-----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, DsUEYi43TMLG4Ox9WflYsMB0vEwPELOO57C2LKcT3jD9OC2NzHjOu2hfhtqnNQVq 9fKj5DeWGia5pb5sqWHT2g== /in/edgar/work/20000607/0000950005-00-000728/0000950005-00-000728.txt : 20000919 0000950005-00-000728.hdr.sgml : 20000919 ACCESSION NUMBER: 0000950005-00-000728 CONFORMED SUBMISSION TYPE: SB-2/A PUBLIC DOCUMENT COUNT: 20 FILED AS OF DATE: 20000607 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/A SEC ACT: SEC FILE NUMBER: 333-95341 FILM NUMBER: 650778 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/A 1 0001.txt SB-2/A As filed with the Securities and Exchange Commission on June 7, 2000 - -------------------------------------------------------------------------------- Registration No. 333-95341 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------ PRE-EFFECTIVE AMENDMENT NO. 6 TO FORM SB-2 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 WORLD WIDE WIRELESS COMMUNICATIONS, INC. (Name of small business issuer in its charter) -----------------
Nevada 4812 860887822 (State or jurisdiction of (Primary Standard Industrial (IRS Employer incorporation or organization) Identification No.) Classification Code No.)
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 Proposed maximum Amount of securities to be Amount to be Proposed maximum aggregate offering registration registered registered (1) offering price per unit price (2) fee - ----------------------------------------------------------------------------------------------------------------------------- Common, $ .001 par per share 9,780,916 $4.50 $44,014,122 $11,620 - ----------------------------------------------------------------------------------------------------------------------------- (1) Includes 5,780,916 shares owned by certain current shareholders of World Wide Wireless Communications, Inc. World Wide Wireless Communications, Inc. will not receive any of the proceeds of such sales. (2) Estimated pursuant to Rule 457(a) under the Securities Act of 1933, as amended, solely for purposes of calculating the registration fee.
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. 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 June 7, 2000 World Wide Wireless Communications, Inc. 4,000,000 shares of Common Stock This is our initial public offering. We expect that the price at which we will offer our shares will be between $4.00 and $5.00 per share. This price may not reflect the market price of our shares after this offering. We intend to directly place these shares without the use of an underwriter. There are no escrow arrangements pertaining to this offering and there is no minimum amount we are required to raise in this offering before we may have access to funds received from investors. The minimum subscription is 1,000 shares and investors who meet the qualification requirements set forth in this prospectus may purchase the shares from us. Our shares are currently traded on the OTC Bulletin Board under the trading symbol WLGSE. ---------------------- Investing in our common stock involves a great amount of risk. See "Risk Factors" beginning on page 5. ---------------------- Per Share Total Public Offering Price.......................... ______ _______ Underwriting Discounts and Commissions ........ ______ _______ Proceeds Before Expenses....................... ______ _______ The proceeds before expenses are calculated before deducting estimated expenses of $60,000, including registration fees and other offering costs, in addition to legal and accounting fees. 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 The information in this prospectus is not complete and may be changed. Sellinging shareholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is prohibited. Selling Shareholder Prospectus Subject to Completion, dated June 7, 2000 World Wide Wireless Communications, Inc. 5,780,916 shares of Common Stock Certain of our shareholders named on page 32 of this prospectus are offering to sell up to 5,780,916 shares of our common stock which they presently own. We will not receive any of the proceeds from the sale of these shares by the selling shareholders. We will receive proceeds of $750,000 from one of the selling shareholders from the exercise of outstanding options to purchase securities covered by this prospectus if that selling shareholder exercises his options in full. The selling shareholders may offer and sell some, all or none of their common stock under this prospectus. The selling shareholders may determine the prices at which they will sell their shares, which may be at market prices prevailing at the time of the sale or some other price. The selling shareholders may use brokers or dealers to assist them in selling their shares, who may receive compensation or commissions for such sales. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The date of this prospectus is _________, 2000 TABLE OF CONTENTS
Page Page ---- ---- Reference Data....................... 2 Executive Compensation............... 30 Prospectus Summary................... 3 Principal and Selling Shareholders.. 32 Summary of Financial Data ........... 4 Certain Transactions................. 36 Risk Factors......................... 5 Description of Securities............ 39 Forward-Looking Statements .......... 11 Price Range of Common Stock.......... 39 Dividend Policy...................... 12 Plan of Distribution................. 41 Use of Proceeds...................... 12 Legal Matters........................ 42 Management's Discussion and Analysis. 15 Experts.............................. 42 Business............................. 16 Additional Information............... 42 Management........................... 27 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 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. 2 PROSPECTUS SUMMARY World Wide Wireless Communications, Inc. We provide high-speed broadband wireless Internet service in the United States and internationally. We are also developing a new technology, named the distributed wireless call processing system, which we believe will significantly enhance wireless communications in the future. We intend to license this technology to third parties in the future. We are incorporated under the laws of the State of Nevada. Our offices are located at 520 Third Street, Suite 101, Oakland, CA 94607. Our telephone number is (510) 839-6100. Summary of the offering Type of security................................ Common stock Common stock registered by company.............. We are registering and selling 4,000,000 shares of common stock on behalf of our company. We will also register another 5,780,916 shares of common stock for existing shareholders with registration rights. We will not sell the 5,780,916 shares owned by the existing shareholders with registration rights. Common stock offered for sale by our company in this offering ............ 4,000,000 shares Common stock to be outstanding after this offering .............................. 87,545,517 Use of proceeds................................ For expansion of our sales force, marketing and distribution activities, expansion of both our domestic and international business operations, for acquiring spectrum, and for general corporate purposes. See "Use of Proceeds" for more information. We intend to offer all of the shares directly to the public without the use of an underwriter. There is no minimum number of shares that must be sold. There can be no assurance that all of the shares offered will be sold. Accordingly, investors will bear the risk that we will accept subscriptions for less than 4,000,000 shares and then be unable to successfully complete all of the anticipated uses of the proceeds of this offering as expected. If fewer than 4,000,000 shares are sold, our business, financial condition and results of operations could be adversely affected. Funds from this offering will not be placed in an escrow or trust account and will be available for use as the funds are received. The minimum investment per shareholder is 1,000 shares. There is no maximum investment per shareholder. This offering will begin as of the effective date of this prospectus and continue for 12 months or such earlier date as we may terminate the offering. If this offering terminates, all subscription payments received after termination will be promptly returned. 3 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. 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
4 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 virtually no revenues and have incurred substantial expenditures. We expect to continue to experience losses from operations while we develop and expand our wireless Internet service system and other technologies. In view of this fact, our auditors have stated in their report for the period ended September 30, 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 transmission for our wireless service, thereby making our services significantly less attractive to potential customers We believe that it is important for us to obtain the right to conduct two-way transmissions through the radio transmission frequencies for which we acquire licenses. None of our present channel leases in the United States allow for two-way transmissions. Permission to conduct two-way transmissions must be obtained from the Federal Communications Commission, and the rules of the FCC require that we file applications with the FCC to receive permission to conduct two-way transmissions through these frequencies. 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- 5 way system. The applications must meet FCC interference protection rules or contain the consent of other licensees in these markets and adjacent markets. We cannot be certain that: o We will be able to complete the necessary processes to enable us to complete 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. If we are unable to obtain such an authorization, we will be forced to operate our service as a one-way transmission service, which we believe would make our Internet access services significantly less attractive to prospective customers than two-way transmission services. We are subject to other substantial governmental regulations 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 distributed wireless call processing system technology remains in the development phase and we have not yet developed a fully functional prototype of that technology. We cannot be certain when we will be able to complete development of that system and whether that system will work in the manner anticipated when development is completed. Furthermore, we cannot be certain whether the system will receive substantial market acceptance assuming that it is developed. For these reasons, although we believe that our distributed wireless call processing system is promising, an investor should not assume that the system will be available or will contribute positively to our business prospects or financial condition. 6 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 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 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 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 transmission 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 licenses we obtain. For example, we may attempt to provide services directly to Internet users or license our rights to use the 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. 7 We are subject to the requirements that we receive regulatory approvals from those countries in which we do business, the delay or denial of which can reduce our revenues and adversely affect our foreign operations. We anticipate that a substantial percentage of our revenues will be derived from operations outside of the United States. Our reliance on international operations to obtain consents of local regulatory authorities, some of which may significantly delay or deny permitting us to operate in those jurisdictions. For example, we will not be able to generate revenues from our operations in Argentina until such time as the governmental regulatory authority, the CNC, approves our application to acquire 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 will require that there be a modern telecommunications infrastructure which allows for the fast and efficient transfer of data from the source of the data to the transmission towers we lease. Many countries in which we are conducting or intend to conduct business lack the high speed cable, satellite or fiber optic wiring systems necessary for high speed data transmission and in many of those countries it is not economically viable to install that infrastructure. This limits our ability to provide high-speed Internet services efficiently, thereby making our services in those countries less attractive. Because we operate internationally, our operations are subject to unexpected political changes, changes in legal requirements and fluctuations in exchange rates, all of which may substantially increase our operating costs or make it difficult to do business there In addition to these international risks, we are also subject to the following risks in connection with our international operations that may substantially reduce our revenues, increase our operating and capital expenses, and otherwise materially affect our ability to conduct business: o unexpected changes in regulatory requirements, taxes, trade laws and tariffs, which can substantially increase the costs of doing business in other jurisdictions; o changes in a specific country's or region's political or economic conditions which may make it difficult or impossible to conduct business there; o lack of clear rules and regulations governing the issuance of licenses and standards for their operation; and o fluctuating exchange rates. By way of illustration, the regulatory authority in Ghana with responsibility for telecommunications licenses, the National Communications Agency, has invalidated certain license transfers which its predecessor agency made several years earlier. These licenses include those which we wish to use for our operations in that country. Although we intend to pursue our application for a license to use those frequencies, there can be no assurance that we will obtain the desired license or that the 8 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, which could cause us to fail to develop our international operations successfully We intend to expand our international sales efforts in the future. We have very limited experience in marketing, selling and supporting our products and services abroad. There is a risk that we will not be able to expand due to this inexperience. If we are unable to grow our international operations successfully and in a timely manner, our business and operating results could be seriously harmed. This could be reflected in a loss in your investment. If we do not develop system features in response to customer requirements, customers may not wish to use our services, which would seriously harm our business The broadband wireless access industry is rapidly evolving and is subject to technological change and innovation. These changes are requiring that providers of broadband services adopt new technologies quickly or modify existing technologies to maintain service and market products. Compliance with these changes may cause us to incur unexpected expenses or lose revenues. If we are unable to comply with diverse new or varying governmental regulations or industry standards in each of the many worldwide markets in which we compete, we may not be able to respond to customers in a timely manner or market our products, which could seriously harm our business. We are dependent on the services of key individuals and the loss of any of these individuals could significantly 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 may be unable to protect our intellectual property rights Our success depends in part on our ability to protect our proprietary technologies. We rely on a combination of patent, copyright and trademark laws, trade secrets and confidentiality and other contractual provisions to establish and protect our proprietary rights. We have received one patent from the United States Patent and Trademark Office pertaining to the distributed wireless call processing system and may file for additional patents in the future. However, our patents may not be of sufficient scope or strength, others may independently develop similar technologies or products, duplicate any of our products or design around our patents, and the patents may not provide us competitive advantages. Litigation, which could result in substantial costs and diversion of effort by us, may also be necessary to enforce any patents issued or licensed to us or to determine the scope and validity of third-party proprietary rights. Any such litigation, regardless of outcome, could be expensive and time consuming, and adverse determinations in any such litigation could seriously harm our business. We have not yet sought patent protection for the distributed wireless call processing system in any country other than the United States, nor have we sought to register our trademarks in those countries in which we currently do or intend to do business. The laws of other countries vary with respect to 9 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 market 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. 