02 WIRELESS SOLUTIONS INC

-----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, OpOjCP9W/N7WFt053mqb9RNCnI8HFirAJSDQnB4pQ2Ok6RUitTC+y2mkKyj7Sn4N JGlBMM53jcBhi6AkE+Jrag== 0000950144-02-009100.txt : 20020819 0000950144-02-009100.hdr.sgml : 20020819 20020819172547 ACCESSION NUMBER: 0000950144-02-009100 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020819 FILER: COMPANY DATA: COMPANY CONFORMED NAME: O2WIRELESS SOLUTIONS INC CENTRAL INDEX KEY: 0001113529 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 582467466 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-31295 FILM NUMBER: 02743136 BUSINESS ADDRESS: STREET 1: 440 INTERSTATE PARKWAY NORTH CITY: ATLANTA STATE: GA ZIP: 30339 BUSINESS PHONE: 7707635620 MAIL ADDRESS: STREET 1: 440 INTERSTATE PARKWAY NORTH CITY: ATLANTA STATE: GA ZIP: 30339 10-Q 1 g77987e10vq.htm O2 WIRELESS SOLUTIONS INC 02 WIRELESS SOLUTIONS INC

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934


For Quarterly Period Ended		Commission File Number:
June 30, 2002		0-31295

O2WIRELESS SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)


Georgia		58-2467466

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2355 Industrial Park Blvd, Cumming, Georgia		30041

(Address of principal executive offices)		(Zip Code)

678-513-1501

(Registrant’s telephone number, including area code)

440 Interstate North Parkway, Atlanta, Georgia 30339

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [ ]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:


Common Stock, $.0001 par value per share		27,937,737 shares

Class		Outstanding at August 19, 2002

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O2WIRELESS SOLUTIONS, INC.
FORM 10-Q
JUNE 30, 2002
TABLE OF CONTENTS


		Page

PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets (unaudited) as of December 31, 2001 and June 30, 2002		3
	Condensed Consolidated Statements of Operations (unaudited) for the Three and Six Months Ended June 30, 2001 and 2002		4
	Condensed Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended June 30, 2001 and 2002		5
	Notes to Condensed Consolidated Financial Statements (unaudited)		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		17
Item 3.	Quantitative and Qualitative Disclosure about Market Risk		31
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings		32
Item 2.	Changes in Securities and Use of Proceeds		32
Item 4.	Submission of Matters to a Vote of Security Holders		32
Item 5.	Other Events		33
Item 6.	Exhibits and Reports on Form 8-K		33
SIGNATURES			34

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

o2wireless Solutions, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)
(Unaudited)


			December 31,			June 30,
			2001			2002

ASSETS
Current assets:
	Cash and cash equivalents of continuing operations		$	4,528		$	4,753
	Cash and cash equivalents of discontinued operations			71			121
	Contract revenue receivable, net of allowance for doubtful accounts of $3,343 and $4,426 at December 31, 2001 and June 30, 2002, respectively			23,444			12,527
	Costs and estimated earnings in excess of billings on uncompleted contracts			15,456			7,324
	Inventories, net of obsolescence reserve of $446 and $130 at December 31, 2001 and June 30, 2002, respectively			539			134
	Other current assets			2,297			1,889
	Other assets of discontinued operations			4,890			4,505

	Total current assets			51,225			31,253
Property and equipment, net of accumulated depreciation of $3,807 and $4,119 at December 31, 2001 and June 30, 2002, respectively				3,498			2,431
Goodwill, net				28,775			—
Other intangible assets, net				112			—
Other assets				167			124

			$	83,777		$	33,808

LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Affiliate notes payable, current portion		$	1,279		$	617
	Current portion of other indebtedness			442			106
	Accrued earn-out			1,650			1,650
	Accounts payable			9,144			2,676
	Accrued expenses			9,240			10,013
	Line of credit			—			7,655
	Working capital loan agreement			—			4,930
	Billing in excess of costs and estimated earnings on uncompleted contracts			1,137			158
	Other current liabilities			358			572
	Liabilities of discontinued operations			631			3,735

		Total current liabilities		23,881			32,112
	Affiliate notes payable, less current portion			23			—
	Other long-term indebtedness, less current portion			7,502			429
	Other long-term liabilities			674			—

		Total liabilities		32,080			32,541

Redeemable preferred stock:
	Class A redeemable convertible preferred stock, $.01 par value; 100,000 shares authorized; no shares issued or outstanding			—			—
	Series C redeemable convertible preferred stock, no par value; 75,000 shares authorized; no shares issued or outstanding			—			—
	Series D senior redeemable preferred stock, no par value; 100,000 shares authorized; no shares issued or outstanding			—			—

				—			—

Stockholders’ equity:
	Serial preferred stock, no par value, 10,000,000 shares authorized; no shares issued or outstanding			—			—
	Common stock, $.0001 par value; 100,000,000 shares authorized; 27,937,737 shares issued and outstanding at December 31, 2001 and June 30, 2002, respectively			3			3
	Additional paid-in capital			101,823			101,630
	Deferred stock compensation			(368	)		(21	)
	Accumulated other comprehensive loss			(114	)		(57	)
	Accumulated deficit			(49,647	)		(100,288	)

		Total stockholders’ equity		51,697			1,267

			$	83,777		$	33,808

See accompanying notes to unaudited consolidated financial statements

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o2wireless Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In thousands, except share and per share data)
(Unaudited)


				Three months ended June 30,						Six months ended June 30,

				2001			2002			2001			2002

Revenues				$	25,006		$	10,794		$	52,754		$	33,371
Operating expenses:
	Cost of revenues				20,272			14,332			42,728			33,769
	Selling, general, and administrative expenses				6,780			6,124			15,623			11,862
	Management fees				—			400			—			400
	Merger-related expenses				—			1,124			—			1,124
	Restructuring charge				—			3,004			1,100			3,427
	Restructuring credit				—			—			—			(314	)
	Depreciation				322			413			633			760
	Intangible amortization				38			155			75			201
	Goodwill amortization				1,580			—			3,148			—
	Goodwill impairment				—			—			—			28,753

		Operating loss			(3,986	)		(14,758	)		(10,553	)		(46,611	)
Other income (expense):
	Interest income				207			6			442			10
	Interest expense				(430	)		(448	)		(851	)		(676	)
	Other				143			5			157			15

Loss from continuing operations before income taxes					(4,066	)		(15,195	)		(10,805	)		(47,262	)
Discontinued operations:
	Loss from discontinued operations net of tax — Specialty Drilling, Inc.				0			0			(196	)		0
	Income (loss) from discontinued operations net of tax — o2wireless Lighting, Inc.				164			(95	)		266			(263	)
	Gain on disposal of discontinued operations net of tax — Specialty Drilling, Inc.				0			0			0			284
	Gain on disposal of discontinued operations net of tax — o2wireless Lighting, Inc.				0			(3,400	)		(588	)		(3,400	)

		Total discontinued operations			—			(3,495	)		(518	)		(3,379	)

Net loss				$	(3,902	)	$	(18,690	)	$	(11,323	)	$	(50,641	)

Earnings per share data:
	Net loss per common share:
		Continuing operations:
			Basic and diluted:	$	(0.15	)	$	(0.54	)	$	(0.39	)	$	(1.69	)
		Discontinued operations:
			Basic and diluted	$	0.01		$	(0.13	)	$	(0.02	)	$	(0.12	)

		Net loss per common share:
			Basic and diluted	$	(0.14	)	$	(0.67	)	$	(0.41	)	$	(1.81	)

		Weighted-average common shares outstanding:
			Basic and diluted		27,937,737			27,937,737			27,842,840			27,937,737

See accompanying notes to unaudited consolidated financial statements

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o2wireless Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands, except share and per share data)
(Unaudited)


				Six Months ended June 30,

				2001			2002

Cash flows from operating activities:
	Net loss from continuing operations				(10,805	)		(47,262	)
	Adjustments to reconcile net loss from continuing operations to net cash provided by (used in) continuing operating activities:
		Depreciation and amortization			3,856			962
		Goodwill impairment			—			28,753
		Amortization of deferred stock-based compensation			389			71
		(Gain) loss on disposal of assets			(30	)		421
		Changes in operating assets and liabilities:
			Contract revenues receivable		21,177			10,917
			Costs and estimated earnings in excess of billings on uncompleted contracts		2,014			8,132
			Inventories		15			404
			Other current assets		(1,239	)		407
			Other assets		85			43
			Accounts payable		(6,886	)		(6,469	)
			Accrued expenses		(473	)		787
			Billings in excess of cost and estimated earnings on uncompleted contracts		(2,543	)		(979	)
			Other liabilities		(1,443	)		(706	)

			Net cash provided by (used in) continuing operating activities		4,117			(4,519	)

Discontinued operations:
	Gain (loss) from discontinued operations				70			(263	)
	(Loss) on disposal of discontinued operations				(588	)		(3,116	)
	Adjustment to reconcile loss from discontinued operations to net cash used in discontinued operating activities				(154	)		3,728

			Net cash (used in) provided by discontinued operating activities		(672	)		349

			Net cash provided by (used in) operating activities		3,445			(4,170	)

Cash flows used in investing activities:
	Purchase of property and equipment				(564	)		(114	)
	Cash paid for acquisitions, net				(11,036	)		—

			Net cash used in continuing investing activities		(11,600	)		(114	)

Discontinued operations:
	Purchase of property and equipment, net				(56	)		(10	)
	Proceeds from disposal of discontinued operations				640			—

			Net cash provided by discontinued investing activities		584			(10	)

			Net cash used in investing activities		(11,016	)		(124	)

Cash flows from financing activities:
	Exercise of stock options and warrants				14			—
	Repayment of various notes payable				(1,093	)		(666	)
	Repayment of borrowing under credit facility				—			(1,765	)
	Proceeds from borrowing under credit facility				11,664			7,000

			Net cash provided by continuing financing activities		10,585			4,569

Net increase in cash and cash equivalents					3,014			275
Cash and cash equivalents at beginning of period					12,168			4,599

Cash and cash equivalents at end of period				$	15,182		$	4,874

Supplemental disclosure of cash flow information:
	Cash paid during the period for interest			$	826		$	587

See accompanying notes to unaudited consolidated financial statements

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o2wireless Solutions Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1) Summary of Significant Accounting Policies and Procedures

a) Organization, Basis of Presentation and Liquidity

o2wireless Solutions, Inc. and subsidiaries (formerly Clear Holdings, Inc. and subsidiaries) – (the “Company”) is headquartered in Cumming, Georgia. The Company provides comprehensive integrated network solutions to all sectors of the wireless telecommunications industry. This comprehensive end-to-end solution enables the Company to address the current and emerging network infrastructure requirements of its customers. These solutions enable its customers to plan, design, deploy and maintain their wireless networks. The Company also offers business planning and consulting services to wireless telecommunications industry participants.

The accompanying consolidated financial statements as of June 30, 2002, and for the three and six months ended June 30, 2001 and 2002 are unaudited and have been prepared by management. In the opinion of management, these unaudited consolidated financial statements include all adjustments, consisting of normal recurring adjustments and reclassifications, necessary for a fair presentation of the financial condition and results of operations for the interim periods presented. The consolidated balance sheet data for December 31, 2001 was derived from audited consolidated financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. Interim operating results are not necessarily indicative of operating results for the entire year. The financial information presented herein should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2001 which includes information and disclosures not included herein. All significant inter-company accounts or balances have been eliminated upon consolidation.

The telecommunications market is characterized by significant risks as a result of changes in economic conditions, changes in technology, outsourcing of telecommunications networks, consolidation of equipment vendors and other significant factors. The Company’s ability to effectively manage its operations, personnel levels and third-party subcontractors is critical to achieving profitability. Changes in technology, adverse economic or industry conditions or the loss of one or more of the Company’s key customers, among other factors, could have a material adverse effect on the Company’s financial position and results of operations.

The Company currently funds its operations with available cash, cash equivalents, and its working capital loan agreement with Baran Group Ltd. (“Baran”) (see Note 7 “Baran Group Ltd. Merger” for further discussion). Due to significant cost reduction steps taken in 2001 and early 2002, continuing efforts to further reduce expenses to reflect diminished revenue opportunity, and proceeds presently expected to be received (see paragraph below) in connection with the Baran working capital loan agreement, the Company presently believes that it will have sufficient cash and cash equivalents to fund its operations pending the closing of the merger with Baran.

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agreement at the completion of Baran’s review and evaluation of the Company’s current financial condition, assuming Baran proceeds with the merger. If the proposed merger does not close, the Company will not have sufficient liquidity to maintain operations through the early part of the fourth quarter of fiscal year ended December 31, 2002. As such, management would consider re-financing of the existing credit facility, negotiating the sale of the Company to another acquirer, or pursuing other options available to the Company. However, management expresses no assurances that these alternatives would be available to the Company if the proposed merger with Baran is not completed and, as such, could be required to liquidate.

The Company’s bank credit facility requires that it maintain specified levels of earnings (loss) before income taxes, depreciation, and amortization (EBITDA) and its borrowing base is dependent upon the amount of eligible receivables, as defined in the credit agreement. As of June 30, 2002, the Company was not in compliance with its EBITDA covenant under the terms of the fifth amendment to its credit agreement dated June 5, 2002 and was therefore in default. Under the terms of the fifth amendment, if the EBITDA requirements are not met, suspension of the EBITDA requirements under the facility would have been permitted if Baran made cash available to the Company to fund the EBITDA shortfall either in the form of an equity contribution or one or more subsequent disbursements under the working capital loan agreement with Baran. As of the date of filing of this Report, Baran had not provided the Company with additional funding; however, the Company expects to receive additional funding after Baran has completed its review and evaluation of the Company (approximately 30 days), assuming Baran proceeds with the merger. On August 15, 2002, the Company obtained a waiver of the default at June 30, 2002 subject to (1) remitting $1 million to the Bank as a permanent reduction in the Company’s credit line and (2) an agreement to pay no further monies to Baran. If the Company fails to achieve its budgeted revenues and margins and/or experiences any significant write-offs, the Company could be in violation of the covenants of its credit facility in the future. Based on the Company’s current cash and cash equivalents, it does not have sufficient resources to repay its indebtedness under the credit facility if called by the lenders.

On June 30, 2002, the Company had cash and cash equivalents of $4.8 million, which included approximately $1.5 million in checks that had not cleared the bank at June 30, 2002. As of June 30, 2002, the Company had outstanding balances of $5.0 million under the Baran Working Capital Loan Agreement (see Note 7 “Baran Group Ltd. Merger” for further discussion) and $7.7 million under the credit facility with no additional availability under the credit facility. As a result of principal reduction payments made subsequent to June 30, 2002, the outstanding balance under the credit facility was $5.6 million as of the date of filing this report.

b) Derivative Financial Instruments

In June 1998, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No. 133”). This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. Effective January 1, 2001, the Company adopted SFAS No. 133 which requires that all derivatives be recognized on the balance sheet at their fair value.

The Company engages in activities that expose it to various market risks, including the effects of a change in interest rates. This financial exposure is managed as an integral part of the Company’s risk management program, which seeks to reduce the potentially adverse effect that the volatility in interest rates may have on operating results. The Company currently maintains an interest rate swap, to minimize significant, unanticipated earnings fluctuations caused by volatility in interest rates. The Company assesses, both at inception and on an ongoing basis, whether the interest rate swap is effective in offsetting changes in cash flows of the hedged items.

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The Company has entered into an interest rate swap agreement with its senior lender in accordance with its loan agreement, which has been classified as a cash flow hedge. The interest rate swap agreement allows the Company to swap interest rate payments from a floating rate of LIBOR to a fixed interest payment of 7.25% on a notional principal of $12.5 million and will be in effect until January 2003. Changes in the fair value of the interest rate swap agreement are recognized in other comprehensive income or loss until such point that the interest rate swap no longer qualifies for hedge accounting, at which point, the gain (loss) reported is reported as a component of interest expense. During 2001, the Company recognized a comprehensive loss of $200,000 on the interest rate swap agreement. During the three month period ended September 30, 2001, the Company repaid $5 million on its line of credit with the result that its line of credit fell below the notional principal of $12.5 million. Thus the interest rate swap agreement no longer qualifies for hedge accounting and therefore for the quarter ended June 30, 2002 the Company recorded to interest expense a $94,000 decrease in the fair value of the swap agreement. The fair value of the interest rate swap liability was approximately $674,000 and $396,000 at December 31, 2001 and June 30, 2002, respectively.

c) Comprehensive Income (Loss)

On January 1, 1998, the Company adopted Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income (“SFAS No. 130”). SFAS No. 130 establishes standards for reporting and presentation of comprehensive income or loss and its components in a full set of financial statements. Comprehensive income or loss consists of net income or loss and all other gains and losses that are excluded from net income by current accounting standards. SFAS No. 130 requires only additional disclosures in the financial statements and does not affect the Company’s position or results of operations. As discussed above in Note 1 (b), during 2001 the Company recognized a comprehensive loss on its interest rate swap agreement of $200,000. The Company had no other comprehensive income or loss for the three and six month periods ended June 30, 2001 or June 30, 2002.

d) Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 141, “Business Combinations” (“SFAS 141”), which is effective for all business combinations initiated after June 30, 2001. SFAS 141 requires companies to account for all business combinations using the purchase method of accounting, recognize intangible assets if certain criteria are met, as well as provide additional disclosures regarding business combinations and allocation of purchase price. The Company adopted SFAS 141 as of July 1, 2001. The adoption of SFAS 141 did not have a material effect on the financial position or results of the operations of the Company.

