-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ROL76LR8kEwo0h46c4sNNeclNx6Q1iIAZEnW58cz1e765RAt3OudzlhEIyEdu42D iJAtrBzeZqa8XvOrTqZWQA== 0000897069-00-000628.txt : 20001229 0000897069-00-000628.hdr.sgml : 20001229 ACCESSION NUMBER: 0000897069-00-000628 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001228 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WORLD WIDE WIRELESS COMMUNICATIONS INC CENTRAL INDEX KEY: 0001098207 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370] IRS NUMBER: 860887822 FILING VALUES: FORM TYPE: 10KSB SEC ACT: SEC FILE NUMBER: 000-30405 FILM NUMBER: 796636 BUSINESS ADDRESS: STREET 1: 520 THIRD STREET SUITE 101 STREET 2: 510-839-6100 CITY: OAKLAND STATE: CA ZIP: 94607 BUSINESS PHONE: 5108396100 10KSB 1 0001.txt FORM 10-KSB U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended September 30, 2000 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________________ to __________________ Commission file number: World Wide Wireless Communications, Inc. (Name of small business issuer in its charter) Nevada 860887822 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 520 Third Street, Suite 101, Oakland, California 94607 (Address of principal executive offices) (Zip Code) Issuer's telephone number: (510) 839-6100 Name of each exchange on which registered: OTC Bulletin Board under the trading symbol WLGS Securities registered under Section 12(b) of the Act: None Securities registered under Section 12(g) of the Exchange Act: Common Stock, $.01 par value per share (Title of class) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 ___. Check if disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10KSB. [ ] Issuer's revenues for its most recent fiscal year: $524,245 Aggregate market value of voting stock held by non-affiliates of the issuer as of December 18, 2000: $14,719,124 State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. 88,332,644 shares of common stock as of November 30, 2000. Documents incorporated by reference: None. Transitional Small Business Disclosure Format: Yes ___ No X ------ World Wide Wireless Communications, Inc. Index to Annual Report on Form 10-KSB For The Fiscal Year Ended September 30, 2000 Page Item 1. Description of Business.............................................3 Item 2. Description of Property............................................17 Item 3. Legal Matters......................................................18 Item 4. Submission of Matters to a Vote of Security Holders................19 Item 5. Market for Common Equity and Related Stockholder Matters...........20 Item 6. Management's Discussion and Analysis of Financial Statements and Results of Operations............. ..........................21 Item 7. Financial Statements...............................................23 Item 8. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.............. ..........................23 Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act ...............24 Item 10. Executive Compensation.............................................26 Item 11. Security Ownership of Certain Beneficial Owners and Management.....27 Item 12. Certain Relationships And Related Transactions.....................29 Item 13. Exhibits and Reports on Form 8-K...................................29 SIGNATURES....................................................................30 Item 14. EXHIBITS...........................................................31 -2- PART I Item 1. Description of 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 distributed 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 distributed wireless call processing system. National Micro Vision Systems, Inc. was formed to operate a network of wireless Internet sites. In April of 1998, Worldwide Wireless, Inc., TSI Technologies, Inc. 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, Inc. then changed its name to World Wide Wireless Communications, Inc. and began trading on the OTC Bulletin Board under the symbol WLGS. Worldwide Wireless, Inc. remains a significant shareholder in our company, but it does not play a role in our current operations. National Micro Vision Systems, Inc. is now completely separate from and unrelated to us. We have purchased, leased or otherwise have acquired an interest in a substantial number of high-speed wireless Internet frequencies in the United States, Peru, and Thailand either by ourselves or through our subsidiaries. We have also applied for reinstatement of our subsidiary's license in Argentina. We plan to purchase or lease additional wireless Internet frequencies in the United States and abroad, should we receive additional funding. In addition to acquiring and developing wireless Internet frequencies, we have received a patent on a new generation of wireless cellular telephone technology that we have named the distributed wireless call processing system. We believe that this technology may enhance wireless communications in the future by 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. The growth in data traffic is resulting in an increase in the demand for high-speed access. To accelerate the speed at which data can be transmitted, service carriers are increasingly relying on broadband, which allows the transmission of multiple data channels through a single medium. One broadband medium consists of wireless frequencies which have large bandwidth, or an ability to transmit large amounts of data in a short period of time. 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 various frequencies within the band of 2.15 to 2.68 Gigahertz or GHz, to offer two-way broadband wireless data services upon the opening of a filing window. On March 23, 2000, the FCC announced the initial filing window for two way authorization which eventually took place between August 14, and August 18, 2000. Previously, these frequencies had been restricted to one-way video transmissions, which limited their effectiveness for data transmission. The FCC has also increased the availability of various higher frequencies within the bands of 24 to 40 GHz. Internationally, these frequencies vary slightly, with the lower -3- frequency services being between 2.5 to 5.0 GHz and the higher frequency-type services being offered on frequencies similar to the higher frequencies used in the United States. 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 infrastructure for the connection to the subscriber have constrained service providers from exploiting these opportunities. 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 connection to the subscriber has become a bottleneck that limits high-speed data transmission. Alternative technologies for broadband access include: o Digital subscriber line, or DSL, technology which 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 Optic-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 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 licenses in these lower frequencies within the 2.15 to 2.68 GHz range. 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 lower frequency licenses will generate vary substantially, but International Data Corporation estimates that revenue generated by basic services delivered via fixed, non-satellite based wireless technologies will grow from $767 million last year to $7.4 billion in 2003. -4- Lower and Higher Frequency Wireless Transmission Systems We have chosen to focus on acquiring licenses to transmit within the lower frequency ranges approved by the FCC and used internationally, which are generally between 2.15 and 5.0 GHz. Although the higher frequencies are large enough to transmit large amounts of data at once, the higher frequencies have severe limitations including high costs of build out, very short range of less than 5 kilometers and severe problems with interference from weather and atmospheric conditions. Even though they have these limitations, higher frequency transmissions would appear to have major potential in wireless local loops, internal wireless networks and intranets. The lower frequencies approved by the FCC have less bandwidth than those in the higher frequencies. Nonetheless, we believe that the lower frequencies have more than enough bandwidth for the great majority of potential business and residential users. In the United States, which allows 10 watts of power in transmitting data, the range of the lower frequencies is at least 50 kilometers and transmissions within these frequencies are much less affected by atmospheric and meteorological phenomena. It is also much less expensive to install and operate lower frequency transmission services than at higher frequencies, in part because the greater range of the lower frequencies require the installation of fewer transmitters. Both high and low frequency transmissions 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 these frequencies acquire them 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 higher frequencies as a means of transmissions for Internet access, 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 the lower frequencies for our Internet access service. 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 wireless transmissions within the lower FCC-approved frequencies has traditionally been that a clear line of sight was necessary between the transmission and the receiver. This limitation allowed these frequencies to be used only in areas with even terrain and no obstructions, insofar as buildings and hills would often disrupt transmissions. Although these problems persist with the lower frequencies, there have been recent developments which have shown a potential for reducing these problems. Cisco Systems, Inc. announced the development of Vector Orthogonal Frequency Division Multiplexing, which purportedly has the ability to reassemble multi-path 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 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 and, we believe, will enhance lower frequency transmissions as a medium for Internet access. A part of the spectrum which the lower frequencies occupy consist of frequencies referred to as Instructional Television Fixed Service. 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 are leasing transmission rights of the holders of Instructional Television Fixed Service licenses. As we discuss below, we have leased a number of these 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 Thailand and Peru to establish an up-to-date, high-speed, broadband wireless Internet system -5- equal to any of the most developed nations with very little infrastructural costs. We believe the same will be true in the many other countries throughout Asia, Latin America, 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 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 Distributed Wireless Call Processing Systems. Acquisition of Wireless Internet Frequencies - Spectrum We have determined that our primary target for acquisition of wireless frequencies will be in the frequency range within the United States of 2.5 GHz to 3.0 GHz and in similar frequency ranges up to around 5.0 GHz 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 technological development in both the short and long term. Prior to 1999, we controlled 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 December 2000, we lease, own or possess reversionary rights to licensed frequencies in the following additional locations: -6- Location State/Country Hot Springs Arkansas Aspen Colorado Vail Colorado Hilo Hawaii Grand Rapids Michigan Key West Florida Ukiah California La Grande Oregon Pierre South Dakota Buenos Aires* Argentina, South America Bangkok Thailand. Asia Hat Yai Thailand, Asia Khon Kaen Thailand, Asia Nakhon Ratchasima Thailand, Asia Phuket Thailand, Asia Chiang Mai Thailand, Asia Lima/ Callao Peru, South America - ------------------- * At this point the license in Buenos Aires, Argentina has been revoked. Although the government in Argentina has informed us it will reissue the licenses we cannot provide assurance that this will occur. 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 nine Instructional Television Fixed Service channels for our high-speed 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 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 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 for the lower frequencies. We have submitted six applications for two way transmissions on our existing licenses to the FCC in the following markets: Aspen, Grand Rapids, Key West, Pierre, Ukiah and Vail. Each of those applications is currently pending. 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. We selected Andrew Corporation as our exclusive systems integrator worldwide. We anticipate that this association with Andrew Corporation will assist us in our effort to deploy our high speed wireless data systems throughout the world. Most recently, Andrew Corporation has provided significant assistance with our system build out in Lima/Callao, Peru. 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. Commercial service commenced in this location in December 1999. Because the high-speed wireless component of the Mt. Diablo operations is only available in -7- 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 within these frequencies and because of the specific demographics within the potential Mt. Diablo transmission area, we decided to commence the limited-type of service close to our headquarters in Oakland. In December 1999, we entered into an amended lease agreement regarding a lease for the license covering Concord, California and the surrounding area. We have recently received a Notice of Default from the lessor. The Notice of Default is based on a requirement in the amended agreement that the balance of the purchase price for the assignment of the license be paid by December 1, 2000. Our management has been advised by counsel, that payment of the balance of the purchase price prior to the FCC's consent to the assignment of the license may constitute a premature assignment in violation of the FCC's rules. The assignment application has not been filed with the FCC for the FCC to make a definitive ruling on this issue. At this point, no formal legal action has been taken by the Lessor. We intend to build-out domestic systems in various areas including the small town of Ukiah, California, some ninety miles north of San Francisco. In addition to Ukiah, we plan to commence domestic build-out programs in northern San Diego County, South Bend, Indiana, Grand Rapids, Michigan, Vail and Aspen, Colorado, Key West, Florida, and Pierre, South Dakota. We recently entered into an agreement with Shekinah Network to lease their excess airtime capacity in Hot Springs, Arkansas and Hilo, Hawaii. We signed an agreement to acquire 51% of Infotel Argentina, S.A. in November, 1999. We intend to commence operations in Buenos Aires, Argentina as soon as we obtain the necessary licenses. We have secured the necessary backbone connections and transmitter locations in the Greater Buenos Aires metropolitan area, which contains more than 16 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. The Argentine government recently announced that it was revoking certain non-operating lower frequency licenses. As a result the licenses for which we had submitted transfer requests were revoked. The Argentine government has set forth criteria for the return of the licenses and we have submitted the necessary documentation. We expect that the CNC will ultimately approve our applications and allow for us to commence offering our wireless services. However, we have been informed that the government might not reissue the same lower frequency licenses for those cities outside Buenos Aires, but may instead issue a new series of licenses on a different frequency. We cannot provide assurance that a license from the Argentine government will be forthcoming. We acquired all of the shares of Digital Way, S.A., a Peruvian telecommunications company earlier this year. Digital Way presently owns a wireless transmission license in Lima/Callao and is in the process of attempting to secure additional licenses in that area as well as licenses for five different cities in Peru. We have received necessary governmental consent in Peru for the transfer of the control of Digital Way's licenses. Digital Way, S.A. recently launched its two way, high speed, broadband wireless internet operations in metropolitan Lima/Callao Peru. This effort has generated interest from business customers in the region. This service is to be marketed under the name "Speedway" and is intended to provide high quality service to currently underserved sectors of the Peruvian market. We intend to inaugurate services in Thailand subject to funding. Earlier this year, we entered into a joint venture with World T.V. Communication Co. Ltd, a Thai corporation, to provide high speed, wireless, broadband internet and related services in Bangkok and other major areas in Thailand. World T.V. Communication Co. Ltd, currently owns frequencies in Bangkok and throughout "up-country" Thailand. Upon receipt of our frequency licenses and additional funding, we intend to commence a build out of our high speed broadband fixed wireless data service system in India. We have entered into an agreement with a group of Indian businessmen to establish such a system. Under the agreement, a new entity World Wide Wireless Communications (India) Ltd. was formed. World Wide Wireless Communications (India) has received internet service provider licenses in five cities in India. The success of this venture depends on obtaining a -8- nationwide internet service provider license and an appropriate frequency license from the Indian government. We applied for the licenses and we are awaiting their approval by the government. We 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 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 sought the return of the $1,000,000. Accordingly, we entered into an agreement with the company to rescind the previous contract. To date the company has returned $750,000 and has agreed to return the remaining $250,000 by January 1, 2001. The remaining $250,000 owed is secured by a guarantee from Lafise Bank Limited. We previously applied for licenses in the 3.5 GHz range in Germany and the Czech Republic. We are still evaluating our options in Germany. We did not receive licenses in the Czech Republic, but we are currently negotiating with an individual who holds licenses in that country. In addition, we are exploring additional markets in Europe - including 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. Although we initiated negotiations with businesses in Puerto Rico and Portugal in 1999, no further negotiations or affiliations are currently pending in those countries. Development and Licensing of Distributed Wireless Call Processing System We are completing the development of our distributed wireless call processing system. The major feature of this system is that it allows individual cell phones and other communication units to amplify signals, thereby reducing the need for repeater stations. The system allows every handset itself to serve 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 the system 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. We are looking to license this technology to a third party developer in order to potentially create a royalty stream of income. However, we cannot guarantee that we will enter into such an agreement. Competition Our competitive business position is largely dependent on the various markets in which we operate. United States The telecommunications market in the United States is highly competitive and largely deregulated, although the FCC still plays a prominent role. We are focusing our strategy on underserved rural areas that are less economically viable for high speed wireline or cable-modem services. Although other fixed wireless providers, such as Sprint and Worldcom/MCI, may eventually become competitors, in the next few years these operators will likely focus on the more lucrative opportunities offered by larger markets. We believe that markets in which we have licenses, such as Key West and Aspen, will not be the focus of these service providers in the near future which we hope will enable us to establish our services in these markets before other larger companies enter these markets. Other potential competitors such as satellite broadband and dial-up Internet -9- service providers currently provide less bandwidth than do service providers using our frequencies which can result in some instances in transmission delays and downstream service interruptions, particularly in bad weather. Peru The Peruvian Internet market is still dominated by the former monopoly, Telefonica del Peru, which provides basic dedicated, hosting and high-speed wired services. Access connections are limited by the limited personal computer and cable penetration rates, as well as low availability of local content. Although Bell South and AT&T Latin America plan to enter the Internet service provider marketplace, we believe it is a lower priority than providing their basic telephony services. Diginet Americas has entered Peru with a fixed wireless broadband service. Diginet Americas intends to provide "point to multipoint" services such as ours. Most of the less prominent Internet service provider companies are focusing on the Lima-Callao market where there are numerous high-income and corporate customers. Argentina Argentina's Internet service provider market is relatively competitive, with four significant Internet access providers, none of which possesses a market share greater than 25%, however, taken together, these four companies represent about 80% of the total Internet service provider market. We believe that some of the cable providers have entered or plan to enter, the dial-up and cable-modem markets. In addition, Velocom and Millicom, two Argentine companies, have recently entered the market using wireless spectrum (3.5 GHz) in a similar range as ours. Winstar, an American company, recently rolled out Internet service provider services in Buenos Aires using higher bandwidth than ours. Winstar primarily plans to concentrate on large businesses. We plan to focus our efforts on small to medium size businesses if our license is restored. We believe that services on our frequencies, if the government reinstates our licenses, provide for a geographically longer-range of coverage. Thailand Pyramid Research, a research firm, indicates that there are currently at least four competitors for us in the Internet service provider market in Thailand. However, it reports that none of them have more than 30% of the market. Fixed wireless technology is not yet prevalent in Thailand providing a good potential environment for our technology. India Slow deregulation has stifled competition in the Indian Internet service provider market. The former monopoly, VSNL, still retains a significant majority of all Internet access connections. Currently, in order to provide internet access in India a company must first apply for an Internet service provider license. The Indian government has indicated that it considers Internet access a top priority and intends to increase availability of such licenses. We anticipate that our current relationship with certain Indian contacts will ultimately allow us to gain access to additional licenses and an Internet service provider license. At this point, our four major competitors are the former telephone monopoly (VSNL), Satyam Infoway, Regional Monopoly (MTNL) and Cable Satellite Network "Zee". Acquisitions On December 1, 1999, we signed an agreement to acquire 51% of Infotel Argentina, S.A., the owner of wireless transmission 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. -10- On February 10, 2000, we signed an agreement to purchase Digital Way, S.A., a Peruvian telecommunications company. Digital Way currently owns licenses for spectrum in the 2.3 to 2.5 GHz range, and has national and international long-distance concessions as well as value added licenses for services in Peru. The purchase price for Digital Way consisted of $400,000 in cash and 181,700 shares of common stock. If Digital Way offers us additional spectrum, we have an option to pay additional consideration for these. We sought and received approval for this acquisition from the Peruvian government. In March 2000, we signed an agreement to acquire 25% of El Salvador Telecom, S.A. de C.V. ("SalTel") a telecommunications company in El Salvador. Pursuant to the terms of the letter of intent, we paid $1,000,000 to that company as an advance payment of the purchase price. The agreement provided that the purchase was conditioned upon the company's acquisition of certain licenses and the occurrence of certain other conditions which have not been met. As a result we sought the return of the $1,000,000 payment. To date the company has returned $750,000 and has agreed to return the remaining $250,000 by January 1, 2001. The remaining $250,000 owed is secured by a guarantee from Lafise Bank Limited. 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. We are either applying directly for licenses in some countries or applying jointly with local partners in other countries. 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 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 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 licenses are also between 2.4 GHz and 2.6 GHz and are granted for periods of 20 years. 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 abroad, and changes in governments may result in substantial changes in the enforcement of regulations. For example, in September 2000, the government of Argentina revoked licenses for lower transmission frequencies, those ranging between 2.5 and 4.0 Gigahertz or GHz for all communication carriers, including those of the Company's subsidiary, Infotel Argentina, S.A. Although we have resubmitted the necessary paperwork to obtain licenses in Argentina, it is unclear at this point whether the government will decide whether to reissue the licenses. A denial of our most recent 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. 