousand Dollars ($50,000.00)
shall be paid by World Wide Wireless Communications, Inc. to Shekinah on the
Effective Date.
<PAGE>
1.3.2. The non-refundable sum of Twenty-Five Thousand Dollars
($25,000.00) shall be paid by World Wide Wirelss Communications, Inc. to
Shekinah on or before January 25, 1999 (sixty days (60) following the Effective
Date).
1.3.3. The balance of Four Hundred and Twenty-Five Thousand Dollars
($425,000.00) shall be paid by World Wide Wireless Communications, Inc. to
Shekinah on or before February 25, 1999 (ninety days (90) following the
Effective Date).
1.4 Exercise of the Option. The Option granted under this Agreement shall
be exercised by World Wide Wireless Communications, Inc. only as follows:
1.4.1. The Option with respect to each License and Application shall
be exercisable by World Wide Wireless Communications, Inc. only upon the
occurrence of one of the following events (a "Termination Event"): (i) the
termination of the associated Existing Lease Agreement due to breach thereunder
of the Existing Lessee; (ii) the termination of the associated Existing Lease
Agreement due to the mutual consent of the parties thereto; or (iii) the
expiration of the associated Existing Lease Agreement; provided that Skekinah
Network and the Existing Lease have not entered into a new lease agreement
pursuant to the terms of such Existing Lease Agreement. Shekinah Network shall
provide written notice to World Wide Wireless Communications, Inc. for any
Termination Event within thirty (30) days following the occurrence thereof (each
such notice hereinafter referred to as a "Termination Notice"). (iv) The
Availability of a License or Application not otherwise subject to an Existing
Lease Agreement.
1.4.2. Within ninety (90) days following the receipt of a Termination
Notice by Shekinah Network with respect to any License of Application (the
"Exercise Period"), World Wide Wireless Communications, Inc. shall provide
written notice to Shekinah Network of its intent to exercise its Option for the
License or Application (and the Channels covered thereunder) at issue. If World
Wide Wireless Communications, Inc. declines to exercise the Option for any given
License or Application within the applicable Exercise Period, Shekinah Network
shall have no further obligations to World Wide Communications, Inc. with
respect to such License or Application.
1.4.3. Notwithstanding anything to the contrary in this Agreement, the
Option with respect to each License and Application shall be expressly subject
to any rights of first refusal of Existing Licenses which are contained in the
Existing Lease Agreements.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1. Shekinah Network. Shekinah Network hereby represents and warrants to
World Wide Wireless Communications, Inc. as follows:
2.1.1. Organization. It is a non-profit corporation duly organized,
validly existing and in good standing under the laws of the State of California
and has full power and authority to carry on its business as said business as
said business is now being conducted and to own or to lease the assets it now
owns or leases.
2.1.2. Authority/Enforceability. It has the full power and authority
to execute and deliver this Agreement, and all other documents required to be
executed and delivered by it hereunder, to consummate the transactions hereby
contemplated to fully perform its obligations hereunder and to take all other
actions required to be taken by it pursuant to the provisions hereof. The
execution and delivery of this Agreement, and all other documents required to be
executed and delivered by it hereunder, and its performance hereunder and
thereunder have been duly authorized by all requisite action. This Agreement
<PAGE>
and all other documents required to be executed and delivered by it hereunder
have been duly executed and delivered by it and constitute valid and legally
binding agreements and obligations enforceable in accordance with their
respective terms against it. Notwithstanding anything to the contrary in this
Agreement, except as expressly provided herein, Shekinah Network makes no
representation whatsoever with respect to the Licenses or the Applications.
2.1.3. No Conflicts. Except for any FCC approval which may be required
prior to the execution and consummation of any agreement under Sections 1.1.1 or
1.2 hereof, the execution, and delivery and performance by it of this Agreement,
or any other document required to be executed and delivered by it hereunder, in
accordance with its terms will not, other than as disclosed by it to World Wide
Wireless Communications, Inc.: (i) violate any order or decree of any court or
governmental authority by which, with it is bound, (iii) violate, result in a
breach of, constitute a default (or an event which, with or without the giving
of notice, lapse of time or both, would constitute a default) under, result in
the invalidity of, accelerate the performance required by or cause the
acceleration of the maturity or, terminate or modify or give any third party the
right to terminate or modify, or otherwise, instrument, note, mortgage, lease,
license, franchise, permit or other authorization, right, restriction or
obligation to which it is a party or by which it is bound, (iv) constitute an
act of bankruptcy, preference, insolvency or fraudulent conveyance under any
bankruptcy act or other law for the protection of debtors or creditors, or (v)
conflict with or result in any breach or violation of the terms, conditions or
provisions of its organizational documents.
2.2. World Wide Wireless Communications, Inc.. World Wide Wireless
Communications, Inc. hereby represents and warrants to Shekinah Network, as
follows:
2.2.1. Organization. It is corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada and has full
power and authority to carry on its business as said business is now being
conducted and to own or to lease the assets it now owns or leases.
2.2.2. Authority/Enforceability. It has the full power and authority
to execute and deliver this Agreement, and all other documents required to be
executed and delivered by it hereunder, to consummate the transactions hereby
contemplated, to fully perform its obligations hereunder and to take all other
actions required to be taken by it pursuant to the provisions hereof. The
execution and delivery of this Agreement, and all other documents required to be
executed and delivered by it hereunder, and its performance hereunder and
thereunder have been duly authorized by all requisite action. This Agreement and
all other documents required to be executed and delivered by it hereunder have
been duly executed and delivered by it and constitute valid and legally binding
agreements and obligations enforceable in accordance with their respective terms
against it.
2.2.3. No Conflicts. Except for any FCC approval which may be required
prior to the execution and consummation of any agreement under Sections 1.1.1.
or 1.2 hereof, the execution, and delivery and performance by it of this
Agreement, or any other document required to be executed and delivered by it
hereunder, in accordance with its terms will not, other than as disclosed by it
to Shekinah Network: (i) violate any provisions of any law, rule or regulation
which is applicable to it, (ii) violate any order or decree of any court or
governmental authority by which it is bound, (iii) violate, result in a breach
of, constitute a default (or an event which, with or without the giving of
notice, lapse of time or both, would constitute a default) under, result in the
invalidity of, accelerate the performance required by or cause the acceleration
of the maturity of, terminate or modify or give any third party the right to
terminate or modify, or other authorization, right, restriction or obligation to
which it is insolvency or fraudulent conveyance under any bankruptcy act or
other law for the protection of debtors or creditors, or (v) conflict with or
result in any breach or violation of the terms, conditions or provisions of its
organizational documents.
<PAGE>
ARTICLE 3
RIGHTS AND REMEDIES
3.1. Indemnification.
3.1.1. Each party shall indemnify, defend and hold the other Party and
their officers, managers, directors, employees, agents and representatives free
and harmless from and against any and all claims, actions, suits, liability,
loss, damages, costs, expenses, judgments, deficiencies, charges and reasonable
fees or legal counsel arising out of or in connection with any material breach
by the Party of any representation, warrant or covenant of this Agreement or any
failure by the Party to perform its obligations hereunder. World Wide Wireless
Communications, Inc. shall further indemnify defend and hold Shekinah Network,
its officer, directors, employees, agents and representatives harmless from and
against any and all claims, actions, suits, liabilities, damages, costs,
expenses, judgments, deficiencies, charges and reasonable fees of legal counsel
arising out of or in connection with any challenge by an Existing Lessee to the
termination of an Existing Lease Agreement with respect to any License or
Application; provided that World Wide Wireless Communications, Inc. exercises
the Option with respect to such License or Application and Shekinah Network and
World Wide Wireless Communications, Inc. actually enter into any agreement
pursuant to Sections 1.1.1 or 1.1.2 with respect to such License or Application
following such termination.
3.1.2. If claim by a third party is made against a Party indemnified
under Section 3.1.1, above ("Indemnitee"), and the Indemnitee intends to seek
indemnification with respect thereto, it shall promptly give written notice to
the indemnifying Party ("Indemnitor") of such claim; provided, however, that
failure by Indemnitee to give prompt notice of a claim shall not relieve
Indemnitor of its obligations unless said failure materially prejudices
Indemnitor's ability to defend the claim. Indemnitor shall have ten (10)
business days after said notice is given to elect by written notice given to
Indemnitee to undertake, conduct and control, through counsel of its own
choosing (subject, as to choice of counsel, to the consent of Indemnitee, such
consent not to be unreasonably withheld) and at its sole expense, the good faith
settlement or defense of the claim and Indemnitee shall cooperate with
Indemnitor in connection there with; provided further that if the defendants in
an action include all of the Parties and any Party shall reasonably conclude
that there may be reasonable defenses available to it which are different from
or in addition to those available to the other Party or if the interests of one
Party reasonably may be deemed to conflict with the interests of the other
Party, each Party shall have the right to select separate counsel and to assumen
such legal defenses and otherwise to participate in the defense of such action,
with the expenses and fees of such separate counsel and other expenses related
to such participation to be paid by each Party as incurred. So as long as the
Indemnitor is contesting a claim in good faith, Indemnitee shall not pay or
settle the claim. If Indemnitor does not make timely election to undertake the
good faith defense or settlement of the claim afore-said, or if Indemnitor fails
to proceed with the good faith defense or settlement of the matter after making
such election, then, in either such event, Indemnitee shall, upon ten (10) days'
written notice to Indemnitor, have the right to contest the claim at its
exclusive discreation, at the risk and expense of Indemnitor to the full extent
set forth in Section 3.2.1 above, as applicable.
3.2. Termination
3.2.1. This Agreement may be terminated, without limiting any other
legal or equitable rights or remedies the terminating Party may have, as
follows; (i) Immediately upon the mutual written consent of the Parties; (ii) By
the non-breaching Party in the event of a material breach of a representation,
warranty, covenant or agreement by the other Party upon thirty (30) days written
notice by the non-breaching Party to the breaching Party in the event that the
breaching Party has not cured the breach within said thirty (30) day period;
provided, however, that in the event that World Wide Wireless Communications,
Inc. shall fail to make any of the payments specified in Section 1.3 when due,
Shekinah Network shall be entitled immediately to terminate this Agreement and
any Excess Capacity Lease agreements that may have been entered into by parties
and Shekinah Network shall have no further
<PAGE>
liabilities or obligations to World Wide Wireless Communications, Inc. of any
kind; (iii) By any Party if the other Party shall generally not pay its debts
generally, or shall make a general assignment for the benefit of creditors; or
any proceeding adjudicating a party as bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief, or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, or other similar
official for it or for any substantial part of its property; or the other Party
shall take any action to authorize or facilitate any of the actions set forth
above in this subsection (iii).
3.2.2. In the event of a material breach by a Party under this
Agreement, the other Party, in addition to having the right to terminate this
Agreement without liability, may pursue such other remedies as may be available
to it at law or in equity. Neither termination nor expiration of this Agreement
shall relieve the Parties of liabilities previously accrued hereunder or any
liability, obligation or agreement which is to survive or be performed after
such termination or expiration. However, the exclusive remedy for failure to
meet payments under section 1.3.2 is termination of this option agreement and
the termination of any Excess Capacity Lease agreements that may have been
entered into by parties.
ARTICLE 4
MISCELLANEOUSE
4.1. Assignment. The Parties agree that this Agreement and all of the
rights, privileges, obligations and liabilities hereunder shall be freely
assignable. The Parties further agree to execute any documents necessary and to
cooperate fully in carrying out any such assignment. The Parties hereto hereby
expressly acknowledge and agree that, subject to the receipt of FCC approval
therefore, Shekinah Network intends to assign each of the Licenses and the
Applications to a ITFS qualified entity, and to assign to such entity all of the
rights, privileges, obligations and liabilities under this Agreement.
4.2. Compliance With The Communications Act and FCC Rules. This Agreement
and any agreement concluded under Sections 1.1.1 and 1.1.2 hereof may be subject
to the Communications Act of 1934, as amended, and the rules and regulations and
policies of the FCC 9collectively, the "Act"). If the consummation of the
transactions contemplated by this Agreement shall be held by the FCC or a court
of competent jurisdiction to be violative of the Act, the parties shall use
their best efforts in good faith to arrange for the consummation of those
transactions (without any practical alteration of the consideration to be
received by either Party) in a manner consistent with the required and to
cooperate fully with each other in order to obtain FCC approval of this
transaction if any such approval is required.
4.3. Severability. Each provision of this Agreement shall be considered
severable and if for any reason any provision or provisions of this Agreement of
the application thereof are determined to be invalid or contrary to any existing
or future law of any jurisdiction or any rule or regulation of any government
authority, such invalidity shall not impair the operation of or affect those
provisions in any other jurisdiction or any other provisions hereof which are
valid.
4.4. Entire Agreement. This Agreement constitutes and contains the entire
agreement and understating concerning the subject matters and replaces all prior
negotiations and all agreements proposed or otherwise, whether written or oral,
concerning the subject matter hereof. This is an integrated document.
4.5. Governing Law. This agreement shall be deemed to have been executed
and delivered within the state of California, and the rights and obligations of
the parties hereunder shall be construed and enforced in accordance with, and
governed by, the principals of conflict of laws. Any disputes regarding the
application or effect of any FCC Rules and/or Regulations shall be governed by
the rules of the FCC.
<PAGE>
4.6. Construction. Each Party has cooperated in the drafting and
preparation of the Agreement. Hence, in any construction to be made of this
Agreement, the same shall not be construed against any Party on the basis that
the Party was its drafter.
4.7. Modification and Waiver. This agreement may not be modified in any way
unless by a writing executed by both Parties hereto. No waiver of any breach of
any term or provision of this Agreement shall not be, or shall be binding unless
in writing and signed by the Party waiving the breach.
4.8. Attorneys' Fees. In the event of litigation in connection with or
concerning the subject matter of this Agreement, the Parties agree that the
prevailing Party shall be reimbursed its attorneys' fees and costs. Any legal
costs incurred in connection with the termination of the Existing Lease
Agreements associated with those Licenses or Applications for which World Wide
Wireless Communications, Inc. exercises the Option shall be born by World Wide
Wireless Communications, Inc.
4.9. Binging on Successors. The terms, conditions and provisions of this
Agreement shall inure to the benefit of, and be binding upon, the Parties and
their respective heirs, successors, transferees and assigns.
4.10. Notices. All notices or other communications required or permitted
hereunder shall be in writing (which shall include communications by telex and
telecopier); shall be deemed to have been given when delivered by had, telecopy
followed by mailed notices as hereinafter provided), overnight delivery service,
with acknowledged receipt, or when received by the United States mail if sent by
registered or certified mail postage prepaid, return receipt requested,
addressed to a Party at the addresses set forth for that Party on the signature
page of this Agreement with copies (which shall not constitute notice) to the
individuals or entities designated by the Party on the signature page of this
Agreement, or such other address which the Party shall have given in writing for
such purpose by notice hereunder.
4.11. Third Parties. Nothing herein shall be construed to be to the benefit
of or enforceable by any third party including, but not limited to , any
creditor of the Parties.
4.12. Cooperation. Each of the Parties agrees to cooperate fully and to
execute any and all supplementary documents and to take all additional actions
that may be necessary or appropriate to give full force to the basic terms and
intent of this Agreement.
4.13. Counterparts. This Agreements may be executed in counterparts, each
of which shall be deemed an original, and all counterparts taken together shall
constitute the Agreement of the Parties.
<PAGE>
IN WITNESS WHEREOF, The Parties have caused this Agreement to be
executed as of the day and year first above written.
Shekinah Network
By: ______________________________
Name: Charles J. McKee
Title: President
World Wide Wireless Communications, Inc.
By: ______________________________
Name: Doug Haffer
Title: President
Address for Notices:
Shekinah Network
14875 Powerline road
Atascadero, CA 93422
Attn: Charles McKee, President
Phone/Fax: (805) 438-3341
Gardner, Carton & Douglas
1301 K Street, N.W., Suite 900
Washington, D.C. 20005
Phone: (202) 408-7100
Fax: (202) 289-1504
Douglass P. Haffer
One Post Street Suite 2600
San Francisco, CA 94104
Phone: (415) 956-9190
Fax: (415) 391 3199
<PAGE>
EXHIBIT A
FCC LICENSES
Albuquerque, New Mexico BPLIF-921015DB, -granted 8/5/94-, Call Sign WNC-373
Anchorage, Alaska BPLIF-951016AG, -granted 5/2/96-, Call Sign WNC-732
Aspen, Colorado BPLIF-951018AK, -granted 5/4/98-, Call Sign WND-368
Carlsbad, New Mexico BMPLIF-971024DB, -granted 12/8/94-, Call Sign WNC-533
Champaign, Illinois BMPLIF-960729dw, -granted 2/28/95,- Call Sign WNC-552
Des Moines, Iowa BPLIF-951020BS, -granted ?-. Call Sign WND-401
Fairbanks, Alaska BMPLIF-970819DI, -granted 7/5/96-, Call Sign WNC-773
Fairmont, Minnesota BPLIF-951017AL, -granted 10/10/96-, Call Sign WND-329
Grand Rapids, Michigan BMPLIF-980429K, -granted 9/3/93-. Call sign WLX-950
Hilo, Hawaii BPLIF-951020B4, -granted 3/14/97-, Call Sign WNC-810
Hot Springs, Arkansas BPLIF-951018AV, -granted 4/20/98-, Call Sign WND-348
Key West, Florida BPLIF-951018AV, -granted 5/30/97-, Call Sign WND-798
La Crosse, Wisconsin BPLIF-951020ZW, -granted 10/31/97-, Sall Sign WNC-868
La Grande, Oregon BPLIF-951020EY, -granted 7/25/97-, Call Sign WNC-956
Medford, Oregon BMPLIF-950308DA, -granted 10/8/93-, Call Sign WLX-975
Nashville, Tennessee BMPLIF-940819EC, -granted 4/24/95,- Call Sign WLX-978
Opelika, Alabama BPLIF-951020GB, -granted 3/20/98-, Call Sign WND-321
Pierre, South Dakota BMPLIF-971121DE, -granted 5/23/96-, Call Sign WNC-797
Pocatello, Idaho BPLIF-951020UQ, -granted 8/24/98-, Call Sign WND-465
Redding, California BMPLIF-950523DZ, -granted 9/2/94,- Call Sign WNC-407
Reno/Carson City, Nevada BPLIF-951020DE, -granted 8/21/98-. Call Sign WND-476
Santa Barbara, California BMPLIF-980213DH, -granted 12/6/93-, Call Sign WLX-994
Sebring, Florida BPLIF-951020JX, -granted 8/22/97-, Call Sign WNC-904
Sheridan, Wyoming BPLIF-930108DC, -granted 9/-29-94-, Call Sign WNC-426
St. Croix, Virgin Islands BPLIF-951020JL, -granted 10/22/97-, Call Sign WND-210
St. Thomas, Virgin Islands BPLIF-951018AG, -granted 2/12/98-, Call Sign WNC-892
Ukiah, California BPLIF951017AK, -granted 7/25/97-, Call Sign WNC-893
<PAGE>
Vail, Colorado BPLIF-951018AL, -granted 4/15/98-, Call Sign WND-352
Visalia, California BPLIF-951020MQ, -granted 7-5-96-, Call Sign WNC-787
Wenatchee, Washington BMPLIF-980227DW, -granted 8-23-95-, Call Sign WNC-661
Yuma Arizona BPLIF-920708DC, -granted 7/9/93-, Call Sign WLX-919
<PAGE>
EXHIBIT B
APPLICATION FILED BY SHKINAH NETWORK
Alamosa, Colorado BPLIF-951018AN, -filed 10-95-
Casper, Wyoming BPLIF-951020ED, -filed 10-95
Columbus, Ohio BPLIF-951020YS, -filed 10-95-
Del Rio, Texas BPLIF-951020QA, -filed 10-95-
Elizabeth City (Midway), North Carolina BPLIF-951019BJ, -filed 10-95-
Eureka, California BPLIF-951017AM, -filed 10-95-
Grand Junction, Colorado BPLIF-951020FH, -filed 10-95-
Las Vegas, New Mexico BPLIF951020TA, -filed 10-95-
Springfield, Missouri BPLIF-951020KQ, -filed 10-95-
<PAGE>
EXHIBIT C
ITFS EXCESS CAPACITY
AIRTIME LEASE AGREEMENTS
Alamosa, Colorado
By and between Shekihan Network and "MPO Industries." ECLS Date 10-15-94
Albuquerque
By and between Shekihan Network and "Multimedia TV." ECLA Date 7-7-92
Anchorage, Alaska
By and between Shekihan Network and "ATI of Anchorage." ECLA Date 12-21-92
Aspen, Colorado
By and between Shekihan Network and "NONE" (Terminated)
Carlsbad, New Mexico
By and between Shekihan Network and "Multimedia TV." ECLA Date 10-20-97
Casper, Wyoming
By and between Shekihan Network and " NONE" (Terminated)
Champaign, Illinois
By and between Shekihan Network and "Heartland Wireless of Champaign." ECLA Date
12-27-93
Columbus, Ohio
By and between Shekihan Network and "ATI of Columbus." ECLA Date 12-12-92
Del Rio, Texas
By and between Shekihan Network and "All-Tex Wireless Video, Inc." ECLA Date
10-10-95
Des Moines/Grimes, Iowa
By and between Shekihan Network and "Des Moines F Partnership." ECLA Date
10-1-95
Elizabeth City (Midway), North Carolina
By and between Shekihan Network and "Wireless One of North Carolina." ECLA Date
8/25/97
Eureka, California
By and between Shekihan Network and "MPO Industries." ECLA Date 9-10-94
Fairbanks, Alaska
By and between Shekihan Network and "Alaska Wireless Cable." ECLA Date 5-1-95
Fairmont, Minnesota
By and between Shekihan Network and "Starcom/Fairmont Wireless." ECLAS Date
9-23-95
Grand Junction, Colorado
By and between Shekihan Network and "Wireless Cable of Grand Junction." ECLA
Date 4-15-93
Grand Rapids, Michigan
By and between Shekihan Network and "NONE" (Terminated)
Hilo, Hawaii
By and between Shekihan Network and "Hilo Wireless Cable, Ltd. "ECLA Date
10-1-95
Hot Springs, Arkansas
By and between Shekihan Network and "Skyview Wireless Cable, Inc." ECLA Date
10-1-95
<PAGE>
Key West, Florida
By and between Shekihan Network and "NONE" (Terminated)
La Crosse, Wisconsin
By and between Shekihan Network and "Wisconsin Wireless Cable." ECLA Date 1-1-95
La Grande, Oregon
By and between Shekihan Network and "NONE" (Terminated)
Las Vegas, New Mexico
By and between Shekihan Network and "Las Vegas Wireless Cable." ECLA Date
10-1-95
Medford, Oregon
By and between Shekihan Network and and "ATI of Medford." ECLA Date 5-5-92
Nashville, Tennessee
By and between Shekihan Network and "Nashville Wireless Cable Television, Inc."
ECLA Date 3-25-94
Opelika, Alabama
By and between Shekihan Network and Wireless One (no current information!)
Pierre, South Dakota
By and between Shekihan Network and "NONE" (Terminated)
Pocatello, Idaho
By and between Shekihan Network and "Centimeter Wave Television, Inc." ECLA Date
10-1-95
Redding, California
By and between Shekihan Network and "ATI Of Redding." ECLA Date 8-14-92
Reno/Carson City, Nevada
By and between Shekihan Network and "Quadravision." ECLA Date 8-10-95
Santa Barbara, California
By and between Shekihan Network and "ATI of Santa Barbara." ECLA Date 6-9-92
Sebring, Florida
By and between Shekihan Network and "ATI of Sebring." ECLA Date 9-14-95
Sheridan, Wyoming
By and between Shekihan Network and "ATI of Sheridan." ECLA Date 5-5-92
Springfield, Missouri
By and between Shekihan Network and "Hearthland Wireless Cable, Inc." ECLA Date
10-10-95
St. Croix/Friedensfeld, Virgin Islands
By and between Shekihan Network and "Antilles Wireless Cable TV, Co." ECLA Date
9-12-95
St. Thomas/Charlotte Amalie, Virgin Islands
By and between Shekihan Network and "Antilles Wireless Cable TV, Co." ECLA Date
9-12-95
Ukiah, California
By and between Shekihan Network and "NONE" (Terminated)
Vail, Colorado
By and between Shekihan Network and "NONE" (Terminated)
<PAGE>
Visalia, California
By and between Shekihan Network and "ATI of Visalia." ECLA Date 1-14-93
Wenatchee, Washington
By and between Shekihan Network and "ATI of Wenatchee." ECLA Date 12-1-94
Yuma, Arizona
By and between Shekihan Network and "Cardiff Broadcasting Partnertship II." ECLA
Date 5-5-92
SOUTH BEND
MMDS LEASE AGREEMENT
THIS AGREEMENT OF LICENSE made and entered into this 22 day of
December, 1992 by and between OI Capital Corporation a corporation organized and
existing under the laws of the State of Indiana, with its principal office at
421 South Second Street, Elkhart, IN 46516, herein called LICENSOR, AND National
Micro Vision Systems, Inc., a Nevada Corporation herein called LICENSEE:
WITNESSETH:
That, for and in consideration of the mutual promises of LICENSOR and
LICENSEE, herein contained, and the respective performances thereof, the
LICENSOR grants to the LICENSEE a nonexclusive License to use its 700 foot
tower, transmitter building (Premises) at the base of said tower or in close
proximity, together with such other portion of its property located in the South
One-Third (1/3) of the West Half (1/2) of the Northwest Quarter (1/4) of Section
33, Township 37 North, Range 3 East, containing approximately 8.209 acres in St.
Joseph County, Indiana, as is herein specified, but for no other purposes,
subject to the following terms and conditions:
1. This License is granted to enable the LICENSEE to rent space and
install equipment for the purpose operating MMDS wireless cable system E Group
For South Bend, Ind. at its own risk and expense. The use of the property
granted by this License is for the installation, operation, and maintenance of
said equipment, including base station, antenna pole or mast, wiring, and
accessories used therewith at places designated by LICENSOR.
2. The term of the License shall be for a period of five years
commencing on the 1st day of January, 1993, and ending on the 31st day of
December, 1998; provided, however, that either the LICENSOR or the LICENSEE may
cancel this agreement by One Hundred Twenty (120) days written notice ot the
other party. After the term of this agreement expires, this contract shall
continue for successive additional periods of one (1) month, provided that
either LICENSOR or LICENSEE may terminate this agreement at any time with or
without cause upon written notice other the other party sent by certified or
registered mail. LICENSEE shall have the option to renew this License upon
completion of the term of said License, except that the rental factor shall be
renegotiated between both parties for the renewal period.
3. LICENSOR agrees that this License Agreement becomes binding only
upon issuance, by the Federal Communications Commission, of the LICENSEE'S
Operating License or Permit.
4. The LICENSEE may install an antenna for the heretofore related
equipment, at the 675 foot level on said tower. A base station for such system
may be installed in the transmitter building. Associated transmission line may
be installed between the base station in the transmitter building and the
antenna on the tower. The location and quality of the installation, removal
maintenance and operation of all such equipment shall be subject to the absolute
control and approval of the LICENSOR or it's agents. All costs and expenses of
each installation, removal, relocation, operation and maintenance shall be paid
by the LICENSEE, except the power supply as hereinafter mentioned. No equipment
shall be installed by the LICENSEE until it is determined to the satisfaction of
the LICENSOR or it's agent that said equipment will not interfere in any way
with the normal operation of existing communications and broadcast equipment at
the site. If, at any time, LICENSEE'S equipment shall interfere in any way with
the normal operation of existing communications and broadcast equipment at the
site, any cost connected with the adjustment of LICENSEE'S or any other
occupant's transmitting equipment, made necessary by the LICENSEE'S
installation, shall be borne solely by the LICENSEE. LICENSEE further agrees
that at any time during the term of this License, should the Licensor or it's
agents determine that it is in the best interest of the tower site or the other
occupants of the tower for the LICENSEE to relocate it's antenna or place it's
transmitting equipment on an antenna jointly used by other occupants of the
tower, the LICENSEE shall do so at it's expense, provided that this can be done
without any undue harm to the LICENSEE'S signal. LICENSOR shall make no
unreasonable request of LICENSEE, and any request shall be supported by adequate
technical information.
<PAGE>
5. The LICENSEE shall pay to the LICENSOR the sum of Two Thousand &
00/100 Dollars ($2000.00) per month for each such MMDS wireless cable system
installed and operated under this License. Said payments for each system shall
begin on the day of commencement of installation of equipment for that system or
90 days from the date of this License which ever occurs first, and end on the
day of the removal of the last of such equipment for that system. Said monthly
payments shall be paid in advance and on the first day of each monthly period
while the equipment for such system is on the property of the LICENSOR. Power
required for each such MMDS wireless cable system shall be paid for, but not
guaranteed, by the LICENSOR as a part of said rental consideration. LICENSEE
agrees to the LICENSOR increasing the monthly rental rate, not to exceed fifteen
percent (15%), at the end of the third (3rd) year of the LICENSE AGREEMENT.
6. The LICENSEE shall pay to and deposit with the LICENSOR the sum of
Two Thousand & 00/100 Dollars ($2000.00) prior to the commencement of the term
of this License Agreement, which said amount shall be held by LICENSOR as
security for the full and timely performance by the LICENSEE of all the terms
and conditions hereof. The rights of the LICENSOR against the LICENSEE for a
breach of this agreement shall in no way be limited or restricted to the amount
of the security deposit and the LICENSOR shall have the right to pursue any
available remedy to protect its interest herein. The deposit shall be returned
to the LICENSEE at the final termination of this agreement, provided that all
the terms and conditions herein have been fully performed.
7. In the event the an additional MMDS System or group is installed by
the LICENSEE upon the premises, then the additional sum of One Thousand Five
Hundred & 00/100 Dollars ($1500.00) per month shall be paid by the LICENSEE to
the LICENSOR. The LICENSOR agrees that the LICENSEE may further license others
to use it's equipment located upon the premises, but any such sublicenses shall
be subject to the increased payment provisions of this License Agreement. The
LICENSEE hereby agrees to indemnify and save harmless the LICENSOR from and
against any and all claims, demands, damages, and liabilities of every kind and
nature resulting from such sublicense agreements, except liability caused solely
by the negligence of the LICENSOR.
8. Rights of ingress and egress over the property of the LICENSOR are
hereby granted to the LICENSEE for the purpose of conducting the business for
which this License is granted; provided, however, that such rights and the
exercise thereof are subject to the absolute control and approval of the
LICENSOR.
9. At the termination of this License, by the expiration of timer,
cancellation, or otherwise, the LICENSEE shall promptly remove all property
placed on the premises under this License and restore the LICENSOR'S property to
the condition it was in at the date of the execution of this Agreement,
reasonable wear and tear excepted. All such repairs to all of the LICENSOR'S
property used under this License shall be made by the LICENSEE at the times and
in the manner determined and directed by the LICENSOR.
10. The LICENSEE hereby covenants with the LICENSOR to indemnify and
save harmless the LICENSOR against and from any and all liability of every kind
and nature whatsoever resulting form the existence of this License and all
operations and activities thereunder. To provide the LICENSOR with the indemnity
herein set forth, the LICENSEE agrees to maintain a policy of insurance issued
by a company authorized to do business in Indiana in an amount not less than
$500,000.00 for bodily injury, including death, to any one person, and
$1,000,000.00 for all bodily injuries, including death, sustained by more than
one person in any one occurrence and $300,000.00 for property damage in any one
occurrence. The LICENSEE shall furnish the LICENSOR with a certificate of
insurance issued by said company evidencing the existence of such insurance
annually.
<PAGE>
11. To secure the payment of the License Agreement monthly fee and
other liabilities of the LICENSEE hereunder, LICENSEE hereby grants to LICENSOR,
which shall continue upon default by LICENSEE, as defined in this License
Agreement, a security interest in all of LICENSEE'S personal property;
(including without limitation LICENSEE'S transmission equipment, feedline,
antenna, dishes, etc.; whether now or hereinafter acquired) which is now or
hereinafter located at the premises and in the proceeds thereof, including tort
claims and insurance (all hereinafter collectively referred to as "collateral").
LICENSEE shall not permit the removal of any collateral from the premises,
except with the permission of the LICENSOR. Upon the occurrence of default of
this License Agreement, LICENSOR shall have the remedies of a secured party
available under Indiana law. Theses remedies shall include, without limitation,
the right to take possession of the secured collateral and for that purpose
LICENSOR may enter the premises and remove it and LICENSEE shall hold LICENSOR
harmless from any and all liability sustained thereby, except through wonton or
willful misbehavior. LICENSOR may require that LICENSEE make the collateral
available to LICENSOR at a place to be designated convenient to both parties.
LICENSOR shall give LICENSEE at least 10 days prior to notice of the time and
place of any public sale thereof or of the time at which any private sale or any
other intended disposition thereof is to be made Expenses of retaking, holding,
preparing for sale, selling and the like shall include LICENSOR'S reasonable
attorney's fees and legal expenses.
12. This Agreement is subject to all Federal, State, and Municipal laws
and rules, regulations, and order of governmental agencies, including, but not
limited to, the rules, regulations, and order of the Federal Communications
Commission.
13. Neither this Agreement nor any right or privileges thereunder may
be assigned or transferred by operation of law or otherwise without the written
consent of the LICENSOR.
14. Failure or delay on the part of the LICENSOR or the LICENSEE to
exercise any right, power or privilege hereunder shall not operate as a waiver
thereof.
15. All notices and demands which may or are required to be given by
either party to the other hereunder shall be in writing and shall be sent by
United Stated Certified or registered mail, postage prepaid, addressed to the
LICENSEE at 17138 Von Karman, Irvine, California 92714 and addressed to the
LICENSOR at 421 South Second Street, Elkhart, IN 46516, or to such other firm or
to such other place as LICENSOR or it's agents may from time to time designate
in writing.
16. This contract constitutes the entire agreement of the parties
hereto and shall supersede all other prior offers, negotiations and agreements.
17. Licensee at it's discretion, may install an electrical generator
for the operation of it's equipment. The location and installation procedure
shall require prior written approval of license.
Executed at Elkhart, Indiana, the day and year first above written.
OI CAPITAL CORPORATION
By: _________________________
LICENSOR
NATIONAL MICRO VISION SYSTEMS, INC.
By: __________________________
LICENSEE
LEASE AGREEMENT
BETWEEN
WORLD WIDE WIRELESS COMMUNICATIONS, INC.
AND
SHEKINAH NETWORK
Vail, Colorado
ITFS EXCESS CAPACITY AIRTIME LEASE AGREEMENT
THIS AGREEMENT is made this 1st day of August 1999 by Shekinah Network
(hereinafter referred to as "Lessor") having its principal place of business at
14875 Powerline Road, Atascadero, CA 93422 and World Wide Wireless
Communications, Inc. (hereinafter referred to as "Lessee") having its principal
place of business at One Post Street, Suite 2600 San Francisco, CA 94104.
WHEREAS, the Federal Communications Commission ("FCC") has authorized
licenses for Instructional Television Fixed Service ("ITFS") channels and has
authorized the licensee to lease excess capacity to non-ITFS users; and
WHEREAS, Lessor has been granted an FCC License for (call sign) WNC-798
(the "License") for the Channel group C1-4 (the "ITFS Channels") in Vail,
Colorado ("The Market"); and
WHEREAS, Lessee is in the business of providing voice, video, data and
other services via microwave transmission in the Market Area and desires to
lease the excess ITFS capacity of the ITFS channels; and
WHEREAS, Lessor has determined that there will be excess airtime
capacity available on the ITFS Channels and desires to lease this excess airtime
capacity to Lessee.
NOW, THEREFORE, in consideration of the mutual promises, undertakings,
covenants and conditions set forth herein, the Lessor and Lessee do hereby agree
and warrant as follows:
1. TERM OF AGREEMENT
A. Initial Term. This Agreement shall be effective upon the date of its
execution and shall extend for an initial term of five (5) years (the
"Initial Term").
B. Renewal Term Provided that the License is renewed by the FCC, Lessee
shall have the right to extend this Agreement on its then existing
terms and conditions for one (1) additional five (5) year term (the
"Renewal Term"). The Renewal Term shall automatically go into effect
upon the conclusion of the Initial Term unless Lessee notifies Lessor
at least one hundred eighty days (180) before the end of the Initial
Term that Lessee does not wish to extend this Agreement.
C. New Lease Agreement/Right of first Refusal.
(1) Providing that Lessor's FCC license remains in good standing
and/or Lessor seeks to renew such license, Lessee and Lessor shall
negotiate in good faith for a new excess capacity airtime lease
agreement (hereinafter referred to as "New Lease Agreement") no later
than one hundred eighty days (180) prior to the end of the latter of
(i) Initial Term or (ii) the Renewal Term if the Agreement is extended
for the Renewal Term.
<PAGE>
(2) If Lessor elects to not reasonably pursue a New Lease Agreement
with Lessee, then Lessor shall so notify Lessee in writing of such
intent no later than one hundred eighty (180) days prior to the end of
the Renewal Term.
(3) If Lessor and Lessee do not enter into a New Lease Agreement,
Lessor grants Lessee a right of first refusal on any competing
proposals for lease agreements or transfers or assignments of any part
of the ITFS Channels received by Lessor during the twelve (12) months
following the expiration of the latter of (i) the Initial Term or (ii)
the Renewal Term, if the Agreement is extended for the Renewal Term.
If any acceptable offer to lease or acquire the ITFS Channels is made
to Lessor, Lessor shall give written notice to Lessee describing the
person to whom the proposed lease or transfer is to be made, the fees,
charges, rental or other consideration to be received fro the lease or
transfer, the terms thereof and generally the relevant other terms and
conditions of the lease or transfer. Lessee shall have a period of
thirty (30) days after its receipt of such notice from Lessor in which
to elect, by giving written notice to Lessor, to lease or, if
eligible, obtain any or all of the ITFS Channels for the same fees,
charges, rental or other consideration for which Lessor proposed to
lease or transfer to the third person.
(i) The fees, charges, rental or consideration shall be paid by such
third person or Lessee in cash.
(ii) If Lessor does not believe Lessee's stated offer is in an amount
fairlyequivalent to the fair value of the consideration payable by the
third person and so notifies Lessee in writing within seven (7) days
after Lessor's receipt of Lessee's notice of election to so lease or
purchase, Lessee may within five (5) days after its receipt of such
notice from Lessor elect to refer such question for determination by
an impartial arbitrator and the right of first refusal of Lessee shall
then be held open until (5) days after Lessee is notified of such
determination. Such arbitrator shall be chosen either by agreement of
Lessee and Lessor at the time such question arises, or, at the option
of either party, by referring the question to the American Arbitration
Association with instructions that the American Arbitration
Association select a single arbitrator under a request from the
parties for expedited and accelerated determination. The determination
of the arbitrator chosen under either option contained in this
subparagraph shall be final and binding upon Lessee and Lessor. The
parties shall share equally in the costs and fees of the arbitration
(iii) In the event Lessee shall elect to exercise its right of first
refusal, the lease agreement or other transfer or assignment shall be
consummated within thirty (30) days of the latest of: (1) the day on
which Lessor received notice of Lessee's election to exercise the
right of first refusal; (2) the day upon which any question required
to be determined by the arbitrator hereunder has been determined; or
(3) the date of any FCC approval in the case of assignment or
transfer; or at such other time as may be mutually agreed. The right
of first refusal is terminated either by the lease or other transfer
to Lessee as provided herein or by notice to Lessee of the Lessor's
proposal to lease or otherwise transfer the ITFS Channels or any part
to a third person and Lessee's unwillingness or failure to meet and
accept such a bona fide offer pursuant to the times and procedures as
set forth above; provided that such proposed lease or transfer is
consummated at the same fees, charges, rental or other consideration
and upon the same terms as to which such right of first refusal
applied, within thirty (30) days after Lessee's right of first refusal
had expired or had been specifically waived by written notice given to
Lessor by Lessee, or within thirty (30) days following FCC approval in
the case of assignment or transfer.
<PAGE>
C) Operation During End of Term. If Lessor and Lessee do not enter into
New Lease Agreement before the end of the Initial Term, Lessee shall
cease leasing the ITFS Channels on the last day of the Initial Term.
D) No Rights Beyond Term of Licenses. Lessor and Lessee agree that this
Agreement shall not give rise to any rights or remedies beyond the
expiration of any FCC license necessary for the continued operation of
the ITFS Channels. Provided, however, that while this Agreement is in
effect, Lessor shall obtain and maintain in force all licenses,
permits and authorizations required or desired in connection with the
use of the ITFS Channels. Lessor shall take all necessary steps to
renew the licenses for the ITFS Channels and shall not commit any act
or engage in any activity which could reasonably be expected to cause
the FCC to impair, restrict, revoke, cancel, suspend or refuse to
renew the ITFS licenses. Lessor shall take all reasonable steps to
comply with the Communications Act of 1934, as amended and the rules
and regulations of the FCC, and shall file all reports, schedules
and/or forms required by the FCC to be filed by Lessor. All expenses,
including attorneys fees and filing fees, incurred in preparing and
filing such reports, schedules and/or forms required by the FCC shall
be paid by the Lessee.
2. ALLOCATION OF AIRTIME.
A. Excess Capacity Airtime. To the extent allowed by the FCC rules and
regulations and any amendments thereof, Lessor agrees to lease to
Lessee the exclusive use of all excess capacity not utilized by Lessor
("Excess Capacity Airtime").
B. Lessor's Primary Airtime. During analog transmission over the ITFS
Channels, Lessor reserves for its exclusive use a minimum of twenty
(20) hours of airtime per-channel per-week to be used for its ITFS
scheduled programs. During digital transmission ovr the ITFS Channels,
Lessor shall have the exclusive use of 12.5% of the total capacity
available on the Lessor's ITFS Channels. This airtime shall be know as
"Lessor's Primary Airtime".
C. Schedule of Airtime. The schedule which depicts the agreement of the
parties as to use of Lessor's Channels shall be attached hereto and
made a part hereof as Exhibit A which is subject to change upon
agreement by both parties.
D. Lessee's use of its Excess Capacity Airtime. Lessee shall have the
right to utilize its Excess Capacity Airtime for any purpose allowed
or authorized by the FCC including but not limited to voice, video and
data transmission.
E. Alternate Use and Vertical Blanking Intervals. Lessor shall have the
right to use the second audio carrier ("SAP") and vertical blanking
intervals. ("VBI") on which Lessor's ITFS programming is being
transmitted. Lessee shall at all times have the right to use the VBI
and SAP not utilized by Lessor and 100% of the response frequencies
associated with the ITFS Channels. Lessor shall be responsible for any
equipment needed to utilize the VBI and/or SAP and such equipment
shall be compatible with Lessee's system.
F. Lessor's Use of ITFS Channels. Lessor agrees that its program services
and airtime use will not harm or interfere with Lessee's current or
future signal paths utilized within Lessee's System for program
encryption, pilot carrier signaling and other technical needs utilized
for the operation of and such services provided by Lessee's System.
Nor will Lessor, by its own action, or through a third party, utilize
any part of its licensed frequency spectrum to create or operate a
<PAGE>
service that is in competition with current, planned or future
services provided by Lessee's System. Lessor agrees to use its Primary
Airtime in accordance with the FCC's rules and regulations. Lessor
shall not take or fail to take any action which may have a material
adverse effect on Lessee's right to utilize its Excess Capacity
Airtime.
G. Expanded System Capacity. Lessee shall have the right at anytime to
require Lessor to file with the FCC any necessary application to
expand the channel capacity to Lessor's station to enable it to carry
more than one video signal per channel or digital data services;
provided however, before Lessee can exercise this right, it must
demonstrate to the Lessor's reasonable satisfaction that such
modification will not materially degrade the performance of the
station nor impair signal quality at the registered ITFS receive
sites. Once such modification has been constructed, the modified
facilities shall automatically be considered a part of this agreement
and subject to all terms and conditions hereof. It is understood that
Lessee shall have the full-time use of the Expanded Channels to the
extend permitted by FCC rules.
3. TRANSMISSION SITE AND FACILITIES.
A. Primary Transmission Site. Lessor's ITFS Channels are located at Key
West, FL, Lessee agrees to provide Lessor space at the Primary
Transmission site for Lessor's audio and video transmission equipment
which shall not exceed on rack. Such space shall be leased to Lessor
pursuant to Exhibit D hereto. This site shall hereinafter be described
as the "Primary Transmission Site". At Lessee's sole expense, Lessee
shall contract for a lease of space at the Transmission Site upon such
terms as the parties agree. The Transmission Site shall comply with
the standards, specifications and regulations of the FCC rules and
orders pertaining to Lessor's ITFS license.
B. Relocation of Transmission Site.
(i) Lessor acknowledges that the location of the Primary Transmission
Site for ITFS Channels is critical to the Lessee's business and
agrees that it will not relocate the transmission facilities for
ITFS Channels from the Primary Transmission Site without Lessee's
prior written consent.
(ii) Lessor further acknowledges that possibility that, as a result of
currently unforeseen events, the Primary Transmission Site may
not be the optimum site for the location of the ITFS Channels or
Lessee's business throughout the term of this Lease Agreement.
Lessor therefore agrees that if at any time or from time to time
Lessee requests in writing that the transmission facilities for
the ITFS Channels be relocated, Lessor shall file with the FCC
and any other regulatory body having jurisdicition over the ITFS
Channels all applications, amendments, and requests for
modification that may be necessary to obtain any necessary
consents to permit such relocation to such location within or
adjacent to the Market as may be requested by Lessee; provided,
however, that Lessor shall not be obligated to submit or
procecute any application, amendment, or request for modification
that Lessor reasonably determines, upon advice of counsel
contained in a written opinion, would be in violation of the
terms of the License, any statute, rule, or regulations regarding
the operation of the ITFS Channels or the submission of materials
to the FCC, or any of its obligations as an ITFS licensee; and
<PAGE>
provided, further, that any such relocation will not result in
loss of service to Lessor's registered receive sites served by
the transmission facilities in the event that the authorization
is obtained to relocate the ITFS Channels to the location
requested by Lessee, Lessor shall relocate such channels to such
new location as soon as reasonably possible after authorization
is obtained. Lessee shall bear reasonable costs associated with
such relocation, including engineering and construction, and all
reasonable costs associated with obtaining FCC or any other
regulatory approval therefore.
(iii) Lessor agrees to file modification applications requested by
Lessee. Such modifications may include but shall not be limited
to the following: power increase or decrease, polarization,
transmit antenna patterns, digital, two-way (return path) use of
the ITFS Channels, boosters, beam benders or repeaters, cells,
sectorization, channel swaps, channel loading, channel shifting
and application within five (5) business days or receipt of the
modification application from Lessee or during any FCC designated
filing window. Lessee will use reasonable efforts to provide
Lessor with the engineering for the modification thirty (30) days
prior to the request for filing. If Lessor believes that such
modification will have an adverse effect on Lessor's ability to
provide its services to its receive sites, Lessor agrees to file
the modification application as presented by Lessee and within
the time limit requested by Lessee; however, Lessee agrees not to
implement construction and Lessor agrees not to withdraw the
application until the parties have adequately addressed and
resolved the potential material adverse effect or the matter has
been submitted to arbitration pursuant to Section 16 and a final
decision has been rendered by arbitrator. Although Lessee intends
to file such modification applications, it may elect not to
construct the Channels in that manner and may desire to utilize
the Channels as currently licensed. A copy of the modification
application, bearing the FCC's date stamp, shall be mailed to
Lessee by Lessor, within fourteen (14) days of the filing of the
modification application. Lessee shall be solely responsible for
all engineering and legal costs associated with the preparation,
review and filing of the modification application. In the event
that any license modification requested by Lessee requires
receive site upgrades in order for Lessor's receive sites to
continue to receive Lessor's services, then Lessee agrees to pay
for all costs to complete such upgrade prior to implementing the
license modification.
C. System Construction. Lessee shall within a reasonable period of time,
but not later than six (6) months after the FCC grant of digital
authority for the ITFS Channels, purchase equipment such as the
antenna, waveguide or transmitters specified on the authorization for
the ITFS Channels. At Lessee's expense, Lessee shall purchase and
install such transmitters, transmission line, modulators, antennas and
other equipment as required to operate the ITFS Channels in accordance
with the provision of such authorization. Any equipment so used in
such construction shall be leased to lessor pursuant to Paragraph 5
hereof. Such equipment is hereinafter referred to as the "Leased
Equipment". Lessee shall retain title to the Leased Equipment except
as noted by Paragraph 15 herein.
D. Maintenance of Transmission Equipment. At Lessee's expense and subject
to Lessor's right to supervise the maintenance of this equipment,
Lessee shall maintain and operate the Leased Equipment during the
terms of this Agreement for a nominal fee. Lessee shall also pay all
taxes and other charges assessed against the Leased Equipment.
E. Transmission of Programming. At no cost or expense to Lessor, Lessee
shall provide the necessary labor and equipment capabilities to
transmit on the ITFS Channels programming required to be carried
pursuant to this Agreement such as Lessor's ITFS programming and TBN.
Lessee shall also comply with Lessor's instructions regarding the
transmission of such programming such as the dates and times to
transmit programming.
<PAGE>
F. Interference. Lessee shall operate the Leased Equipment so that such
operation does not create or increase interference with electronic
transmission of any other FCC licensees entitles to protection under
FCC rules and regulations. If Lessee's entitled to protection under
FCC rules and regulations. If Lessee's operation of the Lease
Equipment does so create or increase interference, Lessee shall pay
all of the reasonable engineering and legal fees necessary to resolve
the interference problem so created.
G. Alterations and Attachments. Lessee, at its own expense, may make
alterations of or attachments to the ITFS equipment or the common
equipment as defined in Exhibit C (including the installation of
encoding and/or addressing equipment) as may be reasonably required
from time to time by the nature of its business; provided however,
that such alterations or attachments do not interfere with Lessor's
signal or ongoing operations or violate any FCC rules or regulations;
and provided further that FCC authorization, if required, is obtained
in advance of any such alteration or attachment at the sole cost of
Lessee. to the extent any FCC authorization pertaining to the ITFS
equipment is required, Lessor agrees to use its best efforts to obtain
such authorization.
H. Licensee Control and Liability. Nothing herein shall derogate from
such licensee control of operations of the ITFS Channels that Lessor,
as an FCC licensee, shall be required to maintain and Lessee
acknowledges the reservation by Lessor of such control. Lessor shall
at all times retain ultimate and exclusive responsibility for the
operation and control of the ITFS Channels including policy decisions.
4. LESSOR'S RECEIVE SITES.
Attached hereto as Exhibit B is list of the registered receive sites
designated by Lessor to receive its ITFS programming and to be installed at the
expense of Lessee. Those receive sites so listed shall be installed with a
Standard Installation. If as the result of any relocation of the Primary
Transmit Site, the equipment at Lessor's existing registered receive sites must
be reoriented, Lessee shall pay the cost of same. As used herein for the
purposes of this Agreement, the phrase "Standard Installation" shall mean an
installation consisting of the placement of the ITFS/MMDS receiving antenna at
an elevation (not to exceed thirty [30] feet above the base mounting location)
which could normally receive the line-of-sight transmission from the
Transmission Site; the coupling thereto of a block-down converter; and a
sufficient amount of transmission line (coaxial cable) to connect the received
ITFS programming to the input of (i) one classroom designated by Lessor to
receive the ITFS programming or (ii) the receive site internal/external
distribution system. Also, if as the result of any relocation of the Transmit
Site, the equipment at Lessor's existing receive sites must be reoriented,
Lessee shall pay the cost of same. Lessee also agrees that for digital
transmission of the ITFS Channels Lessee will purchase and install at Lessee's
expense, one single-point modem to receive its ITFS programming.
5. LEASE OF EQUIPMENT.
A) Lessor's Lease of Leased Equipment. For a nominal fee, Lessor shall
lease from Lessee the Leased Equipment during the terms of this Agreement. A
list of this equipment is attached hereto as Exhibit C and incorporated by
reference herein. Lessor shall have no responsibility for the loss of or damage
to the Leased Equipment during the terms of this Agreement and Lessee shall bear
all such responsibility.
<PAGE>
6. FEES.
A) Lessor's Service Fee. In consideration of the lease of the Leased
Equipment, and for its share of the projected costs to maintain the Transmission
Site and the Lease Equipment, Lessor shall pay Lessee an annual fee provided for
in Exhibit D.
B) Subscriber Royalty Fees or Percentage. Beginning on the Execution
Date of this Agreement and continuing thereafter during the Initial Term of this
Agreement, Lessee shall pay to Lessor the Subscriber Royalty Fee, System
Percentage or monthly minimum, whichever is greater as set out in Exhibit D
which is attached herewith and incorporated by reference herein. If the
Execution Date shall be a date other than the first day of a calendar month,
then the Subscriber Royalty Fee for the partial month shall be paid on a
proportionate basis. A late fee of 10% (ten percent) will be assessed to past
due accounts, and a finance charge of one and one-half percent (1.5%) per month
will be assessed in addition to the late fee until paid.
C) Notice of Construction and Required Certificate. Within thirty (30)
days of completion of construction at the Transmission Site, Lessee shall notify
Lessor of such completion of construction in writing. Within thirty (30) days of
the end of each month in which Excess Capacity Airtime is leased hereunder,
Lessee shall provide Lessor with a certificate, certified as accurate and
correct by an authorized agent of Lessee, showing the number of subscribers
served during such month.
D) Right to Audit. Lessee shall for a period of three (3) years after
their creation, keep, maintain and preserve complete and accurate records and
accounts, including all invoices, correspondence, ledgers, financial and other
records pertaining to Lessee's use of Excess Capacity Airtime and Lessor's
charges hereunder; and such records and corporate accounts shall be available
for inspection and audit at Lessee's corporate offices or at Lessee's offices in
the Market, as designated by Lessee, at any time or times during the term of
this Agreement or within ninety (90) days thereafter, during reasonable business
hours, by Lessor or its nominee. In the event that there is discovered an
underpayment of the Subscriber Royalty Fee as defined in Paragraph 6 (B) above,
Lessee shall pay to Lessor a penalty equal to ten percent (10%) of the amount of
each such underpayment. All information obtained by Lessor during any audit
herein shall be maintained by Lessor in strict confidence.
7. PROGRAMMING.
A) Control Over Programming.
(i) Program Content. Lessee intends that only programming of a sort
which would not serve to place Lessor's reputation in the community in jeopardy
will be transmitted by Lessee on the ITFS Channels. In an attempt to minimize
disputes, recognizing the difficulties inherent in specifying exact standards
herein, it is agreed that Lessee shall have the right to market the programming
provided by the networks and services listed on Exhibit E. If, however, the
programming content of any networks and services listed on Exhibit E materially
changes, Lessor shall have the right, upon ninety (90) days notice, to deny
Lessee the right to continue transmitting such programming if Lessor would have
the right to deny Lessee the right to transmit such programming under the
provisions of this paragraph in the first instance. If Lessee proposes to
transmit the programming of any new programming service, the Lessee shall notify
Lessor in writing specifying in detail the nature of the new programming service
and Lessor shall have the right, upon written served upon Lessee within thirty
(30) days after Lessor's receipt of any such notice from Lessee, to deny to
Lessee the right to transmit such service if such programming is obscene and/or
contradicting local, state and/or federal laws or otherwise violates any
federal, state or local laws or regulations. If no such denial notice is
received by Lessee within such thirty (30) days, lessee shall be authorized to
transmit all such services for which no denial notice is received. There shall
be no reduction in fees required under this Agreement for any such programming
not permitted to be transmitted.
B) Availability of Programming. It is understood by Lessee and Lessor
that there is expected to be no direct out-of-pocket annual costs for the
acquisition of the qualified ITFS educational
<PAGE>
programming for Lessor's use during Lessor's Primary Airtime on the ITFS
channels, based on current plans. In the event that this ITFS educational
programming either; (1) ceases to be available, or, (2) becomes available only
at a fee, then Lessor may incur direct out-of-pocket costs in Lessor's
acquisition of ITFS programming. Lessee agrees to provide its best efforts to
assist Lessor in the acquisition of alternative programming, if necessary.
Additionally, Lessee agrees to make payment to Lessor for the actual, direct
programming costs incurred. If any; If Lessor, after expending its best efforts,
is unable to obtain suitable ITFS programming for a cost equal to the amount to
be paid by Lessee, Lessor and Lessee shall use their best efforts to reach
agreement on modifications to this Agreement to avoid any un-reimbursed ITFS
programming costs to Lessor. If no such agreement can be reached, Lessor may
terminate this agreement. In the case of such termination, Lessor shall use its
best efforts (with out-of-pocket costs of Lessor to be paid by Lessee, with
Lessee's prior approval) to transfer the license for the ITFS Channels to
another qualified educational entity, subject to FCC approval, with the intent
of assigning this Agreement from Lessor to the new educational entity.
C) Integration of Lessor's Programming. Lessee agrees to integrate
Lessor's programming into the overall communications service offered to
subscribers, without cost to Lessor. This integration shall include, but not be
limited to, listing Lessor's material in any program guides produced by Lessee
for subscribers.
D) Carriage of TBN. In the event that Lessor's ITFS Channels are used
for analog video transmission and TBN is not transmitted on a local VHF or UHF
station, with a market coverage equivalent to both area and signal quality of
our ITFS channels, and Lessee does not have local off-air insertion as part of
its standard installation, then, if so designated by Lessor, Lessee agrees to
transmit on one of the ITFS Channels the programming of Trinity Broadcasting
Network ("TBN") during those time periods such channel is not used for Lessor's
ITFS programming ("TBN Airtime") provided that Lessee is not required to pay a
fee for carriage of TBN. In the event that Lessee is permitted to program the
hours previously occupied by TBN, then Lessee shall increase, in proportion to
the increase in Excess Capacity Airtime, the amount of minimum fees and
subscriber royalty fees payable under the provision 6 (B) of this agreement
during the remainder of the term(s) of the agreement. For purposes of
calculating any such proportionate increase, the parties acknowledge and agree
that the minimum fee and subscriber royalty fee agreed to herein are based on
Lessee's equivalent use of three full-time ITFS channels.
E) Station Identification. During Lessee's use of Lessor's excess
channel capacity, Lessee shall transmit Lessor's call sign for each respective
station as required by the FCC.
8. PROCECUTION OF PETITIONS, AUTHORIZATIONS AND LICENSES.
A) Best Efforts to Secure Approval of this Agreement. The parties
recognize that certain approvals will be required from the FCC in order to
effectuate this Agreement. Both parties shall use their best efforts to prepare,
file and prosecute before the FCC all petitions, waivers, applications and other
documents necessary to secure any FCC approval required to effectuate this
Agreement. Lessee shall assist in the preparation and prosecution of such
applications and as provided for herein, shall pay all filing fees, attorneys'
fees, engineering fees, and all other expenses in connection therewith. Lessor
also agrees to cooperate with Lessee's efforts to cause other ITFS, OFS, MDs and
MMDS operators to co-locate at the Transmission Site. Notwithstanding anything
in this Agreement to the contrary, it is understood that no filing shall be made
with the FCC with respect to this Agreement unless both parties have reviewed
such filing and consented in writing to its submission, such consent not be
unreasonably withheld.
B) Further Efforts. Throughout the Initial Term of this Agreement,
Lessor shall use its best efforts to obtain and maintain in force all licenses,
permits and authorizations required for Lessee and Lessor to use the ITFS
Channels as contemplated by this Agreement. Lessee shall be responsible for all
cash expenses incurred to obtain and maintain in force such licenses, permits
and authorizations. When mutually agreed by the parties and at Lessee's sole
expense, Lessor shall apply for, and use its best efforts
<PAGE>
to obtain those reasonable license modifications which would assist Lessee in
its business. Lessor also shall consider filing, at Lessee's sole expense, such
reasonable protests, comments or other petitions to deny any other ITFS, MMDS,
MDS and/or OFS applications or amendments as may be requested by Lessee in the
mutual best interests of the parties and the public. Lessor and Lessee shall
promptly notify each other of any event of which it has knowledge that may
affect any of the licenses, permits or authorization affecting the ITFS
Channels.
C) Attorneys' Fees. With respect to any legal work conducted pursuant
to Paragraph 8(A) and (B) above, Lessee shall be responsible for all attorneys'
fees in connection therewith and shall make payments directly to the attorney.
However, any attorney fees paid by Lessee shall be approved in advance by
Lessee.
9. REPRESENTATIONS AND WARRANTIES.
A) Representations and Warranties of Lessor. Lessor represents and
warrants to Lesse as follows:
(i) Organization. Lessor is a non-profit organization duly organized
and existing in good standing under the laws of the State of California, and it
has full power and authority to carry out all of the transactions contemplated
by this Agreement and all other agreement, certificates or instruments executed
and delivered in connection herewith.
(ii) No Violation. Neither the execution nor delivery of this agreement
or any other agreements, certificates or instruments executed and delivered
herewith, nor the performance of the transactions contemplated hereby constitute
or will constitute a violation of , be in conflict with, or a default under any
term or provision of the governing instruments or Lessor or any agreement or
commitment to which Lessor is bound, or any judgment, decree, order, regulation
or rule of any court or governmental authority, or consent of any federal, state
or local authority is required in connection with the execution and delivery of
this Agreement or any other agreements, certificates or instruments executed and
delivered herewith or with the performance of the transaction contemplated
hereby.
B) Representations and Warranties of Lessee. Lessee represents and
warrants to Lessor as follows:
(ii) Organization. Lessee is duly organized, validly existing and in
good standing under the laws of the State of its incorporation and it has full
power and authority to own property and carry all of the transactions
contemplated by this Agreement, and all other agreements, certificates or
instruments executed and delivered by Lessee in connection herewith.
(ii) Corporation Action; Valid and Binding Agreements. Lessee has taken
all corporate action necessary to authorize the execution and delivery of this
Agreement and all other agreements, certificates or instruments executed and
delivered in connection herewith. Upon execution and delivery, this Agreement
and all other agreements, certificates or instruments executed and delivered by
Lessee in connection herewith will constitute valid and binding agreements of
Lessee enforceable in accordance with their respective terms.
(iii) Litigation and Investigations. There is no action, suit,
proceeding or investigation pending or, to the best of Lessee's knowledge,
threatened against Lessee, its principals or related entities before any court,
administrative agency or other governmental body, and Lessee does not know nor
is aware of any reason for commencement of any such action, proceeding or
investigation.
(iv) Misrepresentation of Material Fact. To the best of Lessee's
knowledge, information and believe, no document or contract that was shown to
Lessor and which in any way affects any of the properties, assets or proposed
transactions of Lessee as such relates to this Agreement, no certificate or
<PAGE>
statement furnished by or on behalf of Lessee in connection with this Agreement,
nor this Agreement itself contains any untrue statement of material fact or
omits to state a material fact which would make the statements contained herein
misleading.
C) Survival or Representations and Warranties. The representations and
warranties contained in this Agreement shall be deemed to be continuing during
the Initial terms of this Agreement, and each Party shall have the duty promptly
to notify the notify the other of any event or circumstance which might
reasonably be deemed to constitute a breach of or lead to a breach of its
warranties or representations hereunder. The waiver by either Party of any
breach of any presentation or warranty under this Agreement shall not constitute
a waiver of any other representation or warranty or of any failure in the future
by the other Party to fulfill such representation or warranty.
10. TERMINATION.
A) Termination of FCC Authorization. Without further liability to
either Lessor or Lessee, this Agreement shall terminate in the event that for
any reason (i) Lessor shall not be licensed on the leased ITFS Channels, or (ii)
the FCC shall terminate or diminish Lessor's authority to lease the ITFS
Channels in accordance with the terms of this Agreement.
B) Termination by Reason of Default or Nonperformance. At the option of
the non-defaulting party, this Agreement may be terminated upon the material
breach or default by the defaulting party of its duties and obligations
hereunder is such breach or default is not cured by such defaulting party and is
breach or default shall continue for a period of thirty (30) consecutive days
after such defaulting party's receipt of notice thereof from the non-defaulting
party. It is understood and agreed that any failure on the part of Lessee to
make any payment required under Paragraph 6 hereof shall be a material breach of
default of its duties and obligations hereunder. It is also understood and
agreed that any consequences resulting from the loss of local participating
receive sites shall not be considered a material breach or default by Lessor of
its duties and obligations hereunder.
C) Remedies to Continue. In the event of termination of this Agreement
pursuant to Paragraph 10(B), such termination shall not affect or diminish the
rights or claims or remedies available in equity or at law to the non-defaulting
party arising by reason of a breach or default of this Agreement. However, no
liability shall arise on the part of Lessor or Lessee upon termination of this
Agreement pursuant to Paragraph 10(A) except where the loss of the FCC license
occurs as a result of the default of either party.
11. TRANSFER OF RIGHTS AND OBLIGATIONS.
Lessee shall have the right to assign its rights under this lease as
collateral for any financing arrangements it makes. Lessee shall also have the
right to pledge the Leased Equipment as collateral security for any loans it
makes; provided, however, that any pledge of the Leased Equipment shall be made
subject to the provisions of this lease. Lessee shall further have the right to
subcontract any portion of its obligations under this Agreement to any
partnership, joint venture, corporation or entity which Lessee may choose,
provided that Lessee gives Lessor notice of any proposed subcontracting and,
provided further, that no such subcontracting shall release Lessee from
fulfilling all of its obligations under this Agreement. Lessee shall have the
right to assign or transfer its rights, benefits, duties and obligations under
this Agreement to a commonly-owned company without the prior consent of Lessor.
Apart from the foregoing, neither party may assign or transfer its rights,
benefits, duties or obligations under this Agreement without the prior written
consent of the other, which consent shall not be unreasonably witheld.
<PAGE>
12. INDEMNIFICATION.
A) By Lessor. To the extent permitted by state and federal law and its
charter or by-laws, Lessor shall forever protect, save and keep Lessee and its
permitted successors and assigns harmless and indemnify Lessor against and from
any and all claims, demands, losses, costs, damages, suits, judgments,
penalties, expenses and liabilities or any kind or nature whatsoever, including
reasonable attorneys' fees, arising directly or indirectly out of (i) the
willful misconduct of Lessor, its agents or employees, in connection with the
performance of this Agreement; (ii) any programming transmitted by Lessor during
any of Lessor's Airtime.
B) By Lessee. To the extent permitted by state and federal law and its
charter or by-laws, Lessor shall forever protect, save and keep Lessee and its
permitted successors and assigns harmless and indemnify Lessor against and from
any and all claims, demands, losses, costs, damages, suits, judgments,
penalties, expenses and liabilities or any kind or nature whatsoever, including
reasonable attorneys' fees, which arise directly or indirectly out of (i) the
negligence or willful misconduct of Lessee, its agents or employees, in
connection with the performance of this Agreement; (ii) any programming
transmitted by Lessee or any of its authorized agents or subcontractors with the
public, third parties and subscribers to the Lessee's programming service; or
(iv) any maintenance, installation or other work performed by Lessee or any
authorized agent or subcontractor under this Agreement.
C) Notice of Claim; Defense of Claim. Each party shall notify the other
of any such claim promptly upon receipt of same. Either party (hereinafter
referred to as appropriate the "Indemnitor" or Indemnitee") shall have the
option to defend, at its own expense, any claims arising under this Paragraph.
In Indemnitor assumes the defense of any such claim, Indemnitee shall delegate
complete and sole authority to the Indemnitor to defend or settle same and
Indemnitee shall cooperate with Indemnitor in the defense thereof.
13) INSURANCE.
A) Policies Required. At its expense, Lessee shall secure and maintain
with financially reputable insurers, one or more policies of insurance insuring
the Leased Equipment and Lessee's utilization of the ITFS Channels against
casualty and other losses of the kinds customarily insured against by firms of
established reputations engaged in the same or similar line of business, or such
types and in such amounts as are customarily carried under similar circumstances
by such firms, including, without limitation: (i) "All Risk" property insurance
covering the ITFS Equipment and the common Equipment to the extent of one
hundred percent (100%) of its full replacement value without deduction for
depreciation: (ii) comprehensive general public liability insurance covering
liability resulting from lessee's operation of the ITFS equipment on an
occurrence basis having minimum limits of liability in an amount of not less
than One Million Dollars ($1,000,000.00) for bodily injury, personal injury or
death to any person or persons in any one occurrence, and not less than Two
Million Dollars ($2,000,000.00) in the aggregate for all such losses during each
policy year, and not less than Three Hundred Thousand Dollars ($300,000.00) with
respect to damage to property; (ii) all workers compensation, automobile
liability and similar insurance required by law.
B) Insurance Policy Forms. All policies of insurance required by this
Paragraph shall, whre appropriate, designate Lessor as either the insured party
or as a named additionally insured party, shall be written as primary policies,
not contributory with and not in excess of any coverage which Lessor shall
carry, and shall contain a provision that the issuer shall give to Lessor thirty
(30) days prior written notice of any cancellation or lapse of such insurance or
of any change in the coverage thereof.
C) Proof of Insurance. Executed copies of the policies of insurance
required under this section or certificates thereof shall be delivered to Lessor
not later than ten (10) after execution of this agreement. Lessee shall furnish
Lessor evidence of renewal of each such policy not later than thirty (30) days
prior to the expiration of the term thereof.
<PAGE>
14. RELATIONSHIP OF PARTIES.
By the provisions of this Agreement, Lessor and Lessee intend to enter
an airtime lease relationship and not a joint venture. They will carry out this
Agreement to preserve that intent. Neither party shall represent itself as the
other party, nor as having any relationship with one another, except as Lessor
and Lessee under the terms of this Agreement.
15. EQUIPMENT PURCHASE.
A) Lessor's Option to Purchase. In the event that this Agreement is
terminated, Lessor shall have the option to purchase the Leased
Equipment used exclusively for Lessor's ITFS license. Any equipment
which is used in a shared fashion (such as transmit antenna,
decoders and combiners) in providing signals other than Lessor's
signals are excluded from this option to purchase. The intent of
the purchase option provided for in Paragraphs 16(A) is to provide
Lessor with the capability to continue to perform on Lessor's ITFS
license. The purchase price shall be the market value of such
equipment noted above as determined by mutual agreement or by
averaging the values obtained from two (2) appraisals, with one
appraiser each chosen by Lessor and Lessee.
B) Lessee's Option to Purchase. If during the terms of this Agreement
the FCC modifies its rules so as to enable Lessee to be licensed to
operate the ITFS frequencies, Lessee shall have a right of first
refusal to acquire such licenses subject to the same terms and
conditions as the right provided for in Paragraph 1(B).
16. NON-DISCLOSURE
Lessor acknowledges that there may be made available to it pursuant to
this Agreement proprietary information of Lessee relating to the encoding and/or
decoding system associated with the ITFS channel equipment and its patented
processes including, but not limited to, improvements, innovations, adaptation,
inventions, results of experimentation, processes and methods, whether or not
deemed patentable, and certain business and marketing techniques (all herein
referred to as "Confidential Information"). Lessor acknowledges that this
Confidential Information has been developed by Lessee at considerable effort and
expense and represents special, unique and valuable proprietary assets of
Lessee, the value of which may be destroyed by unauthorized dissemination.
Accordingly, Lessor covenants and agrees that, except as may be required for the
performance of this Agreement or by law or court order, neither it nor any of
its agents or affiliates shall disclose such Confidential Information to any
third person, firm, corporation or other entity for any reason whatsoever, such
undertaking to be enforceable by injunctive or other equitable relief to prevent
any violation or threatened violation thereof.
17. NON-COMPETITION
During the term of this Agreement, Lessor agrees not to transmit
programming or to lease or sublease any channel capacity on its ITFS Facilities
for the transmission of programming that is competitive with the programming
transmitted by Lessee.
18. FORCE MAJEURE
If by reason of Force Majeure either party is unable in whole or in
part to perform its obligations hereunder, the party shall not be deemed in
violation of default during the period of such inability. As used herein, the
phrase "Force Majeure", shall mean the following: act of God, acts of public
enemies, orders of any branch of the government of the United States of America,
any state or any political subdivisions, thereof which are not the result of a
breach of this Agreement, orders of any military authority insurrections, riots,
epidemics, fires, civil disturbances, explosions, or any other cause or event
not reasonably within control of the adversely affected party.
19. CONDITION PRECEDENT
This Agreement is conditional on the issuance of a Final Order by the
FCC granting Lessor a construction permit for the ITFS Channels in the Market
from the Transmission Site. By "Final Order" the parties mean an action or order
of the FCC which is not reversed, stayed, enjoined, vacated, set aside, annulled
or suspended and
<PAGE>
with respect to which no timely-filed request for administrative or judicial
review is pending and as to which the time for filing any such request, or for
the FCC to set aside the action on its own motion, has expired.
20. NOTICE
Any notice required to be given to Lessor under any provision of this
Agreement shall be delivered personally or by certified mail to Lessor at the
address first written above. Any notice required to be given to Lessee under any
provision of this Agreement shall be delivered personally or by certified mail
to Lessee at the address first written above.
21. SEVERABILITY
Should any court or agency determine that any provision of this
Agreement is invalid, the remainder of the Agreement shall remain in effect.
22. WAIVER
A waiver by either Lessor or Lessee of a breach of any provision of
this Agreement shall not be deemed to constitute a waiver of any preceding or
subsequent breach of the same provision or of any other provision.
23. PAYMENT OF EXPENSES AND SIGNING FEES
A signing fee of One Dollar ($1) shall be paid to Lessor. Lessee shall
pay all costs and expenses incident to fulfilling or modifying this Agreement,
such as, attorneys' fees or, if necessary, any travel expenses approved in
advance by Lessee, FCC filing fees, and engineering costs.
24. VENUE AND GOVERNING LAW
Venue for any cause of action brought by or between Lessor and/or
Lessee relating to this Agreement shall be in California and all provisions of
this Agreement shall be construed under the laws of the State of California and
County of Lessor.
25. COUNTERPARTS
This Agreement may be executed in one or more counterparts each of
which shall be deemed an original, but all of which shall constitute one and the
same instrument, and shall become effective when each of the parties hereto
shall have delivered to it this Agreement duly executed by each of the other
parties hereto.
26. ENTIRE AGREEMENT
This Agreement constitutes the entire Agreement between the parties and
supersedes all prior oral or written provisions of any kind. The parties further
agree that this Agreement may only be modified by written Agreement signed by
both parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
this day of July 1st, 1999.
SHEKINAH NETWORK
By: ______________________________
Name: Charles J. McKee
Title: President
<PAGE>
WORLD WIDE WIRELESS COMMUNICATIONS, INC.
By: ______________________________
Name: Douglas P. Haffer
Title: President
Address for Notices:
Shekinah Network
14875 Powerline road
Atascadero, CA 93422
Phone/Fax: (805) 438-3341
Attn: Charles McKee, President
Gardner, Carton & Douglas
Attn: Laura Mow
1301 K Street, N.W., Suite 900
Washington, D.C. 20005
Phone: (202) 408-7100
Fax: (202) 289-1504
World Wide Wireless Communications, Inc.
One Post Street Suite 2600
San Francisco, CA 94104
Phone: (415) 981- 7777
Fax: (415) 391-3199
<PAGE>
EXHIBIT A
Schedule of Airtime
<PAGE>
EXHIBIT B
Receive Sites
There shall be attached hereto and incorporated by reference a copy of
FCC Form 330 Section IV listing Lessor" receive sites.
<PAGE>
EXHIBIT C
Leased Equipment
Noted below is a list of equipment that Lessee is leasing to Lessor:
(1) Four (4) ITFS tansmitters and related hardware
(2) Lessor's ITFS receive site antennas and related hardware
*(3) Combining network, transmission line and antenna
*Common Equipment
<PAGE>
EXHIBIT D
Service and Royalty Fees
1. Lessor's Service Fee
Services Provided Annual Fee
----------------- ----------
(a) Lease of Leased Equipment [6(A)] $1.00
(b) Maintenance of Leased Equipment [3(D)] $1.00
(c) Lease of space at Primary Transmission Site [3A)] $1.00
2. Lessee's Subscriber Royalty Fee
Lessee shall pay Lessor a minimum monthly Transmission Fee 5% of the system's
Gross receipts or a monthly minimum payment of $500 per month whichever is
greater.
Payment shall be as follows: Commencing on the Execution (Effective) Date and as
defined in Paragraph 6)B, payments for each month shall be made by the twentieth
(20th) day of the following month.
<PAGE>
EXHIBIT E
Programming
In addition to digital data services, such as the Internet or Intranet, the
following is a list of video programming services Lessee may provide over
Lessee's System.
TLC - The Leaning Channel
TWC - The Weather Channel
Lifetime
ESPN - Sports
AMC - American Movie Classics
SCOLA
WHTN - World Harvest Television Network
ECO - Galavision
CNN - Cable News Network
CNN - Headline News
C-Span I
C-Span II
BET - Black Entertainment Network
CNBC - Consumer News & Business Channel
Nickelodeon
The Discovery Channel
A&E - Arts and Entertainment
The Family Channel
The Disney Channel
PBS - Public Broadcasting Service
TBN - Trinity Broadcasting Network
TNIN - The New Inspirational Network
ME/U - Mind Extension Network
The International Channel
BRAVO Network
The Travel Channel
Family Network
Keystone Inspirational Network
LEASE AGREEMENT
BETWEEN
WORLD WIDE WIRELESS COMMUNICATIONS, INC.
AND
SHEKINAH NETWORK
Aspen, Colorado
ITFS EXCESS CAPACITY AIRTIME LEASE AGREEMENT
THIS AGREEMENT is made this 1st day of August 1999 by Shekinah Network
(hereinafter referred to as "Lessor") having its principal place of business at
14875 Powerline Road, Atascadero, CA 93422 and World Wide Wireless
Communications, Inc. (hereinafter referred to as "Lessee") having its principal
place of business at One Post Street, Suite 2600 San Francisco, CA 94104.
WHEREAS, the Federal Communications Commission ("FCC") has authorized
licenses for Instructional Television Fixed Service ("ITFS") channels and has
authorized the licensee to lease excess capacity to non-ITFS users; and
WHEREAS, Lessor has been granted an FCC License for (call sign) WNC-798
(the "License") for the Channel group C1-4 (the "ITFS Channels") in Aspen,
Colorado ("The Market"); and
WHEREAS, Lessee is in the business of providing voice, video, data and
other services via microwave transmission in the Market Area and desires to
lease the excess ITFS capacity of the ITFS channels; and
WHEREAS, Lessor has determined that there will be excess airtime
capacity available on the ITFS Channels and desires to lease this excess airtime
capacity to Lessee.
NOW, THEREFORE, in consideration of the mutual promises, undertakings,
covenants and conditions set forth herein, the Lessor and Lessee do hereby agree
and warrant as follows:
3. TERM OF AGREEMENT
A. Initial Term. This Agreement shall be effective upon the date of its
execution and shall extend for an initial term of five (5) years (the
"Initial Term").
B. Renewal Term Provided that the License is renewed by the FCC, Lessee
shall have the right to extend this Agreement on its then existing
terms and conditions for one (1) additional five (5) year term (the
"Renewal Term"). The Renewal Term shall automatically go into effect
upon the conclusion of the Initial Term unless Lessee notifies Lessor
at least one hundred eighty days (180) before the end of the Initial
Term that Lessee does not wish to extend this Agreement.
C. New Lease Agreement/Right of first Refusal.
(1) Providing that Lessor's FCC license remains in good standing
and/or Lessor seeks to renew such license, Lessee and Lessor shall
negotiate in good faith for a new excess capacity airtime lease
agreement (hereinafter referred to as "New Lease Agreement") no later
than one hundred eighty days (180) prior to the end of the latter of
(i) Initial Term or (ii) the Renewal Term if the Agreement is extended
for the Renewal Term.
<PAGE>
(3) If Lessor elects to not reasonably pursue a New Lease Agreement
with Lessee, then Lessor shall so notify Lessee in writing of such
intent no later than one hundred eighty (180) days prior to the end of
the Renewal Term.
(3) If Lessor and Lessee do not enter into a New Lease Agreement,
Lessor grants Lessee a right of first refusal on any competing
proposals for lease agreements or transfers or assignments of any part
of the ITFS Channels received by Lessor during the twelve (12) months
following the expiration of the latter of (i) the Initial Term or (ii)
the Renewal Term, if the Agreement is extended for the Renewal Term.
If any acceptable offer to lease or acquire the ITFS Channels is made
to Lessor, Lessor shall give written notice to Lessee describing the
person to whom the proposed lease or transfer is to be made, the fees,
charges, rental or other consideration to be received fro the lease or
transfer, the terms thereof and generally the relevant other terms and
conditions of the lease or transfer. Lessee shall have a period of
thirty (30) days after its receipt of such notice from Lessor in which
to elect, by giving written notice to Lessor, to lease or, if
eligible, obtain any or all of the ITFS Channels for the same fees,
charges, rental or other consideration for which Lessor proposed to
lease or transfer to the third person.
(i) The fees, charges, rental or consideration shall be paid by such
third person or Lessee in cash.
(iv) If Lessor does not believe Lessee's stated offer is in an amount
fairly equivalent to the fair value of the consideration payable by
the third person and so notifies Lessee in writing within seven (7)
days after Lessor's receipt of Lessee's notice of election to so lease
or purchase, Lessee may within five (5) days after its receipt of such
notice from Lessor elect to refer such question for determination by
an impartial arbitrator and the right of first refusal of Lessee shall
then be held open until (5) days after Lessee is notified of such
determination. Such arbitrator shall be chosen either by agreement of
Lessee and Lessor at the time such question arises, or, at the option
of either party, by referring the question to the American Arbitration
Association with instructions that the American Arbitration
Association select a single arbitrator under a request from the
parties for expedited and accelerated determination. The determination
of the arbitrator chosen under either option contained in this
subparagraph shall be final and binding upon Lessee and Lessor. The
parties shall share equally in the costs and fees of the arbitration
(v) In the event Lessee shall elect to exercise its right of first
refusal, the lease agreement or other transfer or assignment shall be
consummated within thirty (30) days of the latest of: (1) the day on
which Lessor received notice of Lessee's election to exercise the
right of first refusal; (2) the day upon which any question required
to be determined by the arbitrator hereunder has been determined; or
(3) the date of any FCC approval in the case of assignment or
transfer; or at such other time as may be mutually agreed. The right
of first refusal is terminated either by the lease or other transfer
to Lessee as provided herein or by notice to Lessee of the Lessor's
proposal to lease or otherwise transfer the ITFS Channels or any part
to a third person and Lessee's unwillingness or failure to meet and
accept such a bona fide offer pursuant to the times and procedures as
set forth above; provided that such proposed lease or transfer is
consummated at the same fees, charges, rental or other consideration
and upon the same terms as to which such right of first refusal
applied, within thirty (30) days after Lessee's right of first refusal
had expired or had been specifically waived by written notice given to
Lessor by Lessee, or within thirty (30) days following FCC approval in
the case of assignment or transfer.
C) Operation During End of Term. If Lessor and Lessee do not enter into
New Lease Agreement before the end of the Initial Term, Lessee shall
cease leasing the ITFS Channels on the last day of the Initial Term.
<PAGE>
D) No Rights Beyond Term of Licenses. Lessor and Lessee agree that this
Agreement shall not give rise to any rights or remedies beyond the
expiration of any FCC license necessary for the continued operation of
the ITFS Channels. Provided, however, that while this Agreement is in
effect, Lessor shall obtain and maintain in force all licenses,
permits and authorizations required or desired in connection with the
use of the ITFS Channels. Lessor shall take all necessary steps to
renew the licenses for the ITFS Channels and shall not commit any act
or engage in any activity which could reasonably be expected to cause
the FCC to impair, restrict, revoke, cancel, suspend or refuse to
renew the ITFS licenses. Lessor shall take all reasonable steps to
comply with the Communications Act of 1934, as amended and the rules
and regulations of the FCC, and shall file all reports, schedules
and/or forms required by the FCC to be filed by Lessor. All expenses,
including attorneys fees and filing fees, incurred in preparing and
filing such reports, schedules and/or forms required by the FCC shall
be paid by the Lessee.
4. ALLOCATION OF AIRTIME.
A. Excess Capacity Airtime. To the extent allowed by the FCC rules and
regulations and any amendments thereof, Lessor agrees to lease to
Lessee the exclusive use of all excess capacity not utilized by Lessor
("Excess Capacity Airtime").
B. Lessor's Primary Airtime. During analog transmission over the ITFS
Channels, Lessor reserves for its exclusive use a minimum of twenty
(20) hours of airtime per-channel per-week to be used for its ITFS
scheduled programs. During digital transmission ovr the ITFS Channels,
Lessor shall have the exclusive use of 12.5% of the total capacity
available on the Lessor's ITFS Channels. This airtime shall be know as
"Lessor's Primary Airtime".
C. Schedule of Airtime. The schedule which depicts the agreement of the
parties as to use of Lessor's Channels shall be attached hereto and
made a part hereof as Exhibit A which is subject to change upon
agreement by both parties.
D. Lessee's use of its Excess Capacity Airtime. Lessee shall have the
right to utilize its Excess Capacity Airtime for any purpose allowed
or authorized by the FCC including but not limited to voice, video and
data transmission.
E. Alternate Use and Vertical Blanking Intervals. Lessor shall have the
right to use the second audio carrier ("SAP") and vertical blanking
intervals. ("VBI") on which Lessor's ITFS programming is being
transmitted. Lessee shall at all times have the right to use the VBI
and SAP not utilized by Lessor and 100% of the response frequencies
associated with the ITFS Channels. Lessor shall be responsible for any
equipment needed to utilize the VBI and/or SAP and such equipment
shall be compatible with Lessee's system.
F. Lessor's Use of ITFS Channels. Lessor agrees that its program services
and airtime use will not harm or interfere with Lessee's current or
future signal paths utilized within Lessee's System for program
encryption, pilot carrier signaling and other technical needs utilized
for the operation of and such services provided by Lessee's System.