In June 2001, FASB issued Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”), which requires non-amortization of goodwill and intangible assets that have indefinite useful lives and annual tests of impairment of those assets. SFAS 142 also provides specific guidance about how to determine and measure goodwill and intangible asset impairment, and requires additional disclosure of information about goodwill and other intangible assets. The provisions of this statement are required to be applied starting with fiscal years beginning after December 15, 2001 and applied to all goodwill and other intangible assets recognized in its financial statements at that date. Goodwill and intangible assets acquired after June 30, 2001 will be subject to the non-amortization provisions of the statement. The Company adopted SFAS 142 beginning January 1, 2002 upon which time the Company ceased amortizing goodwill in accordance with the guidelines set forth in the standard.

During the first quarter of 2002, as a result of recent economic triggering events, the Company performed an impairment analysis of its goodwill and recorded a $28.8 million pre-tax charge for the impairment of goodwill. The charge reflected changes in the Company’s business plan, continued declines in the telecommunications sector, along with the current depressed market price for the Company’s common stock. The impairment charge is reflected as an operating expense in the accompanying consolidated financial statements as the impairment analysis was performed as a result of current period events, and was not attributable to the transition provisions of SFAS 142.

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In August 2001, FASB issued Statement of Financial Accounting Standards No. 143, “Accounting for Asset Retirement Obligations” (“SFAS 143”). SFAS 143 requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, the entity capitalizes a cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement. Companies are required to adopt SFAS 143 in the first fiscal year beginning after June 15, 2002. Adoption of SFAS 143 is not currently expected to have a material impact on the Company’s results of operations.

In October 2001, FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets which supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of and the accounting and reporting provisions of Accounting Principles Board (“APB”) Opinion No. 30, Reporting the Results of Operations – Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions for the disposal of a segment of a business. SFAS 144 retains many of the fundamental provisions of SFAS 121, but resolves certain implementation issues associated with that Statement. SFAS 144 became effective for the Company beginning January 1, 2002. Adoption of SFAS 144 has not had any material effect on the Company’s financial statements.

In May 2002, the FASB issued SFAS No. 145, Revision of FAS Nos. 4, 44 and 64, Amendment of SFAS13 and Technical Corrections as of April 2002.” SFAS No. 145 is effective for fiscal periods beginning after May 15, 2002. The Company does not believe that the adoption of SFAS No. 145 will have any material effect on its financial statements.

In July 2002, FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS No. 146 provides new guidance on the recognition of costs associated with exit or disposal activities. The standard requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of commitment to an exit or disposal plan. SFAS No. 146 supercedes previous accounting guidance provided by the Emerging Issues Task Force (EITF) EITF 94-3 “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit and Activity (including Certain Costs Incurred in a Restructuring).” EITF 94-3 required recognition of costs at the date of commitment to an exit or disposal plan. SFAS No. 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. Adoption of SFAS 146 is not currently expected to have a material impact on the Company’s results of operations.

2) Goodwill and Intangibles

During the past few years, the Company acquired certain strategically positioned companies in order to create an integrated telecommunications services company with depth and expertise in wireless and wireline technologies and a broad geographical presence. All of the Company’s acquisitions have been accounted for under the purchase method of accounting. Aggregate goodwill for all of the Company’s acquisitions from 1997 to 2001 was approximately $44.2 million which, prior to December 31, 2001, was generally being amortized on a straight-line basis over 5 to 10 years, the expected period of benefit. Effective January 1, 2002, with the adoption of SFAS 142, the Company is no longer amortizing goodwill on these acquisitions but evaluating the carrying value of the goodwill on an annual basis or as required if an event occurs or circumstances change that would more likely than not reduce the fair value of the Company below its carrying value.

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During the first quarter of 2002, as a result of recent economic triggering events, the Company performed an impairment review of its goodwill and recorded a $28.8 million pre-tax charge for the impairment of goodwill. The charge reflected declines in the telecommunications sector along with the current depressed market price for the Company’s common stock and was reflected as an operating expense in the first quarter of 2002 financial statements.

The following is a pro forma presentation of reported net loss and earnings per share, adjusted for the exclusion of goodwill and intangible amortization net of related income tax effect (amounts in thousands of dollars except per share data):


	Three months ended June 30,						Six months ended June 30,

	2001			2002			2001			2002

Net loss – as reported	$	(3,902	)	$	(18,690	)	$	(11,323	)	$	(50,641	)
Goodwill amortization, net of taxes		1,580			—			3,148			—
Intangibles amortization		38			155			75			193

Net loss – as adjusted	$	(2,284	)	$	(18,535	)	$	(8,100	)	$	(50,448	)

Basic and diluted earnings per share:
As reported	$	(0.14	)	$	(0.67	)	$	(0.41	)	$	(1.81	)
Goodwill amortization, net of taxes		0.06			—			0.11			—
Intangibles amortization		—			0.01			—			0.01

As adjusted	$	(0.08	)	$	(0.66	)	$	(0.30	)	$	(1.80	)

Weighted-average common shares outstanding:
Basic and diluted		27,937,737			27,937,737			27,842,840			27,937,737

3) Restructuring

During the first quarter of 2002, the Company implemented a restructuring plan to further streamline operations and cost structure to reflect the slowdown in the telecommunications sector and the decline in revenues it has experienced. As part of the restructuring plan, which consists primarily of severances for workforce reduction, write-off of fixed assets, closure of certain offices and the consolidation of certain facilities, the Company recorded a restructuring charge of approximately $3.4 million over the first two quarters of 2002. During the three months ended March 31, 2002, the Company recorded a charge of approximately $423,000 of which $283,000 was incurred during that period. During the three months ended June 30, 2002, the Company recorded an additional charge of approximately $3.0 million of which $1.05 million was incurred during that period. The Company anticipates recording an additional restructuring charge of approximately $1.5 – 2 million during the three months ended September 30, 2002.

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Workforce reduction has been the main focus of the restructuring. Employee headcount has been reduced from 573 employees at December 31, 2001 to 352 employees at June 30, 2002, representing a reduction of 221 employees or approximately 39% of the Company’s workforce. The reductions took place in all sectors of operations and at all levels of staff, including management. The Company recorded approximately $1.9 million for severance and other termination benefits related to the workforce reduction during the six month period ended June 30, 2002.

Additionally, as part of the restructuring, the Company is closing certain regional offices. Costs related to remaining office and equipment leases for these offices were included in the Company’s restructuring reserve. The Company’s fiscal year 2002 restructuring plan utilization was as follows (in thousands of dollars):


	FY 2002 Restructuring Plan

	1st Qtr		1st Qtr			Balance at		2nd Qtr		2nd Qtr			Balance at
	Charges		Incurred			3/31/2002		Charges		Incurred			6/30/2002

Employee Severance	$	223	$	(223	)	$	—	$	1,367	$	(446	)	$	921
Severance Benefits		140		—			140		140		(80	)		60
Office Closings		60		(60	)		—		951		(453	)		498
Fixed Asset Write-off		—		—			—		448		(448	)		—
Office and Equipment Leases Write-off		—		—			—		98		(9	)		89

Total	$	423	$	(283	)	$	140	$	3,004	$	(1,436	)	$	1,568

During the first quarter of 2001, the Company also implemented a restructuring plan at which time it took a restructuring charge totaling approximately $1.1 million. As of March 31, 2002 approximately $786,000 in costs were paid relating to this restructuring. The Company now believes it has incurred and paid all costs associated with that restructuring. Therefore, during the three months ended March 31, 2002, the Company recorded a restructuring credit for the remaining unused liability of approximately $314,000 related to that initial charge.

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4) Discontinued Operations

Specialty Drilling, Inc. Sale

On April 12, 2001 the Company sold substantially all of the assets of Specialty Drilling, Inc. During the quarter ended March 31, 2001 the Company provided for approximately $784,000 in losses from discontinued operations and losses on disposal of discontinued operations. As of March 31, 2002, approximately $500,000 in losses had been incurred and paid. The Company does not believe there are any additional losses to be paid and hence reversed the remaining $284,000 of the provision during the quarter ended March 31, 2002.

o2wireless Lighting, Inc. Sale

On June 4, 2002, the Company’s Board of Directors formally approved a “Recovery Plan” issued in connection with the signing of the merger agreement with Baran Group, Ltd. (See Note 7 “Baran Group Ltd. Merger” for further discussion). This Plan included certain revenue and other operating performance targets, relocation of the corporate offices, an incentive bonus program for key staff and management, and the sale of o2wireless Lighting, Inc. (the Lighting Division). The Lighting Division installs lighting systems on towers and sells aftermarket lighting systems. Historically, the Company has not accounted for the division as a segment.

In August 2001, FASB issued SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” The definition of a segment under SFAS 144 broadens the definition and scope of a segment. Further the term segment was replaced by the term “component of an entity.” The Lighting Division has clearly distinguishable operations and cash flows from other aspects of the turn-key operation. Furthermore, the Lighting Division’s operations and cash flows will be eliminated from the ongoing operations of the entity, and the Company will have no further involvement in the operations of the Lighting Division as it is expected to be sold to an independent third party. The Company is presently in negotiations with a third party regarding the sale of the Lighting Division.

Accordingly, the Company has classified the Lighting Division as held for sale and reflected it as a discontinued operation for all periods presented. The Company expects the sale of the Lighting Division to be completed by the fourth quarter of fiscal year 2002. The condensed consolidated financial statements have been reclassified to segregate the net assets and operating results of these discontinued operations for all periods presented.

Summary operating results of the discontinued operations (in thousands of dollars) are as follows:


	Three months ended June 30,					Six months ended June 30,

	2001		2002			2001			2002

Revenue	$	2,822	$	1,535		$	5,412		$	3,017
Gross profit		873		514			1,678			1,014
Operating income (loss)		164		(95	)		267			(262	)
Interest expense		—		—			(1	)		(1	)
Loss on disposal of assets		—		(3,400	)		—			(3,400	)
Income tax expense		—		—			—			—
Gain (loss) from discontinued operations		164		(3,495	)		266			(3,663	)

The operating loss for the three months ended June 30, 2001 includes depreciation of $20,000. The operating loss for the three months ended June 30, 2002 includes depreciation of $16,000 and restructuring costs of $19,000.

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The operating loss for the six months ended June 30, 2001 includes depreciation of $39,000. The operating loss for the six months ended June 30, 2002 includes depreciation of $33,000 and restructuring costs of $19,000.

The restructuring costs consist of the following (in thousands of dollars):


	Three months ended June 30,				Six months ended June 30,

	2001		2002		2001		2002

Employee Severance	$	—	$	13	$	—	$	13
Severance Benefits		—		6		—		6
Total	$	—	$	19	$	—	$	19

Assets and liabilities of discontinued operations (in thousands of dollars) are as follows:


		December 31,		June 30,
		2001		2002

Cash and cash equivalents		$	71	$	121
Contract revenue receivable, net of allowance for doubtful accounts of $13 and $5 at December 31, 2001 and June 30, 2002, respectively			1,389		1,116
Inventories			2,895		2,867
Other current assets			116		50
Property and equipment, net of accumulated depreciation of $154 and $187 at December 31, 2001 and June 30, 2002, respectively			479		455
Other assets			11		17

Assets of discontinued operations		$	4,961	$	4,626

Current portion of other indebtedness			9		10
Accounts payable			436		198
Accrued expenses			169		116
Other current liabilities			6		5
Other long-term indebtedness, less current portion			11		6
Reserve for loss on sale and operating losses			—		3,400

	Liabilities of discontinued operations	$	631	$	3,735

5) Segment and Customer Information

The Company operates and manages its business as a single segment. The Company provides comprehensive integrated network solutions to service providers in the wireless telecommunications industry. The following is a summary of revenues by geographic area (in thousands of dollars):


	Three months ended June 30,				Six months ended June 30,

	2001		2002		2001		2002

U.S.	$	23,645	$	10,529	$	49,648	$	32,390
Foreign		1,361		265		3,106		981

Consolidated	$	25,006	$	10,794	$	52,754	$	33,371

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6) Legal Matters

In the normal course of business, the Company is subject to certain administrative proceedings and litigation. The following is a summary of three proceedings currently pending:

On November 7, 2000, a suit was filed against the Company and two officers of the Company, (as well as a third individual not affiliated with the Company), asserting that the defendants engaged in a conspiracy to pursue frivolous litigation against the plaintiff, to threaten further litigation and to interfere with the business relations of the plaintiff and that agents of the Company acting to benefit the Company committed acts of fraud against, and violated fiduciary duties to the plaintiff. The Complaint was later amended to reflect that the plaintiff had lost by jury verdict in related litigation in Georgia concerning a sale of a 30 MHz PCS license for Honolulu. An additional amendment to the Complaint, filed in August 2001, abandoned plaintiff’s claim for interference with business relations and added a subsidiary of the Company as a defendant. The Company vigorously defended all claims against it. An agreement has been reached between the parties that all claims against the Company will be dismissed with prejudice in connection with the resolution of related disputes between parties to two other lawsuits to which the Company is not a party. In management’s opinion, the outcome of the foregoing proceeding will not materially affect the financial condition and results of the Company.

On July 12, 2002, an action was filed against o2wireless in the United States District Court for the Northern District of Georgia, McKenzie Telecommunications Group, Inc. v. Clear Holdings, Inc. and o2wireless, Inc. f/k/a Clear Communications Group, Inc. In the Complaint, the Plaintiff alleges that o2wireless breached its obligations under an asset purchase agreement, dated November 1, 1999, in connection with the sale of McKenzie Telecommunications Group, Inc. (“MTG”) to o2wireless. The Complaint further alleges that the Plaintiff is entitled to receive an earn-out payment under the terms of the asset purchase agreement. The Plaintiff seeks compensatory damages in excess of $3 million. Management believes that the lawsuit is completely without merit and that o2wireless has meritorious defenses against all of the claims alleged in the Complaint. o2wireless intends to deny all of the allegations contained in the Complaint and to vigorously defend the action. Management believes that the outcome of this litigation will not have a material adverse effect on the Company’s results of operations and financial condition; however, the lawsuit is in an early procedural stage and therefore it is not possible to determine with certainty what the effect may be on the Company’s results of operations and financial condition.

On August 6, 2002, an action was filed against o2wireless in the United States District Court for the Southern District of Texas, George A. Jackson and TWR Family of Companies, L.L.C. v. o2wireless, Inc., In the Complaint, the Plaintiff alleges that Plaintiff is entitled to receive an earnout payment of $3.3 million pursuant to the terms of a stock purchase agreement entered into between the parties. The Plaintiff seeks damages in the amount of $3.3 million. Management believes that o2wireless has meritorious defenses against all of the claims alleged in the Complaint. o2wireless intends to deny all of the allegations contained in the Complaint and to vigorously defend the action. Management believes that the outcome of this litigation will not have a material adverse effect on the Company’s results of operations and financial condition; however, the lawsuit is in an early procedural stage and therefore it is not possible to determine with certainty what the effect may be on the Company’s results of operations and financial condition.

7) Baran Group Ltd. Merger

On June 6, 2002, the Company announced the execution of a merger agreement with Baran. If the merger is completed, the Company will merge with and into a wholly owned subsidiary of Baran. Each holder of the Company’s common stock will be entitled to receive 0.032135 ordinary shares of Baran in exchange for their shares of the Company’s common stock. The closing of the merger is subject to the approval of the Company's shareholders and certain other conditions. If, while the merger agreement is in effect, the Company breaches certain exclusivity obligations or accepts another acquisition proposal, Baran will be entitled to receive a termination fee of $1.2 million.

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Baran has notified the Company that, based upon the results of operations of the Company for the second quarter ended June 30, 2002 the ability of Baran to complete the merger transaction with the Company will be subject to Baran’s further review and evaluation of the Company’s current financial condition and third quarter operations. This review is expected to be completed within 30 days and if Baran determines to proceed with the merger, it is likely that the exchange ratio will be reduced. The terms of the merger agreement remain in effect and Baran will continue to provide management consulting services to the Company pursuant to the management consulting agreement entered into between the parties in connection with the execution of the merger agreement.

