-----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, Kt7Vgl/A3OzhcFHfpzeKqjbGW3RVv1PFF4h8SBzxFAeL474O0ifd8Wp8DKdqOYHX l+gsqLlLCGoHvencMkNU5A== /in/edgar/work/20000531/0000950005-00-000716/0000950005-00-000716.txt : 20000919 0000950005-00-000716.hdr.sgml : 20000919 ACCESSION NUMBER: 0000950005-00-000716 CONFORMED SUBMISSION TYPE: SB-2 PUBLIC DOCUMENT COUNT: 31 FILED AS OF DATE: 20000531 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WORLD WIDE WIRELESS COMMUNICATIONS INC CENTRAL INDEX KEY: 0001098207 STANDARD INDUSTRIAL CLASSIFICATION: [7370 ] IRS NUMBER: 860887822 FILING VALUES: FORM TYPE: SB-2 SEC ACT: SEC FILE NUMBER: 333-38158 FILM NUMBER: 646965 BUSINESS ADDRESS: STREET 1: 520 THIRD STREET SUITE 101 STREET 2: 510-839-6100 CITY: OAKLAND STATE: CA ZIP: 94607 BUSINESS PHONE: 5108396100 SB-2 1 0001.txt FORM SB-2 As filed with the Securities and Exchange Commission on May 30, 2000 Registration No._____________ - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------ FORM SB-2 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 WORLD WIDE WIRELESS COMMUNICATIONS, INC. (Name of small business issuer in its charter) -----------------
Nevada 4812 860887822 (State or jurisdiction of (Primary Standard Industrial (IRS Employer incorporation or organization) Identification No.) Classification Code No.)
DOUGLAS P. HAFFER 520 Third Street, Suite 101 Oakland, CA 94607 (510) 839-6100 (Name, Address and Telephone Number of Agent for Service) ----------------------- Copies to: WILLIAM D. EVERS, ESQ. Evers & Hendrickson LLP 155 Montgomery, 12th Floor San Francisco, CA 94104 Phone No.: (415) 772-8102 Fax No.: (415) 772-8101 ------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If this Form is filed to register additional securities for an offering pursuant to Rule 462 (b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this Form is a post-effective amendment filed pursuant to Rule 462 (c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this Form is a post-effective amendment filed pursuant to Rule 462 (d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If delivery of the prospectus is expected to be made pursuant to Rule 434 check the following box. / /
CALCULATION OF REGISTRATION FEE ------------------------- ------------------- --------------------------- ---------------------- ---------------- Title of each class of Amount to be Proposed maximum offering Proposed maximum Amount of securities to be registered (1) price per unit (2) aggregate offering registration registered price fee ------------------------- ------------------- --------------------------- ---------------------- ---------------- Common, $ .001 par per 1,064,000 $1.96 $2,085,440 $550.56 share ------------------------- ------------------- --------------------------- ---------------------- ---------------- Common, $ .001 par per 5,040,000 (3) $1.96 $9,878,400 $2,607.90 share ------------------------- ------------------- --------------------------- ---------------------- ---------------- Common, $ .001 par per 3,346,939 (4) $1.96 $6,560,000 $1,731.84 share ------------------------- ------------------- --------------------------- ---------------------- ---------------- Common, $ .001 par per 1,338,776 (5) $1.96 $2,624,001 $692.74 share ------------------------- ------------------- --------------------------- ---------------------- ---------------- Total Registration Fee $5,583.04 ------------------------- ------------------- --------------------------- ---------------------- ---------------- (1) Pursuant to Rule 416 under the Securities Act of 1933, as amended, there are included in this registration such additional number of shares of common stock or such shares that may be issuable in lieu of such common stock as may become issuable pursuant to anti-dilution provisions of the series A preferred stock, the 4% Convertible Debenture and the warrants described on page 36. (2) Calculated solely for the purpose of determining the registration fee pursuant to Rule 457(c) based on the average bid and asked price of the common stock on the over the Over the Counter Bulletin Board maintained by the National Association of Securities Dealers on May 25, 2000. (3) Represents shares which may be issuable upon exercise of warrants issued to seven selling shareholders in connection with the issuance and sale of common stock. (4) The number of shares being registered equals 200% of that number of shares which would be issuable upon the conversion of the 4% Convertible Debentures the selling shareholders own as of the date of this prospectus. (5) The number of shares being registered equals 200% of that number of shares which would be issuable upon the conversion of either the series A preferred stock the selling shareholders own as of the date of this prospectus, or additional 4% Convertible Debentures if we are unable to obtain shareholder approval for the creation of the series A preferred stock.
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. 2 The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is prohibited. Initial Public Offering Prospectus Subject to Completion, dated May 30, 2000 World Wide Wireless Communications, Inc. We are registering 10,789,715 shares of common stock upon: conversion of series A preferred stock; conversion of 4% Convertible Debentures; and the exercise of certain presently outstanding warrants. We will only receive proceeds from the sale of common stock as a result of the exercise of the warrants. We will use the proceeds, if any, for working capital. See "Use of Proceeds." If and when the owners of series A preferred stock, 4% Convertible Debentures or warrants convert or exercise any of these securities for shares of common stock, that stock may be resold to the public using this prospectus. We will pay all expenses of registration incurred in connection with this offering and certain expenses of the selling shareholders, including up to $25,000 in the legal fees of counsel the selling shareholders retain. The selling shareholders and any intermediaries through whom they sell common stock may be considered "underwriters" within the meaning of the Securities Act of 1933, as to the common stock they sell. Any profits realized or commissions received by them may be considered underwriting compensation. The common stock has not been registered for sale under the securities laws of any state as of the date of this prospectus. Brokers or dealers effecting transactions in the common stock should confirm the registration thereof under the securities laws of the states in which transactions occur or the existence of any exemption from registration. Our shares are currently traded on the OTC Bulletin Board under the trading symbol WLGSE. ______________________ Investing in our common stock involves a great amount of risk. See "Risk Factors" beginning on page 7. ______________________ Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The date of this prospectus is _________, 2000 3 TABLE OF CONTENTS
Page Page ---- ---- Reference Data..............................4 Management......................................28 Prospectus Summary..........................5 Executive Compensation..........................31 Summary of Financial Data...................5 Principal and Selling Shareholders..............33 Risk Factors................................7 Certain Transactions............................36 Forward-Looking Statements..................14 Description of Securities.......................36 Dividend Policy.............................15 Price Range of Common Stock.....................43 Use of Proceeds.............................15 Legal Matters...................................45 Management's Discussion and Analysis........16 Experts.........................................45 Business....................................17 Additional Information..........................45 Financial Statement.............................F-1
Until 90 days after the effective date of this prospectus all dealers effecting transactions in the registered securities, whether or not participating in this distribution, may be required to deliver a prospectus. This is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. You should rely only on the information contained in this prospectus. We have not authorized any person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. The information in this document may only be accurate on the date of this document. REFERENCE DATA We have filed with the Securities and Exchange Commission a registration statement on Form SB-2 under the Securities Act with respect to this offering. This prospectus does not contain all the information set forth in the registration statement and the exhibits and schedules thereto, as permitted by the rules and regulations of the Commission. We will be subject to the informational filing requirements of the Securities Exchange Act of 1934 upon the effectiveness of the SB-2 and the Form 8-A. We intend to furnish our shareholders with annual reports containing financial statements audited by our independent public accountants and quarterly reports containing unaudited financial information for the first three quarters of each fiscal year. Our fiscal year ends on September 30. 4 PROSPECTUS SUMMARY World Wide Wireless Communications, Inc. We provide high-speed broadband wireless Internet service in the United States and internationally through the use of transmitting frequencies within the multichannel multipoint distribution service, commonly known as MMDS. We are also developing a new technology, named Distributed Wireless Call Processing System, or the DWCP system, which we believe will significantly enhance wireless communications in the future. We intend to license this technology to third parties in the future. This prospectus relates solely to the sale of securities by the selling shareholders listed on page 39. We are not selling any shares of our own stock pursuant to this prospectus. We are incorporated under the laws of the State of Nevada. Our offices are located at 520 Third Street, Suite 101, Oakland, CA 94607. Our telephone number is (510) 839-6100. Summary of the offering Type of security.............. Common stock Common stock registered by company................... We are registering 10,789,715 shares of common stock upon: conversion of series A preferred stock which are currently neither authorized nor outstanding; conversion of 4% Convertible Debenture; and the exercise of certain presently outstanding warrants. Use of proceeds.............. We will only receive cash proceeds upon exercise of the warrants. Those proceeds, if any will be used for working capital. All proceeds from sales of common stock made by selling shareholders will go to the selling shareholders and not to us. SUMMARY OF FINANCIAL DATA The summary financial data for the years ended September 30, 1998 and 1999 have been derived from the Financial Statements and Notes to Financial Statements, audited by Reuben E. Price & Co., San Francisco independent auditors. The summary financial data for the six months ended March 31, 2000 and 1999 is derived from our unaudited financial statements which, in the opinion of management, includes all adjustments, none of which were other than normal recurring adjustments necessary for a fair presentation of the financial position and results of operations for such periods. The financial information for the six months ended March 31, 2000 and 1999 is not necessarily indicative of the results of operations for subsequent periods or a full fiscal year. The selected financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Financial Statements and Notes thereto included elsewhere in this prospectus. 5
Statements of Income Data: Cumulative from inception Year ended Year ended on Sept 1, 1994 Six Months Ended Six Months Ended Sept. 30, 1998 Sept. 30, 1999 to Sept. 30 1999 Mar. 31, 2000 Mar. 31, 1999 Audited Audited Audited Unaudited Unaudited Revenue $ -- $ -- $ -- $ 141,268 $ -- Gen. & Adm. Expenses (353,075) (2,383,330) (6,765,842) (2,345,196) (594,650) Total Operating Expenses (353,075) (2,383,330) (6,765,842) (2,345,196) (594,650) Operating loss (353,075) (2,383,330) (6,765,842) (2,203,928) (594,650) Rental income 6,701 0 6,701 0 0 Interest Income 0 0 0 174 0 Net loss (346,374) (2,383,330) (6,759,141) (2,217,484) (594,650)
Sept. 30, 1999 March 31, 2000 March 31, 1999 Audited Unaudited Unaudited Balance Sheet Data: Working capital (153,646) 76,215 Total assets 1,180,777 6,206,693 Long-term debt, less current portion 328,000 740,000 Shareowners' equity 361,309 4,910,887
6 RISK FACTORS An investment in our common stock is very risky. You should be aware that you could lose the entire amount of your investment. You should carefully consider the following risks before you decide to buy our common stock. Risks Related to Our Business We have a history of losses and there is significant doubt about our ability to continue as a going concern We are a development stage company and our revenues for the foreseeable future will not be sufficient to attain profitability. In the two years since we began operations, we have generated no revenues and have incurred substantial expenditures. We expect to continue to experience losses from operations while we develop and expand our wireless Internet service system and other technologies. In view of this fact, our auditors have stated in their report for the period ended September 30, 1999 that our ability to meet our future financing requirements, and the success of our future operations, cannot be determined at this time. We may not have enough capital to remain a going concern, especially if we do not sell a significant amount of securities offered by this prospectus We will require substantial outside investment on a continuing basis to finance the acquisition of additional spectrum licenses, capital expenditures and operations. Although we believe that the proceeds from this offering, together with nominal funds expected to be generated from operations, will be sufficient to finance our working capital requirements for at least twelve months following completion of this offering, there can be no assurances that we will generate sufficient funds from this offering to fund our operations. We do not have a bank line of credit and there can be no assurance that any required or desired financing will be available through bank borrowings, debt, or equity offerings, or otherwise, on acceptable terms. To the extent that future financing requirements are satisfied through the issuance of equity securities, investors may experience significant dilution in the net book value per share of common stock. We do not know how many of the shares offered will be sold. Therefore, investors will bear the risk that we will accept subscriptions for a nominal number of shares and then be unable to exist as a going concern or accomplish our plans as discussed in the Use of Proceeds in this prospectus. If no shares, or a nominal number of shares are sold, our financial condition and our ability to continue as a going concern could suffer. We may not be able to obtain permission to use two-way MMDS transmission We believe that it is important for to obtain the right to conduct two-way transmissions through the MMDS frequencies we acquire. None of our present channel leases in the United States allow for two-way transmissions. Permission to conduct two-way transmissions must be obtained from the Federal Communications Commission, and the rules of the FCC require that we file applications with the FCC to receive permission to conduct two-way transmissions through MMDS. The FCC has announced that the first opportunity to file these applications will occur from July 3 through 10, 2000. The application process will require us to engineer a network configuration and channel-use plan for these frequencies in each market where we intend to launch a two-way system. The applications must meet FCC interference protection 7 rules or contain the consent of other MMDS 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 and file two-way applications for each of our markets. o We will be able to obtain the necessary cooperation and consents from licensees in our markets or adjacent markets to enable us to use our spectrum for two-way communication services. o The FCC will approve our applications. If we do not receive the required consents from the FCC and other licensees within a market, or we are not able to design a two-way system that will meet the FCC's interference protection rules, we will be unable to obtain authorization to implement a two-way system in that market. We are subject to other substantial governmental regulations which could adversely affect our business Our services are subject to current regulations of the FCC with respect to the use of our wireless access. We are required to use and maintain our licenses for certain frequencies and file reports with the FCC. If we fail to comply with these requirements, we may lose our licenses to operate such frequencies. The loss of licenses to operate our frequencies could lead to interruption of our wireless access services and materially adversely affect our business. In addition, changes in the regulatory environment relating to the Internet access could affect the prices at which we may sell our services. These include regulatory changes that, directly or indirectly, affect telecommunications costs, limit usage of subscriber-related information or increase the likelihood or scope of competition from the regional Bell operating companies or other telecommunications companies. For example, regulations recently adopted by the FCC are intended to subsidize Internet connectivity rates for schools and libraries, which could affect demand for our services. The FCC has also stated its intention to consider whether to regulate certain transmission services over the Internet as "telecommunications," even though Internet access itself would not be regulated. Additionally, a number of state and local government officials have also asserted the right or indicated a willingness to impose taxes on Internet-related services, including sales, use and access taxes. We cannot predict the impact that future laws and regulations may have on our business. Our new technology is unproven and may not function as anticipated Our DWCP system technology remains in the development phase and we have not yet developed a fully functional prototype of that technology. We cannot be certain when we will be able to complete development of DWCP and whether DWCP will work in the manner anticipated when development is completed. Furthermore, we cannot be certain whether DWCP will receive substantial market acceptance assuming that it is developed. For these reasons, although we believe that DWCP is promising, an investor should not assume that DWCP will be available or will contribute positively to our business prospects or financial condition. 8 The market for Internet access is extremely competitive, which may prevent us from being able to attract Internet access customers There are many competitors in the market for Internet access, both within the field of providing broadband Internet-based access as well as those offering access through other means. Major wireless service providers include AT&T Corporation, Hughes Network, MCI Worldwide and Sprint, all of which are developing and investing heavily in MMDS and other wireless Internet access distribution methods. Other competitors outside of the area of wireless communications include the following: o Internet Service Providers, or ISPs, which have developed high-speed access capabilities through digital subscriber lines, or DSL along with their existing services, such as through digital subscriber services, of DSL, and T-1 lines; o On-Line information service providers which provide basic Internet access as well as proprietary information not available through public Internet access, such as America On-Line; o Cable operators, such as Time-Warner and AT&T, who offer Internet access through direct cable connections; o Providers of high-speed continuous Internet access, such as UUNET Technologies, Inc. and PSINet, Inc.; and o Regional Bell operating companies, long-distance carriers and competitive local exchange carriers. Many of our competitors are large organizations with substantially greater financial, technical and marketing resources than we presently have. Many of these competitors also have substantially larger subscriber bases, which will make it difficult to compete with them and, we believe, will result in substantial pressure on us to discount the prices of our services. In addition, there has been substantial consolidation among Internet access providers and, in particular, within the broadband MMDS industry. We believe that this trend will continue and, if it does, we anticipate there will be greater price and other competition within the industry. We cannot provide you with any assurance that we will have sufficient financial resources, technical expertise or marketing capabilities to compete successfully. We have yet to obtain customers for our Internet access services We intend to provide broadband Internet access to customers within those geographic areas where we obtain MMDS licenses. However, we have obtained few customers for and have derived no revenues from our services, nor have we entered into any arrangements with other businesses under which they may provide these services within these geographic areas. We also have not yet determined the manner in which we will commercially exploit the MMDS licenses we obtain. For example, we may attempt to provide services directly to Internet users or license our rights to use the MMDS frequencies to third parties. We can provide you with no assurance that we will be able to secure a sufficient number of customers, strategic partners or other sources of revenues from our services to operate profitably at any time in the foreseeable future. 9 We are subject to the requirements that we receive regulatory approvals from those countries in which we do business, the delay or denial of which can reduce our revenues and adversely affect our foreign operations. We anticipate that a substantial percentage of our revenues will be derived from operations outside of the United States. Our reliance on international operations to obtain consents of local regulatory authorities, some of which may significantly delay or deny permitting us to operate in those jurisdictions. For example, we will not be able to generate revenues from our operations in Argentina until such time as the governmental regulatory authority, the Comision Nacional de Communicaciones, or CNC, approves our application to acquire MMDS licenses. In early 2000, the government of Argentina announced that it was placing a freeze on all license transfer applications from foreign-owned firms, which has effectively delayed consideration of our application. A denial of our application or a significant delay in consideration of our application could either prevent us from conducting our planned operations in Argentina or materially adversely affect our ability to do so. Our prospective operations in Peru and other jurisdictions are also subject to receipt of government approval, which we cannot assure you that we will receive at this time. Problems with telecommunications infrastructure in countries in which we do business may substantially limit the effectiveness of our Internet services, thereby making those services less attractive The Internet access services we intend to conduct require that there be a modern telecommunications infrastructure which allows for the fast and efficient transfer of data from the source of the data to the transmission towers we lease. Many countries in which we are conducting or intend to conduct business lack the high speed cable, satellite or fiber optic wiring systems necessary for high speed data transmission and in many of those countries it is not economically viable to install that infrastructure. This limits our ability to provide high-speed Internet services efficiently, thereby making our services in those countries less attractive. Because we operate internationally, our operations are subject to unexpected political changes, changes in legal requirements and fluctuations in exchange rates, all of which may substantially increase our operating costs or make it difficult to do business there In addition to these international risks, we are also subject to the following risks in connection with our international operations that may substantially reduce our revenues, increase our operating and capital expenses, and otherwise materially affect our ability to conduct business: o unexpected changes in regulatory requirements, taxes, trade laws and tariffs, which can substantially increase the costs of doing business in other jurisdictions; o changes in a specific country's or region's political or economic conditions which may make it difficult or impossible to conduct business there; o lack of clear rules and regulations governing the issuance of licenses and standards for their operation; and o fluctuating exchange rates. By way of illustration, the regulatory authority in Ghana with responsibility for telecommunications licenses, the National Communications Agency, has invalidated certain license transfers which its predecessor agency made several years earlier. These licenses include those which we wish to use for our operations in that country. Although we intend to pursue our application for a license to use 10 those frequencies, there can be no assurance that we will obtain the desired license or that the license might be subsequently revoked due to further changes in the regulatory requirements. We cannot assure you that we will be able to conduct our operations profitably in these jurisdictions in view of these risks and cannot quantify the impact which these risks may have on our operations. We are inexperienced in operating a business internationally We intend to expand our international sales efforts in the future. We have very limited experience in marketing, selling and supporting our products and services abroad. There is a risk that we will not be able to expand due to this inexperience. If we are unable to grow our international operations successfully and in a timely manner, our business and operating results could be seriously harmed. This could be reflected in a loss in your investment. If we do not develop system features in response to customer requirements, customers may not wish to use our services, which would seriously harm our business The broadband wireless access industry is rapidly evolving and is subject to technological change and innovation. These changes are requiring that providers of broadband services adopt new technologies quickly or modify existing technologies to maintain service and market products. Compliance with these changes may cause us to incur unexpected expenses or lose revenues. If we are unable to comply with diverse new or varying governmental regulations or industry standards in each of the many worldwide markets in which we compete, we may not be able to respond to customers in a timely manner or market our products, which could seriously harm our business. We are dependent on the services of key individuals and the loss of any of these individuals could significantly affect our ability to operate our business Our development and success is significantly dependent upon Douglas P. Haffer, Chairman, President and Chief Executive Officer; Wayne Caldwell, Vice President and General Counsel; and Dana Miller, Vice President of Licensing and Systems Expansion. We do not currently have key man insurance for any of these officers. Any loss of the services of these members of our senior management personnel could seriously harm our business. We also believe that our success depends in large part on our ability to hire skilled managerial, sales, technical and administrative personnel whose talents are necessary in allowing us to develop our services and operate our business. We will need to hire a substantial number of additional people to allow us to implement our business plan. Because employees with these skills are in high demand, we anticipate encountering considerable competition in attracting those persons. As a result, we may experience a shortage of qualified personnel. We may be unable to protect our intellectual property rights Our success depends in part on our ability to protect our proprietary technologies. We rely on a combination of patent, copyright and trademark laws, trade secrets and confidentiality and other contractual provisions to establish and protect our proprietary rights. We have received one patent from the United States Patent and Trademark Office pertaining to the DWCP system and may file for additional patents in the future. However, our patents may not be of sufficient scope or strength, others may independently develop similar technologies or products, duplicate 11 any of our products or design around our patents, and the patents may not provide us competitive advantages. Litigation, which could result in substantial costs and diversion of effort by us, may also be necessary to enforce any patents issued or licensed to us or to determine the scope and validity of third-party proprietary rights. Any such litigation, regardless of outcome, could be expensive and time consuming, and adverse determinations in any such litigation could seriously harm our business. We have not yet sought patent protection for the DWCP system in any country other than the United States, nor have we sought to register our trademarks in those countries in which we currently do or intend to do business. The laws of other countries vary with respect to intellectual property protection, and some jurisdictions may provide substantially less protection than those of the United States. As a consequence, our ability to protect our intellectual property and prevent competitors from using our intellectual property may be much more limited. Risks Related to this Offering The offering price may drop below that at which our shares are trading on the open market, which could render us unable to sell shares in this offering We are offering to sell shares at the price on the cover page of this prospectus, whereas the market price for our stock may vary significantly. Furthermore, the selling shareholders may sell their shares at any price they deem acceptable, regardless of the price at which we are offering to sell our shares, and we have no control over the price at which they may sell their shares. If the market price for the shares drops below the offering price, or the selling shareholders decide to sell their shares at below our offering price, prospective investors will likely choose to purchase shares from the selling shareholders or on the open market rather than directly from us. If this happens, the amount of financing we receive from this offering will be significantly reduced and we may be unable to raise any funds from this offering. We arbitrarily determined the purchase price of our shares for this offering. The trading price of our shares on the Over-the-Counter Bulletin Board may decline below the price at which you are purchasing shares in this offering. We arbitrarily determined the purchase price of our shares in this offering. The price of the shares offered in this prospectus bears no relationship to our assets, book value, or net worth. This is our initial public offering. Currently, some of our shares that we originally sold as restricted securities in private placement offerings are now trading on the OTCBB under the symbol WLGSE. The price of the securities offered herein may bear no relationship to the price of our shares traded on the OTCBB. Our stock may not meet the requirements to continue to be listed on the Over-the-Counter Bulletin Board, which may make it more difficult for shareholders to sell their shares and expose us to claims for liquidated damages This is our initial public offering. Some of our shares that we initially sold as restricted securities are now freely trading on the OTCBB. The National Association of Securities Dealers, Inc., or "NASD," which administers the OTCBB, implemented regulations in 1999 which require that all companies listed on the OTCBB have a class of securities registered under the Securities Exchange Act of 1934 and file periodic reports with the Securities and Exchange Commission, or SEC. The NASD informed us that our securities would be delisted from the OTCBB on May 17, 2000 unless we register our common stock under the Securities Exchange Act. 12 We are attempting to appeal the NASD's threatened removal of our stock quotations from the OTCBB. On May 17, the Securities and Exchange Commission granted an interim stay, which preserves our OTCBB listing status. No assurances can be given that our attempt to appeal will be successful or when the SEC will rule on our attempt to appeal. We have applied to the SEC to register our shares, but that registration is not yet effective. By filing a registration statement with the SEC, the company is taking steps to become a reporting company. An amended registration statement, which we submitted to the SEC on May 17, 2000 is not yet effective and will not be effective until the SEC comment process is completed. If we are delisted from the OTCBB our shares will not be tradable on the OTCBB until we can obtain a registration and we file an application to relist our shares on the OTCBB. In addition, if we are re-listed, we will be required to continue to file our periodic reports with the SEC in order to maintain our listing. Although trading quotations for the shares could remain available through the "pink sheets" maintained by the National Quotation Service Bureau, Inc., management believes that a delisting of the shares from the OTCBB may reduce the trading volume of the shares and may result in a reduction in the purchase price for the shares. We may be subject to claims for liquidated damages if our shares are delisted from the OTCBB. Under the terms of a Registration Rights Agreement into which we entered with various investors, we will be liable for the payment of liquidated damages equal to 2% per month of the face amount of subordinated debentures and stated value of series A preferred stock that we sold to those investors during that period that our shares not listed on the OTCBB. The aggregate principal amount of the subordinated debentures is currently $3,280,000, and we are contractually obligated to issue additional subordinated debentures or series A preferred stock with a principal amount or stated value of $1,312,000. If our shares are delisted, the amount of these liquidated damages could have a material adverse affect upon our financial condition and business prospects. The market price for our stock has fluctuated substantially and will likely continue to do so Since our shares began trading on the OTCBB in 1997, the prices for our shares have fluctuated widely. There may be many factors which may explain these variations, but we believe that among these factors include the following: o the demand for our common stock; o the number of market makers for our common stock; o developments in the market for broadband Internet access and wireless MMDS transmission in particular; and o changes in the performance of the stock market in general. In recent years, the stock market has experienced extreme price and volume fluctuations that have had a substantial effect on the market prices for many telecommunications, Internet and emerging growth companies such as ours, which may be unrelated to the operating performances of the specific companies. Companies that have experienced volatility in the market price of their stock have been the object of securities class action litigation. If we become the object of securities class action litigation, it could result in substantial costs and a diversion of our management's attention and resources and have an adverse effect on our business, financial 13 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. Maintenance of an Effective Registration Statement Could Prove Costly On April 14, 2000, we entered into a Securities Purchase Agreement with the selling shareholders for the purchase of investment units, consisting of common stock, common stock purchase warrants, 4% subordinated debentures and preferred stock, all which are described below. As part of this transaction, we agreed to maintain an effective registration statement under which the selling shareholders may sell the common stock issuable upon conversion or exercise of their securities until the earlier of: (1) the date when all of those shares of common stock have been sold; or (2) the date when all of those shares of common stock can be sold without any restriction pursuant to SEC Rule 144(k). Unless all shares are sold prior to that time, this will require that the registration statement will need to remain effective for a period of at least two years under present SEC rules. We are not presently able to use registration on Form S-3, and in all likelihood will not be able to do so for the foreseeable future. Consequently, the registrations that we are obligated to keep effective for the holders of these securities are likely to be quite expensive to us and there can be no assurance that we will be able to maintain effectiveness of any required registration statements for such extended periods of time. FORWARD-LOOKING STATEMENTS This prospectus contains forward-looking statements. We intend to identify forward-looking statements in this prospectus using words such as "believes," "intends," "expects," "may," "will," "should," "plan," "projected," "contemplates," "anticipates," or similar statements. These statements are based on our beliefs as well as assumptions we made using information currently available to us. Because these statements reflect our current views concerning future events, these statements involve risks, uncertainties and assumptions. Actual future results may differ significantly from the results discussed in the forward-looking statements. Some, but not all, of the factors that may cause these differences include those discussed in the Risk Factors section beginning on page 5 of this prospectus. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this prospectus. 14 DIVIDEND POLICY We have never declared or paid any cash dividends on our common stock and do not intend to pay dividends on our common stock in the foreseeable future. We intend to invest our future earnings, if any, to fund our growth. USE OF PROCEEDS We will not receive any proceeds from the conversion of shares of series A preferred stock or 4% Convertible Debentures. If all of the warrants for which shares of common stock issuable on exercise of those warrants are exercised, we would receive total proceeds of approximately $11,844,000. We will use these proceeds, assuming we receive any, for working capital. The amounts we actually expend for such working capital may vary significantly and will depend on a number of factors including, but not limited to, the actual net proceeds received, the amount of our future revenues and other factors described under "Risk Factors." Accordingly, our management will retain broad discretion in the allocation of net proceeds of this offering. 15 MANAGEMENT'S DISCUSSION AND ANALYSIS The following should be read in conjunction with the "Risk Factors" starting on page 5 of this prospectus and the "Financial Statements" and the Notes thereto. We did not generate any subscription revenues by providing wireless cable services during fiscal 1998 and 1999 respectively. We did not have enough subscribers in either period to generate revenues sufficient to cover our operating expenses which totaled $353,075 and $2,383,330, respectively, in fiscal 1998 and 1999. Our operating expenses included service costs, programming and license fees, general and administrative expenses, and certain acquisition expenses resulting from acquiring spectrum. Our expenses increased substantially in 1999 over those in 1998 as we substantially increased the scope of our business operations during that period. During 1998 and 1999, we experienced continuing cash shortages due to an insufficient subscriber base. The resulting cash shortages rendered us unable to advertise and aggressively promote our services. Because we have received no revenues from operations and do not anticipate receiving significant revenues for the remainder of the year from operations, we have depended and will likely continue to depend upon equity and debt financing to provide necessary working capital for the foreseeable future. We have obtained financing primarily from the following sources, and believe that our primary sources of financing during the next 12 months will come from the following sources as well as the proceeds from this offering. o During the years ended September 30, 1999 and 1998, we received equity investment of $2,614,074 and $295,000, respectively. This investment was in the form of issuance of our common stock in various private placements. o In October 1999, we received financing of $740,000 from Credit Bancorp, a Netherlands Antilles company, in the form of a convertible subordinated debenture. Under the terms of the debenture, we are to pay Credit Bancorp interest at a rate of 7% per annum over a period of three years. Principal and accrued interest is convertible into common stock at the option of Credit Bancorp. Credit Bancorp has notified us that it has converted the debenture into common stock. o On April 14, 2000, we entered into a Securities Purchase Agreement with seven investors, for the purchase of investment units, consisting of common stock, common stock purchase warrants, 4% subordinated debentures and preferred stock, all which are described below. We refer to these investors as selling shareholders in this prospectus. Pursuant to the Securities Purchase Agreement, the selling shareholders have purchased 760,000 shares of common stock, warrants to purchase 3,600,000 shares of common stock and subordinated debentures with a principal amount of $3,280,000 for a total price of $4,800,000. The selling shareholders have the option to purchase additional shares of common stock, warrants and series A preferred stock from us for a maximum amount of $1,920,000. The selling shareholders will be required to purchase these securities if an effective registration statement under the Securities Act is in effect with respect to all the common stock issued and issuable upon the exercise of the warrants and conversion of the subordinated debentures and series A preferred stock. 16 During the next 12 months we intend to expand our existing licensed operations in Mount Diablo, Ukiah, South Bend, Grand Rapids and San Diego, initiate and expand our Internet service and expand our overseas operations, primarily in Argentina, Peru and Ghana. We anticipate that our expansion will involve the purchase of significant equipment in Argentina and Peru, and estimate that the expenditure will be approximately $4,000,000 to $5,000,000. We also intend to perform additional development on the DWCP System during this period and we anticipate that our expenditures may be as high as $7,000,000 for research and development depending upon sources and availability of financing. We currently have 11 full-time employees and anticipate hiring more employees as we enter new markets. Based on our current plans, we anticipate that the number of our employees will at least double during the next 12 months. As of March 31, 2000, our total working capital was $764,215. Based on our current cash projections, we anticipate that we will be able to fund our operations with available cash, cash we receive in this offering and the proceed of the sale of the securities described above will be sufficient to fund our operations for the next 12 months. We do not anticipate that we will raise significant revenues from operations during the next 12 months. If we raise substantially less than the maximum funding in this offering, or if expenditures are greater than those which we presently anticipate, our available cash may not be sufficient to finance our projected operations during this period. BUSINESS Introduction In February of 1997, Worldwide Wireless, Inc., a Nevada corporation, was formed to coordinate the operations of TSI Technologies, Inc., a Nevada corporation, and National Micro Vision Systems, Inc., a Nevada corporation. Its purpose was to complete the development of its patented advanced digital wireless telephone and network designs and to finance, manufacture, and market these units and systems. TSI Technologies, Inc. was the research and development company formed for the purpose of creating and developing the DWCP system. National Micro Vision Systems, Inc. was formed to operate a network of wireless Internet sites. In April of 1998, World Wide Wireless, Inc, TSI Technologies and National Micro Vision Systems, Inc. acquired Upland Properties, Inc., a Nevada corporation, for stock and transferred their assets to Upland Properties, Inc. Upland Properties then changed its name to World Wide Wireless Communications, Inc. and is trading OTCBB under the symbol WLGS. Both World Wide Wireless, Inc. and TSI Technologies, Inc. remain significant shareholders in our company, but neither plays a role in our current operations. National Micro Vision Systems, Inc. is now completely separate from and unrelated to us. We have purchased and currently lease a substantial number of high-speed wireless Internet frequencies within the MMDS spectrum in the United States, Argentina, Peru and Ghana. We are now attempting to market to our wireless Internet frequencies directly to consumers for use in accessing the Internet and are considering the possibility of entering into strategic alliances with other companies to market access to our high-speed wireless Internet frequencies. We plan to purchase or lease additional wireless Internet frequencies in the United States and abroad. In addition to acquiring and developing wireless Internet frequencies, we are also attempting to develop a new generation of wireless cellular telephone technology that we have named Digital Wireless Call Processing System, or DWCP. We believe that this technology may 17 significantly enhance wireless communications in the future by dramatically increasing cellular telephone network capacity. The Industry Use of the Internet and private communications networks has expanded and continues to expand rapidly. International Data Corporation estimates that there were 142 million Internet subscribers at the end of 1998, and projects that this number will grow to over 500 million subscribers by 2003. Businesses increasingly depend upon data networks, not only for communication within the office, but also to exchange information among corporate sites, remote locations, telecommuting employees, business partners, suppliers and customers. Consumers are also accessing the Internet to communicate, collect and publish information and conduct retail purchases. The growth in data traffic is resulting in an increase in the demand for high-speed access. In light of this demand, the FCC has taken steps to increase the availability of frequencies and bandwidth that may be used by wireless carriers in the United States for such data transmission. In addition, an FCC ruling in September 1998 allowed license holders of MMDS, or various frequencies within the band of 2.15 to 2.68 Gigahertz, or GHz, to offer two-way broadband wireless data services. Previously, these frequencies had been restricted to one-way video transmissions which limited their effectiveness for data transmission. The FCC has increased the availability of various frequencies within the bands of 24 to 40 GHz, frequencies often referred to as LMDS. Internationally, these frequencies vary slightly, with the MMDS-type service being proposed for frequencies from 2.5 to 4.0 GHz while LMDS-type service is offered on frequencies similar to the United States. The FCC has also adopted orders to allocate additional spectrum through auctions during 2000 which can be used by high-speed data transmission service providers. Opportunities in broadband wireless access are increasing globally as Europe, Latin America, Asia Pacific and Canada join the United States in promoting competition in the local communications services market by allocating frequencies and bandwidth and issuing transmission licenses. In this regard, at least 26 countries have allocated broadband wireless frequency bands for use or trials in the last mile, according to Global Telephony. Deregulation has been a significant catalyst for increased competition in the long-haul segment of the market and massive spending on network infrastructure, as incumbent and emerging carriers have sought to address the growing demand for bandwidth. In the local access segment of the market, deregulation has also been a significant catalyst for the growing interest in providing broadband access directly to subscribers. Data services that historically were offered only by a single provider for a region now may be offered by a number of competing service providers. This increased competition has given local service providers compelling incentives to improve data transmission rates in order to offer additional value-added services to subscribers. However, bandwidth limitations of the existing last mile infrastructure have constrained service providers from exploiting these opportunities. Last mile links to subscribers typically consist of copper wires that operate at substantially lower transmission speeds than those offered in the long-haul segment of a network, or by some available broadband alternatives. These copper wires were originally intended to carry only analog circuit-switched, voice signals. As a result, the last mile has become a bottleneck that limits high-speed data transmission. Alternative technologies for broadband access include: 18 o Digital subscriber line, or DSL, technology improves the data transmission rates of a telephone company's existing copper wire network; o Cable modems, which are designed to provide broadband Internet access and are targeted primarily at the residential market; o Fiber-Based Solutions and high-capacity leased lines, which offer the highest data transmission rate of any of the alternative technologies for broadband access; o Point-to-point wireless technology enables data transmission using a dedicated radio link between two locations; and o Broadband point-to-multipoint wireless networks, which consist of a wireless hub that communicates over radio frequencies to transmit and receive network traffic to and from wireless modems installed at multiple subscriber locations. Both incumbent and emerging service providers are emphasizing broadband wireless technologies for Internet access. Established carriers are expected to use broadband wireless technology to reach new customers to whom they previously could not provide access, fill coverage gaps in their existing networks and deploy value-added services in a cost-effective manner. For example, International Data Corporation reports that in 1999, Sprint and MCI WorldCom spent over $1.5 billion to purchase companies holding MMDS licenses. Emerging carriers may use this technology to bypass existing wire-based infrastructure and to compete with incumbent carriers. In addition, this technology may be used to deploy broadband services in regions where there is no wire-based communications infrastructure. Estimates of the revenue which MMDS licenses will generate vary substantially, but International Data Corporation estimates that revenue generated by basic services delivered via fixed wireless technologies will grow from $767 million last year to $7.4 billion in 2003. MMDS and Other Fixed Wireless Transmission Systems The two primary broadband frequencies generally considered for fixed wireless transmissions are MMDS and LMDS. In certain specific circumstances, LMDS is a very attractive alternative to wired services. Its major benefit is its bandwidth, which is large enough to transmit large amounts of data at once. On the other hand, LMDS has severe limitations as well including high costs of build out, very short range (under 5 kilometers) and severe problems with interference from weather and atmospheric conditions. Even though it has these limitations, LMDS would appear to have its major potential in wireless local loops, internal wireless networks, intranets, etc. MMDS, while still considered a broadband service, has less bandwidth than LMDS. Nonetheless, it has more than enough bandwidth for the great majority of potential business and residential users. On the other hand, in the United States, which allows 10 watts of power in transmitting data, the range of MMDS is at least 50 kilometers and it is much less affected, if at all, by atmospheric and meteorological phenomena. It is also much less expensive to build-out than LMDS, in addition to the fact that, because of its greater range, fewer transmitters are required. Both LMDS and MMDS are transmitted over a limited number of licensed frequencies that protect data from interference by other forms of radio or microwave transmitters. It is 19 critical, therefore, that any company operating or attempting to develop a system of wireless Internet over either LMDS or MMDS frequencies acquire these limited frequencies as quickly and as inexpensively as possible and for as many locations and as many channels/bands as possible in each location. Because of the limitations of LMDS, and because we believe that the more viable market for wireless high-speed services is in the small to medium size business and residential market, we have decided to concentrate exclusively on MMDS and other lower-frequency services. In that context, we have been actively engaged in the acquisition of wireless Internet frequencies in the United States and especially abroad. One major technical problem with MMDS has traditionally been a clear line of sight was necessary between the transmission and the receiver. This limitation allowed MMDS to be used only in areas with even terrain and no obstructions, insofar as buildings and hills would often disrupt MMDS transmissions. Although MMDS continues to experience line of sight limitations, there have been recent developments which have shown a potential for reducing these problems. Cisco Systems, Inc. has recently announced the development of Vector Orthogonal Frequency Division Multiplexing, which purportedly has the ability to reassemble multi-path MMDS signals at the receiving point so that they appear to arrive in a single stream from one location, even if obstacles are in the path of the original MMDS signal. (Communications Daily, MMDS Industry Gears Up on Standards Issues, Spectrum Planning, April 3, 2000). This would have the effect of significantly reducing the line of sight problem with MMDS and, we believe, will enhance MMDS as a medium for Internet access. A part of the spectrum MMDS occupies consist of frequencies referred to as Institutional Television Fixed Service, or ITFS. These frequencies are reserved by federal law to television broadcasting by religious, educational or other nonprofit groups. An increasing number of providers of data transmission through MMDS are leasing transmission rights of the holders of ITFS licenses. As we discuss below, we have leased a number of ITFS frequencies from a nonprofit organization. International Broadband Use We believe that international markets offer enormous potential for growth. Although use of the Internet has grown substantially internationally, we believe that the combination of obsolete equipment and newly privatized systems in many countries provide us with great opportunity. The technology we employ allows countries such as Ghana and Argentina to establish an up-to-date, high-speed, broadband wireless Internet system equal to any on the most developed nations with very little infrastructural costs. The same will be true in the many other countries throughout Asia, Latin America, Africa, the Middle East and Europe in which we are actively seeking wireless frequencies. We believe that our approach to providing high-speed, broadband, fixed wireless Internet service will make our service available to a broader customer base than is possible with certain other fixed wireless services. By concentrating on the acquisition of relatively low-frequency spectrum, we can provide service over a substantially larger market of customers, with enhanced propagation properties, and for substantially lower cost than can be offered by higher-frequency LMDS-type fixed wireless services. It is our belief that the bandwidth and speed of our service will meet the requirements of at least 90% of the potential high-speed wireless Internet customer base, and we hope to be able to provide this service more economically and with greater reliability than our competition. In the international market, we should be able to provide a 20 quantum leap in the quality of Internet service beyond that which currently exists and at a price point similar to that being charged by providers of the current service. Our strategy Our activities are currently divided into three categories: o Acquisition of Wireless Internet Frequencies - Spectrum; o Development of Wireless Frequencies - Build Out; and o Development and Licensing of DWCP. Acquisition of Wireless Internet Frequencies - Spectrum We have determined that our primary target for acquisition of wireless frequencies will be in the MMDS frequency range within the United States of 2.5GHz to 3.0GHz and in similar frequency ranges up to around 5.0GHz internationally. With these frequency ranges we believe that we will be able to provide the highest quality, broadest band, and fastest service and the most reasonable costs to the largest number of potential customers. By positioning ourselves to provide enhanced connectivity to the largest number of people, we believe that we will play a significant role in the expansion of this remarkable technological development in both the short and long term.
Prior to 1999, we controlled MMDS and ITFS licenses in only three locations - the East Bay region of San Francisco, California, northern San Diego County, California, and South Bend, Indiana. Since the beginning of 1999, we have acquired rights - either through long-term leases with options to purchase or outright purchases - to additional spectrum both in the United States and elsewhere. As of the date of this offering, we lease, own or possess reversionary rights to licensed frequencies in the following additional locations: Location State/Country Grand Rapids Michigan Vail Colorado Aspen Colorado Key West Florida Ukiah California La Grande Oregon Pierre South Dakota Casper Wyoming Entire nation of Ghana, West Africa Ghana, West Africa Buenos Aires Argentina, South America Rosario Argentina, South America Santa Fe Argentina, South America Corrientes Argentina, South America Mendoza Argentina, South America Neuquen Argentina, South America Cordoba Argentina, South America Bahia Blanca Argentina, South America Lima Peru, South America
21 The licenses in the United States listed in the above table are currently leased from Shekinah Networks. Pursuant to an Option Agreement with Shekinah Networks, we paid $500,000 to lease eight ITFS channels for our high-speed MMDS wireless Internet connections, as authorized by the FCC. This agreement also provides us an exclusive option to lease excess capacity on Shekinah's remaining thirty-two ITFS channels, as they become available. The monthly minimum transmission fee to be paid to Shekinah for each license or application leased, will be 5% of the gross system receipts or $500, whichever is greater. Each lease has a term of five years, which may be renewed at our election for an additional five-year term if the FCC renews the license. All of the United States licenses described above allow us to broadcast over MMDS frequencies using one-way transmissions only. With the exception of certain limited provisional licenses granted in various parts of the country, the FCC has not yet granted long-term two-way transmission licenses. The FCC announced in March 2000 that it would begin to accept applications for two-way MMDS licenses during the week of July 3 through July 10. We are in the process of preparing our applications for two-way transmissions for our existing licenses for submission to the FCC within this period. Development of Wireless Frequencies - Build Out As spectrum is acquired, we plan to provide high-speed Internet services, including telephony and videoconferencing services. We plan to join with local partners and other entities in the industry to form strategic alliances in connection with the use and implementation of high-speed wireless services. We may also provide services directly to users of Internet services. As of the date of this prospectus, and except as described below, we have not yet entered into any strategic alliances. We are currently operating a single system off of Mt. Diablo in Concord, California, an area some thirty miles east of San Francisco. The license at Mt. Diablo is one of only two one-channel licenses that we control, with all the remaining ones being at least four channels. Revenue generating service commenced in this location in December 1999. Because the high-speed wireless component of the Mt. Diablo operations is only available in downlink mode, we have been aware from the outset that the operations in the Concord area would not be typical for the more conventional two-way systems. However, because the FCC has not yet approved permit applications for two-way transmissions over MMDS frequencies and because of the specific demographics within the potential Mt. Diablo transmission area, we determined to commence the limited-type of service close to our headquarters in Oakland. We intend to use this one-way wireless system in only one additional location - San Diego, California. The Concord and San Diego operations will use high-speed wireless transmissions to download information from the internet and similar data sources, but will use telephone lines, either "normal" or high-speed, for the uplink. While this one-way service will provide users with enhanced Internet connections, it will not offer full-time, always on, high-speed two way wireless service that our other locations will provide. We intend to build-out our next domestic system in the small town of Ukiah, California, some ninety miles north of San Francisco. The FCC has already granted digital authorization for the Ukiah license and the remaining locations. The proximity of Ukiah to the corporate headquarters and the relatively compact demography and geography will provide us with a convenient platform to commence full bi-directional wireless service. After Ukiah, the domestic build-out program will include northern San Diego County, South Bend, Indiana, Grand Rapids, 22 Michigan,Vail and Aspen, Colorado, Key West, Florida, Pierre, South Dakota and Casper, Wyoming. We intend to commence operations in Buenos Aires, Argentina during the first six months of 2000. Preparations have commenced to secure the necessary backbone connections and transmitter locations in the Greater Buenos Aires metropolitan area, which contains more than 12 million people. Our ability to begin transmission over the frequencies is subject to approval of the Comision Nacional de Communicaciones, or CNC, the governmental agency primarily responsible for regulating telecommunications in Argentina. We have not yet received approval by the CNC, and the Argentine government recently announced that it was placing a freeze on the review of all license transfer requests. However, we believe that the CNC will ultimately approve our applications and allow for the transfers. If the transfer is approved, we will commence transmitting in Buenos Aires by as early as June 15, 2000. Shortly thereafter, commencement of service is planned in Cordoba and Mendoza, both cities with around 2 million inhabitants. As an initial marketing approach, we expect to establish, jointly with a current retail establishment, an Internet Cafe in Buenos Aires where we intend to broadly expose our services to a large number of potential customers. In Argentina, we will operate through our majority-owned subsidiary, Infotel Argentina, S.A. We expect to be in operation in all eight cities in which we have obtained licenses within eighteen months and hope to expand the number of licenses currently owned. With the current licenses, our transmission range in Argentina will cover approximately 50% of the country's 33 million inhabitants. We do not have Internet access or other service agreements in Argentina with any customers at this time, however. We intend to begin operations in Peru this year. We have acquired all of the shares of Digital Way, S.A., which presently owns an MMDS spectrum license in Lima/Callao and is in the process of attempting to secure additional license in that area as well as licenses for five different cities in Peru. We have yet to receive governmental consent in Peru for the transfer of the control of Digital Way's licenses. We will not be able to commence our Internet service in Peru until we obtain that consent. We intend to commence service in Ghana, West Africa this year. Although Ghana has a much smaller economy than Argentina, fewer people and less computer penetration, we believe that Ghana and other neighboring West African nations provides us with significant revenue potential. Like Argentina, such public locations for service such as Internet cafes and the country's Post Office Department are likely starting places for revenue service. In addition, we believe that the stable political situation in Ghana and the continuing relatively fast-pace of economic growth bodes well for an ever-increasing demand for Internet service. We have been informed that we need to reapply for the licenses we acquired in Ghana on the ground that the original recipient of the license never used the licenses. We are eligible to reapply for the license upon the delivery of a development plan to the National Communications Authority in Ghana and believe we will be granted the license, although we are not certain whether we will receive that license. We have entered into a letter of intent with El Salvador Telecomuniciones S.A. de C.V. for the purpose of acquiring a 25% ownership interest in that company in El Salvador. Pursuant to the terms of the letter of intent, we have paid $1,000,000 to that company as an advance payment of the purchase price, which was to total $3,500,000. The agreement provides that the purchase was conditioned upon that company's acquisition of certain licenses and the occurrence 23 of certain other conditions which have not been met. As a result, we believe that it is improbable that the sale will occur and we are seeking return of the $1,000,000 payment. We have applied for licenses in the 3.5 GHz range in Germany and the Czech Republic. We are awaiting a definitive response on those applications. In addition, we are exploring additional markets in Europe - including Portugal as well as much of Eastern Europe - for expansion of our services. We expect that, in the case of any future acquisition of licensed frequencies, we will operate the systems alone, do so in joint ventures with local entities, or transfer the licenses to third parties for significant consideration. Development and Licensing of DWCP System We are completing the development of our DWCP system, an acronym for Distributed Wireless Call Processing System. The major feature of the DWCP system is that it allows individual cell phones and other communications units to amplify signals, thereby reducing the need for repeater stations. The DWCP system allows every handset itself serves as a mobile, low-power repeater site, and each unit facilitates the operation of the entire local network within a radius of 10-20 miles. A whole continent populated with these units would theoretically have no need for infrastructure support of any kind. In practice, we or parties to whom we license DWCP will build widely scattered gateway sites that will serve to introduce local signals into long lines, international and satellite service providers and introduce data signals into destination networks while providing a medium for our generation of an ongoing revenue stream. It is expected that there will be a dramatic increase in total network capacity and in individual and traffic-form capacities resulting from the use of the DWCP system. This transmission technique, implemented in the chipsets that are the core of the new technology, embodies very low power transmissions along multiple routes between two mobile or stationary points on the network. The result is a large group of transmission paths blanketing the entire cell compared to the hub and spoke transmissions between the central node and the multiple users of a traditional cellular system. The multiplicity of routes between any two points that is possible with this fabric generates an aggregate capacity for the network that far exceeds a hub and spoke system, where multiple transmission paths converge on a single hub, quickly consuming the available radio frequency in the cell. The low transmission powers needed for the DWCP system have the further potential to allow this new network technology to be overlaid on existing wireless cellular installations without interfering with existing signals in the same frequency. As a result, the new technology has the potential to provide overbuild capacity, incremental returns on investments in frequency, and introduction of new, high-value data and non-voice services on cellular franchises already in place. This new technology is currently being engineered to operate in, among other frequencies, the PCS frequency bands and in so-called free or unlicensed frequency bands in the United States. It is readily adapted to other frequencies - - military frequencies and frequencies that may be allocated by foreign governments. 24 By licensing or otherwise transferring this technology to third parties and retaining a substantial royalty interest in it, we believe that we will be able to concentrate on our core business while retaining the potential for a significant revenue stream. Investors should be aware that this system is largely untested and is not widely used, and we cannot ensure that an increase in usage will actually result. We are currently having feasibility studies conducted on DWCP to evaluate its capabilities and market potential. Acquisitions On December 1, 1999, we signed an agreement to acquire 51% of Infotel Argentina, S.A., the owner of MMDS licenses in eight of the largest cities in Argentina, including Buenos Aires. Under the agreement, we will appoint the majority of Infotel's directors and will be in charge of its management. The purchase price for Infotel Argentina S.A. consisted of $900,000 in cash and 454,545 shares of common stock. The Agreement allows us to rescind the purchase in the event that the CNC does not approve the sale of Infotel Argentina S.A. to us and receive repayment of the purchase price. On February 10, 2000, we signed an agreement to purchase Digital Way, S.A., a Peruvian telecommunications company. Digital Way currently owns licenses for MMDS spectrum in the 2.3 to 2.5 GHz range, has national and international long-distance concessions as well as value added licenses for services in Peru. This acquisition requires the approval of the relevant agencies of the Peruvian government. Business Locations Our business headquarters is located at 520 Third Street, Oakland, California, 94607. We also have offices located in Concord, California and Buenos Aires, Argentina. Our office space at One Post Street, San Francisco, was leased on a month-to-month basis. We vacated these offices on August 31, 1999. The actual rent paid, for the fiscal year ended September 30, 1999, was $22,341. In April 1999, we entered into a 5-year lease for approximately 6,000 square feet of office space in Jack London Square, Oakland, California. The lease commenced on June 5, 1999. The triple net rental agreement is for $10,038 per month during the first year. The lease provides for an annual increase based on the indexed cost of living adjustments. Additionally, the lease provides for the landlord's participation in partial reimbursement over the terms of the lease to us for leasehold improvements for which we pay. We began to occupy this space on September 1, 1999. The minimum annual rent is $120,456 for the fiscal years ended September 30, 2000, 2001, 2002 and 2003, and $81,642 for the period October 1, 2003 to June 4, 2004. We also entered into a lease for office space to operate its network operation center at 2962 Treat Boulevard, Suite C, in Concord, California 94518. The triple net rental agreement is for $1,890 per month. The lease provides for an annual increase based on the indexed cost of living adjustments. Additionally, the lease provides for the landlord's participation in partial reimbursement over the terms of the lease to us for leasehold improvements we make. We commenced its occupation of this 1680 square foot space on May 1, 1997. The lease expired on April 30, 2000. We are now occupying the premises on a month-to-month basis. We have lease space by virtue of our acquisition of Infotel Argentina. The lease is for approximately 1,500 square feet and is leased on a month-to-month basis. The monthly rent is 25 approximately $2,000 per month. The lease started on January 1, 1999 and expires on December 31, 2003. Regulation We intend to offer our services exclusively over licensed frequencies in each of the countries in which we operate. In the United States, our frequencies are licensed by the Federal Communications Commission, in Argentina, by the Comision Nacional de Comunicaciones, in Peru by the Telecommunications Concessions Department of the Ministry of Transport, Communciations, Housing and Construction and in Ghana by the National Communications Authority. We are either applying directly for licenses in some countries or applying jointly with local partners in others. Some countries require, for example, domestic control of any entity licensed to use radio frequency within their territory. Within the United States, we operate under MMDS and ITFS licenses issued by the FCC. These licenses are issued in the 2.5 GHz frequency range and can be revoked if the licensee or its assignee is in violation of any of the operation provisions under the license. The licenses are issued in the United States for a fixed time period and can be renewed. Yearly reports are required to be filed with the FCC to establish that the licensee or its assignee is complying with the requirements of the license. Outside the United States, rules and regulations are quite varied. In Argentina, the proposed frequencies for MMDS licenses are between 2.4 GHz and 2.6 GHz and are granted by the CNC. Licenses are granted for periods of 10 years, but may be extended for lengthier periods at the discretion of the CNC. In Peru, frequencies for MMDS licenses are also between 2.4 GHz and 2.6 GHz and are granted for periods of 20 years and in Ghana licenses may be of unlimited duration. As in the United States, licenses may be revoked if the licensee violates any of the license provisions. There are significant differences in the clarity of regulations as well as in the consistency of their enforcement by the regulatory authorities, and changes in governments may result in substantial changes in the enforcement of regulations. For example, in Ghana the National Communications Authority has taken over responsibility for the issuance of licenses from the Ghana Frequency Registration and Control Board. Several licenses which we have acquired in that country were originally issued by the Frequency Registration and Control Board, which subsequently sold licenses for the same frequencies to third parties after that agency no longer had authority to regulate license approvals. We are attempting to limit our involvement to countries in which, historically, such changes in administration have not created disruptions for license holders, although our experience has shown that it is not always possible to do so. 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 26 risk of liability under these laws, we cannot assure you that we will avoid liability entirely under these laws. Patents/Intellectual Property We recently received from the United States Patent and Trademark Office a patent pertaining to the DWCP system, which has been issued patent number 6,055,429. We do not have other patents pending pertaining to other technologies. We currently use the service mark "World Wide Wireless Communications" and have applied to register the service mark consisting of both the name itself and a design logo with the United States Patent and Trademark Office. We presently intend to change our corporate name from World Wide Wireless Communications, Inc. to another name in the near future. Litigation On August 26, 1999, we filed suit against Credit Bancorp, in U.S. District Court in San Francisco, regarding improprieties on the part of Credit Bancorp relating to the August loan. The case was settled on October 11, 1999. As part of the settlement agreement, Credit Bancorp agreed to convert the original loans granted to us to a convertible debenture in the amount of $740,000. On October 11, 1999, we issued a convertible unsecured debenture for $740,000 to Credit Bancorp in settlement of this obligation. The terms of this convertible unsecured debenture are 7% interest per annum payable, semiannually on the last day of February and September, with the principal due September 30, 2002. All amounts of unpaid principal and accrued interest of this debenture are convertible at any time at the conversion price of $1.60 per share of unregistered, restricted shares of our common stock. Credit Bancorp's receiver has agreed to convert principal and accrued interest owing on the debenture into 482,734 shares of our common stock. In November 1999, the SEC filed suit against Credit Bancorp alleging violations of various securities laws in connection with its actions in relation to us and others, and seeking various forms of relief including disgorgement of its illegal gains. A receiver has been appointed to administer the affairs of Credit Bancorp. At this time, management believes that if the suit is successful, certain benefits may accrue to us, including monetary remuneration. 27 MANAGEMENT Our executive officers and directors and their ages as of April 30, 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............ 48 Director, vice president November 1999 to present and secretary Dana Miller............... 40 Vice president May 1998 to present Ramsey Sweis.............. 34 Director May 1998 to present Robert Klein.............. 51 Director May 1998 to present
Douglas P. Haffer has practiced law in San Francisco, Beverly Hills, and Washington D.C. for twenty-five years. During that time he has served as general counsel and/or vice president, and on the Board of Directors, of several corporations, including Commercial Bank of San Francisco, Aca Joe Inc., Finet Holdings Corporation, Worldwide Wireless Inc. and Uniprise Systems, Incorporated. His legal practice concentrated primarily on providing legal counseling to small or start-up businesses. In addition, a significant part of his practice contained an international aspect involving foreign investors seeking investment platforms in the United States. Mr. Haffer attended the University of Wisconsin, Madison from 1965 to 1969 where he received his Bachelor of Arts degree with honors with a major in Latin American history, and was elected to Phi Beta Kappa. He then attended the Harvard Law School from which he graduated in 1972 with a Juris Doctor degree. Mr. Haffer lived in Latin America for seven years and reads, writes and speaks Spanish fluently. He has been a lecturer and adjunct professor of law at the University of San Francisco Law School and at the Law School at the University of California at Davis. Wayne Caldwell has served as Vice President and General Counsel since November 1999. Mr. Caldwell is responsible for legal, governmental and regulatory matters. Prior to joining World Wide Wireless Communications, Inc., Mr. Caldwell was in private practice for two decades specializing in business and regulatory law. Mr. Caldwell is a graduate of Stanford University in economics and received his law degree from the University of San Francisco. Dana Miller was Director of Licensing and Acquisition for National Micro-Vision Systems, Inc. from 1994 to 1996. He worked extensively with the Federal Communications Commission and FCC legal counsel and was responsible for compliance with all FCC regulations. Mr. Miller also coordinated acquisitions of microwave television licenses throughout the United States. He has negotiated FCC lease agreements with educational institutions and nonprofit organizations. From 1996 to 1998 Mr. Miller was a self-employed telecommunications consultant. He is an expert in FCC license application, FCC petition, and license acquisition and maintenance. His accomplishments include resolution of a recent long-term, complex conflict between us and a second national wireless firm, freeing us up to implement high-speed wireless Internet operations in the San Francisco metropolitan area. Ramsey Sweis has had extensive experience in management and in the product design industry. He has been a leader and developer of high performance teams by enabling, training and motivating team members. In the recent past he has provided computer and engineering 28 services to General Motors and Chrysler Corporation. In connection with those activities Mr. Sweis has developed designs between engineering, prototype models, tooling and vendor sources. Mr. Sweis resides in Roseville, Michigan. He has extensive experience in the product design industry. He currently serves as a Program Manager for Hanke Training & Design of Clawson Michigan. From 1997 to 1999 Mr. Sweis served as a designer for Computer and Engineering Services of Auburn Hills, Michigan From 1991 to 1997, Mr. Sweis was a design leader for Megatech Engineering of Warren Michigan. Robert Klein's experience includes an active twenty-year career in the securities industry handling a wide range of duties including management roles and institutional trading. For the past fifteen years a major emphasis has been placed on packaging complex transactions on behalf of corporate clients resulting in the creation and sale of marketable securities. The past five years has been spent on public company development. Since 1992, Mr. Klein has been self-employed through Weissgeld Capital Group, Ltd, a company he founded. In the past, he served as a director for three brokerage firms, including Yorkton Securities. He is currently a director of Spectrum Oil Corp. Mr. Klein has a degree in Applied Mathematics from the University of Waterloo, and an FCSI designation from the Canadian Securities Institute. Director Compensation Directors receive no compensation for serving as directors, except that: o Mr. Sweis received options to purchase 250,000 shares of common stock on October 22, 1998, at an exercise price of $0.095 per share. All of Mr. Sweis' options vested immediately upon the date of grant. The expiration date for Mr. Sweis to exercise the options is October 21, 2003. To date, Mr. Sweis has not exercised any options for shares of common stock. o Mr. Klein received options to purchase 250,000 shares of common stock on October 22, 1998, at an exercise price of $0.095 per share. All of Mr. Klein's options vested immediately upon the date of grant. The expiration date for Mr. Klein to exercise the options is October 21, 2003. To date, Mr. Klein has not exercised any options for shares of common stock. Employment Contracts We have entered into an employment agreement with Mr. Haffer, which provides for an initial term of three years commencing February 1, 2000 at an initial annual base salary of $230,000 plus an annual performance bonus of not less than $34,000. Any bonus in excess of $34,000 will be at the sole discretion of our Board and will not be tied to a fixed set of objective criteria. Mr. Haffer's employment agreement also contains a termination provision that requires us to pay him his annual compensation and minimum bonus amounts remaining on his three-year contract if he is terminated without cause. In October of 1999, we entered into a three-year employment agreement with Mr. Caldwell under which he will receive an annual salary of $48,000. Under the terms of the agreement, on May 8, 2000, Mr. Caldwell's base salary will be increased to $72,000 per year, and on November 8, 2000, Mr. Caldwell's salary will be increased to $96,000 per year. The agreement also provides for an annual performance bonus of not less than 5% of his base salary and not more than 100% of his base salary. The decision to grant the bonus and the amount of the bonus can be decided by management without the consent of our Board of Directors. We 29 have not established a fixed set of performance criteria on which to base Mr. Caldwell's bonus amounts. Mr. Caldwell's employment agreement also contains a termination provision that requires us to pay him his annual compensation and minimum bonus amounts remaining on his three-year contract if he is terminated without cause. In May of 1999, we entered into a two-year employment agreement with Mr. Miller under which he will receive an annual salary of $96,000. Mr. Miller is not entitled to receive any bonuses. Under the terms of the employment agreement, we issued Mr. Miller 179,000 shares of common stock in lieu of payment of $17,000 towards a past obligation of $37,000 and the company acknowledged that we paid Mr. Miller $20,000 for the balance of these fees. Mr. Miller's employment agreement states that he is entitled to receive stock options on the same terms as those granted to our management, although the specific number of shares and other terms of the options are not specified. If Mr. Miller is terminated without cause, he will be entitled to receive his salary for a period of three months after termination. 30 EXECUTIVE COMPENSATION The following table summarizes information regarding the salary and bonus we paid to Mr. Haffer, our Chief Executive Officer, during the fiscal year ended September 30, 1999. Mr. Haffer was the only officer who received a salary plus bonus that exceeded $100,000 during that period.
Summary Compensation Table Restricted Securities stock Underlying Name and Principal Position Salary Bonus awards Options/SAR - --------------------------- ------ ----- ----- ----------- Douglas P. Haffer 106,000 0 -- 800,000 Chairman, CEO and CFO
The following table sets forth information concerning grants of stock options to our Chief Executive Officer for the fiscal year ended September 30, 1999. All options were granted under the 1998 Stock Option Plan. Shareholders never approved our 1998 Stock Option Plan, and therefore, all incentive stock options granted under the 1998 Stock Option Plan are classified and taxed as non-statutory stock options. Option Grants The following table sets forth information concerning grants of stock options to each of our executive officers and directors for the fiscal year ended September 30, 1999. All options were granted under the 1998 Stock Option Plan. Shareholders never approved our 1998 Stock Option Plan, and therefore, all incentive stock options granted under the 1998 Stock Option Plan are classified and taxed as non-statutory stock options.
Individual Grants Number of Percent of Securities options Options Fiscal Year Underlying granted to Exercise Exercised Options Options employees Price as of Expiration Granted Granted from 8/22/98 ($/Share) 4/30/00 Date ------- ------- ------------ --------- ------- ---- Douglas P. Haffer................ 1998 800,000 43% $0.095 0 10/22/03 Chairman, CEO & CFO 2000 800,000 $1.62 0 2/1/05 Wayne Caldwell................... 1999 800,000 21% $0.63 0 10/27/05 Vice Pres. & Secretary Dana Miller...................... 1998 800,000 21% $0.095 0 8/22/03 Vice President Ramsey Sweis..................... 1998 250,000 7% $0.095 0 10/22/03 Director Robert Klein..................... 1998 250,000 7% $0.095 0 10/22/03 Director
31 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. In October 1999, Mr. Caldwell was granted an option for 800,000 shares of our common stock at an exercise price of $0.66 per share. All 800,000 shares vested immediately. The expiration date is five years from the date of grant. In October 1998, Mr. Miller received an option to purchase 800,000 shares of our common stock at an exercise price of $0.095 per share. All 800,000 shares vested immediately. The expiration date is five years from the date of grant. In October 1998, Mr. Sweis received an option to purchase 250,000 shares of our common stock at an exercise price of $0.095 per share. All 250,000 shares vested immediately. The expiration date is five years from the date of grant. In October 1998, Mr. Klein received an option to purchase 250,000 shares of our common stock at an exercise price of $0.095 per share. All 250,000 shares vested immediately. The expiration date is five years from the date of grant. 1998 Stock Option Plan Our Board of Directors adopted a 1998 Stock Incentive Plan in August 1998 reserving 3,000,000 shares for issuance. The Plan provides for the grant of incentive stock options, as defined in Section 422 of the Internal Revenue Code, to our officers and employees, and nonstatutory stock options to employees, directors and consultants. It may be administered by the Board of Directors or delegated to a committee. Shareholders never approved our 1998 Stock Option Plan, and therefore, all incentive stock options granted under the 1998 Stock Option Plan are classified and taxed as non-statutory stock options. The exercise price of incentive stock options granted under the 1998 Stock Option Plan must be at least equal to the fair market value of our common stock on the date of grant. However, for any employee holding more than 10% of the voting power of all classes of our stock, the exercise price will be no less than 110% of the fair market value on the date of grant. Nonstatutory stock options granted to a person who at the time the option is granted does not hold more than 10% of the voting power of all classes of our stock will have an exercise price of no less than 85% of the fair market value of the stock on the date of grant. Options granted to our employees will become exercisable over a period of no longer than 5 years, and no less than 20% of the shares covered will become exercisable annually. No options will be exercisable prior to one year from the date it is granted unless the Board specifically determines otherwise. In no event will any option be exercisable after the expiration of 10 years from the date it is granted, and no Incentive Stock Option granted to a holder of more 32 than 10% of the voting power of all classes of our stock will be exercisable after the expiration of 5 years from the date it is granted. If an optionee's status as an employee with us terminates for any reason, other than death or disability, then the optionee may exercise Incentive Stock Options in the three-month period following such cessation. The three-month period is extended to 12-months for termination due to death or disability. In the event of a merger or consolidation in which we are not the surviving entity, or a sale of all or substantially all of our assets or capital stock, if the surviving entity does not tender to the optionees stock options or capital stock of substantially the same economic benefit as optionees unexercised options, then the Board may grant to optionees the right to exercise any unexpired options for a period of thirty days. The 1998 Stock Option Plan will terminate in July 2008, unless sooner terminated by the Board of Directors. PRINCIPAL SHAREHOLDERS The following table sets forth the beneficial ownership of our common stock as of April 30, 2000 and as adjusted to reflect the sale of the shares of common stock offered hereby: o the Chief Executive Officer, each of the executive officers named in the summary compensation table and each of our directors; o all executive officers and directors as a group; and o each person or entity who we know beneficially owns more than 5% of our outstanding shares of common stock. Except as otherwise indicated, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of common stock held by them. Applicable ownership is based on 83,445,517 shares of common stock outstanding as of April 30, 2000. Beneficial ownership is determined in accordance with the rules of the SEC. Shares of common stock subject to options or warrants that are presently exercisable or exercisable within 60 days of April 30, 2000 are deemed outstanding for the purpose of computing the percentage ownership of the person or entity holding options or warrants, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person or entity. If any shares are issued upon exercise of options, warrants or other rights to acquire our capital stock that are presently outstanding or granted in the future or reserved for future issuance under our stock plan, there will be further dilution to new public investors. 33 Number of Shares Percentage of Beneficially Shares Named Executive Officers and Directors (1) Owned Outstanding - ------------------------------------------ ----- ----------- Douglas P. Haffer (2) .......................... 8,511,073 9.56 Wayne Caldwell (3) ............................. 800,000 * Dana Miller (4) ................................ 1,229,000 1.39 Ramsey Sweis (5) ............................... 250,000 * Robert Klein (6) ............................... 250,000 * Executive Officers and Directors as a Group .... 11,040,073 12.11 Name of Beneficial Owners Worldwide Wireless, Inc. (7) ................... 16,120,679 18.44 c/o Lofton & Associates 3233 East Broadway Long Beach, CA 90803 Kenn Olson (8) ................................. 6,356,260 7.20 3233 East Broadway Long Beach, CA 90803 TSI Technologies, Inc. ......................... 6,042,020 6.91 One Post Street, Suite 2600 San Francisco, CA 94104 Albert and Francis Kutcher ..................... 5,180,300 5.92 12052 Linda Flora Drive Ojai, CA 93023 - -------------------------------------------------------------------------------- * Less than 1%. (1) The address for each of the named executive officers and directors is c/o World Wide Wireless Communications, Inc., 520 Third Street, Suite 101, Oakland, CA 94607. (2) Includes 1,600,000 shares subject to options that are immediately exercisable. (3) Includes 800,000 shares subject to options that are immediately exercisable. (4) Includes 800,000 shares subject to options that are immediately exercisable. In addition, we are informed that Mr. Miller is entitled to receive 250,000 shares of our common stock which are presently held by World Wide Wireless, Inc. and have included those shares in the table. (5) Includes 250,000 shares subject to options that are immediately exercisable. (6) Includes 250,000 shares subject to options that are immediately exercisable. (7) We believe that Michael Lynch is a majority owner of Worldwide Wireless, Inc. and TSI Technologies, Inc. Mr. Lynch is not an officer or director of our company. No officer or director of either World Wide Wireless, Inc. or TSI Technologies is an officer of our company. (8) Includes 800,000 shares that Mr. Olson may be entitled to receive upon the exercise of a stock option he was granted while he was an officer and director. Mr. Jenkins was our Chief Operating Officer from May through November 1999. Behrooz Sarafraz has acted as an independent consultant for us periodically during the previous three years. Continental Capital & Equity Corporation has provided public relations services for us. 34 CERTAIN RELATED PARTY TRANSACTIONS As of September 1999, other than employment agreements and stock option plans, there have been no transactions to which we were a party involving $60,000 or more and in which any director, executive officer or holder of more than five percent of our capital stock had a material interest. DESCRIPTION OF SECURITIES The only shares being registered are those of the selling shareholders. We have also filed a separate registration statement with the SEC to register 4,000,000 shares of our common stock and 5,680,916 shares held by other shareholders. Common Stock Our articles of incorporation authorize us to issue a maximum of 100,000,000 shares of common stock, $0.001 par value. As of April 30, 2000, there were 83,445,517 shares of common stock outstanding. Owners of common stock are entitled to one vote for each share held of record on all matters to be voted on by shareholders, except that, upon giving the legally required notice, shareholders may cumulate their votes in the election of directors. Subject to the rights of any holders of preferred stock, the owners of common stock are entitled to receive dividends when, as and if declared by the Board of Directors out of funds legally available therefore. In the event of a liquidation, dissolution or winding up of our business, the common stock shareholders are entitled to share ratably in all assets remaining which are available for distribution to them after payment of liabilities and preferences to holders of preferred stock. Holders of common stock have no conversion, preemptive or other subscription rights, and there are no redemption provisions applicable to the Common Stock. We have reserved 3,000,000 shares of common stock that have been reserved for issuance under our 1998 Stock Option Plan. In addition, we are obligated to issue 3,600,000 shares of common stock pursuant to the terms of common stock purchase warrants, dated April 14, 2000, 304,000 shares of common stock pursuant to the terms of warrants to be issued as of the date of this prospectus, and additional shares of common stock to be issued pursuant to 4% Convertible Debentures described below to the selling shareholders. Preferred Stock Our certificate of incorporation does not presently authorize us to issue any class of stock other than common stock. Pursuant to the terms of a Securities Purchase Agreement, dated April 14, 2000, between us and various investors to whom we refer as selling shareholders in this prospectus, we are required to submit for shareholder approval an amendment to our certificate of incorporation that authorizes us to issue preferred stock. The Securities Purchase Agreement further states that our Board of Directors will authorize the creation and issuance of a maximum of 1,310 shares of series A preferred stock following the approval of that amendment by the shareholders and upon the our receipt of payment of $1,000 per share from those investors listed in the Securities Purchase Agreement. The selling shareholders may purchase the series A preferred stock at any time after the date the series A preferred stock is authorized, and must purchase the series A preferred stock after we a registration statement is declared effective with regard to the shares of common stock the selling shareholders may purchase pursuant to the Securities Purchase Agreement. See Registration Rights. 35 The series A preferred stock will have a par value of $0.01 per share and a stated value of $1,000 per share. The series A preferred stock will be convertible at any time into a number of shares of common determined by dividing the stated value of the series A preferred stock by the conversion price for those shares. The conversion price shall be the lesser of 110% of the average of the closing trading prices of the common stock per share for the five trading days prior to the date on which the series A preferred stock was originally issued or 85% of the average of the closing trading prices of the common stock for five days immediately prior to the date of conversion. If any shares of series A preferred stock have not been converted prior to April 2005, then all remaining shares of series A preferred stock shall be automatically converted on that date as if the holder voluntarily elected to convert those shares. Holders of the series A preferred stock shall be entitled to receive a dividend, payable in cash at a rate of 4% per annum of the stated value of the series A preferred stock. Dividends are payable semi-annually and accrue if not paid. Failure to pay dividends will result in an increase in the number of shares the series A preferred stock is convertible. The liquidation preference on the series A preferred stock is equal to the stated value per share. This payment shall be prior to any payment we make to the holders of our common stock or other shares of stock which are junior to the series A preferred stock. We must receive approval of our shareholders before we can amend our certificate of incorporation to allow for the creation of the series A preferred stock. If we do not obtain that approval for any reason, the investors shall be entitled to purchase additional 4% Convertible Debentures with an aggregate principal amount of $1,310,000 instead of the series A preferred stock. Warrants/Options We have issued warrants to purchase an aggregate of 3,600,000 shares to the selling shareholders. In addition, the selling shareholders have the right to acquire warrants to purchase an additional 1,440,000 shares of common stock. The warrants allow the holders to purchase shares of our common stock at a price equal to 120% of the market price of our common stock as of the date the warrants were issued. The warrants allow for the holders to exercise their warrants without the payment of cash by surrendering shares otherwise purchasable upon exercise of the warrant with a fair market value equal to the exercise price for the shares they are purchasing. The exercise price is subject to adjustments if we declare a stock split or dividend of our common stock and will be adjusted lower on a weighted average basis if we issue shares of our common stock at below the exercise price of the warrant then in effect. The warrants are exercisable when issued and have a term of five years. We have also agreed to issue to Continental Capital & Equity Corporation an option to purchase 100,000 shares of common stock at a price of $3.25 per share and an option to purchase 100,000 shares at a price of $4.25 per share pursuant to a letter agreement dated March 16, 2000. The underlying shares of common stock were included as part of a prior registration filing and are not incorporated into this registration. Subordinated Debentures We have issued 4% Convertible Debentures to the selling shareholders with a principal amount of $3,280,000. These debentures require the payment of interest at a rate of 4% per annum, payable semi-annually, and principal is due and payable on April 14, 2005. The selling 36 shareholders may convert principal and interest owing under the debentures at any time at a conversion price equal to the lesser of 110% of the average of the closing trading prices of the common stock per share for the five trading days prior to the date on which the debentures were issued or 85% of the average of the closing trading prices of the common stock for five days immediately prior to the date of conversion. During the first six months after the debentures were issued, the conversion price may not be less than $2.00 per share and, during the following six months, will not be less than $1.27 per share. However, if our revenues for the 12 month period ended December 31, 2000 are less than $13,500,000, there will be no minimum exercise price. There will be no minimum exercise price following the end of the second six-month period in any event. The Securities Purchase Agreement provides that we must issue additional debentures to the investors with the same terms if the investors make a subsequent investment and if our shareholders do not approve the amendment to our certificate of incorporation to allow for the creation of preferred stock. If this occurs, we could be obligated to issue notes with an aggregate principal amount of $1,312,000 to these investors. Registration Rights We have entered into a registration rights agreement, dated April 14, 2000, with the selling shareholders which requires that we file a registration statement with the SEC to register under the Securities Act all shares of common stock issued to them or issuable upon the conversion of the subordinated debentures and the series A preferred stock (if any is issued) and exercise of the common stock purchase warrants. The registration rights agreement provides that we must pay all expenses incurred in the registration and certain expenses of the selling shareholders, including up to $25,000 in the legal fees of counsel the selling shareholders retain. We are obligated to keep the registration statement effective with respect to those shares until those shares are sold or until those shares may be sold pursuant to Rule 144(k) of the Securities Act. Unless all shares are sold prior to that time, this will require that the registration statement will need to remain effective for a period of at least two years under present SEC rules. Under the terms of the registration rights agreement we are required to register 200% of the maximum number of shares of common stock issuable upon conversion of the series A preferred stock and 4% Convertible Debentures, plus 100% of the maximum number of shares of common stock issuable upon the exercise of the warrants. The registration rights agreement provides that we must pay the selling shareholders liquidated damages equal to 2% of the outstanding subordinated debentures and series A preferred stock if certain events occur. Principal among these events are: o If the registration statement is not filed by the SEC by May 30, 2000 o If the SEC does not declare the registration statement for the registration of the selling shareholders' shares effective by August 12, 2000; o If our common stock is delisted from the OTCBB; o If the shareholders do not approve of the creation of the series A preferred stock by July 15, 2000. 37 We entered into a registration rights agreement with Credit Bancorp pursuant to which we agreed to register shares of common stock issuable upon the conversion of a convertible subordinated debenture issued to Credit Bancorp. The agreement grants Credit Bancorp so-called piggy-back registration rights only, which means that we are obligated to include their shares in registrations which we are filing for public offerings of securities but does not otherwise require us to register their shares under the Securities Act. These registration rights were included as part of a prior offering and are not incorporated into this registration. Pursuant to a settlement agreement into which we entered with Chalmers R. "Bud" Jenkins, one of our former officers, we agreed to register the 400,000 shares issuable to him. These shares of common stock were included as part of a prior registration filing and are not incorporated into this offering. SELLING SHAREHOLDERS This prospectus relates to the resale of up to 10,789,715 shares of our common stock by the selling shareholders. Selling shareholders includes donees and pledges selling shares received from a named selling shareholder after the date of this prospectus. We will bear all costs, expenses and fees in connection with the registration of these shares. Sales of common stock may be effected by selling shareholders from time to time in one or more types of transactions, which may include block transactions, in the over-the-counter market, in negotiated transactions, through put or call options transactions relating to the common stock, through short sales of shares, or a combination of such methods of sale, at market prices prevailing at the time of sale, or at negotiated prices. The selling shareholders may effect transactions by selling common stock directly to purchasers or to or through broker-dealers, which may act as agents or principals. Such broker-dealers may receive compensation in the form of discounts, concessions, or commissions from the selling shareholders or the purchasers of shares, or both, which compensation to a particular broker-dealer might be in excess of customary commissions. The selling shareholders and any broker-dealers that act in connection with the sale of shares might be deemed to be underwriters within the meaning of section 2(11) of the Securities Act, and any commission received by such broker-dealer and any profit on the resale of the shares sold by them while acting as principal might be deemed to be underwriting discounts or commissions under the Securities Act. We have agreed to indemnify each selling shareholder against certain liabilities, including liabilities arising under the Securities Act. The selling securityholders have agreed to indemnify us and our directors, officers and any controlling persons, as defined in section 15 of the Securities Act, against certain liabilities, including liabilities under the Securities Act. Insofar as indemnification for liabilities under the Securities Act may be permitted to our directors, officers and any controlling persons, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. Except as otherwise indicated, and subject to applicable community property laws, the persons named in the tables have sole voting and investment power with respect to all shares of common stock held by them. Applicable ownership is based on 83,445,517 shares of common stock outstanding as of April 30, 2000. Beneficial ownership is determined in accordance with the rules of the SEC. 38 Shares of common stock subject to options or warrants that are presently exercisable or exercisable within 60 days are deemed outstanding for the purpose of computing the percentage ownership of the person or entity holding options or warrants, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person or entity. Selling shareholders are under no obligation to sell all or any portion of their shares. Particular selling shareholders may not have a present intention of selling their shares and may sell less than the number of shares indicated. The following tables assume that the selling shareholders will sell all of their shares. The following table lists the number of shares being registered for the selling, broken down by transaction:
Number of Shares Owned Transaction by Which Shares Purchased or Name of Selling Shareholder or Acquirable Purchasable - --------------------------- ------------- ----------- Esquire Trading & Finance 1,231,000 196,000 shares acquired as partial consideration Inc. in the April 14, 2000 Securities Purchase Schutzengelstrasse 36 Agreement; Baar, Switzerland CH6342 Fax No.: 041-7601031 735,000 shares issuable upon exercise of the warrant; 214,286 shares issuable upon conversion of 420,000 debentures (1); 85,714 shares issuable upon conversion of 168,000 shares of either series A preferred stock, or additional debentures. (2) Amro International S.A. 2,637,858 420,000 shares acquired as partial consideration c/o Ultra Finance Ltd. in the April 14, 2000 Securities Purchase Grossmuenster Platz 26 Agreement; P.O. Box 4401 Zurich, Switzerland CH8022 1,575,000 shares issuable upon exercise of the warrant; 459,184 shares issuable upon conversion of 900,000 debentures (1); 183,674 shares issuable upon conversion of 360,000 shares of either series A preferred stock, or additional debentures. (2) 39 Celeste Trust Reg. 1,055,143 168,000 shares acquired as partial consideration c/o Trevisa-Treuhand-Ansalt in the April 14, 2000 Securities Purchase Landstrassse 8 Agreement; 9496 Furstentums Balzers, Liechtenstien 630,000 shares issuable upon exercise of the warrant; 183,674 shares issuable upon conversion of 360,000 debentures (1); 73,469 shares issuable upon conversion of 144,000 shares of either series A preferred stock, or additional debentures. (2) The Endeavor Capital Fund, 2,642,143 210,000 shares acquired as partial consideration S.A. in the April 14, 2000 Securities Purchase 14/14 Divrea Chaim Street Agreement; Jerusalem 94479, Israel Fax No.: 011-972-2-5824443 1,575,000 shares issuable upon exercise of the warrant; 612,245 shares issuable upon conversion of 1,200,000 debentures (1); 244,898 shares issuable upon conversion of 480,000 shares of either series A preferred stock, or additional debentures. (2) Nesher, Ltd. 176,143 14,000 shares acquired as partial consideration c/o Ragnall House in the April 14, 2000 Securities 18 Peel Road Purchase Agreement; Doulgas, Isle of Man 1M1 4L2, United Kingdom 105,000 shares issuable upon exercise of the warrant; 40,816 shares issuable upon conversion of 80,000 debentures (1); 16,327 shares issuable upon conversion of 32,000 shares of either series A preferred stock, or additional debentures. (2) 40 Keshet, L.P. 440,357 35,000 shares acquired as partial consideration Seameadow House in the April 14, 2000 Securities Purchase Blackburn Highway Agreement; P.O. Box 173 Road Town, Tortola 262,500 shares issuable upon exercise of the British Virgin Islands warrant; 102,041 shares issuable upon conversion of 200,000 debentures (1); 40,816 shares issuable upon conversion of 80,000 shares of either series A preferred stock, or additional debentures. (2) The Keshet Fund, L.P. 264,214 21,000 shares acquired as partial consideration c/o KCM, LLC in the April 14, 2000 Securities Purchase 135 W. 50th Street Agreement; Suite 1700 New York, NY 10020 157,500 shares issuable upon exercise of the warrant; 61,224 shares issuable upon conversion of 120,000 debentures (1); 24,490 shares issuable upon conversion of 48,000 shares of either series A preferred stock, or additional debentures. (2) - -------------------------------------------------------------------------------- (1) The number of shares being registered equals 200% of that number of shares which would be issuable upon the conversion of the the 4% Convertible Debentures the selling shareholder owns as of the date of this prospectus, based on the market price of $1.96 per share as of March 25, 2000. In accordance with Rule 457(c) of the Securities Act, the market price has been determined by taking the average of the bid and asked price as of a specified date within 5 business days prior to the date of filing this registration statement. (2) The number of shares being registered equals 200% of that number of shares which would be issuable upon the conversion of the either the series A preferred stock the selling shareholder owns as of the date of this prospectus, or additional 4% Convertible Debentures if we are unable to obtain shareholder approval for the creation of the series A preferred stock, based on the market price of $1.96 per share as of March 25, 2000.
The following table sets forth the names of the selling shareholders, the number of shares of common stock beneficially owned by each selling shareholder as of May 25, 2000, and the number of shares that each may offer, and the number of shares of common stock beneficially owned by each selling shareholder upon completion of the offering, assuming all of the shares are sold. The number of shares sold by each selling shareholder may depend upon a number of factors, including, among other things, the market price of the common stock. None of the selling shareholders has, or within the past three years has had, any position, office or other material relationship with us or any of our predecessor affiliates. 41
Name of Selling Shareholder Shares Shares Percentage Beneficially Maximum Beneficially of Class Owned Prior to Shares Owned After After Offering Offered Offering Offering -------- ------- -------- -------- Esquire Trading & Finance Inc. 1,231,000 1,231,000 0 * Amro International S.A. 2,637,858 2,637,858 0 * Celeste Trust Reg. 1,055,143 1,055,143 0 * The Endeavor Capital Fund, S.A. 2,642,143 2,642,143 0 * Nesher, Ltd. 176,143 176,143 0 * Keshet, L.P. 440,357 440,357 0 * The Keshet Fund, L.P. 264,214 264,214 0 * - --------------------------------------- ---------------- ---------------- ---------------- ---------------- * Less than 1%.
Transfer Agent The transfer agent for our common stock is Manhattan Transfer Register Co., Post Office Box 361, Holbrook, New York, 11741-0361. PRICE RANGE OF COMMON STOCK Our common stock has been traded on the OTCBB from January 1998 to present. The security traded under the symbol UPPI from October 1997 through July 1998. However, there were no inside quotes reported for 1997. The market for our common stock has often been sporadic and limited. The following table sets forth in the periods indicated the range of high and low bid prices per share of our common stock traded as reported by the OTCBB.
--------------------------------------------------------------------- Quarter End Low Bid High Bid --------------------------------------------------------------------- 3/31/98 0.25 1.31 --------------------------------------------------------------------- 6/30/98 0.25 2.05 --------------------------------------------------------------------- 9/30/98 0.11 0.60 --------------------------------------------------------------------- 12/31/98 0.09 0.51 --------------------------------------------------------------------- 3/31/99 0.12 0.51 --------------------------------------------------------------------- 6/30/99 0.25 3.99 --------------------------------------------------------------------- 9/30/99 0.875 1.73 --------------------------------------------------------------------- 12/31/99 0.62 2.01 --------------------------------------------------------------------- 3/31/00 1.06 7.78 ---------------------------------------------------------------------
The trading of our shares is subject to limitations set forth in Rule 15g-9 of the Securities Exchange Act. This rule imposes sales practice requirements on broker-dealers who sell so-called penny stocks to persons other than established customers, accredited investors or institutional investors. Accredited investors are generally defined to include individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together with their spouses during the previous two years and expected annual income of that amount during the current year. For sales of shares to other persons broker-dealers must make special suitability determinations, must obtain the written consent of the purchaser to the sale prior to consummating the sale and is generally prohibited from making cold-calls or other unsolicited inquiries to purchasers without complying with these rules. These rules may adversely affect the ability broker-dealers and others to sell our shares or to sell shares in the secondary market. 42 LEGAL MATTERS Certain legal matters in connection with the common stock being offered hereby will be passed upon by Evers & Hendrickson LLP, 155 Montgomery Street, 12th Floor, San Francisco, California 94104. EXPERTS The summary financial data for the years ended September 30, 1998 and 1999 have been derived from the Financial Statements and Notes to Financial Statements, audited by Reuben E. Price & Co., San Francisco, independent auditors. These financial statements are included in reliance upon the authority of that firm as an expert in accounting and auditing. ADDITIONAL INFORMATION A registration statement on Form SB-2, including amendments, relating to the shares offered has been filed with the Securities and Exchange Commission, Office of Small Business Policy, Washington, D.C. This prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules to the registration statement. Statements made in this prospectus as to the contents of any contract or other document are not necessarily complete and, in each instance, we refer you to the copy of the contract or other document filed as an exhibit to the registration statement. Each statement about those contracts and other documents is qualified in all respects by that reference. The registration statement and exhibits and schedules can be inspection without charge and copies, at proscribed rates, at the public reference facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the Securities and Exchange Commission at 1-800-SEC-0300. In addition the Commission maintains a World Wide Web site on the Internet at http://www.sec.gov that contains reports, proxy and information statements and other documents filed electronically with the Commission, including the registration statement. We intend to furnish our shareholders with annual reports containing financial statements audited by our independent public accountants and quarterly reports containing unaudited financial information for the first three quarters of each fiscal year. 43
REUBEN E. PRICE & CO. REUBEN E. PRICE, C.P.A. (1904-1986) PUBLIC ACCOUNTANCY CORPORATION MEMBERS ________ FOUNDED 1942 AMERICAN INSTITUTE OF RICHARD A. PRICE CERTIFIED PUBLIC ACCOUNTANTS 703 MARKET STREET -------- SAN FRANCISCO, CA 94103 SECURITIES AND EXCHANGE COMMISSION PRACTICE SECTION ------- OF THE AMERICAN INSTITUTE OF (415) 982-3556 CERTIFIED PUBLIC ACCOUNTANTS FAX (415) 957-1178 -------- CALIFORNA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS
INDEPENDENT AUDITORS' REPORT Board of Directors World Wide Wireless Communications, Inc. We have audited the accompanying balance sheet of World Wide Wireless Communications Inc. (A Development Stage Company), as of September 30, 1999, and the related statements of operations, statements of cash flows, and statements of stockholders' equity for the years September 30,1999 and 1998, and from inception on September 1, 1994 through September 30, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of World Wide Wireless Communications, Inc. as of September 30, 1999, and the results of its operations, cash flows, and stockholders' equity for the years September 30, 1999 and 1998, and from inception on September 1, 1994 through September 30, 1999 in conformity with generally accepted accounting principles of the United States. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2, the Company has been in the development stage since its inception on September 1, 1994, and has suffered recurring losses and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Realization of a major portion of the assets is dependent upon the Company's ability to meet its future financing requirements, and the success of future operations, the outcome of which cannot be determined at this time. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Reuben E. Price & Co. January 24, 2000 Except for Note 9 SUBSEQUENT EVENTS, Affiliation in new locations, Other, as to which the date is May 15, 2000 F-1 World Wide Wireless Communications, Inc. (A Development Stage Company) Balance Sheet Assets September 30, 1999 ------------------ Current Assets: Cash and Cash Equivalents $ 275,082 Prepaid and other 62,740 ---------- Total Current Assets 337,822 ---------- Fixed Assets Furniture, fixtures and equipment 74,906 Leasehold improvements 261,478 Accumulated Depreciation and amortization (13,506) ---------- Total Fixed Assets 322,878 Other Assets: Option on Frequency Licenses 500,000 Rental Deposit 20,077 ---------- Total Other Assets 520,077 Total Assets $1,180,777 ========== Liabilities and Stockholders' Equity Current Liabilities: Accrued expenses $ 491,468 ---------- Total Current Liabilities 491,468 Long-Term Liabilities: Convertible debenture Loan payable 328,000 ---------- Total Long-Term Liabilities 328,000 Total Liabilities 819,468 Commitments and Contigencies Stockholders' Equity: Common stock, par value $ .001 per share, 100,000,000 shares authorized, 71,183,943 issued and outstanding at September 30, 1999 71,184 Additional paid-in capital 7,049,266 Deficit accumulated during development stage (6,759,141) ---------- Total Stockholders' Equity 361,309 ---------- Total Liabilities and Stockholders' Equity $1,180,777 The accompanying notes are an integral part of these financial statements. F-2 World Wide Wireless Communications, Inc. (A Development Stage Company) Statement of Operations
Cumulative from Inception on For the Year For the Year September 1, 1994 Ended Ended through September 30, September 30, September 30, 1999 1998 1999 ------------- ------------- -------------- Revenues $ -- $ -- $ -- ------------- ------------- -------------- General & Administrative Expenses (2,383,330) (353,075) (6,765,842) ------------- ------------- -------------- Total Operating Expenses (2,383,330) (353,075) (6,765,842) ------------- ------------- -------------- Operating Loss (2,383,330) (353,075) (6,765,842) Rental Income 0 6,701 6,701 ------------- ------------- -------------- Net Loss $ (2,383,330) $ (346,374) $ (6,759,141) ============= ============= ============== Basic Loss Per Share $ (0.04) $ (0.01) ============= ============= Basic Weighted Average Shares Outstanding 56,113,645 39,330,520 ============= ============= Diluted Loss Per Share $ (0.04) $ (0.01) ============= ============= Diluted Weighted Average Shares Outstanding 56,411,173 39,330,520 ============= ============= The accompanying notes are an integral part of these financial statements.
F-3 World Wide Wireless Communications, Inc. (A Development Stage Company) Statements of Cash Flows
Cumulative from For the Year For the Year Inception on Ended Ended September 1, 1994 September 30, September 30, through 1999 1998 September 30, 1999 --------------- --------------- -------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $ (2,383,330) $ (346,374) $ (6,759,141) Adjustments to reconcile net loss from operations to net cash used by operating activities: Common stock issued for services 615,996 30,400 646,396 Depreciation and amortization expense 13,506 0 13,506 Changes in operating assets and liabilities: (Increase) in prepaid and other (62,740) 0 (62,740) (Increase) in prepaid lease expense (500,000) 0 (500,000) (Increase) in other assets (20,077) 0 (20,077) Increase in accrued expenses 4,321 1,194 491,468 --------------- --------------- -------------------- Net Cash (Used) by Operating Activities (2,332,324) (314,780) (6,190,588) --------------- --------------- -------------------- CASH FLOWS FROM INVESTING ACTIVITIES: 0 0 0 --------------- --------------- -------------------- CASH FLOWS FROM FINANCING ACTIVITIES: (Increase) in fixed assets (336,384) 0 (336,384) Proceeds from loan 328,000 0 328,000 Proceeds from issuance of common stock 2,614,074 316,451 6,474,054 --------------- --------------- -------------------- Net Cash Provided by Financing Activities 2,605,690 316,451 6,465,670 --------------- --------------- -------------------- NET INCREASE IN CASH AND CASH EQUIVALENTS 273,366 1,671 275,082 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,716 45 0 --------------- --------------- -------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 275,082 $ 1,716 $ 275,082 =============== =============== ==================== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Interest paid $ - $ - $ - Income taxes paid $ - $ - $ - The accompanying notes are an integral part of these financial statements.