Nor will Lessor, by its own action, or through a third party, utilize
any part of its licensed frequency spectrum to create or operate a
service that is in competition with current, planned or future
services provided by
<PAGE>
Lessee's System. Lessor agrees to use its Primary Airtime in
accordance with the FCC's rules and regulations. Lessor shall not take
or fail to take any action which may have a material adverse effect on
Lessee's right to utilize its Excess Capacity Airtime.
G. Expanded System Capacity. Lessee shall have the right at anytime to
require Lessor to file with the FCC any necessary application to
expand the channel capacity to Lessor's station to enable it to carry
more than one video signal per channel or digital data services;
provided however, before Lessee can exercise this right, it must
demonstrate to the Lessor's reasonable satisfaction that such
modification will not materially degrade the performance of the
station nor impair signal quality at the registered ITFS receive
sites. Once such modification has been constructed, the modified
facilities shall automatically be considered a part of this agreement
and subject to all terms and conditions hereof. It is understood that
Lessee shall have the full-time use of the Expanded Channels to the
extend permitted by FCC rules.
3. TRANSMISSION SITE AND FACILITIES.
C. Primary Transmission Site. Lessor's ITFS Channels are located at Key
West, FL, Lessee agrees to provide Lessor space at the Primary
Transmission site for Lessor's audio and video transmission equipment
which shall not exceed on rack. Such space shall be leased to Lessor
pursuant to Exhibit D hereto. This site shall hereinafter be described
as the "Primary Transmission Site". At Lessee's sole expense, Lessee
shall contract for a lease of space at the Transmission Site upon such
terms as the parties agree. The Transmission Site shall comply with
the standards, specifications and regulations of the FCC rules and
orders pertaining to Lessor's ITFS license.
D. Relocation of Transmission Site.
(i) Lessor acknowledges that the location of the
Primary Transmission Site for ITFS Channels is critical to the
Lessee's business and agrees that it will not relocate the
transmission facilities for ITFS Channels from the Primary
Transmission Site without Lessee's prior written consent.
(ii) Lessor further acknowledges that possibility
that, as a result of currently unforeseen events, the Primary
Transmission Site may not be the optimum site for the location
of the ITFS Channels or Lessee's business throughout the term
of this Lease Agreement. Lessor therefore agrees that if at
any time or from time to time Lessee requests in writing that
the transmission facilities for the ITFS Channels be
relocated, Lessor shall file with the FCC and any other
regulatory body having jurisdicition over the ITFS Channels
all applications, amendments, and requests for modification
that may be necessary to obtain any necessary consents to
permit such relocation to such location within or adjacent to
the Market as may be requested by Lessee; provided, however,
that Lessor shall not be obligated to submit or procecute any
application, amendment, or request for modification that
Lessor reasonably determines, upon advice of counsel contained
in a written opinion, would be in violation of the terms of
the License, any statute, rule, or regulations regarding the
operation of the ITFS Channels or the submission of materials
to the FCC, or any of its obligations as an ITFS licensee; and
provided, further, that any such relocation will not result in
loss of service to Lessor's registered receive sites served by
the transmission facilities in the event that the
authorization is obtained to relocate the ITFS Channels to the
location requested by Lessee, Lessor shall relocate such
channels to such new location as soon as reasonably
<PAGE>
possible after authorization is obtained. Lessee shall bear
reasonable costs associated with such relocation, including
engineering and construction, and all reasonable costs
associated with obtaining FCC or any other regulatory approval
therefore.
(iii) Lessor agrees to file modification applications
requested by Lessee. Such modifications may include but shall
not be limited to the following: power increase or decrease,
polarization, transmit antenna patterns, digital, two-way
(return path) use of the ITFS Channels, boosters, beam benders
or repeaters, cells, sectorization, channel swaps, channel
loading, channel shifting and application within five (5)
business days or receipt of the modification application from
Lessee or during any FCC designated filing window. Lessee will
use reasonable efforts to provide Lessor with the engineering
for the modification thirty (30) days prior to the request for
filing. If Lessor believes that such modification will have an
adverse effect on Lessor's ability to provide its services to
its receive sites, Lessor agrees to file the modification
application as presented by Lessee and within the time limit
requested by Lessee; however, Lessee agrees not to implement
construction and Lessor agrees not to withdraw the application
until the parties have adequately addressed and resolved the
potential material adverse effect or the matter has been
submitted to arbitration pursuant to Section 16 and a final
decision has been rendered by arbitrator. Although Lessee
intends to file such modification applications, it may elect
not to construct the Channels in that manner and may desire to
utilize the Channels as currently licensed. A copy of the
modification application, bearing the FCC's date stamp, shall
be mailed to Lessee by Lessor, within fourteen (14) days of
the filing of the modification application. Lessee shall be
solely responsible for all engineering and legal costs
associated with the preparation, review and filing of the
modification application. In the event that any license
modification requested by Lessee requires receive site
upgrades in order for Lessor's receive sites to continue to
receive Lessor's services, then Lessee agrees to pay for all
costs to complete such upgrade prior to implementing the
license modification.
C. System Construction. Lessee shall within a reasonable
period of time, but not later than six (6) months after the
FCC grant of digital authority for the ITFS Channels, purchase
equipment such as the antenna, waveguide or transmitters
specified on the authorization for the ITFS Channels. At
Lessee's expense, Lessee shall purchase and install such
transmitters, transmission line, modulators, antennas and
other equipment as required to operate the ITFS Channels in
accordance with the provision of such authorization. Any
equipment so used in such construction shall be leased to
lessor pursuant to Paragraph 5 hereof. Such equipment is
hereinafter referred to as the "Leased Equipment". Lessee
shall retain title to the Leased Equipment except as noted by
Paragraph 15 herein.
D. Maintenance of Transmission Equipment. At Lessee's expense
and subject to Lessor's right to supervise the maintenance of
this equipment, Lessee shall maintain and operate the Leased
Equipment during the terms of this Agreement for a nominal
fee. Lessee shall also pay all taxes and other charges
assessed against the Leased Equipment.
E. Transmission of Programming. At no cost or expense to
Lessor, Lessee shall provide the necessary labor and equipment
capabilities to transmit on the ITFS Channels programming
required to be carried pursuant to this Agreement such as
Lessor's ITFS programming and TBN. Lessee shall also comply
with Lessor's instructions regarding the transmission of such
programming such as the dates and times to transmit
programming.
<PAGE>
F. Interference. Lessee shall operate the Leased Equipment so
that such operation does not create or increase interference
with electronic transmission of any other FCC licensees
entitles to protection under FCC rules and regulations. If
Lessee's entitled to protection under FCC rules and
regulations. If Lessee's operation of the Lease Equipment does
so create or increase interference, Lessee shall pay all of
the reasonable engineering and legal fees necessary to resolve
the interference problem so created.
G. Alterations and Attachments. Lessee, at its own expense,
may make alterations of or attachments to the ITFS equipment
or the common equipment as defined in Exhibit C (including the
installation of encoding and/or addressing equipment) as may
be reasonably required from time to time by the nature of its
business; provided however, that such alterations or
attachments do not interfere with Lessor's signal or ongoing
operations or violate any FCC rules or regulations; and
provided further that FCC authorization, if required, is
obtained in advance of any such alteration or attachment at
the sole cost of Lessee. to the extent any FCC authorization
pertaining to the ITFS equipment is required, Lessor agrees to
use its best efforts to obtain such authorization.
H. Licensee Control and Liability. Nothing herein shall
derogate from such licensee control of operations of the ITFS
Channels that Lessor, as an FCC licensee, shall be required to
maintain and Lessee acknowledges the reservation by Lessor of
such control. Lessor shall at all times retain ultimate and
exclusive responsibility for the operation and control of the
ITFS Channels including policy decisions.
4. LESSOR'S RECEIVE SITES.
Attached hereto as Exhibit B is list of the registered receive sites
designated by Lessor to receive its ITFS programming and to be installed at the
expense of Lessee. Those receive sites so listed shall be installed with a
Standard Installation. If as the result of any relocation of the Primary
Transmit Site, the equipment at Lessor's existing registered receive sites must
be reoriented, Lessee shall pay the cost of same. As used herein for the
purposes of this Agreement, the phrase "Standard Installation" shall mean an
installation consisting of the placement of the ITFS/MMDS receiving antenna at
an elevation (not to exceed thirty [30] feet above the base mounting location)
which could normally receive the line-of-sight transmission from the
Transmission Site; the coupling thereto of a block-down converter; and a
sufficient amount of transmission line (coaxial cable) to connect the received
ITFS programming to the input of (i) one classroom designated by Lessor to
receive the ITFS programming or (ii) the receive site internal/external
distribution system. Also, if as the result of any relocation of the Transmit
Site, the equipment at Lessor's existing receive sites must be reoriented,
Lessee shall pay the cost of same. Lessee also agrees that for digital
transmission of the ITFS Channels Lessee will purchase and install at Lessee's
expense, one single-point modem to receive its ITFS programming.
5. LEASE OF EQUIPMENT.
A) Lessor's Lease of Leased Equipment. For a nominal fee, Lessor shall
lease from Lessee the Leased Equipment during the terms of this Agreement. A
list of this equipment is attached hereto as Exhibit C and incorporated by
reference herein. Lessor shall have no responsibility for the loss of or damage
to the Leased Equipment during the terms of this Agreement and Lessee shall bear
all such responsibility.
6. FEES.
A) Lessor's Service Fee. In consideration of the lease of the Leased
Equipment, and for its share of the projected costs to maintain the Transmission
Site and the Lease Equipment, Lessor shall pay Lessee an annual fee provided for
in Exhibit D.
B) Subscriber Royalty Fees or Percentage. Beginning on the Execution
Date of this Agreement and continuing thereafter during the Initial Term of this
Agreement, Lessee shall pay to
<PAGE>
Lessor the Subscriber Royalty Fee, System Percentage or monthly minimum,
whichever is greater as set out in Exhibit D which is attached herewith and
incorporated by reference herein. If the Execution Date shall be a date other
than the first day of a calendar month, then the Subscriber Royalty Fee for the
partial month shall be paid on a proportionate basis. A late fee of 10% (ten
percent) will be assessed to past due accounts, and a finance charge of one and
one-half percent (1.5%) per month will be assessed in addition to the late fee
until paid.
C) Notice of Construction and Required Certificate. Within thirty (30)
days of completion of construction at the Transmission Site, Lessee shall notify
Lessor of such completion of construction in writing. Within thirty (30) days of
the end of each month in which Excess Capacity Airtime is leased hereunder,
Lessee shall provide Lessor with a certificate, certified as accurate and
correct by an authorized agent of Lessee, showing the number of subscribers
served during such month.
D) Right to Audit. Lessee shall for a period of three (3) years after
their creation, keep, maintain and preserve complete and accurate records and
accounts, including all invoices, correspondence, ledgers, financial and other
records pertaining to Lessee's use of Excess Capacity Airtime and Lessor's
charges hereunder; and such records and corporate accounts shall be available
for inspection and audit at Lessee's corporate offices or at Lessee's offices in
the Market, as designated by Lessee, at any time or times during the term of
this Agreement or within ninety (90) days thereafter, during reasonable business
hours, by Lessor or its nominee. In the event that there is discovered an
underpayment of the Subscriber Royalty Fee as defined in Paragraph 6 (B) above,
Lessee shall pay to Lessor a penalty equal to ten percent (10%) of the amount of
each such underpayment. All information obtained by Lessor during any audit
herein shall be maintained by Lessor in strict confidence.
7. PROGRAMMING.
A) Control Over Programming.
(i) Program Content. Lessee intends that only programming of a sort
which would not serve to place Lessor's reputation in the community in jeopardy
will be transmitted by Lessee on the ITFS Channels. In an attempt to minimize
disputes, recognizing the difficulties inherent in specifying exact standards
herein, it is agreed that Lessee shall have the right to market the programming
provided by the networks and services listed on Exhibit E. If, however, the
programming content of any networks and services listed on Exhibit E materially
changes, Lessor shall have the right, upon ninety (90) days notice, to deny
Lessee the right to continue transmitting such programming if Lessor would have
the right to deny Lessee the right to transmit such programming under the
provisions of this paragraph in the first instance. If Lessee proposes to
transmit the programming of any new programming service, the Lessee shall notify
Lessor in writing specifying in detail the nature of the new programming service
and Lessor shall have the right, upon written served upon Lessee within thirty
(30) days after Lessor's receipt of any such notice from Lessee, to deny to
Lessee the right to transmit such service if such programming is obscene and/or
contradicting local, state and/or federal laws or otherwise violates any
federal, state or local laws or regulations. If no such denial notice is
received by Lessee within such thirty (30) days, lessee shall be authorized to
transmit all such services for which no denial notice is received. There shall
be no reduction in fees required under this Agreement for any such programming
not permitted to be transmitted.
B) Availability of Programming. It is understood by Lessee and Lessor
that there is expected to be no direct out-of-pocket annual costs for the
acquisition of the qualified ITFS educational programming for Lessor's use
during Lessor's Primary Airtime on the ITFS channels, based on current plans. In
the event that this ITFS educational programming either; (1) ceases to be
available, or, (2) becomes available only at a fee, then Lessor may incur direct
out-of-pocket costs in Lessor's acquisition of ITFS programming. Lessee agrees
to provide its best efforts to assist Lessor in the acquisition of alternative
programming, if necessary. Additionally, Lessee agrees to make payment to Lessor
for the actual, direct programming costs incurred. If any; If Lessor, after
expending its best efforts, is unable to
<PAGE>
obtain suitable ITFS programming for a cost equal to the amount to be paid by
Lessee, Lessor and Lessee shall use their best efforts to reach agreement on
modifications to this Agreement to avoid any un-reimbursed ITFS programming
costs to Lessor. If no such agreement can be reached, Lessor may terminate this
agreement. In the case of such termination, Lessor shall use its best efforts
(with out-of-pocket costs of Lessor to be paid by Lessee, with Lessee's prior
approval) to transfer the license for the ITFS Channels to another qualified
educational entity, subject to FCC approval, with the intent of assigning this
Agreement from Lessor to the new educational entity.
C) Integration of Lessor's Programming. Lessee agrees to integrate
Lessor's programming into the overall communications service offered to
subscribers, without cost to Lessor. This integration shall include, but not be
limited to, listing Lessor's material in any program guides produced by Lessee
for subscribers.
D) Carriage of TBN. In the event that Lessor's ITFS Channels are used
for analog video transmission and TBN is not transmitted on a local VHF or UHF
station, with a market coverage equivalent to both area and signal quality of
our ITFS channels, and Lessee does not have local off-air insertion as part of
its standard installation, then, if so designated by Lessor, Lessee agrees to
transmit on one of the ITFS Channels the programming of Trinity Broadcasting
Network ("TBN") during those time periods such channel is not used for Lessor's
ITFS programming ("TBN Airtime") provided that Lessee is not required to pay a
fee for carriage of TBN. In the event that Lessee is permitted to program the
hours previously occupied by TBN, then Lessee shall increase, in proportion to
the increase in Excess Capacity Airtime, the amount of minimum fees and
subscriber royalty fees payable under the provision 6 (B) of this agreement
during the remainder of the term(s) of the agreement. For purposes of
calculating any such proportionate increase, the parties acknowledge and agree
that the minimum fee and subscriber royalty fee agreed to herein are based on
Lessee's equivalent use of three full-time ITFS channels.
E) Station Identification. During Lessee's use of Lessor's excess
channel capacity, Lessee shall transmit Lessor's call sign for each respective
station as required by the FCC.
8. PROCECUTION OF PETITIONS, AUTHORIZATIONS AND LICENSES.
A) Best Efforts to Secure Approval of this Agreement. The parties
recognize that certain approvals will be required from the FCC in order to
effectuate this Agreement. Both parties shall use their best efforts to prepare,
file and prosecute before the FCC all petitions, waivers, applications and other
documents necessary to secure any FCC approval required to effectuate this
Agreement. Lessee shall assist in the preparation and prosecution of such
applications and as provided for herein, shall pay all filing fees, attorneys'
fees, engineering fees, and all other expenses in connection therewith. Lessor
also agrees to cooperate with Lessee's efforts to cause other ITFS, OFS, MDs and
MMDS operators to co-locate at the Transmission Site. Notwithstanding anything
in this Agreement to the contrary, it is understood that no filing shall be made
with the FCC with respect to this Agreement unless both parties have reviewed
such filing and consented in writing to its submission, such consent not be
unreasonably withheld.
B) Further Efforts. Throughout the Initial Term of this Agreement,
Lessor shall use its best efforts to obtain and maintain in force all licenses,
permits and authorizations required for Lessee and Lessor to use the ITFS
Channels as contemplated by this Agreement. Lessee shall be responsible for all
cash expenses incurred to obtain and maintain in force such licenses, permits
and authorizations. When mutually agreed by the parties and at Lessee's sole
expense, Lessor shall apply for, and use its best efforts to obtain those
reasonable license modifications which would assist Lessee in its business.
Lessor also shall consider filing, at Lessee's sole expense, such reasonable
protests, comments or other petitions to deny any other ITFS, MMDS, MDS and/or
OFS applications or amendments as may be requested by Lessee in the mutual best
interests of the parties and the public. Lessor and Lessee shall promptly notify
each other of any event of which it has knowledge that may affect any of the
licenses, permits or authorization affecting the ITFS Channels.
<PAGE>
C) Attorneys' Fees. With respect to any legal work conducted pursuant
to Paragraph 8(A) and (B) above, Lessee shall be responsible for all attorneys'
fees in connection therewith and shall make payments directly to the attorney.
However, any attorney fees paid by Lessee shall be approved in advance by
Lessee.
9. REPRESENTATIONS AND WARRANTIES.
A) Representations and Warranties of Lessor. Lessor represents and
warrants to Lesse as follows:
(i) Organization. Lessor is a non-profit organization duly organized
and existing in good standing under the laws of the State of California, and it
has full power and authority to carry out all of the transactions contemplated
by this Agreement and all other agreement, certificates or instruments executed
and delivered in connection herewith.
(ii) No Violation. Neither the execution nor delivery of this agreement
or any other agreements, certificates or instruments executed and delivered
herewith, nor the performance of the transactions contemplated hereby constitute
or will constitute a violation of , be in conflict with, or a default under any
term or provision of the governing instruments or Lessor or any agreement or
commitment to which Lessor is bound, or any judgment, decree, order, regulation
or rule of any court or governmental authority, or consent of any federal, state
or local authority is required in connection with the execution and delivery of
this Agreement or any other agreements, certificates or instruments executed and
delivered herewith or with the performance of the transaction contemplated
hereby.
B) Representations and Warranties of Lessee. Lessee represents and
warrants to Lessor as follows:
(ii) Organization. Lessee is duly organized, validly existing and in
good standing under the laws of the State of its incorporation and it has full
power and authority to own property and carry all of the transactions
contemplated by this Agreement, and all other agreements, certificates or
instruments executed and delivered by Lessee in connection herewith.
(ii) Corporation Action; Valid and Binding Agreements. Lessee has taken
all corporate action necessary to authorize the execution and delivery of this
Agreement and all other agreements, certificates or instruments executed and
delivered in connection herewith. Upon execution and delivery, this Agreement
and all other agreements, certificates or instruments executed and delivered by
Lessee in connection herewith will constitute valid and binding agreements of
Lessee enforceable in accordance with their respective terms.
(iii) Litigation and Investigations. There is no action, suit,
proceeding or investigation pending or, to the best of Lessee's knowledge,
threatened against Lessee, its principals or related entities before any court,
administrative agency or other governmental body, and Lessee does not know nor
is aware of any reason for commencement of any such action, proceeding or
investigation.
(iv) Misrepresentation of Material Fact. To the best of Lessee's
knowledge, information and believe, no document or contract that was shown to
Lessor and which in any way affects any of the properties, assets or proposed
transactions of Lessee as such relates to this Agreement, no certificate or
statement furnished by or on behalf of Lessee in connection with this Agreement,
nor this Agreement itself contains any untrue statement of material fact or
omits to state a material fact which would make the statements contained herein
misleading.
C) Survival or Representations and Warranties. The representations and
warranties
<PAGE>
contained in this Agreement shall be deemed to be continuing during the Initial
terms of this Agreement, and each Party shall have the duty promptly to notify
the notify the other of any event or circumstance which might reasonably be
deemed to constitute a breach of or lead to a breach of its warranties or
representations hereunder. The waiver by either Party of any breach of any
presentation or warranty under this Agreement shall not constitute a waiver of
any other representation or warranty or of any failure in the future by the
other Party to fulfill such representation or warranty.
10. TERMINATION.
A) Termination of FCC Authorization. Without further liability to
either Lessor or Lessee, this Agreement shall terminate in the event that for
any reason (i) Lessor shall not be licensed on the leased ITFS Channels, or (ii)
the FCC shall terminate or diminish Lessor's authority to lease the ITFS
Channels in accordance with the terms of this Agreement.
B) Termination by Reason of Default or Nonperformance. At the option of
the non-defaulting party, this Agreement may be terminated upon the material
breach or default by the defaulting party of its duties and obligations
hereunder is such breach or default is not cured by such defaulting party and is
breach or default shall continue for a period of thirty (30) consecutive days
after such defaulting party's receipt of notice thereof from the non-defaulting
party. It is understood and agreed that any failure on the part of Lessee to
make any payment required under Paragraph 6 hereof shall be a material breach of
default of its duties and obligations hereunder. It is also understood and
agreed that any consequences resulting from the loss of local participating
receive sites shall not be considered a material breach or default by Lessor of
its duties and obligations hereunder.
C) Remedies to Continue. In the event of termination of this Agreement
pursuant to Paragraph 10(B), such termination shall not affect or diminish the
rights or claims or remedies available in equity or at law to the non-defaulting
party arising by reason of a breach or default of this Agreement. However, no
liability shall arise on the part of Lessor or Lessee upon termination of this
Agreement pursuant to Paragraph 10(A) except where the loss of the FCC license
occurs as a result of the default of either party.
11. TRANSFER OF RIGHTS AND OBLIGATIONS.
Lessee shall have the right to assign its rights under this lease as
collateral for any financing arrangements it makes. Lessee shall also have the
right to pledge the Leased Equipment as collateral security for any loans it
makes; provided, however, that any pledge of the Leased Equipment shall be made
subject to the provisions of this lease. Lessee shall further have the right to
subcontract any portion of its obligations under this Agreement to any
partnership, joint venture, corporation or entity which Lessee may choose,
provided that Lessee gives Lessor notice of any proposed subcontracting and,
provided further, that no such subcontracting shall release Lessee from
fulfilling all of its obligations under this Agreement. Lessee shall have the
right to assign or transfer its rights, benefits, duties and obligations under
this Agreement to a commonly-owned company without the prior consent of Lessor.
Apart from the foregoing, neither party may assign or transfer its rights,
benefits, duties or obligations under this Agreement without the prior written
consent of the other, which consent shall not be unreasonably witheld.
12. INDEMNIFICATION.
A) By Lessor. To the extent permitted by state and federal law and its
charter or by-laws, Lessor shall forever protect, save and keep Lessee and its
permitted successors and assigns harmless and indemnify Lessor against and from
any and all claims, demands, losses, costs, damages, suits, judgments,
penalties, expenses and liabilities or any kind or nature whatsoever, including
reasonable attorneys' fees, arising directly or indirectly out of (i) the
willful misconduct of Lessor, its agents or employees, in
<PAGE>
connection with the performance of this Agreement; (ii) any programming
transmitted by Lessor during any of Lessor's Airtime.
B) By Lessee. To the extent permitted by state and federal law and its
charter or by-laws, Lessor shall forever protect, save and keep Lessee and its
permitted successors and assigns harmless and indemnify Lessor against and from
any and all claims, demands, losses, costs, damages, suits, judgments,
penalties, expenses and liabilities or any kind or nature whatsoever, including
reasonable attorneys' fees, which arise directly or indirectly out of (i) the
negligence or willful misconduct of Lessee, its agents or employees, in
connection with the performance of this Agreement; (ii) any programming
transmitted by Lessee or any of its authorized agents or subcontractors with the
public, third parties and subscribers to the Lessee's programming service; or
(iv) any maintenance, installation or other work performed by Lessee or any
authorized agent or subcontractor under this Agreement.
C) Notice of Claim; Defense of Claim. Each party shall notify the other
of any such claim promptly upon receipt of same. Either party (hereinafter
referred to as appropriate the "Indemnitor" or Indemnitee") shall have the
option to defend, at its own expense, any claims arising under this Paragraph.
In Indemnitor assumes the defense of any such claim, Indemnitee shall delegate
complete and sole authority to the Indemnitor to defend or settle same and
Indemnitee shall cooperate with Indemnitor in the defense thereof.
13) INSURANCE.
A) Policies Required. At its expense, Lessee shall secure and maintain
with financially reputable insurers, one or more policies of insurance insuring
the Leased Equipment and Lessee's utilization of the ITFS Channels against
casualty and other losses of the kinds customarily insured against by firms of
established reputations engaged in the same or similar line of business, or such
types and in such amounts as are customarily carried under similar circumstances
by such firms, including, without limitation: (i) "All Risk" property insurance
covering the ITFS Equipment and the common Equipment to the extent of one
hundred percent (100%) of its full replacement value without deduction for
depreciation: (ii) comprehensive general public liability insurance covering
liability resulting from lessee's operation of the ITFS equipment on an
occurrence basis having minimum limits of liability in an amount of not less
than One Million Dollars ($1,000,000.00) for bodily injury, personal injury or
death to any person or persons in any one occurrence, and not less than Two
Million Dollars ($2,000,000.00) in the aggregate for all such losses during each
policy year, and not less than Three Hundred Thousand Dollars ($300,000.00) with
respect to damage to property; (ii) all workers compensation, automobile
liability and similar insurance required by law.
B) Insurance Policy Forms. All policies of insurance required by this
Paragraph shall, whre appropriate, designate Lessor as either the insured party
or as a named additionally insured party, shall be written as primary policies,
not contributory with and not in excess of any coverage which Lessor shall
carry, and shall contain a provision that the issuer shall give to Lessor thirty
(30) days prior written notice of any cancellation or lapse of such insurance or
of any change in the coverage thereof.
C) Proof of Insurance. Executed copies of the policies of insurance
required under this section or certificates thereof shall be delivered to Lessor
not later than ten (10) after execution of this agreement. Lessee shall furnish
Lessor evidence of renewal of each such policy not later than thirty (30) days
prior to the expiration of the term thereof.
27. RELATIONSHIP OF PARTIES.
By the provisions of this Agreement, Lessor and Lessee intend to enter
an airtime lease relationship and not a joint venture. They will carry out this
Agreement to preserve that intent. Neither party shall represent itself as the
other party, nor as having any relationship with one another, except as Lessor
and Lessee under the terms of this Agreement.
<PAGE>
28. EQUIPMENT PURCHASE.
C) Lessor's Option to Purchase. In the event that this Agreement is
terminated, Lessor shall have the option to purchase the Leased
Equipment used exclusively for Lessor's ITFS license. Any
equipment which is used in a shared fashion (such as transmit
antenna, decoders and combiners) in providing signals other than
Lessor's signals are excluded from this option to purchase. The
intent of the purchase option provided for in Paragraphs 16(A) is
to provide Lessor with the capability to continue to perform on
Lessor's ITFS license. The purchase price shall be the market
value of such equipment noted above as determined by mutual
agreement or by averaging the values obtained from two (2)
appraisals, with one appraiser each chosen by Lessor and Lessee.
D) Lessee's Option to Purchase. If during the terms of this
Agreement the FCC modifies its rules so as to enable Lessee to be
licensed to operate the ITFS frequencies, Lessee shall have a
right of first refusal to acquire such licenses subject to the
same terms and conditions as the right provided for in Paragraph
1(B).
29. NON-DISCLOSURE
Lessor acknowledges that there may be made available to it pursuant to
this Agreement proprietary information of Lessee relating to the encoding and/or
decoding system associated with the ITFS channel equipment and its patented
processes including, but not limited to, improvements, innovations, adaptation,
inventions, results of experimentation, processes and methods, whether or not
deemed patentable, and certain business and marketing techniques (all herein
referred to as "Confidential Information"). Lessor acknowledges that this
Confidential Information has been developed by Lessee at considerable effort and
expense and represents special, unique and valuable proprietary assets of
Lessee, the value of which may be destroyed by unauthorized dissemination.
Accordingly, Lessor covenants and agrees that, except as may be required for the
performance of this Agreement or by law or court order, neither it nor any of
its agents or affiliates shall disclose such Confidential Information to any
third person, firm, corporation or other entity for any reason whatsoever, such
undertaking to be enforceable by injunctive or other equitable relief to prevent
any violation or threatened violation thereof.
30. NON-COMPETITION
During the term of this Agreement, Lessor agrees not to transmit
programming or to lease or sublease any channel capacity on its ITFS Facilities
for the transmission of programming that is competitive with the programming
transmitted by Lessee.
31. FORCE MAJEURE
If by reason of Force Majeure either party is unable in whole or in
part to perform its obligations hereunder, the party shall not be deemed in
violation of default during the period of such inability. As used herein, the
phrase "Force Majeure", shall mean the following: act of God, acts of public
enemies, orders of any branch of the government of the United States of America,
any state or any political subdivisions, thereof which are not the result of a
breach of this Agreement, orders of any military authority insurrections, riots,
epidemics, fires, civil disturbances, explosions, or any other cause or event
not reasonably within control of the adversely affected party.
32. CONDITION PRECEDENT
This Agreement is conditional on the issuance of a Final Order by the
FCC granting Lessor a construction permit for the ITFS Channels in the Market
from the Transmission Site. By "Final Order" the parties mean an action or order
of the FCC which is not reversed, stayed, enjoined, vacated, set aside, annulled
or suspended and with respect to which no timely-filed request for
administrative or judicial review is pending and as to which the time for filing
any such request, or for the FCC to set aside the action on its own motion, has
expired.
<PAGE>
33. NOTICE
Any notice required to be given to Lessor under any provision of this
Agreement shall be delivered personally or by certified mail to Lessor at the
address first written above. Any notice required to be given to Lessee under any
provision of this Agreement shall be delivered personally or by certified mail
to Lessee at the address first written above.
34. SEVERABILITY
Should any court or agency determine that any provision of this
Agreement is invalid, the remainder of the Agreement shall remain in effect.
35. WAIVER
A waiver by either Lessor or Lessee of a breach of any provision of
this Agreement shall not be deemed to constitute a waiver of any preceding or
subsequent breach of the same provision or of any other provision.
36. PAYMENT OF EXPENSES AND SIGNING FEES
A signing fee of One Dollar ($1) shall be paid to Lessor. Lessee shall
pay all costs and expenses incident to fulfilling or modifying this Agreement,
such as, attorneys' fees or, if necessary, any travel expenses approved in
advance by Lessee, FCC filing fees, and engineering costs.
37. VENUE AND GOVERNING LAW
Venue for any cause of action brought by or between Lessor and/or
Lessee relating to this Agreement shall be in California and all provisions of
this Agreement shall be construed under the laws of the State of California and
County of Lessor.
38. COUNTERPARTS
This Agreement may be executed in one or more counterparts each of
which shall be deemed an original, but all of which shall constitute one and the
same instrument, and shall become effective when each of the parties hereto
shall have delivered to it this Agreement duly executed by each of the other
parties hereto.
39. ENTIRE AGREEMENT
This Agreement constitutes the entire Agreement between the parties and
supersedes all prior oral or written provisions of any kind. The parties further
agree that this Agreement may only be modified by written Agreement signed by
both parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
this day of July 1st, 1999.
SHEKINAH NETWORK
By: ______________________________
Name: Charles J. McKee
Title: President
WORLD WIDE WIRELESS COMMUNICATIONS, INC.
By: ______________________________
Name: Douglas P. Haffer
Title: President
<PAGE>
Address for Notices:
Shekinah Network
14875 Powerline road
Atascadero, CA 93422
Phone/Fax: (805) 438-3341
Attn: Charles McKee, President
Gardner, Carton & Douglas
Attn: Laura Mow
1301 K Street, N.W., Suite 900
Washington, D.C. 20005
Phone: (202) 408-7100
Fax: (202) 289-1504
World Wide Wireless Communications, Inc.
One Post Street Suite 2600
San Francisco, CA 94104
Phone: (415) 981- 7777
Fax: (415) 391-3199
<PAGE>
EXHIBIT A
Schedule of Airtime
<PAGE>
EXHIBIT B
Receive Sites
There shall be attached hereto and incorporated by reference a copy of
FCC Form 330 Section IV listing Lessor" receive sites.
<PAGE>
EXHIBIT C
Leased Equipment
Noted below is a list of equipment that Lessee is leasing to Lessor:
(3) Four (4) ITFS tansmitters and related hardware
(4) Lessor's ITFS receive site antennas and related hardware
*(3) Combining network, transmission line and antenna
*Common Equipment
<PAGE>
EXHIBIT D
Service and Royalty Fees
1. Lessor's Service Fee
Services Provided Annual Fee
----------------- ----------
(d) Lease of Leased Equipment [6(A)] $1.00
(e) Maintenance of Leased Equipment [3(D)] $1.00
(f) Lease of space at Primary Transmission Site [3A)] $1.00
2. Lessee's Subscriber Royalty Fee
Lessee shall pay Lessor a minimum monthly Transmission Fee 5% of the system's
Gross receipts or a monthly minimum payment of $500 per month whichever is
greater.
Payment shall be as follows: Commencing on the Execution (Effective) Date and as
defined in Paragraph 6)B, payments for each month shall be made by the twentieth
(20th) day of the following month.
<PAGE>
EXHIBIT E
Programming
In addition to digital data services, such as the Internet or Intranet, the
following is a list of video programming services Lessee may provide over
Lessee's System.
TLC - The Leaning Channel
TWC - The Weather Channel
Lifetime
ESPN - Sports
AMC - American Movie Classics
SCOLA
WHTN - World Harvest Television Network
ECO - Galavision
CNN - Cable News Network
CNN - Headline News
C-Span I
C-Span II
BET - Black Entertainment Network
CNBC - Consumer News & Business Channel
Nickelodeon
The Discovery Channel
A&E - Arts and Entertainment
The Family Channel
The Disney Channel
PBS - Public Broadcasting Service
TBN - Trinity Broadcasting Network
TNIN - The New Inspirational Network
ME/U - Mind Extension Network
The International Channel
BRAVO Network
The Travel Channel
Family Network
Keystone Inspirational Network
<PAGE>
LEASE AGREEMENT
BETWEEN
WORLD WIDE WIRELESS COMMUNICATIONS, INC.
AND
SHEKINAH NETWORK
Casper, Wyoming
ITFS EXCESS CAPACITY AIRTIME LEASE AGREEMENT
THIS AGREEMENT is made this 1st day of August 1999 by Shekinah Network
(hereinafter referred to as "Lessor") having its principal place of business at
14875 Powerline Road, Atascadero, CA 93422 and World Wide Wireless
Communications, Inc. (hereinafter referred to as "Lessee") having its principal
place of business at One Post Street, Suite 2600 San Francisco, CA 94104.
WHEREAS, the Federal Communications Commission ("FCC") has authorized
licenses for Instructional Television Fixed Service ("ITFS") channels and has
authorized the licensee to lease excess capacity to non-ITFS users; and
WHEREAS, Lessor has been granted an FCC License for (call sign) WNC-798
(the "License") for the Channel group C1-4 (the "ITFS Channels") in Casper,
Wyoming ("The Market"); and
WHEREAS, Lessee is in the business of providing voice, video, data and
other services via microwave transmission in the Market Area and desires to
lease the excess ITFS capacity of the ITFS channels; and
WHEREAS, Lessor has determined that there will be excess airtime
capacity available on the ITFS Channels and desires to lease this excess airtime
capacity to Lessee.
NOW, THEREFORE, in consideration of the mutual promises, undertakings,
covenants and conditions set forth herein, the Lessor and Lessee do hereby agree
and warrant as follows:
5. TERM OF AGREEMENT
A. Initial Term. This Agreement shall be effective upon the date of its
execution and shall extend for an initial term of five (5) years (the
"Initial Term").
B. Renewal Term Provided that the License is renewed by the FCC, Lessee
shall have the right to extend this Agreement on its then existing
terms and conditions for one (1) additional five (5) year term (the
"Renewal Term"). The Renewal Term shall automatically go into effect
upon the conclusion of the Initial Term unless Lessee notifies Lessor
at least one hundred eighty days (180) before the end of the Initial
Term that Lessee does not wish to extend this Agreement.
C. New Lease Agreement/Right of first Refusal.
(1) Providing that Lessor's FCC license remains in good standing
and/or Lessor seeks to renew such license, Lessee and Lessor shall
negotiate in good faith for a new excess capacity airtime lease
agreement (hereinafter referred to as "New Lease Agreement") no later
than one hundred eighty days (180) prior to the end of the latter of
(i) Initial Term or (ii) the Renewal Term if the Agreement is extended
for the Renewal Term.
<PAGE>
(4) If Lessor elects to not reasonably pursue a New Lease Agreement
with Lessee, then Lessor shall so notify Lessee in writing of such
intent no later than one hundred eighty (180) days prior to the end of
the Renewal Term.
(3) If Lessor and Lessee do not enter into a New Lease Agreement,
Lessor grants Lessee a right of first refusal on any competing
proposals for lease agreements or transfers or assignments of any part
of the ITFS Channels received by Lessor during the twelve (12) months
following the expiration of the latter of (i) the Initial Term or (ii)
the Renewal Term, if the Agreement is extended for the Renewal Term.
If any acceptable offer to lease or acquire the ITFS Channels is made
to Lessor, Lessor shall give written notice to Lessee describing the
person to whom the proposed lease or transfer is to be made, the fees,
charges, rental or other consideration to be received fro the lease or
transfer, the terms thereof and generally the relevant other terms and
conditions of the lease or transfer. Lessee shall have a period of
thirty (30) days after its receipt of such notice from Lessor in which
to elect, by giving written notice to Lessor, to lease or, if
eligible, obtain any or all of the ITFS Channels for the same fees,
charges, rental or other consideration for which Lessor proposed to
lease or transfer to the third person.
(i) The fees, charges, rental or consideration shall be paid by such
third person or Lessee in cash.
(vi) If Lessor does not believe Lessee's stated offer is in an amount
fairly equivalent to the fair value of the consideration payable by
the third person and so notifies Lessee in writing within seven (7)
days after Lessor's receipt of Lessee's notice of election to so lease
or purchase, Lessee may within five (5) days after its receipt of such
notice from Lessor elect to refer such question for determination by
an impartial arbitrator and the right of first refusal of Lessee shall
then be held open until (5) days after Lessee is notified of such
determination. Such arbitrator shall be chosen either by agreement of
Lessee and Lessor at the time such question arises, or, at the option
of either party, by referring the question to the American Arbitration
Association with instructions that the American Arbitration
Association select a single arbitrator under a request from the
parties for expedited and accelerated determination. The determination
of the arbitrator chosen under either option contained in this
subparagraph shall be final and binding upon Lessee and Lessor. The
parties shall share equally in the costs and fees of the arbitration
(vii) In the event Lessee shall elect to exercise its right of first
refusal, the lease agreement or other transfer or assignment shall be
consummated within thirty (30) days of the latest of: (1) the day on
which Lessor received notice of Lessee's election to exercise the
right of first refusal; (2) the day upon which any question required
to be determined by the arbitrator hereunder has been determined; or
(3) the date of any FCC approval in the case of assignment or
transfer; or at such other time as may be mutually agreed. The right
of first refusal is terminated either by the lease or other transfer
to Lessee as provided herein or by notice to Lessee of the Lessor's
proposal to lease or otherwise transfer the ITFS Channels or any part
to a third person and Lessee's unwillingness or failure to meet and
accept such a bona fide offer pursuant to the times and procedures as
set forth above; provided that such proposed lease or transfer is
consummated at the same fees, charges, rental or other consideration
and upon the same terms as to which such right of first refusal
applied, within thirty (30) days after Lessee's right of first refusal
had expired or had been specifically waived by written notice given to
Lessor by Lessee, or within thirty (30) days following FCC approval in
the case of assignment or transfer.
C) Operation During End of Term. If Lessor and Lessee do not enter into
New Lease Agreement before the end of the Initial Term, Lessee shall
cease leasing the ITFS Channels on the last day of the Initial Term.
<PAGE>
D) No Rights Beyond Term of Licenses. Lessor and Lessee agree that this
Agreement shall not give rise to any rights or remedies beyond the
expiration of any FCC license necessary for the continued operation of
the ITFS Channels. Provided, however, that while this Agreement is in
effect, Lessor shall obtain and maintain in force all licenses,
permits and authorizations required or desired in connection with the
use of the ITFS Channels. Lessor shall take all necessary steps to
renew the licenses for the ITFS Channels and shall not commit any act
or engage in any activity which could reasonably be expected to cause
the FCC to impair, restrict, revoke, cancel, suspend or refuse to
renew the ITFS licenses. Lessor shall take all reasonable steps to
comply with the Communications Act of 1934, as amended and the rules
and regulations of the FCC, and shall file all reports, schedules
and/or forms required by the FCC to be filed by Lessor. All expenses,
including attorneys fees and filing fees, incurred in preparing and
filing such reports, schedules and/or forms required by the FCC shall
be paid by the Lessee.
6. ALLOCATION OF AIRTIME.
A. Excess Capacity Airtime. To the extent allowed by the FCC rules and
regulations and any amendments thereof, Lessor agrees to lease to
Lessee the exclusive use of all excess capacity not utilized by Lessor
("Excess Capacity Airtime").
B. Lessor's Primary Airtime. During analog transmission over the ITFS
Channels, Lessor reserves for its exclusive use a minimum of twenty
(20) hours of airtime per-channel per-week to be used for its ITFS
scheduled programs. During digital transmission ovr the ITFS Channels,
Lessor shall have the exclusive use of 12.5% of the total capacity
available on the Lessor's ITFS Channels. This airtime shall be know as
"Lessor's Primary Airtime".
C. Schedule of Airtime. The schedule which depicts the agreement of the
parties as to use of Lessor's Channels shall be attached hereto and
made a part hereof as Exhibit A which is subject to change upon
agreement by both parties.
D. Lessee's use of its Excess Capacity Airtime. Lessee shall have the
right to utilize its Excess Capacity Airtime for any purpose allowed
or authorized by the FCC including but not limited to voice, video and
data transmission.
E. Alternate Use and Vertical Blanking Intervals. Lessor shall have the
right to use the second audio carrier ("SAP") and vertical blanking
intervals. ("VBI") on which Lessor's ITFS programming is being
transmitted. Lessee shall at all times have the right to use the VBI
and SAP not utilized by Lessor and 100% of the response frequencies
associated with the ITFS Channels. Lessor shall be responsible for any
equipment needed to utilize the VBI and/or SAP and such equipment
shall be compatible with Lessee's system.
F. Lessor's Use of ITFS Channels. Lessor agrees that its program services
and airtime use will not harm or interfere with Lessee's current or
future signal paths utilized within Lessee's System for program
encryption, pilot carrier signaling and other technical needs utilized
for the operation of and such services provided by Lessee's System.
Nor will Lessor, by its own action, or through a third party, utilize
any part of its licensed frequency spectrum to create or operate a
service that is in competition with current, planned or future
services provided by
<PAGE>
Lessee's System. Lessor agrees to use its Primary Airtime in
accordance with the FCC's rules and regulations. Lessor shall not take
or fail to take any action which may have a material adverse effect on
Lessee's right to utilize its Excess Capacity Airtime.
G. Expanded System Capacity. Lessee shall have the right at anytime to
require Lessor to file with the FCC any necessary application to
expand the channel capacity to Lessor's station to enable it to carry
more than one video signal per channel or digital data services;
provided however, before Lessee can exercise this right, it must
demonstrate to the Lessor's reasonable satisfaction that such
modification will not materially degrade the performance of the
station nor impair signal quality at the registered ITFS receive
sites. Once such modification has been constructed, the modified
facilities shall automatically be considered a part of this agreement
and subject to all terms and conditions hereof. It is understood that
Lessee shall have the full-time use of the Expanded Channels to the
extend permitted by FCC rules.
3. TRANSMISSION SITE AND FACILITIES.
E. Primary Transmission Site. Lessor's ITFS Channels are located at Key
West, FL, Lessee agrees to provide Lessor space at the Primary
Transmission site for Lessor's audio and video transmission equipment
which shall not exceed on rack. Such space shall be leased to Lessor
pursuant to Exhibit D hereto. This site shall hereinafter be described
as the "Primary Transmission Site". At Lessee's sole expense, Lessee
shall contract for a lease of space at the Transmission Site upon such
terms as the parties agree. The Transmission Site shall comply with
the standards, specifications and regulations of the FCC rules and
orders pertaining to Lessor's ITFS license.
F. Relocation of Transmission Site.
(i) Lessor acknowledges that the location of the
Primary Transmission Site for ITFS Channels is critical to the
Lessee's business and agrees that it will not relocate the
transmission facilities for ITFS Channels from the Primary
Transmission Site without Lessee's prior written consent.
(ii) Lessor further acknowledges that possibility
that, as a result of currently unforeseen events, the Primary
Transmission Site may not be the optimum site for the location
of the ITFS Channels or Lessee's business throughout the term
of this Lease Agreement. Lessor therefore agrees that if at
any time or from time to time Lessee requests in writing that
the transmission facilities for the ITFS Channels be
relocated, Lessor shall file with the FCC and any other
regulatory body having jurisdicition over the ITFS Channels
all applications, amendments, and requests for modification
that may be necessary to obtain any necessary consents to
permit such relocation to such location within or adjacent to
the Market as may be requested by Lessee; provided, however,
that Lessor shall not be obligated to submit or procecute any
application, amendment, or request for modification that
Lessor reasonably determines, upon advice of counsel contained
in a written opinion, would be in violation of the terms of
the License, any statute, rule, or regulations regarding the
operation of the ITFS Channels or the submission of materials
to the FCC, or any of its obligations as an ITFS licensee; and
provided, further, that any such relocation will not result in
loss of service to Lessor's registered receive sites served by
the transmission facilities in the event that the
authorization is obtained to relocate the ITFS Channels to the
location requested by Lessee, Lessor shall relocate such
channels to such new location as soon as reasonably
<PAGE>
possible after authorization is obtained. Lessee shall bear
reasonable costs associated with such relocation, including
engineering and construction, and all reasonable costs
associated with obtaining FCC or any other regulatory approval
therefore.
(iii) Lessor agrees to file modification applications
requested by Lessee. Such modifications may include but shall
not be limited to the following: power increase or decrease,
polarization, transmit antenna patterns, digital, two-way
(return path) use of the ITFS Channels, boosters, beam benders
or repeaters, cells, sectorization, channel swaps, channel
loading, channel shifting and application within five (5)
business days or receipt of the modification application from
Lessee or during any FCC designated filing window. Lessee will
use reasonable efforts to provide Lessor with the engineering
for the modification thirty (30) days prior to the request for
filing. If Lessor believes that such modification will have an
adverse effect on Lessor's ability to provide its services to
its receive sites, Lessor agrees to file the modification
application as presented by Lessee and within the time limit
requested by Lessee; however, Lessee agrees not to implement
construction and Lessor agrees not to withdraw the application
until the parties have adequately addressed and resolved the
potential material adverse effect or the matter has been
submitted to arbitration pursuant to Section 16 and a final
decision has been rendered by arbitrator. Although Lessee
intends to file such modification applications, it may elect
not to construct the Channels in that manner and may desire to
utilize the Channels as currently licensed. A copy of the
modification application, bearing the FCC's date stamp, shall
be mailed to Lessee by Lessor, within fourteen (14) days of
the filing of the modification application. Lessee shall be
solely responsible for all engineering and legal costs
associated with the preparation, review and filing of the
modification application. In the event that any license
modification requested by Lessee requires receive site
upgrades in order for Lessor's receive sites to continue to
receive Lessor's services, then Lessee agrees to pay for all
costs to complete such upgrade prior to implementing the
license modification.
C. System Construction. Lessee shall within a reasonable
period of time, but not later than six (6) months after the
FCC grant of digital authority for the ITFS Channels, purchase
equipment such as the antenna, waveguide or transmitters
specified on the authorization for the ITFS Channels. At
Lessee's expense, Lessee shall purchase and install such
transmitters, transmission line, modulators, antennas and
other equipment as required to operate the ITFS Channels in
accordance with the provision of such authorization. Any
equipment so used in such construction shall be leased to
lessor pursuant to Paragraph 5 hereof. Such equipment is
hereinafter referred to as the "Leased Equipment". Lessee
shall retain title to the Leased Equipment except as noted by
Paragraph 15 herein.
D. Maintenance of Transmission Equipment. At Lessee's expense
and subject to Lessor's right to supervise the maintenance of
this equipment, Lessee shall maintain and operate the Leased
Equipment during the terms of this Agreement for a nominal
fee. Lessee shall also pay all taxes and other charges
assessed against the Leased Equipment.
E. Transmission of Programming. At no cost or expense to
Lessor, Lessee shall provide the necessary labor and equipment
capabilities to transmit on the ITFS Channels programming
required to be carried pursuant to this Agreement such as
Lessor's ITFS programming and TBN. Lessee shall also comply
with Lessor's instructions regarding the transmission of such
programming such as the dates and times to transmit
programming.
F. Interference. Lessee shall operate the Leased Equipment so
that such operation does not create or increase interference
with electronic transmission of any other FCC
<PAGE>
licensees entitles to protection under FCC rules and
regulations. If Lessee's entitled to protection under FCC
rules and regulations. If Lessee's operation of the Lease
Equipment does so create or increase interference, Lessee
shall pay all of the reasonable engineering and legal fees
necessary to resolve the interference problem so created.
G. Alterations and Attachments. Lessee, at its own expense,
may make alterations of or attachments to the ITFS equipment
or the common equipment as defined in Exhibit C (including the
installation of encoding and/or addressing equipment) as may
be reasonably required from time to time by the nature of its
business; provided however, that such alterations or
attachments do not interfere with Lessor's signal or ongoing
operations or violate any FCC rules or regulations; and
provided further that FCC authorization, if required, is
obtained in advance of any such alteration or attachment at
the sole cost of Lessee. to the extent any FCC authorization
pertaining to the ITFS equipment is required, Lessor agrees to
use its best efforts to obtain such authorization.
H. Licensee Control and Liability. Nothing herein shall
derogate from such licensee control of operations of the ITFS
Channels that Lessor, as an FCC licensee, shall be required to
maintain and Lessee acknowledges the reservation by Lessor of
such control. Lessor shall at all times retain ultimate and
exclusive responsibility for the operation and control of the
ITFS Channels including policy decisions.
4. LESSOR'S RECEIVE SITES.
Attached hereto as Exhibit B is list of the registered receive sites
designated by Lessor to receive its ITFS programming and to be installed at the
expense of Lessee. Those receive sites so listed shall be installed with a
Standard Installation. If as the result of any relocation of the Primary
Transmit Site, the equipment at Lessor's existing registered receive sites must
be reoriented, Lessee shall pay the cost of same. As used herein for the
purposes of this Agreement, the phrase "Standard Installation" shall mean an
installation consisting of the placement of the ITFS/MMDS receiving antenna at
an elevation (not to exceed thirty [30] feet above the base mounting location)
which could normally receive the line-of-sight transmission from the
Transmission Site; the coupling thereto of a block-down converter; and a
sufficient amount of transmission line (coaxial cable) to connect the received
ITFS programming to the input of (i) one classroom designated by Lessor to
receive the ITFS programming or (ii) the receive site internal/external
distribution system. Also, if as the result of any relocation of the Transmit
Site, the equipment at Lessor's existing receive sites must be reoriented,
Lessee shall pay the cost of same. Lessee also agrees that for digital
transmission of the ITFS Channels Lessee will purchase and install at Lessee's
expense, one single-point modem to receive its ITFS programming.
5. LEASE OF EQUIPMENT.
A) Lessor's Lease of Leased Equipment. For a nominal fee, Lessor shall
lease from Lessee the Leased Equipment during the terms of this Agreement. A
list of this equipment is attached hereto as Exhibit C and incorporated by
reference herein. Lessor shall have no responsibility for the loss of or damage
to the Leased Equipment during the terms of this Agreement and Lessee shall bear
all such responsibility.
6. FEES.
A) Lessor's Service Fee. In consideration of the lease of the Leased
Equipment, and for its share of the projected costs to maintain the Transmission
Site and the Lease Equipment, Lessor shall pay Lessee an annual fee provided for
in Exhibit D.
B) Subscriber Royalty Fees or Percentage. Beginning on the Execution
Date of this Agreement and continuing thereafter during the Initial Term of this
Agreement, Lessee shall pay to
<PAGE>
Lessor the Subscriber Royalty Fee, System Percentage or monthly minimum,
whichever is greater as set out in Exhibit D which is attached herewith and
incorporated by reference herein. If the Execution Date shall be a date other
than the first day of a calendar month, then the Subscriber Royalty Fee for the
partial month shall be paid on a proportionate basis. A late fee of 10% (ten
percent) will be assessed to past due accounts, and a finance charge of one and
one-half percent (1.5%) per month will be assessed in addition to the late fee
until paid.
C) Notice of Construction and Required Certificate. Within thirty (30)
days of completion of construction at the Transmission Site, Lessee shall notify
Lessor of such completion of construction in writing. Within thirty (30) days of
the end of each month in which Excess Capacity Airtime is leased hereunder,
Lessee shall provide Lessor with a certificate, certified as accurate and
correct by an authorized agent of Lessee, showing the number of subscribers
served during such month.
D) Right to Audit. Lessee shall for a period of three (3) years after
their creation, keep, maintain and preserve complete and accurate records and
accounts, including all invoices, correspondence, ledgers, financial and other
records pertaining to Lessee's use of Excess Capacity Airtime and Lessor's
charges hereunder; and such records and corporate accounts shall be available
for inspection and audit at Lessee's corporate offices or at Lessee's offices in
the Market, as designated by Lessee, at any time or times during the term of
this Agreement or within ninety (90) days thereafter, during reasonable business
hours, by Lessor or its nominee. In the event that there is discovered an
underpayment of the Subscriber Royalty Fee as defined in Paragraph 6 (B) above,
Lessee shall pay to Lessor a penalty equal to ten percent (10%) of the amount of
each such underpayment. All information obtained by Lessor during any audit
herein shall be maintained by Lessor in strict confidence.
7. PROGRAMMING.
A) Control Over Programming.
(i) Program Content. Lessee intends that only programming of a sort
which would not serve to place Lessor's reputation in the community in jeopardy
will be transmitted by Lessee on the ITFS Channels. In an attempt to minimize
disputes, recognizing the difficulties inherent in specifying exact standards
herein, it is agreed that Lessee shall have the right to market the programming
provided by the networks and services listed on Exhibit E. If, however, the
programming content of any networks and services listed on Exhibit E materially
changes, Lessor shall have the right, upon ninety (90) days notice, to deny
Lessee the right to continue transmitting such programming if Lessor would have
the right to deny Lessee the right to transmit such programming under the
provisions of this paragraph in the first instance. If Lessee proposes to
transmit the programming of any new programming service, the Lessee shall notify
Lessor in writing specifying in detail the nature of the new programming service
and Lessor shall have the right, upon written served upon Lessee within thirty
(30) days after Lessor's receipt of any such notice from Lessee, to deny to
Lessee the right to transmit such service if such programming is obscene and/or
contradicting local, state and/or federal laws or otherwise violates any
federal, state or local laws or regulations. If no such denial notice is
received by Lessee within such thirty (30) days, lessee shall be authorized to
transmit all such services for which no denial notice is received. There shall
be no reduction in fees required under this Agreement for any such programming
not permitted to be transmitted.
B) Availability of Programming. It is understood by Lessee and Lessor
that there is expected to be no direct out-of-pocket annual costs for the
acquisition of the qualified ITFS educational programming for Lessor's use
during Lessor's Primary Airtime on the ITFS channels, based on current plans. In
the event that this ITFS educational programming either; (1) ceases to be
available, or, (2) becomes available only at a fee, then Lessor may incur direct
out-of-pocket costs in Lessor's acquisition of ITFS programming. Lessee agrees
to provide its best efforts to assist Lessor in the acquisition of alternative
programming, if necessary. Additionally, Lessee agrees to make payment to Lessor
for the actual, direct programming costs incurred. If any; If Lessor, after
expending its best efforts, is unable to
<PAGE>
obtain suitable ITFS programming for a cost equal to the amount to be paid by
Lessee, Lessor and Lessee shall use their best efforts to reach agreement on
modifications to this Agreement to avoid any un-reimbursed ITFS programming
costs to Lessor. If no such agreement can be reached, Lessor may terminate this
agreement. In the case of such termination, Lessor shall use its best efforts
(with out-of-pocket costs of Lessor to be paid by Lessee, with Lessee's prior
approval) to transfer the license for the ITFS Channels to another qualified
educational entity, subject to FCC approval, with the intent of assigning this
Agreement from Lessor to the new educational entity.
C) Integration of Lessor's Programming. Lessee agrees to integrate
Lessor's programming into the overall communications service offered to
subscribers, without cost to Lessor. This integration shall include, but not be
limited to, listing Lessor's material in any program guides produced by Lessee
for subscribers.
D) Carriage of TBN. In the event that Lessor's ITFS Channels are used
for analog video transmission and TBN is not transmitted on a local VHF or UHF
station, with a market coverage equivalent to both area and signal quality of
our ITFS channels, and Lessee does not have local off-air insertion as part of
its standard installation, then, if so designated by Lessor, Lessee agrees to
transmit on one of the ITFS Channels the programming of Trinity Broadcasting
Network ("TBN") during those time periods such channel is not used for Lessor's
ITFS programming ("TBN Airtime") provided that Lessee is not required to pay a
fee for carriage of TBN. In the event that Lessee is permitted to program the
hours previously occupied by TBN, then Lessee shall increase, in proportion to
the increase in Excess Capacity Airtime, the amount of minimum fees and
subscriber royalty fees payable under the provision 6 (B) of this agreement
during the remainder of the term(s) of the agreement. For purposes of
calculating any such proportionate increase, the parties acknowledge and agree
that the minimum fee and subscriber royalty fee agreed to herein are based on
Lessee's equivalent use of three full-time ITFS channels.
E) Station Identification. During Lessee's use of Lessor's excess
channel capacity, Lessee shall transmit Lessor's call sign for each respective
station as required by the FCC.
8. PROCECUTION OF PETITIONS, AUTHORIZATIONS AND LICENSES.
A) Best Efforts to Secure Approval of this Agreement. The parties
recognize that certain approvals will be required from the FCC in order to
effectuate this Agreement. Both parties shall use their best efforts to prepare,
file and prosecute before the FCC all petitions, waivers, applications and other
documents necessary to secure any FCC approval required to effectuate this
Agreement. Lessee shall assist in the preparation and prosecution of such
applications and as provided for herein, shall pay all filing fees, attorneys'
fees, engineering fees, and all other expenses in connection therewith. Lessor
also agrees to cooperate with Lessee's efforts to cause other ITFS, OFS, MDs and
MMDS operators to co-locate at the Transmission Site. Notwithstanding anything
in this Agreement to the contrary, it is understood that no filing shall be made
with the FCC with respect to this Agreement unless both parties have reviewed
such filing and consented in writing to its submission, such consent not be
unreasonably withheld.
B) Further Efforts. Throughout the Initial Term of this Agreement,
Lessor shall use its best efforts to obtain and maintain in force all licenses,
permits and authorizations required for Lessee and Lessor to use the ITFS
Channels as contemplated by this Agreement. Lessee shall be responsible for all
cash expenses incurred to obtain and maintain in force such licenses, permits
and authorizations. When mutually agreed by the parties and at Lessee's sole
expense, Lessor shall apply for, and use its best efforts to obtain those
reasonable license modifications which would assist Lessee in its business.
Lessor also shall consider filing, at Lessee's sole expense, such reasonable
protests, comments or other petitions to deny any other ITFS, MMDS, MDS and/or
OFS applications or amendments as may be requested by Lessee in the mutual best
interests of the parties and the public. Lessor and Lessee shall promptly notify
each other of any event of which it has knowledge that may affect any of the
licenses, permits or authorization affecting the ITFS Channels.
<PAGE>
C) Attorneys' Fees. With respect to any legal work conducted pursuant
to Paragraph 8(A) and (B) above, Lessee shall be responsible for all attorneys'
fees in connection therewith and shall make payments directly to the attorney.
However, any attorney fees paid by Lessee shall be approved in advance by
Lessee.
9. REPRESENTATIONS AND WARRANTIES.
A) Representations and Warranties of Lessor. Lessor represents and
warrants to Lesse as follows:
(i) Organization. Lessor is a non-profit organization duly organized
and existing in good standing under the laws of the State of California, and it
has full power and authority to carry out all of the transactions contemplated
by this Agreement and all other agreement, certificates or instruments executed
and delivered in connection herewith.
(ii) No Violation. Neither the execution nor delivery of this agreement
or any other agreements, certificates or instruments executed and delivered
herewith, nor the performance of the transactions contemplated hereby constitute
or will constitute a violation of , be in conflict with, or a default under any
term or provision of the governing instruments or Lessor or any agreement or
commitment to which Lessor is bound, or any judgment, decree, order, regulation
or rule of any court or governmental authority, or consent of any federal, state
or local authority is required in connection with the execution and delivery of
this Agreement or any other agreements, certificates or instruments executed and
delivered herewith or with the performance of the transaction contemplated
hereby.
B) Representations and Warranties of Lessee. Lessee represents and
warrants to Lessor as follows:
(ii) Organization. Lessee is duly organized, validly existing and in
good standing under the laws of the State of its incorporation and it has full
power and authority to own property and carry all of the transactions
contemplated by this Agreement, and all other agreements, certificates or
instruments executed and delivered by Lessee in connection herewith.
(ii) Corporation Action; Valid and Binding Agreements. Lessee has taken
all corporate action necessary to authorize the execution and delivery of this
Agreement and all other agreements, certificates or instruments executed and
delivered in connection herewith. Upon execution and delivery, this Agreement
and all other agreements, certificates or instruments executed and delivered by
Lessee in connection herewith will constitute valid and binding agreements of
Lessee enforceable in accordance with their respective terms.
(iii) Litigation and Investigations. There is no action, suit,
proceeding or investigation pending or, to the best of Lessee's knowledge,
threatened against Lessee, its principals or related entities before any court,
administrative agency or other governmental body, and Lessee does not know nor
is aware of any reason for commencement of any such action, proceeding or
investigation.
(iv) Misrepresentation of Material Fact. To the best of Lessee's
knowledge, information and believe, no document or contract that was shown to
Lessor and which in any way affects any of the properties, assets or proposed
transactions of Lessee as such relates to this Agreement, no certificate or
statement furnished by or on behalf of Lessee in connection with this Agreement,
nor this Agreement itself contains any untrue statement of material fact or
omits to state a material fact which would make the statements contained herein
misleading.
<PAGE>
C) Survival or Representations and Warranties. The representations and
warranties contained in this Agreement shall be deemed to be continuing during
the Initial terms of this Agreement, and each Party shall have the duty promptly
to notify the notify the other of any event or circumstance which might
reasonably be deemed to constitute a breach of or lead to a breach of its
warranties or representations hereunder. The waiver by either Party of any
breach of any presentation or warranty under this Agreement shall not constitute
a waiver of any other representation or warranty or of any failure in the future
by the other Party to fulfill such representation or warranty.
10. TERMINATION.
A) Termination of FCC Authorization. Without further liability to
either Lessor or Lessee, this Agreement shall terminate in the event that for
any reason (i) Lessor shall not be licensed on the leased ITFS Channels, or (ii)
the FCC shall terminate or diminish Lessor's authority to lease the ITFS
Channels in accordance with the terms of this Agreement.
B) Termination by Reason of Default or Nonperformance. At the option of
the non-defaulting party, this Agreement may be terminated upon the material
breach or default by the defaulting party of its duties and obligations
hereunder is such breach or default is not cured by such defaulting party and is
breach or default shall continue for a period of thirty (30) consecutive days
after such defaulting party's receipt of notice thereof from the non-defaulting
party. It is understood and agreed that any failure on the part of Lessee to
make any payment required under Paragraph 6 hereof shall be a material breach of
default of its duties and obligations hereunder. It is also understood and
agreed that any consequences resulting from the loss of local participating
receive sites shall not be considered a material breach or default by Lessor of
its duties and obligations hereunder.
C) Remedies to Continue. In the event of termination of this Agreement
pursuant to Paragraph 10(B), such termination shall not affect or diminish the
rights or claims or remedies available in equity or at law to the non-defaulting
party arising by reason of a breach or default of this Agreement. However, no
liability shall arise on the part of Lessor or Lessee upon termination of this
Agreement pursuant to Paragraph 10(A) except where the loss of the FCC license
occurs as a result of the default of either party.
11. TRANSFER OF RIGHTS AND OBLIGATIONS.
Lessee shall have the right to assign its rights under this lease as
collateral for any financing arrangements it makes. Lessee shall also have the
right to pledge the Leased Equipment as collateral security for any loans it
makes; provided, however, that any pledge of the Leased Equipment shall be made
subject to the provisions of this lease. Lessee shall further have the right to
subcontract any portion of its obligations under this Agreement to any
partnership, joint venture, corporation or entity which Lessee may choose,
provided that Lessee gives Lessor notice of any proposed subcontracting and,
provided further, that no such subcontracting shall release Lessee from
fulfilling all of its obligations under this Agreement. Lessee shall have the
right to assign or transfer its rights, benefits, duties and obligations under
this Agreement to a commonly-owned company without the prior consent of Lessor.
Apart from the foregoing, neither party may assign or transfer its rights,
benefits, duties or obligations under this Agreement without the prior written
consent of the other, which consent shall not be unreasonably witheld.
12. INDEMNIFICATION.
A) By Lessor. To the extent permitted by state and federal law and its
charter or by-laws, Lessor shall forever protect, save and keep Lessee and its
permitted successors and assigns harmless and indemnify Lessor against and from
any and all claims, demands, losses, costs, damages, suits, judgments,
penalties, expenses and liabilities or any kind or nature whatsoever, including
reasonable attorneys' fees, arising directly or indirectly out of (i) the
willful misconduct of Lessor, its agents or employees, in
<PAGE>
connection with the performance of this Agreement; (ii) any programming
transmitted by Lessor during any of Lessor's Airtime.
B) By Lessee. To the extent permitted by state and federal law and its
charter or by-laws, Lessor shall forever protect, save and keep Lessee and its
permitted successors and assigns harmless and indemnify Lessor against and from
any and all claims, demands, losses, costs, damages, suits, judgments,
penalties, expenses and liabilities or any kind or nature whatsoever, including
reasonable attorneys' fees, which arise directly or indirectly out of (i) the
negligence or willful misconduct of Lessee, its agents or employees, in
connection with the performance of this Agreement; (ii) any programming
transmitted by Lessee or any of its authorized agents or subcontractors with the
public, third parties and subscribers to the Lessee's programming service; or
(iv) any maintenance, installation or other work performed by Lessee or any
authorized agent or subcontractor under this Agreement.
C) Notice of Claim; Defense of Claim. Each party shall notify the other
of any such claim promptly upon receipt of same. Either party (hereinafter
referred to as appropriate the "Indemnitor" or Indemnitee") shall have the
option to defend, at its own expense, any claims arising under this Paragraph.
In Indemnitor assumes the defense of any such claim, Indemnitee shall delegate
complete and sole authority to the Indemnitor to defend or settle same and
Indemnitee shall cooperate with Indemnitor in the defense thereof.
13) INSURANCE.
A) Policies Required. At its expense, Lessee shall secure and maintain
with financially reputable insurers, one or more policies of insurance insuring
the Leased Equipment and Lessee's utilization of the ITFS Channels against
casualty and other losses of the kinds customarily insured against by firms of
established reputations engaged in the same or similar line of business, or such
types and in such amounts as are customarily carried under similar circumstances
by such firms, including, without limitation: (i) "All Risk" property insurance
covering the ITFS Equipment and the common Equipment to the extent of one
hundred percent (100%) of its full replacement value without deduction for
depreciation: (ii) comprehensive general public liability insurance covering
liability resulting from lessee's operation of the ITFS equipment on an
occurrence basis having minimum limits of liability in an amount of not less
than One Million Dollars ($1,000,000.00) for bodily injury, personal injury or
death to any person or persons in any one occurrence, and not less than Two
Million Dollars ($2,000,000.00) in the aggregate for all such losses during each
policy year, and not less than Three Hundred Thousand Dollars ($300,000.00) with
respect to damage to property; (ii) all workers compensation, automobile
liability and similar insurance required by law.
B) Insurance Policy Forms. All policies of insurance required by this
Paragraph shall, whre appropriate, designate Lessor as either the insured party
or as a named additionally insured party, shall be written as primary policies,
not contributory with and not in excess of any coverage which Lessor shall
carry, and shall contain a provision that the issuer shall give to Lessor thirty
(30) days prior written notice of any cancellation or lapse of such insurance or
of any change in the coverage thereof.
C) Proof of Insurance. Executed copies of the policies of insurance
required under this section or certificates thereof shall be delivered to Lessor
not later than ten (10) after execution of this agreement. Lessee shall furnish
Lessor evidence of renewal of each such policy not later than thirty (30) days
prior to the expiration of the term thereof.
40. RELATIONSHIP OF PARTIES.
By the provisions of this Agreement, Lessor and Lessee intend to enter
an airtime lease relationship and not a joint venture. They will carry out this
Agreement to preserve that intent. Neither party shall represent itself as the
<PAGE>
other party, nor as having any relationship with one another, except as Lessor
and Lessee under the terms of this Agreement.
41. EQUIPMENT PURCHASE.
E) Lessor's Option to Purchase. In the event that this Agreement is
terminated, Lessor shall have the option to purchase the Leased Equipment used
exclusively for Lessor's ITFS license. Any equipment which is used in a shared
fashion (such as transmit antenna, decoders and combiners) in providing signals
other than Lessor's signals are excluded from this option to purchase. The
intent of the purchase option provided for in Paragraphs 16(A) is to provide
Lessor with the capability to continue to perform on Lessor's ITFS license. The
purchase price shall be the market value of such equipment noted above as
determined by mutual agreement or by averaging the values obtained from two (2)
appraisals, with one appraiser each chosen by Lessor and Lessee.
F) Lessee's Option to Purchase. If during the terms of this Agreement
the FCC modifies its rules so as to enable Lessee to be licensed to operate the
ITFS frequencies, Lessee shall have a right of first refusal to acquire such
licenses subject to the same terms and conditions as the right provided for in
Paragraph 1(B).
42. NON-DISCLOSURE
Lessor acknowledges that there may be made available to it pursuant to
this Agreement proprietary information of Lessee relating to the encoding and/or
decoding system associated with the ITFS channel equipment and its patented
processes including, but not limited to, improvements, innovations, adaptation,
inventions, results of experimentation, processes and methods, whether or not
deemed patentable, and certain business and marketing techniques (all herein
referred to as "Confidential Information"). Lessor acknowledges that this
Confidential Information has been developed by Lessee at considerable effort and
expense and represents special, unique and valuable proprietary assets of
Lessee, the value of which may be destroyed by unauthorized dissemination.
Accordingly, Lessor covenants and agrees that, except as may be required for the
performance of this Agreement or by law or court order, neither it nor any of
its agents or affiliates shall disclose such Confidential Information to any
third person, firm, corporation or other entity for any reason whatsoever, such
undertaking to be enforceable by injunctive or other equitable relief to prevent
any violation or threatened violation thereof.
43. NON-COMPETITION
During the term of this Agreement, Lessor agrees not to transmit
programming or to lease or sublease any channel capacity on its ITFS Facilities
for the transmission of programming that is competitive with the programming
transmitted by Lessee.
44. FORCE MAJEURE
If by reason of Force Majeure either party is unable in whole or in
part to perform its obligations hereunder, the party shall not be deemed in
violation of default during the period of such inability. As used herein, the
phrase "Force Majeure", shall mean the following: act of God, acts of public
enemies, orders of any branch of the government of the United States of America,
any state or any political subdivisions, thereof which are not the result of a
breach of this Agreement, orders of any military authority insurrections, riots,
epidemics, fires, civil disturbances, explosions, or any other cause or event
not reasonably within control of the adversely affected party.
45. CONDITION PRECEDENT
This Agreement is conditional on the issuance of a Final Order by the
FCC granting Lessor a construction permit for the ITFS Channels in the Market
from the Transmission Site. By "Final Order" the parties mean an action or order
of the FCC which is not reversed, stayed, enjoined, vacated, set aside, annulled
or suspended and with respect to which no timely-filed request for
administrative or judicial review is pending and as to which the time for filing
any such request, or for the FCC to set aside the action on its own motion, has
expired.
<PAGE>
46. NOTICE
Any notice required to be given to Lessor under any provision of this
Agreement shall be delivered personally or by certified mail to Lessor at the
address first written above. Any notice required to be given to Lessee under any
provision of this Agreement shall be delivered personally or by certified mail
to Lessee at the address first written above.
47. SEVERABILITY
Should any court or agency determine that any provision of this
Agreement is invalid, the remainder of the Agreement shall remain in effect.
48. WAIVER
A waiver by either Lessor or Lessee of a breach of any provision of
this Agreement shall not be deemed to constitute a waiver of any preceding or
subsequent breach of the same provision or of any other provision.
49. PAYMENT OF EXPENSES AND SIGNING FEES
A signing fee of One Dollar ($1) shall be paid to Lessor. Lessee shall
pay all costs and expenses incident to fulfilling or modifying this Agreement,
such as, attorneys' fees or, if necessary, any travel expenses approved in
advance by Lessee, FCC filing fees, and engineering costs.
50. VENUE AND GOVERNING LAW
Venue for any cause of action brought by or between Lessor and/or
Lessee relating to this Agreement shall be in California and all provisions of
this Agreement shall be construed under the laws of the State of California and
County of Lessor.
51. COUNTERPARTS
This Agreement may be executed in one or more counterparts each of
which shall be deemed an original, but all of which shall constitute one and the
same instrument, and shall become effective when each of the parties hereto
shall have delivered to it this Agreement duly executed by each of the other
parties hereto.
52. ENTIRE AGREEMENT
This Agreement constitutes the entire Agreement between the parties and
supersedes all prior oral or written provisions of any kind. The parties further
agree that this Agreement may only be modified by written Agreement signed by
both parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
this day of July 1st, 1999.
SHEKINAH NETWORK
By: ______________________________
Name: Charles J. McKee
Title: President
WORLD WIDE WIRELESS COMMUNICATIONS, INC.
By: ______________________________
Name: Douglas P. Haffer
Title: President
<PAGE>
Address for Notices:
Shekinah Network
14875 Powerline road
Atascadero, CA 93422
Phone/Fax: (805) 438-3341
Attn: Charles McKee, President
Gardner, Carton & Douglas
Attn: Laura Mow
1301 K Street, N.W., Suite 900
Washington, D.C. 20005
Phone: (202) 408-7100
Fax: (202) 289-1504
World Wide Wireless Communications, Inc.
One Post Street Suite 2600
San Francisco, CA 94104
Phone: (415) 981- 7777
Fax: (415) 391-3199
<PAGE>
EXHIBIT A
Schedule of Airtime
<PAGE>
EXHIBIT B
Receive Sites
There shall be attached hereto and incorporated by reference a copy of
FCC Form 330 Section IV listing Lessor" receive sites.
<PAGE>
EXHIBIT C
Leased Equipment
Noted below is a list of equipment that Lessee is leasing to Lessor:
(5) Four (4) ITFS tansmitters and related hardware
(6) Lessor's ITFS receive site antennas and related hardware
*(3) Combining network, transmission line and antenna
*Common Equipment
<PAGE>
EXHIBIT D
Service and Royalty Fees
1. Lessor's Service Fee
Services Provided Annual Fee
----------------- ----------
(g) Lease of Leased Equipment [6(A)] $1.00
(h) Maintenance of Leased Equipment [3(D)] $1.00
(i) Lease of space at Primary Transmission Site [3A)] $1.00
2. Lessee's Subscriber Royalty Fee
Lessee shall pay Lessor a minimum monthly Transmission Fee 5% of the system's
Gross receipts or a monthly minimum payment of $500 per month whichever is
greater.
Payment shall be as follows: Commencing on the Execution (Effective) Date and as
defined in Paragraph 6)B, payments for each month shall be made by the twentieth
(20th) day of the following month.
<PAGE>
EXHIBIT E
Programming
In addition to digital data services, such as the Internet or Intranet, the
following is a list of video programming services Lessee may provide over
Lessee's System.
TLC - The Leaning Channel
TWC - The Weather Channel
Lifetime
ESPN - Sports
AMC - American Movie Classics
SCOLA
WHTN - World Harvest Television Network
ECO - Galavision
CNN - Cable News Network
CNN - Headline News
C-Span I
C-Span II
BET - Black Entertainment Network
CNBC - Consumer News & Business Channel
Nickelodeon
The Discovery Channel
A&E - Arts and Entertainment
The Family Channel
The Disney Channel
PBS - Public Broadcasting Service
TBN - Trinity Broadcasting Network
TNIN - The New Inspirational Network
ME/U - Mind Extension Network
The International Channel
BRAVO Network
The Travel Channel
Family Network
Keystone Inspirational Network
LEASE AGREEMENT
BETWEEN
WORLD WIDE WIRELESS COMMUNICATIONS, INC.
AND
SHEKINAH NETWORK
Grand Rapids, Michigan
ITFS EXCESS CAPACITY AIRTIME LEASE AGREEMENT
THIS AGREEMENT is made this 1st day of August 1999 by Shekinah Network
(hereinafter referred to as "Lessor") having its principal place of business at
14875 Powerline Road, Atascadero, CA 93422 and World Wide Wireless
Communications, Inc. (hereinafter referred to as "Lessee") having its principal
place of business at One Post Street, Suite 2600 San Francisco, CA 94104.
WHEREAS, the Federal Communications Commission ("FCC") has authorized
licenses for Instructional Television Fixed Service ("ITFS") channels and has
authorized the licensee to lease excess capacity to non-ITFS users; and
WHEREAS, Lessor has been granted an FCC License for (call sign) WNC-798
(the "License") for the Channel group C1-4 (the "ITFS Channels") in Grand
Rapids, Michigan ("The Market"); and
WHEREAS, Lessee is in the business of providing voice, video, data and
other services via microwave transmission in the Market Area and desires to
lease the excess ITFS capacity of the ITFS channels; and
WHEREAS, Lessor has determined that there will be excess airtime
capacity available on the ITFS Channels and desires to lease this excess airtime
capacity to Lessee.
NOW, THEREFORE, in consideration of the mutual promises, undertakings,
covenants and conditions set forth herein, the Lessor and Lessee do hereby agree
and warrant as follows:
7. TERM OF AGREEMENT
A. Initial Term. This Agreement shall be effective upon the date of its
execution and shall extend for an initial term of five (5) years (the
"Initial Term").
B. Renewal Term Provided that the License is renewed by the FCC, Lessee
shall have the right to extend this Agreement on its then existing
terms and conditions for one (1) additional five (5) year term (the
"Renewal Term"). The Renewal Term shall automatically go into effect
upon the conclusion of the Initial Term unless Lessee notifies Lessor
at least one hundred eighty days (180) before the end of the Initial
Term that Lessee does not wish to extend this Agreement.
C. New Lease Agreement/Right of first Refusal.
(1) Providing that Lessor's FCC license remains in good standing
and/or Lessor seeks to renew such license, Lessee and Lessor shall
negotiate in good faith for a new excess capacity airtime lease
agreement (hereinafter referred to as "New Lease Agreement") no later
than one hundred eighty days (180) prior to the end of the latter of
(i) Initial Term or (ii) the Renewal Term if the Agreement is extended
for the Renewal Term.
<PAGE>
(5) If Lessor elects to not reasonably pursue a New Lease Agreement
with Lessee, then Lessor shall so notify Lessee in writing of such
intent no later than one hundred eighty (180) days prior to the end of
the Renewal Term.
(3) If Lessor and Lessee do not enter into a New Lease Agreement,
Lessor grants Lessee a right of first refusal on any competing
proposals for lease agreements or transfers or assignments of any part
of the ITFS Channels received by Lessor during the twelve (12) months
following the expiration of the latter of (i) the Initial Term or (ii)
the Renewal Term, if the Agreement is extended for the Renewal Term.
If any acceptable offer to lease or acquire the ITFS Channels is made
to Lessor, Lessor shall give written notice to Lessee describing the
person to whom the proposed lease or transfer is to be made, the fees,
charges, rental or other consideration to be received fro the lease or
transfer, the terms thereof and generally the relevant other terms and
conditions of the lease or transfer. Lessee shall have a period of
thirty (30) days after its receipt of such notice from Lessor in which
to elect, by giving written notice to Lessor, to lease or, if
eligible, obtain any or all of the ITFS Channels for the same fees,
charges, rental or other consideration for which Lessor proposed to
lease or transfer to the third person.
(i) The fees, charges, rental or consideration shall be paid by such
third person or Lessee in cash.
(viii) If Lessor does not believe Lessee's stated offer is in an
amount fairly equivalent to the fair value of the consideration
payable by the third person and so notifies Lessee in writing within
seven (7) days after Lessor's receipt of Lessee's notice of election
to so lease or purchase, Lessee may within five (5) days after its
receipt of such notice from Lessor elect to refer such question for
determination by an impartial arbitrator and the right of first
refusal of Lessee shall then be held open until (5) days after Lessee
is notified of such determination. Such arbitrator shall be chosen
either by agreement of Lessee and Lessor at the time such question
arises, or, at the option of either party, by referring the question
to the American Arbitration Association with instructions that the
American Arbitration Association select a single arbitrator under a
request from the parties for expedited and accelerated determination.
The determination of the arbitrator chosen under either option
contained in this subparagraph shall be final and binding upon Lessee
and Lessor. The parties shall share equally in the costs and fees of
the arbitration
(ix) In the event Lessee shall elect to exercise its right of first
refusal, the lease agreement or other transfer or assignment shall be
consummated within thirty (30) days of the latest of: (1) the day on
which Lessor received notice of Lessee's election to exercise the
right of first refusal; (2) the day upon which any question required
to be determined by the arbitrator hereunder has been determined; or
(3) the date of any FCC approval in the case of assignment or
transfer; or at such other time as may be mutually agreed. The right
of first refusal is terminated either by the lease or other transfer
to Lessee as provided herein or by notice to Lessee of the Lessor's
proposal to lease or otherwise transfer the ITFS Channels or any part
to a third person and Lessee's unwillingness or failure to meet and
accept such a bona fide offer pursuant to the times and procedures as
set forth above; provided that such proposed lease or transfer is
consummated at the same fees, charges, rental or other consideration
and upon the same terms as to which such right of first refusal
applied, within thirty (30) days after Lessee's right of first refusal
had expired or had been specifically waived by written notice given to
Lessor by Lessee, or within thirty (30) days following FCC approval in
the case of assignment or transfer.
C) Operation During End of Term. If Lessor and Lessee do not enter into
New Lease Agreement before the end of the Initial Term, Lessee shall
cease leasing the ITFS Channels on the last day of the Initial Term.
<PAGE>
D) No Rights Beyond Term of Licenses. Lessor and Lessee agree that this
Agreement shall not give rise to any rights or remedies beyond the
expiration of any FCC license necessary for the continued operation of
the ITFS Channels. Provided, however, that while this Agreement is in
effect, Lessor shall obtain and maintain in force all licenses,
permits and authorizations required or desired in connection with the
use of the ITFS Channels. Lessor shall take all necessary steps to
renew the licenses for the ITFS Channels and shall not commit any act
or engage in any activity which could reasonably be expected to cause
the FCC to impair, restrict, revoke, cancel, suspend or refuse to
renew the ITFS licenses. Lessor shall take all reasonable steps to
comply with the Communications Act of 1934, as amended and the rules
and regulations of the FCC, and shall file all reports, schedules
and/or forms required by the FCC to be filed by Lessor. All expenses,
including attorneys fees and filing fees, incurred in preparing and
filing such reports, schedules and/or forms required by the FCC shall
be paid by the Lessee.
8. ALLOCATION OF AIRTIME.
A. Excess Capacity Airtime. To the extent allowed by the FCC rules and
regulations and any amendments thereof, Lessor agrees to lease to
Lessee the exclusive use of all excess capacity not utilized by Lessor
("Excess Capacity Airtime").
B. Lessor's Primary Airtime. During analog transmission over the ITFS
Channels, Lessor reserves for its exclusive use a minimum of twenty
(20) hours of airtime per-channel per-week to be used for its ITFS
scheduled programs. During digital transmission ovr the ITFS Channels,
Lessor shall have the exclusive use of 12.5% of the total capacity
available on the Lessor's ITFS Channels. This airtime shall be know as
"Lessor's Primary Airtime".
C. Schedule of Airtime. The schedule which depicts the agreement of the
parties as to use of Lessor's Channels shall be attached hereto and
made a part hereof as Exhibit A which is subject to change upon
agreement by both parties.
D. Lessee's use of its Excess Capacity Airtime. Lessee shall have the
right to utilize its Excess Capacity Airtime for any purpose allowed
or authorized by the FCC including but not limited to voice, video and
data transmission.
E. Alternate Use and Vertical Blanking Intervals. Lessor shall have the
right to use the second audio carrier ("SAP") and vertical blanking
intervals. ("VBI") on which Lessor's ITFS programming is being
transmitted. Lessee shall at all times have the right to use the VBI
and SAP not utilized by Lessor and 100% of the response frequencies
associated with the ITFS Channels. Lessor shall be responsible for any
equipment needed to utilize the VBI and/or SAP and such equipment
shall be compatible with Lessee's system.
