FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1997
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Commission file number: 0-23598
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NATIONAL WIRELESS HOLDINGS INC.
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(Exact name of registrant as specified in its charter)
Delaware 13-3735316
- ---------------------------------------------- ---------------------------------
(State or other jurisdiction of incorporation) (IRS Employer Identification No.)
249 Royal Palm Way, Suite 301, Palm Beach, Florida 33480
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(Address of principal executive offices) (Zip Code)
(407) 832-0981
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes |X| No |_|
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, $.01 par value: 3,253,000 shares as of June 11, 1997.
<PAGE>
NATIONAL WIRELESS HOLDINGS INC.
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Contents
Page(s)
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Condensed Consolidated Balance Sheets as of April 30, 1997
and October 31, 1996 3
Condensed Consolidated Statements of Operations for the
three months and six months ended April 30, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows for the
six months ended April 30, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 6-8
2
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NATIONAL WIRELESS HOLDINGS INC.
Condensed Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
April 30, October 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 492,767 $ 14,788,765
U S treasury securities 11,791,914
Trade and other receivables 509,005 119,707
Prepaid expenses and other current assets 42,551 120,777
------------ ------------
Total current assets 12,836,237 15,029,249
Notes receivable from EDSS -- 988,000
Wireless frequency license and acquisition costs, net of accumulated
amortization of $403,471 and $311,797, respectively 2,798,618 2,720,102
Transmission and related equipment, net of accumulated
amortization of $325,997 and $226,577, respectively 1,117,001 1,175,521
Leasehold improvements, office equipment and service vehicles, net
of accumulated depreciation of $388,644 and $282,813, respectively 480,975 394,088
Intangible assets, net of accumulated amortization
of $210,672 and $102,251, respectively 3,483,872 398,096
Investments 420,827 608,800
Deposits and other assets 450,789 269,696
------------ ------------
Total Assets $ 21,588,319 $ 21,583,552
============ ============
LIABILITIES and STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and accrued expenses $ 1,360,094 $ 665,448
Due to related parties 93,390 50,000
Current maturities of long-term debt 442,520 443,369
------------ ------------
Total current liabilities 1,896,004 1,158,817
------------ ------------
Long-term debt 47,000 232,247
Due to related parties 321,907 --
Commitments
Stockholders' equity:
Preferred stock -- --
Common Stock $ 01 par value: 20,000,000 shares authorized;
3,253,000 shares issued and outstanding 32,530 32,530
Additional paid-in capital 22,421,173 22,421,173
Accumulated deficit (3,130,295) (2,261,215)
------------ ------------
Total stockholders' equity 19,323,408 20,192,488
------------ ------------
Total liabilities and stockholders' equity $ 21,588,319 $ 21,583,552
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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NATIONAL WIRELESS HOLDINGS INC.
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended April 30, Ended April 30,
------------------------ ------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue:
Services $ 839,394 $ 298,166 $1,345,398 $ 563,522
Interest income 156,869 292,672 352,625 587,534
---------- ---------- ---------- ----------
Total revenue 996,263 590,838 1,698,023 1,151,056
---------- ---------- ---------- ----------
Expenses:
Cost of services 340,941 167,524 681,864 348,917
Market development 168,157 196,513 325,970 436,172
Professional fees 164,512 75,398 267,846 140,234
General and administrative 411,658 218,943 853,850 395,545
Depreciation and amortization 220,314 139,068 405,346 267,236
Interest 19,203 21,353 32,227 46,514
---------- ---------- ---------- ----------
Total expenses 1,324,785 818,799 2,567,103 1,634,618
---------- ---------- ---------- ----------
Net loss $ 328,522 $ 227,961 $ 869,080 $ 483,562
========== ========== ========== ==========
Net loss per common share $ 0.10 $ 0.07 $ 0.27 $ 0.15
========== ========== ========== ==========
Weighted average number of common
shares outstanding 3,253,000 3,253,000 3,253,000 3,253,000
========== ========== ========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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NATIONAL WIRELESS HOLDINGS INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended April 30,
----------------------------