F-4 World Wide Wireless Communications, Inc. (A Development Stage Company) Notes to Financial Statements September 30, 1999 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization The financial statements presented are those of World Wide Wireless Communications, Inc., (the Company) (a development stage company). The Company is engaged in activities related to advanced wireless communications, including the acquisition of radio-frequency spectrum both in the United States and internationally. The Company also plans to license its Distributed Wireless Call Processing System technology. Basic And Diluted Net Loss Per Share The calculation of basic and diluted net loss per share is in accordance with Statement of Financial Accounting Standards No. 128, "Earnings Per Share". The following data show the amounts used in computing loss per share and the effect on loss and the weighted average number of shares of dilutive potential common stock. Loss from continuing operations $ 2,383,330 =========== Weighted average number of common shares used in basic loss per share 56,113,645 Effect of dilutive securities: Stock options 297,528 ----------- Weighted average number of common shares and dilutive potential common stock used in diluted loss per share 54,411,173 =========== The following transactions occurred after fiscal years ended september 30, 1999 and 1998, which, had they taken place during fiscal 1999 and 1998, would have changed the number of shares used in the computations of loss per share: 1999 1998 ---- ---- Common shares issued in private placement 5,964,502 19,303,950 Common shares issued for services 4,438,000 Debenture convertible into shares issued in exchange for a loan payable 462,250 Options 3,200,000 Cash Equivalents For purposes of the Statement of Cash Flows, the Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Balances in bank accounts may, from time to time, exceed federal insured limits. The Company has never experienced any loss, and believes its credit risk to be limited. F-5 World Wide Wireless Communications, Inc. (A Development Stage Company) Notes to Financial Statements September 30, 1999 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Comprehensive Income, Statement of Financial Accounting Standards No. 130 The Company has no material components of other comprehensive income. Income Taxes The Company accounts for income taxes using Statement of Financial Accounting Standards No.109, "Accounting for Income Taxes". Under this statement, the liability method is used in accounting for income taxes. Fixed Assets Furniture, fixtures and equipment are depreciated over their useful lives of 5 to 10 years, using the straight-line method of depreciation. Leasehold improvements are amortized over a 5-year period that coincides with the initial period of the lease, using the straight-line method of amortization. Long-Lived Assets The Company reviews its long-lived assets on an annual basis to determine any impairment in accordance with Statement of Financial Accounting Standards No. 121. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Fair Value of Financial Instruments For cash and cash equivalents and accrued expenses, the carrying amounts in the Balance Sheet represent their fair market value. The carrying amount of the loan payable approximates fair value because of similar current rates at which the Company could borrow funds with consistent remaining maturities. F-6 World Wide Wireless Communications, Inc. (A Development Stage Company) Notes to Financial Statements September 30, 1999 NOTE 2 - REORGANIZATION On May 7, 1998, the Company entered into a reverse merger transaction, whereby it acquired control of a public shell. The reorganization resulted in the issuance of 36,999,993 shares of common stock, representing 82.2% of the total shares outstanding. The value of $21,451 assigned to the 8,024,000 shares, or 17.8% retained by the public shell shareholders, represents the net assets acquired from the public shell. The reorganization was accounted for as a reverse merger under the purchase method. The Company has been in the development stage since its formation on September 1, 1994. It is primarily engaged in activities related to advanced wireless communications, including the acquisition of radio-frequency spectrum both in the United States and internationally. The Company also plans to license its Distributed Wireless Call Processing System technology. The Company's financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has experienced losses since inception, and had an accumulated deficit of $6,759,141 at September 30, 1999. Net losses are expected for the foreseeable future. Management plans to continue the implementation of its business plan to place the company's assets in service to generate related revenue. Simultaneously, the Company is continuing to secure the additional required capital through sales of common stock through the current operating cycle. NOTE 3 - COMMITMENTS AND CONTIGENCIES Litigation On April 12, 1999, the Company, under terms of a Settlement and General Release, issued 825,000 shares of common stock to a former director and a former employee for compensation, approximating $81,000, at a per share price of $0.098. This per share price is in line with the sale of common stock for cash at this period of time. On May 25, 1999, the Company, under terms of a Compromise and Settlement Agreement, issued 750,000 shares of common stock to cover approximately $310,000 of various outstanding obligations of the Company to Corporate Solutions, LLC for services rendered, at a per share price of $0.40. This per share price is in line with the sale of common stock for cash at this period of time. F-7 World Wide Wireless Communications, Inc. (A Development Stage Company) Notes to Financial Statements September 30, 1999 NOTE 3 - COMMITMENTS AND CONTIGENCIES (CONTINUED) Litigation (Continued) In November 1998, the Company and its predecessor affiliates filed an action against the lessor of its leases for the Concord and San Marcos, California multipoint distribution service (MDS) channels. The complaint alleged breach of contract as well as intentional and negligent interference with prospective economic advantage. The Company also sought a preliminary injunction as a result of the lessor's assertion that the predecessor companies and the Company were in default on said leases. The Superior Court of California for the County of Los Angeles issued a preliminary injunction against the lessor to restrain it from taking any further action against the Company and its predecessors. Thereafter, the lessor cross-complained against the Company and its predecessors alleging breach of contract. The preliminary injunction of the Company against the lessor remained in effect until December 9, 1999, when a settlement agreement was signed. The settlement provided for the Company to pay $27,375 to the lessor, relating to lease obligations. This amount is recorded as an expense in the financial statements for the fiscal years ended September 30 1998 and 1999. The Company further agreed to sign a consulting agreement with the lessor for one year, whereby the Company will issue the equivalent of $20,000 of its restricted common stock, the value of which is to be computed at 80% of the market value of the Company's unrestricted shares. Additionally, under this consulting agreement, the Company agreed to execute a promissory note in favor of the lessor in the amount of $40,000, payable at $1,000 per month, commencing December 1, 1999, with a final payment of $28,000 on December 1, 2000. The Company borrowed from Credit Bancorp $328,000 in August 1999 and $412,000 in October 1999. The terms of this loan are 7% interest per annum payable, semiannually on the last day of February and September, with the principal due September 30, 2002. On August 26, 1999, the Company filed suit against Credit Bancorp, in U.S. District Court in San Francisco, regarding improprieties on the part of Credit Bancorp relating to the August 1999 loan. The case was settled on October 11, 1999. As part of the settlement agreement, Credit Bancorp agreed to convert the original loans granted to the Company to a convertible debenture in the amount of $740,000. On October 11, 1999, the Company issued a convertible unsecured debenture for $740,000 to Credit Bancorp in settlement of this obligation. The terms of this convertible unsecured debenture are 7% interest per annum payable semiannually on the last day of February and September, with the principal due September 30, 2002. All amounts of unpaid principal and accrued interest of this debenture are convertible at any time at the conversion price of $1.60 per share of unregistered, restricted shares of the Company's stock, adjusted for any stock splits. F-8 World Wide Wireless Communications, Inc. (A Development Stage Company) Notes to Financial Statements September 30, 1999 NOTE 3 - COMMITMENTS AND CONTIGENCIES (CONTINUED) Litigation (Continued) In November 1999, the Securities and Exchange Commission (SEC) filed suit against Credit Bancorp alleging violations of various securities laws in connection with its actions in relation to the Company (and others), and seeking various forms of relief including disgorgement of its illegal gains. At this time, management believes that if the suit is successful, certain benefits may accrue to the Company, including the cancellation of the $740,000 convertible debenture. Operating Leases The Company's office space at One Post Street, San Francisco, was leased on a month to month basis. The Company vacated these offices on August 31, 1999. The actual rent paid, for the fiscal year ended September 30, 1999, was $22,341. In April 1999, the Company entered into a 5-year lease for approximately 6,000 square feet of office space in Jack London Square, Oakland, California. The lease commenced on June 5, 1999. The triple net rental agreement is for $10,038 per month during the first year, with a rental deposit of $20,077 shown as an Other Asset on the financial statements. The lease provides for an annual increase based on the indexed cost of living adjustments. Additionally, the lease provides for the landlord's participation in partial reimbursement over the terms of the lease to the Company for leasehold improvements paid by the Company. The Company commenced its occupancy of this space on September 1, 1999. The minimum annual rent is $120,456 for the fiscal years ended September 30, 2000, 2001, 2002 and 2003, and $81,642 for the period October 1, 2003 to June 4, 2004. The Company leases (under assignment) all of the channel capacity for certain multipoint distribution service (MDS) and multi-channel multipoint distribution service (MMDS) channels from three carriers that are licensed by the FCC as specified in 47 C.F.R. Paragraph 21.901(b). These MDS/MMDS leases provide for a monthly lease fee of 2% of gross subscriber revenue or a minimum monthly rental aggregating approximately $1,150. The minimum aggregate annual rent is $13,800 for 1999, $67,160 for 2000, and $9,500 for 2001, adjusted annually by changes in the Consumer Price Index. Each of the leases contain three ten-year renewal options, and an option to purchase each license for $225,000, adjusted upon changes in the Consumer Price Index since lease inception. In conjunction with the MDS/MMDS licenses, the Company has acquired (under assignment) transmission sites in the geographical areas covered by the licenses. These site leases have varying terms and conditions, and at September 30, 1999, the minimum annual rental is $42,000 per fiscal year ending September 30, 2000 through 2004. F-9 World Wide Wireless Communications, Inc. (A Development Stage Company) Notes to Financial Statements September 30, 1999 NOTE 3 - COMMITMENTS AND CONTIGENCIES (CONTINUED) Operating Leases (Continued) Rents paid for fiscal years ended September 30, 1999 and 1998 are as follows: 1999 1998 -------- ------- Former office location, San Francisco $ 22,341 $10,163 Current office location, Oakland 38,814 0 Distribution service channel leases 21,300 2,859 Transmission sites 42,000 10,406 -------- ------- Total $124,455 $23,428 ======== ======= The minimum annual rentals under current lations for future fiscal years ended September 30 are as follows:
2000 2001 2002 2003 2004 Remainder ---- ---- ---- ---- ---- --------- Current office location, Oakland $120,456 $120,456 $120,456 $120,456 $81,842 None Distribution service channel leases 67,160 9,500 0 0 0 None Transmission sites 42,000 42,000 42,000 42,000 42,000 None -------- -------- -------- -------- -------- ---- Total $229,616 $171,956 $164,456 $164,456 $123,842 None ======== ======== ======== ======== ======== ====
NOTE 4 - STOCKHOLDERS EQUITY During the fiscal year ended September 30, 1999, the Company sold 19,303,950 shares of its common stock for net cash proceeds of $2,614,074 and issued 4,538,000 shares of its common stock for services at an aggregate value of $615,996. Stock issued for services was at the cash price for the shares at the time of issuance. During the fiscal year ended September 30, 1998, the Company sold 2,100,000 shares of its common stock for net cash proceeds of $295,000 and issued 218,000 shares of its common stock for services at an aggregate value of $30,400. Stock issued for services was at the cash price for the shares at the time of issuance. NOTE 5 - OPTION 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 (ITFS) channels for the Company's high-speed wireless internet connections, as authorized by the Federal Communication Commission (FCC). This agreement also provides the Company an exclusive option to lease excess capacity on Shekinah's remaining thirty-two ITFS channels, as they become available. The monthly minimum transmission fee to be paid to Shekinah for each license or application optioned, will be five percent (5%) of the gross system receipts or five hundred dollars, whichever is greater. Amortization of the licenses will begin when the available channels are placed in service, which management expects to begin in approximately April 2000. F-10 World Wide Wireless Communications, Inc. (A Development Stage Company) Notes to Financial Statements September 30, 1999 NOTE 5 - OPTION ON FREQUENCY LICENSES (CONTINUED) ITFS licenses can only be owned by FCC approved educational, religious or non-profit entities. In the event FCC rules and regulations change to allow commercial companies to own these licenses or the Company establishes an educational, religious or non-profit affiliate, the agreement also provides the Company an option to pay Shekinah $150,000 per-market or channel group on an individual basis or $3,500,000 for all forty channels. The option period extends for ten years, with three additional ten-year term renewals. NOTE 6 - INCOME TAXES A reconciliation between the actual income tax benefit and the federal statutory rate follows: Fiscal years ended September 30, 1999 1998 Amount % Amount % Computed income tax benefit at statutory rate $810,332 34% $117,767 34% Operating loss with no current tax benefit -810,332 -34% -117,767 -34% ------------------------------- Income tax benefit None None ---- ---- At September 30 1999, the Company had a net operating loss carryforward for federal tax purposes of approximately $6,760,000 which if unused to offset future taxable income, will expire between the years 2010 to 2019, and approximately $2,154,000 for state tax purposes, which will expire if unused in 2004 and 2005. A valuation allowance has been recognized to offset the related deferred tax assets due to the uncertainty of realizing any benefit therefrom. During 1999 and 1998, no changes occurred in the conclusions regarding the need for a 100% valuation allowance in all tax jurisdictions. Under section 382 of the Internal Revenue Code, the utilization of net operating loss carryforwards is limited after an ownership change, as defined, to an annual amount equal to the market value of the loss corporation's outstanding stock immediately before the date of the ownership change multiplied by the highest Federal long-term tax exempt rate in effect for any month in the 3 calendar month period ending in the calendar month in which the ownership change occurred. Due to the ownership changes as a result of the May 1998 reorganization and subsequent stock issuances, any future realization of the Company's net operating losses will be severely limited. Significant components of the Company's deferred tax assets are as follows: Fiscal years ended September 30, 1999 1998 ---- ---- Net operating loss carryforwards $2,383,330 $346.374 Valuation allowance (2,383,330) (346,374) --------------- ----------- Net deferred tax assets None None --------------- ----------- NOTE 7 - ACCRUED EXPENSES Accrued expenses consist of the following: F-11 World Wide Wireless Communications, Inc. (A Development Stage Company) Notes to Financial Statements September 30, 1999 Professional fees $191,601 Payroll and related payroll taxes 104,986 Leasehold Improvements 55,288 Other 139,593 -------- Total $491,468 ======== NOTE 8 - STOCK OPTION PLANS Nonstatutory Stock Options The Company has issued stock options under nonstatutory stock option agreements. The options are granted at the fair market value of the shares at the date the option is granted. The options are granted for a period of 5 years, and are fully exercisable during the term of the option period or within thirty (30) days of the participant's resignation or termination. Combined transactions in non-employee options for the fiscal years ended September 30, 1999 and 1998 are as follows: 1999 1998 ------------------------------------ Number Average Number Average of Exercise of Exercise Shares Price Shares Price Options outstanding October 1 - - - - Granted 500,000 0.095 - - Cancelled - - - - Exercised - - - - ------------------------------------ Options outstanding September 30 500,000 0.095 - - ======= ===== ======= ===== Combined transactions in employee options for the fiscal years ended September 30, 1999 and 1998 are as follows: 1999 1998 ------------------------------------ Number Average Number Average of Exercise of Exercise Shares Price Shares Price Options outstanding October 1 - - - - Granted 2,700,000 0.095 - - Cancelled - - - - Exercised - - - - ------------------------------------ Options outstanding September 30 2,700,000 0.095 - - ========= ===== ======== ===== F-12 World Wide Wireless Communications, Inc. (A Development Stage Company) Notes to Financial Statements September 30, 1999 NOTE 8 - STOCK OPTION PLANS (CONTINUED) Incentive Stock Plan The Company adopted an incentive stock plan on August 5, 1998, which has not yet been approved by the shareholders. The options are granted at the fair market value of the shares at the date that the option is granted. The options are granted for a period of 10 years, and are exercisable after one year from the date of grant, at a vested rate of 20% per year during the term of the option period or within thirty (30) days of the participant's resignation or termination. The Company has limited the number of shares under this plan to 3,000,000 shares of its capital stock for this plan. The number of shares of stock covered by each outstanding option, and the exercise price per share thereof set forth in each such option, shall be proportionately adjusted for any stock split, and or, stock dividend. As of September 30, 1999, the Company did not issue any options under this plan; however, subsequent to the date of this financial statement, options, for 800,000 shares of common stock, were granted under the incentive stock plan to an employee within his employment agreement, but are being treated as nonstatutory stock options until the incentive stock plan is approved by the shareholders. Compensation Costs The Company applies APB Opinion 25 in accounting for its stock compensation plans discussed above. Accordingly, no compensation costs have recognized for these plans in 1999 or 1998. Had compensation costs been determined on the basis of fair value pursuant to FASB Statement No. 123, net loss and loss per share would have been increased as follows: 1999 1998 ------------ ---------- Net loss: As reported $(2,383,330) $(346,374) ============ ========== Pro forma $(2,441,575) $(346,374) ============ ========== Basic loss per share: As reported $(0.04) $(0.01) ======= ======= Pro forma $(0.04) $(0.01) ======= ======= Diluted loss per share: As reported $(0.04) $(0.01) ======= ======= Pro forma $(0.04) $(0.01) ======= ======= The fair value of each option granted is estimated on the grant date using the Black-Scholls model. The following assumptions were made in estimating fair value. F-13 World Wide Wireless Communications, Inc. (A Development Stage Company) Notes to Financial Statements September 30, 1999 NOTE 8 - STOCK OPTION PLANS (CONTINUED) Compensation Costs (Continued) Assumption Plans Dividend yield 0 % Risk-free interest rate 7 % Expected life 5 years Expected volatility 97 % NOTE 9 - SUBSEQUENT EVENTS Affiliations in new locations Argentina On December 31, 1999, the Company acquired a 51% interest in Infotel Argentina S.A., a Buenos Aires based company which owns multi-channel multipoint distribution service licenses in eight of the largest Argentine cities including Buenos Aires. The purchase price was $1,500,000, of which $600,000 was paid in cash and $600,000 was paid in 454,545 shares of restricted stock of the Company. The final $300,000 was paid during February 2000. Peru On February 29, 2000, the Company purchased 100% of Digital Way S.A. a Peruvian telecommunications company. The purchase price was $1,300,000, of which $400,000 was paid in cash and $900,000 was paid in 181,100 shares of restricted stock of the Company. El Salvador On March 11, 2000, the Company entered into a letter of intent with El Salvador Telecomuniciones S.A. de C.V. for the purpose of acquiring a 25% ownership interest in that company in El Salvador. Pursuant to the terms of the letter of intent the Company paid $1,000,000 to that company as an advance payment of the purchase price, which was to total $3,500,000. The agreement provides that the purchase was conditioned upon that company's acquisition of certain licenses and the occurrence of certain other condition which have not been met. As a result the Company believes that it is improbable that the sale will occur and is seeking return of the $1,000,000 payment. F-14 INDEPENDENT AUDITORS' REPORT Board of Directors and Shareholders of Infotel S.A. We have audited the accompanying balance sheet of Infotel Argentina S.A. as of June 30, 1999 and the related statements of income, retained earnings, and cash flows for the year then ended. Theses financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Infotel Argentina S.A. as of June 30, 1999, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. Reinaldo Pietrantonio, Contador Publico Nacional Buenos Aires, July 30, 1999 F-15 INFOTEL ARGENTINA S.A. Balance Sheet As of June 30, 1999 ASSETS CURRENT ASSETS Cash $110,861 Accounts receivable 30,707 Prepaid taxes 158,628 ------- Total Current Assets 300,196 PROPERTY AND EQUIPMENT, net of depreciation 131,590 ------- Total Assets $431,786 ======= LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Accounts payable $249,642 Taxes payable 28,219 Total Current Liabilities 131,100 ------- STOCKHOLDERS' EQUITY Common stock; $1 par value, issued and outstanding 12,000 shares 12,000 Additional paid-in capital 116,879 Retained Earnings 25,046 ------- Total Stockholders' Equity 153,925 ------- Total Liabilities and Stockholders' Equity $431,786 ======= The accompanying notes are an integral part of the financial statements. F-16 INFOTEL ARGENTINA S.A Statement of Operations From Inception, February 3, 1999, through June 30, 1999 REVENUE $ 214,203 COST OF GOODS SOLD 127,599 ---------- GROSS PROFIT 86,604 ---------- EXPENSES: Sales and marketing 16,614 General and administrative 31,257 Financing 200 ---------- Total Expenses 48,071 ---------- INCOME FROM OPERATIONS 38,533 Less - Income tax 13,487 ---------- NET INCOME $ 25,046 ========== NET INCOME PER SHARE, BASIC AND DILUTED $ 2.09 ========== WEIGHTED AVERAGE OF SHARES OUTSTANDING 12,000 ========== The accompanying notes are an integral part of the financial statements. F-17 INFOTEL ARGENTINA S.A. Statement of Cash Flows From Inception, February 3, 1999, through June 30, 1999 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 25,046 Adjustments to reconcile net income to net cash used by operating activities: Changes in: Receivables (30,707) Prepaid expenses (158,628) Accounts payable 249,642 Taxes payable 28,219 --------- Net cash provided by operating activities 113,572 --------- CASH FLOWS FROM INVESTING ACTIVITES Purchase of equipment (131,590) --------- Net cash provided by (used for) investing activities (131,590) --------- CASH FLOWS FROM FINANCING ACTIVITIES Sale of common stock, net of stock offering costs 12,000 Proceeds from sale of stock in excess of par 116,879 --------- Net cash provided by financing activities 128,879 --------- NET INCREASE IN CASH 110,861 CASH, beginning of period - --------- CASH, end of period $ 110,861 ========= The accompanying notes are an integral part of the financial statements F-18 INFOTEL ARGENTINA S.A. Statement of Shareowners' Equity From Inception, February 3, 1999, through June 30, 1999 Common Stock Balance at beginning of period $ - Issuance of shares 12,000 ---------- Balance at end of period 12,000 ---------- Capital in Excess of Par Balance at beginning of period - Issuance of shares 116,879 ---------- Balance at end of period 116,879 ---------- Retained Earnings Balance at beginning of - Net Income 25,046 ---------- Balance at end of period 25,046 ---------- Stockholders' Equity at end of period $ 153,925 ========== The accompanying notes are an integral part of the financial statements. F-19 INFOTEL ARGENTINA S.A. Notes to Financial Statements June 30, 1999 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization Infotel Argentina was formed on January 18, 1999, and began operation on February 3, 1999. Cash Equivalents For purposes of the Statement of Cash Flows, the Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Comprehensive Income, Statement of Financial Accounting Standards No. 130 The Company has no material components of other comprehensive income. Income Taxes The Company accounts for income taxes using Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". Under this statement, the liability method is used in accounting for income taxes. Fixed Assets Fixed assets are recorded at cost. Depreciation is taken over the estimated useful life of the assets. Long-Lived Assets The Company reviews its long-lived assets on an annual basis to determine any impairment in accordance with Statement of Financial Accounting Standards No. 121. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Fair Value of Financial Instruments For cash and cash equivalents and accrued expenses, the carrying amounts in the Balance Sheet represent their fair market value. F-20 INDEPENDENT AUDITORS' REPORT Board of Directors and Shareholders of Digital Way S.A. We have audited the accompanying balance sheet of Digital Way S.A.. as of December 31, 1999 and the related statements of income, retained earnings, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Infotel Argentina S.A. as of December 31 1999, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles of the United States. Chavez y R.G. Auditores, Asociados S. Civil April 19, 2000 F-21 Digital Way S.A. Balance Sheet As of December 31, 1999
ASSETS CURRENT ASSETS Cash $ 163 Receivable from officer 21,000 Prepaid taxes 876 Other prepaid expenses and deposits 10,050 --------- Total Current Assets 32,089 PROPERTY AND EQUIPMENT, at cost 1,454 --------- Total Assets $ 33,543 ========= LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Accounts payable $ 32,965 --------- Total Liabilities 32,965 --------- STOCKHOLDERS' EQUITY Common stock; $0.302 par value, issued and outstanding 35,800 shares 10,826 Accumulated deficit (10,278) --------- Total Stockholders' Equity 548 --------- Total Liabilities and Stockholders' Equity $ 33,543 =========
The accompanying notes are an integral part of the financial statements. F-22 Digital Way S.A. Statement Of Operations From Inception, March 28, 1999, through December 31, 1999 REVENUE $ - EXPENSES General and administrative 9,445 Miscellaneous 833 -------- Total Expenses 10,278 -------- INCOME (LOSS) FROM OPERATIONS $(10,278) ======== NET INCOME (LOSS) PER SHARE, BASIC AND DILUTED $ (0.29) ======== WEIGHTED AVERAGE OF SHARES OUTSTANDING 35,800 ======== The accompanying notes are an integral part of the financial statements. F-23 Digital Way S.A. Statement of Cash Flows From Inception, March 28, 1999, through December 31, 1999 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (10,278) Adjustments to reconcile net loss to net cash used by operating activities: Changes in: Receivables from officer (21,000) Prepaid taxes (876) Other prepaid expenses (10,050) Accounts payable 32,995 -------------- Net cash used by operating activities (9,209) -------------- CASH FLOWS FROM INVESTING ACTIVITES: Purchase of equipment (1,454) -------------- Net cash provided by (used for) investing activities (1,454) -------------- CASH FLOWS FROM FINANCING ACTIVITIES: Sale of common stock, net of stock offering costs 10,826 -------------- Net cash provided by financing activities 10,826 -------------- INCREASE IN CASH 163 CASH, beginning of period - -------------- CASH, end of period $ 163 ============== The accompanying notes are an integral part of the financial statements F-24 Digital Way S.A. Statement of Shareowners' Equity From Inception, March 28, 1999, through December 31, 1999 COMMON STOCK Balance at beginning of period $ - Issuance of shares 10,826 ------------ Balance at end of period 10,826 ------------ CAPTIAL IN-EXCESS OF PAR Balance at beginning of period - Issuance of shares - ------------ Balance at end of period - ------------ RETAINED EARNINGS Balance at beginning of period - Net income (loss) (10,278) ------------ Balance at end of period (10,278) ------------ Stockholders' Equity at end of period $ 153,925 ============ The accompanying notes are an integral part of the financial statements. F-25 DIGITAL WAY, S.A. Notes to Financial Statements December 31, 1999 NOTE 1 - SUMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization Digital Way, S.A. (the Company) was formed on March 3, 1998, in order to provide public telecommunication service as authorized by the Peruvian Ministry of Transportation and Communication. The Company became active on March 28, 1999. The Company is of indefinite duration. Cash Equivalents For purposes of the Statement of Cash Flows, the Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Comprehensive Income, Statement of Financial Accounting Standards No. 130 The Company has no material components of other comprehensive income. Income Taxes The Company accounts for income taxes using Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". Under this statement, the liability method is used in accounting for income taxes. Fixed Assets No depreciation has been taken due to the fact that assets have not been placed in service as of December 31, 1999. Long-Lived Assets The Company reviews its long-lived assets on an annual basis to determine any impairment in accordance with Statement of Financial Accounting Standards No. 121. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Fair Value of Financial Instruments For cash and cash equivalents and accrued expenses, the carrying amounts in the Balance Sheet represent their fair market value. F-26 World Wide Wireless Communications, Inc. & Subsidiaries (A Development Stage Company) Balance Sheet March 31, 2000 UNAUDITED Assets Current Assets: Cash and cash equivalents $ 980,083 Prepaid and other 339,938 ---------- Total Current Assets 1,320,021 ---------- Fixed Assets: Furniture, fixtures and equipment 299,502 Leasehold improvements 343,542 Accumulated depreciation and amortization (60,163) Frequency licenses 2,783,064 ---------- Total Fixed Assets 3,365,945 ---------- Other Assets: Prepaid lease expense 500,000 Deposit in acquisition 1,000,000 Rental deposit 20,727 ---------- Total Other Assets 1,520,727 ---------- Total Assets $6,206,693 ========== Liabilities and Stockholders' Equity Current Liabilities: Accrued expenses $499,903 Accounts payable 55,903 ---------- Total Current Liabilities 555,806 ---------- Long-Term Liabilities: Loan payable 740,000 ---------- Total Long-Term Liabilities 740,000 ---------- Total Liabilities 1,295,806 ---------- Stockholders' Equity: Common stock, par value $.001 per share 82,444 100,000,000 shares authorized, 82,443.816 issued and outstanding at March 31, 2000 Additional paid-in capital 13,702,744 Deficit accumulated during development stage (8,874,301) ---------- Total Stockholders Equity 4,910,887 ---------- Total Liabilities and Stockholders' Equity $6,206,693 ========== The accompanying notes are an integral part of the financial statements. F-27 World Wide Wireless Communications, Inc. & Subsidiaries (A Development Stage Company) Statement of Operations March 31, 2000 UNAUDITED
Cumulative For 6 Months For 6 Months from Inception on Ended Ended September 1, 1994 March 31, 2000 March 31, 1999 to March 31, 2000 Revenues $ 141,268 $ 0 $ 141,268 ------------- ------------ --------------- General & Administrative Expense (2,345,196) (594,650) (9,002,012) ------------- ------------ --------------- Total Operating Expense (2,203,928) (594,650) (8,860,744) ------------- ------------ --------------- Operating Income (Loss) (2,203,928) (594,650) (8,860,744) Interest Income 174 0 174 ------------- ------------ --------------- Tax Expense (13,731) 0 (13,731) ------------- ------------ --------------- Net Profit (Loss) $ (2,217,484) $ (594,650) $ (8,874,301) ============= ============ =============== Basic Loss Per Share $ (0.01) ============= Basic Weighted Average Shares Outstanding 82,443,816 ============= Diluted Loss Per Share $ (0.01) ============= Diluted Weighted Average Shares Outstanding 85,993,816 ============= The accompanying notes are an integral part of the financial statements.
F-28 World Wide Wireless Communications, Inc. & Subsidiaries (A Development Stage Company) Statements of Cash Flow March 31, 2000 UNAUDITED
Cumulative from Inception on For 6 Months For 6 Months September 1, 1994 Ended Ended through March 31,2000 March 31,1999 March 31,2000 CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $(2,217,485) $ (845,537) $ (8,976,626) Adjustments to reconcile net loss from operations to net cash used by operating activities: Common stock issued for services 15,910 0 662,306 Depreciation and amortization expense 53,237 0 66,743 Changes in operating assets and liabilities: (Increase)/decrease in prepaid and other (107,951) 0 (170,691) (Increase)/decrease in prepaid lease expense (500,000) (500,000) (Increase)/decrease in other assets (650) 0 (20,727) Increase/(decrease) in accrued expenses (114,387) 272,219 377,081 ------------- ------------- --------------- Net Cash (Used) by Operating Expenses (2,371,326) (1,073,318) (8,561,914) ------------- ------------- --------------- CASH FLOWS FROM INVESTING ACTIVITIES: (Increase) in investments (2,279,699) 0 (2,279,699) ------------- ------------- --------------- CASH FLOWS FROM FINANCING ACTIVITIES: (Increase) in fixed assets (241,456) 0 (577,840) Proceeds from loan 740,000 0 740,000 Proceeds from issuance of common stock 4,857,482 5,492,672 11,659,536 ------------- ------------- --------------- Net Cash Provided by Financing Activities 5,356,026 5,492,672 11,821,696 ------------- ------------- --------------- NET INCREASE IN CASH AND CASH EQUIVALENTS 705,001 4,419,354 980,083 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 275,082 1,716 0 ------------- ------------- --------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 980,083 $ 4,421,070 $ 980,083 ============= ============= =============== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Interest paid $ 0 $ 0 $ 0 Income taxes paid $ 0 $ 0 $ 0 The accompanying notes are an integral part of the financial statements.
F-29 World Wide Wireless Communications, Inc. & Subsidiaries (A Development Stage Company) Notes to Financial Statements March 31, 2000 Unaudited NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization The financial statements presented are those of World Wide Wireless Communications, Inc., (the Company) (A Development Stage Company)and its subsidiaries. The Company is engaged in activities related to advanced wireless communications, including the acquisition of radio-frequency spectrum both in the United States and internationally. The Company also plans to license its Distributed Wireless Call Processing System technology. On December 31, 1999, The Company acquired a 51% interest in Infotel Argentina S.A., a Buenos Aires based company which owns multi-channel multipoint distribution service licenses in eight of the largest Argentine cities including Buenos Aires. The purchase price was $1,500,000, of which $600,000 was paid in cash and $600,000 was paid in 454,545 shares of restricted stock of the Company on December 31, 1999. The final $300,000 was paid during February 2000. On February 29, 2000, the Company purchased 100% of Digital Way S.A. a Peruvian telecommunications company. The purchase price was $1,300,000, of which $400,000 was paid in cash and $900,000 was paid in 181,100 shares of restricted stock of the Company. Basic And Diluted Net Loss Per Share The calculation of basic and diluted net loss per share is in accordance with Statement of Financial Accounting Standards No. 128, "Earnings Per Share". The following data show the amounts used in computing loss per share and the effect on loss and the weighted average number of shares of dilutive potential common stock. Loss from continuing operations $ 2,217,484 =========== Weighted average number of common Shares used in basic loss per share 82,443,816 Effect of dilutive securities: Stock options 3,200,000 Convertible debentures 350,000 Weighted average number of common Shares and dilutive potential Common stock used in diluted Loss per share 85,993,816 =========== F-30 World Wide Wireless Communications, Inc. & Subsidiaries (A Development Stage Company) Notes to Financial Statements March 31, 2000 Unaudited NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONT'D) The following transactions occurred after quarters ended march 31, 2000 and 1999, which, had they taken place during the 6 months ended march 31, 2000 and 1999, would have changed the number of shares used in the computations of loss per share: 2000 1999 ---- ---- Common shares issued in private placement 760,000 3,259,742 Common shares issued for services 0 0 Debentures/warrants convertible into shares issued in exchange for a loan payable 3,600,000 350,000 Options 0 3,200,000 Cash Equivalents For purposes of the Statement of Cash Flows, the Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Balances in bank accounts may, from time to time, exceed federal insured limits. The Company has never experienced any loss, and believes its credit risk to be limited. Comprehensive Income, Statement of Financial Accounting Standards No. 130 The Company has no material components of other comprehensive income. Income Taxes The Company accounts for income taxes using Statement of Financial Accounting Standards No.109, "Accounting for Income Taxes". Under this statement, the liability method is used in accounting for income taxes. Fixed Assets Furniture, fixtures and equipment are depreciated over their useful lives of 5 to 10 years, using the straight-line method of depreciation. Leasehold improvements are amortized over a 5-year period that coincides with the initial period of the lease, using the straight-line method of amortization. Long-Lived Assets The Company reviews its long-lived assets on an annual basis to determine any impairment in accordance with Statement of Financial Accounting Standards No. 121. F-31 World Wide Wireless Communications, Inc. & Subsidiaries (A Development Stage Company) Notes to Financial Statements March 31, 2000 Unaudited NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONT'D) Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Fair Value of Financial Instruments For cash and cash equivalents and accrued expenses, the carrying amounts in the Balance Sheet represent their fair market value. The carrying amount of the loan payable approximates fair value because of similar current rates at which the Company could borrow funds with consistent remaining maturities. Segment Information The Company adopted Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related information" (SFAS No. 131) in 1999. This statement establishes standards for the reporting of information about operating segments in annual and interim financial statements and requires restatement of prior year information. Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. SFAS No. 131 also requires disclosures about products and services, geographic areas and major customers. Consolidated Financial Statements The accounts of the Company and its consolidated subsidiaries are included in the consolidated financial statements after elimination of significant intercompany accounts and transactions. Foreign Currency Transaction The financial statements of the Company's foreign subsidiaries are measured using the local currency as the functional currency. Assets and liabilities of these subsidiaries are translated at exchange rates as of the balance sheet date. Revenues and expenses are translated at average rates of exchange in effect during the year. The resulting cumulative translation adjustments have been recorded as a separate component of stockholder's equity. Foreign currency transaction gains and losses are included in consolidated net income (loss). F-32 World Wide Wireless Communications, Inc. & Subsidiaries (A Development Stage Company) Notes to Financial Statements March 31, 2000 Unaudited NOTE 2 - REORGANIZATION On May 7, 1998, the Company entered into a reverse merger transaction, whereby it acquired control of a public shell. The reorganization resulted in the issuance of 36,999,993 shares of common stock, representing 82.2% of the total shares outstanding. The value of $21,451 assigned to the 8,024,000 shares, or 17.8% retained by the public shell shareholders, represents the net assets acquired from the public shell. The reorganization was accounted for as a reverse merger under the purchase method. The Company has been in the development stage since its formation on September 1, 1994. It is primarily engaged in activities related to advanced wireless communications, including the acquisition of radio-frequency spectrum both in the United States and internationally. The Company also plans to license its Distributed Wireless Call Processing System technology. The Company's financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has experienced losses since inception, and had an accumulated deficit of $8,874,301 at March 31, 2000. Net losses are expected for the foreseeable future. Management plans to continue the implementation of its business plan to place the company's assets in service to generate related revenue. Simultaneously, the Company is continuing to secure the additional required capital through sales of common stock through the current operating cycle. NOTE 3 - COMMITMENTS AND CONTIGENCIES Litigation In November 1998, the Company and its predecessor affiliates filed an action against the lessor of its leases for the Concord and San Marcos, California multipoint distribution service channels. The complaint alleged breach of contract as well as intentional and negligent interference with prospective economic advantage. The Company also sought a preliminary injunction as a result of the lessor's assertion that the predecessor companies and the Company were in default on said leases. The Superior Court of California for the County of Los Angeles issued a preliminary injunction against the lessor to restrain it from taking any further action against the Company and its predecessors. Thereafter, the lessor cross-complained against the Company and its predecessors alleging breach of contract. The preliminary injunction of the Company against the lessor remained in effect until December 9, 1999, when a settlement agreement was signed. F-33 World Wide Wireless Communications, Inc. & Subsidiaries (A Development Stage Company) Notes to Financial Statements March 31, 2000 Unaudited NOTE 3 - COMMITMENTS AND CONTIGENCIES (CONTINUED) The settlement provided for the Company to pay $27,375 to the lessor, relating to lease obligations. This amount is recorded as an expense in the financial statements for the fiscal years ended September 30 1998 and 1999. The Company further agreed to sign a consulting agreement with the lessor for one year, whereby the Company will issue the equivalent of $20,000 of its restricted common stock, the value of which is to be computed at 80% of the market value of the Company's unrestricted shares. Additionally, under this consulting agreement, the Company agreed to execute a promissory note in favor of the lessor in the amount of $40,000, payable at $1,000 per month, commencing December 1, 1999, with a final payment of $28,000 on December 1, 2000. The Company borrowed from Credit Bancorp $328,000 in August 1999 and $412,000 in October 1999. The terms of this loan are 7% interest per annum payable, semiannually on the last day of February and September, with the principal due September 30, 2002. On August 26, 1999, the Company filed suit against Credit Bancorp, in U.S. District Court in San Francisco, regarding improprieties on the part of Credit Bancorp relating to the August 1999 loan. The case was settled on October 11, 1999. As part of the settlement agreement, Credit Bancorp agreed to convert the original loans granted to the Company to a convertible debenture in the amount of $740,000. On October 11, 1999, the Company issued a convertible unsecured debenture for $740,000 to Credit Bancorp in settlement of this obligation. The terms of this convertible unsecured debenture are 7% interest per annum payable semiannually on the last day of February and September, with the principal due September 30, 2002. All amounts of unpaid principal and accrued interest of this debenture are convertible at any time at the conversion price of $1.60 per share of unregistered, restricted shares of the Company's stock, adjusted for any stock splits. In November 1999, the Securities and Exchange Commission (SEC) filed suit against Credit Bancorp alleging violations of various securities laws in connection with its actions in relation to the Company (and others), and seeking various forms of relief including disgorgement of its illegal gains. At this time, the suit remains pending. Operating Leases The Company's office space at One Post Street, San Francisco, was leased on a month-to-month basis. The Company vacated these offices on August 31, 1999. The actual rent paid, for the fiscal year ended September 30, 1999, was $22,341. F-34 World Wide Wireless Communications, Inc. & Subsidiaries (A Development Stage Company) Notes to Financial Statements March 31, 2000 Unaudited NOTE 3 - COMMITMENTS AND CONTIGENCIES (CONTINUED) In April 1999, the Company entered into a 5-year lease for approximately 6,000 square feet of office space in Jack London Square, Oakland, California. The lease commenced on June 5, 1999. The triple net rental agreement is for $10,038 per month during the first year. The lease provides for an annual increase based on the indexed cost of living adjustments. Additionally, the lease provides for the landlord's participation in partial reimbursement over the terms of the lease to the Company for leasehold improvements paid by the Company. The Company commenced its occupancy of this space on September 1, 1999. The minimum annual rent is $120,456 for the fiscal years ended September 30, 2000, 2001, 2002 and 2003, and $81,642 for the period October 1, 2003 to June 4, 2004. The Company leases (under assignment) all of the channel capacity for certain multipoint distribution service and multi-channel multipoint distribution service channels from three carriers that are licensed by the FCC as specified in 47 C.F.R. Paragraph 21.901(b). These service leases provide for a monthly lease fee of 2% of gross subscriber revenue or a minimum monthly rental aggregating approximately $1,150. The minimum aggregate annual rent is $13,800 for 1999, $67,160 for 2000, and $9,500 for 2001, adjusted annually by changes in the Consumer Price Index. Each of the leases contain three ten-year renewal options, and an option to purchase each license for $225,000, adjusted upon changes in the Consumer Price Index since lease inception. In conjunction with the multipoint distribution service and multi-channel multipoint distribution service licenses, the Company has acquired (under assignment) transmission sites in the geographical areas covered by the licenses. These site leases have varying terms and conditions, and at September 30, 1999, the minimum annual rental is $42,000 per fiscal year ending September 30, 2000 through 2004. Rents paid for 6 months ended March 31, 2000 and 1999 are as follows:
6 Months 6 Months March 31, 2000 March 31, 1999 --------------- -------------- Former office location, San Francisco $ 0 $11,080 Current office location, Oakland 62,229 0 Distribution service channel leases 43,433 0 Transmission sites 61,000 13,125 -------- ------- Total $166,662 $24,205 ======== =======
The minimum annual rentals under current lease obligations for future fiscal years ended September 30 are as follows:
2000 2001 2002 2003 2004 Remainder ---- ---- ---- ---- ---- --------- Current office location, Oakland $120,456 $120,456 $120,456 $120,456 $81,842 None Distribution service channel leases 67,160 9,500 0 0 0 None Transmission sites 42,000 42,000 42,000 42,000 42,000 None ------- ------- ------- ------- ------- ---- Total $229,616 $171,956 $164,456 $164,456 $123,842 None ======== ======== ======== ======== ======== ====
F-35 World Wide Wireless Communications, Inc. & Subsidiaries (A Development Stage Company) Notes to Financial Statements March 31, 2000 Unaudited NOTE 4 - STOCKHOLDERS EQUITY During the 6 months ended March 31, 2000, the Company sold 10,069,683 shares of its common stock for net cash proceeds of $4,857,482. The Company also issued 635,645 shares of its common stock for an aggregate value of $1,500,000 as a partial payment for investments in other telecommunications companies. The Company issued 100,000 shares of its common stock for services at an aggregate value of $15,910. Stock issued for the investments was at the market price on the day of issuance. Stock issued for services was at the cash price for the shares at the time of issuance. During the 6 months ended March 31, 1999, the Company sold 11,142,950 shares of its common stock for net cash proceeds of $4,442,409. NOTE 5 - PREPAID LEASE EXPENSE On November 25, 1998, the Company entered into an option agreement with Shekinah Network to pay $500,000 to lease eight Instructional Television Fixed Service channels for the Company's high-speed wireless internet connections, as authorized by the Federal Communication Commission. This agreement also provides the Company an exclusive option to lease excess capacity on Shekinah's remaining thirty-two Instructional Television Fixed Service channels, as they become available. The monthly minimum transmission fee to be paid to Shekinah for each license or application optioned, will be five percent (5%) of the gross system receipts or five hundred dollars, whichever is greater. Amortization of the licenses will begin when the available channels are placed in service, which management expects to begin in approximately June 2000. Instructional Television Fixed Service licenses can only be owned by Federal Communication Commission approved educational, religious or non-profit entities. In the event that the Federal Communication Commission rules and regulations change to allow commercial companies to own these licenses or the Company establishes an educational, religious or non-profit affiliate, the agreement also provides the Company an option to pay Shekinah $150,000 per-market or channel group on an individual basis or $3,500,000 for all forty channels. The option period extends for ten years, with three additional ten-year term renewals. NOTE 6 - INCOME TAXES A reconciliation between the actual income tax benefit and the federal statutory rate follows: 6 Months ended March 31, ------------------------ 2000 1999 Amount % Amount % Computed income tax benefit at statutory rate 753,945 34% 204,704 34% Operating loss with no current tax benefit -753,945 -34% -204,704 -34% ------------- ------------- Income tax benefit None None ----- ---- F-36 World Wide Wireless Communications, Inc. & Subsidiaries (A Development Stage Company) Notes to Financial Statements March 31, 2000 Unaudited NOTE 6 - INCOME TAXES (CONTINUED) At March 31 1999, the Company had a net operating loss carryforward for federal tax purposes of approximately $8,874,301 which if unused to offset future taxable income, will expire between the years 2010 to 2020, and approximately $2,860,000 for state tax purposes, which will expire if unused in 2004 and 2006. A valuation allowance has been recognized to offset the related deferred tax assets due to the uncertainty of realizing any benefit therefrom. During 2000 and 1999, no changes occurred in the conclusions regarding the need for a 100% valuation allowance in all tax jurisdictions. Under section 382 of the Internal Revenue Code, the utilization of net operating loss carryforwards is limited after an ownership change, as defined, to an annual amount equal to the market value of the loss corporation's outstanding stock immediately before the date of the ownership change multiplied by the highest Federal long-term tax exempt rate in effect for any month in the 3 calendar month period ending in the calendar month in which the ownership change occurred. Due to the ownership changes as a result of the May 1998 reorganization and subsequent stock issuances, any future realization of the Company's net operating losses will be severely limited. Significant components of the Company's deferred tax assets are as follows: 6 Months ended March 31, 2000 1999 ---- ---- Net operating loss carryforwards $8,874,301 $602,071 Valuation allowance (8,874,301) (602,071) ------------- ----------- Net deferred tax assets None None ==== ==== NOTE 7 - DEPOSIT IN ACQUISITIONS El Salvador On March 11, 2000, the Company entered into a letter of intent with El Salvador Telecomuniciones S.A. de C.V. for the purpose of acquiring a 25% ownership interest in that company in El Salvador. Pursuant to the terms of the letter of intent the Company paid $1,000,000 to that company as an advance payment of the purchase price, which was to total $3,500,000. The agreement provides that the purchase was conditioned upon that company's acquisition of certain licenses and the occurrence of certain other conditions which have not been met. As a result, the Company believes that it is improbable that the sale will occur and is seeking return of the $1,000,000 payment. F-37 World Wide Wireless Communications, Inc. & Subsidiaries (A Development Stage Company) Notes to Financial Statements March 31, 2000 Unaudited NOTE 8 - SUBSEQUENT EVENTS On April 14, 2000, the Company entered into a Securities Purchase Agreement with six investors, for the purchase of investment units, consisting of common stock, common stock purchase warrants, 4% subordinated debentures and preferred stock. Pursuant to the Securities Purchase Agreement, the investors have purchased 760,000 shares of common stock, warrants to purchase 3,600,000 shares of common stock, and subordinated debentures with a principal amount of $3,280,000, for a total price of $4,800,000. The investors have the option to purchase additional shares of common stock, warrants and series A preferred stock (when authorized) from the Company for a maximum amount of $1,920,000. The investors will be required to purchase these securities if an effective registration statement under the Securities Act is in effect with respect to all the common stock issued and issuable upon the exercise of the warrants and conversion of the subordinated debentures and series A preferred stock. F-38 PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 24. INDEMNIFICATION OF OFFICERS AND DIRECTORS Our Bylaws provide that we may indemnify any director, officer, agent or employee against all expenses and liabilities, including counsel fees, reasonably incurred by or imposed upon them in connection with any proceeding to which they may become involved by reason of their being or having been a director, officer, employee or agent of our Company. Moreover, our Bylaws provide that we shall have the right to purchase and maintain insurance on behalf of any such persons whether or not we would have the power to indemnify such person against the liability insured against. Insofar as indemnification for liabilities arising under the Securities Act, we have been informed that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. Item 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION Expenses of the Registrant in connection with the issuance and distribution of the securities being registered are estimated as follows, assuming the Maximum offering amount is sold: Securities and Exchange Commission filing fee $ 4,752 Accountant's fees and expenses $10,000 Legal fees and expenses $25,000 Printing $ 5,000 Marketing expenses $10,000 Postage $ 5,000 Miscellaneous $ 1,000 ------- Total $60,752 The Registrant will bear all expenses shown above. Item 26. Recent Sales of Unregistered Securities The following is a list of our sales of our common stock during the past three years which were not registered under the Securities Act. None of these sales involved the use of or payments to an underwriter. On July 21, 1998, as part of a corporate reorganization, we issued 1,724,138 shares of our common stock to TSI Technologies, Inc. and 5,275,662 shares to Worldwide Wireless, Inc., both at a per share price of $0.0947. We raised $662,933 in this transaction. These shares were issued in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act. No underwriters were involved in the issuance and no commissions were paid. On October 15, 1998, under terms of a Settlement and General Release, we issued 50,000 shares of common stock to a former consultant in compensation for services rendered, approximating $2,450, at a per share price of $0.050. The shares were issued in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act. Also on October 15, 1998, as part of a corporate reorganization, we issued 1,724,138 shares of our common stock to TSI Technologies, Inc. and 5,275,662 shares to Worldwide Wireless, Inc., both at a per share price of $0.0947. We raised $662,933 in this transaction. These shares were issued in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act. On December 8, 1998, we completed a private placement of 16,285,000 shares of our common stock to a group of accredited investors. Our common stock was sold for between $0.0027 and $0.1394 per share. In addition, approximately 1,543,000 shares of the total number of shares issued were granted to one individual in consideration of consulting services. We raised approximately $736,380. No underwriters were used in completing these transactions. We believe that we have satisfied the exemption from the securities registration requirements provided by Section 3(b) of the Securities Act and Rule 504 of Regulation D promulgated thereunder in that offering. The aggregate offering price received in the offering did not exceed $1,000,000 within the twelve months before the start of and during the offering. The securities were sold in a private placement to only accredited investors, all of whom had a pre-existing personal or business relationship with us or our officers or directors and each of whom provided representations that they were accredited investors and were purchasing for investment and not with a view to resale in connection with a public offering. On April 2, 1999, under terms of a Settlement and General Release, we issued 800,000 shares of common stock to a former employee in compensation for services rendered, approximating $75,200, at a per share price of $0.095. This per share price is in line with the sale of common stock for cash at this period of time. The shares were issued in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act. On April 2, 1999, under terms of a Settlement and General Release, we issued 25,000 shares of common stock to another former employee in compensation for services rendered, approximating $2,350, at a per share price of $0.095. This per share price is in line with the sale of common stock for cash at this period of time. The shares were issued in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act. No underwriters were involved in the issuance and no commissions were paid. On April 12, 1999, under terms of a Settlement and General Release, we issued 825,000 shares of common stock to a former director and a former employee in compensation for services rendered, approximating $81,000, at a per share price of $0.098. This per share price is in line with the sale of common stock for cash at this period of time. The shares were issued in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act. No underwriters were involved in the issuance and no commissions were paid. On May 6, 1999, as part of a corporate reorganization, we issued 2,593,744 shares of our common stock to TSI Technologies, Inc. and 8,969,355 shares to Worldwide Wireless, Inc., both at a per share price of $0.0947. We raised $1,095,112 in this transaction. These shares were issued in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act. No underwriters were involved in the issuance and no commissions were paid. On May 14, 1999, under terms of a Compromise and Settlement Agreement, we issued 600,000 shares of common stock to cover approximately $56,400 of various outstanding obligations to Corporate Architects for consulting services rendered, at a per share price of $0.095. The shares were issued in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act. No underwriters were involved in the issuance and no commissions were paid. On May 25, 1999, under terms of a Compromise and Settlement Agreement, we issued 750,000 shares of common stock as settlement of obligations owing to Corporate Solutions, LLC for consulting services rendered. The amount of the outstanding claims was approximately $310,000, at a per share price of $0.40. The shares were issued in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act. On December 31, 1999, we completed a private placement of 19,164,452 shares of our common stock to a group of accredited purchasers as defined under Rule 502 of Regulation D. Our common stock was sold for between $0.05 and $0.435 per share. No underwriters were used in completing these transactions. We raised approximately $4,310,505. In addition, approximately 2,377,340 shares of the total number of shares issued were granted to one individual in consideration of consulting services. The shares were issued in reliance upon the exemption to registration provided by section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder. On March 1, 2000, we issued 181,100 shares of common stock to four individuals in connection with the purchase of all outstanding shares of Digital Way, S.A., a Peruvian company. These shares were issued in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act. On March 17, 2000, we issued 1,763,372 shares of common stock to Douglas Haffer. Mr. Haffer was entitled to receive a similar number of shares for services rendered to Worldwide Wireless, Inc. in 1998. Mr. Haffer transferred his right to receive those shares from Worldwide Wireless, Inc. to us in exchange for the 1,763,372 shares of common stock we issued to him. We retain the right to receive shares from Worldwide Wireless, Inc. - Worldwide Wireless, Inc. has yet to satisfy this obligation. The shares we issued to Mr. Haffer were issued in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act. On March 21, 2000, we completed a private placement of 3,687,000 shares of our common stock to a group of accredited investors. Our common stock was sold for between $0.30 and $3.20 per share. We raised $3,861,280. We believe that we have satisfied the exemption from the securities registration requirements provided by section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder in this offering. The securities were sold in a private placement to only accredited investors. On April 14, 2000, we sold $1,312,000 of 4% convertible subordinated debentures and related warrants to seven investors pursuant to the exemption from the securities regulation requirement provided by section 4(2) of the Securities Act. The convertible debentures are convertible at the election of the holders into shares of common stock. In connection with this offering, the seven investors also received warrants to purchase a total of 3,600,000 shares of our common stock at an exercise price equal to 120% of the market price of our common stock as of the date the warrants were issued. The warrants are exercisable when issued and have a term of five years. The securities were sold in a private placement to only accredited investors pursuant to 4(2) of the Securities Act. During the period from our incorporation through the present we have granted options to purchase options to purchase common stock to our employees, officers and consultants pursuant to our 1998 stock option plan. These options were granted pursuant to the exemption from the registration requirements set forth in Section 3(b) of the Securities Act and Rule 701 promulgated thereunder. The option share exercise prices between $0.095 and $1.62 per share. No payment was received by the company in connection with the grant of the options. Item 27. EXHIBITS
ITEM (601) DOCUMENT - ---------- -------- 3.1 Articles of Incorporation 3.2 Amendment to Articles of Incorporation filed 3.3 Amendment to Articles of Incorporation filed 3.4 By-laws 4.1.1 Form of Certificate Evidencing shares of Common Stock of World Wide Wireless Communications, Inc. 4.2 Convertible Unsecured Debenture for $740,000 issued by World Wide Wireless Communications, Inc. to Credit Bancorp 5.1 Opinion of Evers & Hendrickson, LLP with respect to the legality of the shares being registered 10.1 Lease Agreement Between World Wide Wireless Communications, Inc. and Shekinah Network 10.2 South Bend MMDS Lease Agreement 10.3 Lease Agreement Between World Wide Wireless Communications, Inc. and Shekinah Network Vail, Colorado 10.4 Lease Agreement Between World Wide Wireless Communications, Inc. and Shekinah Network Aspen, Colorado 10.5 Lease Agreement Between World Wide Wireless Communications, Inc. and Shekinah Network Casper, Wyoming 10.6 Lease Agreement Between World Wide Wireless Communications, Inc. and Shekinah Network Grand Rapids, Michigan 10.7 Lease Agreement Between World Wide Wireless Communications, Inc. and Shekinah Network La Grande, Oregon 10.8 Lease Agreement Between World Wide Wireless Communications, Inc. and Shekinah Network Pierre, South Dakota 10.9 Lease Agreement Between World Wide Wireless Communications, Inc. and Shekinah Network Ukiah, California 10.10 Lease Agreement Between World Wide Wireless Communications, Inc. and Shekinah Network Key West, Florida 10.11 Stock Purchase Agreement dated November 30, 1999 Between Infotel Argentina S.A. and World Wide Wireless Communications, Inc. 10.12 Agreement for Purchase of All Outstanding Shares of Digital Way, S.A. by World Wide Wireless Communications, Inc., dated February 29, 2000 10.13 Letter of Intent dated March 11, 2000 Between SALTEL and World Wide Wireless Communications, Inc. 10.14 Security Purchase Agreement Among World Wide Wireless Communications, Inc. and the Purchasers Named Therein 10.15 Registration Rights Agreements Among World Wide Wireless Communications, Inc. and the Purchasers Named Therein 10.16 Escrow Agreement Among the Purchasers Named Therein, the Representative of the Purchasers and the Escrow Agent 10.17 Form of Debenture of World Wide Wireless Communications, Inc. with Respect to the 4% Convertible Debenture Due 2005 10.18 Form of Warrant to Purchase Shares of World Wide Communications, Inc. Issued in the Offering 21.1 Subsidiaries 23.1 Consent of Evers & Hendrickson, LLP 23.2 Consent of Reuben E. Price & Co. 27.1 Financial Data Schedule
Item 28. UNDERTAKINGS a) The Registrant hereby undertakes that it will: 1) File, during any period in which it offers or sells securities, a post-effective amendment to this registration statement to: (i) Include any prospectus required by Section 10(a)(3) of the Securities Act; (ii) Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement; and (iii) Include any additional or changed material information on the plan of distribution. 2) For determining liability under the Securities Act, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the bona fide offering. 3) File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the Offering. e) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the small business issuer of expenses incurred or paid by a director, officer or controlling person of the small business issuer in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the small business issuer will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. SIGNATURES In accordance with the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe the registrant meets all of the requirements of filing on Form SB-2 and authorized this registration statement to be signed on its behalf by the undersigned on May 26, 2000. World Wide Wireless Communications, Inc. By: /s/ Wayne Caldwell By: /s/ Douglas P. Haffer ----------------------------- -------------------------------------- Wayne Caldwell Douglas P. Haffer Vice President President and Chief Executive Officer In accordance with the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated. Signature Title Date - --------- ----- ---- /s/ Douglas P. Haffer President & CEO & Chairman May 26, 2000 - ------------------------- Douglas P. Haffer /s/ Wayne Caldwell Vice President and Director May 26, 2000 - ------------------------- Wayne Caldwell /s/ Ramsey Sweis Director May 26, 2000 - ------------------------- Ramsey Sweis /s/ Robert Klein Director May 26, 2000 - ------------------------- Robert Klein EX-3.1 2 0002.txt ARTICLES OF INCORPORATION EXHIBIT 3.1 Articles of Incorporation (PURSUANT TO NRS 78) STATE OF NEVADA Secretary of State 1. NAME OF CORPORATION: TAX ENCOUNTERS, INC. 2. RESIDENT AGENT: Name of Resident Agent: The Corporation Trust Company of Nevada Street Address: One East First Street, Reno, Nevada 89501 3. SHARES: Number of shares with par value: 100,000,000 Par Value: $0.001 Number of shares without par value: 4. GOVERNING BOARD: Shall be styled as Directors The FIRST BOARD OF DIRECTORS shall consist of 2 members and the names and addresses are as follows: Cindy Robison 3157 E. Linden, Tuscon, AZ 85716 Joel Watkins 3653 E. 2nd, #205, Tuscon, AZ 85716 5. PURPOSE: The purpose of the corporation shall be: 6. FURTHER MATTERS: 7. SIGNATURES OF INCORPORATORS: The names and addresses of the incorporators signing the articles: Candice Maerz Terrie L. Bates 3225 N. Central Ave. 3225 N. Central Ave. Phoenix, AZ 85012 Phoenix, AZ 85012 /s/ Candice Maerz /s/ Terrie L. Bates ----------------------- ---------------------- Signature Signature State of Arizona County of Maricopa State of Arizona County of Maricopa This instrument was acknowledged This instrument was acknowledged before me on September 10, 1996, before me on September 10, 1996, by Candice Maerz as by Terrie L. Bates as incorporator of TAX ENCOUNTERS, INC. incorporator of TAX ENCOUNTERS, INC. /s/ /s/ ----------------------- ----------------------- 8. CERTIFICATE OF ACCEPTANCE OF APPOINTMENT OF RESIDENT AGENT The Corporation Trust Company of Nevada hereby accepts appointment as Resident Agent for the above name corporation. The Corporation Trust Company of Nevada By: /s/ 9/11/96 ---------------------- -------------- Signature of Resident Agent Date EX-3.2 3 0003.txt AMENDMENT OF ARTICLES OF INCORPORATION--UPLAND CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION OF UPLAND PROPERTIES, INC. We the undersigned President and Secretary of UPLAND PROPERTIES, INC. do hereby certify as follows: That the Board of Directors of said corporation at a meeting duly convened, held on May 16, 1998, adopting a resolution to record the Amended Articles of Incorporation filed on September 12, 1996 as follows: ARTICLE I is hereby amended to read as follows: That the name of the corporation is: WORLD WIDE WIRELESS COMMUNICATIONS, INC. The number of shares of the corporation outstanding and entitled to vote on as amendment to the articles of incorporation 8,024,000, that said amendment has been consented to and approved by a majority vote of the stockholders holding at least a majority of each class of stock outstanding and entitled to vote thereon pursuant to an action by written consent of the shareholders of UPLAND PROPERTIES, INC. /s/ Douglas Haffer ------------------ DOUGLAS HAFFER President /s/ ------------------ Secretary EX-3.3 4 0004.txt AMENDMENT OF ARTICLES OF INCORPORATION CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION Candice Maerz and Terrie L. Bates certify that: 1. They constitute at least two-thirds of the original incorporators of the directors of TAX ENCOUNTERS, INC., a Nevada corporation. 2. The original Articles were filed in the Office of the Secretary of State on September 12, 1996. 3. As of the date of this certificate, no stock of the corporation has been issued. 4. They hereby adopt the following amendments to the articles of incorporation of this corporation: Article 1 is amended to read as follows: NAME OF CORPORATION: UPLAND PROPERTIES, INC. /s/ Candice Maerz ------------------- Signature /s/ Terrie L. Bates ------------------- Signature > EX-3.4 5 0005.txt BY LAWS BY LAWS OF TAX ENCOUNTERS, INC. ARTICLE I. OFFICERS The principle office of the Corporation in the State of Nevada shall be located in Tucson, Arizona, County of Pima. The Corporation may have such offices, either within or without the State of Arizona, as the Board of Directors may designate or as the business of the Corporation may require from time to time. ARTICLE II. SHAREHOLDERS SECTION 1. Annual Meeting. The annual meeting of the shareholders shall be held on the 15th day of the month of January in each year, beginning with the year 1996, at the hour of 10:00 a.m., for the purpose of electing Directors and for the transaction of such other business as may come before the meeting. If the day fixed for the annual meeting shall be a legal holiday in the State of Arizona, such meeting shall be held on the next succeeding business day. If the election of Directors shall not be held on the day designated herein for any annual meeting of the shareholders, or at any adjournment thereof, the Board of Directors shall cause the election to be held at a special meeting of the shareholders as soon thereafter as conveniently may be. SECTION 2. Special Meetings. Special meetings of the shareholders, for any purpose, unless otherwise prescribed by statute, may be called by the President of the Board of Directors, and shall be called by the President at the request of the holders of not less than twenty-five percent (25%) of all outstanding shares of the Corporation entitled to vote at the meeting. SECTION 3. Place of the Meeting. The Board of Directors may designate any place, either within or without the State of Arizona, unless otherwise prescribed by statute, as the place of meeting for any annual meeting or for any special meeting. A waiver of notice signed by all shareholders entitled to vote at a meeting may designate any place, either within or without the State of Arizona, unless otherwise prescribed by statute, as the place for the holding of such meeting. If no designation is made, the place of the meeting shall be the principal office of the Corporation. SECTION 4. Notice of Meeting. Written notice stating the place, day and hour of the meeting and, in case of a special meeting, the purpose or purposes of which the meeting is called, shall unless otherwise prescribed by statute, be delivered not less than 15 days nor more than 45 days before the date of the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at his address as it appears on the stock transfer book of the corporation, with postage thereon prepaid. SECTION 5. Closing of Transfer Books of Fixing of Record. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders of any adjournment thereof, of shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors of the Corporation may provide that the stock transfer books shall be closed for a stated period, but not to exceed in any case fifty days. If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall be closed for at least 45 days immediately preceding such meeting. In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than 60 days and, in particular action requiring such determination of shareholders is to be taken. IF the stock transfer books are not closed and no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed of the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case my be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof. SECTION 6. Voting List. The officer or agent having charge of the stock transfer books for shares of the corporation shall make a complete list of the shareholders entitled to vote at each meeting of shareholders or any adjournment thereof, arranged in alphabetical order, with the address of and the number of shares held by each. Such list shall be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting for the purpose thereof. SECTION 7. Quorum. A majority of the outstanding shares of the corporation entitled to vote, represented in person or proxy, shall constitute a quorum at a meeting of shareholders. If less than a majority of the outstanding shares are represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. The shareholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. SECTION 8. Proxies. At all meetings of shareholders, a shareholder may vote in person or by proxy executed in wiring by the shareholder or by his or her duly authorized attorney-in-fact. Such proxy shall be filed with the secretary of the Corporation before or at the time of the meeting. A meeting of the Board of Directors may be had by means of a telephone conference or similar communication equipment by which all persons participating in the meeting can hear each other, and participation in a meeting under such circumstances shall constitute presence at the meeting. SECTION 9. Voting of Shares. Each outstanding share entitle to vote shall be entitled to one vote upon each matter submitted to a vote at a meeting of shareholders. SECTION 10. Voting of Shares by Certain Holders. Shares standing in the name of another corporation may be voted by such officer, agent or proxy as the Bylaws of such Corporation may prescribe or, in the absence of such provision, as the Board of Directors of such Corporation may determine. Shares held by an administrator, executor, guardian or conservator may be voted by him either in person or by proxy, without a transfer of such shares into his name. Shares standing in the name of a trustee may be voted by him, either in person or by proxy, but no trustee shall be entitled to vote share held by him without a transfer of such shares into his name. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name, if authority to do so be contained in an appropriate order of the court by which receiver was appointed. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. Shares of its own stock belonging to the Corporation shall not be voted directly or indirectly, at any meeting, and shall not be counted in determining the total number of outstanding shares at any given time. SECTION 11. Informal Action by Shareholders. Unless otherwise provided by law, any action required to be taken at a meeting of the shareholders, or any other action which may be taken at a meeting of the shareholders, may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the shareholders entitled to vote with respect to the subject matter thereof. ARTICLE III. BOARD OF DIRECTORS SECTION 1. General Powers. The business and affairs of the Corporation shall be managed by its Board of Directors. SECTION 2. Number, Tenure and Qualifications. The number of Directors of the Corporation shall be fixed by the Board of Directors, but in no event shall be less than one (1) of more than fifteen (15). Each Director shall hold office until the next annual meeting of shareholders and until his successor shall have been elected and qualified. SECTION 3. Regular Meetings. A regular meeting of the Board of Directors shall be held without other notice than this Bylaw immediately after, and at he same place as, the annual meeting of shareholders. The Board of Directors may provide, by resolution, the time and place for the holding of additional regular meetings without notice other than such resolution. SECTION 4. Special Meetings. Special Meetings of the Board of Directors may be called by or at the request of the President or any two Directors. The person or persons authorized to call special meetings of the Board of Directors may fix the place for holding any special meeting of the Board of Directors called by them. SECTION 5. Notice. Notice of any special meeting shall be given at least one (1) day previous thereto by written notice delivered personally or mailed to each Director at his business address, or by telegram. If mailed, such notice shall be deemed to be delivered when deposited in the United States Mail so addressed, with postage thereon prepaid. If notice be given by telegram, such notice shall be deemed to be delivered when the telegram is delivered to the telegraph company. Any Directors may waive notice of any meeting. The Attendance of a Director at a meeting shall constitute a waiver of notice of such meeting, except where a Director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. SECTION 6. Quorum. A majority of the number of Directors fixed by Section 2 of this Article III shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, but if less than such majority is present at a meeting, a majority of the Directors present may adjourn the meeting from time to time without further notice. SECTION 7. Manner of Acting. The act of the majority of the Directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. SECTION 8. Action Without a Meeting. Any action that may be taken by the Board of Directors at a meeting may be taken without a meeting if consent in writing, setting forth the action so to be taken, shall be signed before such action by all of the Directors. SECTION 9. Vacancies. Any vacancy occurring in the Board of Directors may be filled by the affirmative vote of a majority of the remaining Directors though less than a quorum of the Board of Directors, unless otherwise provided by law. A Director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office. Any Directorship to be filled by reason of an increase in the number of Directors may be filled by election by the Board of Directors for a term of office continuing only until the next election of Directors by the shareholders. SECTION 10. Compensation. By resolution of the Board of Directors, each Director may be paid his expenses, if any, of attendance at each meeting of the Board of Directors, and may be paid a stated salary as Director a fixed sum of attendance each meeting of the Board of Directors or both. No such payment shall preclude any Director from serving the Corporation in any other capacity and receiving compensation thereof. SECTION 11. Presumption of Assent. A Director of the Corporation who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as the Secretary of the meeting before the adjournment thereof, or shall forward such dissent by registered mail to the Secretary of the Corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a Director who voted in favor of such action. ARTICLE IV: OFFICERS SECTION 1. Number. The Officers of the Corporation shall be a President, one or more Vice Presidents, a Secretary and a Treasurer, each of whom shall be elected by the Board of Directors. Such other officers and assistant officers as may be deemed necessary may be elected or appointed by the Board of Directors, including a Chairman of the Board. In its discretion, the Board of Directors may leave unfilled for any such period as it may determine any office except those of President and Secretary. Any two or more offices may beheld by the same person, except for the offices of President and Secretary which may not be held by the same person. Officers may be Directors or shareholders of the Corporation. SECTION 2. Election and term of Officer. The officers of the Corporation to be elected by the Board of Directors shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of the shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as conveniently may be. Each officer shall hold office until his successor shall have been duly elected and shall have qualified, or until his SECTION 3. Removal. Any officer or agent may be removed by the Board of Directors whenever, in its judgment, the best interests of the Corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, ofd the person so removed. Election or appointment of an officer or agent shall not of itself create contract rights, and such appointment shall be terminable at will. SECTION 4. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification or otherwise, may be filled by the Board of Directors for the unexpired portion of the term. SECTION 5. President. The President shall be the principal executive officer of the Corporation and, subject to the control of the Board of Directors, shall in general supervise and control all of the business and affairs of the Corporation. He shall, when present, preside at all meetings of the shareholders and of the Board of Directors, unless there is a Chairman of the Board, in which case the Chairman shall preside. He may sign, with the Secretary or any other proper officer of the Corporation thereunto authorized by the Board of Directors, certificates for shares of the Corporation, any deeds, mortgages, bonds, contracts, or other instruments which the Board of Directors has authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by these Bylaws to some other officer or agent of the Corporation, or shall be required by law to be otherwise signed or executed; and in general shall perform all duties incident to the office of the President and such other duties as may be prescribed by the Board of Directors from time to time. SECTION 6. The Vice President. In the absence of the President or in the event of his death, inability or refusal to act, the Vice President shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. The Vice President shall perform such other duties as from time to time may be assigned to him by the President of the Board of Director. If there is more than one Vice President, each Vice President shall succeed to the duties of the President in order of rank as determined by the Board of Director. If no rank has been determined, then each Vice President shall succeed to the duties of the President in order of date of election, the earliest date having the first rank. SECTION 7. Secretary. The Secretary shall: (a) keep the minutes of the proceedings of the shareholders and of the Board of Directors in one or more minute books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of the Bylaws or required by law; (c) be custodian of the corporate records and of the seal of the Corporation and see that the seal of the Corporation is affixed to all documents, the execution of which on behalf of the Corporation under its seal is duly authorized; (d) keep a register of the post office address of each shareholder which shall be furnished to the Secretary by such shareholder; (e) sign with the President certificates of shares of the Corporation, the issuance of which shall have been authorized by resolution of the Board of Directors; (f) have general charge of the stock transfer books of the Corporation; and (g) in general perform all duties incident to the office of the Secretary and such other duties as from time to time may be assigned him by the President or by the Board of Directors. SECTION 8. Treasurer. The Treasurer shall: (a) have charge and custody of and be responsible for all funds and securities of the Corporation; (b) receive and give receipts for money due and payable to the Corporation from any source whatsoever, and deposit all such monies in the name of the Corporation in such banks, trust companies or other depositories as shall be selected in accordance with the provisions of Article VI of these Bylaws; and (c) in general perform all of the duties as from time tot time may be assigned to him by the President or by the Board of Directors. If required by the Board of Directors, the Treasurer shall give a bond for the faithful discharge of his duties in such sum and with such sureties as the Board of Directors shall determine. SECTION 9. The salaries of the officers shall be fixed from time to time by the Board of Directors, and no officer shall be prevented from receiving such salary by reason of the fact that he is also a Director of the Corporation. ARTICLE V: INDEMNITY The Corporation shall indemnify its Directors, officers and employees as follows: A. Every Director, officer, or employee of the Corporation shall be indemnified by the Corporation against all expenses and liabilities, including counsel fees, reasonably incurred by or imposed upon him in connection with any proceeding to which he may become involved, by reason of his being or having been a Director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a Director, officer, employee or agent of the corporation, partnership, joint venture, trust, or enterprise, or any settlement thereof, whether or not he is a Director, officer, employee or agent at the time such expenses are incurred, except in such cases wherein the Director, officer, or employee is adjudged guilty of willful misfeasance or malfeasance in the performance of his duties; provided that in the event of a settlement the indemnification herein shall apply only when the Board of Directors approves such settlement and reimbursement as being for the best interest of the Corporation. B. The Corporation shall provide to any person who is or was a director, officer, employee, or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee, or agent of the corporation, partnership, joint venture, trust or enterprise, the indemnity against expenses of suit, litigation or other proceedings which is specifically permissible under applicable law. C. The Board of Directors may, in its discretion, direct the purchase of liability insurance by way of implementing the provisions of this Article V. ARTICLE VI: CONTRACTS, LOANS, CHECKS AND DEPOSITS SECTION 1. Contracts. The Board of Directors may authorize any officer of officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances. SECTION 2. Loans. No loans shall be contracted on behalf of the Corporation and no evidences of indebtedness shall be issued in its name unless authorized by a resolution of the Board of Directors. Such authority may be general or confined to specific instances. SECTION 3. Checks, Drafts, Etc. All checks, drafts or other orders for the payment of money, notes, or other evidences of indebtedness issued in the name of the Corporation, shall be signed by such officers or officers, agent or agents of the Corporation and in such manner as shall from time to time be determined by resolution of the Board of Directors. SECTION 4. Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board of Directors may select. ARTICLE VII: CERTIFICATES FOR SHARES AND THEIR TRANSFER SECTION 1. Certificates for Shares. Certificates representing shares of the Corporation shall be in form as shall be determined by the Board of Directors. Such certificates shall be signed by the P resident and by the Secretary or by such other officers authorized by law and by the Board of Directors so to do, and sealed with the corporate seal. All certificates for shares shall be consecutively numbered or otherwise indemnified The name and address of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the Corporation. All certificates surrendered to the Corporation for transfer shall be canceled and no new certificates shall be issued until the former certificates for a like number of shares shall have been surrendered and canceled, except that in case of a lost, destroyed or mutilated certificate a new one may be issued therefore upon such terms and indemnity to the Corporation as the Board of Directors may prescribe. SECTION 2. Transfer of Shares. Transfer of shares of the Corporation shall be made only on the stock transfer books of the Corporation by the holder of record thereof or by his legal representative, who shall furnish proper evidence of authority to transfer, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the Corporation, and on surrender for cancellation of the certificate for such shares. The person on whose name shares stand on the books of the Corporation shall be deemed by the Corporation to be the owner thereof for all purposes. Provided, however, that upon any action undertaken by the shareholders to elect S Corporation Status pursuant to Section 1362 of the Internal Revenue Code and upon any shareholders agreement thereto restricting the transfer of said shares so as to disqualify said S Corporation Status, said restriction or transfer shall be made a part of the Bylaws so long as said agreement is in force and effect. ARTICLE VIII: FISCAL YEAR The fiscal year of the Corporation shall begin on the 1st day of January and end on the 31st day of December of each year. ARTICLE IX: DIVIDENDS The Board of Directors may from time to time declare, and the Corporation may pay, d dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and its Articles of Incorporation. ARTICLE X: CORPORATE SEAL The Board of Directors shall provide a corporate seal which shall be circular in form and shall have inscribed thereon the name of the Corporation and the State of the incorporation and the words, "Corporate Seal." ARTICLE XI: WAIVER OF NOTICE Unless otherwise provided by law, whenever any notice is required to be given to any shareholder or director of the Corporation under the provisions of these Bylaws or under the provisions of the Articles of Incorporation or under the provisions of the applicable Business Corporation Act, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. ARTICLE XII: AMENDMENTS These Bylaws may be altered, amended or repealed and new Bylaws may be adopted by the Board of Directors at any regular or special meeting of the Board of Directors. The above Bylaws are certified to have been adopted by the Board of Directors of the Corporation on the 12th day of September 1996. --------------------------------- Secretary EX-4.1.1 6 0006.txt FORM OF CERTIFICATE WWW NUMBER SHARES WW 2847 WORLD WIDE WIRELESS COMMUNICATIONS, INC. INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA COMMON STOCK SEE REVERSE SIDE FOR CERTAIN DEFINITIONS THIS CERTIFIES THAT CUSIP 981550 10 9 SPECIMEN CERTIFICATE SPECIMEN CERTIFICATE SPECIMEN CERTIFICATE to the owner of FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF THE PAR VALUE OF $.001 PER SHARE OF WORLD WIDE WIRELESS COMMUNICATIONS, INC. (hereinafter called the "Corporation") transferable on the books of the Corporation in person or by duly authorized attorney upon surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby are issued and shall be held subject to all the provisions of the Certificate of Incorporation and By-Laws of the Corporation and the amendments from time to time made thereto, copies of which are or will be on file at the principal office of the Corporation, to all of which the holder by acceptance hereof assents. This Certificate is not valid unless countersigned by the Transfer Agent and registered by the Registrar. WITNESS the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. Dated: ?????????????????????? ???????????????????? SECRETARY PRESIDENT [SEAL] Countersigned and Registered: MANHATTAN TRANSFER REGISTRAR CO. (HOLBROOK, N.Y) Transfer Agent and Registrar By Authorized Signature EX-4.2 7 0007.txt CONVERTIBLE UNSECURED DEBENTURE THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 ("ACT"). ANY TRANSFER OF SUCH SECURITIES WILL BE INVALID UNLESS A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO SUCH TRANSFER OR IN THE OPINION OF COUNSEL FOR THE COMPANY REGISTRATION UNDER THE ACT IS UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT. World Wide Wireless Communications, Inc. CONVERTIBLE UNSECURED DEBENTURE $740,000 SEPTEMBER 30, 1999 FOR VALUE RECEIVED, subject to the terms and conditions set forth below, World Wide Wireless Communications, Inc., a Nevada corporation (the "Company"), whose address is 520 Third Street, Suite 101, Oakland, California hereby promises to pay to the order of Credit Bancorp, Netherland Antilles Corporation, (the "Payee"), the principal sum of SEVEN HUNDRED FORTY THOUSAND DOLLARS ($740,000), together with interest on the outstanding principal balance remaining unpaid from time to time from and after the date hereof until paid in full at the rate of seven percent (7%) per annum, payable semiannually in arrears on the last day of each February and each September 30, commencing September 30, 1999 and on the maturity date hereof, computed on actual days elapsed in a 365 day year. The outstanding principal balance, together with all accrued and unpaid interest, will be due and payable on September 30, 2002. All payments on account of principal and interest will be made in lawful money of the United States of America to the address of the Payee set forth on the Schedule of Purchasers attached to the Purchase Agreement (as defined herein), or at such other place as the holder hereof may from time to time designate in writing to the Company. The Payee and each subsequent holder or holders hereof (any such person being referred to herein as the "Holder" and all holders being referred to herein as "Holders") by acceptance of the Debenture each agree to the following terms and conditions: 1 1. PRINCIPAL PAYMENTS. 1.1. Pro Rata Payments. Any and all payments under the Debenture, whether at the election of the Company, upon maturity or following an Event of Default (as defined in Section 3), will be made by the Company prorata to all Holders. 1.2. Optional Prepayments. The Company may prepay the Debenture in whole or in part without penalty. Prepayments will be applied first toward repayment of accrued interest first, and any amount remaining thereafter toward the repayment of principal. If a prepayment is made other than on a dat when interest payments are due, the semi-annual interest payment for the period in which the prepayment was made will be prorated through the date of prepayment. If the Holder has exercised its right to convert some or all of the principal or interest into Common Stock before payment is made, the Company may not prepay those amounts but, instead, will issue shares of Common Stock for the amount converted in accordance with this Debenture. 1.3. Procedures. Upon receipt of any prepayment of principal, the Holder will promptly endorse and surrender this Debenture to the Company for cancellation. If the Company prepays some but not all of the principal, the Company will without charge to the Holder promptly execute and deliver to the Holder a debenture for the unpaid balance of the principal. Following the date of prepayment, interest will be payable only on the portion of the principal which was not prepaid. 2. CONVERTIBILITY. 2.1. Right to Convert. Subject to the provisions of this Debenture, all amounts of unpaid principal and accrued interest are convertible into Common Stock at any time at the election of the Holder. 2.2. Conversion - Public Offering. All amounts of unpaid principal and interest will be converted following five (5) days notice thereof to the Company, into Common Stock of the Company (the "Common Stock") at a conversion price of $1.60 per share (the "Conversion Price"). The Conversion Price will be subject to adjustments pursuant to Section 2.6. 2.3. Mechanics of Conversion. This Debenture may be converted in full or in part by the Holder, pursuant to Section 2.1-2.2, by surrender of this Debenture to the Company at the address set forth 2 above, with a notice of conversion in the form of Exhibit A hereto duly executed by the Holder (specifying the portion of the principal amount and the accrued and unpaid interest, if any, to be converted in the case of a partial conversion). 2.3.1. Surrender of Debenture. To convert any amount owing under this Debenture into Common Stock, the Holder must surrender this Debenture at the principal executive office of the Company, accompanied by a written notice setting forth the amount of principal and interest being converted. If less than the entire principal is being converted, the Company will issue to the Holder a replacement Debenture setting forth the amount of unpaid principal and otherwise containing the same terms and conditions as this Debenture. 2.3.2. Issuance of Shares. Following compliance with the procedures set forth in Section 2.3.1, the Company will issue to the Holder a certificate evidencing the number of shares of Common Stock to which the Holder is entitled. 2.3.3. Fractional Shares. In lieu of issuing any fractional shares, the Company may at its option pay to the Holder cash equal to the market price for the shares if there is a public market for the Common Stock. 2.4. Early Termination of Conversion Option. The right of the Holder to convert any interest or principal into Common Stock will terminate immediately, notwithstanding the fact that such right could otherwise be exercised, two (2) business days prior to the occurrence of any of the following events (hereafter defined as "Events"): (i) the merger or consolidation of the Corporation, whether or not the Corporation is the surviving entity, if the beneficial owners of the outstanding voting securities of the Corporation immediately prior to the merger or consolidation as a group are the beneficial owners of less than 50% of the surviving entity's outstanding voting securities immediately after the merger or consolidation; (ii) the sale, exchange or transfer of all or substantially all of the assets of the Issuer other than in the ordinary course of business; or (iii) the dissolution or liquidation of the Issuer. 3 The Company will provide the Holder with notice of any Event no later than ten (10) business days before that Event occurs. The right of the Holder to convert principal or interest into Common Stock will not be canceled if the party acquiring the Company's stock or assets was an affiliate of the Company immediately prior to an Event or is a person, group or other entity which beneficially owned more than twenty percent (20%) of the Issuer's outstanding voting securities immediately prior to that Event. 2.5. Adjustments to Conversion Price. The Conversion Price will be $1.60 per share subject to an adjustment in the case of stock splits, reverse stock splits, stock dividends, or the reclassification of securities. 2.5.1. Notice of Adjustment. Whenever the Conversion Price or the number of shares of Common Stock issuable upon conversion of the Debenture will be adjusted as provided in this Section 2.5, the Company will forthwith file, at its principal office or at such other place as may be designated by the Company, a statement, signed by its chief executive officer or chief financial officer, showing in detail the facts requiring such adjustment and the Conversion Price and/or the number of shares of Common Stock issuable upon Conversion of the Debenture, as the case may be, that will be in effect after such adjustment. The Company will within 15 days of any adjustment to the Debentures cause a copy of such statement to be sent by first-class, certified mail, return receipt requested, postage prepaid, to each Holder of Debentures at such Holder's address appearing in the Company's records. 2.5.2. Stock Splits and Combinations. In the event the outstanding Common Stock will be subdivided into a greater number of shares of Common Stock, the Current Conversion Price will, simultaneously with the effectiveness of such subdivision, be proportionately reduced, and conversely, in case the outstanding Common Stock will be combined into a smaller number of shares of Common Stock, the Current Conversion Price will, simultaneously with the effectiveness of such combination, be proportionately increased. In addition, if the Company declares a stock dividend payable in the form of common stock, the conversion price will be reduced by an amount equal to the percentage increase in the total outstanding shares of the company resulting from that stock dividend. 4 2.5.3. Reclassification of Securities. In the event that the Company's Common Stock is reclassified or exchanged for another type or class of security without payment of consideration or otherwise changed, the Holder may convert this Debenture into the same type and class of security as the holders of the Common Stock received as a result of that reclassification, exchange or change. The Conversion Price for such security will be proportionally adjusted to reflect the increase or decrease in the number of shares outstanding as a result of that reclassification, exchange or change. 2.6. Reservation of Stock. The Company will at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the principal amount and accrued and unpaid interest of this Debenture, such number of shares of Common Stock as will from time to time be sufficient to effect such conversion. If at any time the number of authorized but unissued shares of Common Stock will not be sufficient to effect such conversion, the Company promptly will take all such corporate action as will be necessary and appropriate to increase such number to the number sufficient for such purpose. 3. SUBORDINATION. The right of the Holder to receive payment of any principal or interest is subject and subordinate to the prior payment of any other indebtedness currently owed by or hereafter incurred by the Company other than any indebtedness currently or hereafter owed to any director or officer of the Company (hereafter "Senior Indebtedness"). During the continuance of any default in the payment of principal or interest on any Senior Indebtedness, no payment of principal or interest will be made on or with respect to this Debenture if written notice of such default has been given to the Company by any holder or holders of any Senior Indebtedness. In the event of any insolvency, bankruptcy, receivership, or liquidation involving the Company, the holders of Senior Indebtedness will be entitled to receive payment in full of all principal and interest on all Senior Indebtedness before the Holder will be entitled to receive any payment of principal or interest. 4. EVENTS OF DEFAULT. If any of the following events occur ("Events of Default"), all unpaid principal and accrued interest will become immediately due and payable: 5 (i) Voluntary Bankruptcy. The Company files a petition for bankruptcy; (ii) Involuntary Bankruptcy. A creditor of the Company files a petition for bankruptcy with respect to the Company and that petition is not discharged within 90 days of the date of filing; (iii) Assignment for Benefit of Creditors. The Company makes an assignment for the benefit of creditors or a receiver is appointed with respect to the Company; (iv) Dissolution. The Company dissolves or commences the liquidation of its entire business; or (v) Sale of Assets. The Company sells, assigns or transfers all or substantially all of its assets other than in the ordinary course of business, provided that it will not be considered an Event of Default if the purchaser of those assets agrees to assume all obligations of the Company with respect to the payment of principal and interest under this Debenture. 5. MISCELLANEOUS. 5.1. Securities Laws Compliance. This Debenture and the shares of Common Stock to be issued hereunder have not been registered under the Securities Act of 1933 (the "Act") pursuant to an exemption to the registration requirements contained in Section 4(2) of the Act, nor have they been registered or qualified under any state securities laws. The Compan reserves the right to condition the issuance of any shares under this Debenture upon the receipt of such information from the Holder so as to allow the Company to verify that the exemption i available as of the date of conversion. The Holder of this Debenture acknowledges that it is acquiring this Debenture for investmen only and not with a view toward the resale or distribution of this Debenture or the Common Stock issuable upon conversion hereof. 5.2. Restrictive Legend. Each certificate for the securities issued upon conversion of all or a portion of the principal amount and accrued and unpaid interest of this Debenture and the Common Stock issued upon conversion thereof will bear a legend on its face substantially in the following form: THIS DEBENTURE AND THE SHARES TO BE ISSUED 6 HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER THAT ACT OR AN OPINION OF COUNSEL OR OTHER EVIDENCE SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 UNDER THE ACT. 5.3. Replacement. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Debenture (provided that an affidavit of the Holder will be satisfactory for such purpose), and of indemnity satisfactory to it, and upon surrender and cancellation of this Debenture, if mutilated, the Company will make and deliver a new Debenture of like tenor in a principal amount equal to the outstanding principal balance of this Debenture. Any Debenture so issued will be dated as of the last date at which principal or interest has been paid upon this Debenture. 5.4. Cancellation. Upon payment in full of all principal and interest payable hereunder, or in the event the Holder converts the entire principal and interest amount hereof into Stock, this Debenture will be surrendered to the Company for cancellation. 5.5. Transferability of Debenture. This Debenture may be sold, assigned, or otherwise transferred, provided that such transfer is conducted in accordance of Rule 144 of the Securities and Exchange Commission, is otherwise exempt from the registration requirements of the Act or if this Debenture is registered under the Act. 5.6. Governing Law/Forum. This Agreement will be governed by and construed under the laws of the State of California, exclusive of any conflicts of laws principles which would apply the laws of any other jurisdiction. The parties agree that any action to enforce or construe this Agreement will be brough in the state courts in the County of San Francisco, State of California, or in the Federal Courts of the Northern District of California. Each party waives all objections to the bringing of such an action in that forum based on lack of personal jurisdiction, improper venue or forum non-conveniens. 7 5.7. Amendment and Waiver. Any provision of the Debenture ma be amended or waived by a writte instrument signed by the Company and by Holders of at least 66-2/3 of the then outstanding aggregate principal amount of Debentures, such amendment or waiver to be effective with respect to all of the Debentures but only in the specific instance and for the specific purpose for which the amendment or waiver is made or given; provided, however, tha no such amendment or waiver will without the prior written consent of the Holders of all of the then outstanding aggregate principal amount of Debentures, modify the principal amount, rate of interest, form and place of payment, conversion or maturity of the Debenture, or the percentage required to effect amendment of the Debenture. 5.8. No Rights as a Shareholder. This Debenture will not give the Holder any right to vote in any matter submitted for consideration by the shareholders or any other right of a shareholder of the company. 5.9. Market Standoff Agreement. The Compan and the Shareholders agree that, in connection with any public offering of the Company's stock (regardless of whether the offering is registered under the Securities Act of 1933, as amended (the "Act") or exempt from registration) the Shareholders will not sell or otherwise dispose of any of their Stoc without the prior written consent of the Company or the underwriter dispose of any of their Stock without the prior written consen of the Company or the underwriter may specify; provided that such period will not exceed 180 days after the completion of the offering. 5.10. Waiver. No delay on the part of the Holder in exercising any right hereunder will operate as a waiver of such right under this Debenture. 5.11. Presentment. Presentment, protest, notice of protest, notice of dishonor, and notice of nonpayment are waived by the Company with respect to any amounts due hereunder, and any rights to direct the Company hereunder, and any right t require proceedings against others or to require exhaustio of security, are waived. 5.12. Notice. Notices and other communications required or permitted to be given hereunder will be in writing and will be conclusively deemed effectively given upon personal delivery or confirmed facsimile transmission, or five days after deposit in United States Mail, by registered or certified mail, postage prepaid, or one day 8 after forwarding through a nationally recognized air courier service, addressed (i) if to the Company, at [ADDRESS TO BE PROVIDED] (ii) if to Payee at, [ADDRESS TO B PROVIDED], Payee's address as set forth in the Schedule of Purchasers attached to the Purchase Agreement, or at such other address as the Company or Payee may designate by ten (10) days, advance written notice to the other party given in the manner herein provided. World Wide Wireless Communications, Inc. - ----------------------------- By: Douglas P. Haffer Title: President 9 EXHIBIT A Notice of Conversion TO: World Wide Wireless Communications, Inc. The undersigned, being the holder of the Convertible Debenture, dated September 30, 1999 made by you for the principal amount of $740,000 (the "Debenture"), hereby surrenders the Debenture to you for conversion into shares of Common Stock issued by you ("Stock"), such conversion to be in accordance with the terms and provisions of Section 2 of the Debenture. The principal amount to be converted upon surrender of the Debenture is $____________ and the accrued and unpaid interest amount to be converted upon the surrender of the Debenture (unless paid within five days after this Notice) is $___________. The undersigned hereby requests that a certificate evidencing the shares of Common Stock to be issued upon such conversion be issued in the name of Dated: , 1999 -------------- - --------------------------- (Name of Holder) By: ----------------------- (Name) - --------------------------- (Title) (Address) ---------------------- ---------------------- ---------------------- C:\TEMP\WWW Communications Inc. - Convertible Debenture(2).WPD 10 EX-5.1 8 0008.txt OPINION OF EVERS & HENDRICKSON, LLP Evers & Hendrickson, LLP Lawyers and Counselors At Law - ------------------------------------ March 26, 2000 Securities and Exchange Commission Division of Corporate Finance 450 Fifth Street, N.W. Washington, D.C. 20549 Re: World Wide Wireless Communications, Inc., Legality of Shares Dear Madam/Sirs: We have made reasonable inquiry and are of the opinion that the securities being offered, will, when sold, be legally issued, fully paid and non-assessable. We are not opining as to any other statements contained in the Form SB-2 registration statement, nor as to matters that occur after the date thereof. Very truly yours, EVERS & HENDRICKSON, LLP /s/ William D. Evers ----------------------------- By: William D. Evers, Partner EX-10.1 9 0009.txt LEASE AGREEMENT LEASE AGREEMENT BETWEEN WORLD WIDE WIRELESS COMMUNICATIONS, INC. AND SHEKINAH NETWORK THIS AGREEMENT is made this 25th day of November 1998 (the "Effective Date"), by and between World Wide Wireless Communications, Inc. a Nevada Corporation, and Shekinah Network, a California non-profit Corporation and World Wide Communications, Inc. and Shekinah Network shall hereinafter be individually referred to as a "Party" or collectively as the "Parties." WHEREAS, the Federal Communications Commission ("FCC") has authorized licenses for Instructional Television Fixed Service ("ITFS") channels and has authorized the licensee to lease excess capacity to non-ITFS users for the transmission of commercial programming; WHEREAS, Shekinah Network has received licenses from the FCC License to construct and operate ITFS systems on the channels and in the markets listed in Exhibit A, attached hereto and incorporated by reference herein (the "Licenses") for the transmission of educational and instructional video programming; WHEREAS, Shekinah Network has filed applications at the FCC to construct and operate ITFS systems on the channels and in the markets listed in exhibit B, attached hereto and incorporated by reference herein (the "Applications") for the transmission of educational and instructional video programming (the channels listed in Exhibit A and Exhibit B are hereinafter referred to as the "Channels"); WHEREAS, with respect to the Licenses and the Applications, Shekinah Network has entered into the Excess Capacity Lease Airtime Agreements listed in Exhibit C, attached hereto and incorporated by reference herein (the "Existing Lease Agreements"), pursuant to which certain non-ITFS users ("Existing Lessees") are not providing, or will provide, access to satellite reception equipment, transmission and reception equipment, operational support and royalties in exchange for access to capacity on the channels covered by the Licenses and the Applications, consistent with the rules and regulations of the FCC; WHEREAS, subject to the terms and conditions set forth herein, Shekinah Network desires to grant to World Wide Wireless Communications, Inc. an exclusive and irrevocable option to lease excess capacity on the Channels, and potentially to acquire the Channels; WHEREAS, subject to the terms and conditions set forth herein, World Wide Wireless Communications, Inc. desires to acquire from Shekinah Network an exclusive and irrevocable option to lease excess capacity on the Channels and potentially to acquire the Channels; NOW, THEREFORE, in consideration of the premises and the mutual agreements, representations, warranties, covenants and promises contained herein, the Parties, intending to be legally bound, hereby agree as follows: NOW, THEREFORE, in consideration of the premises and the mutual agreements, representations, warranties, covenants and promises contained herein, the Parties, intending to be legally bound, hereby agree as follows: ARTICLE 1 OPTION 1.1. Grant of option. Subject to the terms and conditions herein, Shekinah Network hereby grants to World Wide Wireless Communications, Inc. the exclusive, irrevocable right and option to lease from Shekinah Network excess capacity under each License and Application, and the exclusive, irrevocable right and option to acquire from Shekinah Network each License and Application (the "Option") as follows: 1.1.1. Within sixty days (60) days following the exercise of the Option with respect to any License or Application pursuant to Section 1.5 hereof, subject to Sections 1.1.2 and 1.1.3 hereof, Shekinah Network and World Wide Wireless Communications, Inc. shall enter into an Excess Capacity Lease Airtime Agreement ("World Wide Wireless Communications, Inc. Lease Agreement") for such License or Application substantially in the form of Exhibit D, attached hereto and incorporated by reference herein. The World Wide Wireless Communications, Inc. Lease Agreement shall specify a consideration to Shekinah Network of the amount of a One Dollar ($1) Signing Fee, and a monthly minimum Transmission Fee of Five percent (5%) of the Gross system receipts or Five Hundred Dollars whichever is greater. 1.1.2. In the event that the FCC's rules and regulations change such that World Wide Wireless Communications, Inc. is permitted to acquire the Channels outright and to utilize the Channels for purposes other than the transmission of educational and commercial programming, and Shekinah Network desires to sell its Channels and World Wide Wireless Communications, Inc. desires to so acquire the Channels, then upon the exercise of the Option with respect to the Channels covered by any License or Application pursuant to Section 1.5 hereof, World Wide Wireless Communications, Inc. shall notify Shekinah Network in writing within sixty (60) days of its intention to acquire such Channels, and Shekinah Network and World Wide Wireless Communications, Inc. shall enter into an Asset Purchase Agreement for the purchase and sale of such Channels ("Purchase Agreement"). The Purchase Agreement shall contain terms and conditions which are reasonable and customary for purchase agreements of such Channels and shall specify a consideration to Shekinah Network of One Hundred and Fifty Thousan Dollars ($150,000) per-market or channel Group on and individual basis, or all markets or channel groups can be purchased for the sum of Three Million Five Hundred Thousand Dollars ($3,500,000). This would apply to World Wide Wireless Communications, Inc. or a FCC approved educational non-profit entity designated in writing by World Wide Wireless Communications, Inc.. 1.2 Term of Option. The Option shall have a term of ten (10) years from the date hereof (the "Option Term"). World Wide Wireless Communications, Inc. shall have a right to renew this option for three (3) additional terms of ten years each, following the other provisions of this Agreement. 1.3. Payment. In consideration for the grant of the Option, World Wide Wireless Communications, Inc. hereby agrees to pay to Shekinah Network Five Hundred Thousan Dollars ($500,000.00), payable in cash by World Wide Wireless Communications, Inc. by certified or cashier's check or by wire or interbank transfer as follows: 1.3.1. The non-refundable sum of Fifty-Thousand Dollars ($50,000.00) shall be paid by World Wide Wireless Communications, Inc. to Shekinah on the Effective Date. 1.3.2. The non-refundable sum of Twenty-Five Thousand Dollars ($25,000.00) shall be paid by World Wide Wirelss Communications, Inc. to Shekinah on or before January 25, 1999 (sixty days (60) following the Effective Date). 1.3.3. The balance of Four Hundred and Twenty-Five Thousand Dollars ($425,000.00) shall be paid by World Wide Wireless Communications, Inc. to Shekinah on or before February 25, 1999 (ninety days (90) following the Effective Date). 1.4 Exercise of the Option. The Option granted under this Agreement shall be exercised by World Wide Wireless Communications, Inc. only as follows: 1.4.1. The Option with respect to each License and Application shall be exercisable by World Wide Wireless Communications, Inc. only upon the occurrence of one of the following events (a "Termination Event"): (i) the termination of the associated Existing Lease Agreement due to breach thereunder of the Existing Lessee; (ii) the termination of the associated Existing Lease Agreement due to the mutual consent of the parties thereto; or (iii) the expiration of the associated Existing Lease Agreement; provided that Skekinah Network and the Existing Lease have not entered into a new lease agreement pursuant to the terms of such Existing Lease Agreement. Shekinah Network shall provide written notice to World Wide Wireless Communications, Inc. for any Termination Event within thirty (30) days following the occurrence thereof (each such notice hereinafter referred to as a "Termination Notice"). (iv) The Availability of a License or Application not otherwise subject to an Existing Lease Agreement. 1.4.2. Within ninety (90) days following the receipt of a Termination Notice by Shekinah Network with respect to any License of Application (the "Exercise Period"), World Wide Wireless Communications, Inc. shall provide written notice to Shekinah Network of its intent to exercise its Option for the License or Application (and the Channels covered thereunder) at issue. If World Wide Wireless Communications, Inc. declines to exercise the Option for any given License or Application within the applicable Exercise Period, Shekinah Network shall have no further obligations to World Wide Communications, Inc. with respect to such License or Application. 1.4.3. Notwithstanding anything to the contrary in this Agreement, the Option with respect to each License and Application shall be expressly subject to any rights of first refusal of Existing Licenses which are contained in the Existing Lease Agreements. ARTICLE 2 REPRESENTATIONS AND WARRANTIES 2.1. Shekinah Network. Shekinah Network hereby represents and warrants to World Wide Wireless Communications, Inc. as follows: 2.1.1. Organization. It is a non-profit corporation duly organized, validly existing and in good standing under the laws of the State of California and has full power and authority to carry on its business as said business as said business is now being conducted and to own or to lease the assets it now owns or leases. 2.1.2. Authority/Enforceability. It has the full power and authority to execute and deliver this Agreement, and all other documents required to be executed and delivered by it hereunder, to consummate the transactions hereby contemplated to fully perform its obligations hereunder and to take all other actions required to be taken by it pursuant to the provisions hereof. The execution and delivery of this Agreement, and all other documents required to be executed and delivered by it hereunder, and its performance hereunder and thereunder have been duly authorized by all requisite action. This Agreement and all other documents required to be executed and delivered by it hereunder have been duly executed and delivered by it and constitute valid and legally binding agreements and obligations enforceable in accordance with their respective terms against it. Notwithstanding anything to the contrary in this Agreement, except as expressly provided herein, Shekinah Network makes no representation whatsoever with respect to the Licenses or the Applications. 2.1.3. No Conflicts. Except for any FCC approval which may be required prior to the execution and consummation of any agreement under Sections 1.1.1 or 1.2 hereof, the execution, and delivery and performance by it of this Agreement, or any other document required to be executed and delivered by it hereunder, in accordance with its terms will not, other than as disclosed by it to World Wide Wireless Communications, Inc.: (i) violate any order or decree of any court or governmental authority by which, with it is bound, (iii) violate, result in a breach of, constitute a default (or an event which, with or without the giving of notice, lapse of time or both, would constitute a default) under, result in the invalidity of, accelerate the performance required by or cause the acceleration of the maturity or, terminate or modify or give any third party the right to terminate or modify, or otherwise, instrument, note, mortgage, lease, license, franchise, permit or other authorization, right, restriction or obligation to which it is a party or by which it is bound, (iv) constitute an act of bankruptcy, preference, insolvency or fraudulent conveyance under any bankruptcy act or other law for the protection of debtors or creditors, or (v) conflict with or result in any breach or violation of the terms, conditions or provisions of its organizational documents. 