F. Lessor's Use of ITFS Channels. Lessor agrees that its program services
and airtime use will not harm or interfere with Lessee's current or
future signal paths utilized within Lessee's System for program
encryption, pilot carrier signaling and other technical needs utilized
for the operation of and such services provided by Lessee's System.
Nor will Lessor, by its own action, or through a third party, utilize
any part of its licensed frequency spectrum to create or operate a
service that is in competition with current, planned or future
services provided by
<PAGE>
Lessee's System. Lessor agrees to use its Primary Airtime in
accordance with the FCC's rules and regulations. Lessor shall not take
or fail to take any action which may have a material adverse effect on
Lessee's right to utilize its Excess Capacity Airtime.
G. Expanded System Capacity. Lessee shall have the right at anytime to
require Lessor to file with the FCC any necessary application to
expand the channel capacity to Lessor's station to enable it to carry
more than one video signal per channel or digital data services;
provided however, before Lessee can exercise this right, it must
demonstrate to the Lessor's reasonable satisfaction that such
modification will not materially degrade the performance of the
station nor impair signal quality at the registered ITFS receive
sites. Once such modification has been constructed, the modified
facilities shall automatically be considered a part of this agreement
and subject to all terms and conditions hereof. It is understood that
Lessee shall have the full-time use of the Expanded Channels to the
extend permitted by FCC rules.
3. TRANSMISSION SITE AND FACILITIES.
G. Primary Transmission Site. Lessor's ITFS Channels are located at Key
West, FL, Lessee agrees to provide Lessor space at the Primary
Transmission site for Lessor's audio and video transmission equipment
which shall not exceed on rack. Such space shall be leased to Lessor
pursuant to Exhibit D hereto. This site shall hereinafter be described
as the "Primary Transmission Site". At Lessee's sole expense, Lessee
shall contract for a lease of space at the Transmission Site upon such
terms as the parties agree. The Transmission Site shall comply with
the standards, specifications and regulations of the FCC rules and
orders pertaining to Lessor's ITFS license.
H. Relocation of Transmission Site.
(i) Lessor acknowledges that the location of the
Primary Transmission Site for ITFS Channels is critical to the
Lessee's business and agrees that it will not relocate the
transmission facilities for ITFS Channels from the Primary
Transmission Site without Lessee's prior written consent.
(ii) Lessor further acknowledges that possibility
that, as a result of currently unforeseen events, the Primary
Transmission Site may not be the optimum site for the location
of the ITFS Channels or Lessee's business throughout the term
of this Lease Agreement. Lessor therefore agrees that if at
any time or from time to time Lessee requests in writing that
the transmission facilities for the ITFS Channels be
relocated, Lessor shall file with the FCC and any other
regulatory body having jurisdicition over the ITFS Channels
all applications, amendments, and requests for modification
that may be necessary to obtain any necessary consents to
permit such relocation to such location within or adjacent to
the Market as may be requested by Lessee; provided, however,
that Lessor shall not be obligated to submit or procecute any
application, amendment, or request for modification that
Lessor reasonably determines, upon advice of counsel contained
in a written opinion, would be in violation of the terms of
the License, any statute, rule, or regulations regarding the
operation of the ITFS Channels or the submission of materials
to the FCC, or any of its obligations as an ITFS licensee; and
provided, further, that any such relocation will not result in
loss of service to Lessor's registered receive sites served by
the transmission facilities in the event that the
authorization is obtained to relocate the ITFS Channels to the
location requested by Lessee, Lessor shall relocate such
channels to such new location as soon as reasonably
<PAGE>
possible after authorization is obtained. Lessee shall bear
reasonable costs associated with such relocation, including
engineering and construction, and all reasonable costs
associated with obtaining FCC or any other regulatory approval
therefore.
(iii) Lessor agrees to file modification applications
requested by Lessee. Such modifications may include but shall
not be limited to the following: power increase or decrease,
polarization, transmit antenna patterns, digital, two-way
(return path) use of the ITFS Channels, boosters, beam benders
or repeaters, cells, sectorization, channel swaps, channel
loading, channel shifting and application within five (5)
business days or receipt of the modification application from
Lessee or during any FCC designated filing window. Lessee will
use reasonable efforts to provide Lessor with the engineering
for the modification thirty (30) days prior to the request for
filing. If Lessor believes that such modification will have an
adverse effect on Lessor's ability to provide its services to
its receive sites, Lessor agrees to file the modification
application as presented by Lessee and within the time limit
requested by Lessee; however, Lessee agrees not to implement
construction and Lessor agrees not to withdraw the application
until the parties have adequately addressed and resolved the
potential material adverse effect or the matter has been
submitted to arbitration pursuant to Section 16 and a final
decision has been rendered by arbitrator. Although Lessee
intends to file such modification applications, it may elect
not to construct the Channels in that manner and may desire to
utilize the Channels as currently licensed. A copy of the
modification application, bearing the FCC's date stamp, shall
be mailed to Lessee by Lessor, within fourteen (14) days of
the filing of the modification application. Lessee shall be
solely responsible for all engineering and legal costs
associated with the preparation, review and filing of the
modification application. In the event that any license
modification requested by Lessee requires receive site
upgrades in order for Lessor's receive sites to continue to
receive Lessor's services, then Lessee agrees to pay for all
costs to complete such upgrade prior to implementing the
license modification.
C. System Construction. Lessee shall within a reasonable
period of time, but not later than six (6) months after the
FCC grant of digital authority for the ITFS Channels, purchase
equipment such as the antenna, waveguide or transmitters
specified on the authorization for the ITFS Channels. At
Lessee's expense, Lessee shall purchase and install such
transmitters, transmission line, modulators, antennas and
other equipment as required to operate the ITFS Channels in
accordance with the provision of such authorization. Any
equipment so used in such construction shall be leased to
lessor pursuant to Paragraph 5 hereof. Such equipment is
hereinafter referred to as the "Leased Equipment". Lessee
shall retain title to the Leased Equipment except as noted by
Paragraph 15 herein.
D. Maintenance of Transmission Equipment. At Lessee's expense
and subject to Lessor's right to supervise the maintenance of
this equipment, Lessee shall maintain and operate the Leased
Equipment during the terms of this Agreement for a nominal
fee. Lessee shall also pay all taxes and other charges
assessed against the Leased Equipment.
E. Transmission of Programming. At no cost or expense to
Lessor, Lessee shall provide the necessary labor and equipment
capabilities to transmit on the ITFS Channels programming
required to be carried pursuant to this Agreement such as
Lessor's ITFS programming and TBN. Lessee shall also comply
with Lessor's instructions regarding the transmission of such
programming such as the dates and times to transmit
programming.
F. Interference. Lessee shall operate the Leased Equipment so
that such operation does not create or increase interference
with electronic transmission of any other FCC
<PAGE>
licensees entitles to protection under FCC rules and
regulations. If Lessee's entitled to protection under FCC
rules and regulations. If Lessee's operation of the Lease
Equipment does so create or increase interference, Lessee
shall pay all of the reasonable engineering and legal fees
necessary to resolve the interference problem so created.
G. Alterations and Attachments. Lessee, at its own expense,
may make alterations of or attachments to the ITFS equipment
or the common equipment as defined in Exhibit C (including the
installation of encoding and/or addressing equipment) as may
be reasonably required from time to time by the nature of its
business; provided however, that such alterations or
attachments do not interfere with Lessor's signal or ongoing
operations or violate any FCC rules or regulations; and
provided further that FCC authorization, if required, is
obtained in advance of any such alteration or attachment at
the sole cost of Lessee. to the extent any FCC authorization
pertaining to the ITFS equipment is required, Lessor agrees to
use its best efforts to obtain such authorization.
H. Licensee Control and Liability. Nothing herein shall
derogate from such licensee control of operations of the ITFS
Channels that Lessor, as an FCC licensee, shall be required to
maintain and Lessee acknowledges the reservation by Lessor of
such control. Lessor shall at all times retain ultimate and
exclusive responsibility for the operation and control of the
ITFS Channels including policy decisions.
4. LESSOR'S RECEIVE SITES.
Attached hereto as Exhibit B is list of the registered receive sites
designated by Lessor to receive its ITFS programming and to be installed at the
expense of Lessee. Those receive sites so listed shall be installed with a
Standard Installation. If as the result of any relocation of the Primary
Transmit Site, the equipment at Lessor's existing registered receive sites must
be reoriented, Lessee shall pay the cost of same. As used herein for the
purposes of this Agreement, the phrase "Standard Installation" shall mean an
installation consisting of the placement of the ITFS/MMDS receiving antenna at
an elevation (not to exceed thirty [30] feet above the base mounting location)
which could normally receive the line-of-sight transmission from the
Transmission Site; the coupling thereto of a block-down converter; and a
sufficient amount of transmission line (coaxial cable) to connect the received
ITFS programming to the input of (i) one classroom designated by Lessor to
receive the ITFS programming or (ii) the receive site internal/external
distribution system. Also, if as the result of any relocation of the Transmit
Site, the equipment at Lessor's existing receive sites must be reoriented,
Lessee shall pay the cost of same. Lessee also agrees that for digital
transmission of the ITFS Channels Lessee will purchase and install at Lessee's
expense, one single-point modem to receive its ITFS programming.
5. LEASE OF EQUIPMENT.
A) Lessor's Lease of Leased Equipment. For a nominal fee, Lessor shall
lease from Lessee the Leased Equipment during the terms of this Agreement. A
list of this equipment is attached hereto as Exhibit C and incorporated by
reference herein. Lessor shall have no responsibility for the loss of or damage
to the Leased Equipment during the terms of this Agreement and Lessee shall bear
all such responsibility.
6. FEES.
A) Lessor's Service Fee. In consideration of the lease of the Leased
Equipment, and for its share of the projected costs to maintain the Transmission
Site and the Lease Equipment, Lessor shall pay Lessee an annual fee provided for
in Exhibit D.
B) Subscriber Royalty Fees or Percentage. Beginning on the Execution
Date of this Agreement and continuing thereafter during the Initial Term of this
Agreement, Lessee shall pay to
<PAGE>
Lessor the Subscriber Royalty Fee, System Percentage or monthly minimum,
whichever is greater as set out in Exhibit D which is attached herewith and
incorporated by reference herein. If the Execution Date shall be a date other
than the first day of a calendar month, then the Subscriber Royalty Fee for the
partial month shall be paid on a proportionate basis. A late fee of 10% (ten
percent) will be assessed to past due accounts, and a finance charge of one and
one-half percent (1.5%) per month will be assessed in addition to the late fee
until paid.
C) Notice of Construction and Required Certificate. Within thirty (30)
days of completion of construction at the Transmission Site, Lessee shall notify
Lessor of such completion of construction in writing. Within thirty (30) days of
the end of each month in which Excess Capacity Airtime is leased hereunder,
Lessee shall provide Lessor with a certificate, certified as accurate and
correct by an authorized agent of Lessee, showing the number of subscribers
served during such month.
D) Right to Audit. Lessee shall for a period of three (3) years after
their creation, keep, maintain and preserve complete and accurate records and
accounts, including all invoices, correspondence, ledgers, financial and other
records pertaining to Lessee's use of Excess Capacity Airtime and Lessor's
charges hereunder; and such records and corporate accounts shall be available
for inspection and audit at Lessee's corporate offices or at Lessee's offices in
the Market, as designated by Lessee, at any time or times during the term of
this Agreement or within ninety (90) days thereafter, during reasonable business
hours, by Lessor or its nominee. In the event that there is discovered an
underpayment of the Subscriber Royalty Fee as defined in Paragraph 6 (B) above,
Lessee shall pay to Lessor a penalty equal to ten percent (10%) of the amount of
each such underpayment. All information obtained by Lessor during any audit
herein shall be maintained by Lessor in strict confidence.
7. PROGRAMMING.
A) Control Over Programming.
(i) Program Content. Lessee intends that only programming of a sort
which would not serve to place Lessor's reputation in the community in jeopardy
will be transmitted by Lessee on the ITFS Channels. In an attempt to minimize
disputes, recognizing the difficulties inherent in specifying exact standards
herein, it is agreed that Lessee shall have the right to market the programming
provided by the networks and services listed on Exhibit E. If, however, the
programming content of any networks and services listed on Exhibit E materially
changes, Lessor shall have the right, upon ninety (90) days notice, to deny
Lessee the right to continue transmitting such programming if Lessor would have
the right to deny Lessee the right to transmit such programming under the
provisions of this paragraph in the first instance. If Lessee proposes to
transmit the programming of any new programming service, the Lessee shall notify
Lessor in writing specifying in detail the nature of the new programming service
and Lessor shall have the right, upon written served upon Lessee within thirty
(30) days after Lessor's receipt of any such notice from Lessee, to deny to
Lessee the right to transmit such service if such programming is obscene and/or
contradicting local, state and/or federal laws or otherwise violates any
federal, state or local laws or regulations. If no such denial notice is
received by Lessee within such thirty (30) days, lessee shall be authorized to
transmit all such services for which no denial notice is received. There shall
be no reduction in fees required under this Agreement for any such programming
not permitted to be transmitted.
B) Availability of Programming. It is understood by Lessee and Lessor
that there is expected to be no direct out-of-pocket annual costs for the
acquisition of the qualified ITFS educational programming for Lessor's use
during Lessor's Primary Airtime on the ITFS channels, based on current plans. In
the event that this ITFS educational programming either; (1) ceases to be
available, or, (2) becomes available only at a fee, then Lessor may incur direct
out-of-pocket costs in Lessor's acquisition of ITFS programming. Lessee agrees
to provide its best efforts to assist Lessor in the acquisition of alternative
programming, if necessary. Additionally, Lessee agrees to make payment to Lessor
for the actual, direct programming costs incurred. If any; If Lessor, after
expending its best efforts, is unable to
<PAGE>
obtain suitable ITFS programming for a cost equal to the amount to be paid by
Lessee, Lessor and Lessee shall use their best efforts to reach agreement on
modifications to this Agreement to avoid any un-reimbursed ITFS programming
costs to Lessor. If no such agreement can be reached, Lessor may terminate this
agreement. In the case of such termination, Lessor shall use its best efforts
(with out-of-pocket costs of Lessor to be paid by Lessee, with Lessee's prior
approval) to transfer the license for the ITFS Channels to another qualified
educational entity, subject to FCC approval, with the intent of assigning this
Agreement from Lessor to the new educational entity.
C) Integration of Lessor's Programming. Lessee agrees to integrate
Lessor's programming into the overall communications service offered to
subscribers, without cost to Lessor. This integration shall include, but not be
limited to, listing Lessor's material in any program guides produced by Lessee
for subscribers.
D) Carriage of TBN. In the event that Lessor's ITFS Channels are used
for analog video transmission and TBN is not transmitted on a local VHF or UHF
station, with a market coverage equivalent to both area and signal quality of
our ITFS channels, and Lessee does not have local off-air insertion as part of
its standard installation, then, if so designated by Lessor, Lessee agrees to
transmit on one of the ITFS Channels the programming of Trinity Broadcasting
Network ("TBN") during those time periods such channel is not used for Lessor's
ITFS programming ("TBN Airtime") provided that Lessee is not required to pay a
fee for carriage of TBN. In the event that Lessee is permitted to program the
hours previously occupied by TBN, then Lessee shall increase, in proportion to
the increase in Excess Capacity Airtime, the amount of minimum fees and
subscriber royalty fees payable under the provision 6 (B) of this agreement
during the remainder of the term(s) of the agreement. For purposes of
calculating any such proportionate increase, the parties acknowledge and agree
that the minimum fee and subscriber royalty fee agreed to herein are based on
Lessee's equivalent use of three full-time ITFS channels.
E) Station Identification. During Lessee's use of Lessor's excess
channel capacity, Lessee shall transmit Lessor's call sign for each respective
station as required by the FCC.
8. PROCECUTION OF PETITIONS, AUTHORIZATIONS AND LICENSES.
A) Best Efforts to Secure Approval of this Agreement. The parties
recognize that certain approvals will be required from the FCC in order to
effectuate this Agreement. Both parties shall use their best efforts to prepare,
file and prosecute before the FCC all petitions, waivers, applications and other
documents necessary to secure any FCC approval required to effectuate this
Agreement. Lessee shall assist in the preparation and prosecution of such
applications and as provided for herein, shall pay all filing fees, attorneys'
fees, engineering fees, and all other expenses in connection therewith. Lessor
also agrees to cooperate with Lessee's efforts to cause other ITFS, OFS, MDs and
MMDS operators to co-locate at the Transmission Site. Notwithstanding anything
in this Agreement to the contrary, it is understood that no filing shall be made
with the FCC with respect to this Agreement unless both parties have reviewed
such filing and consented in writing to its submission, such consent not be
unreasonably withheld.
B) Further Efforts. Throughout the Initial Term of this Agreement,
Lessor shall use its best efforts to obtain and maintain in force all licenses,
permits and authorizations required for Lessee and Lessor to use the ITFS
Channels as contemplated by this Agreement. Lessee shall be responsible for all
cash expenses incurred to obtain and maintain in force such licenses, permits
and authorizations. When mutually agreed by the parties and at Lessee's sole
expense, Lessor shall apply for, and use its best efforts to obtain those
reasonable license modifications which would assist Lessee in its business.
Lessor also shall consider filing, at Lessee's sole expense, such reasonable
protests, comments or other petitions to deny any other ITFS, MMDS, MDS and/or
OFS applications or amendments as may be requested by Lessee in the mutual best
interests of the parties and the public. Lessor and Lessee shall promptly notify
each other of any event of which it has knowledge that may affect any of the
licenses, permits or authorization affecting the ITFS Channels.
<PAGE>
C) Attorneys' Fees. With respect to any legal work conducted pursuant
to Paragraph 8(A) and (B) above, Lessee shall be responsible for all attorneys'
fees in connection therewith and shall make payments directly to the attorney.
However, any attorney fees paid by Lessee shall be approved in advance by
Lessee.
9. REPRESENTATIONS AND WARRANTIES.
A) Representations and Warranties of Lessor. Lessor represents and
warrants to Lesse as follows:
(i) Organization. Lessor is a non-profit organization duly organized
and existing in good standing under the laws of the State of California, and it
has full power and authority to carry out all of the transactions contemplated
by this Agreement and all other agreement, certificates or instruments executed
and delivered in connection herewith.
(ii) No Violation. Neither the execution nor delivery of this agreement
or any other agreements, certificates or instruments executed and delivered
herewith, nor the performance of the transactions contemplated hereby constitute
or will constitute a violation of , be in conflict with, or a default under any
term or provision of the governing instruments or Lessor or any agreement or
commitment to which Lessor is bound, or any judgment, decree, order, regulation
or rule of any court or governmental authority, or consent of any federal, state
or local authority is required in connection with the execution and delivery of
this Agreement or any other agreements, certificates or instruments executed and
delivered herewith or with the performance of the transaction contemplated
hereby.
B) Representations and Warranties of Lessee. Lessee represents and
warrants to Lessor as follows:
(ii) Organization. Lessee is duly organized, validly existing and in
good standing under the laws of the State of its incorporation and it has full
power and authority to own property and carry all of the transactions
contemplated by this Agreement, and all other agreements, certificates or
instruments executed and delivered by Lessee in connection herewith.
(ii) Corporation Action; Valid and Binding Agreements. Lessee has taken
all corporate action necessary to authorize the execution and delivery of this
Agreement and all other agreements, certificates or instruments executed and
delivered in connection herewith. Upon execution and delivery, this Agreement
and all other agreements, certificates or instruments executed and delivered by
Lessee in connection herewith will constitute valid and binding agreements of
Lessee enforceable in accordance with their respective terms.
(iii) Litigation and Investigations. There is no action, suit,
proceeding or investigation pending or, to the best of Lessee's knowledge,
threatened against Lessee, its principals or related entities before any court,
administrative agency or other governmental body, and Lessee does not know nor
is aware of any reason for commencement of any such action, proceeding or
investigation.
(iv) Misrepresentation of Material Fact. To the best of Lessee's
knowledge, information and believe, no document or contract that was shown to
Lessor and which in any way affects any of the properties, assets or proposed
transactions of Lessee as such relates to this Agreement, no certificate or
statement furnished by or on behalf of Lessee in connection with this Agreement,
nor this Agreement itself contains any untrue statement of material fact or
omits to state a material fact which would make the statements contained herein
misleading.
<PAGE>
C) Survival or Representations and Warranties. The representations and
warranties contained in this Agreement shall be deemed to be continuing during
the Initial terms of this Agreement, and each Party shall have the duty promptly
to notify the notify the other of any event or circumstance which might
reasonably be deemed to constitute a breach of or lead to a breach of its
warranties or representations hereunder. The waiver by either Party of any
breach of any presentation or warranty under this Agreement shall not constitute
a waiver of any other representation or warranty or of any failure in the future
by the other Party to fulfill such representation or warranty.
10. TERMINATION.
A) Termination of FCC Authorization. Without further liability to
either Lessor or Lessee, this Agreement shall terminate in the event that for
any reason (i) Lessor shall not be licensed on the leased ITFS Channels, or (ii)
the FCC shall terminate or diminish Lessor's authority to lease the ITFS
Channels in accordance with the terms of this Agreement.
B) Termination by Reason of Default or Nonperformance. At the option of
the non-defaulting party, this Agreement may be terminated upon the material
breach or default by the defaulting party of its duties and obligations
hereunder is such breach or default is not cured by such defaulting party and is
breach or default shall continue for a period of thirty (30) consecutive days
after such defaulting party's receipt of notice thereof from the non-defaulting
party. It is understood and agreed that any failure on the part of Lessee to
make any payment required under Paragraph 6 hereof shall be a material breach of
default of its duties and obligations hereunder. It is also understood and
agreed that any consequences resulting from the loss of local participating
receive sites shall not be considered a material breach or default by Lessor of
its duties and obligations hereunder.
C) Remedies to Continue. In the event of termination of this Agreement
pursuant to Paragraph 10(B), such termination shall not affect or diminish the
rights or claims or remedies available in equity or at law to the non-defaulting
party arising by reason of a breach or default of this Agreement. However, no
liability shall arise on the part of Lessor or Lessee upon termination of this
Agreement pursuant to Paragraph 10(A) except where the loss of the FCC license
occurs as a result of the default of either party.
11. TRANSFER OF RIGHTS AND OBLIGATIONS.
Lessee shall have the right to assign its rights under this lease as
collateral for any financing arrangements it makes. Lessee shall also have the
right to pledge the Leased Equipment as collateral security for any loans it
makes; provided, however, that any pledge of the Leased Equipment shall be made
subject to the provisions of this lease. Lessee shall further have the right to
subcontract any portion of its obligations under this Agreement to any
partnership, joint venture, corporation or entity which Lessee may choose,
provided that Lessee gives Lessor notice of any proposed subcontracting and,
provided further, that no such subcontracting shall release Lessee from
fulfilling all of its obligations under this Agreement. Lessee shall have the
right to assign or transfer its rights, benefits, duties and obligations under
this Agreement to a commonly-owned company without the prior consent of Lessor.
Apart from the foregoing, neither party may assign or transfer its rights,
benefits, duties or obligations under this Agreement without the prior written
consent of the other, which consent shall not be unreasonably witheld.
12. INDEMNIFICATION.
A) By Lessor. To the extent permitted by state and federal law and its
charter or by-laws, Lessor shall forever protect, save and keep Lessee and its
permitted successors and assigns harmless and indemnify Lessor against and from
any and all claims, demands, losses, costs, damages, suits, judgments,
penalties, expenses and liabilities or any kind or nature whatsoever, including
reasonable attorneys' fees, arising directly or indirectly out of (i) the
willful misconduct of Lessor, its agents or employees, in
<PAGE>
connection with the performance of this Agreement; (ii) any programming
transmitted by Lessor during any of Lessor's Airtime.
B) By Lessee. To the extent permitted by state and federal law and its
charter or by-laws, Lessor shall forever protect, save and keep Lessee and its
permitted successors and assigns harmless and indemnify Lessor against and from
any and all claims, demands, losses, costs, damages, suits, judgments,
penalties, expenses and liabilities or any kind or nature whatsoever, including
reasonable attorneys' fees, which arise directly or indirectly out of (i) the
negligence or willful misconduct of Lessee, its agents or employees, in
connection with the performance of this Agreement; (ii) any programming
transmitted by Lessee or any of its authorized agents or subcontractors with the
public, third parties and subscribers to the Lessee's programming service; or
(iv) any maintenance, installation or other work performed by Lessee or any
authorized agent or subcontractor under this Agreement.
C) Notice of Claim; Defense of Claim. Each party shall notify the other
of any such claim promptly upon receipt of same. Either party (hereinafter
referred to as appropriate the "Indemnitor" or Indemnitee") shall have the
option to defend, at its own expense, any claims arising under this Paragraph.
In Indemnitor assumes the defense of any such claim, Indemnitee shall delegate
complete and sole authority to the Indemnitor to defend or settle same and
Indemnitee shall cooperate with Indemnitor in the defense thereof.
13) INSURANCE.
A) Policies Required. At its expense, Lessee shall secure and maintain
with financially reputable insurers, one or more policies of insurance insuring
the Leased Equipment and Lessee's utilization of the ITFS Channels against
casualty and other losses of the kinds customarily insured against by firms of
established reputations engaged in the same or similar line of business, or such
types and in such amounts as are customarily carried under similar circumstances
by such firms, including, without limitation: (i) "All Risk" property insurance
covering the ITFS Equipment and the common Equipment to the extent of one
hundred percent (100%) of its full replacement value without deduction for
depreciation: (ii) comprehensive general public liability insurance covering
liability resulting from lessee's operation of the ITFS equipment on an
occurrence basis having minimum limits of liability in an amount of not less
than One Million Dollars ($1,000,000.00) for bodily injury, personal injury or
death to any person or persons in any one occurrence, and not less than Two
Million Dollars ($2,000,000.00) in the aggregate for all such losses during each
policy year, and not less than Three Hundred Thousand Dollars ($300,000.00) with
respect to damage to property; (ii) all workers compensation, automobile
liability and similar insurance required by law.
B) Insurance Policy Forms. All policies of insurance required by this
Paragraph shall, whre appropriate, designate Lessor as either the insured party
or as a named additionally insured party, shall be written as primary policies,
not contributory with and not in excess of any coverage which Lessor shall
carry, and shall contain a provision that the issuer shall give to Lessor thirty
(30) days prior written notice of any cancellation or lapse of such insurance or
of any change in the coverage thereof.
C) Proof of Insurance. Executed copies of the policies of insurance
required under this section or certificates thereof shall be delivered to Lessor
not later than ten (10) after execution of this agreement. Lessee shall furnish
Lessor evidence of renewal of each such policy not later than thirty (30) days
prior to the expiration of the term thereof.
53. RELATIONSHIP OF PARTIES.
By the provisions of this Agreement, Lessor and Lessee intend to enter
an airtime lease relationship and not a joint venture. They will carry out this
Agreement to preserve that intent. Neither party shall represent itself as the
<PAGE>
other party, nor as having any relationship with one another, except as Lessor
and Lessee under the terms of this Agreement.
54. EQUIPMENT PURCHASE.
G) Lessor's Option to Purchase. In the event that this Agreement is
terminated, Lessor shall have the option to purchase the Leased
Equipment used exclusively for Lessor's ITFS license. Any equipment
which is used in a shared fashion (such as transmit antenna, decoders
and combiners) in providing signals other than Lessor's signals are
excluded from this option to purchase. The intent of the purchase
option provided for in Paragraphs 16(A) is to provide Lessor with the
capability to continue to perform on Lessor's ITFS license. The
purchase price shall be the market value of such equipment noted above
as determined by mutual agreement or by averaging the values obtained
from two (2) appraisals, with one appraiser each chosen by Lessor and
Lessee.
H) Lessee's Option to Purchase. If during the terms of this Agreement the
FCC modifies its rules so as to enable Lessee to be licensed to
operate the ITFS frequencies, Lessee shall have a right of first
refusal to acquire such licenses subject to the same terms and
conditions as the right provided for in Paragraph 1(B).
55. NON-DISCLOSURE
Lessor acknowledges that there may be made available to it pursuant to
this Agreement proprietary information of Lessee relating to the encoding and/or
decoding system associated with the ITFS channel equipment and its patented
processes including, but not limited to, improvements, innovations, adaptation,
inventions, results of experimentation, processes and methods, whether or not
deemed patentable, and certain business and marketing techniques (all herein
referred to as "Confidential Information"). Lessor acknowledges that this
Confidential Information has been developed by Lessee at considerable effort and
expense and represents special, unique and valuable proprietary assets of
Lessee, the value of which may be destroyed by unauthorized dissemination.
Accordingly, Lessor covenants and agrees that, except as may be required for the
performance of this Agreement or by law or court order, neither it nor any of
its agents or affiliates shall disclose such Confidential Information to any
third person, firm, corporation or other entity for any reason whatsoever, such
undertaking to be enforceable by injunctive or other equitable relief to prevent
any violation or threatened violation thereof.
56. NON-COMPETITION
During the term of this Agreement, Lessor agrees not to transmit
programming or to lease or sublease any channel capacity on its ITFS Facilities
for the transmission of programming that is competitive with the programming
transmitted by Lessee.
57. FORCE MAJEURE
If by reason of Force Majeure either party is unable in whole or in
part to perform its obligations hereunder, the party shall not be deemed in
violation of default during the period of such inability. As used herein, the
phrase "Force Majeure", shall mean the following: act of God, acts of public
enemies, orders of any branch of the government of the United States of America,
any state or any political subdivisions, thereof which are not the result of a
breach of this Agreement, orders of any military authority insurrections, riots,
epidemics, fires, civil disturbances, explosions, or any other cause or event
not reasonably within control of the adversely affected party.
58. CONDITION PRECEDENT
This Agreement is conditional on the issuance of a Final Order by the
FCC granting Lessor a construction permit for the ITFS Channels in the Market
from the Transmission Site. By "Final Order" the parties mean an action or order
of the FCC which is not reversed, stayed, enjoined, vacated, set aside, annulled
or suspended and with respect to which no timely-filed request for
administrative or judicial review is pending and as to which the time for filing
any such request, or for the FCC to set aside the action on its own motion, has
expired.
<PAGE>
59. NOTICE
Any notice required to be given to Lessor under any provision of this
Agreement shall be delivered personally or by certified mail to Lessor at the
address first written above. Any notice required to be given to Lessee under any
provision of this Agreement shall be delivered personally or by certified mail
to Lessee at the address first written above.
60. SEVERABILITY
Should any court or agency determine that any provision of this
Agreement is invalid, the remainder of the Agreement shall remain in effect.
61. WAIVER
A waiver by either Lessor or Lessee of a breach of any provision of
this Agreement shall not be deemed to constitute a waiver of any preceding or
subsequent breach of the same provision or of any other provision.
62. PAYMENT OF EXPENSES AND SIGNING FEES
A signing fee of One Dollar ($1) shall be paid to Lessor. Lessee shall
pay all costs and expenses incident to fulfilling or modifying this Agreement,
such as, attorneys' fees or, if necessary, any travel expenses approved in
advance by Lessee, FCC filing fees, and engineering costs.
63. VENUE AND GOVERNING LAW
Venue for any cause of action brought by or between Lessor and/or
Lessee relating to this Agreement shall be in California and all provisions of
this Agreement shall be construed under the laws of the State of California and
County of Lessor.
64. COUNTERPARTS
This Agreement may be executed in one or more counterparts each of
which shall be deemed an original, but all of which shall constitute one and the
same instrument, and shall become effective when each of the parties hereto
shall have delivered to it this Agreement duly executed by each of the other
parties hereto.
65. ENTIRE AGREEMENT
This Agreement constitutes the entire Agreement between the parties and
supersedes all prior oral or written provisions of any kind. The parties further
agree that this Agreement may only be modified by written Agreement signed by
both parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
this day of July 1st, 1999.
SHEKINAH NETWORK
By: ______________________________
Name: Charles J. McKee
Title: President
WORLD WIDE WIRELESS COMMUNICATIONS, INC.
By: ______________________________
Name: Douglas P. Haffer
Title: President
<PAGE>
Address for Notices:
Shekinah Network
14875 Powerline road
Atascadero, CA 93422
Phone/Fax: (805) 438-3341
Attn: Charles McKee, President
Gardner, Carton & Douglas
Attn: Laura Mow
1301 K Street, N.W., Suite 900
Washington, D.C. 20005
Phone: (202) 408-7100
Fax: (202) 289-1504
World Wide Wireless Communications, Inc.
One Post Street Suite 2600
San Francisco, CA 94104
Phone: (415) 981- 7777
Fax: (415) 391-3199
<PAGE>
EXHIBIT A
Schedule of Airtime
<PAGE>
EXHIBIT B
Receive Sites
There shall be attached hereto and incorporated by reference a copy of
FCC Form 330 Section IV listing Lessor" receive sites.
<PAGE>
EXHIBIT C
Leased Equipment
Noted below is a list of equipment that Lessee is leasing to Lessor:
(7) Four (4) ITFS tansmitters and related hardware
(8) Lessor's ITFS receive site antennas and related hardware
*(3) Combining network, transmission line and antenna
*Common Equipment
<PAGE>
EXHIBIT D
Service and Royalty Fees
1. Lessor's Service Fee
Services Provided Annual Fee
----------------- ----------
(j) Lease of Leased Equipment [6(A)] $1.00
(k) Maintenance of Leased Equipment [3(D)] $1.00
(l) Lease of space at Primary Transmission Site [3A)] $1.00
2. Lessee's Subscriber Royalty Fee
Lessee shall pay Lessor a minimum monthly Transmission Fee 5% of the system's
Gross receipts or a monthly minimum payment of $500 per month whichever is
greater.
Payment shall be as follows: Commencing on the Execution (Effective) Date and as
defined in Paragraph 6)B, payments for each month shall be made by the twentieth
(20th) day of the following month.
<PAGE>
EXHIBIT E
Programming
In addition to digital data services, such as the Internet or Intranet, the
following is a list of video programming services Lessee may provide over
Lessee's System.
TLC - The Leaning Channel
TWC - The Weather Channel
Lifetime
ESPN - Sports
AMC - American Movie Classics
SCOLA
WHTN - World Harvest Television Network
ECO - Galavision
CNN - Cable News Network
CNN - Headline News
C-Span I
C-Span II
BET - Black Entertainment Network
CNBC - Consumer News & Business Channel
Nickelodeon
The Discovery Channel
A&E - Arts and Entertainment
The Family Channel
The Disney Channel
PBS - Public Broadcasting Service
TBN - Trinity Broadcasting Network
TNIN - The New Inspirational Network
ME/U - Mind Extension Network
The International Channel
BRAVO Network
The Travel Channel
Family Network
Keystone Inspirational Network
LEASE AGREEMENT
BETWEEN
WORLD WIDE WIRELESS COMMUNICATIONS, INC.
AND
SHEKINAH NETWORK
La Grande, Oregon
ITFS EXCESS CAPACITY AIRTIME LEASE AGREEMENT
THIS AGREEMENT is made this 1st day of August 1999 by Shekinah Network
(hereinafter referred to as "Lessor") having its principal place of business at
14875 Powerline Road, Atascadero, CA 93422 and World Wide Wireless
Communications, Inc. (hereinafter referred to as "Lessee") having its principal
place of business at One Post Street, Suite 2600 San Francisco, CA 94104.
WHEREAS, the Federal Communications Commission ("FCC") has authorized
licenses for Instructional Television Fixed Service ("ITFS") channels and has
authorized the licensee to lease excess capacity to non-ITFS users; and
WHEREAS, Lessor has been granted an FCC License for (call sign) WNC-798
(the "License") for the Channel group C1-4 (the "ITFS Channels") in La Grande,
Oregon ("The Market"); and
WHEREAS, Lessee is in the business of providing voice, video, data and
other services via microwave transmission in the Market Area and desires to
lease the excess ITFS capacity of the ITFS channels; and
WHEREAS, Lessor has determined that there will be excess airtime
capacity available on the ITFS Channels and desires to lease this excess airtime
capacity to Lessee.
NOW, THEREFORE, in consideration of the mutual promises, undertakings,
covenants and conditions set forth herein, the Lessor and Lessee do hereby agree
and warrant as follows:
9. TERM OF AGREEMENT
A. Initial Term. This Agreement shall be effective upon the date of its
execution and shall extend for an initial term of five (5) years (the
"Initial Term").
B. Renewal Term Provided that the License is renewed by the FCC, Lessee
shall have the right to extend this Agreement on its then existing
terms and conditions for one (1) additional five (5) year term (the
"Renewal Term"). The Renewal Term shall automatically go into effect
upon the conclusion of the Initial Term unless Lessee notifies Lessor
at least one hundred eighty days (180) before the end of the Initial
Term that Lessee does not wish to extend this Agreement.
C. New Lease Agreement/Right of first Refusal.
(1) Providing that Lessor's FCC license remains in good standing
and/or Lessor seeks to renew such license, Lessee and Lessor shall
negotiate in good faith for a new excess capacity airtime lease
agreement (hereinafter referred to as "New Lease Agreement") no later
than one hundred eighty days (180) prior to the end of the latter of
(i) Initial Term or (ii) the Renewal Term if the Agreement is extended
for the Renewal Term.
<PAGE>
(6) If Lessor elects to not reasonably pursue a New Lease Agreement
with Lessee, then Lessor shall so notify Lessee in writing of such
intent no later than one hundred eighty (180) days prior to the end of
the Renewal Term.
(3) If Lessor and Lessee do not enter into a New Lease Agreement,
Lessor grants Lessee a right of first refusal on any competing
proposals for lease agreements or transfers or assignments of any part
of the ITFS Channels received by Lessor during the twelve (12) months
following the expiration of the latter of (i) the Initial Term or (ii)
the Renewal Term, if the Agreement is extended for the Renewal Term.
If any acceptable offer to lease or acquire the ITFS Channels is made
to Lessor, Lessor shall give written notice to Lessee describing the
person to whom the proposed lease or transfer is to be made, the fees,
charges, rental or other consideration to be received fro the lease or
transfer, the terms thereof and generally the relevant other terms and
conditions of the lease or transfer. Lessee shall have a period of
thirty (30) days after its receipt of such notice from Lessor in which
to elect, by giving written notice to Lessor, to lease or, if
eligible, obtain any or all of the ITFS Channels for the same fees,
charges, rental or other consideration for which Lessor proposed to
lease or transfer to the third person.
(i) The fees, charges, rental or consideration shall be paid by such
third person or Lessee in cash.
(x) If Lessor does not believe Lessee's stated offer is in an amount
fairly equivalent to the fair value of the consideration payable by
the third person and so notifies Lessee in writing within seven (7)
days after Lessor's receipt of Lessee's notice of election to so lease
or purchase, Lessee may within five (5) days after its receipt of such
notice from Lessor elect to refer such question for determination by
an impartial arbitrator and the right of first refusal of Lessee shall
then be held open until (5) days after Lessee is notified of such
determination. Such arbitrator shall be chosen either by agreement of
Lessee and Lessor at the time such question arises, or, at the option
of either party, by referring the question to the American Arbitration
Association with instructions that the American Arbitration
Association select a single arbitrator under a request from the
parties for expedited and accelerated determination. The determination
of the arbitrator chosen under either option contained in this
subparagraph shall be final and binding upon Lessee and Lessor. The
parties shall share equally in the costs and fees of the arbitration
(xi) In the event Lessee shall elect to exercise its right of first
refusal, the lease agreement or other transfer or assignment shall be
consummated within thirty (30) days of the latest of: (1) the day on
which Lessor received notice of Lessee's election to exercise the
right of first refusal; (2) the day upon which any question required
to be determined by the arbitrator hereunder has been determined; or
(3) the date of any FCC approval in the case of assignment or
transfer; or at such other time as may be mutually agreed. The right
of first refusal is terminated either by the lease or other transfer
to Lessee as provided herein or by notice to Lessee of the Lessor's
proposal to lease or otherwise transfer the ITFS Channels or any part
to a third person and Lessee's unwillingness or failure to meet and
accept such a bona fide offer pursuant to the times and procedures as
set forth above; provided that such proposed lease or transfer is
consummated at the same fees, charges, rental or other consideration
and upon the same terms as to which such right of first refusal
applied, within thirty (30) days after Lessee's right of first refusal
had expired or had been specifically waived by written notice given to
Lessor by Lessee, or within thirty (30) days following FCC approval in
the case of assignment or transfer.
C) Operation During End of Term. If Lessor and Lessee do not enter into
New Lease Agreement before the end of the Initial Term, Lessee shall
cease leasing the ITFS Channels on the last day of the Initial Term.
<PAGE>
D) No Rights Beyond Term of Licenses. Lessor and Lessee agree that this
Agreement shall not give rise to any rights or remedies beyond the
expiration of any FCC license necessary for the continued operation of
the ITFS Channels. Provided, however, that while this Agreement is in
effect, Lessor shall obtain and maintain in force all licenses,
permits and authorizations required or desired in connection with the
use of the ITFS Channels. Lessor shall take all necessary steps to
renew the licenses for the ITFS Channels and shall not commit any act
or engage in any activity which could reasonably be expected to cause
the FCC to impair, restrict, revoke, cancel, suspend or refuse to
renew the ITFS licenses. Lessor shall take all reasonable steps to
comply with the Communications Act of 1934, as amended and the rules
and regulations of the FCC, and shall file all reports, schedules
and/or forms required by the FCC to be filed by Lessor. All expenses,
including attorneys fees and filing fees, incurred in preparing and
filing such reports, schedules and/or forms required by the FCC shall
be paid by the Lessee.
10. ALLOCATION OF AIRTIME.
A. Excess Capacity Airtime. To the extent allowed by the FCC rules and
regulations and any amendments thereof, Lessor agrees to lease to
Lessee the exclusive use of all excess capacity not utilized by Lessor
("Excess Capacity Airtime").
B. Lessor's Primary Airtime. During analog transmission over the ITFS
Channels, Lessor reserves for its exclusive use a minimum of twenty
(20) hours of airtime per-channel per-week to be used for its ITFS
scheduled programs. During digital transmission ovr the ITFS Channels,
Lessor shall have the exclusive use of 12.5% of the total capacity
available on the Lessor's ITFS Channels. This airtime shall be know as
"Lessor's Primary Airtime".
C. Schedule of Airtime. The schedule which depicts the agreement of the
parties as to use of Lessor's Channels shall be attached hereto and
made a part hereof as Exhibit A which is subject to change upon
agreement by both parties.
D. Lessee's use of its Excess Capacity Airtime. Lessee shall have the
right to utilize its Excess Capacity Airtime for any purpose allowed
or authorized by the FCC including but not limited to voice, video and
data transmission.
E. Alternate Use and Vertical Blanking Intervals. Lessor shall have the
right to use the second audio carrier ("SAP") and vertical blanking
intervals. ("VBI") on which Lessor's ITFS programming is being
transmitted. Lessee shall at all times have the right to use the VBI
and SAP not utilized by Lessor and 100% of the response frequencies
associated with the ITFS Channels. Lessor shall be responsible for any
equipment needed to utilize the VBI and/or SAP and such equipment
shall be compatible with Lessee's system.
F. Lessor's Use of ITFS Channels. Lessor agrees that its program services
and airtime use will not harm or interfere with Lessee's current or
future signal paths utilized within Lessee's System for program
encryption, pilot carrier signaling and other technical needs utilized
for the operation of and such services provided by Lessee's System.
Nor will Lessor, by its own action, or through a third party, utilize
any part of its licensed frequency spectrum to create or operate a
service that is in competition with current, planned or future
services provided by
<PAGE>
Lessee's System. Lessor agrees to use its Primary Airtime in
accordance with the FCC's rules and regulations. Lessor shall not take
or fail to take any action which may have a material adverse effect on
Lessee's right to utilize its Excess Capacity Airtime.
G. Expanded System Capacity. Lessee shall have the right at anytime to
require Lessor to file with the FCC any necessary application to
expand the channel capacity to Lessor's station to enable it to carry
more than one video signal per channel or digital data services;
provided however, before Lessee can exercise this right, it must
demonstrate to the Lessor's reasonable satisfaction that such
modification will not materially degrade the performance of the
station nor impair signal quality at the registered ITFS receive
sites. Once such modification has been constructed, the modified
facilities shall automatically be considered a part of this agreement
and subject to all terms and conditions hereof. It is understood that
Lessee shall have the full-time use of the Expanded Channels to the
extend permitted by FCC rules.
3. TRANSMISSION SITE AND FACILITIES.
I. Primary Transmission Site. Lessor's ITFS Channels are located at Key
West, FL, Lessee agrees to provide Lessor space at the Primary
Transmission site for Lessor's audio and video transmission equipment
which shall not exceed on rack. Such space shall be leased to Lessor
pursuant to Exhibit D hereto. This site shall hereinafter be described
as the "Primary Transmission Site". At Lessee's sole expense, Lessee
shall contract for a lease of space at the Transmission Site upon such
terms as the parties agree. The Transmission Site shall comply with
the standards, specifications and regulations of the FCC rules and
orders pertaining to Lessor's ITFS license.
J. Relocation of Transmission Site.
(i) Lessor acknowledges that the location of the
Primary Transmission Site for ITFS Channels is critical to the
Lessee's business and agrees that it will not relocate the
transmission facilities for ITFS Channels from the Primary
Transmission Site without Lessee's prior written consent.
(ii) Lessor further acknowledges that possibility
that, as a result of currently unforeseen events, the Primary
Transmission Site may not be the optimum site for the location
of the ITFS Channels or Lessee's business throughout the term
of this Lease Agreement. Lessor therefore agrees that if at
any time or from time to time Lessee requests in writing that
the transmission facilities for the ITFS Channels be
relocated, Lessor shall file with the FCC and any other
regulatory body having jurisdicition over the ITFS Channels
all applications, amendments, and requests for modification
that may be necessary to obtain any necessary consents to
permit such relocation to such location within or adjacent to
the Market as may be requested by Lessee; provided, however,
that Lessor shall not be obligated to submit or procecute any
application, amendment, or request for modification that
Lessor reasonably determines, upon advice of counsel contained
in a written opinion, would be in violation of the terms of
the License, any statute, rule, or regulations regarding the
operation of the ITFS Channels or the submission of materials
to the FCC, or any of its obligations as an ITFS licensee; and
provided, further, that any such relocation will not result in
loss of service to Lessor's registered receive sites served by
the transmission facilities in the event that the
authorization is obtained to relocate the ITFS Channels to the
location requested by Lessee, Lessor shall relocate such
channels to such new location as soon as reasonably
<PAGE>
possible after authorization is obtained. Lessee shall bear
reasonable costs associated with such relocation, including
engineering and construction, and all reasonable costs
associated with obtaining FCC or any other regulatory approval
therefore.
(iii) Lessor agrees to file modification applications
requested by Lessee. Such modifications may include but shall
not be limited to the following: power increase or decrease,
polarization, transmit antenna patterns, digital, two-way
(return path) use of the ITFS Channels, boosters, beam benders
or repeaters, cells, sectorization, channel swaps, channel
loading, channel shifting and application within five (5)
business days or receipt of the modification application from
Lessee or during any FCC designated filing window. Lessee will
use reasonable efforts to provide Lessor with the engineering
for the modification thirty (30) days prior to the request for
filing. If Lessor believes that such modification will have an
adverse effect on Lessor's ability to provide its services to
its receive sites, Lessor agrees to file the modification
application as presented by Lessee and within the time limit
requested by Lessee; however, Lessee agrees not to implement
construction and Lessor agrees not to withdraw the application
until the parties have adequately addressed and resolved the
potential material adverse effect or the matter has been
submitted to arbitration pursuant to Section 16 and a final
decision has been rendered by arbitrator. Although Lessee
intends to file such modification applications, it may elect
not to construct the Channels in that manner and may desire to
utilize the Channels as currently licensed. A copy of the
modification application, bearing the FCC's date stamp, shall
be mailed to Lessee by Lessor, within fourteen (14) days of
the filing of the modification application. Lessee shall be
solely responsible for all engineering and legal costs
associated with the preparation, review and filing of the
modification application. In the event that any license
modification requested by Lessee requires receive site
upgrades in order for Lessor's receive sites to continue to
receive Lessor's services, then Lessee agrees to pay for all
costs to complete such upgrade prior to implementing the
license modification.
C. System Construction. Lessee shall within a reasonable
period of time, but not later than six (6) months after the
FCC grant of digital authority for the ITFS Channels, purchase
equipment such as the antenna, waveguide or transmitters
specified on the authorization for the ITFS Channels. At
Lessee's expense, Lessee shall purchase and install such
transmitters, transmission line, modulators, antennas and
other equipment as required to operate the ITFS Channels in
accordance with the provision of such authorization. Any
equipment so used in such construction shall be leased to
lessor pursuant to Paragraph 5 hereof. Such equipment is
hereinafter referred to as the "Leased Equipment". Lessee
shall retain title to the Leased Equipment except as noted by
Paragraph 15 herein.
D. Maintenance of Transmission Equipment. At Lessee's expense
and subject to Lessor's right to supervise the maintenance of
this equipment, Lessee shall maintain and operate the Leased
Equipment during the terms of this Agreement for a nominal
fee. Lessee shall also pay all taxes and other charges
assessed against the Leased Equipment.
E. Transmission of Programming. At no cost or expense to
Lessor, Lessee shall provide the necessary labor and equipment
capabilities to transmit on the ITFS Channels programming
required to be carried pursuant to this Agreement such as
Lessor's ITFS programming and TBN. Lessee shall also comply
with Lessor's instructions regarding the transmission of such
programming such as the dates and times to transmit
programming.
F. Interference. Lessee shall operate the Leased Equipment so
that such operation does not create or increase interference
with electronic transmission of any other FCC
<PAGE>
licensees entitles to protection under FCC rules and
regulations. If Lessee's entitled to protection under FCC
rules and regulations. If Lessee's operation of the Lease
Equipment does so create or increase interference, Lessee
shall pay all of the reasonable engineering and legal fees
necessary to resolve the interference problem so created.
G. Alterations and Attachments. Lessee, at its own expense,
may make alterations of or attachments to the ITFS equipment
or the common equipment as defined in Exhibit C (including the
installation of encoding and/or addressing equipment) as may
be reasonably required from time to time by the nature of its
business; provided however, that such alterations or
attachments do not interfere with Lessor's signal or ongoing
operations or violate any FCC rules or regulations; and
provided further that FCC authorization, if required, is
obtained in advance of any such alteration or attachment at
the sole cost of Lessee. to the extent any FCC authorization
pertaining to the ITFS equipment is required, Lessor agrees to
use its best efforts to obtain such authorization.
H. Licensee Control and Liability. Nothing herein shall
derogate from such licensee control of operations of the ITFS
Channels that Lessor, as an FCC licensee, shall be required to
maintain and Lessee acknowledges the reservation by Lessor of
such control. Lessor shall at all times retain ultimate and
exclusive responsibility for the operation and control of the
ITFS Channels including policy decisions.
4. LESSOR'S RECEIVE SITES.
Attached hereto as Exhibit B is list of the registered receive sites
designated by Lessor to receive its ITFS programming and to be installed at the
expense of Lessee. Those receive sites so listed shall be installed with a
Standard Installation. If as the result of any relocation of the Primary
Transmit Site, the equipment at Lessor's existing registered receive sites must
be reoriented, Lessee shall pay the cost of same. As used herein for the
purposes of this Agreement, the phrase "Standard Installation" shall mean an
installation consisting of the placement of the ITFS/MMDS receiving antenna at
an elevation (not to exceed thirty [30] feet above the base mounting location)
which could normally receive the line-of-sight transmission from the
Transmission Site; the coupling thereto of a block-down converter; and a
sufficient amount of transmission line (coaxial cable) to connect the received
ITFS programming to the input of (i) one classroom designated by Lessor to
receive the ITFS programming or (ii) the receive site internal/external
distribution system. Also, if as the result of any relocation of the Transmit
Site, the equipment at Lessor's existing receive sites must be reoriented,
Lessee shall pay the cost of same. Lessee also agrees that for digital
transmission of the ITFS Channels Lessee will purchase and install at Lessee's
expense, one single-point modem to receive its ITFS programming.
5. LEASE OF EQUIPMENT.
A) Lessor's Lease of Leased Equipment. For a nominal fee, Lessor shall
lease from Lessee the Leased Equipment during the terms of this Agreement. A
list of this equipment is attached hereto as Exhibit C and incorporated by
reference herein. Lessor shall have no responsibility for the loss of or damage
to the Leased Equipment during the terms of this Agreement and Lessee shall bear
all such responsibility.
6. FEES.
A) Lessor's Service Fee. In consideration of the lease of the Leased
Equipment, and for its share of the projected costs to maintain the Transmission
Site and the Lease Equipment, Lessor shall pay Lessee an annual fee provided for
in Exhibit D.
B) Subscriber Royalty Fees or Percentage. Beginning on the Execution
Date of this Agreement and continuing thereafter during the Initial Term of this
Agreement, Lessee shall pay to
<PAGE>
Lessor the Subscriber Royalty Fee, System Percentage or monthly minimum,
whichever is greater as set out in Exhibit D which is attached herewith and
incorporated by reference herein. If the Execution Date shall be a date other
than the first day of a calendar month, then the Subscriber Royalty Fee for the
partial month shall be paid on a proportionate basis. A late fee of 10% (ten
percent) will be assessed to past due accounts, and a finance charge of one and
one-half percent (1.5%) per month will be assessed in addition to the late fee
until paid.
C) Notice of Construction and Required Certificate. Within thirty (30)
days of completion of construction at the Transmission Site, Lessee shall notify
Lessor of such completion of construction in writing. Within thirty (30) days of
the end of each month in which Excess Capacity Airtime is leased hereunder,
Lessee shall provide Lessor with a certificate, certified as accurate and
correct by an authorized agent of Lessee, showing the number of subscribers
served during such month.
D) Right to Audit. Lessee shall for a period of three (3) years after
their creation, keep, maintain and preserve complete and accurate records and
accounts, including all invoices, correspondence, ledgers, financial and other
records pertaining to Lessee's use of Excess Capacity Airtime and Lessor's
charges hereunder; and such records and corporate accounts shall be available
for inspection and audit at Lessee's corporate offices or at Lessee's offices in
the Market, as designated by Lessee, at any time or times during the term of
this Agreement or within ninety (90) days thereafter, during reasonable business
hours, by Lessor or its nominee. In the event that there is discovered an
underpayment of the Subscriber Royalty Fee as defined in Paragraph 6 (B) above,
Lessee shall pay to Lessor a penalty equal to ten percent (10%) of the amount of
each such underpayment. All information obtained by Lessor during any audit
herein shall be maintained by Lessor in strict confidence.
7. PROGRAMMING.
A) Control Over Programming.
(i) Program Content. Lessee intends that only programming of a sort
which would not serve to place Lessor's reputation in the community in jeopardy
will be transmitted by Lessee on the ITFS Channels. In an attempt to minimize
disputes, recognizing the difficulties inherent in specifying exact standards
herein, it is agreed that Lessee shall have the right to market the programming
provided by the networks and services listed on Exhibit E. If, however, the
programming content of any networks and services listed on Exhibit E materially
changes, Lessor shall have the right, upon ninety (90) days notice, to deny
Lessee the right to continue transmitting such programming if Lessor would have
the right to deny Lessee the right to transmit such programming under the
provisions of this paragraph in the first instance. If Lessee proposes to
transmit the programming of any new programming service, the Lessee shall notify
Lessor in writing specifying in detail the nature of the new programming service
and Lessor shall have the right, upon written served upon Lessee within thirty
(30) days after Lessor's receipt of any such notice from Lessee, to deny to
Lessee the right to transmit such service if such programming is obscene and/or
contradicting local, state and/or federal laws or otherwise violates any
federal, state or local laws or regulations. If no such denial notice is
received by Lessee within such thirty (30) days, lessee shall be authorized to
transmit all such services for which no denial notice is received. There shall
be no reduction in fees required under this Agreement for any such programming
not permitted to be transmitted.
B) Availability of Programming. It is understood by Lessee and Lessor
that there is expected to be no direct out-of-pocket annual costs for the
acquisition of the qualified ITFS educational programming for Lessor's use
during Lessor's Primary Airtime on the ITFS channels, based on current plans. In
the event that this ITFS educational programming either; (1) ceases to be
available, or, (2) becomes available only at a fee, then Lessor may incur direct
out-of-pocket costs in Lessor's acquisition of ITFS programming. Lessee agrees
to provide its best efforts to assist Lessor in the acquisition of alternative
programming, if necessary. Additionally, Lessee agrees to make payment to Lessor
for the actual, direct programming costs incurred. If any; If Lessor, after
expending its best efforts, is unable to
<PAGE>
obtain suitable ITFS programming for a cost equal to the amount to be paid by
Lessee, Lessor and Lessee shall use their best efforts to reach agreement on
modifications to this Agreement to avoid any un-reimbursed ITFS programming
costs to Lessor. If no such agreement can be reached, Lessor may terminate this
agreement. In the case of such termination, Lessor shall use its best efforts
(with out-of-pocket costs of Lessor to be paid by Lessee, with Lessee's prior
approval) to transfer the license for the ITFS Channels to another qualified
educational entity, subject to FCC approval, with the intent of assigning this
Agreement from Lessor to the new educational entity.
C) Integration of Lessor's Programming. Lessee agrees to integrate
Lessor's programming into the overall communications service offered to
subscribers, without cost to Lessor. This integration shall include, but not be
limited to, listing Lessor's material in any program guides produced by Lessee
for subscribers.
D) Carriage of TBN. In the event that Lessor's ITFS Channels are used
for analog video transmission and TBN is not transmitted on a local VHF or UHF
station, with a market coverage equivalent to both area and signal quality of
our ITFS channels, and Lessee does not have local off-air insertion as part of
its standard installation, then, if so designated by Lessor, Lessee agrees to
transmit on one of the ITFS Channels the programming of Trinity Broadcasting
Network ("TBN") during those time periods such channel is not used for Lessor's
ITFS programming ("TBN Airtime") provided that Lessee is not required to pay a
fee for carriage of TBN. In the event that Lessee is permitted to program the
hours previously occupied by TBN, then Lessee shall increase, in proportion to
the increase in Excess Capacity Airtime, the amount of minimum fees and
subscriber royalty fees payable under the provision 6 (B) of this agreement
during the remainder of the term(s) of the agreement. For purposes of
calculating any such proportionate increase, the parties acknowledge and agree
that the minimum fee and subscriber royalty fee agreed to herein are based on
Lessee's equivalent use of three full-time ITFS channels.
E) Station Identification. During Lessee's use of Lessor's excess
channel capacity, Lessee shall transmit Lessor's call sign for each respective
station as required by the FCC.
8. PROCECUTION OF PETITIONS, AUTHORIZATIONS AND LICENSES.
A) Best Efforts to Secure Approval of this Agreement. The parties
recognize that certain approvals will be required from the FCC in order to
effectuate this Agreement. Both parties shall use their best efforts to prepare,
file and prosecute before the FCC all petitions, waivers, applications and other
documents necessary to secure any FCC approval required to effectuate this
Agreement. Lessee shall assist in the preparation and prosecution of such
applications and as provided for herein, shall pay all filing fees, attorneys'
fees, engineering fees, and all other expenses in connection therewith. Lessor
also agrees to cooperate with Lessee's efforts to cause other ITFS, OFS, MDs and
MMDS operators to co-locate at the Transmission Site. Notwithstanding anything
in this Agreement to the contrary, it is understood that no filing shall be made
with the FCC with respect to this Agreement unless both parties have reviewed
such filing and consented in writing to its submission, such consent not be
unreasonably withheld.
B) Further Efforts. Throughout the Initial Term of this Agreement,
Lessor shall use its best efforts to obtain and maintain in force all licenses,
permits and authorizations required for Lessee and Lessor to use the ITFS
Channels as contemplated by this Agreement. Lessee shall be responsible for all
cash expenses incurred to obtain and maintain in force such licenses, permits
and authorizations. When mutually agreed by the parties and at Lessee's sole
expense, Lessor shall apply for, and use its best efforts to obtain those
reasonable license modifications which would assist Lessee in its business.
Lessor also shall consider filing, at Lessee's sole expense, such reasonable
protests, comments or other petitions to deny any other ITFS, MMDS, MDS and/or
OFS applications or amendments as may be requested by Lessee in the mutual best
interests of the parties and the public. Lessor and Lessee shall promptly notify
each other of any event of which it has knowledge that may affect any of the
licenses, permits or authorization affecting the ITFS Channels.
C) Attorneys' Fees. With respect to any legal work conducted pursuant
to Paragraph 8(A) and (B) above, Lessee shall be responsible for all attorneys'
fees in connection therewith and shall make payments directly to the attorney.
However, any attorney fees paid by Lessee shall be approved in advance by
Lessee.
9. REPRESENTATIONS AND WARRANTIES.
A) Representations and Warranties of Lessor. Lessor represents and
warrants to Lesse as follows:
(i) Organization. Lessor is a non-profit organization duly organized
and existing in good standing under the laws of the State of California, and it
has full power and authority to carry out all of the transactions contemplated
by this Agreement and all other agreement, certificates or instruments executed
and delivered in connection herewith.
(ii) No Violation. Neither the execution nor delivery of this agreement
or any other agreements, certificates or instruments executed and delivered
herewith, nor the performance of the transactions contemplated hereby constitute
or will constitute a violation of , be in conflict with, or a default under any
term or provision of the governing instruments or Lessor or any agreement or
commitment to which Lessor is bound, or any judgment, decree, order, regulation
or rule of any court or governmental authority, or consent of any federal, state
or local authority is required in connection with the execution and delivery of
this Agreement or any other agreements, certificates or instruments executed and
delivered herewith or with the performance of the transaction contemplated
hereby.
B) Representations and Warranties of Lessee. Lessee represents and
warrants to Lessor as follows:
(ii) Organization. Lessee is duly organized, validly existing and in
good standing under the laws of the State of its incorporation and it has full
power and authority to own property and carry all of the transactions
contemplated by this Agreement, and all other agreements, certificates or
instruments executed and delivered by Lessee in connection herewith.
(ii) Corporation Action; Valid and Binding Agreements. Lessee has taken
all corporate action necessary to authorize the execution and delivery of this
Agreement and all other agreements, certificates or instruments executed and
delivered in connection herewith. Upon execution and delivery, this Agreement
and all other agreements, certificates or instruments executed and delivered by
Lessee in connection herewith will constitute valid and binding agreements of
Lessee enforceable in accordance with their respective terms.
(iii) Litigation and Investigations. There is no action, suit,
proceeding or investigation pending or, to the best of Lessee's knowledge,
threatened against Lessee, its principals or related entities before any court,
administrative agency or other governmental body, and Lessee does not know nor
is aware of any reason for commencement of any such action, proceeding or
investigation.
(iv) Misrepresentation of Material Fact. To the best of Lessee's
knowledge, information and believe, no document or contract that was shown to
Lessor and which in any way affects any of the properties, assets or proposed
transactions of Lessee as such relates to this Agreement, no certificate or
statement furnished by or on behalf of Lessee in connection with this Agreement,
nor this Agreement itself contains any untrue statement of material fact or
omits to state a material fact which would make the statements contained herein
misleading.
<PAGE>
C) Survival or Representations and Warranties. The representations and
warranties contained in this Agreement shall be deemed to be continuing during
the Initial terms of this Agreement, and each Party shall have the duty promptly
to notify the notify the other of any event or circumstance which might
reasonably be deemed to constitute a breach of or lead to a breach of its
warranties or representations hereunder. The waiver by either Party of any
breach of any presentation or warranty under this Agreement shall not constitute
a waiver of any other representation or warranty or of any failure in the future
by the other Party to fulfill such representation or warranty.
10. TERMINATION.
A) Termination of FCC Authorization. Without further liability to
either Lessor or Lessee, this Agreement shall terminate in the event that for
any reason (i) Lessor shall not be licensed on the leased ITFS Channels, or (ii)
the FCC shall terminate or diminish Lessor's authority to lease the ITFS
Channels in accordance with the terms of this Agreement.
B) Termination by Reason of Default or Nonperformance. At the option of
the non-defaulting party, this Agreement may be terminated upon the material
breach or default by the defaulting party of its duties and obligations
hereunder is such breach or default is not cured by such defaulting party and is
breach or default shall continue for a period of thirty (30) consecutive days
after such defaulting party's receipt of notice thereof from the non-defaulting
party. It is understood and agreed that any failure on the part of Lessee to
make any payment required under Paragraph 6 hereof shall be a material breach of
default of its duties and obligations hereunder. It is also understood and
agreed that any consequences resulting from the loss of local participating
receive sites shall not be considered a material breach or default by Lessor of
its duties and obligations hereunder.
C) Remedies to Continue. In the event of termination of this Agreement
pursuant to Paragraph 10(B), such termination shall not affect or diminish the
rights or claims or remedies available in equity or at law to the non-defaulting
party arising by reason of a breach or default of this Agreement. However, no
liability shall arise on the part of Lessor or Lessee upon termination of this
Agreement pursuant to Paragraph 10(A) except where the loss of the FCC license
occurs as a result of the default of either party.
11. TRANSFER OF RIGHTS AND OBLIGATIONS.
Lessee shall have the right to assign its rights under this lease as
collateral for any financing arrangements it makes. Lessee shall also have the
right to pledge the Leased Equipment as collateral security for any loans it
makes; provided, however, that any pledge of the Leased Equipment shall be made
subject to the provisions of this lease. Lessee shall further have the right to
subcontract any portion of its obligations under this Agreement to any
partnership, joint venture, corporation or entity which Lessee may choose,
provided that Lessee gives Lessor notice of any proposed subcontracting and,
provided further, that no such subcontracting shall release Lessee from
fulfilling all of its obligations under this Agreement. Lessee shall have the
right to assign or transfer its rights, benefits, duties and obligations under
this Agreement to a commonly-owned company without the prior consent of Lessor.
Apart from the foregoing, neither party may assign or transfer its rights,
benefits, duties or obligations under this Agreement without the prior written
consent of the other, which consent shall not be unreasonably witheld.
12. INDEMNIFICATION.
A) By Lessor. To the extent permitted by state and federal law and its
charter or by-laws, Lessor shall forever protect, save and keep Lessee and its
permitted successors and assigns harmless and indemnify Lessor against and from
any and all claims, demands, losses, costs, damages, suits, judgments,
penalties, expenses and liabilities or any kind or nature whatsoever, including
reasonable attorneys' fees, arising directly or indirectly out of (i) the
willful misconduct of Lessor, its agents or employees, in
<PAGE>
connection with the performance of this Agreement; (ii) any programming
transmitted by Lessor during any of Lessor's Airtime.
B) By Lessee. To the extent permitted by state and federal law and its
charter or by-laws, Lessor shall forever protect, save and keep Lessee and its
permitted successors and assigns harmless and indemnify Lessor against and from
any and all claims, demands, losses, costs, damages, suits, judgments,
penalties, expenses and liabilities or any kind or nature whatsoever, including
reasonable attorneys' fees, which arise directly or indirectly out of (i) the
negligence or willful misconduct of Lessee, its agents or employees, in
connection with the performance of this Agreement; (ii) any programming
transmitted by Lessee or any of its authorized agents or subcontractors with the
public, third parties and subscribers to the Lessee's programming service; or
(iv) any maintenance, installation or other work performed by Lessee or any
authorized agent or subcontractor under this Agreement.
C) Notice of Claim; Defense of Claim. Each party shall notify the other
of any such claim promptly upon receipt of same. Either party (hereinafter
referred to as appropriate the "Indemnitor" or Indemnitee") shall have the
option to defend, at its own expense, any claims arising under this Paragraph.
In Indemnitor assumes the defense of any such claim, Indemnitee shall delegate
complete and sole authority to the Indemnitor to defend or settle same and
Indemnitee shall cooperate with Indemnitor in the defense thereof.
13) INSURANCE.
A) Policies Required. At its expense, Lessee shall secure and maintain
with financially reputable insurers, one or more policies of insurance insuring
the Leased Equipment and Lessee's utilization of the ITFS Channels against
casualty and other losses of the kinds customarily insured against by firms of
established reputations engaged in the same or similar line of business, or such
types and in such amounts as are customarily carried under similar circumstances
by such firms, including, without limitation: (i) "All Risk" property insurance
covering the ITFS Equipment and the common Equipment to the extent of one
hundred percent (100%) of its full replacement value without deduction for
depreciation: (ii) comprehensive general public liability insurance covering
liability resulting from lessee's operation of the ITFS equipment on an
occurrence basis having minimum limits of liability in an amount of not less
than One Million Dollars ($1,000,000.00) for bodily injury, personal injury or
death to any person or persons in any one occurrence, and not less than Two
Million Dollars ($2,000,000.00) in the aggregate for all such losses during each
policy year, and not less than Three Hundred Thousand Dollars ($300,000.00) with
respect to damage to property; (ii) all workers compensation, automobile
liability and similar insurance required by law.
B) Insurance Policy Forms. All policies of insurance required by this
Paragraph shall, whre appropriate, designate Lessor as either the insured party
or as a named additionally insured party, shall be written as primary policies,
not contributory with and not in excess of any coverage which Lessor shall
carry, and shall contain a provision that the issuer shall give to Lessor thirty
(30) days prior written notice of any cancellation or lapse of such insurance or
of any change in the coverage thereof.
C) Proof of Insurance. Executed copies of the policies of insurance
required under this section or certificates thereof shall be delivered to Lessor
not later than ten (10) after execution of this agreement. Lessee shall furnish
Lessor evidence of renewal of each such policy not later than thirty (30) days
prior to the expiration of the term thereof.
66. RELATIONSHIP OF PARTIES.
By the provisions of this Agreement, Lessor and Lessee intend to enter
an airtime lease relationship and not a joint venture. They will carry out this
Agreement to preserve that intent. Neither party shall represent itself as the
<PAGE>
other party, nor as having any relationship with one another, except as Lessor
and Lessee under the terms of this Agreement.
67. EQUIPMENT PURCHASE.
I) Lessor's Option to Purchase. In the event that this Agreement is
terminated, Lessor shall have the option to purchase the Leased
Equipment used exclusively for Lessor's ITFS license. Any equipment
which is used in a shared fashion (such as transmit antenna, decoders
and combiners) in providing signals other than Lessor's signals are
excluded from this option to purchase. The intent of the purchase
option provided for in Paragraphs 16(A) is to provide Lessor with the
capability to continue to perform on Lessor's ITFS license. The
purchase price shall be the market value of such equipment noted above
as determined by mutual agreement or by averaging the values obtained
from two (2) appraisals, with one appraiser each chosen by Lessor and
Lessee.
J) Lessee's Option to Purchase. If during the terms of this Agreement the
FCC modifies its rules so as to enable Lessee to be licensed to
operate the ITFS frequencies, Lessee shall have a right of first
refusal to acquire such licenses subject to the same terms and
conditions as the right provided for in Paragraph 1(B).
68. NON-DISCLOSURE
Lessor acknowledges that there may be made available to it pursuant to
this Agreement proprietary information of Lessee relating to the encoding and/or
decoding system associated with the ITFS channel equipment and its patented
processes including, but not limited to, improvements, innovations, adaptation,
inventions, results of experimentation, processes and methods, whether or not
deemed patentable, and certain business and marketing techniques (all herein
referred to as "Confidential Information"). Lessor acknowledges that this
Confidential Information has been developed by Lessee at considerable effort and
expense and represents special, unique and valuable proprietary assets of
Lessee, the value of which may be destroyed by unauthorized dissemination.
Accordingly, Lessor covenants and agrees that, except as may be required for the
performance of this Agreement or by law or court order, neither it nor any of
its agents or affiliates shall disclose such Confidential Information to any
third person, firm, corporation or other entity for any reason whatsoever, such
undertaking to be enforceable by injunctive or other equitable relief to prevent
any violation or threatened violation thereof.
69. NON-COMPETITION
During the term of this Agreement, Lessor agrees not to transmit
programming or to lease or sublease any channel capacity on its ITFS Facilities
for the transmission of programming that is competitive with the programming
transmitted by Lessee.
70. FORCE MAJEURE
If by reason of Force Majeure either party is unable in whole or in
part to perform its obligations hereunder, the party shall not be deemed in
violation of default during the period of such inability. As used herein, the
phrase "Force Majeure", shall mean the following: act of God, acts of public
enemies, orders of any branch of the government of the United States of America,
any state or any political subdivisions, thereof which are not the result of a
breach of this Agreement, orders of any military authority insurrections, riots,
epidemics, fires, civil disturbances, explosions, or any other cause or event
not reasonably within control of the adversely affected party.
71. CONDITION PRECEDENT
This Agreement is conditional on the issuance of a Final Order by the
FCC granting Lessor a construction permit for the ITFS Channels in the Market
from the Transmission Site. By "Final Order" the parties mean an action or order
of the FCC which is not reversed, stayed, enjoined, vacated, set aside, annulled
or suspended and with respect to which no timely-filed request for
administrative or judicial review is pending and as to which the time for filing
any such request, or for the FCC to set aside the action on its own motion, has
expired.
<PAGE>
72. NOTICE
Any notice required to be given to Lessor under any provision of this
Agreement shall be delivered personally or by certified mail to Lessor at the
address first written above. Any notice required to be given to Lessee under any
provision of this Agreement shall be delivered personally or by certified mail
to Lessee at the address first written above.
73. SEVERABILITY
Should any court or agency determine that any provision of this
Agreement is invalid, the remainder of the Agreement shall remain in effect.
74. WAIVER
A waiver by either Lessor or Lessee of a breach of any provision of
this Agreement shall not be deemed to constitute a waiver of any preceding or
subsequent breach of the same provision or of any other provision.
75. PAYMENT OF EXPENSES AND SIGNING FEES
A signing fee of One Dollar ($1) shall be paid to Lessor. Lessee shall
pay all costs and expenses incident to fulfilling or modifying this Agreement,
such as, attorneys' fees or, if necessary, any travel expenses approved in
advance by Lessee, FCC filing fees, and engineering costs.
76. VENUE AND GOVERNING LAW
Venue for any cause of action brought by or between Lessor and/or
Lessee relating to this Agreement shall be in California and all provisions of
this Agreement shall be construed under the laws of the State of California and
County of Lessor.
77. COUNTERPARTS
This Agreement may be executed in one or more counterparts each of
which shall be deemed an original, but all of which shall constitute one and the
same instrument, and shall become effective when each of the parties hereto
shall have delivered to it this Agreement duly executed by each of the other
parties hereto.
78. ENTIRE AGREEMENT
This Agreement constitutes the entire Agreement between the parties and
supersedes all prior oral or written provisions of any kind. The parties further
agree that this Agreement may only be modified by written Agreement signed by
both parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
this day of July 1st, 1999.
SHEKINAH NETWORK
By: ______________________________
Name: Charles J. McKee
Title: President
WORLD WIDE WIRELESS COMMUNICATIONS, INC.
By: ______________________________
Name: Douglas P. Haffer
Title: President
<PAGE>
Address for Notices:
Shekinah Network
14875 Powerline road
Atascadero, CA 93422
Phone/Fax: (805) 438-3341
Attn: Charles McKee, President
Phone: (805) 438-3341
Fax: (805) 438-3341
Gardner, Carton & Douglas
Attn: Laura Mow
1301 K Street, N.W., Suite 900
Washington, D.C. 20005
Phone: (202) 408-7100
Fax: (202) 289-1504
World Wide Wireless Communications, Inc.
One Post Street Suite 2600
San Francisco, CA 94104
Phone: (415) 981-7777
Fax: (415) 391 3199
<PAGE>
EXHIBIT A
Schedule of Airtime
<PAGE>
EXHIBIT B
Receive Sites
There shall be attached hereto and incorporated by reference a copy of
FCC Form 330 Section IV listing Lessor's receive sites.
<PAGE>
EXHIBIT C
Leased Equipment
Noted below is a list of equipment that Lessee is leasing to Lessor.
(9) Four (4) ITFS tansmitters and related hardware
(10) Lessor's ITFS receive site antennas and related hardware
*(3) Combining network, transmission line and antenna
*Common Equipment
<PAGE>
EXHIBIT D
Service and Royalty Fees
1. Lessor's Service Fee
Services Provided Annual Fee
----------------- ----------
(m) Lease of Leased Equipment [6(A)] $1.00
(n) Maintenance of Leased Equipment [3(D)] $1.00
(o) Lease of space at Primary Transmission Site [3A)] $1.00
2. Lessee's Subscriber Royalty Fee
Lessee shall pay Lessor a minimum monthly Transmission Fee 5% of the system's
Gross receipts or a monthly minimum payment of $500 per month whichever is
greater.
Payment shall be as follows: Commencing on the Execution (Effective) Date and as
defined in Paragraph 6)B, payments for each month shall be made by the twentieth
(20th) day of the following month.
<PAGE>
EXHIBIT E
Programming
In addition to digital data services, such as the Internet or Intranet, the
following is a list of video programming services Lessee may provide over
Lessee's System.
TLC - The Leaning Channel
TWC - The Weather Channel
Lifetime
ESPN - Sports
AMC - American Movie Classics
SCOLA
WHTN - World Harvest Television Network
ECO - Galavision
CNN - Cable News Network
CNN - Headline News
C-Span I
C-Span II
BET - Black Entertainment Network
CNBC - Consumer News & Business Channel
Nickelodeon
The Discovery Channel
A&E - Arts and Entertainment
The Family Channel
The Disney Channel
PBS - Public Broadcasting Service
TBN - Trinity Broadcasting Network
TNIN - The New Inspirational Network
ME/U - Mind Extension Network
The International Channel
BRAVO Network
The Travel Channel
Family Network
Keystone Inspirational Network
LEASE AGREEMENT
BETWEEN
WORLD WIDE WIRELESS COMMUNICATIONS, INC.
AND
SHEKINAH NETWORK
Pierre, South Dakota
ITFS EXCESS CAPACITY AIRTIME LEASE AGREEMENT
THIS AGREEMENT is made this 1st day of August 1999 by Shekinah Network
(hereinafter referred to as "Lessor") having its principal place of business at
14875 Powerline Road, Atascadero, CA 93422 and World Wide Wireless
Communications, Inc. (hereinafter referred to as "Lessee") having its principal
place of business at One Post Street, Suite 2600 San Francisco, CA 94104.
WHEREAS, the Federal Communications Commission ("FCC") has authorized
licenses for Instructional Television Fixed Service ("ITFS") channels and has
authorized the licensee to lease excess capacity to non-ITFS users; and
WHEREAS, Lessor has been granted an FCC License for (call sign) WNC-798
(the "License") for the Channel group C1-4 (the "ITFS Channels") in Pierre,
South Dakota ("The Market"); and
WHEREAS, Lessee is in the business of providing voice, video, data and
other services via microwave transmission in the Market Area and desires to
lease the excess ITFS capacity of the ITFS channels; and
WHEREAS, Lessor has determined that there will be excess airtime
capacity available on the ITFS Channels and desires to lease this excess airtime
capacity to Lessee.
NOW, THEREFORE, in consideration of the mutual promises, undertakings,
covenants and conditions set forth herein, the Lessor and Lessee do hereby agree
and warrant as follows:
11. TERM OF AGREEMENT
A. Initial Term. This Agreement shall be effective upon the date of its
execution and shall extend for an initial term of five (5) years (the
"Initial Term").
B. Renewal Term Provided that the License is renewed by the FCC, Lessee
shall have the right to extend this Agreement on its then existing
terms and conditions for one (1) additional five (5) year term (the
"Renewal Term"). The Renewal Term shall automatically go into effect
upon the conclusion of the Initial Term unless Lessee notifies Lessor
at least one hundred eighty days (180) before the end of the Initial
Term that Lessee does not wish to extend this Agreement.
C. New Lease Agreement/Right of first Refusal.
(1) Providing that Lessor's FCC license remains in good standing
and/or Lessor seeks to renew such license, Lessee and Lessor shall
negotiate in good faith for a new excess capacity airtime lease
agreement (hereinafter referred to as "New Lease Agreement") no later
than one hundred eighty days (180) prior to the end of the latter of
(i) Initial Term or (ii) the Renewal Term if the Agreement is extended
for the Renewal Term.
<PAGE>
(7) If Lessor elects to not reasonably pursue a New Lease Agreement
with Lessee, then Lessor shall so notify Lessee in writing of such
intent no later than one hundred eighty (180) days prior to the end of
the Renewal Term.
(3) If Lessor and Lessee do not enter into a New Lease Agreement,
Lessor grants Lessee a right of first refusal on any competing
proposals for lease agreements or transfers or assignments of any part
of the ITFS Channels received by Lessor during the twelve (12) months
following the expiration of the latter of (i) the Initial Term or (ii)
the Renewal Term, if the Agreement is extended for the Renewal Term.
If any acceptable offer to lease or acquire the ITFS Channels is made
to Lessor, Lessor shall give written notice to Lessee describing the
person to whom the proposed lease or transfer is to be made, the fees,
charges, rental or other consideration to be received fro the lease or
transfer, the terms thereof and generally the relevant other terms and
conditions of the lease or transfer. Lessee shall have a period of
thirty (30) days after its receipt of such notice from Lessor in which
to elect, by giving written notice to Lessor, to lease or, if
eligible, obtain any or all of the ITFS Channels for the same fees,
charges, rental or other consideration for which Lessor proposed to
lease or transfer to the third person.
(i) The fees, charges, rental or consideration shall be paid by such
third person or Lessee in cash.
(xii) If Lessor does not believe Lessee's stated offer is in an amount
fairly equivalent to the fair value of the consideration payable by
the third person and so notifies Lessee in writing within seven (7)
days after Lessor's receipt of Lessee's notice of election to so lease
or purchase, Lessee may within five (5) days after its receipt of such
notice from Lessor elect to refer such question for determination by
an impartial arbitrator and the right of first refusal of Lessee shall
then be held open until (5) days after Lessee is notified of such
determination. Such arbitrator shall be chosen either by agreement of
Lessee and Lessor at the time such question arises, or, at the option
of either party, by referring the question to the American Arbitration
Association with instructions that the American Arbitration
Association select a single arbitrator under a request from the
parties for expedited and accelerated determination. The determination
of the arbitrator chosen under either option contained in this
subparagraph shall be final and binding upon Lessee and Lessor. The
parties shall share equally in the costs and fees of the arbitration
(xiii) In the event Lessee shall elect to exercise its right of first
refusal, the lease agreement or other transfer or assignment shall be
consummated within thirty (30) days of the latest of: (1) the day on
which Lessor received notice of Lessee's election to exercise the
right of first refusal; (2) the day upon which any question required
to be determined by the arbitrator hereunder has been determined; or
(3) the date of any FCC approval in the case of assignment or
transfer; or at such other time as may be mutually agreed. The right
of first refusal is terminated either by the lease or other transfer
to Lessee as provided herein or by notice to Lessee of the Lessor's
proposal to lease or otherwise transfer the ITFS Channels or any part
to a third person and Lessee's unwillingness or failure to meet and
accept such a bona fide offer pursuant to the times and procedures as
set forth above; provided that such proposed lease or transfer is
consummated at the same fees, charges, rental or other consideration
and upon the same terms as to which such right of first refusal
applied, within thirty (30) days after Lessee's right of first refusal
had expired or had been specifically waived by written notice given to
Lessor by Lessee, or within thirty (30) days following FCC approval in
the case of assignment or transfer.
C) Operation During End of Term. If Lessor and Lessee do not enter into
New Lease Agreement before the end of the Initial Term, Lessee shall
cease leasing the ITFS Channels on the last day of the Initial Term.
<PAGE>
D) No Rights Beyond Term of Licenses. Lessor and Lessee agree that this
Agreement shall not give rise to any rights or remedies beyond the
expiration of any FCC license necessary for the continued operation of
the ITFS Channels. Provided, however, that while this Agreement is in
effect, Lessor shall obtain and maintain in force all licenses,
permits and authorizations required or desired in connection with the
use of the ITFS Channels. Lessor shall take all necessary steps to
renew the licenses for the ITFS Channels and shall not commit any act
or engage in any activity which could reasonably be expected to cause
the FCC to impair, restrict, revoke, cancel, suspend or refuse to
renew the ITFS licenses. Lessor shall take all reasonable steps to
comply with the Communications Act of 1934, as amended and the rules
and regulations of the FCC, and shall file all reports, schedules
and/or forms required by the FCC to be filed by Lessor. All expenses,
including attorneys fees and filing fees, incurred in preparing and
filing such reports, schedules and/or forms required by the FCC shall
be paid by the Lessee.
12. ALLOCATION OF AIRTIME.
A. Excess Capacity Airtime. To the extent allowed by the FCC rules and
regulations and any amendments thereof, Lessor agrees to lease to
Lessee the exclusive use of all excess capacity not utilized by Lessor
("Excess Capacity Airtime").
B. Lessor's Primary Airtime. During analog transmission over the ITFS
Channels, Lessor reserves for its exclusive use a minimum of twenty
(20) hours of airtime per-channel per-week to be used for its ITFS
scheduled programs. During digital transmission ovr the ITFS Channels,
Lessor shall have the exclusive use of 12.5% of the total capacity
available on the Lessor's ITFS Channels. This airtime shall be know as
"Lessor's Primary Airtime".
C. Schedule of Airtime. The schedule which depicts the agreement of the
parties as to use of Lessor's Channels shall be attached hereto and
made a part hereof as Exhibit A which is subject to change upon
agreement by both parties.
D. Lessee's use of its Excess Capacity Airtime. Lessee shall have the
right to utilize its Excess Capacity Airtime for any purpose allowed
or authorized by the FCC including but not limited to voice, video and
data transmission.