1997 1996
------------ -----------
<S> <C> <C>
Cash flows from operating activities
Net loss $ (869,080) $ (483,562)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 405,346 267,236
Accretion of interest income (298,014) (17,537)
Gain on sale of vehicles -- (1,352)
Changes in assets and liabilities:
Due from related parties 73,000 47,350
Trade receivables and other receivables (197,978) (164,182)
Prepaid expenses and other current assets 14,171 2,303
Deposits and other assets (169,649) 35,687
Accounts payable and accrued expenses 330,320 (161,752)
Due to related parties 43,390 70,000
------------ -----------
Net cash used in operating activities (668,494) (405,809)
------------ -----------
Cash flows from investing activities:
Wireless frequency license and acquisition costs (170,190) (187,091)
Acquisition of transmission and related equipment (40,900) (140,619)
Acquisition of leasehold improvements, office equipment and
service vehicles (192,718) (50,814)
Proceeds on sale of vehicles -- 41,130
Purchases of U.S. treasury securities (11,693,040) --
Proceeds from redemption of U.S. securities 199,140 --
Acquisition of EDSS (1,543,700) --
------------ -----------
Net cash used in investing activities (13,441,408) (337,394)
------------ -----------
Cash flows from financing activities:
Increase in notes receivable EDSS -- (200,000)
Principal payments of long-term debt (186,096) (255,745)
------------ -----------
Net cash used in financing activities (186,096) (455,745)
------------ -----------
Net decrease in cash and cash equivalents (14,295,998) (1,198,948)
Cash and cash equivalents, beginning of period 14,788,765 4,888,240
------------ -----------
Cash and cash equivalents, end of period $ 492,767 $ 3,689,292
============ ===========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 32,227 $ 46,514
============ ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
Notes to Condensed Consolidated Financial Statements
(unaudited)
1. Basis of Presentation:
The accompanying unaudited condensed consolidated financial statements of
National Wireless Holdings, Inc. (the "Company") have been prepared in
accordance with generally accepted accounting principles for interim
financial statements and with the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments, consisting solely of normal recurring accruals necessary for
a fair presentation of the financial statements for these interim periods,
have been included. Operating results for the interim period are not
necessarily indicative of the results that may be expected for a full
year. For further information, refer to the financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K for
the fiscal year ended October 31, 1996 (File No. 0-23598) and filed with
the Securities and Exchange Commission.
2. Net Loss Per Share Data:
Net loss per share is computed based on the loss for the period divided by
the weighted average number of common shares outstanding during the
period. Common Stock equivalents are not reflected in the calculation
since they are anti-dilutive.
3. Acquisition of EDSS
On December 13, 1996, the Company exercised a warrant and an option to
purchase shares of the common stock of Electronic Data Submission Systems,
Inc. ("EDSS"), which when combined with its existing share ownership
represents 50% of the outstanding common stock and, pursuant to the EDSS
Shareholders Agreement dated as of July 25, 1996, control of EDSS. The
aggregate purchase price for the purchase of EDSS shares was $1,887,500 of
which an aggregate of $887,500 was paid to EDSS and $1,000,000 was paid to
Joseph D. Truscelli, a principal stockholder of EDSS and President of
EDSS. With the proceeds received from the Company, EDSS acquired a
non-interest-bearing $1,000,000 note payable to a former stockholder for
$775,000. The acquisition has been accounted for under the purchase method
of accounting and the results of operations from the date of purchase have
been reflected in the consolidated statement of operations. The purchase
price has been allocated principally to intangible assets (goodwill) and
is being amortized over 15 years.
6
<PAGE>
Notes to Condensed Consolidated Financial Statements
(unaudited), Continued
The unaudited consolidated results of operations on a pro forma basis as
though EDSS had been acquired as of the beginning of fiscal year 1996 are
as follows:
Six months ended
April 30,
--------------------------
1997 1996
---------- ----------
Revenues $1,939,000 $2,208,000
Net loss 909,000 707,000
Net loss per weighted average number of
common shares outstanding 0.28 0.22
The pro forma financial information is presented for informational
purposes only and is not necessarily indicative of the operating results
that would have occurred had the acquisition been consummated as of the
above date, nor are they necessarily indicative of future operating
results.