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. -11- Patents/Intellectual Property We recently received a patent from the United States Patent and Trademark Office for our distributed wireless call processing system, which has been issued patent number 6,055,429. We do not have other patents pending pertaining to other technologies. We currently use the service mark "World Wide Wireless Communications", however, this particular name is currently not protected by any trademark or copyright protection. We 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 are currently considering changing our corporate name from World Wide Wireless Communications, Inc. to another name. -12- Employees As of December 21, 2000, we had a total of 8 full time employees at our headquarters in Oakland, CA and an additional 26 full time employees in the office of our subsidiaries. Our employees do not belong to a union and we are not subject to any collective bargaining agreements. We believe that our relationship with our employees is good. Risks Related to Our Business We will require substantial additional capital in the short term to remain a going concern We will require substantial short term outside investment on a continuing basis to finance our current operations and capital expenditures as well as the acquisition of additional spectrum and licenses. Our revenues for the foreseeable future may not be sufficient to attain profitability. In the two years since we began operations, we have generated virtually 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, 2000 that our ability to meet our future financing requirements, and the success of our future operations, cannot be determined at this time. In order to finance our working capital requirements we are currently negotiating equity investments with several sophisticated investors, but there can be no assurance that we will obtain this capital or that it will be obtained on terms favorable to us. If we do not obtain short term financing we may not be able to continue as a viable concern. 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. If 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 may not be able to obtain permission to use two-way transmission for our wireless service, thereby making our services significantly less attractive to potential customers. We believe that it is important for us to obtain the right to conduct two-way transmissions through the radio transmission frequencies for which we acquire licenses. 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 these frequencies. In August, we filed six applications for permission to conduct two way transmissions with the FCC for the areas of Vail and Aspen, -13- Colorado, Grand Rapids, Michigan, Key West, Florida, Pierre, South Dakota and Ukiah, California, that are currently pending. We cannot be certain that the licenses will be granted. The application process required 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 licensees in these markets and adjacent markets. We cannot be certain that: o We will be able to complete the necessary processes to enable us to complete 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. If we are unable to obtain this authorization, we might be forced to operate our service as a one-way transmission service, which we believe would make our Internet access services significantly less attractive to prospective customers than two-way transmission services. We are subject to other substantial governmental regulations that 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. For example, we currently have applications pending in Aspen and Vail, Colorado, Grand Rapids, Michigan, Key West, Florida, Pierre, South Dakota and Ukiah, California. Our ability to provide two way broadcasting authority in any of those markets depends on obtaining the necessary license from the FCC. In addition, changes in the regulatory environment relating to 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 distributed wireless call processing system technology is unproven and may not function as anticipated Our distributed wireless call processing 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 that system and whether that system will work in the manner anticipated when development is completed. Furthermore, we cannot be certain whether the system will receive substantial market acceptance assuming that it is developed. For these reasons, although we believe that our distributed wireless call process system is promising, an investor should not assume that the system will be available or will contribute positively to our business prospects or financial condition. -14- 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 jurisdiction, might inhibit our efforts in certain markets. 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, reinstates our subsidiary's license. In early 2000, the government of Argentina announced that it was placing a freeze on all license transfer applications, which has effectively delayed consideration of our application. In September 2000, the government of Argentina revoked licenses for certain lower transmission frequencies, for all communication carriers, including those of the Company's subsidiary, Infotel Argentina, S.A. Although we have resubmitted the necessary paperwork to reinstate licenses in Argentina, it is unclear at this point when the licenses will be reissued. A denial of our most recent 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 other jurisdictions are also subject to receipt of government approval, which we cannot ensure that we will receive. 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 will 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. Some of the countries in which we may conduct business lack the high speed cable or fiber optic wiring systems which may be necessary for high speed data transmission and in many of those countries it is not economically viable to install that infrastructure. This may limit 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, in order to provide our high-speed fixed wireless internet services in Thailand we are required to obtain an internet service provider license. Currently, the country is considering major revisions to the kingdom's telecommunications and Internet laws that may inhibit our ability in the future to obtain or maintain an Internet service provider license. Although we intend to pursue such a license, there can be no assurance that we will obtain the desired license or that the license will not be subsequently revoked due to further changes in the regulatory requirements. We cannot assure you that we will be able to conduct our -15- 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, which could cause us to fail to develop our international operations successfully 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. 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 effect 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 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 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 distributed wireless call processing 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 distributed wireless call processing 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. -16- We may not be able to obtain shareholder approval to increase the number of authorized shares of common stock thereby making it difficult to distribute additional shares to future purchasers As of November 30, 2000, we had 88,332,644 shares of common stock outstanding and have reserved for issuance an additional 9,324,917 shares. We have 100,000,000 shares currently authorized for issuance. We plan to have a shareholder's meeting in order to authorize more stock, however, we can make no assurances that the shareholder's will approve such action. We intend to explore other alternatives in an effort to increase the number of authorized shares, but at this point it is unclear whether additional shares will exist in the near future. We are required to receive shareholder approval to increase our common stock reserve by March 1, 2001 under a recent amendment to the securities purchase agreement signed with the selling shareholders herein. Forward Looking Statements This Form 10-KSB 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. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this prospectus. Item 2. Description of Property We own no real estate, and all of our locations are leased from independent third parties as follows: Location Footage Lease Expiration - -------- ------- ---------------- 520 Third Street 6000 June 4, 2004 Oakland, CA 94607 2962 Treat Boulevard 1680 April 30, 2000 (month to Suite C month thereafter) Concord, CA 94518 Esmeralda 684, 10th Floor 1500 December 31, 2003 Buenos Aires, Argentina 285 Los Rosales 4th Floor 4350.34 May 1, 2010 San Isidro 57.33 Lima, Peru 40.99 (consists of three offices in the same building) 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. -17- 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. 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 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. We have leased space in Peru by virtue of our acquisition of Digital Way. The lease is for three office spaces within the same building approximately 4,350, 57.53 and 40.99 square feet respectively and is due to expire May 1, 2010. The monthly rent is approximately $4,444.06 per month with a nominal annual increase. Item 3. Legal Matters 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 a 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. The Securities and Exchange Commission commenced an informal inquiry on the Company in August, 2000. We have voluntarily complied with their requests for information and we intend to fully cooperate with the inquiry. In December 1999, we entered into an amended lease agreement regarding a lease for the license covering Concord, California and the surrounding area. We have recently received a Notice of Default from the lessor. The Notice of Default is based on a requirement in the amended agreement that the balance of the purchase price for the assignment of the license be paid by December 1, 2000. Our management has been advised by counsel, that payment of the balance of the purchase price prior to the FCC's consent to the assignment of the license may constitute a premature assignment in violation of the FCC's rules. The assignment application has not been filed with the FCC for the FCC to make a definitive ruling on this issue. At this point, no formal legal action has been taken by the Lessor. -18- Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted during the fourth quarter of the fiscal year covered by this report to a vote of the security holders through the solicitation of proxies or otherwise. -19- PART II Item 5. Market for Common Equity and Related Stockholder Matters Our company's common stock has been traded on the OTC Bulletin Board under the symbol "WLGS". The average high and low bid prices, as reported by the OTC Bulletin Board are as follows: - ----------------------- ---------------------- -------------------- Quarter End Low Bid High Bid - ----------------------- ---------------------- -------------------- 9/30/98 0.11 0.60 - ----------------------- ---------------------- -------------------- 12/31/98 0.09 0.51 - ----------------------- ---------------------- -------------------- 3/31/99 0.12 0.51 - ----------------------- ---------------------- -------------------- 6/30/98 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 - ----------------------- ---------------------- -------------------- 6/30/00 1.45 5.31 - ----------------------- ---------------------- -------------------- 9/30/00 0.78 3.065 - ----------------------- ---------------------- -------------------- The quotations provided above reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. Since our shares began trading on the OTC Bulletin Board in 1997, the prices for our shares have fluctuated widely. There may be many factors which may explain these variations, but we believe that the following are some of these factors: 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 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. There are approximately 269 holders of record of our common stock as of November 30, 2000. 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, and 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 -20- these rules. These rules may adversely affect the ability of broker-dealers and others to sell our shares or to sell shares in the secondary market. No cash dividends have been declared to date on our company's common stock. We expect that all earnings, if any, will be retained to finance the growth of our company and that no cash dividends will be paid for the foreseeable future. Item 6. Management's Discussion and Analysis of Financial Statements and Results of Operations The following should be read in conjunction with the "Risk Factors" and the "Financial Statements" and the Notes thereto. Results of Operations We did not generate any revenues by providing wireless internet services during fiscal 1999 and we generated only approximately $524,000 in 2000, none of which was from Internet-related sources. We did not have enough subscribers in either period to generate revenues sufficient to cover our operating expenses which totaled $2,383,330 and $8,565,788 respectively, in fiscal 1999 and 2000. 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 2000 over those in 1999 as we substantially increased the scope of our business operations during that period. Liquidity and Capital Resources As of September 30th, 2000 our total working capital was $2,403,009. During 1999 and 2000, 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 not received sufficient revenues from operations and do not anticipate receiving sufficient revenues for the next 12 months from operations, we will need to obtain substantial funding from external sources over the next twelve months to finance our current operations. Since we began operations, we have generated virtually 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, 2000 that there is substantial doubt about our ability to continue as a going concern, dependent upon our ability to meet our future financing requirements, and the success of our future operations, the outcome of which cannot be determined at this time. In order to finance our working capital requirements, we are currently negotiating equity investments with several sophisticated investors, but there can be no assurance that we will obtain this capital or that it will be obtained on terms favorable to us. If we do not obtain short term financing we may not be able to continue as a viable concern. 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. If 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. During the fiscal years ended September 30, 2000 and 1999, we received equity investment of $6,652,699 and $2,614,074, respectively. This investment was in the form of issuance of our common stock and /or debentures in various private placements. We have obtained financing primarily from the following sources, and believe that our primary source of financing during the next 12 months will come from similar sources. 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 -21- 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 wants to convert the debentures into common stock. As of December 11, 2000, we have not issued the securities. 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 of which are described below. Pursuant to the Securities Purchase Agreement, these investors 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. On August 10, 2000, we agreed with the investors to modify certain terms of the earlier funding agreement. Under the new terms of this agreement, we issued an additional 1,368,000 shares of common stock to the investors, in exchange for $1,920,000 and the investors' forbearance of certain rights under the original agreement. The conversion price of the subordinated debentures was amended to the lesser of 110% of the average per share market value for the five consecutive trading days immediately preceding the original issue date and 85% of the average per share market value for the five consecutive trading days immediately prior to the conversion date. We also agreed to change the floor price to $1.00 for the period between August 10, 2000 and October 14, 2000, $0.64 from the period between October 14, 2000 and April 14, 2001, and zero thereafter. Notwithstanding these changes, under this amendment if our revenues for fiscal year 2000 fall below $13.5 million than the floor price will be zero as of April 1, 2001. Furthermore, the exercise price of the warrants to purchase our shares was changed to $2.00. On November 15, 2000, the investors agreed to modify the transaction documents in accordance with our request and agreed to waive any breach of the original Securities Purchase Agreement and the first amendment by us which occurred prior to the closing date of this Second Amendment. In consideration for these concessions, we agreed to increase the principal amount of the debentures held by the investors to $6,720,000 and to issue 3,996,113 additional restricted shares of common stock to the investors. The investors have returned to the company 760,000 previously issued shares of common stock in exchange for the issuance of new debenture certificates reflecting the increase in the principal amount. Under this agreement, the selling shareholders may convert the debentures at a conversion price equal to the lesser of $.64 and an amount equal to 85% of the average of the closing trading prices of the common stock for the five consecutive trading days immediately prior to the conversion. At no time shall the conversion price be below the floor price. The floor prices is $.64 for the period between October 1, 2000 and October 14, 2000, $.50 for the period between October 14, 2000 and September 1, 2001 and zero thereafter. However, if our aggregate revenue for the last three quarters of the year 2000 and the first quarter of year 2001 is less than $13.5 million then as of May 14, 2001 the floor price shall be zero. The Second Amendment requires that a registration statement be filed by December 15, 2000 and must be made effective by May 15, 2001. A registration statement was filed with the SEC on December 15, 2000. As part of the amended agreement, the investors waived any previous breach by us of the Registration Rights Agreement or of the original Securities Purchase Agreement. We also agreed to hold a shareholders' meeting no later than March 1, 2001 to increase our common stock reserve. Plan of Operations We are considering alternatives to our present business strategy, which include, but are not limited to modifications of our business plan and the possible sale or licensing of certain assets. Specific components of the modified new business plan could include a significant reduction in our selling, general and administrative expenses, additional equity investment, recapitalization and additions to the current management of the company. We cannot provide assurance that implementing the modified business plan, even with the successful execution of all the components of the new plan, will lead the company to profitability. Due to the substantial operating losses we incurred during the fiscal year ended September 30, 2000 and the current projected future operating losses, we will require new sources of funding in the form of equity or debt financing in order to execute our current business plan. However, there is no certainty that additional financing of any kind will be forthcoming in amounts sufficient to allow the company to continue to operate its business. As of December 11, 2000, we were current on our normal operating payables except for one trade payable where we currently owe approximately $2,000,000. During the next 12 months we intend to initiate and expand licensed operations in Ukiah, California, South Bend, Indiana, Grand Rapids, Michigan, Vail and Aspen, Colorado, Key West, Florida and Pierre, South Dakota. Internationally, we intend to focus primarily in Peru, India, and Thailand, and Argentina assuming that -22- our licenses are restored. We anticipate that our expansion will involve the purchase of significant equipment in these markets and estimate that the expenditure will be approximately $15,000,000 to $25,000,000. We currently have 8 full-time employees at our headquarters office and approximately 26 additional full time employees in the offices of our subsidiaries. We 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. Inflation Inflation does not currently affect our operations, and we do not expect inflation to affect them in the foreseeable future. Item 7. Financial Statements The selected financial data presented below for the years ended September 30, 2000 and September 30, 1999 were derived from the consolidated financial statements of the Company, which were audited by Rueben E. Price & Co., independent certified public accountants, and which are included elsewhere in this Form 10-KSB. This selected consolidated financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Company's consolidated financial statements (including the notes thereto) included elsewhere in this Form 10-KSB. Page Independent Auditor's Report F-2 Consolidated Balance Sheets F-3 Consolidated Statements of Income F-4 Consolidated Statements of Changes in Stockholders' Equity F-5 Consolidated Statements of Cash Flows F-6 Notes to Consolidated Financial Statements F-7 Item 8. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure There have been no changes in or disagreements with our independent auditors regarding accounting and financial disclosure required to be reported under this item. -23- PART III Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act Our executive officers and directors and their ages as of December 15 , 2000 are as follows: Name Age Position Period of Service - ---- --- -------- ----------------- Douglas P. Haffer....... 52 Chairman of the Board, April 1998 to present CEO and CFO Wayne Caldwell.......... 49 Director, Vice President Vice President: and Secretary November 1999 to present Secretary: December 1999 to present Director: January 2000 to present Dana Miller............. 39 Vice President May 1998 to present Ramsey Sweis............ 35 Director May 1998 to present Robert Klein............ 52 Director May 1998 to present Mohammad Ali Guidfar *.. 40 Director August 2000 to present *Effective December 15, 2000, Mr. Guidfar resigned from the Board of Directors. Douglas P. Haffer has practiced law in San Francisco, Beverly Hills, and Washington D.C. for twenty-five years. During that time he 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 our Vice President and Counsel since November 1999. 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 Acquisitions for National Micro-Vision Systems, Inc. from 1995 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 another 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 currently serves as a Program Manager for Hanke Training & Design of Clawson Michigan. From 1997 to 1999 Mr. Sweis served as a -24- designer for Computer and Engineering Services of Rochester Hills, Michigan. From 1991 to 1997, Mr. Sweis was a design leader for Megatech Engineering of Warren Michigan. 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. Mr. Klein has spent the past five years on public company development. Since 1993, 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 Asdar Inc. Mr. Klein has a degree in Applied Mathematics from the University of Waterloo, and an FCSI designation from the Canadian Securities Institute. Mohammad Ali Guidfar has been with the Abdul Latif Jameel Group ("ALJ") for over thirteen years, serving as the General Manager of ALJ's wholly owned Lebanese subsidiary Hartwell Middle East while at the same time holding the position of President and General Director of Jameel SAM of Monaco. ALJ is currently the largest privately owned company in Saudi Arabia. As Director of Jameel SAM, Mr. Guidfar has lead the company in its real estate, shipping and construction ventures. Recently, Mr. Guidfar was one of the select members of the "International Business Strategy Committee" at the ALJ's world headquarters in Jeddah, Saudi Arabia. Mr. Guidfar received his Bachelor of Science in Law at the University of Nice in 1982. 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 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. o Mr. Guidfar received options to purchase 100,000 shares of common stock in August, 2000, at an exercise price of $0.59 per share. All of Mr. Guidfar's options vested immediately upon the date of grant. The expiration date for Mr. Guidfar to exercise the options is August, 2005. To date, Mr. Guidfar has not exercised any options for shares of common stock. Limitation of Liability and Indemnification Matters 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. Compliance with Section 16(a) of the Securities Exchange Act of 1934 Section 16(a) of the Securities Exchange Act of 1934 requires our company's officers and directors, and persons who own more than 10% of a registered class of our company's equity securities, to file reports of -25- ownership and changes in ownership with respect to the securities of our company and its affiliates with the SEC and to furnish copies of these reports to our company. We believe that during fiscal year 2000, Douglas Haffer, Wayne Caldwell, Ramsey Sweis, Robert Klein and Dana Miller each filed a Form 3 late. Ramsey Sweis filed a Form 4 late. We believe that Mohammad Ali Guidfar and Worldwide Wireless Inc. have not filed the required Form 3. Item 10. Executive Compensation Employment Agreements We have entered into an employment agreement with Mr. Douglas 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 $ 23,000. Any bonus in excess of $ 23,000 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. The following table sets forth certain information concerning compensation paid or accrued for the fiscal year ended December 31, 1999 by us to or for the benefit of our chief executive officer and our other executive officers whose total annual compensation for 1999 exceeded $100,000. Summary Compensation Table
Annual Compensation Long-Term Compensation ---------------------------------------------------------------- Awards ---------------------------- Restricted Securities Stock Underlying Awards Options and Name and Principal Position Salary Bonus Warrants - -------------------------------------------------------------------------------------------------------------------- Douglas P. Haffer 2000 220,000 23,000 800,000 Chairman, CEO and CFO 1999 106,000 16,017 800,000
-26- Individual Grants
Number of Percent of Securities options Options Fiscal Year Underlying granted to Exercise Exercised Options Options employees Price as of Expiration Granted Granted from 9/30/99 ($/Share) 9/30/00 Date ------- ------- ------------ --------- ------- ---- Douglas P. Haffer............. 2000 800,000 50% $1.62 0 2/1/05 Chairman, CEO & CFO 1998 800,000 43% $0.095 0 10/22/03
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 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.