E. Alternate Use and Vertical Blanking Intervals. Lessor shall have the
right to use the second audio carrier ("SAP") and vertical blanking
intervals. ("VBI") on which Lessor's ITFS programming is being
transmitted. Lessee shall at all times have the right to use the VBI
and SAP not utilized by Lessor and 100% of the response frequencies
associated with the ITFS Channels. Lessor shall be responsible for any
equipment needed to utilize the VBI and/or SAP and such equipment
shall be compatible with Lessee's system.
F. Lessor's Use of ITFS Channels. Lessor agrees that its program services
and airtime use will not harm or interfere with Lessee's current or
future signal paths utilized within Lessee's System for program
encryption, pilot carrier signaling and other technical needs utilized
for the operation of and such services provided by Lessee's System.
Nor will Lessor, by its own action, or through a third party, utilize
any part of its licensed frequency spectrum to create or operate a
service that is in competition with current, planned or future
services provided by
<PAGE>
Lessee's System. Lessor agrees to use its Primary Airtime in
accordance with the FCC's rules and regulations. Lessor shall not take
or fail to take any action which may have a material adverse effect on
Lessee's right to utilize its Excess Capacity Airtime.
G. Expanded System Capacity. Lessee shall have the right at anytime to
require Lessor to file with the FCC any necessary application to
expand the channel capacity to Lessor's station to enable it to carry
more than one video signal per channel or digital data services;
provided however, before Lessee can exercise this right, it must
demonstrate to the Lessor's reasonable satisfaction that such
modification will not materially degrade the performance of the
station nor impair signal quality at the registered ITFS receive
sites. Once such modification has been constructed, the modified
facilities shall automatically be considered a part of this agreement
and subject to all terms and conditions hereof. It is understood that
Lessee shall have the full-time use of the Expanded Channels to the
extend permitted by FCC rules.
3. TRANSMISSION SITE AND FACILITIES.
K. Primary Transmission Site. Lessor's ITFS Channels are located at Key
West, FL, Lessee agrees to provide Lessor space at the Primary
Transmission site for Lessor's audio and video transmission equipment
which shall not exceed on rack. Such space shall be leased to Lessor
pursuant to Exhibit D hereto. This site shall hereinafter be described
as the "Primary Transmission Site". At Lessee's sole expense, Lessee
shall contract for a lease of space at the Transmission Site upon such
terms as the parties agree. The Transmission Site shall comply with
the standards, specifications and regulations of the FCC rules and
orders pertaining to Lessor's ITFS license.
L. Relocation of Transmission Site.
(i) Lessor acknowledges that the location of the
Primary Transmission Site for ITFS Channels is critical to the
Lessee's business and agrees that it will not relocate the
transmission facilities for ITFS Channels from the Primary
Transmission Site without Lessee's prior written consent.
(ii) Lessor further acknowledges that possibility
that, as a result of currently unforeseen events, the Primary
Transmission Site may not be the optimum site for the location
of the ITFS Channels or Lessee's business throughout the term
of this Lease Agreement. Lessor therefore agrees that if at
any time or from time to time Lessee requests in writing that
the transmission facilities for the ITFS Channels be
relocated, Lessor shall file with the FCC and any other
regulatory body having jurisdicition over the ITFS Channels
all applications, amendments, and requests for modification
that may be necessary to obtain any necessary consents to
permit such relocation to such location within or adjacent to
the Market as may be requested by Lessee; provided, however,
that Lessor shall not be obligated to submit or procecute any
application, amendment, or request for modification that
Lessor reasonably determines, upon advice of counsel contained
in a written opinion, would be in violation of the terms of
the License, any statute, rule, or regulations regarding the
operation of the ITFS Channels or the submission of materials
to the FCC, or any of its obligations as an ITFS licensee; and
provided, further, that any such relocation will not result in
loss of service to Lessor's registered receive sites served by
the transmission facilities in the event that the
authorization is obtained to relocate the ITFS Channels to the
location requested by Lessee, Lessor shall relocate such
channels to such new location as soon as reasonably
<PAGE>
possible after authorization is obtained. Lessee shall bear
reasonable costs associated with such relocation, including
engineering and construction, and all reasonable costs
associated with obtaining FCC or any other regulatory approval
therefore.
(iii) Lessor agrees to file modification applications
requested by Lessee. Such modifications may include but shall
not be limited to the following: power increase or decrease,
polarization, transmit antenna patterns, digital, two-way
(return path) use of the ITFS Channels, boosters, beam benders
or repeaters, cells, sectorization, channel swaps, channel
loading, channel shifting and application within five (5)
business days or receipt of the modification application from
Lessee or during any FCC designated filing window. Lessee will
use reasonable efforts to provide Lessor with the engineering
for the modification thirty (30) days prior to the request for
filing. If Lessor believes that such modification will have an
adverse effect on Lessor's ability to provide its services to
its receive sites, Lessor agrees to file the modification
application as presented by Lessee and within the time limit
requested by Lessee; however, Lessee agrees not to implement
construction and Lessor agrees not to withdraw the application
until the parties have adequately addressed and resolved the
potential material adverse effect or the matter has been
submitted to arbitration pursuant to Section 16 and a final
decision has been rendered by arbitrator. Although Lessee
intends to file such modification applications, it may elect
not to construct the Channels in that manner and may desire to
utilize the Channels as currently licensed. A copy of the
modification application, bearing the FCC's date stamp, shall
be mailed to Lessee by Lessor, within fourteen (14) days of
the filing of the modification application. Lessee shall be
solely responsible for all engineering and legal costs
associated with the preparation, review and filing of the
modification application. In the event that any license
modification requested by Lessee requires receive site
upgrades in order for Lessor's receive sites to continue to
receive Lessor's services, then Lessee agrees to pay for all
costs to complete such upgrade prior to implementing the
license modification.
C. System Construction. Lessee shall within a reasonable
period of time, but not later than six (6) months after the
FCC grant of digital authority for the ITFS Channels, purchase
equipment such as the antenna, waveguide or transmitters
specified on the authorization for the ITFS Channels. At
Lessee's expense, Lessee shall purchase and install such
transmitters, transmission line, modulators, antennas and
other equipment as required to operate the ITFS Channels in
accordance with the provision of such authorization. Any
equipment so used in such construction shall be leased to
lessor pursuant to Paragraph 5 hereof. Such equipment is
hereinafter referred to as the "Leased Equipment". Lessee
shall retain title to the Leased Equipment except as noted by
Paragraph 15 herein.
D. Maintenance of Transmission Equipment. At Lessee's expense
and subject to Lessor's right to supervise the maintenance of
this equipment, Lessee shall maintain and operate the Leased
Equipment during the terms of this Agreement for a nominal
fee. Lessee shall also pay all taxes and other charges
assessed against the Leased Equipment.
E. Transmission of Programming. At no cost or expense to
Lessor, Lessee shall provide the necessary labor and equipment
capabilities to transmit on the ITFS Channels programming
required to be carried pursuant to this Agreement such as
Lessor's ITFS programming and TBN. Lessee shall also comply
with Lessor's instructions regarding the transmission of such
programming such as the dates and times to transmit
programming.
F. Interference. Lessee shall operate the Leased Equipment so
that such operation does not create or increase interference
with electronic transmission of any other FCC
<PAGE>
licensees entitles to protection under FCC rules and
regulations. If Lessee's entitled to protection under FCC
rules and regulations. If Lessee's operation of the Lease
Equipment does so create or increase interference, Lessee
shall pay all of the reasonable engineering and legal fees
necessary to resolve the interference problem so created.
G. Alterations and Attachments. Lessee, at its own expense,
may make alterations of or attachments to the ITFS equipment
or the common equipment as defined in Exhibit C (including the
installation of encoding and/or addressing equipment) as may
be reasonably required from time to time by the nature of its
business; provided however, that such alterations or
attachments do not interfere with Lessor's signal or ongoing
operations or violate any FCC rules or regulations; and
provided further that FCC authorization, if required, is
obtained in advance of any such alteration or attachment at
the sole cost of Lessee. to the extent any FCC authorization
pertaining to the ITFS equipment is required, Lessor agrees to
use its best efforts to obtain such authorization.
H. Licensee Control and Liability. Nothing herein shall
derogate from such licensee control of operations of the ITFS
Channels that Lessor, as an FCC licensee, shall be required to
maintain and Lessee acknowledges the reservation by Lessor of
such control. Lessor shall at all times retain ultimate and
exclusive responsibility for the operation and control of the
ITFS Channels including policy decisions.
4. LESSOR'S RECEIVE SITES.
Attached hereto as Exhibit B is list of the registered receive sites
designated by Lessor to receive its ITFS programming and to be installed at the
expense of Lessee. Those receive sites so listed shall be installed with a
Standard Installation. If as the result of any relocation of the Primary
Transmit Site, the equipment at Lessor's existing registered receive sites must
be reoriented, Lessee shall pay the cost of same. As used herein for the
purposes of this Agreement, the phrase "Standard Installation" shall mean an
installation consisting of the placement of the ITFS/MMDS receiving antenna at
an elevation (not to exceed thirty [30] feet above the base mounting location)
which could normally receive the line-of-sight transmission from the
Transmission Site; the coupling thereto of a block-down converter; and a
sufficient amount of transmission line (coaxial cable) to connect the received
ITFS programming to the input of (i) one classroom designated by Lessor to
receive the ITFS programming or (ii) the receive site internal/external
distribution system. Also, if as the result of any relocation of the Transmit
Site, the equipment at Lessor's existing receive sites must be reoriented,
Lessee shall pay the cost of same. Lessee also agrees that for digital
transmission of the ITFS Channels Lessee will purchase and install at Lessee's
expense, one single-point modem to receive its ITFS programming.
5. LEASE OF EQUIPMENT.
A) Lessor's Lease of Leased Equipment. For a nominal fee, Lessor shall
lease from Lessee the Leased Equipment during the terms of this Agreement. A
list of this equipment is attached hereto as Exhibit C and incorporated by
reference herein. Lessor shall have no responsibility for the loss of or damage
to the Leased Equipment during the terms of this Agreement and Lessee shall bear
all such responsibility.
6. FEES.
A) Lessor's Service Fee. In consideration of the lease of the Leased
Equipment, and for its share of the projected costs to maintain the Transmission
Site and the Lease Equipment, Lessor shall pay Lessee an annual fee provided for
in Exhibit D.
B) Subscriber Royalty Fees or Percentage. Beginning on the Execution
Date of this Agreement and continuing thereafter during the Initial Term of this
Agreement, Lessee shall pay to
<PAGE>
Lessor the Subscriber Royalty Fee, System Percentage or monthly minimum,
whichever is greater as set out in Exhibit D which is attached herewith and
incorporated by reference herein. If the Execution Date shall be a date other
than the first day of a calendar month, then the Subscriber Royalty Fee for the
partial month shall be paid on a proportionate basis. A late fee of 10% (ten
percent) will be assessed to past due accounts, and a finance charge of one and
one-half percent (1.5%) per month will be assessed in addition to the late fee
until paid.
C) Notice of Construction and Required Certificate. Within thirty (30)
days of completion of construction at the Transmission Site, Lessee shall notify
Lessor of such completion of construction in writing. Within thirty (30) days of
the end of each month in which Excess Capacity Airtime is leased hereunder,
Lessee shall provide Lessor with a certificate, certified as accurate and
correct by an authorized agent of Lessee, showing the number of subscribers
served during such month.
D) Right to Audit. Lessee shall for a period of three (3) years after
their creation, keep, maintain and preserve complete and accurate records and
accounts, including all invoices, correspondence, ledgers, financial and other
records pertaining to Lessee's use of Excess Capacity Airtime and Lessor's
charges hereunder; and such records and corporate accounts shall be available
for inspection and audit at Lessee's corporate offices or at Lessee's offices in
the Market, as designated by Lessee, at any time or times during the term of
this Agreement or within ninety (90) days thereafter, during reasonable business
hours, by Lessor or its nominee. In the event that there is discovered an
underpayment of the Subscriber Royalty Fee as defined in Paragraph 6 (B) above,
Lessee shall pay to Lessor a penalty equal to ten percent (10%) of the amount of
each such underpayment. All information obtained by Lessor during any audit
herein shall be maintained by Lessor in strict confidence.
7. PROGRAMMING.
A) Control Over Programming.
(i) Program Content. Lessee intends that only programming of a sort
which would not serve to place Lessor's reputation in the community in jeopardy
will be transmitted by Lessee on the ITFS Channels. In an attempt to minimize
disputes, recognizing the difficulties inherent in specifying exact standards
herein, it is agreed that Lessee shall have the right to market the programming
provided by the networks and services listed on Exhibit E. If, however, the
programming content of any networks and services listed on Exhibit E materially
changes, Lessor shall have the right, upon ninety (90) days notice, to deny
Lessee the right to continue transmitting such programming if Lessor would have
the right to deny Lessee the right to transmit such programming under the
provisions of this paragraph in the first instance. If Lessee proposes to
transmit the programming of any new programming service, the Lessee shall notify
Lessor in writing specifying in detail the nature of the new programming service
and Lessor shall have the right, upon written served upon Lessee within thirty
(30) days after Lessor's receipt of any such notice from Lessee, to deny to
Lessee the right to transmit such service if such programming is obscene and/or
contradicting local, state and/or federal laws or otherwise violates any
federal, state or local laws or regulations. If no such denial notice is
received by Lessee within such thirty (30) days, lessee shall be authorized to
transmit all such services for which no denial notice is received. There shall
be no reduction in fees required under this Agreement for any such programming
not permitted to be transmitted.
B) Availability of Programming. It is understood by Lessee and Lessor
that there is expected to be no direct out-of-pocket annual costs for the
acquisition of the qualified ITFS educational programming for Lessor's use
during Lessor's Primary Airtime on the ITFS channels, based on current plans. In
the event that this ITFS educational programming either; (1) ceases to be
available, or, (2) becomes available only at a fee, then Lessor may incur direct
out-of-pocket costs in Lessor's acquisition of ITFS programming. Lessee agrees
to provide its best efforts to assist Lessor in the acquisition of alternative
programming, if necessary. Additionally, Lessee agrees to make payment to Lessor
for the actual, direct programming costs incurred. If any; If Lessor, after
expending its best efforts, is unable to
<PAGE>
obtain suitable ITFS programming for a cost equal to the amount to be paid by
Lessee, Lessor and Lessee shall use their best efforts to reach agreement on
modifications to this Agreement to avoid any un-reimbursed ITFS programming
costs to Lessor. If no such agreement can be reached, Lessor may terminate this
agreement. In the case of such termination, Lessor shall use its best efforts
(with out-of-pocket costs of Lessor to be paid by Lessee, with Lessee's prior
approval) to transfer the license for the ITFS Channels to another qualified
educational entity, subject to FCC approval, with the intent of assigning this
Agreement from Lessor to the new educational entity.
C) Integration of Lessor's Programming. Lessee agrees to integrate
Lessor's programming into the overall communications service offered to
subscribers, without cost to Lessor. This integration shall include, but not be
limited to, listing Lessor's material in any program guides produced by Lessee
for subscribers.
D) Carriage of TBN. In the event that Lessor's ITFS Channels are used
for analog video transmission and TBN is not transmitted on a local VHF or UHF
station, with a market coverage equivalent to both area and signal quality of
our ITFS channels, and Lessee does not have local off-air insertion as part of
its standard installation, then, if so designated by Lessor, Lessee agrees to
transmit on one of the ITFS Channels the programming of Trinity Broadcasting
Network ("TBN") during those time periods such channel is not used for Lessor's
ITFS programming ("TBN Airtime") provided that Lessee is not required to pay a
fee for carriage of TBN. In the event that Lessee is permitted to program the
hours previously occupied by TBN, then Lessee shall increase, in proportion to
the increase in Excess Capacity Airtime, the amount of minimum fees and
subscriber royalty fees payable under the provision 6 (B) of this agreement
during the remainder of the term(s) of the agreement. For purposes of
calculating any such proportionate increase, the parties acknowledge and agree
that the minimum fee and subscriber royalty fee agreed to herein are based on
Lessee's equivalent use of three full-time ITFS channels.
E) Station Identification. During Lessee's use of Lessor's excess
channel capacity, Lessee shall transmit Lessor's call sign for each respective
station as required by the FCC.
8. PROCECUTION OF PETITIONS, AUTHORIZATIONS AND LICENSES.
A) Best Efforts to Secure Approval of this Agreement. The parties
recognize that certain approvals will be required from the FCC in order to
effectuate this Agreement. Both parties shall use their best efforts to prepare,
file and prosecute before the FCC all petitions, waivers, applications and other
documents necessary to secure any FCC approval required to effectuate this
Agreement. Lessee shall assist in the preparation and prosecution of such
applications and as provided for herein, shall pay all filing fees, attorneys'
fees, engineering fees, and all other expenses in connection therewith. Lessor
also agrees to cooperate with Lessee's efforts to cause other ITFS, OFS, MDs and
MMDS operators to co-locate at the Transmission Site. Notwithstanding anything
in this Agreement to the contrary, it is understood that no filing shall be made
with the FCC with respect to this Agreement unless both parties have reviewed
such filing and consented in writing to its submission, such consent not be
unreasonably withheld.
B) Further Efforts. Throughout the Initial Term of this Agreement,
Lessor shall use its best efforts to obtain and maintain in force all licenses,
permits and authorizations required for Lessee and Lessor to use the ITFS
Channels as contemplated by this Agreement. Lessee shall be responsible for all
cash expenses incurred to obtain and maintain in force such licenses, permits
and authorizations. When mutually agreed by the parties and at Lessee's sole
expense, Lessor shall apply for, and use its best efforts to obtain those
reasonable license modifications which would assist Lessee in its business.
Lessor also shall consider filing, at Lessee's sole expense, such reasonable
protests, comments or other petitions to deny any other ITFS, MMDS, MDS and/or
OFS applications or amendments as may be requested by Lessee in the mutual best
interests of the parties and the public. Lessor and Lessee shall promptly notify
each other of any event of which it has knowledge that may affect any of the
licenses, permits or authorization affecting the ITFS Channels.
<PAGE>
C) Attorneys' Fees. With respect to any legal work conducted pursuant
to Paragraph 8(A) and (B) above, Lessee shall be responsible for all attorneys'
fees in connection therewith and shall make payments directly to the attorney.
However, any attorney fees paid by Lessee shall be approved in advance by
Lessee.
9. REPRESENTATIONS AND WARRANTIES.
A) Representations and Warranties of Lessor. Lessor represents and
warrants to Lesse as follows:
(i) Organization. Lessor is a non-profit organization duly organized
and existing in good standing under the laws of the State of California, and it
has full power and authority to carry out all of the transactions contemplated
by this Agreement and all other agreement, certificates or instruments executed
and delivered in connection herewith.
(ii) No Violation. Neither the execution nor delivery of this agreement
or any other agreements, certificates or instruments executed and delivered
herewith, nor the performance of the transactions contemplated hereby constitute
or will constitute a violation of , be in conflict with, or a default under any
term or provision of the governing instruments or Lessor or any agreement or
commitment to which Lessor is bound, or any judgment, decree, order, regulation
or rule of any court or governmental authority, or consent of any federal, state
or local authority is required in connection with the execution and delivery of
this Agreement or any other agreements, certificates or instruments executed and
delivered herewith or with the performance of the transaction contemplated
hereby.
B) Representations and Warranties of Lessee. Lessee represents and
warrants to Lessor as follows:
(ii) Organization. Lessee is duly organized, validly existing and in
good standing under the laws of the State of its incorporation and it has full
power and authority to own property and carry all of the transactions
contemplated by this Agreement, and all other agreements, certificates or
instruments executed and delivered by Lessee in connection herewith.
(ii) Corporation Action; Valid and Binding Agreements. Lessee has taken
all corporate action necessary to authorize the execution and delivery of this
Agreement and all other agreements, certificates or instruments executed and
delivered in connection herewith. Upon execution and delivery, this Agreement
and all other agreements, certificates or instruments executed and delivered by
Lessee in connection herewith will constitute valid and binding agreements of
Lessee enforceable in accordance with their respective terms.
(iii) Litigation and Investigations. There is no action, suit,
proceeding or investigation pending or, to the best of Lessee's knowledge,
threatened against Lessee, its principals or related entities before any court,
administrative agency or other governmental body, and Lessee does not know nor
is aware of any reason for commencement of any such action, proceeding or
investigation.
(iv) Misrepresentation of Material Fact. To the best of Lessee's
knowledge, information and believe, no document or contract that was shown to
Lessor and which in any way affects any of the properties, assets or proposed
transactions of Lessee as such relates to this Agreement, no certificate or
statement furnished by or on behalf of Lessee in connection with this Agreement,
nor this Agreement itself contains any untrue statement of material fact or
omits to state a material fact which would make the statements contained herein
misleading.
<PAGE>
C) Survival or Representations and Warranties. The representations and
warranties contained in this Agreement shall be deemed to be continuing during
the Initial terms of this Agreement, and each Party shall have the duty promptly
to notify the notify the other of any event or circumstance which might
reasonably be deemed to constitute a breach of or lead to a breach of its
warranties or representations hereunder. The waiver by either Party of any
breach of any presentation or warranty under this Agreement shall not constitute
a waiver of any other representation or warranty or of any failure in the future
by the other Party to fulfill such representation or warranty.
10. TERMINATION.
A) Termination of FCC Authorization. Without further liability to
either Lessor or Lessee, this Agreement shall terminate in the event that for
any reason (i) Lessor shall not be licensed on the leased ITFS Channels, or (ii)
the FCC shall terminate or diminish Lessor's authority to lease the ITFS
Channels in accordance with the terms of this Agreement.
B) Termination by Reason of Default or Nonperformance. At the option of
the non-defaulting party, this Agreement may be terminated upon the material
breach or default by the defaulting party of its duties and obligations
hereunder is such breach or default is not cured by such defaulting party and is
breach or default shall continue for a period of thirty (30) consecutive days
after such defaulting party's receipt of notice thereof from the non-defaulting
party. It is understood and agreed that any failure on the part of Lessee to
make any payment required under Paragraph 6 hereof shall be a material breach of
default of its duties and obligations hereunder. It is also understood and
agreed that any consequences resulting from the loss of local participating
receive sites shall not be considered a material breach or default by Lessor of
its duties and obligations hereunder.
C) Remedies to Continue. In the event of termination of this Agreement
pursuant to Paragraph 10(B), such termination shall not affect or diminish the
rights or claims or remedies available in equity or at law to the non-defaulting
party arising by reason of a breach or default of this Agreement. However, no
liability shall arise on the part of Lessor or Lessee upon termination of this
Agreement pursuant to Paragraph 10(A) except where the loss of the FCC license
occurs as a result of the default of either party.
11. TRANSFER OF RIGHTS AND OBLIGATIONS.
Lessee shall have the right to assign its rights under this lease as
collateral for any financing arrangements it makes. Lessee shall also have the
right to pledge the Leased Equipment as collateral security for any loans it
makes; provided, however, that any pledge of the Leased Equipment shall be made
subject to the provisions of this lease. Lessee shall further have the right to
subcontract any portion of its obligations under this Agreement to any
partnership, joint venture, corporation or entity which Lessee may choose,
provided that Lessee gives Lessor notice of any proposed subcontracting and,
provided further, that no such subcontracting shall release Lessee from
fulfilling all of its obligations under this Agreement. Lessee shall have the
right to assign or transfer its rights, benefits, duties and obligations under
this Agreement to a commonly-owned company without the prior consent of Lessor.
Apart from the foregoing, neither party may assign or transfer its rights,
benefits, duties or obligations under this Agreement without the prior written
consent of the other, which consent shall not be unreasonably witheld.
12. INDEMNIFICATION.
A) By Lessor. To the extent permitted by state and federal law and its
charter or by-laws, Lessor shall forever protect, save and keep Lessee and its
permitted successors and assigns harmless and indemnify Lessor against and from
any and all claims, demands, losses, costs, damages, suits, judgments,
penalties, expenses and liabilities or any kind or nature whatsoever, including
reasonable attorneys' fees, arising directly or indirectly out of (i) the
willful misconduct of Lessor, its agents or employees, in
<PAGE>
connection with the performance of this Agreement; (ii) any programming
transmitted by Lessor during any of Lessor's Airtime.
B) By Lessee. To the extent permitted by state and federal law and its
charter or by-laws, Lessor shall forever protect, save and keep Lessee and its
permitted successors and assigns harmless and indemnify Lessor against and from
any and all claims, demands, losses, costs, damages, suits, judgments,
penalties, expenses and liabilities or any kind or nature whatsoever, including
reasonable attorneys' fees, which arise directly or indirectly out of (i) the
negligence or willful misconduct of Lessee, its agents or employees, in
connection with the performance of this Agreement; (ii) any programming
transmitted by Lessee or any of its authorized agents or subcontractors with the
public, third parties and subscribers to the Lessee's programming service; or
(iv) any maintenance, installation or other work performed by Lessee or any
authorized agent or subcontractor under this Agreement.
C) Notice of Claim; Defense of Claim. Each party shall notify the other
of any such claim promptly upon receipt of same. Either party (hereinafter
referred to as appropriate the "Indemnitor" or Indemnitee") shall have the
option to defend, at its own expense, any claims arising under this Paragraph.
In Indemnitor assumes the defense of any such claim, Indemnitee shall delegate
complete and sole authority to the Indemnitor to defend or settle same and
Indemnitee shall cooperate with Indemnitor in the defense thereof.
13) INSURANCE.
A) Policies Required. At its expense, Lessee shall secure and maintain
with financially reputable insurers, one or more policies of insurance insuring
the Leased Equipment and Lessee's utilization of the ITFS Channels against
casualty and other losses of the kinds customarily insured against by firms of
established reputations engaged in the same or similar line of business, or such
types and in such amounts as are customarily carried under similar circumstances
by such firms, including, without limitation: (i) "All Risk" property insurance
covering the ITFS Equipment and the common Equipment to the extent of one
hundred percent (100%) of its full replacement value without deduction for
depreciation: (ii) comprehensive general public liability insurance covering
liability resulting from lessee's operation of the ITFS equipment on an
occurrence basis having minimum limits of liability in an amount of not less
than One Million Dollars ($1,000,000.00) for bodily injury, personal injury or
death to any person or persons in any one occurrence, and not less than Two
Million Dollars ($2,000,000.00) in the aggregate for all such losses during each
policy year, and not less than Three Hundred Thousand Dollars ($300,000.00) with
respect to damage to property; (ii) all workers compensation, automobile
liability and similar insurance required by law.
B) Insurance Policy Forms. All policies of insurance required by this
Paragraph shall, whre appropriate, designate Lessor as either the insured party
or as a named additionally insured party, shall be written as primary policies,
not contributory with and not in excess of any coverage which Lessor shall
carry, and shall contain a provision that the issuer shall give to Lessor thirty
(30) days prior written notice of any cancellation or lapse of such insurance or
of any change in the coverage thereof.
C) Proof of Insurance. Executed copies of the policies of insurance
required under this section or certificates thereof shall be delivered to Lessor
not later than ten (10) after execution of this agreement. Lessee shall furnish
Lessor evidence of renewal of each such policy not later than thirty (30) days
prior to the expiration of the term thereof.
79. RELATIONSHIP OF PARTIES.
By the provisions of this Agreement, Lessor and Lessee intend to enter
an airtime lease relationship and not a joint venture. They will carry out this
Agreement to preserve that intent. Neither party shall represent itself as the
<PAGE>
other party, nor as having any relationship with one another, except as Lessor
and Lessee under the terms of this Agreement.
80. EQUIPMENT PURCHASE.
K) Lessor's Option to Purchase. In the event that this Agreement is
terminated, Lessor shall have the option to purchase the Leased
Equipment used exclusively for Lessor's ITFS license. Any equipment
which is used in a shared fashion (such as transmit antenna, decoders
and combiners) in providing signals other than Lessor's signals are
excluded from this option to purchase. The intent of the purchase
option provided for in Paragraphs 16(A) is to provide Lessor with the
capability to continue to perform on Lessor's ITFS license. The
purchase price shall be the market value of such equipment noted above
as determined by mutual agreement or by averaging the values obtained
from two (2) appraisals, with one appraiser each chosen by Lessor and
Lessee.
L) Lessee's Option to Purchase. If during the terms of this Agreement the
FCC modifies its rules so as to enable Lessee to be licensed to
operate the ITFS frequencies, Lessee shall have a right of first
refusal to acquire such licenses subject to the same terms and
conditions as the right provided for in Paragraph 1(B).
81. NON-DISCLOSURE
Lessor acknowledges that there may be made available to it pursuant to
this Agreement proprietary information of Lessee relating to the encoding and/or
decoding system associated with the ITFS channel equipment and its patented
processes including, but not limited to, improvements, innovations, adaptation,
inventions, results of experimentation, processes and methods, whether or not
deemed patentable, and certain business and marketing techniques (all herein
referred to as "Confidential Information"). Lessor acknowledges that this
Confidential Information has been developed by Lessee at considerable effort and
expense and represents special, unique and valuable proprietary assets of
Lessee, the value of which may be destroyed by unauthorized dissemination.
Accordingly, Lessor covenants and agrees that, except as may be required for the
performance of this Agreement or by law or court order, neither it nor any of
its agents or affiliates shall disclose such Confidential Information to any
third person, firm, corporation or other entity for any reason whatsoever, such
undertaking to be enforceable by injunctive or other equitable relief to prevent
any violation or threatened violation thereof.
82. NON-COMPETITION
During the term of this Agreement, Lessor agrees not to transmit
programming or to lease or sublease any channel capacity on its ITFS Facilities
for the transmission of programming that is competitive with the programming
transmitted by Lessee.
83. FORCE MAJEURE
If by reason of Force Majeure either party is unable in whole or in
part to perform its obligations hereunder, the party shall not be deemed in
violation of default during the period of such inability. As used herein, the
phrase "Force Majeure", shall mean the following: act of God, acts of public
enemies, orders of any branch of the government of the United States of America,
any state or any political subdivisions, thereof which are not the result of a
breach of this Agreement, orders of any military authority insurrections, riots,
epidemics, fires, civil disturbances, explosions, or any other cause or event
not reasonably within control of the adversely affected party.
84. CONDITION PRECEDENT
This Agreement is conditional on the issuance of a Final Order by the
FCC granting Lessor a construction permit for the ITFS Channels in the Market
from the Transmission Site. By "Final Order" the parties mean an action or order
of the FCC which is not reversed, stayed, enjoined, vacated, set aside, annulled
or suspended and with respect to which no timely-filed request for
administrative or judicial review is pending and as to which the time for filing
any such request, or for the FCC to set aside the action on its own motion, has
expired.
<PAGE>
85. NOTICE
Any notice required to be given to Lessor under any provision of this
Agreement shall be delivered personally or by certified mail to Lessor at the
address first written above. Any notice required to be given to Lessee under any
provision of this Agreement shall be delivered personally or by certified mail
to Lessee at the address first written above.
86. SEVERABILITY
Should any court or agency determine that any provision of this
Agreement is invalid, the remainder of the Agreement shall remain in effect.
87. WAIVER
A waiver by either Lessor or Lessee of a breach of any provision of
this Agreement shall not be deemed to constitute a waiver of any preceding or
subsequent breach of the same provision or of any other provision.
88. PAYMENT OF EXPENSES AND SIGNING FEES
A signing fee of One Dollar ($1) shall be paid to Lessor. Lessee shall
pay all costs and expenses incident to fulfilling or modifying this Agreement,
such as, attorneys' fees or, if necessary, any travel expenses approved in
advance by Lessee, FCC filing fees, and engineering costs.
89. VENUE AND GOVERNING LAW
Venue for any cause of action brought by or between Lessor and/or
Lessee relating to this Agreement shall be in California and all provisions of
this Agreement shall be construed under the laws of the State of California and
County of Lessor.
90. COUNTERPARTS
This Agreement may be executed in one or more counterparts each of
which shall be deemed an original, but all of which shall constitute one and the
same instrument, and shall become effective when each of the parties hereto
shall have delivered to it this Agreement duly executed by each of the other
parties hereto.
91. ENTIRE AGREEMENT
This Agreement constitutes the entire Agreement between the parties and
supersedes all prior oral or written provisions of any kind. The parties further
agree that this Agreement may only be modified by written Agreement signed by
both parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
this day of July 1st, 1999.
SHEKINAH NETWORK
By: ______________________________
Name: Charles J. McKee
Title: President
WORLD WIDE WIRELESS COMMUNICATIONS, INC.
By: ______________________________
Name: Douglas P. Haffer
Title: President
<PAGE>
Address for Notices:
Shekinah Network
14875 Powerline road
Atascadero, CA 93422
Phone/Fax: (805) 438-3341
Attn: Charles McKee, President
Gardner, Carton & Douglas
Attn: Laura Mow
1301 K Street, N.W., Suite 900
Washington, D.C. 20005
Phone: (202) 408-7100
Fax: (202) 289-1504
World Wide Wireless Communications, Inc.
One Post Street Suite 2600
San Francisco, CA 94104
Phone: (415) 981- 7777
Fax: (415) 391-3199
<PAGE>
EXHIBIT A
Schedule of Airtime
<PAGE>
EXHIBIT B
Receive Sites
There shall be attached hereto and incorporated by reference a copy of
FCC Form 330 Section IV listing Lessor" receive sites.
<PAGE>
EXHIBIT C
Leased Equipment
Noted below is a list of equipment that Lessee is leasing to Lessor:
(11) Four (4) ITFS tansmitters and related hardware
(12) Lessor's ITFS receive site antennas and related hardware
*(3) Combining network, transmission line and antenna
*Common Equipment
<PAGE>
EXHIBIT D
Service and Royalty Fees
1. Lessor's Service Fee
Services Provided Annual Fee
----------------- ----------
(p) Lease of Leased Equipment [6(A)] $1.00
(q) Maintenance of Leased Equipment [3(D)] $1.00
(r) Lease of space at Primary Transmission Site [3A)] $1.00
2. Lessee's Subscriber Royalty Fee
Lessee shall pay Lessor a minimum monthly Transmission Fee 5% of the system's
Gross receipts or a monthly minimum payment of $500 per month whichever is
greater.
Payment shall be as follows: Commencing on the Execution (Effective) Date and as
defined in Paragraph 6)B, payments for each month shall be made by the twentieth
(20th) day of the following month.
<PAGE>
EXHIBIT E
Programming
In addition to digital data services, such as the Internet or Intranet, the
following is a list of video programming services Lessee may provide over
Lessee's System.
TLC - The Leaning Channel
TWC - The Weather Channel
Lifetime
ESPN - Sports
AMC - American Movie Classics
SCOLA
WHTN - World Harvest Television Network
ECO - Galavision
CNN - Cable News Network
CNN - Headline News
C-Span I
C-Span II
BET - Black Entertainment Network
CNBC - Consumer News & Business Channel
Nickelodeon
The Discovery Channel
A&E - Arts and Entertainment
The Family Channel
The Disney Channel
PBS - Public Broadcasting Service
TBN - Trinity Broadcasting Network
TNIN - The New Inspirational Network
ME/U - Mind Extension Network
The International Channel
BRAVO Network
The Travel Channel
Family Network
Keystone Inspirational Network
LEASE AGREEMENT
BETWEEN
WORLD WIDE WIRELESS COMMUNICATIONS, INC.
AND
SHEKINAH NETWORK
Ukiah, California
ITFS EXCESS CAPACITY AIRTIME LEASE AGREEMENT
THIS AGREEMENT is made this 1st day of August 1999 by Shekinah Network
(hereinafter referred to as "Lessor") having its principal place of business at
14875 Powerline Road, Atascadero, CA 93422 and World Wide Wireless
Communications, Inc. (hereinafter referred to as "Lessee") having its principal
place of business at One Post Street, Suite 2600 San Francisco, CA 94104.
WHEREAS, the Federal Communications Commission ("FCC") has authorized
licenses for Instructional Television Fixed Service ("ITFS") channels and has
authorized the licensee to lease excess capacity to non-ITFS users; and
WHEREAS, Lessor has been granted an FCC License for (call sign) WNC-798
(the "License") for the Channel group C1-4 (the "ITFS Channels") in Ukiah,
California ("The Market"); and
WHEREAS, Lessee is in the business of providing voice, video, data and
other services via microwave transmission in the Market Area and desires to
lease the excess ITFS capacity of the ITFS channels; and
WHEREAS, Lessor has determined that there will be excess airtime
capacity available on the ITFS Channels and desires to lease this excess airtime
capacity to Lessee.
NOW, THEREFORE, in consideration of the mutual promises, undertakings,
covenants and conditions set forth herein, the Lessor and Lessee do hereby agree
and warrant as follows:
13. TERM OF AGREEMENT
A. Initial Term. This Agreement shall be effective upon the date of its
execution and shall extend for an initial term of five (5) years (the
"Initial Term").
B. Renewal Term Provided that the License is renewed by the FCC, Lessee
shall have the right to extend this Agreement on its then existing
terms and conditions for one (1) additional five (5) year term (the
"Renewal Term"). The Renewal Term shall automatically go into effect
upon the conclusion of the Initial Term unless Lessee notifies Lessor
at least one hundred eighty days (180) before the end of the Initial
Term that Lessee does not wish to extend this Agreement.
C. New Lease Agreement/Right of first Refusal.
(1) Providing that Lessor's FCC license remains in good standing
and/or Lessor seeks to renew such license, Lessee and Lessor shall
negotiate in good faith for a new excess capacity airtime lease
agreement (hereinafter referred to as "New Lease Agreement") no later
than one hundred eighty days (180) prior to the end of the latter of
(i) Initial Term or (ii) the Renewal Term if the Agreement is extended
for the Renewal Term.
<PAGE>
(8) If Lessor elects to not reasonably pursue a New Lease Agreement
with Lessee, then Lessor shall so notify Lessee in writing of such
intent no later than one hundred eighty (180) days prior to the end of
the Renewal Term.
(3) If Lessor and Lessee do not enter into a New Lease Agreement,
Lessor grants Lessee a right of first refusal on any competing
proposals for lease agreements or transfers or assignments of any part
of the ITFS Channels received by Lessor during the twelve (12) months
following the expiration of the latter of (i) the Initial Term or (ii)
the Renewal Term, if the Agreement is extended for the Renewal Term.
If any acceptable offer to lease or acquire the ITFS Channels is made
to Lessor, Lessor shall give written notice to Lessee describing the
person to whom the proposed lease or transfer is to be made, the fees,
charges, rental or other consideration to be received fro the lease or
transfer, the terms thereof and generally the relevant other terms and
conditions of the lease or transfer. Lessee shall have a period of
thirty (30) days after its receipt of such notice from Lessor in which
to elect, by giving written notice to Lessor, to lease or, if
eligible, obtain any or all of the ITFS Channels for the same fees,
charges, rental or other consideration for which Lessor proposed to
lease or transfer to the third person.
(i) The fees, charges, rental or consideration shall be paid by such
third person or Lessee in cash.
(xiv) If Lessor does not believe Lessee's stated offer is in an amount
fairly equivalent to the fair value of the consideration payable by
the third person and so notifies Lessee in writing within seven (7)
days after Lessor's receipt of Lessee's notice of election to so lease
or purchase, Lessee may within five (5) days after its receipt of such
notice from Lessor elect to refer such question for determination by
an impartial arbitrator and the right of first refusal of Lessee shall
then be held open until (5) days after Lessee is notified of such
determination. Such arbitrator shall be chosen either by agreement of
Lessee and Lessor at the time such question arises, or, at the option
of either party, by referring the question to the American Arbitration
Association with instructions that the American Arbitration
Association select a single arbitrator under a request from the
parties for expedited and accelerated determination. The determination
of the arbitrator chosen under either option contained in this
subparagraph shall be final and binding upon Lessee and Lessor. The
parties shall share equally in the costs and fees of the arbitration
(xv) In the event Lessee shall elect to exercise its right of first
refusal, the lease agreement or other transfer or assignment shall be
consummated within thirty (30) days of the latest of: (1) the day on
which Lessor received notice of Lessee's election to exercise the
right of first refusal; (2) the day upon which any question required
to be determined by the arbitrator hereunder has been determined; or
(3) the date of any FCC approval in the case of assignment or
transfer; or at such other time as may be mutually agreed. The right
of first refusal is terminated either by the lease or other transfer
to Lessee as provided herein or by notice to Lessee of the Lessor's
proposal to lease or otherwise transfer the ITFS Channels or any part
to a third person and Lessee's unwillingness or failure to meet and
accept such a bona fide offer pursuant to the times and procedures as
set forth above; provided that such proposed lease or transfer is
consummated at the same fees, charges, rental or other consideration
and upon the same terms as to which such right of first refusal
applied, within thirty (30) days after Lessee's right of first refusal
had expired or had been specifically waived by written notice given to
Lessor by Lessee, or within thirty (30) days following FCC approval in
the case of assignment or transfer.
C) Operation During End of Term. If Lessor and Lessee do not enter into
New Lease Agreement before the end of the Initial Term, Lessee shall
cease leasing the ITFS Channels on the last day of the Initial Term.
<PAGE>
D) No Rights Beyond Term of Licenses. Lessor and Lessee agree that this
Agreement shall not give rise to any rights or remedies beyond the
expiration of any FCC license necessary for the continued operation of
the ITFS Channels. Provided, however, that while this Agreement is in
effect, Lessor shall obtain and maintain in force all licenses,
permits and authorizations required or desired in connection with the
use of the ITFS Channels. Lessor shall take all necessary steps to
renew the licenses for the ITFS Channels and shall not commit any act
or engage in any activity which could reasonably be expected to cause
the FCC to impair, restrict, revoke, cancel, suspend or refuse to
renew the ITFS licenses. Lessor shall take all reasonable steps to
comply with the Communications Act of 1934, as amended and the rules
and regulations of the FCC, and shall file all reports, schedules
and/or forms required by the FCC to be filed by Lessor. All expenses,
including attorneys fees and filing fees, incurred in preparing and
filing such reports, schedules and/or forms required by the FCC shall
be paid by the Lessee.
14. ALLOCATION OF AIRTIME.
A. Excess Capacity Airtime. To the extent allowed by the FCC rules and
regulations and any amendments thereof, Lessor agrees to lease to
Lessee the exclusive use of all excess capacity not utilized by Lessor
("Excess Capacity Airtime").
B. Lessor's Primary Airtime. During analog transmission over the ITFS
Channels, Lessor reserves for its exclusive use a minimum of twenty
(20) hours of airtime per-channel per-week to be used for its ITFS
scheduled programs. During digital transmission ovr the ITFS Channels,
Lessor shall have the exclusive use of 12.5% of the total capacity
available on the Lessor's ITFS Channels. This airtime shall be know as
"Lessor's Primary Airtime".
C. Schedule of Airtime. The schedule which depicts the agreement of the
parties as to use of Lessor's Channels shall be attached hereto and
made a part hereof as Exhibit A which is subject to change upon
agreement by both parties.
D. Lessee's use of its Excess Capacity Airtime. Lessee shall have the
right to utilize its Excess Capacity Airtime for any purpose allowed
or authorized by the FCC including but not limited to voice, video and
data transmission.
E. Alternate Use and Vertical Blanking Intervals. Lessor shall have the
right to use the second audio carrier ("SAP") and vertical blanking
intervals. ("VBI") on which Lessor's ITFS programming is being
transmitted. Lessee shall at all times have the right to use the VBI
and SAP not utilized by Lessor and 100% of the response frequencies
associated with the ITFS Channels. Lessor shall be responsible for any
equipment needed to utilize the VBI and/or SAP and such equipment
shall be compatible with Lessee's system.
F. Lessor's Use of ITFS Channels. Lessor agrees that its program services
and airtime use will not harm or interfere with Lessee's current or
future signal paths utilized within Lessee's System for program
encryption, pilot carrier signaling and other technical needs utilized
for the operation of and such services provided by Lessee's System.
Nor will Lessor, by its own action, or through a third party, utilize
any part of its licensed frequency spectrum to create or operate a
service that is in competition with current, planned or future
services provided by
<PAGE>
Lessee's System. Lessor agrees to use its Primary Airtime in
accordance with the FCC's rules and regulations. Lessor shall not take
or fail to take any action which may have a material adverse effect on
Lessee's right to utilize its Excess Capacity Airtime.
G. Expanded System Capacity. Lessee shall have the right at anytime to
require Lessor to file with the FCC any necessary application to
expand the channel capacity to Lessor's station to enable it to carry
more than one video signal per channel or digital data services;
provided however, before Lessee can exercise this right, it must
demonstrate to the Lessor's reasonable satisfaction that such
modification will not materially degrade the performance of the
station nor impair signal quality at the registered ITFS receive
sites. Once such modification has been constructed, the modified
facilities shall automatically be considered a part of this agreement
and subject to all terms and conditions hereof. It is understood that
Lessee shall have the full-time use of the Expanded Channels to the
extend permitted by FCC rules.
3. TRANSMISSION SITE AND FACILITIES.
M. Primary Transmission Site. Lessor's ITFS Channels are located at Key
West, FL, Lessee agrees to provide Lessor space at the Primary
Transmission site for Lessor's audio and video transmission equipment
which shall not exceed on rack. Such space shall be leased to Lessor
pursuant to Exhibit D hereto. This site shall hereinafter be described
as the "Primary Transmission Site". At Lessee's sole expense, Lessee
shall contract for a lease of space at the Transmission Site upon such
terms as the parties agree. The Transmission Site shall comply with
the standards, specifications and regulations of the FCC rules and
orders pertaining to Lessor's ITFS license.
N. Relocation of Transmission Site.
(i) Lessor acknowledges that the location of the
Primary Transmission Site for ITFS Channels is critical to the
Lessee's business and agrees that it will not relocate the
transmission facilities for ITFS Channels from the Primary
Transmission Site without Lessee's prior written consent.
(ii) Lessor further acknowledges that possibility
that, as a result of currently unforeseen events, the Primary
Transmission Site may not be the optimum site for the location
of the ITFS Channels or Lessee's business throughout the term
of this Lease Agreement. Lessor therefore agrees that if at
any time or from time to time Lessee requests in writing that
the transmission facilities for the ITFS Channels be
relocated, Lessor shall file with the FCC and any other
regulatory body having jurisdicition over the ITFS Channels
all applications, amendments, and requests for modification
that may be necessary to obtain any necessary consents to
permit such relocation to such location within or adjacent to
the Market as may be requested by Lessee; provided, however,
that Lessor shall not be obligated to submit or procecute any
application, amendment, or request for modification that
Lessor reasonably determines, upon advice of counsel contained
in a written opinion, would be in violation of the terms of
the License, any statute, rule, or regulations regarding the
operation of the ITFS Channels or the submission of materials
to the FCC, or any of its obligations as an ITFS licensee; and
provided, further, that any such relocation will not result in
loss of service to Lessor's registered receive sites served by
the transmission facilities in the event that the
authorization is obtained to relocate the ITFS Channels to the
location requested by Lessee, Lessor shall relocate such
channels to such new location as soon as reasonably
<PAGE>
possible after authorization is obtained. Lessee shall bear
reasonable costs associated with such relocation, including
engineering and construction, and all reasonable costs
associated with obtaining FCC or any other regulatory approval
therefore.
(iii) Lessor agrees to file modification applications
requested by Lessee. Such modifications may include but shall
not be limited to the following: power increase or decrease,
polarization, transmit antenna patterns, digital, two-way
(return path) use of the ITFS Channels, boosters, beam benders
or repeaters, cells, sectorization, channel swaps, channel
loading, channel shifting and application within five (5)
business days or receipt of the modification application from
Lessee or during any FCC designated filing window. Lessee will
use reasonable efforts to provide Lessor with the engineering
for the modification thirty (30) days prior to the request for
filing. If Lessor believes that such modification will have an
adverse effect on Lessor's ability to provide its services to
its receive sites, Lessor agrees to file the modification
application as presented by Lessee and within the time limit
requested by Lessee; however, Lessee agrees not to implement
construction and Lessor agrees not to withdraw the application
until the parties have adequately addressed and resolved the
potential material adverse effect or the matter has been
submitted to arbitration pursuant to Section 16 and a final
decision has been rendered by arbitrator. Although Lessee
intends to file such modification applications, it may elect
not to construct the Channels in that manner and may desire to
utilize the Channels as currently licensed. A copy of the
modification application, bearing the FCC's date stamp, shall
be mailed to Lessee by Lessor, within fourteen (14) days of
the filing of the modification application. Lessee shall be
solely responsible for all engineering and legal costs
associated with the preparation, review and filing of the
modification application. In the event that any license
modification requested by Lessee requires receive site
upgrades in order for Lessor's receive sites to continue to
receive Lessor's services, then Lessee agrees to pay for all
costs to complete such upgrade prior to implementing the
license modification.
C. System Construction. Lessee shall within a reasonable
period of time, but not later than six (6) months after the
FCC grant of digital authority for the ITFS Channels, purchase
equipment such as the antenna, waveguide or transmitters
specified on the authorization for the ITFS Channels. At
Lessee's expense, Lessee shall purchase and install such
transmitters, transmission line, modulators, antennas and
other equipment as required to operate the ITFS Channels in
accordance with the provision of such authorization. Any
equipment so used in such construction shall be leased to
lessor pursuant to Paragraph 5 hereof. Such equipment is
hereinafter referred to as the "Leased Equipment". Lessee
shall retain title to the Leased Equipment except as noted by
Paragraph 15 herein.
D. Maintenance of Transmission Equipment. At Lessee's expense
and subject to Lessor's right to supervise the maintenance of
this equipment, Lessee shall maintain and operate the Leased
Equipment during the terms of this Agreement for a nominal
fee. Lessee shall also pay all taxes and other charges
assessed against the Leased Equipment.
E. Transmission of Programming. At no cost or expense to
Lessor, Lessee shall provide the necessary labor and equipment
capabilities to transmit on the ITFS Channels programming
required to be carried pursuant to this Agreement such as
Lessor's ITFS programming and TBN. Lessee shall also comply
with Lessor's instructions regarding the transmission of such
programming such as the dates and times to transmit
programming.
F. Interference. Lessee shall operate the Leased Equipment so
that such operation does not create or increase interference
with electronic transmission of any other FCC
<PAGE>
licensees entitles to protection under FCC rules and
regulations. If Lessee's entitled to protection under FCC
rules and regulations. If Lessee's operation of the Lease
Equipment does so create or increase interference, Lessee
shall pay all of the reasonable engineering and legal fees
necessary to resolve the interference problem so created.
G. Alterations and Attachments. Lessee, at its own expense,
may make alterations of or attachments to the ITFS equipment
or the common equipment as defined in Exhibit C (including the
installation of encoding and/or addressing equipment) as may
be reasonably required from time to time by the nature of its
business; provided however, that such alterations or
attachments do not interfere with Lessor's signal or ongoing
operations or violate any FCC rules or regulations; and
provided further that FCC authorization, if required, is
obtained in advance of any such alteration or attachment at
the sole cost of Lessee. to the extent any FCC authorization
pertaining to the ITFS equipment is required, Lessor agrees to
use its best efforts to obtain such authorization.
H. Licensee Control and Liability. Nothing herein shall
derogate from such licensee control of operations of the ITFS
Channels that Lessor, as an FCC licensee, shall be required to
maintain and Lessee acknowledges the reservation by Lessor of
such control. Lessor shall at all times retain ultimate and
exclusive responsibility for the operation and control of the
ITFS Channels including policy decisions.
4. LESSOR'S RECEIVE SITES.
Attached hereto as Exhibit B is list of the registered receive sites
designated by Lessor to receive its ITFS programming and to be installed at the
expense of Lessee. Those receive sites so listed shall be installed with a
Standard Installation. If as the result of any relocation of the Primary
Transmit Site, the equipment at Lessor's existing registered receive sites must
be reoriented, Lessee shall pay the cost of same. As used herein for the
purposes of this Agreement, the phrase "Standard Installation" shall mean an
installation consisting of the placement of the ITFS/MMDS receiving antenna at
an elevation (not to exceed thirty [30] feet above the base mounting location)
which could normally receive the line-of-sight transmission from the
Transmission Site; the coupling thereto of a block-down converter; and a
sufficient amount of transmission line (coaxial cable) to connect the received
ITFS programming to the input of (i) one classroom designated by Lessor to
receive the ITFS programming or (ii) the receive site internal/external
distribution system. Also, if as the result of any relocation of the Transmit
Site, the equipment at Lessor's existing receive sites must be reoriented,
Lessee shall pay the cost of same. Lessee also agrees that for digital
transmission of the ITFS Channels Lessee will purchase and install at Lessee's
expense, one single-point modem to receive its ITFS programming.
5. LEASE OF EQUIPMENT.
A) Lessor's Lease of Leased Equipment. For a nominal fee, Lessor shall
lease from Lessee the Leased Equipment during the terms of this Agreement. A
list of this equipment is attached hereto as Exhibit C and incorporated by
reference herein. Lessor shall have no responsibility for the loss of or damage
to the Leased Equipment during the terms of this Agreement and Lessee shall bear
all such responsibility.
6. FEES.
A) Lessor's Service Fee. In consideration of the lease of the Leased
Equipment, and for its share of the projected costs to maintain the Transmission
Site and the Lease Equipment, Lessor shall pay Lessee an annual fee provided for
in Exhibit D.
B) Subscriber Royalty Fees or Percentage. Beginning on the Execution
Date of this Agreement and continuing thereafter during the Initial Term of this
Agreement, Lessee shall pay to
<PAGE>
Lessor the Subscriber Royalty Fee, System Percentage or monthly minimum,
whichever is greater as set out in Exhibit D which is attached herewith and
incorporated by reference herein. If the Execution Date shall be a date other
than the first day of a calendar month, then the Subscriber Royalty Fee for the
partial month shall be paid on a proportionate basis. A late fee of 10% (ten
percent) will be assessed to past due accounts, and a finance charge of one and
one-half percent (1.5%) per month will be assessed in addition to the late fee
until paid.
C) Notice of Construction and Required Certificate. Within thirty (30)
days of completion of construction at the Transmission Site, Lessee shall notify
Lessor of such completion of construction in writing. Within thirty (30) days of
the end of each month in which Excess Capacity Airtime is leased hereunder,
Lessee shall provide Lessor with a certificate, certified as accurate and
correct by an authorized agent of Lessee, showing the number of subscribers
served during such month.
D) Right to Audit. Lessee shall for a period of three (3) years after
their creation, keep, maintain and preserve complete and accurate records and
accounts, including all invoices, correspondence, ledgers, financial and other
records pertaining to Lessee's use of Excess Capacity Airtime and Lessor's
charges hereunder; and such records and corporate accounts shall be available
for inspection and audit at Lessee's corporate offices or at Lessee's offices in
the Market, as designated by Lessee, at any time or times during the term of
this Agreement or within ninety (90) days thereafter, during reasonable business
hours, by Lessor or its nominee. In the event that there is discovered an
underpayment of the Subscriber Royalty Fee as defined in Paragraph 6 (B) above,
Lessee shall pay to Lessor a penalty equal to ten percent (10%) of the amount of
each such underpayment. All information obtained by Lessor during any audit
herein shall be maintained by Lessor in strict confidence.
7. PROGRAMMING.
A) Control Over Programming.
(i) Program Content. Lessee intends that only programming of a sort
which would not serve to place Lessor's reputation in the community in jeopardy
will be transmitted by Lessee on the ITFS Channels. In an attempt to minimize
disputes, recognizing the difficulties inherent in specifying exact standards
herein, it is agreed that Lessee shall have the right to market the programming
provided by the networks and services listed on Exhibit E. If, however, the
programming content of any networks and services listed on Exhibit E materially
changes, Lessor shall have the right, upon ninety (90) days notice, to deny
Lessee the right to continue transmitting such programming if Lessor would have
the right to deny Lessee the right to transmit such programming under the
provisions of this paragraph in the first instance. If Lessee proposes to
transmit the programming of any new programming service, the Lessee shall notify
Lessor in writing specifying in detail the nature of the new programming service
and Lessor shall have the right, upon written served upon Lessee within thirty
(30) days after Lessor's receipt of any such notice from Lessee, to deny to
Lessee the right to transmit such service if such programming is obscene and/or
contradicting local, state and/or federal laws or otherwise violates any
federal, state or local laws or regulations. If no such denial notice is
received by Lessee within such thirty (30) days, lessee shall be authorized to
transmit all such services for which no denial notice is received. There shall
be no reduction in fees required under this Agreement for any such programming
not permitted to be transmitted.
B) Availability of Programming. It is understood by Lessee and Lessor
that there is expected to be no direct out-of-pocket annual costs for the
acquisition of the qualified ITFS educational programming for Lessor's use
during Lessor's Primary Airtime on the ITFS channels, based on current plans. In
the event that this ITFS educational programming either; (1) ceases to be
available, or, (2) becomes available only at a fee, then Lessor may incur direct
out-of-pocket costs in Lessor's acquisition of ITFS programming. Lessee agrees
to provide its best efforts to assist Lessor in the acquisition of alternative
programming, if necessary. Additionally, Lessee agrees to make payment to Lessor
for the actual, direct programming costs incurred. If any; If Lessor, after
expending its best efforts, is unable to
<PAGE>
obtain suitable ITFS programming for a cost equal to the amount to be paid by
Lessee, Lessor and Lessee shall use their best efforts to reach agreement on
modifications to this Agreement to avoid any un-reimbursed ITFS programming
costs to Lessor. If no such agreement can be reached, Lessor may terminate this
agreement. In the case of such termination, Lessor shall use its best efforts
(with out-of-pocket costs of Lessor to be paid by Lessee, with Lessee's prior
approval) to transfer the license for the ITFS Channels to another qualified
educational entity, subject to FCC approval, with the intent of assigning this
Agreement from Lessor to the new educational entity.
C) Integration of Lessor's Programming. Lessee agrees to integrate
Lessor's programming into the overall communications service offered to
subscribers, without cost to Lessor. This integration shall include, but not be
limited to, listing Lessor's material in any program guides produced by Lessee
for subscribers.
D) Carriage of TBN. In the event that Lessor's ITFS Channels are used
for analog video transmission and TBN is not transmitted on a local VHF or UHF
station, with a market coverage equivalent to both area and signal quality of
our ITFS channels, and Lessee does not have local off-air insertion as part of
its standard installation, then, if so designated by Lessor, Lessee agrees to
transmit on one of the ITFS Channels the programming of Trinity Broadcasting
Network ("TBN") during those time periods such channel is not used for Lessor's
ITFS programming ("TBN Airtime") provided that Lessee is not required to pay a
fee for carriage of TBN. In the event that Lessee is permitted to program the
hours previously occupied by TBN, then Lessee shall increase, in proportion to
the increase in Excess Capacity Airtime, the amount of minimum fees and
subscriber royalty fees payable under the provision 6 (B) of this agreement
during the remainder of the term(s) of the agreement. For purposes of
calculating any such proportionate increase, the parties acknowledge and agree
that the minimum fee and subscriber royalty fee agreed to herein are based on
Lessee's equivalent use of three full-time ITFS channels.
E) Station Identification. During Lessee's use of Lessor's excess
channel capacity, Lessee shall transmit Lessor's call sign for each respective
station as required by the FCC.
8. PROCECUTION OF PETITIONS, AUTHORIZATIONS AND LICENSES.
A) Best Efforts to Secure Approval of this Agreement. The parties
recognize that certain approvals will be required from the FCC in order to
effectuate this Agreement. Both parties shall use their best efforts to prepare,
file and prosecute before the FCC all petitions, waivers, applications and other
documents necessary to secure any FCC approval required to effectuate this
Agreement. Lessee shall assist in the preparation and prosecution of such
applications and as provided for herein, shall pay all filing fees, attorneys'
fees, engineering fees, and all other expenses in connection therewith. Lessor
also agrees to cooperate with Lessee's efforts to cause other ITFS, OFS, MDs and
MMDS operators to co-locate at the Transmission Site. Notwithstanding anything
in this Agreement to the contrary, it is understood that no filing shall be made
with the FCC with respect to this Agreement unless both parties have reviewed
such filing and consented in writing to its submission, such consent not be
unreasonably withheld.
B) Further Efforts. Throughout the Initial Term of this Agreement,
Lessor shall use its best efforts to obtain and maintain in force all licenses,
permits and authorizations required for Lessee and Lessor to use the ITFS
Channels as contemplated by this Agreement. Lessee shall be responsible for all
cash expenses incurred to obtain and maintain in force such licenses, permits
and authorizations. When mutually agreed by the parties and at Lessee's sole
expense, Lessor shall apply for, and use its best efforts to obtain those
reasonable license modifications which would assist Lessee in its business.
Lessor also shall consider filing, at Lessee's sole expense, such reasonable
protests, comments or other petitions to deny any other ITFS, MMDS, MDS and/or
OFS applications or amendments as may be requested by Lessee in the mutual best
interests of the parties and the public. Lessor and Lessee shall promptly notify
each other of any event of which it has knowledge that may affect any of the
licenses, permits or authorization affecting the ITFS Channels.
<PAGE>
C) Attorneys' Fees. With respect to any legal work conducted pursuant
to Paragraph 8(A) and (B) above, Lessee shall be responsible for all attorneys'
fees in connection therewith and shall make payments directly to the attorney.
However, any attorney fees paid by Lessee shall be approved in advance by
Lessee.
9. REPRESENTATIONS AND WARRANTIES.
A) Representations and Warranties of Lessor. Lessor represents and
warrants to Lesse as follows:
(i) Organization. Lessor is a non-profit organization duly organized
and existing in good standing under the laws of the State of California, and it
has full power and authority to carry out all of the transactions contemplated
by this Agreement and all other agreement, certificates or instruments executed
and delivered in connection herewith.
(ii) No Violation. Neither the execution nor delivery of this agreement
or any other agreements, certificates or instruments executed and delivered
herewith, nor the performance of the transactions contemplated hereby constitute
or will constitute a violation of , be in conflict with, or a default under any
term or provision of the governing instruments or Lessor or any agreement or
commitment to which Lessor is bound, or any judgment, decree, order, regulation
or rule of any court or governmental authority, or consent of any federal, state
or local authority is required in connection with the execution and delivery of
this Agreement or any other agreements, certificates or instruments executed and
delivered herewith or with the performance of the transaction contemplated
hereby.
B) Representations and Warranties of Lessee. Lessee represents and
warrants to Lessor as follows:
(ii) Organization. Lessee is duly organized, validly existing and in
good standing under the laws of the State of its incorporation and it has full
power and authority to own property and carry all of the transactions
contemplated by this Agreement, and all other agreements, certificates or
instruments executed and delivered by Lessee in connection herewith.
(ii) Corporation Action; Valid and Binding Agreements. Lessee has taken
all corporate action necessary to authorize the execution and delivery of this
Agreement and all other agreements, certificates or instruments executed and
delivered in connection herewith. Upon execution and delivery, this Agreement
and all other agreements, certificates or instruments executed and delivered by
Lessee in connection herewith will constitute valid and binding agreements of
Lessee enforceable in accordance with their respective terms.
(iii) Litigation and Investigations. There is no action, suit,
proceeding or investigation pending or, to the best of Lessee's knowledge,
threatened against Lessee, its principals or related entities before any court,
administrative agency or other governmental body, and Lessee does not know nor
is aware of any reason for commencement of any such action, proceeding or
investigation.
(iv) Misrepresentation of Material Fact. To the best of Lessee's
knowledge, information and believe, no document or contract that was shown to
Lessor and which in any way affects any of the properties, assets or proposed
transactions of Lessee as such relates to this Agreement, no certificate or
statement furnished by or on behalf of Lessee in connection with this Agreement,
nor this Agreement itself contains any untrue statement of material fact or
omits to state a material fact which would make the statements contained herein
misleading.
<PAGE>
C) Survival or Representations and Warranties. The representations and
warranties contained in this Agreement shall be deemed to be continuing during
the Initial terms of this Agreement, and each Party shall have the duty promptly
to notify the notify the other of any event or circumstance which might
reasonably be deemed to constitute a breach of or lead to a breach of its
warranties or representations hereunder. The waiver by either Party of any
breach of any presentation or warranty under this Agreement shall not constitute
a waiver of any other representation or warranty or of any failure in the future
by the other Party to fulfill such representation or warranty.
10. TERMINATION.
A) Termination of FCC Authorization. Without further liability to
either Lessor or Lessee, this Agreement shall terminate in the event that for
any reason (i) Lessor shall not be licensed on the leased ITFS Channels, or (ii)
the FCC shall terminate or diminish Lessor's authority to lease the ITFS
Channels in accordance with the terms of this Agreement.
B) Termination by Reason of Default or Nonperformance. At the option of
the non-defaulting party, this Agreement may be terminated upon the material
breach or default by the defaulting party of its duties and obligations
hereunder is such breach or default is not cured by such defaulting party and is
breach or default shall continue for a period of thirty (30) consecutive days
after such defaulting party's receipt of notice thereof from the non-defaulting
party. It is understood and agreed that any failure on the part of Lessee to
make any payment required under Paragraph 6 hereof shall be a material breach of
default of its duties and obligations hereunder. It is also understood and
agreed that any consequences resulting from the loss of local participating
receive sites shall not be considered a material breach or default by Lessor of
its duties and obligations hereunder.
C) Remedies to Continue. In the event of termination of this Agreement
pursuant to Paragraph 10(B), such termination shall not affect or diminish the
rights or claims or remedies available in equity or at law to the non-defaulting
party arising by reason of a breach or default of this Agreement. However, no
liability shall arise on the part of Lessor or Lessee upon termination of this
Agreement pursuant to Paragraph 10(A) except where the loss of the FCC license
occurs as a result of the default of either party.
11. TRANSFER OF RIGHTS AND OBLIGATIONS.
Lessee shall have the right to assign its rights under this lease as
collateral for any financing arrangements it makes. Lessee shall also have the
right to pledge the Leased Equipment as collateral security for any loans it
makes; provided, however, that any pledge of the Leased Equipment shall be made
subject to the provisions of this lease. Lessee shall further have the right to
subcontract any portion of its obligations under this Agreement to any
partnership, joint venture, corporation or entity which Lessee may choose,
provided that Lessee gives Lessor notice of any proposed subcontracting and,
provided further, that no such subcontracting shall release Lessee from
fulfilling all of its obligations under this Agreement. Lessee shall have the
right to assign or transfer its rights, benefits, duties and obligations under
this Agreement to a commonly-owned company without the prior consent of Lessor.
Apart from the foregoing, neither party may assign or transfer its rights,
benefits, duties or obligations under this Agreement without the prior written
consent of the other, which consent shall not be unreasonably witheld.
12. INDEMNIFICATION.
A) By Lessor. To the extent permitted by state and federal law and its
charter or by-laws, Lessor shall forever protect, save and keep Lessee and its
permitted successors and assigns harmless and indemnify Lessor against and from
any and all claims, demands, losses, costs, damages, suits, judgments,
penalties, expenses and liabilities or any kind or nature whatsoever, including
reasonable attorneys' fees, arising directly or indirectly out of (i) the
willful misconduct of Lessor, its agents or employees, in
<PAGE>
connection with the performance of this Agreement; (ii) any programming
transmitted by Lessor during any of Lessor's Airtime.
B) By Lessee. To the extent permitted by state and federal law and its
charter or by-laws, Lessor shall forever protect, save and keep Lessee and its
permitted successors and assigns harmless and indemnify Lessor against and from
any and all claims, demands, losses, costs, damages, suits, judgments,
penalties, expenses and liabilities or any kind or nature whatsoever, including
reasonable attorneys' fees, which arise directly or indirectly out of (i) the
negligence or willful misconduct of Lessee, its agents or employees, in
connection with the performance of this Agreement; (ii) any programming
transmitted by Lessee or any of its authorized agents or subcontractors with the
public, third parties and subscribers to the Lessee's programming service; or
(iv) any maintenance, installation or other work performed by Lessee or any
authorized agent or subcontractor under this Agreement.
C) Notice of Claim; Defense of Claim. Each party shall notify the other
of any such claim promptly upon receipt of same. Either party (hereinafter
referred to as appropriate the "Indemnitor" or Indemnitee") shall have the
option to defend, at its own expense, any claims arising under this Paragraph.
In Indemnitor assumes the defense of any such claim, Indemnitee shall delegate
complete and sole authority to the Indemnitor to defend or settle same and
Indemnitee shall cooperate with Indemnitor in the defense thereof.
13) INSURANCE.
A) Policies Required. At its expense, Lessee shall secure and maintain
with financially reputable insurers, one or more policies of insurance insuring
the Leased Equipment and Lessee's utilization of the ITFS Channels against
casualty and other losses of the kinds customarily insured against by firms of
established reputations engaged in the same or similar line of business, or such
types and in such amounts as are customarily carried under similar circumstances
by such firms, including, without limitation: (i) "All Risk" property insurance
covering the ITFS Equipment and the common Equipment to the extent of one
hundred percent (100%) of its full replacement value without deduction for
depreciation: (ii) comprehensive general public liability insurance covering
liability resulting from lessee's operation of the ITFS equipment on an
occurrence basis having minimum limits of liability in an amount of not less
than One Million Dollars ($1,000,000.00) for bodily injury, personal injury or
death to any person or persons in any one occurrence, and not less than Two
Million Dollars ($2,000,000.00) in the aggregate for all such losses during each
policy year, and not less than Three Hundred Thousand Dollars ($300,000.00) with
respect to damage to property; (ii) all workers compensation, automobile
liability and similar insurance required by law.
B) Insurance Policy Forms. All policies of insurance required by this
Paragraph shall, whre appropriate, designate Lessor as either the insured party
or as a named additionally insured party, shall be written as primary policies,
not contributory with and not in excess of any coverage which Lessor shall
carry, and shall contain a provision that the issuer shall give to Lessor thirty
(30) days prior written notice of any cancellation or lapse of such insurance or
of any change in the coverage thereof.
C) Proof of Insurance. Executed copies of the policies of insurance
required under this section or certificates thereof shall be delivered to Lessor
not later than ten (10) after execution of this agreement. Lessee shall furnish
Lessor evidence of renewal of each such policy not later than thirty (30) days
prior to the expiration of the term thereof.
92. RELATIONSHIP OF PARTIES.
By the provisions of this Agreement, Lessor and Lessee intend to enter
an airtime lease relationship and not a joint venture. They will carry out this
Agreement to preserve that intent. Neither party shall represent itself as the
<PAGE>
other party, nor as having any relationship with one another, except as Lessor
and Lessee under the terms of this Agreement.
93. EQUIPMENT PURCHASE.
M) Lessor's Option to Purchase. In the event that this Agreement is
terminated, Lessor shall have the option to purchase the Leased
Equipment used exclusively for Lessor's ITFS license. Any equipment
which is used in a shared fashion (such as transmit antenna, decoders
and combiners) in providing signals other than Lessor's signals are
excluded from this option to purchase. The intent of the purchase
option provided for in Paragraphs 16(A) is to provide Lessor with the
capability to continue to perform on Lessor's ITFS license. The
purchase price shall be the market value of such equipment noted above
as determined by mutual agreement or by averaging the values obtained
from two (2) appraisals, with one appraiser each chosen by Lessor and
Lessee.
N) Lessee's Option to Purchase. If during the terms of this Agreement the
FCC modifies its rules so as to enable Lessee to be licensed to
operate the ITFS frequencies, Lessee shall have a right of first
refusal to acquire such licenses subject to the same terms and
conditions as the right provided for in Paragraph 1(B).
94. NON-DISCLOSURE
Lessor acknowledges that there may be made available to it pursuant to
this Agreement proprietary information of Lessee relating to the encoding and/or
decoding system associated with the ITFS channel equipment and its patented
processes including, but not limited to, improvements, innovations, adaptation,
inventions, results of experimentation, processes and methods, whether or not
deemed patentable, and certain business and marketing techniques (all herein
referred to as "Confidential Information"). Lessor acknowledges that this
Confidential Information has been developed by Lessee at considerable effort and
expense and represents special, unique and valuable proprietary assets of
Lessee, the value of which may be destroyed by unauthorized dissemination.
Accordingly, Lessor covenants and agrees that, except as may be required for the
performance of this Agreement or by law or court order, neither it nor any of
its agents or affiliates shall disclose such Confidential Information to any
third person, firm, corporation or other entity for any reason whatsoever, such
undertaking to be enforceable by injunctive or other equitable relief to prevent
any violation or threatened violation thereof.
95. NON-COMPETITION
During the term of this Agreement, Lessor agrees not to transmit
programming or to lease or sublease any channel capacity on its ITFS Facilities
for the transmission of programming that is competitive with the programming
transmitted by Lessee.
96. FORCE MAJEURE
If by reason of Force Majeure either party is unable in whole or in
part to perform its obligations hereunder, the party shall not be deemed in
violation of default during the period of such inability. As used herein, the
phrase "Force Majeure", shall mean the following: act of God, acts of public
enemies, orders of any branch of the government of the United States of America,
any state or any political subdivisions, thereof which are not the result of a
breach of this Agreement, orders of any military authority insurrections, riots,
epidemics, fires, civil disturbances, explosions, or any other cause or event
not reasonably within control of the adversely affected party.
97. CONDITION PRECEDENT
This Agreement is conditional on the issuance of a Final Order by the
FCC granting Lessor a construction permit for the ITFS Channels in the Market
from the Transmission Site. By "Final Order" the parties mean an action or order
of the FCC which is not reversed, stayed, enjoined, vacated, set aside, annulled
or suspended and with respect to which no timely-filed request for
administrative or judicial review is pending and as to which the time for filing
any such request, or for the FCC to set aside the action on its own motion, has
expired.
<PAGE>
98. NOTICE
Any notice required to be given to Lessor under any provision of this
Agreement shall be delivered personally or by certified mail to Lessor at the
address first written above. Any notice required to be given to Lessee under any
provision of this Agreement shall be delivered personally or by certified mail
to Lessee at the address first written above.
99. SEVERABILITY
Should any court or agency determine that any provision of this
Agreement is invalid, the remainder of the Agreement shall remain in effect.
100. WAIVER
A waiver by either Lessor or Lessee of a breach of any provision of
this Agreement shall not be deemed to constitute a waiver of any preceding or
subsequent breach of the same provision or of any other provision.
101. PAYMENT OF EXPENSES AND SIGNING FEES
A signing fee of One Dollar ($1) shall be paid to Lessor. Lessee shall
pay all costs and expenses incident to fulfilling or modifying this Agreement,
such as, attorneys' fees or, if necessary, any travel expenses approved in
advance by Lessee, FCC filing fees, and engineering costs.
102. VENUE AND GOVERNING LAW
Venue for any cause of action brought by or between Lessor and/or
Lessee relating to this Agreement shall be in California and all provisions of
this Agreement shall be construed under the laws of the State of California and
County of Lessor.
103. COUNTERPARTS
This Agreement may be executed in one or more counterparts each of
which shall be deemed an original, but all of which shall constitute one and the
same instrument, and shall become effective when each of the parties hereto
shall have delivered to it this Agreement duly executed by each of the other
parties hereto.
104. ENTIRE AGREEMENT
This Agreement constitutes the entire Agreement between the parties and
supersedes all prior oral or written provisions of any kind. The parties further
agree that this Agreement may only be modified by written Agreement signed by
both parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
this day of July 1st, 1999.
SHEKINAH NETWORK
By: ______________________________
Name: Charles J. McKee
Title: President
WORLD WIDE WIRELESS COMMUNICATIONS, INC.
By: ______________________________
Name: Douglas P. Haffer
Title: President
<PAGE>
Address for Notices:
Shekinah Network
14875 Powerline road
Atascadero, CA 93422
Phone/Fax: (805) 438-3341
Attn: Charles McKee, President
Gardner, Carton & Douglas
Attn: Laura Mow
1301 K Street, N.W., Suite 900
Washington, D.C. 20005
Phone: (202) 408-7100
Fax: (202) 289-1504
World Wide Wireless Communications, Inc.
One Post Street Suite 2600
San Francisco, CA 94104
Phone: (415) 981- 7777
Fax: (415) 391-3199
<PAGE>
EXHIBIT A
Schedule of Airtime
<PAGE>
EXHIBIT B
Receive Sites
There shall be attached hereto and incorporated by reference a copy of
FCC Form 330 Section IV listing Lessor" receive sites.
<PAGE>
EXHIBIT C
Leased Equipment
Noted below is a list of equipment that Lessee is leasing to Lessor:
(13) Four (4) ITFS tansmitters and related hardware
(14) Lessor's ITFS receive site antennas and related hardware
*(3) Combining network, transmission line and antenna
*Common Equipment
<PAGE>
EXHIBIT D
Service and Royalty Fees
1. Lessor's Service Fee
Services Provided Annual Fee
----------------- ----------
(s) Lease of Leased Equipment [6(A)] $1.00
(t) Maintenance of Leased Equipment [3(D)] $1.00
(u) Lease of space at Primary Transmission Site [3A)] $1.00
2. Lessee's Subscriber Royalty Fee
Lessee shall pay Lessor a minimum monthly Transmission Fee 5% of the system's
Gross receipts or a monthly minimum payment of $500 per month whichever is
greater.
Payment shall be as follows: Commencing on the Execution (Effective) Date and as
defined in Paragraph 6)B, payments for each month shall be made by the twentieth
(20th) day of the following month.
<PAGE>
EXHIBIT E
Programming
In addition to digital data services, such as the Internet or Intranet, the
following is a list of video programming services Lessee may provide over
Lessee's System.
TLC - The Leaning Channel
TWC - The Weather Channel
Lifetime
ESPN - Sports
AMC - American Movie Classics
SCOLA
WHTN - World Harvest Television Network
ECO - Galavision
CNN - Cable News Network
CNN - Headline News
C-Span I
C-Span II
BET - Black Entertainment Network
CNBC - Consumer News & Business Channel
Nickelodeon
The Discovery Channel
A&E - Arts and Entertainment
The Family Channel
The Disney Channel
PBS - Public Broadcasting Service
TBN - Trinity Broadcasting Network
TNIN - The New Inspirational Network
ME/U - Mind Extension Network
The International Channel
BRAVO Network
The Travel Channel
Family Network
Keystone Inspirational Network
LEASE AGREEMENT
BETWEEN
WORLD WIDE WIRELESS COMMUNICATIONS, INC.
AND
SHEKINAH NETWORK
Key West, Florida
ITFS EXCESS CAPACITY AIRTIME LEASE AGREEMENT
THIS AGREEMENT is made this 1st day of August 1999 by Shekinah Network
(hereinafter referred to as "Lessor") having its principal place of business at
14875 Powerline Road, Atascadero, CA 93422 and World Wide Wireless
Communications, Inc. (hereinafter referred to as "Lessee") having its principal
place of business at One Post Street, Suite 2600 San Francisco, CA 94104.
WHEREAS, the Federal Communications Commission ("FCC") has authorized
licenses for Instructional Television Fixed Service ("ITFS") channels and has
authorized the licensee to lease excess capacity to non-ITFS users; and
WHEREAS, Lessor has been granted an FCC License for (call sign) WNC-798
(the "License") for the Channel group C1-4 (the "ITFS Channels") in Key West,
Florida ("The Market"); and
WHEREAS, Lessee is in the business of providing voice, video, data and
other services via microwave transmission in the Market Area and desires to
lease the excess ITFS capacity of the ITFS channels; and
WHEREAS, Lessor has determined that there will be excess airtime
capacity available on the ITFS Channels and desires to lease this excess airtime
capacity to Lessee.
NOW, THEREFORE, in consideration of the mutual promises, undertakings,
covenants and conditions set forth herein, the Lessor and Lessee do hereby agree
and warrant as follows:
1. TERM OF AGREEMENT
A. Initial Term. This Agreement shall be effective upon the date
of its execution and shall extend for an initial term of five
(5) years (the "Initial Term").
B. Renewal Term Provided that the License is renewed by the FCC,
Lessee shall have the right to extend this Agreement on its
then existing terms and conditions for one (1) additional five
(5) year term (the "Renewal Term"). The Renewal Term shall
automatically go into effect upon the conclusion of the
Initial Term unless Lessee notifies Lessor at least one
hundred eighty days (180) before the end of the Initial Term
that Lessee does not wish to extend this Agreement.
C. New Lease Agreement/Right of first Refusal.
(1) Providing that Lessor's FCC license remains in good
standing and/or Lessor seeks to renew such license, Lessee and
Lessor shall negotiate in good faith for a new excess capacity
airtime lease agreement (hereinafter referred to as "New Lease
Agreement") no later than one hundred eighty days (180) prior
to the end of the latter of (i) Initial Term or (ii) the
Renewal Term if the Agreement is extended for the Renewal
Term.
(2) If Lessor elects to not reasonably pursue a New Lease
Agreement with Lessee, then Lessor shall so notify Lessee in
writing of such intent no later than one hundred eighty (180)
days prior to the end of the Renewal Term.
<PAGE>
(3) If Lessor and Lessee do not enter into a New Lease
Agreement, Lessor grants Lessee a right of first refusal on
any competing proposals for lease agreements or transfers or
assignments of any part of the ITFS Channels received by
Lessor during the twelve (12) months following the expiration
of the latter of (i) the Initial Term or (ii) the Renewal
Term, if the Agreement is extended for the Renewal Term. If
any acceptable offer to lease or acquire the ITFS Channels is
made to Lessor, Lessor shall give written notice to Lessee
describing the person to whom the proposed lease or transfer
is to be made, the fees, charges, rental or other
consideration to be received fro the lease or transfer, the
terms thereof and generally the relevant other terms and
conditions of the lease or transfer. Lessee shall have a
period of thirty (30) days after its receipt of such notice
from Lessor in which to elect, by giving written notice to
Lessor, to lease or, if eligible, obtain any or all of the
ITFS Channels for the same fees, charges, rental or other
consideration for which Lessor proposed to lease or transfer
to the third person.
(i) The fees, charges, rental or consideration shall be paid
by such third person or Lessee in cash.
(ii) If Lessor does not believe Lessee's stated offer is in an
amount fairly equivalent to the fair value of the
consideration payable by the third person and so notifies
Lessee in writing within seven (7) days after Lessor's receipt
of Lessee's notice of election to so lease or purchase, Lessee
may within five (5) days after its receipt of such notice from
Lessor elect to refer such question for determination by an
impartial arbitrator and the right of first refusal of Lessee
shall then be held open until (5) days after Lessee is
notified of such determination. Such arbitrator shall be
chosen either by agreement of Lessee and Lessor at the time
such question arises, or, at the option of either party, by
referring the question to the American Arbitration Association
with instructions that the American Arbitration Association
select a single arbitrator under a request from the parties
for expedited and accelerated determination. The determination
of the arbitrator chosen under either option contained in this
subparagraph shall be final and binding upon Lessee and
Lessor. The parties shall share equally in the costs and fees
of the arbitration
(iii) In the event Lessee shall elect to exercise its right of
first refusal, the lease agreement or other transfer or
assignment shall be consummated within thirty (30) days of the
latest of: (1) the day on which Lessor received notice of
Lessee's election to exercise the right of first refusal; (2)
the day upon which any question required to be determined by
the arbitrator hereunder has been determined; or (3) the date
of any FCC approval in the case of assignment or transfer; or
at such other time as may be mutually agreed. The right of
first refusal is terminated either by the lease or other
transfer to Lessee as provided herein or by notice to Lessee
of the Lessor's proposal to lease or otherwise transfer the
ITFS Channels or any part to a third person and Lessee's
unwillingness or failure to meet and accept such a bona fide
offer pursuant to the times and procedures as set forth above;
provided that such proposed lease or transfer is consummated
at the same fees, charges, rental or other consideration and
upon the same terms as to which such right of first refusal
applied, within thirty (30) days after Lessee's right of first
refusal had expired or had been specifically waived by written
notice given to Lessor by Lessee, or within thirty (30) days
following FCC approval in the case of assignment or transfer.
<PAGE>
C) Operation During End of Term. If Lessor and Lessee do not
enter into New Lease Agreement before the end of the Initial
Term, Lessee shall cease leasing the ITFS Channels on the last
day of the Initial Term.
D) No Rights Beyond Term of Licenses. Lessor and Lessee agree
that this Agreement shall not give rise to any rights or
remedies beyond the expiration of any FCC license necessary
for the continued operation of the ITFS Channels. Provided,
however, that while this Agreement is in effect, Lessor shall
obtain and maintain in force all licenses, permits and
authorizations required or desired in connection with the use
of the ITFS Channels. Lessor shall take all necessary steps to
renew the licenses for the ITFS Channels and shall not commit
any act or engage in any activity which could reasonably be
expected to cause the FCC to impair, restrict, revoke, cancel,
suspend or refuse to renew the ITFS licenses. Lessor shall
take all reasonable steps to comply with the Communications
Act of 1934, as amended and the rules and regulations of the
FCC, and shall file all reports, schedules and/or forms
required by the FCC to be filed by Lessor. All expenses,
including attorneys fees and filing fees, incurred in
preparing and filing such reports, schedules and/or forms
required by the FCC shall be paid by the Lessee.
2. ALLOCATION OF AIRTIME.
A. Excess Capacity Airtime. To the extent allowed by the
FCC rules and regulations and any amendments thereof,
Lessor agrees to lease to Lessee the exclusive use of
all excess capacity not utilized by Lessor ("Excess
Capacity Airtime").
B. Lessor's Primary Airtime. During analog transmission
over the ITFS Channels, Lessor reserves for its
exclusive use a minimum of twenty (20) hours of
airtime per-channel per-week to be used for its ITFS
scheduled programs. During digital transmission ovr
the ITFS Channels, Lessor shall have the exclusive
use of 12.5% of the total capacity available on the
Lessor's ITFS Channels. This airtime shall be know as
"Lessor's Primary Airtime".
C. Schedule of Airtime. The schedule which depicts the
agreement of the parties as to use of Lessor's
Channels shall be attached hereto and made a part
hereof as Exhibit A which is subject to change upon
agreement by both parties.