4. Potential Sale of SFTV
On February 26, 1997, the registrant and its wholly-owned subsidiary,
South Florida Television, Inc. ("SFTV") entered into an Agreement and Plan
of Reorganization, as amended, (the "Merger Agreement") with BellSouth
Corporation ("BellSouth") and its wholly-owned subsidiary, Bell South
South Florida Merger Subsidiary, Inc. ("BellSouth Sub"), pursuant to which
BellSouth Sub will merge into SFTV, SFTV will become a wholly-owned
subsidiary of BellSouth and the registrant will receive an aggregate of
$48 million (before expenses) in BellSouth common stock (the "Merger").
The Merger Agreement provides for usual conditions of closing and receipt
of certain approvals from the Federal Communications Commission. The
Merger, which is expected to close by mid-summer 1997, will be treated as
a tax-free reorganization, except as to the cash received.
5. Consulting Agreements
On April 1, 1997, the Company entered into a one year consulting agreement
with BellSouth to provide expertise in the wireless communication industry
for a monthly fee of $50,000.
Continued 7
<PAGE>
Notes to Condensed Consolidated Financial Statements
(unaudited), Continued
On February 28, 1997, the Company entered into a consulting agreement with
Michael J. Specchio, Inc. ("MJS Inc.") which is owned and managed by
Michael J. Specchio, Chairman of the registrant, and simultaneously
terminated its employment agreement, as amended, with Mr. Specchio. Under
said consulting agreement, MJS Inc. is retained as a consultant and is
obliged to provide the services of Mr. Specchio on substantially a
full-time basis for a term ending September 2001 for annual compensation
of $180,000, on substantially the same terms as Mr. Specchio was
previously employed under such employment agreement. Under the consulting
agreement, MJS Inc. also has the same severance benefits as previously
provided to Mr. Specchio.
8
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Introduction
National Wireless Holdings Inc. (the "Company") was incorporated in
Delaware on August 31, 1993. Since its inception, the Company has sought to
identify wireless systems for acquisition and development and to acquire
frequencies and wireless cable technology. The Company's fiscal year ends on
October 31.
The Company has acquired rights to build and operate a wireless
cable system in Miami, Florida, as well as a satellite programming uplink
facility in the same area. The Company also seeks to support, finance and
acquire new technologies for the wireless cable industry and to secure and
assemble rights to frequencies in other markets. The Company has also acquired
interests in an educational programming distribution business and an electronic
healthcare billing system company and may acquire or invest in other businesses.
Certain statements contained in this Quarterly Report on Form 10-Q
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors that may cause
the actual results, performance or achievements of the Company, or industry
results, to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Given
these uncertainties, prospective investors are cautioned not to place undue
reliance on such forward-looking statements.
Results of Operations
Six months ended April 30, 1997 as compared to six months ended April 30, 1996:
Service Revenue:
Service revenue increased from $563,522 for the six months ended April 30, 1996
to $1,345,398 for the six months ended April 30, 1997 as a result of increased
revenues from TLC Communications, Inc. ("TLC"), a subsidiary acquired in August
1995, the addition of revenues of EDSS (as described below), a majority owned
subsidiary acquired in December 1996, and commencement of a consulting agreement
with a subsidiary of BellSouth Corporation.
Interest Income:
Interest income decreased from $587,534 for the six months ended April 30, 1996
to $352,625 for the six months ended April 30, 1997 primarily as a result of
changes in cash and treasury securities balances and interest rates.
Cost of Services:
Cost of services increased from $348,917 for the six months ended April 30, 1996
to $681,864 for the six months ended April 30, 1997 as a result of increased
operating costs and the acquisitions referred to above.
9
<PAGE>
Market Development:
Market development expenses decreased from $436,172 for the six months ended
April 30, 1996 to $325,970 for the six months ended April 30, 1997 as a result
of less activity in the development of the Miami market due to the proposed sale
of SFTV as described below.
Professional Fees:
Professional fees increased from $140,234 in the six months ended April 30, 1996
to $267,846 in the six months ended April 30, 1997 as a result of additional
activity relating to subsidiaries and corporate actions.
General and Administrative:
General and administrative expense increased from $395,545 in the six months
ended April 30, 1996 to $853,850 in the six months ended April 30, 1997
primarily as a result of increased business levels resulting from the
acquisitions, the proposed sale and other costs.
Depreciation and Amortization:
Depreciation and amortization increased from $267,236 in the six months ended
April 30, 1996 to $405,346 in the six months ended April 30, 1997 primarily as a
result of the EDSS acquisition and acquisition of equipment for TLC.