2.2. World Wide Wireless Communications, Inc.. World Wide Wireless Communications, Inc. hereby represents and warrants to Shekinah Network, as follows: 2.2.1. Organization. It is corporation duly organized, validly existing and in good standing under the laws of the State of Nevada and has full power and authority to carry on its business as said business is now being conducted and to own or to lease the assets it now owns or leases. 2.2.2. Authority/Enforceability. It has the full power and authority to execute and deliver this Agreement, and all other documents required to be executed and delivered by it hereunder, to consummate the transactions hereby contemplated, to fully perform its obligations hereunder and to take all other actions required to be taken by it pursuant to the provisions hereof. The execution and delivery of this Agreement, and all other documents required to be executed and delivered by it hereunder, and its performance hereunder and thereunder have been duly authorized by all requisite action. This Agreement and all other documents required to be executed and delivered by it hereunder have been duly executed and delivered by it and constitute valid and legally binding agreements and obligations enforceable in accordance with their respective terms against it. 2.2.3. No Conflicts. Except for any FCC approval which may be required prior to the execution and consummation of any agreement under Sections 1.1.1. or 1.2 hereof, the execution, and delivery and performance by it of this Agreement, or any other document required to be executed and delivered by it hereunder, in accordance with its terms will not, other than as disclosed by it to Shekinah Network: (i) violate any provisions of any law, rule or regulation which is applicable to it, (ii) violate any order or decree of any court or governmental authority by which it is bound, (iii) violate, result in a breach of, constitute a default (or an event which, with or without the giving of notice, lapse of time or both, would constitute a default) under, result in the invalidity of, accelerate the performance required by or cause the acceleration of the maturity of, terminate or modify or give any third party the right to terminate or modify, or other authorization, right, restriction or obligation to which it is insolvency or fraudulent conveyance under any bankruptcy act or other law for the protection of debtors or creditors, or (v) conflict with or result in any breach or violation of the terms, conditions or provisions of its organizational documents. ARTICLE 3 RIGHTS AND REMEDIES 3.1. Indemnification. 3.1.1. Each party shall indemnify, defend and hold the other Party and their officers, managers, directors, employees, agents and representatives free and harmless from and against any and all claims, actions, suits, liability, loss, damages, costs, expenses, judgments, deficiencies, charges and reasonable fees or legal counsel arising out of or in connection with any material breach by the Party of any representation, warrant or covenant of this Agreement or any failure by the Party to perform its obligations hereunder. World Wide Wireless Communications, Inc. shall further indemnify defend and hold Shekinah Network, its officer, directors, employees, agents and representatives harmless from and against any and all claims, actions, suits, liabilities, damages, costs, expenses, judgments, deficiencies, charges and reasonable fees of legal counsel arising out of or in connection with any challenge by an Existing Lessee to the termination of an Existing Lease Agreement with respect to any License or Application; provided that World Wide Wireless Communications, Inc. exercises the Option with respect to such License or Application and Shekinah Network and World Wide Wireless Communications, Inc. actually enter into any agreement pursuant to Sections 1.1.1 or 1.1.2 with respect to such License or Application following such termination. 3.1.2. If claim by a third party is made against a Party indemnified under Section 3.1.1, above ("Indemnitee"), and the Indemnitee intends to seek indemnification with respect thereto, it shall promptly give written notice to the indemnifying Party ("Indemnitor") of such claim; provided, however, that failure by Indemnitee to give prompt notice of a claim shall not relieve Indemnitor of its obligations unless said failure materially prejudices Indemnitor's ability to defend the claim. Indemnitor shall have ten (10) business days after said notice is given to elect by written notice given to Indemnitee to undertake, conduct and control, through counsel of its own choosing (subject, as to choice of counsel, to the consent of Indemnitee, such consent not to be unreasonably withheld) and at its sole expense, the good faith settlement or defense of the claim and Indemnitee shall cooperate with Indemnitor in connection there with; provided further that if the defendants in an action include all of the Parties and any Party shall reasonably conclude that there may be reasonable defenses available to it which are different from or in addition to those available to the other Party or if the interests of one Party reasonably may be deemed to conflict with the interests of the other Party, each Party shall have the right to select separate counsel and to assumen such legal defenses and otherwise to participate in the defense of such action, with the expenses and fees of such separate counsel and other expenses related to such participation to be paid by each Party as incurred. So as long as the Indemnitor is contesting a claim in good faith, Indemnitee shall not pay or settle the claim. If Indemnitor does not make timely election to undertake the good faith defense or settlement of the claim afore-said, or if Indemnitor fails to proceed with the good faith defense or settlement of the matter after making such election, then, in either such event, Indemnitee shall, upon ten (10) days' written notice to Indemnitor, have the right to contest the claim at its exclusive discreation, at the risk and expense of Indemnitor to the full extent set forth in Section 3.2.1 above, as applicable. 3.2. Termination 3.2.1. This Agreement may be terminated, without limiting any other legal or equitable rights or remedies the terminating Party may have, as follows; (i) Immediately upon the mutual written consent of the Parties; (ii) By the non-breaching Party in the event of a material breach of a representation, warranty, covenant or agreement by the other Party upon thirty (30) days written notice by the non-breaching Party to the breaching Party in the event that the breaching Party has not cured the breach within said thirty (30) day period; provided, however, that in the event that World Wide Wireless Communications, Inc. shall fail to make any of the payments specified in Section 1.3 when due, Shekinah Network shall be entitled immediately to terminate this Agreement and any Excess Capacity Lease agreements that may have been entered into by parties and Shekinah Network shall have no further liabilities or obligations to World Wide Wireless Communications, Inc. of any kind; (iii) By any Party if the other Party shall generally not pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding adjudicating a party as bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property; or the other Party shall take any action to authorize or facilitate any of the actions set forth above in this subsection (iii). 3.2.2. In the event of a material breach by a Party under this Agreement, the other Party, in addition to having the right to terminate this Agreement without liability, may pursue such other remedies as may be available to it at law or in equity. Neither termination nor expiration of this Agreement shall relieve the Parties of liabilities previously accrued hereunder or any liability, obligation or agreement which is to survive or be performed after such termination or expiration. However, the exclusive remedy for failure to meet payments under section 1.3.2 is termination of this option agreement and the termination of any Excess Capacity Lease agreements that may have been entered into by parties. ARTICLE 4 MISCELLANEOUSE 4.1. Assignment. The Parties agree that this Agreement and all of the rights, privileges, obligations and liabilities hereunder shall be freely assignable. The Parties further agree to execute any documents necessary and to cooperate fully in carrying out any such assignment. The Parties hereto hereby expressly acknowledge and agree that, subject to the receipt of FCC approval therefore, Shekinah Network intends to assign each of the Licenses and the Applications to a ITFS qualified entity, and to assign to such entity all of the rights, privileges, obligations and liabilities under this Agreement. 4.2. Compliance With The Communications Act and FCC Rules. This Agreement and any agreement concluded under Sections 1.1.1 and 1.1.2 hereof may be subject to the Communications Act of 1934, as amended, and the rules and regulations and policies of the FCC 9collectively, the "Act"). If the consummation of the transactions contemplated by this Agreement shall be held by the FCC or a court of competent jurisdiction to be violative of the Act, the parties shall use their best efforts in good faith to arrange for the consummation of those transactions (without any practical alteration of the consideration to be received by either Party) in a manner consistent with the required and to cooperate fully with each other in order to obtain FCC approval of this transaction if any such approval is required. 4.3. Severability. Each provision of this Agreement shall be considered severable and if for any reason any provision or provisions of this Agreement of the application thereof are determined to be invalid or contrary to any existing or future law of any jurisdiction or any rule or regulation of any government authority, such invalidity shall not impair the operation of or affect those provisions in any other jurisdiction or any other provisions hereof which are valid. 4.4. Entire Agreement. This Agreement constitutes and contains the entire agreement and understating concerning the subject matters and replaces all prior negotiations and all agreements proposed or otherwise, whether written or oral, concerning the subject matter hereof. This is an integrated document. 4.5. Governing Law. This agreement shall be deemed to have been executed and delivered within the state of California, and the rights and obligations of the parties hereunder shall be construed and enforced in accordance with, and governed by, the principals of conflict of laws. Any disputes regarding the application or effect of any FCC Rules and/or Regulations shall be governed by the rules of the FCC. 4.6. Construction. Each Party has cooperated in the drafting and preparation of the Agreement. Hence, in any construction to be made of this Agreement, the same shall not be construed against any Party on the basis that the Party was its drafter. 4.7. Modification and Waiver. This agreement may not be modified in any way unless by a writing executed by both Parties hereto. No waiver of any breach of any term or provision of this Agreement shall not be, or shall be binding unless in writing and signed by the Party waiving the breach. 4.8. Attorneys' Fees. In the event of litigation in connection with or concerning the subject matter of this Agreement, the Parties agree that the prevailing Party shall be reimbursed its attorneys' fees and costs. Any legal costs incurred in connection with the termination of the Existing Lease Agreements associated with those Licenses or Applications for which World Wide Wireless Communications, Inc. exercises the Option shall be born by World Wide Wireless Communications, Inc. 4.9. Binging on Successors. The terms, conditions and provisions of this Agreement shall inure to the benefit of, and be binding upon, the Parties and their respective heirs, successors, transferees and assigns. 4.10. Notices. All notices or other communications required or permitted hereunder shall be in writing (which shall include communications by telex and telecopier); shall be deemed to have been given when delivered by had, telecopy followed by mailed notices as hereinafter provided), overnight delivery service, with acknowledged receipt, or when received by the United States mail if sent by registered or certified mail postage prepaid, return receipt requested, addressed to a Party at the addresses set forth for that Party on the signature page of this Agreement with copies (which shall not constitute notice) to the individuals or entities designated by the Party on the signature page of this Agreement, or such other address which the Party shall have given in writing for such purpose by notice hereunder. 4.11. Third Parties. Nothing herein shall be construed to be to the benefit of or enforceable by any third party including, but not limited to , any creditor of the Parties. 4.12. Cooperation. Each of the Parties agrees to cooperate fully and to execute any and all supplementary documents and to take all additional actions that may be necessary or appropriate to give full force to the basic terms and intent of this Agreement. 4.13. Counterparts. This Agreements may be executed in counterparts, each of which shall be deemed an original, and all counterparts taken together shall constitute the Agreement of the Parties. IN WITNESS WHEREOF, The Parties have caused this Agreement to be executed as of the day and year first above written. Shekinah Network By: ______________________________ Name: Charles J. McKee Title: President World Wide Wireless Communications, Inc. By: ______________________________ Name: Doug Haffer Title: President Address for Notices: Shekinah Network 14875 Powerline road Atascadero, CA 93422 Attn: Charles McKee, President Phone/Fax: (805) 438-3341 Gardner, Carton & Douglas 1301 K Street, N.W., Suite 900 Washington, D.C. 20005 Phone: (202) 408-7100 Fax: (202) 289-1504 Douglass P. Haffer One Post Street Suite 2600 San Francisco, CA 94104 Phone: (415) 956-9190 Fax: (415) 391 3199 EXHIBIT A FCC LICENSES Albuquerque, New Mexico BPLIF-921015DB, -granted 8/5/94-, Call Sign WNC-373 Anchorage, Alaska BPLIF-951016AG, -granted 5/2/96-, Call Sign WNC-732 Aspen, Colorado BPLIF-951018AK, -granted 5/4/98-, Call Sign WND-368 Carlsbad, New Mexico BMPLIF-971024DB, -granted 12/8/94-, Call Sign WNC-533 Champaign, Illinois BMPLIF-960729dw, -granted 2/28/95,- Call Sign WNC-552 Des Moines, Iowa BPLIF-951020BS, -granted ?-. Call Sign WND-401 Fairbanks, Alaska BMPLIF-970819DI, -granted 7/5/96-, Call Sign WNC-773 Fairmont, Minnesota BPLIF-951017AL, -granted 10/10/96-, Call Sign WND-329 Grand Rapids, Michigan BMPLIF-980429K, -granted 9/3/93-. Call sign WLX-950 Hilo, Hawaii BPLIF-951020B4, -granted 3/14/97-, Call Sign WNC-810 Hot Springs, Arkansas BPLIF-951018AV, -granted 4/20/98-, Call Sign WND-348 Key West, Florida BPLIF-951018AV, -granted 5/30/97-, Call Sign WND-798 La Crosse, Wisconsin BPLIF-951020ZW, -granted 10/31/97-, Sall Sign WNC-868 La Grande, Oregon BPLIF-951020EY, -granted 7/25/97-, Call Sign WNC-956 Medford, Oregon BMPLIF-950308DA, -granted 10/8/93-, Call Sign WLX-975 Nashville, Tennessee BMPLIF-940819EC, -granted 4/24/95,- Call Sign WLX-978 Opelika, Alabama BPLIF-951020GB, -granted 3/20/98-, Call Sign WND-321 Pierre, South Dakota BMPLIF-971121DE, -granted 5/23/96-, Call Sign WNC-797 Pocatello, Idaho BPLIF-951020UQ, -granted 8/24/98-, Call Sign WND-465 Redding, California BMPLIF-950523DZ, -granted 9/2/94,- Call Sign WNC-407 Reno/Carson City, Nevada BPLIF-951020DE, -granted 8/21/98-. Call Sign WND-476 Santa Barbara, California BMPLIF-980213DH, -granted 12/6/93-, Call Sign WLX-994 Sebring, Florida BPLIF-951020JX, -granted 8/22/97-, Call Sign WNC-904 Sheridan, Wyoming BPLIF-930108DC, -granted 9/-29-94-, Call Sign WNC-426 St. Croix, Virgin Islands BPLIF-951020JL, -granted 10/22/97-, Call Sign WND-210 St. Thomas, Virgin Islands BPLIF-951018AG, -granted 2/12/98-, Call Sign WNC-892 Ukiah, California BPLIF951017AK, -granted 7/25/97-, Call Sign WNC-893 Vail, Colorado BPLIF-951018AL, -granted 4/15/98-, Call Sign WND-352 Visalia, California BPLIF-951020MQ, -granted 7-5-96-, Call Sign WNC-787 Wenatchee, Washington BMPLIF-980227DW, -granted 8-23-95-, Call Sign WNC-661 Yuma Arizona BPLIF-920708DC, -granted 7/9/93-, Call Sign WLX-919 EXHIBIT B APPLICATION FILED BY SHKINAH NETWORK Alamosa, Colorado BPLIF-951018AN, -filed 10-95- Casper, Wyoming BPLIF-951020ED, -filed 10-95 Columbus, Ohio BPLIF-951020YS, -filed 10-95- Del Rio, Texas BPLIF-951020QA, -filed 10-95- Elizabeth City (Midway), North Carolina BPLIF-951019BJ, -filed 10-95- Eureka, California BPLIF-951017AM, -filed 10-95- Grand Junction, Colorado BPLIF-951020FH, -filed 10-95- Las Vegas, New Mexico BPLIF951020TA, -filed 10-95- Springfield, Missouri BPLIF-951020KQ, -filed 10-95- EXHIBIT C ITFS EXCESS CAPACITY AIRTIME LEASE AGREEMENTS Alamosa, Colorado By and between Shekihan Network and "MPO Industries." ECLS Date 10-15-94 Albuquerque By and between Shekihan Network and "Multimedia TV." ECLA Date 7-7-92 Anchorage, Alaska By and between Shekihan Network and "ATI of Anchorage." ECLA Date 12-21-92 Aspen, Colorado By and between Shekihan Network and "NONE" (Terminated) Carlsbad, New Mexico By and between Shekihan Network and "Multimedia TV." ECLA Date 10-20-97 Casper, Wyoming By and between Shekihan Network and " NONE" (Terminated) Champaign, Illinois By and between Shekihan Network and "Heartland Wireless of Champaign." ECLA Date 12-27-93 Columbus, Ohio By and between Shekihan Network and "ATI of Columbus." ECLA Date 12-12-92 Del Rio, Texas By and between Shekihan Network and "All-Tex Wireless Video, Inc." ECLA Date 10-10-95 Des Moines/Grimes, Iowa By and between Shekihan Network and "Des Moines F Partnership." ECLA Date 10-1-95 Elizabeth City (Midway), North Carolina By and between Shekihan Network and "Wireless One of North Carolina." ECLA Date 8/25/97 Eureka, California By and between Shekihan Network and "MPO Industries." ECLA Date 9-10-94 Fairbanks, Alaska By and between Shekihan Network and "Alaska Wireless Cable." ECLA Date 5-1-95 Fairmont, Minnesota By and between Shekihan Network and "Starcom/Fairmont Wireless." ECLAS Date 9-23-95 Grand Junction, Colorado By and between Shekihan Network and "Wireless Cable of Grand Junction." ECLA Date 4-15-93 Grand Rapids, Michigan By and between Shekihan Network and "NONE" (Terminated) Hilo, Hawaii By and between Shekihan Network and "Hilo Wireless Cable, Ltd. "ECLA Date 10-1-95 Hot Springs, Arkansas By and between Shekihan Network and "Skyview Wireless Cable, Inc." ECLA Date 10-1-95 Key West, Florida By and between Shekihan Network and "NONE" (Terminated) La Crosse, Wisconsin By and between Shekihan Network and "Wisconsin Wireless Cable." ECLA Date 1-1-95 La Grande, Oregon By and between Shekihan Network and "NONE" (Terminated) Las Vegas, New Mexico By and between Shekihan Network and "Las Vegas Wireless Cable." ECLA Date 10-1-95 Medford, Oregon By and between Shekihan Network and and "ATI of Medford." ECLA Date 5-5-92 Nashville, Tennessee By and between Shekihan Network and "Nashville Wireless Cable Television, Inc." ECLA Date 3-25-94 Opelika, Alabama By and between Shekihan Network and Wireless One (no current information!) Pierre, South Dakota By and between Shekihan Network and "NONE" (Terminated) Pocatello, Idaho By and between Shekihan Network and "Centimeter Wave Television, Inc." ECLA Date 10-1-95 Redding, California By and between Shekihan Network and "ATI Of Redding." ECLA Date 8-14-92 Reno/Carson City, Nevada By and between Shekihan Network and "Quadravision." ECLA Date 8-10-95 Santa Barbara, California By and between Shekihan Network and "ATI of Santa Barbara." ECLA Date 6-9-92 Sebring, Florida By and between Shekihan Network and "ATI of Sebring." ECLA Date 9-14-95 Sheridan, Wyoming By and between Shekihan Network and "ATI of Sheridan." ECLA Date 5-5-92 Springfield, Missouri By and between Shekihan Network and "Hearthland Wireless Cable, Inc." ECLA Date 10-10-95 St. Croix/Friedensfeld, Virgin Islands By and between Shekihan Network and "Antilles Wireless Cable TV, Co." ECLA Date 9-12-95 St. Thomas/Charlotte Amalie, Virgin Islands By and between Shekihan Network and "Antilles Wireless Cable TV, Co." ECLA Date 9-12-95 Ukiah, California By and between Shekihan Network and "NONE" (Terminated) Vail, Colorado By and between Shekihan Network and "NONE" (Terminated) Visalia, California By and between Shekihan Network and "ATI of Visalia." ECLA Date 1-14-93 Wenatchee, Washington By and between Shekihan Network and "ATI of Wenatchee." ECLA Date 12-1-94 Yuma, Arizona By and between Shekihan Network and "Cardiff Broadcasting Partnertship II." ECLA Date 5-5-92 EX-10.2 10 0010.txt SOUTH BEND MMDS LEASE AGREEMENT SOUTH BEND MMDS LEASE AGREEMENT THIS AGREEMENT OF LICENSE made and entered into this 22 day of December, 1992 by and between OI Capital Corporation a corporation organized and existing under the laws of the State of Indiana, with its principal office at 421 South Second Street, Elkhart, IN 46516, herein called LICENSOR, AND National Micro Vision Systems, Inc., a Nevada Corporation herein called LICENSEE: WITNESSETH: That, for and in consideration of the mutual promises of LICENSOR and LICENSEE, herein contained, and the respective performances thereof, the LICENSOR grants to the LICENSEE a nonexclusive License to use its 700 foot tower, transmitter building (Premises) at the base of said tower or in close proximity, together with such other portion of its property located in the South One-Third (1/3) of the West Half (1/2) of the Northwest Quarter (1/4) of Section 33, Township 37 North, Range 3 East, containing approximately 8.209 acres in St. Joseph County, Indiana, as is herein specified, but for no other purposes, subject to the following terms and conditions: 1. This License is granted to enable the LICENSEE to rent space and install equipment for the purpose operating MMDS wireless cable system E Group For South Bend, Ind. at its own risk and expense. The use of the property granted by this License is for the installation, operation, and maintenance of said equipment, including base station, antenna pole or mast, wiring, and accessories used therewith at places designated by LICENSOR. 2. The term of the License shall be for a period of five years commencing on the 1st day of January, 1993, and ending on the 31st day of December, 1998; provided, however, that either the LICENSOR or the LICENSEE may cancel this agreement by One Hundred Twenty (120) days written notice ot the other party. After the term of this agreement expires, this contract shall continue for successive additional periods of one (1) month, provided that either LICENSOR or LICENSEE may terminate this agreement at any time with or without cause upon written notice other the other party sent by certified or registered mail. LICENSEE shall have the option to renew this License upon completion of the term of said License, except that the rental factor shall be renegotiated between both parties for the renewal period. 3. LICENSOR agrees that this License Agreement becomes binding only upon issuance, by the Federal Communications Commission, of the LICENSEE'S Operating License or Permit. 4. The LICENSEE may install an antenna for the heretofore related equipment, at the 675 foot level on said tower. A base station for such system may be installed in the transmitter building. Associated transmission line may be installed between the base station in the transmitter building and the antenna on the tower. The location and quality of the installation, removal maintenance and operation of all such equipment shall be subject to the absolute control and approval of the LICENSOR or it's agents. All costs and expenses of each installation, removal, relocation, operation and maintenance shall be paid by the LICENSEE, except the power supply as hereinafter mentioned. No equipment shall be installed by the LICENSEE until it is determined to the satisfaction of the LICENSOR or it's agent that said equipment will not interfere in any way with the normal operation of existing communications and broadcast equipment at the site. If, at any time, LICENSEE'S equipment shall interfere in any way with the normal operation of existing communications and broadcast equipment at the site, any cost connected with the adjustment of LICENSEE'S or any other occupant's transmitting equipment, made necessary by the LICENSEE'S installation, shall be borne solely by the LICENSEE. LICENSEE further agrees that at any time during the term of this License, should the Licensor or it's agents determine that it is in the best interest of the tower site or the other occupants of the tower for the LICENSEE to relocate it's antenna or place it's transmitting equipment on an antenna jointly used by other occupants of the tower, the LICENSEE shall do so at it's expense, provided that this can be done without any undue harm to the LICENSEE'S signal. LICENSOR shall make no unreasonable request of LICENSEE, and any request shall be supported by adequate technical information. 5. The LICENSEE shall pay to the LICENSOR the sum of Two Thousand & 00/100 Dollars ($2000.00) per month for each such MMDS wireless cable system installed and operated under this License. Said payments for each system shall begin on the day of commencement of installation of equipment for that system or 90 days from the date of this License which ever occurs first, and end on the day of the removal of the last of such equipment for that system. Said monthly payments shall be paid in advance and on the first day of each monthly period while the equipment for such system is on the property of the LICENSOR. Power required for each such MMDS wireless cable system shall be paid for, but not guaranteed, by the LICENSOR as a part of said rental consideration. LICENSEE agrees to the LICENSOR increasing the monthly rental rate, not to exceed fifteen percent (15%), at the end of the third (3rd) year of the LICENSE AGREEMENT. 6. The LICENSEE shall pay to and deposit with the LICENSOR the sum of Two Thousand & 00/100 Dollars ($2000.00) prior to the commencement of the term of this License Agreement, which said amount shall be held by LICENSOR as security for the full and timely performance by the LICENSEE of all the terms and conditions hereof. The rights of the LICENSOR against the LICENSEE for a breach of this agreement shall in no way be limited or restricted to the amount of the security deposit and the LICENSOR shall have the right to pursue any available remedy to protect its interest herein. The deposit shall be returned to the LICENSEE at the final termination of this agreement, provided that all the terms and conditions herein have been fully performed. 7. In the event the an additional MMDS System or group is installed by the LICENSEE upon the premises, then the additional sum of One Thousand Five Hundred & 00/100 Dollars ($1500.00) per month shall be paid by the LICENSEE to the LICENSOR. The LICENSOR agrees that the LICENSEE may further license others to use it's equipment located upon the premises, but any such sublicenses shall be subject to the increased payment provisions of this License Agreement. The LICENSEE hereby agrees to indemnify and save harmless the LICENSOR from and against any and all claims, demands, damages, and liabilities of every kind and nature resulting from such sublicense agreements, except liability caused solely by the negligence of the LICENSOR. 8. Rights of ingress and egress over the property of the LICENSOR are hereby granted to the LICENSEE for the purpose of conducting the business for which this License is granted; provided, however, that such rights and the exercise thereof are subject to the absolute control and approval of the LICENSOR. 9. At the termination of this License, by the expiration of timer, cancellation, or otherwise, the LICENSEE shall promptly remove all property placed on the premises under this License and restore the LICENSOR'S property to the condition it was in at the date of the execution of this Agreement, reasonable wear and tear excepted. All such repairs to all of the LICENSOR'S property used under this License shall be made by the LICENSEE at the times and in the manner determined and directed by the LICENSOR. 10. The LICENSEE hereby covenants with the LICENSOR to indemnify and save harmless the LICENSOR against and from any and all liability of every kind and nature whatsoever resulting form the existence of this License and all operations and activities thereunder. To provide the LICENSOR with the indemnity herein set forth, the LICENSEE agrees to maintain a policy of insurance issued by a company authorized to do business in Indiana in an amount not less than $500,000.00 for bodily injury, including death, to any one person, and $1,000,000.00 for all bodily injuries, including death, sustained by more than one person in any one occurrence and $300,000.00 for property damage in any one occurrence. The LICENSEE shall furnish the LICENSOR with a certificate of insurance issued by said company evidencing the existence of such insurance annually. 11. To secure the payment of the License Agreement monthly fee and other liabilities of the LICENSEE hereunder, LICENSEE hereby grants to LICENSOR, which shall continue upon default by LICENSEE, as defined in this License Agreement, a security interest in all of LICENSEE'S personal property; (including without limitation LICENSEE'S transmission equipment, feedline, antenna, dishes, etc.; whether now or hereinafter acquired) which is now or hereinafter located at the premises and in the proceeds thereof, including tort claims and insurance (all hereinafter collectively referred to as "collateral"). LICENSEE shall not permit the removal of any collateral from the premises, except with the permission of the LICENSOR. Upon the occurrence of default of this License Agreement, LICENSOR shall have the remedies of a secured party available under Indiana law. Theses remedies shall include, without limitation, the right to take possession of the secured collateral and for that purpose LICENSOR may enter the premises and remove it and LICENSEE shall hold LICENSOR harmless from any and all liability sustained thereby, except through wonton or willful misbehavior. LICENSOR may require that LICENSEE make the collateral available to LICENSOR at a place to be designated convenient to both parties. LICENSOR shall give LICENSEE at least 10 days prior to notice of the time and place of any public sale thereof or of the time at which any private sale or any other intended disposition thereof is to be made Expenses of retaking, holding, preparing for sale, selling and the like shall include LICENSOR'S reasonable attorney's fees and legal expenses. 12. This Agreement is subject to all Federal, State, and Municipal laws and rules, regulations, and order of governmental agencies, including, but not limited to, the rules, regulations, and order of the Federal Communications Commission. 13. Neither this Agreement nor any right or privileges thereunder may be assigned or transferred by operation of law or otherwise without the written consent of the LICENSOR. 14. Failure or delay on the part of the LICENSOR or the LICENSEE to exercise any right, power or privilege hereunder shall not operate as a waiver thereof. 15. All notices and demands which may or are required to be given by either party to the other hereunder shall be in writing and shall be sent by United Stated Certified or registered mail, postage prepaid, addressed to the LICENSEE at 17138 Von Karman, Irvine, California 92714 and addressed to the LICENSOR at 421 South Second Street, Elkhart, IN 46516, or to such other firm or to such other place as LICENSOR or it's agents may from time to time designate in writing. 16. This contract constitutes the entire agreement of the parties hereto and shall supersede all other prior offers, negotiations and agreements. 17. Licensee at it's discretion, may install an electrical generator for the operation of it's equipment. The location and installation procedure shall require prior written approval of license. Executed at Elkhart, Indiana, the day and year first above written. OI CAPITAL CORPORATION By: _________________________ LICENSOR NATIONAL MICRO VISION SYSTEMS, INC. By: __________________________ LICENSEE EX-10.3 11 0011.txt LEASE AGREEMENT--VAIL, COLORADO LEASE AGREEMENT BETWEEN WORLD WIDE WIRELESS COMMUNICATIONS, INC. AND SHEKINAH NETWORK Vail, Colorado ITFS EXCESS CAPACITY AIRTIME LEASE AGREEMENT THIS AGREEMENT is made this 1st day of August 1999 by Shekinah Network (hereinafter referred to as "Lessor") having its principal place of business at 14875 Powerline Road, Atascadero, CA 93422 and World Wide Wireless Communications, Inc. (hereinafter referred to as "Lessee") having its principal place of business at One Post Street, Suite 2600 San Francisco, CA 94104. WHEREAS, the Federal Communications Commission ("FCC") has authorized licenses for Instructional Television Fixed Service ("ITFS") channels and has authorized the licensee to lease excess capacity to non-ITFS users; and WHEREAS, Lessor has been granted an FCC License for (call sign) WNC-798 (the "License") for the Channel group C1-4 (the "ITFS Channels") in Vail, Colorado ("The Market"); and WHEREAS, Lessee is in the business of providing voice, video, data and other services via microwave transmission in the Market Area and desires to lease the excess ITFS capacity of the ITFS channels; and WHEREAS, Lessor has determined that there will be excess airtime capacity available on the ITFS Channels and desires to lease this excess airtime capacity to Lessee. NOW, THEREFORE, in consideration of the mutual promises, undertakings, covenants and conditions set forth herein, the Lessor and Lessee do hereby agree and warrant as follows: 1. TERM OF AGREEMENT A. Initial Term. This Agreement shall be effective upon the date of its execution and shall extend for an initial term of five (5) years (the "Initial Term"). B. Renewal Term Provided that the License is renewed by the FCC, Lessee shall have the right to extend this Agreement on its then existing terms and conditions for one (1) additional five (5) year term (the "Renewal Term"). The Renewal Term shall automatically go into effect upon the conclusion of the Initial Term unless Lessee notifies Lessor at least one hundred eighty days (180) before the end of the Initial Term that Lessee does not wish to extend this Agreement. C. New Lease Agreement/Right of first Refusal. (1) Providing that Lessor's FCC license remains in good standing and/or Lessor seeks to renew such license, Lessee and Lessor shall negotiate in good faith for a new excess capacity airtime lease agreement (hereinafter referred to as "New Lease Agreement") no later than one hundred eighty days (180) prior to the end of the latter of (i) Initial Term or (ii) the Renewal Term if the Agreement is extended for the Renewal Term. (2) If Lessor elects to not reasonably pursue a New Lease Agreement with Lessee, then Lessor shall so notify Lessee in writing of such intent no later than one hundred eighty (180) days prior to the end of the Renewal Term. (3) If Lessor and Lessee do not enter into a New Lease Agreement, Lessor grants Lessee a right of first refusal on any competing proposals for lease agreements or transfers or assignments of any part of the ITFS Channels received by Lessor during the twelve (12) months following the expiration of the latter of (i) the Initial Term or (ii) the Renewal Term, if the Agreement is extended for the Renewal Term. If any acceptable offer to lease or acquire the ITFS Channels is made to Lessor, Lessor shall give written notice to Lessee describing the person to whom the proposed lease or transfer is to be made, the fees, charges, rental or other consideration to be received fro the lease or transfer, the terms thereof and generally the relevant other terms and conditions of the lease or transfer. Lessee shall have a period of thirty (30) days after its receipt of such notice from Lessor in which to elect, by giving written notice to Lessor, to lease or, if eligible, obtain any or all of the ITFS Channels for the same fees, charges, rental or other consideration for which Lessor proposed to lease or transfer to the third person. (i) The fees, charges, rental or consideration shall be paid by such third person or Lessee in cash. (ii) If Lessor does not believe Lessee's stated offer is in an amount fairlyequivalent to the fair value of the consideration payable by the third person and so notifies Lessee in writing within seven (7) days after Lessor's receipt of Lessee's notice of election to so lease or purchase, Lessee may within five (5) days after its receipt of such notice from Lessor elect to refer such question for determination by an impartial arbitrator and the right of first refusal of Lessee shall then be held open until (5) days after Lessee is notified of such determination. Such arbitrator shall be chosen either by agreement of Lessee and Lessor at the time such question arises, or, at the option of either party, by referring the question to the American Arbitration Association with instructions that the American Arbitration Association select a single arbitrator under a request from the parties for expedited and accelerated determination. The determination of the arbitrator chosen under either option contained in this subparagraph shall be final and binding upon Lessee and Lessor. The parties shall share equally in the costs and fees of the arbitration (iii) In the event Lessee shall elect to exercise its right of first refusal, the lease agreement or other transfer or assignment shall be consummated within thirty (30) days of the latest of: (1) the day on which Lessor received notice of Lessee's election to exercise the right of first refusal; (2) the day upon which any question required to be determined by the arbitrator hereunder has been determined; or (3) the date of any FCC approval in the case of assignment or transfer; or at such other time as may be mutually agreed. The right of first refusal is terminated either by the lease or other transfer to Lessee as provided herein or by notice to Lessee of the Lessor's proposal to lease or otherwise transfer the ITFS Channels or any part to a third person and Lessee's unwillingness or failure to meet and accept such a bona fide offer pursuant to the times and procedures as set forth above; provided that such proposed lease or transfer is consummated at the same fees, charges, rental or other consideration and upon the same terms as to which such right of first refusal applied, within thirty (30) days after Lessee's right of first refusal had expired or had been specifically waived by written notice given to Lessor by Lessee, or within thirty (30) days following FCC approval in the case of assignment or transfer. C) Operation During End of Term. If Lessor and Lessee do not enter into New Lease Agreement before the end of the Initial Term, Lessee shall cease leasing the ITFS Channels on the last day of the Initial Term. D) No Rights Beyond Term of Licenses. Lessor and Lessee agree that this Agreement shall not give rise to any rights or remedies beyond the expiration of any FCC license necessary for the continued operation of the ITFS Channels. Provided, however, that while this Agreement is in effect, Lessor shall obtain and maintain in force all licenses, permits and authorizations required or desired in connection with the use of the ITFS Channels. Lessor shall take all necessary steps to renew the licenses for the ITFS Channels and shall not commit any act or engage in any activity which could reasonably be expected to cause the FCC to impair, restrict, revoke, cancel, suspend or refuse to renew the ITFS licenses. Lessor shall take all reasonable steps to comply with the Communications Act of 1934, as amended and the rules and regulations of the FCC, and shall file all reports, schedules and/or forms required by the FCC to be filed by Lessor. All expenses, including attorneys fees and filing fees, incurred in preparing and filing such reports, schedules and/or forms required by the FCC shall be paid by the Lessee. 2. ALLOCATION OF AIRTIME. A. Excess Capacity Airtime. To the extent allowed by the FCC rules and regulations and any amendments thereof, Lessor agrees to lease to Lessee the exclusive use of all excess capacity not utilized by Lessor ("Excess Capacity Airtime"). B. Lessor's Primary Airtime. During analog transmission over the ITFS Channels, Lessor reserves for its exclusive use a minimum of twenty (20) hours of airtime per-channel per-week to be used for its ITFS scheduled programs. During digital transmission ovr the ITFS Channels, Lessor shall have the exclusive use of 12.5% of the total capacity available on the Lessor's ITFS Channels. This airtime shall be know as "Lessor's Primary Airtime". C. Schedule of Airtime. The schedule which depicts the agreement of the parties as to use of Lessor's Channels shall be attached hereto and made a part hereof as Exhibit A which is subject to change upon agreement by both parties. D. Lessee's use of its Excess Capacity Airtime. Lessee shall have the right to utilize its Excess Capacity Airtime for any purpose allowed or authorized by the FCC including but not limited to voice, video and data transmission. E. Alternate Use and Vertical Blanking Intervals. Lessor shall have the right to use the second audio carrier ("SAP") and vertical blanking intervals. ("VBI") on which Lessor's ITFS programming is being transmitted. Lessee shall at all times have the right to use the VBI and SAP not utilized by Lessor and 100% of the response frequencies associated with the ITFS Channels. Lessor shall be responsible for any equipment needed to utilize the VBI and/or SAP and such equipment shall be compatible with Lessee's system. F. Lessor's Use of ITFS Channels. Lessor agrees that its program services and airtime use will not harm or interfere with Lessee's current or future signal paths utilized within Lessee's System for program encryption, pilot carrier signaling and other technical needs utilized for the operation of and such services provided by Lessee's System. Nor will Lessor, by its own action, or through a third party, utilize any part of its licensed frequency spectrum to create or operate a service that is in competition with current, planned or future services provided by Lessee's System. Lessor agrees to use its Primary Airtime in accordance with the FCC's rules and regulations. Lessor shall not take or fail to take any action which may have a material adverse effect on Lessee's right to utilize its Excess Capacity Airtime. G. Expanded System Capacity. Lessee shall have the right at anytime to require Lessor to file with the FCC any necessary application to expand the channel capacity to Lessor's station to enable it to carry more than one video signal per channel or digital data services; provided however, before Lessee can exercise this right, it must demonstrate to the Lessor's reasonable satisfaction that such modification will not materially degrade the performance of the station nor impair signal quality at the registered ITFS receive sites. Once such modification has been constructed, the modified facilities shall automatically be considered a part of this agreement and subject to all terms and conditions hereof. It is understood that Lessee shall have the full-time use of the Expanded Channels to the extend permitted by FCC rules. 3. TRANSMISSION SITE AND FACILITIES. A. Primary Transmission Site. Lessor's ITFS Channels are located at Key West, FL, Lessee agrees to provide Lessor space at the Primary Transmission site for Lessor's audio and video transmission equipment which shall not exceed on rack. Such space shall be leased to Lessor pursuant to Exhibit D hereto. This site shall hereinafter be described as the "Primary Transmission Site". At Lessee's sole expense, Lessee shall contract for a lease of space at the Transmission Site upon such terms as the parties agree. The Transmission Site shall comply with the standards, specifications and regulations of the FCC rules and orders pertaining to Lessor's ITFS license. B. Relocation of Transmission Site. (i) Lessor acknowledges that the location of the Primary Transmission Site for ITFS Channels is critical to the Lessee's business and agrees that it will not relocate the transmission facilities for ITFS Channels from the Primary Transmission Site without Lessee's prior written consent. (ii) Lessor further acknowledges that possibility that, as a result of currently unforeseen events, the Primary Transmission Site may not be the optimum site for the location of the ITFS Channels or Lessee's business throughout the term of this Lease Agreement. Lessor therefore agrees that if at any time or from time to time Lessee requests in writing that the transmission facilities for the ITFS Channels be relocated, Lessor shall file with the FCC and any other regulatory body having jurisdicition over the ITFS Channels all applications, amendments, and requests for modification that may be necessary to obtain any necessary consents to permit such relocation to such location within or adjacent to the Market as may be requested by Lessee; provided, however, that Lessor shall not be obligated to submit or procecute any application, amendment, or request for modification that Lessor reasonably determines, upon advice of counsel contained in a written opinion, would be in violation of the terms of the License, any statute, rule, or regulations regarding the operation of the ITFS Channels or the submission of materials to the FCC, or any of its obligations as an ITFS licensee; and provided, further, that any such relocation will not result in loss of service to Lessor's registered receive sites served by the transmission facilities in the event that the authorization is obtained to relocate the ITFS Channels to the location requested by Lessee, Lessor shall relocate such channels to such new location as soon as reasonably possible after authorization is obtained. Lessee shall bear reasonable costs associated with such relocation, including engineering and construction, and all reasonable costs associated with obtaining FCC or any other regulatory approval therefore. (iii) Lessor agrees to file modification applications requested by Lessee. Such modifications may include but shall not be limited to the following: power increase or decrease, polarization, transmit antenna patterns, digital, two-way (return path) use of the ITFS Channels, boosters, beam benders or repeaters, cells, sectorization, channel swaps, channel loading, channel shifting and application within five (5) business days or receipt of the modification application from Lessee or during any FCC designated filing window. Lessee will use reasonable efforts to provide Lessor with the engineering for the modification thirty (30) days prior to the request for filing. If Lessor believes that such modification will have an adverse effect on Lessor's ability to provide its services to its receive sites, Lessor agrees to file the modification application as presented by Lessee and within the time limit requested by Lessee; however, Lessee agrees not to implement construction and Lessor agrees not to withdraw the application until the parties have adequately addressed and resolved the potential material adverse effect or the matter has been submitted to arbitration pursuant to Section 16 and a final decision has been rendered by arbitrator. Although Lessee intends to file such modification applications, it may elect not to construct the Channels in that manner and may desire to utilize the Channels as currently licensed. A copy of the modification application, bearing the FCC's date stamp, shall be mailed to Lessee by Lessor, within fourteen (14) days of the filing of the modification application. Lessee shall be solely responsible for all engineering and legal costs associated with the preparation, review and filing of the modification application. In the event that any license modification requested by Lessee requires receive site upgrades in order for Lessor's receive sites to continue to receive Lessor's services, then Lessee agrees to pay for all costs to complete such upgrade prior to implementing the license modification. C. System Construction. Lessee shall within a reasonable period of time, but not later than six (6) months after the FCC grant of digital authority for the ITFS Channels, purchase equipment such as the antenna, waveguide or transmitters specified on the authorization for the ITFS Channels. At Lessee's expense, Lessee shall purchase and install such transmitters, transmission line, modulators, antennas and other equipment as required to operate the ITFS Channels in accordance with the provision of such authorization. Any equipment so used in such construction shall be leased to lessor pursuant to Paragraph 5 hereof. Such equipment is hereinafter referred to as the "Leased Equipment". Lessee shall retain title to the Leased Equipment except as noted by Paragraph 15 herein. D. Maintenance of Transmission Equipment. At Lessee's expense and subject to Lessor's right to supervise the maintenance of this equipment, Lessee shall maintain and operate the Leased Equipment during the terms of this Agreement for a nominal fee. Lessee shall also pay all taxes and other charges assessed against the Leased Equipment. E. Transmission of Programming. At no cost or expense to Lessor, Lessee shall provide the necessary labor and equipment capabilities to transmit on the ITFS Channels programming required to be carried pursuant to this Agreement such as Lessor's ITFS programming and TBN. Lessee shall also comply with Lessor's instructions regarding the transmission of such programming such as the dates and times to transmit programming. F. Interference. Lessee shall operate the Leased Equipment so that such operation does not create or increase interference with electronic transmission of any other FCC licensees entitles to protection under FCC rules and regulations. If Lessee's entitled to protection under FCC rules and regulations. If Lessee's operation of the Lease Equipment does so create or increase interference, Lessee shall pay all of the reasonable engineering and legal fees necessary to resolve the interference problem so created. G. Alterations and Attachments. Lessee, at its own expense, may make alterations of or attachments to the ITFS equipment or the common equipment as defined in Exhibit C (including the installation of encoding and/or addressing equipment) as may be reasonably required from time to time by the nature of its business; provided however, that such alterations or attachments do not interfere with Lessor's signal or ongoing operations or violate any FCC rules or regulations; and provided further that FCC authorization, if required, is obtained in advance of any such alteration or attachment at the sole cost of Lessee. to the extent any FCC authorization pertaining to the ITFS equipment is required, Lessor agrees to use its best efforts to obtain such authorization. H. Licensee Control and Liability. Nothing herein shall derogate from such licensee control of operations of the ITFS Channels that Lessor, as an FCC licensee, shall be required to maintain and Lessee acknowledges the reservation by Lessor of such control. Lessor shall at all times retain ultimate and exclusive responsibility for the operation and control of the ITFS Channels including policy decisions. 4. LESSOR'S RECEIVE SITES. Attached hereto as Exhibit B is list of the registered receive sites designated by Lessor to receive its ITFS programming and to be installed at the expense of Lessee. Those receive sites so listed shall be installed with a Standard Installation. If as the result of any relocation of the Primary Transmit Site, the equipment at Lessor's existing registered receive sites must be reoriented, Lessee shall pay the cost of same. As used herein for the purposes of this Agreement, the phrase "Standard Installation" shall mean an installation consisting of the placement of the ITFS/MMDS receiving antenna at an elevation (not to exceed thirty [30] feet above the base mounting location) which could normally receive the line-of-sight transmission from the Transmission Site; the coupling thereto of a block-down converter; and a sufficient amount of transmission line (coaxial cable) to connect the received ITFS programming to the input of (i) one classroom designated by Lessor to receive the ITFS programming or (ii) the receive site internal/external distribution system. Also, if as the result of any relocation of the Transmit Site, the equipment at Lessor's existing receive sites must be reoriented, Lessee shall pay the cost of same. Lessee also agrees that for digital transmission of the ITFS Channels Lessee will purchase and install at Lessee's expense, one single-point modem to receive its ITFS programming. 5. LEASE OF EQUIPMENT. A) Lessor's Lease of Leased Equipment. For a nominal fee, Lessor shall lease from Lessee the Leased Equipment during the terms of this Agreement. A list of this equipment is attached hereto as Exhibit C and incorporated by reference herein. Lessor shall have no responsibility for the loss of or damage to the Leased Equipment during the terms of this Agreement and Lessee shall bear all such responsibility. 6. FEES. A) Lessor's Service Fee. In consideration of the lease of the Leased Equipment, and for its share of the projected costs to maintain the Transmission Site and the Lease Equipment, Lessor shall pay Lessee an annual fee provided for in Exhibit D. B) Subscriber Royalty Fees or Percentage. Beginning on the Execution Date of this Agreement and continuing thereafter during the Initial Term of this Agreement, Lessee shall pay to Lessor the Subscriber Royalty Fee, System Percentage or monthly minimum, whichever is greater as set out in Exhibit D which is attached herewith and incorporated by reference herein. If the Execution Date shall be a date other than the first day of a calendar month, then the Subscriber Royalty Fee for the partial month shall be paid on a proportionate basis. A late fee of 10% (ten percent) will be assessed to past due accounts, and a finance charge of one and one-half percent (1.5%) per month will be assessed in addition to the late fee until paid. C) Notice of Construction and Required Certificate. Within thirty (30) days of completion of construction at the Transmission Site, Lessee shall notify Lessor of such completion of construction in writing. Within thirty (30) days of the end of each month in which Excess Capacity Airtime is leased hereunder, Lessee shall provide Lessor with a certificate, certified as accurate and correct by an authorized agent of Lessee, showing the number of subscribers served during such month. D) Right to Audit. Lessee shall for a period of three (3) years after their creation, keep, maintain and preserve complete and accurate records and accounts, including all invoices, correspondence, ledgers, financial and other records pertaining to Lessee's use of Excess Capacity Airtime and Lessor's charges hereunder; and such records and corporate accounts shall be available for inspection and audit at Lessee's corporate offices or at Lessee's offices in the Market, as designated by Lessee, at any time or times during the term of this Agreement or within ninety (90) days thereafter, during reasonable business hours, by Lessor or its nominee. In the event that there is discovered an underpayment of the Subscriber Royalty Fee as defined in Paragraph 6 (B) above, Lessee shall pay to Lessor a penalty equal to ten percent (10%) of the amount of each such underpayment. All information obtained by Lessor during any audit herein shall be maintained by Lessor in strict confidence. 7. PROGRAMMING. A) Control Over Programming. (i) Program Content. Lessee intends that only programming of a sort which would not serve to place Lessor's reputation in the community in jeopardy will be transmitted by Lessee on the ITFS Channels. In an attempt to minimize disputes, recognizing the difficulties inherent in specifying exact standards herein, it is agreed that Lessee shall have the right to market the programming provided by the networks and services listed on Exhibit E. If, however, the programming content of any networks and services listed on Exhibit E materially changes, Lessor shall have the right, upon ninety (90) days notice, to deny Lessee the right to continue transmitting such programming if Lessor would have the right to deny Lessee the right to transmit such programming under the provisions of this paragraph in the first instance. If Lessee proposes to transmit the programming of any new programming service, the Lessee shall notify Lessor in writing specifying in detail the nature of the new programming service and Lessor shall have the right, upon written served upon Lessee within thirty (30) days after Lessor's receipt of any such notice from Lessee, to deny to Lessee the right to transmit such service if such programming is obscene and/or contradicting local, state and/or federal laws or otherwise violates any federal, state or local laws or regulations. If no such denial notice is received by Lessee within such thirty (30) days, lessee shall be authorized to transmit all such services for which no denial notice is received. There shall be no reduction in fees required under this Agreement for any such programming not permitted to be transmitted. B) Availability of Programming. It is understood by Lessee and Lessor that there is expected to be no direct out-of-pocket annual costs for the acquisition of the qualified ITFS educational programming for Lessor's use during Lessor's Primary Airtime on the ITFS channels, based on current plans. In the event that this ITFS educational programming either; (1) ceases to be available, or, (2) becomes available only at a fee, then Lessor may incur direct out-of-pocket costs in Lessor's acquisition of ITFS programming. Lessee agrees to provide its best efforts to assist Lessor in the acquisition of alternative programming, if necessary. Additionally, Lessee agrees to make payment to Lessor for the actual, direct programming costs incurred. If any; If Lessor, after expending its best efforts, is unable to obtain suitable ITFS programming for a cost equal to the amount to be paid by Lessee, Lessor and Lessee shall use their best efforts to reach agreement on modifications to this Agreement to avoid any un-reimbursed ITFS programming costs to Lessor. If no such agreement can be reached, Lessor may terminate this agreement. In the case of such termination, Lessor shall use its best efforts (with out-of-pocket costs of Lessor to be paid by Lessee, with Lessee's prior approval) to transfer the license for the ITFS Channels to another qualified educational entity, subject to FCC approval, with the intent of assigning this Agreement from Lessor to the new educational entity. C) Integration of Lessor's Programming. Lessee agrees to integrate Lessor's programming into the overall communications service offered to subscribers, without cost to Lessor. This integration shall include, but not be limited to, listing Lessor's material in any program guides produced by Lessee for subscribers. D) Carriage of TBN. In the event that Lessor's ITFS Channels are used for analog video transmission and TBN is not transmitted on a local VHF or UHF station, with a market coverage equivalent to both area and signal quality of our ITFS channels, and Lessee does not have local off-air insertion as part of its standard installation, then, if so designated by Lessor, Lessee agrees to transmit on one of the ITFS Channels the programming of Trinity Broadcasting Network ("TBN") during those time periods such channel is not used for Lessor's ITFS programming ("TBN Airtime") provided that Lessee is not required to pay a fee for carriage of TBN. In the event that Lessee is permitted to program the hours previously occupied by TBN, then Lessee shall increase, in proportion to the increase in Excess Capacity Airtime, the amount of minimum fees and subscriber royalty fees payable under the provision 6 (B) of this agreement during the remainder of the term(s) of the agreement. For purposes of calculating any such proportionate increase, the parties acknowledge and agree that the minimum fee and subscriber royalty fee agreed to herein are based on Lessee's equivalent use of three full-time ITFS channels. E) Station Identification. During Lessee's use of Lessor's excess channel capacity, Lessee shall transmit Lessor's call sign for each respective station as required by the FCC. 8. PROCECUTION OF PETITIONS, AUTHORIZATIONS AND LICENSES. A) Best Efforts to Secure Approval of this Agreement. The parties recognize that certain approvals will be required from the FCC in order to effectuate this Agreement. Both parties shall use their best efforts to prepare, file and prosecute before the FCC all petitions, waivers, applications and other documents necessary to secure any FCC approval required to effectuate this Agreement. Lessee shall assist in the preparation and prosecution of such applications and as provided for herein, shall pay all filing fees, attorneys' fees, engineering fees, and all other expenses in connection therewith. Lessor also agrees to cooperate with Lessee's efforts to cause other ITFS, OFS, MDs and MMDS operators to co-locate at the Transmission Site. Notwithstanding anything in this Agreement to the contrary, it is understood that no filing shall be made with the FCC with respect to this Agreement unless both parties have reviewed such filing and consented in writing to its submission, such consent not be unreasonably withheld. B) Further Efforts. Throughout the Initial Term of this Agreement, Lessor shall use its best efforts to obtain and maintain in force all licenses, permits and authorizations required for Lessee and Lessor to use the ITFS Channels as contemplated by this Agreement. Lessee shall be responsible for all cash expenses incurred to obtain and maintain in force such licenses, permits and authorizations. When mutually agreed by the parties and at Lessee's sole expense, Lessor shall apply for, and use its best efforts to obtain those reasonable license modifications which would assist Lessee in its business. Lessor also shall consider filing, at Lessee's sole expense, such reasonable protests, comments or other petitions to deny any other ITFS, MMDS, MDS and/or OFS applications or amendments as may be requested by Lessee in the mutual best interests of the parties and the public. Lessor and Lessee shall promptly notify each other of any event of which it has knowledge that may affect any of the licenses, permits or authorization affecting the ITFS Channels. C) Attorneys' Fees. With respect to any legal work conducted pursuant to Paragraph 8(A) and (B) above, Lessee shall be responsible for all attorneys' fees in connection therewith and shall make payments directly to the attorney. However, any attorney fees paid by Lessee shall be approved in advance by Lessee. 9. REPRESENTATIONS AND WARRANTIES. A) Representations and Warranties of Lessor. Lessor represents and warrants to Lesse as follows: (i) Organization. Lessor is a non-profit organization duly organized and existing in good standing under the laws of the State of California, and it has full power and authority to carry out all of the transactions contemplated by this Agreement and all other agreement, certificates or instruments executed and delivered in connection herewith. (ii) No Violation. Neither the execution nor delivery of this agreement or any other agreements, certificates or instruments executed and delivered herewith, nor the performance of the transactions contemplated hereby constitute or will constitute a violation of , be in conflict with, or a default under any term or provision of the governing instruments or Lessor or any agreement or commitment to which Lessor is bound, or any judgment, decree, order, regulation or rule of any court or governmental authority, or consent of any federal, state or local authority is required in connection with the execution and delivery of this Agreement or any other agreements, certificates or instruments executed and delivered herewith or with the performance of the transaction contemplated hereby. B) Representations and Warranties of Lessee. Lessee represents and warrants to Lessor as follows: (ii) Organization. Lessee is duly organized, validly existing and in good standing under the laws of the State of its incorporation and it has full power and authority to own property and carry all of the transactions contemplated by this Agreement, and all other agreements, certificates or instruments executed and delivered by Lessee in connection herewith. (ii) Corporation Action; Valid and Binding Agreements. Lessee has taken all corporate action necessary to authorize the execution and delivery of this Agreement and all other agreements, certificates or instruments executed and delivered in connection herewith. Upon execution and delivery, this Agreement and all other agreements, certificates or instruments executed and delivered by Lessee in connection herewith will constitute valid and binding agreements of Lessee enforceable in accordance with their respective terms. (iii) Litigation and Investigations. There is no action, suit, proceeding or investigation pending or, to the best of Lessee's knowledge, threatened against Lessee, its principals or related entities before any court, administrative agency or other governmental body, and Lessee does not know nor is aware of any reason for commencement of any such action, proceeding or investigation. (iv) Misrepresentation of Material Fact. To the best of Lessee's knowledge, information and believe, no document or contract that was shown to Lessor and which in any way affects any of the properties, assets or proposed transactions of Lessee as such relates to this Agreement, no certificate or statement furnished by or on behalf of Lessee in connection with this Agreement, nor this Agreement itself contains any untrue statement of material fact or omits to state a material fact which would make the statements contained herein misleading. C) Survival or Representations and Warranties. The representations and warranties contained in this Agreement shall be deemed to be continuing during the Initial terms of this Agreement, and each Party shall have the duty promptly to notify the notify the other of any event or circumstance which might reasonably be deemed to constitute a breach of or lead to a breach of its warranties or representations hereunder. The waiver by either Party of any breach of any presentation or warranty under this Agreement shall not constitute a waiver of any other representation or warranty or of any failure in the future by the other Party to fulfill such representation or warranty. 10. TERMINATION. A) Termination of FCC Authorization. Without further liability to either Lessor or Lessee, this Agreement shall terminate in the event that for any reason (i) Lessor shall not be licensed on the leased ITFS Channels, or (ii) the FCC shall terminate or diminish Lessor's authority to lease the ITFS Channels in accordance with the terms of this Agreement. B) Termination by Reason of Default or Nonperformance. At the option of the non-defaulting party, this Agreement may be terminated upon the material breach or default by the defaulting party of its duties and obligations hereunder is such breach or default is not cured by such defaulting party and is breach or default shall continue for a period of thirty (30) consecutive days after such defaulting party's receipt of notice thereof from the non-defaulting party. It is understood and agreed that any failure on the part of Lessee to make any payment required under Paragraph 6 hereof shall be a material breach of default of its duties and obligations hereunder. It is also understood and agreed that any consequences resulting from the loss of local participating receive sites shall not be considered a material breach or default by Lessor of its duties and obligations hereunder. C) Remedies to Continue. In the event of termination of this Agreement pursuant to Paragraph 10(B), such termination shall not affect or diminish the rights or claims or remedies available in equity or at law to the non-defaulting party arising by reason of a breach or default of this Agreement. However, no liability shall arise on the part of Lessor or Lessee upon termination of this Agreement pursuant to Paragraph 10(A) except where the loss of the FCC license occurs as a result of the default of either party. 11. TRANSFER OF RIGHTS AND OBLIGATIONS. Lessee shall have the right to assign its rights under this lease as collateral for any financing arrangements it makes. Lessee shall also have the right to pledge the Leased Equipment as collateral security for any loans it makes; provided, however, that any pledge of the Leased Equipment shall be made subject to the provisions of this lease. Lessee shall further have the right to subcontract any portion of its obligations under this Agreement to any partnership, joint venture, corporation or entity which Lessee may choose, provided that Lessee gives Lessor notice of any proposed subcontracting and, provided further, that no such subcontracting shall release Lessee from fulfilling all of its obligations under this Agreement. Lessee shall have the right to assign or transfer its rights, benefits, duties and obligations under this Agreement to a commonly-owned company without the prior consent of Lessor. Apart from the foregoing, neither party may assign or transfer its rights, benefits, duties or obligations under this Agreement without the prior written consent of the other, which consent shall not be unreasonably witheld. 12. INDEMNIFICATION. A) By Lessor. To the extent permitted by state and federal law and its charter or by-laws, Lessor shall forever protect, save and keep Lessee and its permitted successors and assigns harmless and indemnify Lessor against and from any and all claims, demands, losses, costs, damages, suits, judgments, penalties, expenses and liabilities or any kind or nature whatsoever, including reasonable attorneys' fees, arising directly or indirectly out of (i) the willful misconduct of Lessor, its agents or employees, in connection with the performance of this Agreement; (ii) any programming transmitted by Lessor during any of Lessor's Airtime. B) By Lessee. To the extent permitted by state and federal law and its charter or by-laws, Lessor shall forever protect, save and keep Lessee and its permitted successors and assigns harmless and indemnify Lessor against and from any and all claims, demands, losses, costs, damages, suits, judgments, penalties, expenses and liabilities or any kind or nature whatsoever, including reasonable attorneys' fees, which arise directly or indirectly out of (i) the negligence or willful misconduct of Lessee, its agents or employees, in connection with the performance of this Agreement; (ii) any programming transmitted by Lessee or any of its authorized agents or subcontractors with the public, third parties and subscribers to the Lessee's programming service; or (iv) any maintenance, installation or other work performed by Lessee or any authorized agent or subcontractor under this Agreement. C) Notice of Claim; Defense of Claim. Each party shall notify the other of any such claim promptly upon receipt of same. Either party (hereinafter referred to as appropriate the "Indemnitor" or Indemnitee") shall have the option to defend, at its own expense, any claims arising under this Paragraph. In Indemnitor assumes the defense of any such claim, Indemnitee shall delegate complete and sole authority to the Indemnitor to defend or settle same and Indemnitee shall cooperate with Indemnitor in the defense thereof. 13) INSURANCE. A) Policies Required. At its expense, Lessee shall secure and maintain with financially reputable insurers, one or more policies of insurance insuring the Leased Equipment and Lessee's utilization of the ITFS Channels against casualty and other losses of the kinds customarily insured against by firms of established reputations engaged in the same or similar line of business, or such types and in such amounts as are customarily carried under similar circumstances by such firms, including, without limitation: (i) "All Risk" property insurance covering the ITFS Equipment and the common Equipment to the extent of one hundred percent (100%) of its full replacement value without deduction for depreciation: (ii) comprehensive general public liability insurance covering liability resulting from lessee's operation of the ITFS equipment on an occurrence basis having minimum limits of liability in an amount of not less than One Million Dollars ($1,000,000.00) for bodily injury, personal injury or death to any person or persons in any one occurrence, and not less than Two Million Dollars ($2,000,000.00) in the aggregate for all such losses during each policy year, and not less than Three Hundred Thousand Dollars ($300,000.00) with respect to damage to property; (ii) all workers compensation, automobile liability and similar insurance required by law. B) Insurance Policy Forms. All policies of insurance required by this Paragraph shall, whre appropriate, designate Lessor as either the insured party or as a named additionally insured party, shall be written as primary policies, not contributory with and not in excess of any coverage which Lessor shall carry, and shall contain a provision that the issuer shall give to Lessor thirty (30) days prior written notice of any cancellation or lapse of such insurance or of any change in the coverage thereof. C) Proof of Insurance. Executed copies of the policies of insurance required under this section or certificates thereof shall be delivered to Lessor not later than ten (10) after execution of this agreement. Lessee shall furnish Lessor evidence of renewal of each such policy not later than thirty (30) days prior to the expiration of the term thereof. 14. RELATIONSHIP OF PARTIES. By the provisions of this Agreement, Lessor and Lessee intend to enter an airtime lease relationship and not a joint venture. They will carry out this Agreement to preserve that intent. Neither party shall represent itself as the other party, nor as having any relationship with one another, except as Lessor and Lessee under the terms of this Agreement. 15. EQUIPMENT PURCHASE. A) Lessor's Option to Purchase. In the event that this Agreement is terminated, Lessor shall have the option to purchase the Leased Equipment used exclusively for Lessor's ITFS license. Any equipment which is used in a shared fashion (such as transmit antenna, decoders and combiners) in providing signals other than Lessor's signals are excluded from this option to purchase. The intent of the purchase option provided for in Paragraphs 16(A) is to provide Lessor with the capability to continue to perform on Lessor's ITFS license. The purchase price shall be the market value of such equipment noted above as determined by mutual agreement or by averaging the values obtained from two (2) appraisals, with one appraiser each chosen by Lessor and Lessee. B) Lessee's Option to Purchase. If during the terms of this Agreement the FCC modifies its rules so as to enable Lessee to be licensed to operate the ITFS frequencies, Lessee shall have a right of first refusal to acquire such licenses subject to the same terms and conditions as the right provided for in Paragraph 1(B). 16. NON-DISCLOSURE Lessor acknowledges that there may be made available to it pursuant to this Agreement proprietary information of Lessee relating to the encoding and/or decoding system associated with the ITFS channel equipment and its patented processes including, but not limited to, improvements, innovations, adaptation, inventions, results of experimentation, processes and methods, whether or not deemed patentable, and certain business and marketing techniques (all herein referred to as "Confidential Information"). Lessor acknowledges that this Confidential Information has been developed by Lessee at considerable effort and expense and represents special, unique and valuable proprietary assets of Lessee, the value of which may be destroyed by unauthorized dissemination. Accordingly, Lessor covenants and agrees that, except as may be required for the performance of this Agreement or by law or court order, neither it nor any of its agents or affiliates shall disclose such Confidential Information to any third person, firm, corporation or other entity for any reason whatsoever, such undertaking to be enforceable by injunctive or other equitable relief to prevent any violation or threatened violation thereof. 17. NON-COMPETITION During the term of this Agreement, Lessor agrees not to transmit programming or to lease or sublease any channel capacity on its ITFS Facilities for the transmission of programming that is competitive with the programming transmitted by Lessee. 18. FORCE MAJEURE If by reason of Force Majeure either party is unable in whole or in part to perform its obligations hereunder, the party shall not be deemed in violation of default during the period of such inability. As used herein, the phrase "Force Majeure", shall mean the following: act of God, acts of public enemies, orders of any branch of the government of the United States of America, any state or any political subdivisions, thereof which are not the result of a breach of this Agreement, orders of any military authority insurrections, riots, epidemics, fires, civil disturbances, explosions, or any other cause or event not reasonably within control of the adversely affected party. 19. CONDITION PRECEDENT This Agreement is conditional on the issuance of a Final Order by the FCC granting Lessor a construction permit for the ITFS Channels in the Market from the Transmission Site. By "Final Order" the parties mean an action or order of the FCC which is not reversed, stayed, enjoined, vacated, set aside, annulled or suspended and with respect to which no timely-filed request for administrative or judicial review is pending and as to which the time for filing any such request, or for the FCC to set aside the action on its own motion, has expired. 20. NOTICE Any notice required to be given to Lessor under any provision of this Agreement shall be delivered personally or by certified mail to Lessor at the address first written above. Any notice required to be given to Lessee under any provision of this Agreement shall be delivered personally or by certified mail to Lessee at the address first written above. 21. SEVERABILITY Should any court or agency determine that any provision of this Agreement is invalid, the remainder of the Agreement shall remain in effect. 22. WAIVER A waiver by either Lessor or Lessee of a breach of any provision of this Agreement shall not be deemed to constitute a waiver of any preceding or subsequent breach of the same provision or of any other provision. 23. PAYMENT OF EXPENSES AND SIGNING FEES A signing fee of One Dollar ($1) shall be paid to Lessor. Lessee shall pay all costs and expenses incident to fulfilling or modifying this Agreement, such as, attorneys' fees or, if necessary, any travel expenses approved in advance by Lessee, FCC filing fees, and engineering costs. 24. VENUE AND GOVERNING LAW Venue for any cause of action brought by or between Lessor and/or Lessee relating to this Agreement shall be in California and all provisions of this Agreement shall be construed under the laws of the State of California and County of Lessor. 25. COUNTERPARTS This Agreement may be executed in one or more counterparts each of which shall be deemed an original, but all of which shall constitute one and the same instrument, and shall become effective when each of the parties hereto shall have delivered to it this Agreement duly executed by each of the other parties hereto. 26. ENTIRE AGREEMENT This Agreement constitutes the entire Agreement between the parties and supersedes all prior oral or written provisions of any kind. The parties further agree that this Agreement may only be modified by written Agreement signed by both parties. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on this day of July 1st, 1999. SHEKINAH NETWORK By: ______________________________ Name: Charles J. McKee Title: President WORLD WIDE WIRELESS COMMUNICATIONS, INC. By: ______________________________ Name: Douglas P. Haffer Title: President Address for Notices: Shekinah Network 14875 Powerline road Atascadero, CA 93422 Phone/Fax: (805) 438-3341 Attn: Charles McKee, President Gardner, Carton & Douglas Attn: Laura Mow 1301 K Street, N.W., Suite 900 Washington, D.C. 20005 Phone: (202) 408-7100 Fax: (202) 289-1504 World Wide Wireless Communications, Inc. One Post Street Suite 2600 San Francisco, CA 94104 Phone: (415) 981- 7777 Fax: (415) 391-3199 EXHIBIT A Schedule of Airtime EXHIBIT B Receive Sites There shall be attached hereto and incorporated by reference a copy of FCC Form 330 Section IV listing Lessor" receive sites. EXHIBIT C Leased Equipment Noted below is a list of equipment that Lessee is leasing to Lessor: (1) Four (4) ITFS tansmitters and related hardware (2) Lessor's ITFS receive site antennas and related hardware *(3) Combining network, transmission line and antenna *Common Equipment EXHIBIT D Service and Royalty Fees 1. Lessor's Service Fee Services Provided Annual Fee ----------------- ---------- (a) Lease of Leased Equipment [6(A)] $1.00 (b) Maintenance of Leased Equipment [3(D)] $1.00 (c) Lease of space at Primary Transmission Site [3A)] $1.00 2. Lessee's Subscriber Royalty Fee Lessee shall pay Lessor a minimum monthly Transmission Fee 5% of the system's Gross receipts or a monthly minimum payment of $500 per month whichever is greater. Payment shall be as follows: Commencing on the Execution (Effective) Date and as defined in Paragraph 6)B, payments for each month shall be made by the twentieth (20th) day of the following month. EXHIBIT E Programming In addition to digital data services, such as the Internet or Intranet, the following is a list of video programming services Lessee may provide over Lessee's System. TLC - The Leaning Channel TWC - The Weather Channel Lifetime ESPN - Sports AMC - American Movie Classics SCOLA WHTN - World Harvest Television Network ECO - Galavision CNN - Cable News Network CNN - Headline News C-Span I C-Span II BET - Black Entertainment Network CNBC - Consumer News & Business Channel Nickelodeon The Discovery Channel A&E - Arts and Entertainment The Family Channel The Disney Channel PBS - Public Broadcasting Service TBN - Trinity Broadcasting Network TNIN - The New Inspirational Network ME/U - Mind Extension Network The International Channel BRAVO Network The Travel Channel Family Network Keystone Inspirational Network EX-10.4 12 0012.txt LEASE AGREEMENT--ASPEN, COLORADO LEASE AGREEMENT BETWEEN WORLD WIDE WIRELESS COMMUNICATIONS, INC. AND SHEKINAH NETWORK Aspen, Colorado ITFS EXCESS CAPACITY AIRTIME LEASE AGREEMENT THIS AGREEMENT is made this 1st day of August 1999 by Shekinah Network (hereinafter referred to as "Lessor") having its principal place of business at 14875 Powerline Road, Atascadero, CA 93422 and World Wide Wireless Communications, Inc. (hereinafter referred to as "Lessee") having its principal place of business at One Post Street, Suite 2600 San Francisco, CA 94104. WHEREAS, the Federal Communications Commission ("FCC") has authorized licenses for Instructional Television Fixed Service ("ITFS") channels and has authorized the licensee to lease excess capacity to non-ITFS users; and WHEREAS, Lessor has been granted an FCC License for (call sign) WNC-798 (the "License") for the Channel group C1-4 (the "ITFS Channels") in Aspen, Colorado ("The Market"); and WHEREAS, Lessee is in the business of providing voice, video, data and other services via microwave transmission in the Market Area and desires to lease the excess ITFS capacity of the ITFS channels; and WHEREAS, Lessor has determined that there will be excess airtime capacity available on the ITFS Channels and desires to lease this excess airtime capacity to Lessee. NOW, THEREFORE, in consideration of the mutual promises, undertakings, covenants and conditions set forth herein, the Lessor and Lessee do hereby agree and warrant as follows: 3. TERM OF AGREEMENT A. Initial Term. This Agreement shall be effective upon the date of its execution and shall extend for an initial term of five (5) years (the "Initial Term"). B. Renewal Term Provided that the License is renewed by the FCC, Lessee shall have the right to extend this Agreement on its then existing terms and conditions for one (1) additional five (5) year term (the "Renewal Term"). The Renewal Term shall automatically go into effect upon the conclusion of the Initial Term unless Lessee notifies Lessor at least one hundred eighty days (180) before the end of the Initial Term that Lessee does not wish to extend this Agreement. C. New Lease Agreement/Right of first Refusal. (1) Providing that Lessor's FCC license remains in good standing and/or Lessor seeks to renew such license, Lessee and Lessor shall negotiate in good faith for a new excess capacity airtime lease agreement (hereinafter referred to as "New Lease Agreement") no later than one hundred eighty days (180) prior to the end of the latter of (i) Initial Term or (ii) the Renewal Term if the Agreement is extended for the Renewal Term. (3) If Lessor elects to not reasonably pursue a New Lease Agreement with Lessee, then Lessor shall so notify Lessee in writing of such intent no later than one hundred eighty (180) days prior to the end of the Renewal Term. (3) If Lessor and Lessee do not enter into a New Lease Agreement, Lessor grants Lessee a right of first refusal on any competing proposals for lease agreements or transfers or assignments of any part of the ITFS Channels received by Lessor during the twelve (12) months following the expiration of the latter of (i) the Initial Term or (ii) the Renewal Term, if the Agreement is extended for the Renewal Term. If any acceptable offer to lease or acquire the ITFS Channels is made to Lessor, Lessor shall give written notice to Lessee describing the person to whom the proposed lease or transfer is to be made, the fees, charges, rental or other consideration to be received fro the lease or transfer, the terms thereof and generally the relevant other terms and conditions of the lease or transfer. Lessee shall have a period of thirty (30) days after its receipt of such notice from Lessor in which to elect, by giving written notice to Lessor, to lease or, if eligible, obtain any or all of the ITFS Channels for the same fees, charges, rental or other consideration for which Lessor proposed to lease or transfer to the third person. (i) The fees, charges, rental or consideration shall be paid by such third person or Lessee in cash. (iv) If Lessor does not believe Lessee's stated offer is in an amount fairly equivalent to the fair value of the consideration payable by the third person and so notifies Lessee in writing within seven (7) days after Lessor's receipt of Lessee's notice of election to so lease or purchase, Lessee may within five (5) days after its receipt of such notice from Lessor elect to refer such question for determination by an impartial arbitrator and the right of first refusal of Lessee shall then be held open until (5) days after Lessee is notified of such determination. Such arbitrator shall be chosen either by agreement of Lessee and Lessor at the time such question arises, or, at the option of either party, by referring the question to the American Arbitration Association with instructions that the American Arbitration Association select a single arbitrator under a request from the parties for expedited and accelerated determination. The determination of the arbitrator chosen under either option contained in this subparagraph shall be final and binding upon Lessee and Lessor. The parties shall share equally in the costs and fees of the arbitration (v) In the event Lessee shall elect to exercise its right of first refusal, the lease agreement or other transfer or assignment shall be consummated within thirty (30) days of the latest of: (1) the day on which Lessor received notice of Lessee's election to exercise the right of first refusal; (2) the day upon which any question required to be determined by the arbitrator hereunder has been determined; or (3) the date of any FCC approval in the case of assignment or transfer; or at such other time as may be mutually agreed. The right of first refusal is terminated either by the lease or other transfer to Lessee as provided herein or by notice to Lessee of the Lessor's proposal to lease or otherwise transfer the ITFS Channels or any part to a third person and Lessee's unwillingness or failure to meet and accept such a bona fide offer pursuant to the times and procedures as set forth above; provided that such proposed lease or transfer is consummated at the same fees, charges, rental or other consideration and upon the same terms as to which such right of first refusal applied, within thirty (30) days after Lessee's right of first refusal had expired or had been specifically waived by written notice given to Lessor by Lessee, or within thirty (30) days following FCC approval in the case of assignment or transfer. C) Operation During End of Term. If Lessor and Lessee do not enter into New Lease Agreement before the end of the Initial Term, Lessee shall cease leasing the ITFS Channels on the last day of the Initial Term. D) No Rights Beyond Term of Licenses. Lessor and Lessee agree that this Agreement shall not give rise to any rights or remedies beyond the expiration of any FCC license necessary for the continued operation of the ITFS Channels. Provided, however, that while this Agreement is in effect, Lessor shall obtain and maintain in force all licenses, permits and authorizations required or desired in connection with the use of the ITFS Channels. Lessor shall take all necessary steps to renew the licenses for the ITFS Channels and shall not commit any act or engage in any activity which could reasonably be expected to cause the FCC to impair, restrict, revoke, cancel, suspend or refuse to renew the ITFS licenses. Lessor shall take all reasonable steps to comply with the Communications Act of 1934, as amended and the rules and regulations of the FCC, and shall file all reports, schedules and/or forms required by the FCC to be filed by Lessor. All expenses, including attorneys fees and filing fees, incurred in preparing and filing such reports, schedules and/or forms required by the FCC shall be paid by the Lessee. 4. ALLOCATION OF AIRTIME. A. Excess Capacity Airtime. To the extent allowed by the FCC rules and regulations and any amendments thereof, Lessor agrees to lease to Lessee the exclusive use of all excess capacity not utilized by Lessor ("Excess Capacity Airtime"). B. Lessor's Primary Airtime. During analog transmission over the ITFS Channels, Lessor reserves for its exclusive use a minimum of twenty (20) hours of airtime per-channel per-week to be used for its ITFS scheduled programs. During digital transmission ovr the ITFS Channels, Lessor shall have the exclusive use of 12.5% of the total capacity available on the Lessor's ITFS Channels. This airtime shall be know as "Lessor's Primary Airtime". C. Schedule of Airtime. The schedule which depicts the agreement of the parties as to use of Lessor's Channels shall be attached hereto and made a part hereof as Exhibit A which is subject to change upon agreement by both parties. D. Lessee's use of its Excess Capacity Airtime. Lessee shall have the right to utilize its Excess Capacity Airtime for any purpose allowed or authorized by the FCC including but not limited to voice, video and data transmission. E. Alternate Use and Vertical Blanking Intervals. Lessor shall have the right to use the second audio carrier ("SAP") and vertical blanking intervals. ("VBI") on which Lessor's ITFS programming is being transmitted. Lessee shall at all times have the right to use the VBI and SAP not utilized by Lessor and 100% of the response frequencies associated with the ITFS Channels. Lessor shall be responsible for any equipment needed to utilize the VBI and/or SAP and such equipment shall be compatible with Lessee's system. F. Lessor's Use of ITFS Channels. Lessor agrees that its program services and airtime use will not harm or interfere with Lessee's current or future signal paths utilized within Lessee's System for program encryption, pilot carrier signaling and other technical needs utilized for the operation of and such services provided by Lessee's System. Nor will Lessor, by its own action, or through a third party, utilize any part of its licensed frequency spectrum to create or operate a service that is in competition with current, planned or future services provided by Lessee's System. Lessor agrees to use its Primary Airtime in accordance with the FCC's rules and regulations. Lessor shall not take or fail to take any action which may have a material adverse effect on Lessee's right to utilize its Excess Capacity Airtime. G. Expanded System Capacity. Lessee shall have the right at anytime to require Lessor to file with the FCC any necessary application to expand the channel capacity to Lessor's station to enable it to carry more than one video signal per channel or digital data services; provided however, before Lessee can exercise this right, it must demonstrate to the Lessor's reasonable satisfaction that such modification will not materially degrade the performance of the station nor impair signal quality at the registered ITFS receive sites. Once such modification has been constructed, the modified facilities shall automatically be considered a part of this agreement and subject to all terms and conditions hereof. It is understood that Lessee shall have the full-time use of the Expanded Channels to the extend permitted by FCC rules. 3. TRANSMISSION SITE AND FACILITIES. C. Primary Transmission Site. Lessor's ITFS Channels are located at Key West, FL, Lessee agrees to provide Lessor space at the Primary Transmission site for Lessor's audio and video transmission equipment which shall not exceed on rack. Such space shall be leased to Lessor pursuant to Exhibit D hereto. This site shall hereinafter be described as the "Primary Transmission Site". At Lessee's sole expense, Lessee shall contract for a lease of space at the Transmission Site upon such terms as the parties agree. The Transmission Site shall comply with the standards, specifications and regulations of the FCC rules and orders pertaining to Lessor's ITFS license. D. Relocation of Transmission Site. (i) Lessor acknowledges that the location of the Primary Transmission Site for ITFS Channels is critical to the Lessee's business and agrees that it will not relocate the transmission facilities for ITFS Channels from the Primary Transmission Site without Lessee's prior written consent. (ii) Lessor further acknowledges that possibility that, as a result of currently unforeseen events, the Primary Transmission Site may not be the optimum site for the location of the ITFS Channels or Lessee's business throughout the term of this Lease Agreement. Lessor therefore agrees that if at any time or from time to time Lessee requests in writing that the transmission facilities for the ITFS Channels be relocated, Lessor shall file with the FCC and any other regulatory body having jurisdicition over the ITFS Channels all applications, amendments, and requests for modification that may be necessary to obtain any necessary consents to permit such relocation to such location within or adjacent to the Market as may be requested by Lessee; provided, however, that Lessor shall not be obligated to submit or procecute any application, amendment, or request for modification that Lessor reasonably determines, upon advice of counsel contained in a written opinion, would be in violation of the terms of the License, any statute, rule, or regulations regarding the operation of the ITFS Channels or the submission of materials to the FCC, or any of its obligations as an ITFS licensee; and provided, further, that any such relocation will not result in loss of service to Lessor's registered receive sites served by the transmission facilities in the event that the authorization is obtained to relocate the ITFS Channels to the location requested by Lessee, Lessor shall relocate such channels to such new location as soon as reasonably possible after authorization is obtained. Lessee shall bear reasonable costs associated with such relocation, including engineering and construction, and all reasonable costs associated with obtaining FCC or any other regulatory approval therefore. (iii) Lessor agrees to file modification applications requested by Lessee. Such modifications may include but shall not be limited to the following: power increase or decrease, polarization, transmit antenna patterns, digital, two-way (return path) use of the ITFS Channels, boosters, beam benders or repeaters, cells, sectorization, channel swaps, channel loading, channel shifting and application within five (5) business days or receipt of the modification application from Lessee or during any FCC designated filing window. Lessee will use reasonable efforts to provide Lessor with the engineering for the modification thirty (30) days prior to the request for filing. If Lessor believes that such modification will have an adverse effect on Lessor's ability to provide its services to its receive sites, Lessor agrees to file the modification application as presented by Lessee and within the time limit requested by Lessee; however, Lessee agrees not to implement construction and Lessor agrees not to withdraw the application until the parties have adequately addressed and resolved the potential material adverse effect or the matter has been submitted to arbitration pursuant to Section 16 and a final decision has been rendered by arbitrator. Although Lessee intends to file such modification applications, it may elect not to construct the Channels in that manner and may desire to utilize the Channels as currently licensed. A copy of the modification application, bearing the FCC's date stamp, shall be mailed to Lessee by Lessor, within fourteen (14) days of the filing of the modification application. Lessee shall be solely responsible for all engineering and legal costs associated with the preparation, review and filing of the modification application. In the event that any license modification requested by Lessee requires receive site upgrades in order for Lessor's receive sites to continue to receive Lessor's services, then Lessee agrees to pay for all costs to complete such upgrade prior to implementing the license modification. C. System Construction. Lessee shall within a reasonable period of time, but not later than six (6) months after the FCC grant of digital authority for the ITFS Channels, purchase equipment such as the antenna, waveguide or transmitters specified on the authorization for the ITFS Channels. At Lessee's expense, Lessee shall purchase and install such transmitters, transmission line, modulators, antennas and other equipment as required to operate the ITFS Channels in accordance with the provision of such authorization. Any equipment so used in such construction shall be leased to lessor pursuant to Paragraph 5 hereof. Such equipment is hereinafter referred to as the "Leased Equipment". Lessee shall retain title to the Leased Equipment except as noted by Paragraph 15 herein. D. Maintenance of Transmission Equipment. At Lessee's expense and subject to Lessor's right to supervise the maintenance of this equipment, Lessee shall maintain and operate the Leased Equipment during the terms of this Agreement for a nominal fee. Lessee shall also pay all taxes and other charges assessed against the Leased Equipment. E. Transmission of Programming. At no cost or expense to Lessor, Lessee shall provide the necessary labor and equipment capabilities to transmit on the ITFS Channels programming required to be carried pursuant to this Agreement such as Lessor's ITFS programming and TBN. Lessee shall also comply with Lessor's instructions regarding the transmission of such programming such as the dates and times to transmit programming. F. Interference. Lessee shall operate the Leased Equipment so that such operation does not create or increase interference with electronic transmission of any other FCC licensees entitles to protection under FCC rules and regulations. If Lessee's entitled to protection under FCC rules and regulations. If Lessee's operation of the Lease Equipment does so create or increase interference, Lessee shall pay all of the reasonable engineering and legal fees necessary to resolve the interference problem so created. G. Alterations and Attachments. Lessee, at its own expense, may make alterations of or attachments to the ITFS equipment or the common equipment as defined in Exhibit C (including the installation of encoding and/or addressing equipment) as may be reasonably required from time to time by the nature of its business; provided however, that such alterations or attachments do not interfere with Lessor's signal or ongoing operations or violate any FCC rules or regulations; and provided further that FCC authorization, if required, is obtained in advance of any such alteration or attachment at the sole cost of Lessee. to the extent any FCC authorization pertaining to the ITFS equipment is required, Lessor agrees to use its best efforts to obtain such authorization. H. Licensee Control and Liability. Nothing herein shall derogate from such licensee control of operations of the ITFS Channels that Lessor, as an FCC licensee, shall be required to maintain and Lessee acknowledges the reservation by Lessor of such control. Lessor shall at all times retain ultimate and exclusive responsibility for the operation and control of the ITFS Channels including policy decisions. 4. LESSOR'S RECEIVE SITES. Attached hereto as Exhibit B is list of the registered receive sites designated by Lessor to receive its ITFS programming and to be installed at the expense of Lessee. Those receive sites so listed shall be installed with a Standard Installation. If as the result of any relocation of the Primary Transmit Site, the equipment at Lessor's existing registered receive sites must be reoriented, Lessee shall pay the cost of same. As used herein for the purposes of this Agreement, the phrase "Standard Installation" shall mean an installation consisting of the placement of the ITFS/MMDS receiving antenna at an elevation (not to exceed thirty [30] feet above the base mounting location) which could normally receive the line-of-sight transmission from the Transmission Site; the coupling thereto of a block-down converter; and a sufficient amount of transmission line (coaxial cable) to connect the received ITFS programming to the input of (i) one classroom designated by Lessor to receive the ITFS programming or (ii) the receive site internal/external distribution system. Also, if as the result of any relocation of the Transmit Site, the equipment at Lessor's existing receive sites must be reoriented, Lessee shall pay the cost of same. Lessee also agrees that for digital transmission of the ITFS Channels Lessee will purchase and install at Lessee's expense, one single-point modem to receive its ITFS programming. 5. LEASE OF EQUIPMENT. A) Lessor's Lease of Leased Equipment. For a nominal fee, Lessor shall lease from Lessee the Leased Equipment during the terms of this Agreement. A list of this equipment is attached hereto as Exhibit C and incorporated by reference herein. Lessor shall have no responsibility for the loss of or damage to the Leased Equipment during the terms of this Agreement and Lessee shall bear all such responsibility. 6. FEES. A) Lessor's Service Fee. In consideration of the lease of the Leased Equipment, and for its share of the projected costs to maintain the Transmission Site and the Lease Equipment, Lessor shall pay Lessee an annual fee provided for in Exhibit D. B) Subscriber Royalty Fees or Percentage. Beginning on the Execution Date of this Agreement and continuing thereafter during the Initial Term of this Agreement, Lessee shall pay to Lessor the Subscriber Royalty Fee, System Percentage or monthly minimum, whichever is greater as set out in Exhibit D which is attached herewith and incorporated by reference herein. If the Execution Date shall be a date other than the first day of a calendar month, then the Subscriber Royalty Fee for the partial month shall be paid on a proportionate basis. A late fee of 10% (ten percent) will be assessed to past due accounts, and a finance charge of one and one-half percent (1.5%) per month will be assessed in addition to the late fee until paid. C) Notice of Construction and Required Certificate. Within thirty (30) days of completion of construction at the Transmission Site, Lessee shall notify Lessor of such completion of construction in writing. Within thirty (30) days of the end of each month in which Excess Capacity Airtime is leased hereunder, Lessee shall provide Lessor with a certificate, certified as accurate and correct by an authorized agent of Lessee, showing the number of subscribers served during such month. D) Right to Audit. Lessee shall for a period of three (3) years after their creation, keep, maintain and preserve complete and accurate records and accounts, including all invoices, correspondence, ledgers, financial and other records pertaining to Lessee's use of Excess Capacity Airtime and Lessor's charges hereunder; and such records and corporate accounts shall be available for inspection and audit at Lessee's corporate offices or at Lessee's offices in the Market, as designated by Lessee, at any time or times during the term of this Agreement or within ninety (90) days thereafter, during reasonable business hours, by Lessor or its nominee. In the event that there is discovered an underpayment of the Subscriber Royalty Fee as defined in Paragraph 6 (B) above, Lessee shall pay to Lessor a penalty equal to ten percent (10%) of the amount of each such underpayment. All information obtained by Lessor during any audit herein shall be maintained by Lessor in strict confidence. 7. PROGRAMMING. A) Control Over Programming. (i) Program Content. Lessee intends that only programming of a sort which would not serve to place Lessor's reputation in the community in jeopardy will be transmitted by Lessee on the ITFS Channels. In an attempt to minimize disputes, recognizing the difficulties inherent in specifying exact standards herein, it is agreed that Lessee shall have the right to market the programming provided by the networks and services listed on Exhibit E. If, however, the programming content of any networks and services listed on Exhibit E materially changes, Lessor shall have the right, upon ninety (90) days notice, to deny Lessee the right to continue transmitting such programming if Lessor would have the right to deny Lessee the right to transmit such programming under the provisions of this paragraph in the first instance. If Lessee proposes to transmit the programming of any new programming service, the Lessee shall notify Lessor in writing specifying in detail the nature of the new programming service and Lessor shall have the right, upon written served upon Lessee within thirty (30) days after Lessor's receipt of any such notice from Lessee, to deny to Lessee the right to transmit such service if such programming is obscene and/or contradicting local, state and/or federal laws or otherwise violates any federal, state or local laws or regulations. If no such denial notice is received by Lessee within such thirty (30) days, lessee shall be authorized to transmit all such services for which no denial notice is received. There shall be no reduction in fees required under this Agreement for any such programming not permitted to be transmitted. B) Availability of Programming. It is understood by Lessee and Lessor that there is expected to be no direct out-of-pocket annual costs for the acquisition of the qualified ITFS educational programming for Lessor's use during Lessor's Primary Airtime on the ITFS channels, based on current plans. In the event that this ITFS educational programming either; (1) ceases to be available, or, (2) becomes available only at a fee, then Lessor may incur direct out-of-pocket costs in Lessor's acquisition of ITFS programming. Lessee agrees to provide its best efforts to assist Lessor in the acquisition of alternative programming, if necessary. Additionally, Lessee agrees to make payment to Lessor for the actual, direct programming costs incurred. If any; If Lessor, after expending its best efforts, is unable to obtain suitable ITFS programming for a cost equal to the amount to be paid by Lessee, Lessor and Lessee shall use their best efforts to reach agreement on modifications to this Agreement to avoid any un-reimbursed ITFS programming costs to Lessor. If no such agreement can be reached, Lessor may terminate this agreement. In the case of such termination, Lessor shall use its best efforts (with out-of-pocket costs of Lessor to be paid by Lessee, with Lessee's prior approval) to transfer the license for the ITFS Channels to another qualified educational entity, subject to FCC approval, with the intent of assigning this Agreement from Lessor to the new educational entity. C) Integration of Lessor's Programming. Lessee agrees to integrate Lessor's programming into the overall communications service offered to subscribers, without cost to Lessor. This integration shall include, but not be limited to, listing Lessor's material in any program guides produced by Lessee for subscribers. D) Carriage of TBN. In the event that Lessor's ITFS Channels are used for analog video transmission and TBN is not transmitted on a local VHF or UHF station, with a market coverage equivalent to both area and signal quality of our ITFS channels, and Lessee does not have local off-air insertion as part of its standard installation, then, if so designated by Lessor, Lessee agrees to transmit on one of the ITFS Channels the programming of Trinity Broadcasting Network ("TBN") during those time periods such channel is not used for Lessor's ITFS programming ("TBN Airtime") provided that Lessee is not required to pay a fee for carriage of TBN. In the event that Lessee is permitted to program the hours previously occupied by TBN, then Lessee shall increase, in proportion to the increase in Excess Capacity Airtime, the amount of minimum fees and subscriber royalty fees payable under the provision 6 (B) of this agreement during the remainder of the term(s) of the agreement. For purposes of calculating any such proportionate increase, the parties acknowledge and agree that the minimum fee and subscriber royalty fee agreed to herein are based on Lessee's equivalent use of three full-time ITFS channels. E) Station Identification. During Lessee's use of Lessor's excess channel capacity, Lessee shall transmit Lessor's call sign for each respective station as required by the FCC. 8. PROCECUTION OF PETITIONS, AUTHORIZATIONS AND LICENSES. A) Best Efforts to Secure Approval of this Agreement. The parties recognize that certain approvals will be required from the FCC in order to effectuate this Agreement. Both parties shall use their best efforts to prepare, file and prosecute before the FCC all petitions, waivers, applications and other documents necessary to secure any FCC approval required to effectuate this Agreement. Lessee shall assist in the preparation and prosecution of such applications and as provided for herein, shall pay all filing fees, attorneys' fees, engineering fees, and all other expenses in connection therewith. Lessor also agrees to cooperate with Lessee's efforts to cause other ITFS, OFS, MDs and MMDS operators to co-locate at the Transmission Site. Notwithstanding anything in this Agreement to the contrary, it is understood that no filing shall be made with the FCC with respect to this Agreement unless both parties have reviewed such filing and consented in writing to its submission, such consent not be unreasonably withheld. B) Further Efforts. Throughout the Initial Term of this Agreement, Lessor shall use its best efforts to obtain and maintain in force all licenses, permits and authorizations required for Lessee and Lessor to use the ITFS Channels as contemplated by this Agreement. Lessee shall be responsible for all cash expenses incurred to obtain and maintain in force such licenses, permits and authorizations. When mutually agreed by the parties and at Lessee's sole expense, Lessor shall apply for, and use its best efforts to obtain those reasonable license modifications which would assist Lessee in its business. Lessor also shall consider filing, at Lessee's sole expense, such reasonable protests, comments or other petitions to deny any other ITFS, MMDS, MDS and/or OFS applications or amendments as may be requested by Lessee in the mutual best interests of the parties and the public. Lessor and Lessee shall promptly notify each other of any event of which it has knowledge that may affect any of the licenses, permits or authorization affecting the ITFS Channels. C) Attorneys' Fees. With respect to any legal work conducted pursuant to Paragraph 8(A) and (B) above, Lessee shall be responsible for all attorneys' fees in connection therewith and shall make payments directly to the attorney. However, any attorney fees paid by Lessee shall be approved in advance by Lessee. 9. REPRESENTATIONS AND WARRANTIES. A) Representations and Warranties of Lessor. Lessor represents and warrants to Lesse as follows: (i) Organization. Lessor is a non-profit organization duly organized and existing in good standing under the laws of the State of California, and it has full power and authority to carry out all of the transactions contemplated by this Agreement and all other agreement, certificates or instruments executed and delivered in connection herewith. (ii) No Violation. Neither the execution nor delivery of this agreement or any other agreements, certificates or instruments executed and delivered herewith, nor the performance of the transactions contemplated hereby constitute or will constitute a violation of , be in conflict with, or a default under any term or provision of the governing instruments or Lessor or any agreement or commitment to which Lessor is bound, or any judgment, decree, order, regulation or rule of any court or governmental authority, or consent of any federal, state or local authority is required in connection with the execution and delivery of this Agreement or any other agreements, certificates or instruments executed and delivered herewith or with the performance of the transaction contemplated hereby. B) Representations and Warranties of Lessee. Lessee represents and warrants to Lessor as follows: (ii) Organization. Lessee is duly organized, validly existing and in good standing under the laws of the State of its incorporation and it has full power and authority to own property and carry all of the transactions contemplated by this Agreement, and all other agreements, certificates or instruments executed and delivered by Lessee in connection herewith. (ii) Corporation Action; Valid and Binding Agreements. Lessee has taken all corporate action necessary to authorize the execution and delivery of this Agreement and all other agreements, certificates or instruments executed and delivered in connection herewith. Upon execution and delivery, this Agreement and all other agreements, certificates or instruments executed and delivered by Lessee in connection herewith will constitute valid and binding agreements of Lessee enforceable in accordance with their respective terms. (iii) Litigation and Investigations. There is no action, suit, proceeding or investigation pending or, to the best of Lessee's knowledge, threatened against Lessee, its principals or related entities before any court, administrative agency or other governmental body, and Lessee does not know nor is aware of any reason for commencement of any such action, proceeding or investigation. (iv) Misrepresentation of Material Fact. To the best of Lessee's knowledge, information and believe, no document or contract that was shown to Lessor and which in any way affects any of the properties, assets or proposed transactions of Lessee as such relates to this Agreement, no certificate or statement furnished by or on behalf of Lessee in connection with this Agreement, nor this Agreement itself contains any untrue statement of material fact or omits to state a material fact which would make the statements contained herein misleading. C) Survival or Representations and Warranties. The representations and warranties contained in this Agreement shall be deemed to be continuing during the Initial terms of this Agreement, and each Party shall have the duty promptly to notify the notify the other of any event or circumstance which might reasonably be deemed to constitute a breach of or lead to a breach of its warranties or representations hereunder. The waiver by either Party of any breach of any presentation or warranty under this Agreement shall not constitute a waiver of any other representation or warranty or of any failure in the future by the other Party to fulfill such representation or warranty. 10. TERMINATION. A) Termination of FCC Authorization. Without further liability to either Lessor or Lessee, this Agreement shall terminate in the event that for any reason (i) Lessor shall not be licensed on the leased ITFS Channels, or (ii) the FCC shall terminate or diminish Lessor's authority to lease the ITFS Channels in accordance with the terms of this Agreement. B) Termination by Reason of Default or Nonperformance. At the option of the non-defaulting party, this Agreement may be terminated upon the material breach or default by the defaulting party of its duties and obligations hereunder is such breach or default is not cured by such defaulting party and is breach or default shall continue for a period of thirty (30) consecutive days after such defaulting party's receipt of notice thereof from the non-defaulting party. It is understood and agreed that any failure on the part of Lessee to make any payment required under Paragraph 6 hereof shall be a material breach of default of its duties and obligations hereunder. It is also understood and agreed that any consequences resulting from the loss of local participating receive sites shall not be considered a material breach or default by Lessor of its duties and obligations hereunder. C) Remedies to Continue. In the event of termination of this Agreement pursuant to Paragraph 10(B), such termination shall not affect or diminish the rights or claims or remedies available in equity or at law to the non-defaulting party arising by reason of a breach or default of this Agreement. However, no liability shall arise on the part of Lessor or Lessee upon termination of this Agreement pursuant to Paragraph 10(A) except where the loss of the FCC license occurs as a result of the default of either party. 11. TRANSFER OF RIGHTS AND OBLIGATIONS. Lessee shall have the right to assign its rights under this lease as collateral for any financing arrangements it makes. Lessee shall also have the right to pledge the Leased Equipment as collateral security for any loans it makes; provided, however, that any pledge of the Leased Equipment shall be made subject to the provisions of this lease. Lessee shall further have the right to subcontract any portion of its obligations under this Agreement to any partnership, joint venture, corporation or entity which Lessee may choose, provided that Lessee gives Lessor notice of any proposed subcontracting and, provided further, that no such subcontracting shall release Lessee from fulfilling all of its obligations under this Agreement. Lessee shall have the right to assign or transfer its rights, benefits, duties and obligations under this Agreement to a commonly-owned company without the prior consent of Lessor. Apart from the foregoing, neither party may assign or transfer its rights, benefits, duties or obligations under this Agreement without the prior written consent of the other, which consent shall not be unreasonably witheld. 12. INDEMNIFICATION. A) By Lessor. To the extent permitted by state and federal law and its charter or by-laws, Lessor shall forever protect, save and keep Lessee and its permitted successors and assigns harmless and indemnify Lessor against and from any and all claims, demands, losses, costs, damages, suits, judgments, penalties, expenses and liabilities or any kind or nature whatsoever, including reasonable attorneys' fees, arising directly or indirectly out of (i) the willful misconduct of Lessor, its agents or employees, in connection with the performance of this Agreement; (ii) any programming transmitted by Lessor during any of Lessor's Airtime. B) By Lessee. To the extent permitted by state and federal law and its charter or by-laws, Lessor shall forever protect, save and keep Lessee and its permitted successors and assigns harmless and indemnify Lessor against and from any and all claims, demands, losses, costs, damages, suits, judgments, penalties, expenses and liabilities or any kind or nature whatsoever, including reasonable attorneys' fees, which arise directly or indirectly out of (i) the negligence or willful misconduct of Lessee, its agents or employees, in connection with the performance of this Agreement; (ii) any programming transmitted by Lessee or any of its authorized agents or subcontractors with the public, third parties and subscribers to the Lessee's programming service; or (iv) any maintenance, installation or other work performed by Lessee or any authorized agent or subcontractor under this Agreement. C) Notice of Claim; Defense of Claim. Each party shall notify the other of any such claim promptly upon receipt of same. Either party (hereinafter referred to as appropriate the "Indemnitor" or Indemnitee") shall have the option to defend, at its own expense, any claims arising under this Paragraph. In Indemnitor assumes the defense of any such claim, Indemnitee shall delegate complete and sole authority to the Indemnitor to defend or settle same and Indemnitee shall cooperate with Indemnitor in the defense thereof. 13) INSURANCE. A) Policies Required. At its expense, Lessee shall secure and maintain with financially reputable insurers, one or more policies of insurance insuring the Leased Equipment and Lessee's utilization of the ITFS Channels against casualty and other losses of the kinds customarily insured against by firms of established reputations engaged in the same or similar line of business, or such types and in such amounts as are customarily carried under similar circumstances by such firms, including, without limitation: (i) "All Risk" property insurance covering the ITFS Equipment and the common Equipment to the extent of one hundred percent (100%) of its full replacement value without deduction for depreciation: (ii) comprehensive general public liability insurance covering liability resulting from lessee's operation of the ITFS equipment on an occurrence basis having minimum limits of liability in an amount of not less than One Million Dollars ($1,000,000.00) for bodily injury, personal injury or death to any person or persons in any one occurrence, and not less than Two Million Dollars ($2,000,000.00) in the aggregate for all such losses during each policy year, and not less than Three Hundred Thousand Dollars ($300,000.00) with respect to damage to property; (ii) all workers compensation, automobile liability and similar insurance required by law. B) Insurance Policy Forms. All policies of insurance required by this Paragraph shall, whre appropriate, designate Lessor as either the insured party or as a named additionally insured party, shall be written as primary policies, not contributory with and not in excess of any coverage which Lessor shall carry, and shall contain a provision that the issuer shall give to Lessor thirty (30) days prior written notice of any cancellation or lapse of such insurance or of any change in the coverage thereof. C) Proof of Insurance. Executed copies of the policies of insurance required under this section or certificates thereof shall be delivered to Lessor not later than ten (10) after execution of this agreement. Lessee shall furnish Lessor evidence of renewal of each such policy not later than thirty (30) days prior to the expiration of the term thereof. 27. RELATIONSHIP OF PARTIES. By the provisions of this Agreement, Lessor and Lessee intend to enter an airtime lease relationship and not a joint venture. They will carry out this Agreement to preserve that intent. Neither party shall represent itself as the other party, nor as having any relationship with one another, except as Lessor and Lessee under the terms of this Agreement. 28. EQUIPMENT PURCHASE. C) Lessor's Option to Purchase. In the event that this Agreement is terminated, Lessor shall have the option to purchase the Leased Equipment used exclusively for Lessor's ITFS license. Any equipment which is used in a shared fashion (such as transmit antenna, decoders and combiners) in providing signals other than Lessor's signals are excluded from this option to purchase. The intent of the purchase option provided for in Paragraphs 16(A) is to provide Lessor with the capability to continue to perform on Lessor's ITFS license. The purchase price shall be the market value of such equipment noted above as determined by mutual agreement or by averaging the values obtained from two (2) appraisals, with one appraiser each chosen by Lessor and Lessee. D) Lessee's Option to Purchase. If during the terms of this Agreement the FCC modifies its rules so as to enable Lessee to be licensed to operate the ITFS frequencies, Lessee shall have a right of first refusal to acquire such licenses subject to the same terms and conditions as the right provided for in Paragraph 1(B). 29. NON-DISCLOSURE Lessor acknowledges that there may be made available to it pursuant to this Agreement proprietary information of Lessee relating to the encoding and/or decoding system associated with the ITFS channel equipment and its patented processes including, but not limited to, improvements, innovations, adaptation, inventions, results of experimentation, processes and methods, whether or not deemed patentable, and certain business and marketing techniques (all herein referred to as "Confidential Information"). Lessor acknowledges that this Confidential Information has been developed by Lessee at considerable effort and expense and represents special, unique and valuable proprietary assets of Lessee, the value of which may be destroyed by unauthorized dissemination. Accordingly, Lessor covenants and agrees that, except as may be required for the performance of this Agreement or by law or court order, neither it nor any of its agents or affiliates shall disclose such Confidential Information to any third person, firm, corporation or other entity for any reason whatsoever, such undertaking to be enforceable by injunctive or other equitable relief to prevent any violation or threatened violation thereof. 30. NON-COMPETITION During the term of this Agreement, Lessor agrees not to transmit programming or to lease or sublease any channel capacity on its ITFS Facilities for the transmission of programming that is competitive with the programming transmitted by Lessee. 31. FORCE MAJEURE If by reason of Force Majeure either party is unable in whole or in part to perform its obligations hereunder, the party shall not be deemed in violation of default during the period of such inability. As used herein, the phrase "Force Majeure", shall mean the following: act of God, acts of public enemies, orders of any branch of the government of the United States of America, any state or any political subdivisions, thereof which are not the result of a breach of this Agreement, orders of any military authority insurrections, riots, epidemics, fires, civil disturbances, explosions, or any other cause or event not reasonably within control of the adversely affected party. 32. CONDITION PRECEDENT This Agreement is conditional on the issuance of a Final Order by the FCC granting Lessor a construction permit for the ITFS Channels in the Market from the Transmission Site. By "Final Order" the parties mean an action or order of the FCC which is not reversed, stayed, enjoined, vacated, set aside, annulled or suspended and with respect to which no timely-filed request for administrative or judicial review is pending and as to which the time for filing any such request, or for the FCC to set aside the action on its own motion, has expired. 