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 Over-the-Counter Bulletin Board, or 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. We have also requested from the SEC and have received on May 16, 2000 an interim order staying the delisting of our common stock from the OTCBB. Our case is now pending before the SEC. There can be no assurance that we will ultimately be able to prevail before the NASD or SEC and prevent the delisting of our shares. If we do not prevail and the SEC does not approve the registration of our common stock, it is possible that our shares may be delisted from the OTCBB. Should we be able to maintain the listing of our shares on the OTCBB, 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 market 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. 10 Sales of the selling shareholders' shares and and shares issued to investors recently may depress the price of our stock We are registering 5,780,916 shares of common stock owned by several of our current shareholders and warrant holders pursuant to the exercise of their registration rights. We also have an obligation to register shares of common stock issued to or issuable upon the conversion of subordinated debentures, series A preferred stock and exercise of warrants. The sale of all of these shares, especially if the sale occurs within a short period of time, could substantially reduce the market price for our stock. FORWARD-LOOKING STATEMENTS This prospectus contains forward-looking statements. We intend to identify forward-looking statements in this prospectus using words such as "believes," "intends," "expects," "may," "will," "should," "plan," "projected," "contemplates," "anticipates," or similar statements. These statements are based on our beliefs as well as assumptions we made using information currently available to us. Because these statements reflect our current views concerning future events, these statements involve risks, uncertainties and assumptions. Actual future results may differ significantly from the results discussed in the forward-looking statements. Some, but not all, of the factors that may cause these differences include those discussed in the Risk Factors section beginning on page 5 of this prospectus. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this prospectus. 11 DIVIDEND POLICY We have never declared or paid any cash dividends on our capital stock and do not intend to pay dividends in the foreseeable future. We intend to invest our future earnings, if any, to fund our growth. USE OF PROCEEDS If the entire offering is sold, the net proceeds from the sale of the common stock, after deducting underwriting discounts and other expenses, are estimated to be approximately $15,780,000. The net proceeds have been calculated using an initial public offering price of $4.50. There is no guarantee that we will receive any proceeds, the following table presents how we intend to use the proceeds of 25%, 50%, 75% and 100% of the offering. We expect to use the net proceeds over a 12-month period in approximately the following amounts and percentages:
Percentage of Offering Raised ------------------------------------------------------------------------------- 25% 50% 75% 100% --------- ---------- ----------- ----------- Expansion of Mt. Diablo, Ukiah, $ 394,500 $1,183,500 $ 2,367,000 $ 3,945,000 South Bend, Grand Rapids and (10%) (15%) (20%) (25%) San Diego Initiate Internet Access $ 78,900 $ 236,700 $ 591,750 $ 946,800 (2%) (3%) (5%) (6%) Argentina Operations $1,775,250 $3,313,800 $ 4,734,000 $ 5,523,000 (45%) (42%) (40%) (35%) Peru Operations $ 986,250 $1,972,500 $ 2,603,700 $ 3,156,000 (25%) (25%) (22%) (20%) Working Capital $ 710,100 $1,183,500 $ 1,538,550 $ 2,209,200 (18%) (15%) (13%) (14%) Total $3,945,000 $7,890,000 $11,835,000 $15,780,000 (100%) (100%) (100%) (100%)
* We intend to expand the Mount Diablo, Ukiah, South Bend, Grand Rapids and San Diego systems through the purchase of digital compression equipment in order to digitize the system and to add additional subscribers through marketing and advertising and the upgrading of available services. The amounts allocated to the expansion include the hiring of additional installers and repair personnel as well as anticipated installation costs. * We intend to initiate and expand Internet access services through the acquisition of Internet backbone connections, the purchase of telecommunications equipment and outsource services, for marketing, advertising and promotion and for the hiring of technical support personnel. * The amounts allocated to the Argentina operation include acquiring spectrum, purchasing equipment, the hiring of additional installers and repair personnel as well as anticipated installation costs and general working capital. * The amounts allocated to the Peru expansion include acquiring spectrum, purchasing equipment, the hiring of additional installers and repair personnel as well as anticipated installation costs and general working capital. * Proceeds allocated to working capital will be used to fund our general operations. 12 In addition to the proceeds we receive from the sale of our shares, one of the selling shareholders, Continental Capital & Equity Corporation, has notified us that it wishes for us to register 100,000 shares of common stock issuable upon exercise of a option at a price of $3.25 per share and another 100,000 shares at a price of $4.25 per share. If Continental Capital & Equity Corporation exercises these warrants in full, we will receive proceeds of $750,000. We have also received a request from Union Atlantic LC to register shares issuable upon the exercise of a warrant to purchase 100,000 shares of common stock at a price of $3.23 per share. If the warrant is exercised in full, we will receive total proceeds of $323,000. We intend to allocate those proceeds among the items in the table in accordance with the percentages set forth beside each item. We do not know at this time whether either company will exercise any of the warrants and therefore whether we will receive any proceeds from the exercise of the warrants. The above listed use of proceeds represents our best estimate of the allocation of the net proceeds of this offering based upon the current status of our business operations, our current plans and current economic conditions. Future events, including the problems, delays, expenses and complications frequently encountered by early stage companies as well as changes in regulatory, political and competitive conditions affecting our business and the success or lack thereof of our marketing efforts, may make shifts in the allocation of funds necessary or desirable. Prior to expenditure, the net proceeds will be invested in short-term interest bearing investment grade securities or money market funds. Management believes that the funds received from this offering will exceed our cash flow requirements for more than twelve months. No proceeds from this offering will be used to acquire assets or finance other businesses. However, we hope to continue to acquire spectrum both nationally and internationally consistent with its corporate objectives and mission statement. DILUTION Our present common stockholders acquired their shares at a cost substantially below the price at which the shares are being offered in this offering. Investors purchasing the shares in this offering will, therefore, incur an immediate and substantial dilution of their investment insofar as it relates to our resulting net tangible book after completion of the offering. Our net tangible book value as of March 31, 2000 was $0.0596 per share. "Net tangible book value" per share represents our total tangible assets less total liabilities divided by the number of shares outstanding of common stock. Our net tangible book value after the offering on a pro-forma basis will be $0.2394 per share assuming that we sell the full number of shares we are offering. This represents an immediate dilution in net tangible book value per share of $4.2606 if the entire offering is sold to new investors purchasing shares at $4.50 per share. The following table illustrates the per share dilution that you will experience on a pro forma basis as if the shares offered herein were outstanding as of March 31,2000. As there is no guarantee that we will receive any proceeds, the table presents per share dilution assuming receipt of 25%, 50% and 100% of the offering.
Percentage of offering received 25% 50% 100% ------- ------- ------- Offering price per share $4.5000 $4.5000 $4.5000 Net tangible book value after sales of common $0.1056 $0.1512 $0.2394 13 shares Dilution to purchasers of shares $4.3944 $4.3488 $4.2606
This information is based on pro forma shares outstanding on March 31, 2000 and excludes all shares issuable upon exercise or conversion of warrants and convertible securities and shares reserved for issuance pursuant to our 1998 Stock Plan. 14 MANAGEMENT'S DISCUSSION AND ANALYSIS The following should be read in conjunction with the "Risk Factors" starting on page 5 of this prospectus and the "Financial Statements" and the Notes thereto. We did not generate any subscription revenues by providing wireless cable services during fiscal 1998 and 1999 respectively. We did not have enough subscribers in either period to generate revenues sufficient to cover our operating expenses which totaled $353,075 and $2,383,330, respectively, in fiscal 1998 and 1999. Our operating expenses included service costs, programming and license fees, general and administrative expenses, and certain acquisition expenses resulting from acquiring spectrum. Our expenses increased substantially in 1999 over those in 1998 as we substantially increased the scope of our business operations during that period. During 1998 and 1999, we experienced continuing cash shortages due to an insufficient subscriber base. The resulting cash shortages rendered us unable to advertise and aggressively promote our services. Because we have received no revenues from operations and do not anticipate receiving significant revenues for the remainder of the year from operations, we have depended and will likely continue to depend upon equity and debt financing to provide necessary working capital for the foreseeable future. We have obtained financing primarily from the following sources, and believe that our primary sources of financing during the next 12 months will come from the following sources as well as the proceeds from this offering. o During the years ended September 30, 1999 and 1998, we received equity investment of $2,614,074 and $295,000, respectively. This investment was in the form of issuance of our common stock in various private placements. o In October 1999, we received financing of $740,000 from Credit Bancorp, a Netherlands Antilles company, in the form of a convertible subordinated debenture. Under the terms of the debenture, we are to pay Credit Bancorp interest at a rate of 7% per annum over a period of three years. Principal and accrued interest is convertible into common stock at the option of Credit Bancorp. Credit Bancorp has notified us that it has converted the debenture into common stock. o On April 14, 2000, we entered into a Securities Purchase Agreement with six investors, for the purchase of investment units, consisting of common stock, common stock purchase warrants, 4% subordinated debentures and preferred stock, all which are described below. We refer to these investors as unit investors in this prospectus. Pursuant to the Securities Purchase Agreement, the unit investors have purchased 760,000 shares of common stock, warrants to purchase 3,600,000 shares of common stock and subordinated debentures with a principal amount of $3,280,000 for a total price of $4,800,000. The unit investors have the option to purchase additional shares of common stock, warrants and series A preferred stock from us for a maximum amount of $1,920,000. The unit investors will be required to purchase these securities if an effective registration statement under the Securities Act is in effect with respect to all the common stock issued and issuable upon the exercise of the warrants and conversion of the subordinated debentures and series A preferred stock. 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 15 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 distributed wireless call processing 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 distributed wireless telephone and network designs and to finance, manufacture, and market these units and systems. TSI Technologies, Inc. was the research and development company formed for the purpose of creating and developing the distributed wireless call processing system. National Micro Vision Systems, Inc. was formed to operate a network of wireless Internet sites. In April of 1998, 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 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 the distributed wireless call processing system. We believe that this technology may significantly enhance wireless communications in the future by dramatically increasing cellular telephone network capacity. The Industry Use of the Internet and private communications networks has expanded and continues to expand rapidly. International Data Corporation estimates that there were 142 million Internet subscribers at the 16 end of 1998, and projects that this number will grow to over 500 million subscribers by 2003. Businesses increasingly depend upon data networks, not only for communication within the office, but also to exchange information among corporate sites, remote locations, telecommuting employees, business partners, suppliers and customers. Consumers are also accessing the Internet to communicate, collect and publish information and conduct retail purchases. The growth in data traffic is resulting in an increase in the demand for high-speed access. To accelerate the speed at which data can be transmitted, service carriers are increasingly relying on broadband, which allows the transmission of multiple data channels through a single medium. One broadband medium consists of wireless frequencies which have large bandwidth, or an ability to transmit large amounts of data in a short period of time. The FCC has taken steps to increase the availability of frequencies and bandwidth that may be used by wireless carriers in the United States for such data transmission. In addition, an FCC ruling in September 1998 allowed license holders of various frequencies within the band of 2.15 to 2.68 Gigahertz, or GHz, to offer two-way broadband wireless data services. Previously, these frequencies had been restricted to one-way video transmissions which limited their effectiveness for data transmission. The FCC has also increased the availability of various higher frequencies within the bands of 24 to 40 GHz. Internationally, these frequencies vary slightly, with the lower frequency services being between 2.5 to 4.0 GHz and the higher frequency-type services being offered on frequencies similar to the higher frequencies used in 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 infrastructure for the connection to the subscriber have constrained service providers from exploiting these opportunities. Links to subscribers typically consist of copper wires that operate at substantially lower transmission speeds than those offered in the long-haul segment of a network, or by some available broadband alternatives. These copper wires were originally intended to carry