Interest Expense:
Interest expense decreased from $46,514 in the six months ended April 30, 1996
to $32,227 in the six months ended April 30, 1997 due to principal repayment of
long-term debt.
Net Loss:
As a result of the foregoing events, net loss increased from $483,562 in the six
months ended April 30, 1996 to $869,080 in the six months ended April 30, 1997.
Liquidity and Capital Resources
The Company has funded its operations with the net proceeds from a
$500,000 private placement in 1993 of the Company's Series A Preferred Stock and
its initial public offering in 1994 of 2,000,000 shares of Common Stock
aggregating, after payment of offering costs, approximately $22,000,000. The
proceeds have been used and are currently reserved to fund construction and
development of its wireless cable systems in the Miami market, acquisitions of
wireless cable frequency rights, development of its other businesses and
development and acquisition of new technologies and businesses in other area.
Such amount, with interest thereon, is expected to be sufficient to implement
this business plan through October 1998, or for a shorter period if the Company
determines to invest a substantial portion of its assets in major acquisitions
or equity investments. The development of wireless cable systems entails
substantial capital investment and will require additional funding. The future
availability and terms of equity and debt financing to meet future capital needs
could force the Company to modify, curtail, delay or suspend some or all aspects
of its planned operations. As discussed below, the Company has agreed to sell
its wireless cable assets in the Miami market, and, upon completion of the sale,
will reallocate its capital to development of its other businesses or to
acquisitions.
The Company has obtained rights to a sufficient number of
frequencies in Miami, Florida to commence development of a wireless cable system
when digital technology becomes available on an economic basis. The Company
believes that the overall cost of developing such a system in Miami would be in
excess of $100,000,000, and the initial capital investment required, including
acquisition and early phase construction costs, is estimated to be from
$10,000,000 to
10
<PAGE>
$13,000,000. The actual capital investment requirements for developing any
markets may vary substantially from such estimates depending upon which
frequencies are actually acquired, the technical configuration of the
transmission systems, and regulatory issues. The balance of the required capital
will be invested as subscribers are added. There can be no assurance that the
Company can develop the Miami market, and, as discussed below, the Company has
agreed to sell its wireless cable assets in the Miami market.
The Company has capitalized the costs of obtaining the rights to
wireless frequencies in the Miami market. The recoverability of such costs is
dependent upon the successful development of a system in Miami or through the
resale of such frequency rights. Management estimates that, if it does not
complete the proposed sale of its assets in the Miami market, it will recover
the carrying amount of these costs from cash flows generated by the system once
it has been developed. However, it is reasonably possible that such estimate
will change in the near term as a result of frequency availability, technology,
regulatory or other changes.
Development of markets in which the Company has already acquired
rights, including acquisition of the additional frequencies and other related
assets which may be necessary to make development feasible, would use
substantially all its capital. The Company also may acquire additional, as yet
unidentified wireless frequencies or assets; however, there can be no assurance
it will acquire any of them. If it does not sell its interests in the Miami
market, as discussed below, the Company plans to use its assets to develop
Miami, and will seek additional capital to develop Miami and other markets in
which it may acquire interests through equity or debt financing, joint ventures
or other arrangements. The Company may sell frequencies to finance development
or acquisition of other markets. The failure to obtain additional funds on a
timely basis could have a material adverse affect on the Company and its
business and, if such financing is not available, the Company may be obliged to
modify or curtail its operations. The Company believes it will be able to
undertake limited development of Miami (that is, with less rapid construction
and less extensive marketing) without such additional financings or strategic
alliances and also make other acquisitions or investments.