Management Consulting Agreement

As part of the merger transaction, Baran and the Company have entered into an agreement under which Baran has begun providing financial and management consulting services to the Company, on business and financial matters as are reasonably requested from time to time by the Company’s board of directors, including corporate strategy, budgeting of future corporate investments, acquisition and divestiture decisions, operational matters and debt and equity financing. In consideration for the services rendered by Baran under the agreement, the Company will pay Baran a monthly fee of $400,000 for the remainder of June 2002, and commencing in July 2002 and continuing each month thereafter that the agreement is in effect, an amount equal to six percent (6%) of the Company’s consolidated monthly revenues. While the agreement is in effect, $40,000 of the monthly fee will be paid by the fifteenth day of the succeeding month. Any remaining fees due and payable under the agreement to Baran shall be paid by the later of the end of the calendar month succeeding the month in which the agreement terminates, or the date on which the Company’s obligations to Wachovia Bank, N.A., as described below are paid in full. As a condition to the waiver received from Wachovia with respect to the default at June 30, 2002, the Company is prohibited from paying additional monies to Baran.

In addition, the Company will promptly reimburse Baran’s reasonable travel accommodation and transportation expenses and other out-of-pocket costs as may be incurred by Baran or its personnel, in connection with services rendered under the agreement. The agreement will terminate on the earlier of:

• the effective time of the merger,

• 90 days following a notice of termination sent by the Company to Baran,

• six months from the date of the agreement,

• 10 days after the Company notifies Baran of termination for cause, as defined below, which Baran fails to cure,

• 10 days after Baran gives notice to the Company of breach of the agreement, which the Company fails to cure, and

• the date of termination of the merger agreement due to the Company accepting an acquisition that is more favorable to the Company than the proposed merger.

For purposes of this agreement, “cause” is defined as the filing of a bankruptcy petition by Baran, Baran becoming insolvent or making an assignment for the benefit of creditors, or Baran’s failing to render services to the Company for a continuous 30 day period, without having provided the Company with advance written notice of the reasons for the failure.

Working Capital Loan Agreement: Working Capital Note and Warrant

Baran Sub extended the first advance on June 6, 2002, immediately following the execution of the loan agreement and the merger agreement, in the amount of $5,000,000, which was evidenced by a working capital note. In addition, and provided that no event of default has occurred, Baran Sub has agreed to advance to the Company the following:

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• No later than the date the Company files its Form 10-Q for the quarter ended June 30, 2002 or August 15, 2002, the lesser of (x) $3,000,000 or (y) the amount of the Company’s loss (as defined below) for the quarter ended June 30, 2002; and

• If the loan agreement is in effect as of the later of the date the Company files its Form 10-Q for the quarter ended September 30, 2002 or November 15, 2002, at its discretion, an amount equal to the Company’s loss for the quarter ended September 30, 2002.

“Loss” is defined in the loan agreement as the Company’s consolidated earnings before interest, taxes, depreciation, amortization, non-cash restructuring expenses and any accrued and unpaid management fees due to Baran Sub.

As of the date of filing this report, Baran has not made any additional advances. Management expects to receive additional advances after Baran has completed its review and evaluation of the Company (approximately 30 days), assuming Baran proceeds with the merger.

In consideration of Baran Sub’s execution of the loan agreement and the extension of the initial working capital advance to the Company, the Company has issued to Baran Sub a warrant to purchase 5,559,610 shares of the Company’s common stock, at a purchase price equal to $0.45 per share, which warrant may be exercised only in the event that the merger agreement is terminated due to acceptance of an acquisition proposal more favorable to the Company than the proposed merger with Baran. The loan has been discounted to reflect the fair value of the warrants issued, totaling approximately $80,000, using the Black-Scholes option pricing method based on the following weighted-average assumptions: expected volatility – 159%; expected life – three years; risk-free interest rate – 3.9%; expected dividend yield – 0%, discounted to reflect a 5% probability of occurrence.

Subordination Agreement

Also on June 5, 2002, Baran Sub entered into a subordination agreement with Wachovia Bank, N.A. Under the subordination agreement, all rights and remedies of Baran Sub under the loan agreement are and shall continue to be junior in right of payments to the rights of Wachovia Bank under the Company’s credit agreement. Under the subordination agreement, Baran Sub agreed that it shall not receive or accept any payment on its advances unless and until all of the Company’s obligations under the credit agreement are paid in full. However, Baran Sub shall be entitled to receive, unless there is an event of default under the credit agreement between Wachovia Bank and the Company, up to $40,000 per month and reimbursement of its out-of-pocket expenses in partial payment of the amounts due under the management consulting agreement described above. As a condition to the waiver received from Wachovia with respect to the default at June 30, 2002, the Company is prohibited from paying additional monies to Baran. In addition, Baran Sub has agreed not to accelerate the maturity of its loan to the Company or commence any action against the Company to recover any part of its loans or join with any creditor, unless Wachovia Bank shall also have joined in bringing against the Company any proceeding under any bankruptcy, insolvency or similar law.

All liens, pledges, and security interest of any nature in any collateral held by or in favor of Baran Sub under the loan agreement were made junior to the liens, pledges and security interests in any collateral held by or in favor of Wachovia Bank.

Baran Sub has agreed that, unless and until the subordination agreement is terminated, it shall not proceed with any enforcement action against the Company and shall have the sole right to administer and enforce all matters in respect of the collateral.

If the merger fails to become effective as a result of the Company’s acceptance of a superior acquisition proposal, Wachovia Bank has agreed that, as a condition to its consent to the transaction contemplated by the superior proposal, it will require the payment in full of all of its senior debt upon the closing of the transaction constituting the superior proposal and that in no event will the senior debt be sold, assigned or transferred to the party which proposed the superior proposal or to any other party on its behalf.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements regarding our expected financial position and operating results, our business strategy and our financing plans are forward-looking statements. These statements can sometimes be identified by our use of forward-looking words such as “believe,” “project,” “may,” “will,” “anticipate,” “estimate,” “expect,” or “intend.” Known and unknown risks, uncertainties and other factors could cause our actual results to differ materially from those contemplated by these statements. Such risks and uncertainties include, but are not limited to:

• general economic conditions,

• competition in the wireless services industry,

• demand for outsourced wireless network services,

• the Company’s ability to manage its operations effectively,

• the Company’s ability to maintain and increase revenues while controlling costs,

• the Company’s ability to retain its customers and attract new business,

• fluctuations in quarterly operating results, and

• other uncertainties detailed from time to time in the Company’s Securities and Exchange Commission filings.

The section entitled “Risk Factors” in Item 1 of our Form 10-K for the year ended December 31, 2001, discusses some additional important factors that could cause the Company’s actual results to differ materially from those in such forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We are under no obligation to update any of the forward-looking statements after the filing of this Form 10-Q to conform such statements to actual results or to changes in our expectations.

The following discussion should be read in conjunction with our financial statements and the related notes and other financial information appearing elsewhere in this Form 10-Q and the information contained in our Annual Report on Form 10-K for the year ended December 31, 2001.

Overview

We provide comprehensive integrated network solutions to all sectors of the wireless telecommunications industry. This comprehensive end-to-end solution enables us to address the current and emerging network infrastructure requirements of our customers. These solutions enable our customers to plan, design, deploy and maintain their wireless networks. We also offer business planning and consulting services to wireless telecommunications industry participants.

The Company currently funds its operations with available cash, cash equivalents, and its working capital loan agreement with Baran (see Note 7 “Baran Group Ltd. Merger” for further discussion). Due to significant cost reduction steps taken in 2001 and early 2002, continuing efforts to further reduce expenses to reflect diminished revenue opportunity, and proceeds presently expected to be received (see paragraph below) in connection with the Baran working capital loan agreement, the Company presently believes that it will have sufficient cash and cash equivalents to fund its operations pending the closing of the merger with Baran.

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Management presently expects that the proposed merger with Baran (as described in Note 7 “Baran Group Ltd. Merger”) will close during the fourth quarter of the fiscal year ended December 31, 2002. However, Baran has notified the Company that, based upon the results of operations of the Company for the second quarter ended June 30, 2002, the ability of Baran to complete the merger transaction with the Company will be subject to Baran’s further review and evaluation of the Company’s current financial condition and third quarter operations. This review is expected to be completed within 30 days and if Baran determines to proceed with the merger, it is likely that the exchange ratio will be reduced. Management expects to receive additional advances in connection with the working capital loan agreement at the completion of Baran’s review and evaluation of the Company’s current financial condition, assuming Baran proceeds with the merger. The terms of the merger agreement remain in effect and Baran will continue to provide management consulting services to the Company pursuant to the management consulting agreement entered into between the parties in connection with the execution of the merger agreement. If the proposed merger does not close, the Company will not have sufficient liquidity to maintain operations through the early part of the fourth quarter of fiscal year ended December 31, 2002. As such, management would consider re-financing the existing credit facility, negotiating the sale of the Company to another acquirer, or pursuing other options available to the Company. However, management expresses no assurances that these alternatives would be available to the Company if the proposed merger with Baran is not completed and as such could be required to liquidate.

During the past few years, we acquired certain strategically positioned companies in order to create an integrated telecommunications services company with depth and expertise in wireless and wireline technologies and a broad geographical presence. All of our acquisitions have been accounted for under the purchase method of accounting. Aggregate goodwill for all of our acquisitions from 1997 to 2001 is approximately $44.2 million which, prior to December 31, 2001, was generally being amortized on a straight-line basis over 5 to 10 years, the expected period of benefit. Effective January 1, 2002, with the adoption of FAS 142 the Company is no longer amortizing goodwill on these acquisitions but evaluating the carrying value of the goodwill on an annual basis or as required if an event occurs or circumstances change that would more likely than not reduce the fair value of the Company below its carrying value.

During the first quarter of 2002, as a result of recent economic triggering events, the Company performed an impairment analysis of its goodwill and recorded a $28.8 million pre-tax charge for the impairment of goodwill. The charge reflected changes in the Company’s business plans, declines in the telecommunications sector along with the current depressed market price for the Company’s common stock and is reflected as an operating expense in the accompanying financial statements.

We generally offer our network planning, design and deployment services on either a fixed-price or a time-and-materials basis, with scheduled deadlines for completion times, that is, on a time-certain basis. Revenue on time and-materials contracts is recognized as services are rendered. We recognize revenues for our fixed-price contracts using the percentage-of-completion method of accounting. Under the percentage-of-completion method, in each period we recognize expenses as they are incurred, and we recognize revenues based on a comparison of the current costs incurred for the project to the then estimated total costs of the project.

Accordingly, the revenues we recognize in a given quarter depend primarily on the costs we have incurred for individual projects and our then current estimate of the total remaining costs to complete individual projects. These estimates are reviewed on a contract-by-contract basis, and are revised periodically throughout the life of the contract such that adjustments to the results of operations relating to these revisions are reflected in the period of revision. Our estimated costs for a project are based on many factors. Accordingly, the final project’s cost may vary from the original estimate. Certain project costs can vary significantly from original estimates, which may lead to significant fluctuations in actual gross margin compared to projected margins. If in any period we significantly increase our estimate of the total costs to complete a project, we may recognize very little or no additional revenue with respect to that project. As a result, gross margins in such period and in future periods may be significantly reduced, and in some cases, a loss may be required to be recognized. Provisions for estimated losses on uncompleted contracts are made

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in the period in which such losses are determined. For the three months ended June 30, 2002, revenues from our fixed-price contracts accounted for approximately 75% of our total revenues. Our contracts are typically structured with milestone events that dictate the timing of payments to us from our customers. Accordingly, there may be a significant delay between the date we record revenues and the date we receive payment from our customers. During our planning process, we divide projects into deliverables, which enables us to better understand the costs associated with each of the components and minimize the risks of exceeding our initial estimates.

Our customers include wireless carriers, equipment vendors, tower companies and broadband carriers. We have derived, and believe that we will continue to derive a significant portion of our revenues from a limited number of customers. For the three months ended June 30, 2002, we derived 61% of our revenues from our top five customers. Our business was obtained from multiple departments within these organizations. The volume of work performed for specific customers is likely to vary from period to period, and a major customer in one period may not use our services in a subsequent period.

Due to the recent downturn in financial markets in general, and specifically within the telecommunications industry, many of our customers are having trouble obtaining necessary capital resources which are required to fund the expansion of their businesses (e.g. telecom network deployments and upgrades). The current volatility of the financial markets and economic slowdown in the U.S. and internationally has also intensified the uncertainty experienced by many of our customers, who are finding it increasingly difficult to predict demand for their products and services. As a result, many of our customers may continue to slow and postpone the deployment of new wireless networks and the development of new technologies and products, which may continue to reduce the demand for our services. Some of our customers have recently cancelled or suspended their contracts with us and many of our customers or potential customers have postponed entering into new contracts for our services. Also due to the difficult financing and economic conditions, some of our customers may not be able to pay us for services that we have already performed. Based on the Company’s assessment of the expected collectibility of various receivables, we have increased our allowance for doubtful accounts by $771,000 during the quarter ending June 30, 2002 to specifically reserve for those customers for which collectibility is uncertain.

Our net contract revenue receivables have continued to decrease in absolute dollars from $23.4 million at December 31, 2001 to $12.5 million at June 30, 2002. This reflects the slowdown in revenues for the period along with slower payments from our customers. This has resulted in an increase of our days sales outstanding (DSO’s), from 79 days at December 31, 2001 to 104 days at June 30, 2002. Our costs and estimated earnings in excess of billings decreased from $15.5 million at December 31, 2001 to $7.3 million at June 30, 2002. This represented an increase from 45 days to 61 days. This increase represents a delay in billing certain large projects as billing milestones had not been achieved.

Our cost of revenues includes direct materials, compensation and benefits, living and travel expenses, payments to third-party subcontractors and other direct project-related expenses, in addition to allocation of indirect overhead. Cost of revenues excludes down-time for direct compensation and benefits and training not required for a specific job. As of June 30, 2002 we had 281 employees working on contracted projects.

Selling, general and administrative expenses include compensation and benefits, facilities expenses and other expenses not related directly to projects. All unassigned employees and related costs are charged to selling, general and administrative expenses along with training costs associated with new hires.

Depreciation and amortization expenses include depreciation on our furniture, fixtures and equipment and in prior years, amortization related to our acquisitions through December 31, 2001.

Interest expense is primarily related to interest on notes payable to related parties and our bank facility. It also includes adjustments to the valuation of the interest rate swap agreement.

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Prior to our initial public offering in August 2000, we granted options to certain of our employees at exercise prices below our initial public offering price of $12.00 per share, which resulted in a total future compensation expense of approximately $1.9 million to be recognized over the vesting period of the options. A majority of the aggregate expense amount has been recognized over the past two fiscal years. Of this aggregate amount, approximately $23,000 was expensed during the three months ended June 30, 2002 as a component of selling general and administrative expenses and the remaining $21,000 will be expensed through September 30, 2002.

Critical Accounting Policies and Significant Estimates

Factors that could affect the Company's future operating results and cause actual results to vary materially from expectations include, but are not limited to, lower than anticipated growth from existing customers, an inability to attract new customers, an inability to successfully integrate acquisitions, technology changes, or a decline in the financial stability of the Company's customers.

Negative developments in these or other risk factors could have a material adverse effect on the Company's financial position and results of operations.

A summary of the Company's critical accounting policies follows:

Revenue Recognition

The Company offers network planning, design and deployment services on either a fixed price or a time and materials basis, with scheduled deadlines for completion times. Revenue on time and materials contracts is recognized as services are rendered. Revenue on fixed price contracts is recognized using the percentage-of-completion method. Under the percentage-of-completion method, in each period expenses are recognized as incurred and revenue is recognized based on a comparison of the current costs incurred for the project to the then estimated total costs of the project. Accordingly, the revenues recognized in a given quarter depend on the costs incurred for individual projects and the estimate of the total remaining costs to complete individual projects. These estimates are reviewed on a contract-by-contract basis, and are revised periodically throughout the life of the contract such that adjustments to the results of operations relating to these revisions are reflected in the period of revision. Estimated costs to complete a project are based on many factors. Accordingly, the final project cost may vary from the original estimate. Certain project costs can vary significantly from original estimates which may lead to significant fluctuations in actual gross margin compared to projected margins. As a result, gross margins in future periods may be significantly reduced, and in some cases, a loss may be required to be recognized. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined.

Contract Revenue Receivables

The Company is required to estimate the collectibility of its contract revenue receivables. A considerable amount of judgment is required in assessing the ultimate realization of these receivables including the current credit-worthiness of each customer. Significant changes in required reserves have been recorded in recent periods and may occur in the future due to the current market environment in the telecommunications industry.