only analog circuit-switched, voice signals. As a result, the connection to the subscriber has become a bottleneck that limits high-speed data transmission. Alternative technologies for broadband access include: o Digital subscriber line, or DSL, technology improves the data transmission rates of a telephone company's existing copper wire network; 17 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 licenses in these lower frequencies within the 2.15 to 2.68 GHz range. Emerging carriers may use this technology to bypass existing wire-based infrastructure and to compete with incumbent carriers. In addition, this technology may be used to deploy broadband services in regions where there is no wire-based communications infrastructure. Estimates of the revenue which lower frequency licenses will generate vary substantially, but International Data Corporation estimates that revenue generated by basic services delivered via fixed, non-satellite based wireless technologies will grow from $767 million last year to $7.4 billion in 2003. Lower and Higher Frequency Wireless Transmission Systems We have chosen to focus on acquiring licenses to transmit within the lower frequency ranges approved by the FCC and used internationally, which are generally between 2.15 and 2.68 GHz. Although the higher frequencies are large enough to transmit large amounts of data at once, the higher frequencies have severe limitations including high costs of build out, very short range of less than 5 kilometers and severe problems with interference from weather and atmospheric conditions. Even though they have these limitations, higher frequency transmissions would appear to have major potential in wireless local loops, internal wireless networks and intranets. The lower frequencies approved by the FCC have less bandwidth than those in the higher frequencies. Nonetheless, we believe that the lower frequencies have more than enough bandwidth for the great majority of potential business and residential users. In the United States, which allows 10 watts of power in transmitting data, the range of the lower frequencies is at least 50 kilometers and transmissions within these frequencies are much less affected by atmospheric and meteorological phenomena. It is also much less expensive to install and operate lower frequency transmission services than at higher frequencies, in part because the greater range of the lower frequencies require the installation of fewer transmitters. Both high and low frequency transmissions are transmitted over a limited number of licensed frequencies that protect data from interference by other forms of radio or microwave transmitters. It is critical, therefore, that any company operating or attempting to develop a system of wireless Internet over these frequencies acquire them as quickly and as inexpensively as possible and for as many locations and as many channels/bands as possible in each location. 18 Because of the limitations of higher frequencies as means of transmissions for Internet access, and because we believe that the more viable market for wireless high-speed services is in the small to medium-size business and residential market, we have decided to concentrate exclusively on the lower frequencies for our Internet access service. In that context, we have been actively engaged in the acquisition of wireless Internet frequencies in the United States and especially abroad. One major technical problem with wireless transmissions within the lower FCC-approved frequencies has traditionally been that a clear line of sight was necessary between the transmission and the receiver. This limitation allowed these frequencies to be used only in areas with even terrain and no obstructions, insofar as buildings and hills would often disrupt transmissions. Although these problems persist with the lower frequencies, there have been recent developments which have shown a potential for reducing these problems. Cisco Systems, Inc. has recently announced the development of Vector Orthogonal Frequency Division Multiplexing, which purportedly has the ability to reassemble multi-path signals at the receiving point so that they appear to arrive in a single stream from one location, even if obstacles are in the path of the original signal. (Communications Daily, MMDS Industry Gears Up on Standards Issues, Spectrum Planning, April 3, 2000). This would have the effect of significantly reducing the line of sight problem and, we believe, will enhance lower frequency transmissions as a medium for Internet access. A part of the spectrum which the lower frequencies occupy consist of frequencies referred to as Instructional Television Fixed Service. These frequencies are reserved by federal law to television broadcasting by religious, educational or other nonprofit groups. An increasing number of providers of data transmission are leasing transmission rights of the holders of Instructional Television Fixed Service licenses. As we discuss below, we have leased a number of these frequencies from a nonprofit organization. International Broadband Use We believe that international markets offer enormous potential for growth. Although use of the Internet has grown substantially internationally, we believe that the combination of obsolete equipment and newly privatized systems in many countries provide us with great opportunity. The technology we employ allows countries such as 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 wireless services. It is our belief that the bandwidth and speed of our service will meet the requirements of at least 90% of the potential high-speed wireless Internet customer base, and we hope to be able to provide this service more economically and with greater reliability than our competition. In the international market, we should be able to provide a quantum leap in the quality of Internet service beyond that which currently exists and at a price point similar to that being charged by providers of the current service. 19 Our strategy Our activities are currently divided into three categories: o Acquisition of Wireless Internet Frequencies - Spectrum; o Development of Wireless Frequencies - Build Out; and o Development and Licensing of Distributed Wireless Call Processing System. Acquisition of Wireless Internet Frequencies - Spectrum We have determined that our primary target for acquisition of wireless frequencies will be in the frequency range within the United States of 2.5GHz 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 licenses in only three locations - the East Bay region of San Francisco, California, northern San Diego County, California, and South Bend, Indiana. Since the beginning of 1999, we have acquired rights - either through long-term leases with options to purchase or outright purchases - to additional spectrum both in the United States and elsewhere. As of the date of this offering, we lease, own or possess reversionary rights to licensed frequencies in the following additional locations: Location State/Country Grand Rapids Michigan Vail Colorado Aspen Colorado Key West Florida Ukiah California La Grande Oregon Pierre South Dakota Casper Wyoming Entire nation of Ghana, West Africa Ghana, West Africa Buenos Aires Argentina, South America Rosario Argentina, South America Santa Fe Argentina, South America Corrientes Argentina, South America Mendoza Argentina, South America Neuquen Argentina, South America Cordoba Argentina, South America Bahia Blanca Argentina, South America Lima Peru, South America The licenses in the United States listed in the above table are currently leased from Shekinah Networks. Pursuant to an Option Agreement with Shekinah Networks, we paid $500,000 to lease eight Instructional Television Fixed Service channels for our high-speed wireless Internet connections, as authorized by the FCC. This agreement also provides us an exclusive option to lease excess capacity on Shekinah's remaining thirty-two channels, as they become available. The monthly minimum 20 transmission fee to be paid to Shekinah for each license or application leased, will be 5% of the gross system receipts or $500, whichever is greater. Each lease has a term of five years, which may be renewed at our election for an additional five-year term if the FCC renews the license. All of the United States licenses described above allow us to broadcast over frequencies using one-way transmissions only. With the exception of certain limited provisional licenses granted in various parts of the country, the FCC has not yet granted long-term two-way transmission licenses for the lower frequencies. The FCC announced in March 2000 that it would begin to accept applications for two-way 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 within these frequencies and because of the specific demographics within the potential Mt. Diablo transmission area, we determined to commence the limited-type of service close to our headquarters in Oakland. We intend to use this one-way wireless system in only one additional location - San Diego, California. The Concord and San Diego operations will use high-speed wireless transmissions to download information from the internet and similar data sources, but will use telephone lines, either normal or high-speed, for the uplink. While this one-way service will provide users with enhanced Internet connections, it will not offer full-time, always on, high-speed two way wireless service that our other locations will provide. We intend to build-out our next domestic system in the small town of Ukiah, California, some ninety miles north of San Francisco. The FCC has already granted digital authorization for the Ukiah license and the remaining locations. The proximity of Ukiah to the corporate headquarters and the relatively compact demography and geography will provide us with a convenient platform to commence full bi-directional wireless service. After Ukiah, the domestic build-out program will include northern San Diego County, South Bend, Indiana, Grand Rapids, Michigan, Vail and Aspen, Colorado, Key West, Florida, Pierre, South Dakota and Casper, Wyoming. We intend to commence operations in Buenos Aires, Argentina during the first six months of 2000. Preparations have commenced to secure the necessary backbone connections and transmitter locations in the Greater Buenos Aires metropolitan area, which contains more than 12 million people. Our ability to begin transmission over the frequencies is subject to approval of the Comision Nacional de Communicaciones, or CNC, the governmental agency primarily responsible for regulating telecommunications in Argentina. We have not yet received approval by the CNC, and the Argentine government recently announced that it was placing a freeze on the review of license transfer requests and transfers of shares in entities holding these licenses. The CNC announced that the freeze expires on June 21 22, 2000 and we believe that the CNC will ultimately approve our applications and allow for us to commence offering our wireless services. If the transfer is approved, we will commence transmitting in Buenos Aires by as early as July of this year. 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. We intend to begin operations in Peru this year. We have acquired all of the shares of Digital Way, S.A., which presently owns a wireless transmission license in Lima/Callao and is in the process of attempting to secure additional licenses in that area as well as licenses for five different cities in Peru. We have 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 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. 22 Development and Licensing of Distributed Wireless Call Processing System We are completing the development of our distributed wireless call processing system. The major feature of the system is that it allows individual cell phones and other communications units to amplify signals, thereby reducing the need for repeater stations. The 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 the system will build widely scattered gateway sites that will serve to introduce local signals into long lines, international and satellite service providers and introduce data signals into destination networks while providing a medium for our generation of an ongoing revenue stream. We expect that there will be a dramatic increase in total network capacity and in individual and traffic-form capacities resulting from the use of the distributed wireless call processing 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 power needed for this system have the further potential to allow this new technology to be overlaid on existing wireless cellular installations without interfering with existing signals in the same frequency. As a result, the new technology has the potential to provide overbuild capacity, incremental returns on investments in frequency, and introduction of new, high-value data and non-voice services on cellular franchises already in place. This new technology is currently being engineered to operate in, among other frequencies, the PCS frequency bands and in so-called free or unlicensed frequency bands in the United States. It is readily adapted to other frequencies - - military frequencies and frequencies that may be allocated by foreign governments. By licensing or otherwise transferring this technology to third parties and retaining a substantial royalty interest in it, we believe that we will be able to concentrate on our core business while retaining the potential for a significant revenue stream. Investors should be aware that this system is largely untested and is not widely used, and we cannot ensure that an increase in usage will actually result. We are currently having feasibility studies conducted on the distributed wireless call processing system 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 wireless transmission licenses in eight of the largest cities in Argentina, including Buenos Aires. Under the agreement, we will appoint the majority of Infotel's directors and will be in charge of its management. The purchase price for Infotel Argentina S.A. consisted of $900,000 in cash and 454,545 shares of common stock. The Agreement allows us to rescind the purchase in the event that the CNC does not approve the sale of Infotel Argentina S.A. to us and receive repayment of the purchase price. 23 On February 10, 2000, we signed an agreement to purchase Digital Way, S.A., a Peruvian telecommunications company. Digital Way currently owns licenses for spectrum in the 2.3 to 2.5 GHz range, 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 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 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 24 time period and can be renewed. Yearly reports are required to be filed with the FCC to establish that the licensee or its assignee is complying with the requirements of the license. Outside the United States, rules and regulations are quite varied. In Argentina, the proposed frequencies for licenses are between 2.4 GHz and 2.6 GHz and are granted by the CNC. Licenses are granted for periods of 10 years, but may be extended for lengthier periods at the discretion of the CNC. In Peru, frequencies for licenses are also between 2.4 GHz and 2.6 GHz and are granted for periods of 20 years 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 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 distributed wireless call processing system, which has been issued patent number 6,055,429. We do not have other patents pending pertaining to other technologies. We currently use the service mark "World Wide Wireless Communications" 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 25 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. 26 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 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 27 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 ' options vested immediately upon the date of grant. The expiration date for Mr. Klein to exercise the options is October 21, 2003. To date, Mr. Klein has not exercised any options for shares of common stock. Employment Contracts We have entered into an employment agreement with Mr. Haffer, which provides for an initial term of three years commencing February 1, 2000 at an initial annual base salary of $230,000 plus an annual performance bonus of not less than $34,000. Any bonus in excess of $34,000 will be at the sole discretion of our Board and will not be tied to a fixed set of objective criteria. Mr. Haffer's employment agreement also contains a termination provision that requires us to pay him his annual compensation and minimum bonus amounts remaining on his three-year contract if he is terminated without cause. In October of 1999, we entered into a three-year employment agreement with Mr. Caldwell under which he will receive an annual salary of $48,000. Under the terms of the agreement, on May 8, 2000, Mr. Caldwell's base salary will be increased to $72,000 per year, and on November 8, 2000, Mr. Caldwell's salary will be increased to $96,000 per year. The agreement also provides for an annual performance bonus of not less than 5% of his base salary and not more than 100% of his base salary. The decision to grant the bonus and the amount of the bonus can be decided by management without the consent of our Board of Directors. We have not established a fixed set of performance criteria on which to base Mr. Caldwell's bonus amounts. Mr. Caldwell's employment agreement also contains a termination provision that requires us to pay him his annual compensation and minimum bonus amounts remaining on his three-year contract if he is terminated without cause. In May of 1999, we entered into a two-year employment agreement with Mr. Miller under which he will receive an annual salary of $96,000. Mr. Miller is not entitled to receive any bonuses. Under the 28 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. 29 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 $100,000 during that period. Summary Compensation Table