Aggregated Options/ SAR Exercises at September 30, 2000 ------------------------------------------------------- Number of Securities Underlying Value of Unexercised In- Unexercised Options/SARS at the-Money Options/ SARS at September 30, 2000 September 30, 2000 Exercisable/Unexercisable Exercisable/Unexercisable Name Douglas P. Haffer............. 1,600,000/0 0/0 Chairman, CEO & CFO
Item 11. Security Ownership of Certain Beneficial Owners and Management The following table sets forth certain information regarding beneficial ownership of our common stock as of November 30, 2000, by: o each person who is known to own beneficially more than 5% of the outstanding shares of our common stock; o each of our directors; and o all our directors and executive officers as a group. Applicable ownership is based on 88,332,644 shares of common stock outstanding as of November 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 November 30, 2000 are deemed outstanding for the purpose of computing the percentage ownership of the person or entity holding -27- options or warrants, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person or entity. The persons listed below have sole voting and investment power with respect to all shares of common stock shown as being beneficially owned by them, subject to community property laws, where applicable. The number of shares column in the table includes shares issuable upon exercise of options and warrants exercisable within 60 days of November 30, 2000. The number of options and warrants exercisable within 60 days of November 30, 2000 are listed in the shares issuable upon exercise of options or warrants column. The address of all directors and officers is care of World Wide Wireless Communications, Inc., 520 Third Street, Oakland, California, 94607.
Shares Issuable Name of Named Executive Officer, Number of Percentage Upon Exercise of Director, or Beneficial Owner Shares Ownership Options or Warrants - ----------------------------- ------ --------- ------------------- Douglas P. Haffer (1) 7,341,073 8.3% 1,600,000 Wayne Caldwell (2) 1,000,000 * 1,000,000 Ramsey Sweis (3) 250,000 * 250,000 Robert Klein (4) 250,000 * 250,000 Mohammad Ali Guidfar (5)* 200,000 * 100,000 Executive Officers and Directors 10,370,073 1.2% shares as a Group Worldwide Wireless, Inc. (6) 17,315,170 19.6% C/o Lofton & Associaties 3233 East Broadway Long Beach, CA 90803 - ------------------------------------------ * Less than 1% * Effective December 15, 2000 Mr. Guidfar resigned from the Board of Directors. (1) The 1,600,000 shares subject to options are immediately exercisable. (2) The 1,000,000 shares subject to options that are immediately exercisable. (3) The 250,000 shares subject to options are immediately exercisable. (4) The 250,000 shares subject to options are immediately exercisable. (5) We awarded him 200,000 shares in exchange for services rendered before he become a Director. The remaining shares include 100,000 shares subject to options that are immediately exercisable. (6) 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.
-28- Item 12. Certain Relationships And Related Transactions As of September 2000, 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. Item 13. Exhibits and Reports on Form 8-K (a) The exhibit list is located at the end of this report. (b) We filed no Form 8-Ks during the fourth quarter. -29- SIGNATURES In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on December 21, 2000. World Wide Wireless Communications, Inc. By: /s/ DOUGLAS HAFFER ------------------ Douglas P. Haffer Chief Executive Officer and Chief Financial Officer In accordance with the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities indicated on December 21, 2000: Signature Title Date /s/ DOUGLAS HAFFER Director, Chief Executive Officer, December 21, 2000 - ------------------ Chief Financial Officer and Douglas Haffer Chairman of the Board (Principal Financial and Accounting Officer) /s/ WAYNE CALDWELL Director, Vice President and December 21, 2000 - ------------------ Secretary Wayne Caldwell /s/ RAMSEY SWEIS Director December 21, 2000 - ------------------ Ramsey Sweis Director December 21, 2000 - ------------------ Robert Klein -30- Item 14. Exhibit List ITEM (601) DOCUMENT ---------- -------- * 3.1 Articles of Incorporation. * 3.2 Amendment to Articles of Incorporation * 3.3 Amendment to Articles of Incorporation. * 3.4 By-laws. * 4.1 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. * 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 Reserved * 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 Lease Agreement Between World Wide Wireless Communications, Inc. and Shekinah Network Hilo, Hawaii. *** 10.12 Lease Agreement Between World Wide Wireless Communications, Inc. and Shekinah Network Hot Springs, Arkansas. *** 10.13 Supply Agreement between World Wide Wireless Communications and Andrew Corporation dated March 13, 2000. * 10.14 Stock Purchase Agreement dated November 30, 1999 Between Infotel Argentina S.A. and World Wide Wireless Communications, Inc. * 10.15 Agreement for Purchase of All Outstanding Shares of Digital Way, S.A. by World Wide Wireless Communications, Inc., dated February 29, 2000. * 10.16 Letter of Intent dated March 22, 2000 Between SALTEL and World Wide Wireless Communications, Inc. -31- ITEM (601) DOCUMENT ---------- -------- * 10.17 Security Purchase Agreement Among World Wide Wireless Communications, Inc. and the Purchasers Named Therein. * 10.18 Registration Rights Agreements Among World Wide Wireless Communications, Inc. and the Purchasers Named Therein. * 10.19 Escrow Agreement Among the Purchasers Named Therein, the Representative of the Purchasers and the Escrow Agent. * 10.20 Form of Debenture of World Wide Wireless Communications, Inc. with Respect to the 4% Convertible Debenture Due 2005. * 10.21 Form of Warrant to Purchase Shares of World Wide Communications, Inc. Issued in the Offering. 10.22 Amendment to the Securities Purchase Agreement entered into between World Wide Wireless Communications and the selling shareholders named therein. *** 10.23 Second Amendment to the Securities Purchase Agreement entered into between World Wide Wireless Communications and the selling shareholders name therein. 10.24 Agreement between World Wide Wireless Communications, Inc. and Mr. Neelam Kumar Oswal. 10.25 Joint Venture Agreement between World Wide Wireless Communications, Inc. and World Thai Star Co. Ltd. ** 10.26 Compromise and Settlement Agreement between World Wide Wireless Communications, Inc. and Corporate Solutions LLC, dated May 25, 1999. *** 10.27 Written Agreement between Jorge Emilio Zedan and World Wide Wireless Communications, Inc. *** 10.28 Employment Agreement between Douglas Haffer and World Wide Wireless Communications, Inc. *** 10.29 World Wide Communications, Inc. Incentive Stock Option Plan * 21.1 Subsidiaries 27.1 Financial Data Schedule. * Filed with the registration statement on Form SB-2 with the Securities and Exchange Commission on May 31, 2000. ** Filed with the registration statement on Form SB-2 with the Securities and Exchange Commission on June 30, 2000. *** Filed with the registration statement on Form SB-2 with the Securities and Exchange Commission on December 15, 2000. -33- Index to Consolidated financial statements Independent Auditor's Report.................................................F-2 Consolidated Balance Sheet...................................................F-3 Consolidated Statements of Operations and Comprehensive Income...............F-4 Statements of Shareholders' Equity...........................................F-5 Consolidated Statements of Cash Flows........................................F-6 The accompanying notes are an integral part of these financial statements....F-6 Notes to Consolidated Financial Statements...................................F-7 F-1 Independent Auditor's Report INDEPENDENT AUDITORS' REPORT Board of Directors World Wide Wireless Communications, Inc. We have audited the accompanying consolidated balance sheet of World Wide Wireless Communications, Inc., as of September 30, 2000, and the related consolidated statements of operations, consolidated statements of cash flows, and statement of stockholders' equity for the years ended September 30, 2000 and 1999. We did not audit the balance sheet and related statement of income, cash flows and shareholders equity of Infotel Argentina and Digital Way. These statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to amounts included for Infotel Argentina and Digital Way, is based solely upon the reports of the other auditors. Infotel Argentina was purchased on December 31, 1999 and Digital Way was purchased on February 29, 2000, in transactions accounted for as purchases. The financial statements of the newly acquired subsidiaries are included in the consolidated financial statements of World Wide Wireless Communications, Inc. and reflect total assets of 5% for Infotel Argentina and 5% for Digital Way for the year ended September 30, 2000. These financial statements are the responsibility of World Wide Wireless Communications, Inc.'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 consolidated financial position of World Wide Wireless Communications, Inc. as of September 30, 2000 and the consolidated results of its operations, cash flows, and stockholder's equity for the years ended September 30, 2000 and 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 suffered recurring losses that raises 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. December 13, 2000 F-2 World Wide Wireless Communications, Inc. Consolidated Balance Sheet Assets Current Assets: September 30, 2000 Cash and cash equivalents $ 3,111,150 Refund receivable 500,000 Inventory 750,458 Prepaid and other 402,950 ------------ Total Current Assets 4,764,558 ------------ Frequency licenses 1,175,067 ------------ Option on frequency licenses 500,000 ------------ Deposits in Acquisition 395,012 ------------ Fixed Assets: Equipment 2,466,736 Furniture and fixtures 91,938 Leasehold improvements 424,710 Less: Accumulated depreciation and amortization (176,234) Total Fixed Assets 2,807,150 ------------ Other Assets 61,775 ------------ Total Assets $ 9,703,562 ============ Liabilities and Stockholders' Equity Current Liabilities: Accounts payable $ 1,645,829 Accrued expenses 715,720 ------------ Total Current Liabilities 2,361,549 Convertible debentures 5,227,678 ------------ Total Liabilities 7,589,227 ------------ Commitments and Contingencies - Minority interest 115,150 ------------ Stockholders' Equity: Common stock, par value $ .001 per share, 100,000,000 shares authorized, 86,264,163 issued and outstanding 86,264 Additional paid-in capital 17,069,330 Accumulated deficit (15,155,249) Other comprehensive income (loss) (1,160) ------------ Total Stockholders' Equity 1,999,185 ------------ Total Liabilities and Stockholders' Equity $ 9,703,562 ============ The accompanying notes are an integral part of these financial statements. F-3 World Wide Wireless Communications Inc. Consolidated Statements of Operations and Comprehensive Income For the Year Ended For the Year September 30, 2000 Ended September 30, 1999 Revenue $ 524,245 $ Cost of revenue 336,716 ------------ ----------- Gross profit 187,529 ------------ ----------- Operating Expenses General and administrative 7,065,788 2,383,330 Impairment Loss 1,500,000 ------------ ----------- Total Operating Expenses (8,565,788) (2,383,330) ------------ ----------- Operating (Loss) (8,378,259) (2,383,330) ------------ ----------- Other Income (Expense) Interest income 52,857 - Interest (expense) (70,706) - ------------ ----------- Total Other (Expense) (17,849) ------------ ----------- Net Loss (8,396,108) (2,383,330) ------------ ----------- Other Comprehensive Income (Loss) Foreign currency translation (1,160) ------------ ----------- Total Other Comprehensive Income (Loss) (1,160) ------------ ----------- Total Comprehensive Income (Loss) (8,397,268) (2,383,330) ============ ============ Loss Per Share (Basic and Diluted) $ (0.10) $ (0.04) ============ ============= Basic and Diluted Weighted Average Shares Outstanding 81,656,614 56,113,645 ============ ============ The accompanying notes are an integral part of these financial statements. F-4 World Wide Wireless Communications, Inc. Consolidated Statements of Cash Flows For the Year For the Year Ended Ended September 30, 2000 September 30, 1999 CASH FLOWS FROM OPERATING ACTIVITIES: Total Comprehensive Income (Loss) $ (8,397,268) $ (2,383,330) Adjustments to reconcile net loss from operations to net cash used by operating activities: Common stock issued for services 1,142,445 615,996 Impairment loss 1,500,00 Depreciation and amortization expense 164,450 13,506 Changes in operating assets and liabilities: (Increase) in inventory (750,458) (Increase) in prepaid and other (336,560) (62,740) (Increase) in other assets (5,742) (20,077) Increase in accounts payable, trade 1,645,829 Increase in accrued expenses 224,251 4,321 ------------ ------------- Net Cash (Used) by Operating Activities (4,813,053) (1,832,324) ------------ ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of fixed assets (2,531,850) (336,384) Refund receivable (500,000) Deposits in acquisition (395,012) Acquisition of frequency licenses (1,175,067) Acquisition of intangible assets (41,327) Acquisition of option on frequency licenses - (500,000) ------------ ------------- Net Cash (Used) by Investing Activities (4,643,256) (836,384) ------------ ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from convertible debentures 5,639,678 328,000 Proceeds from issuance of common stock 6,652,699 2,614,074 ------------ ------------- Net Cash Provided by Financing Activities 12,292,377 2,942,074 ------------ ------------- NET INCREASE IN CASH AND CASH EQUIVALENTS 2,836,068 273,366 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 275,082 1,716 ------------ ------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,111,150 $ 275,082 ------------ ------------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Interest paid $ - $ - Income taxes paid $ - $ - SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES Interest accrued on debentures, added to the principal of the debentures $ 27,678 $ - Debentures converted to capital stock $ 740,000 $ - Capital stock issued in acquisition of subsidiaries $ 1,500,000 $ - The accompanying notes are an integral part of these financial statements F-5 World Wide Wireless Communications, Inc. Statements of Shareholders' Equity Common Stock
Accumulated Additional Other Paid-in Accumulated Comprehensive Total Shares Amount Capital Deficit Income Equity ---------- --------- ----------- ------------- ------------- ------------ Balance, September 30, 1998 47,341,993 $ 47,342 $ 3,843,038 $ (4,375,811) $ - (485,431) Common stock issued in private placement between $0.05 and $0.435 per share 19,303,950 19,304 2,594,770 2,614,074 Common stock issued for services 4,538,000 4,538 611,458 615,996 Net loss for the fiscal year ended, September 30, 1999 (2,383,330) (2,383,330) ---------- --------- ----------- ------------ -------- ----------- Balance, September 30, 1999 71,183,943 71,184 7,049,266 (6,759,141) - 361,309 Common stock issued in private Placement between $0.25 and $6.125 per share 11,548,745 11,549 6,641,150 6,652,699 Common stock issued in Conversion of debentures at $0.625 per share 462,500 462 739,538 740,000 Common stock issued for services 2,433,330 2,433 1,140,012 1,142,445 Common stock issued for acquisition of subsidiaries 635,645 636 1,499,364 1,500,000 Net loss for the fiscal year ended, September 30, 2000 (8,396,108) (8,396,108) Other comprehensive income: Foreign currency adjustment (1,160) (1,160) ---------- --------- ----------- ------------ -------- ----------- Balance, September 30, 2000 86,264,163 $ 86,264 $17,069,330 $(15,155,249) $ (1,160) $ 1,999,185 ========== ========= =========== ============ ======== ===========
The accompanying notes are an integral part of these financial statements. F-6 Notes to Consolidated Financial Statements NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization The consolidated financial statements presented are those of World Wide Wireless Communications, Inc., (the Company) and its subsidiaries, Infotel Argentina, S.A. (Argentina) and Digital Way, S.A. (Peru). 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. 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. The consolidated subsidiaries are Infotel Argentina, S.A. of Argentina and Digital Way S.A. of Peru. 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. Inventory Inventory is entirely made up of equipment intended to be sold to customers as part of the Company's fixed wireless internet services. Inventory is valued at the lower of cost or market. Operating Intangible Assets The frequency licenses are not yet placed in service and consequently are not being amortized. 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. Amortizable intangibles, consisting primarily of software, are amortized over a two year period. Long-Lived Assets The Company reviews its long-lived assets on a quarterly 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 debentures payable approximates fair value because of similar current rates at which the Company could borrow funds with consistent remaining maturities. F-7 NOTE 1-- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 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. The company has three geographic reportable operating segments: United States, Peru, and Argentina. 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. Comprehensive Income and Foreign Currency Transactions As of October 1, 1999 the Company adopted FASB Statement No. 130, Reporting Comprehensive Income. 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. The sole component of other comprehensive income is a foreign currency translation adjustment related to the subsidiary Digital Way in Peru. Recent Accounting Pronouncements In June 1998 and June 1999 respectively, the Financial Accounting Standards Board issued SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities" (SFAS No. 133), and SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities- Deferral of the Effective Date of FASB No. 133" (SFAS no.137). The Company is required to adopt SFAS No. 133 and SFAS no. 137 in the year ended September 30, 2001. These pronouncements establish methods of accounting for derivative financial instruments and hedging activities related to those instruments as well as other hedging activities. To date, the Company has not entered into any derivative financial instruments or hedging activities. 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". NOTE 2 -- GOING CONCERN 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 $15,155,249 at September 30, 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 additional capital through sales of common stock through the current operating cycle. There is no assurance that management will be successful in its efforts. NOTE 3 -- ACQUISITIONS 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 (MMDS) licenses in eight of the largest Argentine cities including Buenos Aires. The price was $1,500,000, made up of $900,000 in cash and $600,000 paid in 454,545 shares of company stock. Infotel also engages in telephone system integration and F-8 NOTE 3 -- ACQUISITIONS (continued) engineering projects. The minority interest in net loss is not recognized, because the Company anticipates being fully responsible for the subsidiaries losses. Impairment Loss The Argentine government has revoked all MMDS licenses, including those held by the Company's subsidiary, Infotel. The Company and Infotel have taken all prescribed steps in order to secure the re-issuance of the licenses, and talks are on-going with the appropriate Argentine government agencies. However, there is no guarantee that the licenses will be reissued to Infotel. Therefore, management is recognizing an impairment of the frequency licenses asset in the amount of the Company's investment of $1,500,000. Peru On February 29, 2000, the Company purchased 100% of Digital Way S.A., a Peruvian telecommunications company. The price was $1,300,000, made up of $400,000 cash and $900,000 paid in 181,100 shares of company stock. Digital Way S.A., holds MMDS licenses in the Lima-Callao area. It holds local and international long distance telephone licenses. India In June 2000, the Company entered into an agreement with a group of Indian businessmen to establish a joint venture, World Wide Wireless Communications (India) Ltd., to establish fixed wireless data service in India. A refundable deposit of $248,350 (shown as part of Deposits in Acquisitions) was posted with the Indian government as part of the process of applying for both frequency and internet service provider licenses. These license applications are pending. Thailand In May 2000, the Company entered into a joint venture with World Star T.V. Communication Co. Ltd. (WSTV), a Thai corporation, to provide fixed wireless data services in Thailand. WSTV currently owns frequency licenses in Bangkok and other major areas in Thailand. As of September 30, 2000, $146,662 has been invested, and is shown as part of Deposits in Acquisition. In August 2000, the Company entered into a Letter of Intent with E-Z Net Co. Ltd. of Bangkok for E-Z Net to provide internet service provider services to the new joint venture. The required governmental approvals are pending. 