Inventories

The Company is required to state its inventories at the lower of cost or market. In assessing the ultimate realization of inventories, the Company is required to make judgments as to future demand requirements and compare that with the current or committed inventory levels. The Company has recorded changes in required reserves in recent periods due to changes in strategic direction, such as discontinuances of product lines as well as changes in market conditions due to changes in demand requirements. It is possible that changes in required inventory reserves may continue to occur in the future due to the current market conditions.

Restructurings

The Company initiated restructuring plans during the three months ended March 31, 2001 and 2002, respectively, and the three months ended June 30, 2002. See further discussion Note 3 “Restructuring.” In conjunction with these restructuring plans, the Company established restructuring reserves to account for the estimated costs related to the restructuring plan. These costs primarily related to employee severance benefits, office and equipment obligations, and the write-off of fixed assets.

The Company established reserves for individually negotiated employee severance payments based upon length of service, accrued vacation, extended insurance coverages, and expected federal and state payroll taxes.

For office closings, reserves were established for all remaining lease payments due on buildings and office equipment that would no longer be utilized in continuing operations. The Company assumed no sub-leases would be executed.

The impairment charges for fixed assets related to field and office equipment owned by the Company that would be abandoned and no longer utilized in continuing operations. The Company assumed no salvage value on disposal of these fixed assets.

The Company is self-insured for medical claims up to a stop loss of $70,000 per event and has established termination benefits reserves for the expected period that former employees of the Company will be covered under COBRA benefits.

Legal

The Company is subject to proceedings, lawsuits and other claims related to environmental, labor, product and other matters. The Company is required to assess the likelihood of any adverse judgments or outcomes to these matters as well as potential ranges of probable losses. A determination of the amount of reserves required, if any, for these contingencies are made after careful analysis of each individual issue. The required reserves may change in the future due to new developments in each matter or changes in approach such as a change in settlement strategy in dealing with these matters.

Related Parties

The Company has related party transactions with members of its Board of Directors, senior management, and employees. These transactions may include issuances of debt and loans, execution of operating leases to the Company, and potential earn-out payments. The Company believes that the terms of the above transactions with related parties are comparable to similar transactions among unrelated parties.

Discontinued Operations of the Lighting Division

The Company has recorded an estimated loss on the future sale for the Lighting Division asset group of approximately $3.4 million, representing the estimated fair value of the asset group. Management established its estimated loss on future sale assuming transaction costs of $500,000 and current negotiated offers available to the Company.

Baran Warrant

The Company has issued to Baran a warrant to purchase 5,559,610 shares of the Company's common stock, at a purchase price equal to $0.45 per share, which warrant may be exercised only in the event that the merger agreement is terminated due to acceptance of an acquisition proposal more favorable to the Company than the proposed merger with Baran. The loan has been discounted to reflect the fair value of the warrants issued, totaling approximately $80,000. Management valued the warrants using the Black-Scholes option pricing method based on the following weighted-average assumptions: expected volatility — 159%; expected life — three years; risk-free interest rate — 3.9%; expected dividend yield — 0%, discounted to reflect a 5% probability of occurrence. Management established its 5% probability of receiving a more favorable offer based on required fees to be repaid to Baran, increased dilution of its common stock upon execution of the warrant, and alternative offers available to the Company.

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The Company has related party transactions with members of its Board of Directors, senior management, and employees. These transactions include issuances of debt and loans, execution of operating leases to the Company, and potential earn-out payments. The Company believes that the terms of the above transactions with related parties are comparable to similar transactions among unrelated parties.

Restructuring

During the first quarter of 2002 the Company implemented a restructuring plan to further streamline operations and cost structure to reflect the slowdown in the telecommunications sector and the decline in revenues it has experienced. As part of the restructuring plan, which consists primarily of severances for workforce reduction, write-off of fixed assets, closure of certain offices and the consolidation of certain facilities, the Company recorded a restructuring charge of approximately $3.4 million over the first two quarters of 2002. During the three months ended March 31, 2002, the Company recorded a charge of approximately $423,000 of which $283,000 was paid during that period. During the three months ended June 30, 2002, the Company recorded an additional charge of approximately $3.0 million of which $1.8 million was paid during that period. The Company anticipates recording an additional restructuring charge of approximately $1.5-2 million during the three months ended September 30, 2002.


	FY 2002 Restructuring Plan

	1st Qtr		1st Qtr			Balance at		2nd Qtr		2nd Qtr			Balance at
	Charges		Incurred			3/31/2002		Charges		Incurred			6/30/2002

Employee Severance	$	223	$	(223	)	$	—	$	1,367	$	(446	)	$	921
Severance Benefits		140		—			140		140		(80	)		60
Office Closings		60		(60	)		—		951		(453	)		498
Fixed Asset Write-off		—		—			—		448		(448	)		—
Office and Equipment Leases Write-off		—		—			—		98		(9	)		89

Total	$	423	$	(283	)	$	140	$	3,004	$	(1,436	)	$	1,568

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During the first quarter of 2001, the Company also implemented a restructuring plan at which time it took a restructuring charge totaling approximately $1.1 million. As of March 31, 2002 approximately $786,000 in costs were paid relating to this restructuring. The Company now believes it has incurred and paid all costs associated with that restructuring. Hence, during the three months ended March 31, 2002, the Company recorded a restructuring credit for the remaining unused liability of approximately $314,000 related to that initial charge.

Discontinued Operations

Specialty Drilling, Inc. Sale

On April 12, 2001 the Company sold substantially all of the assets of Specialty Drilling, Inc. During the quarter ended March 31, 2001 the Company provided for approximately $784,000 in losses from discontinued operations and losses on disposal of discontinued operations. As of March 31, 2002, approximately $500,000 in losses had been incurred and paid. The Company does not believe there are any additional losses to be paid and reversed the remaining $284,000 of the provision during the quarter ended March 31, 2002.

Revenues from Specialty Drilling, Inc. were approximately $170,000 for the six months ended June 30, 2001 while the net loss for the six months ended June 30, 2001 was $196,000. There were no discontinued operations for the six months ended June 30, 2002 related to the sale of Specialty Drilling, Inc.

o2wireless Lighting, Inc. Sale

On June 4, 2002, the Company’s Board of Directors formally approved a “Recovery Plan” adopted in connection with the signing of the merger agreement with Baran Group, Ltd. (See Note 7 “Baran Group Ltd. Merger” for further discussion). This Plan included certain revenue and other operating performance targets, relocation of the corporate offices, an incentive bonus program for key staff and management, and the sale of o2wireless Lighting, Inc. (the “Lighting Division”). The Lighting Division installs lighting systems on towers and sells aftermarket systems.

In August 2001, FASB issued SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” As the Lighting Division has clearly distinguishable operations and cash flows from the rest of the Company, the assets and liabilities of the Lighting Division are defined as an asset group under SFAS 144 and will be discontinued from the ongoing operations of the Company. The Company plans to have no further involvement in the operations of the Lighting Division and expects to sell the asset group to an independent third party and is in current negotiations regarding the sale of the Lighting Division.

Accordingly, the Company has classified the Lighting Division as held for sale and reflected it as a discontinued operation for all periods presented. The Company expects the sale of the Lighting Division to be completed by the fourth quarter of fiscal year 2002. The condensed consolidated financial statements have been reclassified to segregate the assets, liabilities and operating results of the discontinued operations for all periods presented.

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Accordingly, the Company has elected to report the pending sale of the Lighting Division as a discontinued operation by early adoption of SFAS 144. The Company expects the sale of the Lighting Division to be completed by the fourth quarter of fiscal year 2002. The condensed consolidated financial statements have been reclassified to segregate the net assets and operating results of these discontinued operations for all periods presented.

Summary operating results of the discontinued operations (in thousands of dollars) are as follows:


	Three months ended June 30,					Six months ended June 30,

	2001		2002			2001			2002

Revenue	$	2,822	$	1,535		$	5,412		$	3,017
Gross profit		873		514			1,678			1,014
Operating income (loss)		164		(95	)		267			(262	)
Interest expense		—		—			(1	)		(1	)
Loss on disposal of assets		—		(3,400	)		—			(3,400	)
Income tax expense		—		—			—			—
(Loss) gain from discontinued operations		164		(3,495	)		266			(3,663	)

The restructuring costs consist of the following (in thousands of dollars):


	Three months ended June 30,				Six months ended June 30,

	2001		2002		2001		2002

Employee Severance	$	—	$	13	$	—	$	13
Severance Benefits		—		6		—		6
Total	$	—	$	19	$	—	$	19

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Assets and liabilities of discontinued operations (in thousands of dollars) are as follows:


		December 31,		June 30,
		2001		2002

Cash and cash equivalents		$	71	$	121
Contract revenue receivable, net of allowance for doubtful accounts of $13 and $5 at December 31, 2001 and June 30, 2002, respectively			1,389		1,116
Inventories			2,895		2,867
Other current assets			116		50
Property and equipment, net of accumulated depreciation of $154 and $187 at December 31, 2001 and June 30, 2002, respectively			479		455
Other assets			11		17

Assets of discontinued operations		$	4,961	$	4,626

Current portion of other indebtedness			9		10
Accounts payable			436		198
Accrued expenses			169		116
Other current liabilities			6		5
Other long-term indebtedness, less current portion			11		6
Reserve for loss on sale and operating losses			—		3,400

	Liabilities of discontinued operations	$	631	$	3,735

Results of Operations for the Three Months and Six Months Ended June 30, 2002

Revenues. Our revenues decreased 57%, or $14.2 million, from $25.0 million for the three months ended June 30, 2001 to $10.8 million for the three months ended June 30, 2002. The decrease was primarily attributable to the overall decline in network construction activity and the continued reduction or delay of capital expenditures by some of our customers, particularly equipment manufacturers. We do not anticipate any significant increase in revenues in the near future until there is a sustained increase in capital expenditures in the telecommunications sector.

Our revenues decreased 37% or $19.4 million from $52.7 million for the six months ended June 30, 2001 to $33.4 million for the six months ended June 30, 2002. The decrease was primarily attributable to the overall decline in network construction activity and the continued reduction or delay of capital expenditures by some of our customers, particularly equipment manufacturers.

Cost of Revenues. Our cost of revenues decreased 29% from $20.3 million, or 81% of revenues, for the three months ended June 30, 2001 to $14.3 million, or 133% of revenues, for the three months ended June 30, 2002. Gross margin decreased from 19% for the three months ended June 30, 2001 to (33%) for the three months ended June 30, 2002. The decrease in 2002 reflected continued pricing pressure in the telecommunications sector, causing revenue to decline at a faster rate than cost-cutting initiatives along with costs of approximately $1.7 million associated with the closure of certain contracts in one of our divisions closed during the quarter.

Our cost of revenues decreased 21% from $42.7 million for the six months ended June 30, 2001 to $33.8 million for the six months ended June 30, 2002 due, primarily to deterioration of our revenue base. Gross margin was (1)% for the six months ended June 30, 2002, compared to 19% for the six months ended June 30, 2001. Gross margin for the six months ended June 30, 2002 decreased from that of the prior year primarily due to continued pricing pressure in the telecommunication sector causing revenue to decline at a faster rate than cost-cutting initiatives. We expect margins to improve for the remaining quarters of 2002 based on our continued cost reduction efforts and streamlining of our operations.

Selling, General and Administrative Expenses. Selling, general, and administrative expenses decreased 10% from $6.8 million, or 27% of revenues, for the three months ended June 30, 2001 to $6.1 million, or 57% of revenues, for the three months ended June 30, 2002. The decrease in absolute dollars reflects our continued efforts to reduce selling, general and administrative expenses in line with the decline in revenues. Included in SG&A expenses for the quarter is a $1.2 million bad debt expense recorded during the three months ended June 30, 2002. Based on the Company’s assessment of the expected collectibility of various receivables, we have increased our allowance for doubtful accounts by approximately $500,000 during the quarter ended June 30, 2002 to specifically reserve for those customers for which collectibility is uncertain.

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Selling, general, and administrative expenses decreased 24% from $15.6 million for the six months ended June 30, 2001 to $11.9 million for the six months ended June 30, 2002. The decrease was attributable in large part to our restructuring plan and reductions in costs to match our declining revenue.

Depreciation and Amortization. Depreciation and amortization expenses decreased 71% from $1.9 million for the three months ended June 30, 2001 to $568,000 for the three months ended June 30, 2002. This significant decrease is attributable to the adoption of FAS 142 on January 1, 2002, with the result that the Company is no longer amortizing goodwill on acquisitions but evaluating the carrying value of goodwill on an annual basis or as required if an event occurs or circumstances change that would more likely than not reduce the fair value of the Company below its carrying value. As described previously, the Company recorded a $28.8 million charge for the impairment of its goodwill balance during the first quarter of 2002. This is recorded as an operating expense in the accompanying financial statements as the impairment analysis was performed as a result of current period events, not attributable to the transition provisions of SFAS 142.

Depreciation and amortization expenses decreased 75% from $3.9 million for the six months ended June 30, 2001 to $961,000 for the six months ended June 30, 2002. This significant decrease reflects the adoption of FAS 142 on January 1, 2002 as discussed in the previous paragraph.

Interest Expense. Interest expense remained relatively constant from $430,000 for the three months ended June 30, 2001 to $448,000 for the three months ended June 30, 2002. The primary reason for the consistency in interest expense is a reflection of similar levels of borrowing and similar interest rates in both fiscal periods. Interest expense is expected to increase in future quarters with the addition of the Baran debt.

Interest expense decreased 21% from $851,000 for the six months ended June 30, 2001 to $676,000 for the six months ended June 30, 2002. The decrease in interest expense is primarily attributable to a reduced usage of the credit facility.

Other Income (Expense). For the three months ended June 30, 2001, other income was approximately $143,000 as compared to other income of approximately $5,000 for the three months ended June 30, 2002. Other income for the three months ended June 30, 2001 consisted primarily of interest income from our note receivable with South Carolina Phone LLC, which was fully paid during 2001.

For the six months ended June 30, 2001, other income was $157,000 as compared to other expense of approximately $15,000 for the six months ended June 30, 2002. The income for the six months ended June 30, 2001 was primarily attributable to interest income from our note receivable with South Carolina Phone LLC.

Income Tax Expense. No income tax expense was recorded for the three months or six months ended June 30, 2001 and 2002.

Net Loss. Net loss from continuing operations for the three months ended June 30, 2001 was $4.1 million, as compared to net loss of $15.2 million for the three months ended June 30, 2002. The increase in net loss was primarily attributable to decreased margins, restructuring charges, merger related expenses, the overall decline in network construction activity and the continued reduction or delay of capital expenditures by some of our customers, particularly equipment manufacturers.

Net loss from continuing operations for the six months ended June 30, 2002 was $47.3 million, as compared to a net loss of $10.8 million for the six months ended June 30, 2001. The net loss for the six months ended June 30, 2002 is primarily attributable to further erosion within the marketplace and the write-off of approximately $28.8 million in goodwill.

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Liquidity and Capital Resources

Net Cash Used in Operating Activities

As of June 30, 2002, we had a cash balance of approximately $4.8 million which included approximately $1.5 million of outstanding checks that had not cleared the bank at June 30, 2002. Net cash provided by and used in operations is primarily derived from our contracts in process and changes in working capital. Net cash used by continuing operations was approximately $4.5 million for the six months ended June 30, 2002.

Net Cash Used in Investing Activities

Net cash used in investing activities by continuing operation was approximately $124,000 for the six months ended June 30, 2002, consisting primarily of capital expenditures to support our operations.

Net Cash Provided by Financing Activities

Net cash provided by financing activities for the six months ended June 30, 2002 was approximately $4.6 million. This consisted primarily of $7.0 million borrowed under our credit facility and working capital loan agreement with Baran, offset by repayment of various notes payable of approximately $1.8 million.

Contractual Obligations and Commercial Commitments

The following summarizes our future contractual obligations and commercial commitments for the period ended June 30, 2002 (in thousands of dollars):


			Payments Due by Period

			Less than						After
	Total		1 year		1-3 years		4-5 years		5 years

Line of credit and notes payable	$	13,508	$	13,212	$	296	$	—	$	—
Capital Lease Obligations		235		96		139		—		—
Operating Leases		4,304		1,247		2,676		381		—

Total Contractual Cash Obligations	$	18,047	$	14,555	$	3,111	$	381	$	—

Our commercial commitments for the period ended June 30, 2002 represented the proceeds received in connection with the Baran working capital loan agreement and our credit facility which are included above in our line of credit and notes payable balance. At June 30, 2002, we had no availability for additional borrowings under the credit facility and at that date it had $7.7 million in outstanding borrowings. The credit facility is due November 15, 2002. For more information regarding the credit facility, please see “-Credit Facility” below.