D. Lessee's use of its Excess Capacity Airtime. Lessee
shall have the right to utilize its Excess Capacity
Airtime for any purpose allowed or authorized by the
FCC including but not limited to voice, video and
data transmission.
E. Alternate Use and Vertical Blanking Intervals. Lessor
shall have the right to use the second audio carrier
("SAP") and vertical blanking intervals. ("VBI") on
which Lessor's ITFS programming is being transmitted.
Lessee shall at all times have the right to use the
VBI and SAP not utilized by Lessor and 100% of the
response frequencies associated with the ITFS
Channels. Lessor shall be responsible for any
equipment needed to utilize the VBI and/or SAP and
such equipment shall be compatible with Lessee's
system.
F. Lessor's Use of ITFS Channels. Lessor agrees that its
program services and airtime use will not harm or
interfere with Lessee's current or future signal
paths utilized within Lessee's System for program
encryption, pilot carrier signaling and other
technical needs utilized for the operation of and
such services provided by Lessee's System. Nor will
Lessor, by its own action, or through a third party,
utilize any part of its licensed frequency spectrum
to create or
<PAGE>
operate a service that is in competition with
current, planned or future services provided by
Lessee's System. Lessor agrees to use its Primary
Airtime in accordance with the FCC's rules and
regulations. Lessor shall not take or fail to take
any action which may have a material adverse effect
on Lessee's right to utilize its Excess Capacity
Airtime.
G. Expanded System Capacity. Lessee shall have the right
at anytime to require Lessor to file with the FCC any
necessary application to expand the channel capacity
to Lessor's station to enable it to carry more than
one video signal per channel or digital data
services; provided however, before Lessee can
exercise this right, it must demonstrate to the
Lessor's reasonable satisfaction that such
modification will not materially degrade the
performance of the station nor impair signal quality
at the registered ITFS receive sites. Once such
modification has been constructed, the modified
facilities shall automatically be considered a part
of this agreement and subject to all terms and
conditions hereof. It is understood that Lessee shall
have the full-time use of the Expanded Channels to
the extend permitted by FCC rules.
3. TRANSMISSION SITE AND FACILITIES.
A. Primary Transmission Site. Lessor's ITFS Channels are
located at Key West, FL, Lessee agrees to provide
Lessor space at the Primary Transmission site for
Lessor's audio and video transmission equipment which
shall not exceed on rack. Such space shall be leased
to Lessor pursuant to Exhibit D hereto. This site
shall hereinafter be described as the "Primary
Transmission Site". At Lessee's sole expense, Lessee
shall contract for a lease of space at the
Transmission Site upon such terms as the parties
agree. The Transmission Site shall comply with the
standards, specifications and regulations of the FCC
rules and orders pertaining to Lessor's ITFS license.
B. Relocation of Transmission Site.
(i) Lessor acknowledges that the location of the
Primary Transmission Site for ITFS Channels is critical to the
Lessee's business and agrees that it will not relocate the
transmission facilities for ITFS Channels from the Primary
Transmission Site without Lessee's prior written consent.
(ii) Lessor further acknowledges that possibility
that, as a result of currently unforeseen events, the Primary
Transmission Site may not be the optimum site for the location
of the ITFS Channels or Lessee's business throughout the term
of this Lease Agreement. Lessor therefore agrees that if at
any time or from time to time Lessee requests in writing that
the transmission facilities for the ITFS Channels be
relocated, Lessor shall file with the FCC and any other
regulatory body having jurisdicition over the ITFS Channels
all applications, amendments, and requests for modification
that may be necessary to obtain any necessary consents to
permit such relocation to such location within or adjacent to
the Market as may be requested by Lessee; provided, however,
that Lessor shall not be obligated to submit or procecute any
application, amendment, or request for modification that
Lessor reasonably determines, upon advice of counsel contained
in a written opinion, would be in violation of the terms of
the License, any statute, rule, or regulations regarding the
operation of the ITFS Channels or the submission of materials
to the FCC, or any of its obligations as an ITFS licensee; and
provided, further, that any such relocation will not result in
loss of service to Lessor's registered receive sites served by
the transmission facilities in the event that the
authorization is obtained to relocate the ITFS Channels to the
location requested by Lessee, Lessor shall relocate such
channels to such new location as soon as reasonably possible
after authorization is obtained. Lessee shall bear reasonable
costs associated
<PAGE>
with such relocation, including engineering and construction,
and all reasonable costs associated with obtaining FCC or any
other regulatory approval therefore.
(iii) Lessor agrees to file modification applications
requested by Lessee. Such modifications may include but shall
not be limited to the following: power increase or decrease,
polarization, transmit antenna patterns, digital, two-way
(return path) use of the ITFS Channels, boosters, beam benders
or repeaters, cells, sectorization, channel swaps, channel
loading, channel shifting and application within five (5)
business days or receipt of the modification application from
Lessee or during any FCC designated filing window. Lessee will
use reasonable efforts to provide Lessor with the engineering
for the modification thirty (30) days prior to the request for
filing. If Lessor believes that such modification will have an
adverse effect on Lessor's ability to provide its services to
its receive sites, Lessor agrees to file the modification
application as presented by Lessee and within the time limit
requested by Lessee; however, Lessee agrees not to implement
construction and Lessor agrees not to withdraw the application
until the parties have adequately addressed and resolved the
potential material adverse effect or the matter has been
submitted to arbitration pursuant to Section 16 and a final
decision has been rendered by arbitrator. Although Lessee
intends to file such modification applications, it may elect
not to construct the Channels in that manner and may desire to
utilize the Channels as currently licensed. A copy of the
modification application, bearing the FCC's date stamp, shall
be mailed to Lessee by Lessor, within fourteen (14) days of
the filing of the modification application. Lessee shall be
solely responsible for all engineering and legal costs
associated with the preparation, review and filing of the
modification application. In the event that any license
modification requested by Lessee requires receive site
upgrades in order for Lessor's receive sites to continue to
receive Lessor's services, then Lessee agrees to pay for all
costs to complete such upgrade prior to implementing the
license modification.
C. System Construction. Lessee shall within a reasonable
period of time, but not later than six (6) months after the
FCC grant of digital authority for the ITFS Channels, purchase
equipment such as the antenna, waveguide or transmitters
specified on the authorization for the ITFS Channels. At
Lessee's expense, Lessee shall purchase and install such
transmitters, transmission line, modulators, antennas and
other equipment as required to operate the ITFS Channels in
accordance with the provision of such authorization. Any
equipment so used in such construction shall be leased to
lessor pursuant to Paragraph 5 hereof. Such equipment is
hereinafter referred to as the "Leased Equipment". Lessee
shall retain title to the Leased Equipment except as noted by
Paragraph 15 herein.
D. Maintenance of Transmission Equipment. At Lessee's expense
and subject to Lessor's right to supervise the maintenance of
this equipment, Lessee shall maintain and operate the Leased
Equipment during the terms of this Agreement for a nominal
fee. Lessee shall also pay all taxes and other charges
assessed against the Leased Equipment.
E. Transmission of Programming. At no cost or expense to
Lessor, Lessee shall provide the necessary labor and equipment
capabilities to transmit on the ITFS Channels programming
required to be carried pursuant to this Agreement such as
Lessor's ITFS programming and TBN. Lessee shall also comply
with Lessor's instructions regarding the transmission of such
programming such as the dates and times to transmit
programming.
F. Interference. Lessee shall operate the Leased Equipment so
that such operation does not create or increase interference
with electronic transmission of any other FCC licensees
entitles to protection under FCC rules and regulations. If
Lessee's entitled to protection under FCC rules and
regulations. If Lessee's operation of the Lease
<PAGE>
Equipment does so create or increase interference, Lessee
shall pay all of the reasonable engineering and legal fees
necessary to resolve the interference problem so created.
G. Alterations and Attachments. Lessee, at its own expense,
may make alterations of or attachments to the ITFS equipment
or the common equipment as defined in Exhibit C (including the
installation of encoding and/or addressing equipment) as may
be reasonably required from time to time by the nature of its
business; provided however, that such alterations or
attachments do not interfere with Lessor's signal or ongoing
operations or violate any FCC rules or regulations; and
provided further that FCC authorization, if required, is
obtained in advance of any such alteration or attachment at
the sole cost of Lessee. to the extent any FCC authorization
pertaining to the ITFS equipment is required, Lessor agrees to
use its best efforts to obtain such authorization.
H. Licensee Control and Liability. Nothing herein shall
derogate from such licensee control of operations of the ITFS
Channels that Lessor, as an FCC licensee, shall be required to
maintain and Lessee acknowledges the reservation by Lessor of
such control. Lessor shall at all times retain ultimate and
exclusive responsibility for the operation and control of the
ITFS Channels including policy decisions.
4. LESSOR'S RECEIVE SITES.
Attached hereto as Exhibit B is list of the registered receive sites
designated by Lessor to receive its ITFS programming and to be installed at the
expense of Lessee. Those receive sites so listed shall be installed with a
Standard Installation. If as the result of any relocation of the Primary
Transmit Site, the equipment at Lessor's existing registered receive sites must
be reoriented, Lessee shall pay the cost of same. As used herein for the
purposes of this Agreement, the phrase "Standard Installation" shall mean an
installation consisting of the placement of the ITFS/MMDS receiving antenna at
an elevation (not to exceed thirty [30] feet above the base mounting location)
which could normally receive the line-of-sight transmission from the
Transmission Site; the coupling thereto of a block-down converter; and a
sufficient amount of transmission line (coaxial cable) to connect the received
ITFS programming to the input of (i) one classroom designated by Lessor to
receive the ITFS programming or (ii) the receive site internal/external
distribution system. Also, if as the result of any relocation of the Transmit
Site, the equipment at Lessor's existing receive sites must be reoriented,
Lessee shall pay the cost of same. Lessee also agrees that for digital
transmission of the ITFS Channels Lessee will purchase and install at Lessee's
expense, one single-point modem to receive its ITFS programming.
5. LEASE OF EQUIPMENT.
A) Lessor's Lease of Leased Equipment. For a nominal fee, Lessor shall
lease from Lessee the Leased Equipment during the terms of this Agreement. A
list of this equipment is attached hereto as Exhibit C and incorporated by
reference herein. Lessor shall have no responsibility for the loss of or damage
to the Leased Equipment during the terms of this Agreement and Lessee shall bear
all such responsibility.
6. FEES.
A) Lessor's Service Fee. In consideration of the lease of the Leased
Equipment, and for its share of the projected costs to maintain the Transmission
Site and the Lease Equipment, Lessor shall pay Lessee an annual fee provided for
in Exhibit D.
B) Subscriber Royalty Fees or Percentage. Beginning on the Execution
Date of this Agreement and continuing thereafter during the Initial Term of this
Agreement, Lessee shall pay to Lessor the Subscriber Royalty Fee, System
Percentage or monthly minimum, whichever is greater as set out in Exhibit D
which is attached herewith and incorporated by reference herein. If the
Execution Date shall be a date other than the first day of a calendar month,
then the Subscriber Royalty Fee for the partial month shall be paid on a
proportionate basis. A late fee of 10% (ten percent) will be assessed to past
due accounts, and
<PAGE>
a finance charge of one and one-half percent (1.5%) per month will be assessed
in addition to the late fee until paid.
C) Notice of Construction and Required Certificate. Within thirty (30)
days of completion of construction at the Transmission Site, Lessee shall notify
Lessor of such completion of construction in writing. Within thirty (30) days of
the end of each month in which Excess Capacity Airtime is leased hereunder,
Lessee shall provide Lessor with a certificate, certified as accurate and
correct by an authorized agent of Lessee, showing the number of subscribers
served during such month.
D) Right to Audit. Lessee shall for a period of three (3) years after
their creation, keep, maintain and preserve complete and accurate records and
accounts, including all invoices, correspondence, ledgers, financial and other
records pertaining to Lessee's use of Excess Capacity Airtime and Lessor's
charges hereunder; and such records and corporate accounts shall be available
for inspection and audit at Lessee's corporate offices or at Lessee's offices in
the Market, as designated by Lessee, at any time or times during the term of
this Agreement or within ninety (90) days thereafter, during reasonable business
hours, by Lessor or its nominee. In the event that there is discovered an
underpayment of the Subscriber Royalty Fee as defined in Paragraph 6 (B) above,
Lessee shall pay to Lessor a penalty equal to ten percent (10%) of the amount of
each such underpayment. All information obtained by Lessor during any audit
herein shall be maintained by Lessor in strict confidence.
7. PROGRAMMING.
A) Control Over Programming.
(i) Program Content. Lessee intends that only programming of a sort
which would not serve to place Lessor's reputation in the community in jeopardy
will be transmitted by Lessee on the ITFS Channels. In an attempt to minimize
disputes, recognizing the difficulties inherent in specifying exact standards
herein, it is agreed that Lessee shall have the right to market the programming
provided by the networks and services listed on Exhibit E. If, however, the
programming content of any networks and services listed on Exhibit E materially
changes, Lessor shall have the right, upon ninety (90) days notice, to deny
Lessee the right to continue transmitting such programming if Lessor would have
the right to deny Lessee the right to transmit such programming under the
provisions of this paragraph in the first instance. If Lessee proposes to
transmit the programming of any new programming service, the Lessee shall notify
Lessor in writing specifying in detail the nature of the new programming service
and Lessor shall have the right, upon written served upon Lessee within thirty
(30) days after Lessor's receipt of any such notice from Lessee, to deny to
Lessee the right to transmit such service if such programming is obscene and/or
contradicting local, state and/or federal laws or otherwise violates any
federal, state or local laws or regulations. If no such denial notice is
received by Lessee within such thirty (30) days, lessee shall be authorized to
transmit all such services for which no denial notice is received. There shall
be no reduction in fees required under this Agreement for any such programming
not permitted to be transmitted.
B) Availability of Programming. It is understood by Lessee and Lessor
that there is expected to be no direct out-of-pocket annual costs for the
acquisition of the qualified ITFS educational programming for Lessor's use
during Lessor's Primary Airtime on the ITFS channels, based on current plans. In
the event that this ITFS educational programming either; (1) ceases to be
available, or, (2) becomes available only at a fee, then Lessor may incur direct
out-of-pocket costs in Lessor's acquisition of ITFS programming. Lessee agrees
to provide its best efforts to assist Lessor in the acquisition of alternative
programming, if necessary. Additionally, Lessee agrees to make payment to Lessor
for the actual, direct programming costs incurred. If any; If Lessor, after
expending its best efforts, is unable to obtain suitable ITFS programming for a
cost equal to the amount to be paid by Lessee, Lessor and Lessee shall use their
best efforts to reach agreement on modifications to this Agreement to avoid any
un-reimbursed ITFS programming costs to Lessor. If no such agreement can be
reached, Lessor may terminate this agreement. In the case of such termination,
Lessor shall use its best efforts (with out-of-pocket costs of Lessor to be paid
by Lessee, with Lessee's prior approval) to transfer the license for the ITFS
Channels to another qualified educational entity, subject to FCC approval, with
the intent of assigning this Agreement from Lessor to the new educational
entity.
<PAGE>
C) Integration of Lessor's Programming. Lessee agrees to integrate
Lessor's programming into the overall communications service offered to
subscribers, without cost to Lessor. This integration shall include, but not be
limited to, listing Lessor's material in any program guides produced by Lessee
for subscribers.
D) Carriage of TBN. In the event that Lessor's ITFS Channels are used
for analog video transmission and TBN is not transmitted on a local VHF or UHF
station, with a market coverage equivalent to both area and signal quality of
our ITFS channels, and Lessee does not have local off-air insertion as part of
its standard installation, then, if so designated by Lessor, Lessee agrees to
transmit on one of the ITFS Channels the programming of Trinity Broadcasting
Network ("TBN") during those time periods such channel is not used for Lessor's
ITFS programming ("TBN Airtime") provided that Lessee is not required to pay a
fee for carriage of TBN. In the event that Lessee is permitted to program the
hours previously occupied by TBN, then Lessee shall increase, in proportion to
the increase in Excess Capacity Airtime, the amount of minimum fees and
subscriber royalty fees payable under the provision 6 (B) of this agreement
during the remainder of the term(s) of the agreement. For purposes of
calculating any such proportionate increase, the parties acknowledge and agree
that the minimum fee and subscriber royalty fee agreed to herein are based on
Lessee's equivalent use of three full-time ITFS channels.
E) Station Identification. During Lessee's use of Lessor's excess
channel capacity, Lessee shall transmit Lessor's call sign for each respective
station as required by the FCC.
8) PROCECUTION OF PETITIONS, AUTHORIZATIONS AND LICENSES.
A) Best Efforts to Secure Approval of this Agreement. The parties
recognize that certain approvals will be required from the FCC in order to
effectuate this Agreement. Both parties shall use their best efforts to prepare,
file and prosecute before the FCC all petitions, waivers, applications and other
documents necessary to secure any FCC approval required to effectuate this
Agreement. Lessee shall assist in the preparation and prosecution of such
applications and as provided for herein, shall pay all filing fees, attorneys'
fees, engineering fees, and all other expenses in connection therewith. Lessor
also agrees to cooperate with Lessee's efforts to cause other ITFS, OFS, MDs and
MMDS operators to co-locate at the Transmission Site. Notwithstanding anything
in this Agreement to the contrary, it is understood that no filing shall be made
with the FCC with respect to this Agreement unless both parties have reviewed
such filing and consented in writing to its submission, such consent not be
unreasonably withheld.
B) Further Efforts. Throughout the Initial Term of this Agreement,
Lessor shall use its best efforts to obtain and maintain in force all licenses,
permits and authorizations required for Lessee and Lessor to use the ITFS
Channels as contemplated by this Agreement. Lessee shall be responsible for all
cash expenses incurred to obtain and maintain in force such licenses, permits
and authorizations. When mutually agreed by the parties and at Lessee's sole
expense, Lessor shall apply for, and use its best efforts to obtain those
reasonable license modifications which would assist Lessee in its business.
Lessor also shall consider filing, at Lessee's sole expense, such reasonable
protests, comments or other petitions to deny any other ITFS, MMDS, MDS and/or
OFS applications or amendments as may be requested by Lessee in the mutual best
interests of the parties and the public. Lessor and Lessee shall promptly notify
each other of any event of which it has knowledge that may affect any of the
licenses, permits or authorization affecting the ITFS Channels.
C) Attorneys' Fees. With respect to any legal work conducted pursuant
to Paragraph 8(A) and (B) above, Lessee shall be responsible for all attorneys'
fees in connection therewith and shall make payments directly to the attorney.
However, any attorney fees paid by Lessee shall be approved in advance by
Lessee.
9. REPRESENTATIONS AND WARRANTIES.
A) Representations and Warranties of Lessor. Lessor represents and
warrants to Lesse as follows:
<PAGE>
(i) Organization. Lessor is a non-profit organization duly organized
and existing in good standing under the laws of the State of California, and it
has full power and authority to carry out all of the transactions contemplated
by this Agreement and all other agreement, certificates or instruments executed
and delivered in connection herewith.
(ii) No Violation. Neither the execution nor delivery of this agreement
or any other agreements, certificates or instruments executed and delivered
herewith, nor the performance of the transactions contemplated hereby constitute
or will constitute a violation of , be in conflict with, or a default under any
term or provision of the governing instruments or Lessor or any agreement or
commitment to which Lessor is bound, or any judgment, decree, order, regulation
or rule of any court or governmental authority, or consent of any federal, state
or local authority is required in connection with the execution and delivery of
this Agreement or any other agreements, certificates or instruments executed and
delivered herewith or with the performance of the transaction contemplated
hereby.
B) Representations and Warranties of Lessee. Lessee represents and
warrants to Lessor as follows:
(ii) Organization. Lessee is duly organized, validly existing and in
good standing under the laws of the State of its incorporation and it has full
power and authority to own property and carry all of the transactions
contemplated by this Agreement, and all other agreements, certificates or
instruments executed and delivered by Lessee in connection herewith.
(ii) Corporation Action; Valid and Binding Agreements. Lessee has taken
all corporate action necessary to authorize the execution and delivery of this
Agreement and all other agreements, certificates or instruments executed and
delivered in connection herewith. Upon execution and delivery, this Agreement
and all other agreements, certificates or instruments executed and delivered by
Lessee in connection herewith will constitute valid and binding agreements of
Lessee enforceable in accordance with their respective terms.
(iii) Litigation and Investigations. There is no action, suit,
proceeding or investigation pending or, to the best of Lessee's knowledge,
threatened against Lessee, its principals or related entities before any court,
administrative agency or other governmental body, and Lessee does not know nor
is aware of any reason for commencement of any such action, proceeding or
investigation.
(iv) Misrepresentation of Material Fact. To the best of Lessee's
knowledge, information and believe, no document or contract that was shown to
Lessor and which in any way affects any of the properties, assets or proposed
transactions of Lessee as such relates to this Agreement, no certificate or
statement furnished by or on behalf of Lessee in connection with this Agreement,
nor this Agreement itself contains any untrue statement of material fact or
omits to state a material fact which would make the statements contained herein
misleading.
C) Survival or Representations and Warranties. The representations and
warranties contained in this Agreement shall be deemed to be continuing during
the Initial terms of this Agreement, and each Party shall have the duty promptly
to notify the notify the other of any event or circumstance which might
reasonably be deemed to constitute a breach of or lead to a breach of its
warranties or representations hereunder. The waiver by either Party of any
breach of any presentation or warranty under this Agreement shall not constitute
a waiver of any other representation or warranty or of any failure in the future
by the other Party to fulfill such representation or warranty.
10. TERMINATION.
A) Termination of FCC Authorization. Without further liability to
either Lessor or Lessee, this Agreement shall terminate in the event that for
any reason (i) Lessor shall not be licensed on the leased ITFS Channels, or (ii)
the FCC shall terminate or diminish Lessor's authority to lease the ITFS
Channels in accordance with the terms of this Agreement.
<PAGE>
B) Termination by Reason of Default or Nonperformance. At the option of
the non-defaulting party, this Agreement may be terminated upon the material
breach or default by the defaulting party of its duties and obligations
hereunder is such breach or default is not cured by such defaulting party and is
breach or default shall continue for a period of thirty (30) consecutive days
after such defaulting party's receipt of notice thereof from the non-defaulting
party. It is understood and agreed that any failure on the part of Lessee to
make any payment required under Paragraph 6 hereof shall be a material breach of
default of its duties and obligations hereunder. It is also understood and
agreed that any consequences resulting from the loss of local participating
receive sites shall not be considered a material breach or default by Lessor of
its duties and obligations hereunder.
C) Remedies to Continue. In the event of termination of this Agreement
pursuant to Paragraph 10(B), such termination shall not affect or diminish the
rights or claims or remedies available in equity or at law to the non-defaulting
party arising by reason of a breach or default of this Agreement. However, no
liability shall arise on the part of Lessor or Lessee upon termination of this
Agreement pursuant to Paragraph 10(A) except where the loss of the FCC license
occurs as a result of the default of either party.
11. TRANSFER OF RIGHTS AND OBLIGATIONS.
Lessee shall have the right to assign its rights under this lease as
collateral for any financing arrangements it makes. Lessee shall also have the
right to pledge the Leased Equipment as collateral security for any loans it
makes; provided, however, that any pledge of the Leased Equipment shall be made
subject to the provisions of this lease. Lessee shall further have the right to
subcontract any portion of its obligations under this Agreement to any
partnership, joint venture, corporation or entity which Lessee may choose,
provided that Lessee gives Lessor notice of any proposed subcontracting and,
provided further, that no such subcontracting shall release Lessee from
fulfilling all of its obligations under this Agreement. Lessee shall have the
right to assign or transfer its rights, benefits, duties and obligations under
this Agreement to a commonly-owned company without the prior consent of Lessor.
Apart from the foregoing, neither party may assign or transfer its rights,
benefits, duties or obligations under this Agreement without the prior written
consent of the other, which consent shall not be unreasonably witheld.
12. INDEMNIFICATION.
A) By Lessor. To the extent permitted by state and federal law and its
charter or by-laws, Lessor shall forever protect, save and keep Lessee and its
permitted successors and assigns harmless and indemnify Lessor against and from
any and all claims, demands, losses, costs, damages, suits, judgments,
penalties, expenses and liabilities or any kind or nature whatsoever, including
reasonable attorneys' fees, arising directly or indirectly out of (i) the
willful misconduct of Lessor, its agents or employees, in connection with the
performance of this Agreement; (ii) any programming transmitted by Lessor during
any of Lessor's Airtime.
B) By Lessee. To the extent permitted by state and federal law and its
charter or by-laws, Lessor shall forever protect, save and keep Lessee and its
permitted successors and assigns harmless and indemnify Lessor against and from
any and all claims, demands, losses, costs, damages, suits, judgments,
penalties, expenses and liabilities or any kind or nature whatsoever, including
reasonable attorneys' fees, which arise directly or indirectly out of (i) the
negligence or willful misconduct of Lessee, its agents or employees, in
connection with the performance of this Agreement; (ii) any programming
transmitted by Lessee or any of its authorized agents or subcontractors with the
public, third parties and subscribers to the Lessee's programming service; or
(iv) any maintenance, installation or other work performed by Lessee or any
authorized agent or subcontractor under this Agreement.
C) Notice of Claim; Defense of Claim. Each party shall notify the other
of any such claim promptly upon receipt of same. Either party (hereinafter
referred to as appropriate the "Indemnitor" or Indemnitee") shall have the
option to defend, at its own expense, any claims arising under this Paragraph.
In Indemnitor assumes the defense of any such claim, Indemnitee shall delegate
complete and sole
<PAGE>
authority to the Indemnitor to defend or settle same and Indemnitee shall
cooperate with Indemnitor in the defense thereof.
13) INSURANCE.
A) Policies Required. At its expense, Lessee shall secure and maintain
with financially reputable insurers, one or more policies of insurance insuring
the Leased Equipment and Lessee's utilization of the ITFS Channels against
casualty and other losses of the kinds customarily insured against by firms of
established reputations engaged in the same or similar line of business, or such
types and in such amounts as are customarily carried under similar circumstances
by such firms, including, without limitation: (i) "All Risk" property insurance
covering the ITFS Equipment and the common Equipment to the extent of one
hundred percent (100%) of its full replacement value without deduction for
depreciation: (ii) comprehensive general public liability insurance covering
liability resulting from lessee's operation of the ITFS equipment on an
occurrence basis having minimum limits of liability in an amount of not less
than One Million Dollars ($1,000,000.00) for bodily injury, personal injury or
death to any person or persons in any one occurrence, and not less than Two
Million Dollars ($2,000,000.00) in the aggregate for all such losses during each
policy year, and not less than Three Hundred Thousand Dollars ($300,000.00) with
respect to damage to property; (ii) all workers compensation, automobile
liability and similar insurance required by law.
B) Insurance Policy Forms. All policies of insurance required by this
Paragraph shall, whre appropriate, designate Lessor as either the insured party
or as a named additionally insured party, shall be written as primary policies,
not contributory with and not in excess of any coverage which Lessor shall
carry, and shall contain a provision that the issuer shall give to Lessor thirty
(30) days prior written notice of any cancellation or lapse of such insurance or
of any change in the coverage thereof.
C) Proof of Insurance. Executed copies of the policies of insurance
required under this section or certificates thereof shall be delivered to Lessor
not later than ten (10) after execution of this agreement. Lessee shall furnish
Lessor evidence of renewal of each such policy not later than thirty (30) days
prior to the expiration of the term thereof.
14. RELATIONSHIP OF PARTIES.
By the provisions of this Agreement, Lessor and Lessee intend to enter
an airtime lease relationship and not a joint venture. They will carry out this
Agreement to preserve that intent. Neither party shall represent itself as the
other party, nor as having any relationship with one another, except as Lessor
and Lessee under the terms of this Agreement.
15. EQUIPMENT PURCHASE.
(A) Lessor's Option to Purchase. In the event that this Agreement
is terminated, Lessor shall have the option to purchase the
Leased Equipment used exclusively for Lessor's ITFS license.
Any equipment which is used in a shared fashion (such as
transmit antenna, decoders and combiners) in providing signals
other than Lessor's signals are excluded from this option to
purchase. The intent of the purchase option provided for in
Paragraphs 16(A) is to provide Lessor with the capability to
continue to perform on Lessor's ITFS license. The purchase
price shall be the market value of such equipment noted above
as determined by mutual agreement or by averaging the values
obtained from two (2) appraisals, with one appraiser each
chosen by Lessor and Lessee.
(B) Lessee's Option to Purchase. If during the terms of this
Agreement the FCC modifies its rules so as to enable Lessee to
be licensed to operate the ITFS frequencies, Lessee shall have
a right of first refusal to acquire such licenses subject to
the same terms and conditions as the right provided for in
Paragraph 1(B).
<PAGE>
16. NON-DISCLOSURE
Lessor acknowledges that there may be made available to it pursuant to
this Agreement proprietary information of Lessee relating to the encoding and/or
decoding system associated with the ITFS channel equipment and its patented
processes including, but not limited to, improvements, innovations, adaptation,
inventions, results of experimentation, processes and methods, whether or not
deemed patentable, and certain business and marketing techniques (all herein
referred to as "Confidential Information"). Lessor acknowledges that this
Confidential Information has been developed by Lessee at considerable effort and
expense and represents special, unique and valuable proprietary assets of
Lessee, the value of which may be destroyed by unauthorized dissemination.
Accordingly, Lessor covenants and agrees that, except as may be required for the
performance of this Agreement or by law or court order, neither it nor any of
its agents or affiliates shall disclose such Confidential Information to any
third person, firm, corporation or other entity for any reason whatsoever, such
undertaking to be enforceable by injunctive or other equitable relief to prevent
any violation or threatened violation thereof.
17. NON-COMPETITION
During the term of this Agreement, Lessor agrees not to transmit
programming or to lease or sublease any channel capacity on its ITFS Facilities
for the transmission of programming that is competitive with the programming
transmitted by Lessee.
18. FORCE MAJEURE
If by reason of Force Majeure either party is unable in whole or in
part to perform its obligations hereunder, the party shall not be deemed in
violation of default during the period of such inability. As used herein, the
phrase "Force Majeure", shall mean the following: act of God, acts of public
enemies, orders of any branch of the government of the United States of America,
any state or any political subdivisions, thereof which are not the result of a
breach of this Agreement, orders of any military authority insurrections, riots,
epidemics, fires, civil disturbances, explosions, or any other cause or event
not reasonably within control of the adversely affected party.
19. CONDITION PRECEDENT
This Agreement is conditional on the issuance of a Final Order by the
FCC granting Lessor a construction permit for the ITFS Channels in the Market
from the Transmission Site. By "Final Order" the parties mean an action or order
of the FCC which is not reversed, stayed, enjoined, vacated, set aside, annulled
or suspended and with respect to which no timely-filed request for
administrative or judicial review is pending and as to which the time for filing
any such request, or for the FCC to set aside the action on its own motion, has
expired.
20. NOTICE
Any notice required to be given to Lessor under any provision of this
Agreement shall be delivered personally or by certified mail to Lessor at the
address first written above. Any notice required to be given to Lessee under any
provision of this Agreement shall be delivered personally or by certified mail
to Lessee at the address first written above.
21. SEVERABILITY
Should any court or agency determine that any provision of this
Agreement is invalid, the remainder of the Agreement shall remain in effect.
22. WAIVER
<PAGE>
A waiver by either Lessor or Lessee of a breach of any provision of
this Agreement shall not be deemed to constitute a waiver of any preceding or
subsequent breach of the same provision or of any other provision.
23. PAYMENT OF EXPENSES AND SIGNING FEES
A signing fee of One Dollar ($1) shall be paid to Lessor. Lessee shall
pay all costs and expenses incident to fulfilling or modifying this Agreement,
such as, attorneys' fees or, if necessary, any travel expenses approved in
advance by Lessee, FCC filing fees, and engineering costs.
24. VENUE AND GOVERNING LAW
Venue for any cause of action brought by or between Lessor and/or
Lessee relating to this Agreement shall be in California and all provisions of
this Agreement shall be construed under the laws of the State of California and
County of Lessor.
25. COUNTERPARTS
This Agreement may be executed in one or more counterparts each of
which shall be deemed an original, but all of which shall constitute one and the
same instrument, and shall become effective when each of the parties hereto
shall have delivered to it this Agreement duly executed by each of the other
parties hereto.
26. ENTIRE AGREEMENT
This Agreement constitutes the entire Agreement between the parties and
supersedes all prior oral or written provisions of any kind. The parties further
agree that this Agreement may only be modified by written Agreement signed by
both parties.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on this day of July 1st, 1999.
SHEKINAH NETWORK
By: ______________________________
Name: Charles J. McKee
Title: President
WORLD WIDE WIRELESS COMMUNICATIONS, INC.
By: ______________________________
Name: Douglas P. Haffer
Title: President
<PAGE>
Address for Notices:
Shekinah Network
14875 Powerline road
Atascadero, CA 93422
Phone/Fax: (805) 438-3341
Attn: Charles McKee, President
Gardner, Carton & Douglas
Attn: Laura Mow
1301 K Street, N.W., Suite 900
Washington, D.C. 20005
Phone: (202) 408-7100
Fax: (202) 289-1504
World Wide Wireless Communications, Inc.
Oakland, CA
Phone: (510) 839- 6100
Fax: (510) 839-7808
<PAGE>
EXHIBIT A
Schedule of Airtime
<PAGE>
EXHIBIT B
Receive Sites
There shall be attached hereto and incorporated by reference a copy of
FCC Form 330 Section IV listing Lessor" receive sites.
<PAGE>
EXHIBIT C
Leased Equipment
Noted below is a list of equipment that Lessee is leasing to Lessor:
(1) Four (4) ITFS tansmitters and related hardware
(2) Lessor's ITFS receive site antennas and related hardware
*(3) Combining network, transmission line and antenna
* Common Equipment
<PAGE>
EXHIBIT D
Service and Royalty Fees
1. Lessor's Service Fee
Services Provided Annual Fee
Lease of Leased Equipment [6(A)] $1.00
Maintenance of Leased Equipment [3(D)] $1.00
Lease of space at Primary Transmission Site [3A)] $1.00
2. Lessee's Subscriber Royalty Fee
Lessee shall pay Lessor a minimum monthly Transmission Fee 5%
of the system's Gross receipts or a monthly minimum payment of $500 per month
whichever is greater.
Payment shall be as follows: Commencing on the Execution
(Effective) Date and as defined in Paragraph 6)B, payments for each month shall
be made by the twentieth (20th) day of the following month.
<PAGE>
EXHIBIT E
Programming
In addition to digital data services, such as the Internet or Intranet, the
following is a list of video programming services Lessee may provide over
Lessee's System.
TLC - The Leaning Channel
TWC - The Weather Channel Lifetime
ESPN - Sports
AMC - American Movie Classics
SCOLA
WHTN - World Harvest Television Network
ECO - Galavision
CNN - Cable News Network
CNN - Headline News
C-Span I
C-Span II
BET - Black Entertainment Network
CNBC - Consumer News & Business Channel
Nickelodeon
The Discovery Channel
A&E - Arts and Entertainment
The Family Channel
The Disney Channel
PBS - Public Broadcasting Service
TBN - Trinity Broadcasting Network
TNIN - The New Inspirational Network
ME/U - Mind Extension Network
The International Channel
BRAVO Network
The Travel Channel
Family Network
Keystone Inspirational Network
STOCK PURCHASE AGREEMENT
In Buenos Aires, on this 30th day of the month of November, 1999, WORLD WIDE
WIRELESS COMMUNICATION, INC. (the "Buyer"), with domicile at 520 - 3rd Street,
Suite 101, Oakland, California 94607, U.S.A., represented herein by Douglas P.
Haffer and JORGE OMAR COVELLO, with domicile at J.M. Bosch 961, Province of
Buenos Aires (the "Seller") hereby enter into this stock purchase agreement (the
"Agreement") for shares of INFOTEL ARGENTINA S.A. (the "Company"), subject to
the following terms and conditions:
1. Definitions:
The meaning of the following terms in the Agreement shall be:
1.1 Affiliate: the Affiliate of a person, is a person controlled by,
controller of or subject to joint control with such person. For the
purposes of this definition, the word control will have the meaning
assigned to it in Section 33 of Law 19,550 [1]
1.2 Irrevocable Capital Payments: the irrevocable capital payments on
account of future stock issues and any other capital payment that the
Seller may have made to the Company as at the Closing Date.
1.3 Balance Sheet as at the Closing Date: the Company's balance sheet as at
such date, which will be prepared in the manner and within the terms
contemplated in Clause 3.3.
1.4 Business Day: any day other than Saturday, Sunday or a day in which by
law commercial banks are authorized or obliged to conduct no business
in the place where a payment should be made.
1.5 Dollars: United States Dollars.
1.6 Equity Interest: 6,120 common, nominative non endorsable shares of the
Company with a nominal value of Argentine Pesos 1 (one) each, with the
right to 1 (one) vote per share representing 51% of the Company's
capital stock.
1.7 Hidden Liabilities: 100% of all Liabilities as at the Date herein which
have not been posted to the accounts or for which a reserve has not
been set up in the company's accounts and which have been incurred
prior to the execution hereof. Hidden Liabilities include, among
others, (i) any claim after the Closing Date which stems from the non
performance of labor or social security obligations for which the
Company is liable, either directly or joint and severally, for events
having occurred prior to or on the Closing Date, for any cause,
including labor accidents or accidents-diseases originated or developed
prior to or on the Closing Date; and (ii) any judicial or
administrative action, claim or notice, originating in events prior to
or on the Closing Date; and (ii) the legal expenses incurred in the
investigation and defense of the same. The examination of the Company
by the Buyer will not release the Seller from his obligation for Hidden
Liabilities.
1.8 Withdrawals on Account: They are the withdrawals on account of profits,
for director or syndic [2] fees or withdrawals made for any other
concepts by the Seller
- --------
1 Argentine Business Organizations Act. (Translator's Note)
2 "Sindico": In Argentine law, shareholders' representative, charged by
law with the on-going review of corporate books, records, etc. to
safeguard the interests of shareholders from fraud or mismanagement.
(T.N.)
<PAGE>
or the directors or syndics prior to or on the Closing Date. Any
Withdrawals on Account which may not be canceled against non allocated
profits before the Closing date shall be considered Liabilities as at
the Closing Date. Withdrawals on Account dated after the date of the
Last Balance Sheet shall not exceed the average monthly withdrawals
made by the Seller as reported in the Last Balance Sheet.
1.9 Balance: it shall have the meaning assigned to it in Clause 4.
1.10 Service: the service provided by the Company, understood as that
described in Clause 5.2.
1.11 Last Balance Sheet: The Company's balance sheet as at June 30, 1999.
2. Objective.
The Seller sells to the Buyer and the Buyer buys from the Seller, the
Equity Interest and the Irrevocable Capital Payments, if any. The
Seller's holdings in the Equity Interest is the following:
============================================== =================================
NAME NUMBER OF SHARES
- ---------------------------------------------- ---------------------------------
Jorge Omar Covello 6,120
============================================== =================================
2.1 Annulment of the Transaction. The Parties recognize that the approval
of the "Comision Nacional de Comunicaciones" (National Communications
Commission ("CNC") is required for the Buyer to effect the purchase of
Shares under this agreement and for the Shareholders' Agreement
executed in connection with the same. Should the Buyer fail to obtain
approval of the CNC to become the owner of the Equity Interest, the
Buyer shall also have the right to terminate this agreement, in which
case, the Buyer shall return the shares to the Seller and the latter
will return the price paid until such time, and the parties will have
no further claims against each other.
2.2 It is likewise expressly indicated that within a period of no more than
5 (five) business days as from the execution hereof and at the Buyer's
satisfaction, the Seller shall obtain an instrument from Terra
Telecommunications Corp. and World Access Communications Corp., both
with domicile at 1160 N.W. 158th Drive, Miami, Florida, United States
of America, terminating any agreement existing between said companies
and the Company. Failure to obtain such instrument, or lack of approval
thereof by the Buyer will give the Buyer the right to terminate this
Agreement, notwithstanding any emerging liabilities.
Gross Price and Final Price.
3.1 The Gross Price is USD 1,500,000 (U.S. Dollars One million five hundred
thousand).
3.2 The Seller, for a period of one year after the shares mentioned in
Clause 4.1(d) have been issued, [sic] the Buyer will maintain 50% of
said shares in his own custody. If it is found that the Company is
liable for any claim, debt or liability of the company existing prior
to Infotel Argentina S.A., the Seller will be liable for any claim,
debt or obligation transferred to Infotel Argentina S.A. which shall be
settled with the payment of money to the claimant or the return of the
shares issued under the terms
<PAGE>
of 4.1(d) for the same value. For the period of 4 years after the
expiration of the term contemplated in Clause 3.2, the Seller will be
responsible for any claim, debt or liability of the company existing
prior to Infotel Argentina S.A. [sic] any liability will be covered and
settled with the withholding of any amounts that may be payable to the
Seller according to the agreement between the Parties.
3.3 On the date of closing, the company Infotel Argentina will prepare a
balance sheet as at that date from which a result will be obtained and
on the basis of which the company shall begin operating; in this sense,
the company will have results of a tax nature, others of a labor
nature, for customers and for suppliers which will generate a "balance"
which if negative, will be subtracted from the last payment [under]
point 4(d) and should it be positive will be added to the gross price
and paid out in accordance with point 4(d) (i.e. capitalized in shares
to 365 days). The seller shall have 15 days to prepare it and present
it for audit by the buyer which will react within five days.
4. Terms of Payment, Payment Currency and Place of Payment
4.1 The Price shall be payable by the Buyer to the Seller as follows:
a) The amount of USD 100,000 (Dollars one hundred thousand) has
been received by the Seller in advance.
b) The amount of USD 500,000 (Dollars five hundred thousand) on
the Closing Date, with this Agreement serving as valid
receipt.
c) The amount of USD 300,000 (Dollars three hundred thousand) on
December 30, 1999.
d) The amount of USD 600,000 (Dollars six hundred thousand) in
Seller's shares on 29 December 1999. Said shares will be
valued at the lowest bid price for said shares in the market
in which they were traded on November 17 & 18, 1999. Also, 50%
of said shares shall not be transferred for the period of one
year counted as from their date of purchase and the other 50%
will remain with the seller for the concept of surety until
the date as indicated in point 3.2 and the same shall be
delivered to the buyer within 365 days [.] The same shall be
delivered under the terms of the laws of the United States of
America and free of encumbrances.
The payment contemplated in paragraph d) is designated the
Balance.
4.2 All payments contemplated herein, except for that pursuant to Clause
4.1.d) shall be made in Dollars by means of transfer to the bank
accounts indicated in Schedule 4.2, in accordance with the percentages
indicated therein. Default in the payment of the amounts contemplated
in this Clause will occur as a matter of law, without need for judicial
or extrajudicial claims. If the due date was a non business day, the
payment shall be made on the following Business Day.
5. Representations and Warranties by the Seller.
The Seller hereby represents and warrants to the Buyer that:
The Equity Interest and the Seller:
5.1 The Seller is the owner of 100% of the Equity Interest, which is free
of any liens or encumbrances. The Equity Interest represents 51% of the
Capital Stock and 51% of
<PAGE>
the Company's votes, and its sale is not subject to any approval,
authorization or permit, except for the CNC's approval mentioned in
Clause 2.1. The Seller is not restricted from freely disposing of the
Equity Interest and has been recognized by the CNC as a shareholder in
the Company, there being no transfers of shares pending approval by the
CNC. The Equity Interest is transferred with all the equity and
political rights, and includes the assignment of all Irrevocable
Capital Payments, if any. Neither the Seller nor the Company are a
party to any shareholders agreements or share syndication agreements.
The Company:
5.2 The company is a "sociedad anonima" (stock corporation) established in
accordance with the laws of the Republic of Argentina, with domicile at
Esmeralda 684, piso 10, of the City of Buenos Aires. The Company's
Bylaws in effect with record of registration with the "Inspeccion
General de Justicia" (Legal Persons Registry) under the Public Registry
of Commerce ("IGJ") are those attached hereto as Schedule 5.2(i). All
the Company's books are appropriately kept as established by the IGJ.
There are no amendments to the bylaws, capital increases or actions of
any type pending registration with the IGJ. Schedule 5.2(ii) contains
copy of the minutes of the Board, Shareholders' Meetings, and records
of attendance to the shareholders' meetings for the last 5 years and
copy of the Stock Registry Book from the date of incorporation of the
Company until the present.
5.3 The Company's capital amounts to Arg.$ 12,000 (Argentine Pesos twelve
thousand), represented by 12,000 (twelve thousand) common, nominative,
non endorsable shares with a nominal value of Arg.$ 1 (Argentine Pesos
one) each and with the right to 1 (one) vote per share; the capital
stock has been completely paid-in; there are no outstanding
underwriting rights pending exercise by any of the shareholders or
third parties, nor any options or commitments giving the Seller or any
third parties the right to buy or underwrite shares in the Company or
capitalize credits against the Company.
5.4 The execution of this Agreement will not cause the acceleration of any
outstanding Company liability, nor will it result in the infringement
of any law, decree, judicial order or any other rule of mandatory
compliance by the Company, its by-laws, the decisions of the Corporate
bodies or any agreement of which, to date, the Company or the Seller
may be a party.
5.5 All the powers of attorney granted by the Company in favor of
directors, officials, employees, professionals and others are those
specified in Schedule 5.6.
Economic Condition of the Company
5.6 The Company has perfect title to all its assets, which are detailed in
Schedule 5.7(i) and are free from any liens or encumbrances, with the
exception of those indicated in Schedule 5.7(ii), are in a good
condition, except for the wear caused by normal use. The Company is in
possession of its assets and is not restricted to dispose thereof, with
the exception of the assets indicated in Schedule 5.7(iii), which were
acquired pursuant to the procedure of Law 11,867 [3]. In the last ten
(10) years, the
- ---------------
3 T.N. Argentine Law which regulates the conveyance of commercial
establishments, including all tangible and intangible property and
rights.
<PAGE>
Company has acquired no assets which due to their number or
characteristics should have been purchased in accordance with the
regime of Law 11,87.
5.7 The Company is the lessee of the premises used as offices, the lease
agreement for which is attached as Schedule 5.8. Rental and expenses
payable by the Company are in good standing. Neither the Company nor
its counterparts are in default in the performance of their obligations
resulting from the written or oral agreements mentioned under 5.8. The
Company has free use of such assets, which are used to render the
Service.
5.8 The Company's Financial Reports as at July 1, 1999, as at November 30,
1999, attached to the balance sheet as at the Closing Date, have been
prepared in accordance with the accounting standards in force in the
Republic of Argentina, uniformly applied. The Balance Sheet as at the
Closing Date will be prepared in accordance with said standards. All of
them accurately reflect the shareholder's equity position and the
results of the Company's operations as at those dates.
5.9 Since the Last Balance Sheet to date, there has been no substantial
adverse change in the financial condition, assets or business of the
Company, and the Company (a) has undertaken no obligations nor
conducted any transactions outside those originating in the ordinary
and normal course of business; (b) has not increased its capital nor
received capital contributions on account of future issues; (c) has not
redeemed or amortized its shares; (d) has not increased the
remuneration of any of its directors, officials or employees; (e) has
not recorded in the accounts any revenues for services not rendered;
(f) has not sold any of the assets appearing on the last Balance Sheet,
except those sales having occurred after the date of the same which
respond to its ordinary business operations and are posted to the
accounts and (g) no notice has been received nor is there knowledge of
any circumstance leading to assume that the Current Investments and/or
the Credits for Sales indicated in the Last Balance Sheet will not be
normally liquidated or received.
5.10. As from the Last Balance Sheet and to date, the Company has not
undertaken any real or contingent liability, foreign to the ordinary
course of business.
5.11 There are no extra-judicial claims, mediations, labor arbitrations,
court actions, claims, administrative proceedings, proceedings for
violations, of whatever nature, trade union conflicts or dispute
situations initiated or which may be initiated against the Company or
against the Seller susceptible of causing a damage to the Company or of
restricting or preventing the transfer of the Equity Interest, other
than those listed in Schedule 5.12. Schedule 5.12 contains a detail of
the extra-judicial claims, mediations, labor arbitrations, court
actions, claims, administrative proceedings, proceedings for
violations, of whatever nature, trade union conflicts or dispute
situations initiated or which may be initiated against the Company or
against the Seller, indicating the names of the parties to the claim,
the date thereof, the respective court, administrative seat or offices
with which the claim has been filed, the amount initially claimed (if
an amount is claimed), the adjusted amount as at the Closing Date with
interest calculated according to the law, procedural status of the
claim and cause thereof.
5.12 As at the Closing Date, the Company has filed in due time and as
appropriate all the filings required by tax and social security laws,
has paid or set up provisions for all the payments, taxes and fees
required therein; and has not be advised, nor has it any
<PAGE>
reason to assume that it has any past due debts of a tax or social
security nature or payable debts of the same nature.
5.13 Schedule 5.14 contains copy of all contracts for amounts exceeding
Arg.$ 10,000 per year in which the Company is a party and a detail of
oral agreements for amounts exceeding Arg.$ 10,000 per year of which
the Company is a party. Neither the Company nor its counterparts are in
default for any obligation emerging from said contracts.
5.14 All the information supplied to the Buyer on the Company and the Seller
in connection with the valuation of the Equity Interest and the
Irrevocable Capital Payments is truthful and complete. The Seller
provided the information that was requested by the Buyer.
5.15. As at the Closing Date, the Company has 7 Customers, as indicated in
Schedule 5.16, where their name, address and telephone number are
listed.
5.16 Neither the Seller nor the Company have agreed to pay any commission or
finder's fee to any broker or intermediary for the execution of this
Agreement.
Company personnel:
5.17 Schedule 5.18 details, in a complete and truthful manner, all the
personnel hired by the Company with a permanent employment status -
including name and surname, employment date, labor category, job,
working hours and place of work, vacations, salary items and discounts
- and their employment conditions. The only personnel working for the
Company is that specifically included in the aforementioned list. The
Company does not apply any other Collective Labor Agreement nor does it
have any pension plans, non-mandatory insurance, bonuses, profit
sharing or other benefits or voluntary compensations for its personnel.
In the last five (5) years there have been no labor conflicts or
strikes, nor is there any indication that they may occur after the
Closing Date.
All the Company's labor obligations, whether of a direct or joint and
several liability nature, including labor obligations derived from
laws, decrees, collective labor agreements, rules issued by competent
authorities, decisions by the Company (such as salaries, bonuses and
their supplements) as well as the total payments and contributions for
which it is liable, including Social Security obligations,
contributions and union [sic], mandatory insurance, etc. have been
calculated, stated and paid in legal form.
All the personnel employed is registered normally in the Payroll Ledger
and the data recorded therein are truthful and accurate in coincidence
with contractual modalities. All permanently employed personnel is
comprised in the roster included in the contract entered into with the
Labor Accidents Insurance Company ("Aseguradora de Riesgos del
Trabajo") in the terms of law 24,557, as well as in the mandatory
collective life insurance policy and any other mandatory insurance.
The Company has fully complied with the Improvement Plan developed by
the Labor Accidents Insurance Company ("Aseguradora de Riesgos del
Trabajo") and complies with regulations in force in the areas of labor
hygiene, medicine and safety.
The Company has demanded - in accordance with section 17 of law 25,013
- from its contractors and/or subcontractors all the documentation
crediting compliance by them with their labor and social security
obligations with respect of their employees
<PAGE>
which by reason of such contracting have or are rendering services to
the Company, with such documents being maintained in its files.
There are no legal connections, originated prior to or on the Closing
Date, with people related to the Company which could in the future be
construed, either by them or by third parties (labor authorities, tax
agencies, etc.) as a "labor relation."
Company Licenses
The Company is the holder of the license to provide Value Added Services and
Data Transmission Services in the national territory, granted by the CNC through
Resolution No. 3357 dated February 5, 1999 and of the permit of an interim
nature to use channel "1-1" in table 1.4, Annex 1 to Communications Secretariat
Resolution No. 869/98 in the service areas corresponding to the Multiple Buenos
Aires Area, Bahia Blanca, Rosario, Santa Fe and cities of Mendoza, Cordoba,
Neuquen and Corrientes, granted by the Communications Secretariat through
Resolution No. 1193 dated September 3, 1999, copies of which are attached hereto
as Schedule 5.19 (the "Licenses"); all requirements and conditions for the award
of the Licenses have been duly complied with; the Licenses are in force, there
is no action or proceeding initiated by the CNC or other authority against the
Company or its shareholders, nor reasons to assume any such actions may be
initiated for violation or alleged violation of any rule or provision which
could cause the lapse, suspension or modification of the Licenses.
Technical Aspects of the Company:
5.18 The Company's licenses and of the system of Fixed Data Transmission and
Value Added Services [sic] the company's assets shall allow for the
operation of technical work to third parties.
5.19 The Seller has not incurred nor will it incur, be it by action or
omission, in conducts which may prevent or hinder approval of the
transfer of the Equity Interest by the CNC.
Bank Accounts. Bank Agreements.
5.20 Schedule 5.23 contains a complete and detailed description of all
agreements of the Company with banks and financial institutions with
which it operates, with an indication of the checking accounts, safety
deposit boxes, loans, overdrafts, certificates of deposit and other
transactions with such institutions, with the account numbers and the
names of individuals authorized to represent the Company.
Execution of the Agreement
5.21 The Seller has the power to enter into this Agreement.
Insurance Policies.
5.22 The Company has contracted the insurance policies attached hereto in
Schedule 5.26. The payment of the premiums on said policies are in good
standing. Neither the Company nor its counterparts are in default in
the performance of their obligations.
<PAGE>
5.23 Y2K
All products, computer assets and/or services, including, among others,
any kind of hardware components or software programs used by the
Company, have not been affected in their correct and normal operation
prior to or simultaneously with 9 September 1999, nor will they be
affected after said date, with respect to the data, calculations,
output information or other functions (including, among others,
calculation, comparison and sequence) which are date-dependant or
date-related, and that said information technology products, goods
and/or services shall create, store, process and/or output (as may be
the case) date-related or containing dates without errors or omissions.
The Company has taken all necessary preventive measures so that after 9
September 1999 the effects that the information technology crisis
presents for the year 2000 shall in no way affect any of the normal
Company activities, including, as an illustration, the rendering of the
Service, and that, for the same reason, the greatest diligence has been
applied to the review of all supply circuits, both of assets and
services, which currently and/or at the time foreseen for the onset of
the information technology crisis (1 January 2000) and for the whole
duration of the same, may be necessary to satisfy, as a minimum, the
Company's customary needs and allow for its normal operation,
understanding as such that maintained prior to 9 September 1999. The
Company has complied with the CNC's rules regarding Y2K.
6. Administrative Approval.
Both parties shall be responsible for obtaining the CNC's approval for
the Buyer to become the owner of the Equity Interest. Both parties
commit their best efforts to assist the Buyer in obtaining such
authorization as soon as possible and to provide their maximum
cooperation to respond to any requirement from the CNC. Any expenses to
be incurred to obtain it will be borne by the Buyer. Should the CNC
fail to grant such approval, the Buyer shall have the right to sell its
shares in part or in total and assign this Agreement, in part or in
total, to a third party, providing notice thereof to the Seller, but
without the need to require his consent. Likewise, the Buyer shall have
the option, until finding a substitute susceptible of approval by the
CNC, of reselling 2% of the Company shares to the Seller who will be
obliged to buy then at the same price per share at which the Buyer has
bought them. Any delays which may arise in obtaining said approval
shall not affect the terms indicated in this Agreement.
Until such time as the CNC decides on the approval of the transfer of
shares (and should it fail to be approved, until an alternative
transfer to a company designated by the Buyer shall have been
approved), the Buyer shall notwithstanding have, in the internal
shareholders' relation between the parties, all the rights pertaining
to shareholders, for which purpose the Seller herein grants the Buyer
an irrevocable power of attorney, effective as from the Closing Date,
attached hereto as Schedule 6 and further commits to execute any other
documents which may be required.
7. Non Performance
7.1 Seller's Non Performance
<PAGE>
7.1.1 In case of non performance by the Seller of any of his obligations
under this Agreement, including, among others, if the inaccuracy or
falseness of any of the representations and warranties contained in
Clause 5 was demonstrated and such inaccuracy or falseness was not
remedied within thirty (30) business days of having been effectively
served notice to that end, or if there was any Hidden Liabilities, the
Seller will be jointly and severally liable to the Buyer for the
damages that he or the Company may suffer for such reason.
7.1.2 Defense
In case the Seller considered that the Hidden Liabilities are
inappropriate, and to the extent the Seller shall have complied with
his obligations under Clause 7.1.2, the Seller may defend such claim
through the legal counsel appointed by him at his expense, in which
case he shall serve effective notice to the Buyer indicating he will
undertake such defense. To this end, the Buyer shall provide the
information required by the Seller and grant the special powers of
attorney of the case, with prohibition to substitute and settle. The
Seller shall not, without the previous written consent of the Buyer,
settle or offer to settle any claims or actions for a Hidden Liability
nor offer for seizure Company assets or invoke allegations which in the
opinion of the Company's lawyers could be used against the Company in
another case. The Seller shall provide the Buyer with written copy of
any writ or document, before its presentation to the judge or competent
authority. If the Seller shall fail to assume the defense of such claim
within a reasonable time, the Buyer shall have the right, but not the
obligation, of assuming the defense of the same. If the Buyer shall
assume such defense, it shall be exercised with diligence, and the
Seller shall be bound by the result obtained by the Buyer with regard
to such claim, in which case the Seller will also be accountable to the
Buyer for the legal fees set by the court and such reasonable costs as
may have been incurred in such defense. In case the Seller shall
demonstrate the third party claim to be groundless, then the Company
shall reimburse him, within 30 calendar days of the request, for any
expenses and fees incurred by the Seller.
7.1.3 Currency
For the purpose of the deductions or withholdings or reimbursements
contemplated in this clause, any Argentine Peso denominated Hidden
Liability shall be converted into Dollars at the seller exchange rate
set by Banco de la Nacion Argentina effective on the date it is paid by
the Company or the Buyer, or the date the Buyer deducts it, as may be
the case.
7.2 Non Performance by the Buyer.
(a) In case of non performance by the Buyer in the payment of the
Price not remedied within five (5) calendar days of effective
notice having been served, the Seller shall have the right to
chose between two options to demand payment, plus a 10% annual
interest, from the date of default until the payment date or
cause the buyer to loose the rights of purchase without any
type of judicial or extrajudicial claim.
<PAGE>
8. Performance Events prior to the Closing Date
The following events shall have been performed as at the Closing Date:
(a) The holding of (i) a Unanimous Shareholders' Meeting of the
Company which shall have accepted the resignation submitted by
the Company's Board of Directors and examined their
performance and the distribution of profits, within the limits
allowed by the law, to compensate Withdrawals on Account
against non-allocated results. The Directors shall have
renounced their fees and any other remuneration. At the same
unanimous shareholders' meeting, the new Board of Directors
proposed by the Buyer shall have been appointed, in accordance
with Schedule 8.(a)(i) attached hereto; (ii) a Unanimous
Shareholders' Meeting in which the Company's bylaws shall have
been amended pursuant to Schedule 8(a)(ii) and (iii) a Board
Meeting in which a power of attorney shall have been granted
in the terms of Schedule 8(a)(ii) attached hereto.
(b) The delivery to the Buyer of the certificates corresponding to
the Equity Interest and the registration in the Stock Registry
Book of the transfer of the Equity Interest to the Buyer.
(c) The delivery to the Buyer of copy of the communication signed
by the Seller notifying the Company of the transfer of the
Equity Interest and the Irrevocable Capital Payments, in
accordance with Schedule 8(c) attached hereto.
(d) The resignation of all holders of powers of attorney of the
Company to their powers and mandates, in accordance with
Schedule 8(d) attached hereto.
(e) The delivery to the Buyer of the original Bylaws and Company
books and ledgers and any other documentation required to
record the taking of possession of the Company by the Buyer
and the return of the books to headquarters, where all the
documentation shall remain or to any other place where it is
legally maintained.
(f) The Seller shall have delivered to the Buyer letters signed by
the Seller for the purpose of notifying the CNC of the
transfer of the stock in accordance with Schedule 8(f)
attached hereto.
(g) The Company shall have sold or transferred the assets
connected to the Teleport in the terms of the specimen
agreement attached hereto as Schedule 8(g). Such assets will
not be computed for the purpose of calculating the Company's
Shareholders' Equity pursuant to clause 3.3 but shall not be
transferred if this has an effect on the net worth and affects
future administrative and joint resolution acts.
9. Performance Events After the Closing Date
9.1 The parties recognize that the Company shall have set up, prior to
December 10, 1999, the sureties required by Resolution CNC 869/98, as
amended. The Seller and the Buyer undertake to capitalize or provide
personal sureties to the Company to the extent that it may be required
for the Company to set up such sureties. If one of the parties shall
fail to perform his obligation of capitalizing the Company or setting
up personal sureties, then the other party shall have the right to
collect from the non-
<PAGE>
performing party a penalty equivalent to two (2) times the total amount
of the surety to be set up by the Company.
10. Jurisdiction
Except for the provisions of Clause 3.3, any controversy arising
between the parties in connection with this Agreement, its existence,
validity, interpretation or performance, (the "Controversy"), will be
submitted to the mediation procedure of the Rules of the Arbitration
Court of the Buenos Aires Stock Exchange. Any Controversy which is not
resolved under the previous procedure will be subject to legal
arbitration in accordance with such Rules. The award shall not be
subject to appeal.
11. Notices
Any notices to the parties shall be served at the domiciles indicated
below, which may be replaced by others, by serving effective notice to
the other party. Notices will become effective within three (3)
business days of their reception.
For the Buyer:
WORLD WIDE WIRELESS COMMUNICATIONS, INC.
Attention: Douglas P. Haffer
Domicile: 520 - 3rd Street, Suite 101, Oakland, California 94067, USA
Fax: 1 (510) 839-7088; and
ALLENDE & BREA
Maipu 1300, piso 10
Ciudad de Buenos Aires
Atencion: Maria Roja Villegas Arevalo
For the Seller:
Esmeralda 684 10(0) piso
Ciudad de Buenos Aires
Fax:
Atencion: Walter Arneson
12. Prohibition to Compete
The Seller shall not directly or indirectly through a company of which
he is a part currently or in the future, as partner, shareholder,
director or executive, take part in activities which compete with those
carried out by the Company in the Republic of Argentina; with competing
activities being understood as any type of Internet related services,
for a period of 10 years counted as from the Closing Date. Likewise,
the Seller may carry out activities not comprised among the competing
activities and, in that case, will offer the possibility of
participating in such development first to the Company and then to the
Buyer, before offering it to any third party. In case the Company
and/or the Buyer, as may be case, did fail to accept participating in
such development, the Seller may present it to other persons or carry
it out on his own. The Seller declares that undertaking this commitment
of non competition is
<PAGE>
reasonable and justified since both the Seller and the Buyer have taken
it into account at the time of fixing the Price. In case of non
performance of this obligation, the Seller shall pay the Buyer a sum
equivalent to two (2) times the annual billings of the business in
competition with that of the Buyer.
13. Construction: Severability
Each of the provisions in this Agreement shall be considered severable.
If, for any reason, any of such provisions was declared null, this will
not affect the validity of the others.
14. Sundry.
14.1 This Agreement reflects the totality of the agreements reached by the
parties, renders void any oral or written pre-dated agreement and can
only be modified in writing, with the signature of both parties. For
the purposes of this Agreement, the Schedules hereto shall be
considered part of the Agreement.
14.2 This agreement shall be ruled and construed in accordance with
Argentine Law.
14.3 The words appearing capitalized herein shall have the meanings assigned
to them in Clause 1 herein or any other Clauses in this Agreement where
they appear written between brackets and quotation marks.
14.4 None of the parties shall publicly announce or disclose the execution
of this transaction without the other's consent.
In witness whereof, the parties have caused two copies of this agreement to be
executed with the same contents and for the same purpose.
WORLD WIDE WIRELESS JORGE OMAR COVELLO
COMMUNICATIONS, INC.
(there appear signatures)
Name: Douglas Haffer
Title: President
World Wide Wireless Communications, Inc. and Digital Way, S.A.
AGREEMENT FOR PURCHASE OF ALL OUTSTANDING SHARES OF DIGITAL WAY, S. A.
BY
WORLD WIDE WIRELESS COMMUNICATIONS,INC.
Page 1 of 12
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Private and confidential - not to be reproduced without the joint approval of
the parties involved
<PAGE>
This is an agreement ("Agreement") made by and between DIGITAL WAY, S.A, a
Peruvian company represented herein by its President and Chief Executive Officer
JOSE A. DeIZCUE (hereinafter referred to as "SELLERS"), and WORLD WIDE WIRELESS
COMMUNICATIONS, INC (W3COM), a company duly organized under the laws of the
State of Nevada, United States of America, and having its registered office at
520 Third Street, Suite 101, Oakland CA., herein represented by its manager
DOUGLAS HAFFER, its President and Cief Executive Officer (hereinafter referred
to as "BUYER")
WITNESSETH that the parties hereto hereby as follows:
1. CONSIDERING
1.1. Whereas Sellers are the only holders of rights to the whole of the shares
representing the capital of the private limited liability company operating
under the corporate name DIGITAL WAY, S.A., a company incorporated under the
laws of Peru, and having its registered office located at Sebastian Telleria
308, San Isidro, Lima, 27 Peru (hereinafter referred to as "DWSA");
1.2. Whereas DWSA holds all necessary concessions and licenses to provide Local
Carrier services in Lima/Callao, Peru by using their 16 MHz MMDS spectrum
license at 2.3 - 2.5 GHz range and microwave licenses at 7.1-7.7 GHz, and that
it has certain nation wide and international long-distance concessions and value
added licenses as more fully described in Annex B
1.3. Whereas DWSA is attempting to secure additional MMDS spectrum for
Lima/Callao and at least five additional cities throughout Peru to total 32MHz
of spectrum therein;
1.4. Whereas SELLERS wish to assign and transfer the whole of the shares they
hold in DWSA to the BUYER, with further rights and privileges under certain
circumstances and with the terms and conditions stated in this instrument;
1.5. Whereas BUYER has rights to operating and frequency licenses for eight (8)
cities in Argentina, is currently operating a start-up wireless Internet access
system in the USA, holds licenses for MMDS frequencies in the USA and in Africa,
and has applied for similar licenses in several countries in Europe;
Page 2 of 12
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Private and confidential - not to be reproduced without the joint approval of
the parties involved
<PAGE>
1.6. Whereas BUYER has interests in developing business in Peru specifically
exploiting opportunities in Broadband Wireless Access services in the MMDS (2.5
GHz) bands, and wish to buy the referred shares of DWSA;
1.7. Whereas BUYER agrees, upon signature of this instrument, to assume
principal responsibility for raising sufficient funds to deploy a Broadband
Wireless Access business in Latin America as it will be defined in its Business
Plan;
1.8. Whereas BUYER is interested in entering and agreement with the current
management to assist in the operation of DWSA in Peru considering their
management experience, structure and office allowing for quick implementation of
business activities within Peru
1.9. Therefore BUYER and SELLERS agree to enter into this Agreement to develop
Broadband Wireless Access operations.
2. SCOPE
2.1. This Agreement sets forth the terms and conditions applicable to the
purchase by BUYER and the sale, transfer, convey and deliver by the SELLERS of
the SELLERS' shares, rights, and title of DWSA, including but not limited to
goodwill, authorizations, licenses, contracts, agreements books, records.
2.2. Any ANNEX may, by mutual agreement in writing between BUYER and SELLERS, be
included or amended from time to time to incorporate any clause.
2.3. ANNEXES are only valid if signed and dated by BUYER and SELLERS or their
legitimate trustees.
2.4. The SELLERS undertake to assign and transfer all of the shares of DWSA with
all rights and privileges which they hold in DWSA, identified hereunder, to the
BUYER under the terms and conditions contained herein.
2.5. Except as otherwise provided in this agreement BUYER shall assume all the
rights and liabilities of DWSA.
2.6. The transfer of shares shall not have to be implemented in the event that
the analysis of the documentation related to DWSA or to BUYER discloses a fact
that prevents, renders difficult or encumbers with additional liens the firm and
valuable transfer thereof.
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2.10. The Effective Date of the present agreement and the related agreements
that parties may conclude shall take place at 3:00 P.M, at Oakland, California,
on February 29, 2000 other place as shall be mutually agreed upon by parties.
The date on which the execution shall occur is referred to in this agreement as
Execution Date. Parties shall determine upon this date the specific conditions
and terms of ANNEXES and related agreements or complements as such but not
limited to covenants not to compete, dispute resolution procedure, cooperation
on claims, change of name, among others.
2.11. Execution of this Agreement shall be performed in as many as 3 stages and
under certain conditions as stated in ANNEX A.
2.12. Within 10 days of the Effective Date, the parties hereto shall execute the
relevant instrument of amendment to DWSA articles of association. This date can
be renewed with the agreement of both Parties.
2.13. Parties hereto undertake to execute all instruments necessary to carry out
the assignment and transfer of shares and authorizations of DWSA providing for
SELLERS right to manage, under the terms to be adopted by the Parties and the
least tax impact possible to the companies and individuals involved.
3. SPECIFICATIONS
3.1. The full force and effect of this Agreement, including the transfer of
shares, depend on the conditions stated below:
(a) Approval by Peruvian authorities of modification of shareholders of
DWSA.
(b) Approval by Board and/or shareholders of BUYER and SELLER.
3.2. SELLERS hereby agrees to file with the any required Peruvian agency, the
final documents of transfer of the shares, upon completion of all requirements
outlined in clause 3.1
3.3. Upon completion of all requirements outlined in clause 3.1 and other
relevant clauses of the Agreement, Parties shall execute all acts, agreements
and documents and comply with all other requirements under the relevant
legislations, approve the transfer of the shares.
3.4 As soon as the transfers of shares are executed Parties agree to communicate
the fact to clients, users and third parties undertaking to fully comply with
the terms and conditions of the agreements presently in force and pursuant the
terms and conditions to be defined in the execution agreement.
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4 COVENANTED PRICE AND PAYMENT TERMS:
4.1. The total, certain and covenant price and payment terms of the assignment
of shares is defined in ANNEX A. WWWC shall agree that, if on the first
anniversary after the closing date of the definitive agreement, the share price
of WLGS' common stock should be less than on said closing date, WLGS will issue
additional shares to Sellers to assure that the value of those shares at the end
of the year shall be equal to at least $900,000, $1,250,000, or $1,500,000
depending on whether DWSA had, by that time, fulfilled Phase I, II, or III. If
at any time within Two (02) years of the signing of the definitive agreement,
Phase I, II and III are fulfilled, DWSA will be entitled to full compensation by
wwwc as detailed in Annex A
4.2. The total price shall take into consideration the transferring of all
shares and the total business and is formed by a composition of investments, to
develop the business, and the price of shares.
4.3. The price of shares of DWSA were based on an evaluation and consideration
of:
(a) Circuits and Network licenses held by DWSA
(b) Knowledge of MMDS and broadband wireless access markets in Peru
(c) Contacts with Peruvian businesses, regulators, legislative and
financial entities and knowledge of Peruvian markets and contacts;
(d) DWSA does not have debt or any significant liabilities.
4.4. The prices and payments shall be defined in ANNEX A
.
5. CURRENCY
5.1. All payments to SELLERS shall be executed in US Dollars (USD). The payments
must be available to the SELLERS on their account to be supplied on the
respective due dates specified in this Agreement.
6. INDIRECT DAMAGES
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6.1. The Parties are not entitled to be reimbursed for any indirect or
consequential loss or damages such as lost profits, loss of use or loss of data
whether due to a breach against the other Party's obligations under this
Agreement.
7. DEFAULT
7.1. Failure by any Party to comply with any material term or condition under
this Agreement shall entitle the non-breaching party to give the defaulting
Party written notice of such default. If the defaulting Party has not cured such
default within 15 days after receipt of notice the non breaching Party shall be
entitled, in addition to all other remedies, unless limited by this agreement to
terminate this Agreement by giving notice to take effect immediately.
7.2. Provided that if SELLERS terminate this agreement by reason of any default
by BUYER, SELLERS shall be entitled to a termination fee equal to the amount
paid by BUYER to date of termination.
7.3. In event that the Effective Date of this Agreement is performed, subject to
the terms hereof and stated in the related agreements shall become irrevocable
and irreversible document, and shall bind upon the parties and their heirs and
successors.
7.4. SELLERS shall guarantee the full ownership of the shares, the disposal of
which is hereby said, rendering the present instrument always good, steady and
valuable.
7.5. Likewise, SELLERS shall be responsible for eventual debts or liabilities
undertaken by DWSA prior to the Effective Date hereof, even though any
assessments, receipt or suits, convictions or other forms of establishment of
obligations to pay shall occur after the Effective Date.
7.6. Any claims relating to the period of time previous to the execution hereof,
even when expressed subsequently, shall be exclusively borne by and at the
exclusive risk of SELLERS, which shall undertake the responsibilities resulting
therefrom.
8. INDEPENDENT CONTRACTOR
8.1. SELLERS and BUYER hereby declare and agree that each is engaged in an
independent business and that each shall perform its obligations throughout this
Agreement with the other Party as an independent contractor, except for the
purposes stated in clause 3.1 (a). Each has and hereby retains the right to
exercise full control of and supervision over the performance of its own
obligations hereunder. Each shall be responsible for its own acts.
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9. FORCE MAJEUR
9.1. Any failure by the Parties to carry out any of their obligations shall not
be deemed a breach of this Agreement if such failure is caused by Force Majeur.
For purposes of this Agreement Force Majeur shall include, inter alia, strikes,
lockouts, boycotts, embargoes, governmental restrictions, wars, war-like
actions, civil commotion, riots, uprising, revolutions, epidemics, fires,
floods, storms, earthquakes, other natural occurrence or any other event beyond
the control of such Party. The performance of the Parties' obligations shall be
suspended for as long as Force Majeur continues to exist. It is understood that
such Party shall take all reasonable steps to limit the effect of Force Majeur
by resorting to alternative measures. If such Force Majeur continues in
existence for more than six (6) months, either Party, at his option, shall have
the right to terminate this Agreement. Such termination shall be without
prejudice to the rights of either Party, which may have accrued up to the date
of termination.
9.2. Notice in writing of Force Majeur shall be made within 15 days of its
occurrence. If such notice is made later it shall have effect only concerning
the preceding 15 days. A Party in default may not invoke Force Majeur, occurring
subsequent to such default as an excuse therefore.
10. WARRANTIES
10.1. For the purposes of this Agreement and to the extent that it may adversely
affect the transactions provided for hereunder, Parties separately represent and
warrant that the following Representations and Warranties are true, accurate and
in no way misleading:
(a) DWSA is a company duly organized and registered before the applicable
governmental authorities, validly existing without any infringement to
the Peruvian laws;
(b) Parties have full powers, authority and legal right to enter into this
Agreement, to comply with all of their obligations hereunder and to
consummate the relevant transactions, except by the provided in clause
3.1.b;
(c) No lien, charge, debt or encumbrance, of any nature whatsoever, falls
on any of the assets or rights of DWSA and W3COM and which is an
object hereof;
(d) There are no material legal or administrative proceedings, of any
nature whatsoever, pending against DWSA or W3COM or its shares;
(e) DWSA authorizations are in good legal and administrative condition,
and the rights resulting therefrom may be fully performed by the
holder;
(f) DWSA authorizations are free and unencumbered of any liens or
encumbrances of any nature whatsoever, and may be transferred,
assigned, sold or otherwise
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disposed of, in favor of third parties, subject to the limitations of
the relevant legislation and as stated hereunder.
11. MISCELLANEOUS
Non-waiver
11.1. The failure of any party to insist upon strict adherence to any term or
condition of this Agreement on any occasion shall not be considered a waiver of
any right thereafter to insist upon strict adherence to that term or condition
or any other term or condition of this Agreement.
Language
11.2. All documentation to be provided by SELLERS or BUYER under this Agreement
as well as all notices and other communications between the parties hereunder
shall be in the English language, except as required by the Peruvian government.
Assignment and Succession
11.3. This document shall be binding upon and inure to the benefit of the legal
successors and assigns of all the Parties hereto or the company that SELLERS
intend to incorporate.
11.4. The Parties may not, however, without the prior written agreement of the
other party, whose consent shall not be unreasonably withheld in the case of a
proposed assignment by a Party to its Affiliate(s), assign this Agreement, in
whole or part, by contract operation of law or otherwise, or any of its rights
or obligations hereunder to any third party.
.
Confidentiality
11.5. BUYER and SELLERS acknowledge and agree that, from time to time, each may
disclose to the other certain confidential or proprietary business information
in the course of performing the transactions contemplated by this Agreement
including inter alia all technical and managerial information, know-how and
expertise, which under normal international trade practice are considered as
trade secrets (hereinafter referred to as the "Confidential Information"). Each
Party agrees to treat Confidential Information of the other Party in the same
manner as it treats its own proprietary information. Neither Party shall use,
disclose, make or have made any copies of the other Party's
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Confidential Information, in whole or in part, except as expressly provided
herein. The Parties acknowledge and agree that all business plans are considered
Confidential Information. Notwithstanding the foregoing, neither Party shall
have any obligations regarding non-use or non-disclosure of any Confidential
Information which (i) is already known to the receiving Party at the time of
disclosure; (ii) is or becomes part of the public domain without violation of
the terms hereof; (iii) is shown by conclusive documentary evidence to have been
developed independently by the receiving Party without violation of the terms
hereof; (iv) is disclosed by the disclosing Party to a third party without
similar restrictions on the third Party's rights or; (v) is received from a
third Party without similar restrictions and without violation of this or a
similar agreement.
Specific Termination
11.6. This agreement may be terminated by any of the Parties hereto in the event
of any infringement of any provision hereunder or any obligation undertaken
hereunder in the same terms provided in clause 11.11.
11.7. This agreement may also be terminated by any of the Parties hereto,
without previous notice in case of bankruptcy, liquidation or receivership of
the other party.
General Termination
11.8. Should either of the following events occur with regard to either of the
Parties, the other Party may terminate this Agreement by written notice, which
shall state the cause of termination and which shall be effective on the date
specified in the notice:
(a) Failure of any Party to observe any of the material terms of this
Agreement, which failure continues for a period of thirty (30) days
after written notice from the other Parties, or
(b) Insolvency, bankruptcy, assignment for creditors or any other winding
up, termination of the affairs or sale of assets of any Party, or
11.9. SELLERS may terminate this Agreement, in whole or in part, or any license
granted hereunder, if BUYER violates or fails to perform any of its material
obligations hereunder and such failure cannot be remedied or is not remedied
within 10 days after written notice thereof has been sent to Buyer.
11.10. In the event of any termination Parties shall within thirty (30) days of
termination return to other all copies of the all Documentation to the other.
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Severability
11.16. Should any of the provisions of this Agreement, or portions thereof, be
found to be invalid by any court of competent jurisdiction, the remainder of
this Agreement shall nonetheless remain in full force and effect.
12. ORDER OF PRIORITY AND MODIFICATION THE AGREEMENT
12.1. This Agreement sets forth the entire agreement and understanding between
the parties regarding the subject matter hereof. None of the parties shall be
bound by any term, condition or provision other than has expressly been
stipulated in this Agreement. This Agreement supersedes all previous oral or
written agreements and/or arrangements made between the parties concerning the
subject matter hereof.
11.2. In the event of any discrepancy between any data, stipulation or provision
given in any of the Items of this Agreement, on the one hand, and data,
stipulation or provision given in any of the ANNEXES, on the other hand, the
data stipulation or provision contained in a Item of this Agreement text shall
prevail. In the event of any discrepancy between Business Plan on the one hand
and this Agreement on the other, this Agreement shall prevail.
12.3. The above order or priority shall apply only to the extent that the
circumstances would not give obvious reason for another assessment.
13. APPLICABLE LAW
13.1. This Agreement shall be governed, construed and enforced in accordance
with the laws of the United States of America and Peru.
14. SETTLEMENT OF DISPUTES
14.1. For any disputes arising out of this Agreement, the parties consent to the
personal and exclusive jurisdiction of and venue in the state and federal courts
located within California
15. ANNEXES
15.1. The following Annexes, attached hereto, are an integral part of this
Agreement and are incorporated herein by reference:
ANNEX A Prices and Payments - Terms and Conditions
ANNEX B Licenses
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16. NOTICES
16.1. Any and all notices or information other than information or proposals of
pure technical nature shall be given by any Party by prepaid mail or by telefax
or courier to the other Party at the following address:
If to Buyer: If to Sellers:
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Douglas Haffer Jose A. de Izcue
520 Third Street, Suite 101 Sebastian Telleria 308
Oakland, CA, USA 94607 San Isidro, Lima 27 Peru
Phone: 1-510-839-6100 Phone: 511 441 7994
Fax: 1-510-839-7088
16.2. The aforementioned address of the Parties may be changed at any time by
giving fifteen (15) days prior notice to the other Parties in accordance with
the foregoing. Either Party may also by giving fifteen (15) days prior notice to
the other Parties give further specifications as to which address notice,
information or proposals of various nature shall be forwarded.
In witness whereof, the Parties hereto, have executed this Agreement in two (2)
identical originals by their duly authorized officers as of the Effective Date.
Each Party has received one original bearing the following legally binding
signatures of Buyer and Seller.
February 29, 2000
SELLERS BUYER
By: ____________________________________ By: ______________________________
Name: ___________________________________ Name: _____________________________
Title: __________________________________ Title: ____________________________
Date: ___________________________________ Date: _____________________________
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ANNEX A
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PHASE 1 $400,000 $900,000 in shares
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PHASE 2 $150,000 $350,000 in Shares
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PHASE 3 $250,000 in shares
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Phase 1: DWSA transfers all outstanding shares to WWWC. DWSA warrants that it
is the lawful owner of 16 MHz spectrum license, channels 12, 12', 13
and 13' of 2.3 to 2.5 GHz. range for the cities of Lima and Callao
within the Nation of Peru.
In consideration for the transfer of these shares, WWWC will,
immediately concurrently upon transfer of the shares, pay to DWSA
$400,000 in Cash and $900,000 of WWWC restricted stock with the value
of the stock based upon the price of the shares at the previous days
closing price.
Phase 2: DWSA will assist WWWC in the acquisition of an additional 16MHz of
licensed spectrum from the government of Peru for the cities of Lima
and Callao.
In consideration for this assistance, WWWC will, immediately within
fifteen after upon the award of the license(s), pay to DWSA $150,000
in cash and $350,000 of WWWC restricted stock with the value of the
stock based upon the price of the shares at the previous days close of
trading. Any additional costs incurred in acquiring the above will be
responsibility of WWWC.
Phase 3: DWSA will assist WWWC in the acquisition of an additional 32MHz of
licensed spectrum from the government of Peru for each of 5 cities in
Peru other than Lima and Callao.
In consideration for this assistance, WWWC will, immediately upon
within fifteen after the award of the license(s), pay to DWSA $250,000
of WWWC restricted stock with the value of the stock based upon the
price of the shares at the previous days close of trading. Any
additional costs incurred in acquiring the above will be
responsibility of WWWC.
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Letter of Intent
March 11, 2000
Jorge Emilio Zedan
President of El Salvador Telecom, S.A. de C.V.
SALTEL
San Salvador, El Salvador
Dear Don Jorge:
In relation to our conversations relating to the possibility of acquiring shares
in SALTEL, this letter serves to confirm to you our intention of effectuating
the acquisition of shares in that company pursuant to the following general
terms:
I. RECITALS
1.1. World Wide Wireless Communications, Inc., hereinafter "World
Wide" is a corporation organized under the laws of the State of
Nevada, United States of America, among whose activities is to
provide high speed wireless internet services
1.2. World Wide intends to invest in the Central American region,
beginning with El Salvador, where it plans to establish its
Regional Operations Center.
1.3. SALTEL is a company organized under the laws of El Salvador,
among whose activities is the offering of telephone services,
access services, and intermediate services, with its current
technical, operative, and administrative infrastructure. This
company, and its legal representative don Jorge Emilio Zedan have
the ability to request and obtain frequencies throughout the
Central American region, as permitted and limited by the laws of
the individual countries. As part of the relationship to be
established, Mr. Zedan assumes personal responsibility to take
those steps necessary in this regard within the shortest possible
time.
1.4. That for the interests of both companies, it is beneficial to
establish a strategic alliance or joint venture, whose activities
will include the integration of World Wide into the share
structure of SALTEL in the legal manner most convenient/
II. Nature of the Investment
2.1 World Wide declares its intent to acquire at least twenty five
per cent of the capital stock of SALTEL, upon the basis that by
acquiring said
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percentage it assumes the rights of a minority shareholder as
established under the Commercial Code of El Salvador.
2.2 World Wide will pay, for this twenty-five percent of, the amount
of THREE MILLION FIVE HUNDRED THOUSAND DOLLARS, money of the
United States of America, in the following form: (a) within five
days from Monday, March 13, the amount of ONE MILLION DOLLARS;
and (b) the rest of the TWO MILLION FIVE HUNDRED THOUDAND DOLLARS
by monthly payments in equal and successive amounts of ONE
HUNDRED THOUSAND DOLLARES, payable on the first day of the month;
in addition, interest on the unpaid balance in the amount of 8%,
which shall be included and incorporated in the payments. ___
2.3 The shares that are issued as the result of this increase in
capital will be issued immediately in the name of World Wide.
2.4 The payments will be made in accordance with instructions ot be
given to World Wide by SALTEL.