Restricted Securities stock Underlying Name and Principal Position Salary Bonus award Options/SAR - --------------------------- ------ ----- ----- ----------- Douglas P. Haffer 106,000 0 -- 800,000 Chairman, CEO and CFO
The following table sets forth information concerning grants of stock options to our Chief Executive Officer for the fiscal year ended September 30, 1999. All options were granted under the 1998 Stock Option Plan. Shareholders never approved our 1998 Stock Option Plan, and therefore, all incentive stock options granted under the 1998 Stock Option Plan are classified and taxed as non-statutory stock options. Option Grants The following table sets forth information concerning grants of stock options to each of the executive officers and directors named in the table above for the fiscal year ended September 30, 1999. All options were granted under the 1998 Stock Option Plan. Shareholders never approved our 1998 Stock Option Plan, and therefore, all incentive stock options granted under the 1998 Stock Option Plan are classified and taxed as non-statutory stock options. Individual Grants
Number of Percent of Securities options Options Fiscal Year Underlying granted to Exercise Exercised Options Options employees Price as of Expiration Granted Granted from 8/22/98 ($/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
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 30 such that the grant or exercise of the options will not create a taxable event." All 800,000 shares vested immediately. The expiration date of the option is 5 years from the date of grant. The option will be treated as non-statutory stock options. In October 1999, Mr. Caldwell was granted an option for 800,000 shares of our common stock at an exercise price of $0.66 per share. All 800,000 shares vested immediately. The expiration date is five years from the date of grant. In October 1998, Mr. Miller received an option to purchase 800,000 shares of our common stock at an exercise price of $0.095 per share. All 800,000 shares vested immediately. The expiration date is five years from the date of grant. In October 1998, Mr. Sweis received an option to purchase 250,000 shares of our common stock at an exercise price of $0.095 per share. All 250,000 shares vested immediately. The expiration date is five years from the date of grant. In October 1998, Mr. Klein received an option to purchase 250,000 shares of our common stock at an exercise price of $0.095 per share. All 250,000 shares vested immediately. The expiration date is five years from the date of grant. 1998 Stock Option Plan Our Board of Directors adopted a 1998 Stock Incentive Plan in August 1998 reserving 3,000,000 shares for issuance. The Plan provides for the grant of incentive stock options, as defined in Section 422 of the Internal Revenue Code, to our officers and employees, and nonstatutory stock options to employees, directors and consultants. It may be administered by the Board of Directors or delegated to a committee. Shareholders never approved our 1998 Stock Option Plan, and therefore, all incentive stock options granted under the 1998 Stock Option Plan are classified and taxed as non-statutory stock options. The exercise price of incentive stock options granted under the 1998 Stock Option Plan must be at least equal to the fair market value of our common stock on the date of grant. However, for any employee holding more than 10% of the voting power of all classes of our stock, the exercise price will be no less than 110% of the fair market value on the date of grant. Nonstatutory stock options granted to a person who at the time the option is granted does not hold more than 10% of the voting power of all classes of our stock will have an exercise price of no less than 85% of the fair market value of the stock on the date of grant. Options granted to our employees will become exercisable over a period of no longer than 5 years, and no less than 20% of the shares covered will become exercisable annually. No options will be exercisable prior to one year from the date it is granted unless the Board specifically determines otherwise. In no event will any option be exercisable after the expiration of 10 years from the date it is granted, and no Incentive Stock Option granted to a holder of more than 10% of the voting power of all classes of our stock will be exercisable after the expiration of 5 years from the date it is granted. If an optionee's status as an employee with us terminates for any reason, other than death or disability, then the optionee may exercise Incentive Stock Options in the three-month period following such cessation. The three-month period is extended to 12-months for termination due to death or disability. In the event of a merger or consolidation in which we are not the surviving entity, or a sale of all or substantially all of our assets or capital stock, if the surviving entity does not tender to the optionees stock options or capital stock of substantially the same economic benefit as optionees unexercised 31 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 AND SELLING SHAREHOLDERS The following table sets forth the beneficial ownership of our common stock as of April 30, 2000 and as adjusted to reflect the sale of the shares of common stock offered hereby: o the chief executive officer, each of the executive officers named in the summary compensation table and each of our directors; o all executive officers and directors as a group; o each person or entity who we know beneficially owns more than 5% of our outstanding shares of common stock; and o each selling shareholder. We will not be selling the 5,780,916 shares owned by those shareholders. Except as otherwise indicated, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of common stock held by them. Applicable ownership is based on 83,445,517 shares of common stock outstanding as of April 30, 2000. Beneficial ownership is determined in accordance with the rules of the SEC. Shares of common stock subject to options or warrants that are presently exercisable or exercisable within 60 days of April 30, 2000 are deemed outstanding for the purpose of computing the percentage ownership of the person or entity holding options or warrants, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person or entity. If any shares are issued upon exercise of options, warrants or other rights to acquire our capital stock that are presently outstanding or granted in the future or reserved for future issuance under our stock plan, there will be further dilution to new public investors. Selling shareholders are under no obligation to sell all or any portion of their shares. Particular selling shareholders may not have a present intention of selling their shares and may sell less than the number of shares indicated. The following table assumes that the selling shareholders will sell all of their shares. Named Executive Officers and Directors (1)
Number of Percentage of Number of Shares Shares Outstanding Shares Beneficially Prior to After Being Owned Offering Offering Offered ----- -------- -------- ------- Douglas P. Haffer (2)............. 8,511,073 10.01 9.56 Wayne Caldwell (3)................ 800,000 * * Dana Miller (4)................... 1,229,000 1.46 1.39 Ramsey Sweis (5).................. 250,000 * * 32 Robert Klein (6) ................. 250,000 * * Executive Officers and Directors as a Group ........... 11,040,073 12.67 12.11 Name of Beneficial Owners - ------------------------- World Wide Wireless, Inc. (7) 16,120,679 19.32 18.44 c/o Lofton & Associates 3233 East Broadway Long Beach, CA 90803 Kenn Olson (8) 6,356,260 7.54 7.20 3233 East Broadway Long Beach, CA 90803 TSI Technologies, Inc. 6,042,020 7.24 6.91 One Post Street, Suite 2600 San Francisco, CA 94104 Albert and Francis Kutcher 5,180,300 6.21 5.92 12052 Linda Flora Drive Ojai, CA 93023 Name of Selling Shareholder - --------------------------- Patrick McCleary 350,000 * * 350,000 1215 Wildwood Road Boulder, CA 80303 Darryl Pohl 1,400,000 1.68 * 1,400,000 c/o Solomon Smith Barney 2420 NW Professional Drive, Suite 200 Corvallis, OR 97330 Ridge Capital Associates LLC 1,818,182 2.18 * 1,818,182 1688 Meridian Avenue, Suite 801 Miami Beach, FL 33139 Behrooz Sarafraz 2,182,500 2.62 1.42 1,000,000 2 Mariposa Court Tiburon, CA 94920 Chalmers R. Jenkins (9) 400,000 * * 400,000 10727 E. San Salvador Drive Scottsdale, AZ 85228 Joseph W. Hubbard 20,000 * * 20,000 26573 Basswood Rancho Palos Verdes, CA 90274 33 Continental Capital & Equity Corporation (10) 210,000 * * 210,000 195 Wekiva Springs Road, Suite 200 Longwood, FL 32779 Credit Bancorp (11) 482,734 * * 482,734 1144 Hooper Avenue Suite 203 Toms River, NJ 08753 Union Atlantic LC (12) 100,000 * * 100,000 3300 PGA Blvd., Suite 810 Palm Beach Gardens, FL 33410 - --------------- * 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 World Wide Wireless, Inc. and TSI Technologies, Inc. Mr. Lynch is not an officer or director of our company. No officer or director of either World Wide Wireless, Inc. or TSI Technologies is an officer of our company. (8) Includes 800,000 shares that Mr. Olson may be entitled to receive upon the exercise of a stock option he was granted while he was an officer and director. (9) Consists of 400,000 shares issuable to Mr. Jenkins in connection with a settlement agreement between Mr. Jenkins and us. (10) Includes 100,000 shares issuable upon the exercise of options to purchase shares at $3.25 per share and 100,000 shares issuable upon options to purchase shares at a price of $4.25 per share. (11) Consists of shares issuable upon conversion of principal and interest owing under a convertible subordinated debenture. The operations of Credit Bancorp have been suspended and a receiver has been appointed for that corporation. The receiver has notified us that it wishes to exercise Credit Bancorp's registration rights and thereby convert principal and interest owing under the debenture. 34 (12) Consists of 100,000 shares of common stock issuable upon an exercise of a warrant to purchase shares at a price of $3.23 per share.
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. Union Atlantic LC assisted us in locating the investors who subsequently purchased the units in the unit offering. 35 CERTAIN RELATED PARTY TRANSACTIONS As of September 1999, other than employment agreements and stock option plans, there have been no transactions to which we were a party involving $60,000 or more and in which any director, executive officer or holder of more than five percent of our capital stock had a material interest. DESCRIPTION OF SECURITIES Common Stock Our articles of incorporation authorize us to issue a maximum of 100,000,000 shares of common stock, $0.001 par value. As of April 30, 2000, there were 83,445,517 shares of common stock outstanding. Owners of common stock are entitled to one vote for each share held of record on all matters to be voted on by shareholders, except that, upon giving the legally required notice, shareholders may cumulate their votes in the election of directors. Subject to the rights of any holders of preferred stock, the owners of common stock are entitled to receive dividends when, as and if declared by the Board of Directors out of funds legally available therefore. In the event of a liquidation, dissolution or winding up of our business, the common stock shareholders are entitled to share ratably in all assets remaining which are available for distribution to them after payment of liabilities and preferences to holders of preferred stock. Holders of common stock have no conversion, preemptive or other subscription rights, and there are no redemption provisions applicable to the Common Stock. We have reserved 3,000,000 shares of common stock that have been reserved for issuance under our 1998 Stock Option Plan. In addition, we are obligated to issue 3,600,000 shares of common stock pursuant to the terms of common stock purchase warrants, dated April 14, 2000, 304,000 shares of common stock pursuant to the terms of warrants to be issued as of the date of this prospectus, and additional shares of common stock to be issued pursuant to 4% Convertible Debentures described below to the unit investors. Preferred Stock Our certificate of incorporation does not presently authorize us to issue any class of stock other than common stock. Pursuant to the terms of a Securities Purchase Agreement, dated April 14, 2000, between us and various investors to whom we refer as unit investors in this prospectus, we are required to submit for shareholder approval an amendment to our certificate of incorporation that authorizes us to issue preferred stock. The Securities Purchase Agreement further states that our Board of Directors will authorize the creation and issuance of a maximum of 1,310 shares of series A preferred stock following the approval of that amendment by the shareholders and upon the our receipt of payment of $1,000 per share from those investors listed in the Securities Purchase Agreement. The unit investors may purchase the series A preferred stock at any time after the date the series A preferred stock is authorized, and must purchase the series A preferred stock after we a registration statement is declared effective with regard to the shares of common stock the unit investors may purchase pursuant to the Securities Purchase Agreement. 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 36 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. The liquidation preference on the series A preferred stock is equal to the stated value per share. This payment shall be prior to any payment we make to the holders of our common stock or other shares of stock which are junior to the series A preferred stock. We must receive approval of our shareholders before we can amend our certificate of incorporation to allow for the creation of the series A preferred stock. If we do not obtain that approval for any reason, the investors shall be entitled to purchase additional 4% Convertible Debentures with an aggregate principal amount of $1,310,000 instead of the series A preferred stock. Warrants/Options We have issued warrants to purchase an aggregate of 3,600,000 shares to the unit investors. In addition, the unit investors the right to acquire warrants to purchase an additional 1,440,000 shares of common stock as of the date of this prospectus. The warrants allow the holders to purchase shares of our common stock at a price of $3.23 per share. 