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On April 15, 2002, the Company entered into a Standby Letter of Credit Agreement with Fleet Capital Corporation. This Letter of Credit is in the amount of $337,652. The Letter of Credit is guaranteed by several of the Company’s shareholders including American Capital Strategies, Ltd., Stratford Capital Partners, LP, DFW Capital Partners, LP, and DeMuth, Folger & Wetherill II, LP. The Letter of Credit will expire on April 15, 2003 and shall not be extended without the express written consent of each of the shareholders noted above.

Cash Requirements

Our cash requirements through the end of fiscal year 2002 are primarily to fund operations, capital expenditures, cash restructuring outlays and service debt agreements.

Sources of Cash

We currently fund our operations with available cash, cash equivalents, and the proceeds received in connection with the Baran working capital loan agreement (see Note 7 “Baran Group Ltd. Merger” in the accompanying financial statements for further discussion). Due to significant cost reduction steps taken in 2001 and early 2002, continuing efforts to further reduce expenses to reflect diminished revenue opportunity, and proceeds presently expected to be received (see paragraph below) in connection with the Baran working capital loan agreement, the Company presently believes that it will have sufficient cash and cash equivalents to fund its operations pending the closing of the merger with Baran.

Management presently expects that the proposed merger with Baran (as described in Note 7 “Baran Group Ltd. Merger”) will close during the fourth quarter of the fiscal year ended December 31, 2002. However, Baran has notified the Company that, based upon the results of operations of the Company for the second quarter ended June 30, 2002, the ability of Baran to complete the merger transaction with the Company will be subject to Baran’s further review and evaluation of the Company’s current financial condition and third quarter operations. This review is expected to be completed within 30 days and if Baran determines to proceed with the merger, it is likely that the exchange ratio will be reduced. Management expects to receive additional advances in connection with the working capital loan agreement at the completion of Baran’s review and evaluation of the Company’s current financial condition, assuming Baran proceeds with the merger. If the proposed merger does not close, the Company will not have sufficient liquidity to maintain operations through the early part of the fourth quarter of fiscal year ended December 31, 2002. As such, management would consider re-financing of the existing credit facility, negotiating the sale of the Company to another acquirer, or pursuing other options available to the Company. However, management expresses no assurances that these alternatives would be available to the Company if the proposed merger with Baran is not completed and, as such, could be required to liquidate.

The Company’s bank credit facility requires that it maintains specified levels of earnings (loss) before income taxes, depreciation, and amortization (EBITDA) and its borrowing base is dependent upon the amount of eligible receivables, as defined in the credit agreement. As of June 30, 2002, the Company was not in compliance with its EBITDA covenant under the terms of the fifth amendment to its credit agreement dated June 5, 2002 and was therefore in default. Under the terms of the fifth amendment, if the EBITDA requirements are not met, suspension of the requirements under the facility would have been permitted if Baran made cash available to the Company to fund the EBITDA shortfall either in the form of an equity contribution or one or more subsequent disbursements under the working capital loan agreement with Baran. As of the date of filing this report, Baran had not provided the Company with additional funding; however, the Company expects to receive additional funding after Baran has completed its review and evaluation of the Company’s current financial condition (approximately 30 days), assuming Baran proceeds with the merger. See further detail in “Credit Facility” below. On August 15, 2002 the Company obtained a waiver of the default at June 30, 2002 subject to (1) remitting $1.0 million to the Bank as a permanent reduction in the Company’s credit line and (2) an agreement to pay no further monies to Baran. If the Company fails to achieve its budgeted revenues and margins and/or experiences any significant write-offs, the Company could be in violation of the covenants of its credit facility in the future. Based on the Company’s current cash and cash equivalents, it would not have sufficient resources to repay its indebtedness under the credit facility.

On June 30, 2002, the Company had cash and cash equivalents of $4.8 million, which included approximately $1.5 million in checks that had not cleared the bank at June 30, 2002. As of June 30, 2002, the Company had outstanding balances of $5.0 million related to the Baran Working Capital Loan (see Note 7 “Baran Group Ltd. Merger” in the accompanying financial statements for further discussion) and $7.7 million under its credit facility with no additional availability under the credit facility. As a result of principal reduction payments made subsequent to June 30, 2002, the outstanding balance under the credit facility was $5.6 million as of the date of filing this report.

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Credit Facility

Effective June 5, 2002, the Company amended its syndicated credit agreement with Wachovia Bank, N.A., as agent. The amount available under the credit facility is limited to the lesser of (a) $9.7 million or (b) a predefined borrowing base determined by Eligible Receivables, as defined in the credit agreement. The Eligible Receivables balance excludes certain accounts receivable from EBITDA covenant calculations. After the amendment, no more revolving loans or letters of credit will be made available to the Company. The amendment provides for repayments aggregating $1.6 million over the period ending November 15, 2002, the maturity date of the term loan. Accordingly, the Company’s ability to maintain its current level of borrowings under the facility, without having to make additional repayments prior to maturity, is contingent upon gross receivables, based on a pre-defined borrowing base.

The line of credit is secured by substantially all of the Company’s business assets, is guaranteed by its subsidiaries and Baran, and is senior to approximately $5.6 million of subordinated indebtedness. The terms of the credit agreement include several covenants and restrictions including but not limited to those discussed in this filing. Under the terms of the agreement, for the quarters ended June 30, 2002 and September 30, 2002, the Company’s EBITDA for each such fiscal quarter, adjusted for certain restructuring costs, is required to be at least $1. However, in the event that EBITDA for a fiscal quarter, as so adjusted, is less than $1, the suspension of the Company’s compliance is permitted if Baran makes available to the Company, either in the form of an equity contribution or one or more subsequent disbursements under the Baran Sub loan agreement, an amount equal to the amount necessary to cover the difference between the EBITDA loss for the fiscal quarter and $1. The amount of the disbursement under the Baran Sub loan agreement is limited to $3 million for the quarter ended June 30, 2002. As of the date of filing this report, Baran had not provided the Company with additional funding; however, the Company expects to

- 28 -

receive additional funding after Baran has completed its review and evaluation of the Company (approximately 30 days), assuming Baran proceeds with the merger. See Note 7 “Baran Group Ltd. Merger” in the accompanying financial statements. As of June 30, 2002, the Company was not in compliance with its EBITDA covenant under the terms of the fifth amendment to its credit agreement dated June 5, 2002 and was therefore in default. On August 15, 2002, the Company obtained a waiver of the default at June 30, 2002 subject to (1) remitting $1.0 million to the Bank as a permanent reduction in the Company’s credit line and (2) an agreement to pay no further monies to Baran.

In addition, the Company is required to provide the lenders with periodic budgets, financial statements and periodic reports and filings. Additionally, the Company is restricted in the amount of payments to holders of seller notes. The covenants in the credit facility also limit the Company’s ability to sell its assets outside the ordinary course of business, merge with or acquire other businesses. In addition, the Company is limited in capital expenditures that can be incurred during a given period. If the Company continues to experience significant losses, the Company could be in violation of the covenants in its credit facility in the future.

Baran Working Capital Loan Agreement

On June 5, 2002, as part of the merger transaction, Baran Acquisition Sub, Inc. (“Baran Sub”), a wholly owned subsidiary of Baran, entered into a working capital loan agreement with the Company. In the loan agreement, Baran Sub agreed to provide working capital advances to the Company, subject to conditions and covenants imposed on the Company, and provided that the representations and warranties of the Company given in the loan agreement remain true and correct on the date of each advance to the Company by Baran Sub. Also on June 5, 2002, Baran Sub entered into a subordination agreement with Wachovia Bank, N.A. Under the subordination agreement, all rights and remedies of Baran Sub under the loan agreement are and shall continue to be junior in right of payments to the rights of Wachovia Bank under the Company’s credit agreement.

As of the date of filing this report, Baran has not made any additional advances. Management expects to receive additional advances at the completion of Baran’s review and evaluation of the merger agreement, assuming Baran proceeds with the merger.

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Interest Rate Risk

We are exposed to market risk from changes in interest rates and equity prices that could affect our results of operations and financial condition. We manage our exposure to these market risks through our regular operating and financing activities and, when deemed appropriate, hedge these risks through the use of derivative financial instruments. We use the term hedge to mean a strategy designed to manage risks of volatility in prices or rate movements on certain assets, liabilities or anticipated transactions and by creating a relationship in which gains or losses on derivative instruments are expected to counterbalance the losses or gains on the assets, liabilities or anticipated transactions exposed to such market risks. We use derivative financial instruments as risk management tools and not for trading or speculative purposes. We generally do not hedge our credit risk on customer receivables.

We use a combination of financial instruments, including variable-rate debt instruments and, to a lesser extent, interest rate swaps to manage the interest rate mix of our total debt portfolio and related cash flows. To manage this mix in a cost-effective manner, we, from time to time, may enter into interest rate swap agreements in which we agree to exchange various combinations of fixed and/or variable interest rates based on agreed-upon notional amounts.

Recent Developments

Baran has notified the Company that, based upon the results of operations of the Company for the second quarter ended June 30, 2002, the ability of Baran to complete the merger transaction with the Company will be subject to Baran’s further review and evaluation of the Company’s current financial condition and third quarter operations. This review is expected to be completed within 30 days and if Baran determines to proceed with the merger, it is likely that the exchange ratio will be reduced. The terms of the merger agreement remain in effect and Baran will continue to provide management consulting services to the Company pursuant to the management consulting agreement entered into between the parties in connection with the execution of the merger agreement. Baran has made no additional advances under its working capital loan agreement with the Company.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk .

The Company engages in activities that expose it to various market risks, including the effects of a change in interest rates. This financial exposure is managed as an integral part of the Company’s risk management program, which seeks to reduce the potentially adverse effect that the volatility for the markets may have on operating results. The Company does not use derivative financial instruments for trading purposes. The Company currently maintains an interest rate swap, to minimize significant, unanticipated earnings fluctuations caused by volatility in interest rates. The Company assesses, both at inception and on an ongoing basis, whether the interest rate swap is highly effective in offsetting changes in cash flows of the hedged items. For more information regarding the Company’s interest rate swap agreement, please see Note 1(c) of “Notes to Consolidated Financial Statements” included in this report.

At June 30, 2002, we had notes payable to affiliated parties (the “Notes”) of approximately $627,000 with interest payable at a rate equal to 9.75% per annum, which rate shall be adjusted on July 31 and December 31 of each year the Notes remain outstanding to a rate equal to the most recently announced by Citibank, N.A., in the Wall Street Journal as its prime rate of interest.

Our revolving credit facility bears interest at LIBOR plus a margin of up to 3.75%. Accordingly, changes in LIBOR, which is affected by changes in interest rates in general, will affect the interest rate on our revolving credit facility.

We temporarily invest our excess cash in money market funds. Changes in interest rates would not significantly affect the fair value of these cash investments.

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PART II. – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the normal course of business, the Company is subject to certain administrative proceedings and litigation. The following is a summary of three proceedings currently pending:

On July 12, 2002, an action was filed against o2wireless in the United States District Court for the Northern District of Georgia, McKenzie Telecommunications Group, Inc. v. Clear Holdings, Inc. and o2wireless, Inc. f/k/a Clear Communications Group, Inc. Civil Action File No. 1:02-CV-1955. In the Complaint, the Plaintiff alleges that o2wireless breached its obligations under an asset purchase agreement, dated November 1, 1999, in connection with the sale of McKenzie Telecommunications Group, Inc. (“MTG”) to o2wireless. The Complaint further alleges that the Plaintiff is entitled to receive an earn-out payment under the terms of the asset purchase agreement. The Plaintiff seeks compensatory damages in excess of $3 million. Management believes that the lawsuit is completely without merit and that o2wireless has meritorious defenses against all of the claims alleged in the Complaint. o2wireless intends to deny all of the allegations contained in the Complaint and to vigorously defend the action. Management believes that the outcome of this litigation will not have a material adverse effect on the Company’s results of operations and financial condition; however, the lawsuit is in an early procedural stage and therefore it is not possible to determine with certainty what the effect may be on the Company’s results of operations and financial condition.

On August 6, 2002, an action was filed against o2wireless in the United States District Court for the Southern District of Texas, George A. Jackson and TWR Family of Companies, L.L.C. v. o2wireless, Inc., Civil Action File No. H-02-2974. In the Complaint, the Plaintiff alleges that Plaintiff is entitled to receive an earnout payment of $3.3 million pursuant to the terms of a stock purchase agreement entered into between the parties. The Plaintiff seeks damages in the amount of $3.3 million. Management believes that o2wireless has meritorious defenses against all of the claims alleged in the Complaint. o2wireless intends to deny all of the allegations contained in the Complaint and to vigorously defend the action. Management believes that the outcome of this litigation will not have a material adverse effect on the Company’s results of operations and financial condition; however, the lawsuit is in an early procedural stage and therefore it is not possible to determine with certainty what the effect may be on the Company’s results of operations and financial condition.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

In consideration of Baran Acquisition Sub Inc.’s execution of the loan agreement and the extension of the initial working capital advance of $5.0 million to the Company, the Company issued to Baran Sub a warrant to purchase 5,559,610 shares of the Company’s common stock, at a purchase price equal to $0.45 per share (the “Warrant”). The Warrant may be exercised only in the event that the merger agreement is terminated due to acceptance of an acquisition proposal more favorable to the Company than the proposed merger with Baran.

The issuance of the Warrant described above was made in reliance on the exemption from registration provided in Section 4(2) of the Securities Act of 1933, as amended, as a transaction by an issuer not involving a public offering. The Warrant was acquired by Baran Sub for investment purposes with no view toward the resale or distribution thereof. The purchaser has a pre-existing relationship with the Company and the offers and sales were made without any public solicitation. No underwriter was involved in the transaction and no commissions were paid.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The 2002 Annual Meeting of Shareholders of the Company was held on May 21, 2002. At the meeting, the following matters were submitted for approval by the shareholders:

Election of Directors. The following persons were elected as Class II Directors to serve for a term of three years and until there successors are elected and qualified: Donald F. DeMuth and Darin R. Winn.

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The number of votes cast for and withheld for the election of each nominee for director was as follows:


	Votes		Votes
	For		Withheld

Donald F. DeMuth		17,797,865		7,013,784
Darin R. Winn		17,796,365		7,015,284

No other matters were presented at the meeting.

ITEM 5. OTHER EVENTS

Nasdaq Delisting Notification

On July 17, 2002, the Company announced that it received a determination from the Staff at the Nasdaq Stock Market on July 12, 2002 indicating that the Company fails to comply with the minimum bid price requirement for continued listing set forth in Nasdaq Marketplace Rule 4450(a)(5), and that its common stock is, therefore, subject to delisting from the Nasdaq National Market. The Company has requested an oral hearing before a Nasdaq Listing Qualifications Panel which is scheduled for August 22, 2002. There can be no assurance that the Panel will grant the Company’s request for continued listing.

The Company’s common stock will continue to be traded on the Nasdaq National Market pending the final decision by the listing Qualification Panel. If the Company’s appeal is denied, the Company currently meets the listing requirements to list on the Nasdaq Small Cap Market.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits


4.3.3		Fourth Amendment, dated May 20, 2002, to Amended and Restated Credit Agreement among o2wireless Solutions, Inc., the Company, certain subsidiaries and Wachovia Bank, N.A.

4.3.4		Fifth Amendment, dated June 5, 2002, to Amended and Restated Credit Agreement among o2wireless Solutions, Inc., the Company, certain subsidiaries and Wachovia Bank, N.A.

10.8		Employment Agreement dated June 5, 2002 between o2wireless Solutions, Inc. and Martin Dempsey

99.1		Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K

The Company filed a Current Report on Form 8-K on June 12, 2002 in connection with the execution of the merger agreement with Baran Group Ltd. In connection with the filing of the Form 8-K, the Company filed the following exhibits:

• The Agreement and Plan of Merger with Baran Group Ltd.,

• The Working Capital Loan Agreement with Baran Acquisitions Sub, Inc. and

• The Management Consulting Agreement with Baran Group Ltd.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		O2WIRELESS SOLUTIONS, INC


		By: /s/ Andrew D. Roscoe

Date: August 19, 2002		Andrew D. Roscoe Chairman and Co-Chief Executive Officer (principal executive officer)


		By: /s/ William J. Loughman

Date: August 19, 2002		William J. Loughman President and Co-Chief Executive Officer (principal executive officer)


		By: /s/ Martin Dempsey

Date: August 19, 2002		Martin Dempsey Vice President of Finance (principal financial and accounting officer)

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EXHIBIT INDEX


4.3.3		Fourth Amendment, dated May 20, 2002, to Amended and Restated Credit Agreement among o2wireless Solutions, Inc., the Company, certain subsidiaries and Wachovia Bank, N.A.

4.3.4		Fifth Amendment, dated June 5, 2002, to Amended and Restated Credit Agreement among o2wireless Solutions, Inc., the Company, certain subsidiaries and Wachovia Bank, N.A.