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 provided that the purchase was conditioned upon the company's acquisition of certain licenses, and the occurrence of certain other conditions that were not met. As a result, the Company has entered into an agreement for the refund of the advance payment. The Company has received $500,000, and is scheduled to receive the remainder in January 2001. This amount is shown as an account receivable and is secured by a bank letter of credit. Pro Forma Data The following pro forma data is presented on a combined basis, as if Infotel Argentina S.A. and Digital Way S.A.(Peru) had been acquired at the date of their formation, January 18, 1999 and March 28, 1999, respectively: F-9 NOTE 3 -- ACQUISITIONS (continued) September 30, 2000 1999 ---- ---- Total Assets $ 9,703,562 $ 1,472,125 Total Liabilities 7,633,671 979,553 Total Shareholders Equity 2,069,891 3,492,572 For the Year Ended September 30, 2000 1999 ---- ---- Revenues $ 671,907 $ 135,690 Expenses 9,010,946 2,479,874 ----------- ----------- Net (Loss) $(8,339,039) $(2,344,184) Basic and Diluted Loss Per Share (0.10) (0.04) NOTE 4 -- COMMITMENTS AND CONTINGENCIES 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. 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. Under terms of the settlement agreement, the Company also has option to purchase the Concord and San Marcos leases for a price of $250,000 each, less lease payments already made. The Company elected to exercise the option to purchase the Concord lease, and the appropriate transfer procedure has been initiated with the U.S. Federal Communications Commission (FCC). The Company believes that under current FCC regulations it is not required to pay the $250,000 purchase price until such time as the FCC has approved the transfer of the license. 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 6, 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. Credit Bancorp notified the Company that it wants to convert the debentures into common stock. As of December 2000, the Company has not issued the securities. F-10 NOTE 4 -- COMMITMENTS AND CONTINGENCIES (continued) 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, 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, 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 multi-point distribution service and multi-channel multi-point 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, 2000, the minimum annual rental is $42,000 per fiscal year ending September 30, 2001 through 2004. The company has based eight Instructional Television Fixed Service channels for use as MMDS channels from the Shekinah Network, as described more fully in Note 5 below. These leases provide for a monthly lease fee of 5% of gross system receipts, with a minimum of $500 per channel. The minimum aggregate annual fee is $60,000 per fiscal year ending September 30, 2001 through 2004. Administrative The Securities and Exchange Commission (SEC) commenced an informal inquiry of the Company in August 2000. Management has voluntarily complied with their requests for information and intends to fully cooperate with the inquiry. F-11 NOTE 4 -- COMMITMENTS AND CONTINGENCIES (continued) Rents paid for fiscal years ended September 30, 2000 and 1999 are as follows: 2000 1999 ---- ---- Former office location, San Francisco $ - $ 22,341 Current office location, Oakland 128,460 38,814 Current office location, Concord 22,412 - Distribution service channel leases 98,110 21,300 Transmission sites 85,501 42,000 --------- --------- Total $ 334,483 $ 124,455 ========= ========= The minimum annual rentals under current lease obligations for future fiscal years ended September 30 are as follows: 2001 2002 2003 2004 Remainder ---- ---- ---- ---- --------- Office location, Oakland $128,460 $128,460 $128,460 $ 74,935 None Office location, Concord 23,916 23,916 13,951 None None Distribution service channel leases 69,600 60,000 60,000 60,000 None Transmission sites 42,000 42,000 42,000 42,000 None -------- -------- -------- -------- Total $263,976 $254,376 $244,411 $176,936 None NOTE 5 -- STOCKHOLDERS EQUITY During the fiscal year ended September 30, 2000, the Company sold 11,548,745 shares of its common stock for net cash proceeds of $6,652,699. The company issued 2,598,602 shares of its common stock for services at an aggregate value of $1,142,445. Stock issued for services was at the cash price for the shares at the time of issuance. The Company issued 470,373 shares of its common stock for the acquisition of subsidiaries at an aggregate value of $1,500,000. Stock issued for assets was at the cash price for the shares at the time of issuance. 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. The Company also 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. NOTE 6 -- OPTIONS ON FREQUENCY LICENSES 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 F-12 NOTE 6 -- OPTIONS ON FREQUENCY LICENSES (continued) 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. 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 7 -- INCOME TAXES A reconciliation between the actual income tax benefit and the federal statutory rate follows: Fiscal years ended September 30, 2000 1999 ---- ---- Amount % % % ------ - - - Computed income tax benefit at statutory rate $ 2,848,407 (34)% $ 810,332 $(34) Operating loss with no current tax benefit (2,848,407) (34)% ($810,332) (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 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: 2000 1999 ---- ---- Net operating loss carryforwards $ 14,999,561 $ 6,759,141 Valuation allowance (14,999,561) (6,759,141) ----------- ---------- Net deferred tax assets None None NOTE 8 -NET LOSS PER COMMON SHARE Net loss per common share, basic and diluted, has been computed using weighted average common shares outstanding. The effect of outstanding stock options and warrants has been excluded from the dilutive computation, as their inclusion would be anti-dilutive. F-13 NOTE 8 -NET LOSS PER COMMONS SHARE (continued) Fiscal Year Ended September 30, 2000 1999 ---- ---- Net Income (Loss) $(8,397,268) $(2,383,330) =========== =========== Weighted average number of common shares 81,656,614 56,113,645 =========== ========== Basic and diluted loss per share $ (0.10) $ (0.04) =========== =========== The following common stock equivalents have been excluded from the dilutive computation, as their inclusion would be anti-dilutive. Stock Options 3,750,000 2,950,000 Convertible warrants 3,600,000 - ----------- ----------- 7,350,000 2,950,000 =========== =========== NOTE 9 - 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, 2000 and 1999 are as follows: 2000 1999 ---- ---- Average Average Number of Exercise Number of Exercise Shares Price Shares Price Options outstanding October 1 500,000 0.095 - - Granted - - 500,000 0.095 Cancelled/Expired - - - - Exercised - - - - ------------------------------------------ Options outstanding, September 30 500,000 0.095 500,000 0.095 ======= ===== ======= ===== 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. All such options are being treated as nonstatutory stock options until the incentive stock plan is approved by the shareholders. Combined transactions in employee options for the fiscal years ended September 30, 2000 and 1999 are as follows: F-14 NOTE 9 - STOCK OPTION PLANS (continued) 2000 1999 ---- ---- Average Average Number of Exercise Number of Exercise Shares Price Shares Price Options outstanding October 1 2,450,000 $0.095 800,000 $0.095 Granted 1,600,000 1.125 1,650,000 0.095 Cancelled/Expired (800,000) 0.095 - - Exercised - - - - ------------------------------------------- Options outstanding, September 30 3,250,000 0.602 2,450,000 0.095 ========= ====== ========= ====== 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 2000 or 1999. 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: 2000 1999 Net loss: $(8,396,108) $(2,383,330) =========== ========== Pro forma $(8,391,562) $(2,441,575) =========== =========== Basic and Diluted loss per share: As reported $ (0.10) $ (0.04) =========== =========== Pro forma $ (0.10) $ (0.04) =========== =========== The fair value of each option granted is estimated on the grant date using the Black-Scholes model. The following assumptions were made in estimating fair value: Assumption Plans Dividend yield 0% Risk-free interest rate 7% Expected life 5 years Expected volatility 97% NOTE 10 - SEGMENT INFORMATION September 30, 2000 ------------------ USA Argentina Peru Total Assets $ 9,691,532 $ 544,692 4494,430 Total Liabilities & Minority Interest 7,170,914 485,492 764,273 Total Shareholders Equity 2,520,617 59,200 (269,843) For the Year Ended September 30, 2000 ------------------------------------- Revenue 2,903 521,343 - Cost of Sales - 336,717 - ---------- -------- -------- Gross Profit 2,903 184,626 - Expenses 7,875,836 (360,426) 274,926 ---------- -------- -------- Net Loss $(7,875,836) $(175,800) $(274,926) F-15 NOTE 11 - SECURITIES PURCHASE AGREEMENT 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 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 amount 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 warrant and conversion of the subordinated debentures and series A preferred stock. On August 10, 2000, the Company agreed with the investors to modify certain terms of the earlier funding agreement. Under the new terms of this agreement, the Company issued an additional 1,368,000 shares of common stock to the investors, in exchange for $1,920,000 and the investors' forbearance of certain rights under the original agreement. The conversion price of the subordinated debentures was amended to the lesser of 110% of the average per share market value for the five consecutive trading days immediately preceding the original issue date, and 85% of the average per share market value for the five consecutive trading days immediately prior to the conversion date. The Company also agreed to change the floor price to $1.00 for the period between August 10, 2000 and October 14, 2000, $0.64 from the period between October 14, 2000 and April 14, 2001, and zero thereafter. Notwithstanding these changes, under this amendment, if the Company's revenues for fiscal year 2000 fall below $13.5 million, then the floor price will be zero as of April 1, 2001. Furthermore, the exercise price of the warrants to purchase the Company's shares was changed to $2.00. After September 30, 2000, the Company reached an agreement with the investors amending the original securities agreement and the first amendment thereto. In exchange for a waiver by the investors for any breach of the original agreement and the first amendment, the Company agreed to increase the principal amount of the debentures by $2,128,000, and to issue an additional four million restricted shares of common stock to them. Under this agreement, the investors may convert the debentures at a conversion price equal to the lesser of $.64 and an amount equal to 85% of the average of the closing trading prices of the common stock for the five consecutive trading days immediately prior to the conversion. At no time shall the conversion price be below the floor price. The floor price is $.64 for the period between October 1, 2000 and October 14, 2000, $.50 for the period between October 14, 2000 and September 1, 2001, and zero thereafter. However, if the Company's aggregate revenue for the last three quarters of the year 2000 and the first quarter of the year 2001 is less than $13.5 million, then as of May 14, 2001, the floor price shall be zero. Under the amended agreement, the Company reserves the right to redeem the debentures if the per share market value of the common stock is less than $1.00. The redemption price is calculated at 120% of the principal amount, and 100% of the unpaid interest accrued on those debentures being redeemed. Pursuant to the most recent amended agreement, the Company must file a SB-2 registration statement on December 15, 2000 which must be made effective by May 15, 2001. If the Company fails to abide by these amendments, the Company will be required to pay certain liquidated damages. F-16 EX-10.22 2 0002.txt AMENDMENT AMENDMENT AMENDMENT dated August 10, 2000 (the "Amendment") to the Securities Purchase Agreement dated April 14, 2000 (the "Purchase Agreement") and related Transaction Documents (as defined in the Purchase Agreement) between World Wide Wireless Communications, Inc. (the "Company") and each of: 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." All capitalized terms not otherwise defined herein shall have the meaning ascribed to such terms in the Purchase Agreement. WHEREAS, the Purchasers desire to continue their investment in the Company as contemplated by the Purchase Agreement as amended hereby; and WHEREAS, the Purchasers have made certain concessions to the Company in respect of their rights and the Company's obligations under the Transaction Documents; and WHEREAS, the Company wishes to obtain the additional financing contemplated by the Purchase Agreement under the terms of the Transaction Documents as amended hereby, NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein, and for other good and valuable consideration, the adequacy and receipt of which are hereby acknowledged, the Company and each Purchaser hereby restate their respective representations, warranties and covenants as contained in the Transaction Documents as of the date hereof and agree to amend the Transaction Documents as follows: 1. August 10, 2000 (the "Amendment Closing Date") shall be the Subsequent Closing Date for all purposes under the Transaction Documents and upon the purchase of the securities contemplated by this Amendment, the Purchasers shall have no further obligation to purchase securities from the Company. 2. Talbiya B Investments Ltd. is hereby joined as a Purchaser to the Securities Purchase Agreement, as amended hereby and as a Purchaser to the Registration Rights Agreement, as amended hereby. 3. The total number of shares of Common Stock to be issued and delivered by the Company to the Purchasers pursuant to the Purchase Agreement shall be 2,128,000 of which 760,000 were the Initial Shares issued and delivered on the Initial Closing Date, 760,000 shall be shares issued and delivered by the Company on the Amendment Closing Date in consideration of the Purchasers' forbearance of their rights under the Transaction Documents (the "Consideration Shares") and 608,000 shall be Additional Shares issued and delivered by the Company on the Amendment Closing Date. The Consideration Shares shall for all purposes under the Transaction Documents (other than with respect to the consideration payable to the Company in respect of such shares) be Additional Shares subject to all the representations and warranties, and rights and obligations of the parties pertaining to Additional Shares. The number of Consideration Shares, Additional Shares, Convertible Securities and Additional Warrants to be issued and delivered to each Purchaser and the Additional Purchase Price payable therefor is identified on Schedule 1 (the "Amended Schedule 2") attached hereto, which Amended Schedule 2 shall supersede and replace Schedule 2 to the Purchase Agreement. 4. The definition of "Effectiveness Date" in the Registration Rights Agreement is hereby deleted and replaced with: ""Effectiveness Date" means September 8, 2000." Each Purchaser hereby waives any remedies which may have accrued in favor of such Purchaser against the Company as a result of the Company's failure to comply, prior to the Amendment Closing Date, with the provisions of Section 7(e)(A) of the Registration Rights Agreement. Notwithstanding the foregoing, if the Company does not comply with the provisions of Section 7(e)(A) after the Amendment Closing Date giving effect to the additional time given to the Company as a result of the amended "Effectiveness Date," (i) such waiver shall be of no further force and effect and (ii) all the rights and remedies available to the Purchasers shall be based upon the unamended Effectiveness Date. 5. Paragraph 4(c)(i) of the Debentures (including those issued on the Initial Closing Date and those to be issued on the Amendment Closing Date) shall be amended and restated as follows: "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 $1.00 for the period beginning on August 10, 2000 and ending on October 14, 2000, $0.64 from the period beginning on October 14, 2000 and ending on April 14, 2001, 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 (such revenues shall be presumed to be less than 13.5 million in the event the Company does not file a Form 10-K by March 31, 2001), then from and after April 1, 2001 the Floor Price shall be zero." On the Amendment Closing Date, the Company shall issue and deliver to each Purchaser a new Debenture certificate (in the same principal amount issued to such Purchaser on the Initial Closing Date) reflecting the foregoing amendment with an Original Issue Date (as defined therein) of April 14, 2000. 6. The definition of "Warrant Price" in the Warrants issued by the Company on the Initial Closing Date is hereby deleted and replaced with: ""Warrant Price" means a price equal to $2.00, as such price may be adjusted from time to time as shall result from the adjustments specified in Section 4 hereof." The Company shall issue and deliver to each Purchaser on the Amendment Closing Date new certificates for the Warrants (in the amounts issued to such Purchaser on the Initial Closing Date) reflecting the foregoing amendment with an Original Issue Date (as defined therein) of April 14, 2000. 7. The form of Certificate of Designations attached to the Purchase Agreement shall be superseded and replaced by the Amended Form of Certificate of Designations attached hereto as Exhibit A. -2- 8. The Company shall pay the reasonable fees and expenses of Stroock & Stroock & Lavan, counsel for the Purchasers, in connection with the negotiation and performance of this Amendment. 9. As a condition precedent to the obligations of the Purchasers under this Amendment (including payment of the Additional Purchase Price), the Company shall have delivered to the Purchasers an opinion from counsel to the Company addressed to the Purchasers, in form and substance satisfactory to the Purchasers, in respect of (i) the Company's authority to execute and deliver this Amendment, (ii) the enforceability this Amendment, (iii) the enforceability of the Transaction Documents (as amended hereby) to which the Company is a party, and (iv) such other customary legal matters as the Purchasers shall request. All provisions of the Transaction Documents, except as amended herein, shall continue in full force and effect. This Amendment 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. -3- IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized persons as of the date first indicated above. WORLD WIDE WIRELESS COMMUNICATIONS, INC. By:____________________________________ Name: Title: ESQUIRE TRADING & FINANCE, INC. By:____________________________________ Name: Title: AMRO INTERNATIONAL, S.A. By:____________________________________ Name: Title: CELESTE TRUST REG. By:____________________________________ Name: Title: -4- THE ENDEAVOR CAPITAL FUND, S.A. By: Endeavor Management, Inc. By:___________________________ Name: Title: THE KESHET FUND, L.P. By:____________________________________ \ Name: Title: KESHET, L.P. By:____________________________________ \ Name: Title: NESHER, LTD. By:____________________________________ Name: Title: TALBIYA B. INVESTMENTS LTD. By:____________________________________ Name: Title: -5- SCHEDULE 1 Amended Schedule 2 to the Securities Purchase Agreement Schedule 2 Purchasers
- ------------------- ----------------------- --------------- ---------------- ----------------- ------------ ---------- Number of Number of Principal Amount Number of Portion Name of Purchaser Address of Purchaser Additional Consideration or Stated Value Additional of Shares Shares of Additional Warrants Additional Convertible Purchase Securities, if Price applicable - ------------------- ----------------------- --------------- ---------------- ----------------- ------------ ---------- Esquire Trading & Schutzengelstrasse 36 132,000 140,000 $248,000 285,000 $380,000 Finance Inc. Baar, Switzerland CH6342 Fax No.: 041-7601031 Amro c/o Ultra Finance Ltd. 300,000 300,000 $600,000 675,000 $900,000 International S.A. Grossmuenster Platz 26, P.O. Box 4401 Zurich, Switzerland CH8022 Celeste Trust Reg. c/o 116,000 120,000 $224,000 255,000 $340,000 Trevisa-Treuhand-Ansalt Landstrasse 8 9496 Furstentums Balzers, Liechtenstien The Endeavor 14/14 Divrea Chaim 0 150,000 $0 0 0 Capital Fund, Street S.A. Jerusalem 94479, Israel Fax No.: 011-972-2-5824443 Nesher, Ltd. c/o Ragnall House 8,000 10,000 $32,000 30,000 $40,000 18 Peel Road Douglas, Isle of Man 1M1 4L2, United Kingdom Keshet, L.P. Seameadow House 20,000 25,000 $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 12,000 15,000 $48,000 45,000 $60,000 L.P. 135 W. 50th Street Suite 1700 New York, NY 10020 Talbiya B. Ragnall House, 18 20,000 0 $80,000 75,000 $100,000 Investments Ltd. Peel Road, Douglas, Isle of Man IM1 4LZ Total: 608,000 760,000 $1,312,000 1,440,000 $1,920,000 ======= ======= ========== ========= ==========