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. We have agreed to issue to Union Atlantic LC a warrant to purchase 100,000 shares of common stock at a price of $3.23 per share. Both Continental Capital & Equity Corporation and Union Atlantic LC are selling shareholders. Subordinated Debentures We have issued 4% Convertible Subordinated Debentures to the unit investors with a principal amount of $1,312,000. These debentures require the payment of interest at a rate of 4% per annum, payable semi-annually, and principal is due and payable on April 14, 2005. The unit investors may convert principal and interest owing under the debentures at any time at a conversion price equal to the lesser of 110% of the average of the closing trading prices of the common stock per share for the five trading days prior to the date on which the debentures were issued or 85% of the average of the closing trading prices of the common stock for five days immediately prior to the date of conversion. During the first six months after the debentures were issued, the conversion price may not be less than $2.00 per share and, during the following six months, will not be less than $1.27 per share. However, if our revenues for the 12 month period ended December 31, 2000 are less than $13,500,000, there will be no minimum exercise price. There will be no minimum exercise price following the end of the second six-month period in any event. 37 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 unit investors which requires that we file a registration statement with the SEC to register under the Securities Act all shares of common stock issued to them or issuable upon the conversion of the subordinated debentures and the series A preferred stock (if any is issued) and exercise of the common stock purchase warrants. We are obligated to file a registration statement for the shares by May 29, 2000. The registration rights agreement provides that we must pay all expenses incurred in the registration and certain expenses of the selling shareholders, including up to $25,000 in the legal fees of counsel the selling shareholders retain. We are obligated to keep the registration statement effective with respect to those shares until those shares are sold or until those shares may be sold pursuant to Rule 144(k) of the Securities Act. Unless all shares are sold prior to that time, this will require that the registration statement will need to remain effective for a period of at least two years under present SEC rules. The registration rights agreement provides that we must pay the unit investors liquidated damages equal to 2% of the outstanding subordinated debentures and series A preferred stock if certain events occur. Principal among these events are: o If the SEC does not declare the registration statement for the registration of the unit investors' shares effective by August 12, 2000; o If our common stock is delisted from the OTCBB; o If the shareholders do not approve of the creation of the series A preferred stock by July 15, 2000. We have entered into a registration rights agreement with Credit Bancorp pursuant to which we have agreed to register shares of common stock issuable upon the conversion of a convertible subordinated debenture issued to Credit Bancorp. The agreement grants Credit Bancorp so-called piggy-back registration rights only, which means that we are obligated to include their shares in registrations which we are filing for public offerings of securities but does not otherwise require us to register their shares under the Securities Act. The government appointed receiver of Credit Bancorp has notified us that it wishes to exercise these registration rights in connection with this offering and is one of the selling shareholder. Pursuant to a settlement agreement into which we entered with Chalmers R. "Bud" Jenkins, one of our former officers, we agreed to register the 400,000 shares issuable to him. Mr. Jenkins is included as a selling shareholder and he may sell his shares under this prospectus. We have entered into written or oral agreements with all of the other selling shareholders pursuant to which we have agreed to register the shares they own or may purchase on the exercise of outstanding options under the Securities Act. Transfer Agent The transfer agent for our common stock is Manhattan Transfer Register Co., Post Office Box 361, Holbrook, New York, 11741-0361. 38 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 3.97 9/30/99 0.875 1.73 12/31/99 0.62 2.01 3/31/00 1.06 7.78 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 transmission in particular; and o changes in the performance of the stock market in general. In recent years, the stock market has experienced extreme price and volume fluctuations that have had a substantial effect on the market prices for many telecommunications, Internet and emerging growth companies such as ours, which may be unrelated to the operating performances of the specific companies. Companies that have experienced volatility in the market price of their stock have been the object of securities class action litigation. If we become the object of securities class action litigation, it could result in substantial costs and a diversion of our management's attention and resources and have an adverse effect on our business, financial condition and results of operations. In addition, holders of shares of our common stock could suffer substantial losses as a result of fluctuations and declines in the stock price. 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 39 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. 40 PLAN OF DISTRIBUTION We are offering our shares directly to the public as direct placement or distribution. There is no minimum number of shares that must be sold. There can be no assurance that all of the shares offered will be sold. Accordingly, investors will bear the risk that we will accept subscriptions for less than 4,000,000 shares and then be unable to successfully complete all of the anticipated uses of the proceeds of this offering. If fewer than 4,000,000 shares are sold, our business, financial condition, and results of operations could be adversely affected. Funds from this offering will not be placed in an escrow or trust account and will be available for use as the funds are received. The minimum investment per shareholder is $4,500 for 1,000 shares of stock. There is no maximum investment per shareholder. In order to purchase shares, you must represent to us in writing that the amount of your investment does not exceed 10% of your net worth and you meet one of the following requirements: o Your income last year was at least $50,000 and your net worth was at least $75,000, or o You net worth was at least $150,000, excluding the value of your home. For the purpose of calculating your net worth, you should not take into account the value of your home, automobiles or household furnishings. The shares will initially be sold through our executive officers who will not receive commissions and who will be registered as sales representatives where required under state securities laws. We currently intend to solicit prospective investors directly through in-person communications only. We currently do not have a broker-dealer involved with the sale of our shares; however, we anticipate obtaining a broker-dealer to sell our shares on a best efforts basis. If we do determine to use a broker-dealer, we anticipate paying that broker-dealer a commission of a maximum of 12% of the investment funds that broker obtains. Any selected broker-dealer that sells securities in this type of an offering would be deemed an underwriter as defined in Section 2(11) of the Securities Act. Prior to the involvement of any broker-dealer in the offering, that broker must obtain a no objection position from the NASD regarding the contemplated underwriting compensation and arrangements. This offering will begin as of the effective date of this prospectus and continue for twelve months or such earlier date as we may terminate the offering. If this offering terminates, all subscription payments that we have not accepted will be promptly returned. Investors may subscribe for the shares by executing a subscription agreement and delivering that agreement to us plus the purchase price for the shares to World Wide Wireless Communications, Inc., 520 Third Street, Suite 101, Oakland, California 94607. We are not participating in the offering of any of the shares which the selling shareholders are selling. None of the selling shareholders have informed us of any arrangements into which they have entered with respect to the sale of their shares. The selling shareholders are not limited to selling their shares at the offering price set forth in this prospectus, but rather may sell their shares at such prices as they choose in their discretion. The selling shareholders are not obligated to sell any specific number of their shares in this offering. The selling shareholders may effect the sale or distribution of their shares directly to purchasers from time to time on the OTCBB at prices and at terms prevailing at the time of sale. The shares may be sold by one or more of the following methods: 41 o a block trade in which the broker or dealer so engaged will attempt to sell the shares of common stock as an agent, but may position and resell a portion of the block as principal to facilitate the transaction; o purchases by a broker or dealer as principal and resales by that broker or dealer for its own account pursuant to this prospectus; o an over-the-counter distribution in accordance with the rules of the OTCBB; o in ordinary brokerage transactions or transactions in which the broker solicits purchasers; o in transactions otherwise than on any stock exchange or in the over-the-counter market; or o pursuant to Rule 144 of the SEC. The selling shareholders may effect any of these transactions at market prices prevailing at the time of sale, at prices related to the prevailing market prices, at varying prices determined at the time of sale or at negotiated or fixed prices, in each case as the selling shareholder determines, or by agreement between the selling shareholder and underwriters, brokers, dealers or agents, or purchasers. We can provide you with no assurance that any of the selling shareholders will sell any or all of the shares they offer. In effecting sales, brokers or dealers engaged by the selling shareholders may arrange for other brokers or dealers to participate. Brokers or dealers may receive commissions or discounts from the selling shareholders in amounts to be negotiated prior to the sale. The selling shareholders, and any brokers, dealers or agents that participate in the distribution of the shares may be deemed to be underwriters, and any profit on the sale of the common stock by them and any discounts, concessions or commissions received by any underwriters, brokers, dealers or agents may be deemed to be underwriting discounts and commissions under the Securities Act. Under the securities laws of certain states, the shares may be sold in such states only through registered or licensed brokers or dealers. In addition, in certain states the shares may not be sold unless they have been registered or qualified for sale in that state or an exemption from registration or qualification is available and is met. LEGAL MATTERS Certain legal matters in connection with the common stock being offered hereby will be passed upon by Evers & Hendrickson LLP, 155 Montgomery Street, 12th Floor, San Francisco, California 94104. EXPERTS The summary financial data for the years ended September 30, 1998 and 1999 have been derived from the Financial Statements and Notes to Financial Statements, audited by Reuben E. Price & Co., San Francisco, independent auditors. These financial statements are included in reliance upon the authority of that firm as an expert in accounting and auditing. 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, 42 D.C. This prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules to the registration statement. Statements made in this prospectus as to the contents of any contract or other document are not necessarily complete and, in each instance, we refer you to the copy of the contract or other document filed as an exhibit to the registration statement. Each statement about those contracts and other documents is qualified in all respects by that reference. Following the offering, we will become subject to the reporting requirements of the Securities Exchange Act of 1934. In accordance with that law, we will be required to file reports and other information with the SEC. The registration statement and exhibits and schedules, as well as those other reports and other information when so filed, can be inspection without charge and copies, at proscribed rates, at the public reference facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the Securities and Exchange Commission at 1-800-SEC-0300. In addition the Commission maintains a World Wide Web site on the Internet at http://www.sec.gov that contains reports, proxy and information statements and other documents filed electronically with the Commission, including the registration statement. We intend to furnish our shareholders with annual reports containing financial statements audited by our independent public accountants and quarterly reports containing unaudited financial information for the first three quarters of each fiscal year. 43 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 stockholder's 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 3, 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 3. 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 11 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: 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) Statements 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 -- 13,506 Changes in operating assets and liabilities: (Increase) in prepaid and other (62,740) 0 (62,740) (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 (1,832,324) (314,780) (5,690,588) ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: (Increase) in fixed assets (336,384) 0 (336,384) (Increase) in option on frequency licenses (500,000) 0 (500,000) ----------- ----------- ----------- Net Cash (Used) by Investing Activities (836,384) 0 (836,384) ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: 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 2,942,074 316,451 6,802,054 ----------- ----------- ----------- 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) Statements of Shareholders' Equity
Common Stock (1) Deficit ---------------------------------------- Accumulated Additional during Paid-in Development Total Shares Amount Capital Stage Equity ----------- ----------- ----------- ----------- ----------- Inception, September 1, 1994 -- -- $ -- $ -- $ -- Common stock issued to founders 33,774,781 33,775 -- -- 33,775 Net loss for the fiscal year ended ended September 30, 1995 -- -- -- (5,721) (5,721) ----------- ----------- ----------- ----------- ----------- Balance September 30, 1995 33,774,781 33,775 0 (5,721) 28,054 Common stock issued for cash at $2.65 a share 994,639 994 712,206 -- 713,200 Net loss for the fiscal year ended September 30, 1996 -- -- -- (773,097) (773,097) ----------- ----------- ----------- ----------- ----------- Balance September 30, 1996 34,769,420 34,769 712,206 (778,818) (31,843) Common stock issued for cash: At $2.65 a share 61,610 62 44,138 -- 44,200 At $4.69 a share 2,168,963 2,169 2,747,831 -- 2,750,000 Net loss for the fiscal year ended September 30, 1997 -- -- -- (3,250,619) (3,250,619) ----------- ----------- ----------- ----------- ----------- Balance September 30, 1997 36,999,993 37,000 3,504,175 (4,029,437) (488,262) Issuance of common stock in reorganization 8,024,000 8,024 15,781 -- 23,805 Common stock issued in private placement between $.0667 and $.25 per share 2,100,000 2,100 292,900 -- 295,000 Common stock issued for services 218,000 218 30,182 -- 30,400 Net loss for the fiscal year ended September 30, 1998 -- -- -- (346,374) (346,374) ----------- ----------- ----------- ----------- ----------- Balance September 30, 1998 47,341,993 47,342 3,843,038 (4,375,811) (485,431) Common stock issued in private placement between $.05 and $.435 per share 19,303,950 19,304 2,594,770 -- 2,614,074 Common stock issued for services 4,538,000 4,538 611,458 -- 615,996 Net loss for the fiscal year ended September 30, 1999 -- -- -- (2,383,330) (2,383,330) ----------- ----------- ----------- ----------- ----------- Balance, September 30, 1999 71,183,943 $ 71,184 $ 7,049,266 $(6,759,141) $ 361,309 =========== =========== =========== =========== =========== (1) The common stock information has been retroactively restated to give effect to the reorganization of May 7, 1998 (See Note 2 to the financial statements). The accompanying notes are an integral part of these financial statements