10.8		Employment Agreement dated June 5, 2002 between o2wireless Solutions, Inc. and Martin Dempsey

99.1		Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

EX-4.3.3 3 g77987exv4w3w3.txt FOURTH AMEND 5/20/02 TO AMEND & RESTATED CREDIT EXHIBIT 4.3.3 FOURTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT This Fourth Amendment to Amended and Restated Credit Agreement (this "Amendment" or the "Fourth Amendment"), dated as of May 20, 2002 (the "Amendment Date"), is made by and among: (i) O2wireless Solutions, Inc., a Georgia corporation, f/k/a Clear Holdings, Inc. ("Parent"); (ii) O2wireless, Inc., a Georgia corporation, f/k/a Clear Communications Group, Inc. ("Borrower"), individually and as successor-by-merger to TWR Telecom, Inc., a Texas corporation ("Telecom"); (iii) O2wireless Lighting, Inc., a Texas corporation, f/k/a TWR Lighting, Inc. ("Lighting"); (iv) O2wireless Systems Group, Inc., an Illinois corporation, f/k/a Communications Consulting Services, Inc. ("Systems Group"), individually and as successor-by-merger to Cellular Technology, Inc., a Missouri corporation ("CTI"); (v) O2wireless Deployment, Inc., a Georgia corporation ("Deployment"), individually and as successor-by-merger to (A) ISDC, Inc., a Georgia corporation ("ISDC"), (B) Communications Development Systems, Inc., ("CDS"), and (C) Specialty Drilling, Inc., a Texas corporation ("SDI"); (vi) O2wireless Site Development, Inc., a Georgia corporation ("Site Development"), individually and as successor-by-merger to (A) Clear Program Management, Inc., a Georgia corporation ("CPM"); and (B) Clear Tower Corporation, a Georgia corporation ("CTC"); (vii) Young & Associates, Inc., a Nevada corporation ("Young"); (viii) O2wireless North Carolina, Inc., a North Carolina corporation, f/k/a Cardinal Engineering, Inc. ("North Carolina") (Parent, Lighting, Systems Group, Deployment, Site Development, Young and North Carolina hereinafter sometimes called, collectively, "Current Affiliate Guarantors" or, individually a "Current Affiliate Guarantor"); and (ix) Wachovia Bank, N.A. a national banking association (in its individual capacity, "Wachovia"), (A) as a Lender (as hereinafter defined), (B) as successor-in-interest to First Union National Bank, a national bank ("FUNB"), and (C) as agent for itself and each other Lender from time to time party to the Credit Agreement defined below (Wachovia, acting in such capacity, hereinafter sometimes called "Agent"), for the purpose of amending that certain Amended and Restated Credit Agreement (as amended to date, the "Credit Agreement"), dated as of September 29, 2000 (the "Closing Date"), originally made among FUNB, Wachovia, Agent, Parent, Borrower, Telecom, Lighting, CTI, CPM, CTC, ISDC, CDS, SDI and Rooker Tower Company, a Tennessee corporation ("Rooker"). Capitalized terms used in this Amendment, and not otherwise expressly defined herein, shall have the meanings given to such terms the Credit Agreement, as amended hereby. Subsequent to the Closing Date, (i) Rooker was dissolved and its assets were contributed to Borrower, (ii) Systems Group became an Affiliate Guarantor pursuant to a Joinder Agreement, dated as of June 30, 2000, made by Systems Group in favor of Agent and Lenders; (iii) Young became an Affiliate Guarantor pursuant to a Joinder Agreement, dated as of December 20, 2000, made by Young in favor of Agent and Lenders; (iii) Site Development became an Affiliate Guarantor by virtue of its merger with each of CPM and CTC, effective on December 29, 2000; (iv) Deployment became an Affiliate Guarantor by virtue of its merger with each of ISDC, CDS and SDI, effective on December 29, 2000; and (v) North Carolina became an Affiliate Guarantor pursuant to a Joinder Agreement, dated as of January 24, 2001, made by North Carolina in favor of Agent and Lenders. RECITALS: WHEREAS, an Event of Default currently exists, namely in respect of Borrower's non-compliance with Section 4.2(F) of the Credit Agreement for the Fiscal Quarter ending March 31, 2002 (the "Existing Default"); and WHEREAS, Wachovia, as sole Lender and Agent, has agreed to waive the Existing Default, subject, however, to certain terms and conditions hereinafter set forth; and WHEREAS, all Current Affiliate Guarantors will obtain direct and material economic benefits from this Amendment being made, and have agreed to join with Borrower in executing this Amendment in order to confirm their continuing credit support to Borrower in respect thereof; NOW, THEREFORE, in consideration of the foregoing recitals and the agreements, provisions and covenants herein contained, the receipt and sufficiency of which are hereby acknowledged, Borrower and Current Affiliate Guarantors (sometimes hereinafter called, collectively, the "Loan Parties" and, individually a "Loan Party"), together with Wachovia, as sole Lender and Agent, each intending to be legally bound, hereby acknowledge, covenant and agree as follows: 1. Definitions. In addition to terms defined in the Credit Agreement and used in this Amendment as defined therein, and terms elsewhere defined in this Amendment, the following terms, as and when used in the Credit Agreement, henceforth shall have the meanings assigned to such terms hereinbelow (and such terms, together with all other terms elsewhere defined in this Amendment, shall be deemed expressly incorporated by reference into Section 10.1 of the Credit Agreement and made an integral part thereof in the appropriate alphabetical order) effective as of the Amendment Date: (i) the "Borrowing Limitation" definition appearing in Section 10.1 shall be changed in its entirety to read as follows: "Borrowing Limitation" shall mean an amount equal to the lesser of (A) the Borrowing Base; or (B) $9,668,000, reducing, however, to $9,318,000, on the Amendment Date; $9,218,000, on June 20, 2002, and $9,118,000, on July 20, 2002, in conjunction with mandatory reductions in the Revolving Loans outstanding of not less than $350,000, $100,000, and $100,000 being required to be made, respectively, on each of the aforesaid dates, and reducing to zero (0) on the Expiry Date. (ii) the "Expiry Date" definition appearing in Section 10.1 shall be changed, in its entirety, to read as follows: "Expiry Date" means August 15, 2002. 2 2. No More Loans. From and after the Amendment Date, the Revolving Loan Commitment shall terminate, and no more Revolving Loans or Letters of Credit shall be made available to Borrower. 3. EDITDA. Effective retroactive to March 31, 2002, Wachovia, as sole Lender and Agent, hereby waives the Existing Default; and Lender further agrees, in connection therewith, to suspend Borrower's compliance with Section 4.2(F) of the Credit Agreement for the Fiscal Quarter ending June 30, 2002, so long as and provided that Borrower's EBITDA for such Fiscal Quarter is at least One Dollar ($1.00). 4. Certain Representations And Warranties Of Loan Parties. Each Loan Party represents and warrants to Wachovia as the Agent and sole Lender as further inducements to its entry into this Amendment that: (a) it has the power and authority to enter into, deliver and to perform this Amendment and any Loan Documents to be executed and delivered in connection herewith (herein, "Amendment Documents"), and to incur any obligations provided for in this Amendment and any Amendment Documents, all of which have been duly authorized and approved in accordance with its corporate documents; (b) it has obtained all consents or approvals from any Person necessary to permit it to enter into and perform under the amendment Documents without its being in violation of any material agreements with such Persons; (c) this Amendment, together with all Amendment Documents, shall constitute, when executed, its valid and legally binding obligations in accordance with their respective terms; (d) except with respect to events or circumstances occurring subsequent to the date thereof and known to the Agent and the Lenders, all representations and warranties made by it in the Credit Agreement remain true and correct in all material respects as of the date hereof, with the same force and effect as if all such representations and warranties were fully set forth herein; (e) its obligations under the Credit Agreement and the other Loan Documents remain valid and enforceable obligations, and the execution and delivery of the Amendment and the other Amendment Documents shall not be construed as a novation of the Credit Agreement or any of the other Loan Documents; (f) as of the date hereof, it has no knowledge of any offsets, counterclaims or defenses existing in its favor in respect of the payment of any of the Obligations; and (g) as of the date hereof, after giving effect hereto, it has no knowledge that any Default or Event of Default exists; and (h) it owns no Domestic Subsidiaries which are not Loan Parties. Each Loan Party further relieves and releases Wachovia, as Agent and sole Lender, and Wachovia's directors, officers, agents and other representatives, from any liability for any action taken (or omitted to be taken) by any thereof in respect of, pursuant to, or in connection with, this Amendment, the Credit Agreement or any Loan Document. 5. Miscellaneous. (a) Reference to Agreement and Note. This Amendment shall become effective upon its execution and all other Amendment Documents (if any) by all parties hereto and thereto. Upon the effectiveness of this Amendment, each reference in the Credit Agreement to "this Agreement" and each reference in the other Loan Documents to the Credit Agreement, shall mean and be a reference to the Credit Agreement as amended hereby. 3 (b) Effect on Loan Documents. Except as specifically amended above, the Credit Agreement and all other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed. (c) No Waiver. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power, or remedy of the Agent or Lenders under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents. (d) Costs and Expenses. The Borrower agrees to pay on demand all reasonable costs and expenses of the Agent in connection with the preparation, reproduction, execution, and delivery of this Amendment and the other instruments and documents to be delivered hereunder, including (A) the costs and expenses incurred by the Agent in conducting and completing its field audit, as contemplated in the First Amendment, and (B) the reasonable fees and out-of-pocket expenses of counsel for the Agent with respect hereto. All such fees and charges, if not paid promptly when due, may be charged directly as Revolving Loans. (e) No Novation. Nothing contained herein is intended, or shall be construed, to constitute a novation of the Credit Agreement or any Loan Document. (f) Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of Georgia, without giving effect to conflict of law provisions. (g) Loan Document. This Amendment constitutes a Loan Document. IN WITNESS WHEREOF, the undersigned have caused their duly authorized officers to execute this Amendment as of the date first above written. "BORROWER" O2 WIRELESS, INC. f/k/a CLEAR COMMUNICATIONS GROUP, INC. By: /s/ Andrew D. Roscoe ---------------------------------------- Name: Andrew D. Roscoe Title: President & CEO 4 "CURRENT AFFILIATE GUARANTORS" O2WIRELESS SOLUTIONS, INC. (SEAL) f/k/a CLEAR HOLDINGS, INC. By: /s/ Andrew D. Roscoe ---------------------------------------- Name: Andrew D. Roscoe Title: President, Chairman & CEO O2 WIRELESS LIGHTING, INC. f/k/a TWR LIGHTING, INC. By: /s/ Andrew D. Roscoe ---------------------------------------- Name: Andrew D. Roscoe Title: President & CEO O2 WIRELESS SYSTEMS GROUP, INC. By: /s/ Andrew D. Roscoe ---------------------------------------- Name: Andrew D. Roscoe Title: President & CEO O2 WIRELESS SITE DEVELOPMENT, INC. By: /s/ Andrew D. Roscoe ---------------------------------------- Name: Andrew D. Roscoe Title: President & CEO O2 WIRELESS DEPLOYMENT, INC. By: /s/ Andrew D. Roscoe ---------------------------------------- Name: Andrew D. Roscoe Title: President & CEO 5 YOUNG & ASSOCIATES, INC. By: /s/ Andrew D. Roscoe ---------------------------------------- Name: Andrew D. Roscoe Title: President & CEO O2 WIRELESS NORTH CAROLINA, INC. By: /s/ Andrew D. Roscoe ---------------------------------------- Name: Andrew D. Roscoe Title: President & CEO 6 "LENDERS" WACHOVIA BANK, N.A., as Agent and sole Lender By: /s/ William W. Teegarden --------------------------------------- Name: William W. Teegarden Title: Senior Vice President 7 EX-4.3.4 4 g77987exv4w3w4.txt FIFTH AMEND 6/5/02 TO AMEND & RESTATED CREDIT EXHIBIT 4.3.4 FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT This Fifth Amendment to Amended and Restated Credit Agreement (this "Amendment" or the "Fifth Amendment"), dated as of June 5, 2002 (the "Amendment Date"), is made by and among: (i) O2wireless Solutions, Inc., a Georgia corporation, f/k/a Clear Holdings, Inc. ("Parent"); (ii) O2wireless, Inc., a Georgia corporation, f/k/a Clear Communications Group, Inc. ("Borrower"), individually and as successor-by-merger to TWR Telecom, Inc., a Texas corporation ("Telecom"); (iii) O2wireless Lighting, Inc., a Texas corporation, f/k/a TWR Lighting, Inc. ("Lighting"); (iv) O2wireless Systems Group, Inc., an Illinois corporation, f/k/a Communications Consulting Services, Inc. ("Systems Group"), individually and as successor-by-merger to Cellular Technology, Inc., a Missouri corporation ("CTI"); (v) O2wireless Deployment, Inc., a Georgia corporation ("Deployment"), individually and as successor-by-merger to (A) ISDC, Inc., a Georgia corporation ("ISDC"), (B) Communications Development Systems, Inc., ("CDS"), and (C) Specialty Drilling, Inc., a Texas corporation ("SDI"); (vi) O2wireless Site Development, Inc., a Georgia corporation ("Site Development"), individually and as successor-by-merger to (A) Clear Program Management, Inc., a Georgia corporation ("CPM"); and (B) Clear Tower Corporation, a Georgia corporation ("CTC"); (vii) Young & Associates, Inc., a Nevada corporation ("Young"); (viii) O2wireless North Carolina, Inc., a North Carolina corporation, f/k/a Cardinal Engineering, Inc. ("North Carolina") (Parent, Lighting, Systems Group, Deployment, Site Development, Young and North Carolina hereinafter sometimes called, collectively, "Current Affiliate Guarantors" or, individually a "Current Affiliate Guarantor"); and (ix) Wachovia Bank, N.A. a national banking association (in its individual capacity, "Wachovia"), (A) as a Lender (as hereinafter defined), (B) as successor-in-interest to First Union National Bank, a national bank ("FUNB"), and (C) as agent for itself and each other Lender from time to time party to the Credit Agreement defined below (Wachovia, acting in such capacity, hereinafter sometimes called "Agent"), for the purpose of amending that certain Amended and Restated Credit Agreement (as amended to date, the "Credit Agreement"), dated as of September 29, 2000 (the "Closing Date"), originally made among FUNB, Wachovia, Agent, Parent, Borrower, Telecom, Lighting, CTI, CPM, CTC, ISDC, CDS, SDI and Rooker Tower Company, a Tennessee corporation ("Rooker"). Capitalized terms used in this Amendment, and not otherwise expressly defined herein, shall have the meanings given to such terms the Credit Agreement, as amended hereby. Subsequent to the Closing Date, (i) Rooker was dissolved and its assets were contributed to Borrower, (ii) Systems Group became an Affiliate Guarantor pursuant to a Joinder Agreement, dated as of June 30, 2000, made by Systems Group in favor of Agent and Lenders; (iii) Young became an Affiliate Guarantor pursuant to a Joinder Agreement, dated as of December 20, 2000, made by Young in favor of Agent and Lenders; (iii) Site Development became an Affiliate Guarantor by virtue of its merger with each of CPM and CTC, effective on December 29, 2000; (iv) Deployment became an Affiliate Guarantor by virtue of its merger with each of ISDC, CDS and SDI, effective on December 29, 2000; and (v) North Carolina became an Affiliate Guarantor pursuant to a Joinder Agreement, dated as of January 24, 2001, made by North Carolina in favor of Agent and Lenders. RECITALS: WHEREAS, Wachovia, as sole Lender and Agent, has agreed with Borrower to modify certain terms and conditions of the Credit Agreement; and WHEREAS, all Current Affiliate Guarantors will obtain direct and material economic benefits from this Amendment being made, and have agreed to join with Borrower in executing this Amendment in order to confirm their continuing credit support to Borrower in respect thereof; and NOW, THEREFORE, in consideration of the foregoing recitals and the agreements, provisions and covenants herein contained, the receipt and sufficiency of which are hereby acknowledged, Borrower and Current Affiliate Guarantors (sometimes hereinafter called, collectively, the "Loan Parties" and, individually a "Loan Party"), together with Wachovia, as sole Lender and Agent, each intending to be legally bound, hereby acknowledge, covenant and agree as follows: 1. Definitions. In addition to terms defined in the Credit Agreement and used in this Amendment as defined therein, and terms elsewhere defined in this Amendment, the following terms, as and when used in the Credit Agreement, henceforth shall have the meanings assigned to such terms hereinbelow (and such terms, together with all other terms elsewhere defined in this Amendment, shall be deemed expressly incorporated by reference into Section 10.1 of the Credit Agreement and made an integral part thereof in the appropriate alphabetical order) effective as of the Amendment Date: (i) the "Borrowing Limitation" definition appearing in Section 10.1 shall be changed in its entirety to read as follows: "Borrowing Limitation" shall mean an amount equal to the lesser of (A) the Borrowing Base; or (B) $9,668,000, reducing, however, to (i) $9,318,000, on May 20, 2002, (ii) $9,068,000, on July 1, 2002, and (iii) subsequent to July 1, 2002, to $9,068,000 minus the sum of $250,000 per month, effective on the first day of each succeeding calendar month; e.g., said amount shall reduce to $8,818,000 effective on August 1, 2002; the foregoing to be accompanied by mandatory reductions in the Revolving Loans then outstanding of not less than $350,000, to be made on May 20, 2002, and not less than $250,000 per month, to be made beginning on the first day of July, 2002, and continuing on the first day of each succeeding calendar month thereafter; and reducing to zero (0) on the Expiry Date. (ii) the "Expiry Date" definition appearing in Section 10.1 shall be changed, in its entirety, to read as follows: "Expiry Date" means November 15, 2002. 2 (iii) there shall be deemed added to Section 10.1 of the Credit Agreement, in the appropriate alphabetical order, a new definition, to read as follows: "Fourth Amendment" shall mean the Fourth Amendment, dated as of May 20, 2002, amending this Agreement. 2. No More Loans. The terms of Section 2 of the Fourth Amendment, pertaining to the termination of the Revolving Loan Commitment, are incorporated by reference herein and made an integral part hereof, as a restatement thereof for clarity. 