33. NOTICE Any notice required to be given to Lessor under any provision of this Agreement shall be delivered personally or by certified mail to Lessor at the address first written above. Any notice required to be given to Lessee under any provision of this Agreement shall be delivered personally or by certified mail to Lessee at the address first written above. 34. SEVERABILITY Should any court or agency determine that any provision of this Agreement is invalid, the remainder of the Agreement shall remain in effect. 35. WAIVER A waiver by either Lessor or Lessee of a breach of any provision of this Agreement shall not be deemed to constitute a waiver of any preceding or subsequent breach of the same provision or of any other provision. 36. PAYMENT OF EXPENSES AND SIGNING FEES A signing fee of One Dollar ($1) shall be paid to Lessor. Lessee shall pay all costs and expenses incident to fulfilling or modifying this Agreement, such as, attorneys' fees or, if necessary, any travel expenses approved in advance by Lessee, FCC filing fees, and engineering costs. 37. VENUE AND GOVERNING LAW Venue for any cause of action brought by or between Lessor and/or Lessee relating to this Agreement shall be in California and all provisions of this Agreement shall be construed under the laws of the State of California and County of Lessor. 38. COUNTERPARTS This Agreement may be executed in one or more counterparts each of which shall be deemed an original, but all of which shall constitute one and the same instrument, and shall become effective when each of the parties hereto shall have delivered to it this Agreement duly executed by each of the other parties hereto. 39. ENTIRE AGREEMENT This Agreement constitutes the entire Agreement between the parties and supersedes all prior oral or written provisions of any kind. The parties further agree that this Agreement may only be modified by written Agreement signed by both parties. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on this day of July 1st, 1999. SHEKINAH NETWORK By: ______________________________ Name: Charles J. McKee Title: President WORLD WIDE WIRELESS COMMUNICATIONS, INC. By: ______________________________ Name: Douglas P. Haffer Title: President Address for Notices: Shekinah Network 14875 Powerline road Atascadero, CA 93422 Phone/Fax: (805) 438-3341 Attn: Charles McKee, President Gardner, Carton & Douglas Attn: Laura Mow 1301 K Street, N.W., Suite 900 Washington, D.C. 20005 Phone: (202) 408-7100 Fax: (202) 289-1504 World Wide Wireless Communications, Inc. One Post Street Suite 2600 San Francisco, CA 94104 Phone: (415) 981- 7777 Fax: (415) 391-3199 EXHIBIT A Schedule of Airtime EXHIBIT B Receive Sites There shall be attached hereto and incorporated by reference a copy of FCC Form 330 Section IV listing Lessor" receive sites. EXHIBIT C Leased Equipment Noted below is a list of equipment that Lessee is leasing to Lessor: (3) Four (4) ITFS tansmitters and related hardware (4) Lessor's ITFS receive site antennas and related hardware *(3) Combining network, transmission line and antenna *Common Equipment EXHIBIT D Service and Royalty Fees 1. Lessor's Service Fee Services Provided Annual Fee ----------------- ---------- (d) Lease of Leased Equipment [6(A)] $1.00 (e) Maintenance of Leased Equipment [3(D)] $1.00 (f) Lease of space at Primary Transmission Site [3A)] $1.00 2. Lessee's Subscriber Royalty Fee Lessee shall pay Lessor a minimum monthly Transmission Fee 5% of the system's Gross receipts or a monthly minimum payment of $500 per month whichever is greater. Payment shall be as follows: Commencing on the Execution (Effective) Date and as defined in Paragraph 6)B, payments for each month shall be made by the twentieth (20th) day of the following month. EXHIBIT E Programming In addition to digital data services, such as the Internet or Intranet, the following is a list of video programming services Lessee may provide over Lessee's System. TLC - The Leaning Channel TWC - The Weather Channel Lifetime ESPN - Sports AMC - American Movie Classics SCOLA WHTN - World Harvest Television Network ECO - Galavision CNN - Cable News Network CNN - Headline News C-Span I C-Span II BET - Black Entertainment Network CNBC - Consumer News & Business Channel Nickelodeon The Discovery Channel A&E - Arts and Entertainment The Family Channel The Disney Channel PBS - Public Broadcasting Service TBN - Trinity Broadcasting Network TNIN - The New Inspirational Network ME/U - Mind Extension Network The International Channel BRAVO Network The Travel Channel Family Network Keystone Inspirational Network EX-10.5 13 0013.txt LEASE AGREEMENT--CASPER, WYOMING LEASE AGREEMENT BETWEEN WORLD WIDE WIRELESS COMMUNICATIONS, INC. AND SHEKINAH NETWORK Casper, Wyoming ITFS EXCESS CAPACITY AIRTIME LEASE AGREEMENT THIS AGREEMENT is made this 1st day of August 1999 by Shekinah Network (hereinafter referred to as "Lessor") having its principal place of business at 14875 Powerline Road, Atascadero, CA 93422 and World Wide Wireless Communications, Inc. (hereinafter referred to as "Lessee") having its principal place of business at One Post Street, Suite 2600 San Francisco, CA 94104. WHEREAS, the Federal Communications Commission ("FCC") has authorized licenses for Instructional Television Fixed Service ("ITFS") channels and has authorized the licensee to lease excess capacity to non-ITFS users; and WHEREAS, Lessor has been granted an FCC License for (call sign) WNC-798 (the "License") for the Channel group C1-4 (the "ITFS Channels") in Casper, Wyoming ("The Market"); and WHEREAS, Lessee is in the business of providing voice, video, data and other services via microwave transmission in the Market Area and desires to lease the excess ITFS capacity of the ITFS channels; and WHEREAS, Lessor has determined that there will be excess airtime capacity available on the ITFS Channels and desires to lease this excess airtime capacity to Lessee. NOW, THEREFORE, in consideration of the mutual promises, undertakings, covenants and conditions set forth herein, the Lessor and Lessee do hereby agree and warrant as follows: 5. TERM OF AGREEMENT A. Initial Term. This Agreement shall be effective upon the date of its execution and shall extend for an initial term of five (5) years (the "Initial Term"). B. Renewal Term Provided that the License is renewed by the FCC, Lessee shall have the right to extend this Agreement on its then existing terms and conditions for one (1) additional five (5) year term (the "Renewal Term"). The Renewal Term shall automatically go into effect upon the conclusion of the Initial Term unless Lessee notifies Lessor at least one hundred eighty days (180) before the end of the Initial Term that Lessee does not wish to extend this Agreement. C. New Lease Agreement/Right of first Refusal. (1) Providing that Lessor's FCC license remains in good standing and/or Lessor seeks to renew such license, Lessee and Lessor shall negotiate in good faith for a new excess capacity airtime lease agreement (hereinafter referred to as "New Lease Agreement") no later than one hundred eighty days (180) prior to the end of the latter of (i) Initial Term or (ii) the Renewal Term if the Agreement is extended for the Renewal Term. (4) If Lessor elects to not reasonably pursue a New Lease Agreement with Lessee, then Lessor shall so notify Lessee in writing of such intent no later than one hundred eighty (180) days prior to the end of the Renewal Term. (3) If Lessor and Lessee do not enter into a New Lease Agreement, Lessor grants Lessee a right of first refusal on any competing proposals for lease agreements or transfers or assignments of any part of the ITFS Channels received by Lessor during the twelve (12) months following the expiration of the latter of (i) the Initial Term or (ii) the Renewal Term, if the Agreement is extended for the Renewal Term. If any acceptable offer to lease or acquire the ITFS Channels is made to Lessor, Lessor shall give written notice to Lessee describing the person to whom the proposed lease or transfer is to be made, the fees, charges, rental or other consideration to be received fro the lease or transfer, the terms thereof and generally the relevant other terms and conditions of the lease or transfer. Lessee shall have a period of thirty (30) days after its receipt of such notice from Lessor in which to elect, by giving written notice to Lessor, to lease or, if eligible, obtain any or all of the ITFS Channels for the same fees, charges, rental or other consideration for which Lessor proposed to lease or transfer to the third person. (i) The fees, charges, rental or consideration shall be paid by such third person or Lessee in cash. (vi) If Lessor does not believe Lessee's stated offer is in an amount fairly equivalent to the fair value of the consideration payable by the third person and so notifies Lessee in writing within seven (7) days after Lessor's receipt of Lessee's notice of election to so lease or purchase, Lessee may within five (5) days after its receipt of such notice from Lessor elect to refer such question for determination by an impartial arbitrator and the right of first refusal of Lessee shall then be held open until (5) days after Lessee is notified of such determination. Such arbitrator shall be chosen either by agreement of Lessee and Lessor at the time such question arises, or, at the option of either party, by referring the question to the American Arbitration Association with instructions that the American Arbitration Association select a single arbitrator under a request from the parties for expedited and accelerated determination. The determination of the arbitrator chosen under either option contained in this subparagraph shall be final and binding upon Lessee and Lessor. The parties shall share equally in the costs and fees of the arbitration (vii) In the event Lessee shall elect to exercise its right of first refusal, the lease agreement or other transfer or assignment shall be consummated within thirty (30) days of the latest of: (1) the day on which Lessor received notice of Lessee's election to exercise the right of first refusal; (2) the day upon which any question required to be determined by the arbitrator hereunder has been determined; or (3) the date of any FCC approval in the case of assignment or transfer; or at such other time as may be mutually agreed. The right of first refusal is terminated either by the lease or other transfer to Lessee as provided herein or by notice to Lessee of the Lessor's proposal to lease or otherwise transfer the ITFS Channels or any part to a third person and Lessee's unwillingness or failure to meet and accept such a bona fide offer pursuant to the times and procedures as set forth above; provided that such proposed lease or transfer is consummated at the same fees, charges, rental or other consideration and upon the same terms as to which such right of first refusal applied, within thirty (30) days after Lessee's right of first refusal had expired or had been specifically waived by written notice given to Lessor by Lessee, or within thirty (30) days following FCC approval in the case of assignment or transfer. C) Operation During End of Term. If Lessor and Lessee do not enter into New Lease Agreement before the end of the Initial Term, Lessee shall cease leasing the ITFS Channels on the last day of the Initial Term. D) No Rights Beyond Term of Licenses. Lessor and Lessee agree that this Agreement shall not give rise to any rights or remedies beyond the expiration of any FCC license necessary for the continued operation of the ITFS Channels. Provided, however, that while this Agreement is in effect, Lessor shall obtain and maintain in force all licenses, permits and authorizations required or desired in connection with the use of the ITFS Channels. Lessor shall take all necessary steps to renew the licenses for the ITFS Channels and shall not commit any act or engage in any activity which could reasonably be expected to cause the FCC to impair, restrict, revoke, cancel, suspend or refuse to renew the ITFS licenses. Lessor shall take all reasonable steps to comply with the Communications Act of 1934, as amended and the rules and regulations of the FCC, and shall file all reports, schedules and/or forms required by the FCC to be filed by Lessor. All expenses, including attorneys fees and filing fees, incurred in preparing and filing such reports, schedules and/or forms required by the FCC shall be paid by the Lessee. 6. ALLOCATION OF AIRTIME. A. Excess Capacity Airtime. To the extent allowed by the FCC rules and regulations and any amendments thereof, Lessor agrees to lease to Lessee the exclusive use of all excess capacity not utilized by Lessor ("Excess Capacity Airtime"). B. Lessor's Primary Airtime. During analog transmission over the ITFS Channels, Lessor reserves for its exclusive use a minimum of twenty (20) hours of airtime per-channel per-week to be used for its ITFS scheduled programs. During digital transmission ovr the ITFS Channels, Lessor shall have the exclusive use of 12.5% of the total capacity available on the Lessor's ITFS Channels. This airtime shall be know as "Lessor's Primary Airtime". C. Schedule of Airtime. The schedule which depicts the agreement of the parties as to use of Lessor's Channels shall be attached hereto and made a part hereof as Exhibit A which is subject to change upon agreement by both parties. D. Lessee's use of its Excess Capacity Airtime. Lessee shall have the right to utilize its Excess Capacity Airtime for any purpose allowed or authorized by the FCC including but not limited to voice, video and data transmission. E. Alternate Use and Vertical Blanking Intervals. Lessor shall have the right to use the second audio carrier ("SAP") and vertical blanking intervals. ("VBI") on which Lessor's ITFS programming is being transmitted. Lessee shall at all times have the right to use the VBI and SAP not utilized by Lessor and 100% of the response frequencies associated with the ITFS Channels. Lessor shall be responsible for any equipment needed to utilize the VBI and/or SAP and such equipment shall be compatible with Lessee's system. F. Lessor's Use of ITFS Channels. Lessor agrees that its program services and airtime use will not harm or interfere with Lessee's current or future signal paths utilized within Lessee's System for program encryption, pilot carrier signaling and other technical needs utilized for the operation of and such services provided by Lessee's System. Nor will Lessor, by its own action, or through a third party, utilize any part of its licensed frequency spectrum to create or operate a service that is in competition with current, planned or future services provided by Lessee's System. Lessor agrees to use its Primary Airtime in accordance with the FCC's rules and regulations. Lessor shall not take or fail to take any action which may have a material adverse effect on Lessee's right to utilize its Excess Capacity Airtime. G. Expanded System Capacity. Lessee shall have the right at anytime to require Lessor to file with the FCC any necessary application to expand the channel capacity to Lessor's station to enable it to carry more than one video signal per channel or digital data services; provided however, before Lessee can exercise this right, it must demonstrate to the Lessor's reasonable satisfaction that such modification will not materially degrade the performance of the station nor impair signal quality at the registered ITFS receive sites. Once such modification has been constructed, the modified facilities shall automatically be considered a part of this agreement and subject to all terms and conditions hereof. It is understood that Lessee shall have the full-time use of the Expanded Channels to the extend permitted by FCC rules. 3. TRANSMISSION SITE AND FACILITIES. E. Primary Transmission Site. Lessor's ITFS Channels are located at Key West, FL, Lessee agrees to provide Lessor space at the Primary Transmission site for Lessor's audio and video transmission equipment which shall not exceed on rack. Such space shall be leased to Lessor pursuant to Exhibit D hereto. This site shall hereinafter be described as the "Primary Transmission Site". At Lessee's sole expense, Lessee shall contract for a lease of space at the Transmission Site upon such terms as the parties agree. The Transmission Site shall comply with the standards, specifications and regulations of the FCC rules and orders pertaining to Lessor's ITFS license. F. Relocation of Transmission Site. (i) Lessor acknowledges that the location of the Primary Transmission Site for ITFS Channels is critical to the Lessee's business and agrees that it will not relocate the transmission facilities for ITFS Channels from the Primary Transmission Site without Lessee's prior written consent. (ii) Lessor further acknowledges that possibility that, as a result of currently unforeseen events, the Primary Transmission Site may not be the optimum site for the location of the ITFS Channels or Lessee's business throughout the term of this Lease Agreement. Lessor therefore agrees that if at any time or from time to time Lessee requests in writing that the transmission facilities for the ITFS Channels be relocated, Lessor shall file with the FCC and any other regulatory body having jurisdicition over the ITFS Channels all applications, amendments, and requests for modification that may be necessary to obtain any necessary consents to permit such relocation to such location within or adjacent to the Market as may be requested by Lessee; provided, however, that Lessor shall not be obligated to submit or procecute any application, amendment, or request for modification that Lessor reasonably determines, upon advice of counsel contained in a written opinion, would be in violation of the terms of the License, any statute, rule, or regulations regarding the operation of the ITFS Channels or the submission of materials to the FCC, or any of its obligations as an ITFS licensee; and provided, further, that any such relocation will not result in loss of service to Lessor's registered receive sites served by the transmission facilities in the event that the authorization is obtained to relocate the ITFS Channels to the location requested by Lessee, Lessor shall relocate such channels to such new location as soon as reasonably possible after authorization is obtained. Lessee shall bear reasonable costs associated with such relocation, including engineering and construction, and all reasonable costs associated with obtaining FCC or any other regulatory approval therefore. (iii) Lessor agrees to file modification applications requested by Lessee. Such modifications may include but shall not be limited to the following: power increase or decrease, polarization, transmit antenna patterns, digital, two-way (return path) use of the ITFS Channels, boosters, beam benders or repeaters, cells, sectorization, channel swaps, channel loading, channel shifting and application within five (5) business days or receipt of the modification application from Lessee or during any FCC designated filing window. Lessee will use reasonable efforts to provide Lessor with the engineering for the modification thirty (30) days prior to the request for filing. If Lessor believes that such modification will have an adverse effect on Lessor's ability to provide its services to its receive sites, Lessor agrees to file the modification application as presented by Lessee and within the time limit requested by Lessee; however, Lessee agrees not to implement construction and Lessor agrees not to withdraw the application until the parties have adequately addressed and resolved the potential material adverse effect or the matter has been submitted to arbitration pursuant to Section 16 and a final decision has been rendered by arbitrator. Although Lessee intends to file such modification applications, it may elect not to construct the Channels in that manner and may desire to utilize the Channels as currently licensed. A copy of the modification application, bearing the FCC's date stamp, shall be mailed to Lessee by Lessor, within fourteen (14) days of the filing of the modification application. Lessee shall be solely responsible for all engineering and legal costs associated with the preparation, review and filing of the modification application. In the event that any license modification requested by Lessee requires receive site upgrades in order for Lessor's receive sites to continue to receive Lessor's services, then Lessee agrees to pay for all costs to complete such upgrade prior to implementing the license modification. C. System Construction. Lessee shall within a reasonable period of time, but not later than six (6) months after the FCC grant of digital authority for the ITFS Channels, purchase equipment such as the antenna, waveguide or transmitters specified on the authorization for the ITFS Channels. At Lessee's expense, Lessee shall purchase and install such transmitters, transmission line, modulators, antennas and other equipment as required to operate the ITFS Channels in accordance with the provision of such authorization. Any equipment so used in such construction shall be leased to lessor pursuant to Paragraph 5 hereof. Such equipment is hereinafter referred to as the "Leased Equipment". Lessee shall retain title to the Leased Equipment except as noted by Paragraph 15 herein. D. Maintenance of Transmission Equipment. At Lessee's expense and subject to Lessor's right to supervise the maintenance of this equipment, Lessee shall maintain and operate the Leased Equipment during the terms of this Agreement for a nominal fee. Lessee shall also pay all taxes and other charges assessed against the Leased Equipment. E. Transmission of Programming. At no cost or expense to Lessor, Lessee shall provide the necessary labor and equipment capabilities to transmit on the ITFS Channels programming required to be carried pursuant to this Agreement such as Lessor's ITFS programming and TBN. Lessee shall also comply with Lessor's instructions regarding the transmission of such programming such as the dates and times to transmit programming. F. Interference. Lessee shall operate the Leased Equipment so that such operation does not create or increase interference with electronic transmission of any other FCC licensees entitles to protection under FCC rules and regulations. If Lessee's entitled to protection under FCC rules and regulations. If Lessee's operation of the Lease Equipment does so create or increase interference, Lessee shall pay all of the reasonable engineering and legal fees necessary to resolve the interference problem so created. G. Alterations and Attachments. Lessee, at its own expense, may make alterations of or attachments to the ITFS equipment or the common equipment as defined in Exhibit C (including the installation of encoding and/or addressing equipment) as may be reasonably required from time to time by the nature of its business; provided however, that such alterations or attachments do not interfere with Lessor's signal or ongoing operations or violate any FCC rules or regulations; and provided further that FCC authorization, if required, is obtained in advance of any such alteration or attachment at the sole cost of Lessee. to the extent any FCC authorization pertaining to the ITFS equipment is required, Lessor agrees to use its best efforts to obtain such authorization. H. Licensee Control and Liability. Nothing herein shall derogate from such licensee control of operations of the ITFS Channels that Lessor, as an FCC licensee, shall be required to maintain and Lessee acknowledges the reservation by Lessor of such control. Lessor shall at all times retain ultimate and exclusive responsibility for the operation and control of the ITFS Channels including policy decisions. 4. LESSOR'S RECEIVE SITES. Attached hereto as Exhibit B is list of the registered receive sites designated by Lessor to receive its ITFS programming and to be installed at the expense of Lessee. Those receive sites so listed shall be installed with a Standard Installation. If as the result of any relocation of the Primary Transmit Site, the equipment at Lessor's existing registered receive sites must be reoriented, Lessee shall pay the cost of same. As used herein for the purposes of this Agreement, the phrase "Standard Installation" shall mean an installation consisting of the placement of the ITFS/MMDS receiving antenna at an elevation (not to exceed thirty [30] feet above the base mounting location) which could normally receive the line-of-sight transmission from the Transmission Site; the coupling thereto of a block-down converter; and a sufficient amount of transmission line (coaxial cable) to connect the received ITFS programming to the input of (i) one classroom designated by Lessor to receive the ITFS programming or (ii) the receive site internal/external distribution system. Also, if as the result of any relocation of the Transmit Site, the equipment at Lessor's existing receive sites must be reoriented, Lessee shall pay the cost of same. Lessee also agrees that for digital transmission of the ITFS Channels Lessee will purchase and install at Lessee's expense, one single-point modem to receive its ITFS programming. 5. LEASE OF EQUIPMENT. A) Lessor's Lease of Leased Equipment. For a nominal fee, Lessor shall lease from Lessee the Leased Equipment during the terms of this Agreement. A list of this equipment is attached hereto as Exhibit C and incorporated by reference herein. Lessor shall have no responsibility for the loss of or damage to the Leased Equipment during the terms of this Agreement and Lessee shall bear all such responsibility. 6. FEES. A) Lessor's Service Fee. In consideration of the lease of the Leased Equipment, and for its share of the projected costs to maintain the Transmission Site and the Lease Equipment, Lessor shall pay Lessee an annual fee provided for in Exhibit D. B) Subscriber Royalty Fees or Percentage. Beginning on the Execution Date of this Agreement and continuing thereafter during the Initial Term of this Agreement, Lessee shall pay to Lessor the Subscriber Royalty Fee, System Percentage or monthly minimum, whichever is greater as set out in Exhibit D which is attached herewith and incorporated by reference herein. If the Execution Date shall be a date other than the first day of a calendar month, then the Subscriber Royalty Fee for the partial month shall be paid on a proportionate basis. A late fee of 10% (ten percent) will be assessed to past due accounts, and a finance charge of one and one-half percent (1.5%) per month will be assessed in addition to the late fee until paid. C) Notice of Construction and Required Certificate. Within thirty (30) days of completion of construction at the Transmission Site, Lessee shall notify Lessor of such completion of construction in writing. Within thirty (30) days of the end of each month in which Excess Capacity Airtime is leased hereunder, Lessee shall provide Lessor with a certificate, certified as accurate and correct by an authorized agent of Lessee, showing the number of subscribers served during such month. D) Right to Audit. Lessee shall for a period of three (3) years after their creation, keep, maintain and preserve complete and accurate records and accounts, including all invoices, correspondence, ledgers, financial and other records pertaining to Lessee's use of Excess Capacity Airtime and Lessor's charges hereunder; and such records and corporate accounts shall be available for inspection and audit at Lessee's corporate offices or at Lessee's offices in the Market, as designated by Lessee, at any time or times during the term of this Agreement or within ninety (90) days thereafter, during reasonable business hours, by Lessor or its nominee. In the event that there is discovered an underpayment of the Subscriber Royalty Fee as defined in Paragraph 6 (B) above, Lessee shall pay to Lessor a penalty equal to ten percent (10%) of the amount of each such underpayment. All information obtained by Lessor during any audit herein shall be maintained by Lessor in strict confidence. 7. PROGRAMMING. A) Control Over Programming. (i) Program Content. Lessee intends that only programming of a sort which would not serve to place Lessor's reputation in the community in jeopardy will be transmitted by Lessee on the ITFS Channels. In an attempt to minimize disputes, recognizing the difficulties inherent in specifying exact standards herein, it is agreed that Lessee shall have the right to market the programming provided by the networks and services listed on Exhibit E. If, however, the programming content of any networks and services listed on Exhibit E materially changes, Lessor shall have the right, upon ninety (90) days notice, to deny Lessee the right to continue transmitting such programming if Lessor would have the right to deny Lessee the right to transmit such programming under the provisions of this paragraph in the first instance. If Lessee proposes to transmit the programming of any new programming service, the Lessee shall notify Lessor in writing specifying in detail the nature of the new programming service and Lessor shall have the right, upon written served upon Lessee within thirty (30) days after Lessor's receipt of any such notice from Lessee, to deny to Lessee the right to transmit such service if such programming is obscene and/or contradicting local, state and/or federal laws or otherwise violates any federal, state or local laws or regulations. If no such denial notice is received by Lessee within such thirty (30) days, lessee shall be authorized to transmit all such services for which no denial notice is received. There shall be no reduction in fees required under this Agreement for any such programming not permitted to be transmitted. B) Availability of Programming. It is understood by Lessee and Lessor that there is expected to be no direct out-of-pocket annual costs for the acquisition of the qualified ITFS educational programming for Lessor's use during Lessor's Primary Airtime on the ITFS channels, based on current plans. In the event that this ITFS educational programming either; (1) ceases to be available, or, (2) becomes available only at a fee, then Lessor may incur direct out-of-pocket costs in Lessor's acquisition of ITFS programming. Lessee agrees to provide its best efforts to assist Lessor in the acquisition of alternative programming, if necessary. Additionally, Lessee agrees to make payment to Lessor for the actual, direct programming costs incurred. If any; If Lessor, after expending its best efforts, is unable to obtain suitable ITFS programming for a cost equal to the amount to be paid by Lessee, Lessor and Lessee shall use their best efforts to reach agreement on modifications to this Agreement to avoid any un-reimbursed ITFS programming costs to Lessor. If no such agreement can be reached, Lessor may terminate this agreement. In the case of such termination, Lessor shall use its best efforts (with out-of-pocket costs of Lessor to be paid by Lessee, with Lessee's prior approval) to transfer the license for the ITFS Channels to another qualified educational entity, subject to FCC approval, with the intent of assigning this Agreement from Lessor to the new educational entity. C) Integration of Lessor's Programming. Lessee agrees to integrate Lessor's programming into the overall communications service offered to subscribers, without cost to Lessor. This integration shall include, but not be limited to, listing Lessor's material in any program guides produced by Lessee for subscribers. D) Carriage of TBN. In the event that Lessor's ITFS Channels are used for analog video transmission and TBN is not transmitted on a local VHF or UHF station, with a market coverage equivalent to both area and signal quality of our ITFS channels, and Lessee does not have local off-air insertion as part of its standard installation, then, if so designated by Lessor, Lessee agrees to transmit on one of the ITFS Channels the programming of Trinity Broadcasting Network ("TBN") during those time periods such channel is not used for Lessor's ITFS programming ("TBN Airtime") provided that Lessee is not required to pay a fee for carriage of TBN. In the event that Lessee is permitted to program the hours previously occupied by TBN, then Lessee shall increase, in proportion to the increase in Excess Capacity Airtime, the amount of minimum fees and subscriber royalty fees payable under the provision 6 (B) of this agreement during the remainder of the term(s) of the agreement. For purposes of calculating any such proportionate increase, the parties acknowledge and agree that the minimum fee and subscriber royalty fee agreed to herein are based on Lessee's equivalent use of three full-time ITFS channels. E) Station Identification. During Lessee's use of Lessor's excess channel capacity, Lessee shall transmit Lessor's call sign for each respective station as required by the FCC. 8. PROCECUTION OF PETITIONS, AUTHORIZATIONS AND LICENSES. A) Best Efforts to Secure Approval of this Agreement. The parties recognize that certain approvals will be required from the FCC in order to effectuate this Agreement. Both parties shall use their best efforts to prepare, file and prosecute before the FCC all petitions, waivers, applications and other documents necessary to secure any FCC approval required to effectuate this Agreement. Lessee shall assist in the preparation and prosecution of such applications and as provided for herein, shall pay all filing fees, attorneys' fees, engineering fees, and all other expenses in connection therewith. Lessor also agrees to cooperate with Lessee's efforts to cause other ITFS, OFS, MDs and MMDS operators to co-locate at the Transmission Site. Notwithstanding anything in this Agreement to the contrary, it is understood that no filing shall be made with the FCC with respect to this Agreement unless both parties have reviewed such filing and consented in writing to its submission, such consent not be unreasonably withheld. B) Further Efforts. Throughout the Initial Term of this Agreement, Lessor shall use its best efforts to obtain and maintain in force all licenses, permits and authorizations required for Lessee and Lessor to use the ITFS Channels as contemplated by this Agreement. Lessee shall be responsible for all cash expenses incurred to obtain and maintain in force such licenses, permits and authorizations. When mutually agreed by the parties and at Lessee's sole expense, Lessor shall apply for, and use its best efforts to obtain those reasonable license modifications which would assist Lessee in its business. Lessor also shall consider filing, at Lessee's sole expense, such reasonable protests, comments or other petitions to deny any other ITFS, MMDS, MDS and/or OFS applications or amendments as may be requested by Lessee in the mutual best interests of the parties and the public. Lessor and Lessee shall promptly notify each other of any event of which it has knowledge that may affect any of the licenses, permits or authorization affecting the ITFS Channels. C) Attorneys' Fees. With respect to any legal work conducted pursuant to Paragraph 8(A) and (B) above, Lessee shall be responsible for all attorneys' fees in connection therewith and shall make payments directly to the attorney. However, any attorney fees paid by Lessee shall be approved in advance by Lessee. 9. REPRESENTATIONS AND WARRANTIES. A) Representations and Warranties of Lessor. Lessor represents and warrants to Lesse as follows: (i) Organization. Lessor is a non-profit organization duly organized and existing in good standing under the laws of the State of California, and it has full power and authority to carry out all of the transactions contemplated by this Agreement and all other agreement, certificates or instruments executed and delivered in connection herewith. (ii) No Violation. Neither the execution nor delivery of this agreement or any other agreements, certificates or instruments executed and delivered herewith, nor the performance of the transactions contemplated hereby constitute or will constitute a violation of , be in conflict with, or a default under any term or provision of the governing instruments or Lessor or any agreement or commitment to which Lessor is bound, or any judgment, decree, order, regulation or rule of any court or governmental authority, or consent of any federal, state or local authority is required in connection with the execution and delivery of this Agreement or any other agreements, certificates or instruments executed and delivered herewith or with the performance of the transaction contemplated hereby. B) Representations and Warranties of Lessee. Lessee represents and warrants to Lessor as follows: (ii) Organization. Lessee is duly organized, validly existing and in good standing under the laws of the State of its incorporation and it has full power and authority to own property and carry all of the transactions contemplated by this Agreement, and all other agreements, certificates or instruments executed and delivered by Lessee in connection herewith. (ii) Corporation Action; Valid and Binding Agreements. Lessee has taken all corporate action necessary to authorize the execution and delivery of this Agreement and all other agreements, certificates or instruments executed and delivered in connection herewith. Upon execution and delivery, this Agreement and all other agreements, certificates or instruments executed and delivered by Lessee in connection herewith will constitute valid and binding agreements of Lessee enforceable in accordance with their respective terms. (iii) Litigation and Investigations. There is no action, suit, proceeding or investigation pending or, to the best of Lessee's knowledge, threatened against Lessee, its principals or related entities before any court, administrative agency or other governmental body, and Lessee does not know nor is aware of any reason for commencement of any such action, proceeding or investigation. (iv) Misrepresentation of Material Fact. To the best of Lessee's knowledge, information and believe, no document or contract that was shown to Lessor and which in any way affects any of the properties, assets or proposed transactions of Lessee as such relates to this Agreement, no certificate or statement furnished by or on behalf of Lessee in connection with this Agreement, nor this Agreement itself contains any untrue statement of material fact or omits to state a material fact which would make the statements contained herein misleading. C) Survival or Representations and Warranties. The representations and warranties contained in this Agreement shall be deemed to be continuing during the Initial terms of this Agreement, and each Party shall have the duty promptly to notify the notify the other of any event or circumstance which might reasonably be deemed to constitute a breach of or lead to a breach of its warranties or representations hereunder. The waiver by either Party of any breach of any presentation or warranty under this Agreement shall not constitute a waiver of any other representation or warranty or of any failure in the future by the other Party to fulfill such representation or warranty. 10. TERMINATION. A) Termination of FCC Authorization. Without further liability to either Lessor or Lessee, this Agreement shall terminate in the event that for any reason (i) Lessor shall not be licensed on the leased ITFS Channels, or (ii) the FCC shall terminate or diminish Lessor's authority to lease the ITFS Channels in accordance with the terms of this Agreement. B) Termination by Reason of Default or Nonperformance. At the option of the non-defaulting party, this Agreement may be terminated upon the material breach or default by the defaulting party of its duties and obligations hereunder is such breach or default is not cured by such defaulting party and is breach or default shall continue for a period of thirty (30) consecutive days after such defaulting party's receipt of notice thereof from the non-defaulting party. It is understood and agreed that any failure on the part of Lessee to make any payment required under Paragraph 6 hereof shall be a material breach of default of its duties and obligations hereunder. It is also understood and agreed that any consequences resulting from the loss of local participating receive sites shall not be considered a material breach or default by Lessor of its duties and obligations hereunder. C) Remedies to Continue. In the event of termination of this Agreement pursuant to Paragraph 10(B), such termination shall not affect or diminish the rights or claims or remedies available in equity or at law to the non-defaulting party arising by reason of a breach or default of this Agreement. However, no liability shall arise on the part of Lessor or Lessee upon termination of this Agreement pursuant to Paragraph 10(A) except where the loss of the FCC license occurs as a result of the default of either party. 11. TRANSFER OF RIGHTS AND OBLIGATIONS. Lessee shall have the right to assign its rights under this lease as collateral for any financing arrangements it makes. Lessee shall also have the right to pledge the Leased Equipment as collateral security for any loans it makes; provided, however, that any pledge of the Leased Equipment shall be made subject to the provisions of this lease. Lessee shall further have the right to subcontract any portion of its obligations under this Agreement to any partnership, joint venture, corporation or entity which Lessee may choose, provided that Lessee gives Lessor notice of any proposed subcontracting and, provided further, that no such subcontracting shall release Lessee from fulfilling all of its obligations under this Agreement. Lessee shall have the right to assign or transfer its rights, benefits, duties and obligations under this Agreement to a commonly-owned company without the prior consent of Lessor. Apart from the foregoing, neither party may assign or transfer its rights, benefits, duties or obligations under this Agreement without the prior written consent of the other, which consent shall not be unreasonably witheld. 12. INDEMNIFICATION. A) By Lessor. To the extent permitted by state and federal law and its charter or by-laws, Lessor shall forever protect, save and keep Lessee and its permitted successors and assigns harmless and indemnify Lessor against and from any and all claims, demands, losses, costs, damages, suits, judgments, penalties, expenses and liabilities or any kind or nature whatsoever, including reasonable attorneys' fees, arising directly or indirectly out of (i) the willful misconduct of Lessor, its agents or employees, in connection with the performance of this Agreement; (ii) any programming transmitted by Lessor during any of Lessor's Airtime. B) By Lessee. To the extent permitted by state and federal law and its charter or by-laws, Lessor shall forever protect, save and keep Lessee and its permitted successors and assigns harmless and indemnify Lessor against and from any and all claims, demands, losses, costs, damages, suits, judgments, penalties, expenses and liabilities or any kind or nature whatsoever, including reasonable attorneys' fees, which arise directly or indirectly out of (i) the negligence or willful misconduct of Lessee, its agents or employees, in connection with the performance of this Agreement; (ii) any programming transmitted by Lessee or any of its authorized agents or subcontractors with the public, third parties and subscribers to the Lessee's programming service; or (iv) any maintenance, installation or other work performed by Lessee or any authorized agent or subcontractor under this Agreement. C) Notice of Claim; Defense of Claim. Each party shall notify the other of any such claim promptly upon receipt of same. Either party (hereinafter referred to as appropriate the "Indemnitor" or Indemnitee") shall have the option to defend, at its own expense, any claims arising under this Paragraph. In Indemnitor assumes the defense of any such claim, Indemnitee shall delegate complete and sole authority to the Indemnitor to defend or settle same and Indemnitee shall cooperate with Indemnitor in the defense thereof. 13) INSURANCE. A) Policies Required. At its expense, Lessee shall secure and maintain with financially reputable insurers, one or more policies of insurance insuring the Leased Equipment and Lessee's utilization of the ITFS Channels against casualty and other losses of the kinds customarily insured against by firms of established reputations engaged in the same or similar line of business, or such types and in such amounts as are customarily carried under similar circumstances by such firms, including, without limitation: (i) "All Risk" property insurance covering the ITFS Equipment and the common Equipment to the extent of one hundred percent (100%) of its full replacement value without deduction for depreciation: (ii) comprehensive general public liability insurance covering liability resulting from lessee's operation of the ITFS equipment on an occurrence basis having minimum limits of liability in an amount of not less than One Million Dollars ($1,000,000.00) for bodily injury, personal injury or death to any person or persons in any one occurrence, and not less than Two Million Dollars ($2,000,000.00) in the aggregate for all such losses during each policy year, and not less than Three Hundred Thousand Dollars ($300,000.00) with respect to damage to property; (ii) all workers compensation, automobile liability and similar insurance required by law. B) Insurance Policy Forms. All policies of insurance required by this Paragraph shall, whre appropriate, designate Lessor as either the insured party or as a named additionally insured party, shall be written as primary policies, not contributory with and not in excess of any coverage which Lessor shall carry, and shall contain a provision that the issuer shall give to Lessor thirty (30) days prior written notice of any cancellation or lapse of such insurance or of any change in the coverage thereof. C) Proof of Insurance. Executed copies of the policies of insurance required under this section or certificates thereof shall be delivered to Lessor not later than ten (10) after execution of this agreement. Lessee shall furnish Lessor evidence of renewal of each such policy not later than thirty (30) days prior to the expiration of the term thereof. 40. RELATIONSHIP OF PARTIES. By the provisions of this Agreement, Lessor and Lessee intend to enter an airtime lease relationship and not a joint venture. They will carry out this Agreement to preserve that intent. Neither party shall represent itself as the other party, nor as having any relationship with one another, except as Lessor and Lessee under the terms of this Agreement. 41. EQUIPMENT PURCHASE. E) Lessor's Option to Purchase. In the event that this Agreement is terminated, Lessor shall have the option to purchase the Leased Equipment used exclusively for Lessor's ITFS license. Any equipment which is used in a shared fashion (such as transmit antenna, decoders and combiners) in providing signals other than Lessor's signals are excluded from this option to purchase. The intent of the purchase option provided for in Paragraphs 16(A) is to provide Lessor with the capability to continue to perform on Lessor's ITFS license. The purchase price shall be the market value of such equipment noted above as determined by mutual agreement or by averaging the values obtained from two (2) appraisals, with one appraiser each chosen by Lessor and Lessee. F) Lessee's Option to Purchase. If during the terms of this Agreement the FCC modifies its rules so as to enable Lessee to be licensed to operate the ITFS frequencies, Lessee shall have a right of first refusal to acquire such licenses subject to the same terms and conditions as the right provided for in Paragraph 1(B). 42. NON-DISCLOSURE Lessor acknowledges that there may be made available to it pursuant to this Agreement proprietary information of Lessee relating to the encoding and/or decoding system associated with the ITFS channel equipment and its patented processes including, but not limited to, improvements, innovations, adaptation, inventions, results of experimentation, processes and methods, whether or not deemed patentable, and certain business and marketing techniques (all herein referred to as "Confidential Information"). Lessor acknowledges that this Confidential Information has been developed by Lessee at considerable effort and expense and represents special, unique and valuable proprietary assets of Lessee, the value of which may be destroyed by unauthorized dissemination. Accordingly, Lessor covenants and agrees that, except as may be required for the performance of this Agreement or by law or court order, neither it nor any of its agents or affiliates shall disclose such Confidential Information to any third person, firm, corporation or other entity for any reason whatsoever, such undertaking to be enforceable by injunctive or other equitable relief to prevent any violation or threatened violation thereof. 43. NON-COMPETITION During the term of this Agreement, Lessor agrees not to transmit programming or to lease or sublease any channel capacity on its ITFS Facilities for the transmission of programming that is competitive with the programming transmitted by Lessee. 44. FORCE MAJEURE If by reason of Force Majeure either party is unable in whole or in part to perform its obligations hereunder, the party shall not be deemed in violation of default during the period of such inability. As used herein, the phrase "Force Majeure", shall mean the following: act of God, acts of public enemies, orders of any branch of the government of the United States of America, any state or any political subdivisions, thereof which are not the result of a breach of this Agreement, orders of any military authority insurrections, riots, epidemics, fires, civil disturbances, explosions, or any other cause or event not reasonably within control of the adversely affected party. 45. CONDITION PRECEDENT This Agreement is conditional on the issuance of a Final Order by the FCC granting Lessor a construction permit for the ITFS Channels in the Market from the Transmission Site. By "Final Order" the parties mean an action or order of the FCC which is not reversed, stayed, enjoined, vacated, set aside, annulled or suspended and with respect to which no timely-filed request for administrative or judicial review is pending and as to which the time for filing any such request, or for the FCC to set aside the action on its own motion, has expired. 46. NOTICE Any notice required to be given to Lessor under any provision of this Agreement shall be delivered personally or by certified mail to Lessor at the address first written above. Any notice required to be given to Lessee under any provision of this Agreement shall be delivered personally or by certified mail to Lessee at the address first written above. 47. SEVERABILITY Should any court or agency determine that any provision of this Agreement is invalid, the remainder of the Agreement shall remain in effect. 48. WAIVER A waiver by either Lessor or Lessee of a breach of any provision of this Agreement shall not be deemed to constitute a waiver of any preceding or subsequent breach of the same provision or of any other provision. 49. PAYMENT OF EXPENSES AND SIGNING FEES A signing fee of One Dollar ($1) shall be paid to Lessor. Lessee shall pay all costs and expenses incident to fulfilling or modifying this Agreement, such as, attorneys' fees or, if necessary, any travel expenses approved in advance by Lessee, FCC filing fees, and engineering costs. 50. VENUE AND GOVERNING LAW Venue for any cause of action brought by or between Lessor and/or Lessee relating to this Agreement shall be in California and all provisions of this Agreement shall be construed under the laws of the State of California and County of Lessor. 51. COUNTERPARTS This Agreement may be executed in one or more counterparts each of which shall be deemed an original, but all of which shall constitute one and the same instrument, and shall become effective when each of the parties hereto shall have delivered to it this Agreement duly executed by each of the other parties hereto. 52. ENTIRE AGREEMENT This Agreement constitutes the entire Agreement between the parties and supersedes all prior oral or written provisions of any kind. The parties further agree that this Agreement may only be modified by written Agreement signed by both parties. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on this day of July 1st, 1999. SHEKINAH NETWORK By: ______________________________ Name: Charles J. McKee Title: President WORLD WIDE WIRELESS COMMUNICATIONS, INC. By: ______________________________ Name: Douglas P. Haffer Title: President Address for Notices: Shekinah Network 14875 Powerline road Atascadero, CA 93422 Phone/Fax: (805) 438-3341 Attn: Charles McKee, President Gardner, Carton & Douglas Attn: Laura Mow 1301 K Street, N.W., Suite 900 Washington, D.C. 20005 Phone: (202) 408-7100 Fax: (202) 289-1504 World Wide Wireless Communications, Inc. One Post Street Suite 2600 San Francisco, CA 94104 Phone: (415) 981- 7777 Fax: (415) 391-3199 EXHIBIT A Schedule of Airtime EXHIBIT B Receive Sites There shall be attached hereto and incorporated by reference a copy of FCC Form 330 Section IV listing Lessor" receive sites. EXHIBIT C Leased Equipment Noted below is a list of equipment that Lessee is leasing to Lessor: (5) Four (4) ITFS tansmitters and related hardware (6) Lessor's ITFS receive site antennas and related hardware *(3) Combining network, transmission line and antenna *Common Equipment EXHIBIT D Service and Royalty Fees 1. Lessor's Service Fee Services Provided Annual Fee ----------------- ---------- (g) Lease of Leased Equipment [6(A)] $1.00 (h) Maintenance of Leased Equipment [3(D)] $1.00 (i) Lease of space at Primary Transmission Site [3A)] $1.00 2. Lessee's Subscriber Royalty Fee Lessee shall pay Lessor a minimum monthly Transmission Fee 5% of the system's Gross receipts or a monthly minimum payment of $500 per month whichever is greater. Payment shall be as follows: Commencing on the Execution (Effective) Date and as defined in Paragraph 6)B, payments for each month shall be made by the twentieth (20th) day of the following month. EXHIBIT E Programming In addition to digital data services, such as the Internet or Intranet, the following is a list of video programming services Lessee may provide over Lessee's System. TLC - The Leaning Channel TWC - The Weather Channel Lifetime ESPN - Sports AMC - American Movie Classics SCOLA WHTN - World Harvest Television Network ECO - Galavision CNN - Cable News Network CNN - Headline News C-Span I C-Span II BET - Black Entertainment Network CNBC - Consumer News & Business Channel Nickelodeon The Discovery Channel A&E - Arts and Entertainment The Family Channel The Disney Channel PBS - Public Broadcasting Service TBN - Trinity Broadcasting Network TNIN - The New Inspirational Network ME/U - Mind Extension Network The International Channel BRAVO Network The Travel Channel Family Network Keystone Inspirational Network EX-10.6 14 0014.txt LEASE AGREEMENT--GRAND RAPIDS, MICHIGAN LEASE AGREEMENT BETWEEN WORLD WIDE WIRELESS COMMUNICATIONS, INC. AND SHEKINAH NETWORK Grand Rapids, Michigan ITFS EXCESS CAPACITY AIRTIME LEASE AGREEMENT THIS AGREEMENT is made this 1st day of August 1999 by Shekinah Network (hereinafter referred to as "Lessor") having its principal place of business at 14875 Powerline Road, Atascadero, CA 93422 and World Wide Wireless Communications, Inc. (hereinafter referred to as "Lessee") having its principal place of business at One Post Street, Suite 2600 San Francisco, CA 94104. WHEREAS, the Federal Communications Commission ("FCC") has authorized licenses for Instructional Television Fixed Service ("ITFS") channels and has authorized the licensee to lease excess capacity to non-ITFS users; and WHEREAS, Lessor has been granted an FCC License for (call sign) WNC-798 (the "License") for the Channel group C1-4 (the "ITFS Channels") in Grand Rapids, Michigan ("The Market"); and WHEREAS, Lessee is in the business of providing voice, video, data and other services via microwave transmission in the Market Area and desires to lease the excess ITFS capacity of the ITFS channels; and WHEREAS, Lessor has determined that there will be excess airtime capacity available on the ITFS Channels and desires to lease this excess airtime capacity to Lessee. NOW, THEREFORE, in consideration of the mutual promises, undertakings, covenants and conditions set forth herein, the Lessor and Lessee do hereby agree and warrant as follows: 7. TERM OF AGREEMENT A. Initial Term. This Agreement shall be effective upon the date of its execution and shall extend for an initial term of five (5) years (the "Initial Term"). B. Renewal Term Provided that the License is renewed by the FCC, Lessee shall have the right to extend this Agreement on its then existing terms and conditions for one (1) additional five (5) year term (the "Renewal Term"). The Renewal Term shall automatically go into effect upon the conclusion of the Initial Term unless Lessee notifies Lessor at least one hundred eighty days (180) before the end of the Initial Term that Lessee does not wish to extend this Agreement. C. New Lease Agreement/Right of first Refusal. (1) Providing that Lessor's FCC license remains in good standing and/or Lessor seeks to renew such license, Lessee and Lessor shall negotiate in good faith for a new excess capacity airtime lease agreement (hereinafter referred to as "New Lease Agreement") no later than one hundred eighty days (180) prior to the end of the latter of (i) Initial Term or (ii) the Renewal Term if the Agreement is extended for the Renewal Term. (5) If Lessor elects to not reasonably pursue a New Lease Agreement with Lessee, then Lessor shall so notify Lessee in writing of such intent no later than one hundred eighty (180) days prior to the end of the Renewal Term. (3) If Lessor and Lessee do not enter into a New Lease Agreement, Lessor grants Lessee a right of first refusal on any competing proposals for lease agreements or transfers or assignments of any part of the ITFS Channels received by Lessor during the twelve (12) months following the expiration of the latter of (i) the Initial Term or (ii) the Renewal Term, if the Agreement is extended for the Renewal Term. If any acceptable offer to lease or acquire the ITFS Channels is made to Lessor, Lessor shall give written notice to Lessee describing the person to whom the proposed lease or transfer is to be made, the fees, charges, rental or other consideration to be received fro the lease or transfer, the terms thereof and generally the relevant other terms and conditions of the lease or transfer. Lessee shall have a period of thirty (30) days after its receipt of such notice from Lessor in which to elect, by giving written notice to Lessor, to lease or, if eligible, obtain any or all of the ITFS Channels for the same fees, charges, rental or other consideration for which Lessor proposed to lease or transfer to the third person. (i) The fees, charges, rental or consideration shall be paid by such third person or Lessee in cash. (viii) If Lessor does not believe Lessee's stated offer is in an amount fairly equivalent to the fair value of the consideration payable by the third person and so notifies Lessee in writing within seven (7) days after Lessor's receipt of Lessee's notice of election to so lease or purchase, Lessee may within five (5) days after its receipt of such notice from Lessor elect to refer such question for determination by an impartial arbitrator and the right of first refusal of Lessee shall then be held open until (5) days after Lessee is notified of such determination. Such arbitrator shall be chosen either by agreement of Lessee and Lessor at the time such question arises, or, at the option of either party, by referring the question to the American Arbitration Association with instructions that the American Arbitration Association select a single arbitrator under a request from the parties for expedited and accelerated determination. The determination of the arbitrator chosen under either option contained in this subparagraph shall be final and binding upon Lessee and Lessor. The parties shall share equally in the costs and fees of the arbitration (ix) In the event Lessee shall elect to exercise its right of first refusal, the lease agreement or other transfer or assignment shall be consummated within thirty (30) days of the latest of: (1) the day on which Lessor received notice of Lessee's election to exercise the right of first refusal; (2) the day upon which any question required to be determined by the arbitrator hereunder has been determined; or (3) the date of any FCC approval in the case of assignment or transfer; or at such other time as may be mutually agreed. The right of first refusal is terminated either by the lease or other transfer to Lessee as provided herein or by notice to Lessee of the Lessor's proposal to lease or otherwise transfer the ITFS Channels or any part to a third person and Lessee's unwillingness or failure to meet and accept such a bona fide offer pursuant to the times and procedures as set forth above; provided that such proposed lease or transfer is consummated at the same fees, charges, rental or other consideration and upon the same terms as to which such right of first refusal applied, within thirty (30) days after Lessee's right of first refusal had expired or had been specifically waived by written notice given to Lessor by Lessee, or within thirty (30) days following FCC approval in the case of assignment or transfer. C) Operation During End of Term. If Lessor and Lessee do not enter into New Lease Agreement before the end of the Initial Term, Lessee shall cease leasing the ITFS Channels on the last day of the Initial Term. D) No Rights Beyond Term of Licenses. Lessor and Lessee agree that this Agreement shall not give rise to any rights or remedies beyond the expiration of any FCC license necessary for the continued operation of the ITFS Channels. Provided, however, that while this Agreement is in effect, Lessor shall obtain and maintain in force all licenses, permits and authorizations required or desired in connection with the use of the ITFS Channels. Lessor shall take all necessary steps to renew the licenses for the ITFS Channels and shall not commit any act or engage in any activity which could reasonably be expected to cause the FCC to impair, restrict, revoke, cancel, suspend or refuse to renew the ITFS licenses. Lessor shall take all reasonable steps to comply with the Communications Act of 1934, as amended and the rules and regulations of the FCC, and shall file all reports, schedules and/or forms required by the FCC to be filed by Lessor. All expenses, including attorneys fees and filing fees, incurred in preparing and filing such reports, schedules and/or forms required by the FCC shall be paid by the Lessee. 8. ALLOCATION OF AIRTIME. A. Excess Capacity Airtime. To the extent allowed by the FCC rules and regulations and any amendments thereof, Lessor agrees to lease to Lessee the exclusive use of all excess capacity not utilized by Lessor ("Excess Capacity Airtime"). B. Lessor's Primary Airtime. During analog transmission over the ITFS Channels, Lessor reserves for its exclusive use a minimum of twenty (20) hours of airtime per-channel per-week to be used for its ITFS scheduled programs. During digital transmission ovr the ITFS Channels, Lessor shall have the exclusive use of 12.5% of the total capacity available on the Lessor's ITFS Channels. This airtime shall be know as "Lessor's Primary Airtime". C. Schedule of Airtime. The schedule which depicts the agreement of the parties as to use of Lessor's Channels shall be attached hereto and made a part hereof as Exhibit A which is subject to change upon agreement by both parties. D. Lessee's use of its Excess Capacity Airtime. Lessee shall have the right to utilize its Excess Capacity Airtime for any purpose allowed or authorized by the FCC including but not limited to voice, video and data transmission. E. Alternate Use and Vertical Blanking Intervals. Lessor shall have the right to use the second audio carrier ("SAP") and vertical blanking intervals. ("VBI") on which Lessor's ITFS programming is being transmitted. Lessee shall at all times have the right to use the VBI and SAP not utilized by Lessor and 100% of the response frequencies associated with the ITFS Channels. Lessor shall be responsible for any equipment needed to utilize the VBI and/or SAP and such equipment shall be compatible with Lessee's system. F. Lessor's Use of ITFS Channels. Lessor agrees that its program services and airtime use will not harm or interfere with Lessee's current or future signal paths utilized within Lessee's System for program encryption, pilot carrier signaling and other technical needs utilized for the operation of and such services provided by Lessee's System. Nor will Lessor, by its own action, or through a third party, utilize any part of its licensed frequency spectrum to create or operate a service that is in competition with current, planned or future services provided by Lessee's System. Lessor agrees to use its Primary Airtime in accordance with the FCC's rules and regulations. Lessor shall not take or fail to take any action which may have a material adverse effect on Lessee's right to utilize its Excess Capacity Airtime. G. Expanded System Capacity. Lessee shall have the right at anytime to require Lessor to file with the FCC any necessary application to expand the channel capacity to Lessor's station to enable it to carry more than one video signal per channel or digital data services; provided however, before Lessee can exercise this right, it must demonstrate to the Lessor's reasonable satisfaction that such modification will not materially degrade the performance of the station nor impair signal quality at the registered ITFS receive sites. Once such modification has been constructed, the modified facilities shall automatically be considered a part of this agreement and subject to all terms and conditions hereof. It is understood that Lessee shall have the full-time use of the Expanded Channels to the extend permitted by FCC rules. 3. TRANSMISSION SITE AND FACILITIES. G. Primary Transmission Site. Lessor's ITFS Channels are located at Key West, FL, Lessee agrees to provide Lessor space at the Primary Transmission site for Lessor's audio and video transmission equipment which shall not exceed on rack. Such space shall be leased to Lessor pursuant to Exhibit D hereto. This site shall hereinafter be described as the "Primary Transmission Site". At Lessee's sole expense, Lessee shall contract for a lease of space at the Transmission Site upon such terms as the parties agree. The Transmission Site shall comply with the standards, specifications and regulations of the FCC rules and orders pertaining to Lessor's ITFS license. H. Relocation of Transmission Site. (i) Lessor acknowledges that the location of the Primary Transmission Site for ITFS Channels is critical to the Lessee's business and agrees that it will not relocate the transmission facilities for ITFS Channels from the Primary Transmission Site without Lessee's prior written consent. (ii) Lessor further acknowledges that possibility that, as a result of currently unforeseen events, the Primary Transmission Site may not be the optimum site for the location of the ITFS Channels or Lessee's business throughout the term of this Lease Agreement. Lessor therefore agrees that if at any time or from time to time Lessee requests in writing that the transmission facilities for the ITFS Channels be relocated, Lessor shall file with the FCC and any other regulatory body having jurisdicition over the ITFS Channels all applications, amendments, and requests for modification that may be necessary to obtain any necessary consents to permit such relocation to such location within or adjacent to the Market as may be requested by Lessee; provided, however, that Lessor shall not be obligated to submit or procecute any application, amendment, or request for modification that Lessor reasonably determines, upon advice of counsel contained in a written opinion, would be in violation of the terms of the License, any statute, rule, or regulations regarding the operation of the ITFS Channels or the submission of materials to the FCC, or any of its obligations as an ITFS licensee; and provided, further, that any such relocation will not result in loss of service to Lessor's registered receive sites served by the transmission facilities in the event that the authorization is obtained to relocate the ITFS Channels to the location requested by Lessee, Lessor shall relocate such channels to such new location as soon as reasonably possible after authorization is obtained. Lessee shall bear reasonable costs associated with such relocation, including engineering and construction, and all reasonable costs associated with obtaining FCC or any other regulatory approval therefore. (iii) Lessor agrees to file modification applications requested by Lessee. Such modifications may include but shall not be limited to the following: power increase or decrease, polarization, transmit antenna patterns, digital, two-way (return path) use of the ITFS Channels, boosters, beam benders or repeaters, cells, sectorization, channel swaps, channel loading, channel shifting and application within five (5) business days or receipt of the modification application from Lessee or during any FCC designated filing window. Lessee will use reasonable efforts to provide Lessor with the engineering for the modification thirty (30) days prior to the request for filing. If Lessor believes that such modification will have an adverse effect on Lessor's ability to provide its services to its receive sites, Lessor agrees to file the modification application as presented by Lessee and within the time limit requested by Lessee; however, Lessee agrees not to implement construction and Lessor agrees not to withdraw the application until the parties have adequately addressed and resolved the potential material adverse effect or the matter has been submitted to arbitration pursuant to Section 16 and a final decision has been rendered by arbitrator. Although Lessee intends to file such modification applications, it may elect not to construct the Channels in that manner and may desire to utilize the Channels as currently licensed. A copy of the modification application, bearing the FCC's date stamp, shall be mailed to Lessee by Lessor, within fourteen (14) days of the filing of the modification application. Lessee shall be solely responsible for all engineering and legal costs associated with the preparation, review and filing of the modification application. In the event that any license modification requested by Lessee requires receive site upgrades in order for Lessor's receive sites to continue to receive Lessor's services, then Lessee agrees to pay for all costs to complete such upgrade prior to implementing the license modification. C. System Construction. Lessee shall within a reasonable period of time, but not later than six (6) months after the FCC grant of digital authority for the ITFS Channels, purchase equipment such as the antenna, waveguide or transmitters specified on the authorization for the ITFS Channels. At Lessee's expense, Lessee shall purchase and install such transmitters, transmission line, modulators, antennas and other equipment as required to operate the ITFS Channels in accordance with the provision of such authorization. Any equipment so used in such construction shall be leased to lessor pursuant to Paragraph 5 hereof. Such equipment is hereinafter referred to as the "Leased Equipment". Lessee shall retain title to the Leased Equipment except as noted by Paragraph 15 herein. D. Maintenance of Transmission Equipment. At Lessee's expense and subject to Lessor's right to supervise the maintenance of this equipment, Lessee shall maintain and operate the Leased Equipment during the terms of this Agreement for a nominal fee. Lessee shall also pay all taxes and other charges assessed against the Leased Equipment. E. Transmission of Programming. At no cost or expense to Lessor, Lessee shall provide the necessary labor and equipment capabilities to transmit on the ITFS Channels programming required to be carried pursuant to this Agreement such as Lessor's ITFS programming and TBN. Lessee shall also comply with Lessor's instructions regarding the transmission of such programming such as the dates and times to transmit programming. F. Interference. Lessee shall operate the Leased Equipment so that such operation does not create or increase interference with electronic transmission of any other FCC licensees entitles to protection under FCC rules and regulations. If Lessee's entitled to protection under FCC rules and regulations. If Lessee's operation of the Lease Equipment does so create or increase interference, Lessee shall pay all of the reasonable engineering and legal fees necessary to resolve the interference problem so created. G. Alterations and Attachments. Lessee, at its own expense, may make alterations of or attachments to the ITFS equipment or the common equipment as defined in Exhibit C (including the installation of encoding and/or addressing equipment) as may be reasonably required from time to time by the nature of its business; provided however, that such alterations or attachments do not interfere with Lessor's signal or ongoing operations or violate any FCC rules or regulations; and provided further that FCC authorization, if required, is obtained in advance of any such alteration or attachment at the sole cost of Lessee. to the extent any FCC authorization pertaining to the ITFS equipment is required, Lessor agrees to use its best efforts to obtain such authorization. H. Licensee Control and Liability. Nothing herein shall derogate from such licensee control of operations of the ITFS Channels that Lessor, as an FCC licensee, shall be required to maintain and Lessee acknowledges the reservation by Lessor of such control. Lessor shall at all times retain ultimate and exclusive responsibility for the operation and control of the ITFS Channels including policy decisions. 4. LESSOR'S RECEIVE SITES. Attached hereto as Exhibit B is list of the registered receive sites designated by Lessor to receive its ITFS programming and to be installed at the expense of Lessee. Those receive sites so listed shall be installed with a Standard Installation. If as the result of any relocation of the Primary Transmit Site, the equipment at Lessor's existing registered receive sites must be reoriented, Lessee shall pay the cost of same. As used herein for the purposes of this Agreement, the phrase "Standard Installation" shall mean an installation consisting of the placement of the ITFS/MMDS receiving antenna at an elevation (not to exceed thirty [30] feet above the base mounting location) which could normally receive the line-of-sight transmission from the Transmission Site; the coupling thereto of a block-down converter; and a sufficient amount of transmission line (coaxial cable) to connect the received ITFS programming to the input of (i) one classroom designated by Lessor to receive the ITFS programming or (ii) the receive site internal/external distribution system. Also, if as the result of any relocation of the Transmit Site, the equipment at Lessor's existing receive sites must be reoriented, Lessee shall pay the cost of same. Lessee also agrees that for digital transmission of the ITFS Channels Lessee will purchase and install at Lessee's expense, one single-point modem to receive its ITFS programming. 5. LEASE OF EQUIPMENT. A) Lessor's Lease of Leased Equipment. For a nominal fee, Lessor shall lease from Lessee the Leased Equipment during the terms of this Agreement. A list of this equipment is attached hereto as Exhibit C and incorporated by reference herein. Lessor shall have no responsibility for the loss of or damage to the Leased Equipment during the terms of this Agreement and Lessee shall bear all such responsibility. 6. FEES. A) Lessor's Service Fee. In consideration of the lease of the Leased Equipment, and for its share of the projected costs to maintain the Transmission Site and the Lease Equipment, Lessor shall pay Lessee an annual fee provided for in Exhibit D. B) Subscriber Royalty Fees or Percentage. Beginning on the Execution Date of this Agreement and continuing thereafter during the Initial Term of this Agreement, Lessee shall pay to Lessor the Subscriber Royalty Fee, System Percentage or monthly minimum, whichever is greater as set out in Exhibit D which is attached herewith and incorporated by reference herein. If the Execution Date shall be a date other than the first day of a calendar month, then the Subscriber Royalty Fee for the partial month shall be paid on a proportionate basis. A late fee of 10% (ten percent) will be assessed to past due accounts, and a finance charge of one and one-half percent (1.5%) per month will be assessed in addition to the late fee until paid. C) Notice of Construction and Required Certificate. Within thirty (30) days of completion of construction at the Transmission Site, Lessee shall notify Lessor of such completion of construction in writing. Within thirty (30) days of the end of each month in which Excess Capacity Airtime is leased hereunder, Lessee shall provide Lessor with a certificate, certified as accurate and correct by an authorized agent of Lessee, showing the number of subscribers served during such month. D) Right to Audit. Lessee shall for a period of three (3) years after their creation, keep, maintain and preserve complete and accurate records and accounts, including all invoices, correspondence, ledgers, financial and other records pertaining to Lessee's use of Excess Capacity Airtime and Lessor's charges hereunder; and such records and corporate accounts shall be available for inspection and audit at Lessee's corporate offices or at Lessee's offices in the Market, as designated by Lessee, at any time or times during the term of this Agreement or within ninety (90) days thereafter, during reasonable business hours, by Lessor or its nominee. In the event that there is discovered an underpayment of the Subscriber Royalty Fee as defined in Paragraph 6 (B) above, Lessee shall pay to Lessor a penalty equal to ten percent (10%) of the amount of each such underpayment. All information obtained by Lessor during any audit herein shall be maintained by Lessor in strict confidence. 7. PROGRAMMING. A) Control Over Programming. (i) Program Content. Lessee intends that only programming of a sort which would not serve to place Lessor's reputation in the community in jeopardy will be transmitted by Lessee on the ITFS Channels. In an attempt to minimize disputes, recognizing the difficulties inherent in specifying exact standards herein, it is agreed that Lessee shall have the right to market the programming provided by the networks and services listed on Exhibit E. If, however, the programming content of any networks and services listed on Exhibit E materially changes, Lessor shall have the right, upon ninety (90) days notice, to deny Lessee the right to continue transmitting such programming if Lessor would have the right to deny Lessee the right to transmit such programming under the provisions of this paragraph in the first instance. If Lessee proposes to transmit the programming of any new programming service, the Lessee shall notify Lessor in writing specifying in detail the nature of the new programming service and Lessor shall have the right, upon written served upon Lessee within thirty (30) days after Lessor's receipt of any such notice from Lessee, to deny to Lessee the right to transmit such service if such programming is obscene and/or contradicting local, state and/or federal laws or otherwise violates any federal, state or local laws or regulations. If no such denial notice is received by Lessee within such thirty (30) days, lessee shall be authorized to transmit all such services for which no denial notice is received. There shall be no reduction in fees required under this Agreement for any such programming not permitted to be transmitted. B) Availability of Programming. It is understood by Lessee and Lessor that there is expected to be no direct out-of-pocket annual costs for the acquisition of the qualified ITFS educational programming for Lessor's use during Lessor's Primary Airtime on the ITFS channels, based on current plans. In the event that this ITFS educational programming either; (1) ceases to be available, or, (2) becomes available only at a fee, then Lessor may incur direct out-of-pocket costs in Lessor's acquisition of ITFS programming. Lessee agrees to provide its best efforts to assist Lessor in the acquisition of alternative programming, if necessary. Additionally, Lessee agrees to make payment to Lessor for the actual, direct programming costs incurred. If any; If Lessor, after expending its best efforts, is unable to obtain suitable ITFS programming for a cost equal to the amount to be paid by Lessee, Lessor and Lessee shall use their best efforts to reach agreement on modifications to this Agreement to avoid any un-reimbursed ITFS programming costs to Lessor. If no such agreement can be reached, Lessor may terminate this agreement. In the case of such termination, Lessor shall use its best efforts (with out-of-pocket costs of Lessor to be paid by Lessee, with Lessee's prior approval) to transfer the license for the ITFS Channels to another qualified educational entity, subject to FCC approval, with the intent of assigning this Agreement from Lessor to the new educational entity. C) Integration of Lessor's Programming. Lessee agrees to integrate Lessor's programming into the overall communications service offered to subscribers, without cost to Lessor. This integration shall include, but not be limited to, listing Lessor's material in any program guides produced by Lessee for subscribers. D) Carriage of TBN. In the event that Lessor's ITFS Channels are used for analog video transmission and TBN is not transmitted on a local VHF or UHF station, with a market coverage equivalent to both area and signal quality of our ITFS channels, and Lessee does not have local off-air insertion as part of its standard installation, then, if so designated by Lessor, Lessee agrees to transmit on one of the ITFS Channels the programming of Trinity Broadcasting Network ("TBN") during those time periods such channel is not used for Lessor's ITFS programming ("TBN Airtime") provided that Lessee is not required to pay a fee for carriage of TBN. In the event that Lessee is permitted to program the hours previously occupied by TBN, then Lessee shall increase, in proportion to the increase in Excess Capacity Airtime, the amount of minimum fees and subscriber royalty fees payable under the provision 6 (B) of this agreement during the remainder of the term(s) of the agreement. For purposes of calculating any such proportionate increase, the parties acknowledge and agree that the minimum fee and subscriber royalty fee agreed to herein are based on Lessee's equivalent use of three full-time ITFS channels. E) Station Identification. During Lessee's use of Lessor's excess channel capacity, Lessee shall transmit Lessor's call sign for each respective station as required by the FCC. 8. PROCECUTION OF PETITIONS, AUTHORIZATIONS AND LICENSES. A) Best Efforts to Secure Approval of this Agreement. The parties recognize that certain approvals will be required from the FCC in order to effectuate this Agreement. Both parties shall use their best efforts to prepare, file and prosecute before the FCC all petitions, waivers, applications and other documents necessary to secure any FCC approval required to effectuate this Agreement. Lessee shall assist in the preparation and prosecution of such applications and as provided for herein, shall pay all filing fees, attorneys' fees, engineering fees, and all other expenses in connection therewith. Lessor also agrees to cooperate with Lessee's efforts to cause other ITFS, OFS, MDs and MMDS operators to co-locate at the Transmission Site. Notwithstanding anything in this Agreement to the contrary, it is understood that no filing shall be made with the FCC with respect to this Agreement unless both parties have reviewed such filing and consented in writing to its submission, such consent not be unreasonably withheld. B) Further Efforts. Throughout the Initial Term of this Agreement, Lessor shall use its best efforts to obtain and maintain in force all licenses, permits and authorizations required for Lessee and Lessor to use the ITFS Channels as contemplated by this Agreement. Lessee shall be responsible for all cash expenses incurred to obtain and maintain in force such licenses, permits and authorizations. When mutually agreed by the parties and at Lessee's sole expense, Lessor shall apply for, and use its best efforts to obtain those reasonable license modifications which would assist Lessee in its business. Lessor also shall consider filing, at Lessee's sole expense, such reasonable protests, comments or other petitions to deny any other ITFS, MMDS, MDS and/or OFS applications or amendments as may be requested by Lessee in the mutual best interests of the parties and the public. Lessor and Lessee shall promptly notify each other of any event of which it has knowledge that may affect any of the licenses, permits or authorization affecting the ITFS Channels. C) Attorneys' Fees. With respect to any legal work conducted pursuant to Paragraph 8(A) and (B) above, Lessee shall be responsible for all attorneys' fees in connection therewith and shall make payments directly to the attorney. However, any attorney fees paid by Lessee shall be approved in advance by Lessee. 9. REPRESENTATIONS AND WARRANTIES. A) Representations and Warranties of Lessor. Lessor represents and warrants to Lesse as follows: (i) Organization. Lessor is a non-profit organization duly organized and existing in good standing under the laws of the State of California, and it has full power and authority to carry out all of the transactions contemplated by this Agreement and all other agreement, certificates or instruments executed and delivered in connection herewith. (ii) No Violation. Neither the execution nor delivery of this agreement or any other agreements, certificates or instruments executed and delivered herewith, nor the performance of the transactions contemplated hereby constitute or will constitute a violation of , be in conflict with, or a default under any term or provision of the governing instruments or Lessor or any agreement or commitment to which Lessor is bound, or any judgment, decree, order, regulation or rule of any court or governmental authority, or consent of any federal, state or local authority is required in connection with the execution and delivery of this Agreement or any other agreements, certificates or instruments executed and delivered herewith or with the performance of the transaction contemplated hereby. B) Representations and Warranties of Lessee. Lessee represents and warrants to Lessor as follows: (ii) Organization. Lessee is duly organized, validly existing and in good standing under the laws of the State of its incorporation and it has full power and authority to own property and carry all of the transactions contemplated by this Agreement, and all other agreements, certificates or instruments executed and delivered by Lessee in connection herewith. (ii) Corporation Action; Valid and Binding Agreements. Lessee has taken all corporate action necessary to authorize the execution and delivery of this Agreement and all other agreements, certificates or instruments executed and delivered in connection herewith. Upon execution and delivery, this Agreement and all other agreements, certificates or instruments executed and delivered by Lessee in connection herewith will constitute valid and binding agreements of Lessee enforceable in accordance with their respective terms. (iii) Litigation and Investigations. There is no action, suit, proceeding or investigation pending or, to the best of Lessee's knowledge, threatened against Lessee, its principals or related entities before any court, administrative agency or other governmental body, and Lessee does not know nor is aware of any reason for commencement of any such action, proceeding or investigation. (iv) Misrepresentation of Material Fact. To the best of Lessee's knowledge, information and believe, no document or contract that was shown to Lessor and which in any way affects any of the properties, assets or proposed transactions of Lessee as such relates to this Agreement, no certificate or statement furnished by or on behalf of Lessee in connection with this Agreement, nor this Agreement itself contains any untrue statement of material fact or omits to state a material fact which would make the statements contained herein misleading. C) Survival or Representations and Warranties. The representations and warranties contained in this Agreement shall be deemed to be continuing during the Initial terms of this Agreement, and each Party shall have the duty promptly to notify the notify the other of any event or circumstance which might reasonably be deemed to constitute a breach of or lead to a breach of its warranties or representations hereunder. The waiver by either Party of any breach of any presentation or warranty under this Agreement shall not constitute a waiver of any other representation or warranty or of any failure in the future by the other Party to fulfill such representation or warranty. 10. TERMINATION. A) Termination of FCC Authorization. Without further liability to either Lessor or Lessee, this Agreement shall terminate in the event that for any reason (i) Lessor shall not be licensed on the leased ITFS Channels, or (ii) the FCC shall terminate or diminish Lessor's authority to lease the ITFS Channels in accordance with the terms of this Agreement. B) Termination by Reason of Default or Nonperformance. At the option of the non-defaulting party, this Agreement may be terminated upon the material breach or default by the defaulting party of its duties and obligations hereunder is such breach or default is not cured by such defaulting party and is breach or default shall continue for a period of thirty (30) consecutive days after such defaulting party's receipt of notice thereof from the non-defaulting party. It is understood and agreed that any failure on the part of Lessee to make any payment required under Paragraph 6 hereof shall be a material breach of default of its duties and obligations hereunder. It is also understood and agreed that any consequences resulting from the loss of local participating receive sites shall not be considered a material breach or default by Lessor of its duties and obligations hereunder. C) Remedies to Continue. In the event of termination of this Agreement pursuant to Paragraph 10(B), such termination shall not affect or diminish the rights or claims or remedies available in equity or at law to the non-defaulting party arising by reason of a breach or default of this Agreement. However, no liability shall arise on the part of Lessor or Lessee upon termination of this Agreement pursuant to Paragraph 10(A) except where the loss of the FCC license occurs as a result of the default of either party. 11. TRANSFER OF RIGHTS AND OBLIGATIONS. Lessee shall have the right to assign its rights under this lease as collateral for any financing arrangements it makes. Lessee shall also have the right to pledge the Leased Equipment as collateral security for any loans it makes; provided, however, that any pledge of the Leased Equipment shall be made subject to the provisions of this lease. Lessee shall further have the right to subcontract any portion of its obligations under this Agreement to any partnership, joint venture, corporation or entity which Lessee may choose, provided that Lessee gives Lessor notice of any proposed subcontracting and, provided further, that no such subcontracting shall release Lessee from fulfilling all of its obligations under this Agreement. Lessee shall have the right to assign or transfer its rights, benefits, duties and obligations under this Agreement to a commonly-owned company without the prior consent of Lessor. Apart from the foregoing, neither party may assign or transfer its rights, benefits, duties or obligations under this Agreement without the prior written consent of the other, which consent shall not be unreasonably witheld. 12. INDEMNIFICATION. A) By Lessor. To the extent permitted by state and federal law and its charter or by-laws, Lessor shall forever protect, save and keep Lessee and its permitted successors and assigns harmless and indemnify Lessor against and from any and all claims, demands, losses, costs, damages, suits, judgments, penalties, expenses and liabilities or any kind or nature whatsoever, including reasonable attorneys' fees, arising directly or indirectly out of (i) the willful misconduct of Lessor, its agents or employees, in connection with the performance of this Agreement; (ii) any programming transmitted by Lessor during any of Lessor's Airtime. B) By Lessee. To the extent permitted by state and federal law and its charter or by-laws, Lessor shall forever protect, save and keep Lessee and its permitted successors and assigns harmless and indemnify Lessor against and from any and all claims, demands, losses, costs, damages, suits, judgments, penalties, expenses and liabilities or any kind or nature whatsoever, including reasonable attorneys' fees, which arise directly or indirectly out of (i) the negligence or willful misconduct of Lessee, its agents or employees, in connection with the performance of this Agreement; (ii) any programming transmitted by Lessee or any of its authorized agents or subcontractors with the public, third parties and subscribers to the Lessee's programming service; or (iv) any maintenance, installation or other work performed by Lessee or any authorized agent or subcontractor under this Agreement. C) Notice of Claim; Defense of Claim. Each party shall notify the other of any such claim promptly upon receipt of same. Either party (hereinafter referred to as appropriate the "Indemnitor" or Indemnitee") shall have the option to defend, at its own expense, any claims arising under this Paragraph. In Indemnitor assumes the defense of any such claim, Indemnitee shall delegate complete and sole authority to the Indemnitor to defend or settle same and Indemnitee shall cooperate with Indemnitor in the defense thereof. 13) INSURANCE. A) Policies Required. At its expense, Lessee shall secure and maintain with financially reputable insurers, one or more policies of insurance insuring the Leased Equipment and Lessee's utilization of the ITFS Channels against casualty and other losses of the kinds customarily insured against by firms of established reputations engaged in the same or similar line of business, or such types and in such amounts as are customarily carried under similar circumstances by such firms, including, without limitation: (i) "All Risk" property insurance covering the ITFS Equipment and the common Equipment to the extent of one hundred percent (100%) of its full replacement value without deduction for depreciation: (ii) comprehensive general public liability insurance covering liability resulting from lessee's operation of the ITFS equipment on an occurrence basis having minimum limits of liability in an amount of not less than One Million Dollars ($1,000,000.00) for bodily injury, personal injury or death to any person or persons in any one occurrence, and not less than Two Million Dollars ($2,000,000.00) in the aggregate for all such losses during each policy year, and not less than Three Hundred Thousand Dollars ($300,000.00) with respect to damage to property; (ii) all workers compensation, automobile liability and similar insurance required by law. B) Insurance Policy Forms. All policies of insurance required by this Paragraph shall, whre appropriate, designate Lessor as either the insured party or as a named additionally insured party, shall be written as primary policies, not contributory with and not in excess of any coverage which Lessor shall carry, and shall contain a provision that the issuer shall give to Lessor thirty (30) days prior written notice of any cancellation or lapse of such insurance or of any change in the coverage thereof. C) Proof of Insurance. Executed copies of the policies of insurance required under this section or certificates thereof shall be delivered to Lessor not later than ten (10) after execution of this agreement. Lessee shall furnish Lessor evidence of renewal of each such policy not later than thirty (30) days prior to the expiration of the term thereof. 53. RELATIONSHIP OF PARTIES. By the provisions of this Agreement, Lessor and Lessee intend to enter an airtime lease relationship and not a joint venture. They will carry out this Agreement to preserve that intent. Neither party shall represent itself as the other party, nor as having any relationship with one another, except as Lessor and Lessee under the terms of this Agreement. 54. EQUIPMENT PURCHASE. G) Lessor's Option to Purchase. In the event that this Agreement is terminated, Lessor shall have the option to purchase the Leased Equipment used exclusively for Lessor's ITFS license. Any equipment which is used in a shared fashion (such as transmit antenna, decoders and combiners) in providing signals other than Lessor's signals are excluded from this option to purchase. The intent of the purchase option provided for in Paragraphs 16(A) is to provide Lessor with the capability to continue to perform on Lessor's ITFS license. The purchase price shall be the market value of such equipment noted above as determined by mutual agreement or by averaging the values obtained from two (2) appraisals, with one appraiser each chosen by Lessor and Lessee. H) Lessee's Option to Purchase. If during the terms of this Agreement the FCC modifies its rules so as to enable Lessee to be licensed to operate the ITFS frequencies, Lessee shall have a right of first refusal to acquire such licenses subject to the same terms and conditions as the right provided for in Paragraph 1(B). 55. NON-DISCLOSURE Lessor acknowledges that there may be made available to it pursuant to this Agreement proprietary information of Lessee relating to the encoding and/or decoding system associated with the ITFS channel equipment and its patented processes including, but not limited to, improvements, innovations, adaptation, inventions, results of experimentation, processes and methods, whether or not deemed patentable, and certain business and marketing techniques (all herein referred to as "Confidential Information"). Lessor acknowledges that this Confidential Information has been developed by Lessee at considerable effort and expense and represents special, unique and valuable proprietary assets of Lessee, the value of which may be destroyed by unauthorized dissemination. Accordingly, Lessor covenants and agrees that, except as may be required for the performance of this Agreement or by law or court order, neither it nor any of its agents or affiliates shall disclose such Confidential Information to any third person, firm, corporation or other entity for any reason whatsoever, such undertaking to be enforceable by injunctive or other equitable relief to prevent any violation or threatened violation thereof. 56. NON-COMPETITION During the term of this Agreement, Lessor agrees not to transmit programming or to lease or sublease any channel capacity on its ITFS Facilities for the transmission of programming that is competitive with the programming transmitted by Lessee. 57. FORCE MAJEURE If by reason of Force Majeure either party is unable in whole or in part to perform its obligations hereunder, the party shall not be deemed in violation of default during the period of such inability. As used herein, the phrase "Force Majeure", shall mean the following: act of God, acts of public enemies, orders of any branch of the government of the United States of America, any state or any political subdivisions, thereof which are not the result of a breach of this Agreement, orders of any military authority insurrections, riots, epidemics, fires, civil disturbances, explosions, or any other cause or event not reasonably within control of the adversely affected party. 58. CONDITION PRECEDENT This Agreement is conditional on the issuance of a Final Order by the FCC granting Lessor a construction permit for the ITFS Channels in the Market from the Transmission Site. By "Final Order" the parties mean an action or order of the FCC which is not reversed, stayed, enjoined, vacated, set aside, annulled or suspended and with respect to which no timely-filed request for administrative or judicial review is pending and as to which the time for filing any such request, or for the FCC to set aside the action on its own motion, has expired. 59. NOTICE Any notice required to be given to Lessor under any provision of this Agreement shall be delivered personally or by certified mail to Lessor at the address first written above. Any notice required to be given to Lessee under any provision of this Agreement shall be delivered personally or by certified mail to Lessee at the address first written above. 60. SEVERABILITY Should any court or agency determine that any provision of this Agreement is invalid, the remainder of the Agreement shall remain in effect. 61. WAIVER A waiver by either Lessor or Lessee of a breach of any provision of this Agreement shall not be deemed to constitute a waiver of any preceding or subsequent breach of the same provision or of any other provision. 62. PAYMENT OF EXPENSES AND SIGNING FEES A signing fee of One Dollar ($1) shall be paid to Lessor. Lessee shall pay all costs and expenses incident to fulfilling or modifying this Agreement, such as, attorneys' fees or, if necessary, any travel expenses approved in advance by Lessee, FCC filing fees, and engineering costs. 63. VENUE AND GOVERNING LAW Venue for any cause of action brought by or between Lessor and/or Lessee relating to this Agreement shall be in California and all provisions of this Agreement shall be construed under the laws of the State of California and County of Lessor. 64. COUNTERPARTS This Agreement may be executed in one or more counterparts each of which shall be deemed an original, but all of which shall constitute one and the same instrument, and shall become effective when each of the parties hereto shall have delivered to it this Agreement duly executed by each of the other parties hereto. 65. ENTIRE AGREEMENT This Agreement constitutes the entire Agreement between the parties and supersedes all prior oral or written provisions of any kind. The parties further agree that this Agreement may only be modified by written Agreement signed by both parties. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on this day of July 1st, 1999. SHEKINAH NETWORK By: ______________________________ Name: Charles J. McKee Title: President WORLD WIDE WIRELESS COMMUNICATIONS, INC. By: ______________________________ Name: Douglas P. Haffer Title: President Address for Notices: Shekinah Network 14875 Powerline road Atascadero, CA 93422 Phone/Fax: (805) 438-3341 Attn: Charles McKee, President Gardner, Carton & Douglas Attn: Laura Mow 1301 K Street, N.W., Suite 900 Washington, D.C. 20005 Phone: (202) 408-7100 Fax: (202) 289-1504 World Wide Wireless Communications, Inc. One Post Street Suite 2600 San Francisco, CA 94104 Phone: (415) 981- 7777 Fax: (415) 391-3199 EXHIBIT A Schedule of Airtime EXHIBIT B Receive Sites There shall be attached hereto and incorporated by reference a copy of FCC Form 330 Section IV listing Lessor" receive sites. EXHIBIT C Leased Equipment Noted below is a list of equipment that Lessee is leasing to Lessor: (7) Four (4) ITFS tansmitters and related hardware (8) Lessor's ITFS receive site antennas and related hardware *(3) Combining network, transmission line and antenna *Common Equipment EXHIBIT D Service and Royalty Fees 1. Lessor's Service Fee Services Provided Annual Fee ----------------- ---------- (j) Lease of Leased Equipment [6(A)] $1.00 (k) Maintenance of Leased Equipment [3(D)] $1.00 (l) Lease of space at Primary Transmission Site [3A)] $1.00 2. Lessee's Subscriber Royalty Fee Lessee shall pay Lessor a minimum monthly Transmission Fee 5% of the system's Gross receipts or a monthly minimum payment of $500 per month whichever is greater. Payment shall be as follows: Commencing on the Execution (Effective) Date and as defined in Paragraph 6)B, payments for each month shall be made by the twentieth (20th) day of the following month. EXHIBIT E Programming In addition to digital data services, such as the Internet or Intranet, the following is a list of video programming services Lessee may provide over Lessee's System. TLC - The Leaning Channel TWC - The Weather Channel Lifetime ESPN - Sports AMC - American Movie Classics SCOLA WHTN - World Harvest Television Network ECO - Galavision CNN - Cable News Network CNN - Headline News C-Span I C-Span II BET - Black Entertainment Network CNBC - Consumer News & Business Channel Nickelodeon The Discovery Channel A&E - Arts and Entertainment The Family Channel The Disney Channel PBS - Public Broadcasting Service TBN - Trinity Broadcasting Network TNIN - The New Inspirational Network ME/U - Mind Extension Network The International Channel BRAVO Network The Travel Channel Family Network Keystone Inspirational Network EX-10.7 15 0015.txt LEASE AGREEMENT--LA GRANDE, OREGON LEASE AGREEMENT BETWEEN WORLD WIDE WIRELESS COMMUNICATIONS, INC. AND SHEKINAH NETWORK La Grande, Oregon ITFS EXCESS CAPACITY AIRTIME LEASE AGREEMENT THIS AGREEMENT is made this 1st day of August 1999 by Shekinah Network (hereinafter referred to as "Lessor") having its principal place of business at 14875 Powerline Road, Atascadero, CA 93422 and World Wide Wireless Communications, Inc. (hereinafter referred to as "Lessee") having its principal place of business at One Post Street, Suite 2600 San Francisco, CA 94104. WHEREAS, the Federal Communications Commission ("FCC") has authorized licenses for Instructional Television Fixed Service ("ITFS") channels and has authorized the licensee to lease excess capacity to non-ITFS users; and WHEREAS, Lessor has been granted an FCC License for (call sign) WNC-798 (the "License") for the Channel group C1-4 (the "ITFS Channels") in La Grande, Oregon ("The Market"); and WHEREAS, Lessee is in the business of providing voice, video, data and other services via microwave transmission in the Market Area and desires to lease the excess ITFS capacity of the ITFS channels; and WHEREAS, Lessor has determined that there will be excess airtime capacity available on the ITFS Channels and desires to lease this excess airtime capacity to Lessee. NOW, THEREFORE, in consideration of the mutual promises, undertakings, covenants and conditions set forth herein, the Lessor and Lessee do hereby agree and warrant as follows: 9. TERM OF AGREEMENT A. Initial Term. This Agreement shall be effective upon the date of its execution and shall extend for an initial term of five (5) years (the "Initial Term"). B. Renewal Term Provided that the License is renewed by the FCC, Lessee shall have the right to extend this Agreement on its then existing terms and conditions for one (1) additional five (5) year term (the "Renewal Term"). The Renewal Term shall automatically go into effect upon the conclusion of the Initial Term unless Lessee notifies Lessor at least one hundred eighty days (180) before the end of the Initial Term that Lessee does not wish to extend this Agreement. C. New Lease Agreement/Right of first Refusal. (1) Providing that Lessor's FCC license remains in good standing and/or Lessor seeks to renew such license, Lessee and Lessor shall negotiate in good faith for a new excess capacity airtime lease agreement (hereinafter referred to as "New Lease Agreement") no later than one hundred eighty days (180) prior to the end of the latter of (i) Initial Term or (ii) the Renewal Term if the Agreement is extended for the Renewal Term. (6) If Lessor elects to not reasonably pursue a New Lease Agreement with Lessee, then Lessor shall so notify Lessee in writing of such intent no later than one hundred eighty (180) days prior to the end of the Renewal Term. (3) If Lessor and Lessee do not enter into a New Lease Agreement, Lessor grants Lessee a right of first refusal on any competing proposals for lease agreements or transfers or assignments of any part of the ITFS Channels received by Lessor during the twelve (12) months following the expiration of the latter of (i) the Initial Term or (ii) the Renewal Term, if the Agreement is extended for the Renewal Term. If any acceptable offer to lease or acquire the ITFS Channels is made to Lessor, Lessor shall give written notice to Lessee describing the person to whom the proposed lease or transfer is to be made, the fees, charges, rental or other consideration to be received fro the lease or transfer, the terms thereof and generally the relevant other terms and conditions of the lease or transfer. Lessee shall have a period of thirty (30) days after its receipt of such notice from Lessor in which to elect, by giving written notice to Lessor, to lease or, if eligible, obtain any or all of the ITFS Channels for the same fees, charges, rental or other consideration for which Lessor proposed to lease or transfer to the third person. (i) The fees, charges, rental or consideration shall be paid by such third person or Lessee in cash. (x) If Lessor does not believe Lessee's stated offer is in an amount fairly equivalent to the fair value of the consideration payable by the third person and so notifies Lessee in writing within seven (7) days after Lessor's receipt of Lessee's notice of election to so lease or purchase, Lessee may within five (5) days after its receipt of such notice from Lessor elect to refer such question for determination by an impartial arbitrator and the right of first refusal of Lessee shall then be held open until (5) days after Lessee is notified of such determination. Such arbitrator shall be chosen either by agreement of Lessee and Lessor at the time such question arises, or, at the option of either party, by referring the question to the American Arbitration Association with instructions that the American Arbitration Association select a single arbitrator under a request from the parties for expedited and accelerated determination. The determination of the arbitrator chosen under either option contained in this subparagraph shall be final and binding upon Lessee and Lessor. The parties shall share equally in the costs and fees of the arbitration (xi) In the event Lessee shall elect to exercise its right of first refusal, the lease agreement or other transfer or assignment shall be consummated within thirty (30) days of the latest of: (1) the day on which Lessor received notice of Lessee's election to exercise the right of first refusal; (2) the day upon which any question required to be determined by the arbitrator hereunder has been determined; or (3) the date of any FCC approval in the case of assignment or transfer; or at such other time as may be mutually agreed. The right of first refusal is terminated either by the lease or other transfer to Lessee as provided herein or by notice to Lessee of the Lessor's proposal to lease or otherwise transfer the ITFS Channels or any part to a third person and Lessee's unwillingness or failure to meet and accept such a bona fide offer pursuant to the times and procedures as set forth above; provided that such proposed lease or transfer is consummated at the same fees, charges, rental or other consideration and upon the same terms as to which such right of first refusal applied, within thirty (30) days after Lessee's right of first refusal had expired or had been specifically waived by written notice given to Lessor by Lessee, or within thirty (30) days following FCC approval in the case of assignment or transfer. C) Operation During End of Term. If Lessor and Lessee do not enter into New Lease Agreement before the end of the Initial Term, Lessee shall cease leasing the ITFS Channels on the last day of the Initial Term. D) No Rights Beyond Term of Licenses. Lessor and Lessee agree that this Agreement shall not give rise to any rights or remedies beyond the expiration of any FCC license necessary for the continued operation of the ITFS Channels. Provided, however, that while this Agreement is in effect, Lessor shall obtain and maintain in force all licenses, permits and authorizations required or desired in connection with the use of the ITFS Channels. Lessor shall take all necessary steps to renew the licenses for the ITFS Channels and shall not commit any act or engage in any activity which could reasonably be expected to cause the FCC to impair, restrict, revoke, cancel, suspend or refuse to renew the ITFS licenses. Lessor shall take all reasonable steps to comply with the Communications Act of 1934, as amended and the rules and regulations of the FCC, and shall file all reports, schedules and/or forms required by the FCC to be filed by Lessor. All expenses, including attorneys fees and filing fees, incurred in preparing and filing such reports, schedules and/or forms required by the FCC shall be paid by the Lessee. 10. ALLOCATION OF AIRTIME. A. Excess Capacity Airtime. To the extent allowed by the FCC rules and regulations and any amendments thereof, Lessor agrees to lease to Lessee the exclusive use of all excess capacity not utilized by Lessor ("Excess Capacity Airtime"). B. Lessor's Primary Airtime. During analog transmission over the ITFS Channels, Lessor reserves for its exclusive use a minimum of twenty (20) hours of airtime per-channel per-week to be used for its ITFS scheduled programs. During digital transmission ovr the ITFS Channels, Lessor shall have the exclusive use of 12.5% of the total capacity available on the Lessor's ITFS Channels. This airtime shall be know as "Lessor's Primary Airtime". C. Schedule of Airtime. The schedule which depicts the agreement of the parties as to use of Lessor's Channels shall be attached hereto and made a part hereof as Exhibit A which is subject to change upon agreement by both parties. D. Lessee's use of its Excess Capacity Airtime. Lessee shall have the right to utilize its Excess Capacity Airtime for any purpose allowed or authorized by the FCC including but not limited to voice, video and data transmission. E. Alternate Use and Vertical Blanking Intervals. Lessor shall have the right to use the second audio carrier ("SAP") and vertical blanking intervals. ("VBI") on which Lessor's ITFS programming is being transmitted. Lessee shall at all times have the right to use the VBI and SAP not utilized by Lessor and 100% of the response frequencies associated with the ITFS Channels. Lessor shall be responsible for any equipment needed to utilize the VBI and/or SAP and such equipment shall be compatible with Lessee's system. F. Lessor's Use of ITFS Channels. Lessor agrees that its program services and airtime use will not harm or interfere with Lessee's current or future signal paths utilized within Lessee's System for program encryption, pilot carrier signaling and other technical needs utilized for the operation of and such services provided by Lessee's System. Nor will Lessor, by its own action, or through a third party, utilize any part of its licensed frequency spectrum to create or operate a service that is in competition with current, planned or future services provided by Lessee's System. Lessor agrees to use its Primary Airtime in accordance with the FCC's rules and regulations. Lessor shall not take or fail to take any action which may have a material adverse effect on Lessee's right to utilize its Excess Capacity Airtime. G. Expanded System Capacity. Lessee shall have the right at anytime to require Lessor to file with the FCC any necessary application to expand the channel capacity to Lessor's station to enable it to carry more than one video signal per channel or digital data services; provided however, before Lessee can exercise this right, it must demonstrate to the Lessor's reasonable satisfaction that such modification will not materially degrade the performance of the station nor impair signal quality at the registered ITFS receive sites. Once such modification has been constructed, the modified facilities shall automatically be considered a part of this agreement and subject to all terms and conditions hereof. It is understood that Lessee shall have the full-time use of the Expanded Channels to the extend permitted by FCC rules. 3. TRANSMISSION SITE AND FACILITIES. I. Primary Transmission Site. Lessor's ITFS Channels are located at Key West, FL, Lessee agrees to provide Lessor space at the Primary Transmission site for Lessor's audio and video transmission equipment which shall not exceed on rack. Such space shall be leased to Lessor pursuant to Exhibit D hereto. This site shall hereinafter be described as the "Primary Transmission Site". At Lessee's sole expense, Lessee shall contract for a lease of space at the Transmission Site upon such terms as the parties agree. The Transmission Site shall comply with the standards, specifications and regulations of the FCC rules and orders pertaining to Lessor's ITFS license. J. Relocation of Transmission Site. (i) Lessor acknowledges that the location of the Primary Transmission Site for ITFS Channels is critical to the Lessee's business and agrees that it will not relocate the transmission facilities for ITFS Channels from the Primary Transmission Site without Lessee's prior written consent. (ii) Lessor further acknowledges that possibility that, as a result of currently unforeseen events, the Primary Transmission Site may not be the optimum site for the location of the ITFS Channels or Lessee's business throughout the term of this Lease Agreement. Lessor therefore agrees that if at any time or from time to time Lessee requests in writing that the transmission facilities for the ITFS Channels be relocated, Lessor shall file with the FCC and any other regulatory body having jurisdicition over the ITFS Channels all applications, amendments, and requests for modification that may be necessary to obtain any necessary consents to permit such relocation to such location within or adjacent to the Market as may be requested by Lessee; provided, however, that Lessor shall not be obligated to submit or procecute any application, amendment, or request for modification that Lessor reasonably determines, upon advice of counsel contained in a written opinion, would be in violation of the terms of the License, any statute, rule, or regulations regarding the operation of the ITFS Channels or the submission of materials to the FCC, or any of its obligations as an ITFS licensee; and provided, further, that any such relocation will not result in loss of service to Lessor's registered receive sites served by the transmission facilities in the event that the authorization is obtained to relocate the ITFS Channels to the location requested by Lessee, Lessor shall relocate such channels to such new location as soon as reasonably possible after authorization is obtained. Lessee shall bear reasonable costs associated with such relocation, including engineering and construction, and all reasonable costs associated with obtaining FCC or any other regulatory approval therefore. (iii) Lessor agrees to file modification applications requested by Lessee. Such modifications may include but shall not be limited to the following: power increase or decrease, polarization, transmit antenna patterns, digital, two-way (return path) use of the ITFS Channels, boosters, beam benders or repeaters, cells, sectorization, channel swaps, channel loading, channel shifting and application within five (5) business days or receipt of the modification application from Lessee or during any FCC designated filing window. Lessee will use reasonable efforts to provide Lessor with the engineering for the modification thirty (30) days prior to the request for filing. If Lessor believes that such modification will have an adverse effect on Lessor's ability to provide its services to its receive sites, Lessor agrees to file the modification application as presented by Lessee and within the time limit requested by Lessee; however, Lessee agrees not to implement construction and Lessor agrees not to withdraw the application until the parties have adequately addressed and resolved the potential material adverse effect or the matter has been submitted to arbitration pursuant to Section 16 and a final decision has been rendered by arbitrator. Although Lessee intends to file such modification applications, it may elect not to construct the Channels in that manner and may desire to utilize the Channels as currently licensed. A copy of the modification application, bearing the FCC's date stamp, shall be mailed to Lessee by Lessor, within fourteen (14) days of the filing of the modification application. Lessee shall be solely responsible for all engineering and legal costs associated with the preparation, review and filing of the modification application. In the event that any license modification requested by Lessee requires receive site upgrades in order for Lessor's receive sites to continue to receive Lessor's services, then Lessee agrees to pay for all costs to complete such upgrade prior to implementing the license modification. C. System Construction. Lessee shall within a reasonable period of time, but not later than six (6) months after the FCC grant of digital authority for the ITFS Channels, purchase equipment such as the antenna, waveguide or transmitters specified on the authorization for the ITFS Channels. At Lessee's expense, Lessee shall purchase and install such transmitters, transmission line, modulators, antennas and other equipment as required to operate the ITFS Channels in accordance with the provision of such authorization. Any equipment so used in such construction shall be leased to lessor pursuant to Paragraph 5 hereof. Such equipment is hereinafter referred to as the "Leased Equipment". Lessee shall retain title to the Leased Equipment except as noted by Paragraph 15 herein. D. Maintenance of Transmission Equipment. At Lessee's expense and subject to Lessor's right to supervise the maintenance of this equipment, Lessee shall maintain and operate the Leased Equipment during the terms of this Agreement for a nominal fee. Lessee shall also pay all taxes and other charges assessed against the Leased Equipment. E. Transmission of Programming. At no cost or expense to Lessor, Lessee shall provide the necessary labor and equipment capabilities to transmit on the ITFS Channels programming required to be carried pursuant to this Agreement such as Lessor's ITFS programming and TBN. Lessee shall also comply with Lessor's instructions regarding the transmission of such programming such as the dates and times to transmit programming. F. Interference. Lessee shall operate the Leased Equipment so that such operation does not create or increase interference with electronic transmission of any other FCC licensees entitles to protection under FCC rules and regulations. If Lessee's entitled to protection under FCC rules and regulations. If Lessee's operation of the Lease Equipment does so create or increase interference, Lessee shall pay all of the reasonable engineering and legal fees necessary to resolve the interference problem so created. G. Alterations and Attachments. Lessee, at its own expense, may make alterations of or attachments to the ITFS equipment or the common equipment as defined in Exhibit C (including the installation of encoding and/or addressing equipment) as may be reasonably required from time to time by the nature of its business; provided however, that such alterations or attachments do not interfere with Lessor's signal or ongoing operations or violate any FCC rules or regulations; and provided further that FCC authorization, if required, is obtained in advance of any such alteration or attachment at the sole cost of Lessee. to the extent any FCC authorization pertaining to the ITFS equipment is required, Lessor agrees to use its best efforts to obtain such authorization. H. Licensee Control and Liability. Nothing herein shall derogate from such licensee control of operations of the ITFS Channels that Lessor, as an FCC licensee, shall be required to maintain and Lessee acknowledges the reservation by Lessor of such control. Lessor shall at all times retain ultimate and exclusive responsibility for the operation and control of the ITFS Channels including policy decisions. 4. LESSOR'S RECEIVE SITES. Attached hereto as Exhibit B is list of the registered receive sites designated by Lessor to receive its ITFS programming and to be installed at the expense of Lessee. Those receive sites so listed shall be installed with a Standard Installation. If as the result of any relocation of the Primary Transmit Site, the equipment at Lessor's existing registered receive sites must be reoriented, Lessee shall pay the cost of same. As used herein for the purposes of this Agreement, the phrase "Standard Installation" shall mean an installation consisting of the placement of the ITFS/MMDS receiving antenna at an elevation (not to exceed thirty [30] feet above the base mounting location) which could normally receive the line-of-sight transmission from the Transmission Site; the coupling thereto of a block-down converter; and a sufficient amount of transmission line (coaxial cable) to connect the received ITFS programming to the input of (i) one classroom designated by Lessor to receive the ITFS programming or (ii) the receive site internal/external distribution system. Also, if as the result of any relocation of the Transmit Site, the equipment at Lessor's existing receive sites must be reoriented, Lessee shall pay the cost of same. Lessee also agrees that for digital transmission of the ITFS Channels Lessee will purchase and install at Lessee's expense, one single-point modem to receive its ITFS programming. 5. LEASE OF EQUIPMENT. A) Lessor's Lease of Leased Equipment. For a nominal fee, Lessor shall lease from Lessee the Leased Equipment during the terms of this Agreement. A list of this equipment is attached hereto as Exhibit C and incorporated by reference herein. Lessor shall have no responsibility for the loss of or damage to the Leased Equipment during the terms of this Agreement and Lessee shall bear all such responsibility. 6. FEES. A) Lessor's Service Fee. In consideration of the lease of the Leased Equipment, and for its share of the projected costs to maintain the Transmission Site and the Lease Equipment, Lessor shall pay Lessee an annual fee provided for in Exhibit D. B) Subscriber Royalty Fees or Percentage. Beginning on the Execution Date of this Agreement and continuing thereafter during the Initial Term of this Agreement, Lessee shall pay to Lessor the Subscriber Royalty Fee, System Percentage or monthly minimum, whichever is greater as set out in Exhibit D which is attached herewith and incorporated by reference herein. If the Execution Date shall be a date other than the first day of a calendar month, then the Subscriber Royalty Fee for the partial month shall be paid on a proportionate basis. A late fee of 10% (ten percent) will be assessed to past due accounts, and a finance charge of one and one-half percent (1.5%) per month will be assessed in addition to the late fee until paid. C) Notice of Construction and Required Certificate. Within thirty (30) days of completion of construction at the Transmission Site, Lessee shall notify Lessor of such completion of construction in writing. Within thirty (30) days of the end of each month in which Excess Capacity Airtime is leased hereunder, Lessee shall provide Lessor with a certificate, certified as accurate and correct by an authorized agent of Lessee, showing the number of subscribers served during such month. D) Right to Audit. Lessee shall for a period of three (3) years after their creation, keep, maintain and preserve complete and accurate records and accounts, including all invoices, correspondence, ledgers, financial and other records pertaining to Lessee's use of Excess Capacity Airtime and Lessor's charges hereunder; and such records and corporate accounts shall be available for inspection and audit at Lessee's corporate offices or at Lessee's offices in the Market, as designated by Lessee, at any time or times during the term of this Agreement or within ninety (90) days thereafter, during reasonable business hours, by Lessor or its nominee. In the event that there is discovered an underpayment of the Subscriber Royalty Fee as defined in Paragraph 6 (B) above, Lessee shall pay to Lessor a penalty equal to ten percent (10%) of the amount of each such underpayment. All information obtained by Lessor during any audit herein shall be maintained by Lessor in strict confidence. 