III. Special Conditions
<TABLE>
<CAPTION>
3.1 World Wide declares that its intention to purchase is subject to
(i) that SALTEL establishes the existence of its licenses to
operate as an operator of telephone services; (ii) that SALTEL
demonstrates that it has a concession for the exploitation of
public telephone service and concessions for the exploitation of
radioelectric spectrum, including the use of the following
frequencies:
<S> <C>
Network Colonia Roma-Cerro San Jacinto Tx 2431.25MHz - Rx 2329.75 MHz
Network Cerro San Jacinto-Costa del Sol Tx 2438.25MHz - Rx 2336.75 MHz
Network Colonia Roma-Boqueron Tx 2438.28MHz - Rx 2336.75 MHz
Network Boqueron-Aeropuerto El Salvador Tx 2431.25MHz - Rx 2329.75 MHz
</TABLE>
SALTEL will convert, as permitted by competent authorities, if
it is required, the previous point to point licenses to point
to multipoint with a minimum bandwidth of 24MHz.
IV. Closing Date. Due Diligence
4.1 The purchase of the shares shall take place no later than five
working days from the date of this letter. 4.2 Notwithstanding
the previous section, World Wide, by means of an independent law
firm, will proceed to commence due diligence of SALTEL which
shoull be completed within the provisions of paragraph 4.1
V. Legal Form of Acquisition of Shares
5.1 Taking into consideration that the purpose of these negotiations,
in addition to consolidating a strategic alliance between the
parties, is to strengthen the financial position of the company,
it is agreed that upon the
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introduction of World Wide as a shareholder and the increase in
capital afforded thereby, the current shareholders will renounce
any preferred rights they may have to subscription of shares; and
for said purposem there will be held an extraordinary meeting of
shareholders.
VI. Special Domicile. Acceptance of the Letter
6.1 For the legal purposes of this Letter, both parties acknowledge
domicile in the city of San Salvador
6.2 As a sign of the acceptance, a copy of the letter should be
signed by Jorge Zedan which shall be held by World Wide.
VII. Other Conditions
7.1 It is expressly understood by the parties, that if a settlement
of the pending litigation between SALTEL and CTE is reached,
World Wide will receive the benefits of not paying any of the
interest payments otherwise agreed to herein; and if any amounts
had previously been paid, it will be deducted from future
payments.
7.2 Similarly, it is understood that upon the sale of substantial all
of SALTEL to any third parties the point to point licenses
detailed previously will be transferred automatically to World
Wide or its designee.
7.3 Both parties declare their intent to broaden their operations
throughout the rest of the countries of Central America, in
accordance with subsequent agreements as to percentages of equity
participation in the form most equitable; it being understate
that the licenses and frequencies will be in the name of a
company designated by World Wide. SALTEL and/or its actual
shareholders, will have the option of subscribing to the shares
of the companies formed in the rest of Central America equal to
at least 10% of the capital stock of those companies.
In accordance with the foregoing, and with authorization to do so, this
document was executed and issued in the city of San Salvador, Republic
of El Salvador, as of the date first above written.
3
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EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
By and Among
WORLD WIDE WIRELESS COMMUNICATIONS INC.,
ESQUIRE TRADING & FINANCE, INC.,
AMRO INTERNATIONAL, S.A.,
CELESTE TRUST REG.,
THE ENDEAVOR CAPITAL FUND, S.A.,
NESHER, LTD.
THE KESHET FUND, L.P.,
AND
KESHET, L.P.
Dated as of April 14, 2000
================================================================================
<PAGE>
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TABLE OF CONTENTS
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ARTICLE I PURCHASE AND SALE OF THE SECURITIES.............................................................1
1.1 Purchase and Sale........................................................................................1
1.2 The Closings.............................................................................................2
ARTICLE II REPRESENTATIONS AND WARRANTIES..................................................................4
2.1 Representations and Warranties of the Company............................................................4
2.2 Representations and Warranties of the Purchasers........................................................12
ARTICLE III OTHER AGREEMENTS OF THE PARTIES................................................................13
3.1 Transfer Restrictions...................................................................................13
3.2 Stop Transfer Orders; Suspension of Qualification.......................................................14
3.3 Furnishing of Information...............................................................................14
3.4 Form D; Blue Sky Laws...................................................................................15
3.5 Integration.............................................................................................15
3.6 Certain Agreements......................................................................................15
3.7 Listing and Reservation of Underlying Shares and Warrant Shares; Compliance with Law....................15
3.8 Notice of Breaches......................................................................................16
3.9 Conversion Obligations of the Company...................................................................16
3.10 Use of Proceeds.........................................................................................17
3.11 Indemnification.........................................................................................17
3.12 Subsequent Sales and Registrations......................................................................18
3.13 Proxy Statement.........................................................................................19
3.14 Filing of Certificate of Amendment and Certificate of Designation.......................................19
3.15 Filing of Form 8-K......................................................................................19
3.16 Incorporation of the Debentures and the Certificate of Designation By Reference.........................19
ARTICLE IV CONDITIONS.....................................................................................19
4.1 Conditions Precedent to Sale of the Initial Securities..................................................19
4.2 Conditions Precedent to the Obligation of the Purchasers to Purchase the Additional Securities..........21
ARTICLE V MISCELLANEOUS..................................................................................23
5.1 Fees and Expenses.......................................................................................23
5.2 Entire Agreement; Amendments............................................................................23
5.3 Notices.................................................................................................23
5.4 Amendments; Waivers.....................................................................................24
5.5 Headings................................................................................................24
5.6 Successors and Assigns..................................................................................24
5.7 No Third Party Beneficiaries............................................................................25
5.8 Governing Law...........................................................................................25
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5.9 Survival................................................................................................25
5.10 Execution...............................................................................................25
5.11 Publicity...............................................................................................25
5.12 Consent to Jurisdiction; Attorneys' Fees................................................................25
5.13 Waiver of Jury Trial....................................................................................26
5.14 Severability............................................................................................26
5.15 Remedies................................................................................................27
5.16 Independent Nature of Purchasers' Obligations and Rights................................................27
</TABLE>
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Schedules and Exhibits
Schedule 1 - Purchasers of Securities
Schedule 2 - Purchasers of Securities at Subsequent Closings
Schedule 2.1(a) - Organization and Qualification; Subsidiaries
Schedule 2.1(c)(i) - Capitalization; Rights to Acquire Capital Stock
Schedule 2.1(c)(ii) - Notice with Respect to Listing
Schedule 2.1(f) - Consents and Approvals
Schedule 2.1(g) - Litigation; Proceedings
Schedule 2.1(q) - Intellectual Property Rights
Schedule 2.1(s) - Registration Rights, Rights of Participation
Schedule 2.1(t) - Title
Exhibit A - Form of Debentures
Exhibit B - Form of Warrants
Exhibit C - Form of Certificate of Designation
Exhibit D - Form of Registration Rights Agreement
Exhibit E - Form of Transfer Agent Instructions
Exhibit F - Legal Opinion of Evers & Hendrickson LLP
Exhibit G - Form of Certificate of Amendment of Articles of
Incorporation
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SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of April 14,
2000, by and among World Wide Wireless Communications Inc., a Nevada corporation
(the "Company"), Esquire Trading & Finance, Inc. ("Esquire"), Amro
International, S.A. ("Amro"), Celeste Trust Reg. ("Celeste"), The Endeavor
Capital Fund, S.A. ("Endeavor"), Nesher, Ltd. ("Nesher"), The Keshet Fund, L.P.
("Keshet Fund") and Keshet, L.P. ("Keshet"). Esquire, Amro, Celeste, Endeavor,
Keshet Fund and Keshet are each referred to herein as a "Purchaser" and are
collectively referred to herein as the "Purchasers."
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers, and the
Purchasers desire to acquire from the Company, $4,592,000 aggregate principal
amount of 4% Convertible Debentures due 2005 of the Company (the "Debentures"),
which Debentures are exchangeable for a like stated value of Series A
Convertible Preferred Stock, par value $0.01 per share and stated value of
$1,000 per share, upon Shareholder Approval (as defined herein) (the "Preferred
Stock" and, together with the Debentures, the "Convertible Securities"), shares
of the Company's common stock, par value $.001 per share (the "Common Stock"),
and warrants (the "Warrants") to purchase shares of the Common Stock.
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement, the Company and each Purchaser agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE SECURITIES
1.1 Purchase and Sale.
(a) Subject to the terms and conditions set forth, the Company
shall issue and sell to the Purchasers, and the Purchasers, severally and not
jointly, shall purchase from the Company (i) an aggregate principal amount of
$4,592,000 of Debentures, (ii) 1,064,000 shares of Common Stock (the "Shares")
and (iii) Warrants to purchase up to 5,040,000 shares of Common Stock.
(b) The Debentures shall be substantially in the form annexed
hereto as Exhibit A and the Warrants shall be in the form annexed hereto as
Exhibit B. The Preferred Stock shall have the respective rights, preferences and
privileges set forth in the Company's Certificate of Designation, Preferences
and Rights of the Series A Preferred Stock (the "Certificate of Designation")
the form of which is annexed hereto as Exhibit C, which Certificate of
Designation, upon Shareholder Approval, shall be promptly filed by the Company
with the Secretary of State of the State of Nevada (the "Nevada Secretary of
State").
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1.2 The Closings.
(a) The Initial Closing.
(i) The closing of the purchase and sale of the
Initial Securities (as defined below) (the "Initial Closing") shall
take place at the offices of Stroock & Stroock & Lavan LLP, 180 Maiden
Lane, New York, New York 10038-4982, immediately following the
execution hereof or such later date or different location as the
parties shall agree in writing, but not prior to the date that the
conditions set forth in Section 4.1 have been satisfied or waived by
the appropriate party. The date of the Initial Closing is hereinafter
referred to as the "Initial Closing Date." At the Initial Closing, the
Company shall sell and issue to the Purchasers, and the Purchasers
shall, severally and not jointly, purchase from the Company, (A) an
aggregate principal amount of $3,280,000 of Debentures (the "Initial
Debentures"), (B) 760,000 shares of Common Stock (the "Initial Shares")
and (C) Warrants to purchase up to 3,600,000 shares of Common Stock
(the "Initial Warrants" and together with the Initial Debentures and
Initial Shares, the "Initial Securities") for an aggregate purchase
price of $4,800,000 (the "Initial Purchase Price").
(ii) At the Initial Closing (a) the Company shall
deliver to each Purchaser (1) Initial Debentures (in definitive form)
in the denominations specified on Schedule 1 attached hereto, each
registered in the name of such Purchaser, (2) one or more certificates
representing the Initial Shares purchased by such Purchaser as set
forth next to such Purchaser's name on Schedule 1 attached hereto, each
registered in the name of such Purchaser (3) a warrant agreement
representing the Initial Warrants purchased by such Purchaser as set
forth next to such Purchaser's name on Schedule 1 attached hereto,
registered in the name of such Purchaser, and (4) all other documents,
instruments and writings required to have been delivered at or prior to
the Initial Closing by the Company pursuant to this Agreement and the
Registration Rights Agreement dated the date hereof by and among the
Company and the Purchasers, in the form of Exhibit D annexed hereto
(the "Registration Rights Agreement"), and (b) each Purchaser shall
deliver to the Company the portion of the Initial Purchase Price set
forth next to its name on Schedule 1, in United States dollars in
immediately available funds by wire transfer to an account designated
in writing by the Company for such purpose on or prior to the Initial
Closing Date, and all documents, instruments and writings required to
have been delivered at or prior to the Initial Closing by such
Purchaser pursuant to this Agreement and the Registration Rights
Agreement.
(b) Subsequent Closings.
(i) Subsequent Closings. The date and time of the Subsequent
Closings (as defined below) (the "Subsequent Closing Dates") shall be
10:00 a.m., Eastern time, on the date specified in the Additional Share
Notice (as defined below) or the Company Call Notice (as defined
below), as the case may be
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(or such later date as is mutually agreed to by the Company and the
applicable Purchaser or Purchasers). At any time after the Initial
Closing Date, at such Purchaser's option (each, a "Purchaser Call
Option"), by delivering written notice to the Company (an "Additional
Securities Notice") at least five (5) Business Days (the "Additional
Securities Notice Date") prior to the Subsequent Closing Date set forth
in the Additional Securities Notice, the Purchasers may, severally and
not jointly, purchase from the Company, and the Company shall sell and
issue at multiple closings, if applicable, to the Purchasers, such
Purchaser's portion (based on the amounts set forth next to such
Purchaser's name on Schedule 2 attached hereto) of (A) an additional
$1,312,000 aggregate principal amount of Debentures or, if the
Shareholder Approval shall have been obtained, 1,312 shares of
Preferred Stock (the "Additional Convertible Securities"), (B) 304,000
shares of Common Stock (the "Additional Shares") and (C) Warrants to
purchase an additional 1,440,000 shares of Common Stock (the
"Additional Warrants" and together with the Additional Convertible
Securities and the Additional Shares, the "Additional Securities") for
an aggregate purchase price of $1,920,000. Each Purchaser shall only be
entitled to deliver one Additional Securities Notice. The Additional
Securities Notice shall set forth (i) such Purchaser's portion of the
Additional Securities as set forth on Schedule 2 attached hereto, (ii)
such Purchaser's portion of the Additional Purchase Price (as defined
below) as set forth on Schedule 2 attached hereto and (iii) the date
for the Subsequent Closing Date. The closings of the purchase and sale
of the Additional Securities are hereinafter referred to each as the
"Subsequent Closing," and the purchase price paid for the Additional
Securities is hereinafter referred to as the "Additional Purchase
Price." The Initial Closing and the Subsequent Closing are each
referred to herein as a "Closing." If any Purchaser has not exercised
its Purchaser Call Option on the third day after the date on which the
Registration Statement (as defined in the Registration Rights
Agreement) is declared effective by the Securities and Exchange
Commission (the "Commission") (or if such third day is not a business
day, the next succeeding business day), the Company shall have the
option, by delivering written notice to such Purchaser (a "Company Call
Notice") at least five (5) Business Days (the "Company Call Notice
Date") prior to the Subsequent Closing Date set forth in the Company
Call Notice, to sell and issue to such Purchaser, and such Purchaser
shall, severally and not jointly, purchase from the Company such
Purchaser's portion (based on the amounts set forth next to such
Purchaser's name on Schedule 2 attached hereto) of the Additional
Securities. The Company Call Notice shall set forth (i) such
Purchaser's portion of the Additional Securities as set forth on
Schedule 2 attached hereto, (ii) such Purchaser's portion of the
Additional Purchase Price as set forth on Schedule 2 attached hereto
and (iii) the date for the Subsequent Closing Date.
(ii) At the Subsequent Closing, (a) the Company shall deliver
to each Purchaser (1) Additional Convertible Securities in the
denominations specified on Schedule 2 attached hereto, each registered
in the name of such Purchaser, (2) one or more certificates
representing the Additional Shares purchased by such Purchaser as set
forth next to such Purchaser's name on Schedule 2 attached hereto, each
registered in the
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name of such Purchaser, (3) a warrant agreement representing the
Additional Warrants purchased by such Purchaser as set forth next to
such Purchaser's name on Schedule 2 attached hereto, registered in the
name of such Purchaser, and (4) all other documents, instruments and
writings required to have been delivered at or prior to the Subsequent
Closing by the Company pursuant to this Agreement and the Registration
Rights Agreement, and (b) each Purchaser shall deliver to the Company
the portion of the Additional Purchaser Price set forth next to its
name on Schedule 2 attached hereto, in United States dollars in
immediately available funds by wire transfer to an account designated
in writing by the Company for such purpose on or prior to the
Subsequent Closing Date, and all documents, instruments and writings
required to have been delivered at or prior to the Subsequent Closing
by such Purchaser pursuant to this Agreement and the Registration
Rights Agreement. The Subsequent Closing shall take place in the same
manner as the Initial Closing; provided, however, that in no case shall
the Subsequent Closing take place unless and until the conditions
listed in Section 4.2 have been satisfied or waived by the appropriate
party.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchasers as follows:
(a) Organization and Qualification; Subsidiaries. The Company
is a corporation, duly organized, validly existing and in good standing under
the laws of the State of Nevada, with the requisite corporate power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. The Company has no subsidiaries other than as set forth
in Schedule 2.1(a) (collectively, the "Subsidiaries"). Other than the
Subsidiaries, the Company does not own any equity securities of any other
Person. A "Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind. Each of the Subsidiaries is a corporation, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with the full
corporate power and authority to own and use its properties and assets and to
carry on its business as currently conducted. Each of the Company and the
Subsidiaries is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the case may be,
would not, individually or in the aggregate, (x) adversely affect the legality,
validity or enforceability of the Debentures or any of the other Transaction
Documents (as defined below), (y) have or result in a material adverse effect on
the results of operations, assets, prospects or financial condition of the
Company and the Subsidiaries, taken as a whole or (z) adversely impair the
Company's ability to perform fully on a timely basis its
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obligations under any Transaction Document, including, without limitation, the
Company's obligations under Section 3.7 hereof (any of (x), (y) or (z), being a
"Material Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by this Agreement, the other Transaction Documents and, subject to
Shareholder Approval, the Certificate of Amendment to the Articles of
Incorporation (the "Certificate of Amendment") and Certificate of Designation,
and otherwise to carry out its obligations hereunder and thereunder. This
Agreement, the Registration Rights Agreement, the Debentures and the Warrants
are collectively referred to as the "Transaction Documents." The execution and
delivery of each of the Transaction Documents, the Certificate of Amendment and
the Certificate of Designation by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company and, except for the Shareholder
Approval with respect to the Certificate of Amendment and Certificate of
Designation, no further action is required by the Company. Each of the
Transaction Documents has been or will be prior to the applicable Closing duly
executed by the Company and each constitutes or will constitute the legal, valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its respective certificate of incorporation, bylaws or other organizational
documents.
(c) Capitalization; Rights to Acquire Capital Stock. The
authorized, issued and outstanding capital stock of the Company is set forth in
Schedule 2.1(c). All issued and outstanding shares of capital stock of the
Company and each Subsidiary have been duly authorized and validly issued and are
fully paid and non-assessable. Except as disclosed in Schedule 2.1(c), (i) no
shares of the Company's capital stock are subject to preemptive rights or any
other similar rights or any liens or encumbrances suffered or permitted by the
Company; (ii) there are no outstanding debt securities issued by the Company;
(iii) there are no outstanding options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities or
rights convertible into, any shares of capital stock of the Company or any of
its Subsidiaries, or contracts, commitments, understandings or arrangements by
which the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its Subsidiaries; (iv) there
are no agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of their securities under
the Securities Act of 1933, as amended (the "Securities Act")(except the
Registration Rights Agreement); (v) there are no outstanding securities of the
Company or any of its Subsidiaries which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to redeem a security of the
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Company or any of its Subsidiaries; (vi) there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the Securities (as defined below) as described in this Agreement;
and (vii) the Company does not have any stock appreciation rights or "phantom
stock" plans or agreements or any similar plan or agreement. Except as set forth
on Schedule 2.1(c), and, to the best knowledge of the Company, no Person or
group of related Persons beneficially owns (as determined pursuant to Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) or has the right to acquire by agreement with or by obligation binding
upon the Company beneficial ownership of in excess of 5% of the Common Stock.
The Common Stock is quoted on the OTC Bulletin Board. Except as described on
Schedule 2.1(c)(ii), the Company has received no notice, either oral or written,
with respect to the continued eligibility of the Common Stock for such listing,
and the Company has maintained all requirements for the continuation of such
listing. After giving effect to the transactions contemplated in this Agreement,
the Company believes that it is in compliance with all such maintenance
requirements.
(d) Issuance of Securities. The Shares have been duly
authorized, and when issued and paid for in accordance with the terms hereof,
shall be validly issued, fully paid and nonassessable, free and clear of all
liens, encumbrances, security interests, charges and rights of first refusal of
any kind (collectively, "Liens"). The Preferred Stock, when issued in exchange
for the Debentures in accordance with the terms of the Debentures, shall be duly
authorized, validly issued, fully paid and nonassessable, free and clear of all
Liens. The Shares, the Preferred Stock and the Warrants, upon issuance, will not
subject the holders thereof to personal liability by reason of being such
holders. The shares of Common Stock issuable upon conversion of the Convertible
Securities are referred to herein as the "Underlying Shares." When issued in
accordance with the Debentures or the Certificate of Designation, as the case
may be, the Underlying Shares will be duly authorized, validly issued, fully
paid and nonassessable, free and clear of all Liens. The shares of Common Stock
issuable upon exercise of the Warrants are referred to herein as the "Warrant
Shares." When issued and paid for in accordance with the Warrants, the Warrant
Shares will be duly authorized, validly issued, fully paid and nonassessable,
free and clear of all Liens. The Debentures, the Shares, the Preferred Stock,
the Warrants, the Underlying Shares and the Warrant Shares are referred to
herein collectively as the "Securities." The Company has and, at each Closing
Date, will have and at all times while the Convertible Securities and the
Warrants are outstanding will maintain an adequate reserve of duly authorized
shares of Common Stock at least equal to the sum of (A) 200% of the number of
shares of Common Stock needed to provide for the issuance of the Underlying
Shares (without regard to any limitations on conversions thereof) and (B) 100%
of the number of shares of Common Stock needed to provide for the issuance of
the Warrant Shares (without regard to any limitations on exercise thereof).
(e) No Conflicts. The execution, delivery and performance of
this Agreement, the other Transaction Documents, the Certificate of Amendment
and the Certificate of Designation by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby (including, without
limitation, the reservation for issuance and issuance of the Underlying Shares
and the Warrant Shares) do not and will not (i) conflict with or
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violate any provision of its or any of its Subsidiaries' charter, bylaws or
other organizational documents, (ii) conflict with, or constitute a default (or
an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument (evidencing a debt of
the Company or otherwise) to which the Company or any Subsidiary is a party or
by which any property or asset of the Company or any Subsidiary is bound or
affected, (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company or any Subsidiary is subject (including Federal
and state securities laws and regulations), or by which any property or asset of
the Company or any Subsidiary is bound or affected, or (iv) result in the
creation or imposition of a Lien upon any of the Securities or any of the
properties or assets of the Company or any Subsidiary, or any of its
"Affiliates" (as such term is defined under Rule 405 promulgated under the
Securities Act), except in the case of each of clauses (ii) and (iii), such
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have or result in a
Material Adverse Effect. The business of the Company is not being conducted in
violation of any law, ordinance or regulation of any governmental authority
except for any such violation as would not, individually or in the aggregate,
have or result in a Material Adverse Effect.
(f) Consents and Approvals. Except as specifically set forth
in Schedule 2.1(f), neither the Company nor any Subsidiary is required to obtain
any consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, the
Certificate of Amendment or Certificate of Designation, other than (i) the
filing of the Registration Statement with the Commission, which shall be filed
in accordance with and in the time periods set forth in the Registration Rights
Agreement, (ii) the filing of the Certificate of Amendment and the Certificate
of Designation with the Nevada Secretary of State promptly upon receipt of
Shareholder Approval, (iii) the application(s) or any letter(s) acceptable to
the National Association of Securities Dealers, Inc. (the "NASD") for the
quotation of the Shares, the Underlying Shares and the Warrant Shares on the OTC
Bulletin Board (and with any other national securities exchange or market on
which the Common Stock is then listed) and (iv) any filings, notices or
registrations under applicable federal and state securities laws with respect to
the Shareholder Approval (together with the consents, waivers, authorizations,
orders, notices and filings referred to in Schedule 2.1(f), the "Required
Approvals").
(g) Litigation; Proceedings. Except as disclosed in Schedule
2.1(g), there is no action, suit, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of the Subsidiaries or any of their respective
assets or properties before or by any court, governmental or administrative
agency or regulatory authority (federal, state, county, local or foreign) which
(i) adversely affects or challenges the legality, validity or enforceability of
any of the Transaction Documents, the Certificate of Amendment, the Certificate
of Designation or the Securities or (ii) could reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect.
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(h) No Default or Violation. Neither the Company nor any
Subsidiary (i) is in default under or in violation of any indenture, loan or
credit agreement or any other agreement or instrument to which it is a party or
by which it or any of its properties is bound which would reasonably be expected
to, individually or in the aggregate, have a Material Adverse Effect, (ii) is in
violation of any order of any court, arbitrator or governmental body applicable
to it, or (iii) is in violation of any statute, rule or regulation of any
governmental authority to which it is subject, which violation could reasonably
be expected to, individually or in the aggregate, have a Material Adverse
Effect.
(i) Schedules. The Schedules to this Agreement furnished by or
on behalf of the Company do not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
made therein not misleading.
(j) Form SB-2; Financial Statements; No Adverse Change. The
Company has filed a Registration Statement on Form SB-2 (File No. 333-95341)
with the Commission (as amended or supplemented from time to time, the "SB-2").
As of the date of filing of the SB-2 and each amendment thereto, the SB-2
complied in all material respects with the requirements of the Securities Act
and the rules and regulations of the Commission promulgated thereunder, and did
not when filed, contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading. All material agreements to which the Company
or any Subsidiary is a party or to which the property or assets of the Company
and its Subsidiaries are subject have been filed as exhibits to the SB-2 as
required; neither the Company nor any of its Subsidiaries is in breach of any
agreement where such breach could reasonably be expected to, individually or in
the aggregate, have a Material Adverse Effect. The financial statements of the
Company included in the SB-2 comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing. Such financial statements
have been prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis during the periods involved,
except as may be otherwise specified in such financial statements or the notes
thereto, and fairly present, in all material respects, the consolidated
financial position of the Company as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal year-end audit adjustments. Since the
date of the financial statements included in the SB-2, there has been no event,
occurrence or development that has had, or would reasonably be expected to have,
a Material Adverse Effect that has not been specifically disclosed to the
Purchasers by the Company.
(k) Seniority. No class of equity securities of the Company is
senior to the Preferred Stock in right of payment, whether upon liquidation,
dissolution or otherwise.
(l) Investment Company. The Company is not, and is not
controlled by or under common control with an affiliate of, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
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(m) Certain Fees. Except as set forth in Section 5.1 hereof,
no fees or commissions will be payable by the Company to any broker, financial
advisor, finder, investment banker, or bank with respect to the transactions
contemplated by this Agreement. The Purchasers shall have no obligation with
respect to any fees or with respect to any claims made by or on behalf of other
Persons for fees of a type contemplated in this Section 2.1(m) that may be due
in connection with the transactions contemplated by this Agreement. The Company
shall indemnify and hold harmless each of the Purchasers, its employees,
officers, directors, agents, and partners, and their respective Affiliates, from
and against all claims, losses, damages, costs (including the costs of
preparation and attorney's fees) and expenses suffered in respect of any such
claimed or existing fees arising from the action or inaction of the Company.
(n) Solicitation Materials. The Company has not distributed
any offering materials in connection with the offering and sale of the
Securities. The Company confirms that it has not provided the Purchasers or
their agents or counsel with any information that constitutes or might
constitute material non-public information. The Company understands and confirms
that the Purchasers shall be relying on the foregoing representations in
effecting transactions in securities of the Company.
(o) Employment Matters. The Company and each Subsidiary is in
compliance in all material respects with all presently applicable provisions of
the Employee Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder ("ERISA"); no "reportable
event" (as defined in ERISA) has occurred with respect to any "pension plan" (as
defined in ERISA) for which the Company or any Subsidiary would have any
liability; neither the Company nor any Subsidiary has incurred and expects to
incur liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal
Revenue Code of 1986, as amended, including the regulations and published
interpretations thereunder (the "Code"); and each "pension plan" for which the
Company or any Subsidiary would have any liability that is intended to be
qualified under Section 401(a) of the Code is so qualified in all material
respects and nothing has occurred, whether by action or by failure to act, which
would cause the loss of such qualification.
(p) Exclusivity. The Company shall not issue and sell the
Debentures, the Shares, the Preferred Stock or the Warrants to any Person other
than the Purchasers pursuant to this Agreement other than with the prior written
consent of each of the Purchasers.
(q) Intellectual Property Rights. The Company and its
Subsidiaries own or possess adequate rights or licenses to use all trademarks,
trade names, service marks, service mark registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. Except as set forth on Schedule 2.1(q), none of the
Company's trademarks, trade names, service marks, service mark registrations,
service names, patents, patent rights, copyrights, inventions, licenses,
approvals, government authorizations, trade secrets or other intellectual
property rights have expired or terminated, or are expected to
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expire or terminate within two years from the date of this Agreement, except
where such expiration or termination would not have, individually or in the
aggregate, a Material Adverse Effect. The Company and its Subsidiaries do not
have any knowledge of any infringement by the Company or its Subsidiaries of
trademarks, trade name rights, patents, patent rights, copyrights, inventions,
licenses, service names, service marks, service mark registrations, trade
secrets or other similar rights of others, or of any such development of similar
or identical trade secrets or technical information by others and, except as set
forth on Schedule 2.1(q), no claim, action or proceeding has been made or
brought against, or to the Company's knowledge, has been threatened against, the
Company or its Subsidiaries regarding trademarks, trade name rights, patents,
patent rights, inventions, copyrights, licenses, service names, service marks,
service mark registrations, trade secrets or other infringement. Except as set
forth on Schedule 2.1(q), the Company and its Subsidiaries are unaware of any
facts or circumstances which might give rise to any of the foregoing. The
Company and its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their intellectual properties
except where the failure to do so would not have, individually or in the
aggregate, a Material Adverse Effect.
(r) Acknowledgment of Dilution. The Company understands and
acknowledges that the number of Underlying Shares issuable upon conversion of
the Convertible Securities will increase in certain circumstances. The Company
further acknowledges that its obligation to issue (i) the Underlying Shares upon
conversion of the Convertible Securities and (ii) the Warrant Shares upon
exercise of the Warrants is, in each case, unconditional and absolute regardless
of the effect of any such dilution.
(s) Registration Rights; Rights of Participation. Except as
described on Schedule 2.1(s) hereto, (A) the Company has not granted or agreed
to grant to any Person any rights (including "piggy-back" registration rights)
to have any securities of the Company registered with the Commission or any
other governmental authority which has not been satisfied and (B) no Person,
including, but not limited to, current or former shareholders of the Company,
underwriters, brokers or agents, has any right of first refusal, preemptive
right, right of participation, or any similar right to participate in the
transactions contemplated by this Agreement, any other Transaction Document, the
Certificate of Amendment or the Certificate of Designation.
(t) Title. Except as disclosed in Schedule 2.1(t), the Company
and the Subsidiaries have good and marketable title in fee simple to all real
property and personal property owned by them which is material to the business
of the Company or the Subsidiaries, in each case free and clear of all liens,
except for liens, claims or encumbrances that do not materially affect the value
of such property and do not interfere with the use made and proposed to be made
of such property by the Company or the Subsidiaries. Neither the Company nor any
of its Subsidiaries owns any real property. Any real property and facilities
held under lease by the Company or the Subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company or the Subsidiaries.
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(u) Permits. The Company and the Subsidiaries possess all
franchises, certificates, licenses, authorizations and permits or similar
authority issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct their respective businesses as described in the
SB-2 except where the failure to possess such permits would not, individually or
in the aggregate, have a Material Adverse Effect ("Material Permits"), and
neither the Company nor any such Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material Permit.
(v) Insurance. The Company and each Subsidiary maintains
property and casualty, general liability, workers' compensation, environmental
hazard, personal injury and other similar types of insurance with financially
sound and reputable insurers that is adequate, consistent with industry
standards. Neither the Company nor any Subsidiary has received notice from, and
has any knowledge of any threat by, any insurer (that has issued any insurance
policy to the Company or any Subsidiary) that such insurer intends to deny
coverage under or cancel, discontinue or not renew any insurance policy
presently in force.
(w) Taxes. All applicable tax returns required to be filed by
the Company and each of the Subsidiaries have been filed, or if not yet filed
have been granted extensions of the filing dates which extensions have not
expired, and all taxes, assessments, fees and other governmental charges upon
the Company, the Subsidiaries, or upon any of their respective properties,
income or franchises, shown in such returns and on assessments received by the
Company or the Subsidiaries to be due and payable have been paid, or adequate
reserves therefor have been set up if any of such taxes are being contested in
good faith; or if any of such tax returns have not been filed or if any such
taxes have not been paid or so reserved for, the failure to so file or to pay
would not in the aggregate or individually have a Material Adverse Effect.
(x) Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(y) Private Offering. The Company and all Persons acting on
its behalf have not made, and will not make, offers or sales of the Debentures,
the Shares, the Preferred Stock or the Warrants, and any securities that might
be integrated with offers and sales of the Debentures, the Shares, the Preferred
Stock and the Warrants, except to "accredited investors" (as defined in
Regulation D ("Regulation D") under the Securities Act) without any general
solicitation or advertising and otherwise in compliance with the conditions of
Regulation D. The offer and sale by the Company to the Purchasers of the
Convertible Securities and the Warrants and the Underlying Shares and the
Warrant Shares into which the Convertible Securities and the
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Warrants are convertible or exercisable, as the case may be, is exempt from the
registration requirements of the Securities Act.
(z) No Integrated Offering. Neither the Company, nor any of
its Affiliates, nor any Person acting on its or their behalf, has directly or
indirectly made any offers or sales in any security or solicited any offers to
buy any securities under circumstances that would cause the offering of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the Securities Act or any applicable shareholder
approval provisions.
(aa) Full Disclosure. The representations and warranties of
the Company set forth in this Agreement do not contain any untrue statement of a
material fact or omit any material fact necessary to make the statements
contained herein true, in light of the circumstances under which they were made,
not misleading.
2.2 Representations and Warranties of the Purchasers. Each of the
Purchasers, severally and not jointly, hereby represents and warrants to the
Company as follows:
(a) Investment Intent. Such Purchaser is acquiring the
Securities for its own account for investment purposes only and not with a view
to or for distributing or reselling such Securities or any part thereof or
interest therein, without prejudice, however, to such Purchaser's right, subject
to the provisions of this Agreement and the Registration Rights Agreement, at
all times to sell or otherwise dispose of all or any part of such Securities
pursuant to an effective registration statement under the Securities Act and in
compliance with applicable State securities laws or under an exemption from such
registration.
(b) Investor Status. At the time such Purchaser was offered
the Securities, and at each Closing Date, (i) it was and will be, an "accredited
investor" (as defined in Regulation D), or (ii) such Purchaser either alone or
together with its representatives, had and will have such knowledge,
sophistication and experience in business and financial matters so as to be
capable of evaluating the merits and risks of the prospective investment in the
Securities, and had and will have so evaluated the merits and risks of such
investment. Such Purchaser has the authority and is duly and legally qualified
to purchase and own the Securities.
(c) Ability of Purchaser to Bear Risk of Investment. Such
Purchaser is able to bear the economic risk of an investment in the Securities
and, at the present time, is able to afford a complete loss of such investment.
(d) Reliance. Each Purchaser understands and acknowledges that
(i) the Securities are being offered and sold to the Purchaser without
registration under the Securities Act in a private placement that is exempt from
the registration provisions of the Securities Act under Section 4(2) of the
Securities Act or Regulation D promulgated thereunder and (ii) the availability
of such exemption, depends in part on, and the Company will rely upon the
accuracy
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and truthfulness of, the foregoing representations and such Purchaser hereby
consents to such reliance.
The Company acknowledges and agrees that the Purchasers make
no representations or warranties with respect to the transactions contemplated
hereby or the other Transaction Documents other than those specifically set
forth in this Section 2.2.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions.
(a) If any Purchaser should decide to dispose of any Shares,
any Convertible Securities (and upon conversion thereof, any of the Underlying
Shares) or Warrants (and upon exercise thereof, any of the Warrant Shares) held
by it, each Purchaser understands and agrees that it may do so only pursuant to
an effective registration statement under the Securities Act, to the Company or
pursuant to an available exemption from the registration requirements of the
Securities Act. In connection with any transfer of any Securities other than
pursuant to an effective registration statement or to the Company, the Company
may require the transferor thereof to provide to the Company a written opinion
of counsel, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration of such transferred securities under the Securities Act which
opinion shall be delivered by counsel for the Company or, at the Purchaser's
option, another counsel designated by the Purchaser. Notwithstanding the
foregoing, the Company hereby consents to and agrees to register (i) any
transfer of Securities by one Purchaser to another Purchaser, and agrees that no
documentation other than executed transfer documents shall be required for any
such transfer, and (ii) any transfer by any Purchaser to an Affiliate of such
Purchaser or to an Affiliate of another Purchaser, or any transfer among any
such Affiliates, provided that transferee certifies in writing to the Company
that it is an "accredited investor" (as defined in Regulation D). At any time
after the first anniversary of the Initial Closing Date, if the Securities have
not been registered under the Securities Act, the Company agrees, upon any
Purchaser's request, to provide to such Purchaser a written opinion of counsel,
the form and substance of which shall be reasonably satisfactory to such
Purchaser, to the effect that the Purchaser may transfer its Securities pursuant
to Rule 144 of the Securities Act. Any such transferee shall agree in writing to
be bound by the terms of this Agreement and shall have the rights of a Purchaser
under this Agreement and the Registration Rights Agreement.
(b) Each Purchaser agrees to the imprinting, so long as is
required by this Section 3.1(b), of the following legend on the Securities:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON
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AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT.
The Underlying Shares issuable upon conversion of the Convertible
Securities and the Warrant Shares issuable upon exercise of the Warrants shall
not contain the legend set forth above if such conversion or exercise occurs at
any time while the Registration Statement is effective under the Securities Act
and upon the sale of the Underlying Shares or the Warrant Shares by the
Purchasers or in the event there is not an effective Registration Statement at
such time, if in the written opinion of counsel to the Company (such opinion to
be furnished at the sole expenses of the Company at the request of a Purchaser)
such legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the staff of
the Commission). The Company agrees that it will provide each Purchaser, upon
request, with a certificate or certificates representing Underlying Shares
and/or Warrant Shares, free from such legend at such time as such legend is no
longer required hereunder.
3.2 Stop Transfer Orders; Suspension of Qualification. The Company may
not make any notation on its records or give instructions to any transfer agent
of the Company which enlarge the restrictions of transfer set forth in Section
3.1. The Company will advise the Purchasers, promptly after it receives notice
of issuance by the Commission, any state securities commission or any other
regulatory authority of any stop order or of any order preventing or suspending
the use of any offering of any securities of the Company, or of the suspension
of the qualification of the Common Stock for offering or sale in any
jurisdiction, or the initiation of any proceeding for any such purpose.
3.3 Furnishing of Information. As long as any Purchaser owns
Securities, the Company covenants to use its best efforts to cause the SB-2 to
be declared effective under the Securities Act as promptly as possible. The
Company shall furnish copies of all amendments to the SB-2 and copies of all
correspondence relating thereto to the Purchasers and their counsel, which
documents will be subject to the review of the Purchasers and their counsel.
Thereafter, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to Section
13(a) or 15(d) of the Exchange Act and to promptly furnish the Purchasers with
true and complete copies of all such filings. As long as any Purchaser owns
Securities, if the Company is not required to file reports pursuant to Section
13(a) or 15(d) of the Exchange Act, it will prepare and furnish to the
Purchasers and make publicly available in accordance with Rule 144(c)
promulgated under the Securities Act annual and quarterly financial statements,
together with a discussion and analysis of such financial statements in form and
substance substantially similar to those that would otherwise be required to be
included in reports required by Section 13(a) or 15(d) of the Exchange Act, as
well as any other information required thereby,
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in the time period that such filings would have been required to have been made
under the Exchange Act. The Company further covenants that it will take such
further action as any holder of Securities may reasonably request, all to the
extent required from time to time to enable such Person to sell Underlying
Shares and/or Warrant Shares without registration under the Securities Act
within the limitation of the exemptions provided by Rule 144 promulgated under
the Securities Act, including the legal opinion referenced above in Section 3.1.
Upon the request of any such Person, the Company shall deliver to such Person a
written certification of a duly authorized officer as to whether it has complied
with such requirements.
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3.4 Form D; Blue Sky Laws. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof to each Purchaser promptly after such filing. The Company shall, on or
before the Initial Closing Date, take such action as the Company shall
reasonably determine is necessary to qualify the Securities for, or obtain
exemption for the Securities for, sale to the Purchasers at the Initial Closing
pursuant to this Agreement under applicable securities or "Blue Sky" laws of the
states of the United States, and shall provide evidence of any such action so
taken to the Purchasers on or prior to the Initial Closing Date. The Company
shall make all filings and reports relating to the offer and sale of the
Securities required under applicable securities or "Blue Sky" laws of the states
of the United States following the Initial Closing Date.
3.5 Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of any or all of such securities to any Purchaser.
3.6 Certain Agreements. As long as any Purchaser owns Securities, the
Company shall not and shall cause the Subsidiaries not to, without the consent
of the holders of all of the Securities then outstanding, (i) amend its
certificate of incorporation, bylaws or other organizational documents so as to
adversely affect any rights of any Purchaser; (ii) declare, authorize, set aside
or pay any dividend or other distribution with respect to the Common Stock
except as permitted under the Transaction Documents and as would not adversely
affect the rights of any Purchaser hereunder or under the other Transaction
Documents; (iii) repay, repurchase or offer to repay, repurchase or otherwise
acquire shares of its Common Stock in any manner; (iv) issue any series of
preferred stock or other securities with rights senior (in respect of
liquidations, dividends, preferences and similar rights) to those of the
Preferred Stock or (v) enter into any agreement with respect to any of the
foregoing.
3.7 Listing and Reservation of Underlying Shares and Warrant Shares;
Compliance with Law
(a) The Company shall notify the Commission and the NASD, in
accordance with their requirements, of the transactions contemplated by this
Agreement and the other Transaction Documents, and shall take all other
necessary action and proceedings as may be required and permitted by applicable
law, rule and regulation, for the legal and valid issuance of the Securities to
the Purchasers and promptly provide copies thereof to the Purchasers.
(b) The Company shall take all action necessary to at all
times have authorized, and reserved for the purpose of issuance upon conversion
of the Convertible Securities and upon exercise of the Warrants, no less than
the sum of (A) 200% of the number of shares of
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Common Stock needed to provide for the issuance of the Underlying Shares
(without regard to any limitations on conversions thereof) and (B) 100% of the
number of shares of Common Stock needed to provide for the issuance of the
Warrant Shares (without regard to any limitations on exercise thereof).
(c) Until at least two (2) years after the last of the
Convertible Securities has been converted into Underlying Shares or the last of
the Warrants has been exercised for the Warrant Shares, (i) the Company will
cause its Common Stock to continue to be registered under Sections 12(b) or
12(g) of the Exchange Act, will comply in all respects with its reporting and
filing obligations under such Exchange Act, will comply with all requirements
related to any registration statement filed pursuant to this Agreement or the
Registration Rights Agreement and will not take any action or file any document
(whether or not permitted by the Securities Act or the Exchange Act or the rules
and regulations thereunder) to terminate or suspend such registration or to
terminate or suspend its reporting and filing obligations under the Securities
Act and Exchange Act, except as permitted herein and (ii) the Company will take
all action within its power to continue the listing or trading of its Common
Stock on the OTC Bulletin Board and will comply in all respects with the
Company's reporting, filing and other obligations under the bylaws or rules of
the NASD.
3.8 Notice of Breaches.
(a) Each of the Company and each Purchaser shall give prompt
written notice to the other of any material breach of any representation,
warranty or other agreement contained in this Agreement, any other Transaction
Document, the Certificate of Amendment or the Certificate of Designation, as
well as any events or occurrences arising after the date hereof and prior to any
Closing Date, which would reasonably be likely to cause any representation or
warranty or other agreement of such party, as the case may be, contained herein
to be materially incorrect or breached as of such Closing Date. However, no
disclosure by any party pursuant to this Section 3.8 shall be deemed to cure any
breach of any representation, warranty or other agreement contained herein or in
the Registration Rights Agreement.
(b) Notwithstanding the generality of Section 3.8(a), the
Company shall promptly notify each Purchaser of any notice or claim (written or
oral) that it receives from any lender of the Company to the effect that the
consummation of the transactions contemplated hereby or by any other Transaction
Document violates or would violate any written agreement or understanding
between such lender and the Company, and the Company shall promptly furnish by
facsimile to each Purchaser a copy of any written statement in support of or
relating to such claim or notice.
(c) The default by any Purchaser of any of its obligations,
representations or warranties under any Transaction Document shall not be
imputed to, and shall have no effect upon, any other Purchaser or affect the
Company's obligations under the Transaction Documents to any non-defaulting
Purchaser with respect to any outstanding Shares, Convertible Securities,
Warrants, Underlying Shares or Warrant Shares.
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3.9 Conversion Obligations of the Company. The Company covenants to
convert the Convertible Securities and to deliver the Underlying Shares in
accordance with the terms and conditions and within the time period set forth in
the Debentures or the Certificate of Designation, as the case may be.
3.10 Use of Proceeds. The Company shall use all of the proceeds from
the sale of the Securities for working capital and general corporate purposes
and not for the satisfaction of any portion of Company borrowings outside the
normal course of business, including, without limitation, any obligation or
liability of any kind whatsoever owed to a shareholder, officer or director of
the Company, or to redeem Company equity or equity-equivalent securities.
Pending application of the proceeds of this placement in the manner permitted
hereby, the Company will invest such proceeds in interest bearing accounts
and/or short-term, investment grade interest bearing securities.
3.11 Indemnification. The Company also will indemnify and hold the
Purchasers harmless against any and all losses, claims, damages or liabilities
to any such Person (including, without limitation, in connection with any
action, proceeding or investigation brought by or against any such Person,
including by shareholders of the Company) in connection with or as a result of
any matter referred to in Transaction Documents, the Certificate of Amendment or
the Certificate of Designation, including, without limitation, for any
misrepresentation by the Company, for breaches of representations and warranties
contained in any of the Transaction Documents, the Certificate of Amendment or
the Certificate of Designation, and for any breach, non-compliance or
nonfulfillment by the Company of any covenant, agreement or undertaking to be
complied with or performed by it contained in or pursuant to the Transaction
Documents, the Certificate of Amendment or the Certificate of Designation,
except to the extent that it is finally judicially determined that such losses,
claims, damages or liabilities resulted solely from the gross negligence or bad
faith of the Purchasers. If for any reason the foregoing indemnification is
unavailable to such Purchaser or is insufficient to hold such Person harmless,
then the Company shall contribute to the amount paid or payable by such
Purchaser as a result of such loss, claim, damage or liability in such
proportion as is appropriate to reflect the relative economic interests of the
Company and its shareholders on the one hand and the Purchasers on the other
hand in the matters contemplated by the Transaction Documents, the Certificate
of Amendment or the Certificate of Designation, as well as the relative fault of
the Company and the Purchasers with respect to such loss, claim, damage or
liability and any other relevant equitable considerations. The reimbursement,
indemnity and contribution obligations of the Company under this paragraph shall
be in addition to any liability which the Company may otherwise have, shall
extend upon the same terms and conditions to any affiliate of the Purchasers and
the partners, directors, agents, employees or controlling persons (if any), as
the case may be, of the Purchasers and any such affiliate, and shall be binding
upon and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers, any such affiliate and any such
Person. The Company also agrees that neither the Purchasers nor any of such
affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company in connection with or as a result of any matter referred
to in this
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Agreement, the other Transaction Documents, the Certificate of Amendment or the
Certificate of Designation, except to the extent that it is finally judicially
determined that any losses, claims, damages, liabilities or expenses incurred by
the Company result solely from the gross negligence or bad faith of, or knowing
breach of this Agreement, the other Transaction Documents, the Certificate of
Amendment or the Certificate of Designation by, the Purchasers. Promptly after
receipt by the Purchasers or any affiliate, partners, directors, agents,
employees and controlling persons, as the case may be, of notice of any claim or
other commencement of any action in respect of which indemnity may be sought,
such party will notify the Company in writing of the receipt or commencement
thereof and the Company shall have the right to assume the defense of such claim
or action (including the employment of counsel reasonably satisfactory to the
indemnified parties and the payment of fees and expenses of such counsel). The
indemnified party shall cooperate with the Company and the Company's counsel in
the defense of such claim or action. The Purchasers understand that the Company
shall not in connection with any one such claim or action or separate but
substantially similar related claims or actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys for all
of the indemnified parties unless the defense of one indemnified party is unique
or separate from that of another indemnified party or one or more legal defenses
are available to an indemnified party but not to other indemnified parties
subject to the same claim or action. In the event the Company does not promptly
assume the defense of a claim or action, the indemnified parties shall have the
right to employ counsel reasonably satisfactory to the Company, at the Company's
expense, to defend such claim or action. The indemnified party shall not admit
any liability with respect to the claim or action or settle, compromise, pay or
discharge the same without the prior written consent of the Company so long as
the Company is reasonably contesting or defending the same in good faith. The
Company shall not compromise, settle or discharge any claim or action without
the Purchasers' consent, as applicable, which consent will not be unreasonably
withheld, unless there is no finding or admission of any violation of any law
against the indemnified party and the sole relief is monetary damages paid in
full by the Company. The provisions of this Section 3.11 shall survive any
termination or completion of the Transaction Documents.
3.12 Subsequent Sales and Registrations. (a) Until such time as all of
the Convertible Securities have been converted into Common Stock or have been
redeemed pursuant to the Debentures or the Certificate of Designation, the
Company shall not, directly or indirectly, without the prior written consent of
the Purchasers, offer, sell, grant any option to purchase, or otherwise dispose
of (or announce any offer, sale, grant of any option to purchase or other
disposition) any of its or its Affiliates' equity or equity-equivalent
securities or any instrument that permits the holder thereof to acquire Common
Stock, except (i) the granting of options or warrants to employees, officers and
directors, and the issuance of shares upon exercise of options granted, under
any stock option plan heretofore or hereinafter duly adopted by the Company,
(ii) shares issued upon exercise of any currently outstanding warrants disclosed
in Schedule 2.1(c)(i), and (iii) shares of Common Stock issued upon conversion
of the Convertible Securities or upon exercise of the Warrants.
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(b) Other than Underlying Shares, Warrant Shares and other "Registrable
Securities" (as defined in the Registration Rights Agreement) to be registered
in accordance with the Registration Rights Agreement, the Company shall not, for
a period of not less than 90 Trading Days (as defined in the Debentures) after
the dates that any registration statement relating to the Securities is declared
effective by the Commission, without the prior written consent of the
Purchasers, (i) register for resale any securities of the Company, except as set
forth on Schedule 2.1(s), or (ii) issue or sell any of its or any of its
Affiliates' equity or equity-equivalent securities except for (A) securities
issued upon the exercise or conversion of the securities set forth on Schedule
2.1(c)(i) or (B) securities sold pursuant to the Company's employee benefit
plans. Any days that any Purchaser is unable to sell Underlying Shares or
Warrant Shares under the Registration Statement shall be added to such 90
Trading Day period for the purposes of (i) and (ii) above.
3.13 Proxy Statement. The Company shall provide each shareholder
entitled to vote at the next meeting of shareholders of the Company, which
meeting shall occur on or before July 15, 2000, a proxy statement, which has
been previously reviewed by the Purchasers and counsel of their choice,
soliciting each such shareholder's affirmative vote at such shareholder meeting
for approval of the Company's issuance of all of the Securities as described in
this Agreement and the authorization and adoption by the shareholders of the
Certificate of Amendment and the Certificate of Designation, including the
Preferred Stock described therein (such affirmative vote being referred to as
the "Shareholder Approval"), and the Company shall use its best efforts to (i)
solicit the Shareholder Approval, including hiring a proxy solicitation firm,
and (ii) cause the Board of Directors of the Company to recommend to the
shareholders that they approve such proposals.
3.14 Filing of Certificate of Amendment and Certificate of Designation.
Not later than the third Business Day following receipt of Shareholder Approval,
the Company shall file the Certificate of Amendment and the Certificate of
Designation with the Nevada Secretary of State and shall consummate the Company
Exchange (as defined in the Debentures) in accordance with the terms of the
Debentures.
3.15 Filing of Form 8-K. On or before the first Business Day following
each Closing Date, the Company shall file a Form 8-K with the Commission
describing the terms of the transactions contemplated by the Transaction
Documents and consummated at the applicable Closing, in the form required by the
Exchange Act.
3.16 Incorporation of the Debentures and the Certificate of Designation
By Reference. The Debentures and, upon the filing thereof with the Nevada
Secretary of State, the Certificate of Designation, are hereby incorporated
herein by reference and made a part hereof.
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ARTICLE IV
CONDITIONS
4.1 Conditions Precedent to Sale of the Initial Securities
(a) Conditions Precedent to the Obligation of the Company to
Sell the Initial Securities. The obligation of the Company to sell the Initial
Securities hereunder is subject to the satisfaction or waiver by the Company, at
or before the Initial Closing, of each of the following conditions:
(i) Accuracy of the Purchasers' Representations and
Warranties. The representations and warranties of each Purchaser shall
be true and correct in all material respects as of the date when made
and as of the Initial Closing Date, as though made on and as of such
date;
(ii) Performance by the Purchasers. Each Purchaser
shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by such Purchaser
at or prior to the Initial Closing; and
(iii) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by any court or governmental authority
of competent jurisdiction which prohibits the consummation of any of
the transactions contemplated by this Agreement or the Registration
Rights Agreement.
(b) Conditions Precedent to the Obligation of the Purchasers
to Purchase the Initial Securities. The obligation of each Purchaser hereunder
to acquire and pay for the Initial Securities is subject to the satisfaction or
waiver by such Purchaser, at or before the Initial Closing, of each of the
following conditions:
(i) Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company set forth
in this Agreement and in the Registration Rights Agreement shall be
true and correct in all material respects as of the date when made and
as of the Initial Closing Date as though made on and as of such date;
(ii) Performance by the Company. The Company shall
have performed, satisfied and complied with in all material respects
all covenants, agreements and conditions required by this Agreement to
be performed, satisfied or complied with by the Company at or prior to
the Initial Closing;
(iii) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by
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any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by
this Agreement or any other Transaction Document;
(iv) Adverse Changes. Since the date of the financial
statements included in the SB-2, no event which had a Material Adverse
Effect and no material adverse change in the financial condition of the
Company shall have occurred (for purposes hereof changes in the market
price of the Common Stock may be considered as a factor in determining
whether there has occurred an event which has had a Material Adverse
Effect or whether a material adverse change has occurred);
(v) No Suspensions of Trading in Common Stock. The
trading in the Common Stock shall not have been suspended by the
Commission or on OTC Bulletin Board, which suspension shall remain in
effect;
(vi) Legal Opinion. The Company shall have delivered
to the Purchasers the opinion of Evers & Hendrickson LLP, outside
counsel to the Company, in substantially the form annexed hereto as
Exhibit F;
(vii) Required Approvals. All Required Approvals
shall have been obtained;
(viii) Shares of Common Stock. On or prior to the
Initial Closing Date, the Company shall have duly reserved the number
of Underlying Shares and Warrant Shares required by the Transaction
Documents to be reserved for issuance upon conversion of the
Convertible Securities and upon exercise of the Warrants;
(ix) Delivery of Stock Certificates, Debentures and
Warrant Certificates. The Company shall have delivered to each
Purchaser or such Purchaser's designee, (i) stock certificates
representing the Initial Shares, registered in the name of such
Purchaser, each in form satisfactory to such Purchaser, (ii) the
Debentures representing the Initial Debentures, registered in the name
of such Purchaser, each in form satisfactory to the Purchaser, and
(iii) warrant certificate(s) representing the Initial Warrants,
registered in the name of such Purchaser, in form satisfactory to the
Purchaser;
(x) Registration Rights Agreement. The Company shall
have executed and delivered the Registration Rights Agreement;
(xi) Transfer Agent Instructions. The Irrevocable
Transfer Agent Instructions, in the form of Exhibit E annexed hereto,
shall have been delivered to and acknowledged in writing by the
Company's transfer agent; and
(xii) Officer's Certificate. On the Initial Closing
Date the Company shall deliver to the Purchasers an Officer's
Certificate dated the Initial Closing Date and
-22-
<PAGE>
signed by an executive officer of the Company confirming the accuracy
of the Company's representations, warranties and covenants as of the
Initial Closing Date and confirming the compliance by the Company with
the conditions precedent set forth in this Section 4.1 as of the
Initial Closing Date.
4.2 Conditions Precedent to the Obligation of the Purchasers to
Purchase the Additional Securities. The obligation of each Purchaser hereunder
to acquire and pay for the Additional Securities is subject to the satisfaction
or waiver by each Purchaser, at or before the Subsequent Closing, of each of the
following conditions:
(a) Initial Closing. The Initial Closing shall have
occurred.
(b) Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company contained
herein and in the Registration Rights Agreement shall be true and
correct as of the date when made and as of the Subsequent Closing Date,
as though made on and as of such date, except where the event causing
such representation or warranty to be untrue or incorrect would not
result in a Material Adverse Effect;
(c) Performance by the Company. The Company shall
have performed, satisfied and complied in all material respects with
all covenants, agreements and conditions required by this Agreement and
the other Transactions Documents to be performed, satisfied or complied
with by the Company at or prior to the Subsequent Closing Date;
(d) Registration Statement. The Registration
Statement with respect to the Underlying Shares issuable on conversion
of all Convertible Securities and with respect to the Warrant Shares
issuable upon exercise of all Warrants shall have been declared
effective under the Securities Act by the Commission, in a timely
manner in accordance with the Registration Rights Agreement; and such
Registration Statement shall be effective, not subject to any stop
order and not be subject to any suspension pursuant to Section 3(d) of
the Registration Rights Agreement, and no stop order shall be pending
or threatened as of the Subsequent Closing Date;
(e) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by any court or governmental authority
of competent jurisdiction which prohibits the consummation of any of
the transactions contemplated by this Agreement and the other
Transaction Documents relating to the issuance, conversion or exercise
of any of the Securities;
(f) Litigation; Proceedings. No action, suit, notice
of violation, proceeding or investigation shall have been instituted or
threatened against the Company
-23-
<PAGE>
which could reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect;
(g) No Suspensions of Trading in Common Stock. The
trading in the Common Stock, at all times since the Initial Closing
Date, shall not have been suspended by the Commission or on OTC
Bulletin Board, which suspension shall remain in effect;
(h) Required Approvals. All Required Approvals shall
have been obtained;
(i) Shares of Common Stock. On the Subsequent Closing
Date the Company shall have duly reserved the number of Underlying
Shares and Warrant Shares required by this Agreement to be reserved for
issuance upon conversion or exercise of any Additional Securities, as
applicable;
(j) Delivery of Securities. The Company shall have
delivered to each Purchaser or such Purchaser's designee the Additional
Securities, registered in the name of such Purchaser, and in form
satisfactory to such Purchaser; and
(k) Performance of Conversion Obligations. The
Company shall have delivered Underlying Shares upon conversion of the
Convertible Securities and otherwise performed its obligations in
accordance with the terms, conditions and timing requirements of the
Convertible Securities.
ARTICLE V
MISCELLANEOUS
5.1 Fees and Expenses. (a) The Company shall pay the reasonable legal
fees and expenses of Stroock & Stroock & Lavan LLP, counsel for the Purchasers,
incident to the negotiation, preparation, execution, delivery and performance of
this Agreement and the other Transaction Documents, in connection with the
negotiation, preparation, execution and delivery of this Agreement and the other
Transaction Documents. The Company shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by the Company incident to the negotiation, preparation, execution,
delivery and performance of this Agreement and the other Transaction Documents.
The Company shall pay all stamp and other taxes and duties levied in connection
with the issuance of the Securities pursuant to the Transaction Documents.
(b) The Company shall pay to Union Atlantic LC and Continental Capital
& Equity Corporation (the "Finders") as a commission in connection with the
transactions contemplated hereby, a fee payable in United States dollars in
immediately available funds by wire transfer to an account designated in writing
by the Finders for such purpose equal to 8% of the aggregate
-24-
<PAGE>
purchase price of securities sold at such Closing (6.5% to Union Atlantic LC and
1.5% to Continental Capital & Equity Corporation). In addition, Union Atlantic
LC will receive 100,000 Warrants in connection with the transactions
contemplated hereby. The Finders are intended third-party beneficiaries of this
Section 5.1(b).
5.2 Entire Agreement; Amendments. This Agreement, together with the
Exhibits and Schedules hereto, the other Transaction Documents and, when filed
with the Nevada Secretary of State, the Amended Articles and Certificate of
Designation, contain the entire understanding of the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings,
oral or written, with respect to such matters.
5.3 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earlier of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified for notice prior to 5:00 p.m., New York City time, on
a Business Day, (ii) the Business Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified for notice later than 5:00 p.m., New York City time, on any
date and earlier than 11:59 p.m., New York City time, on such date, (iii) the
Business Day following the date of mailing, if sent by nationally recognized
overnight courier service or (iv) actual receipt by the party to whom such
notice is required to be given. The addresses for such communications shall be
with respect to each Purchaser at its address set forth under its name on
Schedule 1 attached hereto, or with respect to the Company, addressed to:
World Wide Wireless Communications Inc.
520 Third Street, Suite 101
Oakland, California 94607
Attention: Douglas P. Haffer
Telephone No.: (510) 839-6100
Facsimile No.: (510) 839-7088
or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices to any Purchaser shall be sent to Stroock &
Stroock & Lavan LLP, 180 Maiden Lane, New York, New York 10038-4982, Attention:
James R. Tanenbaum, Esq., Telephone No.: (212) 806-5400, Facsimile No.: (212)
806-6006. Copies of notices to the Company shall be sent to Evers & Hendrickson,
LLP, 155 Montgomery, 12th Floor, San Francisco, California 94104, Attention:
William D. Evers, Esq., Telephone No.: (415) 772-8100, Facsimile No.: (415)
772-8101.
5.4 Amendments; Waivers. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by both the Company and the Purchasers; or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition
-25-
<PAGE>
or requirement of this Agreement shall be deemed to be a continuing waiver in
the future or a waiver of any other provision, condition or requirement hereof,
nor shall any delay or omission of either party to exercise any right hereunder
in any manner impair the exercise of any such right accruing to it thereafter.
Notwithstanding the foregoing, no such amendment shall be effective to the
extent that it applies to less than all of the holders of the Securities
outstanding. The Company shall not offer or pay any consideration to a Purchaser
for consenting to such an amendment or waiver unless the same consideration is
offered to each Purchaser and the same consideration is paid to each Purchaser
which consents to such amendment or waiver.
5.5 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
5.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each of the Purchasers. The Purchasers may
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the Company, except that any assignee must make the
representations and warranties set forth in Section 2.2 and otherwise comply
with the terms of this Agreement otherwise applicable to its assignor. This
provision shall not limit a Purchaser's right to transfer securities or transfer
or assign rights under the Registration Rights Agreement.
5.7 No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
5.8 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York, without
regard to the principles of conflicts of law thereof.
5.9 Survival. The agreements, covenants, representations, warranties
and provisions contained in this Agreement shall survive the delivery of the
Securities pursuant to this Agreement and each Closing hereunder and any
conversion of the Convertible Securities or exercise of the Warrants.
5.10 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that all
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
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<PAGE>
5.11 Publicity. The Company and each Purchaser shall consult with each
other in issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby and neither party shall issue
any such press release or otherwise make any such public statement without the
prior written consent of the other, which consent shall not be unreasonably
withheld or delayed, except that no prior consent shall be required if such
disclosure is required by law, in which such case the disclosing party shall
provide the other party with prior notice of such public statement. The Company
shall not publicly or otherwise disclose the names of any of the Purchasers
without each such Purchaser's prior written consent unless otherwise required by
law, in which case the Company shall inform such Purchaser of such disclosure in
writing prior to making such disclosure.
5.12 Consent to Jurisdiction; Attorneys' Fees (a) The Company
(including, but not limited to, its affiliates, subsidiaries, officers,
directors and controlling persons) and each Purchaser hereby (i) irrevocably
submits to the exclusive jurisdiction of any New York State court or Federal
court sitting in the Borough of Manhattan, The City of New York in any action
related to, connected with or arising out of, in whole or in part, the
Transaction Documents, including, but not limited to, transactions in the
securities of the Company subsequent to the purchase by such Purchaser or
Persons claimed to be affiliated with such Purchaser, (ii) agrees that all
claims in such action shall be decided in such court, (iii) waives, to the
fullest extent it may effectively do so, the defense of inconvenient forum and
(iv) consents to the service of process by certified mail, return receipt
requested. Nothing herein shall affect the right of any party to serve legal
process in any manner permitted by law or affect its right to bring any action
in any other court.
(b) In connection with any dispute between the Company and any
Purchaser, related to, connected with or arising out of, in whole or in part,
the Transaction Documents including, but not limited to, transactions in the
securities of the Company subsequent to the purchase, by a Purchaser or Persons
claimed to be affiliated to a Purchaser, the prevailing party shall be awarded
all reasonable attorneys' fees and expenses incurred by it. In that connection
fees and expenses actually paid by a party in connection with the litigation of
any dispute shall be deemed presumably reasonable.
(c) In the event that any Purchaser or any Person claimed to be
affiliated or associated with such Purchaser becomes involved in any capacity in
any action, proceeding or investigation brought by or against any Person,
including shareholders of the Company, in connection with or as a result of any
matter referred to in the Transaction Documents, the Company will promptly
reimburse such Purchaser and/or those claimed to be affiliated or associated
with such Purchaser for its legal fees and expenses and other expenses
(including the cost of any investigation and preparation) incurred in connection
therewith, as those fees and expenses are incurred; provided, however, that if
at the conclusion of such action, proceeding or investigation it shall be
finally judicially determined by a court of competent jurisdiction that
indemnity for such fees and expenses is contrary to law, or that such Purchaser
is not the prevailing party then in that event, such Purchaser and/or any other
Person having received such advances of fees and expenses shall promptly
reimburse the Company in full for the sums advanced.
-27-
<PAGE>
(d) The provisions of this Section 5.12 shall survive any termination
or completion of the Transaction Documents.
5.13 Waiver of Jury Trial (a) The parties hereto each waive their
respective rights to a trial by jury of any claim or cause of action based upon
or arising out of or related to the Transaction Documents, or the transactions
contemplated by the Transaction Documents, in any action, proceeding or other
litigation of any type brought by any of the parties against any other party or
parties, whether with respect to contract claims, tort claims, or otherwise. The
parties hereto each agree that any such claim or cause of action shall be tried
by a court trial without a jury. Without limiting the foregoing, the parties
further agree that their respective right to a trial by jury is waived by
operation of this Section 5.13 as to any action, counterclaim or other
proceeding which seeks, in whole or in part, to challenge the validity or
enforceability of any of the Transaction Documents or any provision hereof or
thereof. The waiver shall apply to any subsequent amendments, renewals,
supplements or modifications to any of the Transaction Documents.
(b) The provisions of this Section 5.13 shall survive any termination
or completion of the Transaction Documents.
5.14 Severability. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, illegal, void or unenforceable in any
respect, the remainder of the terms, provisions, covenants and restrictions set
forth herein shall remain in full force and effect and shall in no way be
affected, impaired or invalidated, and the parties hereto shall use their
reasonable efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
5.15 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Purchasers
will be entitled to specific performance of the obligations of the Company under
the Transaction Documents and injunctive relief. Each of the Company and the
Purchasers (severally and not jointly) agree that monetary damages would not be
adequate compensation for any loss incurred by reason of any breach of its
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation or injunctive relief
the defense that a remedy at law would be adequate.
5.16 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser hereunder is several and not joint with the
obligations of the other Purchasers hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any Closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a
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<PAGE>
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert with respect to such obligations or
the transactions contemplated by this Agreement. Each Purchaser shall be
entitled to protect and enforce its rights, including without limitation the
rights arising out of this Agreement or out of the other Transaction Documents,
and it shall not be necessary for any other Purchaser to be joined as an
additional party in any proceeding for such purpose.
-29-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.
WORLD WIDE WIRELESS
COMMUNICATIONS, INC.
By: /s/ Douglas P. Haffer
-------------------------------------
Name: Douglas P. Haffer
Title: President
ESQUIRE TRADING & FINANCE, INC.
By: /s/ Roland Wineger
-------------------------------------
Name: Roland Wineger
Title: Director
AMRO INTERNATIONAL, S.A.
By: /s/ H. U. Bachofer
-------------------------------------
Name: H. U. Bachofer
Title: Director
CELESTE TRUST REG.
By: /s/ Thomas Hackl
-------------------------------------
Name: Thomas Hackl
Title: Representative
THE ENDEAVOR CAPITAL FUND, S.A.
By: Endeavor Management, Inc.
By: /s/ Shmuli Margulies
------------------------------
Name: Shmuli Margulies
Title: Director
-30-
<PAGE>
THE KESHET FUND, L.P.
By: /s/ David Grin
-------------------------------------
Name: David Grin
Title:
KESHET, L.P.
By: /s/ David Grin
-------------------------------------
Name: David Grin
Title:
NESHER, LTD.
By: /s/ J. D. Clarke
-------------------------------------
Name: J. D. Clarke
Title: Director
-31-
<PAGE>
<TABLE>
Schedule 1
Purchasers
----------
<CAPTION>
Number of Principal Amount Portion of
Initial of Initial Number of Initial Purchase
Name of Purchaser Address of Purchaser Shares Debentures Initial Warrants Price
----------------- -------------------- -------- ----------- ---------------- ----------------
<S> <C> <C> <C> <C>
Esquire Trading & Schutzengelstrasse 36 140,000 $420,000 525,000 $700,000
Finance Inc. Baar, Switzerland CH6342
Fax No.: 041-7601031
Amro International c/o Ultra Finance Ltd. 300,000 $900,000 1,125,000 $1,500,000
S.A. Grossmuenster Platz 26,
P.O. Box 4401
Zurich, Switzerland
CH8022
Celeste Trust Reg. c/o 120,000 $360,000 450,000 $600,000
Trevisa-Treuhand-Ansalt
Landstrassse 8
9496 Furstentums
Balzers, Liechtenstien
The Endeavor 14/14 Divrea Chaim 150,000 $1,200,000 1,125,000 $1,500,000
Capital Fund, S.A. Street
Jerusalem 94479, Israel
Fax No.:
011-972-2-5824443
Nesher, Ltd. c/o Ragnall House 10,000 $80,000 75,000 $100,000
18 Peel Road
Douglas, Isle of Man
1M1 4L2, United Kingdom
Keshet, L.P. Seameadow House 25,000 $200,000 187,500 $250,000
BlackBurn Highway
P.O. Box 173
Road Town, Tortola
British Virgin Islands
The Keshet Fund, c/o KCM, LLC 15,000 $120,000 112,500 $150,000
L.P. 135 W. 50th Street
Suite 1700
New York, NY 10020
Total: 760,000 $3.280,000 3,600,000 $4,800,000
======= ========== ========= ==========
</TABLE>
-32-
<PAGE>
<TABLE>
Schedule 2
Purchasers
<CAPTION>
Number of Principal Amount Portion of
Additional or Stated Value of Number of Additional Purchase
Name of Purchaser Address of Purchaser Shares Additional Additional Warrants Price
----------------- -------------------- --------- ------------------ ------------------- -------------------
Convertible Securities,
as applicable
-------------
<S> <C> <C> <C> <C>
Esquire Trading & Schutzengelstrasse 36 56,000 $168,000 210,000 $280,000
Finance Inc. Baar, Switzerland CH6342
Fax No.: 041-7601031
Amro International c/o Ultra Finance Ltd. 120,000 $360,000 450,000 $600,000
S.A. Grossmuenster Platz 26,
P.O. Box 4401
Zurich, Switzerland
CH8022
Celeste Trust Reg. c/o 48,000 $144,000 180,000 $240,000
Trevisa-Treuhand-Ansalt
Landstrassse 8
9496 Furstentums
Balzers, Liechtenstien
The Endeavor 14/14 Divrea Chaim 60,000 $480,000 450,000 $600,000
Capital Fund, S.A. Street
Jerusalem 94479, Israel
Fax No.:
011-972-2-5824443
Nesher, Ltd. c/o Ragnall House 4,000 $32,000 30,000 $40,000
18 Peel Road
Douglas, Isle of Man
1M1 4L2, United Kingdom
Keshet, L.P. Seameadow House 10,000 $80,000 75,000 $100,000
BlackBurn Highway
P.O. Box 173
Road Town, Tortola
British Virgin Islands
The Keshet Fund, c/o KCM, LLC 6,000 $48,000 45,000 $60,000
L.P. 135 W. 50th Street
Suite 1700
New York, NY 10020
Total: 304,000 $1.312,000 1,440,000 $1,920,000
======= ========== ========= ==========
</TABLE>
-33-
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made
and entered into as of April 14, 2000, by and among World Wide Wireless
Communications, Inc., a Nevada corporation (the "Company"), Esquire Trading &
Finance, Inc. ("Esquire"), Amro International, S.A. ("Amro"), Celeste Trust Reg.
("Celeste"), The Endeavor Capital Fund, S.A. ("Endeavor"), Nesher, Ltd.
("Nesher"), The Keshet Fund, L.P. ("Keshet Fund") and Keshet, L.P. ("Keshet").
Esquire, Amro, Celeste, Endeavor, Nesher, Keshet Fund and Keshet are each
referred to herein as a "Purchaser" and are collectively referred to herein as
the "Purchasers."
This Agreement is being entered into pursuant to the
Securities Purchase Agreement, dated as of the date hereof among the Company and
the Purchasers (the "Purchase Agreement").
The Company and the Purchasers hereby agree as follows:
1. Definitions.
Capitalized terms used and not otherwise defined herein shall
have the meanings given such terms in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
"Advice" shall have meaning set forth in Section 3(m).
"Affiliate" means, with respect to any Person, any other
Person that directly or indirectly controls or is controlled by or under common
control with such Person. For the purposes of this definition, "control," when
used with respect to any Person, means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms of "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing.
"Board" shall have meaning set forth in Section 3(n).
"Business Day" means any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
state of New York generally are authorized or required by law or other
government actions to close.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's Common Stock, par value
$.001 per share.
<PAGE>
"Convertible Securities" means the Debentures and the
Preferred Stock.
"Debentures" means the 4% Convertible Debentures due 2005 of
the Company issued to the Purchasers pursuant to the Purchase Agreement.
"Effectiveness Date" means the 120th day following the Initial
Closing Date.
"Effectiveness Period" shall have the meaning set forth in
Section 2.
"Event" shall have the meaning set forth in Section 7(e)(i).
"Event Date" shall have the meaning set forth in Section
7(e)(i).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Filing Date" means the 45th day following the Initial Closing
Date.
"Holder" or "Holders" means the holder or holders, as the case
may be, from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in
Section 5(c).
"Indemnifying Party" shall have the meaning set forth in
Section 5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Preferred Stock" means the Series A Convertible Preferred
Stock, par value $0.01 per share and stated value $1,000 per share, of the
Company issued to the Purchasers pursuant to the Debentures.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the
-2-
<PAGE>
Prospectus, including post-effective amendments, and all material incorporated
by reference in such Prospectus.
"Registrable Securities" means the Shares, the shares of
Common Stock issuable upon conversion of the Convertible Securities and the
shares of Common Stock issuable upon exercise of the Warrants; provided,
however, that Registrable Securities shall include (but not be limited to) a
number of shares of Common Stock equal to no less than the sum of (A) 200% of
the maximum number of shares of Common Stock which would be issuable upon
conversion of the Convertible Securities and (B) 100% of the maximum number of
shares of Common Stock which would be issuable upon exercise of the Warrants (in
each case, without regard to any limitations on conversions or exercise
thereof), assuming such conversion and exercise occurred on the Initial Closing
Date or the Filing Date, whichever date would produce a greater number of
Registrable Securities. Such registered shares of Common Stock shall be
allocated among the Holders pro rata based on the total number of Registrable
Securities issued or issuable as of each date that a Registration Statement, as
amended, relating to the resale of the Registrable Securities is declared
effective by the Commission. Notwithstanding anything herein contained to the
contrary, if the actual number of shares of Common Stock issuable upon
conversion of the Convertible Securities and upon exercise of the Warrants
exceeds the sum of (A) 200% of the maximum number of shares of Common Stock
which would be issuable upon conversion of the Convertible Securities and (B)
100% of the maximum number of shares of Common Stock which would be issuable
upon exercise of the Warrants (in each case, without regard to any limitations
on conversions or exercise thereof) based upon a computation as at the Initial
Closing Date or the Filing Date, the term "Registrable Securities" shall be
deemed to include such additional shares of Common Stock.
"Registration Statement" means the registration statements and
any additional registration statements contemplated by Section 2, including (in
each case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference in such
registration statement.
"Rule 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
-3-
<PAGE>
"Special Counsel" means any special counsel to the Holders,
for which the Holders will be reimbursed by the Company pursuant to Section 4.
2. Shelf Registration.
(a) On or prior to the Filing Date the Company shall prepare
and file with the Commission a "shelf" Registration Statement covering all
Registrable Securities for an offering to be made on a continuous basis pursuant
to Rule 415. The Registration Statement shall be on Form SB-2 (and converted to
Form S-3 as soon as the Company becomes eligible to register for resale the
Registrable Securities on Form S-3). The Company shall (i) not permit any
securities other than the Registrable Securities to be included in the
Registration Statement and (ii) use its best efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly as
possible after the filing thereof, but in any event prior to the Effectiveness
Date, and to keep such Registration Statement continuously effective under the
Securities Act until such date as is the earlier of (x) the date when all
Registrable Securities covered by such Registration Statement have been sold or
(y) the date on which the Registrable Securities may be sold without any
restriction pursuant to Rule 144(k) as determined by the counsel to the Company
pursuant to a written opinion letter, addressed to the Company's transfer agent
to such effect (the "Effectiveness Period").
(b) The initial number of Registrable Securities included in
any Registration Statement and each increase in the number of Registrable
Securities included therein shall be allocated pro rata among the Purchasers
based on the number of Registrable Securities held by each Purchaser at the time
the Registration Statement covering such initial number of Registrable
Securities or increase thereof is declared effective by the Commission. In the
event that a Purchaser sells or otherwise transfers any of such Purchaser's
Registrable Securities, each transferee shall be allocated a pro rata portion of
the then remaining number of Registrable Securities included in such
Registration Statement for such transferor. Any shares of Common Stock included
in a Registration Statement and which remain allocated to any Person which
ceases to hold any Registrable Securities covered by such Registration Statement
shall be allocated to the remaining Purchasers, pro rata based on the number of
Registrable Securities then held by such Purchasers which are covered by such
Registration Statement.
(c) In the event the number of shares available under a
Registration Statement filed pursuant to Section 2(a) is insufficient to cover
all of the Registrable Securities which such Registration Statement is required
to cover or a Purchaser's allocated portion of the Registrable Securities
pursuant to Section 2(b), the Company shall amend the Registration Statement, or
file a new Registration Statement (on the short form available therefor, if
applicable), or both, so as to cover at least that number of shares of Common
Stock equal to the sum of (x) the product of (i) 2 and (ii) the number of
Underlying Shares issuable upon conversion of the Convertible Securities
(without regard to any limitations on conversion) as of the date immediately
preceding the date such amendment or new Registration Statement is filed with
the Commission, plus (y) the number of Warrant Shares issuable upon exercise of
the Warrants (without regard to any limitations on exercise) as of the date
immediately preceding the date such amendment or new Registration Statement is
filed with the Commission, plus (z) the number of Underlying Shares
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and Warrant Shares held by the Purchasers as of the date immediately preceding
the date on which such amendment or new Registration Statement is filed with the
Commission, in each case, as soon as practicable, but in any event not later
than fifteen (15) business days after the necessity therefor arises. The Company
shall cause such amendment and/or new Registration Statement to become effective
as soon as practicable following the filing thereof, but in no event later than
60 days after filing. For purposes of the foregoing provision, the number of
shares available under a Registration Statement shall be deemed "insufficient to
cover all of the Registrable Securities" if the number of Registrable Securities
issued or issuable upon conversion of the Convertible Securities and exercise of
the Warrants covered by such Registration Statement is greater than the sum of
(a) the quotient determined by dividing (i) the number of shares of Common Stock
available for resale under the Registration Statement to cover shares issued or
issuable upon conversion of the Convertible Securities by (ii) 1.5 and (b) the
number of shares of Common Stock available for resale under the Registration
Statement to cover shares issued or issuable upon exercise of the Warrants. For
purposes of the calculation set forth in the foregoing sentence, any
restrictions on the convertibility of the Convertible Securities or exercise of
the Warrants shall be disregarded and such calculation shall assume that the
Convertible Securities are then convertible into, and the Warrants are then
exercisable for, shares of Common Stock at the then prevailing Conversion Ratio
(as defined in the Debentures or the Amended Articles, as applicable) or Warrant
Price (as defined in the Warrants), respectively.
(d) The Company shall use its best efforts to qualify for
registration on Form S-3 or any comparable or successor form or forms. In the
event that Form S-3 is not available for the registration of the resale of
Registrable Securities hereunder, the Company shall (i) register the resale of
the Registrable Securities on another appropriate form and (ii) undertake to
register the resale of the Registrable Securities on Form S-3 as soon as such
form is available, provided that the Company shall maintain the effectiveness of
the Registration Statement then in effect until such time as a Registration
Statement on Form S-3 covering the Registrable Securities has been declared
effective by the Commission.
3. Registration Procedures.
In connection with the Company's registration obligations
hereunder, the Company shall:
(a)Prepare and file with the Commission on or prior to the
Filing Date, a Registration Statement on Form SB-2 (converted to Form S-3 as
soon as the Company becomes eligible to register for resale the Registrable
Securities on Form S-3), which shall be "evergreened," in accordance with the
method or methods of distribution thereof as specified by the Holders (except if
otherwise directed by the Holders), and cause the Registration Statement to
become effective and remain effective as provided herein; provided, however,
that not less than ten (10) Business Days prior to the filing of the
Registration Statement or any related Prospectus or any amendment or supplement
thereto (including any document that would be incorporated therein by
reference), the Company shall (i) furnish to the Holders and any Special
Counsel, copies of all such documents proposed to be filed, which documents
(other than those incorporated by reference) will be subject to the review of
such Holders and such Special
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Counsel, and (ii) cause its officers and directors, counsel and independent
certified public accountants to respond to such inquiries as shall be necessary,
in the reasonable opinion of counsel to such Holders, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall not
file the Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Holders of a majority of the Registrable
Securities or any Special Counsel, shall reasonably object in writing within
three (3) Business Days of their receipt thereof.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period and prepare and
file with the Commission such additional Registration Statements in order to
register for resale under the Securities Act all of the Registrable Securities;
(ii) cause the related Prospectus to be amended or supplemented by any required
Prospectus supplement, and as so supplemented or amended to be filed pursuant to
Rule 424 (or any similar provisions then in force) promulgated under the
Securities Act; (iii) respond as promptly as possible to any comments received
from the Commission with respect to the Registration Statement or any amendment
thereto and as promptly as possible provide the Holders true and complete copies
of all correspondence from and to the Commission relating to the Registration
Statement; and (iv) comply in all material respects with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of disposition by the
Holders thereof set forth in the Registration Statement as so amended or in such
Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold
and any Special Counsel as promptly as possible (and, in the case of (i)(A)
below, not less than five (5) days prior to such filing) and (if requested by
any such Person) confirm such notice in writing no later than one (1) Business
Day following the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to the Registration Statement is proposed to be filed;
(B) when the Commission notifies the Company whether there will be a "review" of
such Registration Statement and whenever the Commission comments in writing on
such Registration Statement and (C) with respect to the Registration Statement
or any post-effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other Federal or state governmental authority
for amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement covering any or
all of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) if at any time any of the representations and warranties of the
Company contained in any agreement contemplated hereby ceases to be true and
correct in all material respects; (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (vi) of the occurrence of any event that makes any statement made
in the Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
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that requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
(d) Use its best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of, (i) any order suspending the effectiveness of
the Registration Statement or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(e) If requested by the Holders of a majority in interest of
the Registrable Securities, (i) promptly incorporate in a Prospectus supplement
or post-effective amendment to the Registration Statement such information as
the Company reasonably agrees should be included therein and (ii) make all
required filings of such Prospectus supplement or such post-effective amendment
as soon as practicable after the Company has received notification of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment.
(f) Furnish to each Holder and any Special Counsel, without
charge, at least one conformed copy of each Registration Statement and each
amendment thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, to the extent
requested by such Person and all exhibits to the extent requested by such Person
(including those previously furnished or incorporated by reference) promptly
after the filing of such documents with the Commission.
(g) Promptly deliver to each Holder and any Special Counsel,
without charge, as many copies of the Prospectus or Prospectuses (including each
form of prospectus) and each amendment or supplement thereto as such Persons may
reasonably request; and the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities,
use its best efforts to register or qualify or cooperate with the selling
Holders, and any Special Counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Holder requests in
writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a Registration Statement;
provided, however, that the Company shall not be required to qualify generally
to do business in any jurisdiction where it is not then so qualified or to take
any action that would subject it to general service of process in any such
jurisdiction where it is not then so subject or subject the Company to any
material tax in any such jurisdiction where it is not then so subject.
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<PAGE>
(i) Cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold pursuant to a Registration Statement, which certificates shall be free
of all restrictive legends, and to enable such Registrable Securities to be in
such denominations and registered in such names as any Holders may request at
least two (2) Business Days prior to any sale of Registrable Securities.
(j) Upon the occurrence of any event contemplated by Section
3(c)(vi), as promptly as possible, prepare a supplement or amendment, including
a post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
(k) Use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be eligible for quotation on the
National Association of Securities Dealers, Inc.'s OTC Bulletin Board (the "OTC
Bulletin Board") and any other securities exchange, quotation system, market or
over-the-counter bulletin board, if any, on which similar securities issued by
the Company are then listed as and when required pursuant to the Purchase
Agreement.
(l) Comply in all material respects with all applicable rules
and regulations of the Commission and make generally available to its security
holders earning statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 not later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such period is a
fiscal year) commencing on the first day of the first fiscal quarter of the
Company after the effective date of the Registration Statement, which statement
shall conform to the requirements of Rule 158.