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 Organization The financial statements presented are those of World Wide Wireless Communications, Inc., (the Company) (a development stage company). The Company, incorporated in Nevada, 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". 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. Comprehensive Income, Statement of Financial Accounting Standards No. 130 The Company will account for components of other comprehensive income in accordance with Statement of Financial Accounting Standards No. 130. As of the statement date 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, an assets and liability based approach is used in accounting for income taxes. Deferred income tax assets and liabilities are recorded to reflect the tax consequences on future years of temporary differences of revenue and expense items for financial statement and income tax purposes. 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. Intangible assets are amortized over their useful lives, using the straight-line method of depreciation. F-6 World Wide Wireless Communications, Inc. (A Development Stage Company) Notes to Financial Statements September 30, 1999 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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. NOTE 2 - BASIS OF PRESENTATION 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. NOTE 3 - GOING CONCERN/DEVELOPMENT STAGE 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 F-7 World Wide Wireless Communications, Inc. (A Development Stage Company) Notes to Financial Statements September 30, 1999 NOTE 3 - GOING CONCERN/DEVELOPMENT STAGE (CONT'D) foreseeable future. Management plans to continue the implementation of its business plan to place the Company's assets in service to generate related revenue. Simultaneously, the Company is continuing to secure additional capital through sales of common stock through the current operating cycle. NOTE 4 - 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 line with the sale of common stock for cash at this period of time. In November 1998, the Company and its predecessor affiliates filed an action against the lessor of its leases for the Concord and San Diego, 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, F-8 World Wide Wireless Communications, Inc. (A Development Stage Company) Notes to Financial Statements September 30, 1999 NOTE 4 - COMMITMENTS AND CONTIGENCIES (CONT'D) Litigation (Cont'd) 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, 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, F-9 World Wide Wireless Communications, Inc. (A Development Stage Company) Notes to Financial Statements September 30, 1999 NOTE 4 - COMMITMENTS AND CONTIGENCIES (CONT'D) Operating Leases(Cont'd) 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. The company has based eight Instructional Television Fixed Service channels for use as MMDS channels from the Shekinah Network, as described more fully in Note 5 below. These leases provide for a monthly lease fee of 5% of gross system receipts, with a minimum of $500 per channel. The minimum aggregate annual fee is $48,000 per fiscal year ending September 30, 2000 through 2004. 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 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 Shekinah channels 48,000 48,000 48,000 48,000 48,000 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 $277,616 $219,956 $210,456 $210,456 $171,842 None ======== ======== ======== ======== -------- ====
NOTE 5 - 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. F-10 World Wide Wireless Communications, Inc. (A Development Stage Company) Notes to Financial Statements September 30, 1999 NOTE 6 - OPTION ON FREQUENCY LICENSES On November 25, 1998, the Company entered into an option agreement with Shekinah Network to pay $500,000 for a non-refundable option 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), as well as 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 during the year 2000. 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 7 - 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% Valuation Allowances -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 F-11 World Wide Wireless Communications, Inc. (A Development Stage Company) Notes to Financial Statements September 30, 1999 NOTE 7 - INCOME TAXES (CONT'D) 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 8 - BASIC AND DILUTED NET LOSS 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 F-12 World Wide Wireless Communications, Inc. (A Development Stage Company) Notes to Financial Statements September 30, 1999 NOTE 9 - ACCRUED EXPENSES Accrued expenses consist of the following: Professional fees $191,601 Payroll and related payroll taxes 104,986 Leasehold Improvements 55,288 Other 139,593 -------- Total $491,468 ======== NOTE 10 - 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-13 World Wide Wireless Communications, Inc. (A Development Stage Company) Notes to Financial Statements September 30, 1999 NOTE 10 - 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-14 World Wide Wireless Communications, Inc. (A Development Stage Company) Notes to Financial Statements September 30, 1999 NOTE 10 - 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 11 - 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. Most of the purchase price is attributable to the licenses. Peru On February 29, 2000, the Company purchased 100% of Digital Way S.A. a Peruvian telecommunications company which owns licenses in Lima, Peru. 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. Most of the purchase price is attributable to the licenses. 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-15 World Wide Wireless Communications, Inc. (A Development Stage Company) Notes to Financial Statements September 30, 1999 NOTE 11 - SUBSEQUENT EVENTS (CONT'D) Pro forma data The following pro forma data is presented on a combined basis, as if Infotel Agentina S.A. and Digital Way S.A.(Peru) had been acquired on October 1, 1998: September 30, 1999 ------------------ Total Assets $ 1,472,125 Total Liabilities 979,553 Total Shareholders Equity 3,275,626 For the Year Ended September 30, 1999 ------------------ Revenues $ 135,690 Expenses 2,479,874 ------------ Net (Loss) $ (2,344,184) ============ F-16 INDEPENDENT AUDITORS' REPORT Board of Directors and Shareholders of Infotel Argentina 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 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 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 of the United States. Reinaldo Pietrantonio, Contador Publico Nacional Buenos Aires, July 30, 1999 F-17 INDEPENDENT AUDITORS' REPORT Board of Directors and Shareholders of Infotel Argentina 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-18 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 277,861 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-19 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-20 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-21 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-22 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-23 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 Digital Way, 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-24 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 Digital Way, 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-25 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 $ 32,995 -------- Total Liabilities 32,995 -------- 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-26 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-27 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 ACTIVITIES: 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 -------- NET 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-28 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-29 DIGITAL WAY, S.A. Notes to Financial Statements December 31, 1999 NOTE 1 - SUMMARY 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-30 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 these financial statements. F-31 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 these financial statements. F-32 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 these financial statements.
F-33 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-34 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONT'D) The following transactions occurred after quarters ended March 31, 2000 World Wide Wireless Communications, Inc. & Subsidiaries (A Development Stage Company) Notes to Financial Statements March 31, 2000 Unaudited 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-35 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONT'D) Estimates World Wide Wireless Communications, Inc. & Subsidiaries (A Development Stage Company) Notes to Financial Statements March 31, 2000 Unaudited 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-36 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-37 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-38 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-39 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-40 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-41 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-42 UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS BASIS OF PRESENTATION The following Unaudited Pro Forma Condensed Combined Financial Statements and related notes contain forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed herein. We undertake no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances. In the opinion of Management, all adjustments necessary to fairly present this pro forma information have been made. The Unaudited Pro Forma Condensed Combined Financial Statements are based upon, and should be read in conjunction with, the historical financial statements of World Wide Wireless Communications, Inc., Infotel Argentina, S.A. (Infotel), and Digital Way, S.A. (Digital), and the respective notes to such financial statements presented elsewhere in this Prospectus. The pro forma information is based upon tentative allocations of purchase price for the acquisitions and may not be indicative of the results that would have been reported had such events actually occurred on the dates specified, nor is it indicative of the Company's future results. Purchase accounting is based upon preliminary asset valuations, which are subject to change. The Unaudited Pro Forma Condensed Combined Statements of Operations for the year ended September 30, 1999 and the six months ended March 31, 2000 are presented as if World Wide Wireless Communications, Inc. had completed the acquisitions of Infotel and Digital as of October 1, 1998. Since our historical unaudited consolidated statements of operations for the six months ended March 31, 2000 reflect the acquisitions of Infotel and Digital, no pro forma adjustments are necessary for the six months ended March 31, 2000. Since our historical unaudited consolidated balance sheets as of March 31, 2000 reflect the acquisitions of Infotel and Digital, no pro forma balance sheet adjustments are necessary as of March 31, 2000. F-43 World Wide Wireless Communications, Inc. & Subsidiaries (A Development Stage Company) Unaudited Pro-Forma Condensed Combined Balance Sheet September 30, 1999
World Wide Infotel Digital Pro-Forma Wireless Argentina Way Combined Communications, S.A. S.A. Adjustments Company Inc. Pro-Forma Pro-Forma at Sept. 30, 1999 Sept. 30, 1999 Sept. 30, 1999 Sept. 30, 1999 Assets Current Assets: Cash and cash equivalents $ 275,082 $ 45,816 $ 150 $ 321,048 Prepaid and other 62,740 150,761 22,700 236,201 ----------- ----------- ----------- ----------- Total Current Assets 337,822 196,577 22,850 557,249 ----------- ----------- ----------- ----------- Fixed Assets: Furniture, fixtures and equipment 74,906 70,467 1,454 146,827 Leasehold improvements 261,478 -- -- 261,478 Accumulated depreciation and amortization (13,506) -- -- (13,506) Frequency licenses -- -- -- $2,783,064 2,783,064 ----------- ----------- ----------- ----------- Total Fixed Assets 322,878 70,467 1,454 3,177,863 ----------- ----------- ----------- ----------- Other Assets: Prepaid lease expense 500,000 -- -- 500,000 Rental Deposit 20,077 -- -- 20,077 ----------- ----------- ----------- ----------- Total Other Assets 520,077 -- -- 520,077 ----------- ----------- ----------- ----------- Total Assets $ 1,180,777 $ 267,044 $ 24,304 $ 1,472,125 =========== =========== =========== =========== Liabilities and Stockholders' Equity Current Liabilities: Accrued expenses $ 491,468 $ 121,339 -- $ 612,807 Accounts Payable -- 16,737 $ 22,009 38,746 ----------- ----------- ----------- ----------- Total Current Liabilities 491,468 138,076 22,009 651,553 ----------- ----------- ----------- ----------- Long-Term Liabilities: Loan payable 328,000 -- -- 328,000 ----------- ----------- ----------- ----------- Total Long-Term Liabilities 328,000 -- -- 328,000 ----------- ----------- ----------- ----------- Total Liabilities 819,468 138,076 22,009 979,553 ----------- ----------- ----------- ----------- Stockholders' Equity: Common stock, par value $.001 per share 71,184 6,120 10,826 (16,946) 71,184 Additional paid-in capital 7,049,266 -- -- 2,800,000 9,849,266 Deficit accumulated during development stage (6,759,141) 122,848 (8,531) (6,644,824) ----------- ----------- ----------- ----------- Total Stockholders' Equity 361,309 128,968 2,295 3,275,626 ----------- ----------- ----------- ----------- Total Liabilities and Stockholders' Equity $ 1,180,777 $ 267,044 $ 24,304 $ 1,472,125 =========== =========== =========== =========== The accompanying notes are an integral part of these financial statements
F-44 World Wide Wireless Communications, Inc. & Subsidiaries (A Development Stage Company) Unaudited Pro-Forma Condensed Combined Statements of Operation For the Fiscal Year Ended September 30, 1999
World Wide Wireless Infotel Argantina Digital Way S.A. Combined Cumulative Communications Pro-Forma from Pro-Forma from Pro-Forma for the Fiscal Year Inception at Inception at Fiscal Year Ended Feb. 3, 1999 to Mar. 28, 1999 to Ended Sep. 30, 1999 Sep. 30, 1999 Sep. 30, 1999 Sep. 30, 1999 UNAUDITED. UNAUDITED UNAUDITED Revenues $ -- $ 135,690 $ -- $ 135,690 ------------ ------------ ------------ ------------ General & Admin 2,383,330 64,269 7,278 2,454,877 ------------ ------------ ------------ ------------ Tot. Operating Exp 2,383,330 64,269 7,278 2,454,877 ------------ ------------ ------------ ------------ Oper'ing Inc. (Loss) (2,383,330) 71,421 (7,278) (2,319,187) Tax Expense -- 24,997 -- 24,997 ------------ ------------ ------------ ------------ Net Profit (Loss) $ (2,383,330) $ 46,424 $ (7,278) $ (2,344,184) ============ ============ ============ ============ Basic Loss per share $ (0.4) ============ Basic Weighted Average Shares Outstanding 56,749,290 ============ Diluted Loss Per Share $ (0.04) ============ Diluted Weighted Average shares Outstanding 57,046,818 ============ The accompanying notes are an integral part of these financial statements.
F-45 World Wide Wireless Communications, Inc. & Subsidiaries (A Development Stage Company) Unaudited Pro-Forma Condensed Combined Statements of Operation For the Six Months Ended March 31, 2000
World Wide Wireless Infotel Argentina Digital Way S.A. Combined Cumulative Comm. for the 6 Mo. Pro-Forma for the 6 Pro-Forma for the Pro-Forma for the 6 Ended March 31, Months Ended March 6 Months Ended Months Ended 2000 31, 2000 March 31, 2000 March 31, 2000 UNAUDITED UNAUDITED. UNAUDITED UNAUDITED Revenues $ 141,268 $ 147,661 $ -- $ 288,929 ------------ ------------ ------------ ------------ General & Admin 2,345,196 104,904 4,127 2,454,227 ------------ ------------ ------------ ------------ Tot. Operating Exp 2,345,196 104,904 4,127 2454,227 ------------ ------------ ------------ ------------ Oper'ing Inc. (Loss) (2,203,928) 42,757 (4,127) (2,165,298) Interest Income 174 -- -- 174 Tax Expense (13,730) (14,964) -- (28,694) ------------ ------------ ------------ ------------ Net Profit (Loss) $ (2,217,484) $ 27,793 $ (4,127) $ (2,193,818) ============ ============ ============ ============ Basic Loss per share $ (0.01) ============ Basic Weighted Average Shares Outstanding 82,433,816 ============ Diluted Loss Per Share $ (0.01) ============ Diluted Weighted Averag shares Outstanding 85,993,816 ============ The accompanying notes are an integral part of these financial statements.