7. PROGRAMMING. A) Control Over Programming. (i) Program Content. Lessee intends that only programming of a sort which would not serve to place Lessor's reputation in the community in jeopardy will be transmitted by Lessee on the ITFS Channels. In an attempt to minimize disputes, recognizing the difficulties inherent in specifying exact standards herein, it is agreed that Lessee shall have the right to market the programming provided by the networks and services listed on Exhibit E. If, however, the programming content of any networks and services listed on Exhibit E materially changes, Lessor shall have the right, upon ninety (90) days notice, to deny Lessee the right to continue transmitting such programming if Lessor would have the right to deny Lessee the right to transmit such programming under the provisions of this paragraph in the first instance. If Lessee proposes to transmit the programming of any new programming service, the Lessee shall notify Lessor in writing specifying in detail the nature of the new programming service and Lessor shall have the right, upon written served upon Lessee within thirty (30) days after Lessor's receipt of any such notice from Lessee, to deny to Lessee the right to transmit such service if such programming is obscene and/or contradicting local, state and/or federal laws or otherwise violates any federal, state or local laws or regulations. If no such denial notice is received by Lessee within such thirty (30) days, lessee shall be authorized to transmit all such services for which no denial notice is received. There shall be no reduction in fees required under this Agreement for any such programming not permitted to be transmitted. B) Availability of Programming. It is understood by Lessee and Lessor that there is expected to be no direct out-of-pocket annual costs for the acquisition of the qualified ITFS educational programming for Lessor's use during Lessor's Primary Airtime on the ITFS channels, based on current plans. In the event that this ITFS educational programming either; (1) ceases to be available, or, (2) becomes available only at a fee, then Lessor may incur direct out-of-pocket costs in Lessor's acquisition of ITFS programming. Lessee agrees to provide its best efforts to assist Lessor in the acquisition of alternative programming, if necessary. Additionally, Lessee agrees to make payment to Lessor for the actual, direct programming costs incurred. If any; If Lessor, after expending its best efforts, is unable to obtain suitable ITFS programming for a cost equal to the amount to be paid by Lessee, Lessor and Lessee shall use their best efforts to reach agreement on modifications to this Agreement to avoid any un-reimbursed ITFS programming costs to Lessor. If no such agreement can be reached, Lessor may terminate this agreement. In the case of such termination, Lessor shall use its best efforts (with out-of-pocket costs of Lessor to be paid by Lessee, with Lessee's prior approval) to transfer the license for the ITFS Channels to another qualified educational entity, subject to FCC approval, with the intent of assigning this Agreement from Lessor to the new educational entity. C) Integration of Lessor's Programming. Lessee agrees to integrate Lessor's programming into the overall communications service offered to subscribers, without cost to Lessor. This integration shall include, but not be limited to, listing Lessor's material in any program guides produced by Lessee for subscribers. D) Carriage of TBN. In the event that Lessor's ITFS Channels are used for analog video transmission and TBN is not transmitted on a local VHF or UHF station, with a market coverage equivalent to both area and signal quality of our ITFS channels, and Lessee does not have local off-air insertion as part of its standard installation, then, if so designated by Lessor, Lessee agrees to transmit on one of the ITFS Channels the programming of Trinity Broadcasting Network ("TBN") during those time periods such channel is not used for Lessor's ITFS programming ("TBN Airtime") provided that Lessee is not required to pay a fee for carriage of TBN. In the event that Lessee is permitted to program the hours previously occupied by TBN, then Lessee shall increase, in proportion to the increase in Excess Capacity Airtime, the amount of minimum fees and subscriber royalty fees payable under the provision 6 (B) of this agreement during the remainder of the term(s) of the agreement. For purposes of calculating any such proportionate increase, the parties acknowledge and agree that the minimum fee and subscriber royalty fee agreed to herein are based on Lessee's equivalent use of three full-time ITFS channels. E) Station Identification. During Lessee's use of Lessor's excess channel capacity, Lessee shall transmit Lessor's call sign for each respective station as required by the FCC. 8. PROCECUTION OF PETITIONS, AUTHORIZATIONS AND LICENSES. A) Best Efforts to Secure Approval of this Agreement. The parties recognize that certain approvals will be required from the FCC in order to effectuate this Agreement. Both parties shall use their best efforts to prepare, file and prosecute before the FCC all petitions, waivers, applications and other documents necessary to secure any FCC approval required to effectuate this Agreement. Lessee shall assist in the preparation and prosecution of such applications and as provided for herein, shall pay all filing fees, attorneys' fees, engineering fees, and all other expenses in connection therewith. Lessor also agrees to cooperate with Lessee's efforts to cause other ITFS, OFS, MDs and MMDS operators to co-locate at the Transmission Site. Notwithstanding anything in this Agreement to the contrary, it is understood that no filing shall be made with the FCC with respect to this Agreement unless both parties have reviewed such filing and consented in writing to its submission, such consent not be unreasonably withheld. B) Further Efforts. Throughout the Initial Term of this Agreement, Lessor shall use its best efforts to obtain and maintain in force all licenses, permits and authorizations required for Lessee and Lessor to use the ITFS Channels as contemplated by this Agreement. Lessee shall be responsible for all cash expenses incurred to obtain and maintain in force such licenses, permits and authorizations. When mutually agreed by the parties and at Lessee's sole expense, Lessor shall apply for, and use its best efforts to obtain those reasonable license modifications which would assist Lessee in its business. Lessor also shall consider filing, at Lessee's sole expense, such reasonable protests, comments or other petitions to deny any other ITFS, MMDS, MDS and/or OFS applications or amendments as may be requested by Lessee in the mutual best interests of the parties and the public. Lessor and Lessee shall promptly notify each other of any event of which it has knowledge that may affect any of the licenses, permits or authorization affecting the ITFS Channels. C) Attorneys' Fees. With respect to any legal work conducted pursuant to Paragraph 8(A) and (B) above, Lessee shall be responsible for all attorneys' fees in connection therewith and shall make payments directly to the attorney. However, any attorney fees paid by Lessee shall be approved in advance by Lessee. 9. REPRESENTATIONS AND WARRANTIES. A) Representations and Warranties of Lessor. Lessor represents and warrants to Lesse as follows: (i) Organization. Lessor is a non-profit organization duly organized and existing in good standing under the laws of the State of California, and it has full power and authority to carry out all of the transactions contemplated by this Agreement and all other agreement, certificates or instruments executed and delivered in connection herewith. (ii) No Violation. Neither the execution nor delivery of this agreement or any other agreements, certificates or instruments executed and delivered herewith, nor the performance of the transactions contemplated hereby constitute or will constitute a violation of , be in conflict with, or a default under any term or provision of the governing instruments or Lessor or any agreement or commitment to which Lessor is bound, or any judgment, decree, order, regulation or rule of any court or governmental authority, or consent of any federal, state or local authority is required in connection with the execution and delivery of this Agreement or any other agreements, certificates or instruments executed and delivered herewith or with the performance of the transaction contemplated hereby. B) Representations and Warranties of Lessee. Lessee represents and warrants to Lessor as follows: (ii) Organization. Lessee is duly organized, validly existing and in good standing under the laws of the State of its incorporation and it has full power and authority to own property and carry all of the transactions contemplated by this Agreement, and all other agreements, certificates or instruments executed and delivered by Lessee in connection herewith. (ii) Corporation Action; Valid and Binding Agreements. Lessee has taken all corporate action necessary to authorize the execution and delivery of this Agreement and all other agreements, certificates or instruments executed and delivered in connection herewith. Upon execution and delivery, this Agreement and all other agreements, certificates or instruments executed and delivered by Lessee in connection herewith will constitute valid and binding agreements of Lessee enforceable in accordance with their respective terms. (iii) Litigation and Investigations. There is no action, suit, proceeding or investigation pending or, to the best of Lessee's knowledge, threatened against Lessee, its principals or related entities before any court, administrative agency or other governmental body, and Lessee does not know nor is aware of any reason for commencement of any such action, proceeding or investigation. (iv) Misrepresentation of Material Fact. To the best of Lessee's knowledge, information and believe, no document or contract that was shown to Lessor and which in any way affects any of the properties, assets or proposed transactions of Lessee as such relates to this Agreement, no certificate or statement furnished by or on behalf of Lessee in connection with this Agreement, nor this Agreement itself contains any untrue statement of material fact or omits to state a material fact which would make the statements contained herein misleading. C) Survival or Representations and Warranties. The representations and warranties contained in this Agreement shall be deemed to be continuing during the Initial terms of this Agreement, and each Party shall have the duty promptly to notify the notify the other of any event or circumstance which might reasonably be deemed to constitute a breach of or lead to a breach of its warranties or representations hereunder. The waiver by either Party of any breach of any presentation or warranty under this Agreement shall not constitute a waiver of any other representation or warranty or of any failure in the future by the other Party to fulfill such representation or warranty. 10. TERMINATION. A) Termination of FCC Authorization. Without further liability to either Lessor or Lessee, this Agreement shall terminate in the event that for any reason (i) Lessor shall not be licensed on the leased ITFS Channels, or (ii) the FCC shall terminate or diminish Lessor's authority to lease the ITFS Channels in accordance with the terms of this Agreement. B) Termination by Reason of Default or Nonperformance. At the option of the non-defaulting party, this Agreement may be terminated upon the material breach or default by the defaulting party of its duties and obligations hereunder is such breach or default is not cured by such defaulting party and is breach or default shall continue for a period of thirty (30) consecutive days after such defaulting party's receipt of notice thereof from the non-defaulting party. It is understood and agreed that any failure on the part of Lessee to make any payment required under Paragraph 6 hereof shall be a material breach of default of its duties and obligations hereunder. It is also understood and agreed that any consequences resulting from the loss of local participating receive sites shall not be considered a material breach or default by Lessor of its duties and obligations hereunder. C) Remedies to Continue. In the event of termination of this Agreement pursuant to Paragraph 10(B), such termination shall not affect or diminish the rights or claims or remedies available in equity or at law to the non-defaulting party arising by reason of a breach or default of this Agreement. However, no liability shall arise on the part of Lessor or Lessee upon termination of this Agreement pursuant to Paragraph 10(A) except where the loss of the FCC license occurs as a result of the default of either party. 11. TRANSFER OF RIGHTS AND OBLIGATIONS. Lessee shall have the right to assign its rights under this lease as collateral for any financing arrangements it makes. Lessee shall also have the right to pledge the Leased Equipment as collateral security for any loans it makes; provided, however, that any pledge of the Leased Equipment shall be made subject to the provisions of this lease. Lessee shall further have the right to subcontract any portion of its obligations under this Agreement to any partnership, joint venture, corporation or entity which Lessee may choose, provided that Lessee gives Lessor notice of any proposed subcontracting and, provided further, that no such subcontracting shall release Lessee from fulfilling all of its obligations under this Agreement. Lessee shall have the right to assign or transfer its rights, benefits, duties and obligations under this Agreement to a commonly-owned company without the prior consent of Lessor. Apart from the foregoing, neither party may assign or transfer its rights, benefits, duties or obligations under this Agreement without the prior written consent of the other, which consent shall not be unreasonably witheld. 12. INDEMNIFICATION. A) By Lessor. To the extent permitted by state and federal law and its charter or by-laws, Lessor shall forever protect, save and keep Lessee and its permitted successors and assigns harmless and indemnify Lessor against and from any and all claims, demands, losses, costs, damages, suits, judgments, penalties, expenses and liabilities or any kind or nature whatsoever, including reasonable attorneys' fees, arising directly or indirectly out of (i) the willful misconduct of Lessor, its agents or employees, in connection with the performance of this Agreement; (ii) any programming transmitted by Lessor during any of Lessor's Airtime. B) By Lessee. To the extent permitted by state and federal law and its charter or by-laws, Lessor shall forever protect, save and keep Lessee and its permitted successors and assigns harmless and indemnify Lessor against and from any and all claims, demands, losses, costs, damages, suits, judgments, penalties, expenses and liabilities or any kind or nature whatsoever, including reasonable attorneys' fees, which arise directly or indirectly out of (i) the negligence or willful misconduct of Lessee, its agents or employees, in connection with the performance of this Agreement; (ii) any programming transmitted by Lessee or any of its authorized agents or subcontractors with the public, third parties and subscribers to the Lessee's programming service; or (iv) any maintenance, installation or other work performed by Lessee or any authorized agent or subcontractor under this Agreement. C) Notice of Claim; Defense of Claim. Each party shall notify the other of any such claim promptly upon receipt of same. Either party (hereinafter referred to as appropriate the "Indemnitor" or Indemnitee") shall have the option to defend, at its own expense, any claims arising under this Paragraph. In Indemnitor assumes the defense of any such claim, Indemnitee shall delegate complete and sole authority to the Indemnitor to defend or settle same and Indemnitee shall cooperate with Indemnitor in the defense thereof. 13) INSURANCE. A) Policies Required. At its expense, Lessee shall secure and maintain with financially reputable insurers, one or more policies of insurance insuring the Leased Equipment and Lessee's utilization of the ITFS Channels against casualty and other losses of the kinds customarily insured against by firms of established reputations engaged in the same or similar line of business, or such types and in such amounts as are customarily carried under similar circumstances by such firms, including, without limitation: (i) "All Risk" property insurance covering the ITFS Equipment and the common Equipment to the extent of one hundred percent (100%) of its full replacement value without deduction for depreciation: (ii) comprehensive general public liability insurance covering liability resulting from lessee's operation of the ITFS equipment on an occurrence basis having minimum limits of liability in an amount of not less than One Million Dollars ($1,000,000.00) for bodily injury, personal injury or death to any person or persons in any one occurrence, and not less than Two Million Dollars ($2,000,000.00) in the aggregate for all such losses during each policy year, and not less than Three Hundred Thousand Dollars ($300,000.00) with respect to damage to property; (ii) all workers compensation, automobile liability and similar insurance required by law. B) Insurance Policy Forms. All policies of insurance required by this Paragraph shall, whre appropriate, designate Lessor as either the insured party or as a named additionally insured party, shall be written as primary policies, not contributory with and not in excess of any coverage which Lessor shall carry, and shall contain a provision that the issuer shall give to Lessor thirty (30) days prior written notice of any cancellation or lapse of such insurance or of any change in the coverage thereof. C) Proof of Insurance. Executed copies of the policies of insurance required under this section or certificates thereof shall be delivered to Lessor not later than ten (10) after execution of this agreement. Lessee shall furnish Lessor evidence of renewal of each such policy not later than thirty (30) days prior to the expiration of the term thereof. 66. RELATIONSHIP OF PARTIES. By the provisions of this Agreement, Lessor and Lessee intend to enter an airtime lease relationship and not a joint venture. They will carry out this Agreement to preserve that intent. Neither party shall represent itself as the other party, nor as having any relationship with one another, except as Lessor and Lessee under the terms of this Agreement. 67. EQUIPMENT PURCHASE. I) Lessor's Option to Purchase. In the event that this Agreement is terminated, Lessor shall have the option to purchase the Leased Equipment used exclusively for Lessor's ITFS license. Any equipment which is used in a shared fashion (such as transmit antenna, decoders and combiners) in providing signals other than Lessor's signals are excluded from this option to purchase. The intent of the purchase option provided for in Paragraphs 16(A) is to provide Lessor with the capability to continue to perform on Lessor's ITFS license. The purchase price shall be the market value of such equipment noted above as determined by mutual agreement or by averaging the values obtained from two (2) appraisals, with one appraiser each chosen by Lessor and Lessee. J) Lessee's Option to Purchase. If during the terms of this Agreement the FCC modifies its rules so as to enable Lessee to be licensed to operate the ITFS frequencies, Lessee shall have a right of first refusal to acquire such licenses subject to the same terms and conditions as the right provided for in Paragraph 1(B). 68. NON-DISCLOSURE Lessor acknowledges that there may be made available to it pursuant to this Agreement proprietary information of Lessee relating to the encoding and/or decoding system associated with the ITFS channel equipment and its patented processes including, but not limited to, improvements, innovations, adaptation, inventions, results of experimentation, processes and methods, whether or not deemed patentable, and certain business and marketing techniques (all herein referred to as "Confidential Information"). Lessor acknowledges that this Confidential Information has been developed by Lessee at considerable effort and expense and represents special, unique and valuable proprietary assets of Lessee, the value of which may be destroyed by unauthorized dissemination. Accordingly, Lessor covenants and agrees that, except as may be required for the performance of this Agreement or by law or court order, neither it nor any of its agents or affiliates shall disclose such Confidential Information to any third person, firm, corporation or other entity for any reason whatsoever, such undertaking to be enforceable by injunctive or other equitable relief to prevent any violation or threatened violation thereof. 69. NON-COMPETITION During the term of this Agreement, Lessor agrees not to transmit programming or to lease or sublease any channel capacity on its ITFS Facilities for the transmission of programming that is competitive with the programming transmitted by Lessee. 70. FORCE MAJEURE If by reason of Force Majeure either party is unable in whole or in part to perform its obligations hereunder, the party shall not be deemed in violation of default during the period of such inability. As used herein, the phrase "Force Majeure", shall mean the following: act of God, acts of public enemies, orders of any branch of the government of the United States of America, any state or any political subdivisions, thereof which are not the result of a breach of this Agreement, orders of any military authority insurrections, riots, epidemics, fires, civil disturbances, explosions, or any other cause or event not reasonably within control of the adversely affected party. 71. CONDITION PRECEDENT This Agreement is conditional on the issuance of a Final Order by the FCC granting Lessor a construction permit for the ITFS Channels in the Market from the Transmission Site. By "Final Order" the parties mean an action or order of the FCC which is not reversed, stayed, enjoined, vacated, set aside, annulled or suspended and with respect to which no timely-filed request for administrative or judicial review is pending and as to which the time for filing any such request, or for the FCC to set aside the action on its own motion, has expired. 72. NOTICE Any notice required to be given to Lessor under any provision of this Agreement shall be delivered personally or by certified mail to Lessor at the address first written above. Any notice required to be given to Lessee under any provision of this Agreement shall be delivered personally or by certified mail to Lessee at the address first written above. 73. SEVERABILITY Should any court or agency determine that any provision of this Agreement is invalid, the remainder of the Agreement shall remain in effect. 74. WAIVER A waiver by either Lessor or Lessee of a breach of any provision of this Agreement shall not be deemed to constitute a waiver of any preceding or subsequent breach of the same provision or of any other provision. 75. PAYMENT OF EXPENSES AND SIGNING FEES A signing fee of One Dollar ($1) shall be paid to Lessor. Lessee shall pay all costs and expenses incident to fulfilling or modifying this Agreement, such as, attorneys' fees or, if necessary, any travel expenses approved in advance by Lessee, FCC filing fees, and engineering costs. 76. VENUE AND GOVERNING LAW Venue for any cause of action brought by or between Lessor and/or Lessee relating to this Agreement shall be in California and all provisions of this Agreement shall be construed under the laws of the State of California and County of Lessor. 77. COUNTERPARTS This Agreement may be executed in one or more counterparts each of which shall be deemed an original, but all of which shall constitute one and the same instrument, and shall become effective when each of the parties hereto shall have delivered to it this Agreement duly executed by each of the other parties hereto. 78. ENTIRE AGREEMENT This Agreement constitutes the entire Agreement between the parties and supersedes all prior oral or written provisions of any kind. The parties further agree that this Agreement may only be modified by written Agreement signed by both parties. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on this day of July 1st, 1999. SHEKINAH NETWORK By: ______________________________ Name: Charles J. McKee Title: President WORLD WIDE WIRELESS COMMUNICATIONS, INC. By: ______________________________ Name: Douglas P. Haffer Title: President Address for Notices: Shekinah Network 14875 Powerline road Atascadero, CA 93422 Phone/Fax: (805) 438-3341 Attn: Charles McKee, President Phone: (805) 438-3341 Fax: (805) 438-3341 Gardner, Carton & Douglas Attn: Laura Mow 1301 K Street, N.W., Suite 900 Washington, D.C. 20005 Phone: (202) 408-7100 Fax: (202) 289-1504 World Wide Wireless Communications, Inc. One Post Street Suite 2600 San Francisco, CA 94104 Phone: (415) 981-7777 Fax: (415) 391 3199 EXHIBIT A Schedule of Airtime EXHIBIT B Receive Sites There shall be attached hereto and incorporated by reference a copy of FCC Form 330 Section IV listing Lessor's receive sites. EXHIBIT C Leased Equipment Noted below is a list of equipment that Lessee is leasing to Lessor. (9) Four (4) ITFS tansmitters and related hardware (10) Lessor's ITFS receive site antennas and related hardware *(3) Combining network, transmission line and antenna *Common Equipment EXHIBIT D Service and Royalty Fees 1. Lessor's Service Fee Services Provided Annual Fee ----------------- ---------- (m) Lease of Leased Equipment [6(A)] $1.00 (n) Maintenance of Leased Equipment [3(D)] $1.00 (o) Lease of space at Primary Transmission Site [3A)] $1.00 2. Lessee's Subscriber Royalty Fee Lessee shall pay Lessor a minimum monthly Transmission Fee 5% of the system's Gross receipts or a monthly minimum payment of $500 per month whichever is greater. Payment shall be as follows: Commencing on the Execution (Effective) Date and as defined in Paragraph 6)B, payments for each month shall be made by the twentieth (20th) day of the following month. EXHIBIT E Programming In addition to digital data services, such as the Internet or Intranet, the following is a list of video programming services Lessee may provide over Lessee's System. TLC - The Leaning Channel TWC - The Weather Channel Lifetime ESPN - Sports AMC - American Movie Classics SCOLA WHTN - World Harvest Television Network ECO - Galavision CNN - Cable News Network CNN - Headline News C-Span I C-Span II BET - Black Entertainment Network CNBC - Consumer News & Business Channel Nickelodeon The Discovery Channel A&E - Arts and Entertainment The Family Channel The Disney Channel PBS - Public Broadcasting Service TBN - Trinity Broadcasting Network TNIN - The New Inspirational Network ME/U - Mind Extension Network The International Channel BRAVO Network The Travel Channel Family Network Keystone Inspirational Network EX-10.8 16 0016.txt LEASE AGREEMENT--PIERRE, SOUTH DAKOTA LEASE AGREEMENT BETWEEN WORLD WIDE WIRELESS COMMUNICATIONS, INC. AND SHEKINAH NETWORK Pierre, South Dakota ITFS EXCESS CAPACITY AIRTIME LEASE AGREEMENT THIS AGREEMENT is made this 1st day of August 1999 by Shekinah Network (hereinafter referred to as "Lessor") having its principal place of business at 14875 Powerline Road, Atascadero, CA 93422 and World Wide Wireless Communications, Inc. (hereinafter referred to as "Lessee") having its principal place of business at One Post Street, Suite 2600 San Francisco, CA 94104. WHEREAS, the Federal Communications Commission ("FCC") has authorized licenses for Instructional Television Fixed Service ("ITFS") channels and has authorized the licensee to lease excess capacity to non-ITFS users; and WHEREAS, Lessor has been granted an FCC License for (call sign) WNC-798 (the "License") for the Channel group C1-4 (the "ITFS Channels") in Pierre, South Dakota ("The Market"); and WHEREAS, Lessee is in the business of providing voice, video, data and other services via microwave transmission in the Market Area and desires to lease the excess ITFS capacity of the ITFS channels; and WHEREAS, Lessor has determined that there will be excess airtime capacity available on the ITFS Channels and desires to lease this excess airtime capacity to Lessee. NOW, THEREFORE, in consideration of the mutual promises, undertakings, covenants and conditions set forth herein, the Lessor and Lessee do hereby agree and warrant as follows: 11. TERM OF AGREEMENT A. Initial Term. This Agreement shall be effective upon the date of its execution and shall extend for an initial term of five (5) years (the "Initial Term"). B. Renewal Term Provided that the License is renewed by the FCC, Lessee shall have the right to extend this Agreement on its then existing terms and conditions for one (1) additional five (5) year term (the "Renewal Term"). The Renewal Term shall automatically go into effect upon the conclusion of the Initial Term unless Lessee notifies Lessor at least one hundred eighty days (180) before the end of the Initial Term that Lessee does not wish to extend this Agreement. C. New Lease Agreement/Right of first Refusal. (1) Providing that Lessor's FCC license remains in good standing and/or Lessor seeks to renew such license, Lessee and Lessor shall negotiate in good faith for a new excess capacity airtime lease agreement (hereinafter referred to as "New Lease Agreement") no later than one hundred eighty days (180) prior to the end of the latter of (i) Initial Term or (ii) the Renewal Term if the Agreement is extended for the Renewal Term. (7) If Lessor elects to not reasonably pursue a New Lease Agreement with Lessee, then Lessor shall so notify Lessee in writing of such intent no later than one hundred eighty (180) days prior to the end of the Renewal Term. (3) If Lessor and Lessee do not enter into a New Lease Agreement, Lessor grants Lessee a right of first refusal on any competing proposals for lease agreements or transfers or assignments of any part of the ITFS Channels received by Lessor during the twelve (12) months following the expiration of the latter of (i) the Initial Term or (ii) the Renewal Term, if the Agreement is extended for the Renewal Term. If any acceptable offer to lease or acquire the ITFS Channels is made to Lessor, Lessor shall give written notice to Lessee describing the person to whom the proposed lease or transfer is to be made, the fees, charges, rental or other consideration to be received fro the lease or transfer, the terms thereof and generally the relevant other terms and conditions of the lease or transfer. Lessee shall have a period of thirty (30) days after its receipt of such notice from Lessor in which to elect, by giving written notice to Lessor, to lease or, if eligible, obtain any or all of the ITFS Channels for the same fees, charges, rental or other consideration for which Lessor proposed to lease or transfer to the third person. (i) The fees, charges, rental or consideration shall be paid by such third person or Lessee in cash. (xii) If Lessor does not believe Lessee's stated offer is in an amount fairly equivalent to the fair value of the consideration payable by the third person and so notifies Lessee in writing within seven (7) days after Lessor's receipt of Lessee's notice of election to so lease or purchase, Lessee may within five (5) days after its receipt of such notice from Lessor elect to refer such question for determination by an impartial arbitrator and the right of first refusal of Lessee shall then be held open until (5) days after Lessee is notified of such determination. Such arbitrator shall be chosen either by agreement of Lessee and Lessor at the time such question arises, or, at the option of either party, by referring the question to the American Arbitration Association with instructions that the American Arbitration Association select a single arbitrator under a request from the parties for expedited and accelerated determination. The determination of the arbitrator chosen under either option contained in this subparagraph shall be final and binding upon Lessee and Lessor. The parties shall share equally in the costs and fees of the arbitration (xiii) In the event Lessee shall elect to exercise its right of first refusal, the lease agreement or other transfer or assignment shall be consummated within thirty (30) days of the latest of: (1) the day on which Lessor received notice of Lessee's election to exercise the right of first refusal; (2) the day upon which any question required to be determined by the arbitrator hereunder has been determined; or (3) the date of any FCC approval in the case of assignment or transfer; or at such other time as may be mutually agreed. The right of first refusal is terminated either by the lease or other transfer to Lessee as provided herein or by notice to Lessee of the Lessor's proposal to lease or otherwise transfer the ITFS Channels or any part to a third person and Lessee's unwillingness or failure to meet and accept such a bona fide offer pursuant to the times and procedures as set forth above; provided that such proposed lease or transfer is consummated at the same fees, charges, rental or other consideration and upon the same terms as to which such right of first refusal applied, within thirty (30) days after Lessee's right of first refusal had expired or had been specifically waived by written notice given to Lessor by Lessee, or within thirty (30) days following FCC approval in the case of assignment or transfer. C) Operation During End of Term. If Lessor and Lessee do not enter into New Lease Agreement before the end of the Initial Term, Lessee shall cease leasing the ITFS Channels on the last day of the Initial Term. D) No Rights Beyond Term of Licenses. Lessor and Lessee agree that this Agreement shall not give rise to any rights or remedies beyond the expiration of any FCC license necessary for the continued operation of the ITFS Channels. Provided, however, that while this Agreement is in effect, Lessor shall obtain and maintain in force all licenses, permits and authorizations required or desired in connection with the use of the ITFS Channels. Lessor shall take all necessary steps to renew the licenses for the ITFS Channels and shall not commit any act or engage in any activity which could reasonably be expected to cause the FCC to impair, restrict, revoke, cancel, suspend or refuse to renew the ITFS licenses. Lessor shall take all reasonable steps to comply with the Communications Act of 1934, as amended and the rules and regulations of the FCC, and shall file all reports, schedules and/or forms required by the FCC to be filed by Lessor. All expenses, including attorneys fees and filing fees, incurred in preparing and filing such reports, schedules and/or forms required by the FCC shall be paid by the Lessee. 12. ALLOCATION OF AIRTIME. A. Excess Capacity Airtime. To the extent allowed by the FCC rules and regulations and any amendments thereof, Lessor agrees to lease to Lessee the exclusive use of all excess capacity not utilized by Lessor ("Excess Capacity Airtime"). B. Lessor's Primary Airtime. During analog transmission over the ITFS Channels, Lessor reserves for its exclusive use a minimum of twenty (20) hours of airtime per-channel per-week to be used for its ITFS scheduled programs. During digital transmission ovr the ITFS Channels, Lessor shall have the exclusive use of 12.5% of the total capacity available on the Lessor's ITFS Channels. This airtime shall be know as "Lessor's Primary Airtime". C. Schedule of Airtime. The schedule which depicts the agreement of the parties as to use of Lessor's Channels shall be attached hereto and made a part hereof as Exhibit A which is subject to change upon agreement by both parties. D. Lessee's use of its Excess Capacity Airtime. Lessee shall have the right to utilize its Excess Capacity Airtime for any purpose allowed or authorized by the FCC including but not limited to voice, video and data transmission. E. Alternate Use and Vertical Blanking Intervals. Lessor shall have the right to use the second audio carrier ("SAP") and vertical blanking intervals. ("VBI") on which Lessor's ITFS programming is being transmitted. Lessee shall at all times have the right to use the VBI and SAP not utilized by Lessor and 100% of the response frequencies associated with the ITFS Channels. Lessor shall be responsible for any equipment needed to utilize the VBI and/or SAP and such equipment shall be compatible with Lessee's system. F. Lessor's Use of ITFS Channels. Lessor agrees that its program services and airtime use will not harm or interfere with Lessee's current or future signal paths utilized within Lessee's System for program encryption, pilot carrier signaling and other technical needs utilized for the operation of and such services provided by Lessee's System. Nor will Lessor, by its own action, or through a third party, utilize any part of its licensed frequency spectrum to create or operate a service that is in competition with current, planned or future services provided by Lessee's System. Lessor agrees to use its Primary Airtime in accordance with the FCC's rules and regulations. Lessor shall not take or fail to take any action which may have a material adverse effect on Lessee's right to utilize its Excess Capacity Airtime. G. Expanded System Capacity. Lessee shall have the right at anytime to require Lessor to file with the FCC any necessary application to expand the channel capacity to Lessor's station to enable it to carry more than one video signal per channel or digital data services; provided however, before Lessee can exercise this right, it must demonstrate to the Lessor's reasonable satisfaction that such modification will not materially degrade the performance of the station nor impair signal quality at the registered ITFS receive sites. Once such modification has been constructed, the modified facilities shall automatically be considered a part of this agreement and subject to all terms and conditions hereof. It is understood that Lessee shall have the full-time use of the Expanded Channels to the extend permitted by FCC rules. 3. TRANSMISSION SITE AND FACILITIES. K. Primary Transmission Site. Lessor's ITFS Channels are located at Key West, FL, Lessee agrees to provide Lessor space at the Primary Transmission site for Lessor's audio and video transmission equipment which shall not exceed on rack. Such space shall be leased to Lessor pursuant to Exhibit D hereto. This site shall hereinafter be described as the "Primary Transmission Site". At Lessee's sole expense, Lessee shall contract for a lease of space at the Transmission Site upon such terms as the parties agree. The Transmission Site shall comply with the standards, specifications and regulations of the FCC rules and orders pertaining to Lessor's ITFS license. L. Relocation of Transmission Site. (i) Lessor acknowledges that the location of the Primary Transmission Site for ITFS Channels is critical to the Lessee's business and agrees that it will not relocate the transmission facilities for ITFS Channels from the Primary Transmission Site without Lessee's prior written consent. (ii) Lessor further acknowledges that possibility that, as a result of currently unforeseen events, the Primary Transmission Site may not be the optimum site for the location of the ITFS Channels or Lessee's business throughout the term of this Lease Agreement. Lessor therefore agrees that if at any time or from time to time Lessee requests in writing that the transmission facilities for the ITFS Channels be relocated, Lessor shall file with the FCC and any other regulatory body having jurisdicition over the ITFS Channels all applications, amendments, and requests for modification that may be necessary to obtain any necessary consents to permit such relocation to such location within or adjacent to the Market as may be requested by Lessee; provided, however, that Lessor shall not be obligated to submit or procecute any application, amendment, or request for modification that Lessor reasonably determines, upon advice of counsel contained in a written opinion, would be in violation of the terms of the License, any statute, rule, or regulations regarding the operation of the ITFS Channels or the submission of materials to the FCC, or any of its obligations as an ITFS licensee; and provided, further, that any such relocation will not result in loss of service to Lessor's registered receive sites served by the transmission facilities in the event that the authorization is obtained to relocate the ITFS Channels to the location requested by Lessee, Lessor shall relocate such channels to such new location as soon as reasonably possible after authorization is obtained. Lessee shall bear reasonable costs associated with such relocation, including engineering and construction, and all reasonable costs associated with obtaining FCC or any other regulatory approval therefore. (iii) Lessor agrees to file modification applications requested by Lessee. Such modifications may include but shall not be limited to the following: power increase or decrease, polarization, transmit antenna patterns, digital, two-way (return path) use of the ITFS Channels, boosters, beam benders or repeaters, cells, sectorization, channel swaps, channel loading, channel shifting and application within five (5) business days or receipt of the modification application from Lessee or during any FCC designated filing window. Lessee will use reasonable efforts to provide Lessor with the engineering for the modification thirty (30) days prior to the request for filing. If Lessor believes that such modification will have an adverse effect on Lessor's ability to provide its services to its receive sites, Lessor agrees to file the modification application as presented by Lessee and within the time limit requested by Lessee; however, Lessee agrees not to implement construction and Lessor agrees not to withdraw the application until the parties have adequately addressed and resolved the potential material adverse effect or the matter has been submitted to arbitration pursuant to Section 16 and a final decision has been rendered by arbitrator. Although Lessee intends to file such modification applications, it may elect not to construct the Channels in that manner and may desire to utilize the Channels as currently licensed. A copy of the modification application, bearing the FCC's date stamp, shall be mailed to Lessee by Lessor, within fourteen (14) days of the filing of the modification application. Lessee shall be solely responsible for all engineering and legal costs associated with the preparation, review and filing of the modification application. In the event that any license modification requested by Lessee requires receive site upgrades in order for Lessor's receive sites to continue to receive Lessor's services, then Lessee agrees to pay for all costs to complete such upgrade prior to implementing the license modification. C. System Construction. Lessee shall within a reasonable period of time, but not later than six (6) months after the FCC grant of digital authority for the ITFS Channels, purchase equipment such as the antenna, waveguide or transmitters specified on the authorization for the ITFS Channels. At Lessee's expense, Lessee shall purchase and install such transmitters, transmission line, modulators, antennas and other equipment as required to operate the ITFS Channels in accordance with the provision of such authorization. Any equipment so used in such construction shall be leased to lessor pursuant to Paragraph 5 hereof. Such equipment is hereinafter referred to as the "Leased Equipment". Lessee shall retain title to the Leased Equipment except as noted by Paragraph 15 herein. D. Maintenance of Transmission Equipment. At Lessee's expense and subject to Lessor's right to supervise the maintenance of this equipment, Lessee shall maintain and operate the Leased Equipment during the terms of this Agreement for a nominal fee. Lessee shall also pay all taxes and other charges assessed against the Leased Equipment. E. Transmission of Programming. At no cost or expense to Lessor, Lessee shall provide the necessary labor and equipment capabilities to transmit on the ITFS Channels programming required to be carried pursuant to this Agreement such as Lessor's ITFS programming and TBN. Lessee shall also comply with Lessor's instructions regarding the transmission of such programming such as the dates and times to transmit programming. F. Interference. Lessee shall operate the Leased Equipment so that such operation does not create or increase interference with electronic transmission of any other FCC licensees entitles to protection under FCC rules and regulations. If Lessee's entitled to protection under FCC rules and regulations. If Lessee's operation of the Lease Equipment does so create or increase interference, Lessee shall pay all of the reasonable engineering and legal fees necessary to resolve the interference problem so created. G. Alterations and Attachments. Lessee, at its own expense, may make alterations of or attachments to the ITFS equipment or the common equipment as defined in Exhibit C (including the installation of encoding and/or addressing equipment) as may be reasonably required from time to time by the nature of its business; provided however, that such alterations or attachments do not interfere with Lessor's signal or ongoing operations or violate any FCC rules or regulations; and provided further that FCC authorization, if required, is obtained in advance of any such alteration or attachment at the sole cost of Lessee. to the extent any FCC authorization pertaining to the ITFS equipment is required, Lessor agrees to use its best efforts to obtain such authorization. H. Licensee Control and Liability. Nothing herein shall derogate from such licensee control of operations of the ITFS Channels that Lessor, as an FCC licensee, shall be required to maintain and Lessee acknowledges the reservation by Lessor of such control. Lessor shall at all times retain ultimate and exclusive responsibility for the operation and control of the ITFS Channels including policy decisions. 4. LESSOR'S RECEIVE SITES. Attached hereto as Exhibit B is list of the registered receive sites designated by Lessor to receive its ITFS programming and to be installed at the expense of Lessee. Those receive sites so listed shall be installed with a Standard Installation. If as the result of any relocation of the Primary Transmit Site, the equipment at Lessor's existing registered receive sites must be reoriented, Lessee shall pay the cost of same. As used herein for the purposes of this Agreement, the phrase "Standard Installation" shall mean an installation consisting of the placement of the ITFS/MMDS receiving antenna at an elevation (not to exceed thirty [30] feet above the base mounting location) which could normally receive the line-of-sight transmission from the Transmission Site; the coupling thereto of a block-down converter; and a sufficient amount of transmission line (coaxial cable) to connect the received ITFS programming to the input of (i) one classroom designated by Lessor to receive the ITFS programming or (ii) the receive site internal/external distribution system. Also, if as the result of any relocation of the Transmit Site, the equipment at Lessor's existing receive sites must be reoriented, Lessee shall pay the cost of same. Lessee also agrees that for digital transmission of the ITFS Channels Lessee will purchase and install at Lessee's expense, one single-point modem to receive its ITFS programming. 5. LEASE OF EQUIPMENT. A) Lessor's Lease of Leased Equipment. For a nominal fee, Lessor shall lease from Lessee the Leased Equipment during the terms of this Agreement. A list of this equipment is attached hereto as Exhibit C and incorporated by reference herein. Lessor shall have no responsibility for the loss of or damage to the Leased Equipment during the terms of this Agreement and Lessee shall bear all such responsibility. 6. FEES. A) Lessor's Service Fee. In consideration of the lease of the Leased Equipment, and for its share of the projected costs to maintain the Transmission Site and the Lease Equipment, Lessor shall pay Lessee an annual fee provided for in Exhibit D. B) Subscriber Royalty Fees or Percentage. Beginning on the Execution Date of this Agreement and continuing thereafter during the Initial Term of this Agreement, Lessee shall pay to Lessor the Subscriber Royalty Fee, System Percentage or monthly minimum, whichever is greater as set out in Exhibit D which is attached herewith and incorporated by reference herein. If the Execution Date shall be a date other than the first day of a calendar month, then the Subscriber Royalty Fee for the partial month shall be paid on a proportionate basis. A late fee of 10% (ten percent) will be assessed to past due accounts, and a finance charge of one and one-half percent (1.5%) per month will be assessed in addition to the late fee until paid. C) Notice of Construction and Required Certificate. Within thirty (30) days of completion of construction at the Transmission Site, Lessee shall notify Lessor of such completion of construction in writing. Within thirty (30) days of the end of each month in which Excess Capacity Airtime is leased hereunder, Lessee shall provide Lessor with a certificate, certified as accurate and correct by an authorized agent of Lessee, showing the number of subscribers served during such month. D) Right to Audit. Lessee shall for a period of three (3) years after their creation, keep, maintain and preserve complete and accurate records and accounts, including all invoices, correspondence, ledgers, financial and other records pertaining to Lessee's use of Excess Capacity Airtime and Lessor's charges hereunder; and such records and corporate accounts shall be available for inspection and audit at Lessee's corporate offices or at Lessee's offices in the Market, as designated by Lessee, at any time or times during the term of this Agreement or within ninety (90) days thereafter, during reasonable business hours, by Lessor or its nominee. In the event that there is discovered an underpayment of the Subscriber Royalty Fee as defined in Paragraph 6 (B) above, Lessee shall pay to Lessor a penalty equal to ten percent (10%) of the amount of each such underpayment. All information obtained by Lessor during any audit herein shall be maintained by Lessor in strict confidence. 7. PROGRAMMING. A) Control Over Programming. (i) Program Content. Lessee intends that only programming of a sort which would not serve to place Lessor's reputation in the community in jeopardy will be transmitted by Lessee on the ITFS Channels. In an attempt to minimize disputes, recognizing the difficulties inherent in specifying exact standards herein, it is agreed that Lessee shall have the right to market the programming provided by the networks and services listed on Exhibit E. If, however, the programming content of any networks and services listed on Exhibit E materially changes, Lessor shall have the right, upon ninety (90) days notice, to deny Lessee the right to continue transmitting such programming if Lessor would have the right to deny Lessee the right to transmit such programming under the provisions of this paragraph in the first instance. If Lessee proposes to transmit the programming of any new programming service, the Lessee shall notify Lessor in writing specifying in detail the nature of the new programming service and Lessor shall have the right, upon written served upon Lessee within thirty (30) days after Lessor's receipt of any such notice from Lessee, to deny to Lessee the right to transmit such service if such programming is obscene and/or contradicting local, state and/or federal laws or otherwise violates any federal, state or local laws or regulations. If no such denial notice is received by Lessee within such thirty (30) days, lessee shall be authorized to transmit all such services for which no denial notice is received. There shall be no reduction in fees required under this Agreement for any such programming not permitted to be transmitted. B) Availability of Programming. It is understood by Lessee and Lessor that there is expected to be no direct out-of-pocket annual costs for the acquisition of the qualified ITFS educational programming for Lessor's use during Lessor's Primary Airtime on the ITFS channels, based on current plans. In the event that this ITFS educational programming either; (1) ceases to be available, or, (2) becomes available only at a fee, then Lessor may incur direct out-of-pocket costs in Lessor's acquisition of ITFS programming. Lessee agrees to provide its best efforts to assist Lessor in the acquisition of alternative programming, if necessary. Additionally, Lessee agrees to make payment to Lessor for the actual, direct programming costs incurred. If any; If Lessor, after expending its best efforts, is unable to obtain suitable ITFS programming for a cost equal to the amount to be paid by Lessee, Lessor and Lessee shall use their best efforts to reach agreement on modifications to this Agreement to avoid any un-reimbursed ITFS programming costs to Lessor. If no such agreement can be reached, Lessor may terminate this agreement. In the case of such termination, Lessor shall use its best efforts (with out-of-pocket costs of Lessor to be paid by Lessee, with Lessee's prior approval) to transfer the license for the ITFS Channels to another qualified educational entity, subject to FCC approval, with the intent of assigning this Agreement from Lessor to the new educational entity. C) Integration of Lessor's Programming. Lessee agrees to integrate Lessor's programming into the overall communications service offered to subscribers, without cost to Lessor. This integration shall include, but not be limited to, listing Lessor's material in any program guides produced by Lessee for subscribers. D) Carriage of TBN. In the event that Lessor's ITFS Channels are used for analog video transmission and TBN is not transmitted on a local VHF or UHF station, with a market coverage equivalent to both area and signal quality of our ITFS channels, and Lessee does not have local off-air insertion as part of its standard installation, then, if so designated by Lessor, Lessee agrees to transmit on one of the ITFS Channels the programming of Trinity Broadcasting Network ("TBN") during those time periods such channel is not used for Lessor's ITFS programming ("TBN Airtime") provided that Lessee is not required to pay a fee for carriage of TBN. In the event that Lessee is permitted to program the hours previously occupied by TBN, then Lessee shall increase, in proportion to the increase in Excess Capacity Airtime, the amount of minimum fees and subscriber royalty fees payable under the provision 6 (B) of this agreement during the remainder of the term(s) of the agreement. For purposes of calculating any such proportionate increase, the parties acknowledge and agree that the minimum fee and subscriber royalty fee agreed to herein are based on Lessee's equivalent use of three full-time ITFS channels. E) Station Identification. During Lessee's use of Lessor's excess channel capacity, Lessee shall transmit Lessor's call sign for each respective station as required by the FCC. 8. PROCECUTION OF PETITIONS, AUTHORIZATIONS AND LICENSES. A) Best Efforts to Secure Approval of this Agreement. The parties recognize that certain approvals will be required from the FCC in order to effectuate this Agreement. Both parties shall use their best efforts to prepare, file and prosecute before the FCC all petitions, waivers, applications and other documents necessary to secure any FCC approval required to effectuate this Agreement. Lessee shall assist in the preparation and prosecution of such applications and as provided for herein, shall pay all filing fees, attorneys' fees, engineering fees, and all other expenses in connection therewith. Lessor also agrees to cooperate with Lessee's efforts to cause other ITFS, OFS, MDs and MMDS operators to co-locate at the Transmission Site. Notwithstanding anything in this Agreement to the contrary, it is understood that no filing shall be made with the FCC with respect to this Agreement unless both parties have reviewed such filing and consented in writing to its submission, such consent not be unreasonably withheld. B) Further Efforts. Throughout the Initial Term of this Agreement, Lessor shall use its best efforts to obtain and maintain in force all licenses, permits and authorizations required for Lessee and Lessor to use the ITFS Channels as contemplated by this Agreement. Lessee shall be responsible for all cash expenses incurred to obtain and maintain in force such licenses, permits and authorizations. When mutually agreed by the parties and at Lessee's sole expense, Lessor shall apply for, and use its best efforts to obtain those reasonable license modifications which would assist Lessee in its business. Lessor also shall consider filing, at Lessee's sole expense, such reasonable protests, comments or other petitions to deny any other ITFS, MMDS, MDS and/or OFS applications or amendments as may be requested by Lessee in the mutual best interests of the parties and the public. Lessor and Lessee shall promptly notify each other of any event of which it has knowledge that may affect any of the licenses, permits or authorization affecting the ITFS Channels. C) Attorneys' Fees. With respect to any legal work conducted pursuant to Paragraph 8(A) and (B) above, Lessee shall be responsible for all attorneys' fees in connection therewith and shall make payments directly to the attorney. However, any attorney fees paid by Lessee shall be approved in advance by Lessee. 9. REPRESENTATIONS AND WARRANTIES. A) Representations and Warranties of Lessor. Lessor represents and warrants to Lesse as follows: (i) Organization. Lessor is a non-profit organization duly organized and existing in good standing under the laws of the State of California, and it has full power and authority to carry out all of the transactions contemplated by this Agreement and all other agreement, certificates or instruments executed and delivered in connection herewith. (ii) No Violation. Neither the execution nor delivery of this agreement or any other agreements, certificates or instruments executed and delivered herewith, nor the performance of the transactions contemplated hereby constitute or will constitute a violation of , be in conflict with, or a default under any term or provision of the governing instruments or Lessor or any agreement or commitment to which Lessor is bound, or any judgment, decree, order, regulation or rule of any court or governmental authority, or consent of any federal, state or local authority is required in connection with the execution and delivery of this Agreement or any other agreements, certificates or instruments executed and delivered herewith or with the performance of the transaction contemplated hereby. B) Representations and Warranties of Lessee. Lessee represents and warrants to Lessor as follows: (ii) Organization. Lessee is duly organized, validly existing and in good standing under the laws of the State of its incorporation and it has full power and authority to own property and carry all of the transactions contemplated by this Agreement, and all other agreements, certificates or instruments executed and delivered by Lessee in connection herewith. (ii) Corporation Action; Valid and Binding Agreements. Lessee has taken all corporate action necessary to authorize the execution and delivery of this Agreement and all other agreements, certificates or instruments executed and delivered in connection herewith. Upon execution and delivery, this Agreement and all other agreements, certificates or instruments executed and delivered by Lessee in connection herewith will constitute valid and binding agreements of Lessee enforceable in accordance with their respective terms. (iii) Litigation and Investigations. There is no action, suit, proceeding or investigation pending or, to the best of Lessee's knowledge, threatened against Lessee, its principals or related entities before any court, administrative agency or other governmental body, and Lessee does not know nor is aware of any reason for commencement of any such action, proceeding or investigation. (iv) Misrepresentation of Material Fact. To the best of Lessee's knowledge, information and believe, no document or contract that was shown to Lessor and which in any way affects any of the properties, assets or proposed transactions of Lessee as such relates to this Agreement, no certificate or statement furnished by or on behalf of Lessee in connection with this Agreement, nor this Agreement itself contains any untrue statement of material fact or omits to state a material fact which would make the statements contained herein misleading. C) Survival or Representations and Warranties. The representations and warranties contained in this Agreement shall be deemed to be continuing during the Initial terms of this Agreement, and each Party shall have the duty promptly to notify the notify the other of any event or circumstance which might reasonably be deemed to constitute a breach of or lead to a breach of its warranties or representations hereunder. The waiver by either Party of any breach of any presentation or warranty under this Agreement shall not constitute a waiver of any other representation or warranty or of any failure in the future by the other Party to fulfill such representation or warranty. 10. TERMINATION. A) Termination of FCC Authorization. Without further liability to either Lessor or Lessee, this Agreement shall terminate in the event that for any reason (i) Lessor shall not be licensed on the leased ITFS Channels, or (ii) the FCC shall terminate or diminish Lessor's authority to lease the ITFS Channels in accordance with the terms of this Agreement. B) Termination by Reason of Default or Nonperformance. At the option of the non-defaulting party, this Agreement may be terminated upon the material breach or default by the defaulting party of its duties and obligations hereunder is such breach or default is not cured by such defaulting party and is breach or default shall continue for a period of thirty (30) consecutive days after such defaulting party's receipt of notice thereof from the non-defaulting party. It is understood and agreed that any failure on the part of Lessee to make any payment required under Paragraph 6 hereof shall be a material breach of default of its duties and obligations hereunder. It is also understood and agreed that any consequences resulting from the loss of local participating receive sites shall not be considered a material breach or default by Lessor of its duties and obligations hereunder. C) Remedies to Continue. In the event of termination of this Agreement pursuant to Paragraph 10(B), such termination shall not affect or diminish the rights or claims or remedies available in equity or at law to the non-defaulting party arising by reason of a breach or default of this Agreement. However, no liability shall arise on the part of Lessor or Lessee upon termination of this Agreement pursuant to Paragraph 10(A) except where the loss of the FCC license occurs as a result of the default of either party. 11. TRANSFER OF RIGHTS AND OBLIGATIONS. Lessee shall have the right to assign its rights under this lease as collateral for any financing arrangements it makes. Lessee shall also have the right to pledge the Leased Equipment as collateral security for any loans it makes; provided, however, that any pledge of the Leased Equipment shall be made subject to the provisions of this lease. Lessee shall further have the right to subcontract any portion of its obligations under this Agreement to any partnership, joint venture, corporation or entity which Lessee may choose, provided that Lessee gives Lessor notice of any proposed subcontracting and, provided further, that no such subcontracting shall release Lessee from fulfilling all of its obligations under this Agreement. Lessee shall have the right to assign or transfer its rights, benefits, duties and obligations under this Agreement to a commonly-owned company without the prior consent of Lessor. Apart from the foregoing, neither party may assign or transfer its rights, benefits, duties or obligations under this Agreement without the prior written consent of the other, which consent shall not be unreasonably witheld. 12. INDEMNIFICATION. A) By Lessor. To the extent permitted by state and federal law and its charter or by-laws, Lessor shall forever protect, save and keep Lessee and its permitted successors and assigns harmless and indemnify Lessor against and from any and all claims, demands, losses, costs, damages, suits, judgments, penalties, expenses and liabilities or any kind or nature whatsoever, including reasonable attorneys' fees, arising directly or indirectly out of (i) the willful misconduct of Lessor, its agents or employees, in connection with the performance of this Agreement; (ii) any programming transmitted by Lessor during any of Lessor's Airtime. B) By Lessee. To the extent permitted by state and federal law and its charter or by-laws, Lessor shall forever protect, save and keep Lessee and its permitted successors and assigns harmless and indemnify Lessor against and from any and all claims, demands, losses, costs, damages, suits, judgments, penalties, expenses and liabilities or any kind or nature whatsoever, including reasonable attorneys' fees, which arise directly or indirectly out of (i) the negligence or willful misconduct of Lessee, its agents or employees, in connection with the performance of this Agreement; (ii) any programming transmitted by Lessee or any of its authorized agents or subcontractors with the public, third parties and subscribers to the Lessee's programming service; or (iv) any maintenance, installation or other work performed by Lessee or any authorized agent or subcontractor under this Agreement. C) Notice of Claim; Defense of Claim. Each party shall notify the other of any such claim promptly upon receipt of same. Either party (hereinafter referred to as appropriate the "Indemnitor" or Indemnitee") shall have the option to defend, at its own expense, any claims arising under this Paragraph. In Indemnitor assumes the defense of any such claim, Indemnitee shall delegate complete and sole authority to the Indemnitor to defend or settle same and Indemnitee shall cooperate with Indemnitor in the defense thereof. 13) INSURANCE. A) Policies Required. At its expense, Lessee shall secure and maintain with financially reputable insurers, one or more policies of insurance insuring the Leased Equipment and Lessee's utilization of the ITFS Channels against casualty and other losses of the kinds customarily insured against by firms of established reputations engaged in the same or similar line of business, or such types and in such amounts as are customarily carried under similar circumstances by such firms, including, without limitation: (i) "All Risk" property insurance covering the ITFS Equipment and the common Equipment to the extent of one hundred percent (100%) of its full replacement value without deduction for depreciation: (ii) comprehensive general public liability insurance covering liability resulting from lessee's operation of the ITFS equipment on an occurrence basis having minimum limits of liability in an amount of not less than One Million Dollars ($1,000,000.00) for bodily injury, personal injury or death to any person or persons in any one occurrence, and not less than Two Million Dollars ($2,000,000.00) in the aggregate for all such losses during each policy year, and not less than Three Hundred Thousand Dollars ($300,000.00) with respect to damage to property; (ii) all workers compensation, automobile liability and similar insurance required by law. B) Insurance Policy Forms. All policies of insurance required by this Paragraph shall, whre appropriate, designate Lessor as either the insured party or as a named additionally insured party, shall be written as primary policies, not contributory with and not in excess of any coverage which Lessor shall carry, and shall contain a provision that the issuer shall give to Lessor thirty (30) days prior written notice of any cancellation or lapse of such insurance or of any change in the coverage thereof. C) Proof of Insurance. Executed copies of the policies of insurance required under this section or certificates thereof shall be delivered to Lessor not later than ten (10) after execution of this agreement. Lessee shall furnish Lessor evidence of renewal of each such policy not later than thirty (30) days prior to the expiration of the term thereof. 79. RELATIONSHIP OF PARTIES. By the provisions of this Agreement, Lessor and Lessee intend to enter an airtime lease relationship and not a joint venture. They will carry out this Agreement to preserve that intent. Neither party shall represent itself as the other party, nor as having any relationship with one another, except as Lessor and Lessee under the terms of this Agreement. 80. EQUIPMENT PURCHASE. K) Lessor's Option to Purchase. In the event that this Agreement is terminated, Lessor shall have the option to purchase the Leased Equipment used exclusively for Lessor's ITFS license. Any equipment which is used in a shared fashion (such as transmit antenna, decoders and combiners) in providing signals other than Lessor's signals are excluded from this option to purchase. The intent of the purchase option provided for in Paragraphs 16(A) is to provide Lessor with the capability to continue to perform on Lessor's ITFS license. The purchase price shall be the market value of such equipment noted above as determined by mutual agreement or by averaging the values obtained from two (2) appraisals, with one appraiser each chosen by Lessor and Lessee. L) Lessee's Option to Purchase. If during the terms of this Agreement the FCC modifies its rules so as to enable Lessee to be licensed to operate the ITFS frequencies, Lessee shall have a right of first refusal to acquire such licenses subject to the same terms and conditions as the right provided for in Paragraph 1(B). 81. NON-DISCLOSURE Lessor acknowledges that there may be made available to it pursuant to this Agreement proprietary information of Lessee relating to the encoding and/or decoding system associated with the ITFS channel equipment and its patented processes including, but not limited to, improvements, innovations, adaptation, inventions, results of experimentation, processes and methods, whether or not deemed patentable, and certain business and marketing techniques (all herein referred to as "Confidential Information"). Lessor acknowledges that this Confidential Information has been developed by Lessee at considerable effort and expense and represents special, unique and valuable proprietary assets of Lessee, the value of which may be destroyed by unauthorized dissemination. Accordingly, Lessor covenants and agrees that, except as may be required for the performance of this Agreement or by law or court order, neither it nor any of its agents or affiliates shall disclose such Confidential Information to any third person, firm, corporation or other entity for any reason whatsoever, such undertaking to be enforceable by injunctive or other equitable relief to prevent any violation or threatened violation thereof. 82. NON-COMPETITION During the term of this Agreement, Lessor agrees not to transmit programming or to lease or sublease any channel capacity on its ITFS Facilities for the transmission of programming that is competitive with the programming transmitted by Lessee. 83. FORCE MAJEURE If by reason of Force Majeure either party is unable in whole or in part to perform its obligations hereunder, the party shall not be deemed in violation of default during the period of such inability. As used herein, the phrase "Force Majeure", shall mean the following: act of God, acts of public enemies, orders of any branch of the government of the United States of America, any state or any political subdivisions, thereof which are not the result of a breach of this Agreement, orders of any military authority insurrections, riots, epidemics, fires, civil disturbances, explosions, or any other cause or event not reasonably within control of the adversely affected party. 84. CONDITION PRECEDENT This Agreement is conditional on the issuance of a Final Order by the FCC granting Lessor a construction permit for the ITFS Channels in the Market from the Transmission Site. By "Final Order" the parties mean an action or order of the FCC which is not reversed, stayed, enjoined, vacated, set aside, annulled or suspended and with respect to which no timely-filed request for administrative or judicial review is pending and as to which the time for filing any such request, or for the FCC to set aside the action on its own motion, has expired. 85. NOTICE Any notice required to be given to Lessor under any provision of this Agreement shall be delivered personally or by certified mail to Lessor at the address first written above. Any notice required to be given to Lessee under any provision of this Agreement shall be delivered personally or by certified mail to Lessee at the address first written above. 86. SEVERABILITY Should any court or agency determine that any provision of this Agreement is invalid, the remainder of the Agreement shall remain in effect. 87. WAIVER A waiver by either Lessor or Lessee of a breach of any provision of this Agreement shall not be deemed to constitute a waiver of any preceding or subsequent breach of the same provision or of any other provision. 88. PAYMENT OF EXPENSES AND SIGNING FEES A signing fee of One Dollar ($1) shall be paid to Lessor. Lessee shall pay all costs and expenses incident to fulfilling or modifying this Agreement, such as, attorneys' fees or, if necessary, any travel expenses approved in advance by Lessee, FCC filing fees, and engineering costs. 89. VENUE AND GOVERNING LAW Venue for any cause of action brought by or between Lessor and/or Lessee relating to this Agreement shall be in California and all provisions of this Agreement shall be construed under the laws of the State of California and County of Lessor. 90. COUNTERPARTS This Agreement may be executed in one or more counterparts each of which shall be deemed an original, but all of which shall constitute one and the same instrument, and shall become effective when each of the parties hereto shall have delivered to it this Agreement duly executed by each of the other parties hereto. 91. ENTIRE AGREEMENT This Agreement constitutes the entire Agreement between the parties and supersedes all prior oral or written provisions of any kind. The parties further agree that this Agreement may only be modified by written Agreement signed by both parties. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on this day of July 1st, 1999. SHEKINAH NETWORK By: ______________________________ Name: Charles J. McKee Title: President WORLD WIDE WIRELESS COMMUNICATIONS, INC. By: ______________________________ Name: Douglas P. Haffer Title: President Address for Notices: Shekinah Network 14875 Powerline road Atascadero, CA 93422 Phone/Fax: (805) 438-3341 Attn: Charles McKee, President Gardner, Carton & Douglas Attn: Laura Mow 1301 K Street, N.W., Suite 900 Washington, D.C. 20005 Phone: (202) 408-7100 Fax: (202) 289-1504 World Wide Wireless Communications, Inc. One Post Street Suite 2600 San Francisco, CA 94104 Phone: (415) 981- 7777 Fax: (415) 391-3199 EXHIBIT A Schedule of Airtime EXHIBIT B Receive Sites There shall be attached hereto and incorporated by reference a copy of FCC Form 330 Section IV listing Lessor" receive sites. EXHIBIT C Leased Equipment Noted below is a list of equipment that Lessee is leasing to Lessor: (11) Four (4) ITFS tansmitters and related hardware (12) Lessor's ITFS receive site antennas and related hardware *(3) Combining network, transmission line and antenna *Common Equipment EXHIBIT D Service and Royalty Fees 1. Lessor's Service Fee Services Provided Annual Fee ----------------- ---------- (p) Lease of Leased Equipment [6(A)] $1.00 (q) Maintenance of Leased Equipment [3(D)] $1.00 (r) Lease of space at Primary Transmission Site [3A)] $1.00 2. Lessee's Subscriber Royalty Fee Lessee shall pay Lessor a minimum monthly Transmission Fee 5% of the system's Gross receipts or a monthly minimum payment of $500 per month whichever is greater. Payment shall be as follows: Commencing on the Execution (Effective) Date and as defined in Paragraph 6)B, payments for each month shall be made by the twentieth (20th) day of the following month. EXHIBIT E Programming In addition to digital data services, such as the Internet or Intranet, the following is a list of video programming services Lessee may provide over Lessee's System. TLC - The Leaning Channel TWC - The Weather Channel Lifetime ESPN - Sports AMC - American Movie Classics SCOLA WHTN - World Harvest Television Network ECO - Galavision CNN - Cable News Network CNN - Headline News C-Span I C-Span II BET - Black Entertainment Network CNBC - Consumer News & Business Channel Nickelodeon The Discovery Channel A&E - Arts and Entertainment The Family Channel The Disney Channel PBS - Public Broadcasting Service TBN - Trinity Broadcasting Network TNIN - The New Inspirational Network ME/U - Mind Extension Network The International Channel BRAVO Network The Travel Channel Family Network Keystone Inspirational Network EX-10.9 17 0017.txt LEASE AGREEMENT--UKIAH, CALIFORNIA LEASE AGREEMENT BETWEEN WORLD WIDE WIRELESS COMMUNICATIONS, INC. AND SHEKINAH NETWORK Ukiah, California ITFS EXCESS CAPACITY AIRTIME LEASE AGREEMENT THIS AGREEMENT is made this 1st day of August 1999 by Shekinah Network (hereinafter referred to as "Lessor") having its principal place of business at 14875 Powerline Road, Atascadero, CA 93422 and World Wide Wireless Communications, Inc. (hereinafter referred to as "Lessee") having its principal place of business at One Post Street, Suite 2600 San Francisco, CA 94104. WHEREAS, the Federal Communications Commission ("FCC") has authorized licenses for Instructional Television Fixed Service ("ITFS") channels and has authorized the licensee to lease excess capacity to non-ITFS users; and WHEREAS, Lessor has been granted an FCC License for (call sign) WNC-798 (the "License") for the Channel group C1-4 (the "ITFS Channels") in Ukiah, California ("The Market"); and WHEREAS, Lessee is in the business of providing voice, video, data and other services via microwave transmission in the Market Area and desires to lease the excess ITFS capacity of the ITFS channels; and WHEREAS, Lessor has determined that there will be excess airtime capacity available on the ITFS Channels and desires to lease this excess airtime capacity to Lessee. NOW, THEREFORE, in consideration of the mutual promises, undertakings, covenants and conditions set forth herein, the Lessor and Lessee do hereby agree and warrant as follows: 13. TERM OF AGREEMENT A. Initial Term. This Agreement shall be effective upon the date of its execution and shall extend for an initial term of five (5) years (the "Initial Term"). B. Renewal Term Provided that the License is renewed by the FCC, Lessee shall have the right to extend this Agreement on its then existing terms and conditions for one (1) additional five (5) year term (the "Renewal Term"). The Renewal Term shall automatically go into effect upon the conclusion of the Initial Term unless Lessee notifies Lessor at least one hundred eighty days (180) before the end of the Initial Term that Lessee does not wish to extend this Agreement. C. New Lease Agreement/Right of first Refusal. (1) Providing that Lessor's FCC license remains in good standing and/or Lessor seeks to renew such license, Lessee and Lessor shall negotiate in good faith for a new excess capacity airtime lease agreement (hereinafter referred to as "New Lease Agreement") no later than one hundred eighty days (180) prior to the end of the latter of (i) Initial Term or (ii) the Renewal Term if the Agreement is extended for the Renewal Term. (8) If Lessor elects to not reasonably pursue a New Lease Agreement with Lessee, then Lessor shall so notify Lessee in writing of such intent no later than one hundred eighty (180) days prior to the end of the Renewal Term. (3) If Lessor and Lessee do not enter into a New Lease Agreement, Lessor grants Lessee a right of first refusal on any competing proposals for lease agreements or transfers or assignments of any part of the ITFS Channels received by Lessor during the twelve (12) months following the expiration of the latter of (i) the Initial Term or (ii) the Renewal Term, if the Agreement is extended for the Renewal Term. If any acceptable offer to lease or acquire the ITFS Channels is made to Lessor, Lessor shall give written notice to Lessee describing the person to whom the proposed lease or transfer is to be made, the fees, charges, rental or other consideration to be received fro the lease or transfer, the terms thereof and generally the relevant other terms and conditions of the lease or transfer. Lessee shall have a period of thirty (30) days after its receipt of such notice from Lessor in which to elect, by giving written notice to Lessor, to lease or, if eligible, obtain any or all of the ITFS Channels for the same fees, charges, rental or other consideration for which Lessor proposed to lease or transfer to the third person. (i) The fees, charges, rental or consideration shall be paid by such third person or Lessee in cash. (xiv) If Lessor does not believe Lessee's stated offer is in an amount fairly equivalent to the fair value of the consideration payable by the third person and so notifies Lessee in writing within seven (7) days after Lessor's receipt of Lessee's notice of election to so lease or purchase, Lessee may within five (5) days after its receipt of such notice from Lessor elect to refer such question for determination by an impartial arbitrator and the right of first refusal of Lessee shall then be held open until (5) days after Lessee is notified of such determination. Such arbitrator shall be chosen either by agreement of Lessee and Lessor at the time such question arises, or, at the option of either party, by referring the question to the American Arbitration Association with instructions that the American Arbitration Association select a single arbitrator under a request from the parties for expedited and accelerated determination. The determination of the arbitrator chosen under either option contained in this subparagraph shall be final and binding upon Lessee and Lessor. The parties shall share equally in the costs and fees of the arbitration (xv) In the event Lessee shall elect to exercise its right of first refusal, the lease agreement or other transfer or assignment shall be consummated within thirty (30) days of the latest of: (1) the day on which Lessor received notice of Lessee's election to exercise the right of first refusal; (2) the day upon which any question required to be determined by the arbitrator hereunder has been determined; or (3) the date of any FCC approval in the case of assignment or transfer; or at such other time as may be mutually agreed. The right of first refusal is terminated either by the lease or other transfer to Lessee as provided herein or by notice to Lessee of the Lessor's proposal to lease or otherwise transfer the ITFS Channels or any part to a third person and Lessee's unwillingness or failure to meet and accept such a bona fide offer pursuant to the times and procedures as set forth above; provided that such proposed lease or transfer is consummated at the same fees, charges, rental or other consideration and upon the same terms as to which such right of first refusal applied, within thirty (30) days after Lessee's right of first refusal had expired or had been specifically waived by written notice given to Lessor by Lessee, or within thirty (30) days following FCC approval in the case of assignment or transfer. C) Operation During End of Term. If Lessor and Lessee do not enter into New Lease Agreement before the end of the Initial Term, Lessee shall cease leasing the ITFS Channels on the last day of the Initial Term. D) No Rights Beyond Term of Licenses. Lessor and Lessee agree that this Agreement shall not give rise to any rights or remedies beyond the expiration of any FCC license necessary for the continued operation of the ITFS Channels. Provided, however, that while this Agreement is in effect, Lessor shall obtain and maintain in force all licenses, permits and authorizations required or desired in connection with the use of the ITFS Channels. Lessor shall take all necessary steps to renew the licenses for the ITFS Channels and shall not commit any act or engage in any activity which could reasonably be expected to cause the FCC to impair, restrict, revoke, cancel, suspend or refuse to renew the ITFS licenses. Lessor shall take all reasonable steps to comply with the Communications Act of 1934, as amended and the rules and regulations of the FCC, and shall file all reports, schedules and/or forms required by the FCC to be filed by Lessor. All expenses, including attorneys fees and filing fees, incurred in preparing and filing such reports, schedules and/or forms required by the FCC shall be paid by the Lessee. 14. ALLOCATION OF AIRTIME. A. Excess Capacity Airtime. To the extent allowed by the FCC rules and regulations and any amendments thereof, Lessor agrees to lease to Lessee the exclusive use of all excess capacity not utilized by Lessor ("Excess Capacity Airtime"). B. Lessor's Primary Airtime. During analog transmission over the ITFS Channels, Lessor reserves for its exclusive use a minimum of twenty (20) hours of airtime per-channel per-week to be used for its ITFS scheduled programs. During digital transmission ovr the ITFS Channels, Lessor shall have the exclusive use of 12.5% of the total capacity available on the Lessor's ITFS Channels. This airtime shall be know as "Lessor's Primary Airtime". C. Schedule of Airtime. The schedule which depicts the agreement of the parties as to use of Lessor's Channels shall be attached hereto and made a part hereof as Exhibit A which is subject to change upon agreement by both parties. D. Lessee's use of its Excess Capacity Airtime. Lessee shall have the right to utilize its Excess Capacity Airtime for any purpose allowed or authorized by the FCC including but not limited to voice, video and data transmission. E. Alternate Use and Vertical Blanking Intervals. Lessor shall have the right to use the second audio carrier ("SAP") and vertical blanking intervals. ("VBI") on which Lessor's ITFS programming is being transmitted. Lessee shall at all times have the right to use the VBI and SAP not utilized by Lessor and 100% of the response frequencies associated with the ITFS Channels. Lessor shall be responsible for any equipment needed to utilize the VBI and/or SAP and such equipment shall be compatible with Lessee's system. F. Lessor's Use of ITFS Channels. Lessor agrees that its program services and airtime use will not harm or interfere with Lessee's current or future signal paths utilized within Lessee's System for program encryption, pilot carrier signaling and other technical needs utilized for the operation of and such services provided by Lessee's System. Nor will Lessor, by its own action, or through a third party, utilize any part of its licensed frequency spectrum to create or operate a service that is in competition with current, planned or future services provided by Lessee's System. Lessor agrees to use its Primary Airtime in accordance with the FCC's rules and regulations. Lessor shall not take or fail to take any action which may have a material adverse effect on Lessee's right to utilize its Excess Capacity Airtime. G. Expanded System Capacity. Lessee shall have the right at anytime to require Lessor to file with the FCC any necessary application to expand the channel capacity to Lessor's station to enable it to carry more than one video signal per channel or digital data services; provided however, before Lessee can exercise this right, it must demonstrate to the Lessor's reasonable satisfaction that such modification will not materially degrade the performance of the station nor impair signal quality at the registered ITFS receive sites. Once such modification has been constructed, the modified facilities shall automatically be considered a part of this agreement and subject to all terms and conditions hereof. It is understood that Lessee shall have the full-time use of the Expanded Channels to the extend permitted by FCC rules. 3. TRANSMISSION SITE AND FACILITIES. M. Primary Transmission Site. Lessor's ITFS Channels are located at Key West, FL, Lessee agrees to provide Lessor space at the Primary Transmission site for Lessor's audio and video transmission equipment which shall not exceed on rack. Such space shall be leased to Lessor pursuant to Exhibit D hereto. This site shall hereinafter be described as the "Primary Transmission Site". At Lessee's sole expense, Lessee shall contract for a lease of space at the Transmission Site upon such terms as the parties agree. The Transmission Site shall comply with the standards, specifications and regulations of the FCC rules and orders pertaining to Lessor's ITFS license. N. Relocation of Transmission Site. (i) Lessor acknowledges that the location of the Primary Transmission Site for ITFS Channels is critical to the Lessee's business and agrees that it will not relocate the transmission facilities for ITFS Channels from the Primary Transmission Site without Lessee's prior written consent. (ii) Lessor further acknowledges that possibility that, as a result of currently unforeseen events, the Primary Transmission Site may not be the optimum site for the location of the ITFS Channels or Lessee's business throughout the term of this Lease Agreement. Lessor therefore agrees that if at any time or from time to time Lessee requests in writing that the transmission facilities for the ITFS Channels be relocated, Lessor shall file with the FCC and any other regulatory body having jurisdicition over the ITFS Channels all applications, amendments, and requests for modification that may be necessary to obtain any necessary consents to permit such relocation to such location within or adjacent to the Market as may be requested by Lessee; provided, however, that Lessor shall not be obligated to submit or procecute any application, amendment, or request for modification that Lessor reasonably determines, upon advice of counsel contained in a written opinion, would be in violation of the terms of the License, any statute, rule, or regulations regarding the operation of the ITFS Channels or the submission of materials to the FCC, or any of its obligations as an ITFS licensee; and provided, further, that any such relocation will not result in loss of service to Lessor's registered receive sites served by the transmission facilities in the event that the authorization is obtained to relocate the ITFS Channels to the location requested by Lessee, Lessor shall relocate such channels to such new location as soon as reasonably possible after authorization is obtained. Lessee shall bear reasonable costs associated with such relocation, including engineering and construction, and all reasonable costs associated with obtaining FCC or any other regulatory approval therefore. (iii) Lessor agrees to file modification applications requested by Lessee. Such modifications may include but shall not be limited to the following: power increase or decrease, polarization, transmit antenna patterns, digital, two-way (return path) use of the ITFS Channels, boosters, beam benders or repeaters, cells, sectorization, channel swaps, channel loading, channel shifting and application within five (5) business days or receipt of the modification application from Lessee or during any FCC designated filing window. Lessee will use reasonable efforts to provide Lessor with the engineering for the modification thirty (30) days prior to the request for filing. If Lessor believes that such modification will have an adverse effect on Lessor's ability to provide its services to its receive sites, Lessor agrees to file the modification application as presented by Lessee and within the time limit requested by Lessee; however, Lessee agrees not to implement construction and Lessor agrees not to withdraw the application until the parties have adequately addressed and resolved the potential material adverse effect or the matter has been submitted to arbitration pursuant to Section 16 and a final decision has been rendered by arbitrator. Although Lessee intends to file such modification applications, it may elect not to construct the Channels in that manner and may desire to utilize the Channels as currently licensed. A copy of the modification application, bearing the FCC's date stamp, shall be mailed to Lessee by Lessor, within fourteen (14) days of the filing of the modification application. Lessee shall be solely responsible for all engineering and legal costs associated with the preparation, review and filing of the modification application. In the event that any license modification requested by Lessee requires receive site upgrades in order for Lessor's receive sites to continue to receive Lessor's services, then Lessee agrees to pay for all costs to complete such upgrade prior to implementing the license modification. C. System Construction. Lessee shall within a reasonable period of time, but not later than six (6) months after the FCC grant of digital authority for the ITFS Channels, purchase equipment such as the antenna, waveguide or transmitters specified on the authorization for the ITFS Channels. At Lessee's expense, Lessee shall purchase and install such transmitters, transmission line, modulators, antennas and other equipment as required to operate the ITFS Channels in accordance with the provision of such authorization. Any equipment so used in such construction shall be leased to lessor pursuant to Paragraph 5 hereof. Such equipment is hereinafter referred to as the "Leased Equipment". Lessee shall retain title to the Leased Equipment except as noted by Paragraph 15 herein. D. Maintenance of Transmission Equipment. At Lessee's expense and subject to Lessor's right to supervise the maintenance of this equipment, Lessee shall maintain and operate the Leased Equipment during the terms of this Agreement for a nominal fee. Lessee shall also pay all taxes and other charges assessed against the Leased Equipment. E. Transmission of Programming. At no cost or expense to Lessor, Lessee shall provide the necessary labor and equipment capabilities to transmit on the ITFS Channels programming required to be carried pursuant to this Agreement such as Lessor's ITFS programming and TBN. Lessee shall also comply with Lessor's instructions regarding the transmission of such programming such as the dates and times to transmit programming. F. Interference. Lessee shall operate the Leased Equipment so that such operation does not create or increase interference with electronic transmission of any other FCC licensees entitles to protection under FCC rules and regulations. If Lessee's entitled to protection under FCC rules and regulations. If Lessee's operation of the Lease Equipment does so create or increase interference, Lessee shall pay all of the reasonable engineering and legal fees necessary to resolve the interference problem so created. G. Alterations and Attachments. Lessee, at its own expense, may make alterations of or attachments to the ITFS equipment or the common equipment as defined in Exhibit C (including the installation of encoding and/or addressing equipment) as may be reasonably required from time to time by the nature of its business; provided however, that such alterations or attachments do not interfere with Lessor's signal or ongoing operations or violate any FCC rules or regulations; and provided further that FCC authorization, if required, is obtained in advance of any such alteration or attachment at the sole cost of Lessee. to the extent any FCC authorization pertaining to the ITFS equipment is required, Lessor agrees to use its best efforts to obtain such authorization. H. Licensee Control and Liability. Nothing herein shall derogate from such licensee control of operations of the ITFS Channels that Lessor, as an FCC licensee, shall be required to maintain and Lessee acknowledges the reservation by Lessor of such control. Lessor shall at all times retain ultimate and exclusive responsibility for the operation and control of the ITFS Channels including policy decisions. 4. LESSOR'S RECEIVE SITES. Attached hereto as Exhibit B is list of the registered receive sites designated by Lessor to receive its ITFS programming and to be installed at the expense of Lessee. Those receive sites so listed shall be installed with a Standard Installation. If as the result of any relocation of the Primary Transmit Site, the equipment at Lessor's existing registered receive sites must be reoriented, Lessee shall pay the cost of same. As used herein for the purposes of this Agreement, the phrase "Standard Installation" shall mean an installation consisting of the placement of the ITFS/MMDS receiving antenna at an elevation (not to exceed thirty [30] feet above the base mounting location) which could normally receive the line-of-sight transmission from the Transmission Site; the coupling thereto of a block-down converter; and a sufficient amount of transmission line (coaxial cable) to connect the received ITFS programming to the input of (i) one classroom designated by Lessor to receive the ITFS programming or (ii) the receive site internal/external distribution system. Also, if as the result of any relocation of the Transmit Site, the equipment at Lessor's existing receive sites must be reoriented, Lessee shall pay the cost of same. Lessee also agrees that for digital transmission of the ITFS Channels Lessee will purchase and install at Lessee's expense, one single-point modem to receive its ITFS programming. 5. LEASE OF EQUIPMENT. A) Lessor's Lease of Leased Equipment. For a nominal fee, Lessor shall lease from Lessee the Leased Equipment during the terms of this Agreement. A list of this equipment is attached hereto as Exhibit C and incorporated by reference herein. Lessor shall have no responsibility for the loss of or damage to the Leased Equipment during the terms of this Agreement and Lessee shall bear all such responsibility. 6. FEES. A) Lessor's Service Fee. In consideration of the lease of the Leased Equipment, and for its share of the projected costs to maintain the Transmission Site and the Lease Equipment, Lessor shall pay Lessee an annual fee provided for in Exhibit D. B) Subscriber Royalty Fees or Percentage. Beginning on the Execution Date of this Agreement and continuing thereafter during the Initial Term of this Agreement, Lessee shall pay to Lessor the Subscriber Royalty Fee, System Percentage or monthly minimum, whichever is greater as set out in Exhibit D which is attached herewith and incorporated by reference herein. If the Execution Date shall be a date other than the first day of a calendar month, then the Subscriber Royalty Fee for the partial month shall be paid on a proportionate basis. A late fee of 10% (ten percent) will be assessed to past due accounts, and a finance charge of one and one-half percent (1.5%) per month will be assessed in addition to the late fee until paid. C) Notice of Construction and Required Certificate. Within thirty (30) days of completion of construction at the Transmission Site, Lessee shall notify Lessor of such completion of construction in writing. Within thirty (30) days of the end of each month in which Excess Capacity Airtime is leased hereunder, Lessee shall provide Lessor with a certificate, certified as accurate and correct by an authorized agent of Lessee, showing the number of subscribers served during such month. D) Right to Audit. Lessee shall for a period of three (3) years after their creation, keep, maintain and preserve complete and accurate records and accounts, including all invoices, correspondence, ledgers, financial and other records pertaining to Lessee's use of Excess Capacity Airtime and Lessor's charges hereunder; and such records and corporate accounts shall be available for inspection and audit at Lessee's corporate offices or at Lessee's offices in the Market, as designated by Lessee, at any time or times during the term of this Agreement or within ninety (90) days thereafter, during reasonable business hours, by Lessor or its nominee. In the event that there is discovered an underpayment of the Subscriber Royalty Fee as defined in Paragraph 6 (B) above, Lessee shall pay to Lessor a penalty equal to ten percent (10%) of the amount of each such underpayment. All information obtained by Lessor during any audit herein shall be maintained by Lessor in strict confidence. 7. PROGRAMMING. A) Control Over Programming. (i) Program Content. Lessee intends that only programming of a sort which would not serve to place Lessor's reputation in the community in jeopardy will be transmitted by Lessee on the ITFS Channels. In an attempt to minimize disputes, recognizing the difficulties inherent in specifying exact standards herein, it is agreed that Lessee shall have the right to market the programming provided by the networks and services listed on Exhibit E. If, however, the programming content of any networks and services listed on Exhibit E materially changes, Lessor shall have the right, upon ninety (90) days notice, to deny Lessee the right to continue transmitting such programming if Lessor would have the right to deny Lessee the right to transmit such programming under the provisions of this paragraph in the first instance. If Lessee proposes to transmit the programming of any new programming service, the Lessee shall notify Lessor in writing specifying in detail the nature of the new programming service and Lessor shall have the right, upon written served upon Lessee within thirty (30) days after Lessor's receipt of any such notice from Lessee, to deny to Lessee the right to transmit such service if such programming is obscene and/or contradicting local, state and/or federal laws or otherwise violates any federal, state or local laws or regulations. If no such denial notice is received by Lessee within such thirty (30) days, lessee shall be authorized to transmit all such services for which no denial notice is received. There shall be no reduction in fees required under this Agreement for any such programming not permitted to be transmitted. B) Availability of Programming. It is understood by Lessee and Lessor that there is expected to be no direct out-of-pocket annual costs for the acquisition of the qualified ITFS educational programming for Lessor's use during Lessor's Primary Airtime on the ITFS channels, based on current plans. In the event that this ITFS educational programming either; (1) ceases to be available, or, (2) becomes available only at a fee, then Lessor may incur direct out-of-pocket costs in Lessor's acquisition of ITFS programming. Lessee agrees to provide its best efforts to assist Lessor in the acquisition of alternative programming, if necessary. Additionally, Lessee agrees to make payment to Lessor for the actual, direct programming costs incurred. If any; If Lessor, after expending its best efforts, is unable to obtain suitable ITFS programming for a cost equal to the amount to be paid by Lessee, Lessor and Lessee shall use their best efforts to reach agreement on modifications to this Agreement to avoid any un-reimbursed ITFS programming costs to Lessor. If no such agreement can be reached, Lessor may terminate this agreement. In the case of such termination, Lessor shall use its best efforts (with out-of-pocket costs of Lessor to be paid by Lessee, with Lessee's prior approval) to transfer the license for the ITFS Channels to another qualified educational entity, subject to FCC approval, with the intent of assigning this Agreement from Lessor to the new educational entity. C) Integration of Lessor's Programming. Lessee agrees to integrate Lessor's programming into the overall communications service offered to subscribers, without cost to Lessor. This integration shall include, but not be limited to, listing Lessor's material in any program guides produced by Lessee for subscribers. D) Carriage of TBN. In the event that Lessor's ITFS Channels are used for analog video transmission and TBN is not transmitted on a local VHF or UHF station, with a market coverage equivalent to both area and signal quality of our ITFS channels, and Lessee does not have local off-air insertion as part of its standard installation, then, if so designated by Lessor, Lessee agrees to transmit on one of the ITFS Channels the programming of Trinity Broadcasting Network ("TBN") during those time periods such channel is not used for Lessor's ITFS programming ("TBN Airtime") provided that Lessee is not required to pay a fee for carriage of TBN. In the event that Lessee is permitted to program the hours previously occupied by TBN, then Lessee shall increase, in proportion to the increase in Excess Capacity Airtime, the amount of minimum fees and subscriber royalty fees payable under the provision 6 (B) of this agreement during the remainder of the term(s) of the agreement. For purposes of calculating any such proportionate increase, the parties acknowledge and agree that the minimum fee and subscriber royalty fee agreed to herein are based on Lessee's equivalent use of three full-time ITFS channels. E) Station Identification. During Lessee's use of Lessor's excess channel capacity, Lessee shall transmit Lessor's call sign for each respective station as required by the FCC. 8. PROCECUTION OF PETITIONS, AUTHORIZATIONS AND LICENSES. A) Best Efforts to Secure Approval of this Agreement. The parties recognize that certain approvals will be required from the FCC in order to effectuate this Agreement. Both parties shall use their best efforts to prepare, file and prosecute before the FCC all petitions, waivers, applications and other documents necessary to secure any FCC approval required to effectuate this Agreement. Lessee shall assist in the preparation and prosecution of such applications and as provided for herein, shall pay all filing fees, attorneys' fees, engineering fees, and all other expenses in connection therewith. Lessor also agrees to cooperate with Lessee's efforts to cause other ITFS, OFS, MDs and MMDS operators to co-locate at the Transmission Site. Notwithstanding anything in this Agreement to the contrary, it is understood that no filing shall be made with the FCC with respect to this Agreement unless both parties have reviewed such filing and consented in writing to its submission, such consent not be unreasonably withheld. B) Further Efforts. Throughout the Initial Term of this Agreement, Lessor shall use its best efforts to obtain and maintain in force all licenses, permits and authorizations required for Lessee and Lessor to use the ITFS Channels as contemplated by this Agreement. Lessee shall be responsible for all cash expenses incurred to obtain and maintain in force such licenses, permits and authorizations. When mutually agreed by the parties and at Lessee's sole expense, Lessor shall apply for, and use its best efforts to obtain those reasonable license modifications which would assist Lessee in its business. Lessor also shall consider filing, at Lessee's sole expense, such reasonable protests, comments or other petitions to deny any other ITFS, MMDS, MDS and/or OFS applications or amendments as may be requested by Lessee in the mutual best interests of the parties and the public. Lessor and Lessee shall promptly notify each other of any event of which it has knowledge that may affect any of the licenses, permits or authorization affecting the ITFS Channels. C) Attorneys' Fees. With respect to any legal work conducted pursuant to Paragraph 8(A) and (B) above, Lessee shall be responsible for all attorneys' fees in connection therewith and shall make payments directly to the attorney. However, any attorney fees paid by Lessee shall be approved in advance by Lessee. 9. REPRESENTATIONS AND WARRANTIES. A) Representations and Warranties of Lessor. Lessor represents and warrants to Lesse as follows: (i) Organization. Lessor is a non-profit organization duly organized and existing in good standing under the laws of the State of California, and it has full power and authority to carry out all of the transactions contemplated by this Agreement and all other agreement, certificates or instruments executed and delivered in connection herewith. (ii) No Violation. Neither the execution nor delivery of this agreement or any other agreements, certificates or instruments executed and delivered herewith, nor the performance of the transactions contemplated hereby constitute or will constitute a violation of , be in conflict with, or a default under any term or provision of the governing instruments or Lessor or any agreement or commitment to which Lessor is bound, or any judgment, decree, order, regulation or rule of any court or governmental authority, or consent of any federal, state or local authority is required in connection with the execution and delivery of this Agreement or any other agreements, certificates or instruments executed and delivered herewith or with the performance of the transaction contemplated hereby. B) Representations and Warranties of Lessee. Lessee represents and warrants to Lessor as follows: (ii) Organization. Lessee is duly organized, validly existing and in good standing under the laws of the State of its incorporation and it has full power and authority to own property and carry all of the transactions contemplated by this Agreement, and all other agreements, certificates or instruments executed and delivered by Lessee in connection herewith. (ii) Corporation Action; Valid and Binding Agreements. Lessee has taken all corporate action necessary to authorize the execution and delivery of this Agreement and all other agreements, certificates or instruments executed and delivered in connection herewith. Upon execution and delivery, this Agreement and all other agreements, certificates or instruments executed and delivered by Lessee in connection herewith will constitute valid and binding agreements of Lessee enforceable in accordance with their respective terms. (iii) Litigation and Investigations. There is no action, suit, proceeding or investigation pending or, to the best of Lessee's knowledge, threatened against Lessee, its principals or related entities before any court, administrative agency or other governmental body, and Lessee does not know nor is aware of any reason for commencement of any such action, proceeding or investigation. (iv) Misrepresentation of Material Fact. To the best of Lessee's knowledge, information and believe, no document or contract that was shown to Lessor and which in any way affects any of the properties, assets or proposed transactions of Lessee as such relates to this Agreement, no certificate or statement furnished by or on behalf of Lessee in connection with this Agreement, nor this Agreement itself contains any untrue statement of material fact or omits to state a material fact which would make the statements contained herein misleading. C) Survival or Representations and Warranties. The representations and warranties contained in this Agreement shall be deemed to be continuing during the Initial terms of this Agreement, and each Party shall have the duty promptly to notify the notify the other of any event or circumstance which might reasonably be deemed to constitute a breach of or lead to a breach of its warranties or representations hereunder. The waiver by either Party of any breach of any presentation or warranty under this Agreement shall not constitute a waiver of any other representation or warranty or of any failure in the future by the other Party to fulfill such representation or warranty. 10. TERMINATION. A) Termination of FCC Authorization. Without further liability to either Lessor or Lessee, this Agreement shall terminate in the event that for any reason (i) Lessor shall not be licensed on the leased ITFS Channels, or (ii) the FCC shall terminate or diminish Lessor's authority to lease the ITFS Channels in accordance with the terms of this Agreement. B) Termination by Reason of Default or Nonperformance. At the option of the non-defaulting party, this Agreement may be terminated upon the material breach or default by the defaulting party of its duties and obligations hereunder is such breach or default is not cured by such defaulting party and is breach or default shall continue for a period of thirty (30) consecutive days after such defaulting party's receipt of notice thereof from the non-defaulting party. It is understood and agreed that any failure on the part of Lessee to make any payment required under Paragraph 6 hereof shall be a material breach of default of its duties and obligations hereunder. It is also understood and agreed that any consequences resulting from the loss of local participating receive sites shall not be considered a material breach or default by Lessor of its duties and obligations hereunder. C) Remedies to Continue. In the event of termination of this Agreement pursuant to Paragraph 10(B), such termination shall not affect or diminish the rights or claims or remedies available in equity or at law to the non-defaulting party arising by reason of a breach or default of this Agreement. However, no liability shall arise on the part of Lessor or Lessee upon termination of this Agreement pursuant to Paragraph 10(A) except where the loss of the FCC license occurs as a result of the default of either party. 11. TRANSFER OF RIGHTS AND OBLIGATIONS. Lessee shall have the right to assign its rights under this lease as collateral for any financing arrangements it makes. Lessee shall also have the right to pledge the Leased Equipment as collateral security for any loans it makes; provided, however, that any pledge of the Leased Equipment shall be made subject to the provisions of this lease. Lessee shall further have the right to subcontract any portion of its obligations under this Agreement to any partnership, joint venture, corporation or entity which Lessee may choose, provided that Lessee gives Lessor notice of any proposed subcontracting and, provided further, that no such subcontracting shall release Lessee from fulfilling all of its obligations under this Agreement. Lessee shall have the right to assign or transfer its rights, benefits, duties and obligations under this Agreement to a commonly-owned company without the prior consent of Lessor. Apart from the foregoing, neither party may assign or transfer its rights, benefits, duties or obligations under this Agreement without the prior written consent of the other, which consent shall not be unreasonably witheld. 12. INDEMNIFICATION. A) By Lessor. To the extent permitted by state and federal law and its charter or by-laws, Lessor shall forever protect, save and keep Lessee and its permitted successors and assigns harmless and indemnify Lessor against and from any and all claims, demands, losses, costs, damages, suits, judgments, penalties, expenses and liabilities or any kind or nature whatsoever, including reasonable attorneys' fees, arising directly or indirectly out of (i) the willful misconduct of Lessor, its agents or employees, in connection with the performance of this Agreement; (ii) any programming transmitted by Lessor during any of Lessor's Airtime. B) By Lessee. To the extent permitted by state and federal law and its charter or by-laws, Lessor shall forever protect, save and keep Lessee and its permitted successors and assigns harmless and indemnify Lessor against and from any and all claims, demands, losses, costs, damages, suits, judgments, penalties, expenses and liabilities or any kind or nature whatsoever, including reasonable attorneys' fees, which arise directly or indirectly out of (i) the negligence or willful misconduct of Lessee, its agents or employees, in connection with the performance of this Agreement; (ii) any programming transmitted by Lessee or any of its authorized agents or subcontractors with the public, third parties and subscribers to the Lessee's programming service; or (iv) any maintenance, installation or other work performed by Lessee or any authorized agent or subcontractor under this Agreement. C) Notice of Claim; Defense of Claim. Each party shall notify the other of any such claim promptly upon receipt of same. Either party (hereinafter referred to as appropriate the "Indemnitor" or Indemnitee") shall have the option to defend, at its own expense, any claims arising under this Paragraph. In Indemnitor assumes the defense of any such claim, Indemnitee shall delegate complete and sole authority to the Indemnitor to defend or settle same and Indemnitee shall cooperate with Indemnitor in the defense thereof. 13) INSURANCE. A) Policies Required. At its expense, Lessee shall secure and maintain with financially reputable insurers, one or more policies of insurance insuring the Leased Equipment and Lessee's utilization of the ITFS Channels against casualty and other losses of the kinds customarily insured against by firms of established reputations engaged in the same or similar line of business, or such types and in such amounts as are customarily carried under similar circumstances by such firms, including, without limitation: (i) "All Risk" property insurance covering the ITFS Equipment and the common Equipment to the extent of one hundred percent (100%) of its full replacement value without deduction for depreciation: (ii) comprehensive general public liability insurance covering liability resulting from lessee's operation of the ITFS equipment on an occurrence basis having minimum limits of liability in an amount of not less than One Million Dollars ($1,000,000.00) for bodily injury, personal injury or death to any person or persons in any one occurrence, and not less than Two Million Dollars ($2,000,000.00) in the aggregate for all such losses during each policy year, and not less than Three Hundred Thousand Dollars ($300,000.00) with respect to damage to property; (ii) all workers compensation, automobile liability and similar insurance required by law. B) Insurance Policy Forms. All policies of insurance required by this Paragraph shall, whre appropriate, designate Lessor as either the insured party or as a named additionally insured party, shall be written as primary policies, not contributory with and not in excess of any coverage which Lessor shall carry, and shall contain a provision that the issuer shall give to Lessor thirty (30) days prior written notice of any cancellation or lapse of such insurance or of any change in the coverage thereof. C) Proof of Insurance. Executed copies of the policies of insurance required under this section or certificates thereof shall be delivered to Lessor not later than ten (10) after execution of this agreement. Lessee shall furnish Lessor evidence of renewal of each such policy not later than thirty (30) days prior to the expiration of the term thereof. 92. RELATIONSHIP OF PARTIES. By the provisions of this Agreement, Lessor and Lessee intend to enter an airtime lease relationship and not a joint venture. They will carry out this Agreement to preserve that intent. Neither party shall represent itself as the other party, nor as having any relationship with one another, except as Lessor and Lessee under the terms of this Agreement. 93. EQUIPMENT PURCHASE. M) Lessor's Option to Purchase. In the event that this Agreement is terminated, Lessor shall have the option to purchase the Leased Equipment used exclusively for Lessor's ITFS license. Any equipment which is used in a shared fashion (such as transmit antenna, decoders and combiners) in providing signals other than Lessor's signals are excluded from this option to purchase. The intent of the purchase option provided for in Paragraphs 16(A) is to provide Lessor with the capability to continue to perform on Lessor's ITFS license. The purchase price shall be the market value of such equipment noted above as determined by mutual agreement or by averaging the values obtained from two (2) appraisals, with one appraiser each chosen by Lessor and Lessee. N) Lessee's Option to Purchase. If during the terms of this Agreement the FCC modifies its rules so as to enable Lessee to be licensed to operate the ITFS frequencies, Lessee shall have a right of first refusal to acquire such licenses subject to the same terms and conditions as the right provided for in Paragraph 1(B). 94. NON-DISCLOSURE Lessor acknowledges that there may be made available to it pursuant to this Agreement proprietary information of Lessee relating to the encoding and/or decoding system associated with the ITFS channel equipment and its patented processes including, but not limited to, improvements, innovations, adaptation, inventions, results of experimentation, processes and methods, whether or not deemed patentable, and certain business and marketing techniques (all herein referred to as "Confidential Information"). Lessor acknowledges that this Confidential Information has been developed by Lessee at considerable effort and expense and represents special, unique and valuable proprietary assets of Lessee, the value of which may be destroyed by unauthorized dissemination. Accordingly, Lessor covenants and agrees that, except as may be required for the performance of this Agreement or by law or court order, neither it nor any of its agents or affiliates shall disclose such Confidential Information to any third person, firm, corporation or other entity for any reason whatsoever, such undertaking to be enforceable by injunctive or other equitable relief to prevent any violation or threatened violation thereof. 95. NON-COMPETITION During the term of this Agreement, Lessor agrees not to transmit programming or to lease or sublease any channel capacity on its ITFS Facilities for the transmission of programming that is competitive with the programming transmitted by Lessee. 96. FORCE MAJEURE If by reason of Force Majeure either party is unable in whole or in part to perform its obligations hereunder, the party shall not be deemed in violation of default during the period of such inability. As used herein, the phrase "Force Majeure", shall mean the following: act of God, acts of public enemies, orders of any branch of the government of the United States of America, any state or any political subdivisions, thereof which are not the result of a breach of this Agreement, orders of any military authority insurrections, riots, epidemics, fires, civil disturbances, explosions, or any other cause or event not reasonably within control of the adversely affected party. 97. CONDITION PRECEDENT This Agreement is conditional on the issuance of a Final Order by the FCC granting Lessor a construction permit for the ITFS Channels in the Market from the Transmission Site. By "Final Order" the parties mean an action or order of the FCC which is not reversed, stayed, enjoined, vacated, set aside, annulled or suspended and with respect to which no timely-filed request for administrative or judicial review is pending and as to which the time for filing any such request, or for the FCC to set aside the action on its own motion, has expired. 98. NOTICE Any notice required to be given to Lessor under any provision of this Agreement shall be delivered personally or by certified mail to Lessor at the address first written above. Any notice required to be given to Lessee under any provision of this Agreement shall be delivered personally or by certified mail to Lessee at the address first written above. 99. SEVERABILITY Should any court or agency determine that any provision of this Agreement is invalid, the remainder of the Agreement shall remain in effect. 100. WAIVER A waiver by either Lessor or Lessee of a breach of any provision of this Agreement shall not be deemed to constitute a waiver of any preceding or subsequent breach of the same provision or of any other provision. 101. PAYMENT OF EXPENSES AND SIGNING FEES A signing fee of One Dollar ($1) shall be paid to Lessor. Lessee shall pay all costs and expenses incident to fulfilling or modifying this Agreement, such as, attorneys' fees or, if necessary, any travel expenses approved in advance by Lessee, FCC filing fees, and engineering costs. 102. VENUE AND GOVERNING LAW Venue for any cause of action brought by or between Lessor and/or Lessee relating to this Agreement shall be in California and all provisions of this Agreement shall be construed under the laws of the State of California and County of Lessor. 103. COUNTERPARTS This Agreement may be executed in one or more counterparts each of which shall be deemed an original, but all of which shall constitute one and the same instrument, and shall become effective when each of the parties hereto shall have delivered to it this Agreement duly executed by each of the other parties hereto. 104. ENTIRE AGREEMENT This Agreement constitutes the entire Agreement between the parties and supersedes all prior oral or written provisions of any kind. The parties further agree that this Agreement may only be modified by written Agreement signed by both parties. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on this day of July 1st, 1999. SHEKINAH NETWORK By: ______________________________ Name: Charles J. McKee Title: President WORLD WIDE WIRELESS COMMUNICATIONS, INC. By: ______________________________ Name: Douglas P. Haffer Title: President Address for Notices: Shekinah Network 14875 Powerline road Atascadero, CA 93422 Phone/Fax: (805) 438-3341 Attn: Charles McKee, President Gardner, Carton & Douglas Attn: Laura Mow 1301 K Street, N.W., Suite 900 Washington, D.C. 20005 Phone: (202) 408-7100 Fax: (202) 289-1504 World Wide Wireless Communications, Inc. One Post Street Suite 2600 San Francisco, CA 94104 Phone: (415) 981- 7777 Fax: (415) 391-3199 EXHIBIT A Schedule of Airtime EXHIBIT B Receive Sites There shall be attached hereto and incorporated by reference a copy of FCC Form 330 Section IV listing Lessor" receive sites. EXHIBIT C Leased Equipment Noted below is a list of equipment that Lessee is leasing to Lessor: (13) Four (4) ITFS tansmitters and related hardware (14) Lessor's ITFS receive site antennas and related hardware *(3) Combining network, transmission line and antenna *Common Equipment EXHIBIT D Service and Royalty Fees 1. Lessor's Service Fee Services Provided Annual Fee ----------------- ---------- (s) Lease of Leased Equipment [6(A)] $1.00 (t) Maintenance of Leased Equipment [3(D)] $1.00 (u) Lease of space at Primary Transmission Site [3A)] $1.00 2. Lessee's Subscriber Royalty Fee Lessee shall pay Lessor a minimum monthly Transmission Fee 5% of the system's Gross receipts or a monthly minimum payment of $500 per month whichever is greater. Payment shall be as follows: Commencing on the Execution (Effective) Date and as defined in Paragraph 6)B, payments for each month shall be made by the twentieth (20th) day of the following month. EXHIBIT E Programming In addition to digital data services, such as the Internet or Intranet, the following is a list of video programming services Lessee may provide over Lessee's System. TLC - The Leaning Channel TWC - The Weather Channel Lifetime ESPN - Sports AMC - American Movie Classics SCOLA WHTN - World Harvest Television Network ECO - Galavision CNN - Cable News Network CNN - Headline News C-Span I C-Span II BET - Black Entertainment Network CNBC - Consumer News & Business Channel Nickelodeon The Discovery Channel A&E - Arts and Entertainment The Family Channel The Disney Channel PBS - Public Broadcasting Service TBN - Trinity Broadcasting Network TNIN - The New Inspirational Network ME/U - Mind Extension Network The International Channel BRAVO Network The Travel Channel Family Network Keystone Inspirational Network EX-10.10 18 0018.txt LEASE AGREEMENT LEASE AGREEMENT BETWEEN WORLD WIDE WIRELESS COMMUNICATIONS, INC. AND SHEKINAH NETWORK Key West, Florida ITFS EXCESS CAPACITY AIRTIME LEASE AGREEMENT THIS AGREEMENT is made this 1st day of August 1999 by Shekinah Network (hereinafter referred to as "Lessor") having its principal place of business at 14875 Powerline Road, Atascadero, CA 93422 and World Wide Wireless Communications, Inc. (hereinafter referred to as "Lessee") having its principal place of business at One Post Street, Suite 2600 San Francisco, CA 94104. WHEREAS, the Federal Communications Commission ("FCC") has authorized licenses for Instructional Television Fixed Service ("ITFS") channels and has authorized the licensee to lease excess capacity to non-ITFS users; and WHEREAS, Lessor has been granted an FCC License for (call sign) WNC-798 (the "License") for the Channel group C1-4 (the "ITFS Channels") in Key West, Florida ("The Market"); and WHEREAS, Lessee is in the business of providing voice, video, data and other services via microwave transmission in the Market Area and desires to lease the excess ITFS capacity of the ITFS channels; and WHEREAS, Lessor has determined that there will be excess airtime capacity available on the ITFS Channels and desires to lease this excess airtime capacity to Lessee. NOW, THEREFORE, in consideration of the mutual promises, undertakings, covenants and conditions set forth herein, the Lessor and Lessee do hereby agree and warrant as follows: 1. TERM OF AGREEMENT A. Initial Term. This Agreement shall be effective upon the date of its execution and shall extend for an initial term of five (5) years (the "Initial Term"). B. Renewal Term Provided that the License is renewed by the FCC, Lessee shall have the right to extend this Agreement on its then existing terms and conditions for one (1) additional five (5) year term (the "Renewal Term"). The Renewal Term shall automatically go into effect upon the conclusion of the Initial Term unless Lessee notifies Lessor at least one hundred eighty days (180) before the end of the Initial Term that Lessee does not wish to extend this Agreement. C. New Lease Agreement/Right of first Refusal. (1) Providing that Lessor's FCC license remains in good standing and/or Lessor seeks to renew such license, Lessee and Lessor shall negotiate in good faith for a new excess capacity airtime lease agreement (hereinafter referred to as "New Lease Agreement") no later than one hundred eighty days (180) prior to the end of the latter of (i) Initial Term or (ii) the Renewal Term if the Agreement is extended for the Renewal Term. (2) If Lessor elects to not reasonably pursue a New Lease Agreement with Lessee, then Lessor shall so notify Lessee in writing of such intent no later than one hundred eighty (180) days prior to the end of the Renewal Term. (3) If Lessor and Lessee do not enter into a New Lease Agreement, Lessor grants Lessee a right of first refusal on any competing proposals for lease agreements or transfers or assignments of any part of the ITFS Channels received by Lessor during the twelve (12) months following the expiration of the latter of (i) the Initial Term or (ii) the Renewal Term, if the Agreement is extended for the Renewal Term. If any acceptable offer to lease or acquire the ITFS Channels is made to Lessor, Lessor shall give written notice to Lessee describing the person to whom the proposed lease or transfer is to be made, the fees, charges, rental or other consideration to be received fro the lease or transfer, the terms thereof and generally the relevant other terms and conditions of the lease or transfer. Lessee shall have a period of thirty (30) days after its receipt of such notice from Lessor in which to elect, by giving written notice to Lessor, to lease or, if eligible, obtain any or all of the ITFS Channels for the same fees, charges, rental or other consideration for which Lessor proposed to lease or transfer to the third person. (i) The fees, charges, rental or consideration shall be paid by such third person or Lessee in cash. (ii) If Lessor does not believe Lessee's stated offer is in an amount fairly equivalent to the fair value of the consideration payable by the third person and so notifies Lessee in writing within seven (7) days after Lessor's receipt of Lessee's notice of election to so lease or purchase, Lessee may within five (5) days after its receipt of such notice from Lessor elect to refer such question for determination by an impartial arbitrator and the right of first refusal of Lessee shall then be held open until (5) days after Lessee is notified of such determination. Such arbitrator shall be chosen either by agreement of Lessee and Lessor at the time such question arises, or, at the option of either party, by referring the question to the American Arbitration Association with instructions that the American Arbitration Association select a single arbitrator under a request from the parties for expedited and accelerated determination. The determination of the arbitrator chosen under either option contained in this subparagraph shall be final and binding upon Lessee and Lessor. The parties shall share equally in the costs and fees of the arbitration (iii) In the event Lessee shall elect to exercise its right of first refusal, the lease agreement or other transfer or assignment shall be consummated within thirty (30) days of the latest of: (1) the day on which Lessor received notice of Lessee's election to exercise the right of first refusal; (2) the day upon which any question required to be determined by the arbitrator hereunder has been determined; or (3) the date of any FCC approval in the case of assignment or transfer; or at such other time as may be mutually agreed. The right of first refusal is terminated either by the lease or other transfer to Lessee as provided herein or by notice to Lessee of the Lessor's proposal to lease or otherwise transfer the ITFS Channels or any part to a third person and Lessee's unwillingness or failure to meet and accept such a bona fide offer pursuant to the times and procedures as set forth above; provided that such proposed lease or transfer is consummated at the same fees, charges, rental or other consideration and upon the same terms as to which such right of first refusal applied, within thirty (30) days after Lessee's right of first refusal had expired or had been specifically waived by written notice given to Lessor by Lessee, or within thirty (30) days following FCC approval in the case of assignment or transfer. C) Operation During End of Term. If Lessor and Lessee do not enter into New Lease Agreement before the end of the Initial Term, Lessee shall cease leasing the ITFS Channels on the last day of the Initial Term. D) No Rights Beyond Term of Licenses. Lessor and Lessee agree that this Agreement shall not give rise to any rights or remedies beyond the expiration of any FCC license necessary for the continued operation of the ITFS Channels. Provided, however, that while this Agreement is in effect, Lessor shall obtain and maintain in force all licenses, permits and authorizations required or desired in connection with the use of the ITFS Channels. Lessor shall take all necessary steps to renew the licenses for the ITFS Channels and shall not commit any act or engage in any activity which could reasonably be expected to cause the FCC to impair, restrict, revoke, cancel, suspend or refuse to renew the ITFS licenses. Lessor shall take all reasonable steps to comply with the Communications Act of 1934, as amended and the rules and regulations of the FCC, and shall file all reports, schedules and/or forms required by the FCC to be filed by Lessor. All expenses, including attorneys fees and filing fees, incurred in preparing and filing such reports, schedules and/or forms required by the FCC shall be paid by the Lessee. 2. ALLOCATION OF AIRTIME. A. Excess Capacity Airtime. To the extent allowed by the FCC rules and regulations and any amendments thereof, Lessor agrees to lease to Lessee the exclusive use of all excess capacity not utilized by Lessor ("Excess Capacity Airtime"). B. Lessor's Primary Airtime. During analog transmission over the ITFS Channels, Lessor reserves for its exclusive use a minimum of twenty (20) hours of airtime per-channel per-week to be used for its ITFS scheduled programs. During digital transmission ovr the ITFS Channels, Lessor shall have the exclusive use of 12.5% of the total capacity available on the Lessor's ITFS Channels. This airtime shall be know as "Lessor's Primary Airtime". C. Schedule of Airtime. The schedule which depicts the agreement of the parties as to use of Lessor's Channels shall be attached hereto and made a part hereof as Exhibit A which is subject to change upon agreement by both parties. D. Lessee's use of its Excess Capacity Airtime. Lessee shall have the right to utilize its Excess Capacity Airtime for any purpose allowed or authorized by the FCC including but not limited to voice, video and data transmission. E. Alternate Use and Vertical Blanking Intervals. Lessor shall have the right to use the second audio carrier ("SAP") and vertical blanking intervals. ("VBI") on which Lessor's ITFS programming is being transmitted. Lessee shall at all times have the right to use the VBI and SAP not utilized by Lessor and 100% of the response frequencies associated with the ITFS Channels. Lessor shall be responsible for any equipment needed to utilize the VBI and/or SAP and such equipment shall be compatible with Lessee's system. F. Lessor's Use of ITFS Channels. Lessor agrees that its program services and airtime use will not harm or interfere with Lessee's current or future signal paths utilized within Lessee's System for program encryption, pilot carrier signaling and other technical needs utilized for the operation of and such services provided by Lessee's System. Nor will Lessor, by its own action, or through a third party, utilize any part of its licensed frequency spectrum to create or operate a service that is in competition with current, planned or future services provided by Lessee's System. Lessor agrees to use its Primary Airtime in accordance with the FCC's rules and regulations. Lessor shall not take or fail to take any action which may have a material adverse effect on Lessee's right to utilize its Excess Capacity Airtime. G. Expanded System Capacity. Lessee shall have the right at anytime to require Lessor to file with the FCC any necessary application to expand the channel capacity to Lessor's station to enable it to carry more than one video signal per channel or digital data services; provided however, before Lessee can exercise this right, it must demonstrate to the Lessor's reasonable satisfaction that such modification will not materially degrade the performance of the station nor impair signal quality at the registered ITFS receive sites. Once such modification has been constructed, the modified facilities shall automatically be considered a part of this agreement and subject to all terms and conditions hereof. It is understood that Lessee shall have the full-time use of the Expanded Channels to the extend permitted by FCC rules. 3. TRANSMISSION SITE AND FACILITIES. A. Primary Transmission Site. Lessor's ITFS Channels are located at Key West, FL, Lessee agrees to provide Lessor space at the Primary Transmission site for Lessor's audio and video transmission equipment which shall not exceed on rack. Such space shall be leased to Lessor pursuant to Exhibit D hereto. This site shall hereinafter be described as the "Primary Transmission Site". At Lessee's sole expense, Lessee shall contract for a lease of space at the Transmission Site upon such terms as the parties agree. The Transmission Site shall comply with the standards, specifications and regulations of the FCC rules and orders pertaining to Lessor's ITFS license. B. Relocation of Transmission Site. (i) Lessor acknowledges that the location of the Primary Transmission Site for ITFS Channels is critical to the Lessee's business and agrees that it will not relocate the transmission facilities for ITFS Channels from the Primary Transmission Site without Lessee's prior written consent. (ii) Lessor further acknowledges that possibility that, as a result of currently unforeseen events, the Primary Transmission Site may not be the optimum site for the location of the ITFS Channels or Lessee's business throughout the term of this Lease Agreement. Lessor therefore agrees that if at any time or from time to time Lessee requests in writing that the transmission facilities for the ITFS Channels be relocated, Lessor shall file with the FCC and any other regulatory body having jurisdicition over the ITFS Channels all applications, amendments, and requests for modification that may be necessary to obtain any necessary consents to permit such relocation to such location within or adjacent to the Market as may be requested by Lessee; provided, however, that Lessor shall not be obligated to submit or procecute any application, amendment, or request for modification that Lessor reasonably determines, upon advice of counsel contained in a written opinion, would be in violation of the terms of the License, any statute, rule, or regulations regarding the operation of the ITFS Channels or the submission of materials to the FCC, or any of its obligations as an ITFS licensee; and provided, further, that any such relocation will not result in loss of service to Lessor's registered receive sites served by the transmission facilities in the event that the authorization is obtained to relocate the ITFS Channels to the location requested by Lessee, Lessor shall relocate such channels to such new location as soon as reasonably possible after authorization is obtained. Lessee shall bear reasonable costs associated with such relocation, including engineering and construction, and all reasonable costs associated with obtaining FCC or any other regulatory approval therefore. (iii) Lessor agrees to file modification applications requested by Lessee. Such modifications may include but shall not be limited to the following: power increase or decrease, polarization, transmit antenna patterns, digital, two-way (return path) use of the ITFS Channels, boosters, beam benders or repeaters, cells, sectorization, channel swaps, channel loading, channel shifting and application within five (5) business days or receipt of the modification application from Lessee or during any FCC designated filing window. Lessee will use reasonable efforts to provide Lessor with the engineering for the modification thirty (30) days prior to the request for filing. If Lessor believes that such modification will have an adverse effect on Lessor's ability to provide its services to its receive sites, Lessor agrees to file the modification application as presented by Lessee and within the time limit requested by Lessee; however, Lessee agrees not to implement construction and Lessor agrees not to withdraw the application until the parties have adequately addressed and resolved the potential material adverse effect or the matter has been submitted to arbitration pursuant to Section 16 and a final decision has been rendered by arbitrator. Although Lessee intends to file such modification applications, it may elect not to construct the Channels in that manner and may desire to utilize the Channels as currently licensed. A copy of the modification application, bearing the FCC's date stamp, shall be mailed to Lessee by Lessor, within fourteen (14) days of the filing of the modification application. Lessee shall be solely responsible for all engineering and legal costs associated with the preparation, review and filing of the modification application. In the event that any license modification requested by Lessee requires receive site upgrades in order for Lessor's receive sites to continue to receive Lessor's services, then Lessee agrees to pay for all costs to complete such upgrade prior to implementing the license modification. C. System Construction. Lessee shall within a reasonable period of time, but not later than six (6) months after the FCC grant of digital authority for the ITFS Channels, purchase equipment such as the antenna, waveguide or transmitters specified on the authorization for the ITFS Channels. At Lessee's expense, Lessee shall purchase and install such transmitters, transmission line, modulators, antennas and other equipment as required to operate the ITFS Channels in accordance with the provision of such authorization. Any equipment so used in such construction shall be leased to lessor pursuant to Paragraph 5 hereof. Such equipment is hereinafter referred to as the "Leased Equipment". Lessee shall retain title to the Leased Equipment except as noted by Paragraph 15 herein. D. Maintenance of Transmission Equipment. At Lessee's expense and subject to Lessor's right to supervise the maintenance of this equipment, Lessee shall maintain and operate the Leased Equipment during the terms of this Agreement for a nominal fee. Lessee shall also pay all taxes and other charges assessed against the Leased Equipment. E. Transmission of Programming. At no cost or expense to Lessor, Lessee shall provide the necessary labor and equipment capabilities to transmit on the ITFS Channels programming required to be carried pursuant to this Agreement such as Lessor's ITFS programming and TBN. Lessee shall also comply with Lessor's instructions regarding the transmission of such programming such as the dates and times to transmit programming. F. Interference. Lessee shall operate the Leased Equipment so that such operation does not create or increase interference with electronic transmission of any other FCC licensees entitles to protection under FCC rules and regulations. If Lessee's entitled to protection under FCC rules and regulations. If Lessee's operation of the Lease Equipment does so create or increase interference, Lessee shall pay all of the reasonable engineering and legal fees necessary to resolve the interference problem so created. G. Alterations and Attachments. Lessee, at its own expense, may make alterations of or attachments to the ITFS equipment or the common equipment as defined in Exhibit C (including the installation of encoding and/or addressing equipment) as may be reasonably required from time to time by the nature of its business; provided however, that such alterations or attachments do not interfere with Lessor's signal or ongoing operations or violate any FCC rules or regulations; and provided further that FCC authorization, if required, is obtained in advance of any such alteration or attachment at the sole cost of Lessee. to the extent any FCC authorization pertaining to the ITFS equipment is required, Lessor agrees to use its best efforts to obtain such authorization. H. Licensee Control and Liability. Nothing herein shall derogate from such licensee control of operations of the ITFS Channels that Lessor, as an FCC licensee, shall be required to maintain and Lessee acknowledges the reservation by Lessor of such control. Lessor shall at all times retain ultimate and exclusive responsibility for the operation and control of the ITFS Channels including policy decisions. 4. LESSOR'S RECEIVE SITES. Attached hereto as Exhibit B is list of the registered receive sites designated by Lessor to receive its ITFS programming and to be installed at the expense of Lessee. Those receive sites so listed shall be installed with a Standard Installation. If as the result of any relocation of the Primary Transmit Site, the equipment at Lessor's existing registered receive sites must be reoriented, Lessee shall pay the cost of same. As used herein for the purposes of this Agreement, the phrase "Standard Installation" shall mean an installation consisting of the placement of the ITFS/MMDS receiving antenna at an elevation (not to exceed thirty [30] feet above the base mounting location) which could normally receive the line-of-sight transmission from the Transmission Site; the coupling thereto of a block-down converter; and a sufficient amount of transmission line (coaxial cable) to connect the received ITFS programming to the input of (i) one classroom designated by Lessor to receive the ITFS programming or (ii) the receive site internal/external distribution system. Also, if as the result of any relocation of the Transmit Site, the equipment at Lessor's existing receive sites must be reoriented, Lessee shall pay the cost of same. Lessee also agrees that for digital transmission of the ITFS Channels Lessee will purchase and install at Lessee's expense, one single-point modem to receive its ITFS programming. 5. LEASE OF EQUIPMENT. A) Lessor's Lease of Leased Equipment. For a nominal fee, Lessor shall lease from Lessee the Leased Equipment during the terms of this Agreement. A list of this equipment is attached hereto as Exhibit C and incorporated by reference herein. Lessor shall have no responsibility for the loss of or damage to the Leased Equipment during the terms of this Agreement and Lessee shall bear all such responsibility. 6. FEES. A) Lessor's Service Fee. In consideration of the lease of the Leased Equipment, and for its share of the projected costs to maintain the Transmission Site and the Lease Equipment, Lessor shall pay Lessee an annual fee provided for in Exhibit D. B) Subscriber Royalty Fees or Percentage. Beginning on the Execution Date of this Agreement and continuing thereafter during the Initial Term of this Agreement, Lessee shall pay to Lessor the Subscriber Royalty Fee, System Percentage or monthly minimum, whichever is greater as set out in Exhibit D which is attached herewith and incorporated by reference herein. If the Execution Date shall be a date other than the first day of a calendar month, then the Subscriber Royalty Fee for the partial month shall be paid on a proportionate basis. A late fee of 10% (ten percent) will be assessed to past due accounts, and a finance charge of one and one-half percent (1.5%) per month will be assessed in addition to the late fee until paid. C) Notice of Construction and Required Certificate. Within thirty (30) days of completion of construction at the Transmission Site, Lessee shall notify Lessor of such completion of construction in writing. Within thirty (30) days of the end of each month in which Excess Capacity Airtime is leased hereunder, Lessee shall provide Lessor with a certificate, certified as accurate and correct by an authorized agent of Lessee, showing the number of subscribers served during such month. D) Right to Audit. Lessee shall for a period of three (3) years after their creation, keep, maintain and preserve complete and accurate records and accounts, including all invoices, correspondence, ledgers, financial and other records pertaining to Lessee's use of Excess Capacity Airtime and Lessor's charges hereunder; and such records and corporate accounts shall be available for inspection and audit at Lessee's corporate offices or at Lessee's offices in the Market, as designated by Lessee, at any time or times during the term of this Agreement or within ninety (90) days thereafter, during reasonable business hours, by Lessor or its nominee. In the event that there is discovered an underpayment of the Subscriber Royalty Fee as defined in Paragraph 6 (B) above, Lessee shall pay to Lessor a penalty equal to ten percent (10%) of the amount of each such underpayment. All information obtained by Lessor during any audit herein shall be maintained by Lessor in strict confidence. 7. PROGRAMMING. A) Control Over Programming. (i) Program Content. Lessee intends that only programming of a sort which would not serve to place Lessor's reputation in the community in jeopardy will be transmitted by Lessee on the ITFS Channels. In an attempt to minimize disputes, recognizing the difficulties inherent in specifying exact standards herein, it is agreed that Lessee shall have the right to market the programming provided by the networks and services listed on Exhibit E. If, however, the programming content of any networks and services listed on Exhibit E materially changes, Lessor shall have the right, upon ninety (90) days notice, to deny Lessee the right to continue transmitting such programming if Lessor would have the right to deny Lessee the right to transmit such programming under the provisions of this paragraph in the first instance. If Lessee proposes to transmit the programming of any new programming service, the Lessee shall notify Lessor in writing specifying in detail the nature of the new programming service and Lessor shall have the right, upon written served upon Lessee within thirty (30) days after Lessor's receipt of any such notice from Lessee, to deny to Lessee the right to transmit such service if such programming is obscene and/or contradicting local, state and/or federal laws or otherwise violates any federal, state or local laws or regulations. If no such denial notice is received by Lessee within such thirty (30) days, lessee shall be authorized to transmit all such services for which no denial notice is received. There shall be no reduction in fees required under this Agreement for any such programming not permitted to be transmitted. B) Availability of Programming. It is understood by Lessee and Lessor that there is expected to be no direct out-of-pocket annual costs for the acquisition of the qualified ITFS educational programming for Lessor's use during Lessor's Primary Airtime on the ITFS channels, based on current plans. In the event that this ITFS educational programming either; (1) ceases to be available, or, (2) becomes available only at a fee, then Lessor may incur direct out-of-pocket costs in Lessor's acquisition of ITFS programming. Lessee agrees to provide its best efforts to assist Lessor in the acquisition of alternative programming, if necessary. Additionally, Lessee agrees to make payment to Lessor for the actual, direct programming costs incurred. If any; If Lessor, after expending its best efforts, is unable to obtain suitable ITFS programming for a cost equal to the amount to be paid by Lessee, Lessor and Lessee shall use their best efforts to reach agreement on modifications to this Agreement to avoid any un-reimbursed ITFS programming costs to Lessor. If no such agreement can be reached, Lessor may terminate this agreement. In the case of such termination, Lessor shall use its best efforts (with out-of-pocket costs of Lessor to be paid by Lessee, with Lessee's prior approval) to transfer the license for the ITFS Channels to another qualified educational entity, subject to FCC approval, with the intent of assigning this Agreement from Lessor to the new educational entity. C) Integration of Lessor's Programming. Lessee agrees to integrate Lessor's programming into the overall communications service offered to subscribers, without cost to Lessor. This integration shall include, but not be limited to, listing Lessor's material in any program guides produced by Lessee for subscribers. D) Carriage of TBN. In the event that Lessor's ITFS Channels are used for analog video transmission and TBN is not transmitted on a local VHF or UHF station, with a market coverage equivalent to both area and signal quality of our ITFS channels, and Lessee does not have local off-air insertion as part of its standard installation, then, if so designated by Lessor, Lessee agrees to transmit on one of the ITFS Channels the programming of Trinity Broadcasting Network ("TBN") during those time periods such channel is not used for Lessor's ITFS programming ("TBN Airtime") provided that Lessee is not required to pay a fee for carriage of TBN. In the event that Lessee is permitted to program the hours previously occupied by TBN, then Lessee shall increase, in proportion to the increase in Excess Capacity Airtime, the amount of minimum fees and subscriber royalty fees payable under the provision 6 (B) of this agreement during the remainder of the term(s) of the agreement. For purposes of calculating any such proportionate increase, the parties acknowledge and agree that the minimum fee and subscriber royalty fee agreed to herein are based on Lessee's equivalent use of three full-time ITFS channels. E) Station Identification. During Lessee's use of Lessor's excess channel capacity, Lessee shall transmit Lessor's call sign for each respective station as required by the FCC. 8) PROCECUTION OF PETITIONS, AUTHORIZATIONS AND LICENSES. A) Best Efforts to Secure Approval of this Agreement. The parties recognize that certain approvals will be required from the FCC in order to effectuate this Agreement. Both parties shall use their best efforts to prepare, file and prosecute before the FCC all petitions, waivers, applications and other documents necessary to secure any FCC approval required to effectuate this Agreement. Lessee shall assist in the preparation and prosecution of such applications and as provided for herein, shall pay all filing fees, attorneys' fees, engineering fees, and all other expenses in connection therewith. Lessor also agrees to cooperate with Lessee's efforts to cause other ITFS, OFS, MDs and MMDS operators to co-locate at the Transmission Site. Notwithstanding anything in this Agreement to the contrary, it is understood that no filing shall be made with the FCC with respect to this Agreement unless both parties have reviewed such filing and consented in writing to its submission, such consent not be unreasonably withheld. B) Further Efforts. Throughout the Initial Term of this Agreement, Lessor shall use its best efforts to obtain and maintain in force all licenses, permits and authorizations required for Lessee and Lessor to use the ITFS Channels as contemplated by this Agreement. Lessee shall be responsible for all cash expenses incurred to obtain and maintain in force such licenses, permits and authorizations. When mutually agreed by the parties and at Lessee's sole expense, Lessor shall apply for, and use its best efforts to obtain those reasonable license modifications which would assist Lessee in its business. Lessor also shall consider filing, at Lessee's sole expense, such reasonable protests, comments or other petitions to deny any other ITFS, MMDS, MDS and/or OFS applications or amendments as may be requested by Lessee in the mutual best interests of the parties and the public. Lessor and Lessee shall promptly notify each other of any event of which it has knowledge that may affect any of the licenses, permits or authorization affecting the ITFS Channels. C) Attorneys' Fees. With respect to any legal work conducted pursuant to Paragraph 8(A) and (B) above, Lessee shall be responsible for all attorneys' fees in connection therewith and shall make payments directly to the attorney. However, any attorney fees paid by Lessee shall be approved in advance by Lessee. 9. REPRESENTATIONS AND WARRANTIES. A) Representations and Warranties of Lessor. Lessor represents and warrants to Lesse as follows: (i) Organization. Lessor is a non-profit organization duly organized and existing in good standing under the laws of the State of California, and it has full power and authority to carry out all of the transactions contemplated by this Agreement and all other agreement, certificates or instruments executed and delivered in connection herewith. (ii) No Violation. Neither the execution nor delivery of this agreement or any other agreements, certificates or instruments executed and delivered herewith, nor the performance of the transactions contemplated hereby constitute or will constitute a violation of , be in conflict with, or a default under any term or provision of the governing instruments or Lessor or any agreement or commitment to which Lessor is bound, or any judgment, decree, order, regulation or rule of any court or governmental authority, or consent of any federal, state or local authority is required in connection with the execution and delivery of this Agreement or any other agreements, certificates or instruments executed and delivered herewith or with the performance of the transaction contemplated hereby. B) Representations and Warranties of Lessee. Lessee represents and warrants to Lessor as follows: (ii) Organization. Lessee is duly organized, validly existing and in good standing under the laws of the State of its incorporation and it has full power and authority to own property and carry all of the transactions contemplated by this Agreement, and all other agreements, certificates or instruments executed and delivered by Lessee in connection herewith. (ii) Corporation Action; Valid and Binding Agreements. Lessee has taken all corporate action necessary to authorize the execution and delivery of this Agreement and all other agreements, certificates or instruments executed and delivered in connection herewith. Upon execution and delivery, this Agreement and all other agreements, certificates or instruments executed and delivered by Lessee in connection herewith will constitute valid and binding agreements of Lessee enforceable in accordance with their respective terms. (iii) Litigation and Investigations. There is no action, suit, proceeding or investigation pending or, to the best of Lessee's knowledge, threatened against Lessee, its principals or related entities before any court, administrative agency or other governmental body, and Lessee does not know nor is aware of any reason for commencement of any such action, proceeding or investigation. (iv) Misrepresentation of Material Fact. To the best of Lessee's knowledge, information and believe, no document or contract that was shown to Lessor and which in any way affects any of the properties, assets or proposed transactions of Lessee as such relates to this Agreement, no certificate or statement furnished by or on behalf of Lessee in connection with this Agreement, nor this Agreement itself contains any untrue statement of material fact or omits to state a material fact which would make the statements contained herein misleading. C) Survival or Representations and Warranties. The representations and warranties contained in this Agreement shall be deemed to be continuing during the Initial terms of this Agreement, and each Party shall have the duty promptly to notify the notify the other of any event or circumstance which might reasonably be deemed to constitute a breach of or lead to a breach of its warranties or representations hereunder. The waiver by either Party of any breach of any presentation or warranty under this Agreement shall not constitute a waiver of any other representation or warranty or of any failure in the future by the other Party to fulfill such representation or warranty. 10. TERMINATION. A) Termination of FCC Authorization. Without further liability to either Lessor or Lessee, this Agreement shall terminate in the event that for any reason (i) Lessor shall not be licensed on the leased ITFS Channels, or (ii) the FCC shall terminate or diminish Lessor's authority to lease the ITFS Channels in accordance with the terms of this Agreement. B) Termination by Reason of Default or Nonperformance. At the option of the non-defaulting party, this Agreement may be terminated upon the material breach or default by the defaulting party of its duties and obligations hereunder is such breach or default is not cured by such defaulting party and is breach or default shall continue for a period of thirty (30) consecutive days after such defaulting party's receipt of notice thereof from the non-defaulting party. It is understood and agreed that any failure on the part of Lessee to make any payment required under Paragraph 6 hereof shall be a material breach of default of its duties and obligations hereunder. It is also understood and agreed that any consequences resulting from the loss of local participating receive sites shall not be considered a material breach or default by Lessor of its duties and obligations hereunder. C) Remedies to Continue. In the event of termination of this Agreement pursuant to Paragraph 10(B), such termination shall not affect or diminish the rights or claims or remedies available in equity or at law to the non-defaulting party arising by reason of a breach or default of this Agreement. However, no liability shall arise on the part of Lessor or Lessee upon termination of this Agreement pursuant to Paragraph 10(A) except where the loss of the FCC license occurs as a result of the default of either party. 11. TRANSFER OF RIGHTS AND OBLIGATIONS. Lessee shall have the right to assign its rights under this lease as collateral for any financing arrangements it makes. Lessee shall also have the right to pledge the Leased Equipment as collateral security for any loans it makes; provided, however, that any pledge of the Leased Equipment shall be made subject to the provisions of this lease. Lessee shall further have the right to subcontract any portion of its obligations under this Agreement to any partnership, joint venture, corporation or entity which Lessee may choose, provided that Lessee gives Lessor notice of any proposed subcontracting and, provided further, that no such subcontracting shall release Lessee from fulfilling all of its obligations under this Agreement. Lessee shall have the right to assign or transfer its rights, benefits, duties and obligations under this Agreement to a commonly-owned company without the prior consent of Lessor. Apart from the foregoing, neither party may assign or transfer its rights, benefits, duties or obligations under this Agreement without the prior written consent of the other, which consent shall not be unreasonably witheld. 12. INDEMNIFICATION. A) By Lessor. To the extent permitted by state and federal law and its charter or by-laws, Lessor shall forever protect, save and keep Lessee and its permitted successors and assigns harmless and indemnify Lessor against and from any and all claims, demands, losses, costs, damages, suits, judgments, penalties, expenses and liabilities or any kind or nature whatsoever, including reasonable attorneys' fees, arising directly or indirectly out of (i) the willful misconduct of Lessor, its agents or employees, in connection with the performance of this Agreement; (ii) any programming transmitted by Lessor during any of Lessor's Airtime. B) By Lessee. To the extent permitted by state and federal law and its charter or by-laws, Lessor shall forever protect, save and keep Lessee and its permitted successors and assigns harmless and indemnify Lessor against and from any and all claims, demands, losses, costs, damages, suits, judgments, penalties, expenses and liabilities or any kind or nature whatsoever, including reasonable attorneys' fees, which arise directly or indirectly out of (i) the negligence or willful misconduct of Lessee, its agents or employees, in connection with the performance of this Agreement; (ii) any programming transmitted by Lessee or any of its authorized agents or subcontractors with the public, third parties and subscribers to the Lessee's programming service; or (iv) any maintenance, installation or other work performed by Lessee or any authorized agent or subcontractor under this Agreement. C) Notice of Claim; Defense of Claim. Each party shall notify the other of any such claim promptly upon receipt of same. Either party (hereinafter referred to as appropriate the "Indemnitor" or Indemnitee") shall have the option to defend, at its own expense, any claims arising under this Paragraph. In Indemnitor assumes the defense of any such claim, Indemnitee shall delegate complete and sole authority to the Indemnitor to defend or settle same and Indemnitee shall cooperate with Indemnitor in the defense thereof. 13) INSURANCE. A) Policies Required. At its expense, Lessee shall secure and maintain with financially reputable insurers, one or more policies of insurance insuring the Leased Equipment and Lessee's utilization of the ITFS Channels against casualty and other losses of the kinds customarily insured against by firms of established reputations engaged in the same or similar line of business, or such types and in such amounts as are customarily carried under similar circumstances by such firms, including, without limitation: (i) "All Risk" property insurance covering the ITFS Equipment and the common Equipment to the extent of one hundred percent (100%) of its full replacement value without deduction for depreciation: (ii) comprehensive general public liability insurance covering liability resulting from lessee's operation of the ITFS equipment on an occurrence basis having minimum limits of liability in an amount of not less than One Million Dollars ($1,000,000.00) for bodily injury, personal injury or death to any person or persons in any one occurrence, and not less than Two Million Dollars ($2,000,000.00) in the aggregate for all such losses during each policy year, and not less than Three Hundred Thousand Dollars ($300,000.00) with respect to damage to property; (ii) all workers compensation, automobile liability and similar insurance required by law. B) Insurance Policy Forms. All policies of insurance required by this Paragraph shall, whre appropriate, designate Lessor as either the insured party or as a named additionally insured party, shall be written as primary policies, not contributory with and not in excess of any coverage which Lessor shall carry, and shall contain a provision that the issuer shall give to Lessor thirty (30) days prior written notice of any cancellation or lapse of such insurance or of any change in the coverage thereof. C) Proof of Insurance. Executed copies of the policies of insurance required under this section or certificates thereof shall be delivered to Lessor not later than ten (10) after execution of this agreement. Lessee shall furnish Lessor evidence of renewal of each such policy not later than thirty (30) days prior to the expiration of the term thereof. 14. RELATIONSHIP OF PARTIES. By the provisions of this Agreement, Lessor and Lessee intend to enter an airtime lease relationship and not a joint venture. They will carry out this Agreement to preserve that intent. Neither party shall represent itself as the other party, nor as having any relationship with one another, except as Lessor and Lessee under the terms of this Agreement. 15. EQUIPMENT PURCHASE. (A) Lessor's Option to Purchase. In the event that this Agreement is terminated, Lessor shall have the option to purchase the Leased Equipment used exclusively for Lessor's ITFS license. Any equipment which is used in a shared fashion (such as transmit antenna, decoders and combiners) in providing signals other than Lessor's signals are excluded from this option to purchase. The intent of the purchase option provided for in Paragraphs 16(A) is to provide Lessor with the capability to continue to perform on Lessor's ITFS license. The purchase price shall be the market value of such equipment noted above as determined by mutual agreement or by averaging the values obtained from two (2) appraisals, with one appraiser each chosen by Lessor and Lessee. (B) Lessee's Option to Purchase. If during the terms of this Agreement the FCC modifies its rules so as to enable Lessee to be licensed to operate the ITFS frequencies, Lessee shall have a right of first refusal to acquire such licenses subject to the same terms and conditions as the right provided for in Paragraph 1(B). 16. NON-DISCLOSURE Lessor acknowledges that there may be made available to it pursuant to this Agreement proprietary information of Lessee relating to the encoding and/or decoding system associated with the ITFS channel equipment and its patented processes including, but not limited to, improvements, innovations, adaptation, inventions, results of experimentation, processes and methods, whether or not deemed patentable, and certain business and marketing techniques (all herein referred to as "Confidential Information"). Lessor acknowledges that this Confidential Information has been developed by Lessee at considerable effort and expense and represents special, unique and valuable proprietary assets of Lessee, the value of which may be destroyed by unauthorized dissemination. Accordingly, Lessor covenants and agrees that, except as may be required for the performance of this Agreement or by law or court order, neither it nor any of its agents or affiliates shall disclose such Confidential Information to any third person, firm, corporation or other entity for any reason whatsoever, such undertaking to be enforceable by injunctive or other equitable relief to prevent any violation or threatened violation thereof. 17. NON-COMPETITION During the term of this Agreement, Lessor agrees not to transmit programming or to lease or sublease any channel capacity on its ITFS Facilities for the transmission of programming that is competitive with the programming transmitted by Lessee. 18. FORCE MAJEURE If by reason of Force Majeure either party is unable in whole or in part to perform its obligations hereunder, the party shall not be deemed in violation of default during the period of such inability. As used herein, the phrase "Force Majeure", shall mean the following: act of God, acts of public enemies, orders of any branch of the government of the United States of America, any state or any political subdivisions, thereof which are not the result of a breach of this Agreement, orders of any military authority insurrections, riots, epidemics, fires, civil disturbances, explosions, or any other cause or event not reasonably within control of the adversely affected party. 19. CONDITION PRECEDENT This Agreement is conditional on the issuance of a Final Order by the FCC granting Lessor a construction permit for the ITFS Channels in the Market from the Transmission Site. By "Final Order" the parties mean an action or order of the FCC which is not reversed, stayed, enjoined, vacated, set aside, annulled or suspended and with respect to which no timely-filed request for administrative or judicial review is pending and as to which the time for filing any such request, or for the FCC to set aside the action on its own motion, has expired. 20. NOTICE Any notice required to be given to Lessor under any provision of this Agreement shall be delivered personally or by certified mail to Lessor at the address first written above. Any notice required to be given to Lessee under any provision of this Agreement shall be delivered personally or by certified mail to Lessee at the address first written above. 21. SEVERABILITY Should any court or agency determine that any provision of this Agreement is invalid, the remainder of the Agreement shall remain in effect. 22. WAIVER A waiver by either Lessor or Lessee of a breach of any provision of this Agreement shall not be deemed to constitute a waiver of any preceding or subsequent breach of the same provision or of any other provision. 23. PAYMENT OF EXPENSES AND SIGNING FEES A signing fee of One Dollar ($1) shall be paid to Lessor. Lessee shall pay all costs and expenses incident to fulfilling or modifying this Agreement, such as, attorneys' fees or, if necessary, any travel expenses approved in advance by Lessee, FCC filing fees, and engineering costs. 24. VENUE AND GOVERNING LAW Venue for any cause of action brought by or between Lessor and/or Lessee relating to this Agreement shall be in California and all provisions of this Agreement shall be construed under the laws of the State of California and County of Lessor. 25. COUNTERPARTS This Agreement may be executed in one or more counterparts each of which shall be deemed an original, but all of which shall constitute one and the same instrument, and shall become effective when each of the parties hereto shall have delivered to it this Agreement duly executed by each of the other parties hereto. 26. ENTIRE AGREEMENT This Agreement constitutes the entire Agreement between the parties and supersedes all prior oral or written provisions of any kind. The parties further agree that this Agreement may only be modified by written Agreement signed by both parties. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on this day of July 1st, 1999. SHEKINAH NETWORK By: ______________________________ Name: Charles J. McKee Title: President WORLD WIDE WIRELESS COMMUNICATIONS, INC. By: ______________________________ Name: Douglas P. Haffer Title: President Address for Notices: Shekinah Network 14875 Powerline road Atascadero, CA 93422 Phone/Fax: (805) 438-3341 Attn: Charles McKee, President Gardner, Carton & Douglas Attn: Laura Mow 1301 K Street, N.W., Suite 900 Washington, D.C. 20005 Phone: (202) 408-7100 Fax: (202) 289-1504 World Wide Wireless Communications, Inc. Oakland, CA Phone: (510) 839- 6100 Fax: (510) 839-7808 EXHIBIT A Schedule of Airtime EXHIBIT B Receive Sites There shall be attached hereto and incorporated by reference a copy of FCC Form 330 Section IV listing Lessor" receive sites. EXHIBIT C Leased Equipment Noted below is a list of equipment that Lessee is leasing to Lessor: (1) Four (4) ITFS tansmitters and related hardware (2) Lessor's ITFS receive site antennas and related hardware *(3) Combining network, transmission line and antenna * Common Equipment EXHIBIT D Service and Royalty Fees 1. Lessor's Service Fee Services Provided Annual Fee Lease of Leased Equipment [6(A)] $1.00 Maintenance of Leased Equipment [3(D)] $1.00 Lease of space at Primary Transmission Site [3A)] $1.00 2. Lessee's Subscriber Royalty Fee Lessee shall pay Lessor a minimum monthly Transmission Fee 5% of the system's Gross receipts or a monthly minimum payment of $500 per month whichever is greater. Payment shall be as follows: Commencing on the Execution (Effective) Date and as defined in Paragraph 6)B, payments for each month shall be made by the twentieth (20th) day of the following month. EXHIBIT E Programming In addition to digital data services, such as the Internet or Intranet, the following is a list of video programming services Lessee may provide over Lessee's System. TLC - The Leaning Channel TWC - The Weather Channel Lifetime ESPN - Sports AMC - American Movie Classics SCOLA WHTN - World Harvest Television Network ECO - Galavision CNN - Cable News Network CNN - Headline News C-Span I C-Span II BET - Black Entertainment Network CNBC - Consumer News & Business Channel Nickelodeon The Discovery Channel A&E - Arts and Entertainment The Family Channel The Disney Channel PBS - Public Broadcasting Service TBN - Trinity Broadcasting Network TNIN - The New Inspirational Network ME/U - Mind Extension Network The International Channel BRAVO Network The Travel Channel Family Network Keystone Inspirational Network EX-10.11 19 0019.txt STOCK PURCHASE AGREEMENT DATED NOVEMBER 30, 1999 STOCK PURCHASE AGREEMENT In Buenos Aires, on this 30th day of the month of November, 1999, WORLD WIDE WIRELESS COMMUNICATION, INC. (the "Buyer"), with domicile at 520 - 3rd Street, Suite 101, Oakland, California 94607, U.S.A., represented herein by Douglas P. Haffer and JORGE OMAR COVELLO, with domicile at J.M. Bosch 961, Province of Buenos Aires (the "Seller") hereby enter into this stock purchase agreement (the "Agreement") for shares of INFOTEL ARGENTINA S.A. (the "Company"), subject to the following terms and conditions: 1. Definitions: The meaning of the following terms in the Agreement shall be: 1.1 Affiliate: the Affiliate of a person, is a person controlled by, controller of or subject to joint control with such person. For the purposes of this definition, the word control will have the meaning assigned to it in Section 33 of Law 19,550 [1] 1.2 Irrevocable Capital Payments: the irrevocable capital payments on account of future stock issues and any other capital payment that the Seller may have made to the Company as at the Closing Date. 1.3 Balance Sheet as at the Closing Date: the Company's balance sheet as at such date, which will be prepared in the manner and within the terms contemplated in Clause 3.3. 1.4 Business Day: any day other than Saturday, Sunday or a day in which by law commercial banks are authorized or obliged to conduct no business in the place where a payment should be made. 1.5 Dollars: United States Dollars. 1.6 Equity Interest: 6,120 common, nominative non endorsable shares of the Company with a nominal value of Argentine Pesos 1 (one) each, with the right to 1 (one) vote per share representing 51% of the Company's capital stock. 1.7 Hidden Liabilities: 100% of all Liabilities as at the Date herein which have not been posted to the accounts or for which a reserve has not been set up in the company's accounts and which have been incurred prior to the execution hereof. Hidden Liabilities include, among others, (i) any claim after the Closing Date which stems from the non performance of labor or social security obligations for which the Company is liable, either directly or joint and severally, for events having occurred prior to or on the Closing Date, for any cause, including labor accidents or accidents-diseases originated or developed prior to or on the Closing Date; and (ii) any judicial or administrative action, claim or notice, originating in events prior to or on the Closing Date; and (ii) the legal expenses incurred in the investigation and defense of the same. The examination of the Company by the Buyer will not release the Seller from his obligation for Hidden Liabilities. 1.8 Withdrawals on Account: They are the withdrawals on account of profits, for director or syndic [2] fees or withdrawals made for any other concepts by the Seller - -------- 1 Argentine Business Organizations Act. (Translator's Note) 2 "Sindico": In Argentine law, shareholders' representative, charged by law with the on-going review of corporate books, records, etc. to safeguard the interests of shareholders from fraud or mismanagement. (T.N.) or the directors or syndics prior to or on the Closing Date. Any Withdrawals on Account which may not be canceled against non allocated profits before the Closing date shall be considered Liabilities as at the Closing Date. Withdrawals on Account dated after the date of the Last Balance Sheet shall not exceed the average monthly withdrawals made by the Seller as reported in the Last Balance Sheet. 1.9 Balance: it shall have the meaning assigned to it in Clause 4. 1.10 Service: the service provided by the Company, understood as that described in Clause 5.2. 1.11 Last Balance Sheet: The Company's balance sheet as at June 30, 1999. 2. Objective. The Seller sells to the Buyer and the Buyer buys from the Seller, the Equity Interest and the Irrevocable Capital Payments, if any. The Seller's holdings in the Equity Interest is the following: ============================================== ================================= NAME NUMBER OF SHARES - ---------------------------------------------- --------------------------------- Jorge Omar Covello 6,120 ============================================== ================================= 2.1 Annulment of the Transaction. The Parties recognize that the approval of the "Comision Nacional de Comunicaciones" (National Communications Commission ("CNC") is required for the Buyer to effect the purchase of Shares under this agreement and for the Shareholders' Agreement executed in connection with the same. Should the Buyer fail to obtain approval of the CNC to become the owner of the Equity Interest, the Buyer shall also have the right to terminate this agreement, in which case, the Buyer shall return the shares to the Seller and the latter will return the price paid until such time, and the parties will have no further claims against each other. 2.2 It is likewise expressly indicated that within a period of no more than 5 (five) business days as from the execution hereof and at the Buyer's satisfaction, the Seller shall obtain an instrument from Terra Telecommunications Corp. and World Access Communications Corp., both with domicile at 1160 N.W. 158th Drive, Miami, Florida, United States of America, terminating any agreement existing between said companies and the Company. Failure to obtain such instrument, or lack of approval thereof by the Buyer will give the Buyer the right to terminate this Agreement, notwithstanding any emerging liabilities. Gross Price and Final Price. 3.1 The Gross Price is USD 1,500,000 (U.S. Dollars One million five hundred thousand). 3.2 The Seller, for a period of one year after the shares mentioned in Clause 4.1(d) have been issued, [sic] the Buyer will maintain 50% of said shares in his own custody. If it is found that the Company is liable for any claim, debt or liability of the company existing prior to Infotel Argentina S.A., the Seller will be liable for any claim, debt or obligation transferred to Infotel Argentina S.A. which shall be settled with the payment of money to the claimant or the return of the shares issued under the terms of 4.1(d) for the same value. For the period of 4 years after the expiration of the term contemplated in Clause 3.2, the Seller will be responsible for any claim, debt or liability of the company existing prior to Infotel Argentina S.A. [sic] any liability will be covered and settled with the withholding of any amounts that may be payable to the Seller according to the agreement between the Parties. 3.3 On the date of closing, the company Infotel Argentina will prepare a balance sheet as at that date from which a result will be obtained and on the basis of which the company shall begin operating; in this sense, the company will have results of a tax nature, others of a labor nature, for customers and for suppliers which will generate a "balance" which if negative, will be subtracted from the last payment [under] point 4(d) and should it be positive will be added to the gross price and paid out in accordance with point 4(d) (i.e. capitalized in shares to 365 days). The seller shall have 15 days to prepare it and present it for audit by the buyer which will react within five days. 4. Terms of Payment, Payment Currency and Place of Payment 4.1 The Price shall be payable by the Buyer to the Seller as follows: a) The amount of USD 100,000 (Dollars one hundred thousand) has been received by the Seller in advance. b) The amount of USD 500,000 (Dollars five hundred thousand) on the Closing Date, with this Agreement serving as valid receipt. c) The amount of USD 300,000 (Dollars three hundred thousand) on December 30, 1999. d) The amount of USD 600,000 (Dollars six hundred thousand) in Seller's shares on 29 December 1999. Said shares will be valued at the lowest bid price for said shares in the market in which they were traded on November 17 & 18, 1999. Also, 50% of said shares shall not be transferred for the period of one year counted as from their date of purchase and the other 50% will remain with the seller for the concept of surety until the date as indicated in point 3.2 and the same shall be delivered to the buyer within 365 days [.] The same shall be delivered under the terms of the laws of the United States of America and free of encumbrances. The payment contemplated in paragraph d) is designated the Balance. 4.2 All payments contemplated herein, except for that pursuant to Clause 4.1.d) shall be made in Dollars by means of transfer to the bank accounts indicated in Schedule 4.2, in accordance with the percentages indicated therein. Default in the payment of the amounts contemplated in this Clause will occur as a matter of law, without need for judicial or extrajudicial claims. If the due date was a non business day, the payment shall be made on the following Business Day. 5. Representations and Warranties by the Seller. The Seller hereby represents and warrants to the Buyer that: The Equity Interest and the Seller: 5.1 The Seller is the owner of 100% of the Equity Interest, which is free of any liens or encumbrances. The Equity Interest represents 51% of the Capital Stock and 51% of the Company's votes, and its sale is not subject to any approval, authorization or permit, except for the CNC's approval mentioned in Clause 2.1. The Seller is not restricted from freely disposing of the Equity Interest and has been recognized by the CNC as a shareholder in the Company, there being no transfers of shares pending approval by the CNC. The Equity Interest is transferred with all the equity and political rights, and includes the assignment of all Irrevocable Capital Payments, if any. Neither the Seller nor the Company are a party to any shareholders agreements or share syndication agreements. The Company: 5.2 The company is a "sociedad anonima" (stock corporation) established in accordance with the laws of the Republic of Argentina, with domicile at Esmeralda 684, piso 10, of the City of Buenos Aires. The Company's Bylaws in effect with record of registration with the "Inspeccion General de Justicia" (Legal Persons Registry) under the Public Registry of Commerce ("IGJ") are those attached hereto as Schedule 5.2(i). All the Company's books are appropriately kept as established by the IGJ. There are no amendments to the bylaws, capital increases or actions of any type pending registration with the IGJ. Schedule 5.2(ii) contains copy of the minutes of the Board, Shareholders' Meetings, and records of attendance to the shareholders' meetings for the last 5 years and copy of the Stock Registry Book from the date of incorporation of the Company until the present. 5.3 The Company's capital amounts to Arg.$ 12,000 (Argentine Pesos twelve thousand), represented by 12,000 (twelve thousand) common, nominative, non endorsable shares with a nominal value of Arg.$ 1 (Argentine Pesos one) each and with the right to 1 (one) vote per share; the capital stock has been completely paid-in; there are no outstanding underwriting rights pending exercise by any of the shareholders or third parties, nor any options or commitments giving the Seller or any third parties the right to buy or underwrite shares in the Company or capitalize credits against the Company. 5.4 The execution of this Agreement will not cause the acceleration of any outstanding Company liability, nor will it result in the infringement of any law, decree, judicial order or any other rule of mandatory compliance by the Company, its by-laws, the decisions of the Corporate bodies or any agreement of which, to date, the Company or the Seller may be a party. 5.5 All the powers of attorney granted by the Company in favor of directors, officials, employees, professionals and others are those specified in Schedule 5.6. Economic Condition of the Company 5.6 The Company has perfect title to all its assets, which are detailed in Schedule 5.7(i) and are free from any liens or encumbrances, with the exception of those indicated in Schedule 5.7(ii), are in a good condition, except for the wear caused by normal use. The Company is in possession of its assets and is not restricted to dispose thereof, with the exception of the assets indicated in Schedule 5.7(iii), which were acquired pursuant to the procedure of Law 11,867 [3]. In the last ten (10) years, the - --------------- 3 T.N. Argentine Law which regulates the conveyance of commercial establishments, including all tangible and intangible property and rights. Company has acquired no assets which due to their number or characteristics should have been purchased in accordance with the regime of Law 11,87. 5.7 The Company is the lessee of the premises used as offices, the lease agreement for which is attached as Schedule 5.8. Rental and expenses payable by the Company are in good standing. Neither the Company nor its counterparts are in default in the performance of their obligations resulting from the written or oral agreements mentioned under 5.8. The Company has free use of such assets, which are used to render the Service. 5.8 The Company's Financial Reports as at July 1, 1999, as at November 30, 1999, attached to the balance sheet as at the Closing Date, have been prepared in accordance with the accounting standards in force in the Republic of Argentina, uniformly applied. The Balance Sheet as at the Closing Date will be prepared in accordance with said standards. All of them accurately reflect the shareholder's equity position and the results of the Company's operations as at those dates. 5.9 Since the Last Balance Sheet to date, there has been no substantial adverse change in the financial condition, assets or business of the Company, and the Company (a) has undertaken no obligations nor conducted any transactions outside those originating in the ordinary and normal course of business; (b) has not increased its capital nor received capital contributions on account of future issues; (c) has not redeemed or amortized its shares; (d) has not increased the remuneration of any of its directors, officials or employees; (e) has not recorded in the accounts any revenues for services not rendered; (f) has not sold any of the assets appearing on the last Balance Sheet, except those sales having occurred after the date of the same which respond to its ordinary business operations and are posted to the accounts and (g) no notice has been received nor is there knowledge of any circumstance leading to assume that the Current Investments and/or the Credits for Sales indicated in the Last Balance Sheet will not be normally liquidated or received. 5.10. As from the Last Balance Sheet and to date, the Company has not undertaken any real or contingent liability, foreign to the ordinary course of business. 5.11 There are no extra-judicial claims, mediations, labor arbitrations, court actions, claims, administrative proceedings, proceedings for violations, of whatever nature, trade union conflicts or dispute situations initiated or which may be initiated against the Company or against the Seller susceptible of causing a damage to the Company or of restricting or preventing the transfer of the Equity Interest, other than those listed in Schedule 5.12. Schedule 5.12 contains a detail of the extra-judicial claims, mediations, labor arbitrations, court actions, claims, administrative proceedings, proceedings for violations, of whatever nature, trade union conflicts or dispute situations initiated or which may be initiated against the Company or against the Seller, indicating the names of the parties to the claim, the date thereof, the respective court, administrative seat or offices with which the claim has been filed, the amount initially claimed (if an amount is claimed), the adjusted amount as at the Closing Date with interest calculated according to the law, procedural status of the claim and cause thereof. 5.12 As at the Closing Date, the Company has filed in due time and as appropriate all the filings required by tax and social security laws, has paid or set up provisions for all the payments, taxes and fees required therein; and has not be advised, nor has it any reason to assume that it has any past due debts of a tax or social security nature or payable debts of the same nature. 5.13 Schedule 5.14 contains copy of all contracts for amounts exceeding Arg.$ 10,000 per year in which the Company is a party and a detail of oral agreements for amounts exceeding Arg.$ 10,000 per year of which the Company is a party. Neither the Company nor its counterparts are in default for any obligation emerging from said contracts. 5.14 All the information supplied to the Buyer on the Company and the Seller in connection with the valuation of the Equity Interest and the Irrevocable Capital Payments is truthful and complete. The Seller provided the information that was requested by the Buyer. 5.15. As at the Closing Date, the Company has 7 Customers, as indicated in Schedule 5.16, where their name, address and telephone number are listed. 5.16 Neither the Seller nor the Company have agreed to pay any commission or finder's fee to any broker or intermediary for the execution of this Agreement. Company personnel: 5.17 Schedule 5.18 details, in a complete and truthful manner, all the personnel hired by the Company with a permanent employment status - including name and surname, employment date, labor category, job, working hours and place of work, vacations, salary items and discounts - and their employment conditions. The only personnel working for the Company is that specifically included in the aforementioned list. The Company does not apply any other Collective Labor Agreement nor does it have any pension plans, non-mandatory insurance, bonuses, profit sharing or other benefits or voluntary compensations for its personnel. In the last five (5) years there have been no labor conflicts or strikes, nor is there any indication that they may occur after the Closing Date. All the Company's labor obligations, whether of a direct or joint and several liability nature, including labor obligations derived from laws, decrees, collective labor agreements, rules issued by competent authorities, decisions by the Company (such as salaries, bonuses and their supplements) as well as the total payments and contributions for which it is liable, including Social Security obligations, contributions and union [sic], mandatory insurance, etc. have been calculated, stated and paid in legal form. All the personnel employed is registered normally in the Payroll Ledger and the data recorded therein are truthful and accurate in coincidence with contractual modalities. All permanently employed personnel is comprised in the roster included in the contract entered into with the Labor Accidents Insurance Company ("Aseguradora de Riesgos del Trabajo") in the terms of law 24,557, as well as in the mandatory collective life insurance policy and any other mandatory insurance. The Company has fully complied with the Improvement Plan developed by the Labor Accidents Insurance Company ("Aseguradora de Riesgos del Trabajo") and complies with regulations in force in the areas of labor hygiene, medicine and safety. The Company has demanded - in accordance with section 17 of law 25,013 - from its contractors and/or subcontractors all the documentation crediting compliance by them with their labor and social security obligations with respect of their employees which by reason of such contracting have or are rendering services to the Company, with such documents being maintained in its files. There are no legal connections, originated prior to or on the Closing Date, with people related to the Company which could in the future be construed, either by them or by third parties (labor authorities, tax agencies, etc.) as a "labor relation." Company Licenses The Company is the holder of the license to provide Value Added Services and Data Transmission Services in the national territory, granted by the CNC through Resolution No. 3357 dated February 5, 1999 and of the permit of an interim nature to use channel "1-1" in table 1.4, Annex 1 to Communications Secretariat Resolution No. 869/98 in the service areas corresponding to the Multiple Buenos Aires Area, Bahia Blanca, Rosario, Santa Fe and cities of Mendoza, Cordoba, Neuquen and Corrientes, granted by the Communications Secretariat through Resolution No. 1193 dated September 3, 1999, copies of which are attached hereto as Schedule 5.19 (the "Licenses"); all requirements and conditions for the award of the Licenses have been duly complied with; the Licenses are in force, there is no action or proceeding initiated by the CNC or other authority against the Company or its shareholders, nor reasons to assume any such actions may be initiated for violation or alleged violation of any rule or provision which could cause the lapse, suspension or modification of the Licenses. Technical Aspects of the Company: 5.18 The Company's licenses and of the system of Fixed Data Transmission and Value Added Services [sic] the company's assets shall allow for the operation of technical work to third parties. 5.19 The Seller has not incurred nor will it incur, be it by action or omission, in conducts which may prevent or hinder approval of the transfer of the Equity Interest by the CNC. Bank Accounts. Bank Agreements. 5.20 Schedule 5.23 contains a complete and detailed description of all agreements of the Company with banks and financial institutions with which it operates, with an indication of the checking accounts, safety deposit boxes, loans, overdrafts, certificates of deposit and other transactions with such institutions, with the account numbers and the names of individuals authorized to represent the Company. Execution of the Agreement 5.21 The Seller has the power to enter into this Agreement. Insurance Policies. 5.22 The Company has contracted the insurance policies attached hereto in Schedule 5.26. The payment of the premiums on said policies are in good standing. Neither the Company nor its counterparts are in default in the performance of their obligations. 5.23 Y2K All products, computer assets and/or services, including, among others, any kind of hardware components or software programs used by the Company, have not been affected in their correct and normal operation prior to or simultaneously with 9 September 1999, nor will they be affected after said date, with respect to the data, calculations, output information or other functions (including, among others, calculation, comparison and sequence) which are date-dependant or date-related, and that said information technology products, goods and/or services shall create, store, process and/or output (as may be the case) date-related or containing dates without errors or omissions. The Company has taken all necessary preventive measures so that after 9 September 1999 the effects that the information technology crisis presents for the year 2000 shall in no way affect any of the normal Company activities, including, as an illustration, the rendering of the Service, and that, for the same reason, the greatest diligence has been applied to the review of all supply circuits, both of assets and services, which currently and/or at the time foreseen for the onset of the information technology crisis (1 January 2000) and for the whole duration of the same, may be necessary to satisfy, as a minimum, the Company's customary needs and allow for its normal operation, understanding as such that maintained prior to 9 September 1999. The Company has complied with the CNC's rules regarding Y2K. 6. Administrative Approval. Both parties shall be responsible for obtaining the CNC's approval for the Buyer to become the owner of the Equity Interest. Both parties commit their best efforts to assist the Buyer in obtaining such authorization as soon as possible and to provide their maximum cooperation to respond to any requirement from the CNC. Any expenses to be incurred to obtain it will be borne by the Buyer. Should the CNC fail to grant such approval, the Buyer shall have the right to sell its shares in part or in total and assign this Agreement, in part or in total, to a third party, providing notice thereof to the Seller, but without the need to require his consent. Likewise, the Buyer shall have the option, until finding a substitute susceptible of approval by the CNC, of reselling 2% of the Company shares to the Seller who will be obliged to buy then at the same price per share at which the Buyer has bought them. Any delays which may arise in obtaining said approval shall not affect the terms indicated in this Agreement. Until such time as the CNC decides on the approval of the transfer of shares (and should it fail to be approved, until an alternative transfer to a company designated by the Buyer shall have been approved), the Buyer shall notwithstanding have, in the internal shareholders' relation between the parties, all the rights pertaining to shareholders, for which purpose the Seller herein grants the Buyer an irrevocable power of attorney, effective as from the Closing Date, attached hereto as Schedule 6 and further commits to execute any other documents which may be required. 7. Non Performance 7.1 Seller's Non Performance 7.1.1 In case of non performance by the Seller of any of his obligations under this Agreement, including, among others, if the inaccuracy or falseness of any of the representations and warranties contained in Clause 5 was demonstrated and such inaccuracy or falseness was not remedied within thirty (30) business days of having been effectively served notice to that end, or if there was any Hidden Liabilities, the Seller will be jointly and severally liable to the Buyer for the damages that he or the Company may suffer for such reason. 7.1.2 Defense In case the Seller considered that the Hidden Liabilities are inappropriate, and to the extent the Seller shall have complied with his obligations under Clause 7.1.2, the Seller may defend such claim through the legal counsel appointed by him at his expense, in which case he shall serve effective notice to the Buyer indicating he will undertake such defense. To this end, the Buyer shall provide the information required by the Seller and grant the special powers of attorney of the case, with prohibition to substitute and settle. The Seller shall not, without the previous written consent of the Buyer, settle or offer to settle any claims or actions for a Hidden Liability nor offer for seizure Company assets or invoke allegations which in the opinion of the Company's lawyers could be used against the Company in another case. The Seller shall provide the Buyer with written copy of any writ or document, before its presentation to the judge or competent authority. If the Seller shall fail to assume the defense of such claim within a reasonable time, the Buyer shall have the right, but not the obligation, of assuming the defense of the same. If the Buyer shall assume such defense, it shall be exercised with diligence, and the Seller shall be bound by the result obtained by the Buyer with regard to such claim, in which case the Seller will also be accountable to the Buyer for the legal fees set by the court and such reasonable costs as may have been incurred in such defense. In case the Seller shall demonstrate the third party claim to be groundless, then the Company shall reimburse him, within 30 calendar days of the request, for any expenses and fees incurred by the Seller. 7.1.3 Currency For the purpose of the deductions or withholdings or reimbursements contemplated in this clause, any Argentine Peso denominated Hidden Liability shall be converted into Dollars at the seller exchange rate set by Banco de la Nacion Argentina effective on the date it is paid by the Company or the Buyer, or the date the Buyer deducts it, as may be the case. 7.2 Non Performance by the Buyer. (a) In case of non performance by the Buyer in the payment of the Price not remedied within five (5) calendar days of effective notice having been served, the Seller shall have the right to chose between two options to demand payment, plus a 10% annual interest, from the date of default until the payment date or cause the buyer to loose the rights of purchase without any type of judicial or extrajudicial claim. 8. Performance Events prior to the Closing Date The following events shall have been performed as at the Closing Date: (a) The holding of (i) a Unanimous Shareholders' Meeting of the Company which shall have accepted the resignation submitted by the Company's Board of Directors and examined their performance and the distribution of profits, within the limits allowed by the law, to compensate Withdrawals on Account against non-allocated results. The Directors shall have renounced their fees and any other remuneration. At the same unanimous shareholders' meeting, the new Board of Directors proposed by the Buyer shall have been appointed, in accordance with Schedule 8.(a)(i) attached hereto; (ii) a Unanimous Shareholders' Meeting in which the Company's bylaws shall have been amended pursuant to Schedule 8(a)(ii) and (iii) a Board Meeting in which a power of attorney shall have been granted in the terms of Schedule 8(a)(ii) attached hereto. (b) The delivery to the Buyer of the certificates corresponding to the Equity Interest and the registration in the Stock Registry Book of the transfer of the Equity Interest to the Buyer. (c) The delivery to the Buyer of copy of the communication signed by the Seller notifying the Company of the transfer of the Equity Interest and the Irrevocable Capital Payments, in accordance with Schedule 8(c) attached hereto. (d) The resignation of all holders of powers of attorney of the Company to their powers and mandates, in accordance with Schedule 8(d) attached hereto. (e) The delivery to the Buyer of the original Bylaws and Company books and ledgers and any other documentation required to record the taking of possession of the Company by the Buyer and the return of the books to headquarters, where all the documentation shall remain or to any other place where it is legally maintained. (f) The Seller shall have delivered to the Buyer letters signed by the Seller for the purpose of notifying the CNC of the transfer of the stock in accordance with Schedule 8(f) attached hereto. (g) The Company shall have sold or transferred the assets connected to the Teleport in the terms of the specimen agreement attached hereto as Schedule 8(g). Such assets will not be computed for the purpose of calculating the Company's Shareholders' Equity pursuant to clause 3.3 but shall not be transferred if this has an effect on the net worth and affects future administrative and joint resolution acts. 9. Performance Events After the Closing Date 9.1 The parties recognize that the Company shall have set up, prior to December 10, 1999, the sureties required by Resolution CNC 869/98, as amended. The Seller and the Buyer undertake to capitalize or provide personal sureties to the Company to the extent that it may be required for the Company to set up such sureties. If one of the parties shall fail to perform his obligation of capitalizing the Company or setting up personal sureties, then the other party shall have the right to collect from the non- performing party a penalty equivalent to two (2) times the total amount of the surety to be set up by the Company. 10. Jurisdiction Except for the provisions of Clause 3.3, any controversy arising between the parties in connection with this Agreement, its existence, validity, interpretation or performance, (the "Controversy"), will be submitted to the mediation procedure of the Rules of the Arbitration Court of the Buenos Aires Stock Exchange. Any Controversy which is not resolved under the previous procedure will be subject to legal arbitration in accordance with such Rules. The award shall not be subject to appeal. 11. Notices Any notices to the parties shall be served at the domiciles indicated below, which may be replaced by others, by serving effective notice to the other party. Notices will become effective within three (3) business days of their reception. For the Buyer: WORLD WIDE WIRELESS COMMUNICATIONS, INC. Attention: Douglas P. Haffer Domicile: 520 - 3rd Street, Suite 101, Oakland, California 94067, USA Fax: 1 (510) 839-7088; and ALLENDE & BREA Maipu 1300, piso 10 Ciudad de Buenos Aires Atencion: Maria Roja Villegas Arevalo For the Seller: Esmeralda 684 10(0) piso Ciudad de Buenos Aires Fax: Atencion: Walter Arneson 12. Prohibition to Compete The Seller shall not directly or indirectly through a company of which he is a part currently or in the future, as partner, shareholder, director or executive, take part in activities which compete with those carried out by the Company in the Republic of Argentina; with competing activities being understood as any type of Internet related services, for a period of 10 years counted as from the Closing Date. Likewise, the Seller may carry out activities not comprised among the competing activities and, in that case, will offer the possibility of participating in such development first to the Company and then to the Buyer, before offering it to any third party. In case the Company and/or the Buyer, as may be case, did fail to accept participating in such development, the Seller may present it to other persons or carry it out on his own. The Seller declares that undertaking this commitment of non competition is reasonable and justified since both the Seller and the Buyer have taken it into account at the time of fixing the Price. In case of non performance of this obligation, the Seller shall pay the Buyer a sum equivalent to two (2) times the annual billings of the business in competition with that of the Buyer. 13. Construction: Severability Each of the provisions in this Agreement shall be considered severable. If, for any reason, any of such provisions was declared null, this will not affect the validity of the others. 14. Sundry. 14.1 This Agreement reflects the totality of the agreements reached by the parties, renders void any oral or written pre-dated agreement and can only be modified in writing, with the signature of both parties. For the purposes of this Agreement, the Schedules hereto shall be considered part of the Agreement. 14.2 This agreement shall be ruled and construed in accordance with Argentine Law. 14.3 The words appearing capitalized herein shall have the meanings assigned to them in Clause 1 herein or any other Clauses in this Agreement where they appear written between brackets and quotation marks. 14.4 None of the parties shall publicly announce or disclose the execution of this transaction without the other's consent. In witness whereof, the parties have caused two copies of this agreement to be executed with the same contents and for the same purpose. WORLD WIDE WIRELESS JORGE OMAR COVELLO COMMUNICATIONS, INC. (there appear signatures) Name: Douglas Haffer Title: President EX-10.12 20 0020.txt AGREEMENT FOR PURCHASE OF ALL OUTSTANDING SHARES World Wide Wireless Communications, Inc. and Digital Way, S.A. AGREEMENT FOR PURCHASE OF ALL OUTSTANDING SHARES OF DIGITAL WAY, S. A. BY WORLD WIDE WIRELESS COMMUNICATIONS,INC. Page 1 of 12 - -------------------------------------------------------------------------------- Private and confidential - not to be reproduced without the joint approval of the parties involved This is an agreement ("Agreement") made by and between DIGITAL WAY, S.A, a Peruvian company represented herein by its President and Chief Executive Officer JOSE A. DeIZCUE (hereinafter referred to as "SELLERS"), and WORLD WIDE WIRELESS COMMUNICATIONS, INC (W3COM), a company duly organized under the laws of the State of Nevada, United States of America, and having its registered office at 520 Third Street, Suite 101, Oakland CA., herein represented by its manager DOUGLAS HAFFER, its President and Cief Executive Officer (hereinafter referred to as "BUYER") WITNESSETH that the parties hereto hereby as follows: 1. CONSIDERING 1.1. Whereas Sellers are the only holders of rights to the whole of the shares representing the capital of the private limited liability company operating under the corporate name DIGITAL WAY, S.A., a company incorporated under the laws of Peru, and having its registered office located at Sebastian Telleria 308, San Isidro, Lima, 27 Peru (hereinafter referred to as "DWSA"); 1.2. Whereas DWSA holds all necessary concessions and licenses to provide Local Carrier services in Lima/Callao, Peru by using their 16 MHz MMDS spectrum license at 2.3 - 2.5 GHz range and microwave licenses at 7.1-7.7 GHz, and that it has certain nation wide and international long-distance concessions and value added licenses as more fully described in Annex B 1.3. Whereas DWSA is attempting to secure additional MMDS spectrum for Lima/Callao and at least five additional cities throughout Peru to total 32MHz of spectrum therein; 1.4. Whereas SELLERS wish to assign and transfer the whole of the shares they hold in DWSA to the BUYER, with further rights and privileges under certain circumstances and with the terms and conditions stated in this instrument; 1.5. Whereas BUYER has rights to operating and frequency licenses for eight (8) cities in Argentina, is currently operating a start-up wireless Internet access system in the USA, holds licenses for MMDS frequencies in the USA and in Africa, and has applied for similar licenses in several countries in Europe; Page 2 of 12 - -------------------------------------------------------------------------------- Private and confidential - not to be reproduced without the joint approval of the parties involved 1.6. Whereas BUYER has interests in developing business in Peru specifically exploiting opportunities in Broadband Wireless Access services in the MMDS (2.5 GHz) bands, and wish to buy the referred shares of DWSA; 1.7. Whereas BUYER agrees, upon signature of this instrument, to assume principal responsibility for raising sufficient funds to deploy a Broadband Wireless Access business in Latin America as it will be defined in its Business Plan; 1.8. Whereas BUYER is interested in entering and agreement with the current management to assist in the operation of DWSA in Peru considering their management experience, structure and office allowing for quick implementation of business activities within Peru 1.9. Therefore BUYER and SELLERS agree to enter into this Agreement to develop Broadband Wireless Access operations. 2. SCOPE 2.1. This Agreement sets forth the terms and conditions applicable to the purchase by BUYER and the sale, transfer, convey and deliver by the SELLERS of the SELLERS' shares, rights, and title of DWSA, including but not limited to goodwill, authorizations, licenses, contracts, agreements books, records. 2.2. Any ANNEX may, by mutual agreement in writing between BUYER and SELLERS, be included or amended from time to time to incorporate any clause. 2.3. ANNEXES are only valid if signed and dated by BUYER and SELLERS or their legitimate trustees. 2.4. The SELLERS undertake to assign and transfer all of the shares of DWSA with all rights and privileges which they hold in DWSA, identified hereunder, to the BUYER under the terms and conditions contained herein. 2.5. Except as otherwise provided in this agreement BUYER shall assume all the rights and liabilities of DWSA. 2.6. The transfer of shares shall not have to be implemented in the event that the analysis of the documentation related to DWSA or to BUYER discloses a fact that prevents, renders difficult or encumbers with additional liens the firm and valuable transfer thereof. Page 3 of 12 - -------------------------------------------------------------------------------- Private and confidential - not to be reproduced without the joint approval of the parties involved 2.10. The Effective Date of the present agreement and the related agreements that parties may conclude shall take place at 3:00 P.M, at Oakland, California, on February 29, 2000 other place as shall be mutually agreed upon by parties. The date on which the execution shall occur is referred to in this agreement as Execution Date. Parties shall determine upon this date the specific conditions and terms of ANNEXES and related agreements or complements as such but not limited to covenants not to compete, dispute resolution procedure, cooperation on claims, change of name, among others. 2.11. Execution of this Agreement shall be performed in as many as 3 stages and under certain conditions as stated in ANNEX A. 2.12. Within 10 days of the Effective Date, the parties hereto shall execute the relevant instrument of amendment to DWSA articles of association. This date can be renewed with the agreement of both Parties. 2.13. Parties hereto undertake to execute all instruments necessary to carry out the assignment and transfer of shares and authorizations of DWSA providing for SELLERS right to manage, under the terms to be adopted by the Parties and the least tax impact possible to the companies and individuals involved. 3. SPECIFICATIONS 3.1. The full force and effect of this Agreement, including the transfer of shares, depend on the conditions stated below: (a) Approval by Peruvian authorities of modification of shareholders of DWSA. (b) Approval by Board and/or shareholders of BUYER and SELLER. 3.2. SELLERS hereby agrees to file with the any required Peruvian agency, the final documents of transfer of the shares, upon completion of all requirements outlined in clause 3.1 3.3. Upon completion of all requirements outlined in clause 3.1 and other relevant clauses of the Agreement, Parties shall execute all acts, agreements and documents and comply with all other requirements under the relevant legislations, approve the transfer of the shares. 3.4 As soon as the transfers of shares are executed Parties agree to communicate the fact to clients, users and third parties undertaking to fully comply with the terms and conditions of the agreements presently in force and pursuant the terms and conditions to be defined in the execution agreement. Page 4 of 12 - -------------------------------------------------------------------------------- Private and confidential - not to be reproduced without the joint approval of the parties involved 4 COVENANTED PRICE AND PAYMENT TERMS: 4.1. The total, certain and covenant price and payment terms of the assignment of shares is defined in ANNEX A. WWWC shall agree that, if on the first anniversary after the closing date of the definitive agreement, the share price of WLGS' common stock should be less than on said closing date, WLGS will issue additional shares to Sellers to assure that the value of those shares at the end of the year shall be equal to at least $900,000, $1,250,000, or $1,500,000 depending on whether DWSA had, by that time, fulfilled Phase I, II, or III. If at any time within Two (02) years of the signing of the definitive agreement, Phase I, II and III are fulfilled, DWSA will be entitled to full compensation by wwwc as detailed in Annex A 4.2. The total price shall take into consideration the transferring of all shares and the total business and is formed by a composition of investments, to develop the business, and the price of shares. 4.3. The price of shares of DWSA were based on an evaluation and consideration of: (a) Circuits and Network licenses held by DWSA (b) Knowledge of MMDS and broadband wireless access markets in Peru (c) Contacts with Peruvian businesses, regulators, legislative and financial entities and knowledge of Peruvian markets and contacts; (d) DWSA does not have debt or any significant liabilities. 4.4. The prices and payments shall be defined in ANNEX A . 5. CURRENCY 5.1. All payments to SELLERS shall be executed in US Dollars (USD). The payments must be available to the SELLERS on their account to be supplied on the respective due dates specified in this Agreement. 6. INDIRECT DAMAGES Page 5 of 12 - -------------------------------------------------------------------------------- Private and confidential - not to be reproduced without the joint approval of the parties involved 6.1. The Parties are not entitled to be reimbursed for any indirect or consequential loss or damages such as lost profits, loss of use or loss of data whether due to a breach against the other Party's obligations under this Agreement. 7. DEFAULT 7.1. Failure by any Party to comply with any material term or condition under this Agreement shall entitle the non-breaching party to give the defaulting Party written notice of such default. If the defaulting Party has not cured such default within 15 days after receipt of notice the non breaching Party shall be entitled, in addition to all other remedies, unless limited by this agreement to terminate this Agreement by giving notice to take effect immediately. 7.2. Provided that if SELLERS terminate this agreement by reason of any default by BUYER, SELLERS shall be entitled to a termination fee equal to the amount paid by BUYER to date of termination. 7.3. In event that the Effective Date of this Agreement is performed, subject to the terms hereof and stated in the related agreements shall become irrevocable and irreversible document, and shall bind upon the parties and their heirs and successors. 7.4. SELLERS shall guarantee the full ownership of the shares, the disposal of which is hereby said, rendering the present instrument always good, steady and valuable. 7.5. Likewise, SELLERS shall be responsible for eventual debts or liabilities undertaken by DWSA prior to the Effective Date hereof, even though any assessments, receipt or suits, convictions or other forms of establishment of obligations to pay shall occur after the Effective Date. 7.6. Any claims relating to the period of time previous to the execution hereof, even when expressed subsequently, shall be exclusively borne by and at the exclusive risk of SELLERS, which shall undertake the responsibilities resulting therefrom. 8. INDEPENDENT CONTRACTOR 8.1. SELLERS and BUYER hereby declare and agree that each is engaged in an independent business and that each shall perform its obligations throughout this Agreement with the other Party as an independent contractor, except for the purposes stated in clause 3.1 (a). Each has and hereby retains the right to exercise full control of and supervision over the performance of its own obligations hereunder. Each shall be responsible for its own acts. Page 6 of 12 - -------------------------------------------------------------------------------- Private and confidential - not to be reproduced without the joint approval of the parties involved 9. FORCE MAJEUR 9.1. Any failure by the Parties to carry out any of their obligations shall not be deemed a breach of this Agreement if such failure is caused by Force Majeur. For purposes of this Agreement Force Majeur shall include, inter alia, strikes, lockouts, boycotts, embargoes, governmental restrictions, wars, war-like actions, civil commotion, riots, uprising, revolutions, epidemics, fires, floods, storms, earthquakes, other natural occurrence or any other event beyond the control of such Party. The performance of the Parties' obligations shall be suspended for as long as Force Majeur continues to exist. It is understood that such Party shall take all reasonable steps to limit the effect of Force Majeur by resorting to alternative measures. If such Force Majeur continues in existence for more than six (6) months, either Party, at his option, shall have the right to terminate this Agreement. Such termination shall be without prejudice to the rights of either Party, which may have accrued up to the date of termination. 9.2. Notice in writing of Force Majeur shall be made within 15 days of its occurrence. If such notice is made later it shall have effect only concerning the preceding 15 days. A Party in default may not invoke Force Majeur, occurring subsequent to such default as an excuse therefore. 10. WARRANTIES 10.1. For the purposes of this Agreement and to the extent that it may adversely affect the transactions provided for hereunder, Parties separately represent and warrant that the following Representations and Warranties are true, accurate and in no way misleading: (a) DWSA is a company duly organized and registered before the applicable governmental authorities, validly existing without any infringement to the Peruvian laws; (b) Parties have full powers, authority and legal right to enter into this Agreement, to comply with all of their obligations hereunder and to consummate the relevant transactions, except by the provided in clause 3.1.b; (c) No lien, charge, debt or encumbrance, of any nature whatsoever, falls on any of the assets or rights of DWSA and W3COM and which is an object hereof; (d) There are no material legal or administrative proceedings, of any nature whatsoever, pending against DWSA or W3COM or its shares; (e) DWSA authorizations are in good legal and administrative condition, and the rights resulting therefrom may be fully performed by the holder; (f) DWSA authorizations are free and unencumbered of any liens or encumbrances of any nature whatsoever, and may be transferred, assigned, sold or otherwise Page 7 of 12 - -------------------------------------------------------------------------------- Private and confidential - not to be reproduced without the joint approval of the parties involved disposed of, in favor of third parties, subject to the limitations of the relevant legislation and as stated hereunder. 11. MISCELLANEOUS Non-waiver 11.1. The failure of any party to insist upon strict adherence to any term or condition of this Agreement on any occasion shall not be considered a waiver of any right thereafter to insist upon strict adherence to that term or condition or any other term or condition of this Agreement. Language 11.2. All documentation to be provided by SELLERS or BUYER under this Agreement as well as all notices and other communications between the parties hereunder shall be in the English language, except as required by the Peruvian government. Assignment and Succession 11.3. This document shall be binding upon and inure to the benefit of the legal successors and assigns of all the Parties hereto or the company that SELLERS intend to incorporate. 11.4. The Parties may not, however, without the prior written agreement of the other party, whose consent shall not be unreasonably withheld in the case of a proposed assignment by a Party to its Affiliate(s), assign this Agreement, in whole or part, by contract operation of law or otherwise, or any of its rights or obligations hereunder to any third party. . Confidentiality 11.5. BUYER and SELLERS acknowledge and agree that, from time to time, each may disclose to the other certain confidential or proprietary business information in the course of performing the transactions contemplated by this Agreement including inter alia all technical and managerial information, know-how and expertise, which under normal international trade practice are considered as trade secrets (hereinafter referred to as the "Confidential Information"). Each Party agrees to treat Confidential Information of the other Party in the same manner as it treats its own proprietary information. Neither Party shall use, disclose, make or have made any copies of the other Party's Page 8 of 12 - -------------------------------------------------------------------------------- Private and confidential - not to be reproduced without the joint approval of the parties involved Confidential Information, in whole or in part, except as expressly provided herein. The Parties acknowledge and agree that all business plans are considered Confidential Information. Notwithstanding the foregoing, neither Party shall have any obligations regarding non-use or non-disclosure of any Confidential Information which (i) is already known to the receiving Party at the time of disclosure; (ii) is or becomes part of the public domain without violation of the terms hereof; (iii) is shown by conclusive documentary evidence to have been developed independently by the receiving Party without violation of the terms hereof; (iv) is disclosed by the disclosing Party to a third party without similar restrictions on the third Party's rights or; (v) is received from a third Party without similar restrictions and without violation of this or a similar agreement. Specific Termination 11.6. This agreement may be terminated by any of the Parties hereto in the event of any infringement of any provision hereunder or any obligation undertaken hereunder in the same terms provided in clause 11.11. 11.7. This agreement may also be terminated by any of the Parties hereto, without previous notice in case of bankruptcy, liquidation or receivership of the other party. General Termination 11.8. Should either of the following events occur with regard to either of the Parties, the other Party may terminate this Agreement by written notice, which shall state the cause of termination and which shall be effective on the date specified in the notice: (a) Failure of any Party to observe any of the material terms of this Agreement, which failure continues for a period of thirty (30) days after written notice from the other Parties, or (b) Insolvency, bankruptcy, assignment for creditors or any other winding up, termination of the affairs or sale of assets of any Party, or 11.9. SELLERS may terminate this Agreement, in whole or in part, or any license granted hereunder, if BUYER violates or fails to perform any of its material obligations hereunder and such failure cannot be remedied or is not remedied within 10 days after written notice thereof has been sent to Buyer. 11.10. In the event of any termination Parties shall within thirty (30) days of termination return to other all copies of the all Documentation to the other. Page 9 of 12 - -------------------------------------------------------------------------------- Private and confidential - not to be reproduced without the joint approval of the parties involved Severability 11.16. Should any of the provisions of this Agreement, or portions thereof, be found to be invalid by any court of competent jurisdiction, the remainder of this Agreement shall nonetheless remain in full force and effect. 12. ORDER OF PRIORITY AND MODIFICATION THE AGREEMENT 12.1. This Agreement sets forth the entire agreement and understanding between the parties regarding the subject matter hereof. None of the parties shall be bound by any term, condition or provision other than has expressly been stipulated in this Agreement. This Agreement supersedes all previous oral or written agreements and/or arrangements made between the parties concerning the subject matter hereof. 11.2. In the event of any discrepancy between any data, stipulation or provision given in any of the Items of this Agreement, on the one hand, and data, stipulation or provision given in any of the ANNEXES, on the other hand, the data stipulation or provision contained in a Item of this Agreement text shall prevail. In the event of any discrepancy between Business Plan on the one hand and this Agreement on the other, this Agreement shall prevail. 12.3. The above order or priority shall apply only to the extent that the circumstances would not give obvious reason for another assessment. 13. APPLICABLE LAW 13.1. This Agreement shall be governed, construed and enforced in accordance with the laws of the United States of America and Peru. 14. SETTLEMENT OF DISPUTES 14.1. For any disputes arising out of this Agreement, the parties consent to the personal and exclusive jurisdiction of and venue in the state and federal courts located within California 15. ANNEXES 15.1. The following Annexes, attached hereto, are an integral part of this Agreement and are incorporated herein by reference: ANNEX A Prices and Payments - Terms and Conditions ANNEX B Licenses Page 10 of 12 - -------------------------------------------------------------------------------- Private and confidential - not to be reproduced without the joint approval of the parties involved 16. NOTICES 16.1. Any and all notices or information other than information or proposals of pure technical nature shall be given by any Party by prepaid mail or by telefax or courier to the other Party at the following address: If to Buyer: If to Sellers: - ------------ -------------- Douglas Haffer Jose A. de Izcue 520 Third Street, Suite 101 Sebastian Telleria 308 Oakland, CA, USA 94607 San Isidro, Lima 27 Peru Phone: 1-510-839-6100 Phone: 511 441 7994 Fax: 1-510-839-7088 16.2. The aforementioned address of the Parties may be changed at any time by giving fifteen (15) days prior notice to the other Parties in accordance with the foregoing. Either Party may also by giving fifteen (15) days prior notice to the other Parties give further specifications as to which address notice, information or proposals of various nature shall be forwarded. In witness whereof, the Parties hereto, have executed this Agreement in two (2) identical originals by their duly authorized officers as of the Effective Date. Each Party has received one original bearing the following legally binding signatures of Buyer and Seller. February 29, 2000 SELLERS BUYER By: ____________________________________ By: ______________________________ Name: ___________________________________ Name: _____________________________ Title: __________________________________ Title: ____________________________ Date: ___________________________________ Date: _____________________________ Page 11 of 12 - -------------------------------------------------------------------------------- Private and confidential - not to be reproduced without the joint approval of the parties involved ANNEX A - -------------------------------------------------------------------------------- PHASE 1 $400,000 $900,000 in shares - -------------------------------------------------------------------------------- PHASE 2 $150,000 $350,000 in Shares - -------------------------------------------------------------------------------- PHASE 3 $250,000 in shares - -------------------------------------------------------------------------------- Phase 1: DWSA transfers all outstanding shares to WWWC. DWSA warrants that it is the lawful owner of 16 MHz spectrum license, channels 12, 12', 13 and 13' of 2.3 to 2.5 GHz. range for the cities of Lima and Callao within the Nation of Peru. In consideration for the transfer of these shares, WWWC will, immediately concurrently upon transfer of the shares, pay to DWSA $400,000 in Cash and $900,000 of WWWC restricted stock with the value of the stock based upon the price of the shares at the previous days closing price. Phase 2: DWSA will assist WWWC in the acquisition of an additional 16MHz of licensed spectrum from the government of Peru for the cities of Lima and Callao. In consideration for this assistance, WWWC will, immediately within fifteen after upon the award of the license(s), pay to DWSA $150,000 in cash and $350,000 of WWWC restricted stock with the value of the stock based upon the price of the shares at the previous days close of trading. Any additional costs incurred in acquiring the above will be responsibility of WWWC. Phase 3: DWSA will assist WWWC in the acquisition of an additional 32MHz of licensed spectrum from the government of Peru for each of 5 cities in Peru other than Lima and Callao. In consideration for this assistance, WWWC will, immediately upon within fifteen after the award of the license(s), pay to DWSA $250,000 of WWWC restricted stock with the value of the stock based upon the price of the shares at the previous days close of trading. Any additional costs incurred in acquiring the above will be responsibility of WWWC. Page 12 of 12 - -------------------------------------------------------------------------------- Private and confidential - not to be reproduced without the joint approval of the parties involved EX-10.13 21 0021.txt LETTER OF INTENT Letter of Intent March 11, 2000 Jorge Emilio Zedan President of El Salvador Telecom, S.A. de C.V. SALTEL San Salvador, El Salvador Dear Don Jorge: In relation to our conversations relating to the possibility of acquiring shares in SALTEL, this letter serves to confirm to you our intention of effectuating the acquisition of shares in that company pursuant to the following general terms: I. RECITALS 1.1. World Wide Wireless Communications, Inc., hereinafter "World Wide" is a corporation organized under the laws of the State of Nevada, United States of America, among whose activities is to provide high speed wireless internet services 1.2. World Wide intends to invest in the Central American region, beginning with El Salvador, where it plans to establish its Regional Operations Center. 1.3. SALTEL is a company organized under the laws of El Salvador, among whose activities is the offering of telephone services, access services, and intermediate services, with its current technical, operative, and administrative infrastructure. This company, and its legal representative don Jorge Emilio Zedan have the ability to request and obtain frequencies throughout the Central American region, as permitted and limited by the laws of the individual countries. As part of the relationship to be established, Mr. Zedan assumes personal responsibility to take those steps necessary in this regard within the shortest possible time. 1.4. That for the interests of both companies, it is beneficial to establish a strategic alliance or joint venture, whose activities will include the integration of World Wide into the share structure of SALTEL in the legal manner most convenient/ II. Nature of the Investment 2.1 World Wide declares its intent to acquire at least twenty five per cent of the capital stock of SALTEL, upon the basis that by acquiring said 1 percentage it assumes the rights of a minority shareholder as established under the Commercial Code of El Salvador. 2.2 World Wide will pay, for this twenty-five percent of, the amount of THREE MILLION FIVE HUNDRED THOUSAND DOLLARS, money of the United States of America, in the following form: (a) within five days from Monday, March 13, the amount of ONE MILLION DOLLARS; and (b) the rest of the TWO MILLION FIVE HUNDRED THOUDAND DOLLARS by monthly payments in equal and successive amounts of ONE HUNDRED THOUSAND DOLLARES, payable on the first day of the month; in addition, interest on the unpaid balance in the amount of 8%, which shall be included and incorporated in the payments. ___ 2.3 The shares that are issued as the result of this increase in capital will be issued immediately in the name of World Wide. 2.4 The payments will be made in accordance with instructions ot be given to World Wide by SALTEL. III. Special Conditions
3.1 World Wide declares that its intention to purchase is subject to (i) that SALTEL establishes the existence of its licenses to operate as an operator of telephone services; (ii) that SALTEL demonstrates that it has a concession for the exploitation of public telephone service and concessions for the exploitation of radioelectric spectrum, including the use of the following frequencies: Network Colonia Roma-Cerro San Jacinto Tx 2431.25MHz - Rx 2329.75 MHz Network Cerro San Jacinto-Costa del Sol Tx 2438.25MHz - Rx 2336.75 MHz Network Colonia Roma-Boqueron Tx 2438.28MHz - Rx 2336.75 MHz Network Boqueron-Aeropuerto El Salvador Tx 2431.25MHz - Rx 2329.75 MHz
SALTEL will convert, as permitted by competent authorities, if it is required, the previous point to point licenses to point to multipoint with a minimum bandwidth of 24MHz. IV. Closing Date. Due Diligence 4.1 The purchase of the shares shall take place no later than five working days from the date of this letter. 4.2 Notwithstanding the previous section, World Wide, by means of an independent law firm, will proceed to commence due diligence of SALTEL which shoull be completed within the provisions of paragraph 4.1 V. Legal Form of Acquisition of Shares 5.1 Taking into consideration that the purpose of these negotiations, in addition to consolidating a strategic alliance between the parties, is to strengthen the financial position of the company, it is agreed that upon the 2 introduction of World Wide as a shareholder and the increase in capital afforded thereby, the current shareholders will renounce any preferred rights they may have to subscription of shares; and for said purposem there will be held an extraordinary meeting of shareholders. VI. Special Domicile. Acceptance of the Letter 6.1 For the legal purposes of this Letter, both parties acknowledge domicile in the city of San Salvador 6.2 As a sign of the acceptance, a copy of the letter should be signed by Jorge Zedan which shall be held by World Wide. VII. Other Conditions 7.1 It is expressly understood by the parties, that if a settlement of the pending litigation between SALTEL and CTE is reached, World Wide will receive the benefits of not paying any of the interest payments otherwise agreed to herein; and if any amounts had previously been paid, it will be deducted from future payments. 7.2 Similarly, it is understood that upon the sale of substantial all of SALTEL to any third parties the point to point licenses detailed previously will be transferred automatically to World Wide or its designee. 7.3 Both parties declare their intent to broaden their operations throughout the rest of the countries of Central America, in accordance with subsequent agreements as to percentages of equity participation in the form most equitable; it being understate that the licenses and frequencies will be in the name of a company designated by World Wide. SALTEL and/or its actual shareholders, will have the option of subscribing to the shares of the companies formed in the rest of Central America equal to at least 10% of the capital stock of those companies. In accordance with the foregoing, and with authorization to do so, this document was executed and issued in the city of San Salvador, Republic of El Salvador, as of the date first above written. 3 EX-10.14 22 0022.txt SECURITIES PURCHASE AGREEMENT ================================================================================ EXECUTION COPY SECURITIES PURCHASE AGREEMENT By and Among WORLD WIDE WIRELESS COMMUNICATIONS INC., ESQUIRE TRADING & FINANCE, INC., AMRO INTERNATIONAL, S.A., CELESTE TRUST REG., THE ENDEAVOR CAPITAL FUND, S.A., NESHER, LTD. THE KESHET FUND, L.P., AND KESHET, L.P. Dated as of April 14, 2000 ================================================================================ TABLE OF CONTENTS
Page ---- ARTICLE I PURCHASE AND SALE OF THE SECURITIES.............................................................1 1.1 Purchase and Sale........................................................................................1 1.2 The Closings.............................................................................................2 ARTICLE II REPRESENTATIONS AND WARRANTIES..................................................................4 2.1 Representations and Warranties of the Company............................................................4 2.2 Representations and Warranties of the Purchasers........................................................12 ARTICLE III OTHER AGREEMENTS OF THE PARTIES................................................................13 3.1 Transfer Restrictions...................................................................................13 3.2 Stop Transfer Orders; Suspension of Qualification.......................................................14 3.3 Furnishing of Information...............................................................................14 3.4 Form D; Blue Sky Laws...................................................................................15 3.5 Integration.............................................................................................15 3.6 Certain Agreements......................................................................................15 3.7 Listing and Reservation of Underlying Shares and Warrant Shares; Compliance with Law....................15 3.8 Notice of Breaches......................................................................................16 3.9 Conversion Obligations of the Company...................................................................16 3.10 Use of Proceeds.........................................................................................17 3.11 Indemnification.........................................................................................17 3.12 Subsequent Sales and Registrations......................................................................18 3.13 Proxy Statement.........................................................................................19 3.14 Filing of Certificate of Amendment and Certificate of Designation.......................................19 3.15 Filing of Form 8-K......................................................................................19 3.16 Incorporation of the Debentures and the Certificate of Designation By Reference.........................19 ARTICLE IV CONDITIONS.....................................................................................19 4.1 Conditions Precedent to Sale of the Initial Securities..................................................19 4.2 Conditions Precedent to the Obligation of the Purchasers to Purchase the Additional Securities..........21 ARTICLE V MISCELLANEOUS..................................................................................23 5.1 Fees and Expenses.......................................................................................23 5.2 Entire Agreement; Amendments............................................................................23 5.3 Notices.................................................................................................23 5.4 Amendments; Waivers.....................................................................................24 5.5 Headings................................................................................................24 5.6 Successors and Assigns..................................................................................24 5.7 No Third Party Beneficiaries............................................................................25 5.8 Governing Law...........................................................................................25 -i- 5.9 Survival................................................................................................25 5.10 Execution...............................................................................................25 5.11 Publicity...............................................................................................25 5.12 Consent to Jurisdiction; Attorneys' Fees................................................................25 5.13 Waiver of Jury Trial....................................................................................26 5.14 Severability............................................................................................26 5.15 Remedies................................................................................................27 5.16 Independent Nature of Purchasers' Obligations and Rights................................................27