(m) The Company may require each selling Holder to furnish to
the Company information regarding such Holder and the distribution of such
Registrable Securities as is required by law to be disclosed in the Registration
Statement, and the Company may exclude from such registration the Registrable
Securities of any such Holder who unreasonably fails to furnish such information
within 15 Business Days after receiving such request.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (if such reference to such Holder by name or otherwise
is not required by the Securities Act or any similar federal statute then in
force) the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.
Each Holder covenants and agrees that (i) it will not sell any
Registrable Securities under the Registration Statement until it has received
copies of the Prospectus as then
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<PAGE>
amended or supplemented as contemplated in Section 3(g) and notice from the
Company that such Registration Statement and any post-effective amendments
thereto have become effective as contemplated by Section 3(c) and (ii) it and
its officers, directors or Affiliates, if any, will comply with the prospectus
delivery requirements of the Securities Act as applicable to them in connection
with sales of Registrable Securities pursuant to the Registration Statement.
Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Company of the occurrence of
any event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv),
3(c)(v) or 3(c)(vi), such Holder will forthwith discontinue disposition of such
Registrable Securities under the Registration Statement until such Holder's
receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement contemplated by Section 3(j), or until it is advised in writing (the
"Advice") by the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement.
(n) If (i) there is material non-public information regarding
the Company which the Company's Board of Directors (the "Board") reasonably
determines not to be in the Company's best interest to disclose and which the
Company is not otherwise required to disclose, or (ii) there is a significant
business opportunity (including, but not limited to, the acquisition or
disposition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or other similar transaction) available to
the Company which the Board reasonably determines not to be in the Company's
best interest to disclose, then the Company may postpone or suspend filing or
effectiveness of a registration statement for a period not to exceed 15
consecutive days, provided that the Company may not postpone or suspend its
obligation under this Section 3(n) for more than 30 days in the aggregate during
any 365-day period; provided, however, that no such postponement or suspension
shall be permitted for consecutive 15 day periods, arising out of the same set
of facts, circumstances or transactions.
(o) At its sole discretion, add the Underlying Shares and
Warrant Shares to any currently filed registration statement as an amendment to
said registration statement in order to save filing and legal costs in
connection with the procurement of the Registration Statement, provided that the
Company has a reasonable belief that the registration statement will be deemed
effective in the appropriate time period, and further that it is not in any way
violating any covenants with other investors in connection with such
registration statement by adding the Purchasers to said registration statement.
4. Registration Expenses.
All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company
whether or not the Registration Statement is filed or becomes effective and
whether or not any Registrable Securities are sold pursuant to the Registration
Statement. The fees and expenses referred to in the foregoing sentence shall
include, without limitation, (i) all registration and filing fees (including,
without limitation, fees and expenses (A) with respect to filings required to be
made with the National
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Association of Securities Dealers, Inc. and the NASD Regulation, Inc., and (B)
in compliance with state securities or Blue Sky laws (including, without
limitation, fees and disbursements of counsel for the Holders in connection with
Blue Sky qualifications of the Registrable Securities and determination of the
eligibility of the Registrable Securities for investment under the laws of such
jurisdictions as the Holders of a majority of Registrable Securities may
designate)), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities and of printing prospectuses
(which may be camera ready copies of such prospectuses)), (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of counsel for the
Company and Special Counsel for the Holders, in the case of the Special Counsel,
to a maximum amount of $25,000, (v) Securities Act liability insurance, if the
Company so desires such insurance, and (vi) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement, including, without limitation, the
Company's independent public accountants (including the expenses of any comfort
letters or costs associated with the delivery by independent public accountants
of a comfort letter or comfort letters). In addition, the Company shall be
responsible for all of its internal expenses incurred in connection with the
consummation of the transactions contemplated by this Agreement (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, the
fees and expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange as required hereunder.
5. Indemnification.
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents, brokers (including brokers who
offer and sell Registrable Securities as principal as a result of a pledge or
any failure to perform under a margin call of Common Stock), investment advisors
and employees of each of them, each Person who controls any such Holder (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) and the officers, directors, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and against any
and all losses, claims, damages, liabilities, costs (including, without
limitation, costs of preparation and attorneys' fees) and expenses
(collectively, "Losses"), as incurred, arising out of or relating to any untrue
or alleged untrue statement of a material fact contained in the Registration
Statement, any Prospectus or any form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in the light of the
circumstances under which they were made) not misleading, or arising out of or
relating to any violation by the Company or its agents of the Securities Act or
any rule or regulation promulgated under the Securities Act applicable to the
Company or its agents and relating to action or inaction required of the Company
in connection with a registration of Registrable Securities pursuant to this
Agreement, except to the extent, but only to the extent, that such untrue
statements or omissions are based solely upon information regarding such Holder
furnished in writing to the Company by such Holder expressly for use therein,
which information was reasonably relied on by the Company for use
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<PAGE>
therein or to the extent that such information relates to such Holder or such
Holder's proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use in
the Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto. The Company shall notify the Holders promptly
of the institution, threat or assertion of any Proceeding of which the Company
is aware in connection with the transactions contemplated by this Agreement.
(b) Indemnification by Holders. Each Holder shall, severally
and not jointly, indemnify and hold harmless the Company, the directors,
officers, agents and employees, each Person who controls the Company (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act),
and the directors, officers, agents or employees of such controlling Persons, to
the fullest extent permitted by applicable law, from and against all Losses, as
incurred, arising solely out of or based solely upon any untrue statement of a
material fact contained in the Registration Statement, any Prospectus, or any
form of prospectus, or arising solely out of or based solely upon any omission
of a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in writing by
such Holder to the Company specifically for inclusion in the Registration
Statement or such Prospectus and that such information was reasonably relied
upon by the Company for use in the Registration Statement, such Prospectus or
such form of prospectus or to the extent that such information relates to such
Holder or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement, such Prospectus or such form of
Prospectus.
(c) Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "Indemnified Party"), such Indemnified Party promptly shall notify the
Person from whom indemnity is sought (the "Indemnifying Party) in writing, and
the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (2) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3)
the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the
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Indemnifying Party, and such Indemnified Party shall have been advised by
counsel that a conflict of interest is likely to exist if the same counsel were
to represent such Indemnified Party and the Indemnifying Party (in which case,
if such Indemnified Party notifies the Indemnifying Party in writing that it
elects to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and
such counsel shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending Proceeding in respect of
which any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten (10) Business Days of written notice thereof to the
Indemnifying Party (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided, that
the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).
(d) Contribution. If a claim for indemnification under Section
5(a) or 5(b) is unavailable to an Indemnified Party because of a failure or
refusal of a governmental authority to enforce such indemnification in
accordance with its terms (by reason of public policy or otherwise), then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Losses, in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and Indemnified Party in connection with the
actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations. The relative fault of such Indemnifying
Party and Indemnified Party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission of a material fact,
has been taken or made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include, subject to the limitations set forth
in Section 5(c), any reasonable attorneys' or other reasonable fees or expenses
incurred by such party in connection with any Proceeding to the extent such
party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in
accordance with its terms.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5(d) were determined by pro
rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the
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immediately preceding paragraph. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties.
6. Rule 144.
As long as any Holder owns Convertible Securities, Underlying
Shares, Warrants or Warrant Shares, the Company covenants to timely file (or
obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the date hereof
pursuant to Section 13(a) or 15(d) of the Exchange Act and to promptly furnish
the Holders with true and complete copies of all such filings. As long as any
Holder owns Convertible Securities, Underlying Shares, Warrants or Warrant
Shares, if the Company is not required to file reports pursuant to Section 13(a)
or 15(d) of the Exchange Act, it will prepare and furnish to the Holders and
make publicly available in accordance with Rule 144(c) promulgated under the
Securities Act annual and quarterly financial statements, together with a
discussion and analysis of such financial statements in form and substance
substantially similar to those that would otherwise be required to be included
in reports required by Section 13(a) or 15(d) of the Exchange Act, as well as
any other information required thereby, in the time period that such filings
would have been required to have been made under the Exchange Act. The Company
further covenants that it will take such further action as any Holder may
reasonably request, all to the extent required from time to time to enable such
Person to sell Underlying Shares and Warrant Shares without registration under
the Securities Act within the limitation of the exemptions provided by Rule 144
promulgated under the Securities Act, including providing any legal opinions
referred to in the Purchase Agreement. Upon the request of any Holder, the
Company shall deliver to such Holder a written certification of a duly
authorized officer as to whether it has complied with such requirements.
7. Miscellaneous.
(a) Remedies. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any of
its subsidiaries has, as of the date hereof entered into any agreement currently
in effect, nor shall the Company or any of its subsidiaries, on or after the
date of this Agreement, enter into any
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agreement with respect to its securities that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. Except as disclosed in Schedule 2.1(s) of the Purchase
Agreement, neither the Company nor any of its subsidiaries has previously
entered into any agreement currently in effect granting any registration rights
with respect to any of its securities to any Person. Without limiting the
generality of the foregoing, without the written consent of the Holders of a
majority of the then outstanding Registrable Securities, the Company shall not
grant to any Person the right to request the Company to register any securities
of the Company under the Securities Act unless the rights so granted are subject
in all respects to the prior rights in full of the Holders set forth herein, and
are not otherwise in conflict with the provisions of this Agreement.
(c) No Piggyback on Registrations. Neither the Company nor any
of its security holders (other than the Holders in such capacity pursuant hereto
or as disclosed in Schedule 2.1(s) of the Purchase Agreement) may include
securities of the Company in the Registration Statement, and the Company shall
not after the date hereof enter into any agreement providing such right to any
of its securityholders, unless the right so granted is subject in all respects
to the prior rights in full of the Holders set forth herein, and is not
otherwise in conflict with the provisions of this Agreement.
(d) Piggy-Back Registrations. If at any time when there is not
an effective Registration Statement covering (i) Underlying Shares or (ii)
Warrant Shares, the Company shall determine to prepare and file with the
Commission a registration statement relating to an offering for its own account
or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, the Company shall send to each Holder of Registrable Securities
written notice of such determination and, if within thirty (30) days after
receipt of such notice, any such holder shall so request in writing, (which
request shall specify the Registrable Securities intended to be disposed of by
the Purchasers), the Company will cause the registration under the Securities
Act of all Registrable Securities which the Company has been so requested to
register by the Holder, to the extent requisite to permit the disposition of the
Registrable Securities so to be registered, provided that if at any time after
giving written notice of its intention to register any securities and prior to
the effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register or to
delay registration of such securities, the Company may, at its election, give
written notice of such determination to such Holder and, thereupon, (i) in the
case of a determination not to register, shall be relieved of its obligation to
register any Registrable Securities in connection with such registration (but
not from its obligation to pay expenses in accordance with Section 4 hereof),
and (ii) in the case of a determination to delay registering, shall be permitted
to delay registering any Registrable Securities being registered pursuant to
this Section 7(d) for the same period as the delay in registering such other
securities. The Company shall include in such registration statement all or any
part of such Registrable Securities such holder requests to be registered;
provided, however, that the Company shall not be required to register any
Registrable Securities pursuant to this Section 7(d) that are eligible for sale
pursuant to Rule 144(k) of the
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<PAGE>
Securities Act. In the case of an underwritten public offering, if the managing
underwriter(s) or underwriter(s) should reasonably object to the inclusion of
the Registrable Securities in such registration statement, then if the Company
after consultation with the managing underwriter(s) should reasonably determine
that the inclusion of such Registrable Securities, would materially adversely
affect the offering contemplated in such registration statement, and based on
such determination recommends inclusion in such registration statement of fewer
or none of the Registrable Securities of the Holders, then (x) the number of
Registrable Securities of the Holders included in such registration statement
shall be reduced pro-rata among such Holders (based upon the number of
Registrable Securities requested to be included in the registration), if the
Company after consultation with the underwriter(s) recommends the inclusion of
fewer Registrable Securities, or (y) none of the Registrable Securities of the
Holders shall be included in such registration statement, if the Company after
consultation with the underwriter(s) recommends the inclusion of none of such
Registrable Securities; provided, however, that if Securities are being offered
for the account of other persons or entities as well as the Company, such
reduction shall not represent a greater fraction of the number of Registrable
Securities intended to be offered by the Holders than the fraction of similar
reductions imposed on such other persons or entities (other than the Company).
(e) Failure to File Registration Statement; Rights of
Rescission. The Company and the Purchasers agree that the Holders will suffer
damages if the Registration Statement is not filed on or prior to the Filing
Date and not declared effective by the Commission on or prior to the
Effectiveness Date and maintained in the manner contemplated herein during the
Effectiveness Time or if certain other events occur. The Company and the Holders
further agree that it would not be feasible to ascertain the extent of such
damages with precision. Accordingly, if (A) the Registration Statement is not
filed on or prior to the Filing Date, or is not declared effective by the
Commission on or prior to the Effectiveness Date (or in the event an additional
Registration Statement is filed because the actual number of shares of Common
Stock into which the Convertible Securities are convertible and the Warrants are
exercisable exceeds the number of shares of Common Stock initially registered is
not filed and declared effective with the time periods set forth in Section 2),
or (B) the Company fails to file with the Commission a request for acceleration
in accordance with Rule 12dl-2 promulgated under the Exchange Act within five
(5) Business Days of the date that the Company is notified (orally or in
writing, whichever is earlier) by the Commission that a Registration Statement
will not be "reviewed," or not subject to further review, or (C) the
Registration Statement is filed with and declared effective by the Commission
but thereafter ceases to be effective as to all Registrable Securities at any
time prior to the expiration of the Effectiveness Period, without being
succeeded immediately by a subsequent Registration Statement filed with and
declared effective by the Commission, or (D) trading in the Common Stock shall
be suspended or if the Common Stock is delisted from the OTC Bulletin Board for
any reason for more than three Business Days in the aggregate, or (E) the
conversion rights of the Holders are suspended for any reason except as a result
of Section 4(a)(ii) of the Debentures or Section 6(a)(ii) of the Certificate of
Designation, or (F) the Company breaches in a material respect any covenant or
other material term or condition to this Agreement, the Purchase Agreement
(other than a representation or warranty contained therein), any Transaction
Document or any other agreement, document, certificate or other instrument
delivered in connection with the transactions contemplated hereby
-15-
<PAGE>
and thereby, and such breach continues for a period of thirty days after written
notice thereof to the Company, or (G) the Company fails to convene a meeting of
shareholders within the time period specified in Section 3.13 of the Purchase
Agreement or does so convene a meeting of shareholders within such time period
but fails to obtain Shareholder Approval at such meeting, or (H) the Company has
breached Section 3(n) (any such failure or breach being referred to as an
"Event," and for purposes of clauses (A) and (E) the date on which such Event
occurs, or for purposes of clause (B) the date on which such five day period is
exceeded, or for purposes of clause (C) after more than fifteen Business Days,
or for purposes of clause (D) the date on which such three Business Day period
is exceeded, or for clause (F) the date on which such thirty day period is
exceeded, being referred to as "Event Date"), the Company shall pay in cash as
liquidated damages to each Holder an amount equal to 2.0% per calendar month or
portion thereof of the aggregate principal amount of Debentures, or aggregate
stated value of the outstanding Preferred Stock, as applicable, purchased by
such Holder, plus the principal amount or stated value, as applicable, of any
Convertible Securities that have been converted to the extent any of the
Underlying Shares issued upon such conversion have not been sold, and the
aggregate amount of the exercise price of the Warrants purchased by such Holder,
whether or not exercised, commencing on the Event Date, until the applicable
Event is cured. Payments to be made pursuant to this Section 7(e) shall be due
and payable immediately upon demand in immediately available funds.
(f) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and each of the Holders. Notwithstanding the foregoing, a waiver or consent to
depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of Holders and that does not directly or indirectly
affect the rights of other Holders may be given by Holders of at least a
majority of the Registrable Securities to which such waiver or consent relates;
provided, however, that the provisions of this sentence may not be amended,
modified, or supplemented except in accordance with the provisions of the
immediately preceding sentence.
(g) Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earlier of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified for notice prior to 5:00 p.m., New York
City time, on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified for notice later than 5:00 p.m., New York
City time, on any date and earlier than 11:59 p.m., New York City time, on such
date, (iii) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service or (iv) actual receipt by the
party to whom such notice is required to be given. The addresses for such
communications shall be with respect to each Holder at its address set forth
under its name on Schedule 1 attached hereto, or with respect to the Company,
addressed to:
World Wide Wireless Communications Inc.
-16-
<PAGE>
520 Third Street
Suite 101
Oakland, California 94607
Attention: Douglas P. Haffer
Telephone No.: (510) 839-6100
Facsimile No.: (510) 839-7088
or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices to any Holder shall be sent to Stroock &
Stroock & Lavan LLP, 180 Maiden Lane, New York, New York 10038-4982, Attention:
James R. Tanenbaum, Esq., Telephone No.: (212) 806-5400, Facsimile No.: (212)
806-6006. Copies of notices to the Company shall be sent to Evers & Hendrickson,
LLP, 155 Montgomery, 12th Floor, San Francisco, California 94104, Attention:
William D. Evers, Esq., Telephone No.: (415) 772-8100, Facsimile No.: (415)
772-8101.
(h) Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and permitted
assigns and shall inure to the benefit of each Holder and its successors and
assigns. The Company may not assign this Agreement or any of its rights or
obligations hereunder without the prior written consent of each Holder. Each
Purchaser may assign its rights hereunder in the manner and to the Persons as
permitted under the Purchase Agreement.
(i) Assignment of Registration Rights. The rights of each
Holder hereunder, including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this Agreement, shall be
automatically assignable by each Holder to any Affiliate of such Holder, any
other Holder or Affiliate of any other Holder of all or a portion of the
Securities or the Registrable Securities if: (i) the Holder agrees in writing
with the transferee or assignee to assign such rights, and a copy of such
agreement is furnished to the Company within a reasonable time after such
assignment, (ii) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of (a) the name and address of such
transferee or assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned, (iii) following such
transfer or assignment the further disposition of such securities by the
transferee or assignee is restricted under the Securities Act and applicable
state securities laws, (iv) at or before the time the Company receives the
written notice contemplated by clause (ii) of this Section, the transferee or
assignee agrees in writing with the Company to be bound by all of the provisions
of this Agreement, and (v) such transfer shall have been made in accordance with
the applicable requirements of the Purchase Agreement. In addition, each Holder
shall have the right to assign its rights hereunder to any other Person with the
prior written consent of the Company, which consent shall not be unreasonably
withheld. The rights to assignment shall apply to the Holders (and to
subsequent) successors and assigns.
(j) Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is
-17-
<PAGE>
delivered by facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
were the original thereof.
(k) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to principles of conflicts of law thereof.
(l) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(m) Severability. If any term, provision, covenant or
restriction of this Agreement is held to be invalid, illegal, void or
unenforceable in any respect, the remainder of the terms, provisions, covenants
and restrictions set forth herein shall remain in full force and effect and
shall in no way be affected, impaired or invalidated, and the parties hereto
shall use their reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(n) Headings. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
(o) Shares Held by the Company and its Affiliates. Whenever
the consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its Affiliates (other than any Holder or transferees or successors or assigns
thereof if such Holder is deemed to be an Affiliate solely by reason of its
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
[Remainder of Page Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.
WORLD WIDE WIRELESS
COMMUNICATIONS, INC.
By: /s/ Doug Haffer
-----------------------------------
Name: Douglas P. Haffer
Title: President
ESQUIRE TRADING & FINANCE, INC.
By: /s/ Roland Wineger
-----------------------------------
Name: Roland Wineger
Title: Director
AMRO INTERNATIONAL, S.A.
By: /s/ H. U. Bachofer
-----------------------------------
Name: H. U. Bachofer
Title: Director
CELESTE TRUST REG.
By: /s/ Thomas Hackl
-----------------------------------
Name: Thomas Hackl
Title: Representative
THE ENDEAVOR CAPITAL FUND, S.A.
By: Endeavor Management, Inc.
By: /s/ Shmuli Margulies
-----------------------------------
Name: Shmuli Margulies
Title: Director
-19-
<PAGE>
THE KESHET FUND, L.P.
By: /s/ David Grin
-----------------------------------
Name: David Grin
Title:
KESHET, L.P.
By: /s/ David Grin
-----------------------------------
Name: David Grin
Title:
NESHER, LTD.
By: /s/ J.D. Clarke
-----------------------------------
Name: J. D. Clarke
Title: Director
-20-
CERTIFICATE OF DESIGNATION,
PREFERENCES AND RIGHTS OF THE SERIES A
PREFERRED STOCK
OF
WORLD WIDE WIRELESS COMMUNICATIONS, INC.
TO BE DESIGNATED
SERIES A CONVERTIBLE PREFERRED STOCK
Pursuant to Section 78.195 of the Nevada Revised Statutes, we, the
undersigned, ______________ and _______________, being respectively the
__________ and the _________ of World Wide Wireless Communications, Inc. (the
"Company"), a Nevada corporation organized and existing under the General
Corporation Law of the State of Nevada, DO HEREBY CERTIFY that the following
resolution was duly adopted by the Board of Directors of the Company by
unanimous written consent, and that said resolution has not been rescinded or
amended and is in full force and effect at the date hereof:
RESOLVED, that, pursuant to authority expressly granted to and vested
in the Board of Directors by the provisions of the Articles of Incorporation, as
amended to date, the Board of Directors hereby creates a series of Preferred
Stock of the Company, par value $.01 per share and having a stated value of
$1,000 per share, to be designated "Series A Convertible Preferred Stock" and to
consist of _______________________ (______) shares, and hereby fixes the powers,
designations, preferences and relative, participating, optional and other rights
of the shares of such series, and the qualifications, limitations, or
restrictions thereof (in addition to those provisions set forth in the Articles
of Incorporation, as amended, which are applicable to the Series A Convertible
Preferred Stock), as follows:
Section 1. Designation, Amount, Par Value, Stated Value and Rank. The
series of Preferred Stock shall be designated as Series A Convertible Preferred
Stock (the "Series A Preferred Stock"), and the number of shares so designated
shall be _______ (which shall not be subject to increase without the consent of
the holders of the Series A Preferred Stock ("Holders")). Each share of Series A
Preferred Stock shall have a par value $.01 per share and a stated value of
$1,000 per share (the "Stated Value").
The Series A Preferred Stock shall rank senior to the Junior Securities
(as defined below) and all other series of preferred stock of the Company issued
and outstanding on the Original Issue Date as to distributions and upon
liquidation, dissolution or winding up.
Section 2. Junior Securities. So long as any Series A Preferred Stock
shall remain outstanding, neither the Company nor any subsidiary thereof shall
redeem, purchase or otherwise acquire otherwise than upon conversion or exchange
directly or indirectly any Junior Securities, nor shall the Company directly or
indirectly pay or declare any dividend or make any distribution (other than a
dividend or distribution described in Section 5) upon, nor shall any
distribution be
<PAGE>
made in respect of, any Junior Securities, nor shall any monies be set aside for
or applied to the purchase or redemption (through a sinking fund or otherwise)
of any Junior Securities.
Section 3. Voting Rights. The holders of Series A Preferred Stock shall
have no right to vote, except as otherwise required by Nevada law. However, so
long as any shares of Series A Preferred Stock are outstanding, the Company
shall not and shall cause its subsidiaries not to, without the written consent
of the holders of 66 2/3% of the shares of the Series A Preferred Stock then
outstanding, (a) amend, alter or change the preferences or rights of any series
or class of capital stock of the Company (including the Series A Preferred
Stock) or the qualifications, limitations or restrictions thereof if such
amendment, alteration or change adversely affects the powers, preferences or
rights given to the Series A Preferred Stock, (b) alter or amend this
Certificate of Designation, (c) authorize or create any class or series of any
class of capital stock ranking as to distribution of assets upon a Liquidation
(as defined in Section 4) or otherwise senior to the Series A Preferred Stock,
(d) amend its Articles of Incorporation, bylaws or other organizational
documents so as to affect adversely any rights of any Holders, (e) increase the
authorized number of shares of Series A Preferred Stock, and (f) enter into any
agreement with respect to the foregoing.
Section 4. Liquidation. Upon any liquidation, dissolution or winding-up
of the Company, whether voluntary or involuntary (a "Liquidation"), the Holders
shall be entitled to receive out of the assets of the Company, whether such
assets are capital or surplus, for each share of Series A Preferred Stock an
amount equal to the Aggregate Stated Value (as defined in Section 8) before any
distribution or payment shall be made to the holders of any Junior Securities,
and if the assets of the Company shall be insufficient to pay in full such
amounts, then the entire assets to be distributed to the holders of Series A
Preferred Stock shall be distributed among the holders of Series A Preferred
Stock and the holders of all securities ranking pari passu to the Series A
Preferred Stock ratably in accordance with the respective amounts that would be
payable on such shares if all amounts payable thereon were paid in full. A sale,
conveyance or disposition of all or substantially all of the assets of the
Company or the effectuation by the Company of a transaction or series of related
transactions in which more than 50% of the voting power of the Company is
disposed of, or a consolidation or merger of the Company with or into any other
company or companies shall not be treated as a Liquidation, but instead shall be
subject to the provisions of Section 6(c)(ix). The Company shall mail written
notice of any such Liquidation, not less than 45 days prior to the payment date
stated therein, to each record holder of Series A Preferred Stock.
Section 5. Dividends. The holders of Series A Preferred Stock shall be
entitled to receive in preference to the holders of Common Stock or any Junior
Securities, annual dividends at the rate of 4.0% per annum, compounded
semi-annually, for each share of Series A Preferred Stock. Such dividends shall
be due and payable upon conversion or redemption of such shares of Series A
Preferred Stock. Dividends shall accrue from the Original Issue Date (as defined
herein), whether or not earned or declared, until such time as the shares of
Series A Preferred Stock have been converted or redeemed as herein provided.
Dividends are payable on the Series A Preferred Stock on the last day of June
and December of each year (each, a "Dividend Date") by increasing the Aggregate
Stated Value by the amount of such dividends. Such increase in the
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<PAGE>
Aggregate Stated Value shall constitute full payment of such dividends. When any
dividends are added to the Aggregate Stated Value, such dividends shall, for all
purposes of this Certificate of Designation, be deemed to be part of the
Aggregate Stated Value for purposes of determining dividends thereafter payable
hereunder and amounts thereafter convertible into Common Stock hereunder, and
all references herein to the Aggregate Stated Value shall mean the Aggregate
Stated Value, as adjusted pursuant to this Section 5. The dividends so payable
will be paid to the Holders of shares of Series A Preferred Stock of record as
they appear on the stock books of the Company on the record date, which will be
the June 15 or December 15, as the case may be, before the related Dividend
Date; provided, however, that the Company's obligation to a transferee of shares
of Series A Preferred Stock arises only if such transfer, sale or other
disposition is made in accordance with the terms and conditions hereof and the
Securities Purchase Agreement (as defined below). Notwithstanding the foregoing,
the Company shall not be entitled to pay dividends in shares of Series A
Preferred Stock and shall be required to pay such dividends in cash if any event
constituting a Triggering Event (as defined in Section 7), or an event that with
the passage of time and without being cured would constitute a Triggering Event,
has occurred and is continuing on the Dividend Date or the date which is ten
(10) Business Days prior to the Dividend Date, unless otherwise consented to in
writing by the Holder entitled to receive such dividend.
Section 6. Conversion at the Option of the Holder. (a) (i) Each share
of Series A Preferred Stock shall be convertible into shares of Common Stock
(subject to Section 6(a)(ii)) at the Conversion Ratio (as defined below) at the
option of the holder of such share of Series A Preferred Stock in whole or in
part at any time. If any shares of Series A Preferred Stock remain outstanding
on the Maturity Date, then all such shares shall be converted at the Conversion
Ratio as of such date in accordance with this Section 6. To convert shares of
Series A Preferred Stock into shares of Common Stock on any date, the holder of
such shares of Series A Preferred Stock shall (A) transmit by facsimile (or
otherwise deliver), for receipt on or prior to 11:59 p.m., Eastern time, on such
date, a copy of an executed notice of conversion in the form attached hereto as
Exhibit 1 (the "Conversion Notice") to the Company with a copy thereof to the
Company's designated transfer agent (the "Transfer Agent") and (B) if required
by Section 6(b)(iv), surrender to a common carrier for delivery to the Transfer
Agent as soon as practicable following such date the original certificates
representing the shares of Series A Preferred Stock being converted (or an
indemnification undertaking with respect to such shares in the case of their
loss, theft or destruction) (the "Preferred Stock Certificates"). Each
Conversion Notice shall specify the Aggregate Stated Value of the shares of
Series A Preferred Stock to be converted. The date as of which such conversion
is to be effected shall be the date the Holder delivers such Conversion Notice
by facsimile (the "Conversion Date") (if such date is not a Business Day, then
the Conversion Date will be the next following Business Day). Subject to Section
6(b) hereof, each Conversion Notice, once given, shall be irrevocable. Upon
receipt by the Company of a copy of a Conversion Notice, the Company shall (1)
as soon as practicable, but in no event later than within one (1) Business Day,
send, via facsimile, a confirmation of receipt of such Conversion Notice to such
Holder and the Transfer Agent, which confirmation shall constitute an
instruction to the Transfer Agent to process such Conversion Notice in
accordance with the terms herein and (2) on or before the second (2nd) Trading
Day following the date of receipt by the Company of such Conversion Notice (the
"Delivery Date"), (A) issue and deliver to the address
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<PAGE>
as specified in the Conversion Notice, a certificate, registered in the name of
the Holder or its designee, for the number of shares of Common Stock to which
the Holder shall be entitled, or (B) provided the Transfer Agent is
participating in The Depository Trust Company ("DTC") Fast Automated Securities
Transfer Program, upon the request of the Holder, credit such aggregate number
of shares of Common Stock to which the Holder shall be entitled to the Holder's
or its designee's balance account with DTC through its Deposit Withdrawal Agent
Commission system. If the Aggregate Stated Value of shares of Series A Preferred
Stock represented by the Preferred Stock Certificate(s) submitted for
conversion, as may be required pursuant to Section 6(b)(iv), is greater than the
Aggregate Stated Value of shares of Series A Preferred Stock being converted,
then the Company shall, as soon as practicable and in no event later than the
Delivery Date and at its own expense, issue and deliver to the Holder a new
Preferred Stock Certificate representing the Aggregate Stated Value of Series A
Preferred Stock not converted.
(ii) In no event shall a Holder be permitted to convert in
excess of such Aggregate Stated Value of Series A Preferred Stock upon
the conversion of which, (x) the number of shares of Common Stock owned
by such Holder (other than shares of Common Stock issuable upon
conversion of Series A Preferred Stock or upon exercise of the Warrants
(as defined in the Securities Purchase Agreement)) plus (y) the number
of shares of Common Stock issuable upon such conversion of such shares
of Series A Preferred Stock and the number of shares of Common Stock
issuable upon conversion of Debentures (as defined below) held by such
Holder, would be equal to or exceed (z) 9.999% of the number of shares
of Common Stock then issued and outstanding, including shares issuable
on conversion of the shares of Series A Preferred Stock held by such
Holder after application of this Section 6(a)(ii). As used herein,
beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder. To the extent that the limitation contained
in this Section 6(a)(ii) applies, the determination of whether shares
of Series A Preferred Stock are convertible (in relation to other
securities owned by a Holder) and of which shares of Series A Preferred
Stock are convertible shall be in the sole discretion of such Holder,
and the submission of shares of Series A Preferred Stock for conversion
shall be deemed to be such Holder's determination of whether such
shares of Series A Preferred Stock are convertible (in relation to
other securities owned by a Holder) and of which shares of Series A
Preferred Stock are convertible, in each case subject to such aggregate
percentage limitation, and the Company shall have no obligation to
verify or confirm the accuracy of such determination. Nothing contained
herein shall be deemed to restrict the right of a Holder to convert
such shares of Series A Preferred Stock at such time as such conversion
will not violate the provisions of this paragraph. The provisions of
this Section 6(a)(ii) may be waived by a Holder as to itself (and
solely as to itself) upon not less than 75 days prior notice to the
Company, and the provisions of this Section 6(a)(ii) shall continue to
apply until such 75th day (or later, if stated in the notice of
waiver). No conversion in violation of this paragraph but otherwise in
accordance with this Certificate of Designation shall affect the status
of the securities issued upon such conversion as validly issued,
fully-paid and nonassessable.
-4-
<PAGE>
(b) (i) Not later than any Delivery Date, the Company will deliver to
the applicable Holder by express courier (A) a certificate or
certificates which shall be free of restrictive legends and trading
restrictions (other than those required by Section 3.1(b) of the
Securities Purchase Agreement) representing the number of shares of
Common Stock being acquired upon the conversion of shares of Series A
Preferred Stock (subject to reduction pursuant to Section 6(a)(ii)) and
(B) to the extent required pursuant to Section 6(b)(iv), a new
Preferred Stock Certificate representing the unconverted Aggregate
Stated Value. If in the case of any Conversion Notice such new
Preferred Stock Certificate(s) are not delivered to or as directed by
the applicable Holder by the fifth (5th) Trading Day after the
applicable Conversion Date, the Holder shall be entitled by written
notice to the Company at any time on or before its receipt of such
Preferred Stock Certificate(s) thereafter, to rescind such conversion,
whereupon the Company and the Holder shall each be restored to their
respective positions immediately prior to the delivery of such notice
of revocation, except that any amounts described in Sections 6(b)(ii)
and (iii) shall be payable through the date notice of rescission is
given to the Company.
(ii) The Company understands that a delay in the delivery of
the shares of Common Stock upon conversion of shares of Series A
Preferred Stock and failure to deliver a new Preferred Stock
Certificate representing the unconverted Aggregate Stated Value beyond
the Delivery Date could result in economic loss to the Holder. If the
Company fails to deliver to the Holder such certificate or certificates
pursuant to this Section hereunder by the Delivery Date for any reason,
other than due to the action of the Holder, the Company shall pay to
such Holder, in cash, an amount per Trading Day for each Trading Day
the earlier of the date such certificates are delivered or the date the
conversion is rescinded pursuant to Section 6(b)(i) above, together
with interest on such amount at a rate of 15% per annum, accruing until
such amount and any accrued interest thereon is paid in full, equal to
(i) 1% of the Aggregate Stated Value of such shares of Series A
Preferred Stock, plus the accumulated and unpaid dividends thereon,
requested to be converted for the first five Trading Days after the
Delivery Date and (ii) 2% of the Aggregate Stated Value of such shares
of Series A Preferred Stock, plus the accumulated and unpaid dividends
thereon, requested to be converted for each Trading Day thereafter
(which amounts shall be paid as liquidated damages and not as a
penalty). If the Company fails to deliver to the Holder such
certificate or certificates pursuant to this Section prior to the 15th
Trading Day after the Conversion Date, the Company shall, at the
Holder's option, redeem in cash, from funds legally available therefor
at the time of such redemption, all or a portion of the Aggregate
Stated Value of the shares of Series A Preferred Stock then held by
such Holder, plus the accumulated and unpaid dividends thereon, as
requested by such Holder, in cash. The redemption price shall be equal
to the Aggregate Stated Value of such shares of Series A Preferred
Stock requested to be redeemed, plus accumulated and unpaid dividends
thereon, multiplied by the greater of (A) 125% or (B) the applicable
Conversion Ratio as of the date of such redemption multiplied by the
greatest Per Share Market Value on any Trading Day during the period
beginning on the Conversion Date and ending on the date of payment in
full by the Company of such redemption price. If the Holder has
requested that the Company redeem shares of Series A Preferred Stock
pursuant to this Section and the Company fails
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for any reason to pay the redemption price, as calculated pursuant to
the immediately preceding sentence, within seven days after such notice
is deemed delivered pursuant to Section 6(a)(i), the Company will pay
interest on the redemption price at a rate of 15% per annum, in cash to
such Holder, accruing from such seventh day until the redemption price
and any accumulated dividends thereon is paid in full (which amount
shall be paid as liquidated damages and not as a penalty). Nothing
herein shall limit a Holder's right to pursue actual damages for the
Company's failure to deliver certificates representing shares of Common
Stock upon conversion within the period specified herein (including,
without limitation, damages relating to any purchase of shares of
Common Stock by such Holder to make delivery on a sale effected in
anticipation of receiving certificates representing shares of Common
Stock upon conversion, such damages to be in an amount equal to (A) the
aggregate amount paid by such Holder for the shares of Common Stock so
purchased minus (B) the aggregate amount of net proceeds, if any,
received by such Holder from the sale of the shares of Common Stock
which would have been issued by the Company pursuant to such
conversion), and such Holder shall have the right to pursue all
remedies available to it at law or in equity (including, without
limitation, a decree of specific performance and/or injunctive relief).
(iii) In addition to any other rights available to the Holder,
if the Company fails to deliver to the Holder such certificate or
certificates pursuant to Section 6(b)(i) by the Delivery Date and if
after the Delivery Date the Holder purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by such Holder of the Underlying Shares which
the Holder anticipated receiving upon such conversion (a "Buy-In"),
then the Company shall immediately pay in cash to the Holder (in
addition to any remedies available to or elected by the Holder) the
amount by which (A) the Holder's total purchase price (including
brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (B) the Aggregate Stated Value of the shares of
Series A Preferred Stock for which such conversion was not timely
honored, together with interest thereon at a rate of 15% per annum,
accruing until such amount and any accrued interest thereon is paid in
full (which amount shall be paid as liquidated damages and not as a
penalty). For example, if the Holder purchases shares of Common Stock
having a total purchase price of $11,000 to cover a Buy-In with respect
to an attempted conversion of $10,000 Aggregate Stated Value of shares
of Series A Preferred Stock, the Company shall be required to pay the
Holder $1,000, plus interest. The Holder shall provide the Company
written notice indicating the amounts payable to the Holder in respect
of the Buy-In.
(iv) Notwithstanding anything to the contrary set forth
herein, upon conversion of shares of Series A Preferred Stock in
accordance with the terms hereof, the Holder thereof shall not be
required to physically surrender the certificate representing the
shares of Series A Preferred Stock to the Company unless the entire
Aggregate Stated Value of shares of Series A Preferred Stock
represented by the certificate are being converted. The Holder and the
Company shall maintain records showing the Aggregate Stated Value of
shares of Series A Preferred Stock so converted and the dates of such
conversions or shall use such other method, reasonably satisfactory to
the Holder and the Company, so as not
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to require physical surrender of the certificate representing the
shares of Series A Preferred Stock upon each such conversion. In the
event of any dispute or discrepancy, such records of the Company shall
be controlling and determinative in the absence of manifest error.
Notwithstanding the foregoing, if shares of Series A Preferred Stock
represented by a certificate are converted as aforesaid, the Holder may
not transfer the certificate representing the shares of Series A
Preferred Stock unless the Holder first physically surrenders the
certificate representing the shares of Series A Preferred Stock to the
Company, whereupon the Company will forthwith issue and deliver upon
the order of the Holder a new certificate of like tenor, registered as
the Holder may request, representing in the aggregate the remaining
Aggregate Stated Value of shares of Series A Preferred Stock
represented by such certificate.
(c) (i) The conversion price for the shares of Series A Preferred Stock
(the "Conversion Price") in effect on any Conversion Date shall be the
lesser of (A) an amount equal to 110% of the average Per Share Market
Value for the five (5) consecutive Trading Days immediately preceding
the Original Issue Date (the "Fixed Conversion Price") and (B) an
amount equal to 85% of the average Per Share Market Value for the five
(5) consecutive Trading Days immediately prior to the Conversion Date;
provided, however, that, in any Conversion Notice, a Holder may specify
a Conversion Price higher than the Conversion Price then in effect;
provided further that, if during any period (a "Black-out Period"), a
Holder is unable to trade any Common Stock issued or issuable upon
conversion of shares of Series A Preferred Stock immediately due to the
postponement of filing or delay or suspension of effectiveness of a
registration statement or because the Company has otherwise informed
such Holder that an existing prospectus cannot be used at that time in
the sale or transfer of such Common Stock, such Holder shall have the
option but not the obligation on any Conversion Date within ten Trading
Days following the expiration of the Black-out Period of using the
Conversion Price applicable on such Conversion Date or any Conversion
Price selected by such Holder that would have been applicable had such
Conversion Date been at any earlier time during the Black-out Period or
within the ten Trading Days thereafter; provided further, that in no
event shall the Conversion Price be below the Floor Price. "Floor
Price" shall mean $2.00 for the period beginning on the Original Issue
Date and ending on the six month anniversary of the Original Issue
Date, $1.27 for the period beginning on the six month anniversary of
the Original Issue Date and ending on the eighteen month anniversary of
the Original Issue Date, and zero thereafter. Notwithstanding the
foregoing, if the Company's revenues for the fiscal year ending
December 31, 2000, as shown in the Company's Annual Report on Form 10-K
for the fiscal year ending December 31, 2000, are less than $13.5
million, then from and after the first anniversary of the Original
Issue Date the Floor Price shall be zero.
(ii) If the Company, at any time while any shares of Series A
Preferred Stock are outstanding, (a) shall pay a stock dividend or
otherwise make a distribution or distributions on shares of its Common
Stock or any other equity security payable in shares of Common Stock,
(b) subdivide outstanding shares of Common Stock into a larger number
of shares, (c) combine outstanding shares of Common Stock into a
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smaller number of shares, or (d) issue by reclassification of shares
of Common Stock any shares of capital stock of the Company, the Fixed
Conversion Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding before such event and of which
the denominator shall be the number of shares of Common Stock
outstanding after such event. Any adjustment made pursuant to this
Section 6(c)(ii) shall become effective immediately after the record
date for the determination of stockholders entitled to receive such
dividend or distribution and shall become effective immediately after
the effective date in the case of a subdivision, combination or
re-classification.
(iii) If the Company, at any time while shares of Series A
Preferred Stock are outstanding, shall sell or issue additional shares
of Common Stock or rights or warrants to acquire shares of Common Stock
at a price per share less than the Fixed Conversion Price, excluding
any rights of the holder of the Debentures, the holder of shares of
Series A Preferred Stock or the holders of the Warrants issued pursuant
to the Securities Purchase Agreement to acquire Common Stock, the Fixed
Conversion Price shall be multiplied by a fraction, of which the
denominator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding on the date of issuance of such
shares, rights or warrants plus the number of additional shares of
Common Stock offered for subscription or purchase, and of which the
numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding on the date of issuance of such
shares, rights or warrants plus the number of shares which the
aggregate offering price of the total number of shares so offered would
purchase at such Fixed Conversion Price. Such adjustment shall be made
whenever such shares, rights or warrants are issued, and shall become
effective immediately after the issuance of such shares, rights or
warrants or, if such rights or warrants are issued to stockholders of
the Company, the record date for the determination of stockholders
entitled to receive such rights or warrants. However, upon the
expiration of any right or warrant to purchase Common Stock the
issuance of which resulted in an adjustment in the Fixed Conversion
Price pursuant to this Section 6(c)(iii), if any such right or warrant
shall expire and shall not have been exercised, the Fixed Conversion
Price shall immediately upon such expiration be re-computed and
effective immediately upon such expiration be increased to the price
which it would have been (but reflecting any other adjustments in the
Fixed Conversion Price made pursuant to the provisions of this Section
6 after the issuance of such rights or warrants) had the adjustment of
the Fixed Conversion Price made upon the issuance of such rights or
warrants been made on the basis of offering for subscription or
purchase only that number of shares of Common Stock actually purchased
upon the exercise of such rights or warrants actually exercised.
(iv) If the Company, at any time while shares of Series A
Preferred Stock are outstanding, shall distribute to all holders of
Common Stock (and not to holders of shares of Series A Preferred Stock)
evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security (excluding those referred to in
Sections 6(c)(ii) and (iii) above), then in each such case the Fixed
Conversion Price shall be multiplied by a fraction of which the
denominator shall be the Per Share Market
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Value determined as of the record date fixed for determination of
stockholders entitled to receive such distribution, and of which the
numerator shall be such Per Share Market Value on such record date less
the then fair market value at such record date of the portion of such
assets or evidence of indebtedness so distributed applicable to one
outstanding share of Common Stock as determined by the Board of
Directors in good faith; provided, however, that in the event of a
distribution exceeding ten percent of the net assets of the Company,
such fair market value shall be determined by an Independent Appraiser
(as defined below) selected in good faith by the holders of a majority
in interest of the Aggregate Stated Value of shares of Series A
Preferred Stock plus the Aggregate Principal Amount (as defined in the
Debenture) of Debentures then outstanding; and provided, further, that
the Company, after receipt of the determination by such Independent
Appraiser, shall have the right to select an additional Independent
Appraiser, in good faith, in which case the fair market value shall be
equal to the average of the determinations by each such Independent
Appraiser. In either case the adjustments shall be described in a
statement provided to the Holders of the portion of assets or evidences
of indebtedness so distributed or such subscription rights applicable
to one share of Common Stock. Such adjustment shall be made whenever
any such distribution is made and shall become effective immediately
after the record date mentioned above.
(v) If the Company at any time subdivides (by any stock split,
stock dividend, recapitalization or otherwise) one or more classes of
its outstanding shares of Common Stock into a greater number of shares,
the Fixed Conversion Price in effect immediately prior to such
subdivision will be proportionately reduced. If the Company at any time
combines (by combination, reverse stock split or otherwise) one or more
classes of its outstanding shares of Common Stock into a smaller number
of shares, the Fixed Conversion Price in effect immediately prior to
such combination will be proportionately increased.
(vi) If the Company in any manner issues or sells Convertible
Securities or Options that are convertible into or exchangeable for
Common Stock at a price which varies or may vary with the market price
of the Common Stock, including by way of one or more reset(s) to a
fixed price (each of the formulations for such variable price being
herein referred to as, a "Variable Price"), and such Variable Price is
not calculated using the same formula used to calculate the Conversion
Price in effect immediately prior to the time of such issue or sale,
the Company shall provide written notice thereof via facsimile and
overnight courier to each holder of shares of Series A Preferred Stock
("Variable Notice") on the date of issuance of such Convertible
Securities or Options. If a holder of shares of Series A Preferred
Stock then outstanding provides written notice to the Company via
facsimile and overnight courier (the "Variable Price Election Notice")
within 10 Business Days of receiving a Variable Notice that such holder
desires to replace the Conversion Price then in effect with the
Variable Price described in such Variable Notice, then, from and after
the date of the Company's receipt of the Variable Price Election
Notice, the Conversion Price will automatically be replaced with the
Variable Price for the shares of Series A Preferred Stock held by such
holder. In the
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event that a holder of shares of Series A Preferred Stock delivers a
Conversion Notice after the Company's issuance of Convertible
Securities with a Variable Price but before such holder's receipt of
the Company's Variable Notice, then such holder shall have the option
by written notice to the Company to rescind such Conversion Notice or
to have the Conversion Price be equal to such Variable Price for the
conversion effected by such Conversion Notice. As used herein, (A)
"Convertible Securities" means any stock or securities (other than
Options) directly or indirectly convertible into or exchangeable for
Common Stock and (B) "Options" means any rights, warrants or options to
subscribe for or purchase Common Stock or Convertible Securities.
(vii) All calculations under this Section 6 shall be made to
the nearest cent or the nearest 1/100th of a share, as the case may be.
(viii) Whenever the Conversion Price is adjusted pursuant to
Section 6(c)(ii), (iii) (iv), (v) or (vi) (for purposes of this Section
6(c)(viii), each an "adjustment"), the Company shall cause its Chief
Financial Officer to prepare and execute a certificate setting forth,
in reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated
(including a description of the basis on which the Board made any
determination hereunder), and the Conversion Price after giving effect
to such adjustment, and shall cause copies of such certificate to be
delivered to each Holder promptly after each adjustment. Any dispute
between the Company and the Holders with respect to the matters set
forth in such certificate may at the option of the Holders be submitted
to one of the national accounting firms currently known as the "big
five" selected by the holders of a majority in interest of the
Aggregate Stated Value of shares of Series A Preferred Stock plus the
Aggregate Principal Amount of Debentures then outstanding, provided
that the Company shall have ten days after receipt of notice from such
Holders of their selection of such firm to object thereto, in which
case the holders of a majority in interest of the Aggregate Stated
Value of shares of Series A Preferred Stock plus the Aggregate
Principal Amount of Debentures then outstanding shall select another
such firm and the Company shall have no such right of objection. The
firm selected by the holders of a majority in interest of the Aggregate
Stated Value of shares of Series A Preferred Stock plus the Aggregate
Principal Amount of Debentures then outstanding as provided in the
preceding sentence shall be instructed to deliver a written opinion as
to such matters to the Company and the Holders within thirty days after
submission to it of such dispute. Such opinion shall be final and
binding on the parties hereto. The fees and expenses of such accounting
firm shall be paid by the Company.
(ix) In case the Company after the Original Issue Date shall
do any of the following (each, a "Major Transaction") (a) consolidate
with or merge into any other person and the Company shall not be the
continuing or surviving person of such consolidation or merger, or (b)
permit any other person to consolidate with or merge into the Company
and the Company shall be the continuing or surviving person but, in
connection with such consolidation or merger, any capital stock of the
Company shall be changed into or exchanged for securities of any other
person or cash or any other
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<PAGE>
property, or (c) transfer all or substantially all of its properties or
assets to any other person, or (d) effect a capital reorganization or
reclassification of its capital stock, the holders of the shares of
Series A Preferred Stock then outstanding shall have the right
thereafter to convert such shares only into the shares of stock and
other securities, cash and property receivable upon or deemed to be
held by holders of Common Stock following such Major Transaction, and
the holders of the shares of Series A Preferred Stock shall be entitled
upon such event to receive such amount of securities, cash or property
as the shares of the Common Stock of the Company into which such shares
of Series A Preferred Stock could have been converted immediately prior
to such Major Transaction would have been entitled; provided, however,
that each Holder shall have the option to require the Company to
redeem, from funds legally available therefor at the time of such
redemption, such Aggregate Stated Value of its shares of Series A
Preferred Stock at a price equal to the Aggregate Stated Value of
shares of Series A Preferred Stock to be redeemed, plus accumulated and
unpaid dividends thereon, multiplied by the greater of (A) 125% or (B)
the applicable Conversion Ratio as of the date of such redemption
multiplied by the greatest Per Share Market Value on any Trading Day
during the period beginning on the date of the closing or the date of
the announcement, as the case may be, of the Major Transaction
triggering such redemption right and ending on the date of payment in
full by the Company of such redemption price. The entire redemption
price shall be paid in cash. If the Holder has requested that the
Company redeem shares of Series A Preferred Stock pursuant to this
Section and the Company fails for any reason to pay the redemption
price, as calculated pursuant to the immediately preceding sentence,
within five days after such notice is deemed delivered pursuant to the
preceding sentence, the Company will pay interest on the redemption
price at a rate of 15% per annum, in cash to such Holder, accruing from
such seventh day until the redemption price and any accrued interest
thereon is paid in full (which amount shall be paid as liquidated
damages and not as a penalty). The terms of any such Major Transaction
shall include such terms so as to continue to give to the holder of
shares of Series A Preferred Stock the right to receive the securities,
cash or property set forth in this Section 6(c)(ix) upon any conversion
or redemption following such Major Transaction. This provision shall
similarly apply to successive Major Transactions.
(x) If:
A. the Company shall declare a dividend (or any
other distribution) on its Common Stock; or
B. the Company shall declare a special
nonrecurring cash dividend on or a
redemption of its Common Stock; or
C. the Company shall authorize the granting to
all holders of the Common Stock rights or
warrants to subscribe for or purchase any
shares of capital stock of any class or of
any rights; or
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D. the approval of any stockholders of the
Company shall be required in connection with
any Major Transaction; or
E. the Company shall authorize the voluntary or
involuntary dissolution, liquidation or
winding up of the affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of shares of Series A Preferred Stock, and shall cause
to be mailed to the holders of shares of Series A Preferred Stock at their last
addresses as they shall appear upon the stock books of the Company, at least 30
calendar days prior to the applicable record or effective date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution, redemption, rights or warrants, or
if a record is not to be taken, the date as of which the holders of Common Stock
of record to be entitled to such dividend, distributions, redemption, rights or
warrants are to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected to become
effective or close, and the date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange their shares of Common
Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share exchange;
provided, however, that the failure to mail such notice or any defect therein or
in the mailing thereof shall not affect the validity of the corporate action
required to be specified in such notice. Holders are entitled to convert shares
of Series A Preferred Stock during the 30-day period commencing the date of such
notice to the effective date of the event triggering such notice.
(d) If at any time conditions shall arise by reason of action taken by
the Company which in the opinion of the Board of Directors are not adequately
covered by the other provisions hereof and which might materially and adversely
affect the rights of the holders of shares of Series A Preferred Stock
(different than or distinguished from the effect generally on rights of holders
of any class of the Company's capital stock) or if at any time any such
conditions are expected to arise by reason of any action contemplated by the
Company, the Company shall mail a written notice briefly describing the action
contemplated and the material adverse effects of such action on the rights of
the holders of shares of Series A Preferred Stock at least 10 calendar days
prior to the effective date of such action, and an Independent Appraiser
selected by the holders of majority in interest of the shares of Series A
Preferred Stock plus the Aggregate Principal Amount of Debentures then
outstanding shall give its opinion as to the adjustment, if any (not
inconsistent with the standards established in this Section 6), of the
Conversion Price (including, if necessary, any adjustment as to the securities
into which shares of Series A Preferred Stock may thereafter be convertible) and
any distribution which is or would be required to preserve without diluting the
rights of the holders of shares of Series A Preferred Stock. The Board of
Directors shall make the adjustment recommended forthwith upon the receipt of
such opinion or opinions or the taking of any such action contemplated, as the
case may be; provided, however, that no such adjustment of the Conversion Price
shall be made which in the opinion of the Independent Appraiser giving the
aforesaid opinion would result in an increase of the Conversion Price to more
than the Conversion Price then in effect.
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(e) The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued Common Stock solely for the purpose
of issuance upon conversion of shares of Series A Preferred Stock free from
preemptive rights or any other actual contingent purchase rights of persons
other than the holders of shares of Series A Preferred Stock, not less than 200%
of such number of shares of Common Stock as shall (subject to any additional
requirements of the Company as to reservation of such shares set forth in the
Securities Purchase Agreement) be issuable (taking into account the adjustments
of Section 6(c)) upon the conversion of all outstanding shares of Series A
Preferred Stock (without regard to any limitations on conversions or exercise
thereof). The Company covenants that all shares of Common Stock that shall be so
issuable shall, upon issue, be duly and validly authorized, issued and fully
paid, nonassessable and freely tradable.
(f) Upon a conversion hereunder the Company shall not be required to
issue stock certificates representing fractions of shares of Common Stock, but
may if otherwise permitted, make a cash payment in respect of any final fraction
of a share based on the Per Share Market Value at such time. If the Company
elects not, or is unable, to make such a cash payment, the Holder shall be
entitled to receive, in lieu of the final fraction of a share, one whole share
of Common Stock.
(g) The issuance of certificates for shares of Common Stock on
conversion of shares of Series A Preferred Stock shall be made without charge to
the holders thereof for any documentary stamp or similar taxes that may be
payable in respect of the issue or delivery of such certificate.
(h) Shares of Series A Preferred Stock converted into Common Stock
shall be canceled and retired by the Company.
(i) Whenever notice is required to be given under this Certificate of
Designation, unless otherwise provided herein, such notice shall be given in
accordance with Section 5.3 of the Securities Purchase Agreement.
(j) In the event a Holder shall elect to convert any shares of Series A
Preferred Stock as provided herein, the Company cannot refuse conversion based
on any claim that such Holder or any one associated or affiliated with such
Holder has been engaged in any violation of law, contract, agreement or for any
other reason, unless, an injunction from a court, on notice, restraining and/or
adjoining conversion of all or of said shares of Series A Preferred Stock shall
have been issued and the Company posts a surety bond for the benefit of such
Holder in the amount equal to 130% of the Aggregate Stated Value of shares of
Series A Preferred Stock sought to be converted, which bond shall remain in
effect until the completion of arbitration/litigation of the dispute and the
proceeds of which shall be payable to such Holder in the event it obtains
judgment.
Section 7. Triggering Events.
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Each of the following shall constitute a triggering event (a
"Triggering Event"), whatever the reason for such Triggering Event and whether
it shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment or order of any court or any order, rule or regulation
of any administrative, governmental or non-governmental body or otherwise
howsoever:
(a) the Company shall default in any payment of any amounts due under
the Transaction Documents when and as due (whether at maturity, upon
acceleration or otherwise); or
(b) the Company shall fail duly to perform or observe any term,
covenant or agreement contained in any of this Certificate of Designation, in
the Debentures, in the Securities Purchase Agreement or in the Registration
Rights Agreement for a period of seven days after the date on which written
notice of such failure shall first have been given to the Company; or
(c) (i) a final judgment shall be entered by any court against the
Company for the payment of money which together with all other outstanding final
judgments against the Company exceeds $150,000 in the aggregate, or (ii) a
warrant of attachment or execution or similar process shall be issued or levied
against any of the Company's property which exceeds in value $150,000 in the
aggregate, and if, within 30 days after the entry, issue or levy thereof, such
judgment, warrant or process shall not have been paid or discharged; or
(d) a court having jurisdiction in the premises shall enter a decree or
order for relief in respect of the Company in an involuntary case or proceeding
under any applicable bankruptcy, insolvency, reorganization or other similar law
now or hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of the Company or for any
substantial part of the property of it or ordering the winding-up or liquidation
of the affairs of it and such decree or order shall remain unstayed and in
effect for a period of 30 days; or
(e) the Company shall commence a voluntary case or proceeding under any
applicable bankruptcy, insolvency, reorganization or other similar law now or
hereafter in effect, or shall consent to the entry of an order for relief in an
involuntary case under any such law, or shall consent to the appointment of or
taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or similar official) of the Company or for any substantial part of
its property, or shall make any general assignment for the benefit of creditors,
or shall admit in writing its inability to pay its debts as they become due or
shall take any corporate action in furtherance of any of the foregoing; or
(f) an event of default, as defined in any indenture or instrument
evidencing or under which the Company shall have outstanding indebtedness for
borrowed money in excess of $150,000, inclusive of accrued interest, accrued
premium, if any, or any additional amounts payable, shall happen and be
continuing and such default shall involve the failure to pay the principal of
such indebtedness (or any part thereof), when due and payable after the
expiration of any applicable grace period with respect thereto, or such
indebtedness shall have been
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accelerated so that the same shall be or become due and payable prior to the
date on which the same would otherwise have become due and payable, and failure
to pay shall not have been cured by the Company within 30 days after such
failure or such acceleration shall not be rescinded or annulled within 30 days
after notice thereof shall have first been given to the Company; provided that
if such event of default under such indenture or instrument shall be remedied or
cured by the Company or waived by the holders of such indebtedness, then the
Triggering Event hereunder by reason thereof shall be deemed likewise to have
been thereupon remedied, cured or waived without further action upon the part of
any of the holders of shares of Series A Preferred Stock; or
(g) trading in the Common Stock shall have been suspended for more than
ten Trading Days or the Common Stock is delisted from any principal market or
exchange (including, but not limited to, the OTC Bulletin Board, The Nasdaq
SmallCap Market and the Nasdaq National Market) on which the Common Stock is
then listed for trading; or
(h) the Company fails to timely deliver the shares of Common Stock to
the Holder or a replacement Preferred Stock Certificate representing any
unconverted portion of Series A Preferred Stock pursuant to this Certificate of
Designation; or
(i) the issuance by the Securities and Exchange Commission of any stop
order suspending the effectiveness of the Registration Statement covering any or
all of the Registrable Securities (as defined in the Registration Rights
Agreement) or the initiation of any proceedings for that purpose.
With the exception of a Triggering Event specified in clauses (d) or (e) above,
upon the occurrence and continuance of a Triggering Event, the Holder may
declare the Aggregate Stated Value of and dividends accumulated on the shares of
Series A Preferred Stock and all other amounts owing under the Transaction
Documents to be forthwith due and payable by giving written notice thereof to
the Company without presentment, demand, protest or other notice of any kind,
all of which are hereby expressly waived, anything in the Transaction Documents
to the contrary notwithstanding. Upon the occurrence and continuance of a
Triggering Event specified in clauses (d) or (e) above, such Aggregate Stated
Value, accumulated dividends, interest and other amounts shall thereupon and
concurrently therewith become automatically due and payable all without any
action by the Holder and without presentment, demand, protest or other notice of
any kind, all of which are expressly waived, anything in the Transaction
Documents to the contrary notwithstanding.
Interest on overdue amounts, if any, shall accrue from the date on
which such interest (and other amounts, if any) were due and payable to the date
such interest (and other amounts, if any) are paid or duly provided for, at a
rate of 15% per annum (to the extent payment of such interest shall be legally
enforceable).
Section 8. Definitions. For the purposes hereof, the following terms
shall have the following meanings:
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<PAGE>
"Aggregate Stated Value" means, with respect to the shares of Series A
Preferred Stock, the sum of (a) the stated value thereof, plus (b) accumulated
but unpaid dividends thereon (whether or not earned or declared).
"Common Stock" means the common stock, $.001 par value per share, of
the Company and stock of any other class into which such shares may hereafter
have been reclassified or changed.
"Conversion Ratio" means the number of shares of Common Stock issuable
upon conversion of each share of Series A Preferred Stock determined by the
application of the following formula where "D" equals the accumulated and unpaid
dividends on the Aggregate Stated Value of shares of Series A Preferred Stock so
converted as of the Conversion Date:
Aggregate Stated Value to be Converted + D
------------------------------------------
Conversion Price
"Debenture" shall have the meaning ascribed to it in the Securities
Purchase Agreement.
"Independent Appraiser" means a nationally recognized or major regional
investment banking firm or firm of independent certified public accountants of
recognized standing (which may be the firm that regularly examines the financial
statements of the Company) that is regularly engaged in the business of
appraising the capital stock or assets of corporations or other entities as
going concerns, and which is not affiliated with either the Company or any
Holder.
"Junior Securities" means the Common Stock and all other equity
securities of the Company which are junior in rights and liquidation preference
to the Series A Preferred Stock.
"Maturity Date" shall mean April __, 2005.
"Original Issue Date" shall mean the date of the first issuance of any
shares of Series A Preferred Stock regardless of the number of transfers of any
particular shares of Series A Preferred Stock and regardless of the number of
certificates which may be issued to evidence such shares of Series A Preferred
Stock.
"Per Share Market Value" means on any particular date (a) the closing
bid price per share of the Common Stock on such date on The Nasdaq SmallCap
Market, the Nasdaq National Market or other registered national stock exchange
on which the Common Stock is then listed or if there is no such price on such
date, then the closing bid price on such exchange or quotation system on the
date nearest preceding such date, or (b) if the Common Stock is not listed then
on The Nasdaq Small-Cap Market, the Nasdaq National Market or any registered
national stock exchange, the closing bid price for a share of Common Stock in
the over-the-counter market (as reported by NASDAQ or in the National Quotation
Bureau Incorporated or similar organization or agency succeeding to its
functions of reporting prices) at the close of business on such date, or (c) if
the Common Stock is not then reported by the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices), then the average
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of the over-the-counter quotes on the Electronic Bulletin Board of the National
Association of Securities Dealers, Inc. for the relevant conversion period, as
determined in good faith by the Holder, or (d) if the Common Stock is not then
publicly traded, then the fair market value of a share of Common Stock as
determined by an Independent Appraiser selected in good faith by the holders of
a majority in interest of the shares of Series A Preferred Stock plus the
Aggregate Principal Amount of Debentures then outstanding; provided, however,
that the Company, after receipt of the determination by such Independent
Appraiser, shall have the right to select an additional Independent Appraiser,
in which case, the fair market value shall be equal to the average of the
determinations by each such Independent Appraiser; and provided, further that
all determinations of the Per Share Market Value shall be appropriately adjusted
for any stock dividends, stock splits or other similar transactions during such
period. The determination of fair market value by an Independent Appraiser shall
be based upon the fair market value of the Company determined on a going concern
basis as between a willing buyer and a willing seller and taking into account
all relevant factors determinative of value, and shall be final and binding on
all parties. In determining the fair market value of any shares of Common Stock,
no consideration shall be given to any restrictions on transfer of the Common
Stock imposed by agreement or by federal or state securities laws, or to the
existence or absence of, or any limitations on, voting rights.
"Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Original Issue Date, by and among the Company and the
original Holders.
"Securities Purchase Agreement" means the Securities Purchase
Agreement, dated April __, 2000 among the Company and the original holders of
the Debentures.
"Trading Day" means (a) a day on which the Common Stock is traded on
the Nasdaq National Market, The Nasdaq SmallCap Market or other registered
national stock exchange on which the Common Stock has been listed, or (b) if the
Common Stock is not listed on the Nasdaq National Market, The Nasdaq SmallCap
Market or any registered national stock exchange, a day or which the Common
Stock is traded in the over-the-counter market, as reported by the OTC Bulletin
Board, or (c) if the Common Stock is not quoted on the OTC Bulletin Board, a day
on which the Common Stock is quoted in the over-the-counter market as reported
by the National Quotation Bureau Incorporated (or any similar organization or
agency succeeding its functions of reporting prices); provided, however, that in
the event that the Common Stock is not listed or quoted as set forth in (a), (b)
and (c) hereof, then Trading Day shall mean any day except Saturday, Sunday and
any day which shall be a legal holiday or a day on which banking institutions in
the State of New York are authorized or required by law or other government
action to close.
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<PAGE>
"Underlying Shares" means the number of shares of Common Stock into
which the Debentures or the shares of Series A Preferred Stock are convertible
in accordance with the terms hereof, the Debentures and the Securities Purchase
Agreement.
Section 9. Purchase Rights. If at any time the Company grants, issues
or sells any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of any
class of Common Stock (the "Purchase Rights" ), then the holders of shares of
Series A Preferred Stock will be entitled to acquire, upon the terms applicable
to such Purchase Rights, the aggregate Purchase Rights which such holder could
have acquired if such holder had held the number of shares of Common Stock
acquirable upon complete conversion of the shares of Series A Preferred Stock
(without taking into account any limitations or restrictions on the
convertibility of the shares of Series A Preferred Stock) immediately before the
date on which a record is taken for the grant, issuance or sale of such Purchase
Rights, or, if no such record is taken, the date as of which the record holders
of Common Stock are to be determined for the grant, issue or sale of such
Purchase Rights.
Section 10. Taxes. The Company shall pay any and all taxes attributable
to the issuance and delivery of Common Stock or other securities upon conversion
of the shares of Series A Preferred Stock.
Section 11. No Impairment. The Company shall not by any action
including, without limitation, amending the articles of incorporation or the
by-laws of the Company, or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
action, avoid or seek to avoid the observance or performance of any of the terms
of this Certificate of Designation, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such actions as
may be necessary or appropriate to protect the rights of the Holder against
dilution (to the extent specifically provided herein) or impairment. Without
limiting the generality of the foregoing, the Company will (i) not permit the
par value, if any, of its Common Stock to exceed the then effective Conversion
Price, (ii) not amend or modify any provision of the articles of incorporation
or by-laws of the Company in any manner that would adversely affect in any way
the powers, preferences or relative participating, optional or other special
rights of the Common Stock or which would adversely affect the rights of the
Holders of the shares of Series A Preferred Stock, (iii) take all such action as
may be reasonably necessary in order that the Company may validly and legally
issue fully paid and nonassessable shares of Common Stock, free and clear of any
liens, claims, encumbrances and restrictions (other than as provided herein)
upon the exercise of the shares of Series A Preferred Stock, and (iv) use its
best efforts to obtain all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof as may be reasonably
necessary to enable the Company to perform its obligations under this
Certificate of Designation.
Section 12. Countersignature and Registration. The shares of Series A
Preferred Stock shall not become valid or obligatory for any purpose until the
shares of Series A Preferred Stock shall have been duly executed by the Company
and such signature attested to by an authorized Officer thereof.
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<PAGE>
Section 13. Warranty of the Company. The Company hereby certifies and
warrants that all acts, conditions and things required to be done and performed
and to have happened (including, but not limited to, the Shareholder Approval)
precedent to the creation and issuance of this Certificate of Designation and
the Series A Preferred Stock, and to constitute the same as legal, valid and
binding obligations of the Company enforceable in accordance with their terms,
have been done and performed and have happened in due and strict compliance with
all applicable laws.
Section 14. Descriptive Headings. The descriptive headings appearing
herein are for convenience of reference only and shall not alter, limit or
define the provisions hereof.
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<PAGE>
IN WITNESS WHEREOF, we have subscribed this document on the date
indicated below and do hereby affirm, under the penalties of perjury, that the
statements contained therein have been examined by us and are true and correct.
Dated: April ___, 2000
__________________________________
Name:
Title:
__________________________________
Name:
Title:
ATTEST:
__________________________________
Name:
Title:
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<PAGE>
EXHIBIT 1
CONVERSION NOTICE
Reference is made to the Certificate of Designation, Powers, Preferences and
Rights of the Series of Preferred Stock of World Wide Wireless Communications,
Inc. (the "Company") to be designated 4.0% Series A Convertible Preferred Stock
(the "Certificate of Designation"). In accordance with and pursuant to the
Certificate of Designation, the undersigned hereby elects to convert the number
of shares of 4% Series A Convertible Preferred Stock, par value $.01 per share
and stated value $1,000 per share (the "Preferred Shares"), of World Wide
Wireless Communications, Inc., a Nevada corporation, (the "Company"), indicated
below into shares of Common Stock, par value $.001 per share (the "Common
Stock"), of the Company, by tendering the stock certificate(s) representing the
share(s) of Preferred Shares specified below as of the date specified below.
Date of Conversion: ___________________________________
Number of Preferred Shares to be converted: ___________________________________
Stock certificate no.(s) of Preferred Shares to be converted: __________________
Please confirm the following information:
Conversion Price: ___________________________________
Number of shares of Common Stock to be issued: _________________________________
Please issue the Common Stock into which the Preferred Shares are being
converted and, if applicable, any check drawn on an account of the Company in
the following name and to the following address:
Issue to: _____________________________________________________________
________________________________________________________________________________
Facsimile Number: ________________________________
Authorization: ___________________________________
By:
Title:
Dated:____________________________________________
Account Number (if electronic book entry transfer): ___________________
Transaction Code Number (if electronic book entry transfer):___________
<PAGE>
ACKNOWLEDGMENT
The Company hereby acknowledges this Conversion Notice and hereby
directs [TRANSFER AGENT] to issue the above indicated number of shares of Common
Stock in accordance with the Transfer Agent Instructions dated April ___, 2000
from the Company and acknowledged and agreed to by [TRANSFER AGENT].
WORLD WIDE WIRELESS COMMUNICATIONS, INC.
By: ____________________________________
Name:
Title:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
WORLD WIDE WIRELESS COMMUNICATIONS, INC.
(Incorporated in the State of Nevada)
4% CONVERTIBLE DEBENTURE DUE 2005
No. CD-__ Principal Amount U.S. $_____________
Original Issue Date: April 14, 2000
FOR VALUE RECEIVED, World Wide Wireless Communications, Inc., a
corporation duly incorporated and existing under the laws of the State of Nevada
(the "Company"), hereby promises to pay to the order of ______________________,
or registered assigns (hereinafter, the "Holder"), the principal sum of
______________________ United States Dollars ($________________) on April 14,
2005 (the "Maturity Date"), subject to earlier conversion, redemption or
exchange as provided herein. The Debentures will be convertible into shares of
common stock, par value $.001 per share, of the Company ("Common Stock") on the
terms and subject to the conditions hereinafter set forth at any time after the
date hereof. Interest shall be paid on the unpaid principal balance of this
Debenture at the rate of 4% per annum from the date hereof, payable, in the
manner set forth below, upon conversion, redemption or maturity of this
Debenture to the person that is the Holder on the date of such event. Interest
hereon shall be calculated on the basis of a 360 day year and the actual number
of days elapsed.
1. General. (a) This Debenture is one of a duly authorized issue of
Debentures of the Company in original aggregate principal amount of $4,592,000
designated as its 4% Convertible Debentures due 2005 (herein called the
"Debentures"), issued pursuant to the authorization of the Board of Directors of
the Company and issued pursuant to a Securities Purchase Agreement, dated April
14, 2000, by and among the Company and the Purchasers identified therein (the
"Securities Purchase Agreement"). The Securities Purchase Agreement contains
certain additional terms that are binding upon the Company and each holder of
the Debentures.
(b) The Debentures are issuable, without coupons, in principal
denominations of U.S. $1,000 and integral multiples thereof. The Debentures, and
transfers thereof, shall be in registered form. The registered holder of a
Debenture shall (to the fullest extent permitted by applicable law) be treated
at all times, by all persons and for all purposes as the absolute owner of such
Debenture, regardless of any notice of ownership, theft or loss or of any
writing thereon.
<PAGE>
2. Principal. The Aggregate Principal Amount (as defined in Section 7)
of this Debenture shall be converted into shares of Common Stock on the Maturity
Date in accordance with the terms hereof. The Company may not prepay all or any
portion of this Debenture, except as specifically provided herein.
3. Interest. Each Debenture shall be entitled to receive interest at
the rate of 4.0% per annum, compounded semi-annually, on the Aggregate Principal
Amount thereof. Such interest shall be due and payable upon conversion,
redemption or maturity of this Debenture. Interest shall accrue from the
Original Issue Date (as defined herein), whether or not earned or declared,
until maturity or such time as the Debenture has been converted, exchanged or
redeemed as herein provided. Interest is payable on the Debentures on the last
day of June and December of each year by increasing the Aggregate Principal
Amount of the Debentures by the amount of such interest. Such increase in the
Aggregate Principal Amount shall constitute full payment of such interest. When
any interest is added to the Aggregate Principal Amount, such interest shall,
for all purposes of this Debenture, be deemed to be part of the Aggregate
Principal Amount for purposes of determining interest thereafter payable
hereunder and amounts thereafter convertible into Common Stock hereunder, and
all references herein to the Aggregate Principal Amount shall mean the Aggregate
Principal Amount, as adjusted pursuant to this Section 3. The interest so
payable will be paid to the person in whose name the Debenture (or one or more
predecessor debentures) is registered on the records of the Company regarding
registration and transfers of the Debentures; provided, however, that the
Company's obligation to a transferee of a Debenture arises only if such
transfer, sale or other disposition is made in accordance with the terms and
conditions hereof and the Securities Purchase Agreement.
4. Conversion at the Option of the Holder. (a) (i) The Debentures shall
be convertible into shares of Common Stock (subject to Section 4(a)(ii)) at the
Conversion Ratio (as defined in Section 7) at the option of the holder of the
Debentures in whole or in part at any time. If any Debentures remain outstanding
on the Maturity Date, then all such Debentures shall be converted at the
Conversion Ratio as of such date in accordance with this Section 4. To convert
Debentures into shares of Common Stock on any date, the Holder hereof shall (A)
transmit by facsimile (or otherwise deliver), for receipt on or prior to 11:59
p.m., Eastern time, on such date, a copy of an executed notice of conversion in
the form attached hereto as Exhibit 1 (the "Conversion Notice") to the Company
with a copy thereof to the Company's designated transfer agent (the "Transfer
Agent") and (B) if required by Section 4(b)(iv), surrender to a common carrier
for delivery to the Transfer Agent as soon as practicable following such date
the original Debentures representing the Debentures being converted (or an
indemnification undertaking with respect to such shares in the case of their
loss, theft or destruction) (the "Debenture Certificates"). Each Conversion
Notice shall specify the Aggregate Principal Amount of Debentures to be
converted. The date as of which such conversion is to be effected shall be the
date the Holder delivers such Conversion Notice by facsimile (the "Conversion
Date")(if such date is not a Business Day, then the Conversion Date will be the
next following Business Day). Subject to Section 4(b) hereof, each Conversion
Notice, once given, shall be irrevocable. Upon receipt by the Company of a copy
of a Conversion Notice, the Company shall (1) as soon as practicable, but in no
event later than within one (1) Business Day, send, via facsimile, a
confirmation of receipt of such Conversion Notice to such Holder and the
Transfer Agent, which confirmation shall constitute an instruction
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<PAGE>
to the Transfer Agent to process such Conversion Notice in accordance with the
terms herein and (2) on or before the second (2nd) Trading Day following the
date of receipt by the Company of such Conversion Notice (the "Delivery Date"),
(A) issue and deliver to the address as specified in the Conversion Notice, a
certificate, registered in the name of the Holder or its designee, for the
number of shares of Common Stock to which the Holder shall be entitled, or (B)
provided the Transfer Agent is participating in The Depository Trust Company
("DTC") Fast Automated Securities Transfer Program, upon the request of the
Holder, credit such aggregate number of shares of Common Stock to which the
Holder shall be entitled to the Holder's or its designee's balance account with
DTC through its Deposit Withdrawal Agent Commission system. If the Aggregate
Principal Amount of Debentures represented by the Debenture Certificate(s)
submitted for conversion, as may be required pursuant to Section 4(b)(iv), is
greater than the Aggregate Principal Amount of Debentures being converted, then
the Company shall, as soon as practicable and in no event later than the
Delivery Date and at its own expense, issue and deliver to the Holder a new
Debenture Certificate representing the Aggregate Principal Amount of Debentures
not converted.
(ii) In no event shall a Holder be permitted to convert in
excess of such Aggregate Principal Amount of Debentures upon the
conversion of which, (x) the number of shares of Common Stock owned by
such Holder (other than shares of Common Stock issuable upon conversion
of Debentures or upon exercise of the Warrants (as defined in the
Securities Purchase Agreement)) plus (y) the number of shares of Common
Stock issuable upon such conversion of such Debentures, would be equal
to or exceed (z) 9.999% of the number of shares of Common Stock then
issued and outstanding, including shares issuable on conversion of the
Debentures held by such Holder after application of this Section
4(a)(ii). As used herein, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder. To the extent
that the limitation contained in this Section 4(a)(ii) applies, the
determination of whether Debentures are convertible (in relation to
other securities owned by a Holder) and of which Debentures are
convertible shall be in the sole discretion of such Holder, and the
submission of Debentures for conversion shall be deemed to be such
Holder's determination of whether such Debentures are convertible (in
relation to other securities owned by a Holder) and of which Debentures
are convertible, in each case subject to such aggregate percentage
limitation, and the Company shall have no obligation to verify or
confirm the accuracy of such determination. Nothing contained herein
shall be deemed to restrict the right of a Holder to convert such
Debentures at such time as such conversion will not violate the
provisions of this paragraph. The provisions of this Section 4(a)(ii)
may be waived by a Holder of Debentures as to itself (and solely as to
itself) upon not less than 75 days prior notice to the Company, and the
provisions of this Section 4(a)(ii) shall continue to apply until such
75th day (or later, if stated in the notice of waiver). No conversion
in violation of this paragraph but otherwise in accordance with this
Debenture shall affect the status of the securities issued upon such
conversion as validly issued, fully-paid and nonassessable.
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<PAGE>
(b) (i) Not later than any Delivery Date, the Company will deliver to
the applicable Holder by express courier (A) a certificate or
certificates which shall be free of restrictive legends and trading
restrictions (other than those required by Section 3.1(b) of the
Securities Purchase Agreement) representing the number of shares of
Common Stock being acquired upon the conversion of Debentures (subject
to reduction pursuant to Section 4(a)(ii)) and (B) to the extent
required pursuant to Section 4(b)(iv), a new Debenture Certificate
representing the unconverted Aggregate Principal Amount. If in the case
of any Conversion Notice such new Debenture or Debentures are not
delivered to or as directed by the applicable Holder by the fifth (5th)
Trading Day after the applicable Conversion Date, the Holder shall be
entitled by written notice to the Company at any time on or before its
receipt of such Debenture or Debentures thereafter, to rescind such
conversion, whereupon the Company and the Holder shall each be restored
to their respective positions immediately prior to the delivery of such
notice of revocation, except that any amounts described in Sections
4(b)(ii) and (iii) shall be payable through the date notice of
rescission is given to the Company.
(ii) The Company understands that a delay in the delivery of
the shares of Common Stock upon conversion of Debentures and failure to
deliver a new Debenture representing the unconverted Aggregate
Principal Amount beyond the Delivery Date could result in economic loss
to the Holder. If the Company fails to deliver to the Holder such
certificate or certificates pursuant to this Section hereunder by the
Delivery Date for any reason, other than due to the action of the
Holder, the Company shall pay to such Holder, in cash, an amount per
Trading Day for each Trading Day the earlier of the date such
certificates are delivered or the date the conversion is rescinded
pursuant to Section 4(b)(i) above, together with interest on such
amount at a rate of 15% per annum, accruing until such amount and any
accrued interest thereon is paid in full, equal to (i) 1% of the
Aggregate Principal Amount of the Debentures, plus the accrued and
unpaid interest thereon, requested to be converted for the first five
Trading Days after the Delivery Date and (ii) 2% of the Aggregate
Principal Amount of the Debentures, plus the accrued and unpaid
interest thereon, requested to be converted for each Trading Day
thereafter (which amounts shall be paid as liquidated damages and not
as a penalty). If the Company fails to deliver to the Holder such
certificate or certificates pursuant to this Section prior to the 15th
Trading Day after the Conversion Date, the Company shall, at the
Holder's option, redeem in cash, from funds legally available therefor
at the time of such redemption, all or a portion of the Aggregate
Principal Amount of Debentures then held by such Holder, plus the
accrued and unpaid interest thereon, as requested by such Holder, in
cash. The redemption price shall be equal to the Aggregate Principal
Amount of Debentures requested to be redeemed, plus accrued and unpaid
interest thereon, multiplied by the greater of (A) 125% or (B) the
applicable Conversion Ratio as of the date of such redemption
multiplied by the greatest Per Share Market Value on any Trading Day
during the period beginning on the Conversion Date and ending on the
date of payment in full by the Company of such redemption price. If the
Holder has requested that the Company redeem Debentures pursuant to
this Section and the Company fails for any reason to pay the redemption
price, as calculated pursuant to the immediately preceding sentence,
within seven days after such notice is deemed delivered pursuant to
Section 4(a)(i), the
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<PAGE>
Company will pay interest on the redemption price at a rate of 15% per
annum, in cash to such Holder, accruing from such seventh day until the
redemption price and any accrued interest thereon is paid in full
(which amount shall be paid as liquidated damages and not as a
penalty). Nothing herein shall limit a Holder's right to pursue actual
damages for the Company's failure to deliver certificates representing
shares of Common Stock upon conversion within the period specified
herein (including, without limitation, damages relating to any purchase
of shares of Common Stock by such Holder to make delivery on a sale
effected in anticipation of receiving certificates representing shares
of Common Stock upon conversion, such damages to be in an amount equal
to (A) the aggregate amount paid by such Holder for the shares of
Common Stock so purchased minus (B) the aggregate amount of net
proceeds, if any, received by such Holder from the sale of the shares
of Common Stock which would have been issued by the Company pursuant to
such conversion), and such Holder shall have the right to pursue all
remedies available to it at law or in equity (including, without
limitation, a decree of specific performance and/or injunctive relief).
(iii) In addition to any other rights available to the Holder,
if the Company fails to deliver to the Holder such certificate or
certificates pursuant to Section 4(b)(i) by the Delivery Date and if
after the Delivery Date the Holder purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by such Holder of the Underlying Shares which
the Holder anticipated receiving upon such conversion (a "Buy-In"),
then the Company shall immediately pay in cash to the Holder (in
addition to any remedies available to or elected by the Holder) the
amount by which (A) the Holder's total purchase price (including
brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (B) the Aggregate Principal Amount of the Debentures
for which such conversion was not timely honored, together with
interest thereon at a rate of 15% per annum, accruing until such amount
and any accrued interest thereon is paid in full (which amount shall be
paid as liquidated damages and not as a penalty). For example, if the
Holder purchases shares of Common Stock having a total purchase price
of $11,000 to cover a Buy-In with respect to an attempted conversion of
$10,000 Aggregate Principal Amount of Debentures, the Company shall be
required to pay the Holder $1,000, plus interest. The Holder shall
provide the Company written notice indicating the amounts payable to
the Holder in respect of the Buy-In.
(iv) Notwithstanding anything to the contrary set forth
herein, upon conversion of Debentures in accordance with the terms
hereof, the Holder thereof shall not be required to physically
surrender the certificate representing the Debentures to the Company
unless the entire Aggregate Principal Amount of Debentures represented
by the certificate are being converted. The Holder and the Company
shall maintain records showing the Aggregate Principal Amount of
Debentures so converted and the dates of such conversions or shall use
such other method, reasonably satisfactory to the Holder and the
Company, so as not to require physical surrender of the certificate
representing the Debentures upon each such conversion. In the event of
any dispute or discrepancy, such records of the Company shall be
controlling and determinative in the absence of manifest error.
Notwithstanding the foregoing, if Debentures represented by a
certificate
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<PAGE>
are converted as aforesaid, the Holder may not transfer the certificate
representing the Debentures unless the Holder first physically
surrenders the certificate representing the Debentures to the Company,
whereupon the Company will forthwith issue and deliver upon the order
of the Holder a new certificate of like tenor, registered as the Holder
may request, representing in the aggregate the remaining Aggregate
Principal Amount of Debentures represented by such certificate.