EXHIBIT A AMENDED FORM OF CERTIFICATE OF DESIGNATIONS 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 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 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 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 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. (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 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 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 $1.00 for the period beginning on August [__], 2000 and ending on October 14, 2000, $0.64 from the period beginning on April 14, 2000 and ending on the eighteen month anniversary of the Initial Closing Date (as defined in the Securities Purchase Agreement), 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 April 14, 2001 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 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 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 Fixed 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 shares of Series A Preferred Stock held by such holder. In the 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 Fixed 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 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 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. (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. 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 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: "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 14, 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, the OTC Bulletin Board 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, the OTC Bulletin Board 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 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 14, 2000, as amended as of August [__], 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. "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. 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. [the rest of this page intentionally left blank] 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: ______ ___, 2000 -------------------------------- Name: Title: -------------------------------- Name: Title: ATTEST: ---------------------------------- Name: Title: 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):____________________________________________________________ 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: EX-10.24 3 0003.txt PERSONAL GUARANTEE PERSONAL GUARANTEE This Personal Guarantee (hereinafter referred to as the "Guarantee") is executed by Mr. Neelam Kumar Oswal, s/o Mr. Vidhya Sagar Oswal, r/o/ 396, Maharani Jhansi Road, Ludhiana, Punjab, India (hereinafter referred to as the "Guarantor") which expression shall, unless repugnant to the context or meaning thereof deemed to include his successors, heirs and permitted assigns. IN FAVOUR OF WORLD WIDE WIRELESS COMMUNICATION INC., a Nevada corporation having its registered office at 520- 3rd St., Suite 101, Oakland, California 94607, United States Of America (hereinafter referred to as "WWW") which expression shall, unless repugnant to the context or meaning thereof deemed to include its successors in business and permitted assigns. WHEREAS, WWW and the Guarantor have entered into a Shareholders Agreement dated August 17,2000 (hereinafter referred to as "SHA") for combining their efforts to provide high speed (fixed and wireless) broadband internet and related services to customers in India ("Services") through an Indian Company (hereinafter referred to as the "Joint Venture Company" or "JVC") incorporated under the name World Wide Wireless (India) Limited. WHEREAS, pursuant to Article 4.5 of the SHA, WWW has agreed to provide a bank guarantee for a sum of Rs.20,000,000/- (Rupess twenty million only) ("Guarantee Amount") to the Department of Telecom to enable the JVC to obtain the Internet Service Provider ("ISP") license for providing the Services in the territory classified as Category --A in the policy of the Government of India related to ISP's. WHEREAS, under Article 4.5 of the SHA Guarantor has agreed to secure the Guarantee Amount by giving a personal Guarantee to WWW and has agreed to pay the Guarantee Amount (Rs.20,000,000/- ) unconditionally to WWW upon receiving a notice of demand from WWW. NOW THIS DEED OF GUARANTEE, witnesses as follows: 1. The Guarantor do hereby unconditionally undertakes to pay to WWW in US Dollars an amount equivalent to the Guarantee Amount of Rs.20,000,000/- (Rupess twenty million only), in the event the JVC is not granted the License and the Frequency License (as defined in the SHA) by February 16, 2001, notwithstanding whether or not the Department of Telecom invokes or encashes the guarantee provided by WWW. 2. The Guarantor do hereby undertakes to pay to WWW the Guarantee Amount due and payable under the Guarantee without any demur, protest, correctly on demand to be made upon him by WWW in respect of the Guarantee Amount claimed which would be due to non-fulfillment of the terms, conditions and obligations embodied under the SHA. 3. Be it declared and confirmed that any demand made on the Guarantor by WWW under this Guarantee shall be conclusive and final as regards the Guarantee Amount due and payable by the Guarantor under these presents PROVIDER HOWEVER that the liability of the Guarantor shall be restricted to Guarantee Amount { not exceeding Rs. 20,000,000/- (Rupess twenty million only )} covered by this Guarantee. 4. The Guarantor do hereby further agree that the guarantee herein contained shall remain in full force and effect up to February 16, 2001 or such extended period as may be agreed between WWW and Guarantor in writing considering a period that would be taken for the fulfillment of his obligations under the SHA and this shall continue to be enforceable till all the dues and /or claims of WWW have been duly and satisfactorily met and performed in full by the Guarantor and accordingly the WWW discharges this Guarantee. 5. The Guarantor do hereby undertakes and agrees that this is an unconditional and irrevocable guarantee and undertakes not to revoke this Guarantee during its currency. IN WITNESS WHEREOF, the Guarantor has signed this Guarantee on the ______ day of August, 2000. N.K. Oswal S/o Mr. Vidhya Sagar Oswal R/o 396, Maharani Jhansi Road, Ludhiana (Punjab) India Witnesses: 1. 2. WHEREAS WWW is an internationally recognized provider of high speed (fixed and wireless) broadband internet and related services with a significant global presence and has over the years developed expertise in the same; WHEREAS the INDIAN PARTNER and WWW are desirous of combining their efforts to provide high speed (fixed and wireless) broadband internet and related services to customers in India (hereinafter referred to as the "Services") and accordingly the Parties have agreed for a joint participation through an Indian company (hereinafter referred to as the "Joint Venture Company" or "JVC") incorporated under the name World Wide Wireless (India) Limited. The INDIAN PARTNER had taken care of the responsibility of incorporating the JVC and has incorporated the same through its nominee(s); WHEREAS the Parties have agreed to participate in the ownership, management and operation of the JVC and desire to set out in writing their understanding in relation thereto and their rights and obligations inter se; and WHEREAS the Parties have therefore set forth in this Agreement the terms, conditions and covenants governing their joint participation in the JVC. NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, the Parties agree as follows: 2 1. DEFINITIONS AND INTERPRETATION 1.1 In this Agreement, unless the subject or the context otherwise requires, the following words and expressions shall have the following meanings: "Act" shall mean the Companies Act, 1956, and includes where the context so requires any re-enactment or statutory modifications thereof for the time being in force. "Affiliate(s)" shall mean with respect to any Party to this Agreement any entity which controls, is controlled by, or is under common control with such Party. An entity controls another entity when it owns or controls, directly or indirectly, fifty-one percent (51%) or more of the equity share capital issued and outstanding of the other entity or when it controls the composition of the majority of the Board of Directors of such other entity. "Agreement" or "this Agreement" shall mean this Shareholders' Agreement along with all attachments annexed hereto and shall include any modifications, alterations, additions or deletions thereto made in writing after the date of execution of this Agreement. "Approval(s)" shall mean Government of India permissions, consents, validations, confirmations and other authorizations required to be obtained in order to implement the provisions of this Agreement including all permissions and/or registrations from the Reserve Bank of India and/or other authorities. "Alternate Director" shall mean the director appointed in terms of Article 6.1.4 herein to act for a director during his absence for a period of not less than three (3) months from the State in which meetings of the Board are ordinarily held and such Alternate Director shall not hold office as such for a period longer than that permissible to the director in whose place the Alternate Director has been appointed and shall vacate office if and when the director returns to the State in which meetings of the Board are ordinarily held. "Articles" or "Articles of Association" shall mean the Articles of Association of the JVC. "Board" or "Board of Directors" shall mean the Board of Directors of the JVC. "Distributable Profits" shall mean the profits derived after providing for depreciation, tax or any other charge against the profits. "Effective Date" means the date on which all the conditions precedent under Article 11 have been fulfilled to the satisfaction of WWW. "FIPB" shall mean the Foreign Investment Promotion Board constituted under the auspices of the Ministry of Commerce and Industry, Government of India. "Finder" shall mean Mr. Bob Thornton r/o 1251, Cardeno, Vancouver BC, Canada. "Frequency Licenses" shall mean the license to use the 28 MHz up and 28 MHz down MMDS frequency with a minimum separation of 60 MHz and preferably 100 MHz or such other frequency in accordance with the National Allocation Frequency Plan, 2000 (as amended from time to time) issued by the Ministry of Communications, subject to the satisfaction and business requirements of WWW, for providing the Services to customers in India. 3 "General Meeting" shall mean the duly convened meeting of the shareholders of the JVC. "Joint Venture Company" or "JVC" shall mean the company incorporated under the Act with the name `World Wide Wireless (India) Limited'. "License" shall mean and include the Internet Service Provider ("ISP") license for providing the Services in the territory classified as Category-A in the policy of the Government of India regarding ISP's. "Memorandum" or "Memorandum of Association" shall mean the Memorandum of Association of the JVC. "Parties" shall mean WWW and the INDIAN PARTNER collectively and the term "Party" shall individually refer to WWW or the INDIAN PARTNER. "RBI" shall mean the Reserve Bank of India. 1.2 In this Agreement, headings are for convenience only and shall not affect its interpretation. 1.3 Where a word or phrase is defined, other parts of speech and grammatical forms of that word or phrase shall have corresponding meanings. 1.4 Any reference to a part, clause, exhibit, article, annexure, appendix and schedule shall be construed as a reference to a part, clause, exhibit, article, annexure, appendix and schedule of this Agreement, and reference to this Agreement includes an exhibit, annexure, appendix and schedule attached to this Agreement. 2. MEMORANDUM AND ARTICLES OF ASSOCIATION 2.1 It is the understanding between the Parties that their rights and obligations in the JVC including the operation and management of the JVC shall be interpreted, acted upon and governed in accordance with the terms and conditions of this Agreement. 2.2 The Parties agree that the Memorandum and the Articles of the JVC shall, inter alia, to the extent possible, incorporate and reflect the understanding contained in this Agreement. 2.3 It is expressly agreed that whether or not the Memorandum and the Articles fully incorporate the stipulations hereof or any of them, the Parties' rights and obligations inter se shall be governed by this Agreement and shall prevail in the event of any ambiguity or inconsistency between the two. 3. JOINT VENTURE COMPANY 3.1 The INDIAN PARTNER has represented that the JVC, World Wide Wireless India Ltd., having its registered office at IIIrd Floor, Nego Complex, Pokhowal Road, Gurdev Nagar, Ludhiana, Punjab, has been incorporated as a public limited company. The INDIAN PARTNER has agreed to convert the JVC into a private limited company at the earliest possible date after the execution of this Agreement. 4 3.2 The JVC shall be run as an independent company based on usual commercial practices subject to any directions which may from time to time be given by the Board of Directors in accordance with the spirit of this Agreement. 3.3 The Parties agree that it will be their endeavor and that they shall use best efforts to build a good image for the JVC. The Parties will develop the JVC to enable it to provide the quality and level of services which are equivalent to the quality of the services provided by WWW in overseas markets. 4. CAPITAL AND PARTICIPATION 4.1 Capital 4.1.1 It is acknowledged that the existing authorized share capital of the JVC is Rs.10,000,000/- (Rupees ten million) comprising 1,000,000 (one million) equity shares of Rs. 10/- (Rupees ten) each. It is agreed that the authorized share capital of the JVC would be increased to Rs. 250,000,000/-(Rupees two hundred and fifty million) divided into 25,000,000_ (twenty five million) equity shares of Rs. 10/- (Rupees ten) each within a period of six (6) months from the execution of this Agreement, or within such extended period as the Parties may mutually decide. 4.2 Shareholding Pattern and Contributions 4.2.1 Unless otherwise agreed by the Parties in writing, the shareholding of the JVC shall be held in the following proportion: INDIAN PARTNER and his nominee(s): 51% WWW or its nominee(s) 49% It is agreed that the Parties shall ensure that the nominee(s) appointed by each Party shall be bound by and shall abide with the terms and conditions of this Agreement. In the event of a change in the policy of the Government of India permitting WWW to increase its shareholding, WWW shall have the right to increase its shareholding to 51% in the JVC. In the event of WWW exercising the aforesaid right to increase its shareholding in the JVC, the Indian Partner undertakes to take all steps necessary and required to enable WWW to increase its shareholding in the JVC including making necessary filings with the concerned Government authorities as well as providing no objection letters. It is also agreed that the voting rights of the Parties will be in proportion to their respective shareholding and on poll each equity share will have one vote. 4.2.2 Since the JVC has been incorporated by the INDIAN PARTNER with his nominees as the shareholders, it is agreed that out of the existing paid up share capital of 700 (seven hundred) shares of Rs. 10/- (Rupees ten) each total amounting to Rs. 7,000/- (Rupees seven thousand), the INDIAN PARTNER (either singularly or through his nominees) shall hold 353 (Three hundred fifty three) shares of Rs. 10/- (Rupees ten) each, representing fifty one percent (51%) of the total paid-up share capital and WWW on its own or through its nominees shall acquire 347 (Three hundred forty seven) equity shares of Rs. 10/- (Rupees ten) each representing forty 5 nine percent (49%) of the total paid-up share capital of the JVC for a total consideration of Rs. 3,470 (Rupees three thousand four hundred and seventy).ideration of Rs. 3,470 (Rupees three thousand four hundred and seventy). 4.2.3 It is agreed between the Parties that subject to the INDIAN PARTNER obtaining the License as well as the Frequency Licenses, WWW shall remit a maximum amount of US$ 2,800,000 (US Dollar two million eight hundred thousand only) ("the Maximum Amount") in installments to the JVC. The amount to be paid as each installment would be determined as per the Schedule- I annexed hereto. 4.2.4 (a) The obligation of WWW to invest the first installment in the JVC out of the Maximum Amount as mentioned in Article 4.2.3 shall arise only after the INDIAN PARTNER has obtained the License and the Frequency Licenses in respect of the following cities on or prior to the Effective Date: 1. Delhi 2. Mumbai 3. Chennai 4. Bangalore 5. Ludhiana (b) Thereafter, the installments out of the Maximum Amount mentioned shall be invested by WWW in the JVC as per Schedule I on procurement of Frequency Licenses by the INDIAN PARTNER. (c) It is agreed between the Parties that WWW (AT shall bear the actual incorporation expenses of the JVC amounting to Rs. 180,000/- (Rupees one hundred eighty thousand) as has been incurred by the INDIAN PARTNER. 4.2.5 That it is agreed between the Parties that after the acquisition of the initial 347 (three hundred forty seven) shares by WWW or its nominees in accordance with Article 4.2.2, upon any investment made by WWW in the JVC, the JVC shall issue equity shares to WWW and/or its nominees against such amount invested by WWW. The equity shares so issued to WWW and/or its nominees shall be equivalent to 49% of the paid-up capital of the JVC. In addition to the issue of equity shares by the JVC to WWW and/or its nominees, the JVC shall correspondingly issue fully paid-up equity shares as sweat equity, amounting to 51% of the paid-up capital of the JVC, to the INDIAN PARTNER or his nominees for his efforts in obtaining the License and the Frequency Licenses. 4.2.6 The aforesaid mechanism of contributing to the capital and subscribing to the equity shares of the JVC would continue till such time the paid-up share capital of the JVC reaches the rupee equivalent of US$ 5,800,000 (US Dollars five million eight hundred thousand only). 4.2.7 In the event of the JVC requiring any further funds after the paid-up share capital reaching the rupee equivalent of US$ 5,800,000 (US Dollars five million eight hundred thousand only), WWW shall make all contributions in a manner other than capital contribution such that the shareholding remains as per Article 4.2.1. However, in the event of the JVC procuring Frequency Licenses in respect of cities in addition to those specified in Schedule -- I, all investments towards the build out costs in respect of the infrastructure and equipment required by the JVC for such cities shall be funded by the Parties in proportion to their respective shareholding. 6 4.2.8 Notwithstanding the other provisions of this Agreement, if at any stage in the future, after the Frequency Licenses for the twenty one (21) cities mentioned in Schedule -- I annexed hereto are obtained and the built out in respect thereto is substantially completed, the JVC decides to increase its paid-up share capital by inviting capital contribution, the Parties will subscribe to fresh equity in the JVC in proportion to their shareholding. In the event either Party fails to subscribe to the equity, the other Party, subject to the necessary Approval(s), if any, shall have the first right to subscribe to and acquire such unsubscribed equity either by itself or through an Affiliate or nominee. The Parties agree that at the time of closure of any issue of subscription of shares, the Party not subscribing to the equity (in full or in part) issued to it shall undertake all steps necessary and required to enable the other Party to subscribe to the unsubscribed portion of the equity of the Party not so subscribing and to give full effect to the terms of this Article 4.2.8. In case of either Party so subscribing to the unsubscribed portion of equity of the other Party, such subscription shall be on the same terms and conditions as would be applicable to the Party not so subscribing. Further, in case WWW is not permitted to hold such shares due to Governmental regulations, it shall have a right to nominate a third party to subscribe to such shares. 4.3 Transfer of Shares 4.3.1 The Parties hereto shall not, except as specifically provided hereinafter, sell or transfer their shares in the JVC. Any purported sale or transfer of shares by either of the Parties not in accordance with this Article shall be deemed null and void and the JVC shall not register any such transfer or sale. 4.3.2 If at any time the INDIAN PARTNER desires to sell, transfer or otherwise dispose of any or all of his shares in the JVC, he shall offer such shares in the first instance by a notice in writing ("Offer Notice") to WWW who shall have the right of pre-emption to purchase all of such shares either itself or through its Affiliate(s) or nominee(s) at the price to be determined in accordance with Article 4.3.4. WWW may exercise its right of first refusal within a period of thirty (30) days after receipt of the Offer Notice. If WWW accepts the offer, the transfer of shares shall be completed within a period of sixty (60) days after the expiry of the aforesaid thirty (30) day period. In the event the offer is not accepted by WWW and or its Affiliate(s) or its nominee(s) within the said period, the INDIAN PARTNER shall be entitled to sell such shares to a third party within a period of sixty (60) days after the expiry of aforesaid thirty (30) days period at a price which is not lower than the price offered to WWW. 4.3.3 In the event WWW desires to sell, transfer or otherwise dispose of any or all of its shares of the JVC, it shall offer such shares by a notice in writing ("Offer Notice") in the first instance to the INDIAN PARTNER at a price to be determined in accordance with Article 4.3.4. Such offer must be accepted with a period of thirty (30) days from the date of the Offer Notice. If the offer is accepted, then the Parties shall proceed to complete the sale purchase transaction within a period of sixty (60) days after the expiry of the aforesaid thirty (30) day period. If the offer is not accepted by the INDIAN PARTNER, then WWW shall be entitled to sell such shares to a third party within a period of sixty (60) days at a price which is not lower than the price offered to the INDIAN PARTNER. 