On February 26, 1997, the Company and its wholly-owned subsidiary,
South Florida Television, Inc. ("SFTV") entered into an Agreement and Plan of
Reorganization, as amended, (the "Merger Agreement") with BellSouth Corporation
("BellSouth") and its wholly-owned subsidiary, BellSouth South Florida Merger
Subsidiary, Inc. ("BellSouth Sub"), pursuant to which BellSouth Sub will merge
into SFTV, SFTV will become a wholly-owned subsidiary of BellSouth and the
Company will receive an aggregate of $48 million (before expenses) in BellSouth
common stock (the "Merger"). The Merger Agreement provides for usual conditions
of closing and receipt of certain approvals from the Federal Communications
Commission. The Merger, which is expected to close by early summer 1997, will be
treated as a tax-free reorganization. If the Merger is completed as proposed,
the Company will have approximately $60 million in cash and BellSouth
securities, as well as its full-service teleport and satellite uplink facility
in Miami; its 50 percent interest in EDSS (as described below), a provider of
software which enables physicians to transmit electronically health care claims
to over 350 insurance companies; its investment in an educational video
programming distributor; its specialized communications truck company; and its
strategic alliance with Spike Technologies, which has developed bidirectional
point-to-multipoint microwave antenna technology. The Company has not yet
determined whether it will sell such BellSouth securities in the near future or
how it will invest the proceeds of any such sale.
On December 13, 1996, the Company exercised a warrant and an
option to purchase additional shares of the common stock of Electronic Data
Submission Systems, Inc. ("EDSS"), which when combined with its existing share
ownership represents 50% of the outstanding common stock and, pursuant to the
EDSS Shareholders Agreement, dated as of July 25, 1996, control of EDSS. The
aggregate purchase price for the purchase of EDSS
11
<PAGE>
shares was approximately $1,887,500 of which an aggregate of $887,500 was paid
to EDSS and $1,000,000 was paid to Joseph D. Truscelli, a principal stockholder
and President of EDSS. With the proceeds received from the Company, EDSS
acquired a non-interest-bearing $1,000,000 note payable to a former stockholder
for $775,000. In addition, pursuant to a loan agreement between EDSS and the
Company, dated June 9, 1995, the Company has outstanding loans to EDSS of
approximately $988,000, which have been eliminated from the balance sheet in
consolidation.
The Company may, when and if the opportunity arises, acquire or
invest in other business in the wireless cable industry or in unrelated areas.
If such an opportunity arises, the Company may use a portion of its funds for
that purpose. The Company has no specific arrangements with respect to any such
acquisitions or investments at the present time and is not currently involved in
any negotiations with respect to any such acquisition. There can be no assurance
that any such acquisitions or investments will be made.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Not applicable.
Item 2. Changes in Securities.
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
At its Annual Meeting of Stockholders on June 10, 1997, the
Company's stockholders approved and ratified the following actions:
Number of Votes Number of Votes
For Withheld
--------------- ---------------
1. Amendment of Certificate of Incorporation:
(a) to provide for the election of directors
to staggered terms and for certain related
matters ....................................... 1,890,223 407,377
(b) to broaden the indemnity of directors and
officers ...................................... 2,110,143 187,457
12
<PAGE>
Number of Votes Number of Votes
For Witheld
--------------- --------------
(c) to provide standards for the Board of
Directors in evaluating certain offers ...... 1,993,023 304,577
(d) to require that stockholder actions
may only be taken at an annual or special
meeting of stockholders and may not be
taken by written consent .................... 1,860,043 437,557
(e) to require that certain sections of the
Certificate of Incorporation may
only be amended by the affirmative vote
of at least 75% of the total number of the
then outstanding shares of
capital stock of the Company ................ 1,827,223 470,377
2. Amendment of By-Laws:
(a) to provide for the election of directors to
staggered terms ............................ 1,884,223 413,377
(b) to provide for the removal of directors only
for "cause" ................................ 1,964,933 332,667
3. Election of Directors:
The following individuals were elected as
directors of the Corporation:
Terrence S. Cassidy - Class III ................ 2,278,800 112,900
Michael J. Specchio - Class II ................. 2,278,800 112,900
Thomas R. DiBenedetto - Class III .............. 2,278,800 112,900
Louis B. Lloyd - Class I ....................... 2,278,800 112,900
Michael A. McManus, Jr. - Class II ............. 2,278,800 112,900
to serve, in the case of Class I director until the 1998 Annual Meeting of
Stockholders, in the case of the Class II directors until the 1999 Annual
Meeting of Stockholders, in the case of the Class III directors until the 2000
Annual Meeting of Stockholders, and, in each case, until their respective
successors have been elected and have qualified.
4. 2,381,750 shares of all shares entitled to vote were voted in
favor of, and 9,950 votes were withheld for, the appointment of Coopers &
Lybrand L.L.P. as independent auditors of the Corporation until the next Annual
Meeting of Stockholders.