(c) (i) The conversion price for the Debentures (the "Conversion
Price") in effect on any Conversion Date shall be the lesser of (A) an
amount equal to 110% of the average Per Share Market Value for the five
(5) consecutive Trading Days immediately preceding the Original Issue
Date (the "Fixed Conversion Price") and (B) an amount equal to 85% of
the average Per Share Market Value for the five (5) consecutive Trading
Days immediately prior to the Conversion Date; provided, however, that,
in any Conversion Notice, a Holder may specify a Conversion Price
higher than the Conversion Price then in effect; provided further that,
if during any period (a "Black-out Period"), a Holder is unable to
trade any Common Stock issued or issuable upon conversion of Debentures
immediately due to the postponement of filing or delay or suspension of
effectiveness of a registration statement or because the Company has
otherwise informed such Holder that an existing prospectus cannot be
used at that time in the sale or transfer of such Common Stock, such
Holder shall have the option but not the obligation on any Conversion
Date within ten Trading Days following the expiration of the Black-out
Period of using the Conversion Price applicable on such Conversion Date
or any Conversion Price selected by such Holder that would have been
applicable had such Conversion Date been at any earlier time during the
Black-out Period or within the ten Trading Days thereafter; provided
further, that in no event shall the Conversion Price be below the Floor
Price. "Floor Price" shall mean $2.00 for the period beginning on the
Original Issue Date and ending on the six month anniversary of the
Original Issue Date, $1.27 for the period beginning on the six month
anniversary of the Original Issue Date and ending on the eighteen month
anniversary of the Original Issue Date, and zero thereafter.
Notwithstanding the foregoing, if the Company's revenues for the fiscal
year ending December 31, 2000, as shown in the Company's Annual Report
on Form 10-K for the fiscal year ending December 31, 2000, are less
than $13.5 million, then from and after the first anniversary of the
Original Issue Date the Floor Price shall be zero.
(ii) If the Company, at any time while any Debentures are
outstanding, (a) shall pay a stock dividend or otherwise make a
distribution or distributions on shares of its Common Stock or any
other equity security payable in shares of Common Stock, (b) subdivide
outstanding shares of Common Stock into a larger number of shares, (c)
combine outstanding shares of Common Stock into a smaller number of
shares, or (d) issue by reclassification of shares of Common Stock any
shares of capital stock of the Company, the Fixed Conversion Price
shall be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock (excluding treasury shares, if any)
outstanding before such event and of which the denominator shall be the
number of shares of Common Stock outstanding after such event. Any
adjustment made pursuant to this Section 4(c)(ii) shall become
effective immediately after the record date for the
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determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective
date in the case of a subdivision, combination or re-classification.
(iii) If the Company, at any time while Debentures are
outstanding, shall sell or issue additional shares of Common Stock or
rights or warrants to acquire shares of Common Stock at a price per
share less than the Fixed Conversion Price, excluding any rights of the
holder of the Debentures or the holders of the Warrants issued pursuant
to the Securities Purchase Agreement to acquire Common Stock, the Fixed
Conversion Price shall be multiplied by a fraction, of which the
denominator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding on the date of issuance of such
shares, rights or warrants plus the number of additional shares of
Common Stock offered for subscription or purchase, and of which the
numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding on the date of issuance of such
shares, rights or warrants plus the number of shares which the
aggregate offering price of the total number of shares so offered would
purchase at such Fixed Conversion Price. Such adjustment shall be made
whenever such shares, rights or warrants are issued, and shall become
effective immediately after the issuance of such shares, rights or
warrants or, if such rights or warrants are issued to stockholders of
the Company, the record date for the determination of stockholders
entitled to receive such rights or warrants. However, upon the
expiration of any right or warrant to purchase Common Stock the
issuance of which resulted in an adjustment in the Fixed Conversion
Price pursuant to this Section 4(c)(iii), if any such right or warrant
shall expire and shall not have been exercised, the Fixed Conversion
Price shall immediately upon such expiration be re-computed and
effective immediately upon such expiration be increased to the price
which it would have been (but reflecting any other adjustments in the
Fixed Conversion Price made pursuant to the provisions of this Section
4 after the issuance of such rights or warrants) had the adjustment of
the Fixed Conversion Price made upon the issuance of such rights or
warrants been made on the basis of offering for subscription or
purchase only that number of shares of Common Stock actually purchased
upon the exercise of such rights or warrants actually exercised.
(iv) If the Company, at any time while Debentures are
outstanding, shall distribute to all holders of Common Stock (and not
to holders of Debentures) evidences of its indebtedness or assets or
rights or warrants to subscribe for or purchase any security (excluding
those referred to in Sections 4(c)(ii) and (iii) above), then in each
such case the Fixed Conversion Price shall be multiplied by a fraction
of which the denominator shall be the Per Share Market Value determined
as of the record date fixed for determination of stockholders entitled
to receive such distribution, and of which the numerator shall be such
Per Share Market Value on such record date less the then fair market
value at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of
Common Stock as determined by the Board of Directors in good faith;
provided, however, that in the event of a distribution exceeding ten
percent of the net assets of the Company, such fair market value shall
be determined by an Independent Appraiser (as defined below) selected
in
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good faith by the holders of a majority in interest of the Aggregate
Principal Amount of Debentures then outstanding; and provided, further,
that the Company, after receipt of the determination by such
Independent Appraiser, shall have the right to select an additional
Independent Appraiser, in good faith, in which case the fair market
value shall be equal to the average of the determinations by each such
Independent Appraiser. In either case the adjustments shall be
described in a statement provided to the Holders of the portion of
assets or evidences of indebtedness so distributed or such subscription
rights applicable to one share of Common Stock. Such adjustment shall
be made whenever any such distribution is made and shall become
effective immediately after the record date mentioned above.
(v) If the Company at any time subdivides (by any stock split,
stock dividend, recapitalization or otherwise) one or more classes of
its outstanding shares of Common Stock into a greater number of shares,
the Fixed Conversion Price in effect immediately prior to such
subdivision will be proportionately reduced. If the Company at any time
combines (by combination, reverse stock split or otherwise) one or more
classes of its outstanding shares of Common Stock into a smaller number
of shares, the Fixed Conversion Price in effect immediately prior to
such combination will be proportionately increased.
(vi) If the Company in any manner issues or sells Convertible
Securities or Options that are convertible into or exchangeable for
Common Stock at a price which varies or may vary with the market price
of the Common Stock, including by way of one or more reset(s) to a
fixed price (each of the formulations for such variable price being
herein referred to as, a "Variable Price"), and such Variable Price is
not calculated using the same formula used to calculate the Conversion
Price in effect immediately prior to the time of such issue or sale,
the Company shall provide written notice thereof via facsimile and
overnight courier to each holder of Debentures ("Variable Notice") on
the date of issuance of such Convertible Securities or Options. If a
holder of Debentures then outstanding provides written notice to the
Company via facsimile and overnight courier (the "Variable Price
Election Notice") within 10 Business Days of receiving a Variable
Notice that such holder desires to replace Fixed the Conversion Price
then in effect with the Variable Price described in such Variable
Notice, then, from and after the date of the Company's receipt of the
Variable Price Election Notice, the Fixed Conversion Price will
automatically be replaced with the Variable Price for the Debentures
held by such holder. In the event that a holder of Debentures delivers
a Conversion Notice after the Company's issuance of Convertible
Securities with a Variable Price but before such holder's receipt of
the Company's Variable Notice, then such holder shall have the option
by written notice to the Company to rescind such Conversion Notice or
to have the Conversion Price be equal to such Variable Price for the
conversion effected by such Conversion Notice. As used herein, (A)
"Convertible Securities" means any stock or securities (other than
Options) directly or indirectly convertible into or exchangeable for
Common Stock and (B) "Options" means any rights, warrants or options to
subscribe for or purchase Common Stock or Convertible Securities.
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<PAGE>
(vii) All calculations under this Section 4 shall be made to
the nearest cent or the nearest 1/100th of a share, as the case may be.
(viii) Whenever the Fixed Conversion Price is adjusted
pursuant to Section 4(c)(ii), (iii) (iv), (v) or (vi) (for purposes of
this Section 4(c)(viii), each an "adjustment"), the Company shall cause
its Chief Financial Officer to prepare and execute a certificate
setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such
adjustment was calculated (including a description of the basis on
which the Board made any determination hereunder), and the Conversion
Price after giving effect to such adjustment, and shall cause copies of
such certificate to be delivered to each Holder promptly after each
adjustment. Any dispute between the Company and the Holders with
respect to the matters set forth in such certificate may at the option
of the Holders be submitted to one of the national accounting firms
currently known as the "big five" selected by the holders of a majority
in interest of the Aggregate Principal Amount of Debentures then
outstanding, provided that the Company shall have ten days after
receipt of notice from such Holders of their selection of such firm to
object thereto, in which case the holders of a majority in interest of
the Aggregate Principal Amount of Debentures then outstanding shall
select another such firm and the Company shall have no such right of
objection. The firm selected by the holders of a majority in interest
of the Aggregate Principal Amount of Debentures then outstanding as
provided in the preceding sentence shall be instructed to deliver a
written opinion as to such matters to the Company and the Holders
within thirty days after submission to it of such dispute. Such opinion
shall be final and binding on the parties hereto. The fees and expenses
of such accounting firm shall be paid by the Company.
(ix) In case the Company after the Original Issue Date shall
do any of the following (each, a "Major Transaction") (a) consolidate
with or merge into any other person and the Company shall not be the
continuing or surviving person of such consolidation or merger, or (b)
permit any other person to consolidate with or merge into the Company
and the Company shall be the continuing or surviving person but, in
connection with such consolidation or merger, any capital stock of the
Company shall be changed into or exchanged for securities of any other
person or cash or any other property, or (c) transfer all or
substantially all of its properties or assets to any other person, or
(d) effect a capital reorganization or reclassification of its capital
stock, the holders of the Debentures then outstanding shall have the
right thereafter to convert such shares only into the shares of stock
and other securities, cash and property receivable upon or deemed to be
held by holders of Common Stock following such Major Transaction, and
the holders of the Debentures shall be entitled upon such event to
receive such amount of securities, cash or property as the shares of
the Common Stock of the Company into which such Debentures could have
been converted immediately prior to such Major Transaction would have
been entitled; provided, however, that each Holder shall have the
option to require the Company to redeem, from funds legally available
therefor at the time of such redemption, such Aggregate Principal
Amount of its Debentures at a price equal to the Aggregate Principal
Amount of Debentures to be
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<PAGE>
redeemed, plus accrued and unpaid interest thereon, multiplied by the
greater of (A) 125% or (B) the applicable Conversion Ratio as of the
date of such redemption multiplied by the greatest Per Share Market
Value on any Trading Day during the period beginning on the date of the
closing or the date of the announcement, as the case may be, of the
Major Transaction triggering such redemption right and ending on the
date of payment in full by the Company of such redemption price. The
entire redemption price shall be paid in cash. If the Holder has
requested that the Company redeem Debentures pursuant to this Section
and the Company fails for any reason to pay the redemption price, as
calculated pursuant to the immediately preceding sentence, within five
days after such notice is deemed delivered pursuant to the preceding
sentence, the Company will pay interest on the redemption price at a
rate of 15% per annum, in cash to such Holder, accruing from such
seventh day until the redemption price and any accrued interest thereon
is paid in full (which amount shall be paid as liquidated damages and
not as a penalty). The terms of any such Major Transaction shall
include such terms so as to continue to give to the holder of
Debentures the right to receive the securities, cash or property set
forth in this Section 4(c)(ix) upon any conversion or redemption
following such Major Transaction. This provision shall similarly apply
to successive Major Transactions.
(x) If:
A. the Company shall declare a dividend (or any
other distribution) on its Common Stock; or
B. the Company shall declare a special
nonrecurring cash dividend on or a
redemption of its Common Stock; or
C. the Company shall authorize the granting to
all holders of the Common Stock rights or
warrants to subscribe for or purchase any
shares of capital stock of any class or of
any rights; or
D. the approval of any stockholders of the
Company shall be required in connection with
any Major Transaction; or
E. the Company shall authorize the voluntary or
involuntary dissolution, liquidation or
winding up of the affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of Debentures, and shall cause to be mailed to the
holders of Debentures at their last addresses as they shall appear upon the
stock books of the Company, at least 30 calendar days prior to the applicable
record or effective date hereinafter specified, a notice stating (x) the date on
which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be
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<PAGE>
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided, however, that
the failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice. Holders are entitled to convert Debentures during the 30-day
period commencing the date of such notice to the effective date of the event
triggering such notice.
(d) If at any time conditions shall arise by reason of action taken by
the Company which in the opinion of the Board of Directors are not adequately
covered by the other provisions hereof and which might materially and adversely
affect the rights of the holders of Debentures (different than or distinguished
from the effect generally on rights of holders of any class of the Company's
capital stock) or if at any time any such conditions are expected to arise by
reason of any action contemplated by the Company, the Company shall mail a
written notice briefly describing the action contemplated and the material
adverse effects of such action on the rights of the holders of Debentures at
least 10 calendar days prior to the effective date of such action, and an
Independent Appraiser selected by the holders of majority in interest of the
Debentures shall give its opinion as to the adjustment, if any (not inconsistent
with the standards established in this Section 4), of the Conversion Price
(including, if necessary, any adjustment as to the securities into which
Debentures may thereafter be convertible) and any distribution which is or would
be required to preserve without diluting the rights of the holders of
Debentures. The Board of Directors shall make the adjustment recommended
forthwith upon the receipt of such opinion or opinions or the taking of any such
action contemplated, as the case may be; provided, however, that no such
adjustment of the Conversion Price shall be made which in the opinion of the
Independent Appraiser giving the aforesaid opinion would result in an increase
of the Conversion Price to more than the Conversion Price then in effect.
(e) The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued Common Stock solely for the purpose
of issuance upon conversion of Debentures free from preemptive rights or any
other actual contingent purchase rights of persons other than the holders of
Debentures, not less than 200% of such number of shares of Common Stock as shall
(subject to any additional requirements of the Company as to reservation of such
shares set forth in the Securities Purchase Agreement) be issuable (taking into
account the adjustments of Section 4(c)) upon the conversion of all outstanding
Debentures (without regard to any limitations on conversions or exercise
thereof). The Company covenants that all shares of Common Stock that shall be so
issuable shall, upon issue, be duly and validly authorized, issued and fully
paid, nonassessable and freely tradable.
(f) Upon a conversion hereunder the Company shall not be required to
issue stock certificates representing fractions of shares of Common Stock, but
may if otherwise permitted, make a cash payment in respect of any final fraction
of a share based on the Per Share Market Value at such time. If the Company
elects not, or is unable, to make such a cash payment, the
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<PAGE>
Holder shall be entitled to receive, in lieu of the final fraction of a share,
one whole share of Common Stock.
(g) The issuance of certificates for shares of Common Stock on
conversion of Debentures shall be made without charge to the holders thereof for
any documentary stamp or similar taxes that may be payable in respect of the
issue or delivery of such certificate.
(h) Debentures converted into Common Stock shall be canceled and
retired by the Company.
(i) Whenever notice is required to be given under this Debenture,
unless otherwise provided herein, such notice shall be given in accordance with
Section 5.3 of the Securities Purchase Agreement.
(j) In the event a Holder shall elect to convert any Debentures as
provided herein, the Company cannot refuse conversion based on any claim that
such Holder or any one associated or affiliated with such Holder has been
engaged in any violation of law, contract, agreement or for any other reason,
unless, an injunction from a court, on notice, restraining and/or adjoining
conversion of all or of said Debentures shall have been issued and the Company
posts a surety bond for the benefit of such Holder in the amount equal to 130%
of the Aggregate Principal Amount of Debentures sought to be converted, which
bond shall remain in effect until the completion of arbitration/litigation of
the dispute and the proceeds of which shall be payable to such Holder in the
event it obtains judgment.
5. Company Exchange. At any time or times beginning on the date of
receipt of Shareholder Approval (as defined in the Securities Purchase
Agreement), the Company shall have the right, in its sole discretion, to require
that some or all of the outstanding Aggregate Principal Amount of the Debentures
be exchanged (a "Company Exchange") for shares of Series A Convertible Preferred
Stock of the Company (the "Preferred Stock") having an Aggregate Stated Value
(as defined in the Certificate of Designation) equal to the Aggregate Principal
Amount of the Debentures to be exchanged; provided that the Conditions to
Exchange at the Company's Election (as set forth below) are satisfied as of the
Company Exchange Date (as defined below). The Company may exercise its right to
Company Exchange only by providing each holder of Debentures written notice
("Notice of Company Exchange") at least 10 Business Days but not more than 20
Business Days prior to the date of consummation of such Company Exchange
("Company Exchange Date"). If the Company elects to require exchange of some,
but not all, of the Aggregate Principal Amount of the Debentures then
outstanding, the Company shall require exchange of the pro rata amount from each
holder of such Debentures based on the principal amount of Debentures purchased
by such holder relative to the aggregate principal amount of Debentures
purchased on the Original Issue Date (such amount with respect to each holder
being referred to herein as its "Pro Rata Exchange Amount"). The Notice of
Company Exchange shall indicate (x) the Aggregate Principal Amount of the
Debentures the Company has elected to exchange from all holders of Debentures,
(y) the date selected by the Company for the Company Exchange Date, and (z) each
holder's Pro Rata Exchange Amount of the Aggregate Principal Amount of
Debentures selected for exchange. If the Company has exercised its right of
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Company Exchange and the conditions of this Section 5, including the Conditions
to Exchange at the Company's Election, have been satisfied, then each holder's
Pro Rata Exchange Amount of the Aggregate Principal Amount of Debentures
selected for exchange which remain outstanding on the Company Exchange Date
shall be exchanged as of the Company Exchange Date by delivery by the Company to
each such holder of Debentures of one or more stock certificates representing
the Aggregate Stated Value of shares of Preferred Stock issuable upon such
Company Exchange to such holder. If required by Section 4(b)(iv), all such
holders of the Aggregate Principal Amount of Debentures being exchanged shall
thereupon, surrender all Debentures being exchanged on such date to the Company.
If the Company fails to deliver the stock certificates as required in the second
preceding sentence on the Company Exchange Date with respect to the Aggregate
Principal Amount of Debentures selected for exchange, then the Company Exchange
shall be null and void with respect to such Aggregate Principal Amount of
Debentures and the Holder shall be entitled to all the rights of a holder of
outstanding Debentures. All Debentures that are required to be surrendered for
exchange in accordance with the provisions of this Section 5 shall, from and
after the Company Exchange Date, be deemed to have been retired and canceled and
the Aggregate Principal Amount of Debentures represented thereby exchanged for
an equal Aggregate Stated Value of Preferred Stock for all purposes,
notwithstanding the failure of the Holder to surrender such Debentures on or
prior to such date. "Conditions to Exchange at the Company's Election" means the
following conditions: (i) Shareholder Approval shall have been obtained by the
Company; (ii) the Certificate of Amendment and Certificate of Designation (as
each is defined in the Securities Purchase Agreement) have been filed and
accepted for filing with the Secretary of State of the State of Nevada; (iii)
the Board of Directors of the Company shall have authorized the issuance of the
Preferred Stock; (iv) during the period beginning on the Original Issue Date and
ending on and including the Company Exchange Date, the Company shall have
delivered the applicable Underlying Shares upon conversion of the Debentures to
the holders of the Debentures within three (3) Business Days of the applicable
Conversion Date; (v) during the period beginning on and including the Original
Issue Date and ending on and including the Company Exchange Date, there shall
not have occurred (A) an Event (as defined in the Registration Rights Agreement)
or (B) an event that with the passage of time and without being cured would
constitute an Event; (vi) during the period beginning on and including the
Original Issue Date and ending on and including the Company Exchange Date, there
shall not have occurred (A) an Event of Default or (B) an event that with the
passage of time and without being cured would constitute an Event of Default;
and (vii) during the period beginning on the Original Issue Date and ending on
and including the Company Exchange Date, there shall not have occurred a Major
Transaction which the Company has not publicly and accurately announced as being
consummated, terminated or abandoned. If the Company fails to timely deliver any
stock certificates representing the shares of Preferred Stock in accordance with
this Section 5, then the Company shall not be permitted to submit another Notice
of Company Exchange without the prior written consent of the holders of at least
two-thirds (3/4) of the Aggregate Principal Amount of the Debentures then
outstanding.
6. Events of Default.
Each of the following shall constitute an event of default ("Event of
Default"), whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be
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effected by operation of law or pursuant to any judgment or order of any court
or any order, rule or regulation of any administrative, governmental or
non-governmental body or otherwise howsoever:
(a) the Company shall default in any payment of any amounts due under
the Transaction Documents when and as due (whether at maturity, upon
acceleration or otherwise); or
(b) the Company shall fail duly to perform or observe any term,
covenant or agreement contained in any of the Debentures or in the Securities
Purchase Agreement or in the Registration Rights Agreement for a period of seven
days after the date on which written notice of such failure shall first have
been given to the Company; or
(c) (i) a final judgment shall be entered by any court against the
Company for the payment of money which together with all other outstanding final
judgments against the Company exceeds $150,000 in the aggregate, or (ii) a
warrant of attachment or execution or similar process shall be issued or levied
against any of the Company's property which exceeds in value $150,000 in the
aggregate, and if, within 30 days after the entry, issue or levy thereof, such
judgment, warrant or process shall not have been paid or discharged; or
(d) a court having jurisdiction in the premises shall enter a decree or
order for relief in respect of the Company in an involuntary case or proceeding
under any applicable bankruptcy, insolvency, reorganization or other similar law
now or hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of the Company or for any
substantial part of the property of it or ordering the winding-up or liquidation
of the affairs of it and such decree or order shall remain unstayed and in
effect for a period of 30 days; or
(e) the Company shall commence a voluntary case or proceeding under any
applicable bankruptcy, insolvency, reorganization or other similar law now or
hereafter in effect, or shall consent to the entry of an order for relief in an
involuntary case under any such law, or shall consent to the appointment of or
taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or similar official) of the Company or for any substantial part of
its property, or shall make any general assignment for the benefit of creditors,
or shall admit in writing its inability to pay its debts as they become due or
shall take any corporate action in furtherance of any of the foregoing; or
(f) an event of default, as defined in any indenture or instrument
evidencing or under which the Company shall have outstanding indebtedness for
borrowed money in excess of $150,000, inclusive of accrued interest, accrued
premium, if any, or any additional amounts payable, shall happen and be
continuing and such default shall involve the failure to pay the principal of
such indebtedness (or any part thereof), when due and payable after the
expiration of any applicable grace period with respect thereto, or such
indebtedness shall have been accelerated so that the same shall be or become due
and payable prior to the date on which the same would otherwise have become due
and payable, and failure to pay shall not have been
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cured by the Company within 30 days after such failure or such acceleration
shall not be rescinded or annulled within 30 days after notice thereof shall
have first been given to the Company; provided that if such event of default
under such indenture or instrument shall be remedied or cured by the Company or
waived by the holders of such indebtedness, then the Event of Default hereunder
by reason thereof shall be deemed likewise to have been thereupon remedied,
cured or waived without further action upon the part of any of the holders of
Debentures; or
(g) trading in the Common Stock shall have been suspended for more than
ten Trading Days or the Common Stock is delisted from any principal market or
exchange (including, but not limited to, the OTC Bulletin Board, The Nasdaq
SmallCap Market and the Nasdaq National Market) on which the Common Stock is
then listed for trading; or
(h) the Company fails to timely deliver the shares of Common Stock to
the Holder or a replacement Debenture representing any unconverted portion of
this Debenture pursuant to this Debenture; or
(i) the issuance by the Securities and Exchange Commission of any stop
order suspending the effectiveness of the Registration Statement covering any or
all of the Registrable Securities (as defined in the Registration Rights
Agreement) or the initiation of any proceedings for that purpose.
With the exception of an Event of Default specified in clauses (d) or (e) above,
upon the occurrence and continuance of an Event of Default, the Holder may
declare the Aggregate Principal Amount of and interest on the Debentures and all
other amounts owing under the Transaction Documents to be forthwith due and
payable by giving written notice thereof to the Company without presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived, anything in the Transaction Documents to the contrary notwithstanding.
Upon the occurrence and continuance of an Event of Default specified in clauses
(d) or (e) above, such principal, interest and other amounts shall thereupon and
concurrently therewith become automatically due and payable all without any
action by the Holder and without presentment, demand, protest or other notice of
any kind, all of which are expressly waived, anything in the Transaction
Documents to the contrary notwithstanding.
Interest on overdue principal and interest (and other amounts, if any)
shall accrue from the date on which such principal and interest (and other
amounts, if any) were due and payable to the date such principal and interest
(and other amounts, if any) are paid or duly provided for, at a rate of 15% per
annum (to the extent payment of such interest shall be legally enforceable).
7. Definitions. For the purposes hereof, the following terms shall have
the following meanings:
"Aggregate Principal Amount" means, with respect to the Debentures, the
sum of (a) the principal amount thereof, plus (b) accrued but unpaid interest
thereon (whether or not earned or declared).
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"Common Stock" means the common stock, $.001 par value per share, of
the Company and stock of any other class into which such shares may hereafter
have been reclassified or changed.
"Conversion Ratio" means the number of shares of Common Stock issuable
upon conversion of each Debenture determined by the application of the following
formula where "D" equals the accrued and unpaid interest on the Aggregate
Principal Amount of Debentures so converted (not previously added to the
Aggregate Principal Amount pursuant to Section 2 hereof) as of the Conversion
Date:
Aggregate Principal Amount to be Converted + D
----------------------------------------------
Conversion Price
"Independent Appraiser" means a nationally recognized or major regional
investment banking firm or firm of independent certified public accountants of
recognized standing (which may be the firm that regularly examines the financial
statements of the Company) that is regularly engaged in the business of
appraising the capital stock or assets of corporations or other entities as
going concerns, and which is not affiliated with either the Company or any
Holder.
"Original Issue Date" shall mean the date of the first issuance of any
Debentures regardless of the number of transfers of any particular Debentures
and regardless of the number of certificates which may be issued to evidence
such Debentures.
"Per Share Market Value" means on any particular date (a) the closing
bid price per share of the Common Stock on such date on The Nasdaq SmallCap
Market, the Nasdaq National Market or other registered national stock exchange
on which the Common Stock is then listed or if there is no such price on such
date, then the closing bid price on such exchange or quotation system on the
date nearest preceding such date, or (b) if the Common Stock is not listed then
on The Nasdaq Small-Cap Market, the Nasdaq National Market or any registered
national stock exchange, the closing bid price for a share of Common Stock in
the over-the-counter market (as reported by NASDAQ or in the National Quotation
Bureau Incorporated or similar organization or agency succeeding to its
functions of reporting prices) at the close of business on such date, or (c) if
the Common Stock is not then publicly traded, then the fair market value of a
share of Common Stock as determined by an Independent Appraiser selected in good
faith by the holders of a majority in interest of the shares of the Debentures;
provided, however, that the Company, after receipt of the determination by such
Independent Appraiser, shall have the right to select an additional Independent
Appraiser, in which case, the fair market value shall be equal to the average of
the determinations by each such Independent Appraiser; and provided, further
that all determinations of the Per Share Market Value shall be appropriately
adjusted for any stock dividends, stock splits or other similar transactions
during such period. The determination
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<PAGE>
of fair market value by an Independent Appraiser shall be based upon the fair
market value of the Company determined on a going concern basis as between a
willing buyer and a willing seller and taking into account all relevant factors
determinative of value, and shall be final and binding on all parties. In
determining the fair market value of any shares of Common Stock, no
consideration shall be given to any restrictions on transfer of the Common Stock
imposed by agreement or by federal or state securities laws, or to the existence
or absence of, or any limitations on, voting rights.
"Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Original Issue Date, by and among the Company and the
original Holders.
"Trading Day" means (a) a day on which the Common Stock is traded on
the Nasdaq National Market, The Nasdaq SmallCap Market or other registered
national stock exchange on which the Common Stock has been listed, or (b) if the
Common Stock is not listed on the Nasdaq National Market, The Nasdaq SmallCap
Market or any registered national stock exchange, a day or which the Common
Stock is traded in the over-the-counter market, as reported by the OTC Bulletin
Board, or (c) if the Common Stock is not quoted on the OTC Bulletin Board, a day
on which the Common Stock is quoted in the over-the-counter market as reported
by the National Quotation Bureau Incorporated (or any similar organization or
agency succeeding its functions of reporting prices); provided, however, that in
the event that the Common Stock is not listed or quoted as set forth in (a), (b)
and (c) hereof, then Trading Day shall mean any day except Saturday, Sunday and
any day which shall be a legal holiday or a day on which banking institutions in
the State of New York are authorized or required by law or other government
action to close.
"Underlying Shares" means the number of shares of Common Stock into
which the Debentures are convertible in accordance with the terms hereof and the
Securities Purchase Agreement.
8. Purchase Rights. If at any time the Company grants, issues or sells
any Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
Common Stock (the "Purchase Rights" ), then the holders of Debentures will be
entitled to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which such holder could have acquired if such holder
had held the number of shares of Common Stock acquirable upon complete
conversion of the Debentures (without taking into account any limitations or
restrictions on the convertibility of the Debentures) immediately before the
date on which a record is taken for the grant, issuance or sale of such Purchase
Rights, or, if no such record is taken, the date as of which the record holders
of Common Stock are to be determined for the grant, issue or sale of such
Purchase Rights.
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<PAGE>
9. Taxes. The Company shall pay any and all taxes attributable to the
issuance and delivery of Common Stock or other securities upon conversion of the
Debentures.
10. No Impairment. The Company shall not by any action including,
without limitation, amending the articles of incorporation or the by-laws of the
Company, or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other action, avoid or
seek to avoid the observance or performance of any of the terms of this
Debenture, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of the Holder hereof against dilution (to the
extent specifically provided herein) or impairment. Without limiting the
generality of the foregoing, the Company will (i) not permit the par value, if
any, of its Common Stock to exceed the then effective Conversion Price, (ii) not
amend or modify any provision of the articles of incorporation or by-laws of the
Company in any manner that would adversely affect in any way the powers,
preferences or relative participating, optional or other special rights of the
Common Stock or which would adversely affect the rights of the Holders of the
Debentures, (iii) take all such action as may be reasonably necessary in order
that the Company may validly and legally issue fully paid and nonassessable
shares of Common Stock, free and clear of any liens, claims, encumbrances and
restrictions (other than as provided herein) upon the exercise of this
Debenture, and (iv) use its best efforts to obtain all such authorizations,
exemptions or consents from any public regulatory body having jurisdiction
thereof as may be reasonably necessary to enable the Company to perform its
obligations under this Debenture.
11. Governing Law. The Debentures shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
principles of conflicts of law.
12. Countersignature and Registration. This Debenture shall not become
valid or obligatory for any purpose until the Debentures shall have been duly
executed by the Company and such signature attested to by an authorized Officer
thereof.
13. Warranty of the Company. The Company hereby certifies and warrants
that all acts, conditions and things required to be done and performed and to
have happened precedent to the creation and issuance of this Debenture, and to
constitute the same as legal, valid and binding obligations of the Company
enforceable in accordance with their terms, have been done and performed and
have happened in due and strict compliance with all applicable laws.
14. Descriptive Headings. The descriptive headings appearing herein are
for convenience of reference only and shall not alter, limit or define the
provisions hereof.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed in its corporate name by the manual signature of a duly authorized
signatory, as attested to by another duly authorized signatory of the Company.
Dated: April 14, 2000
WORLD WIDE WIRELESS
COMMUNICATIONS, INC.
By:________________________
Name:
Title:
ATTEST:
By:__________________________________
Name:
Title:
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<PAGE>
EXHIBIT 1
CONVERSION NOTICE
The undersigned hereby elects to have World Wide Wireless Communications, Inc.
(the "Company") convert the Aggregate Principal Amount of 4.0% Convertible
Debentures due 2005 (the "Debentures") of the Company, indicated below into
shares of Common Stock, par value $.001 per share (the "Common Stock"), of the
Company as of the date specified below.
Date of Conversion: _______________________________________________________
Aggregate Principal Amount of Debentures to be converted: ___________________
Please confirm the following information:
Conversion Price: ___________________________________________________________
Number of shares of Common Stock to be issued:_______________________________
Please issue the Common Stock into which the Debentures are being converted and,
if applicable, any check drawn on an account of the Company in the following
name and to the following address:
Issue to: ____________________________________________________________
____________________________________________________________
____________________________________________________________
Facsimile Number:________________________________
Authorization:___________________________________
By:
Title:
Dated:___________________________________________
Account Number (if electronic book entry transfer):____________________
Transaction Code Number (if electronic book entry transfer):___________
<PAGE>
ACKNOWLEDGMENT
The Company hereby acknowledges this Conversion Notice and hereby
directs [TRANSFER AGENT] to issue the above indicated number of shares of Common
Stock in accordance with the Transfer Agent Instructions dated April 14, 2000
from the Company and acknowledged and agreed to by [TRANSFER AGENT].
WORLD WIDE WIRELESS COMMUNICATIONS, INC.
By:_____________________________________
Name:
Title:
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF
WORLD WIDE WIRELESS COMMUNICATIONS, INC.
Expires April 14, 2005
No. W-__ New York, New York
April 14, 2000
FOR VALUE RECEIVED, subject to the provisions hereinafter set forth, the
undersigned, WORLD WIDE WIRELESS COMMUNICATIONS, INC., a Nevada corporation
(together with its successors and assigns, the "Issuer"), hereby certifies that
----------------
or its registered assigns is entitled to subscribe for and purchase, during the
period specified in this Warrant, up to _______ shares (subject to adjustment as
hereinafter provided) of the duly authorized, validly issued, fully paid and
non-assessable common stock, par value $0.001 per share, of the Issuer (the
"Common Stock"), at an exercise price per share equal to the Warrant Price then
in effect, subject, however, to the provisions and upon the terms and conditions
hereinafter set forth. Capitalized terms used in this Warrant and not otherwise
defined herein shall have the respective meanings specified in Section 7 hereof.
1. Term. The right to subscribe for and purchase shares of Warrant
Stock represented hereby shall commence on the date of issuance of this Warrant
and shall expire at 5:00 p.m., New York City time, on April 14, 2005 (such
period being the "Term"). Prior to the end of the Term, the Issuer will not take
any action which would terminate the Warrants.
<PAGE>
2. Method of Exercise Payment; Issuance of New Warrant; Registration,
Transfer and Exchange.
(a) Time of Exercise. The purchase rights represented by this Warrant
may be exercised in whole or in part at any time and from time to time during
the Term.
(b) Method of Exercise. The Holder hereof may exercise this Warrant, in
whole or in part, by the surrender of this Warrant (with the exercise form
attached hereto duly executed) at the principal office of the Issuer, and by the
payment to the Issuer of an amount of consideration therefor equal to the
Warrant Price in effect on the date of such exercise multiplied by the number of
shares of Warrant Stock with respect to which this Warrant is then being
exercised, payable at such Holder's election (i) by certified or official bank
check, (ii) if the Per Share Market Value is greater than the Warrant Price (at
the date of calculation as set forth below), in lieu of exercising this Warrant
for cash, by receiving shares equal to the value (as determined below) of this
Warrant (or the portion thereof being canceled) by surrender of this Warrant at
the principal office of the Issuer together with the properly endorsed
Subscription Form annexed hereto and notice of such election in which event the
Issuer shall issue to the Warrantholder a number of shares of Common Stock
computed using the following formula:
Y(A-B)
------
X = A
Where X = the number of shares of Common Stock to be
issued to the Holder
Y = the number of shares of Common Stock
purchasable under the Warrant or, if only a
portion of the Warrant is being exercised,
the portion of the Warrant being canceled
(at the date of such calculation)
A = the Per Share Market Value of one share of
the Common Stock (at the date of such
calculation)
B = Warrant Price (as adjusted to the date of
such calculation),
or (iii) by a combination of the foregoing methods of payment selected by the
Holder of this Warrant. In any case where the consideration payable upon such
exercise is being paid in whole or in part pursuant to the provisions of clause
(ii) of this subsection (b), such exercise shall be accompanied by written
notice from the Holder of this Warrant specifying the manner of payment thereof
and containing a calculation showing the number of shares of Warrant Stock with
respect to which rights are being surrendered thereunder and the net number of
shares to be issued after giving effect to such surrender.
(c) Issuance of Stock Certificates. In the event of any exercise of the
rights represented by this Warrant in accordance with and subject to the terms
and conditions hereof, (i) certificates for the shares of Warrant Stock so
purchased shall be dated the date of such exercise
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<PAGE>
and delivered to the Holder hereof within a reasonable time, not exceeding three
Trading Days after such exercise, and the Holder hereof shall be deemed for all
purposes to be the Holder of the shares of Warrant Stock so purchased as of the
date of such exercise, and (ii) unless this Warrant has expired, a new Warrant
representing the number of shares of Warrant Stock, if any, with respect to
which this Warrant shall not then have been exercised (less any amount thereof
which shall have been cancelled in payment or partial payment of the Warrant
Price as hereinabove provided) shall also be issued to the Holder hereof at the
Issuer's expense within such time.
(d) Registration. The Warrants shall be numbered and shall be
registered in a Warrant register (the "Warrant Register"). The Issuer shall be
entitled to treat the registered holder of any Warrant on the Warrant Register
(the "Holder") as the owner in fact thereof for all purposes and shall not be
bound to recognize any equitable or other claim to or interest in such Warrant
on the part of any other person, and shall not be liable for any registration of
transfer of Warrants which are registered or are to be registered in the name of
a fiduciary or the nominee of a fiduciary unless made with the actual knowledge
that a fiduciary or nominee is committing a breach of trust in requesting such
registration of transfer, or with such knowledge of such facts that its
participation therein amounts to bad faith. The Warrants shall be registered
initially in the name of Holder as set forth in the first sentence of this
Warrant in such denominations as Holder may request in writing to the Issuer.
(e) Transfer of Warrant. The Warrants will not be sold, transferred,
assigned or hypothecated, in part or in whole (other than by will or pursuant to
the laws of descent and distribution), except to registered assigns of the
Holder and thereafter only 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 Issuer. 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 Issuer in its discretion.
Upon any registration of transfer, the Issuer shall deliver a new Warrant or
Warrants to the persons entitled thereto. The Warrants may be exchanged at the
option of the Holder thereof for another Warrant, or other Warrants, of
different denominations, of like tenor and representing in the aggregate the
right to purchase a like number of shares of Common Stock upon surrender to the
Issuer or its duly authorized agent. Notwithstanding the foregoing, the Issuer
shall have no obligation to cause Warrants to be transferred on its books to any
person if such transfer would violate the Securities Act.
(f) Compliance with Securities Laws.
(i) The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant and the shares of Warrant Stock to be
issued upon exercise hereof are being acquired solely for the Holder's
own account and not as a nominee for any other party, and for
investment, and that the Holder will not offer, sell or otherwise
dispose of this Warrant or any shares of Warrant Stock to be issued
upon exercise hereof except pursuant
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<PAGE>
to an effective registration statement, or an exemption from
registration, under the Securities Act and any applicable state
securities laws.
(ii) Except as provided in paragraph (iii) below, this Warrant
and all certificates representing shares of Warrant Stock issued upon
exercise hereof shall be stamped or imprinted with a legend in
substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT.
(iii) The restrictions imposed by this subsection (g) upon the
transfer of this Warrant and the shares of Warrant Stock to be
purchased upon exercise hereof shall terminate (A) when such securities
shall have been effectively registered under the Securities Act, (B)
upon the Issuer's receipt of an opinion of counsel, in form and
substance reasonably satisfactory to the Issuer, addressed to the
Issuer to the effect that such restrictions are no longer required to
ensure compliance with the Securities Act or (C) upon the Issuer's
receipt of other evidence reasonably satisfactory to the Issuer that
such registration is not required. Whenever such restrictions shall
cease and terminate as to any such securities, the Holder thereof shall
be entitled to receive from the Issuer (or its transfer agent and
registrar), without expense (other than applicable transfer taxes, if
any), new Warrants (or, in the case of shares of Warrant Stock, new
stock certificates) of like tenor not bearing the applicable legends
required by paragraph (ii) above relating to the Securities Act and
state securities laws.
(g) Continuing Rights of Holder. The Issuer will, at the time of or at
any time after each exercise of this Warrant, upon the request of the Holder
hereof or of any shares of Warrant Stock issued upon such exercise, acknowledge
in writing the extent, if any, of its continuing obligation to afford to such
Holder all rights to which such Holder shall continue to be entitled after such
exercise in accordance with the terms of this Warrant, provided that if any such
Holder shall fail to make any such request, the failure shall not affect the
continuing obligation of the Issuer to afford such rights to such Holder.
3. Stock Fully Paid; Reservation and Listing of Shares; Covenants.
(a) Stock Fully Paid. The Issuer represents, warrants, covenants and
agrees that all shares of Warrant Stock which may be issued upon the exercise of
this Warrant or otherwise hereunder will, upon issuance, be duly authorized,
validly issued, fully paid and non-assessable and free from all taxes, liens and
charges created by or through Issuer. The Issuer further
-4-
<PAGE>
covenants and agrees that during the period within which this Warrant may be
exercised, the Issuer will at all times have authorized and reserved for the
purpose of the issue upon exercise of this Warrant a sufficient number of shares
of Common Stock to provide for the exercise of this Warrant.
(b) Payment of Taxes. The Issuer will pay all documentary stamp taxes,
if any, attributable to the issuance of Warrant Stock; provided, however, that
the Issuer shall not be required to pay any tax or taxes which may be payable in
respect of any transfer involved in the issue or delivery of any certificates
for Warrant Stock in a name other than that of the Holder of Warrants in respect
of which such Warrant Stock is issued.
(c) Reservation. If any shares of Common Stock required to be reserved
for issuance upon exercise of this Warrant or as otherwise provided hereunder
require registration or qualification with any governmental authority under any
federal or state law before such shares may be so issued, the Issuer will in
good faith use its best efforts as expeditiously as possible at its expense to
cause such shares to be duly registered or qualified. The transfer agent for the
Common Stock (the "Transfer Agent"), and every subsequent transfer agent, if
any, for the Warrant Stock will be irrevocably authorized and directed at all
times until the end of the Term to reserve such number of authorized and
unissued shares of Common Stock as shall be required for such purpose. The
Issuer will keep a copy of this Agreement on file with the Transfer Agent and
with every subsequent transfer agent for of the Issuer's securities issuable
upon the exercise of the Warrants. The Issuer will supply the Transfer Agent or
any subsequent transfer agent with duly executed certificates for such purpose
and will itself provide or otherwise make available any cash which may be
distributable as provided in Section 6 of this Agreement. All Warrants
surrendered in the exercise of the rights thereby evidenced shall be canceled,
and such canceled Warrants shall constitute sufficient evidence of the number of
Shares that have been issued upon the exercise of such Warrants. No shares of
Common Stock shall be subject to reservation in respect of unexercised Warrants
subsequent to the end of the Term. If the Issuer shall list any shares of Common
Stock on any securities exchange or market it will, at its expense, list
thereon, maintain and increase when necessary such listing, of, all shares of
Warrant Stock from time to time issued upon exercise of this Warrant or as
otherwise provided hereunder, and, to the extent permissible under the
applicable securities exchange rules, all unissued shares of Warrant Stock which
are at any time issuable hereunder, so long as any shares of Common Stock shall
be so listed. The Issuer will also so list on each securities exchange or
market, and will maintain such listing of, any other securities which the Holder
of this Warrant shall be entitled to receive upon the exercise of this Warrant
if at the time any securities of the same class shall be listed on such
securities exchange or market by the Issuer.
(d) Covenants. The Issuer shall not by any action including, without
limitation, amending the certificate of incorporation or the by-laws of the
Issuer, or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other 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 the carrying out of all such terms
and in the taking of all such actions as may be necessary or appropriate to
protect the rights of the Holder hereof against dilution (to the extent
specifically provided herein) or impairment. Without
-5-
<PAGE>
limiting the generality of the foregoing, the Issuer will (i) not permit the par
value, if any, of its Common Stock to exceed the then effective Warrant Price,
(ii) not amend or modify any provision of the certificate of incorporation or
by-laws of the Issuer in any manner that would adversely affect in any way the
powers, preferences or relative participating, optional or other special rights
of the Common Stock or which would adversely affect the rights of the Holders of
the Warrants, (iii) take all such action as may be reasonably necessary in order
that the Issuer may validly and legally issue fully paid and nonassessable
shares of Common Stock, free and clear of any liens, claims, encumbrances and
restrictions (other than as provided herein) upon the exercise of this Warrant,
and (iv) use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
reasonably necessary to enable the Issuer to perform its obligations under this
Warrant.
(e) Loss, Theft, Destruction of Warrants. Upon receipt of evidence
satisfactory to the Issuer of the ownership of and the loss, theft, destruction
or mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Issuer
or, in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Issuer will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same number of shares of Common Stock.
(f) Rights and Obligations under the Registration Rights Agreement.
This Warrant and the Warrant Stock are entitled to the benefits and subject to
the terms of the Registration Rights Agreement dated as of even date herewith
between the Issuer and the Holders listed on the signature pages thereof (as
amended from time to time, the "Registration Rights Agreement"). The Issuer
shall keep or cause to be kept a copy of the Registration Rights Agreement, and
any amendments thereto, at its chief executive office and shall furnish, without
charge, copies thereof to the Holder upon request.
4. Adjustment of Warrant Price and Warrant Share Number. The number and
kind of Securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the happening of
certain events as follows:
(a) Recapitalization, Reorganization, Reclassification, Consolidation,
Merger or Sale.
(i) In case the Issuer after the Original Issue Date shall do any
of the following (each, a "Triggering Event"): (a) consolidate with or
merge into any other Person and the Issuer shall not be the continuing
or surviving corporation of such consolidation or merger, or (b) permit
any other Person to consolidate with or merge into the Issuer and the
Issuer shall be the continuing or surviving Person but, in connection
with such consolidation or merger, any Capital Stock of the Issuer
shall be changed into or exchanged for Securities of any other Person
or cash or any other property, or (c) transfer all or substantially all
of its properties or assets to any other Person, or (d) effect a
capital reorganization or reclassification of its Capital Stock, then,
and in the case of each such Triggering Event, proper provision shall
be made so that, upon the basis and the terms and in the manner
provided in this Warrant, the Holder of this Warrant shall be entitled
upon the exercise hereof at any time after the consummation of such
Triggering Event, to
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<PAGE>
the extent this Warrant is not exercised prior to such Triggering
Event, or is redeemed in connection with such Triggering Event, to
receive at the Warrant Price in effect at the time immediately prior to
the consummation of such Triggering Event in lieu of the Common Stock
issuable upon such exercise of this Warrant prior to such Triggering
Event, the Securities, cash and property to which such Holder would
have been entitled upon the consummation of such Triggering Event if
such Holder had exercised the rights represented by this Warrant
immediately prior thereto, subject to adjustments and increases
(subsequent to such corporate action) as nearly equivalent as possible
to the adjustments provided for in Section 4 hereof.
(ii) Notwithstanding anything contained in this Warrant to the
contrary, the Issuer will not effect any Triggering Event unless, prior
to the consummation thereof, each Person (other than the Issuer) which
may be required to deliver any Securities, cash or property upon the
exercise of this Warrant as provided herein shall assume, by written
instrument delivered to, and reasonably satisfactory to, the Holder of
this Warrant, (A) the obligations of the Issuer under this Warrant (and
if the Issuer shall survive the consummation of such Triggering Event,
such assumption shall be in addition to, and shall not release the
Issuer from, any continuing obligations of the Issuer under this
Warrant) and (B) the obligation to deliver to such Holder such shares
of Securities, cash or property as, in accordance with the foregoing
provisions of this subsection (a), such Holder shall be entitled to
receive, and such Person shall have similarly delivered to such Holder
an opinion of counsel for such Person, which counsel shall be
reasonably satisfactory to such Holder, stating that this Warrant shall
thereafter continue in full force and effect and the terms hereof
(including, without limitation, all of the provisions of this
subsection (a)) shall be applicable to the Securities, cash or property
which such Person may be required to deliver upon any exercise of this
Warrant or the exercise of any rights pursuant hereto.
(b) Subdivision or Combination of Shares. If the Issuer, at any time
while this Warrant is outstanding, shall subdivide or combine any shares of
Common Stock, (i) in case of subdivision of shares, the Warrant Price shall be
proportionately reduced (as at the effective date of such subdivision or, if the
Issuer shall take a record of Holders of its Common Stock for the purpose of so
subdividing, as at the applicable record date, whichever is earlier) to reflect
the increase in the total number of shares of Common Stock outstanding as a
result of such subdivision, or (ii) in the case of a combination of shares, the
Warrant Price shall be proportionately increased (as at the effective date of
such combination or, if the Issuer shall take a record of Holders of its Common
Stock for the purpose of so combining, as at the applicable record date,
whichever is earlier) to reflect the reduction in the total number of shares of
Common Stock outstanding as a result of such combination.
(c) Certain Dividends and Distributions. If the Issuer, at any time
while this Warrant is outstanding, shall:
(i) Stock Dividends. Pay a dividend in, or make any other
distribution to its stockholders (without consideration therefor) of,
shares of Common Stock, the Warrant
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<PAGE>
Price shall be adjusted, as at the date the Issuer shall take a record
of the Holders of the Issuer's Capital Stock for the purpose of
receiving such dividend or other distribution (or if no such record is
taken, as at the date of such payment or other distribution), to that
price determined by multiplying the Warrant Price in effect immediately
prior to such record date (or if no such record is taken, then
immediately prior to such payment or other distribution), by a fraction
(1) the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such dividend or
distribution, and (2) the denominator of which shall be the total
number of shares of Common Stock outstanding immediately after such
dividend or distribution (plus in the event that the Issuer paid cash
for fractional shares, the number of additional shares which would have
been outstanding had the Issuer issued fractional shares in connection
with said dividends); or
(ii) Other Dividends. Pay a dividend on, or make any
distribution of its assets upon or with respect to (including, but not
limited to, a distribution of its property as a dividend in liquidation
or partial liquidation or by way of return of capital), the Common
Stock (other than as described in clause (i) of this subsection (c)),
or in the event that the Issuer shall offer options or rights to
subscribe for shares of Common Stock, or issue any Common Stock
Equivalents, to all of its holders of Common Stock, then on the record
date for such payment, distribution or offer or, in the absence of a
record date, on the date of such payment, distribution or offer, the
Holder shall receive what the Holder would have received had it
exercised this Warrant in full immediately prior to the record date of
such payment, distribution or offer or, in the absence of a record
date, immediately prior to the date of such payment, distribution or
offer.
(d) Issuance of Additional Shares of Common Stock. If the Issuer, at
any time while this Warrant is outstanding but prior to thirty (30) months after
the date hereof, shall issue any Additional Shares of Common Stock (otherwise
than as provided in the foregoing subsections (a) through (c) of this Section
4), at a price per share less than the Warrant Price then in effect or less than
the Per Share Market Value then in effect or without consideration, then the
Warrant Price upon each such issuance shall be adjusted to that price (rounded
to the nearest cent) determined by multiplying the Warrant Price then in effect
by a fraction:
(i) the numerator of which shall be equal to the sum of (A)
the number of shares of Common Stock outstanding immediately prior to
the issuance of such Additional Shares of Common Stock plus (B) the
number of shares of Common Stock (rounded to the nearest whole share)
which the aggregate consideration for the total number of such
Additional Shares of Common Stock so issued would purchase at a price
per share equal to the greater of the Per Share Market Value then in
effect and the Warrant Price then in effect, and
(ii) the denominator of which shall be equal to the number of
shares of Common Stock outstanding immediately after the issuance of
such Additional Shares of Common Stock.
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The provisions of this subsection (d) shall not apply under any of the
circumstances for which an adjustment is provided in subsections (a), (b) or (c)
of this Section 4. No adjustment of the Warrant Price shall be made under this
subsection (d) upon the issuance of any Additional Shares of Common Stock which
are issued pursuant to any Common Stock Equivalent if upon the issuance of such
Common Stock Equivalent (x) any adjustment shall have been made pursuant to
subsection (e) of this Section 4 or (y) no adjustment was required pursuant to
subsection (e) of this Section 4. No adjustment of the Warrant Price shall be
made under this subsection (d) in an amount less than $.01 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, if any, which together with
any adjustments so carried forward shall amount to $.01 per share or more,
provided that upon any adjustment of the Warrant Price as a result of any
dividend or distribution payable in Common Stock or Convertible Securities or
the reclassification, subdivision or combination of Common Stock into a greater
or smaller number of shares, the foregoing figure of $.01 per share (or such
figure as last adjusted) shall be adjusted (to the nearest one-half cent) in
proportion to the adjustment in the Warrant Price.
(e) Issuance of Common Stock Equivalents. If the Issuer, at any time
while this Warrant is outstanding but prior to thirty (30) months after the date
hereof, shall issue any Common Stock Equivalent and the price per share for
which Additional Shares of Common Stock may be issuable thereafter pursuant to
such Common Stock Equivalent shall be less than the Warrant Price then in effect
or less than the Per Share Market Value then in effect, or if, after any such
issuance of Common Stock Equivalents, the price per share for which Additional
Shares of Common Stock may be issuable thereafter is amended or adjusted, and
such price as so amended shall be less than the Warrant Price or less than the
Per Share Market Value in effect at the time of such amendment, then the Warrant
Price upon each such issuance or amendment shall be adjusted as provided in the
first sentence of subsection (d) of this Section 4 on the basis that (1) the
maximum number of Additional Shares of Common Stock issuable pursuant to all
such Common Stock Equivalents shall be deemed to have been issued (whether or
not such Common Stock Equivalents are actually then exercisable, convertible or
exchangeable in whole or in part) as of the earlier of (A) the date on which the
Issuer shall enter into a firm contract for the issuance of such Common Stock
Equivalent, or (B) the date of actual issuance of such Common Stock Equivalent,
and (2) the aggregate consideration for such maximum number of Additional Shares
of Common Stock shall be deemed to be the minimum consideration received or
receivable by the Issuer for the issuance of such Additional Shares of Common
Stock pursuant to such Common Stock Equivalent. No adjustment of the Warrant
Price shall be made under this subsection (e) upon the issuance of any
Convertible Security which is issued pursuant to the exercise of any warrants or
other subscription or purchase rights therefor, if any adjustment shall
previously have been made in the Warrant Price then in effect upon the issuance
of such warrants or other rights pursuant to this subsection (e). If no
adjustment is required under this subsection (e) upon issuance of any Common
Stock Equivalent or once an adjustment is made under this subsection (e) based
upon the Per Share Market Value in effect on the date of such adjustment, no
further adjustment shall be made under this subsection (e) based solely upon a
change in the Per Share Market Value after such date.
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(f) Purchase of Common Stock by the Issuer. If the Issuer at any time
while this Warrant is outstanding but prior to thirty (30) months after the date
hereof shall, directly or indirectly through a Subsidiary or otherwise,
purchase, redeem or otherwise acquire any shares of Common Stock at a price per
share greater than the Per Share Market Value then in effect, then the Warrant
Price upon each such purchase, redemption or acquisition shall be adjusted to
that price determined by multiplying such Warrant Price by a fraction (i) the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such purchase, redemption or acquisition minus the number
of shares of Common Stock which the aggregate consideration for the total number
of such shares of Common Stock so purchased, redeemed or acquired would purchase
at the Per Share Market Value; and (ii) the denominator of which shall be the
number of shares of Common Stock outstanding immediately after such purchase,
redemption or acquisition. For the purposes of this subsection (f), the date as
of which the Per Share Market Value shall be computed shall be the earlier of
(x) the date on which the Issuer shall enter into a firm contract for the
purchase, redemption or acquisition of such Common Stock, or (y) the date of
actual purchase, redemption or acquisition of such Common Stock. For the
purposes of this subsection (f), a purchase, redemption or acquisition of a
Common Stock Equivalent shall be deemed to be a purchase of the underlying
Common Stock, and the computation herein required shall be made on the basis of
the full exercise, conversion or exchange of such Common Stock Equivalent on the
date as of which such computation is required hereby to be made, whether or not
such Common Stock Equivalent is actually exercisable, convertible or
exchangeable on such date.
(g) Other Provisions Applicable to Adjustments Under this Section 4.
The following provisions shall be applicable to the making of adjustments in the
Warrant Price hereinbefore provided in Section 4:
(i) Computation of Consideration. The consideration received
by the Issuer shall be deemed to be the following: to the extent that
any Additional Shares of Common Stock or any Common Stock Equivalents
shall be issued for a cash consideration, the consideration received by
the Issuer therefor, or if such Additional Shares of Common Stock or
Common Stock Equivalents are offered by the Issuer for subscription,
the subscription price, or, if such Additional Shares of Common Stock
or Common Stock Equivalents are sold to underwriters or dealers for
public offering without a subscription offering, the public offering
price, in any such case excluding any amounts paid or receivable for
accrued interest or accrued dividends and without deduction of any
compensation, discounts, commissions, or expenses paid or incurred by
the Issuer for or in connection with the underwriting thereof or
otherwise in connection with the issue thereof; to the extent that such
issuance shall be for a consideration other than cash, then, except as
herein otherwise expressly provided, the fair market value of such
consideration at the, time of such issuance as determined in good faith
by the Board. The consideration for any Additional Shares of Common
Stock issuable pursuant to any Common Stock Equivalents shall be the
consideration received by the Issuer for issuing such Common Stock
Equivalents, plus the additional consideration payable to the Issuer
upon the exercise, conversion or exchange of such Common Stock
Equivalents. In case of the issuance at any time of any Additional
Shares of Common Stock or Common Stock
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Equivalents in payment or satisfaction of any dividend upon any class
of Capital Stock of the Issuer other than Common Stock, the Issuer
shall be deemed to have received for such Additional Shares of Common
Stock or Common Stock Equivalents a consideration equal to the amount
of such dividend so paid or satisfied. In any case in which the
consideration to be received or paid shall be other than cash, the
Board shall notify the Holder of this Warrant of its determination of
the fair market value of such consideration prior to payment or
accepting receipt thereof. If, within thirty days after receipt of said
notice, the Majority Holders shall notify the Board in writing of their
objection to such determination, a determination of the fair market
value of such consideration shall be made by an Independent Appraiser
selected by the Majority Holders with the approval of the Board (which
approval shall not be unreasonably withheld), whose fees and expenses
shall be paid by the Issuer.
(ii) Readjustment of Warrant Price. Prior to thirty (30)
months after the date hereof and upon the expiration or termination of
the right to convert, exchange or exercise any Common Stock Equivalent
the issuance of which effected an adjustment in the Warrant Price, if
such Common Stock Equivalent shall not have been converted, exercised
or exchanged in its entirety, the number of shares of Common Stock
deemed to be issued and outstanding by reason of the fact that they
were issuable upon conversion, exchange or exercise of any such Common
Stock Equivalent shall no longer be computed as set forth above, and
the Warrant Price shall forthwith be readjusted and thereafter be the
price which it would have been (but reflecting any other adjustments in
the Warrant Price made pursuant to the provisions of this Section 4
after the issuance of such Common Stock Equivalent) had the adjustment
of the Warrant Price been made in accordance with the issuance or sale
of the number of Additional Shares of Common Stock actually issued upon
conversion, exchange or issuance of such Common Stock Equivalent and
thereupon only the number of Additional Shares of Common Stock actually
so issued shall be deemed to have been issued and only the
consideration actually received by the Issuer (computed as in clause
(i) of this subsection (g)) shall be deemed to have been received by
the Issuer.
(iii) Outstanding Common Stock. The number of shares of Common
Stock at any time outstanding shall (A) not include any shares thereof
then directly or indirectly owned or held by or for the account of the
Issuer or any of its Subsidiaries, and (B) be deemed to include all
shares of Common Stock then issuable upon conversion, exercise or
exchange of any then outstanding Common Stock Equivalents or any other
evidences of indebtedness, shares of Capital Stock or other Securities
which are or may be at any time convertible into or exchangeable for
shares of Common Stock or Other Common Stock.
(h) Other Action Affecting Common Stock. In case after the Original
Issue Date the Issuer shall take any action affecting its Common Stock, other
than an action described in any of the foregoing subsections (a) through (g) of
this Section 4, inclusive, and the failure to make any adjustment would not
fairly protect the purchase rights represented by this Warrant in accordance
with the essential intent and principle of this Section 4, then the Warrant
Price shall be adjusted
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in such manner and at such time as the Board may in good faith determine to be
equitable in the circumstances.
(i) Adjustment of Warrant Share Number. Upon each adjustment in the
Warrant Price pursuant to any of the foregoing provisions of this Section 4, the
Warrant Share Number shall be adjusted, to the nearest one hundredth of a whole
share, to the product obtained by multiplying the Warrant Share Number
immediately prior to such adjustment in the Warrant Price by a fraction, the
numerator of which shall be the Warrant Price immediately before giving effect
to such adjustment and the denominator of which shall be the Warrant Price
immediately after giving effect to such adjustment. If the Issuer shall be in
default under any provision contained in Section 3 of this Warrant so that
shares issued at the Warrant Price adjusted in accordance with this Section 4
would not be validly issued, the adjustment of the Warrant Share Number provided
for in the foregoing sentence shall nonetheless be made and the Holder of this
Warrant shall be entitled to purchase such greater number of shares at the
lowest price at which such shares may then be validly issued under applicable
law. Such exercise shall not constitute a waiver of any claim arising against
the Issuer by reason of its default under Section 3 of this Warrant.
(j) Form of Warrant after Adjustments. The form of this Warrant need
not be changed because of any adjustments in the Warrant Price or the number and
kind of Securities purchasable upon the exercise of this Warrant.
5. Notice of Adjustments. Whenever the Warrant Price or Warrant Share
Number shall be adjusted pursuant to Section 4 hereof (for purposes of this
Section 5, each an "adjustment"), the Issuer shall cause its Chief Financial
Officer to prepare and execute a certificate setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated (including a description of the
basis on which the Board made any determination hereunder), and the Warrant
Price and Warrant Share Number after giving effect to such adjustment, and shall
cause copies of such certificate to be delivered to the Holder of this Warrant
promptly after each adjustment. Any dispute between the Issuer and the Holder of
this Warrant with respect to the matters set forth in such certificate may at
the option of the Holder of this Warrant be submitted to one of the national
accounting firms currently known as the "big five" selected by the Holder,
provided that the Issuer shall have ten days after receipt of notice from such
Holder of its selection of such firm to object thereto, in which case such
Holder shall select another such firm and the Issuer shall have no such right of
objection. The firm selected by the Holder of this Warrant as provided in the
preceding sentence shall be instructed to deliver a written opinion as to such
matters to the Issuer and such Holder within thirty days after submission to it
of such dispute. Such opinion shall be final and binding on the parties hereto.
The fees and expenses of such accounting firm shall be paid by the Issuer.
6. Fractional Shares. No fractional shares of Warrant Stock will be
issued in connection with and exercise hereof, but in lieu of such fractional
shares, the Issuer shall make a cash payment therefor equal in amount to the
product of the applicable fraction multiplied by the Per Share Market Value then
in effect.
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<PAGE>
7. Definitions. For the purposes of this Warrant, the following terms
have the following meanings:
"Additional Shares of Common Stock" means all shares of Common
Stock issued by the Issuer after the Original Issue Date, and all
shares of Other Common, if any, issued by the Issuer after the Original
Issue Date, except (i) Warrant Stock and (ii) any shares of Common
Stock issuable upon conversion of the Debentures or Preferred Stock.
"Board" means the Board of Directors of the Issuer.
"Capital Stock" means and includes (i) any and all shares,
interests, participations or other equivalents of or interests in
(however designated) corporate stock, including, without limitation,
shares of preferred or preference stock, (ii) all partnership interests
(whether general or limited) in any Person which is a partnership,
(iii) all membership interests or limited liability company interests
in any limited liability company, and (iv) all equity or ownership
interests in any Person of any other type.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Common Stock, $0.001 par value, of
the Issuer and any other Capital Stock into which such stock may
hereafter be changed.
"Common Stock Equivalent" means any Convertible Security or
warrant, option or other right to subscribe for or purchase any
Additional Shares of Common Stock or any Convertible Security (other
than a warrant or stock option issued pursuant to any stock or option
or similar equity-based compensation plan for employees, officers,
directors or consultants.
"Convertible Securities" means evidences of indebtedness,
shares of Capital Stock or other Securities which are or may be at any
time convertible into or exchangeable for Additional Shares of Common
Stock. The term "Convertible Security" means one of the Convertible
Securities.
"Debenture" means the Issuer's Convertible Debentures due
2005.
"Governmental Authority" means any governmental, regulatory or
self-regulatory entity, department, body, official, authority,
commission, board, agency or instrumentality, whether federal, state or
local, and whether domestic or foreign.
"Holders" mean the Persons who shall from time to time own any
Warrant. The term "Holder" means one of the Holders.
"Independent Appraiser" means a nationally recognized or major
regional investment banking firm or firm of independent certified
public accountants of
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<PAGE>
recognized standing (which may be the firm that regularly examines the
financial statements of the Issuer) that is regularly engaged in the
business of appraising the Capital Stock or assets of corporations or
other entities as going concerns, and which is not affiliated with
either the Issuer or the Holder of any Warrant.
"Issuer" means World Wide Wireless Communications, Inc., a
Nevada corporation, and its successors.
"Majority Holders" means at any time the Holders of Warrants
exercisable for a majority of the shares of Warrant Stock issuable
under the Warrants at the time outstanding.
"NASDAQ" means the National Association of Securities Dealers
Automated Quotation System.
"Original Issue Date" means April 14, 2000.
"Other Common" means any other Capital Stock of the Issuer of
any class which shall be authorized at any time after the date of this
Warrant (other than Common Stock) and which shall have the right to
participate in the distribution of earnings and assets of the Issuer
without limitation as to amount.
"Person" means an individual, corporation, limited liability
company, partnership, joint stock company, trust, unincorporated
organization, joint venture, Governmental Authority or other entity of
whatever nature.
"Per Share Market Value" means on any particular date (a) the
closing price per share of the Common Stock on such date on the Nasdaq
National Market, The Nasdaq SmallCap Market or other registered
national stock exchange on which the Common Stock is then listed or if
there is no such price on such date, then the closing price on such
exchange or quotation system on the date nearest preceding such date,
or (b) if the Common Stock is not listed then on the Nasdaq National
Market, The Nasdaq SmallCap Market or any registered national stock
exchange, the closing price for a share of Common Stock in the
over-the-counter market, as reported by NASDAQ or in the National
Quotation Bureau Incorporated or similar organization or agency
succeeding to its functions of reporting prices) at the close of
business on such date, or (c) if the Common Stock is not then reported
by the National Quotation Bureau Incorporated (or similar organization
or agency succeeding to its functions of reporting prices), then the
average of the "Pink Sheet" quotes for the relevant conversion period,
as determined in good faith by the holder, or (d) if the Common Stock
is not then publicly traded the fair market value of a share of Common
Stock as determined by an Independent Appraiser selected in good faith
by the Majority Holders; provided, however, that the Issuer, after
receipt of the determination by such Independent Appraiser, shall have
the right to select an additional Independent Appraiser, in which case,
the fair market value shall be equal to the average of the
determinations by each such Independent Appraiser; and provided,
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<PAGE>
further that all determinations of the Per Share Market Value shall be
appropriately adjusted for any stock dividends, stock splits or other
similar transactions during such period. The determination of fair
market value by an Independent Appraiser shall be based upon the fair
market value of the Issuer determined on a going concern basis as
between a willing buyer and a willing seller and taking into account
all relevant factors determinative of value, and shall be final and
binding on all parties. In determining the fair market value of any
shares of Common Stock, no consideration shall be given to any
restrictions on transfer of the Common Stock imposed by agreement or by
federal or state securities laws, or to the existence or absence of, or
any limitations on, voting rights.
"Preferred Stock" means the Issuer's Series A Convertible
Preferred Stock, par value $.01 per share and stated value $1,000 per
share.
"Registration Rights Agreement" has the meaning specified in
Section 3(f) hereof.
"Registration Statement" has the meaning set forth in the
Registration Rights Agreement.
"Securities" means any debt or equity securities of the
Issuer, whether now or hereafter authorized, any instrument convertible
into or exchangeable for Securities or a Security, and any option,
warrant or other right to purchase or acquire any Security. "Security"
means one of the Securities.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar federal statute then in effect.
"Subsidiary" means any corporation at least 50% of whose
outstanding Voting Stock shall at the time be owned directly or
indirectly by the Issuer or by one or more of its Subsidiaries, or by
the Issuer and one or more of its Subsidiaries.
"Trading Day" means (a) a day on which the Common Stock is
traded on the Nasdaq National Market, The Nasdaq SmallCap Market or
other registered national stock exchange on which the Common Stock has
been listed, or (b) if the Common Stock is not listed on the Nasdaq
National Market, The Nasdaq SmallCap Market or any registered national
stock exchange, a day or which the Common Stock is traded in the
over-the-counter market, as reported by the OTC Bulletin Board, or (c)
if the Common Stock is not quoted on the OTC Bulletin Board, a day on
which the Common Stock is quoted in the over-the-counter market as
reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices);
provided, however, that in the event that the Common Stock is not
listed or quoted as set forth in (a), (b) and (c) hereof, then Trading
Day shall mean any day except Saturday, Sunday and any day which shall
be a legal holiday or a day on which banking institutions in the State
of New York are authorized or required by law or other government
action to close.
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"Term" has the meaning specified in Section 1 hereof.
"Voting Stock", as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however
designated) having ordinary voting power for the election of a majority
of the members of the Board of Directors (or other governing body) of
such corporation, other than Capital Stock having such power only by
reason of the happening of a contingency.
"Warrants" means the Warrants issued and sold pursuant to the
Subscription Agreement, dated April 14, 2000, including, without
limitation, this Warrant, and any other warrants of like tenor issued
in substitution or exchange for any thereof pursuant to the provisions
of Section 2(c), 2(d) or 2(e) hereof or of any of such other Warrants.
"Warrant Price" means a price equal to 110% of the Per Share
Market Value as of the Trading Day on the Initial Closing Date, as such
price may be adjusted from time to time as shall result from the
adjustments specified in Section 4 hereof.
"Warrant Share Number" means at any time the aggregate number
of shares of Warrant Stock which may at such time be purchased upon
exercise of this Warrant, after giving effect to all prior adjustments
and increases to such number made or required to be made under the
terms hereof.
"Warrant Stock" means Common Stock issuable upon exercise of
any Warrant or Warrants or otherwise issuable pursuant to any Warrant
or Warrants.
8. Other Notices. In case at any time:
(A) the Issuer shall make any distributions to
the holders of Common Stock; or
(B) the Issuer shall authorize the granting to
all holders of its Common Stock of rights to
subscribe for or purchase any shares of
Capital Stock of any class or of any Common
Stock Equivalents or Convertible Securities
or other rights; or
(C) there shall be any reclassification of the
Capital Stock of the Issuer; or
(D) there shall be any capital reorganization by
the Issuer; or
(E) there shall be any (i) consolidation or
merger involving the Issuer or (ii) sale,
transfer or other disposition of all or
substantially all of the Issuer's property,
assets or business (except a merger or other
reorganization in which the Issuer
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<PAGE>
shall be the surviving corporation and its
shares of Capital Stock shall continue to be
outstanding and unchanged and except a
consolidation, merger, sale, transfer or
other disposition involving a wholly-owned
Subsidiary); or
(F) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of
the Issuer or any partial liquidation of the
Issuer or distribution to holders of Common
Stock;
then, in each of such cases, the Issuer shall give written notice to the Holder
of the date on which (i) the books of the Issuer shall close or a record shall
be taken for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take place.
Such notice also shall specify the date as of which the holders of Common Stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their certificates for Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be. Such notice shall be given at least twenty
days prior to the action in question and not less than twenty days prior to the
record date or the date on which the Issuer's transfer books are closed in
respect thereto. The Issuer shall give to the Holder notice of all meetings and
actions by written consent of its stockholders, at the same time in the same
manner as notice of any meetings of stockholders is required to be given to
stockholders who do not waive such notice (or, if such requires no notice, then
two Trading Days written notice thereof describing the matters upon which action
is to be taken). The Holder shall have the right to send two representatives
selected by it to each meeting, who shall be permitted to attend, but not vote
at, such meeting and any adjournments thereof. This Warrant entitles the Holder
to receive copies of all financial and other information distributed or required
to be distributed to the holders of the Common Stock.
9. Amendment and Waiver. Any term, covenant, agreement or condition in
this Warrant may be amended, or compliance therewith may be waived (either
generally or in a particular instance and either retroactively or
prospectively), by a written instrument or written instruments executed by the
Issuer and the Majority Holders; provided, however, that no such amendment or
waiver shall reduce the Warrant Share number, increase the Warrant Price,
shorten the period during which this Warrant may be exercised or modify any
provision of this Section 9 without the consent of the Holder of this Warrant.
10. Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW.
11. Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earlier of (i) the date of transmission, if
such notice or communication is delivered via
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facsimile at the facsimile telephone number specified for notice prior to 5:00
p.m., New York City time, on a Business Day, (ii) the Business Day after the
date of transmission, if such notice or communication is delivered via facsimile
at the facsimile telephone number specified for notice later than 5:00 p.m., New
York City time, on any date and earlier than 11:59 p.m., New York City time, on
such date, (iii) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service or (iv) actual receipt by the
party to whom such notice is required to be given. The addresses for such
communications shall be with respect to the Holder of this Warrant or of Warrant
Stock issued pursuant hereto, addressed to such Holder at its last known address
or facsimile number appearing on the books of the Issuer maintained for such
purposes, or with respect to the Issuer, addressed to:
World Wide Wireless Communications, Inc.
520 Third Street
Suite 101
Oakland, California
Attention: Douglas Haffer
Telephone No.: (510) 839-6100
Facsimile No.: (510) 839-7088
or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices to the Holder shall be sent to Stroock &
Stroock & Lavan LLP, 180 Maiden Lane, New York New York 10038-4982, Attention:
James R. Tanenbaum, Esq., Telephone No.: (212) 806-5400, Facsimile No.: (212)
806-6006. Copies of notices to the Issuer shall be sent to Evers & Hendrickson,
LLP, 155 Montgomery, 12th Floor, San Francisco, California 94104, Attention:
William D. Evers, Esq., Telephone No.: (415) 772-8100, Facsimile No.: (415)
772-8101.
12. Warrant Agent. The Issuer may, by written notice to each Holder of
this Warrant, appoint an agent having an office in New York, New York for the
purpose of issuing shares of Warrant Stock on the exercise of this Warrant
pursuant to subsection (b) of Section 2 hereof, exchanging this Warrant pursuant
to subsection (d) of Section 2 hereof or replacing this Warrant pursuant to
subsection (e) of Section 3 hereof, or any of the foregoing, and thereafter any
such issuance, exchange or replacement, as the case may be, shall be made at
such office by such agent.
13. Remedies. The Issuer stipulates that the remedies at law of the
Holder of this Warrant in the event of any default or threatened default by the
Issuer 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 fullest extent permitted by
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.
14. Successors and Assigns. This Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the successors and
assigns of the Issuer, the Holder hereof
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and (to the extent provided herein) the Holders of Warrant Stock issued pursuant
hereto, and shall be enforceable by any such Holder or Holder of Warrant Stock.
15. Modification and Severability. If, in any action before any court
or agency legally empowered to enforce any provision contained herein, any
provision hereof is found to be unenforceable, then such provision shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency. If any such provision is not enforceable as set forth in the preceding
sentence, the unenforceability of such provision shall not affect the other
provisions of this Warrant, but this Warrant shall be construed as if such
unenforceable provision had never been contained herein.
16. Headings. The headings of the Sections of this Warrant are for
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK].
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IN WITNESS WHEREOF, the Issuer has executed this Warrant as of the day
and year first above written.
WORLD WIDE WIRELESS
COMMUNICATIONS, INC.
By:__________________________
Name:
Title:
<PAGE>
EXERCISE FORM
(To be executed by the Registered Holder
upon Exercise of the Warrant)
TO: WORLD WIDE WIRELESS COMMUNICATIONS, INC.
The undersigned holder hereby exercises the right to purchase
_________________ shares of Common Stock (the "Warrant Stock") of World Wide
Wireless Communications, Inc., a Nevada corporation (the "Company"), evidenced
by the attached Warrant (the "Warrant"). Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the Warrant.
1. Form of Warrant Price. The holder intends that payment of the
Warrant Price shall be made as:
____________ a. "Cash Exercise" with respect to _________________
Warrant Stock; and/or
____________ b. "Cashless Exercise" with respect to
_______________ Warrant Stock (to the extent
permitted by the terms of the Warrant).
2. Payment of Warrant Price. In the event that the holder has elected a
Cash Exercise with respect to some or all of the Warrant Stock to be issued
pursuant hereto, the holder shall pay the sum of $___________________ to the
Company in accordance with the terms of the Warrant.
3. Delivery of Warrant Stock. The Company shall deliver to the holder
__________ Warrant Stock in accordance with the terms of the Warrant.
Date: _______________ __, ______
Name of Registered Holder:
____________________________
By:_________________________
Name:
Title:
<PAGE>
ASSIGNMENT
(To be signed only upon transfer of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
all of the rights of the undersigned under the within Warrant, with respect to
the number of shares of Common Stock of WORLD WIDE WIRELESS COMMUNICATIONS, INC.
covered thereby set forth hereinbelow unto:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
Dated: __________, 20__ __________________________________________
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant)
__________________________________________
(Address)
Signed in the presence of:
________________________________
EXHIBIT 21.1
Subsidiaries
Infotel Argentina, S.A.
Country of Incorporation: Argentina
Digital Way, S.A.
Country of Incorporation: Peru
Evers &
Hendrickson, LLP
Lawyers and Counselors At Law
- ------------------------------------
March 21, 2000
Mr. Douglas P. Haffer, President
World Wide Wireless Communications, Inc.
520 Third Street, Suite 101
Oakland, California 94607
Dear Mr. Haffer:
This law firm consents to the incorporation of its name and its opinion
letter regarding the legality of the securities being cleared for registration
with the Securities and Exchange Commission pursuant to filing of the Form SB-2
Registration Statement (Post-Effective Amendment No. 2) on March 23, 2000.
Very truly yours,
EVERS & HENDRICKSON, LLP
/s/ William D. Evers
-----------------------------
By: William D. Evers, Partner
<TABLE>
<CAPTION>
<S> <C> <C>
REUBEN E. PRICE & CO.
REUBEN E. PRICE, C.P.A. (1904-1986) PUBLIC ACCOUNTANCY CORPORATION MEMBERS
________ FOUNDED 1942 AMERICAN INSTITUTE OF
RICHARD A. PRICE CERTIFIED PUBLIC ACCOUNTANTS
703 MARKET STREET _______
SAN FRANCISCO, CA 94103 SECURITIES AND EXCHANGE
________ COMMISSION PRACTICE SECTION
(415) 982-3556 OF THE AMERICAN INSTITUTE OF
FAX (415) 957-1178 CERTIFIED PUBLIC ACCOUNTANTS
_______
CALIFORNA SOCIETY OF
CERTIFIED PUBLIC ACCOUNTANTS
</TABLE>
April 25, 2000
Mr. Douglas P. Haffer, President
World Wide Wireless Communications, Inc.
520 Third Street, Suite 101
Oakland, California 94607
Dear Mr. Haffer:
Please accept this letter as our consent to include in your disclosure document
on Form SB-2 our reports on World Wide Wireless Communications, Inc.'s Balance
Sheet dated September 30, 1999 and the related statements of operations,
statements of cash flows, and statements of stockholders' equity for the years
September 30, 1999 and 1998, and from inception on September 1, 1994 through
September 30, 1999.
Sincerely,
RUEBEN E. PRICE & CO.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEPTEMBER 30, 1999 BALANCE SHEET, STATEMENT OF INCOME AND STATEMENTS OF CASH
FLOWS, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> SEP-30-1999
<CASH> 275
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 63
<PP&E> 336
<DEPRECIATION> 14
<TOTAL-ASSETS> 1,181
<CURRENT-LIABILITIES> 491
<BONDS> 328
0
0
<COMMON> 71
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,181
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 2,383
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,383)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,383)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,383)
<EPS-BASIC> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED MARCH 31, 2000 BALANCE SHEET, STATEMENT OF INCOME AND STATEMENTS OF
CASH FLOWS, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> MAR-31-2000
<CASH> 980
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,320
<PP&E> 643
<DEPRECIATION> 60
<TOTAL-ASSETS> 6,207
<CURRENT-LIABILITIES> 556
<BONDS> 740
0
0
<COMMON> 82,444
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 6,207
<SALES> 141
<TOTAL-REVENUES> 141
<CGS> 0
<TOTAL-COSTS> 2,345
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,204)
<INCOME-TAX> 14
<INCOME-CONTINUING> (2,217)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,217)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
WORLD WIDE WIRELESS COMMUNICATIONS, INC.
Instructions for Subscription
To Subscribe
1. Fill in the requested information.
2. Sign the agreement and return it.
3. Make check payable to World Wide Wireless Communications, Inc.
(for wiring instructions, please see page 3)
World Wide Wireless Communications, Inc.
520 Third Street, Suite 101
Oakland, California 94607
510.839.6100
SUBSCRIPTION AGREEMENT
Dear Sirs:
I acknowledge that I have received the prospectus, dated May __, 2000 (the
"Offering") describing the offer by World Wide Wireless Communications, Inc.
(the "Company") of up to 4,000,000 shares of Common Stock (the "Shares") at the
price of $_.__ per share. I hereby subscribe to purchase from the Company the
number of Shares detailed below. The minimum individual subscription amount is
1000 Shares, for a total purchase price of
<TABLE>
<CAPTION>
<S> <C>
A. Number of Shares _________ (minimum of 500 Shares)
B. Price per Share $________
C. Total Purchase Price (A x B) = $________
</TABLE>
1
<PAGE>
In consideration for such shares, I hereby submit a check made payable to: World
Wide Wireless Communications, Inc. for the total purchase price of $ _______.
The payment so delivered, or the applicable part thereof, shall be returned
promptly to me, without interest or deduction, if the Company does not accept it
in full.
I ACKNOWLEDGE THAT THE COMPANY MAY, IN ITS SOLE DISCRETION, ACCEPT OR REJECT MY
SUBSCRIPTION, IN WHOLE OR IN PART.
I ACKNOWLEDGE THAT I MEET THE SUITABILITY REQUIREMENTS SET FORTH IN THE
PROSPECTUS. SPECIFICALLY, I ACKNOWLEDGE THAT EITHER: (1) MY GROSS INCOME DURING
THE MOST RECENT YEAR EXCEEDED $50,000 AND I HAD A NET WORTH OF NO LESS THAN
$75,000; OR (2) I HAD A NET WORTH OF NO LESS THAN $150,000 REGARDLESS OF INCOME.
IN COMPUTING MY NET WORTH, I AM NOT INCLUDING THE VALUE OF MY HOME, HOME
FURNISHINGS OR AUTOMOBILES. MY INVESTMENT DOES NOT EXCEED 10% OF MY NET WORTH.
I HEREBY AGREE AND UNDERSTAND THAT: MY SIGNATURE TO THIS AGREEMENT CONSTITUTES
MY PURCHASE OF THE SHARES SUBJECT TO ACCEPTANCE OF THIS SUBSCRIPTION BY THE
COMPANY IN ITS SOLE DISCRETION; THAT I AM BOUND BY ALL OF THE TERMS AND
PROVISIONS OF THIS AGREEMENT AND TO PERFORM ALL OF MY OBLIGATIONS THEREUNDER
WITH RESPECT TO THE SHARES TO BE PURCHASED; AND THAT I RECOGNIZE THAT THE
COMPANY MUST RELY UPON THE INFORMATION AND ON THE REPRESENTATIONS SET FORTH
HEREIN.
2
<PAGE>
INDIVIDUAL (NOT ENTITY) PURCHASER
I hereby represent and warrant that I am (i) more than 21 years of age; and (ii)
am a bona fide resident of the state of _____________. I understand that if I
will not be allowed to make this investment if I am not a resident of a state in
which the sale of the shares of World Wide Wireless Communications, Inc. has
been registered or qualified, and that World Wide Wireless Communications, Inc.
will be relying upon my representations in determining whether it can sell these
shares to me in this offering.
<TABLE>
<CAPTION>
<S> <C>
Very truly yours,
-------------------------------------------------
Signature of Individual Purchaser Date
INDIVIDUAL PURCHASER:
- ---------------------------------------------------------------------------------------------------
Print Name of Individual
Address: _____________________________ City:___________________ State:__________ Zip:_______
Home Telephone: (____) ______________ Work Telephone (____) _________________
</TABLE>
ENTITY (Not Individual) PURCHASER
[ ] TRUST (Please include the name of trust, trustee, date trust was formed and
copy of the trust agreement)
[ ] PARTNERSHIP (Please include a copy of the partnership agreement authorizing
signature)
[ ] CORPORATION (Please include corporate resolution authorizing signature)
[ ] OTHER (Please specify and include copy of document authorizing signature)
The undersigned trustee, partner or officer warrants that he has full power and
authority from all necessary beneficiaries, partners, directors, or stockholders
of the entity named below to execute this Subscription Agreement on behalf of
the entity and that investment in the World Wide Wireless Communications, Inc.
is not prohibited by the governing documents of the entity and that the entity
is domiciled in the state of _________________.
<TABLE>
<CAPTION>
<S> <C>
Very truly yours,
Entity Purchaser: _________________________________________________________________
By: _____________________________________________________________________
Signature of trustee, partner or authorized officer Date
Its: __________________________________________________
Address: _____________________________ City:_________________ State:________ Zip:__________
Home Telephone: (____) ______________ Work Telephone (____) _________________
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
ELECTRONIC FUND TRANSFERS:
For wiring funds, use the following information:
---------------------------
---------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TO BE COMPLETED BY THE COMPANY:
ACCEPTED AND AGREED TO:
WORLD WIDE WIRELESS COMMUNICATIONS, INC.
By:_____________________________________
Title: ___________________________________
Date
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TO BE COMPLETED BY SELLING BROKER:
Name:________________________________________________________________
Firm: ________________________________________________________________
Address: _____________________________________________________________
City:____________________________________ State:________ Zip ____________
Telephone (___) _______________ Fax (___) ____________________
- --------------------------------------------------------------------------------
4