-ii- Schedules and Exhibits Schedule 1 - Purchasers of Securities Schedule 2 - Purchasers of Securities at Subsequent Closings Schedule 2.1(a) - Organization and Qualification; Subsidiaries Schedule 2.1(c)(i) - Capitalization; Rights to Acquire Capital Stock Schedule 2.1(c)(ii) - Notice with Respect to Listing Schedule 2.1(f) - Consents and Approvals Schedule 2.1(g) - Litigation; Proceedings Schedule 2.1(q) - Intellectual Property Rights Schedule 2.1(s) - Registration Rights, Rights of Participation Schedule 2.1(t) - Title Exhibit A - Form of Debentures Exhibit B - Form of Warrants Exhibit C - Form of Certificate of Designation Exhibit D - Form of Registration Rights Agreement Exhibit E - Form of Transfer Agent Instructions Exhibit F - Legal Opinion of Evers & Hendrickson LLP Exhibit G - Form of Certificate of Amendment of Articles of Incorporation -iii- SECURITIES PURCHASE AGREEMENT SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of April 14, 2000, by and among World Wide Wireless Communications Inc., a Nevada corporation (the "Company"), Esquire Trading & Finance, Inc. ("Esquire"), Amro International, S.A. ("Amro"), Celeste Trust Reg. ("Celeste"), The Endeavor Capital Fund, S.A. ("Endeavor"), Nesher, Ltd. ("Nesher"), The Keshet Fund, L.P. ("Keshet Fund") and Keshet, L.P. ("Keshet"). Esquire, Amro, Celeste, Endeavor, Keshet Fund and Keshet are each referred to herein as a "Purchaser" and are collectively referred to herein as the "Purchasers." WHEREAS, subject to the terms and conditions set forth in this Agreement, the Company desires to issue and sell to the Purchasers, and the Purchasers desire to acquire from the Company, $4,592,000 aggregate principal amount of 4% Convertible Debentures due 2005 of the Company (the "Debentures"), which Debentures are exchangeable for a like stated value of Series A Convertible Preferred Stock, par value $0.01 per share and stated value of $1,000 per share, upon Shareholder Approval (as defined herein) (the "Preferred Stock" and, together with the Debentures, the "Convertible Securities"), shares of the Company's common stock, par value $.001 per share (the "Common Stock"), and warrants (the "Warrants") to purchase shares of the Common Stock. NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, the Company and each Purchaser agree as follows: ARTICLE I PURCHASE AND SALE OF THE SECURITIES 1.1 Purchase and Sale. (a) Subject to the terms and conditions set forth, the Company shall issue and sell to the Purchasers, and the Purchasers, severally and not jointly, shall purchase from the Company (i) an aggregate principal amount of $4,592,000 of Debentures, (ii) 1,064,000 shares of Common Stock (the "Shares") and (iii) Warrants to purchase up to 5,040,000 shares of Common Stock. (b) The Debentures shall be substantially in the form annexed hereto as Exhibit A and the Warrants shall be in the form annexed hereto as Exhibit B. The Preferred Stock shall have the respective rights, preferences and privileges set forth in the Company's Certificate of Designation, Preferences and Rights of the Series A Preferred Stock (the "Certificate of Designation") the form of which is annexed hereto as Exhibit C, which Certificate of Designation, upon Shareholder Approval, shall be promptly filed by the Company with the Secretary of State of the State of Nevada (the "Nevada Secretary of State"). 1.2 The Closings. (a) The Initial Closing. (i) The closing of the purchase and sale of the Initial Securities (as defined below) (the "Initial Closing") shall take place at the offices of Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York 10038-4982, immediately following the execution hereof or such later date or different location as the parties shall agree in writing, but not prior to the date that the conditions set forth in Section 4.1 have been satisfied or waived by the appropriate party. The date of the Initial Closing is hereinafter referred to as the "Initial Closing Date." At the Initial Closing, the Company shall sell and issue to the Purchasers, and the Purchasers shall, severally and not jointly, purchase from the Company, (A) an aggregate principal amount of $3,280,000 of Debentures (the "Initial Debentures"), (B) 760,000 shares of Common Stock (the "Initial Shares") and (C) Warrants to purchase up to 3,600,000 shares of Common Stock (the "Initial Warrants" and together with the Initial Debentures and Initial Shares, the "Initial Securities") for an aggregate purchase price of $4,800,000 (the "Initial Purchase Price"). (ii) At the Initial Closing (a) the Company shall deliver to each Purchaser (1) Initial Debentures (in definitive form) in the denominations specified on Schedule 1 attached hereto, each registered in the name of such Purchaser, (2) one or more certificates representing the Initial Shares purchased by such Purchaser as set forth next to such Purchaser's name on Schedule 1 attached hereto, each registered in the name of such Purchaser (3) a warrant agreement representing the Initial Warrants purchased by such Purchaser as set forth next to such Purchaser's name on Schedule 1 attached hereto, registered in the name of such Purchaser, and (4) all other documents, instruments and writings required to have been delivered at or prior to the Initial Closing by the Company pursuant to this Agreement and the Registration Rights Agreement dated the date hereof by and among the Company and the Purchasers, in the form of Exhibit D annexed hereto (the "Registration Rights Agreement"), and (b) each Purchaser shall deliver to the Company the portion of the Initial Purchase Price set forth next to its name on Schedule 1, in United States dollars in immediately available funds by wire transfer to an account designated in writing by the Company for such purpose on or prior to the Initial Closing Date, and all documents, instruments and writings required to have been delivered at or prior to the Initial Closing by such Purchaser pursuant to this Agreement and the Registration Rights Agreement. (b) Subsequent Closings. (i) Subsequent Closings. The date and time of the Subsequent Closings (as defined below) (the "Subsequent Closing Dates") shall be 10:00 a.m., Eastern time, on the date specified in the Additional Share Notice (as defined below) or the Company Call Notice (as defined below), as the case may be -2- (or such later date as is mutually agreed to by the Company and the applicable Purchaser or Purchasers). At any time after the Initial Closing Date, at such Purchaser's option (each, a "Purchaser Call Option"), by delivering written notice to the Company (an "Additional Securities Notice") at least five (5) Business Days (the "Additional Securities Notice Date") prior to the Subsequent Closing Date set forth in the Additional Securities Notice, the Purchasers may, severally and not jointly, purchase from the Company, and the Company shall sell and issue at multiple closings, if applicable, to the Purchasers, such Purchaser's portion (based on the amounts set forth next to such Purchaser's name on Schedule 2 attached hereto) of (A) an additional $1,312,000 aggregate principal amount of Debentures or, if the Shareholder Approval shall have been obtained, 1,312 shares of Preferred Stock (the "Additional Convertible Securities"), (B) 304,000 shares of Common Stock (the "Additional Shares") and (C) Warrants to purchase an additional 1,440,000 shares of Common Stock (the "Additional Warrants" and together with the Additional Convertible Securities and the Additional Shares, the "Additional Securities") for an aggregate purchase price of $1,920,000. Each Purchaser shall only be entitled to deliver one Additional Securities Notice. The Additional Securities Notice shall set forth (i) such Purchaser's portion of the Additional Securities as set forth on Schedule 2 attached hereto, (ii) such Purchaser's portion of the Additional Purchase Price (as defined below) as set forth on Schedule 2 attached hereto and (iii) the date for the Subsequent Closing Date. The closings of the purchase and sale of the Additional Securities are hereinafter referred to each as the "Subsequent Closing," and the purchase price paid for the Additional Securities is hereinafter referred to as the "Additional Purchase Price." The Initial Closing and the Subsequent Closing are each referred to herein as a "Closing." If any Purchaser has not exercised its Purchaser Call Option on the third day after the date on which the Registration Statement (as defined in the Registration Rights Agreement) is declared effective by the Securities and Exchange Commission (the "Commission") (or if such third day is not a business day, the next succeeding business day), the Company shall have the option, by delivering written notice to such Purchaser (a "Company Call Notice") at least five (5) Business Days (the "Company Call Notice Date") prior to the Subsequent Closing Date set forth in the Company Call Notice, to sell and issue to such Purchaser, and such Purchaser shall, severally and not jointly, purchase from the Company such Purchaser's portion (based on the amounts set forth next to such Purchaser's name on Schedule 2 attached hereto) of the Additional Securities. The Company Call Notice shall set forth (i) such Purchaser's portion of the Additional Securities as set forth on Schedule 2 attached hereto, (ii) such Purchaser's portion of the Additional Purchase Price as set forth on Schedule 2 attached hereto and (iii) the date for the Subsequent Closing Date. (ii) At the Subsequent Closing, (a) the Company shall deliver to each Purchaser (1) Additional Convertible Securities in the denominations specified on Schedule 2 attached hereto, each registered in the name of such Purchaser, (2) one or more certificates representing the Additional Shares purchased by such Purchaser as set forth next to such Purchaser's name on Schedule 2 attached hereto, each registered in the -3- name of such Purchaser, (3) a warrant agreement representing the Additional Warrants purchased by such Purchaser as set forth next to such Purchaser's name on Schedule 2 attached hereto, registered in the name of such Purchaser, and (4) all other documents, instruments and writings required to have been delivered at or prior to the Subsequent Closing by the Company pursuant to this Agreement and the Registration Rights Agreement, and (b) each Purchaser shall deliver to the Company the portion of the Additional Purchaser Price set forth next to its name on Schedule 2 attached hereto, in United States dollars in immediately available funds by wire transfer to an account designated in writing by the Company for such purpose on or prior to the Subsequent Closing Date, and all documents, instruments and writings required to have been delivered at or prior to the Subsequent Closing by such Purchaser pursuant to this Agreement and the Registration Rights Agreement. The Subsequent Closing shall take place in the same manner as the Initial Closing; provided, however, that in no case shall the Subsequent Closing take place unless and until the conditions listed in Section 4.2 have been satisfied or waived by the appropriate party. ARTICLE II REPRESENTATIONS AND WARRANTIES 2.1 Representations and Warranties of the Company. The Company hereby represents and warrants to the Purchasers as follows: (a) Organization and Qualification; Subsidiaries. The Company is a corporation, duly organized, validly existing and in good standing under the laws of the State of Nevada, with the requisite corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. The Company has no subsidiaries other than as set forth in Schedule 2.1(a) (collectively, the "Subsidiaries"). Other than the Subsidiaries, the Company does not own any equity securities of any other Person. A "Person" means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. Each of the Subsidiaries is a corporation, duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the full corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. Each of the Company and the Subsidiaries is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not, individually or in the aggregate, (x) adversely affect the legality, validity or enforceability of the Debentures or any of the other Transaction Documents (as defined below), (y) have or result in a material adverse effect on the results of operations, assets, prospects or financial condition of the Company and the Subsidiaries, taken as a whole or (z) adversely impair the Company's ability to perform fully on a timely basis its -4- obligations under any Transaction Document, including, without limitation, the Company's obligations under Section 3.7 hereof (any of (x), (y) or (z), being a "Material Adverse Effect"). (b) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement, the other Transaction Documents and, subject to Shareholder Approval, the Certificate of Amendment to the Articles of Incorporation (the "Certificate of Amendment") and Certificate of Designation, and otherwise to carry out its obligations hereunder and thereunder. This Agreement, the Registration Rights Agreement, the Debentures and the Warrants are collectively referred to as the "Transaction Documents." The execution and delivery of each of the Transaction Documents, the Certificate of Amendment and the Certificate of Designation by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and, except for the Shareholder Approval with respect to the Certificate of Amendment and Certificate of Designation, no further action is required by the Company. Each of the Transaction Documents has been or will be prior to the applicable Closing duly executed by the Company and each constitutes or will constitute the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application. Neither the Company nor any Subsidiary is in violation of any of the provisions of its respective certificate of incorporation, bylaws or other organizational documents. (c) Capitalization; Rights to Acquire Capital Stock. The authorized, issued and outstanding capital stock of the Company is set forth in Schedule 2.1(c). All issued and outstanding shares of capital stock of the Company and each Subsidiary have been duly authorized and validly issued and are fully paid and non-assessable. Except as disclosed in Schedule 2.1(c), (i) no shares of the Company's capital stock are subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company; (ii) there are no outstanding debt securities issued by the Company; (iii) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its Subsidiaries; (iv) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of their securities under the Securities Act of 1933, as amended (the "Securities Act")(except the Registration Rights Agreement); (v) there are no outstanding securities of the Company or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem a security of the -5- Company or any of its Subsidiaries; (vi) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Securities (as defined below) as described in this Agreement; and (vii) the Company does not have any stock appreciation rights or "phantom stock" plans or agreements or any similar plan or agreement. Except as set forth on Schedule 2.1(c), and, to the best knowledge of the Company, no Person or group of related Persons beneficially owns (as determined pursuant to Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) or has the right to acquire by agreement with or by obligation binding upon the Company beneficial ownership of in excess of 5% of the Common Stock. The Common Stock is quoted on the OTC Bulletin Board. Except as described on Schedule 2.1(c)(ii), the Company has received no notice, either oral or written, with respect to the continued eligibility of the Common Stock for such listing, and the Company has maintained all requirements for the continuation of such listing. After giving effect to the transactions contemplated in this Agreement, the Company believes that it is in compliance with all such maintenance requirements. (d) Issuance of Securities. The Shares have been duly authorized, and when issued and paid for in accordance with the terms hereof, shall be validly issued, fully paid and nonassessable, free and clear of all liens, encumbrances, security interests, charges and rights of first refusal of any kind (collectively, "Liens"). The Preferred Stock, when issued in exchange for the Debentures in accordance with the terms of the Debentures, shall be duly authorized, validly issued, fully paid and nonassessable, free and clear of all Liens. The Shares, the Preferred Stock and the Warrants, upon issuance, will not subject the holders thereof to personal liability by reason of being such holders. The shares of Common Stock issuable upon conversion of the Convertible Securities are referred to herein as the "Underlying Shares." When issued in accordance with the Debentures or the Certificate of Designation, as the case may be, the Underlying Shares will be duly authorized, validly issued, fully paid and nonassessable, free and clear of all Liens. The shares of Common Stock issuable upon exercise of the Warrants are referred to herein as the "Warrant Shares." When issued and paid for in accordance with the Warrants, the Warrant Shares will be duly authorized, validly issued, fully paid and nonassessable, free and clear of all Liens. The Debentures, the Shares, the Preferred Stock, the Warrants, the Underlying Shares and the Warrant Shares are referred to herein collectively as the "Securities." The Company has and, at each Closing Date, will have and at all times while the Convertible Securities and the Warrants are outstanding will maintain an adequate reserve of duly authorized shares of Common Stock at least equal to the sum of (A) 200% of the number of shares of Common Stock needed to provide for the issuance of the Underlying Shares (without regard to any limitations on conversions thereof) and (B) 100% of the number of shares of Common Stock needed to provide for the issuance of the Warrant Shares (without regard to any limitations on exercise thereof). (e) No Conflicts. The execution, delivery and performance of this Agreement, the other Transaction Documents, the Certificate of Amendment and the Certificate of Designation by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the reservation for issuance and issuance of the Underlying Shares and the Warrant Shares) do not and will not (i) conflict with or -6- violate any provision of its or any of its Subsidiaries' charter, bylaws or other organizational documents, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument (evidencing a debt of the Company or otherwise) to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or any Subsidiary is subject (including Federal and state securities laws and regulations), or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iv) result in the creation or imposition of a Lien upon any of the Securities or any of the properties or assets of the Company or any Subsidiary, or any of its "Affiliates" (as such term is defined under Rule 405 promulgated under the Securities Act), except in the case of each of clauses (ii) and (iii), such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have or result in a Material Adverse Effect. The business of the Company is not being conducted in violation of any law, ordinance or regulation of any governmental authority except for any such violation as would not, individually or in the aggregate, have or result in a Material Adverse Effect. (f) Consents and Approvals. Except as specifically set forth in Schedule 2.1(f), neither the Company nor any Subsidiary is required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, the Certificate of Amendment or Certificate of Designation, other than (i) the filing of the Registration Statement with the Commission, which shall be filed in accordance with and in the time periods set forth in the Registration Rights Agreement, (ii) the filing of the Certificate of Amendment and the Certificate of Designation with the Nevada Secretary of State promptly upon receipt of Shareholder Approval, (iii) the application(s) or any letter(s) acceptable to the National Association of Securities Dealers, Inc. (the "NASD") for the quotation of the Shares, the Underlying Shares and the Warrant Shares on the OTC Bulletin Board (and with any other national securities exchange or market on which the Common Stock is then listed) and (iv) any filings, notices or registrations under applicable federal and state securities laws with respect to the Shareholder Approval (together with the consents, waivers, authorizations, orders, notices and filings referred to in Schedule 2.1(f), the "Required Approvals"). (g) Litigation; Proceedings. Except as disclosed in Schedule 2.1(g), there is no action, suit, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company or any of the Subsidiaries or any of their respective assets or properties before or by any court, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents, the Certificate of Amendment, the Certificate of Designation or the Securities or (ii) could reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect. -7- (h) No Default or Violation. Neither the Company nor any Subsidiary (i) is in default under or in violation of any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound which would reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect, (ii) is in violation of any order of any court, arbitrator or governmental body applicable to it, or (iii) is in violation of any statute, rule or regulation of any governmental authority to which it is subject, which violation could reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect. (i) Schedules. The Schedules to this Agreement furnished by or on behalf of the Company do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein not misleading. (j) Form SB-2; Financial Statements; No Adverse Change. The Company has filed a Registration Statement on Form SB-2 (File No. 333-95341) with the Commission (as amended or supplemented from time to time, the "SB-2"). As of the date of filing of the SB-2 and each amendment thereto, the SB-2 complied in all material respects with the requirements of the Securities Act and the rules and regulations of the Commission promulgated thereunder, and did not when filed, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading. All material agreements to which the Company or any Subsidiary is a party or to which the property or assets of the Company and its Subsidiaries are subject have been filed as exhibits to the SB-2 as required; neither the Company nor any of its Subsidiaries is in breach of any agreement where such breach could reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect. The financial statements of the Company included in the SB-2 comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved, except as may be otherwise specified in such financial statements or the notes thereto, and fairly present, in all material respects, the consolidated financial position of the Company as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal year-end audit adjustments. Since the date of the financial statements included in the SB-2, there has been no event, occurrence or development that has had, or would reasonably be expected to have, a Material Adverse Effect that has not been specifically disclosed to the Purchasers by the Company. (k) Seniority. No class of equity securities of the Company is senior to the Preferred Stock in right of payment, whether upon liquidation, dissolution or otherwise. (l) Investment Company. The Company is not, and is not controlled by or under common control with an affiliate of, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. -8- (m) Certain Fees. Except as set forth in Section 5.1 hereof, no fees or commissions will be payable by the Company to any broker, financial advisor, finder, investment banker, or bank with respect to the transactions contemplated by this Agreement. The Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section 2.1(m) that may be due in connection with the transactions contemplated by this Agreement. The Company shall indemnify and hold harmless each of the Purchasers, its employees, officers, directors, agents, and partners, and their respective Affiliates, from and against all claims, losses, damages, costs (including the costs of preparation and attorney's fees) and expenses suffered in respect of any such claimed or existing fees arising from the action or inaction of the Company. (n) Solicitation Materials. The Company has not distributed any offering materials in connection with the offering and sale of the Securities. The Company confirms that it has not provided the Purchasers or their agents or counsel with any information that constitutes or might constitute material non-public information. The Company understands and confirms that the Purchasers shall be relying on the foregoing representations in effecting transactions in securities of the Company. (o) Employment Matters. The Company and each Subsidiary is in compliance in all material respects with all presently applicable provisions of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for which the Company or any Subsidiary would have any liability; neither the Company nor any Subsidiary has incurred and expects to incur liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended, including the regulations and published interpretations thereunder (the "Code"); and each "pension plan" for which the Company or any Subsidiary would have any liability that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification. (p) Exclusivity. The Company shall not issue and sell the Debentures, the Shares, the Preferred Stock or the Warrants to any Person other than the Purchasers pursuant to this Agreement other than with the prior written consent of each of the Purchasers. (q) Intellectual Property Rights. The Company and its Subsidiaries own or possess adequate rights or licenses to use all trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct their respective businesses as now conducted. Except as set forth on Schedule 2.1(q), none of the Company's trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, government authorizations, trade secrets or other intellectual property rights have expired or terminated, or are expected to -9- expire or terminate within two years from the date of this Agreement, except where such expiration or termination would not have, individually or in the aggregate, a Material Adverse Effect. The Company and its Subsidiaries do not have any knowledge of any infringement by the Company or its Subsidiaries of trademarks, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secrets or other similar rights of others, or of any such development of similar or identical trade secrets or technical information by others and, except as set forth on Schedule 2.1(q), no claim, action or proceeding has been made or brought against, or to the Company's knowledge, has been threatened against, the Company or its Subsidiaries regarding trademarks, trade name rights, patents, patent rights, inventions, copyrights, licenses, service names, service marks, service mark registrations, trade secrets or other infringement. Except as set forth on Schedule 2.1(q), the Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing. The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties except where the failure to do so would not have, individually or in the aggregate, a Material Adverse Effect. (r) Acknowledgment of Dilution. The Company understands and acknowledges that the number of Underlying Shares issuable upon conversion of the Convertible Securities will increase in certain circumstances. The Company further acknowledges that its obligation to issue (i) the Underlying Shares upon conversion of the Convertible Securities and (ii) the Warrant Shares upon exercise of the Warrants is, in each case, unconditional and absolute regardless of the effect of any such dilution. (s) Registration Rights; Rights of Participation. Except as described on Schedule 2.1(s) hereto, (A) the Company has not granted or agreed to grant to any Person any rights (including "piggy-back" registration rights) to have any securities of the Company registered with the Commission or any other governmental authority which has not been satisfied and (B) no Person, including, but not limited to, current or former shareholders of the Company, underwriters, brokers or agents, has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by this Agreement, any other Transaction Document, the Certificate of Amendment or the Certificate of Designation. (t) Title. Except as disclosed in Schedule 2.1(t), the Company and the Subsidiaries have good and marketable title in fee simple to all real property and personal property owned by them which is material to the business of the Company or the Subsidiaries, in each case free and clear of all liens, except for liens, claims or encumbrances that do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company or the Subsidiaries. Neither the Company nor any of its Subsidiaries owns any real property. Any real property and facilities held under lease by the Company or the Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company or the Subsidiaries. -10- (u) Permits. The Company and the Subsidiaries possess all franchises, certificates, licenses, authorizations and permits or similar authority issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses as described in the SB-2 except where the failure to possess such permits would not, individually or in the aggregate, have a Material Adverse Effect ("Material Permits"), and neither the Company nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit. (v) Insurance. The Company and each Subsidiary maintains property and casualty, general liability, workers' compensation, environmental hazard, personal injury and other similar types of insurance with financially sound and reputable insurers that is adequate, consistent with industry standards. Neither the Company nor any Subsidiary has received notice from, and has any knowledge of any threat by, any insurer (that has issued any insurance policy to the Company or any Subsidiary) that such insurer intends to deny coverage under or cancel, discontinue or not renew any insurance policy presently in force. (w) Taxes. All applicable tax returns required to be filed by the Company and each of the Subsidiaries have been filed, or if not yet filed have been granted extensions of the filing dates which extensions have not expired, and all taxes, assessments, fees and other governmental charges upon the Company, the Subsidiaries, or upon any of their respective properties, income or franchises, shown in such returns and on assessments received by the Company or the Subsidiaries to be due and payable have been paid, or adequate reserves therefor have been set up if any of such taxes are being contested in good faith; or if any of such tax returns have not been filed or if any such taxes have not been paid or so reserved for, the failure to so file or to pay would not in the aggregate or individually have a Material Adverse Effect. (x) Internal Accounting Controls. The Company and each of its Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management's general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (y) Private Offering. The Company and all Persons acting on its behalf have not made, and will not make, offers or sales of the Debentures, the Shares, the Preferred Stock or the Warrants, and any securities that might be integrated with offers and sales of the Debentures, the Shares, the Preferred Stock and the Warrants, except to "accredited investors" (as defined in Regulation D ("Regulation D") under the Securities Act) without any general solicitation or advertising and otherwise in compliance with the conditions of Regulation D. The offer and sale by the Company to the Purchasers of the Convertible Securities and the Warrants and the Underlying Shares and the Warrant Shares into which the Convertible Securities and the -11- Warrants are convertible or exercisable, as the case may be, is exempt from the registration requirements of the Securities Act. (z) No Integrated Offering. Neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy any securities under circumstances that would cause the offering of the Securities pursuant to this Agreement to be integrated with prior offerings by the Company for purposes of the Securities Act or any applicable shareholder approval provisions. (aa) Full Disclosure. The representations and warranties of the Company set forth in this Agreement do not contain any untrue statement of a material fact or omit any material fact necessary to make the statements contained herein true, in light of the circumstances under which they were made, not misleading. 2.2 Representations and Warranties of the Purchasers. Each of the Purchasers, severally and not jointly, hereby represents and warrants to the Company as follows: (a) Investment Intent. Such Purchaser is acquiring the Securities for its own account for investment purposes only and not with a view to or for distributing or reselling such Securities or any part thereof or interest therein, without prejudice, however, to such Purchaser's right, subject to the provisions of this Agreement and the Registration Rights Agreement, at all times to sell or otherwise dispose of all or any part of such Securities pursuant to an effective registration statement under the Securities Act and in compliance with applicable State securities laws or under an exemption from such registration. (b) Investor Status. At the time such Purchaser was offered the Securities, and at each Closing Date, (i) it was and will be, an "accredited investor" (as defined in Regulation D), or (ii) such Purchaser either alone or together with its representatives, had and will have such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and had and will have so evaluated the merits and risks of such investment. Such Purchaser has the authority and is duly and legally qualified to purchase and own the Securities. (c) Ability of Purchaser to Bear Risk of Investment. Such Purchaser is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment. (d) Reliance. Each Purchaser understands and acknowledges that (i) the Securities are being offered and sold to the Purchaser without registration under the Securities Act in a private placement that is exempt from the registration provisions of the Securities Act under Section 4(2) of the Securities Act or Regulation D promulgated thereunder and (ii) the availability of such exemption, depends in part on, and the Company will rely upon the accuracy -12- and truthfulness of, the foregoing representations and such Purchaser hereby consents to such reliance. The Company acknowledges and agrees that the Purchasers make no representations or warranties with respect to the transactions contemplated hereby or the other Transaction Documents other than those specifically set forth in this Section 2.2. ARTICLE III OTHER AGREEMENTS OF THE PARTIES 3.1 Transfer Restrictions. (a) If any Purchaser should decide to dispose of any Shares, any Convertible Securities (and upon conversion thereof, any of the Underlying Shares) or Warrants (and upon exercise thereof, any of the Warrant Shares) held by it, each Purchaser understands and agrees that it may do so only pursuant to an effective registration statement under the Securities Act, to the Company or pursuant to an available exemption from the registration requirements of the Securities Act. In connection with any transfer of any Securities other than pursuant to an effective registration statement or to the Company, the Company may require the transferor thereof to provide to the Company a written opinion of counsel, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred securities under the Securities Act which opinion shall be delivered by counsel for the Company or, at the Purchaser's option, another counsel designated by the Purchaser. Notwithstanding the foregoing, the Company hereby consents to and agrees to register (i) any transfer of Securities by one Purchaser to another Purchaser, and agrees that no documentation other than executed transfer documents shall be required for any such transfer, and (ii) any transfer by any Purchaser to an Affiliate of such Purchaser or to an Affiliate of another Purchaser, or any transfer among any such Affiliates, provided that transferee certifies in writing to the Company that it is an "accredited investor" (as defined in Regulation D). At any time after the first anniversary of the Initial Closing Date, if the Securities have not been registered under the Securities Act, the Company agrees, upon any Purchaser's request, to provide to such Purchaser a written opinion of counsel, the form and substance of which shall be reasonably satisfactory to such Purchaser, to the effect that the Purchaser may transfer its Securities pursuant to Rule 144 of the Securities Act. Any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights of a Purchaser under this Agreement and the Registration Rights Agreement. (b) Each Purchaser agrees to the imprinting, so long as is required by this Section 3.1(b), of the following legend on the Securities: THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON -13- AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. The Underlying Shares issuable upon conversion of the Convertible Securities and the Warrant Shares issuable upon exercise of the Warrants shall not contain the legend set forth above if such conversion or exercise occurs at any time while the Registration Statement is effective under the Securities Act and upon the sale of the Underlying Shares or the Warrant Shares by the Purchasers or in the event there is not an effective Registration Statement at such time, if in the written opinion of counsel to the Company (such opinion to be furnished at the sole expenses of the Company at the request of a Purchaser) such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission). The Company agrees that it will provide each Purchaser, upon request, with a certificate or certificates representing Underlying Shares and/or Warrant Shares, free from such legend at such time as such legend is no longer required hereunder. 3.2 Stop Transfer Orders; Suspension of Qualification. The Company may not make any notation on its records or give instructions to any transfer agent of the Company which enlarge the restrictions of transfer set forth in Section 3.1. The Company will advise the Purchasers, promptly after it receives notice of issuance by the Commission, any state securities commission or any other regulatory authority of any stop order or of any order preventing or suspending the use of any offering of any securities of the Company, or of the suspension of the qualification of the Common Stock for offering or sale in any jurisdiction, or the initiation of any proceeding for any such purpose. 3.3 Furnishing of Information. As long as any Purchaser owns Securities, the Company covenants to use its best efforts to cause the SB-2 to be declared effective under the Securities Act as promptly as possible. The Company shall furnish copies of all amendments to the SB-2 and copies of all correspondence relating thereto to the Purchasers and their counsel, which documents will be subject to the review of the Purchasers and their counsel. Thereafter, the Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to Section 13(a) or 15(d) of the Exchange Act and to promptly furnish the Purchasers with true and complete copies of all such filings. As long as any Purchaser owns Securities, if the Company is not required to file reports pursuant to Section 13(a) or 15(d) of the Exchange Act, it will prepare and furnish to the Purchasers and make publicly available in accordance with Rule 144(c) promulgated under the Securities Act annual and quarterly financial statements, together with a discussion and analysis of such financial statements in form and substance substantially similar to those that would otherwise be required to be included in reports required by Section 13(a) or 15(d) of the Exchange Act, as well as any other information required thereby, -14- in the time period that such filings would have been required to have been made under the Exchange Act. The Company further covenants that it will take such further action as any holder of Securities may reasonably request, all to the extent required from time to time to enable such Person to sell Underlying Shares and/or Warrant Shares without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 promulgated under the Securities Act, including the legal opinion referenced above in Section 3.1. Upon the request of any such Person, the Company shall deliver to such Person a written certification of a duly authorized officer as to whether it has complied with such requirements. -15- 3.4 Form D; Blue Sky Laws. The Company agrees to file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof to each Purchaser promptly after such filing. The Company shall, on or before the Initial Closing Date, take such action as the Company shall reasonably determine is necessary to qualify the Securities for, or obtain exemption for the Securities for, sale to the Purchasers at the Initial Closing pursuant to this Agreement under applicable securities or "Blue Sky" laws of the states of the United States, and shall provide evidence of any such action so taken to the Purchasers on or prior to the Initial Closing Date. The Company shall make all filings and reports relating to the offer and sale of the Securities required under applicable securities or "Blue Sky" laws of the states of the United States following the Initial Closing Date. 3.5 Integration. The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require the registration under the Securities Act of the sale of any or all of such securities to any Purchaser. 3.6 Certain Agreements. As long as any Purchaser owns Securities, the Company shall not and shall cause the Subsidiaries not to, without the consent of the holders of all of the Securities then outstanding, (i) amend its certificate of incorporation, bylaws or other organizational documents so as to adversely affect any rights of any Purchaser; (ii) declare, authorize, set aside or pay any dividend or other distribution with respect to the Common Stock except as permitted under the Transaction Documents and as would not adversely affect the rights of any Purchaser hereunder or under the other Transaction Documents; (iii) repay, repurchase or offer to repay, repurchase or otherwise acquire shares of its Common Stock in any manner; (iv) issue any series of preferred stock or other securities with rights senior (in respect of liquidations, dividends, preferences and similar rights) to those of the Preferred Stock or (v) enter into any agreement with respect to any of the foregoing. 3.7 Listing and Reservation of Underlying Shares and Warrant Shares; Compliance with Law (a) The Company shall notify the Commission and the NASD, in accordance with their requirements, of the transactions contemplated by this Agreement and the other Transaction Documents, and shall take all other necessary action and proceedings as may be required and permitted by applicable law, rule and regulation, for the legal and valid issuance of the Securities to the Purchasers and promptly provide copies thereof to the Purchasers. (b) The Company shall take all action necessary to at all times have authorized, and reserved for the purpose of issuance upon conversion of the Convertible Securities and upon exercise of the Warrants, no less than the sum of (A) 200% of the number of shares of -16- Common Stock needed to provide for the issuance of the Underlying Shares (without regard to any limitations on conversions thereof) and (B) 100% of the number of shares of Common Stock needed to provide for the issuance of the Warrant Shares (without regard to any limitations on exercise thereof). (c) Until at least two (2) years after the last of the Convertible Securities has been converted into Underlying Shares or the last of the Warrants has been exercised for the Warrant Shares, (i) the Company will cause its Common Stock to continue to be registered under Sections 12(b) or 12(g) of the Exchange Act, will comply in all respects with its reporting and filing obligations under such Exchange Act, will comply with all requirements related to any registration statement filed pursuant to this Agreement or the Registration Rights Agreement and will not take any action or file any document (whether or not permitted by the Securities Act or the Exchange Act or the rules and regulations thereunder) to terminate or suspend such registration or to terminate or suspend its reporting and filing obligations under the Securities Act and Exchange Act, except as permitted herein and (ii) the Company will take all action within its power to continue the listing or trading of its Common Stock on the OTC Bulletin Board and will comply in all respects with the Company's reporting, filing and other obligations under the bylaws or rules of the NASD. 3.8 Notice of Breaches. (a) Each of the Company and each Purchaser shall give prompt written notice to the other of any material breach of any representation, warranty or other agreement contained in this Agreement, any other Transaction Document, the Certificate of Amendment or the Certificate of Designation, as well as any events or occurrences arising after the date hereof and prior to any Closing Date, which would reasonably be likely to cause any representation or warranty or other agreement of such party, as the case may be, contained herein to be materially incorrect or breached as of such Closing Date. However, no disclosure by any party pursuant to this Section 3.8 shall be deemed to cure any breach of any representation, warranty or other agreement contained herein or in the Registration Rights Agreement. (b) Notwithstanding the generality of Section 3.8(a), the Company shall promptly notify each Purchaser of any notice or claim (written or oral) that it receives from any lender of the Company to the effect that the consummation of the transactions contemplated hereby or by any other Transaction Document violates or would violate any written agreement or understanding between such lender and the Company, and the Company shall promptly furnish by facsimile to each Purchaser a copy of any written statement in support of or relating to such claim or notice. (c) The default by any Purchaser of any of its obligations, representations or warranties under any Transaction Document shall not be imputed to, and shall have no effect upon, any other Purchaser or affect the Company's obligations under the Transaction Documents to any non-defaulting Purchaser with respect to any outstanding Shares, Convertible Securities, Warrants, Underlying Shares or Warrant Shares. -17- 3.9 Conversion Obligations of the Company. The Company covenants to convert the Convertible Securities and to deliver the Underlying Shares in accordance with the terms and conditions and within the time period set forth in the Debentures or the Certificate of Designation, as the case may be. 3.10 Use of Proceeds. The Company shall use all of the proceeds from the sale of the Securities for working capital and general corporate purposes and not for the satisfaction of any portion of Company borrowings outside the normal course of business, including, without limitation, any obligation or liability of any kind whatsoever owed to a shareholder, officer or director of the Company, or to redeem Company equity or equity-equivalent securities. Pending application of the proceeds of this placement in the manner permitted hereby, the Company will invest such proceeds in interest bearing accounts and/or short-term, investment grade interest bearing securities. 3.11 Indemnification. The Company also will indemnify and hold the Purchasers harmless against any and all losses, claims, damages or liabilities to any such Person (including, without limitation, in connection with any action, proceeding or investigation brought by or against any such Person, including by shareholders of the Company) in connection with or as a result of any matter referred to in Transaction Documents, the Certificate of Amendment or the Certificate of Designation, including, without limitation, for any misrepresentation by the Company, for breaches of representations and warranties contained in any of the Transaction Documents, the Certificate of Amendment or the Certificate of Designation, and for any breach, non-compliance or nonfulfillment by the Company of any covenant, agreement or undertaking to be complied with or performed by it contained in or pursuant to the Transaction Documents, the Certificate of Amendment or the Certificate of Designation, except to the extent that it is finally judicially determined that such losses, claims, damages or liabilities resulted solely from the gross negligence or bad faith of the Purchasers. If for any reason the foregoing indemnification is unavailable to such Purchaser or is insufficient to hold such Person harmless, then the Company shall contribute to the amount paid or payable by such Purchaser as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative economic interests of the Company and its shareholders on the one hand and the Purchasers on the other hand in the matters contemplated by the Transaction Documents, the Certificate of Amendment or the Certificate of Designation, as well as the relative fault of the Company and the Purchasers with respect to such loss, claim, damage or liability and any other relevant equitable considerations. The reimbursement, indemnity and contribution obligations of the Company under this paragraph shall be in addition to any liability which the Company may otherwise have, shall extend upon the same terms and conditions to any affiliate of the Purchasers and the partners, directors, agents, employees or controlling persons (if any), as the case may be, of the Purchasers and any such affiliate, and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Company, the Purchasers, any such affiliate and any such Person. The Company also agrees that neither the Purchasers nor any of such affiliates, partners, directors, agents, employees or controlling persons shall have any liability to the Company or any Person asserting claims on behalf of or in right of the Company in connection with or as a result of any matter referred to in this -18- Agreement, the other Transaction Documents, the Certificate of Amendment or the Certificate of Designation, except to the extent that it is finally judicially determined that any losses, claims, damages, liabilities or expenses incurred by the Company result solely from the gross negligence or bad faith of, or knowing breach of this Agreement, the other Transaction Documents, the Certificate of Amendment or the Certificate of Designation by, the Purchasers. Promptly after receipt by the Purchasers or any affiliate, partners, directors, agents, employees and controlling persons, as the case may be, of notice of any claim or other commencement of any action in respect of which indemnity may be sought, such party will notify the Company in writing of the receipt or commencement thereof and the Company shall have the right to assume the defense of such claim or action (including the employment of counsel reasonably satisfactory to the indemnified parties and the payment of fees and expenses of such counsel). The indemnified party shall cooperate with the Company and the Company's counsel in the defense of such claim or action. The Purchasers understand that the Company shall not in connection with any one such claim or action or separate but substantially similar related claims or actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys for all of the indemnified parties unless the defense of one indemnified party is unique or separate from that of another indemnified party or one or more legal defenses are available to an indemnified party but not to other indemnified parties subject to the same claim or action. In the event the Company does not promptly assume the defense of a claim or action, the indemnified parties shall have the right to employ counsel reasonably satisfactory to the Company, at the Company's expense, to defend such claim or action. The indemnified party shall not admit any liability with respect to the claim or action or settle, compromise, pay or discharge the same without the prior written consent of the Company so long as the Company is reasonably contesting or defending the same in good faith. The Company shall not compromise, settle or discharge any claim or action without the Purchasers' consent, as applicable, which consent will not be unreasonably withheld, unless there is no finding or admission of any violation of any law against the indemnified party and the sole relief is monetary damages paid in full by the Company. The provisions of this Section 3.11 shall survive any termination or completion of the Transaction Documents. 3.12 Subsequent Sales and Registrations. (a) Until such time as all of the Convertible Securities have been converted into Common Stock or have been redeemed pursuant to the Debentures or the Certificate of Designation, the Company shall not, directly or indirectly, without the prior written consent of the Purchasers, offer, sell, grant any option to purchase, or otherwise dispose of (or announce any offer, sale, grant of any option to purchase or other disposition) any of its or its Affiliates' equity or equity-equivalent securities or any instrument that permits the holder thereof to acquire Common Stock, except (i) the granting of options or warrants to employees, officers and directors, and the issuance of shares upon exercise of options granted, under any stock option plan heretofore or hereinafter duly adopted by the Company, (ii) shares issued upon exercise of any currently outstanding warrants disclosed in Schedule 2.1(c)(i), and (iii) shares of Common Stock issued upon conversion of the Convertible Securities or upon exercise of the Warrants. -19- (b) Other than Underlying Shares, Warrant Shares and other "Registrable Securities" (as defined in the Registration Rights Agreement) to be registered in accordance with the Registration Rights Agreement, the Company shall not, for a period of not less than 90 Trading Days (as defined in the Debentures) after the dates that any registration statement relating to the Securities is declared effective by the Commission, without the prior written consent of the Purchasers, (i) register for resale any securities of the Company, except as set forth on Schedule 2.1(s), or (ii) issue or sell any of its or any of its Affiliates' equity or equity-equivalent securities except for (A) securities issued upon the exercise or conversion of the securities set forth on Schedule 2.1(c)(i) or (B) securities sold pursuant to the Company's employee benefit plans. Any days that any Purchaser is unable to sell Underlying Shares or Warrant Shares under the Registration Statement shall be added to such 90 Trading Day period for the purposes of (i) and (ii) above. 3.13 Proxy Statement. The Company shall provide each shareholder entitled to vote at the next meeting of shareholders of the Company, which meeting shall occur on or before July 15, 2000, a proxy statement, which has been previously reviewed by the Purchasers and counsel of their choice, soliciting each such shareholder's affirmative vote at such shareholder meeting for approval of the Company's issuance of all of the Securities as described in this Agreement and the authorization and adoption by the shareholders of the Certificate of Amendment and the Certificate of Designation, including the Preferred Stock described therein (such affirmative vote being referred to as the "Shareholder Approval"), and the Company shall use its best efforts to (i) solicit the Shareholder Approval, including hiring a proxy solicitation firm, and (ii) cause the Board of Directors of the Company to recommend to the shareholders that they approve such proposals. 3.14 Filing of Certificate of Amendment and Certificate of Designation. Not later than the third Business Day following receipt of Shareholder Approval, the Company shall file the Certificate of Amendment and the Certificate of Designation with the Nevada Secretary of State and shall consummate the Company Exchange (as defined in the Debentures) in accordance with the terms of the Debentures. 3.15 Filing of Form 8-K. On or before the first Business Day following each Closing Date, the Company shall file a Form 8-K with the Commission describing the terms of the transactions contemplated by the Transaction Documents and consummated at the applicable Closing, in the form required by the Exchange Act. 3.16 Incorporation of the Debentures and the Certificate of Designation By Reference. The Debentures and, upon the filing thereof with the Nevada Secretary of State, the Certificate of Designation, are hereby incorporated herein by reference and made a part hereof. -20- ARTICLE IV CONDITIONS 4.1 Conditions Precedent to Sale of the Initial Securities (a) Conditions Precedent to the Obligation of the Company to Sell the Initial Securities. The obligation of the Company to sell the Initial Securities hereunder is subject to the satisfaction or waiver by the Company, at or before the Initial Closing, of each of the following conditions: (i) Accuracy of the Purchasers' Representations and Warranties. The representations and warranties of each Purchaser shall be true and correct in all material respects as of the date when made and as of the Initial Closing Date, as though made on and as of such date; (ii) Performance by the Purchasers. Each Purchaser shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by such Purchaser at or prior to the Initial Closing; and (iii) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement or the Registration Rights Agreement. (b) Conditions Precedent to the Obligation of the Purchasers to Purchase the Initial Securities. The obligation of each Purchaser hereunder to acquire and pay for the Initial Securities is subject to the satisfaction or waiver by such Purchaser, at or before the Initial Closing, of each of the following conditions: (i) Accuracy of the Company's Representations and Warranties. The representations and warranties of the Company set forth in this Agreement and in the Registration Rights Agreement shall be true and correct in all material respects as of the date when made and as of the Initial Closing Date as though made on and as of such date; (ii) Performance by the Company. The Company shall have performed, satisfied and complied with in all material respects all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Initial Closing; (iii) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by -21- any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement or any other Transaction Document; (iv) Adverse Changes. Since the date of the financial statements included in the SB-2, no event which had a Material Adverse Effect and no material adverse change in the financial condition of the Company shall have occurred (for purposes hereof changes in the market price of the Common Stock may be considered as a factor in determining whether there has occurred an event which has had a Material Adverse Effect or whether a material adverse change has occurred); (v) No Suspensions of Trading in Common Stock. The trading in the Common Stock shall not have been suspended by the Commission or on OTC Bulletin Board, which suspension shall remain in effect; (vi) Legal Opinion. The Company shall have delivered to the Purchasers the opinion of Evers & Hendrickson LLP, outside counsel to the Company, in substantially the form annexed hereto as Exhibit F; (vii) Required Approvals. All Required Approvals shall have been obtained; (viii) Shares of Common Stock. On or prior to the Initial Closing Date, the Company shall have duly reserved the number of Underlying Shares and Warrant Shares required by the Transaction Documents to be reserved for issuance upon conversion of the Convertible Securities and upon exercise of the Warrants; (ix) Delivery of Stock Certificates, Debentures and Warrant Certificates. The Company shall have delivered to each Purchaser or such Purchaser's designee, (i) stock certificates representing the Initial Shares, registered in the name of such Purchaser, each in form satisfactory to such Purchaser, (ii) the Debentures representing the Initial Debentures, registered in the name of such Purchaser, each in form satisfactory to the Purchaser, and (iii) warrant certificate(s) representing the Initial Warrants, registered in the name of such Purchaser, in form satisfactory to the Purchaser; (x) Registration Rights Agreement. The Company shall have executed and delivered the Registration Rights Agreement; (xi) Transfer Agent Instructions. The Irrevocable Transfer Agent Instructions, in the form of Exhibit E annexed hereto, shall have been delivered to and acknowledged in writing by the Company's transfer agent; and (xii) Officer's Certificate. On the Initial Closing Date the Company shall deliver to the Purchasers an Officer's Certificate dated the Initial Closing Date and -22- signed by an executive officer of the Company confirming the accuracy of the Company's representations, warranties and covenants as of the Initial Closing Date and confirming the compliance by the Company with the conditions precedent set forth in this Section 4.1 as of the Initial Closing Date. 4.2 Conditions Precedent to the Obligation of the Purchasers to Purchase the Additional Securities. The obligation of each Purchaser hereunder to acquire and pay for the Additional Securities is subject to the satisfaction or waiver by each Purchaser, at or before the Subsequent Closing, of each of the following conditions: (a) Initial Closing. The Initial Closing shall have occurred. (b) Accuracy of the Company's Representations and Warranties. The representations and warranties of the Company contained herein and in the Registration Rights Agreement shall be true and correct as of the date when made and as of the Subsequent Closing Date, as though made on and as of such date, except where the event causing such representation or warranty to be untrue or incorrect would not result in a Material Adverse Effect; (c) Performance by the Company. The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement and the other Transactions Documents to be performed, satisfied or complied with by the Company at or prior to the Subsequent Closing Date; (d) Registration Statement. The Registration Statement with respect to the Underlying Shares issuable on conversion of all Convertible Securities and with respect to the Warrant Shares issuable upon exercise of all Warrants shall have been declared effective under the Securities Act by the Commission, in a timely manner in accordance with the Registration Rights Agreement; and such Registration Statement shall be effective, not subject to any stop order and not be subject to any suspension pursuant to Section 3(d) of the Registration Rights Agreement, and no stop order shall be pending or threatened as of the Subsequent Closing Date; (e) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement and the other Transaction Documents relating to the issuance, conversion or exercise of any of the Securities; (f) Litigation; Proceedings. No action, suit, notice of violation, proceeding or investigation shall have been instituted or threatened against the Company -23- which could reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect; (g) No Suspensions of Trading in Common Stock. The trading in the Common Stock, at all times since the Initial Closing Date, shall not have been suspended by the Commission or on OTC Bulletin Board, which suspension shall remain in effect; (h) Required Approvals. All Required Approvals shall have been obtained; (i) Shares of Common Stock. On the Subsequent Closing Date the Company shall have duly reserved the number of Underlying Shares and Warrant Shares required by this Agreement to be reserved for issuance upon conversion or exercise of any Additional Securities, as applicable; (j) Delivery of Securities. The Company shall have delivered to each Purchaser or such Purchaser's designee the Additional Securities, registered in the name of such Purchaser, and in form satisfactory to such Purchaser; and (k) Performance of Conversion Obligations. The Company shall have delivered Underlying Shares upon conversion of the Convertible Securities and otherwise performed its obligations in accordance with the terms, conditions and timing requirements of the Convertible Securities. ARTICLE V MISCELLANEOUS 5.1 Fees and Expenses. (a) The Company shall pay the reasonable legal fees and expenses of Stroock & Stroock & Lavan LLP, counsel for the Purchasers, incident to the negotiation, preparation, execution, delivery and performance of this Agreement and the other Transaction Documents, in connection with the negotiation, preparation, execution and delivery of this Agreement and the other Transaction Documents. The Company shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by the Company incident to the negotiation, preparation, execution, delivery and performance of this Agreement and the other Transaction Documents. The Company shall pay all stamp and other taxes and duties levied in connection with the issuance of the Securities pursuant to the Transaction Documents. (b) The Company shall pay to Union Atlantic LC and Continental Capital & Equity Corporation (the "Finders") as a commission in connection with the transactions contemplated hereby, a fee payable in United States dollars in immediately available funds by wire transfer to an account designated in writing by the Finders for such purpose equal to 8% of the aggregate -24- purchase price of securities sold at such Closing (6.5% to Union Atlantic LC and 1.5% to Continental Capital & Equity Corporation). In addition, Union Atlantic LC will receive 100,000 Warrants in connection with the transactions contemplated hereby. The Finders are intended third-party beneficiaries of this Section 5.1(b). 5.2 Entire Agreement; Amendments. This Agreement, together with the Exhibits and Schedules hereto, the other Transaction Documents and, when filed with the Nevada Secretary of State, the Amended Articles and Certificate of Designation, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters. 5.3 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earlier of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified for notice prior to 5:00 p.m., New York City time, on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified for notice later than 5:00 p.m., New York City time, on any date and earlier than 11:59 p.m., New York City time, on such date, (iii) the Business Day following the date of mailing, if sent by nationally recognized overnight courier service or (iv) actual receipt by the party to whom such notice is required to be given. The addresses for such communications shall be with respect to each Purchaser at its address set forth under its name on Schedule 1 attached hereto, or with respect to the Company, addressed to: World Wide Wireless Communications Inc. 520 Third Street, Suite 101 Oakland, California 94607 Attention: Douglas P. Haffer Telephone No.: (510) 839-6100 Facsimile No.: (510) 839-7088 or to such other address or addresses or facsimile number or numbers as any such party may most recently have designated in writing to the other parties hereto by such notice. Copies of notices to any Purchaser shall be sent to Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York 10038-4982, Attention: James R. Tanenbaum, Esq., Telephone No.: (212) 806-5400, Facsimile No.: (212) 806-6006. Copies of notices to the Company shall be sent to Evers & Hendrickson, LLP, 155 Montgomery, 12th Floor, San Francisco, California 94104, Attention: William D. Evers, Esq., Telephone No.: (415) 772-8100, Facsimile No.: (415) 772-8101. 5.4 Amendments; Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by both the Company and the Purchasers; or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition -25- or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. Notwithstanding the foregoing, no such amendment shall be effective to the extent that it applies to less than all of the holders of the Securities outstanding. The Company shall not offer or pay any consideration to a Purchaser for consenting to such an amendment or waiver unless the same consideration is offered to each Purchaser and the same consideration is paid to each Purchaser which consents to such amendment or waiver. 5.5 Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. 5.6 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each of the Purchasers. The Purchasers may assign this Agreement or any rights or obligations hereunder without the prior written consent of the Company, except that any assignee must make the representations and warranties set forth in Section 2.2 and otherwise comply with the terms of this Agreement otherwise applicable to its assignor. This provision shall not limit a Purchaser's right to transfer securities or transfer or assign rights under the Registration Rights Agreement. 5.7 No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. 5.8 Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York, without regard to the principles of conflicts of law thereof. 5.9 Survival. The agreements, covenants, representations, warranties and provisions contained in this Agreement shall survive the delivery of the Securities pursuant to this Agreement and each Closing hereunder and any conversion of the Convertible Securities or exercise of the Warrants. 5.10 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that all parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. -26- 5.11 Publicity. The Company and each Purchaser shall consult with each other in issuing any press releases or otherwise making public statements with respect to the transactions contemplated hereby and neither party shall issue any such press release or otherwise make any such public statement without the prior written consent of the other, which consent shall not be unreasonably withheld or delayed, except that no prior consent shall be required if such disclosure is required by law, in which such case the disclosing party shall provide the other party with prior notice of such public statement. The Company shall not publicly or otherwise disclose the names of any of the Purchasers without each such Purchaser's prior written consent unless otherwise required by law, in which case the Company shall inform such Purchaser of such disclosure in writing prior to making such disclosure. 5.12 Consent to Jurisdiction; Attorneys' Fees (a) The Company (including, but not limited to, its affiliates, subsidiaries, officers, directors and controlling persons) and each Purchaser hereby (i) irrevocably submits to the exclusive jurisdiction of any New York State court or Federal court sitting in the Borough of Manhattan, The City of New York in any action related to, connected with or arising out of, in whole or in part, the Transaction Documents, including, but not limited to, transactions in the securities of the Company subsequent to the purchase by such Purchaser or Persons claimed to be affiliated with such Purchaser, (ii) agrees that all claims in such action shall be decided in such court, (iii) waives, to the fullest extent it may effectively do so, the defense of inconvenient forum and (iv) consents to the service of process by certified mail, return receipt requested. Nothing herein shall affect the right of any party to serve legal process in any manner permitted by law or affect its right to bring any action in any other court. (b) In connection with any dispute between the Company and any Purchaser, related to, connected with or arising out of, in whole or in part, the Transaction Documents including, but not limited to, transactions in the securities of the Company subsequent to the purchase, by a Purchaser or Persons claimed to be affiliated to a Purchaser, the prevailing party shall be awarded all reasonable attorneys' fees and expenses incurred by it. In that connection fees and expenses actually paid by a party in connection with the litigation of any dispute shall be deemed presumably reasonable. (c) In the event that any Purchaser or any Person claimed to be affiliated or associated with such Purchaser becomes involved in any capacity in any action, proceeding or investigation brought by or against any Person, including shareholders of the Company, in connection with or as a result of any matter referred to in the Transaction Documents, the Company will promptly reimburse such Purchaser and/or those claimed to be affiliated or associated with such Purchaser for its legal fees and expenses and other expenses (including the cost of any investigation and preparation) incurred in connection therewith, as those fees and expenses are incurred; provided, however, that if at the conclusion of such action, proceeding or investigation it shall be finally judicially determined by a court of competent jurisdiction that indemnity for such fees and expenses is contrary to law, or that such Purchaser is not the prevailing party then in that event, such Purchaser and/or any other Person having received such advances of fees and expenses shall promptly reimburse the Company in full for the sums advanced. -27- (d) The provisions of this Section 5.12 shall survive any termination or completion of the Transaction Documents. 5.13 Waiver of Jury Trial (a) The parties hereto each waive their respective rights to a trial by jury of any claim or cause of action based upon or arising out of or related to the Transaction Documents, or the transactions contemplated by the Transaction Documents, in any action, proceeding or other litigation of any type brought by any of the parties against any other party or parties, whether with respect to contract claims, tort claims, or otherwise. The parties hereto each agree that any such claim or cause of action shall be tried by a court trial without a jury. Without limiting the foregoing, the parties further agree that their respective right to a trial by jury is waived by operation of this Section 5.13 as to any action, counterclaim or other proceeding which seeks, in whole or in part, to challenge the validity or enforceability of any of the Transaction Documents or any provision hereof or thereof. The waiver shall apply to any subsequent amendments, renewals, supplements or modifications to any of the Transaction Documents. (b) The provisions of this Section 5.13 shall survive any termination or completion of the Transaction Documents. 5.14 Severability. If any term, provision, covenant or restriction of this Agreement is held to be invalid, illegal, void or unenforceable in any respect, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. 5.15 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, the Purchasers will be entitled to specific performance of the obligations of the Company under the Transaction Documents and injunctive relief. Each of the Company and the Purchasers (severally and not jointly) agree that monetary damages would not be adequate compensation for any loss incurred by reason of any breach of its obligations described in the foregoing sentence and hereby agrees to waive in any action for specific performance of any such obligation or injunctive relief the defense that a remedy at law would be adequate. 5.16 Independent Nature of Purchasers' Obligations and Rights. The obligations of each Purchaser hereunder is several and not joint with the obligations of the other Purchasers hereunder, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser hereunder. Nothing contained herein or in any other agreement or document delivered at any Closing, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a -28- joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert with respect to such obligations or the transactions contemplated by this Agreement. Each Purchaser shall be entitled to protect and enforce its rights, including without limitation the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose. -29- IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized persons as of the date first indicated above. WORLD WIDE WIRELESS COMMUNICATIONS, INC. By: /s/ Douglas P. Haffer ------------------------------------- Name: Douglas P. Haffer Title: President ESQUIRE TRADING & FINANCE, INC. By: /s/ Roland Wineger ------------------------------------- Name: Roland Wineger Title: Director AMRO INTERNATIONAL, S.A. By: /s/ H. U. Bachofer ------------------------------------- Name: H. U. Bachofer Title: Director CELESTE TRUST REG. By: /s/ Thomas Hackl ------------------------------------- Name: Thomas Hackl Title: Representative THE ENDEAVOR CAPITAL FUND, S.A. By: Endeavor Management, Inc. By: /s/ Shmuli Margulies ------------------------------ Name: Shmuli Margulies Title: Director -30- THE KESHET FUND, L.P. By: /s/ David Grin ------------------------------------- Name: David Grin Title: KESHET, L.P. By: /s/ David Grin ------------------------------------- Name: David Grin Title: NESHER, LTD. By: /s/ J. D. Clarke ------------------------------------- Name: J. D. Clarke Title: Director -31- Schedule 1 Purchasers ----------
Number of Principal Amount Portion of Initial of Initial Number of Initial Purchase Name of Purchaser Address of Purchaser Shares Debentures Initial Warrants Price ----------------- -------------------- -------- ----------- ---------------- ---------------- Esquire Trading & Schutzengelstrasse 36 140,000 $420,000 525,000 $700,000 Finance Inc. Baar, Switzerland CH6342 Fax No.: 041-7601031 Amro International c/o Ultra Finance Ltd. 300,000 $900,000 1,125,000 $1,500,000 S.A. Grossmuenster Platz 26, P.O. Box 4401 Zurich, Switzerland CH8022 Celeste Trust Reg. c/o 120,000 $360,000 450,000 $600,000 Trevisa-Treuhand-Ansalt Landstrassse 8 9496 Furstentums Balzers, Liechtenstien The Endeavor 14/14 Divrea Chaim 150,000 $1,200,000 1,125,000 $1,500,000 Capital Fund, S.A. Street Jerusalem 94479, Israel Fax No.: 011-972-2-5824443 Nesher, Ltd. c/o Ragnall House 10,000 $80,000 75,000 $100,000 18 Peel Road Douglas, Isle of Man 1M1 4L2, United Kingdom Keshet, L.P. Seameadow House 25,000 $200,000 187,500 $250,000 BlackBurn Highway P.O. Box 173 Road Town, Tortola British Virgin Islands The Keshet Fund, c/o KCM, LLC 15,000 $120,000 112,500 $150,000 L.P. 135 W. 50th Street Suite 1700 New York, NY 10020 Total: 760,000 $3.280,000 3,600,000 $4,800,000 ======= ========== ========= ==========
-32- Schedule 2 Purchasers
Number of Principal Amount Portion of Additional or Stated Value of Number of Additional Purchase Name of Purchaser Address of Purchaser Shares Additional Additional Warrants Price ----------------- -------------------- --------- ------------------ ------------------- ------------------- Convertible Securities, as applicable ------------- Esquire Trading & Schutzengelstrasse 36 56,000 $168,000 210,000 $280,000 Finance Inc. Baar, Switzerland CH6342 Fax No.: 041-7601031 Amro International c/o Ultra Finance Ltd. 120,000 $360,000 450,000 $600,000 S.A. Grossmuenster Platz 26, P.O. Box 4401 Zurich, Switzerland CH8022 Celeste Trust Reg. c/o 48,000 $144,000 180,000 $240,000 Trevisa-Treuhand-Ansalt Landstrassse 8 9496 Furstentums Balzers, Liechtenstien The Endeavor 14/14 Divrea Chaim 60,000 $480,000 450,000 $600,000 Capital Fund, S.A. Street Jerusalem 94479, Israel Fax No.: 011-972-2-5824443 Nesher, Ltd. c/o Ragnall House 4,000 $32,000 30,000 $40,000 18 Peel Road Douglas, Isle of Man 1M1 4L2, United Kingdom Keshet, L.P. Seameadow House 10,000 $80,000 75,000 $100,000 BlackBurn Highway P.O. Box 173 Road Town, Tortola British Virgin Islands The Keshet Fund, c/o KCM, LLC 6,000 $48,000 45,000 $60,000 L.P. 135 W. 50th Street Suite 1700 New York, NY 10020 Total: 304,000 $1.312,000 1,440,000 $1,920,000 ======= ========== ========= ==========
-33- EX-10.15 23 0023.txt REGISTRATION RIGHTS AGREEMENT EXECUTION COPY REGISTRATION RIGHTS AGREEMENT This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered into as of April 14, 2000, by and among World Wide Wireless Communications, Inc., a Nevada corporation (the "Company"), Esquire Trading & Finance, Inc. ("Esquire"), Amro International, S.A. ("Amro"), Celeste Trust Reg. ("Celeste"), The Endeavor Capital Fund, S.A. ("Endeavor"), Nesher, Ltd. ("Nesher"), The Keshet Fund, L.P. ("Keshet Fund") and Keshet, L.P. ("Keshet"). Esquire, Amro, Celeste, Endeavor, Nesher, Keshet Fund and Keshet are each referred to herein as a "Purchaser" and are collectively referred to herein as the "Purchasers." This Agreement is being entered into pursuant to the Securities Purchase Agreement, dated as of the date hereof among the Company and the Purchasers (the "Purchase Agreement"). The Company and the Purchasers hereby agree as follows: 1. Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings given such terms in the Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings: "Advice" shall have meaning set forth in Section 3(m). "Affiliate" means, with respect to any Person, any other Person that directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of "affiliated," "controlling" and "controlled" have meanings correlative to the foregoing. "Board" shall have meaning set forth in Section 3(n). "Business Day" means any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the state of New York generally are authorized or required by law or other government actions to close. "Commission" means the Securities and Exchange Commission. "Common Stock" means the Company's Common Stock, par value $.001 per share. "Convertible Securities" means the Debentures and the Preferred Stock. "Debentures" means the 4% Convertible Debentures due 2005 of the Company issued to the Purchasers pursuant to the Purchase Agreement. "Effectiveness Date" means the 120th day following the Initial Closing Date. "Effectiveness Period" shall have the meaning set forth in Section 2. "Event" shall have the meaning set forth in Section 7(e)(i). "Event Date" shall have the meaning set forth in Section 7(e)(i). "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Filing Date" means the 45th day following the Initial Closing Date. "Holder" or "Holders" means the holder or holders, as the case may be, from time to time of Registrable Securities. "Indemnified Party" shall have the meaning set forth in Section 5(c). "Indemnifying Party" shall have the meaning set forth in Section 5(c). "Losses" shall have the meaning set forth in Section 5(a). "Person" means an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind. "Preferred Stock" means the Series A Convertible Preferred Stock, par value $0.01 per share and stated value $1,000 per share, of the Company issued to the Purchasers pursuant to the Debentures. "Proceeding" means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened. "Prospectus" means the prospectus included in the Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement, and all other amendments and supplements to the -2- Prospectus, including post-effective amendments, and all material incorporated by reference in such Prospectus. "Registrable Securities" means the Shares, the shares of Common Stock issuable upon conversion of the Convertible Securities and the shares of Common Stock issuable upon exercise of the Warrants; provided, however, that Registrable Securities shall include (but not be limited to) a number of shares of Common Stock equal to no less than the sum of (A) 200% of the maximum number of shares of Common Stock which would be issuable upon conversion of the Convertible Securities and (B) 100% of the maximum number of shares of Common Stock which would be issuable upon exercise of the Warrants (in each case, without regard to any limitations on conversions or exercise thereof), assuming such conversion and exercise occurred on the Initial Closing Date or the Filing Date, whichever date would produce a greater number of Registrable Securities. Such registered shares of Common Stock shall be allocated among the Holders pro rata based on the total number of Registrable Securities issued or issuable as of each date that a Registration Statement, as amended, relating to the resale of the Registrable Securities is declared effective by the Commission. Notwithstanding anything herein contained to the contrary, if the actual number of shares of Common Stock issuable upon conversion of the Convertible Securities and upon exercise of the Warrants exceeds the sum of (A) 200% of the maximum number of shares of Common Stock which would be issuable upon conversion of the Convertible Securities and (B) 100% of the maximum number of shares of Common Stock which would be issuable upon exercise of the Warrants (in each case, without regard to any limitations on conversions or exercise thereof) based upon a computation as at the Initial Closing Date or the Filing Date, the term "Registrable Securities" shall be deemed to include such additional shares of Common Stock. "Registration Statement" means the registration statements and any additional registration statements contemplated by Section 2, including (in each case) the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference in such registration statement. "Rule 144" means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "Rule 158" means Rule 158 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "Rule 415" means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "Securities Act" means the Securities Act of 1933, as amended. -3- "Special Counsel" means any special counsel to the Holders, for which the Holders will be reimbursed by the Company pursuant to Section 4. 2. Shelf Registration. (a) On or prior to the Filing Date the Company shall prepare and file with the Commission a "shelf" Registration Statement covering all Registrable Securities for an offering to be made on a continuous basis pursuant to Rule 415. The Registration Statement shall be on Form SB-2 (and converted to Form S-3 as soon as the Company becomes eligible to register for resale the Registrable Securities on Form S-3). The Company shall (i) not permit any securities other than the Registrable Securities to be included in the Registration Statement and (ii) use its best efforts to cause the Registration Statement to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event prior to the Effectiveness Date, and to keep such Registration Statement continuously effective under the Securities Act until such date as is the earlier of (x) the date when all Registrable Securities covered by such Registration Statement have been sold or (y) the date on which the Registrable Securities may be sold without any restriction pursuant to Rule 144(k) as determined by the counsel to the Company pursuant to a written opinion letter, addressed to the Company's transfer agent to such effect (the "Effectiveness Period"). (b) The initial number of Registrable Securities included in any Registration Statement and each increase in the number of Registrable Securities included therein shall be allocated pro rata among the Purchasers based on the number of Registrable Securities held by each Purchaser at the time the Registration Statement covering such initial number of Registrable Securities or increase thereof is declared effective by the Commission. In the event that a Purchaser sells or otherwise transfers any of such Purchaser's Registrable Securities, each transferee shall be allocated a pro rata portion of the then remaining number of Registrable Securities included in such Registration Statement for such transferor. Any shares of Common Stock included in a Registration Statement and which remain allocated to any Person which ceases to hold any Registrable Securities covered by such Registration Statement shall be allocated to the remaining Purchasers, pro rata based on the number of Registrable Securities then held by such Purchasers which are covered by such Registration Statement. (c) In the event the number of shares available under a Registration Statement filed pursuant to Section 2(a) is insufficient to cover all of the Registrable Securities which such Registration Statement is required to cover or a Purchaser's allocated portion of the Registrable Securities pursuant to Section 2(b), the Company shall amend the Registration Statement, or file a new Registration Statement (on the short form available therefor, if applicable), or both, so as to cover at least that number of shares of Common Stock equal to the sum of (x) the product of (i) 2 and (ii) the number of Underlying Shares issuable upon conversion of the Convertible Securities (without regard to any limitations on conversion) as of the date immediately preceding the date such amendment or new Registration Statement is filed with the Commission, plus (y) the number of Warrant Shares issuable upon exercise of the Warrants (without regard to any limitations on exercise) as of the date immediately preceding the date such amendment or new Registration Statement is filed with the Commission, plus (z) the number of Underlying Shares -4- and Warrant Shares held by the Purchasers as of the date immediately preceding the date on which such amendment or new Registration Statement is filed with the Commission, in each case, as soon as practicable, but in any event not later than fifteen (15) business days after the necessity therefor arises. The Company shall cause such amendment and/or new Registration Statement to become effective as soon as practicable following the filing thereof, but in no event later than 60 days after filing. For purposes of the foregoing provision, the number of shares available under a Registration Statement shall be deemed "insufficient to cover all of the Registrable Securities" if the number of Registrable Securities issued or issuable upon conversion of the Convertible Securities and exercise of the Warrants covered by such Registration Statement is greater than the sum of (a) the quotient determined by dividing (i) the number of shares of Common Stock available for resale under the Registration Statement to cover shares issued or issuable upon conversion of the Convertible Securities by (ii) 1.5 and (b) the number of shares of Common Stock available for resale under the Registration Statement to cover shares issued or issuable upon exercise of the Warrants. For purposes of the calculation set forth in the foregoing sentence, any restrictions on the convertibility of the Convertible Securities or exercise of the Warrants shall be disregarded and such calculation shall assume that the Convertible Securities are then convertible into, and the Warrants are then exercisable for, shares of Common Stock at the then prevailing Conversion Ratio (as defined in the Debentures or the Amended Articles, as applicable) or Warrant Price (as defined in the Warrants), respectively. (d) The Company shall use its best efforts to qualify for registration on Form S-3 or any comparable or successor form or forms. In the event that Form S-3 is not available for the registration of the resale of Registrable Securities hereunder, the Company shall (i) register the resale of the Registrable Securities on another appropriate form and (ii) undertake to register the resale of the Registrable Securities on Form S-3 as soon as such form is available, provided that the Company shall maintain the effectiveness of the Registration Statement then in effect until such time as a Registration Statement on Form S-3 covering the Registrable Securities has been declared effective by the Commission. 3. Registration Procedures. In connection with the Company's registration obligations hereunder, the Company shall: (a)Prepare and file with the Commission on or prior to the Filing Date, a Registration Statement on Form SB-2 (converted to Form S-3 as soon as the Company becomes eligible to register for resale the Registrable Securities on Form S-3), which shall be "evergreened," in accordance with the method or methods of distribution thereof as specified by the Holders (except if otherwise directed by the Holders), and cause the Registration Statement to become effective and remain effective as provided herein; provided, however, that not less than ten (10) Business Days prior to the filing of the Registration Statement or any related Prospectus or any amendment or supplement thereto (including any document that would be incorporated therein by reference), the Company shall (i) furnish to the Holders and any Special Counsel, copies of all such documents proposed to be filed, which documents (other than those incorporated by reference) will be subject to the review of such Holders and such Special -5- Counsel, and (ii) cause its officers and directors, counsel and independent certified public accountants to respond to such inquiries as shall be necessary, in the reasonable opinion of counsel to such Holders, to conduct a reasonable investigation within the meaning of the Securities Act. The Company shall not file the Registration Statement or any such Prospectus or any amendments or supplements thereto to which the Holders of a majority of the Registrable Securities or any Special Counsel, shall reasonably object in writing within three (3) Business Days of their receipt thereof. (b) (i) Prepare and file with the Commission such amendments, including post-effective amendments, to the Registration Statement as may be necessary to keep the Registration Statement continuously effective as to the applicable Registrable Securities for the Effectiveness Period and prepare and file with the Commission such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities; (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement, and as so supplemented or amended to be filed pursuant to Rule 424 (or any similar provisions then in force) promulgated under the Securities Act; (iii) respond as promptly as possible to any comments received from the Commission with respect to the Registration Statement or any amendment thereto and as promptly as possible provide the Holders true and complete copies of all correspondence from and to the Commission relating to the Registration Statement; and (iv) comply in all material respects with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by the Registration Statement during the applicable period in accordance with the intended methods of disposition by the Holders thereof set forth in the Registration Statement as so amended or in such Prospectus as so supplemented. (c) Notify the Holders of Registrable Securities to be sold and any Special Counsel as promptly as possible (and, in the case of (i)(A) below, not less than five (5) days prior to such filing) and (if requested by any such Person) confirm such notice in writing no later than one (1) Business Day following the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to the Registration Statement is proposed to be filed; (B) when the Commission notifies the Company whether there will be a "review" of such Registration Statement and whenever the Commission comments in writing on such Registration Statement and (C) with respect to the Registration Statement or any post-effective amendment, when the same has become effective; (ii) of any request by the Commission or any other Federal or state governmental authority for amendments or supplements to the Registration Statement or Prospectus or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose; (iv) if at any time any of the representations and warranties of the Company contained in any agreement contemplated hereby ceases to be true and correct in all material respects; (v) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose; and (vi) of the occurrence of any event that makes any statement made in the Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or -6- that requires any revisions to the Registration Statement, Prospectus or other documents so that, in the case of the Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (d) Use its best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of, (i) any order suspending the effectiveness of the Registration Statement or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment. (e) If requested by the Holders of a majority in interest of the Registrable Securities, (i) promptly incorporate in a Prospectus supplement or post-effective amendment to the Registration Statement such information as the Company reasonably agrees should be included therein and (ii) make all required filings of such Prospectus supplement or such post-effective amendment as soon as practicable after the Company has received notification of the matters to be incorporated in such Prospectus supplement or post-effective amendment. (f) Furnish to each Holder and any Special Counsel, without charge, at least one conformed copy of each Registration Statement and each amendment thereto, including financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference, to the extent requested by such Person and all exhibits to the extent requested by such Person (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission. (g) Promptly deliver to each Holder and any Special Counsel, without charge, as many copies of the Prospectus or Prospectuses (including each form of prospectus) and each amendment or supplement thereto as such Persons may reasonably request; and the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto. (h) Prior to any public offering of Registrable Securities, use its best efforts to register or qualify or cooperate with the selling Holders, and any Special Counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any Holder requests in writing, to keep each such registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by a Registration Statement; provided, however, that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject or subject the Company to any material tax in any such jurisdiction where it is not then so subject. -7- (i) Cooperate with the Holders to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold pursuant to a Registration Statement, which certificates shall be free of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any Holders may request at least two (2) Business Days prior to any sale of Registrable Securities. (j) Upon the occurrence of any event contemplated by Section 3(c)(vi), as promptly as possible, prepare a supplement or amendment, including a post-effective amendment, to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither the Registration Statement nor such Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (k) Use its best efforts to cause all Registrable Securities relating to such Registration Statement to be eligible for quotation on the National Association of Securities Dealers, Inc.'s OTC Bulletin Board (the "OTC Bulletin Board") and any other securities exchange, quotation system, market or over-the-counter bulletin board, if any, on which similar securities issued by the Company are then listed as and when required pursuant to the Purchase Agreement. (l) Comply in all material respects with all applicable rules and regulations of the Commission and make generally available to its security holders earning statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 not later than 45 days after the end of any 12-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) commencing on the first day of the first fiscal quarter of the Company after the effective date of the Registration Statement, which statement shall conform to the requirements of Rule 158. (m) The Company may require each selling Holder to furnish to the Company information regarding such Holder and the distribution of such Registrable Securities as is required by law to be disclosed in the Registration Statement, and the Company may exclude from such registration the Registrable Securities of any such Holder who unreasonably fails to furnish such information within 15 Business Days after receiving such request. If the Registration Statement refers to any Holder by name or otherwise as the holder of any securities of the Company, then such Holder shall have the right to require (if such reference to such Holder by name or otherwise is not required by the Securities Act or any similar federal statute then in force) the deletion of the reference to such Holder in any amendment or supplement to the Registration Statement filed or prepared subsequent to the time that such reference ceases to be required. Each Holder covenants and agrees that (i) it will not sell any Registrable Securities under the Registration Statement until it has received copies of the Prospectus as then -8- amended or supplemented as contemplated in Section 3(g) and notice from the Company that such Registration Statement and any post-effective amendments thereto have become effective as contemplated by Section 3(c) and (ii) it and its officers, directors or Affiliates, if any, will comply with the prospectus delivery requirements of the Securities Act as applicable to them in connection with sales of Registrable Securities pursuant to the Registration Statement. Each Holder agrees by its acquisition of such Registrable Securities that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or 3(c)(vi), such Holder will forthwith discontinue disposition of such Registrable Securities under the Registration Statement until such Holder's receipt of the copies of the supplemented Prospectus and/or amended Registration Statement contemplated by Section 3(j), or until it is advised in writing (the "Advice") by the Company that the use of the applicable Prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus or Registration Statement. (n) If (i) there is material non-public information regarding the Company which the Company's Board of Directors (the "Board") reasonably determines not to be in the Company's best interest to disclose and which the Company is not otherwise required to disclose, or (ii) there is a significant business opportunity (including, but not limited to, the acquisition or disposition of assets (other than in the ordinary course of business) or any merger, consolidation, tender offer or other similar transaction) available to the Company which the Board reasonably determines not to be in the Company's best interest to disclose, then the Company may postpone or suspend filing or effectiveness of a registration statement for a period not to exceed 15 consecutive days, provided that the Company may not postpone or suspend its obligation under this Section 3(n) for more than 30 days in the aggregate during any 365-day period; provided, however, that no such postponement or suspension shall be permitted for consecutive 15 day periods, arising out of the same set of facts, circumstances or transactions. (o) At its sole discretion, add the Underlying Shares and Warrant Shares to any currently filed registration statement as an amendment to said registration statement in order to save filing and legal costs in connection with the procurement of the Registration Statement, provided that the Company has a reasonable belief that the registration statement will be deemed effective in the appropriate time period, and further that it is not in any way violating any covenants with other investors in connection with such registration statement by adding the Purchasers to said registration statement. 4. Registration Expenses. All fees and expenses incident to the performance of or compliance with this Agreement by the Company shall be borne by the Company whether or not the Registration Statement is filed or becomes effective and whether or not any Registrable Securities are sold pursuant to the Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses (A) with respect to filings required to be made with the National -9- Association of Securities Dealers, Inc. and the NASD Regulation, Inc., and (B) in compliance with state securities or Blue Sky laws (including, without limitation, fees and disbursements of counsel for the Holders in connection with Blue Sky qualifications of the Registrable Securities and determination of the eligibility of the Registrable Securities for investment under the laws of such jurisdictions as the Holders of a majority of Registrable Securities may designate)), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities and of printing prospectuses (which may be camera ready copies of such prospectuses)), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company and Special Counsel for the Holders, in the case of the Special Counsel, to a maximum amount of $25,000, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement, including, without limitation, the Company's independent public accountants (including the expenses of any comfort letters or costs associated with the delivery by independent public accountants of a comfort letter or comfort letters). In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit, the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder. 5. Indemnification. (a) Indemnification by the Company. The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Holder, the officers, directors, agents, brokers (including brokers who offer and sell Registrable Securities as principal as a result of a pledge or any failure to perform under a margin call of Common Stock), investment advisors and employees of each of them, each Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, agents and employees of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, costs of preparation and attorneys' fees) and expenses (collectively, "Losses"), as incurred, arising out of or relating to any untrue or alleged untrue statement of a material fact contained in the Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in the light of the circumstances under which they were made) not misleading, or arising out of or relating to any violation by the Company or its agents of the Securities Act or any rule or regulation promulgated under the Securities Act applicable to the Company or its agents and relating to action or inaction required of the Company in connection with a registration of Registrable Securities pursuant to this Agreement, except to the extent, but only to the extent, that such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, which information was reasonably relied on by the Company for use -10- therein or to the extent that such information relates to such Holder or such Holder's proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in the Registration Statement, such Prospectus or such form of Prospectus or in any amendment or supplement thereto. The Company shall notify the Holders promptly of the institution, threat or assertion of any Proceeding of which the Company is aware in connection with the transactions contemplated by this Agreement. (b) Indemnification by Holders. Each Holder shall, severally and not jointly, indemnify and hold harmless the Company, the directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses, as incurred, arising solely out of or based solely upon any untrue statement of a material fact contained in the Registration Statement, any Prospectus, or any form of prospectus, or arising solely out of or based solely upon any omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in the light of the circumstances under which they were made) not misleading, to the extent, but only to the extent, that such untrue statement or omission is contained in any information so furnished in writing by such Holder to the Company specifically for inclusion in the Registration Statement or such Prospectus and that such information was reasonably relied upon by the Company for use in the Registration Statement, such Prospectus or such form of prospectus or to the extent that such information relates to such Holder or such Holder's proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in the Registration Statement, such Prospectus or such form of Prospectus. (c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an "Indemnified Party"), such Indemnified Party promptly shall notify the Person from whom indemnity is sought (the "Indemnifying Party) in writing, and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have proximately and materially adversely prejudiced the Indemnifying Party. An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such fees and expenses; or (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the -11- Indemnifying Party, and such Indemnified Party shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and such counsel shall be at the expense of the Indemnifying Party). The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding. All fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten (10) Business Days of written notice thereof to the Indemnifying Party (regardless of whether it is ultimately determined that an Indemnified Party is not entitled to indemnification hereunder; provided, that the Indemnifying Party may require such Indemnified Party to undertake to reimburse all such fees and expenses to the extent it is finally judicially determined that such Indemnified Party is not entitled to indemnification hereunder). (d) Contribution. If a claim for indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified Party because of a failure or refusal of a governmental authority to enforce such indemnification in accordance with its terms (by reason of public policy or otherwise), then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in Section 5(c), any reasonable attorneys' or other reasonable fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance with its terms. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the -12- immediately preceding paragraph. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties. 6. Rule 144. As long as any Holder owns Convertible Securities, Underlying Shares, Warrants or Warrant Shares, the Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to Section 13(a) or 15(d) of the Exchange Act and to promptly furnish the Holders with true and complete copies of all such filings. As long as any Holder owns Convertible Securities, Underlying Shares, Warrants or Warrant Shares, if the Company is not required to file reports pursuant to Section 13(a) or 15(d) of the Exchange Act, it will prepare and furnish to the Holders and make publicly available in accordance with Rule 144(c) promulgated under the Securities Act annual and quarterly financial statements, together with a discussion and analysis of such financial statements in form and substance substantially similar to those that would otherwise be required to be included in reports required by Section 13(a) or 15(d) of the Exchange Act, as well as any other information required thereby, in the time period that such filings would have been required to have been made under the Exchange Act. The Company further covenants that it will take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such Person to sell Underlying Shares and Warrant Shares without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 promulgated under the Securities Act, including providing any legal opinions referred to in the Purchase Agreement. Upon the request of any Holder, the Company shall deliver to such Holder a written certification of a duly authorized officer as to whether it has complied with such requirements. 7. Miscellaneous. (a) Remedies. In the event of a breach by the Company or by a Holder, of any of their obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Company and each Holder agree that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate. (b) No Inconsistent Agreements. Neither the Company nor any of its subsidiaries has, as of the date hereof entered into any agreement currently in effect, nor shall the Company or any of its subsidiaries, on or after the date of this Agreement, enter into any -13- agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. Except as disclosed in Schedule 2.1(s) of the Purchase Agreement, neither the Company nor any of its subsidiaries has previously entered into any agreement currently in effect granting any registration rights with respect to any of its securities to any Person. Without limiting the generality of the foregoing, without the written consent of the Holders of a majority of the then outstanding Registrable Securities, the Company shall not grant to any Person the right to request the Company to register any securities of the Company under the Securities Act unless the rights so granted are subject in all respects to the prior rights in full of the Holders set forth herein, and are not otherwise in conflict with the provisions of this Agreement. (c) No Piggyback on Registrations. Neither the Company nor any of its security holders (other than the Holders in such capacity pursuant hereto or as disclosed in Schedule 2.1(s) of the Purchase Agreement) may include securities of the Company in the Registration Statement, and the Company shall not after the date hereof enter into any agreement providing such right to any of its securityholders, unless the right so granted is subject in all respects to the prior rights in full of the Holders set forth herein, and is not otherwise in conflict with the provisions of this Agreement. (d) Piggy-Back Registrations. If at any time when there is not an effective Registration Statement covering (i) Underlying Shares or (ii) Warrant Shares, the Company shall determine to prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans, the Company shall send to each Holder of Registrable Securities written notice of such determination and, if within thirty (30) days after receipt of such notice, any such holder shall so request in writing, (which request shall specify the Registrable Securities intended to be disposed of by the Purchasers), the Company will cause the registration under the Securities Act of all Registrable Securities which the Company has been so requested to register by the Holder, to the extent requisite to permit the disposition of the Registrable Securities so to be registered, provided that if at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to such Holder and, thereupon, (i) in the case of a determination not to register, shall be relieved of its obligation to register any Registrable Securities in connection with such registration (but not from its obligation to pay expenses in accordance with Section 4 hereof), and (ii) in the case of a determination to delay registering, shall be permitted to delay registering any Registrable Securities being registered pursuant to this Section 7(d) for the same period as the delay in registering such other securities. The Company shall include in such registration statement all or any part of such Registrable Securities such holder requests to be registered; provided, however, that the Company shall not be required to register any Registrable Securities pursuant to this Section 7(d) that are eligible for sale pursuant to Rule 144(k) of the -14- Securities Act. In the case of an underwritten public offering, if the managing underwriter(s) or underwriter(s) should reasonably object to the inclusion of the Registrable Securities in such registration statement, then if the Company after consultation with the managing underwriter(s) should reasonably determine that the inclusion of such Registrable Securities, would materially adversely affect the offering contemplated in such registration statement, and based on such determination recommends inclusion in such registration statement of fewer or none of the Registrable Securities of the Holders, then (x) the number of Registrable Securities of the Holders included in such registration statement shall be reduced pro-rata among such Holders (based upon the number of Registrable Securities requested to be included in the registration), if the Company after consultation with the underwriter(s) recommends the inclusion of fewer Registrable Securities, or (y) none of the Registrable Securities of the Holders shall be included in such registration statement, if the Company after consultation with the underwriter(s) recommends the inclusion of none of such Registrable Securities; provided, however, that if Securities are being offered for the account of other persons or entities as well as the Company, such reduction shall not represent a greater fraction of the number of Registrable Securities intended to be offered by the Holders than the fraction of similar reductions imposed on such other persons or entities (other than the Company). (e) Failure to File Registration Statement; Rights of Rescission. The Company and the Purchasers agree that the Holders will suffer damages if the Registration Statement is not filed on or prior to the Filing Date and not declared effective by the Commission on or prior to the Effectiveness Date and maintained in the manner contemplated herein during the Effectiveness Time or if certain other events occur. The Company and the Holders further agree that it would not be feasible to ascertain the extent of such damages with precision. Accordingly, if (A) the Registration Statement is not filed on or prior to the Filing Date, or is not declared effective by the Commission on or prior to the Effectiveness Date (or in the event an additional Registration Statement is filed because the actual number of shares of Common Stock into which the Convertible Securities are convertible and the Warrants are exercisable exceeds the number of shares of Common Stock initially registered is not filed and declared effective with the time periods set forth in Section 2), or (B) the Company fails to file with the Commission a request for acceleration in accordance with Rule 12dl-2 promulgated under the Exchange Act within five (5) Business Days of the date that the Company is notified (orally or in writing, whichever is earlier) by the Commission that a Registration Statement will not be "reviewed," or not subject to further review, or (C) the Registration Statement is filed with and declared effective by the Commission but thereafter ceases to be effective as to all Registrable Securities at any time prior to the expiration of the Effectiveness Period, without being succeeded immediately by a subsequent Registration Statement filed with and declared effective by the Commission, or (D) trading in the Common Stock shall be suspended or if the Common Stock is delisted from the OTC Bulletin Board for any reason for more than three Business Days in the aggregate, or (E) the conversion rights of the Holders are suspended for any reason except as a result of Section 4(a)(ii) of the Debentures or Section 6(a)(ii) of the Certificate of Designation, or (F) the Company breaches in a material respect any covenant or other material term or condition to this Agreement, the Purchase Agreement (other than a representation or warranty contained therein), any Transaction Document or any other agreement, document, certificate or other instrument delivered in connection with the transactions contemplated hereby -15- and thereby, and such breach continues for a period of thirty days after written notice thereof to the Company, or (G) the Company fails to convene a meeting of shareholders within the time period specified in Section 3.13 of the Purchase Agreement or does so convene a meeting of shareholders within such time period but fails to obtain Shareholder Approval at such meeting, or (H) the Company has breached Section 3(n) (any such failure or breach being referred to as an "Event," and for purposes of clauses (A) and (E) the date on which such Event occurs, or for purposes of clause (B) the date on which such five day period is exceeded, or for purposes of clause (C) after more than fifteen Business Days, or for purposes of clause (D) the date on which such three Business Day period is exceeded, or for clause (F) the date on which such thirty day period is exceeded, being referred to as "Event Date"), the Company shall pay in cash as liquidated damages to each Holder an amount equal to 2.0% per calendar month or portion thereof of the aggregate principal amount of Debentures, or aggregate stated value of the outstanding Preferred Stock, as applicable, purchased by such Holder, plus the principal amount or stated value, as applicable, of any Convertible Securities that have been converted to the extent any of the Underlying Shares issued upon such conversion have not been sold, and the aggregate amount of the exercise price of the Warrants purchased by such Holder, whether or not exercised, commencing on the Event Date, until the applicable Event is cured. Payments to be made pursuant to this Section 7(e) shall be due and payable immediately upon demand in immediately available funds. (f) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and each of the Holders. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders and that does not directly or indirectly affect the rights of other Holders may be given by Holders of at least a majority of the Registrable Securities to which such waiver or consent relates; provided, however, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the immediately preceding sentence. (g) Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earlier of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified for notice prior to 5:00 p.m., New York City time, on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified for notice later than 5:00 p.m., New York City time, on any date and earlier than 11:59 p.m., New York City time, on such date, (iii) the Business Day following the date of mailing, if sent by nationally recognized overnight courier service or (iv) actual receipt by the party to whom such notice is required to be given. The addresses for such communications shall be with respect to each Holder at its address set forth under its name on Schedule 1 attached hereto, or with respect to the Company, addressed to: World Wide Wireless Communications Inc. -16- 520 Third Street Suite 101 Oakland, California 94607 Attention: Douglas P. Haffer Telephone No.: (510) 839-6100 Facsimile No.: (510) 839-7088 or to such other address or addresses or facsimile number or numbers as any such party may most recently have designated in writing to the other parties hereto by such notice. Copies of notices to any Holder shall be sent to Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York 10038-4982, Attention: James R. Tanenbaum, Esq., Telephone No.: (212) 806-5400, Facsimile No.: (212) 806-6006. Copies of notices to the Company shall be sent to Evers & Hendrickson, LLP, 155 Montgomery, 12th Floor, San Francisco, California 94104, Attention: William D. Evers, Esq., Telephone No.: (415) 772-8100, Facsimile No.: (415) 772-8101. (h) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns and shall inure to the benefit of each Holder and its successors and assigns. The Company may not assign this Agreement or any of its rights or obligations hereunder without the prior written consent of each Holder. Each Purchaser may assign its rights hereunder in the manner and to the Persons as permitted under the Purchase Agreement. (i) Assignment of Registration Rights. The rights of each Holder hereunder, including the right to have the Company register for resale Registrable Securities in accordance with the terms of this Agreement, shall be automatically assignable by each Holder to any Affiliate of such Holder, any other Holder or Affiliate of any other Holder of all or a portion of the Securities or the Registrable Securities if: (i) the Holder agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the Company within a reasonable time after such assignment, (ii) the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of (a) the name and address of such transferee or assignee, and (b) the securities with respect to which such registration rights are being transferred or assigned, (iii) following such transfer or assignment the further disposition of such securities by the transferee or assignee is restricted under the Securities Act and applicable state securities laws, (iv) at or before the time the Company receives the written notice contemplated by clause (ii) of this Section, the transferee or assignee agrees in writing with the Company to be bound by all of the provisions of this Agreement, and (v) such transfer shall have been made in accordance with the applicable requirements of the Purchase Agreement. In addition, each Holder shall have the right to assign its rights hereunder to any other Person with the prior written consent of the Company, which consent shall not be unreasonably withheld. The rights to assignment shall apply to the Holders (and to subsequent) successors and assigns. (j) Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and, all of which taken together shall constitute one and the same Agreement. In the event that any signature is -17- delivered by facsimile transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature were the original thereof. (k) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to principles of conflicts of law thereof. (l) Cumulative Remedies. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. (m) Severability. If any term, provision, covenant or restriction of this Agreement is held to be invalid, illegal, void or unenforceable in any respect, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. (n) Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. (o) Shares Held by the Company and its Affiliates. Whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Company or its Affiliates (other than any Holder or transferees or successors or assigns thereof if such Holder is deemed to be an Affiliate solely by reason of its holdings of such Registrable Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. [Remainder of Page Intentionally Left Blank] -18- IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights Agreement to be duly executed by their respective authorized persons as of the date first indicated above. WORLD WIDE WIRELESS COMMUNICATIONS, INC. By: /s/ Doug Haffer ----------------------------------- Name: Douglas P. Haffer Title: President ESQUIRE TRADING & FINANCE, INC. By: /s/ Roland Wineger ----------------------------------- Name: Roland Wineger Title: Director AMRO INTERNATIONAL, S.A. By: /s/ H. U. Bachofer ----------------------------------- Name: H. U. Bachofer Title: Director CELESTE TRUST REG. By: /s/ Thomas Hackl ----------------------------------- Name: Thomas Hackl Title: Representative THE ENDEAVOR CAPITAL FUND, S.A. By: Endeavor Management, Inc. By: /s/ Shmuli Margulies ----------------------------------- Name: Shmuli Margulies Title: Director -19- THE KESHET FUND, L.P. By: /s/ David Grin ----------------------------------- Name: David Grin Title: KESHET, L.P. By: /s/ David Grin ----------------------------------- Name: David Grin Title: NESHER, LTD. By: /s/ J.D. Clarke ----------------------------------- Name: J. D. Clarke Title: Director -20- EX-10.16 24 0024.txt ESCROW AGREEMENT 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 -2- 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 -3- as specified in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled, or (B) provided the Transfer Agent is participating in The Depository Trust Company ("DTC") Fast Automated Securities Transfer Program, upon the request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder shall be entitled to the Holder's or its designee's balance account with DTC through its Deposit Withdrawal Agent Commission system. If the Aggregate Stated Value of shares of Series A Preferred Stock represented by the Preferred Stock Certificate(s) submitted for conversion, as may be required pursuant to Section 6(b)(iv), is greater than the Aggregate Stated Value of shares of Series A Preferred Stock being converted, then the Company shall, as soon as practicable and in no event later than the Delivery Date and at its own expense, issue and deliver to the Holder a new Preferred Stock Certificate representing the Aggregate Stated Value of Series A Preferred Stock not converted. (ii) In no event shall a Holder be permitted to convert in excess of such Aggregate Stated Value of Series A Preferred Stock upon the conversion of which, (x) the number of shares of Common Stock owned by such Holder (other than shares of Common Stock issuable upon conversion of Series A Preferred Stock or upon exercise of the Warrants (as defined in the Securities Purchase Agreement)) plus (y) the number of shares of Common Stock issuable upon such conversion of such shares of Series A Preferred Stock and the number of shares of Common Stock issuable upon conversion of Debentures (as defined below) held by such Holder, would be equal to or exceed (z) 9.999% of the number of shares of Common Stock then issued and outstanding, including shares issuable on conversion of the shares of Series A Preferred Stock held by such Holder after application of this Section 6(a)(ii). As used herein, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder. To the extent that the limitation contained in this Section 6(a)(ii) applies, the determination of whether shares of Series A Preferred Stock are convertible (in relation to other securities owned by a Holder) and of which shares of Series A Preferred Stock are convertible shall be in the sole discretion of such Holder, and the submission of shares of Series A Preferred Stock for conversion shall be deemed to be such Holder's determination of whether such shares of Series A Preferred Stock are convertible (in relation to other securities owned by a Holder) and of which shares of Series A Preferred Stock are convertible, in each case subject to such aggregate percentage limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. Nothing contained herein shall be deemed to restrict the right of a Holder to convert such shares of Series A Preferred Stock at such time as such conversion will not violate the provisions of this paragraph. The provisions of this Section 6(a)(ii) may be waived by a Holder as to itself (and solely as to itself) upon not less than 75 days prior notice to the Company, and the provisions of this Section 6(a)(ii) shall continue to apply until such 75th day (or later, if stated in the notice of waiver). No conversion in violation of this paragraph but otherwise in accordance with this Certificate of Designation shall affect the status of the securities issued upon such conversion as validly issued, fully-paid and nonassessable. -4- (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 -5- 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 -6- to require physical surrender of the certificate representing the shares of Series A Preferred Stock upon each such conversion. In the event of any dispute or discrepancy, such records of the Company shall be controlling and determinative in the absence of manifest error. Notwithstanding the foregoing, if shares of Series A Preferred Stock represented by a certificate are converted as aforesaid, the Holder may not transfer the certificate representing the shares of Series A Preferred Stock unless the Holder first physically surrenders the certificate representing the shares of Series A Preferred Stock to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new certificate of like tenor, registered as the Holder may request, representing in the aggregate the remaining Aggregate Stated Value of shares of Series A Preferred Stock represented by such certificate. (c) (i) The conversion price for the shares of Series A Preferred Stock (the "Conversion Price") in effect on any Conversion Date shall be the lesser of (A) an amount equal to 110% of the average Per Share Market Value for the five (5) consecutive Trading Days immediately preceding the Original Issue Date (the "Fixed Conversion Price") and (B) an amount equal to 85% of the average Per Share Market Value for the five (5) consecutive Trading Days immediately prior to the Conversion Date; provided, however, that, in any Conversion Notice, a Holder may specify a Conversion Price higher than the Conversion Price then in effect; provided further that, if during any period (a "Black-out Period"), a Holder is unable to trade any Common Stock issued or issuable upon conversion of shares of Series A Preferred Stock immediately due to the postponement of filing or delay or suspension of effectiveness of a registration statement or because the Company has otherwise informed such Holder that an existing prospectus cannot be used at that time in the sale or transfer of such Common Stock, such Holder shall have the option but not the obligation on any Conversion Date within ten Trading Days following the expiration of the Black-out Period of using the Conversion Price applicable on such Conversion Date or any Conversion Price selected by such Holder that would have been applicable had such Conversion Date been at any earlier time during the Black-out Period or within the ten Trading Days thereafter; provided further, that in no event shall the Conversion Price be below the Floor Price. "Floor Price" shall mean $2.00 for the period beginning on the Original Issue Date and ending on the six month anniversary of the Original Issue Date, $1.27 for the period beginning on the six month anniversary of the Original Issue Date and ending on the eighteen month anniversary of the Original Issue Date, and zero thereafter. Notwithstanding the foregoing, if the Company's revenues for the fiscal year ending December 31, 2000, as shown in the Company's Annual Report on Form 10-K for the fiscal year ending December 31, 2000, are less than $13.5 million, then from and after the first anniversary of the Original Issue Date the Floor Price shall be zero. (ii) If the Company, at any time while any shares of Series A Preferred Stock are outstanding, (a) shall pay a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity security payable in shares of Common Stock, (b) subdivide outstanding shares of Common Stock into a larger number of shares, (c) combine outstanding shares of Common Stock into a -7- 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 -8- Value determined as of the record date fixed for determination of stockholders entitled to receive such distribution, and of which the numerator shall be such Per Share Market Value on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of Common Stock as determined by the Board of Directors in good faith; provided, however, that in the event of a distribution exceeding ten percent of the net assets of the Company, such fair market value shall be determined by an Independent Appraiser (as defined below) selected in good faith by the holders of a majority in interest of the Aggregate Stated Value of shares of Series A Preferred Stock plus the Aggregate Principal Amount (as defined in the Debenture) of Debentures then outstanding; and provided, further, that the Company, after receipt of the determination by such Independent Appraiser, shall have the right to select an additional Independent Appraiser, in good faith, in which case the fair market value shall be equal to the average of the determinations by each such Independent Appraiser. In either case the adjustments shall be described in a statement provided to the Holders of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above. (v) If the Company at any time subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Fixed Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. If the Company at any time combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Fixed Conversion Price in effect immediately prior to such combination will be proportionately increased. (vi) If the Company in any manner issues or sells Convertible Securities or Options that are convertible into or exchangeable for Common Stock at a price which varies or may vary with the market price of the Common Stock, including by way of one or more reset(s) to a fixed price (each of the formulations for such variable price being herein referred to as, a "Variable Price"), and such Variable Price is not calculated using the same formula used to calculate the Conversion Price in effect immediately prior to the time of such issue or sale, the Company shall provide written notice thereof via facsimile and overnight courier to each holder of shares of Series A Preferred Stock ("Variable Notice") on the date of issuance of such Convertible Securities or Options. If a holder of shares of Series A Preferred Stock then outstanding provides written notice to the Company via facsimile and overnight courier (the "Variable Price Election Notice") within 10 Business Days of receiving a Variable Notice that such holder desires to replace the Conversion Price then in effect with the Variable Price described in such Variable Notice, then, from and after the date of the Company's receipt of the Variable Price Election Notice, the Conversion Price will automatically be replaced with the Variable Price for the shares of Series A Preferred Stock held by such holder. In the -9- event that a holder of shares of Series A Preferred Stock delivers a Conversion Notice after the Company's issuance of Convertible Securities with a Variable Price but before such holder's receipt of the Company's Variable Notice, then such holder shall have the option by written notice to the Company to rescind such Conversion Notice or to have the Conversion Price be equal to such Variable Price for the conversion effected by such Conversion Notice. As used herein, (A) "Convertible Securities" means any stock or securities (other than Options) directly or indirectly convertible into or exchangeable for Common Stock and (B) "Options" means any rights, warrants or options to subscribe for or purchase Common Stock or Convertible Securities. (vii) All calculations under this Section 6 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. (viii) Whenever the Conversion Price is adjusted pursuant to Section 6(c)(ii), (iii) (iv), (v) or (vi) (for purposes of this Section 6(c)(viii), each an "adjustment"), the Company shall cause its Chief Financial Officer to prepare and execute a certificate setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated (including a description of the basis on which the Board made any determination hereunder), and the Conversion Price after giving effect to such adjustment, and shall cause copies of such certificate to be delivered to each Holder promptly after each adjustment. Any dispute between the Company and the Holders with respect to the matters set forth in such certificate may at the option of the Holders be submitted to one of the national accounting firms currently known as the "big five" selected by the holders of a majority in interest of the Aggregate Stated Value of shares of Series A Preferred Stock plus the Aggregate Principal Amount of Debentures then outstanding, provided that the Company shall have ten days after receipt of notice from such Holders of their selection of such firm to object thereto, in which case the holders of a majority in interest of the Aggregate Stated Value of shares of Series A Preferred Stock plus the Aggregate Principal Amount of Debentures then outstanding shall select another such firm and the Company shall have no such right of objection. The firm selected by the holders of a majority in interest of the Aggregate Stated Value of shares of Series A Preferred Stock plus the Aggregate Principal Amount of Debentures then outstanding as provided in the preceding sentence shall be instructed to deliver a written opinion as to such matters to the Company and the Holders within thirty days after submission to it of such dispute. Such opinion shall be final and binding on the parties hereto. The fees and expenses of such accounting firm shall be paid by the Company. (ix) In case the Company after the Original Issue Date shall do any of the following (each, a "Major Transaction") (a) consolidate with or merge into any other person and the Company shall not be the continuing or surviving person of such consolidation or merger, or (b) permit any other person to consolidate with or merge into the Company and the Company shall be the continuing or surviving person but, in connection with such consolidation or merger, any capital stock of the Company shall be changed into or exchanged for securities of any other person or cash or any other -10- 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 -11- 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. -12- (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. -13- 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 -14- 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: -15- "Aggregate Stated Value" means, with respect to the shares of Series A Preferred Stock, the sum of (a) the stated value thereof, plus (b) accumulated but unpaid dividends thereon (whether or not earned or declared). "Common Stock" means the common stock, $.001 par value per share, of the Company and stock of any other class into which such shares may hereafter have been reclassified or changed. "Conversion Ratio" means the number of shares of Common Stock issuable upon conversion of each share of Series A Preferred Stock determined by the application of the following formula where "D" equals the accumulated and unpaid dividends on the Aggregate Stated Value of shares of Series A Preferred Stock so converted as of the Conversion Date: Aggregate Stated Value to be Converted + D ------------------------------------------ Conversion Price "Debenture" shall have the meaning ascribed to it in the Securities Purchase Agreement. "Independent Appraiser" means a nationally recognized or major regional investment banking firm or firm of independent certified public accountants of recognized standing (which may be the firm that regularly examines the financial statements of the Company) that is regularly engaged in the business of appraising the capital stock or assets of corporations or other entities as going concerns, and which is not affiliated with either the Company or any Holder. "Junior Securities" means the Common Stock and all other equity securities of the Company which are junior in rights and liquidation preference to the Series A Preferred Stock. "Maturity Date" shall mean April __, 2005. "Original Issue Date" shall mean the date of the first issuance of any shares of Series A Preferred Stock regardless of the number of transfers of any particular shares of Series A Preferred Stock and regardless of the number of certificates which may be issued to evidence such shares of Series A Preferred Stock. "Per Share Market Value" means on any particular date (a) the closing bid price per share of the Common Stock on such date on The Nasdaq SmallCap Market, the Nasdaq National Market or other registered national stock exchange on which the Common Stock is then listed or if there is no such price on such date, then the closing bid price on such exchange or quotation system on the date nearest preceding such date, or (b) if the Common Stock is not listed then on The Nasdaq Small-Cap Market, the Nasdaq National Market or any registered national stock exchange, the closing bid price for a share of Common Stock in the over-the-counter market (as reported by NASDAQ or in the National Quotation Bureau Incorporated or similar organization or agency succeeding to its functions of reporting prices) at the close of business on such date, or (c) if the Common Stock is not then reported by the National Quotation Bureau Incorporated (or similar organization or agency succeeding to its functions of reporting prices), then the average -16- of the over-the-counter quotes on the Electronic Bulletin Board of the National Association of Securities Dealers, Inc. for the relevant conversion period, as determined in good faith by the Holder, or (d) if the Common Stock is not then publicly traded, then the fair market value of a share of Common Stock as determined by an Independent Appraiser selected in good faith by the holders of a majority in interest of the shares of Series A Preferred Stock plus the Aggregate Principal Amount of Debentures then outstanding; provided, however, that the Company, after receipt of the determination by such Independent Appraiser, shall have the right to select an additional Independent Appraiser, in which case, the fair market value shall be equal to the average of the determinations by each such Independent Appraiser; and provided, further that all determinations of the Per Share Market Value shall be appropriately adjusted for any stock dividends, stock splits or other similar transactions during such period. The determination of fair market value by an Independent Appraiser shall be based upon the fair market value of the Company determined on a going concern basis as between a willing buyer and a willing seller and taking into account all relevant factors determinative of value, and shall be final and binding on all parties. In determining the fair market value of any shares of Common Stock, no consideration shall be given to any restrictions on transfer of the Common Stock imposed by agreement or by federal or state securities laws, or to the existence or absence of, or any limitations on, voting rights. "Person" means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. "Registration Rights Agreement" means the Registration Rights Agreement, dated as of the Original Issue Date, by and among the Company and the original Holders. "Securities Purchase Agreement" means the Securities Purchase Agreement, dated April __, 2000 among the Company and the original holders of the Debentures. "Trading Day" means (a) a day on which the Common Stock is traded on the Nasdaq National Market, The Nasdaq SmallCap Market or other registered national stock exchange on which the Common Stock has been listed, or (b) if the Common Stock is not listed on the Nasdaq National Market, The Nasdaq SmallCap Market or any registered national stock exchange, a day or which the Common Stock is traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (c) if the Common Stock is not quoted on the OTC Bulletin Board, a day on which the Common Stock is quoted in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding its functions of reporting prices); provided, however, that in the event that the Common Stock is not listed or quoted as set forth in (a), (b) and (c) hereof, then Trading Day shall mean any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other government action to close. -17- "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. -18- 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. -19- IN WITNESS WHEREOF, we have subscribed this document on the date indicated below and do hereby affirm, under the penalties of perjury, that the statements contained therein have been examined by us and are true and correct. Dated: April ___, 2000 __________________________________ Name: Title: __________________________________ Name: Title: ATTEST: __________________________________ Name: Title: -20- 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 ___, 2000 from the Company and acknowledged and agreed to by [TRANSFER AGENT]. WORLD WIDE WIRELESS COMMUNICATIONS, INC. By: ____________________________________ Name: Title: EX-10.17 25 0025.txt CONVERTIBLE DEBENTURE THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. WORLD WIDE WIRELESS COMMUNICATIONS, INC. (Incorporated in the State of Nevada) 4% CONVERTIBLE DEBENTURE DUE 2005 No. CD-__ Principal Amount U.S. $_____________ Original Issue Date: April 14, 2000 FOR VALUE RECEIVED, World Wide Wireless Communications, Inc., a corporation duly incorporated and existing under the laws of the State of Nevada (the "Company"), hereby promises to pay to the order of ______________________, or registered assigns (hereinafter, the "Holder"), the principal sum of ______________________ United States Dollars ($________________) on April 14, 2005 (the "Maturity Date"), subject to earlier conversion, redemption or exchange as provided herein. The Debentures will be convertible into shares of common stock, par value $.001 per share, of the Company ("Common Stock") on the terms and subject to the conditions hereinafter set forth at any time after the date hereof. Interest shall be paid on the unpaid principal balance of this Debenture at the rate of 4% per annum from the date hereof, payable, in the manner set forth below, upon conversion, redemption or maturity of this Debenture to the person that is the Holder on the date of such event. Interest hereon shall be calculated on the basis of a 360 day year and the actual number of days elapsed. 1. General. (a) This Debenture is one of a duly authorized issue of Debentures of the Company in original aggregate principal amount of $4,592,000 designated as its 4% Convertible Debentures due 2005 (herein called the "Debentures"), issued pursuant to the authorization of the Board of Directors of the Company and issued pursuant to a Securities Purchase Agreement, dated April 14, 2000, by and among the Company and the Purchasers identified therein (the "Securities Purchase Agreement"). The Securities Purchase Agreement contains certain additional terms that are binding upon the Company and each holder of the Debentures. (b) The Debentures are issuable, without coupons, in principal denominations of U.S. $1,000 and integral multiples thereof. The Debentures, and transfers thereof, shall be in registered form. The registered holder of a Debenture shall (to the fullest extent permitted by applicable law) be treated at all times, by all persons and for all purposes as the absolute owner of such Debenture, regardless of any notice of ownership, theft or loss or of any writing thereon. 2. Principal. The Aggregate Principal Amount (as defined in Section 7) of this Debenture shall be converted into shares of Common Stock on the Maturity Date in accordance with the terms hereof. The Company may not prepay all or any portion of this Debenture, except as specifically provided herein. 3. Interest. Each Debenture shall be entitled to receive interest at the rate of 4.0% per annum, compounded semi-annually, on the Aggregate Principal Amount thereof. Such interest shall be due and payable upon conversion, redemption or maturity of this Debenture. Interest shall accrue from the Original Issue Date (as defined herein), whether or not earned or declared, until maturity or such time as the Debenture has been converted, exchanged or redeemed as herein provided. Interest is payable on the Debentures on the last day of June and December of each year by increasing the Aggregate Principal Amount of the Debentures by the amount of such interest. Such increase in the Aggregate Principal Amount shall constitute full payment of such interest. When any interest is added to the Aggregate Principal Amount, such interest shall, for all purposes of this Debenture, be deemed to be part of the Aggregate Principal Amount for purposes of determining interest thereafter payable hereunder and amounts thereafter convertible into Common Stock hereunder, and all references herein to the Aggregate Principal Amount shall mean the Aggregate Principal Amount, as adjusted pursuant to this Section 3. The interest so payable will be paid to the person in whose name the Debenture (or one or more predecessor debentures) is registered on the records of the Company regarding registration and transfers of the Debentures; provided, however, that the Company's obligation to a transferee of a Debenture arises only if such transfer, sale or other disposition is made in accordance with the terms and conditions hereof and the Securities Purchase Agreement. 4. Conversion at the Option of the Holder. (a) (i) The Debentures shall be convertible into shares of Common Stock (subject to Section 4(a)(ii)) at the Conversion Ratio (as defined in Section 7) at the option of the holder of the Debentures in whole or in part at any time. If any Debentures remain outstanding on the Maturity Date, then all such Debentures shall be converted at the Conversion Ratio as of such date in accordance with this Section 4. To convert Debentures into shares of Common Stock on any date, the Holder hereof shall (A) transmit by facsimile (or otherwise deliver), for receipt on or prior to 11:59 p.m., Eastern time, on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit 1 (the "Conversion Notice") to the Company with a copy thereof to the Company's designated transfer agent (the "Transfer Agent") and (B) if required by Section 4(b)(iv), surrender to a common carrier for delivery to the Transfer Agent as soon as practicable following such date the original Debentures representing the Debentures being converted (or an indemnification undertaking with respect to such shares in the case of their loss, theft or destruction) (the "Debenture Certificates"). Each Conversion Notice shall specify the Aggregate Principal Amount of Debentures to be converted. The date as of which such conversion is to be effected shall be the date the Holder delivers such Conversion Notice by facsimile (the "Conversion Date")(if such date is not a Business Day, then the Conversion Date will be the next following Business Day). Subject to Section 4(b) hereof, each Conversion Notice, once given, shall be irrevocable. Upon receipt by the Company of a copy of a Conversion Notice, the Company shall (1) as soon as practicable, but in no event later than within one (1) Business Day, send, via facsimile, a confirmation of receipt of such Conversion Notice to such Holder and the Transfer Agent, which confirmation shall constitute an instruction -2- to the Transfer Agent to process such Conversion Notice in accordance with the terms herein and (2) on or before the second (2nd) Trading Day following the date of receipt by the Company of such Conversion Notice (the "Delivery Date"), (A) issue and deliver to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled, or (B) provided the Transfer Agent is participating in The Depository Trust Company ("DTC") Fast Automated Securities Transfer Program, upon the request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder shall be entitled to the Holder's or its designee's balance account with DTC through its Deposit Withdrawal Agent Commission system. If the Aggregate Principal Amount of Debentures represented by the Debenture Certificate(s) submitted for conversion, as may be required pursuant to Section 4(b)(iv), is greater than the Aggregate Principal Amount of Debentures being converted, then the Company shall, as soon as practicable and in no event later than the Delivery Date and at its own expense, issue and deliver to the Holder a new Debenture Certificate representing the Aggregate Principal Amount of Debentures not converted. (ii) In no event shall a Holder be permitted to convert in excess of such Aggregate Principal Amount of Debentures upon the conversion of which, (x) the number of shares of Common Stock owned by such Holder (other than shares of Common Stock issuable upon conversion of Debentures or upon exercise of the Warrants (as defined in the Securities Purchase Agreement)) plus (y) the number of shares of Common Stock issuable upon such conversion of such Debentures, would be equal to or exceed (z) 9.999% of the number of shares of Common Stock then issued and outstanding, including shares issuable on conversion of the Debentures held by such Holder after application of this Section 4(a)(ii). As used herein, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder. To the extent that the limitation contained in this Section 4(a)(ii) applies, the determination of whether Debentures are convertible (in relation to other securities owned by a Holder) and of which Debentures are convertible shall be in the sole discretion of such Holder, and the submission of Debentures for conversion shall be deemed to be such Holder's determination of whether such Debentures are convertible (in relation to other securities owned by a Holder) and of which Debentures are convertible, in each case subject to such aggregate percentage limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. Nothing contained herein shall be deemed to restrict the right of a Holder to convert such Debentures at such time as such conversion will not violate the provisions of this paragraph. The provisions of this Section 4(a)(ii) may be waived by a Holder of Debentures as to itself (and solely as to itself) upon not less than 75 days prior notice to the Company, and the provisions of this Section 4(a)(ii) shall continue to apply until such 75th day (or later, if stated in the notice of waiver). No conversion in violation of this paragraph but otherwise in accordance with this Debenture shall affect the status of the securities issued upon such conversion as validly issued, fully-paid and nonassessable. -3- (b) (i) Not later than any Delivery Date, the Company will deliver to the applicable Holder by express courier (A) a certificate or certificates which shall be free of restrictive legends and trading restrictions (other than those required by Section 3.1(b) of the Securities Purchase Agreement) representing the number of shares of Common Stock being acquired upon the conversion of Debentures (subject to reduction pursuant to Section 4(a)(ii)) and (B) to the extent required pursuant to Section 4(b)(iv), a new Debenture Certificate representing the unconverted Aggregate Principal Amount. If in the case of any Conversion Notice such new Debenture or Debentures are not delivered to or as directed by the applicable Holder by the fifth (5th) Trading Day after the applicable Conversion Date, the Holder shall be entitled by written notice to the Company at any time on or before its receipt of such Debenture or Debentures thereafter, to rescind such conversion, whereupon the Company and the Holder shall each be restored to their respective positions immediately prior to the delivery of such notice of revocation, except that any amounts described in Sections 4(b)(ii) and (iii) shall be payable through the date notice of rescission is given to the Company. (ii) The Company understands that a delay in the delivery of the shares of Common Stock upon conversion of Debentures and failure to deliver a new Debenture representing the unconverted Aggregate Principal Amount beyond the Delivery Date could result in economic loss to the Holder. If the Company fails to deliver to the Holder such certificate or certificates pursuant to this Section hereunder by the Delivery Date for any reason, other than due to the action of the Holder, the Company shall pay to such Holder, in cash, an amount per Trading Day for each Trading Day the earlier of the date such certificates are delivered or the date the conversion is rescinded pursuant to Section 4(b)(i) above, together with interest on such amount at a rate of 15% per annum, accruing until such amount and any accrued interest thereon is paid in full, equal to (i) 1% of the Aggregate Principal Amount of the Debentures, plus the accrued and unpaid interest thereon, requested to be converted for the first five Trading Days after the Delivery Date and (ii) 2% of the Aggregate Principal Amount of the Debentures, plus the accrued and unpaid interest thereon, requested to be converted for each Trading Day thereafter (which amounts shall be paid as liquidated damages and not as a penalty). If the Company fails to deliver to the Holder such certificate or certificates pursuant to this Section prior to the 15th Trading Day after the Conversion Date, the Company shall, at the Holder's option, redeem in cash, from funds legally available therefor at the time of such redemption, all or a portion of the Aggregate Principal Amount of Debentures then held by such Holder, plus the accrued and unpaid interest thereon, as requested by such Holder, in cash. The redemption price shall be equal to the Aggregate Principal Amount of Debentures requested to be redeemed, plus accrued and unpaid interest thereon, multiplied by the greater of (A) 125% or (B) the applicable Conversion Ratio as of the date of such redemption multiplied by the greatest Per Share Market Value on any Trading Day during the period beginning on the Conversion Date and ending on the date of payment in full by the Company of such redemption price. If the Holder has requested that the Company redeem Debentures pursuant to this Section and the Company fails for any reason to pay the redemption price, as calculated pursuant to the immediately preceding sentence, within seven days after such notice is deemed delivered pursuant to Section 4(a)(i), the -4- Company will pay interest on the redemption price at a rate of 15% per annum, in cash to such Holder, accruing from such seventh day until the redemption price and any accrued interest thereon is paid in full (which amount shall be paid as liquidated damages and not as a penalty). Nothing herein shall limit a Holder's right to pursue actual damages for the Company's failure to deliver certificates representing shares of Common Stock upon conversion within the period specified herein (including, without limitation, damages relating to any purchase of shares of Common Stock by such Holder to make delivery on a sale effected in anticipation of receiving certificates representing shares of Common Stock upon conversion, such damages to be in an amount equal to (A) the aggregate amount paid by such Holder for the shares of Common Stock so purchased minus (B) the aggregate amount of net proceeds, if any, received by such Holder from the sale of the shares of Common Stock which would have been issued by the Company pursuant to such conversion), and such Holder shall have the right to pursue all remedies available to it at law or in equity (including, without limitation, a decree of specific performance and/or injunctive relief). (iii) In addition to any other rights available to the Holder, if the Company fails to deliver to the Holder such certificate or certificates pursuant to Section 4(b)(i) by the Delivery Date and if after the Delivery Date the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Holder of the Underlying Shares which the Holder anticipated receiving upon such conversion (a "Buy-In"), then the Company shall immediately pay in cash to the Holder (in addition to any remedies available to or elected by the Holder) the amount by which (A) the Holder's total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (B) the Aggregate Principal Amount of the Debentures for which such conversion was not timely honored, together with interest thereon at a rate of 15% per annum, accruing until such amount and any accrued interest thereon is paid in full (which amount shall be paid as liquidated damages and not as a penalty). For example, if the Holder purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of $10,000 Aggregate Principal Amount of Debentures, the Company shall be required to pay the Holder $1,000, plus interest. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In. (iv) Notwithstanding anything to the contrary set forth herein, upon conversion of Debentures in accordance with the terms hereof, the Holder thereof shall not be required to physically surrender the certificate representing the Debentures to the Company unless the entire Aggregate Principal Amount of Debentures represented by the certificate are being converted. The Holder and the Company shall maintain records showing the Aggregate Principal Amount of Debentures so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of the certificate representing the Debentures upon each such conversion. In the event of any dispute or discrepancy, such records of the Company shall be controlling and determinative in the absence of manifest error. Notwithstanding the foregoing, if Debentures represented by a certificate -5- are converted as aforesaid, the Holder may not transfer the certificate representing the Debentures unless the Holder first physically surrenders the certificate representing the Debentures to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new certificate of like tenor, registered as the Holder may request, representing in the aggregate the remaining Aggregate Principal Amount of Debentures represented by such certificate. (c) (i) The conversion price for the Debentures (the "Conversion Price") in effect on any Conversion Date shall be the lesser of (A) an amount equal to 110% of the average Per Share Market Value for the five (5) consecutive Trading Days immediately preceding the Original Issue Date (the "Fixed Conversion Price") and (B) an amount equal to 85% of the average Per Share Market Value for the five (5) consecutive Trading Days immediately prior to the Conversion Date; provided, however, that, in any Conversion Notice, a Holder may specify a Conversion Price higher than the Conversion Price then in effect; provided further that, if during any period (a "Black-out Period"), a Holder is unable to trade any Common Stock issued or issuable upon conversion of Debentures immediately due to the postponement of filing or delay or suspension of effectiveness of a registration statement or because the Company has otherwise informed such Holder that an existing prospectus cannot be used at that time in the sale or transfer of such Common Stock, such Holder shall have the option but not the obligation on any Conversion Date within ten Trading Days following the expiration of the Black-out Period of using the Conversion Price applicable on such Conversion Date or any Conversion Price selected by such Holder that would have been applicable had such Conversion Date been at any earlier time during the Black-out Period or within the ten Trading Days thereafter; provided further, that in no event shall the Conversion Price be below the Floor Price. "Floor Price" shall mean $2.00 for the period beginning on the Original Issue Date and ending on the six month anniversary of the Original Issue Date, $1.27 for the period beginning on the six month anniversary of the Original Issue Date and ending on the eighteen month anniversary of the Original Issue Date, and zero thereafter. Notwithstanding the foregoing, if the Company's revenues for the fiscal year ending December 31, 2000, as shown in the Company's Annual Report on Form 10-K for the fiscal year ending December 31, 2000, are less than $13.5 million, then from and after the first anniversary of the Original Issue Date the Floor Price shall be zero. (ii) If the Company, at any time while any Debentures are outstanding, (a) shall pay a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity security payable in shares of Common Stock, (b) subdivide outstanding shares of Common Stock into a larger number of shares, (c) combine outstanding shares of Common Stock into a smaller number of shares, or (d) issue by reclassification of shares of Common Stock any shares of capital stock of the Company, the Fixed Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section 4(c)(ii) shall become effective immediately after the record date for the -6- determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification. (iii) If the Company, at any time while Debentures are outstanding, shall sell or issue additional shares of Common Stock or rights or warrants to acquire shares of Common Stock at a price per share less than the Fixed Conversion Price, excluding any rights of the holder of the Debentures or the holders of the Warrants issued pursuant to the Securities Purchase Agreement to acquire Common Stock, the Fixed Conversion Price shall be multiplied by a fraction, of which the denominator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such shares, rights or warrants plus the number of additional shares of Common Stock offered for subscription or purchase, and of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such shares, rights or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered would purchase at such Fixed Conversion Price. Such adjustment shall be made whenever such shares, rights or warrants are issued, and shall become effective immediately after the issuance of such shares, rights or warrants or, if such rights or warrants are issued to stockholders of the Company, the record date for the determination of stockholders entitled to receive such rights or warrants. However, upon the expiration of any right or warrant to purchase Common Stock the issuance of which resulted in an adjustment in the Fixed Conversion Price pursuant to this Section 4(c)(iii), if any such right or warrant shall expire and shall not have been exercised, the Fixed Conversion Price shall immediately upon such expiration be re-computed and effective immediately upon such expiration be increased to the price which it would have been (but reflecting any other adjustments in the Fixed Conversion Price made pursuant to the provisions of this Section 4 after the issuance of such rights or warrants) had the adjustment of the Fixed Conversion Price made upon the issuance of such rights or warrants been made on the basis of offering for subscription or purchase only that number of shares of Common Stock actually purchased upon the exercise of such rights or warrants actually exercised. (iv) If the Company, at any time while Debentures are outstanding, shall distribute to all holders of Common Stock (and not to holders of Debentures) evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase any security (excluding those referred to in Sections 4(c)(ii) and (iii) above), then in each such case the Fixed Conversion Price shall be multiplied by a fraction of which the denominator shall be the Per Share Market Value determined as of the record date fixed for determination of stockholders entitled to receive such distribution, and of which the numerator shall be such Per Share Market Value on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of Common Stock as determined by the Board of Directors in good faith; provided, however, that in the event of a distribution exceeding ten percent of the net assets of the Company, such fair market value shall be determined by an Independent Appraiser (as defined below) selected in -7- good faith by the holders of a majority in interest of the Aggregate Principal Amount of Debentures then outstanding; and provided, further, that the Company, after receipt of the determination by such Independent Appraiser, shall have the right to select an additional Independent Appraiser, in good faith, in which case the fair market value shall be equal to the average of the determinations by each such Independent Appraiser. In either case the adjustments shall be described in a statement provided to the Holders of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above. (v) If the Company at any time subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Fixed Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. If the Company at any time combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Fixed Conversion Price in effect immediately prior to such combination will be proportionately increased. (vi) If the Company in any manner issues or sells Convertible Securities or Options that are convertible into or exchangeable for Common Stock at a price which varies or may vary with the market price of the Common Stock, including by way of one or more reset(s) to a fixed price (each of the formulations for such variable price being herein referred to as, a "Variable Price"), and such Variable Price is not calculated using the same formula used to calculate the Conversion Price in effect immediately prior to the time of such issue or sale, the Company shall provide written notice thereof via facsimile and overnight courier to each holder of Debentures ("Variable Notice") on the date of issuance of such Convertible Securities or Options. If a holder of Debentures then outstanding provides written notice to the Company via facsimile and overnight courier (the "Variable Price Election Notice") within 10 Business Days of receiving a Variable Notice that such holder desires to replace Fixed the Conversion Price then in effect with the Variable Price described in such Variable Notice, then, from and after the date of the Company's receipt of the Variable Price Election Notice, the Fixed Conversion Price will automatically be replaced with the Variable Price for the Debentures held by such holder. In the event that a holder of Debentures delivers a Conversion Notice after the Company's issuance of Convertible Securities with a Variable Price but before such holder's receipt of the Company's Variable Notice, then such holder shall have the option by written notice to the Company to rescind such Conversion Notice or to have the Conversion Price be equal to such Variable Price for the conversion effected by such Conversion Notice. As used herein, (A) "Convertible Securities" means any stock or securities (other than Options) directly or indirectly convertible into or exchangeable for Common Stock and (B) "Options" means any rights, warrants or options to subscribe for or purchase Common Stock or Convertible Securities. -8- (vii) All calculations under this Section 4 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. (viii) Whenever the Fixed Conversion Price is adjusted pursuant to Section 4(c)(ii), (iii) (iv), (v) or (vi) (for purposes of this Section 4(c)(viii), each an "adjustment"), the Company shall cause its Chief Financial Officer to prepare and execute a certificate setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated (including a description of the basis on which the Board made any determination hereunder), and the Conversion Price after giving effect to such adjustment, and shall cause copies of such certificate to be delivered to each Holder promptly after each adjustment. Any dispute between the Company and the Holders with respect to the matters set forth in such certificate may at the option of the Holders be submitted to one of the national accounting firms currently known as the "big five" selected by the holders of a majority in interest of the Aggregate Principal Amount of Debentures then outstanding, provided that the Company shall have ten days after receipt of notice from such Holders of their selection of such firm to object thereto, in which case the holders of a majority in interest of the Aggregate Principal Amount of Debentures then outstanding shall select another such firm and the Company shall have no such right of objection. The firm selected by the holders of a majority in interest of the Aggregate Principal Amount of Debentures then outstanding as provided in the preceding sentence shall be instructed to deliver a written opinion as to such matters to the Company and the Holders within thirty days after submission to it of such dispute. Such opinion shall be final and binding on the parties hereto. The fees and expenses of such accounting firm shall be paid by the Company. (ix) In case the Company after the Original Issue Date shall do any of the following (each, a "Major Transaction") (a) consolidate with or merge into any other person and the Company shall not be the continuing or surviving person of such consolidation or merger, or (b) permit any other person to consolidate with or merge into the Company and the Company shall be the continuing or surviving person but, in connection with such consolidation or merger, any capital stock of the Company shall be changed into or exchanged for securities of any other person or cash or any other property, or (c) transfer all or substantially all of its properties or assets to any other person, or (d) effect a capital reorganization or reclassification of its capital stock, the holders of the Debentures then outstanding shall have the right thereafter to convert such shares only into the shares of stock and other securities, cash and property receivable upon or deemed to be held by holders of Common Stock following such Major Transaction, and the holders of the Debentures shall be entitled upon such event to receive such amount of securities, cash or property as the shares of the Common Stock of the Company into which such Debentures could have been converted immediately prior to such Major Transaction would have been entitled; provided, however, that each Holder shall have the option to require the Company to redeem, from funds legally available therefor at the time of such redemption, such Aggregate Principal Amount of its Debentures at a price equal to the Aggregate Principal Amount of Debentures to be -9- redeemed, plus accrued and unpaid interest thereon, multiplied by the greater of (A) 125% or (B) the applicable Conversion Ratio as of the date of such redemption multiplied by the greatest Per Share Market Value on any Trading Day during the period beginning on the date of the closing or the date of the announcement, as the case may be, of the Major Transaction triggering such redemption right and ending on the date of payment in full by the Company of such redemption price. The entire redemption price shall be paid in cash. If the Holder has requested that the Company redeem Debentures pursuant to this Section and the Company fails for any reason to pay the redemption price, as calculated pursuant to the immediately preceding sentence, within five days after such notice is deemed delivered pursuant to the preceding sentence, the Company will pay interest on the redemption price at a rate of 15% per annum, in cash to such Holder, accruing from such seventh day until the redemption price and any accrued interest thereon is paid in full (which amount shall be paid as liquidated damages and not as a penalty). The terms of any such Major Transaction shall include such terms so as to continue to give to the holder of Debentures the right to receive the securities, cash or property set forth in this Section 4(c)(ix) upon any conversion or redemption following such Major Transaction. This provision shall similarly apply to successive Major Transactions. (x) If: A. the Company shall declare a dividend (or any other distribution) on its Common Stock; or B. the Company shall declare a special nonrecurring cash dividend on or a redemption of its Common Stock; or C. the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; or D. the approval of any stockholders of the Company shall be required in connection with any Major Transaction; or E. the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of Debentures, and shall cause to be mailed to the holders of Debentures at their last addresses as they shall appear upon the stock books of the Company, at least 30 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be -10- determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided, however, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. Holders are entitled to convert Debentures during the 30-day period commencing the date of such notice to the effective date of the event triggering such notice. (d) If at any time conditions shall arise by reason of action taken by the Company which in the opinion of the Board of Directors are not adequately covered by the other provisions hereof and which might materially and adversely affect the rights of the holders of Debentures (different than or distinguished from the effect generally on rights of holders of any class of the Company's capital stock) or if at any time any such conditions are expected to arise by reason of any action contemplated by the Company, the Company shall mail a written notice briefly describing the action contemplated and the material adverse effects of such action on the rights of the holders of Debentures at least 10 calendar days prior to the effective date of such action, and an Independent Appraiser selected by the holders of majority in interest of the Debentures shall give its opinion as to the adjustment, if any (not inconsistent with the standards established in this Section 4), of the Conversion Price (including, if necessary, any adjustment as to the securities into which Debentures may thereafter be convertible) and any distribution which is or would be required to preserve without diluting the rights of the holders of Debentures. The Board of Directors shall make the adjustment recommended forthwith upon the receipt of such opinion or opinions or the taking of any such action contemplated, as the case may be; provided, however, that no such adjustment of the Conversion Price shall be made which in the opinion of the Independent Appraiser giving the aforesaid opinion would result in an increase of the Conversion Price to more than the Conversion Price then in effect. (e) The Company covenants that it will at all times reserve and keep available out of its authorized and unissued Common Stock solely for the purpose of issuance upon conversion of Debentures free from preemptive rights or any other actual contingent purchase rights of persons other than the holders of Debentures, not less than 200% of such number of shares of Common Stock as shall (subject to any additional requirements of the Company as to reservation of such shares set forth in the Securities Purchase Agreement) be issuable (taking into account the adjustments of Section 4(c)) upon the conversion of all outstanding Debentures (without regard to any limitations on conversions or exercise thereof). The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid, nonassessable and freely tradable. (f) Upon a conversion hereunder the Company shall not be required to issue stock certificates representing fractions of shares of Common Stock, but may if otherwise permitted, make a cash payment in respect of any final fraction of a share based on the Per Share Market Value at such time. If the Company elects not, or is unable, to make such a cash payment, the -11- Holder shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock. (g) The issuance of certificates for shares of Common Stock on conversion of Debentures shall be made without charge to the holders thereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate. (h) Debentures converted into Common Stock shall be canceled and retired by the Company. (i) Whenever notice is required to be given under this Debenture, unless otherwise provided herein, such notice shall be given in accordance with Section 5.3 of the Securities Purchase Agreement. (j) In the event a Holder shall elect to convert any Debentures as provided herein, the Company cannot refuse conversion based on any claim that such Holder or any one associated or affiliated with such Holder has been engaged in any violation of law, contract, agreement or for any other reason, unless, an injunction from a court, on notice, restraining and/or adjoining conversion of all or of said Debentures shall have been issued and the Company posts a surety bond for the benefit of such Holder in the amount equal to 130% of the Aggregate Principal Amount of Debentures sought to be converted, which bond shall remain in effect until the completion of arbitration/litigation of the dispute and the proceeds of which shall be payable to such Holder in the event it obtains judgment. 5. Company Exchange. At any time or times beginning on the date of receipt of Shareholder Approval (as defined in the Securities Purchase Agreement), the Company shall have the right, in its sole discretion, to require that some or all of the outstanding Aggregate Principal Amount of the Debentures be exchanged (a "Company Exchange") for shares of Series A Convertible Preferred Stock of the Company (the "Preferred Stock") having an Aggregate Stated Value (as defined in the Certificate of Designation) equal to the Aggregate Principal Amount of the Debentures to be exchanged; provided that the Conditions to Exchange at the Company's Election (as set forth below) are satisfied as of the Company Exchange Date (as defined below). The Company may exercise its right to Company Exchange only by providing each holder of Debentures written notice ("Notice of Company Exchange") at least 10 Business Days but not more than 20 Business Days prior to the date of consummation of such Company Exchange ("Company Exchange Date"). If the Company elects to require exchange of some, but not all, of the Aggregate Principal Amount of the Debentures then outstanding, the Company shall require exchange of the pro rata amount from each holder of such Debentures based on the principal amount of Debentures purchased by such holder relative to the aggregate principal amount of Debentures purchased on the Original Issue Date (such amount with respect to each holder being referred to herein as its "Pro Rata Exchange Amount"). The Notice of Company Exchange shall indicate (x) the Aggregate Principal Amount of the Debentures the Company has elected to exchange from all holders of Debentures, (y) the date selected by the Company for the Company Exchange Date, and (z) each holder's Pro Rata Exchange Amount of the Aggregate Principal Amount of Debentures selected for exchange. If the Company has exercised its right of -12- Company Exchange and the conditions of this Section 5, including the Conditions to Exchange at the Company's Election, have been satisfied, then each holder's Pro Rata Exchange Amount of the Aggregate Principal Amount of Debentures selected for exchange which remain outstanding on the Company Exchange Date shall be exchanged as of the Company Exchange Date by delivery by the Company to each such holder of Debentures of one or more stock certificates representing the Aggregate Stated Value of shares of Preferred Stock issuable upon such Company Exchange to such holder. If required by Section 4(b)(iv), all such holders of the Aggregate Principal Amount of Debentures being exchanged shall thereupon, surrender all Debentures being exchanged on such date to the Company. If the Company fails to deliver the stock certificates as required in the second preceding sentence on the Company Exchange Date with respect to the Aggregate Principal Amount of Debentures selected for exchange, then the Company Exchange shall be null and void with respect to such Aggregate Principal Amount of Debentures and the Holder shall be entitled to all the rights of a holder of outstanding Debentures. All Debentures that are required to be surrendered for exchange in accordance with the provisions of this Section 5 shall, from and after the Company Exchange Date, be deemed to have been retired and canceled and the Aggregate Principal Amount of Debentures represented thereby exchanged for an equal Aggregate Stated Value of Preferred Stock for all purposes, notwithstanding the failure of the Holder to surrender such Debentures on or prior to such date. "Conditions to Exchange at the Company's Election" means the following conditions: (i) Shareholder Approval shall have been obtained by the Company; (ii) the Certificate of Amendment and Certificate of Designation (as each is defined in the Securities Purchase Agreement) have been filed and accepted for filing with the Secretary of State of the State of Nevada; (iii) the Board of Directors of the Company shall have authorized the issuance of the Preferred Stock; (iv) during the period beginning on the Original Issue Date and ending on and including the Company Exchange Date, the Company shall have delivered the applicable Underlying Shares upon conversion of the Debentures to the holders of the Debentures within three (3) Business Days of the applicable Conversion Date; (v) during the period beginning on and including the Original Issue Date and ending on and including the Company Exchange Date, there shall not have occurred (A) an Event (as defined in the Registration Rights Agreement) or (B) an event that with the passage of time and without being cured would constitute an Event; (vi) during the period beginning on and including the Original Issue Date and ending on and including the Company Exchange Date, there shall not have occurred (A) an Event of Default or (B) an event that with the passage of time and without being cured would constitute an Event of Default; and (vii) during the period beginning on the Original Issue Date and ending on and including the Company Exchange Date, there shall not have occurred a Major Transaction which the Company has not publicly and accurately announced as being consummated, terminated or abandoned. If the Company fails to timely deliver any stock certificates representing the shares of Preferred Stock in accordance with this Section 5, then the Company shall not be permitted to submit another Notice of Company Exchange without the prior written consent of the holders of at least two-thirds (3/4) of the Aggregate Principal Amount of the Debentures then outstanding. 6. Events of Default. Each of the following shall constitute an event of default ("Event of Default"), whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be -13- effected by operation of law or pursuant to any judgment or order of any court or any order, rule or regulation of any administrative, governmental or non-governmental body or otherwise howsoever: (a) the Company shall default in any payment of any amounts due under the Transaction Documents when and as due (whether at maturity, upon acceleration or otherwise); or (b) the Company shall fail duly to perform or observe any term, covenant or agreement contained in any of the Debentures or in the Securities Purchase Agreement or in the Registration Rights Agreement for a period of seven days after the date on which written notice of such failure shall first have been given to the Company; or (c) (i) a final judgment shall be entered by any court against the Company for the payment of money which together with all other outstanding final judgments against the Company exceeds $150,000 in the aggregate, or (ii) a warrant of attachment or execution or similar process shall be issued or levied against any of the Company's property which exceeds in value $150,000 in the aggregate, and if, within 30 days after the entry, issue or levy thereof, such judgment, warrant or process shall not have been paid or discharged; or (d) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable bankruptcy, insolvency, reorganization or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company or for any substantial part of the property of it or ordering the winding-up or liquidation of the affairs of it and such decree or order shall remain unstayed and in effect for a period of 30 days; or (e) the Company shall commence a voluntary case or proceeding under any applicable bankruptcy, insolvency, reorganization or other similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or similar official) of the Company or for any substantial part of its property, or shall make any general assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts as they become due or shall take any corporate action in furtherance of any of the foregoing; or (f) an event of default, as defined in any indenture or instrument evidencing or under which the Company shall have outstanding indebtedness for borrowed money in excess of $150,000, inclusive of accrued interest, accrued premium, if any, or any additional amounts payable, shall happen and be continuing and such default shall involve the failure to pay the principal of such indebtedness (or any part thereof), when due and payable after the expiration of any applicable grace period with respect thereto, or such indebtedness shall have been accelerated so that the same shall be or become due and payable prior to the date on which the same would otherwise have become due and payable, and failure to pay shall not have been -14- cured by the Company within 30 days after such failure or such acceleration shall not be rescinded or annulled within 30 days after notice thereof shall have first been given to the Company; provided that if such event of default under such indenture or instrument shall be remedied or cured by the Company or waived by the holders of such indebtedness, then the Event of Default hereunder by reason thereof shall be deemed likewise to have been thereupon remedied, cured or waived without further action upon the part of any of the holders of Debentures; or (g) trading in the Common Stock shall have been suspended for more than ten Trading Days or the Common Stock is delisted from any principal market or exchange (including, but not limited to, the OTC Bulletin Board, The Nasdaq SmallCap Market and the Nasdaq National Market) on which the Common Stock is then listed for trading; or (h) the Company fails to timely deliver the shares of Common Stock to the Holder or a replacement Debenture representing any unconverted portion of this Debenture pursuant to this Debenture; or (i) the issuance by the Securities and Exchange Commission of any stop order suspending the effectiveness of the Registration Statement covering any or all of the Registrable Securities (as defined in the Registration Rights Agreement) or the initiation of any proceedings for that purpose. With the exception of an Event of Default specified in clauses (d) or (e) above, upon the occurrence and continuance of an Event of Default, the Holder may declare the Aggregate Principal Amount of and interest on the Debentures and all other amounts owing under the Transaction Documents to be forthwith due and payable by giving written notice thereof to the Company without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived, anything in the Transaction Documents to the contrary notwithstanding. Upon the occurrence and continuance of an Event of Default specified in clauses (d) or (e) above, such principal, interest and other amounts shall thereupon and concurrently therewith become automatically due and payable all without any action by the Holder and without presentment, demand, protest or other notice of any kind, all of which are expressly waived, anything in the Transaction Documents to the contrary notwithstanding. Interest on overdue principal and interest (and other amounts, if any) shall accrue from the date on which such principal and interest (and other amounts, if any) were due and payable to the date such principal and interest (and other amounts, if any) are paid or duly provided for, at a rate of 15% per annum (to the extent payment of such interest shall be legally enforceable). 7. Definitions. For the purposes hereof, the following terms shall have the following meanings: "Aggregate Principal Amount" means, with respect to the Debentures, the sum of (a) the principal amount thereof, plus (b) accrued but unpaid interest thereon (whether or not earned or declared). -15- "Common Stock" means the common stock, $.001 par value per share, of the Company and stock of any other class into which such shares may hereafter have been reclassified or changed. "Conversion Ratio" means the number of shares of Common Stock issuable upon conversion of each Debenture determined by the application of the following formula where "D" equals the accrued and unpaid interest on the Aggregate Principal Amount of Debentures so converted (not previously added to the Aggregate Principal Amount pursuant to Section 2 hereof) as of the Conversion Date: Aggregate Principal Amount to be Converted + D ---------------------------------------------- Conversion Price "Independent Appraiser" means a nationally recognized or major regional investment banking firm or firm of independent certified public accountants of recognized standing (which may be the firm that regularly examines the financial statements of the Company) that is regularly engaged in the business of appraising the capital stock or assets of corporations or other entities as going concerns, and which is not affiliated with either the Company or any Holder. "Original Issue Date" shall mean the date of the first issuance of any Debentures regardless of the number of transfers of any particular Debentures and regardless of the number of certificates which may be issued to evidence such Debentures. "Per Share Market Value" means on any particular date (a) the closing bid price per share of the Common Stock on such date on The Nasdaq SmallCap Market, the Nasdaq National Market or other registered national stock exchange on which the Common Stock is then listed or if there is no such price on such date, then the closing bid price on such exchange or quotation system on the date nearest preceding such date, or (b) if the Common Stock is not listed then on The Nasdaq Small-Cap Market, the Nasdaq National Market or any registered national stock exchange, the closing bid price for a share of Common Stock in the over-the-counter market (as reported by NASDAQ or in the National Quotation Bureau Incorporated or similar organization or agency succeeding to its functions of reporting prices) at the close of business on such date, or (c) if the Common Stock is not then publicly traded, then the fair market value of a share of Common Stock as determined by an Independent Appraiser selected in good faith by the holders of a majority in interest of the shares of the Debentures; provided, however, that the Company, after receipt of the determination by such Independent Appraiser, shall have the right to select an additional Independent Appraiser, in which case, the fair market value shall be equal to the average of the determinations by each such Independent Appraiser; and provided, further that all determinations of the Per Share Market Value shall be appropriately adjusted for any stock dividends, stock splits or other similar transactions during such period. The determination -16- of fair market value by an Independent Appraiser shall be based upon the fair market value of the Company determined on a going concern basis as between a willing buyer and a willing seller and taking into account all relevant factors determinative of value, and shall be final and binding on all parties. In determining the fair market value of any shares of Common Stock, no consideration shall be given to any restrictions on transfer of the Common Stock imposed by agreement or by federal or state securities laws, or to the existence or absence of, or any limitations on, voting rights. "Person" means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. "Registration Rights Agreement" means the Registration Rights Agreement, dated as of the Original Issue Date, by and among the Company and the original Holders. "Trading Day" means (a) a day on which the Common Stock is traded on the Nasdaq National Market, The Nasdaq SmallCap Market or other registered national stock exchange on which the Common Stock has been listed, or (b) if the Common Stock is not listed on the Nasdaq National Market, The Nasdaq SmallCap Market or any registered national stock exchange, a day or which the Common Stock is traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (c) if the Common Stock is not quoted on the OTC Bulletin Board, a day on which the Common Stock is quoted in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding its functions of reporting prices); provided, however, that in the event that the Common Stock is not listed or quoted as set forth in (a), (b) and (c) hereof, then Trading Day shall mean any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other government action to close. "Underlying Shares" means the number of shares of Common Stock into which the Debentures are convertible in accordance with the terms hereof and the Securities Purchase Agreement. 8. Purchase Rights. If at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the "Purchase Rights" ), then the holders of Debentures will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such holder could have acquired if such holder had held the number of shares of Common Stock acquirable upon complete conversion of the Debentures (without taking into account any limitations or restrictions on the convertibility of the Debentures) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights. -17- 9. Taxes. The Company shall pay any and all taxes attributable to the issuance and delivery of Common Stock or other securities upon conversion of the Debentures. 10. No Impairment. The Company shall not by any action including, without limitation, amending the articles of incorporation or the by-laws of the Company, or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other action, avoid or seek to avoid the observance or performance of any of the terms of this Debenture, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Holder hereof against dilution (to the extent specifically provided herein) or impairment. Without limiting the generality of the foregoing, the Company will (i) not permit the par value, if any, of its Common Stock to exceed the then effective Conversion Price, (ii) not amend or modify any provision of the articles of incorporation or by-laws of the Company in any manner that would adversely affect in any way the powers, preferences or relative participating, optional or other special rights of the Common Stock or which would adversely affect the rights of the Holders of the Debentures, (iii) take all such action as may be reasonably necessary in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock, free and clear of any liens, claims, encumbrances and restrictions (other than as provided herein) upon the exercise of this Debenture, and (iv) use its best efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be reasonably necessary to enable the Company to perform its obligations under this Debenture. 11. Governing Law. The Debentures shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to principles of conflicts of law. 12. Countersignature and Registration. This Debenture shall not become valid or obligatory for any purpose until the Debentures shall have been duly executed by the Company and such signature attested to by an authorized Officer thereof. 13. Warranty of the Company. The Company hereby certifies and warrants that all acts, conditions and things required to be done and performed and to have happened precedent to the creation and issuance of this Debenture, and to constitute the same as legal, valid and binding obligations of the Company enforceable in accordance with their terms, have been done and performed and have happened in due and strict compliance with all applicable laws. 14. Descriptive Headings. The descriptive headings appearing herein are for convenience of reference only and shall not alter, limit or define the provisions hereof. -18- IN WITNESS WHEREOF, the Company has caused this Debenture to be duly executed in its corporate name by the manual signature of a duly authorized signatory, as attested to by another duly authorized signatory of the Company. Dated: April 14, 2000 WORLD WIDE WIRELESS COMMUNICATIONS, INC. By:________________________ Name: Title: ATTEST: By:__________________________________ Name: Title: -19- EXHIBIT 1 CONVERSION NOTICE The undersigned hereby elects to have World Wide Wireless Communications, Inc. (the "Company") convert the Aggregate Principal Amount of 4.0% Convertible Debentures due 2005 (the "Debentures") of the Company, indicated below into shares of Common Stock, par value $.001 per share (the "Common Stock"), of the Company as of the date specified below. Date of Conversion: _______________________________________________________ Aggregate Principal Amount of Debentures to be converted: ___________________ Please confirm the following information: Conversion Price: ___________________________________________________________ Number of shares of Common Stock to be issued:_______________________________ Please issue the Common Stock into which the Debentures are being converted and, if applicable, any check drawn on an account of the Company in the following name and to the following address: Issue to: ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ Facsimile Number:________________________________ Authorization:___________________________________ By: Title: Dated:___________________________________________ Account Number (if electronic book entry transfer):____________________ Transaction Code Number (if electronic book entry transfer):___________ 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-10.18 26 0026.txt WARRANT TO PURCHASE SHARES OF COMMON STOCK THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. WARRANT TO PURCHASE SHARES OF COMMON STOCK OF WORLD WIDE WIRELESS COMMUNICATIONS, INC. Expires April 14, 2005 No. W-__ New York, New York April 14, 2000 FOR VALUE RECEIVED, subject to the provisions hereinafter set forth, the undersigned, WORLD WIDE WIRELESS COMMUNICATIONS, INC., a Nevada corporation (together with its successors and assigns, the "Issuer"), hereby certifies that ---------------- or its registered assigns is entitled to subscribe for and purchase, during the period specified in this Warrant, up to _______ shares (subject to adjustment as hereinafter provided) of the duly authorized, validly issued, fully paid and non-assessable common stock, par value $0.001 per share, of the Issuer (the "Common Stock"), at an exercise price per share equal to the Warrant Price then in effect, subject, however, to the provisions and upon the terms and conditions hereinafter set forth. Capitalized terms used in this Warrant and not otherwise defined herein shall have the respective meanings specified in Section 7 hereof. 1. Term. The right to subscribe for and purchase shares of Warrant Stock represented hereby shall commence on the date of issuance of this Warrant and shall expire at 5:00 p.m., New York City time, on April 14, 2005 (such period being the "Term"). Prior to the end of the Term, the Issuer will not take any action which would terminate the Warrants. 2. Method of Exercise Payment; Issuance of New Warrant; Registration, Transfer and Exchange. (a) Time of Exercise. The purchase rights represented by this Warrant may be exercised in whole or in part at any time and from time to time during the Term. (b) Method of Exercise. The Holder hereof may exercise this Warrant, in whole or in part, by the surrender of this Warrant (with the exercise form attached hereto duly executed) at the principal office of the Issuer, and by the payment to the Issuer of an amount of consideration therefor equal to the Warrant Price in effect on the date of such exercise multiplied by the number of shares of Warrant Stock with respect to which this Warrant is then being exercised, payable at such Holder's election (i) by certified or official bank check, (ii) if the Per Share Market Value is greater than the Warrant Price (at the date of calculation as set forth below), in lieu of exercising this Warrant for cash, by receiving shares equal to the value (as determined below) of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Issuer together with the properly endorsed Subscription Form annexed hereto and notice of such election in which event the Issuer shall issue to the Warrantholder a number of shares of Common Stock computed using the following formula: Y(A-B) ------ X = A Where X = the number of shares of Common Stock to be issued to the Holder Y = the number of shares of Common Stock purchasable under the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being canceled (at the date of such calculation) A = the Per Share Market Value of one share of the Common Stock (at the date of such calculation) B = Warrant Price (as adjusted to the date of such calculation), or (iii) by a combination of the foregoing methods of payment selected by the Holder of this Warrant. In any case where the consideration payable upon such exercise is being paid in whole or in part pursuant to the provisions of clause (ii) of this subsection (b), such exercise shall be accompanied by written notice from the Holder of this Warrant specifying the manner of payment thereof and containing a calculation showing the number of shares of Warrant Stock with respect to which rights are being surrendered thereunder and the net number of shares to be issued after giving effect to such surrender. (c) Issuance of Stock Certificates. In the event of any exercise of the rights represented by this Warrant in accordance with and subject to the terms and conditions hereof, (i) certificates for the shares of Warrant Stock so purchased shall be dated the date of such exercise -2- and delivered to the Holder hereof within a reasonable time, not exceeding three Trading Days after such exercise, and the Holder hereof shall be deemed for all purposes to be the Holder of the shares of Warrant Stock so purchased as of the date of such exercise, and (ii) unless this Warrant has expired, a new Warrant representing the number of shares of Warrant Stock, if any, with respect to which this Warrant shall not then have been exercised (less any amount thereof which shall have been cancelled in payment or partial payment of the Warrant Price as hereinabove provided) shall also be issued to the Holder hereof at the Issuer's expense within such time. (d) Registration. The Warrants shall be numbered and shall be registered in a Warrant register (the "Warrant Register"). The Issuer shall be entitled to treat the registered holder of any Warrant on the Warrant Register (the "Holder") as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such Warrant on the part of any other person, and shall not be liable for any registration of transfer of Warrants which are registered or are to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with the actual knowledge that a fiduciary or nominee is committing a breach of trust in requesting such registration of transfer, or with such knowledge of such facts that its participation therein amounts to bad faith. The Warrants shall be registered initially in the name of Holder as set forth in the first sentence of this Warrant in such denominations as Holder may request in writing to the Issuer. (e) Transfer of Warrant. The Warrants will not be sold, transferred, assigned or hypothecated, in part or in whole (other than by will or pursuant to the laws of descent and distribution), except to registered assigns of the Holder and thereafter only upon delivery thereof duly endorsed by the Holder or by his duly authorized attorney or representative, or accompanied by proper evidence of succession, assignment or authority to transfer. In all cases of transfer by an attorney, the original power of attorney, duly approved, or an official copy thereof, duly certified, shall be deposited with the Issuer. In case of transfer by executors, administrators, guardians or other legal representatives, duly authenticated evidence of their authority shall be produced, and may be required to be deposited with the Issuer in its discretion. Upon any registration of transfer, the Issuer shall deliver a new Warrant or Warrants to the persons entitled thereto. The Warrants may be exchanged at the option of the Holder thereof for another Warrant, or other Warrants, of different denominations, of like tenor and representing in the aggregate the right to purchase a like number of shares of Common Stock upon surrender to the Issuer or its duly authorized agent. Notwithstanding the foregoing, the Issuer shall have no obligation to cause Warrants to be transferred on its books to any person if such transfer would violate the Securities Act. (f) Compliance with Securities Laws. (i) The Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant and the shares of Warrant Stock to be issued upon exercise hereof are being acquired solely for the Holder's own account and not as a nominee for any other party, and for investment, and that the Holder will not offer, sell or otherwise dispose of this Warrant or any shares of Warrant Stock to be issued upon exercise hereof except pursuant -3- to an effective registration statement, or an exemption from registration, under the Securities Act and any applicable state securities laws. (ii) Except as provided in paragraph (iii) below, this Warrant and all certificates representing shares of Warrant Stock issued upon exercise hereof shall be stamped or imprinted with a legend in substantially the following form: THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. (iii) The restrictions imposed by this subsection (g) upon the transfer of this Warrant and the shares of Warrant Stock to be purchased upon exercise hereof shall terminate (A) when such securities shall have been effectively registered under the Securities Act, (B) upon the Issuer's receipt of an opinion of counsel, in form and substance reasonably satisfactory to the Issuer, addressed to the Issuer to the effect that such restrictions are no longer required to ensure compliance with the Securities Act or (C) upon the Issuer's receipt of other evidence reasonably satisfactory to the Issuer that such registration is not required. Whenever such restrictions shall cease and terminate as to any such securities, the Holder thereof shall be entitled to receive from the Issuer (or its transfer agent and registrar), without expense (other than applicable transfer taxes, if any), new Warrants (or, in the case of shares of Warrant Stock, new stock certificates) of like tenor not bearing the applicable legends required by paragraph (ii) above relating to the Securities Act and state securities laws. (g) Continuing Rights of Holder. The Issuer will, at the time of or at any time after each exercise of this Warrant, upon the request of the Holder hereof or of any shares of Warrant Stock issued upon such exercise, acknowledge in writing the extent, if any, of its continuing obligation to afford to such Holder all rights to which such Holder shall continue to be entitled after such exercise in accordance with the terms of this Warrant, provided that if any such Holder shall fail to make any such request, the failure shall not affect the continuing obligation of the Issuer to afford such rights to such Holder. 3. Stock Fully Paid; Reservation and Listing of Shares; Covenants. (a) Stock Fully Paid. The Issuer represents, warrants, covenants and agrees that all shares of Warrant Stock which may be issued upon the exercise of this Warrant or otherwise hereunder will, upon issuance, be duly authorized, validly issued, fully paid and non-assessable and free from all taxes, liens and charges created by or through Issuer. The Issuer further -4- covenants and agrees that during the period within which this Warrant may be exercised, the Issuer will at all times have authorized and reserved for the purpose of the issue upon exercise of this Warrant a sufficient number of shares of Common Stock to provide for the exercise of this Warrant. (b) Payment of Taxes. The Issuer will pay all documentary stamp taxes, if any, attributable to the issuance of Warrant Stock; provided, however, that the Issuer shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issue or delivery of any certificates for Warrant Stock in a name other than that of the Holder of Warrants in respect of which such Warrant Stock is issued. (c) Reservation. If any shares of Common Stock required to be reserved for issuance upon exercise of this Warrant or as otherwise provided hereunder require registration or qualification with any governmental authority under any federal or state law before such shares may be so issued, the Issuer will in good faith use its best efforts as expeditiously as possible at its expense to cause such shares to be duly registered or qualified. The transfer agent for the Common Stock (the "Transfer Agent"), and every subsequent transfer agent, if any, for the Warrant Stock will be irrevocably authorized and directed at all times until the end of the Term to reserve such number of authorized and unissued shares of Common Stock as shall be required for such purpose. The Issuer will keep a copy of this Agreement on file with the Transfer Agent and with every subsequent transfer agent for of the Issuer's securities issuable upon the exercise of the Warrants. The Issuer will supply the Transfer Agent or any subsequent transfer agent with duly executed certificates for such purpose and will itself provide or otherwise make available any cash which may be distributable as provided in Section 6 of this Agreement. All Warrants surrendered in the exercise of the rights thereby evidenced shall be canceled, and such canceled Warrants shall constitute sufficient evidence of the number of Shares that have been issued upon the exercise of such Warrants. No shares of Common Stock shall be subject to reservation in respect of unexercised Warrants subsequent to the end of the Term. If the Issuer shall list any shares of Common Stock on any securities exchange or market it will, at its expense, list thereon, maintain and increase when necessary such listing, of, all shares of Warrant Stock from time to time issued upon exercise of this Warrant or as otherwise provided hereunder, and, to the extent permissible under the applicable securities exchange rules, all unissued shares of Warrant Stock which are at any time issuable hereunder, so long as any shares of Common Stock shall be so listed. The Issuer will also so list on each securities exchange or market, and will maintain such listing of, any other securities which the Holder of this Warrant shall be entitled to receive upon the exercise of this Warrant if at the time any securities of the same class shall be listed on such securities exchange or market by the Issuer. (d) Covenants. The Issuer shall not by any action including, without limitation, amending the certificate of incorporation or the by-laws of the Issuer, or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Holder hereof against dilution (to the extent specifically provided herein) or impairment. Without -5- limiting the generality of the foregoing, the Issuer will (i) not permit the par value, if any, of its Common Stock to exceed the then effective Warrant Price, (ii) not amend or modify any provision of the certificate of incorporation or by-laws of the Issuer in any manner that would adversely affect in any way the powers, preferences or relative participating, optional or other special rights of the Common Stock or which would adversely affect the rights of the Holders of the Warrants, (iii) take all such action as may be reasonably necessary in order that the Issuer may validly and legally issue fully paid and nonassessable shares of Common Stock, free and clear of any liens, claims, encumbrances and restrictions (other than as provided herein) upon the exercise of this Warrant, and (iv) use its best efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be reasonably necessary to enable the Issuer to perform its obligations under this Warrant. (e) Loss, Theft, Destruction of Warrants. Upon receipt of evidence satisfactory to the Issuer of the ownership of and the loss, theft, destruction or mutilation of any Warrant and, in the case of any such loss, theft or destruction, upon receipt of indemnity or security satisfactory to the Issuer or, in the case of any such mutilation, upon surrender and cancellation of such Warrant, the Issuer will make and deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor and representing the right to purchase the same number of shares of Common Stock. (f) Rights and Obligations under the Registration Rights Agreement. This Warrant and the Warrant Stock are entitled to the benefits and subject to the terms of the Registration Rights Agreement dated as of even date herewith between the Issuer and the Holders listed on the signature pages thereof (as amended from time to time, the "Registration Rights Agreement"). The Issuer shall keep or cause to be kept a copy of the Registration Rights Agreement, and any amendments thereto, at its chief executive office and shall furnish, without charge, copies thereof to the Holder upon request. 4. Adjustment of Warrant Price and Warrant Share Number. The number and kind of Securities purchasable upon the exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time upon the happening of certain events as follows: (a) Recapitalization, Reorganization, Reclassification, Consolidation, Merger or Sale. (i) In case the Issuer after the Original Issue Date shall do any of the following (each, a "Triggering Event"): (a) consolidate with or merge into any other Person and the Issuer shall not be the continuing or surviving corporation of such consolidation or merger, or (b) permit any other Person to consolidate with or merge into the Issuer and the Issuer shall be the continuing or surviving Person but, in connection with such consolidation or merger, any Capital Stock of the Issuer shall be changed into or exchanged for Securities of any other Person or cash or any other property, or (c) transfer all or substantially all of its properties or assets to any other Person, or (d) effect a capital reorganization or reclassification of its Capital Stock, then, and in the case of each such Triggering Event, proper provision shall be made so that, upon the basis and the terms and in the manner provided in this Warrant, the Holder of this Warrant shall be entitled upon the exercise hereof at any time after the consummation of such Triggering Event, to -6- the extent this Warrant is not exercised prior to such Triggering Event, or is redeemed in connection with such Triggering Event, to receive at the Warrant Price in effect at the time immediately prior to the consummation of such Triggering Event in lieu of the Common Stock issuable upon such exercise of this Warrant prior to such Triggering Event, the Securities, cash and property to which such Holder would have been entitled upon the consummation of such Triggering Event if such Holder had exercised the rights represented by this Warrant immediately prior thereto, subject to adjustments and increases (subsequent to such corporate action) as nearly equivalent as possible to the adjustments provided for in Section 4 hereof. (ii) Notwithstanding anything contained in this Warrant to the contrary, the Issuer will not effect any Triggering Event unless, prior to the consummation thereof, each Person (other than the Issuer) which may be required to deliver any Securities, cash or property upon the exercise of this Warrant as provided herein shall assume, by written instrument delivered to, and reasonably satisfactory to, the Holder of this Warrant, (A) the obligations of the Issuer under this Warrant (and if the Issuer shall survive the consummation of such Triggering Event, such assumption shall be in addition to, and shall not release the Issuer from, any continuing obligations of the Issuer under this Warrant) and (B) the obligation to deliver to such Holder such shares of Securities, cash or property as, in accordance with the foregoing provisions of this subsection (a), such Holder shall be entitled to receive, and such Person shall have similarly delivered to such Holder an opinion of counsel for such Person, which counsel shall be reasonably satisfactory to such Holder, stating that this Warrant shall thereafter continue in full force and effect and the terms hereof (including, without limitation, all of the provisions of this subsection (a)) shall be applicable to the Securities, cash or property which such Person may be required to deliver upon any exercise of this Warrant or the exercise of any rights pursuant hereto. (b) Subdivision or Combination of Shares. If the Issuer, at any time while this Warrant is outstanding, shall subdivide or combine any shares of Common Stock, (i) in case of subdivision of shares, the Warrant Price shall be proportionately reduced (as at the effective date of such subdivision or, if the Issuer shall take a record of Holders of its Common Stock for the purpose of so subdividing, as at the applicable record date, whichever is earlier) to reflect the increase in the total number of shares of Common Stock outstanding as a result of such subdivision, or (ii) in the case of a combination of shares, the Warrant Price shall be proportionately increased (as at the effective date of such combination or, if the Issuer shall take a record of Holders of its Common Stock for the purpose of so combining, as at the applicable record date, whichever is earlier) to reflect the reduction in the total number of shares of Common Stock outstanding as a result of such combination. (c) Certain Dividends and Distributions. If the Issuer, at any time while this Warrant is outstanding, shall: (i) Stock Dividends. Pay a dividend in, or make any other distribution to its stockholders (without consideration therefor) of, shares of Common Stock, the Warrant -7- Price shall be adjusted, as at the date the Issuer shall take a record of the Holders of the Issuer's Capital Stock for the purpose of receiving such dividend or other distribution (or if no such record is taken, as at the date of such payment or other distribution), to that price determined by multiplying the Warrant Price in effect immediately prior to such record date (or if no such record is taken, then immediately prior to such payment or other distribution), by a fraction (1) the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to such dividend or distribution, and (2) the denominator of which shall be the total number of shares of Common Stock outstanding immediately after such dividend or distribution (plus in the event that the Issuer paid cash for fractional shares, the number of additional shares which would have been outstanding had the Issuer issued fractional shares in connection with said dividends); or (ii) Other Dividends. Pay a dividend on, or make any distribution of its assets upon or with respect to (including, but not limited to, a distribution of its property as a dividend in liquidation or partial liquidation or by way of return of capital), the Common Stock (other than as described in clause (i) of this subsection (c)), or in the event that the Issuer shall offer options or rights to subscribe for shares of Common Stock, or issue any Common Stock Equivalents, to all of its holders of Common Stock, then on the record date for such payment, distribution or offer or, in the absence of a record date, on the date of such payment, distribution or offer, the Holder shall receive what the Holder would have received had it exercised this Warrant in full immediately prior to the record date of such payment, distribution or offer or, in the absence of a record date, immediately prior to the date of such payment, distribution or offer. (d) Issuance of Additional Shares of Common Stock. If the Issuer, at any time while this Warrant is outstanding but prior to thirty (30) months after the date hereof, shall issue any Additional Shares of Common Stock (otherwise than as provided in the foregoing subsections (a) through (c) of this Section 4), at a price per share less than the Warrant Price then in effect or less than the Per Share Market Value then in effect or without consideration, then the Warrant Price upon each such issuance shall be adjusted to that price (rounded to the nearest cent) determined by multiplying the Warrant Price then in effect by a fraction: (i) the numerator of which shall be equal to the sum of (A) the number of shares of Common Stock outstanding immediately prior to the issuance of such Additional Shares of Common Stock plus (B) the number of shares of Common Stock (rounded to the nearest whole share) which the aggregate consideration for the total number of such Additional Shares of Common Stock so issued would purchase at a price per share equal to the greater of the Per Share Market Value then in effect and the Warrant Price then in effect, and (ii) the denominator of which shall be equal to the number of shares of Common Stock outstanding immediately after the issuance of such Additional Shares of Common Stock. -8- The provisions of this subsection (d) shall not apply under any of the circumstances for which an adjustment is provided in subsections (a), (b) or (c) of this Section 4. No adjustment of the Warrant Price shall be made under this subsection (d) upon the issuance of any Additional Shares of Common Stock which are issued pursuant to any Common Stock Equivalent if upon the issuance of such Common Stock Equivalent (x) any adjustment shall have been made pursuant to subsection (e) of this Section 4 or (y) no adjustment was required pursuant to subsection (e) of this Section 4. No adjustment of the Warrant Price shall be made under this subsection (d) in an amount less than $.01 per share, but any such lesser adjustment shall be carried forward and shall be made at the time and together with the next subsequent adjustment, if any, which together with any adjustments so carried forward shall amount to $.01 per share or more, provided that upon any adjustment of the Warrant Price as a result of any dividend or distribution payable in Common Stock or Convertible Securities or the reclassification, subdivision or combination of Common Stock into a greater or smaller number of shares, the foregoing figure of $.01 per share (or such figure as last adjusted) shall be adjusted (to the nearest one-half cent) in proportion to the adjustment in the Warrant Price. (e) Issuance of Common Stock Equivalents. If the Issuer, at any time while this Warrant is outstanding but prior to thirty (30) months after the date hereof, shall issue any Common Stock Equivalent and the price per share for which Additional Shares of Common Stock may be issuable thereafter pursuant to such Common Stock Equivalent shall be less than the Warrant Price then in effect or less than the Per Share Market Value then in effect, or if, after any such issuance of Common Stock Equivalents, the price per share for which Additional Shares of Common Stock may be issuable thereafter is amended or adjusted, and such price as so amended shall be less than the Warrant Price or less than the Per Share Market Value in effect at the time of such amendment, then the Warrant Price upon each such issuance or amendment shall be adjusted as provided in the first sentence of subsection (d) of this Section 4 on the basis that (1) the maximum number of Additional Shares of Common Stock issuable pursuant to all such Common Stock Equivalents shall be deemed to have been issued (whether or not such Common Stock Equivalents are actually then exercisable, convertible or exchangeable in whole or in part) as of the earlier of (A) the date on which the Issuer shall enter into a firm contract for the issuance of such Common Stock Equivalent, or (B) the date of actual issuance of such Common Stock Equivalent, and (2) the aggregate consideration for such maximum number of Additional Shares of Common Stock shall be deemed to be the minimum consideration received or receivable by the Issuer for the issuance of such Additional Shares of Common Stock pursuant to such Common Stock Equivalent. No adjustment of the Warrant Price shall be made under this subsection (e) upon the issuance of any Convertible Security which is issued pursuant to the exercise of any warrants or other subscription or purchase rights therefor, if any adjustment shall previously have been made in the Warrant Price then in effect upon the issuance of such warrants or other rights pursuant to this subsection (e). If no adjustment is required under this subsection (e) upon issuance of any Common Stock Equivalent or once an adjustment is made under this subsection (e) based upon the Per Share Market Value in effect on the date of such adjustment, no further adjustment shall be made under this subsection (e) based solely upon a change in the Per Share Market Value after such date. -9- (f) Purchase of Common Stock by the Issuer. If the Issuer at any time while this Warrant is outstanding but prior to thirty (30) months after the date hereof shall, directly or indirectly through a Subsidiary or otherwise, purchase, redeem or otherwise acquire any shares of Common Stock at a price per share greater than the Per Share Market Value then in effect, then the Warrant Price upon each such purchase, redemption or acquisition shall be adjusted to that price determined by multiplying such Warrant Price by a fraction (i) the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such purchase, redemption or acquisition minus the number of shares of Common Stock which the aggregate consideration for the total number of such shares of Common Stock so purchased, redeemed or acquired would purchase at the Per Share Market Value; and (ii) the denominator of which shall be the number of shares of Common Stock outstanding immediately after such purchase, redemption or acquisition. For the purposes of this subsection (f), the date as of which the Per Share Market Value shall be computed shall be the earlier of (x) the date on which the Issuer shall enter into a firm contract for the purchase, redemption or acquisition of such Common Stock, or (y) the date of actual purchase, redemption or acquisition of such Common Stock. For the purposes of this subsection (f), a purchase, redemption or acquisition of a Common Stock Equivalent shall be deemed to be a purchase of the underlying Common Stock, and the computation herein required shall be made on the basis of the full exercise, conversion or exchange of such Common Stock Equivalent on the date as of which such computation is required hereby to be made, whether or not such Common Stock Equivalent is actually exercisable, convertible or exchangeable on such date. (g) Other Provisions Applicable to Adjustments Under this Section 4. The following provisions shall be applicable to the making of adjustments in the Warrant Price hereinbefore provided in Section 4: (i) Computation of Consideration. The consideration received by the Issuer shall be deemed to be the following: to the extent that any Additional Shares of Common Stock or any Common Stock Equivalents shall be issued for a cash consideration, the consideration received by the Issuer therefor, or if such Additional Shares of Common Stock or Common Stock Equivalents are offered by the Issuer for subscription, the subscription price, or, if such Additional Shares of Common Stock or Common Stock Equivalents are sold to underwriters or dealers for public offering without a subscription offering, the public offering price, in any such case excluding any amounts paid or receivable for accrued interest or accrued dividends and without deduction of any compensation, discounts, commissions, or expenses paid or incurred by the Issuer for or in connection with the underwriting thereof or otherwise in connection with the issue thereof; to the extent that such issuance shall be for a consideration other than cash, then, except as herein otherwise expressly provided, the fair market value of such consideration at the, time of such issuance as determined in good faith by the Board. The consideration for any Additional Shares of Common Stock issuable pursuant to any Common Stock Equivalents shall be the consideration received by the Issuer for issuing such Common Stock Equivalents, plus the additional consideration payable to the Issuer upon the exercise, conversion or exchange of such Common Stock Equivalents. In case of the issuance at any time of any Additional Shares of Common Stock or Common Stock -10- Equivalents in payment or satisfaction of any dividend upon any class of Capital Stock of the Issuer other than Common Stock, the Issuer shall be deemed to have received for such Additional Shares of Common Stock or Common Stock Equivalents a consideration equal to the amount of such dividend so paid or satisfied. In any case in which the consideration to be received or paid shall be other than cash, the Board shall notify the Holder of this Warrant of its determination of the fair market value of such consideration prior to payment or accepting receipt thereof. If, within thirty days after receipt of said notice, the Majority Holders shall notify the Board in writing of their objection to such determination, a determination of the fair market value of such consideration shall be made by an Independent Appraiser selected by the Majority Holders with the approval of the Board (which approval shall not be unreasonably withheld), whose fees and expenses shall be paid by the Issuer. (ii) Readjustment of Warrant Price. Prior to thirty (30) months after the date hereof and upon the expiration or termination of the right to convert, exchange or exercise any Common Stock Equivalent the issuance of which effected an adjustment in the Warrant Price, if such Common Stock Equivalent shall not have been converted, exercised or exchanged in its entirety, the number of shares of Common Stock deemed to be issued and outstanding by reason of the fact that they were issuable upon conversion, exchange or exercise of any such Common Stock Equivalent shall no longer be computed as set forth above, and the Warrant Price shall forthwith be readjusted and thereafter be the price which it would have been (but reflecting any other adjustments in the Warrant Price made pursuant to the provisions of this Section 4 after the issuance of such Common Stock Equivalent) had the adjustment of the Warrant Price been made in accordance with the issuance or sale of the number of Additional Shares of Common Stock actually issued upon conversion, exchange or issuance of such Common Stock Equivalent and thereupon only the number of Additional Shares of Common Stock actually so issued shall be deemed to have been issued and only the consideration actually received by the Issuer (computed as in clause (i) of this subsection (g)) shall be deemed to have been received by the Issuer. (iii) Outstanding Common Stock. The number of shares of Common Stock at any time outstanding shall (A) not include any shares thereof then directly or indirectly owned or held by or for the account of the Issuer or any of its Subsidiaries, and (B) be deemed to include all shares of Common Stock then issuable upon conversion, exercise or exchange of any then outstanding Common Stock Equivalents or any other evidences of indebtedness, shares of Capital Stock or other Securities which are or may be at any time convertible into or exchangeable for shares of Common Stock or Other Common Stock. (h) Other Action Affecting Common Stock. In case after the Original Issue Date the Issuer shall take any action affecting its Common Stock, other than an action described in any of the foregoing subsections (a) through (g) of this Section 4, inclusive, and the failure to make any adjustment would not fairly protect the purchase rights represented by this Warrant in accordance with the essential intent and principle of this Section 4, then the Warrant Price shall be adjusted -11- in such manner and at such time as the Board may in good faith determine to be equitable in the circumstances. (i) Adjustment of Warrant Share Number. Upon each adjustment in the Warrant Price pursuant to any of the foregoing provisions of this Section 4, the Warrant Share Number shall be adjusted, to the nearest one hundredth of a whole share, to the product obtained by multiplying the Warrant Share Number immediately prior to such adjustment in the Warrant Price by a fraction, the numerator of which shall be the Warrant Price immediately before giving effect to such adjustment and the denominator of which shall be the Warrant Price immediately after giving effect to such adjustment. If the Issuer shall be in default under any provision contained in Section 3 of this Warrant so that shares issued at the Warrant Price adjusted in accordance with this Section 4 would not be validly issued, the adjustment of the Warrant Share Number provided for in the foregoing sentence shall nonetheless be made and the Holder of this Warrant shall be entitled to purchase such greater number of shares at the lowest price at which such shares may then be validly issued under applicable law. Such exercise shall not constitute a waiver of any claim arising against the Issuer by reason of its default under Section 3 of this Warrant. (j) Form of Warrant after Adjustments. The form of this Warrant need not be changed because of any adjustments in the Warrant Price or the number and kind of Securities purchasable upon the exercise of this Warrant. 5. Notice of Adjustments. Whenever the Warrant Price or Warrant Share Number shall be adjusted pursuant to Section 4 hereof (for purposes of this Section 5, each an "adjustment"), the Issuer shall cause its Chief Financial Officer to prepare and execute a certificate setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated (including a description of the basis on which the Board made any determination hereunder), and the Warrant Price and Warrant Share Number after giving effect to such adjustment, and shall cause copies of such certificate to be delivered to the Holder of this Warrant promptly after each adjustment. Any dispute between the Issuer and the Holder of this Warrant with respect to the matters set forth in such certificate may at the option of the Holder of this Warrant be submitted to one of the national accounting firms currently known as the "big five" selected by the Holder, provided that the Issuer shall have ten days after receipt of notice from such Holder of its selection of such firm to object thereto, in which case such Holder shall select another such firm and the Issuer shall have no such right of objection. The firm selected by the Holder of this Warrant as provided in the preceding sentence shall be instructed to deliver a written opinion as to such matters to the Issuer and such Holder within thirty days after submission to it of such dispute. Such opinion shall be final and binding on the parties hereto. The fees and expenses of such accounting firm shall be paid by the Issuer. 6. Fractional Shares. No fractional shares of Warrant Stock will be issued in connection with and exercise hereof, but in lieu of such fractional shares, the Issuer shall make a cash payment therefor equal in amount to the product of the applicable fraction multiplied by the Per Share Market Value then in effect. -12- 7. Definitions. For the purposes of this Warrant, the following terms have the following meanings: "Additional Shares of Common Stock" means all shares of Common Stock issued by the Issuer after the Original Issue Date, and all shares of Other Common, if any, issued by the Issuer after the Original Issue Date, except (i) Warrant Stock and (ii) any shares of Common Stock issuable upon conversion of the Debentures or Preferred Stock. "Board" means the Board of Directors of the Issuer. "Capital Stock" means and includes (i) any and all shares, interests, participations or other equivalents of or interests in (however designated) corporate stock, including, without limitation, shares of preferred or preference stock, (ii) all partnership interests (whether general or limited) in any Person which is a partnership, (iii) all membership interests or limited liability company interests in any limited liability company, and (iv) all equity or ownership interests in any Person of any other type. "Commission" means the Securities and Exchange Commission. "Common Stock" means the Common Stock, $0.001 par value, of the Issuer and any other Capital Stock into which such stock may hereafter be changed. "Common Stock Equivalent" means any Convertible Security or warrant, option or other right to subscribe for or purchase any Additional Shares of Common Stock or any Convertible Security (other than a warrant or stock option issued pursuant to any stock or option or similar equity-based compensation plan for employees, officers, directors or consultants. "Convertible Securities" means evidences of indebtedness, shares of Capital Stock or other Securities which are or may be at any time convertible into or exchangeable for Additional Shares of Common Stock. The term "Convertible Security" means one of the Convertible Securities. "Debenture" means the Issuer's Convertible Debentures due 2005. "Governmental Authority" means any governmental, regulatory or self-regulatory entity, department, body, official, authority, commission, board, agency or instrumentality, whether federal, state or local, and whether domestic or foreign. "Holders" mean the Persons who shall from time to time own any Warrant. The term "Holder" means one of the Holders. "Independent Appraiser" means a nationally recognized or major regional investment banking firm or firm of independent certified public accountants of -13- recognized standing (which may be the firm that regularly examines the financial statements of the Issuer) that is regularly engaged in the business of appraising the Capital Stock or assets of corporations or other entities as going concerns, and which is not affiliated with either the Issuer or the Holder of any Warrant. "Issuer" means World Wide Wireless Communications, Inc., a Nevada corporation, and its successors. "Majority Holders" means at any time the Holders of Warrants exercisable for a majority of the shares of Warrant Stock issuable under the Warrants at the time outstanding. "NASDAQ" means the National Association of Securities Dealers Automated Quotation System. "Original Issue Date" means April 14, 2000. "Other Common" means any other Capital Stock of the Issuer of any class which shall be authorized at any time after the date of this Warrant (other than Common Stock) and which shall have the right to participate in the distribution of earnings and assets of the Issuer without limitation as to amount. "Person" means an individual, corporation, limited liability company, partnership, joint stock company, trust, unincorporated organization, joint venture, Governmental Authority or other entity of whatever nature. "Per Share Market Value" means on any particular date (a) the closing price per share of the Common Stock on such date on the Nasdaq National Market, The Nasdaq SmallCap Market or other registered national stock exchange on which the Common Stock is then listed or if there is no such price on such date, then the closing price on such exchange or quotation system on the date nearest preceding such date, or (b) if the Common Stock is not listed then on the Nasdaq National Market, The Nasdaq SmallCap Market or any registered national stock exchange, the closing price for a share of Common Stock in the over-the-counter market, as reported by NASDAQ or in the National Quotation Bureau Incorporated or similar organization or agency succeeding to its functions of reporting prices) at the close of business on such date, or (c) if the Common Stock is not then reported by the National Quotation Bureau Incorporated (or similar organization or agency succeeding to its functions of reporting prices), then the average of the "Pink Sheet" quotes for the relevant conversion period, as determined in good faith by the holder, or (d) if the Common Stock is not then publicly traded the fair market value of a share of Common Stock as determined by an Independent Appraiser selected in good faith by the Majority Holders; provided, however, that the Issuer, after receipt of the determination by such Independent Appraiser, shall have the right to select an additional Independent Appraiser, in which case, the fair market value shall be equal to the average of the determinations by each such Independent Appraiser; and provided, -14- further that all determinations of the Per Share Market Value shall be appropriately adjusted for any stock dividends, stock splits or other similar transactions during such period. The determination of fair market value by an Independent Appraiser shall be based upon the fair market value of the Issuer determined on a going concern basis as between a willing buyer and a willing seller and taking into account all relevant factors determinative of value, and shall be final and binding on all parties. In determining the fair market value of any shares of Common Stock, no consideration shall be given to any restrictions on transfer of the Common Stock imposed by agreement or by federal or state securities laws, or to the existence or absence of, or any limitations on, voting rights. "Preferred Stock" means the Issuer's Series A Convertible Preferred Stock, par value $.01 per share and stated value $1,000 per share. "Registration Rights Agreement" has the meaning specified in Section 3(f) hereof. "Registration Statement" has the meaning set forth in the Registration Rights Agreement. "Securities" means any debt or equity securities of the Issuer, whether now or hereafter authorized, any instrument convertible into or exchangeable for Securities or a Security, and any option, warrant or other right to purchase or acquire any Security. "Security" means one of the Securities. "Securities Act" means the Securities Act of 1933, as amended, or any similar federal statute then in effect. "Subsidiary" means any corporation at least 50% of whose outstanding Voting Stock shall at the time be owned directly or indirectly by the Issuer or by one or more of its Subsidiaries, or by the Issuer and one or more of its Subsidiaries. "Trading Day" means (a) a day on which the Common Stock is traded on the Nasdaq National Market, The Nasdaq SmallCap Market or other registered national stock exchange on which the Common Stock has been listed, or (b) if the Common Stock is not listed on the Nasdaq National Market, The Nasdaq SmallCap Market or any registered national stock exchange, a day or which the Common Stock is traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (c) if the Common Stock is not quoted on the OTC Bulletin Board, a day on which the Common Stock is quoted in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding its functions of reporting prices); provided, however, that in the event that the Common Stock is not listed or quoted as set forth in (a), (b) and (c) hereof, then Trading Day shall mean any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other government action to close. -15- "Term" has the meaning specified in Section 1 hereof. "Voting Stock", as applied to the Capital Stock of any corporation, means Capital Stock of any class or classes (however designated) having ordinary voting power for the election of a majority of the members of the Board of Directors (or other governing body) of such corporation, other than Capital Stock having such power only by reason of the happening of a contingency. "Warrants" means the Warrants issued and sold pursuant to the Subscription Agreement, dated April 14, 2000, including, without limitation, this Warrant, and any other warrants of like tenor issued in substitution or exchange for any thereof pursuant to the provisions of Section 2(c), 2(d) or 2(e) hereof or of any of such other Warrants. "Warrant Price" means a price equal to 110% of the Per Share Market Value as of the Trading Day on the Initial Closing Date, as such price may be adjusted from time to time as shall result from the adjustments specified in Section 4 hereof. "Warrant Share Number" means at any time the aggregate number of shares of Warrant Stock which may at such time be purchased upon exercise of this Warrant, after giving effect to all prior adjustments and increases to such number made or required to be made under the terms hereof. "Warrant Stock" means Common Stock issuable upon exercise of any Warrant or Warrants or otherwise issuable pursuant to any Warrant or Warrants. 8. Other Notices. In case at any time: (A) the Issuer shall make any distributions to the holders of Common Stock; or (B) the Issuer shall authorize the granting to all holders of its Common Stock of rights to subscribe for or purchase any shares of Capital Stock of any class or of any Common Stock Equivalents or Convertible Securities or other rights; or (C) there shall be any reclassification of the Capital Stock of the Issuer; or (D) there shall be any capital reorganization by the Issuer; or (E) there shall be any (i) consolidation or merger involving the Issuer or (ii) sale, transfer or other disposition of all or substantially all of the Issuer's property, assets or business (except a merger or other reorganization in which the Issuer -16- shall be the surviving corporation and its shares of Capital Stock shall continue to be outstanding and unchanged and except a consolidation, merger, sale, transfer or other disposition involving a wholly-owned Subsidiary); or (F) there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Issuer or any partial liquidation of the Issuer or distribution to holders of Common Stock; then, in each of such cases, the Issuer shall give written notice to the Holder of the date on which (i) the books of the Issuer shall close or a record shall be taken for such dividend, distribution or subscription rights or (ii) such reorganization, reclassification, consolidation, merger, disposition, dissolution, liquidation or winding-up, as the case may be, shall take place. Such notice also shall specify the date as of which the holders of Common Stock of record shall participate in such dividend, distribution or subscription rights, or shall be entitled to exchange their certificates for Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, disposition, dissolution, liquidation or winding-up, as the case may be. Such notice shall be given at least twenty days prior to the action in question and not less than twenty days prior to the record date or the date on which the Issuer's transfer books are closed in respect thereto. The Issuer shall give to the Holder notice of all meetings and actions by written consent of its stockholders, at the same time in the same manner as notice of any meetings of stockholders is required to be given to stockholders who do not waive such notice (or, if such requires no notice, then two Trading Days written notice thereof describing the matters upon which action is to be taken). The Holder shall have the right to send two representatives selected by it to each meeting, who shall be permitted to attend, but not vote at, such meeting and any adjournments thereof. This Warrant entitles the Holder to receive copies of all financial and other information distributed or required to be distributed to the holders of the Common Stock. 9. Amendment and Waiver. Any term, covenant, agreement or condition in this Warrant may be amended, or compliance therewith may be waived (either generally or in a particular instance and either retroactively or prospectively), by a written instrument or written instruments executed by the Issuer and the Majority Holders; provided, however, that no such amendment or waiver shall reduce the Warrant Share number, increase the Warrant Price, shorten the period during which this Warrant may be exercised or modify any provision of this Section 9 without the consent of the Holder of this Warrant. 10. Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW. 11. Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earlier of (i) the date of transmission, if such notice or communication is delivered via -17- facsimile at the facsimile telephone number specified for notice prior to 5:00 p.m., New York City time, on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified for notice later than 5:00 p.m., New York City time, on any date and earlier than 11:59 p.m., New York City time, on such date, (iii) the Business Day following the date of mailing, if sent by nationally recognized overnight courier service or (iv) actual receipt by the party to whom such notice is required to be given. The addresses for such communications shall be with respect to the Holder of this Warrant or of Warrant Stock issued pursuant hereto, addressed to such Holder at its last known address or facsimile number appearing on the books of the Issuer maintained for such purposes, or with respect to the Issuer, addressed to: World Wide Wireless Communications, Inc. 520 Third Street Suite 101 Oakland, California Attention: Douglas Haffer Telephone No.: (510) 839-6100 Facsimile No.: (510) 839-7088 or to such other address or addresses or facsimile number or numbers as any such party may most recently have designated in writing to the other parties hereto by such notice. Copies of notices to the Holder shall be sent to Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York New York 10038-4982, Attention: James R. Tanenbaum, Esq., Telephone No.: (212) 806-5400, Facsimile No.: (212) 806-6006. Copies of notices to the Issuer shall be sent to Evers & Hendrickson, LLP, 155 Montgomery, 12th Floor, San Francisco, California 94104, Attention: William D. Evers, Esq., Telephone No.: (415) 772-8100, Facsimile No.: (415) 772-8101. 12. Warrant Agent. The Issuer may, by written notice to each Holder of this Warrant, appoint an agent having an office in New York, New York for the purpose of issuing shares of Warrant Stock on the exercise of this Warrant pursuant to subsection (b) of Section 2 hereof, exchanging this Warrant pursuant to subsection (d) of Section 2 hereof or replacing this Warrant pursuant to subsection (e) of Section 3 hereof, or any of the foregoing, and thereafter any such issuance, exchange or replacement, as the case may be, shall be made at such office by such agent. 13. Remedies. The Issuer stipulates that the remedies at law of the Holder of this Warrant in the event of any default or threatened default by the Issuer in the performance of or compliance with any of the terms of this Warrant are not and will not be adequate and that, to the fullest extent permitted by law, such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise. 14. Successors and Assigns. This Warrant and the rights evidenced hereby shall inure to the benefit of and be binding upon the successors and assigns of the Issuer, the Holder hereof -18- and (to the extent provided herein) the Holders of Warrant Stock issued pursuant hereto, and shall be enforceable by any such Holder or Holder of Warrant Stock. 15. Modification and Severability. If, in any action before any court or agency legally empowered to enforce any provision contained herein, any provision hereof is found to be unenforceable, then such provision shall be deemed modified to the extent necessary to make it enforceable by such court or agency. If any such provision is not enforceable as set forth in the preceding sentence, the unenforceability of such provision shall not affect the other provisions of this Warrant, but this Warrant shall be construed as if such unenforceable provision had never been contained herein. 16. Headings. The headings of the Sections of this Warrant are for convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]. -19- IN WITNESS WHEREOF, the Issuer has executed this Warrant as of the day and year first above written. WORLD WIDE WIRELESS COMMUNICATIONS, INC. By:__________________________ Name: Title: EXERCISE FORM (To be executed by the Registered Holder upon Exercise of the Warrant) TO: WORLD WIDE WIRELESS COMMUNICATIONS, INC. The undersigned holder hereby exercises the right to purchase _________________ shares of Common Stock (the "Warrant Stock") of World Wide Wireless Communications, Inc., a Nevada corporation (the "Company"), evidenced by the attached Warrant (the "Warrant"). Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant. 1. Form of Warrant Price. The holder intends that payment of the Warrant Price shall be made as: ____________ a. "Cash Exercise" with respect to _________________ Warrant Stock; and/or ____________ b. "Cashless Exercise" with respect to _______________ Warrant Stock (to the extent permitted by the terms of the Warrant). 2. Payment of Warrant Price. In the event that the holder has elected a Cash Exercise with respect to some or all of the Warrant Stock to be issued pursuant hereto, the holder shall pay the sum of $___________________ to the Company in accordance with the terms of the Warrant. 3. Delivery of Warrant Stock. The Company shall deliver to the holder __________ Warrant Stock in accordance with the terms of the Warrant. Date: _______________ __, ______ Name of Registered Holder: ____________________________ By:_________________________ Name: Title: ASSIGNMENT (To be signed only upon transfer of Warrant) FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers all of the rights of the undersigned under the within Warrant, with respect to the number of shares of Common Stock of WORLD WIDE WIRELESS COMMUNICATIONS, INC. covered thereby set forth hereinbelow unto: Name of Assignee Address No. of Shares - ---------------- ------- ------------- Dated: __________, 20__ __________________________________________ (Signature must conform in all respects to name of holder as specified on the face of the Warrant) __________________________________________ (Address) Signed in the presence of: ________________________________ EX-21.1 27 0027.txt SUBSIDIARIES EXHIBIT 21.1 Subsidiaries Infotel Argentina, S.A. Country of Incorporation: Argentina Digital Way, S.A. Country of Incorporation: Peru EX-23.1 28 0028.txt CONSENT OF EVERS & HENDRICKSON, LLP Evers & Hendrickson, LLP Lawyers and Counselors At Law - ------------------------------------ May 26, 2000 Mr. Douglas P. Haffer, President World Wide Wireless Communications, Inc. 520 Third Street, Suite 101 Oakland, California 94607 Dear Mr. Haffer: This law firm consents to the incorporation of its name and its opinion letter regarding the legality of the securities being cleared for registration with the Securities and Exchange Commission pursuant to filing of the Form SB-2 Registration Statement on May 30, 2000. Very truly yours, EVERS & HENDRICKSON, LLP /s/ William D. Evers ----------------------------- By: William D. Evers, Partner EX-23.2 29 0029.txt CONSENT OF REUBEN E. PRICE & CO.
REUBEN E. PRICE & CO. REUBEN E. PRICE, C.P.A. (1904-1986) PUBLIC ACCOUNTANCY CORPORATION MEMBERS ________ FOUNDED 1942 AMERICAN INSTITUTE OF RICHARD A. PRICE CERTIFIED PUBLIC ACCOUNTANTS 703 MARKET STREET _______ SAN FRANCISCO, CA 94103 SECURITIES AND EXCHANGE ________ COMMISSION PRACTICE SECTION (415) 982-3556 OF THE AMERICAN INSTITUTE OF FAX (415) 957-1178 CERTIFIED PUBLIC ACCOUNTANTS _______ CALIFORNA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS
April 25, 2000 Mr. Douglas P. Haffer, President World Wide Wireless Communications, Inc. 520 Third Street, Suite 101 Oakland, California 94607 Dear Mr. Haffer: Please accept this letter as our consent to include in your disclosure document on Form SB-2 our reports on World Wide Wireless Communications, Inc.'s Balance Sheet dated September 30, 1999 and the related statements of operations, statements of cash flows, and statements of stockholders' equity for the years September 30, 1999 and 1998, and from inception on September 1, 1994 through September 30, 1999. Sincerely, RUEBEN E. PRICE & CO. EX-27.1 30 0030.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SEPTEMBER 30, 1999 BALANCE SHEET, STATEMENT OF INCOME AND STATEMENTS OF CASH FLOWS, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS SEP-30-1999 SEP-30-1999 275 0 0 0 0 63 336 14 1,181 491 328 0 0 71 0 1,181 0 0 0 2,383 0 0 0 (2,383) 0 (2,383) 0 0 0 (2,383) (0.04) (0.04)
EX-27.2 31 0031.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED MARCH 31, 2000 BALANCE SHEET, STATEMENT OF INCOME AND STATEMENTS OF CASH FLOWS, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS SEP-30-1999 MAR-31-2000 980 0 0 0 0 1,320 643 60 6,207 556 740 0 0 82,444 0 6,207 141 141 0 2,345 0 0 0 (2,204) 14 (2,217) 0 0 0 (2,217) (0.01) (0.01)
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