F-46 NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS Statement of Operations for the year ended September 30, 1999 (a) The results of operations for Infotel were included in the consolidated results of operations as of January 1, 2000. This presentation shows the pro forma effects of the operations of Infotel as if the acquisition occurred on October 1, 1998. (b) The results of operations for Digital were included in the consolidated results of operations as of March 1, 2000. This presentation shows the pro forma effects of the operations of Digital as if the acquisition occurred on October 1, 1998. (c) The weighted average common shares reflects shares of common stock outstanding during the periods presented. Pro forma data includes common stock issuable with respect to the acquisitions. Statement of Operations for the six months ended March 31, 2000 (a) The results of operations for Infotel were included in the consolidated results of operations as of January 1, 2000. This presentation shows the pro forma effects of the operations of Infotel as if the acquisition occurred on October 1, 1998. (b) The results of operations for Digital were included in the consolidated results of operations as of March 1, 2000. This presentation shows the pro forma effects of the operations of Digital as if the acquisition occurred on October 1, 1998. (c) The weighted average common shares reflects shares of common stock outstanding during the periods presented. Pro forma data includes common stock issuable with respect to the acquisitions. F-47 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. In all instances in which we issued shares under the exemption from the registration requirements of the Securities Act under Section 4(2) of the Securities Act, all purchasers had access to the type of information found in a registration statement and all purchasers were sophisticated investors. 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 10.19 Compromise and Settlement Agreement between World Wide Wireless Communications, Inc. and Corporate Solutions LLC, dated May 25, 1999 23.1 Consent of Evers & Hendrickson, LLP 23.2 Consent of Reuben E. Price & Co. 27.1 Financial Data Schedule from September 30, 1999 Balance Sheet. 27.2 Financial Data Schedule from unaudited March 31, 2000 Balance Sheet. 99.1 Form of Subscription Agreement 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 (pre-effective amendment no. 6) to be signed on its behalf by the undersigned on June 6, 2000. World Wide Wireless Communications, Inc. By: Wayne Caldwell By: Douglas P. Haffer ---------------------------- ---------------------------- Wayne Caldwell Douglas P. Haffer Vice President President and Chief Executive Officer In accordance with the requirements of the Securities Act of 1933, this registration statement (pre-effective amendment no. 6) has been signed by the following persons in the capacities and on the dates indicated. Signature Title Date - --------- ----- ---- Douglas P. Haffer President & CEO & Chairman June 6, 2000 - --------------------------- Douglas P. Haffer Wayne Caldwell Vice President and Director June 6, 2000 - --------------------------- Wayne Caldwell EX-3.1(I) 2 0002.txt ARTICLES OF INCORPORATION 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 Candice Maerz Terrie L. Bates ---------------------- ---------------------- Signature Signature 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/ ____________________________ ______________ Signature of Resident Agent Date EX-3.2(I) 3 0003.txt AMENDMENT OF ARTICLES OF INCORPORATION 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. Douglas Haffer ------------------- DOUGLAS HAFFER President ------------------- Secretary EX-3.3(I) 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. Candice Maerz ---------------------- Signature Terrie L. Bates ---------------------- Signature EX-3.4(II) 5 0005.txt BY LAWS BY LAWS OF WORLD WIDE WIRELESS COMMUNICATIONS, INC. ARTICLE I. OFFICERS The principal office of the Corporation shall be located in Oakland, California, County of Alameda. The Corporation may have such offices, either within or without the State of California, 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 California, 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 California, 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 California, 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 entitled 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 shareholders owning sufficient shares required to pass the action, which in no case shall be less than a majority of the outstanding shares. 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 and may determine whether the meeting shall be conducted telephonically or in person. 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 employment with the Corporation has terminated. 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 October and end on the 30st day of September 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 3rd day of December, 1999. -------------------------------- President -------------------------------- Secretary EX-5.1 6 0006.txt LEGALITY OF SHARES Evers & Hendrickson LLP Lawyers and Counselors At Law - ------------------------------------ March 23, 2000 Securities and Exchange Commission Division of Corporate Finance 450 Fifth Street, N.W. Washington, D.C. 20549 Re: World Wide Wireless Communications, Inc., Legality of Shares Dear Madam/Sirs: We have made reasonable inquiry and are of the opinion that the securities being offered, will, when sold, be legally issued, fully paid and non-assessable. We are not opining as to any other statements contained in the Form SB-2 registration statement, nor as to matters that occur after the date thereof. Very truly yours, EVERS & HENDRICKSON LLP /s/ William D. Evers ----------------------- By: William D. Evers, Partner EX-10.1 7 0007.txt LEASE BETWEEN WWW COMM. AND SHEKINAH NETWORK 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 8 0008.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. 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 9 0009.txt LEASE BETWEEN WWW COMM. AND SHEKINAH NETWORK 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 Lessorseeks 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 10 0010.txt LEASE BETWEEN WWW COMM. AND SHEKINAH NETWORK LEASE AGREEMENT BETWEEN WORLD WIDE WIRELESS COMMUNICATIONS, INC. AND SHEKINAH NETWORK Aspen, Colorado ITFS EXCESS CAPACITY AIRTIME LEASE AGREEMENT THIS AGREEMENT is made this 1st day of August 1999 by Shekinah Network (hereinafter referred to as "Lessor") having its principal place of business at 14875 Powerline Road, Atascadero, CA 93422 and World Wide Wireless Communications, Inc. (hereinafter referred to as "Lessee") having its principal place of business at One Post Street, Suite 2600 San Francisco, CA 94104. WHEREAS, the Federal Communications Commission ("FCC") has authorized licenses for Instructional Television Fixed Service ("ITFS") channels and has authorized the licensee to lease excess capacity to non-ITFS users; and WHEREAS, Lessor has been granted an FCC License for (call sign) WNC-798 (the "License") for the Channel group C1-4 (the "ITFS Channels") in Aspen, Colorado ("The Market"); and WHEREAS, Lessee is in the business of providing voice, video, data and other services via microwave transmission in the Market Area and desires to lease the excess ITFS capacity of the ITFS channels; and WHEREAS, Lessor has determined that there will be excess airtime capacity available on the ITFS Channels and desires to lease this excess airtime capacity to Lessee. NOW, THEREFORE, in consideration of the mutual promises, undertakings, covenants and conditions set forth herein, the Lessor and Lessee do hereby agree and warrant as follows: 3. TERM OF AGREEMENT A. Initial Term. This Agreement shall be effective upon the date of its execution and shall extend for an initial term of five (5) years (the "Initial Term"). B. Renewal Term Provided that the License is renewed by the FCC, Lessee shall have the right to extend this Agreement on its then existing terms and conditions for one (1) additional five (5) year term (the "Renewal Term"). The Renewal Term shall automatically go into effect upon the conclusion of the Initial Term unless Lessee notifies Lessor at least one hundred eighty days (180) before the end of the Initial Term that Lessee does not wish to extend this Agreement. C. New Lease Agreement/Right of first Refusal. (1) Providing that Lessor's FCC license remains in good standing and/or Lessorseeks 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 11 0011.txt LEASE BETWEEN WWW COMM. AND SHEKINAH NETWORK 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 Lessorseeks 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 12 0012.txt LEASE BETWEEN WWW COMM. AND SHEKINAH NETWORK LEASE AGREEMENT BETWEEN WORLD WIDE WIRELESS COMMUNICATIONS, INC. AND SHEKINAH NETWORK Grand Rapids, Michigan ITFS EXCESS CAPACITY AIRTIME LEASE AGREEMENT THIS AGREEMENT is made this 1st day of August 1999 by Shekinah Network (hereinafter referred to as "Lessor") having its principal place of business at 14875 Powerline Road, Atascadero, CA 93422 and World Wide Wireless Communications, Inc. (hereinafter referred to as "Lessee") having its principal place of business at One Post Street, Suite 2600 San Francisco, CA 94104. WHEREAS, the Federal Communications Commission ("FCC") has authorized licenses for Instructional Television Fixed Service ("ITFS") channels and has authorized the licensee to lease excess capacity to non-ITFS users; and WHEREAS, Lessor has been granted an FCC License for (call sign) WNC-798 (the "License") for the Channel group C1-4 (the "ITFS Channels") in Grand Rapids, Michigan ("The Market"); and WHEREAS, Lessee is in the business of providing voice, video, data and other services via microwave transmission in the Market Area and desires to lease the excess ITFS capacity of the ITFS channels; and WHEREAS, Lessor has determined that there will be excess airtime capacity available on the ITFS Channels and desires to lease this excess airtime capacity to Lessee. NOW, THEREFORE, in consideration of the mutual promises, undertakings, covenants and conditions set forth herein, the Lessor and Lessee do hereby agree and warrant as follows: 7. TERM OF AGREEMENT A. Initial Term. This Agreement shall be effective upon the date of its execution and shall extend for an initial term of five (5) years (the "Initial Term"). B. Renewal Term Provided that the License is renewed by the FCC, Lessee shall have the right to extend this Agreement on its then existing terms and conditions for one (1) additional five (5) year term (the "Renewal Term"). The Renewal Term shall automatically go into effect upon the conclusion of the Initial Term unless Lessee notifies Lessor at least one hundred eighty days (180) before the end of the Initial Term that Lessee does not wish to extend this Agreement. C. New Lease Agreement/Right of first Refusal. (1) Providing that Lessor's FCC license remains in good standing and/or Lessorseeks 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 13 0013.txt LEASE BETWEEN WWW COMM. AND SHEKINAH NETWORK LEASE AGREEMENT BETWEEN WORLD WIDE WIRELESS COMMUNICATIONS, INC. AND SHEKINAH NETWORK La Grande, Oregon ITFS EXCESS CAPACITY AIRTIME LEASE AGREEMENT THIS AGREEMENT is made this 1st day of August 1999 by Shekinah Network (hereinafter referred to as "Lessor") having its principal place of business at 14875 Powerline Road, Atascadero, CA 93422 and World Wide Wireless Communications, Inc. (hereinafter referred to as "Lessee") having its principal place of business at One Post Street, Suite 2600 San Francisco, CA 94104. WHEREAS, the Federal Communications Commission ("FCC") has authorized licenses for Instructional Television Fixed Service ("ITFS") channels and has authorized the licensee to lease excess capacity to non-ITFS users; and WHEREAS, Lessor has been granted an FCC License for (call sign) WNC-798 (the "License") for the Channel group C1-4 (the "ITFS Channels") in La Grande, Oregon ("The Market"); and WHEREAS, Lessee is in the business of providing voice, video, data and other services via microwave transmission in the Market Area and desires to lease the excess ITFS capacity of the ITFS channels; and WHEREAS, Lessor has determined that there will be excess airtime capacity available on the ITFS Channels and desires to lease this excess airtime capacity to Lessee. NOW, THEREFORE, in consideration of the mutual promises, undertakings, covenants and conditions set forth herein, the Lessor and Lessee do hereby agree and warrant as follows: 9. TERM OF AGREEMENT A. Initial Term. This Agreement shall be effective upon the date of its execution and shall extend for an initial term of five (5) years (the "Initial Term"). B. Renewal Term Provided that the License is renewed by the FCC, Lessee shall have the right to extend this Agreement on its then existing terms and conditions for one (1) additional five (5) year term (the "Renewal Term"). The Renewal Term shall automatically go into effect upon the conclusion of the Initial Term unless Lessee notifies Lessor at least one hundred eighty days (180) before the end of the Initial Term that Lessee does not wish to extend this Agreement. C. New Lease Agreement/Right of first Refusal. (1) Providing that Lessor's FCC license remains in good standing and/or Lessorseeks 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 14 0014.txt LEASE BETWEEN WWW COMM. AND SHEKINAH NETWORK LEASE AGREEMENT BETWEEN WORLD WIDE WIRELESS COMMUNICATIONS, INC. AND SHEKINAH NETWORK Pierre, South Dakota ITFS EXCESS CAPACITY AIRTIME LEASE AGREEMENT THIS AGREEMENT is made this 1st day of August 1999 by Shekinah Network (hereinafter referred to as "Lessor") having its principal place of business at 14875 Powerline Road, Atascadero, CA 93422 and World Wide Wireless Communications, Inc. (hereinafter referred to as "Lessee") having its principal place of business at One Post Street, Suite 2600 San Francisco, CA 94104. WHEREAS, the Federal Communications Commission ("FCC") has authorized licenses for Instructional Television Fixed Service ("ITFS") channels and has authorized the licensee to lease excess capacity to non-ITFS users; and WHEREAS, Lessor has been granted an FCC License for (call sign) WNC-798 (the "License") for the Channel group C1-4 (the "ITFS Channels") in Pierre, South Dakota ("The Market"); and WHEREAS, Lessee is in the business of providing voice, video, data and other services via microwave transmission in the Market Area and desires to lease the excess