4.3.4 A Party shall offer its shares for sale/transfer under the aforesaid Articles at the fair market price which shall be determined in accordance with the relevant RBI guidelines by an 7 independent international accounting firm selected mutually by the Parties. In the event the Parties are unable to decide the independent international accounting firm, the price shall be determined by Arthur Andersen or Price Waterhouse Coopers. 4.3.5 If any transfer of shares under this Article is subject to the Approvals (including final approvals from the RBI), then such transfer shall not become effective until such Approvals have first been obtained. If such Approvals are required, the time period(s) as prescribed in the preceding paragraphs for the completion of the sale and purchase transaction(s) shall be extended by the number of days required for obtaining the Approvals. 4.3.6 In case of transfer of shares by either Party to any third party in pursuance of the above Articles, the following conditions will apply: i) Such third party shall enter into a deed of adherence agreeing to be bound by the provisions of this Agreement; and ii) Such third party shall be someone who, in the opinion of the Party not selling its shares, does not have a conflict of interest or is strategically incompatible or is otherwise unacceptable for good and sufficient reasons to the Party not selling its shares. Notwithstanding the restriction on transfer of shares stipulated hereinabove, WWW may transfer any of its shares to an Affiliate, without requiring the consent of the INDIAN PARTNER, provided that such an Affiliate shall also be bound by the provisions of this Agreement and shall execute a deed of adherence as mentioned above. Further, notwithstanding anything contained in Articles 4.3.1 to 4.3.6, the aforesaid restrictions shall not apply in the event of change in the ownership or control or constitution of WWW. 4.3.7 It is expressly agreed by the INDIAN PARTNER that in order to give effect to the provisions of Articles 4.3.1 to 4.3.6, they shall provide all necessary cooperation to WWW, including but not limited to assistance for obtaining the RBI/FIPB approvals. Further, the INDIAN PARTNER agrees to sign/execute/file any and all documents with the Government of India or its agencies, departments or any other third party to give effect to any transfer of shares in accordance with the provisions of this Agreement. 4.4 Pledge of shares 4.4.1 The Parties agree that the shares held by them shall not be pledged to a third party or otherwise encumbered during the term of this Agreement. In the event the pledge of shares of any Party is necessitated for the purposes of the JVC, such pledge will be made only with the prior written consent and on terms acceptable to the other Party. 4.5 Bank Guarantee 4.5.1 At the request of the INDIAN PARTNER, WWW has agreed to provide a bank guarantee or guarantee(s), as may be required by the Government of India, of an amount of Rs. 20,000,000/- (Rupees Twenty Million) ("Guaranteed Amount") to the concerned governmental authority(ies) for the purpose of procuring the License required by the JVC for providing the Services to customers. However, it is agreed by the Parties that the Guaranteed Amount shall not be more than Rs. 20,000,000/- (Rupees Twenty Million) in any event. 8 4.5.2 In the event the JVC is not granted the License and the Frequency Licenses in respect of the cities specified in Article 4.2.4(a), on the Effective Date or any extension thereof, the INDIAN PARTNER shall be obliged to pay in US Dollars an amount equivalent to the Guaranteed Amount to WWW, notwithstanding whether or not the Department of Telecom invokes or encashes the Bank guarantee provided by WWW. The INDIAN PARTNER agrees to take all necessary actions and procure all Approvals including RBI approvals to ensure that the Guaranteed Amount is refunded to WWW. In the event the RBI approvals are not forthcoming despite best efforts of the INDIAN PARTNER, the INDIAN PARTNER shall be under an obligation to transfer the Guaranteed Amount at the request of WWW to its nominee(s) in India. 4.5.3 Further, the INDIAN PARTNER agrees to secure the Guaranteed Amount by way of personal guarantee. However, the personal guarantee of the INDIAN PARTNER shall cease upon receipt of the Frequency Licenses in respect of the cities stipulated in Article 4.2.4(a). 5. NAME AND TRADE MARK OF THE JVC 5.1 Subject to the approval of the Registrar of Companies, and as per Article 3.1 hereinabove, the JVC shall be converted into a private limited company under the Act and the name shall be changed to "World Wide Wireless (India) Private Limited". 5.2 The Parties agree that since the name of the JVC includes the words [`World Wide Wireless'] and uses the trade mark of WWW, the said name and trade mark will be used only with the consent of and upon the terms stipulated by WWW, who shall have the right and option to require the words [`World Wide Wireless'] eliminated from the name of the JVC and surrender the trade mark, at any time. In the event WWW exercises such an option and instructs the JVC to delete the words [`World Wide Wireless'] from its corporate name and surrender the trade mark, the Parties agree to vote favorably both in the meetings of the Board through their respective nominee Directors, and in the meetings of the shareholders through their respective representatives/proxies in taking necessary and appropriate action and in meeting the requirements to delete the words [`World Wide Wireless'] from the corporate name of the JVC and surrender the trade mark. 5.3 The Parties agree to cause the JVC to enter into a Corporate Name and Trade Mark License Agreement with WWW granting the JVC the right to use the words [`World Wide Wireless'] and the trade mark upon the terms and conditions set out therein. 6. TECHNOLOGY TRANSFER AND SHARING OF PROFITS 6.1 Technology Transfer 6.1.1 WWW will provide the technical know-how, information and technology to the JVC, as may be required for providing the Services. The INDIAN PARTNER agrees that in the event of termination of this Agreement, he shall cause the JVC to return all documents pertaining to the technical know-how, information and technology and to desist from using the same. 6.1.2 Additionally, WWW will also provide the necessary plant, machinery and other equipment along with the incidental and ancillary spares and parts as may be necessary for the purpose of providing the Services. 9 6.2 Sharing Of Profits 6.2.1 It is agreed between the Parties that since WWW will make all capital expenditure and other investments in the JVC, WWW shall be entitled to seventy percent (70%) of the Distributable Profits of the JVC till such time all the capital expenditure and investment made by WWW is recovered. After the capital expenditure and investment made by WWW is recovered, the Distributable Profits of the JVC would be distributed among the Parties in proportion to their shareholding in the JVC. 6.2.2 The Parties agree to arrive at a mutually acceptable mechanism for giving effect to the aforesaid understanding. 7. BOARD OF DIRECTORS OF THE JVC 7.1 Directors 7.1.1 Unless otherwise agreed between the Parties, the Board of Directors of the JVC shall initially consist of five (5) directors. However, after the commencement of the commercial operation of the JVC, the Parties shall have a right to simultaneously nominate one whole time director each and increase the number of directors on the Board of Directors to seven (7). 7.1.2 WWW shall have three (3) nominee directors and the INDIAN PARTNER shall have two (2) nominee directors on the Board. It is further agreed between the Parties that out of the three (3) nominee directors of WWW, two (2) directors shall be whole time directors and out of the two (2) nominee directors of the INDIAN PARTNER, one (1) director shall be a whole time director. 7.1.3 The nominee directors shall hold office at the pleasure of the Party who nominated them and shall be subject to removal by the respective nominating Party. The Parties shall at all times, exercise their respective voting power to support each other in having the nominee director(s) appointed to or removed from the Board in accordance with this Article. 7.1.4 In the event any original director is away for a continuous period of not less than three (3) months from the State in which the registered office of the JVC is located, the Board of Directors shall appoint an Alternate Director for such original director. The person to be appointed as an Alternate Director shall be selected by the Party who had nominated the original director. 7.1.5 Any casual vacancy in the office of a director who is liable to retire by rotation, or for any other reason, may be filled by the Board of Directors provided however that the person to be appointed to fill the vacancy shall be a person nominated by the Party who had nominated the original director. 7.1.6 The representation of the Parties on the Board shall be in the proportion as may be decided by the Parties. It is agreed that in the event the shareholding of the INDIAN PARTNER or WWW reduces below fifty-one percent (51%) and forty-nine percent (49%), respectively, of the total paid-up equity capital, the representation of the nominees of the INDIAN PARTNER or WWW on the Board shall reduce in the following manner: 10 Shareholding of INDIAN PARTNER / WWW No. of nominees on the Board Less than 49% but more than 25% 2 (Two) 25% or less but not less than 10% 1 (One) Less than 10% 0 (Zero) 7.2 Proceedings of the Board 7.2.1 At least fourteen (14) clear days' notice of every meeting of the Board shall be given in writing to every Director. Such notice shall be accompanied by the agenda setting out the business proposed to be transacted at the meeting of the Board, provided however that with the consent of at least one (1) nominee director of WWW, a meeting of the Board may be convened by a shorter notice in case of an emergency or if special circumstances so warrant. Notice of all meetings of the Board shall also be given in writing to directors resident outside India by telex or facsimile transmission and confirmation copy by courier and a copy of such notice shall also be served at the address within India specified by such directors in writing to the JVC. 7.2.2 The quorum for a meeting of the Board shall be three (3) directors, provided that there shall be no quorum unless at least one (1) nominee director of WWW is present. If within half an hour from the time appointed for holding a meeting of a Board, a quorum as specified above is not present, the meeting of the Board shall stand adjourned by seven (7) days on the same day, time and place and if at such adjourned meeting of the Board, a quorum is not present within half an hour from the time appointed for holding the meeting of the Board, the directors present shall constitute a valid quorum provided at least one nominee director representing WWW is present. 7.2.3 The INDIAN PARTNER shall have the right to nominate the Chairman of the Board and WWW shall have a right to nominate the Vice-Chairman. The Chairman shall not have a second or casting vote. It is clarified that the Chairman will have the authority to represent the JVC before various Governmental authorities. 7.2.4 Subject to the provisions of the Act, a resolution by circulation shall be as valid and effectual as a resolution duly passed at a meeting of the Directors called and held in accordance with the provisions of Act and the Articles, provided it has been circulated in draft form, together with the relevant papers, if any, to all the Directors (then in India not being less in number than the quorum required) and has been approved by a majority of the Directors entitled to vote thereon provided always that such majority shall include an affirmative vote of at least one (1) nominee director of WWW. 11 7.3 Management 7.3.1 The JVC shall be managed by the Board of Directors who shall be responsible for making decisions relating to corporate policy on marketing, systems build out and expansion, management salaries, investments etc. 7.3.2 The Parties agree that there shall be two (2) Managing Directors in the JVC, one (1) to be appointed by each Party: 1. Managing Director (Finance/Administration/Legal) to be appointed by WWW. 2. Managing Director (Technical/Operations/Marketing) to be appointed by the INDIAN PARTNER. The Board shall, as far as permissible under the Act and subject to the terms and conditions of this Agreement, delegate the authority upon the Managing Directors to execute and implement the policies of the JVC and to take appropriate steps and measures for the effective management of the JVC. 8. PROCEEDINGS AT GENERAL MEETINGS 8.1 The quorum for a General Meeting shall be two (2) members present in person or through a duly authorized representative in case of a member which is a company, provided that there shall be no quorum unless one (1) representative of WWW is present. 8.2 If within half an hour from the time decided for holding a General Meeting a quorum as specified above is not present, the General Meeting shall stand adjourned by seven (7) days on the same day, time and place as provided by law and if at such adjourned General Meeting a quorum is not present within half an hour from the time decided for holding the General Meeting, the members present shall constitute a valid quorum provided at least one (1) representative of WWW is present. 8.3 The Chairman of the Board will be the Chairman of the General Meeting who shall not have a casting or second vote. 8.4 All matters discussed/proposed in the shareholders meeting shall not be adopted except upon the affirmative vote of the nominee of WWW. 9. UNDERTAKING OF THE PARTIES 9.1 The Parties jointly and severally undertake to ensure: i) that they, their representatives, proxies, agents and nominees representing them at General Meetings of the JVC shall at all times exercise their votes and through their respective nominee Directors (or Alternate Directors) at Board Meetings and, otherwise, act in such manner so as to comply with, and to fully and effectually implement the spirit, intent and specific provisions of this Agreement; and ii) that if any resolution is proposed contrary to the terms of this Agreement they, their representatives, 12 proxies and agents representing them shall vote against it. If for any reason such a resolution is passed, the Parties shall, if necessary, join together and convene an Extraordinary General Meeting of the JVC for implementing the terms of this Agreement. 10. RECORDS, REPORTS AND INSPECTION 10.1 Books and Records The Parties shall cause the JVC to maintain, in accordance with Indian laws, satisfactory financial accounting procedures and books and records which, in reasonable detail, accurately and fairly reflect its operations and transactions. The JVC shall also maintain a second set of books of accounts, accounting statements and accompanying reports in accordance with the international accounting standards applied within WWW. 10.2 Auditors The Parties agree that WWW and the INDIAN PARTNER shall jointly appoint the auditors of the JVC ("Auditors") from among the top five accounting firms of the world. 10.3 Audits An annual audit of the books of account, records and affairs of the JVC shall be made at the JVC's expense each year immediately following the close of the financial year by the Auditors. A signed copy of the report of the annual audit shall be submitted to each member of the Board of Directors. 10.4 Special Audit The Parties will have the right at any time to have a special audit of the books of account, records and affairs of the JVC but any special audit shall be at the expense of the Party requesting the same, unless material discrepancies in any of the JVC's accounts, records or affairs are discovered as a result of such audit, in which event the expenses for such audit shall be paid for by the JVC. 10.5 Right of Access Each Party through its nominated Directors or representatives shall at its own expense be entitled to have: i) reasonable access at all reasonable times to inspect and obtain copies of statutory records under the control of the JVC; ii) reasonable access at all reasonable times with prior notice to observe and inspect operations of the JVC; and iii) access to and right to make inquiry of employees of the JVC through the Managing Directors; and iv) The Managing Directors shall have the right of day to day access to verification (including verification by others on their/his behalf) of all financial, management accounting and other information relating to the JVC's activities and provide such information in such 13 form as each Party may reasonably require after taking appropriate steps where applicable to safeguard confidentiality vis-a-vis third parties. 10.6 Financial Statements The INDIAN PARTNER shall cause the JVC to deliver to WWW yearly financial statements in relation to the conduct of the affairs and activities of the JVC within forty-five (45) days after the expiration of each year. 11. CONDITIONS PRECEDENT 11.1 It is agreed between the Parties that prior to the commencement of the activities of the JVC, all the following conditions precedent must have been fully satisfied: i) The Approvals have been obtained; ii) The License has been obtained; iii) The Frequency Licenses have been obtained in respect of the cities stipulated in Article 4.2.4 (a); iv) Technical Collaboration Agreement has been executed between the JVC and WWW; and v) The Corporate Name and Trade Mark License Agreement has been executed between the JVC and WWW. 11.2 It is agreed that the INDIAN PARTNER will ensure the fulfillment of the conditions precedent by February 16, 2001 ("Effective Date") or such other date as may be mutually extended by the Parties in writing. 11.3 If any of the conditions referred to hereinabove are not fulfilled by the Effective Date, WWW in its sole discretion shall have the following options: i) If, in WWW's opinion, the conditions referred to in Article 11.1 are likely to be satisfied in the near future, allow an additional period of time to the INDIAN PARTNER to cause the JVC to fulfill the conditions; or ii) Terminate this Agreement in accordance with Article 13.3 and exit from the JVC in accordance with Article 13.4. 12. NON-COMPETE 12.1 The Parties hereby agree that during the term of this Agreement and for a period of one (1) year after its termination for any reason whatsoever, the INDIAN PARTNER shall not, either themselves or through any of his nominee(s) or Affiliate(s) or subsidiary(ies) or any entity owned and/or controlled by him, have any business or commercial interest, directly or indirectly, and whether as a principal, agent, shareholder, director, partner, contractor, consultant, employee or in any other capacity be engaged in or otherwise be involved in any other business which competes or its susceptible to compete with the business of the JVC existing or for future. 14 13. TERMINATION 13.1 This Agreement shall be binding upon the Parties from the Effective Date hereof and shall remain in force and effect until terminated pursuant to the provisions of this Agreement. 13.2 Either Party shall be entitled, at its option, to forthwith terminate this Agreement on the happening of any of the following events: i) If the other Party (the "Defaulting Party") commits any material breach or, default of the terms, conditions, undertakings and covenants of this Agreement so that the proper fulfillment of the Agreement is jeopardized to such a degree that the Non-Defaulting Party can no longer be expected to adhere to this Agreement. Provided however that if the breach can be remedied, the right herein shall be exercisable only upon the failure of the Defaulting Party to remedy the breach within ninety (90) days of receipt by it of a written notice from the Non-Defaulting Party requiring it to do so. ii) An event of Force Majeure preventing the JVC from carrying on its business for a continuous period of three (3) months. iii) If such a Party is required, other than in accordance with the provisions of this Agreement, to transfer all or part of its shares or to reduce its percentage of shareholding in the JVC due to a change in or enactment of any law or regulation in India. 13.3 In addition to its right to terminate as provided in Article 13.2 above, this Agreement may be terminated by WWW as follows: i) in the event of enactment of any law or regulation in India, or the adoption by the Government of India or any political subdivision thereof of any policy, guideline or other similar direction which would have the effect of requiring any change in the terms of this Agreement adverse to WWW; or ii) in the event that all or any portion of the facilities or other assets of the JVC are nationalized or expropriated by, or taken over for a period in excess of one (1) month by the Government of India or any political subdivisions thereof; or iii) in the event WWW loses majority control over the Board of Directors of the JVC following any law, regulation, enactment or action of the Government of India; or iv) Non fulfillment of any of the conditions precedent as mentioned in Article 11.1 within the time period stipulated in Article 11.2. 