3. EBITDA. In reference to Section 3 of the Fourth Amendment, the terms of which are likewise incorporated by reference herein and made an integral part hereof, the suspension of Borrower's compliance with Section 4.2(F) of the Credit Agreement referenced therein shall be permitted by Lenders to be continued through the Fiscal Quarter ending September 30, 2002, in addition to the Fiscal Quarter ending June 30, 2002, so long as Borrower's EBITDA for each such Fiscal Quarter, adjusted as reflected in the last sentence of this Section 3, is at least $1.00; provided, however, that, in the event that EBITDA for a Fiscal Quarter, as so adjusted, is less than $1.00, the suspension of Borrower's compliance with Section 4.2(f) of the Credit Agreement referenced therein shall be permitted by Lenders to be continued through the Fiscal Quarter ending September 30, 2002, so long as and provided that Baran makes cash available to Borrower, either in the form of an equity contribution or one or more subsequent disbursements of the Baran Loan, as that term is defined in Section 5 below (separate and apart, however, from the initial disbursement of the Baran Loan), in an amount equal to the amount necessary to cause EBITDA for such Fiscal Quarter to be at least $1.00 or, solely for the Fiscal Quarter ending June 30, 2002, the sum of $3,000,000, if the lesser amount (but no such limitation shall apply in respect of the Fiscal Quarter ending September 30, 2002), with such cash to be made available to Borrower as soon as practicable after, but not later than thirty (30) days after, the end of such Fiscal Quarter; and provided, further, that Borrower provides documentary evidence to such effect to the Agent coincident with such cash being made available to Borrower. For purposes of determining Borrower's compliance herewith, there shall be added back to EBITDA for the Fiscal Quarters ended June 30, 2002 and September 30, 2002 any non-cash restructuring expenses incurred during such period and any accrued, but unpaid fees payable to Baran (as that term is hereinafter defined) during such period, in each case, to the extent deducted in computing net income for such period; but, any cash restructuring expenses incurred during such period and any cash fees paid to Baran during such period (including, but not limited to, those permitted to be paid pursuant to Section 4 below) shall not be added back to EBITDA. 4. Merger. Lender acknowledges receipt of notice from Borrower that, effective not later than the Amendment Date, Borrower intends to enter into a merger agreement (herein, together with all material documents to be executed in connection therewith, the "Baran Merger Agreement") with Baran Acquisition Sub, Inc., a Georgia corporation ("Baran"), pursuant to which as soon as practicable but in any event on or prior to December 31, 2002, Borrower intends to merge with and into Baran (the "Baran Merger") resulting in, among other things, a change of control of Borrower under the terms of Section 6.1(O) of the Credit Agreement, constituting an Event of Default. Lender has agreed with Borrower to forbear from taking action in respect of the Default occasioned by Borrower's entry into the Baran Merger Agreement and to waive the Event of Default caused by the Merger actually occurring so long as and provided 3 that (i) Lender shall have had an opportunity to review and approve the terms of the Baran Merger Agreement prior to its becoming effective (which approval shall be evidenced by Lender's execution hereof) and (ii) the Credit Agreement is terminated and all Obligations are fully paid and satisfied before, or simultaneously with (but not later than the effective date of) the Baran Merger being consummated. Lender further consents to and agrees that, during the period between the Amendment Date and the date on which the Baran Merger is consummated, Borrower may pay, and Baran may receive, cash consulting fees not to exceed $40,000 per month, so long as and provided that no Event of Default or Default then exists or otherwise would be caused by any such payment being made. 5. Subordinated Indebtedness. Lender further acknowledges receipt of notice from Borrower that, effective on the Amendment Date, Borrower intends to enter into a note purchase agreement, loan agreement or similar agreement with Baran (herein, together with all material documents to be executed in connection therewith, the "Baran Loan Agreement"), pursuant to which Borrower intends to borrow initially from Baran on the date hereof the principal sum, in cash, of $5,000,000 (such initial amount, plus any other, subsequent amounts that Borrower may borrow from Baran pursuant thereto, herein called, collectively, the "Baran Loan"), the entire amount of which Baran Loan shall be secured by a Lien (subordinate to Agent's Lien) to be granted on all or certain assets of Borrower and the Affiliate Guarantors (the "Baran Lien"). Lender hereby consents to the borrowing by Borrower of the Baran Loan and the granting by Borrower and the Affiliate Guarantors to Baran of the Baran Lien so long as and provided that (i) Agent shall have had the opportunity to review and approve all terms of the Baran Loan Agreement prior to its becoming effective, which approval shall be evidenced by Lender's execution of the subordination agreement with Baran referenced in clause (iii) below; (ii) the entire proceeds of the initial disbursement ($5,000,000) of the Baran Loan are made and disbursed to Borrower, in full, on the Amendment Date, thereafter to be used by Borrower for its working capital needs and, as may be required under Section 1 above, in respect of the Borrowing Limitation, to repay Revolving Loans; and (iii) Baran shall have executed a subordination agreement with Agent on the Amendment Date, in form and content acceptable to Agent in its sole discretion, pursuant to which Baran shall subordinate its rights, Liens and claims against Borrower and the Affiliate Guarantors arising under the Baran Loan Agreement and the Baran Merger Agreement to those of Agent and Lenders against Borrower and the Affiliate Guarantors arising under the Credit Agreement. 6. Certain Representations And Warranties Of Loan Parties. Each Loan Party represents and warrants to Wachovia as the Agent and sole Lender as further inducements to its entry into this Amendment that: (a) it has the power and authority to enter into, deliver and to perform this Amendment and any Loan Documents to be executed and delivered in connection herewith (herein, "Amendment Documents"), and to incur any obligations provided for in this Amendment and any Amendment Documents, all of which have been duly authorized and approved in accordance with its corporate documents; (b) it has obtained all consents or approvals from any Person necessary to permit it to enter into and perform under the amendment Documents without its being in violation of any material agreements with such Persons; (c) this Amendment, together with all Amendment Documents, shall constitute, when executed, its valid and legally binding obligations in accordance with their respective terms; (d) except with respect to events or circumstances occurring subsequent to the date thereof and known to the Agent and the Lenders, all representations and warranties made by it in the Credit Agreement remain true 4 and correct in all material respects as of the date hereof, with the same force and effect as if all such representations and warranties were fully set forth herein; (e) its obligations under the Credit Agreement and the other Loan Documents remain valid and enforceable obligations, and the execution and delivery of the Amendment and the other Amendment Documents shall not be construed as a novation of the Credit Agreement or any of the other Loan Documents; (f) as of the date hereof, it has no knowledge of any offsets, counterclaims or defenses existing in its favor in respect of the payment of any of the Obligations; and (g) as of the date hereof, after giving effect hereto, it has no knowledge that any Default or Event of Default exists; and (h) it owns no Domestic Subsidiaries which are not Loan Parties. Each Loan Party further relieves and releases Wachovia, as Agent and sole Lender, and Wachovia's directors, officers, agents and other representatives, from any liability for any action taken (or omitted to be taken) by any thereof in respect of, pursuant to, or in connection with, this Amendment, the Credit Agreement or any Loan Document. 7. Miscellaneous. (a) Reference to Agreement and Note. This Amendment shall become effective upon its execution and all other Amendment Documents (if any) by all parties hereto and thereto. Upon the effectiveness of this Amendment, each reference in the Credit Agreement to "this Agreement" and each reference in the other Loan Documents to the Credit Agreement, shall mean and be a reference to the Credit Agreement as amended hereby. (b) Effect on Loan Documents. Except as specifically amended above, the Credit Agreement and all other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed. (c) No Waiver. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power, or remedy of the Agent or Lenders under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents, except as otherwise expressly provided herein. (d) Costs and Expenses. The Borrower agrees to pay on demand all reasonable costs and expenses of the Agent in connection with the preparation, reproduction, execution, and delivery of this Amendment and the other instruments and documents to be delivered hereunder, including (A) the costs and expenses incurred by the Agent in conducting and completing its field audit, as contemplated in the First Amendment, and (B) the reasonable fees and out-of-pocket expenses of counsel for the Agent with respect hereto. All such fees and charges, if not paid promptly when due, may be charged directly as Revolving Loans. (e) No Novation. Nothing contained herein is intended, or shall be construed, to constitute a novation of the Credit Agreement or any Loan Document. (f) Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of Georgia, without giving effect to conflict of law provisions. (g) Loan Document. This Amendment constitutes a Loan Document. 5 IN WITNESS WHEREOF, the undersigned have caused their duly authorized officers to execute this Amendment as of the date first above written. "BORROWER" O2 WIRELESS, INC. f/k/a CLEAR COMMUNICATIONS GROUP, INC. By: /s/ Andrew D. Roscoe -------------------------------------- Name: Andrew D. Roscoe Title: President & CEO 6 "CURRENT AFFILIATE GUARANTORS" O2WIRELESS SOLUTIONS, INC. f/k/a CLEAR HOLDINGS, INC. By: /s/ Andrew D. Roscoe ---------------------------------------- Andrew D. Roscoe President, Chairman & CEO O2 WIRELESS LIGHTING, INC. f/k/a TWR LIGHTING, INC. By: /s/ Andrew D. Roscoe ---------------------------------------- Andrew D. Roscoe President & CEO O2 WIRELESS SYSTEMS GROUP, INC. By: /s/ Andrew D. Roscoe ---------------------------------------- Andrew D. Roscoe President & CEO O2 WIRELESS SITE DEVELOPMENT, INC. By: /s/ Andrew D. Roscoe ---------------------------------------- Andrew D. Roscoe President & CEO O2 WIRELESS DEPLOYMENT, INC. By: /s/ Andrew D. Roscoe ----------------------------------------- Andrew D. Roscoe President & CEO 7 YOUNG & ASSOCIATES, INC. By: /s/ Andrew D. Roscoe ---------------------------------------- Andrew D. Roscoe President & CEO O2 WIRELESS NORTH CAROLINA, INC. By: /s/ Andrew D. Roscoe ---------------------------------------- Andrew D. Roscoe President & CEO 8 "LENDERS" AND "AGENT" WACHOVIA BANK, N.A., as Agent and sole Lender By: /s/ William W. Teegarden ---------------------------------------- Name: William W. Teegarden Title: Senior Vice President 9 EX-10.8 5 g77987exv10w8.txt EMPLOYMENT AGREEMENT DATED 6/5/02 EXHIBIT 10.8 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("Agreement") is made effective as of the 5th day of June , 2002, by and between o2wireless Solutions, Inc., a Georgia corporation (the "Company"), and Martin Dempsey ("Employee"). WHEREAS, the Company desires to employ Employee and Employee desires to accept employment with the Company under the terms and conditions set forth herein; and WHEREAS, the Company and Employee desire to set forth in writing all of the covenants, terms and conditions of their agreement and understanding as to such employment. NOW THEREFORE, in consideration of the foregoing, the mutual promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: 1. EMPLOYMENT AND DUTIES. The Company hereby employs Employee, and Employee hereby accepts employment, as Vice President-Finance, of the Company. Employee shall also be responsible for such other managerial or executive position(s) as agreed to in writing by the parties. Employee's responsibilities will include management and supervision of all aspects of the Company's fiscal policies and procedures, including but not limited to, accounting, cash management, record keeping, preparation of budgets and forecasts, financial statement preparation and reporting, compliance with all applicable tax laws, compliance with securities laws related to periodic reports filed with the Securities and Exchange Commission, and all other duties and responsibilities attendant to the position of Vice President-Finance. Employee agrees to serve in such capacities and to faithfully and diligently perform such duties, responsibilities and services that are incidental thereto, as well as such other duties, responsibilities and services as may be prescribed or requested by the Chief Executive Officer ("CEO") or Board of Directors of the Company ("Board of Directors") from time to time. Employee shall report to the CEO and shall devote his full time, attention and best efforts to the performance of his duties, responsibilities and services to the Company in a lawful manner and in accordance with all policies and procedures of the Company and instructions from the CEO or Board of Directors. 2. TERM. The Term of this Agreement (the "Term of Agreement") shall commence on the date set forth above and will terminate one (1) year thereafter ("Termination Date"), unless the Agreement is terminated at an earlier date as provided herein. 3. COMPENSATION AND EMPLOYEE BENEFITS. (a) Compensation. Employee shall receive an annualized salary (the "Base Salary") of One Hundred Fifteen Thousand Dollars ($115,000.00), which shall be paid in accordance with the Company's regular payroll practices and subject to any and all withholdings pursuant to applicable law. (b) Signing Bonus. Employee shall receive a one time bonus in the total gross amount of $15,000.00 upon execution of this Agreement by the Company and Employee. The Company will withhold all applicable taxes and statutory deductions from said bonus payment. (c) Incentive Bonus. Employee shall be eligible to receive an incentive bonus (the "Incentive Bonus") equal to the lesser of (i) the Maximum Bonus or (ii) the product obtained by multiplying the EBITDA Ratio by the Maximum Bonus. The Incentive Bonus shall be paid to Employee on April 1, 2003; provided, however, that the Incentive Bonus shall not be payable in the event that (i) the employment of the Employee is terminated by the Company pursuant to Section 4(c) hereof, (ii) the employment of Employee is terminated by the Company or the Employee, for any reason prior to December 31, 2002, or (iii) during the period beginning January 1, 2003 and ending April 1, 2003, Employee terminates his employment hereunder pursuant to Section 4(b) hereof. As used in this Section 3(c), the following terms shall have the meanings indicated below: "Maximum Bonus" shall mean an amount equal to 10% of the Employee's Base Salary. "EBITDA Ratio" shall mean the quotient obtained by dividing EBITDA by $4,000,000. "EBITDA" shall mean the earnings of all regions before taking into account interest, taxes, depreciation, amortization and corporate cost allocation. (d) Employee/Fringe Benefits. Employee shall be eligible to participate in all employee benefit programs and fringe benefits (including, but not limited to, medical, dental, vision, life, accidental death and dismemberment, travel, accident and short-term/long-term disability insurance plans or programs, as may be in effect from time to time) as provided by the Company to executive employees, subject to any and all terms, conditions, and eligibility requirements for said programs and benefits, as may from time to time be prescribed by the Company. (e) Other Business Expenses. The Company shall reimburse Employee for his actual out-of-pocket, business expenses that are incurred by Employee and are reasonable and necessary in relation to and in furtherance of Employee's performance of his duties to the Company. Such reimbursement shall be subject to compliance with the Company's reimbursement policies and the provision of substantiating documents of said expenses as may be reasonably requested by the Company. (f) Vacation. Employee shall be entitled to twenty-one (21) days Paid Time Off (PTO) per year for vacation and otherwise shall be subject to the Company's normal vacation policy as it pertains to carryover of vacation from one calendar year to another. Illness, other personal time away from work, and holidays shall be allowed in accordance with the Company's normal policies; provided, that vacation shall be taken at such times as shall not unreasonably interfere with the Employee's responsibilities hereunder. 4. TERMINATION. Employee's employment may be terminated prior to the expiration of the employment term as follows: 2 (a) Death or Disability. Employee's employment hereunder shall terminate automatically upon Employee's death. In such event, Employee's estate shall be entitled to receive any earned and unpaid Base Salary and bonus, prorated through the date of death. If Employee is prevented from performing the essential functions of his position, with or without reasonable accommodations, as a result of physical or mental illness, injury or incapacity for either (i) a period of ninety (90) consecutive days, or (ii) more than one hundred eighty (180) days in the aggregate in any twelve (12) month period, then Employee acknowledges that he would be unable to perform the essential functions of his job and the Company may terminate the Employee's employment upon written notice to Employee. The date of disability shall be the date specified by the Board of Directors of the Company in the written notice provided to Employee by the Company. In the event of termination due to disability, Employee shall be entitled to receive any earned and unpaid Base Salary and bonus, prorated through the date of disability. While receiving disability income payments under the Company's disability income plan, Employee shall not be entitled to receive any Base Salary hereunder, but shall continue to participate in the Company's benefit plans, to the maximum extent permitted by such plans, until the termination of his employment. Termination of his employment for disability shall not restrict or limit the Employee's opportunity to receive continued benefits under the Company's then existing disability plans(s) in accordance with the terms of such plan(s). (b) Termination Without Cause. This Agreement may be terminated by Employee or by the Company at any time, for any reason or without cause or reason, by giving fourteen (14) days written notice to the other party. In the event the Company terminates Employee's employment without cause, then Employee shall be entitled to any earned and unpaid Base Salary prorated through the date of termination and severance pay in the form of continuation of payment of his annualized base salary for a period of six (6) months from the date of such termination, which shall be paid in accordance with the Company's regular payroll practices and subject to any and all applicable taxes and statutory deductions. (c) Termination For Cause: This Agreement may be immediately terminated by the Company without notice at any time and without further obligation, except for Base Salary earned through the date of termination, for any of the following reasons: (a) fraud, misrepresentation, or dishonesty; (b) negligence; (c) criminal acts or conduct, criminal conviction of Employee or the entering by Employee of a plea of "guilty", "no contest", or "nolo contendere" to any misdemeanor or felony; (d) inattention to or failure to properly and accurately perform duties and responsibilities assigned to Employee by the Company, such performance to be judged in the Company's sole and exclusive discretion; (e) reckless or willful misconduct; or (f) the engaging by Employee in act or activity prohibited under the terms of this Agreement. 