13
<PAGE>
Item 5. Other Information.
On April 1, 1997, the registrant entered into a consulting agreement
with BellSouth Wireless Cable, Inc., a subsidiary of BellSouth ("BellSouth
Wireless") pursuant to which BellSouth Wireless retained the registrant as a
consultant for one year for annual compensation of $600,000.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 3.1(a) - Amendment to Certificate of
Incorporation*
Exhibit 3.1(b) - Amendment to By-Laws, dated June
10, 1997*
Exhibit 10.39 - Consulting Agreement, dated April
1, 1997, between the registrant and BellSouth
Wireless Cable, Inc.
(b) Reports on Form 8-K.
None
- ----------
* Incorporated by reference to Appendices I and II to the Schedule 14A of the
registrant, as amended, dated April 3, 1997.
14
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: June 12, 1997
NATIONAL WIRELESS HOLDINGS INC.
-------------------------------
(Registrant)
By: /s/ Terrence S. Cassidy
---------------------------------------------------------------
Terrence S. Cassidy, President and Principal Accounting Officer
EXHIBIT 10.39
CONSULTING AGREEMENT, DATED APRIL 1, 1997,
BETWEEN THE REGISTRANT AND BELLSOUTH WIRELESS CABLE, INC.
<PAGE>
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (this "Agreement") made this 1st day of April,
1997, between BellSouth Wireless Cable, Inc., a Delaware corporation ("BWC") and
National Wireless Holdings Inc., a Delaware corporation ("Consultant").
W I T N E S S E T H:
WHEREAS, the Consultant owns One Hundred Percent (100 %) of the issued and
outstanding shares of the capital stock of South Florida Television, Inc.
("SFT");
WHEREAS, in accordance with that certain Agreement and Plan of
Reorganization (the "Merger Agreement") dated as of February 26, 1997 among
BellSouth Corporation, a Georgia corporation ("BellSouth"), which is the parent
corporation of BWC, BellSouth South Florida Merger Subsidiary, Inc. ("BSFMS"),
SFT and Consultant, BellSouth agreed to acquire all of the outstanding shares of
the capital stock of SFT pursuant to the merger (the "Merger") of BSFMS with and
into SFT, with a closing expected to occur in mid-summer, 1997;
WHEREAS, after the Merger, SFT will continue to conduct the business
previously conducted by Consultant and SFT in the Miami market;
WHEREAS, BWC desires to retain Consultant upon the terms and subject to
the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual promises
and covenants of the parties hereto and for other good and valuable
consideration, the receipt, adequacy and sufficiency of which are hereby
acknowledged, Consultant and BWC, intending to be legally bound, agree as
follows:
1. Retention of Services. BWC agrees to retain Consultant to perform
consulting services, and Consultant agrees to provide consulting services to BWC
and its affiliates, upon the terms and subject to the conditions hereinafter set
forth.
2. Term. The term of this Agreement shall commence on the date hereof and
shall continue until the earlier of (i) the first anniversary of the date
hereof; (ii) the termination of the Merger Agreement pursuant to Section 8.01
thereof; (ii) the breach by the Consultant of any of the terms of the covenant
not to compete (the "Covenant Not to Compete") entered into pursuant to Section
6.03(f) of the Merger Agreement; and (iii) the occurrence of a Termination
Event. As used herein, the term "Termination Event" means the occurrence of any
of the following events: (A) a breach of any provision of this Agreement by
Consultant, or (B) the cessation by
<PAGE>
Consultant of the performance of its duties described in Section 3 hereof;
provided, however, that in the case of any termination pursuant to clauses (A)
or (B) above, BWC shall give Consultant thirty (30) days' written notice of the
factual matters alleged to constitute such Termination Event and, during such
thirty (30) day period, an opportunity to cure.
3. Duties of Consultant.
(a) During the term of this Agreement, Consultant agrees to render
all consulting services reasonably required by BWC, as requested by the
President or a Vice President of BWC from time to time, in connection with the
development and operation by BWC of its wireless cable business. Consultant
shall make available (or in the case of Michael Specchio who is not an employee
of Consultant, cause to make available) the following persons available to
perform services hereunder: Michael J. Specchio (75% of his working time, as
provided in the Consulting Agreement dated February 28, 1997 between Consultant
and Michael J. Specchio, Inc., of which he is an employee), Timothy Mathews (50%
of his working time) and Terrence S. Cassidy (25% of his working time). The
consulting services shall include, but not be limited to, the following matters:
(1) assistance on a project-by-project basis on
transitional issues, marketing ideas, customer relations, and research and
development activities;
(2) assistance with obtaining additional wireless cable
channel rights; and
(3) assistance with maintaining existing lessor
relationships and negotiating leases as they expire.