ITFS capacity of the ITFS channels; and WHEREAS, Lessor has determined that there will be excess airtime capacity available on the ITFS Channels and desires to lease this excess airtime capacity to Lessee. NOW, THEREFORE, in consideration of the mutual promises, undertakings, covenants and conditions set forth herein, the Lessor and Lessee do hereby agree and warrant as follows: 11. TERM OF AGREEMENT A. Initial Term. This Agreement shall be effective upon the date of its execution and shall extend for an initial term of five (5) years (the "Initial Term"). B. Renewal Term Provided that the License is renewed by the FCC, Lessee shall have the right to extend this Agreement on its then existing terms and conditions for one (1) additional five (5) year term (the "Renewal Term"). The Renewal Term shall automatically go into effect upon the conclusion of the Initial Term unless Lessee notifies Lessor at least one hundred eighty days (180) before the end of the Initial Term that Lessee does not wish to extend this Agreement. C. New Lease Agreement/Right of first Refusal. (1) Providing that Lessor's FCC license remains in good standing and/or Lessorseeks 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 15 0015.txt LEASE BETWEEN WWW COMM. AND SHEKINAH NETWORK LEASE AGREEMENT BETWEEN WORLD WIDE WIRELESS COMMUNICATIONS, INC. AND SHEKINAH NETWORK Ukiah, California ITFS EXCESS CAPACITY AIRTIME LEASE AGREEMENT THIS AGREEMENT is made this 1st day of August 1999 by Shekinah Network (hereinafter referred to as "Lessor") having its principal place of business at 14875 Powerline Road, Atascadero, CA 93422 and World Wide Wireless Communications, Inc. (hereinafter referred to as "Lessee") having its principal place of business at One Post Street, Suite 2600 San Francisco, CA 94104. WHEREAS, the Federal Communications Commission ("FCC") has authorized licenses for Instructional Television Fixed Service ("ITFS") channels and has authorized the licensee to lease excess capacity to non-ITFS users; and WHEREAS, Lessor has been granted an FCC License for (call sign) WNC-798 (the "License") for the Channel group C1-4 (the "ITFS Channels") in Ukiah, California ("The Market"); and WHEREAS, Lessee is in the business of providing voice, video, data and other services via microwave transmission in the Market Area and desires to lease the excess ITFS capacity of the ITFS channels; and WHEREAS, Lessor has determined that there will be excess airtime capacity available on the ITFS Channels and desires to lease this excess airtime capacity to Lessee. NOW, THEREFORE, in consideration of the mutual promises, undertakings, covenants and conditions set forth herein, the Lessor and Lessee do hereby agree and warrant as follows: 13. TERM OF AGREEMENT A. Initial Term. This Agreement shall be effective upon the date of its execution and shall extend for an initial term of five (5) years (the "Initial Term"). B. Renewal Term Provided that the License is renewed by the FCC, Lessee shall have the right to extend this Agreement on its then existing terms and conditions for one (1) additional five (5) year term (the "Renewal Term"). The Renewal Term shall automatically go into effect upon the conclusion of the Initial Term unless Lessee notifies Lessor at least one hundred eighty days (180) before the end of the Initial Term that Lessee does not wish to extend this Agreement. C. New Lease Agreement/Right of first Refusal. (1) Providing that Lessor's FCC license remains in good standing and/or Lessorseeks 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-10.19 16 0016.txt COMPROMISE AND SETTLEMENT AGREEMENT COMPROMISE AND SETTLEMENT AGREEMENT Corporate Solutions, L.L.C., 21251 River Bluff Drive, Anderson, California 96007, hereinafter referred to as CORPORATE and World-Wide Wireless Communications, Inc., a corporation, One Post Street, Suite 2600, San Francisco, California 94104, hereinafter referred to as WWWC, in consideration of the promises made herein, agree as follows: Nature and Effect of Agreement 1. This Compromise and Settlement Agreement, hereinafter referred to as "this Agreement", consists of a compromise and settlement by each party of that party's claims against the other party, and a release given by each party to the other relinquishing all claims against the other. By executing this Agreement, each of the parties intends to and does hereby extinguish the obligations heretofore existing between them. This Agreement is not, and shall not be treated as, an admission of liability by either party for any purpose. Nature and Status of Dispute 2. (A) CORPORATE made loans totaling $277,715.00 to WWWC or its predecessor in interest between April 4, 1997 and August 18, 1997, inclusive, which have not been repaid. WWWC disputes its liability for such loans. 1 (B) CORPORATE in large part obtained the funds for such loans by factoring its accounts receivable to Capital Associates of Jackson County, Inc., hereinafter referred to as CAPITAL. Substantial sums remain due to CAPITAL by CORPORATE. WWWC disputes its liability on such factoring arrangement. (C) CORPORATE made additional loans to WWWC or its predecessor in interest of $10,000.00 on September 7, 1997 and $2,500.00 in January of 1998. WWWC acknowledges these liabilities. (D) CORPORATE purchased equipment from Microwave Radio Corporation and had the equipment delivered directly to WWWC. CORPORATE is presently obligated to BNY Financial Corporation, hereinafter referred to as BNY, in the sum of $19,269.00 for such equipment. WWWC disputes any liability to pay for this equipment. (D) CORPORATE purchased equipment from Hybrid Networks, Inc., hereinafter referred to as HYBRID, on August 6, 1997 for the total price of $104,140.00. The check which CORPORATE used to pay for such equipment was dishonored. Thereafter, HYBRID filed a bankruptcy petition. Although WWWC or its predecessor in interest received the equipment, CORPORATE has not paid for the equipment and does not seek reimbursement from WWWC. (E) WWWC or its predecessor in interest entered into various agreements with CORPORATE between December of 1996 and November of 1997 whereby CORPORATE agreed to raise funds for WWWC or its predecessor in interest. Under the terms of such agreements, WWWC or its predecessor in interest agreed to pay fees to CORPORATE. WWWC disputes CORPORATE's performance under these agreements and contends that it has claims against CORPORATE for breach of such 2 agreements. (F) WWWC is the successor in interest to the assets of World Wide Wireless, Inc., the corporation with which CORPORATE dealt in the matters described in Paragraphs 2(A) through (E) above. WWWC claims that it has no liability to CORPORATE whereas CORPORATE contends that the transfer of assets was a fraudulent conveyance. Mutual Compromise Agreement 3. Each party, in consideration of the promises and concessions made by the other, hereby compromises and settles any and all past, present, or future claims, demands, obligations, or causes of action, whether based upon tort, contract, or other theories of recovery, which that party has or which may later accrue to or be acquired by that party against the other party and the other party's predecessors and successors in interest, heirs, and assigns, as well as past, present, and future officers, directors, shareholders, agents, employees, parent and subsidiary organizations, affiliates, and partners arising from the subject matters described in Paragraph 2 of this Agreement, on the following terms and conditions: (A) WWWC agrees to pay CORPORATE the sum of $12,500.00 on or before May 31, 1999. In the event of a delay in payment, interest shall accrue from June 1, 1999 at the rate of ten per cent annum until paid. (B) WWWC agrees to issue to CORPORATE 750,000 shares of common stock (symbol WLGS), restricted only as required by Securities and Exchange Commission Rule 144, on or before May 28, 1999. WWWC shall prepare and file all documents and 3 pay all fees associated with any registration requirements imposed by federal securities law. (C) CORPORATE agrees to pay all sums due CAPITAL arising from transactions described in Paragraph 2 of this Agreement, on such terms as are acceptable to CORPORATE and CAPITAL. (D) CORPORATE agrees to pay all sums due BNY arising from transactions described in Paragraph 2 of this Agreement, on such terms as are acceptable to CORPORATE and BNY. (E) CORPORATE shall have no liability with respect to any sums claimed to be due by HYBRID since no compensation is being paid under this Agreement on account of the HYBRID claim. Mutual General Release 4. Each of the parties on behalf of its parent and subsidiary organizations, affiliates, partners, agents, servants, shareholders, employees, representatives, assigns, and successors, hereby fully releases and discharges the other party and that party's parent and subsidiary organizations, affiliates, partners, agents, servants, shareholders, employees, representatives, assigns, and successors from all rights, claims, and causes of action which each party and the above-mentioned successors have against the other party and the above-mentioned successors, stemming from their differences arising from the subject matters described in Paragraph 2. Unknown Claims 5. (A) Each party acknowledges and agrees that the release it gives to the other 4 party upon executing this Agreement applies to all claims for injuries, damages, or losses to its property, real or personal, which it may have against the other party. Each party waives the application of California Civil Code Section 1542. (B) Each party certifies that it has read the following provisions of California Civil Code Section 1542: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor." and indicates that fact by signing its officer's initials here: DAK for CORPORATE _____ for WWWC (C) Each party understands and acknowledges that the significance and consequence of this waiver of California Civil Code 1542 is that even if it should eventually suffer additional damages arising out of the subject matters described in Paragraph 2 of this Agreement, it will not be able to make any claim for those damages. Furthermore, each party acknowledges that it consciously intends these consequences even as to claims for damages which exist as of the date of this Agreement but which it does not know exist, and which, if known, would materially affect its decision to execute this release, regardless of whether its lack of knowledge is the result of ignorance, oversight, error, negligence, or any other cause. Advice of Attorney 6. Each party warrants and represents that in executing this Agreement, it has relied upon legal advice from the attorney of its choice; that the terms of this Agreement 5 have been read and its consequences (including risks, complications, and costs) have been completely explained to it by its attorney; and that it fully understands the terms of this Agreement. Each party further acknowledges and represents that in executing this release, it has not relied on any inducements, promises, or representations made by the other party. Conditions of Execution 7. Each party acknowledges and warrants that its execution of this Agreement is free and voluntary. Execution of Other Documents 8. Each party to this Agreement shall cooperate fully in the execution of any and all other documents and in the completion of any additional actions that may be necessary or appropriate to give full force and effect to the terms and intent of this Agreement. Attorneys' Fees to Date 9. Each party to this Agreement shall bear all attorney's fees and costs arising from that party's own counsel in connection with the negotiations leading up to this Agreement, the preparation and review of this Agreement, and the disputes which are the subject matter of Paragraph 2. Future Attorneys' Fees 10. If any legal action is brought to enforce the provisions of this Agreement, the prevailing party shall be entitled to recover reasonable attorneys' fees from the other party. 6 Entire Agreement 11. This Agreement contains the entire agreement between the parties. Effective Date 12. This Agreement shall become effective immediately upon execution by CORPORATE and WWWC. Execution of Agreement in Counterparts 13. This Agreement may be signed in counterparts, each of which will represent acceptance and approval of the terms of this Agreement. Governing Law 14. This Agreement is entered into, and shall be construed and interpreted in accordance with the laws of the State of California. Executed at San Francisco, California on May __, 1999. CORPORATE SOLUTIONS, L.L.C. By: /s/ David E. Rinker ---------------------------------- DAVID E. RINKER, Chief Executive WORLD WIDE WIRELESS COMMUNICATONS, INC. By: ---------------------------------- DOUGLAS P. HAFFER, President 7 Entire Agreement 11. This Agreement contains the entire agreement between the parties. Effective Date 12. This Agreement shall become effective immediately upon execution by CORPORATE and WWWC. Execution of Agreement in Counterparts 13. This Agreement may be signed in counterparts, each of which will represent acceptance and approval of the terms of this Agreement. Governing Law 14. This Agreement is entered into, and shall be construed and interpreted in accordance with the laws of the State of California. Executed at San Francisco, California on May 25, 1999. CORPORATE SOLUTIONS, L.L.C. By: /s/ ---------------------------------- DAVID E. RINKER, President WORLD WIDE WIRELESS COMMUNICATONS, INC. By: /s/ ---------------------------------- DOUGLAS P. HAFFER, President 7 EX-23.1 17 0017.txt CONSENT OF EVERS & HENDERICKSON LLP Evers & Hendrickson LLP Lawyers and Counselors At Law - ------------------------------------ May 17, 2000 Mr. Douglas P. Haffer, President World Wide Wireless Communications, Inc. 520 Third Street, Suite 101 Oakland, California 94607 Dear Mr. Haffer: This law firm consents to the incorporation of its name and its opinion letter regarding the legality of the securities being cleared for registration with the Securities and Exchange Commission pursuant to filing of the Form SB-2 Registration Statement (Post-Effective Amendment No. 5) on May 17, 2000. Very truly yours, EVERS & HENDRICKSON LLP /s/ William D. Evers ------------------------- By: William D. Evers, Partner EX-23.2 18 0018.txt CONSENT OF REUBEN E. PRICE & CO. [REUBEN E. PRICE & CO. LETTERHEAD] June 6, 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 19 0019.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 20 0020.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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