13.4 In the event of termination of this Agreement by WWW due to any of the reasons mentioned in Article 13.2 and/or 13.3 above, WWW shall within a period of thirty (30) days have the right and the sole discretion to exercise the following options: i) Require the INDIAN PARTNER to sell all its shares in the JVC to WWW at a fair market price determined in accordance with the provisions of Article 13.7; provided, however, that the INDIAN PARTNER has been allowed to remedy the breach within a period of ninety (90) days from the date of notification of such breach in accordance with Article 22. 15 ii) Require the INDIAN PARTNER to buy all its shares in the JVC at a fair market price determined in accordance with the provisions of Article 13.7. iii) In the event the INDIAN PARTNER is not willing to purchase the shares of WWW, WWW will have the right to sell its shares to a third party at a price mutually agreed between WWW and the third party. 13.5 If this Agreement is terminated by the INDIAN PARTNER due to a material breach by WWW in accordance with Article 13.2(i), the INDIAN PARTNER shall within a period of thirty (30) days have the right to exercise the following options: i) Require WWW to sell its shares in the JVC to the INDIAN PARTNER at a fair market price determined in accordance with the provisions of Article 13.7. Provided, however, that WWW has been allowed to remedy the breach within a period of ninety (90) days from the date of notification of such breach in accordance with Article 22. ii) Require WWW to buy all its shares in the JVC at a fair market price determined in accordance with the provisions of Article 3.7. iii) In the event the WWW is not willing to purchase the shares of the INDIAN PARTNER, the INDIAN PARTNER will have the right to sell its shares to a third party at a price mutually agreed between the INDIAN PARTNER and the third party. 13.6 In the event of exercise of an option by any Party in pursuance of Articles 13.4 and 13.5 hereof, the sale and purchase shall be completed within a period of a sixty (60) days after the expiry of the aforesaid thirty (30) day period. In the event WWW is prevented from exercising its option to purchase shares due to any laws or regulations in India, such Party shall have the right to nominate any nominee(s) who are not prohibited from such shares and such shares shall be sold to such nominee(s). 13.7 The sale of shares pursuant to this Article shall be at the fair market price. The market price of shares for the purposes of this Agreement shall be determined by an independent international accounting firm who shall act as experts and not arbitrators and shall be selected by mutual agreement of the Parties. The determination of the market price of the shares by the said firm shall be final. The time taken for determination of the market price shall be excluded from the time required for acceptance and/or completion of the share transfer. The time taken by the accounting firm to determine the market price shall not extend beyond sixty (60) days. Further, if any transfer of shares under this Article is subject to the Approvals (including final approvals from the RBI), then such transfer shall not become effective until such Approvals have first been obtained. If such Approvals are required, the time period(s) as prescribed in Article 13.6 for the completion of the sale and purchase transaction(s) shall be extended by the number of days required for obtaining the Approvals. 13.8 Neither termination of this Agreement nor exercise of any option provided for in this Article shall: 16 i) relieve either Party from any liability for any failure to perform or comply with the terms of this Agreement; or ii) terminate any right or obligation set forth herein which in accordance with the terms hereof survives such expiration or termination, or which must necessarily survive such expiration or termination in order to give effect to any rights granted hereunder. 13.9 Upon the termination of this Agreement, the Parties hereto shall refrain from any acts, indications, publicity or advertisements which may mislead any third party into the belief that the Parties hereto still maintain business relationships with each other with reference to the JVC and no Party hereto shall commit any act detrimental to the business or reputation of the other Party. 14. DISCLAIMER OF AGENCY AND PARTNERSHIP 14.1 Nothing in this Agreement is intended to constitute, or shall be construed to constitute, the Parties as partners of each other or of the JVC. Nothing contained herein will constitute any Party or the JVC an agent of any other Party or the JVC. Except as may otherwise be explicitly agreed in writing, no Party will have the authority to act on behalf of any other Party or the JVC, nor will the JVC have the authority to act on behalf of any Party. Neither the JVC nor either Party will incur or accept any liability or enter into commitments or contracts on behalf of any Party or the JVC without the express prior written approval of the party to be bound. The employees of each Party will remain the employees solely of such Party, except to the extent that the JVC may agree in writing with a Party that a specified employee is to be an employee of the JVC for a period of time. 15. FINDER'S ROLE It is agreed between the Parties that the Finder and/or his nominees, representatives, agents and assignees shall not in any manner whatsoever be a part of the management and/or any other committee(s) of the JVC, including but not limited to the Board of Directors of the JVC. It is further agreed that the Finder shall not be considered as an employee, agent, representative or advisor of the JVC. 16. ASSIGNMENT 16.1 No Party shall assign or transfer any of its rights and obligations hereunder without the prior written consent of the other Party, except as expressly provided for in connection with a transfer referred to in Article 4.3.6 hereof. This Agreement shall inure to the benefit of and be binding upon the respective successors and permitted assigns. 17. ARBITRATION 17.1 All disputes arising in connection with this Agreement shall, to the extent possible, be settled amicably by prompt good faith negotiations between the representatives of the Parties. In default of such amicable settlement within sixty (60) days of the commencement of discussions, the dispute shall be finally settled under the (Indian) Arbitration and Conciliation Act, 1996 (the "Arbitration Act") by three (3) arbitrators appointed in accordance with said Arbitration Act, whose decision the Parties shall recognize and respect as final and binding upon the Parties without any right of appeal or review on any grounds whether in law or equity before 17 any judicial or Government body. Any such arbitration proceeding shall be held at New Delhi in the English language. Either Party hereby recognizes the right of the other Party to petition any court for an order to confirm or enforce any arbitral decision rendered pursuant to the terms of this Article and agrees to submit to the jurisdiction of any court to which such a petition has been made. Either Party further agrees that it shall not commence or maintain any suit or legal proceeding concerning a dispute hereunder until such dispute has been finally settled in accordance with the arbitration procedure provided for herein and then only for enforcement of the arbitral award, if any. 17.2 Notwithstanding the aforesaid, either Party shall have the right to institute judicial proceedings against the other Party or any one acting through or under such Party in order to enforce the instituting Party's rights hereunder through reformation of contract, specific performance, injunction or similar equitable relief. 18. GOVERNING LAW This Agreement shall be governed and construed in accordance with the laws of India. 19. CONFIDENTIALITY 19.1 For the purposes of this Agreement, "Confidential information" shall mean all know-how and other technical, commercial or other information of any kind, whether or not patented or patentable or copyrighted or copyrightable, developed or acquired by a Party hereto or its Affiliates and disclosed to the other Party or its Affiliates or to the JVC provided that such know-how and information shall not constitute Confidential Information if it (a) was in the possession of the receiving party or known thereby (as shown by written records) prior to disclosure to the receiving party by the disclosing party; (b) was in the public domain when disclosed to the receiving party by the disclosing party or thereafter comes into the public domain through no fault of the receiving party; (c) was made known to the receiving party by one who had the right to disclose such information and who had not received the same from the disclosing party under an obligation of confidentiality; or (d) was developed independently by the receiving party as shown by written record. 19.2 The Parties and their Affiliates shall hold in confidence and shall not disclose in whole or part to any third party other than their Affiliates this Agreement or any contents thereof, except (i) as required by applicable law; (ii) as necessary to obtain Government approvals; or (iii) as part of necessary disclosures to the Parties' or the JVC's lenders, investment bankers, legal counsel and accountants. The Parties and their Affiliates shall consult with each other as to the form of any announcements or disclosures relating to this Agreement and shall confine any disclosures made to unaffiliated third parties to the form and substance so agreed upon between the Parties. 19.3 Notwithstanding disclosures by a Party hereto or its Affiliates of any Confidential Information to the other Party, the JVC or the employees thereof, the Parties agree that the Confidential Information of each Party or its Affiliates shall remain such Party's or its Affiliates' own Confidential Information. 19.4 The Parties agree that, during the term of this Agreement and for a period of five (5) years thereafter, the JVC and the Parties to whom Confidential Information may be disclosed (i) shall 18 not without the prior written consent of the disclosing party disclose such Confidential Information to any third party (including their Affiliates) and (ii) shall use best efforts to safeguard such Confidential Information from misuse or unauthorized disclosure. 19.5 It is further agreed that during the term of this Agreement and for a period of five (5) years thereafter, the JVC and the Party to whom Confidential Information may be disclosed shall not use such Confidential Information other than to further the authorized activities of the JVC or to fulfill the obligations of such Party set forth in this Agreement or any of its Schedules. 20. WAIVER 20.1 Except where time limitations are specifically provided, no failure or delay by either Party (i) to exercise any right hereunder or (ii) to insist upon the strict and punctual performance of any term hereof shall operate as a waiver thereof. Further, a single or partial exercise of any right shall not preclude an additional or further exercise thereof or the exercise of any other right. To be effective, each waiver of any right hereunder must be in writing and signed by the Party waiving its right, and such waiver may be made subject to any conditions specified therein. 21. EXCLUSIVE AGREEMENT, AMENDMENT 21.1 This Agreement including its Exhibits and/or Schedules (which constitute an integral part of this Agreement) constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior or contemporaneous agreements, negotiations, correspondence and undertakings, whether verbal or written, express or implied. This Agreement cannot be changed, amended, modified or terminated except by a written instrument executed by the Parties. 22. NOTICE 22.1 Notices, consents and other communications hereunder shall be in writing, signed by the Party giving notice, and shall be deemed delivered and received (i) if sent by telecopy confirmed by registered mail, one day after transmission (ii) if personally delivered, upon receipt and (iii) if mailed, seven (7) days after being sent by registered or certified mail (return receipt requested) and properly addressed to the other Party at the address given at the beginning of this Agreement or at such other address as a Party may direct by notice in accordance with this Article. 23. PARTIAL INVALIDITY 23.1 In the event any term of this Agreement is declared by a judicial or Government authority to be legally invalid, non-binding or unenforceable, such term shall be deemed deleted herefrom and shall neither affect the Agreement in other respects nor the validity and enforceability of the remaining terms. In the event of a conflict, inconsistency or discrepancy between the terms of this Agreement and those of its Exhibits attached hereto, the terms of this Agreement shall prevail. 19 24. COMPLIANCE WITH THE AGREEMENT i) The Parties shall cause the JVC to acknowledge, undertake and perform all obligations intended under this Agreement. ii) The Parties represent and undertake that they shall, at all times, act, and cause their representatives to act (in Board meetings and/or General Meetings or otherwise) and to exercise their respective rights to implement at all times the underlying spirit, intent and obligations set forth in this Agreement. IN WITNESS WHEREOF, the Parties hereto have signed this Agreement in two (2) original copies as of the date first set forth above. For WORLD WIDE WIRELESS COMMUNICATIONS INC. - ------------------------------ Name: Title: MR. NEELAM KUMAR OSWAL WITNESSES: 1. 2. 20 SCHEDULE-I SCHEDULE FOR PAYMENT* FOR FREQUENCY LICENSES A. Major Cities Sr. No. Cities Value 1. New Delhi US $280,000 2. Mumbai US $280,000 3. Chennai US $280,000 4. Calcutta US $280,000 5. Ahmedabad US $280,000 6. Bangalore US $280,000 7. Hyderabad US $280,000 8. Prune US $280,000 B. Major Cities Sr. No. Cities Value 1. Ludhiana US $40,000 2. Jaipur US $40,000 3. Vadodara US $40,000 4. Trivandrum US $40,000 5. Bhopal US $40,000 6. Amritsar US $40,000 7. Kanpur US $40,000 8. Chandigarh US $40,000 9. Surat US $40,000 21 10. Lucknow US $40,000 11. Indore US $40,000 12. Kochi US $40,000 13. Patna US $40,000 *Note: The obligation of WWW to invest the first installment in the JVC out of the Maximum Amount (as mentioned in Article 4.2.3) shall arise only after the INDIAN PARTNER has obtained the License and the Frequency Licenses in respect of the following cities: 1. Delhi 2. Mumbai 3. Chennai 4. Bangalore 5. Ludhiana -------------------- 22 EX-10.25 4 0004.txt JOINT VENTURE AGREEMENT JOINT VENTURE AGREEMENT This Agreement is made in Bangkok this 7th day of May, 2000 by and between 1. World Wide Wireless Communications, Inc., a Nevada (U.S.A.) corporation, by Mr. Douglas P. Haffer, an authorized director, having its registered office located at 520 Third Street, Suite 101 Oakland, California, USA (hereinafter referred to as WLGS); 2. World Thai Star Co., Ltd., a company incorporated under the laws of the Kingdom of Thailand by Mr. Kraiwat Sriwuttiwong, an authorized director, having its registered office located at 140 Moo 8, Soi Sungkom 1 Chokchai 4 Ladprao Road, Kwang Ladprao, Khet Ladprao Bangkok, Thailand (hereinafter referred to as WTSCO). WITNESSETH Whereas the parties with their expertise, experiences, and resources are desirous to form a joint venture company under the laws of Thailand to engage in the businesses, inter alia, of manufacture and sales of the products or services as hereinafter defined and; Whereas it is the intention of the parties hereto to adopt the terms and conditions governing their respective rights and obligations as shareholders of said joint venture company, It is therefore, agreed as follows: 1. Incorporation of a Joint Venture Company 1.1 As soon as practicable and no longer than fifteen (15) days as from the date of this Joint Venture Agreement, all parties hereto shall jointly establish a limited liability company, under the laws of the Kingdom of Thailand and subject to the terms and conditions contained herein. 1.2 The limited company shall be called "World Wide Wireless Communication (Thailand) Company Limited" (hereinafter referred to as the JVC) and shall have its initial registered office located at Two Pacific Place Building, Suite 1106, No. 142 Sukhumvit Road, Sub-District Klongtoey, District, Klongtoey, Bangkok Thailand 10110. 1.3 The JVC shall be operated and managed pursuant to this Joint Venture Agreement or any amendment thereof, the Memorandum of Association is attached herewith as Annex I and the Articles of Association are attached herewith as Annex II. If any provision in the Memorandum of Association or the Articles of Association are inconsistent with this Joint Venture Agreement, the provisions of this Joint Venture Agreement shall prevail over such provision of the Memorandum of Association or the Articles of Association as the case may be. 2. Business Objectives Such to the terms and conditions hereof and the Articles of Association, the parties hereto intend that the Joint Venture Company shall engage, inter alia, in the business of delivering fixed, high speed, wireless broadband Internet and data transmission service within The Kingdom of Thailand and elsewhere in Southeast Asia. 3. Contribution to the Joint Venture Company 3.1 WLGS shall be responsible for the build-out of the fixed wireless Internet and data transmission system, including engineering, and systems integration. 3.2 WLGS shall be responsible for the Operation of the JVC. 3.3 WTSCO party shall initially contribute to the JVC 2 MMDS channels within Bangkok of at least 8 MHz of bandwidth each, separated by at least 16 MHz of bandwidth. The frequencies shall be digital, and authorized for provision of two-way data transmission. WTSCO will assist the Joint Venture Company in endeavoring to acquire additional spectrum in Bangkok. 3.4 WTSCO shall contribute additional up-country MMDS frequencies to permit the Joint Venture Company to provide two-way fixed wireless Internet and Data Transmission in the provincial other than Bangkok. 3.5 WTSCO shall permit the WLGS and the JVC to use the Second Party's transmission tower-the most advantageous tower if there is more than one - at a cost not to exceed the "out-of-pocket" cost to WTSCO for such usage by WLGS and the JVC. 4. Capital and Shares 4.1 The initial capital of the Joint Venture Company shall be fixed at twenty million Thai Baht (20,000,000 Thai Baht) divided into two million ordinary shares (2,000,000 shares) having a par value of one hundred Thai Baht (100 Thai Baht) each. 4.2 If the capital of the Joint Venture Company is required to be increased at any time, the parties hereto shall arrange for such increase of capital through the loans from banks or other financial institutions on a pro rata basis of their shareholdings. If the parties hereto are unable to obtain such loans from such banks or other financial institutions, the parties hereto shall extend a loan to the Joint Venture Company or otherwise make a guarantee for the Joint Venture Company to such banks or other financial institutions in proportion to their shareholdings. 4.3 WLOS shall contribute 5 million Thai Baht to the JVC for use by WTSCO in transferring its rights to digital MMDS licenses to the JVC. These funds shall be transferred to WLGS's Attorney's Trust Account, and upon proof to attorneys that such rights are in fact held by WTSCO and are transferable to the JVC, the attorneys shall promptly (within 7 days) pay those funds to WTSCO, subject to Article 6 of this Agreement. 2 4.4 Subject to Article 6 of this Agreement, and approval of the Board of Directors of such expenditures. WLGS shall contribute all initial operating capital to the JVC. This shall include an initial start up capital. Start up capital contributed shall be subject approval of the Board of Directors of WLGS after submittal of a detailed budget and expenses by WTSCO. The budget shall be submitted within 10 days of the signing of this Agreement. 5. Shareholdings 5.1 WLGS, by and through its nominated shareholders, hereto agrees to subscribe to ninety-eight thousand shares (98,000 shares) of the JVC representing forty-nine percent (49%) of the initial capital of the JVC. WTSCO, by and through its nominated shareholders, hereto agrees to subscribe to ninety-six thousand shares (96,000 shares) of the JVC representing forty-eight percent (48%) of the initial capital of the JVC. The additional 6,000 shares, representing 3% of the initial capital, shall be subscribed to by Pegasus International Law Office, a limited liability company formed under the laws of the Kingdom of Thailand. The JVC shall issue the share certificates entered in the name of each party hereto to all such parties, and shall be classed as fully paid pending the contributions described in Article 3. 5.2 Additional issuance of shares of the Joint Venture Company shall not be allowed without prior written consent of all parties hereto. If the issuance of such new shares is required or agreed upon, all parties hereto shall have the preemptive right to such newly issued shares on the pro rata basis of the shareholding of all parties then in effect. If any of the parties hereto refuses to subscribe for such newly issued shares after additional issuance of shares is agreed upon by all parties, the other parties shall be entitled to acquire such shares in proportion to their respective shareholding then in effect. Upon full payment for such newly issued shares by the parties subscribing therefore at the time specified by the Joint Venture Company, the Joint Venture Company shall issue the share certificates entered in the name of such subscribing parties. 