4. Compensation.
(a) In consideration of the services of Consultant performed
pursuant to Section 3 hereof, BWC will pay to Consultant a consultant fee in the
amount of Fifty Thousand Dollars ($50,000.00) per month, payable in arrears
within thirty days after receipt of an invoice from Consultant.
(b) In the event BWC terminates this Agreement pursuant to clauses
(ii) or (iii) of Section 2 hereof, BWC agrees to pay to Consultant the
compensation which would otherwise be payable to Consultant pursuant to Section
4(a) hereto up to the end of the month in which such termination occurs.
5. Expenses. BWC shall reimburse Consultant monthly for all reasonable
out-of-pocket expenses related to the performance of its duties hereunder upon
submission by it of bills or statements of account thereof. All such expenses in
excess of Five Hundred Dollars ($500.00) shall be subject to prior approval by
the
2
<PAGE>
President or a Vice President of BWC or BellSouth.
6. Relationship Between Parties. Consultant is retained by BWC only for
the purposes and to the extent set forth in this Agreement and its relationship
to BWC shall be that of an independent contractor. Consultant shall not be
considered under the provisions of this Agreement or otherwise as having an
employee status. BWC may withhold from payment to Consultant any amounts
required to be withheld and paid to any governmental authority.
7. Property of BWC. Consultant acknowledges that from time to time in the
course of providing services pursuant to this Agreement it may have the
opportunity to inspect and use certain property, both tangible and intangible,
of BWC and its affiliates and Consultant hereby agrees that such property shall
remain the exclusive property of BWC and its affiliates. Consultant shall have
no right or proprietary interest in such property, whether tangible or
intangible, including, without limitation, BWC's and its affiliates' customer
and supplier lists, contract forms, books of account, computer programs and
similar property.
8. Confidential Data. Consultant further agrees that, for the term of this
Agreement and for two (2) years thereafter, it will keep confidential and not
directly or indirectly divulge to anyone nor use or otherwise appropriate for
its own benefit, any non-public research or product development information or
any pricing information, marketing information, information regarding sales
techniques of BWC or BellSouth, or any other of the following confidential
information or documents of or relating to BWC or BellSouth: confidential
records, proprietary computer software programs, client and customer lists,
information about client requirements, terms of license agreements, terms of
contracts with clients and customers, planning and financial information of BWC
or BellSouth (hereinafter referred to as the "Confidential Data"). The
prohibitions set forth in this Section 8 shall not apply to any information (a)
in the public domain not as a result of the violation of the Consultant's
undertaking herein, (b) required to be disclosed by law, rule or regulation, or
(c) any information of or relating to SFT which shall be governed by Section
5.03 of the Merger Agreement. Consultant hereby acknowledges and agrees that the
prohibitions against disclosure of Confidential Data recited herein are in
addition to, and not in lieu of, any rights or remedies which BWC may have
available pursuant to the laws of any jurisdiction or at common law to prevent
the disclosure of trade secrets, and the enforcement by BellSouth of its rights
and remedies pursuant to this Agreement shall not be construed as a waiver of
any other rights or available remedies which it may possess in law or equity
absent this Agreement.
9. Successors Bound; Assignability. This Agreement shall be binding upon
BWC and Consultant and their permitted assignees. This Agreement is not
assignable without the other party' prior written consent except that BWC'
right, duties and obligations under this Agreement may be assigned to any of its
subsidiaries or
3
<PAGE>
subsidiaries of BellSouth.
10. Liability. (a) Consultant assumes full responsibility for all damages,
claims, losses or expenses, including damages, claims, losses, court costs,
attorneys fees and expenses of BWC and its affiliates, which may in any way
arise out of or result from the performance of the services as Consultant
hereunder and caused by or resulting from any gross negligence or willful
misconduct of Consultant or any person employed by or under contract with
Consultant in connection with this Agreement, and Consultant agrees to defend
and save BWC and its affiliates harmless from all such claims, damages and
expenses.
(b) BWC assumes full responsibility for all damages, claims, losses or
expenses, including damages, claims, losses, court costs, attorneys fees and
expenses of Consultant and its affiliates, which may in any way arise out of or
result from any gross negligence or willful misconduct of BWC or any person
employed by or under contract with BWC in connection with this Agreement, and
BWC agrees to defend and save Consultant and its affiliates harmless from all
such claims, damages and expenses.
11. Ownership of Materials. In connection with the services to be rendered
by Consultant hereunder, certain materials, including but not limited to market
surveys, financial analysis, reports or studies (hereinafter "Material") may be
prepared for BWC. Such Material shall be treated as confidential information in
accordance with Paragraph 8 hereof. Ownership of, and all rights in the
Material, including trademark rights and copyrights applicable to same shall
belong exclusively to BWC and the Material shall constitute a "work made for
hire" under the Copyright Act of 1976. To the extent that the Material is
determined not to be a "work made for hire" or where necessary for any other
reason, Consultant shall provide BWC with all such assignments of rights,
covenants and other assistance which may be required for BWC, through trademark
or copyright applications and otherwise, to obtain the full benefit of the
rights provided for herein. If such Material includes materials previously
copyrighted by Consultant or others, Consultant grants and agrees to grant to or
procure for BWC an unrestricted royalty-free license to copy such material with
the right to sublicense same to BellSouth Corporation or any direct or indirect
subsidiary of BellSouth Corporation. Consultant shall place BWC's copyright
notice on the Material at BWC's request.
12. Governing Law. This Agreement shall be governed by, and interpreted
and enforced in accordance with, the laws of the State of Delaware.
4
<PAGE>
13. Counterparts. This Agreement may be executed in two counterparts, each
of which will take effect as an original and all of which shall evidence one and
the same agreement.
14. Captions. The captions contained in this Agreement are included only
for convenience of reference and do not define, limit, explain or modify this
Agreement or its interpretation, construction or meaning and are in no way to be
construed as a part of this Agreement.
15. Severability. In the event that any provision of this Agreement or any
word, phrase, clause, sentence or other portion thereof (including, without
limitation, the geographical and temporal restrictions contained herein) should
be held to be illegal, unenforceable or invalid for any reason, such provision
or portion thereof shall be modified or deleted in such a manner so as to make
this Agreement as modified legal and enforceable to the fullest extent permitted
under applicable laws.
5
<PAGE>
16. Entire Agreement. This Agreement constitutes the entire agreement
between BWC and Consultant with regard to the subject matter of this Agreement,
and this Agreement supersedes all prior agreements between BWC and Consultant in
connection with the subject matter of this Agreement; provided however that
nothing herein shall be deemed to modify, supersede or otherwise alter the
Covenant Not to Compete. No change, termination or attempted waiver of any of
the provisions of this Agreement shall be binding upon BWC or Consultant unless
in writing and signed by the party to be charged.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed to be effective as of the date first above written.
BELLSOUTH WIRELESS CABLE, INC. NATIONAL WIRELESS HOLDINGS INC.
By: By:
-------------------------- ----------------------------
Name: Name:
Title: Title:
6
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from NATIONAL
WIRELESS HOLDINGS INC. and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> APR-30-1997
<CASH> 492,767
<SECURITIES> 11,791,914
<RECEIVABLES> 509,005
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 12,836,237
<PP&E> 1,441,998
<DEPRECIATION> 325,997
<TOTAL-ASSETS> 21,588,319
<CURRENT-LIABILITIES> 1,896,004
<BONDS> 0
0
0
<COMMON> 32,530
<OTHER-SE> 19,290,878
<TOTAL-LIABILITY-AND-EQUITY> 21,588,319
<SALES> 0
<TOTAL-REVENUES> 1,698,023
<CGS> 0
<TOTAL-COSTS> 681,864
<OTHER-EXPENSES> 1,885,239
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32,227
<INCOME-PRETAX> (869,080)
<INCOME-TAX> 0
<INCOME-CONTINUING> (869,080)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (869,080)
<EPS-PRIMARY> (.27)
<EPS-DILUTED> (.27)
</TABLE>