6. Profit Distribution Notwithstanding the ownership and the proportion of shareholding set forth in Articles 4 and 5 of this agreement, WLGS shall be entitled to receive 75 percent of the net profits, before taxes, depreciation/amortization, and repayment of any other indebtedness of the JVC, up to and until such time as WLGS's initial investment in the JVC has been repaid. That investment includes: a) Its contribution of equipment described in Article 3, including the freight, handling, its initial set up and installation, and any duty or taxes of same. b) The legal/government fees required to do the JV Agreement and form the JVC. c) The 5 million Thai Baht advance to WTSCO for the assignment of the MMDS licenses. d) Its contribution to start up capital. 3 e) Any and all other sums and expenses advanced by WLGS for and on behalf of the JVC or any party thereto. Upon repayment, in full, to WLGS, of those expenses referenced above, and Notwithstanding the ownership and the proportion of shareholding set forth at agreement number 5 above, WLGS and WTSCO shall split all net profits equally. 7. Transfer of shares 7.1 The parties hereto covenant and agree that, notwithstanding anything to the contrary contained in the Articles of Association, none of the parties shall sell, assign, dispose of or otherwise transfer whether by way of pledge, encumbrance or otherwise any of the shares respectively held by them unless prior written consent is obtained from the other party. Notwithstanding the foregoing, either party shall have the option to transfer any portion of the shares held by it to its affiliate or subsidiary at its sole discretion provided, however, that WLGS shall notify the other parties thereof and ensure that its affiliate or subsidiary shall comply with this Agreement and that such transfer shall in no way effect the JVC's use of the frequencies. 7.2 Subject to the foregoing provisions, if, at any time, either of the parties hereto (hereinafter referred to as the "Offeror") desires to transfer any or all of the shares then held by it, it shall first offer to sell the said shares to the other party (hereinafter referred to as the "Offeree") in proportion to the shares then held by them at the price per share to be determined by the Offeror and Offeree within thirty (30) days of the date of the original offer. The Offeree shall have a thirty (30) day period as of the date of receipt of such offer to accept or reject the sale of such shares. In any event, an offer not having been accepted within such thirty (30) day period shall be deemed to have been rejected. If the Offeree rejects the offer, then the Offeror may sell the shares thus rejected by the Offeree to a third party at the price not less than that earlier determined by the Offer or and the Offeree and on the terms and conditions not less favorable to the Offeror than those of the original offer provided that such transfer shall be completed within thirty (30) days as from the date of receipt by the Offerer of a written notice of the original Offeree's final rejection of the offer. Any such transfer of the shares by either of the parties hereto to a third party shall be conditioned upon the full assumption by such third party transferee of all of the obligations of the transferor provided for in this Agreement. 8. General Meeting of Shareholders 8.1 An ordinary general meeting of shareholders of the Joint Venture Company shall be convened once every year. An extraordinary general meeting of shareholders may be convened whenever any of the parties hereto requests such extraordinary general meeting or otherwise the need therefor arises pursuant to the Articles of Association. 8.2 Any of the matters submitted to a general meeting of shareholders shall be passed by the shareholders holding shares representing a majority of all of the issued shares of 4 the Joint Venture Company and entitled to vote and present or represented by proxy therein unless otherwise provided for by the applicable law. Each shareholder shall have one vote per share held by such shareholder. In case of a tie of votes, the chairman of the general meeting of shareholders shall not be entitled to exercise a casting vote. 8.3 The following matters shall be subject to a resolution passed in a general meeting of shareholders, by a 2/3rds margin, of the Joint Venture Company in addition to the matters set forth under the applicable law: A. Amendment of the Memorandum and the Articles of Association of the Joint Venture Company B. Appointment and removal of directors and auditors C. Increase or decrease of the capital D. Dissolution and liquidation E. Merger or amalgamation F. Acquisition of all or substantial part of the business of other companies or entities G. Transfer or otherwise disposal of all or substantial part of the business of the Joint Venture Company H. Approval of distribution of dividends 9. Board of Directors 9.1 The management of the JVC shall be vested in the board of directors in accordance with the provisions of relevant laws and the Articles of Association of the JVC. 9.2 The JVC shall have four (4) directors. Two (2) directors shall be individuals nominated by the WLGS and two (2) directors shall be individuals nominated by the WTSCO. The parties hereby agree to exercise their voting rights as the shareholders of the JVC so that the respective nominees of the parties are duly nominated as the directors of the JVC. If the ratio of shareholding changes, then the parties hereto shall determine the number of directors to be nominated by each party. The term of office of the directors shall be determined in accordance with the applicable law. 9.3 The JVC shall have one Managing Director, to be appointed from among the directors by the board of directors provided that such Managing Director shall be nominated by WLGS. The Managing Director shall act as the chief executive officer of the JVC and shall convene a meeting of the board of directors and a general meeting of shareholders and act as the chairman of such meetings. The Managing Director shall be in charge of the day to 5 day operations of the JVC. If the Managing Director is unable to perform his duties due to any reason whatsoever, he may assign such duties to other directors nominated by WLGS, or the President, provided that a written notice to that effect s given to the other parties and provided that such director shall be responsible for the result thereof as if he were the Managing Director. 9.4 The JVC shall have a Deputy Managing Director who shall be chosen by the Managing Director from candidates nominated by WTSCO. The Deputy Managing Director shall report to the Managing Director and shall assist, at the direction of the Managing Director, in the day to day operations of the JVC 9.5 The JVC shall have one (1) President to be appointed from among the directors by the board of directors provided that such President be nominated by WTSOO. His primary duties shall be to liaison with all Thai government agencies and act as company spokesman. All news and press releases shall be first approved by the Managing Director. The President shall assist the Managing Director in his duties as the chief executive officer of the JVC. The Managing Director may further delegate duties and responsibilities to the President, as he/she sees fit. If the Managing Director is unable to convene a meeting of the board of directors or a general meeting of shareholders as the case may be and/or to act as the chairman of such meeting due to any reason whatsoever, the President shall convene such meetings and act as the chairman thereof. If the President is unable to perform his duties due to any reason whatsoever, he can assign his duties to other directors, provided that a written notice to that effect is given to the other parties and provided that such director shall be responsible for the results thereof as if he were the President. The Managing Director and the President shall be the authorized signatories whose joint signature together with the seal of the JVC shall bind the JVC of obligations of TB 1,000,000.00 or less. Amounts greater than TB 1,000,000.00 shall require authorization from the board of directors. 9.6 In case of the death, resignation or removal of a director prior to the expiration of his term, the party who originally nominated such director shall nominate a candidate as a new director to replace such director who shall be elected at a general meeting of shareholders of the Joint Venture Company. Any vacancy on the board of directors on death, resignation or removal shall be filled within one (1) calendar month. 9.7 If any of the directors has committed any wrongful act resulting in damage to the JVC or has failed to perform his duties to the JYC, the parties hereto shall determine whether such director shall be discharged or removed upon mutual consultation in good faith. In the event that the parties determine to discharge or remove such director, a new director shall be appointed in such a manner as set forth in the preceding paragraph. 9.8 The meeting of the board of directors shall be held pursuant to the Articles of Association and other rules to be determined later by such meetings. A quorum for any meeting of the board of directors of the JVC shall be all of the directors in person or by proxy. A resolution of the meeting shall be passed by the majority votes of the directors. In case of a 6 tie, the chairman of the board shall not be entitled to exercise a casing vote in addition to his own original vote. The following matters shall be adopted by resolution of the board of directors of the Joint Venture Company. 1. Establishment and amendment of rules and regulations of the Joint Venture Company such as rules of the board of directors and other regulations affecting the employment of the Joint Venture Company. 2. Acquisition or disposal of all or substantial part of the property of the Joint Venture Company, 3. Conclusion of contracts or agreements involving the amount exceeding Thai Baht 1,000,000 (one million Thai Baht) acquisition or grant of loans exceeding the amount of Thai Baht. 4. Acquisition or grant of loans exceeding the amount of Thai Baht 100,000 (one hundred thousand Thai Baht). 5. Provision of guarantee to any debt or obligations. 6. Any other matters relating to the Joint Venture Company as deemed by Board of directors to require an adoption of a resolution. 9.9 The fiscal year of the Joint Venture Company shall commence on the 1st day of January and shall end on the last day of December of the same year. However, the first fiscal year of the Joint Venture Company shall commence on the date of registration of incorporation of the Joint Venture Company. 9.10 The Joint Venture Company shall keep true and accurate books and accounts in accordance with the generally accepted accounting rules and standards. At the end of each fiscal year, such books and accounts shall be audited at the expenses of the Joint Venture Company by a qualified and independent certified public accountant licensed to carry out such audit who will be appointed at the meeting of shareholders as an auditor. 10. Force Majeure A party hereto shall be excused from its obligations hereunder when and to the extent that performance thereof is delayed or prevented by any force majeure event, that is any event beyond the reasonable control of a party and which is unavoidable notwithstanding the reasonable care of the party affected, and shall include, without limitation, acts of government, force of nature, fire explosion, geological change, storm, flood earthquake, tidal wave, lightning or other acts of God or act of war. The party affected by any such force majeure event which seeks to excuse its performance under this Contract or under any of the provisions hereof shall promptly notify the other party advising the latter of the excuse and the steps it will take to complete such performance. A party seeking the excuse will be excused from 7 such performance to the extent such performance is delayed or prevented provided that the party so affected shall use utmost reasonably practical efforts to complete such performance. Notwithstanding the foregoing, should such force maieure event remain more than 30 days as from the date of such notification thereof, this Contract shall terminate. 11. Breach and Termination Unless otherwise provided for in this Agreement, when any party breaches any provision hereof, any of the other parties shall give a notice to such party requiring such party to correct such breach within 15 days as from the date of such notice. Failure to comply with such notice on the part of the defaulting party shall entitle the party giving such notice to terminate this Agreement unless otherwise agreed upon with the other non-defaulting party. Such termination, however, shall be without prejudice to the rights and remedies of the party giving such notice provided for hereunder or under the applicable law. 12. Amendment and Waiver This Agreement may be amended, and the undertaking of any action required hereunder may be waived, by the written consent of each party at the time such amendment or waiver is sought. No such waiver shall operate as a waiver of, or estoppel with respect to, any other action. No failure to exercise and delay in exercising any right, remedy or power hereunder shall operate as a waiver thereof, nor shall single or partial exercise of any right, remedy or power hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy or power provided herein or by law or at equity. The waiver of the time for performance of any act or condition hereunder does not constitute a waiver of the act or condition itself. 13. Assignment Each of the parties agrees that it will not assign, sell, transfer, delegate or otherwise dispose of, whether voluntarily or involuntarily, any right or obligation under this Agreement without the written consent of the other parties. Any purported assignment, transfer or delegation in violation hereof shall be null and void. Subject to the foregoing limits on assignment and delegation, this Agreement shall be binding upon and shall otherwise provided herein, this Agreement does not create and shall not be construed as creating any right or claim enforceable by any person not a party to this Agreement. 14. Confidentiality 14.1 Each party hereto shall maintain in confidential all confidential information identified as such received from the other parties, whether of a commercial or technical nature. The party receiving such confidential information shall use such confidential information only as expressly contemplated by this Agreement and shall not disclose any such confidential information to a third party or make any unauthorized use thereof. Each party hereto shall treat such confidential information with the same degree of care against disclosure or unauthorized use which it affords to its own confidential information of a similar nature or a reasonable degree of care, whichever is greater. The obligation of confidential treatment shall 8 not apply to any confidential information that (a) has become generally available in the public domain, (b) was in the receiving party's possession prior to disclosure as evidenced by documentary records, (c) was independently developed by the receiving party, provided that the person(s) developing the same did not have prior access to the confidential information received from the other party or (d) was received from a third party who had a right to disclose such information. 15. Invalidity or Unenforceability or Severability Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under the applicable laws. However, if any provision of this Agreement shall be held to be invalid or prohibited under applicable laws, such provision shall be ineffective only to the extent of such invalidity or prohibition without invalidating the remainder of such provision or the remaining provisions of this Agreement. 16. Entire Agreement This Agreement shall constitute the entire agreement between both parties hereto and shall supersede any communications, understandings, negotiations, Agreements or promises in respect hereto which have been made either in writing or orally prior to date hereto and are also contradictory to the provisions hereof. 17. Headings The heading of this Agreement are inserted only for convenience and ease of reference and are not to be considered in the construction or interpretation of any provision of this Agreement. 18. Notices In case where any notice or other communications are required or permitted to be given hereunder, such notice or communications shall be in writing and may be delivered in person or sent by mail or transmitted by facsimile to the address of the addressee as specified above. All such notices or other communications shall be deemed to have been duly given and received upon receipt if delivered in person and upon receipt by the postal services or facsimile transmission. 19. Non-Competition Restrictions 19.1 Neither of the parties shall at any time whilst it is beneficially interested in any Shares of the Joint Venture Company or for a period of one year from the date on which such Shareholder ceases to be beneficially interested in the Shares, do or permit any of the following without the prior written consent of the other party: 19.1.1 Either solely or Jointly with or on behalf of any Person directly of indirectly carryon or be engaged or interested (except as the holder for investment of securities 9 dealt in on a recognized stock exchange) in any business competing in the Kingdom of Thailand with the Joint Venture Company; 19.1.2 Solicit the custom of any Person in the Kingdom of Thailand who is or has been at any time during the term of this Agreement a customer of the Joint Venture Company for the purpose of offering to such customer goods or services similar to or competing with those of the Joint Venture Company; 19.1.3 Solicit or entice away or endeavor to solicit or entice away any director or employee of the Joint venture Company or of any Subsidiary of the Joint Venture Company, but without prejudice to the right of such shareholder to terminate arrangements under which any of its staff are seconded to the Joint Venture Company or such Subsidiary; 19.1.4 Cause or permit any person directly or indirectly under its control to do any of the foregoing acts or things; 20. Applicable Law This Agreement shall be interpreted and governed by the laws of the Kingdom of Thailand. 21. Settlement of Dispute In the event of any dispute, controversy or claim arising out of or relating to any provision of this Agreement or the interpretation, enforceability, performance, breach, termination or validity hereof, the parties hereto shall attempt in good faith to amicably resolve the dispute. Any dispute which cannot be resolved within 60 calendar days as from the date such dispute has arisen shall be resolved finally and exclusively by arbitration in Bangkok, Thailand, in accordance with the Rules of Arbitration Institute, Ministry of Justice Thailand, applicable at the time of submission of the dispute to arbitration. Any arbitral award may be entered in any court of competent jurisdiction. The arbitration proceeding shall be conduct by using English language only. 10 IN WITNESS WHEREOF, This Agreement is made in duplicate having corresponding terms and conditions and the parties hereto have read and understood the contents hereof and thereby affixed their respective signatures and corporate seals (if any) in the presence of the witnesses on the date month and year first above written. (Signed) --------------------------------------------------------------- (Mr. Douglas P. Haffer) For and on behalf of World Wide Wireless Communications, Inc. (Signed) --------------------------------------------------------------- (Mr. Kraiwat Sriwuttiwong) For and on behalf of World Thai Star Co., Ltd. (Signed) Witness ------------------------------------------------------ (Songchai Hanratanakul) (Signed) Witness ------------------------------------------------------ (Wayne Caldwell) 11 ADDENDUM This addendum made on this the 24th day of May 2000, is to that certain Joint Venture Agreement made on the 7th day of May 2000, by and between World Wide Wireless Communications, Inc., hereinafter "WLGS" and World Thai Star Company Limited. The Joint Venture Agreement is hereby amended ax follows: Section 3.3 of the Joint Venture Agreement Whereas WTSCO has agreed to contribute to the JVC "2 MMIS channels within Bangkok of at least 8 MHz of bandwidth each separated by at least 16 MHz of bandwidth" it has now been determined that. the 16 MHz separation may not be enough to utilize the equipment to be supplied by WLGS. Should it be determined by WLGS, that for technical reasons, the bandwidth separation must be no less than 36 MHz, WTSCO shall replace one or both of the MMDS channels to ensure a separation of at least 36 MHz. Any reasonable costs associated with this change shall be home initially by WLGS subject to repayment under Article 6 of the Joint Venture Agreement. regarding profit distribution. This Addendum shall take effect immediately when signed by both parties and shall be attached to the Joint Venture Agreement and be made a part thereof. Agreed and Accepted: WTSCO Witness By:___________________________________ By:_____________________________ Kraiwat Sriwuttiwong Agreed and Accepted: WLGS Witness By:___________________________________ By:_____________________________ Douglas Haffer EX-27 5 0005.txt WORLD WIDE WIRELESS FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED FINANCIAL STATEMENTS OF WORLD WIDE WIRELESS COMMUNICATIONS, INC. FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. AMOUNTS IN THOUSANDS (EXCEPT LOSS PER SHARE). 1,000 12-MOS SEP-30-2000 SEP-30-2000 3,111 0 0 0 750 4,765 2,983 (176) 9,704 2,304 5,228 0 0 86 1,913 9,704 0 524 0 (337) (8,566) 0 (71) (8,396) 0 (8,396) 0 0 0 (8,396) (0.10) (0.10)
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