5. CONFIDENTIALITY. (a) Employee agrees that, both during and after termination of his employment for any reason, Employee will hold in a fiduciary capacity for the benefit of the Company, and shall not, without the prior written consent of the Company, directly or indirectly use (for his own benefit or for the benefit of any other person or entity) or disclose, except as authorized by the Company in connection with the performance of Employee's duties, any Confidential Information, as defined hereinafter, that Employee may have or acquire (whether or not developed or compiled by Employee and whether or not Employee has been authorized to have access to such 3 Confidential Information) during the term of, or in connection with, his employment. The term "Confidential Information" as used in this Agreement shall mean and include any information, data and know-how relating to the business of the Company that is disclosed to Employee by the Company or known by him as a result of his relationship with the Company and not generally within the public domain (whether constituting a trade secret or not), including without limitation, the following information: (i) financial information, such as Company's earnings, assets, debts, prices, fee structures, volumes of purchases or sales or other financial data, whether relating to Company generally, or to particular products, services, geographic areas, or time periods; (ii) supply and service information, such as information concerning the goods and services utilized or purchased by the Company, the names or addresses of suppliers, terms of supply or service contracts, or of particular transactions, or related information about potential suppliers, to the extent that such information is not generally known to the public, and to the extent that the combination of suppliers or use of a particular supplier, though generally known or available, yields advantages to Company the details of which are not generally known; (iii) marketing information, such as details about ongoing or proposed marketing programs or agreements by or on behalf of Company, marketing forecasts or results of marketing efforts or information about impending transactions; (iv) personnel information, such as employees' personal or medical histories, compensation or other terms of employment, actual or proposed promotions, hirings, resignations, disciplinary actions, terminations or reasons therefor, training methods, performance, or other employee information; (v) customer information, such as any compilation of past, existing or prospective customers, customer proposals or agreements between customers and the Company, status of customer accounts or credit, or related information about actual or prospective customers; and (vi) information provided to the Company by a third party under an obligation of confidentiality. The term "Confidential Information" does not include information that has become generally available to the public by the act of one who has the right to disclose such information without violating any right of the Company or the customer to which such information pertains. (b) The covenant contained in this Section 5 shall survive the termination of Employee's employment with the Company for any reason for a period of two (2) years; provided, however, that with respect to those items of Confidential Information which constitute a trade secret under applicable law, the Employee's obligations of confidentiality and non-disclosure as set forth in this Section 5 shall continue to survive after said two (2) year period to the greatest extent 4 permitted by applicable law. These rights of the Company are in addition to those rights the Company has under the common law or applicable statutes for the protection of trade secrets. 6. NON-SOLICITATION OF EMPLOYEES. Employee agrees that he will, for so long as he is employed hereunder and for a period of one (1) year after termination of his employment, refrain from, unless previously consented to in writing by the Company, on his behalf or on behalf of any other person or entity, soliciting the employment of, employing or encouraging to leave the employment of the Company, its successors or assigns or any affiliate of the Company or its successors or assigns, any individual who at such time or within one hundred eighty (180) days prior to such time is or was an employee of the Company, its successors or assigns or any affiliate of the Company or its successors or assigns. 7. NON-COMPETITION. Employee expressly covenants and agrees that during the term of his employment hereunder and for a period of six (6) months after termination of his employment for any reason, he will not, without the prior written consent of the Company, obtain or accept a "Competitive Position" in the "Restricted Territory" with a "Competitor" of the Company (as such terms are hereafter defined), if the Company or its successors or assigns is also then still engaged in the Company's Business. For purposes of this Agreement, a "Competitor" of the Company means any business, individual, partnership, joint venture, association, firm, corporation or other entity engaged, wholly or partly, in the business of turnkey cable, fiber optic, and wireline and wireless telecommunications services including land use planning; site acquisition; site, systems (including but not limited to RF) and structural engineering; permitting and zoning; civil, site and tower construction; tower erection; tower design and manufacturing; equipment services; site management and maintenance; and build-to-suit financing/ownership of sites; a "Competitive Position" means the provision of services for the benefit of any Competitor of the Company whereby Employee will use any Confidential Information (as that term is defined in Section 5), or whereby Employee has duties for such Competitor that are the same as or substantially similar to those actually performed by him pursuant to the terms hereof; and the "Restricted Territory" means and includes the geographic area comprising the area within 100 miles of the following office locations of the Company, its subsidiaries, affiliates and/or divisions as set forth on Exhibit "A"; provided that on the date at issue the Company has not permanently ceased to conduct business within such area. Employee acknowledges and agrees that he has been or will be working within and throughout the Restricted Territory as defined above or has had or will have material contact with customers or actively sought prospective customers of the Company located within such areas. 8. MATERIAL CONTACT. For the purposes of Sections 7 and 8 of this Agreement, "material contact" exists between Employee and each customer or potential customer: (i) with whom Employee dealt; (ii) whose dealings with the Company were coordinated or supervised by Employee; or (iii) about whom Employee obtained Confidential Information in the ordinary course of business as a result of Employee's performance of his duties and responsibilities hereunder and in the case of each of clauses (i), (ii) and (iii) above, such occurrence was within two (2) years prior to the date of termination of Employee's employment with the Company. 9. TOLLING OF PERIOD OF RESTRAINT. Employee hereby expressly acknowledges and agrees that in the event the enforceability of any of the terms of this Agreement shall be challenged in court or pursuant to arbitration and Employee is not enjoined from breaching any 5 of the restraints set forth in Sections 5 through 8, then if a court of competent jurisdiction or arbitration panel finds that the challenged restraint is enforceable, the time period of the restraint shall be deemed tolled upon the filing of the lawsuit challenging the enforceability of the restraint until the dispute is finally resolved and all periods of appeal have expired, but in no event shall any restriction endure beyond the two (2) year anniversary of the Employee's termination from employment with the Company. 10. ACKNOWLEDGMENTS. The Employee hereby acknowledges and agrees that the restrictions contained in Sections 5 through 8 are fair and reasonable and necessary for the protection of the legitimate business interests of the Company. Employee acknowledges that in the event the Employee's employment with the Company terminates for any reason, the Employee will be able to earn a livelihood without violating the restrictions contained in Sections 5 through 8 and that the Employee's ability to earn a livelihood without violating such restrictions is a material condition to the Employee's employment and continued employment with the Company. 11. WORK PRODUCT; INVENTIONS. (a) Ownership by the Company. The Company shall own all right, title and interest in and to all work product developed by Employee in Employee's provision of services to the Company, including without limitation, all preliminary designs and drafts, all other works of authorship, all derivative works and patentable and unpatentable inventions and improvements, all copies of such works in whatever medium such copies are fixed or embodied, and all worldwide copyrights, trademarks, patents or other intellectual property rights in and to such works (collectively the "Work Product"). All copyrightable materials of the Work Product shall be deemed a "work made for hire" for the purposes of U.S. Copyright Act, 17 U.S.C. ss. 101 et seq., as amended. (b) Assignment and Transfer. In the event any right, title or interest in and to any of the Work Product (including without limitation all worldwide copyrights, trademarks, patents or other intellectual property rights therein) does and shall not vest automatically in and with the Company, Employee agrees to and hereby does irrevocably assign, convey and otherwise transfer to the Company, and the Company's respective successors and assigns, all such right, title and interest in and to the Work Product with no requirement of further consideration from or action by Employee or the Company. (c) Registration Rights. The Company shall have the exclusive worldwide right to register, in all cases as "claimant" and when applicable as "author," all copyrights in and to any copyrightable element of the Work Product, and file any and all applicable renewals and extensions of such copyright registrations. The Company shall also have the exclusive worldwide right to file applications for and obtain (i) patents on and for any of the Work Product in Employee's name and (ii) assignments for the transfer of the ownership of any such patents to the Company. (d) Additional Documents. Employee agrees to execute and deliver all documents requested by the Company regarding or related to the ownership and/or other intellectual property rights and registrations specified herein. Employee hereby further irrevocably 6 designates and appoints the Company as Employee's agent and attorney-in-fact to act for and on Employee's behalf and stead to execute, register and file any such assignments, applications, registrations, renewals and extensions and to do all other lawfully permitted acts to further the registration, prosecution and issuance of patents, copyright or similar protections with the same legal force and effect as if executed by Employee. 12. RIGHTS TO MATERIALS. All records, files, memoranda, computer programs, reports, price lists, customer lists, drawings, plans, sketches, projections, business plans, financial information, Company documents and the like (together with all copies thereof) relating to the business of the Company, which Employee shall use or prepare or come in contact with in the course of, or as a result of, his employment shall, as between the parties hereto, remain the sole property of the Company. Upon the termination of his employment or upon the prior demand of the Company, he shall immediately return all such materials and shall not thereafter cause removal thereof from the premises of the Company. 13. ASSISTANCE IN LITIGATION. Employee shall, upon reasonable notice, furnish such information and assistance to the Company as may reasonably be required by the Company in connection with any litigation in which it is, or may become, a party, and which arises out of facts and circumstances known to Employee. The Company shall promptly reimburse Employee for his out-of-pocket expenses incurred in connection with the fulfillment of his obligations under this Section; provided, however, that Employee's obligations under this Section shall only exist during the term of this Agreement and during the period, if any, during which he receives compensation from the Company following the termination or expiration of this Agreement. 14. SEVERABILITY. The parties covenant and agree that the provisions contained herein are reasonable and are not known or believed to be in violation of any federal, state, or local law, rule or regulation. Except as noted below, should any provision of this Agreement be declared or determined by any court of competent jurisdiction to be unenforceable or invalid for any reason, the validity of the remaining parts, terms or provisions of this Agreement shall not be affected thereby and the invalid or unenforceable part, term or provision shall be deemed not to be a part of this Agreement. The covenants set forth in this Agreement are to be reformed pursuant to Section 15 if held to be unreasonable or unenforceable, in whole or in part, and, as written and as reformed, shall be deemed to be part of this Agreement. 15. REFORMATION. If any of the covenants or promises of this Agreement are determined by any court of law or equity, with jurisdiction over this matter, to be unreasonable or unenforceable, in whole or in part, as written, Employee hereby consents to and affirmatively requests that said court reform the covenant or promise so as to be reasonable and enforceable and that said court enforce the covenant or promise as so reformed. 16. INJUNCTIVE RELIEF. Employee understands, acknowledges and agrees that in the event of a breach or threatened breach of any of the covenants and promises contained in this Agreement, the Company will suffer irreparable injury for which there is no adequate remedy at law and the Company will therefore be entitled to obtain, without bond, injunctive relief enjoining said breach or threatened breach. The Employee further acknowledges, however, that the Company shall have the right to seek a remedy at law as well as or in lieu of equitable relief in the event of any such breach. 7 17. EMPLOYEE'S OBLIGATIONS UPON TERMINATION. Upon the termination of Employee's employment hereunder for whatever reason, Employee shall automatically tender Employee's resignation from any office Employee may hold with the Company or any subsidiary of the Company, and Employee shall not at any time thereafter represent himself to be connected or to have any connection with the Company or its related entities. 18. ASSIGNMENT. Due to the personal service nature of Employee's obligations, Employee may not assign this Agreement. Subject to the restrictions in this Section, this Agreement shall be binding upon and benefit the parties hereto, and their respective heirs, successors or assigns. The term "Company" as used in this Agreement shall be deemed to include the successors and assigns of the original or any subsequent entity constituting the Company as well as any and all divisions, subsidiaries or affiliates thereof. 19. MUTUAL NON-DISPARAGEMENT; PRESS RELEASES. (a) Mutual Non-Disparagement. The Company and Employee agree that neither party will undertake any disparaging or harassing conduct directed at the other at any time during the term of this Agreement or following termination hereof. (b) Press Releases. Other than as required by applicable law, the parties agree that no public announcement or similar publicity with respect to this Agreement or the termination of Employee's employment with the Company will be issued, if at all, unless the parties agree as to the time, manner and content of such announcement or publicity. Unless consented to by the Company in advance or required by law, Employee shall keep this Agreement strictly confidential and may not make any disclosure of this Agreement or any of its terms or provisions to any person. The parties will consult with each other in good faith concerning the means by which the Company's employees, customers and suppliers and others having dealings with Employee will be informed of the termination of Employee's employment with the Company. 20. ENTIRE AGREEMENT; MODIFICATION; GOVERNING LAW. This Agreement constitutes the entire understanding between the parties regarding the subject matters addressed herein and supersedes any prior oral or written agreements between the parties. This Agreement can only be modified by a writing signed by both parties, and shall be interpreted in accordance with and governed by the laws of the State of Georgia without regard to the choice of law provisions thereof. Notwithstanding the foregoing, the protective provisions contained in Sections 5 through 12 hereof shall be governed and enforced in accordance with the laws of the state in which enforcement of such provisions is sought. 8 21. NEGOTIATED AGREEMENT. Employee and the Company agree that this Agreement shall be construed as drafted by both of them, as parties of equivalent bargaining power, and not for or against either of them as drafter. 22. REVIEW AND VOLUNTARINESS OF AGREEMENT. Employee acknowledges Employee has had an opportunity to read, review, and consider the provisions of this Agreement, that Employee has in fact read and does understand such provisions, and that Employee has voluntarily entered into this Agreement. 23. NON-WAIVER. The failure of the Company to insist upon or enforce strict performance of any provision of this Agreement or to exercise any rights or remedies hereunder will not be construed as a waiver by the Company to assert or rely upon any such provision, right or remedy in that or any other instance. 24. NO CONFLICTING OBLIGATIONS. Employee hereby acknowledges and represents that Employee's execution of this Agreement and performance of employment-related obligations and duties for the Company as set forth hereunder will not cause any breach, default or violation of any other employment, non-disclosure, confidentiality, non-competition or other agreement to which Employee may be a party or otherwise bound. Employee hereby agrees that he will not use in the performance of his duties for the Company (or otherwise disclose to the Company) any trade secrets or confidential information of any prior employer or other person or entity if and to the extent that such use or disclosure may cause a breach or violation of any obligation or duty owed to such employer, person, or entity under any agreement or applicable law. 25. RIGHT TO ARBITRATION. Any controversy or claim arising out of or relating to Employee's employment by the Company, or the termination thereof, or this Agreement, or the breach thereof (including, without limitation, any claim that any provision of this Agreement or any obligation of Employee is illegal or otherwise unenforceable or voidable under law, ordinance or ruling or that Employee's employment by the Company was illegally terminated) shall be settled by arbitration at the office of the American Arbitration Association in Atlanta, Georgia, in accordance with the United States Arbitration Act (9 USC, ss. 1 et seq.) and the rules of the American Arbitration Association. Company and Employee each consents and submits to the personal jurisdiction and venue of the trial courts of Cobb County, Georgia, and also to the personal jurisdiction and venue of the United States District Court for the Northern District of Georgia for purposes of enforcing this provision. All awards of the arbitration shall be binding and non-appealable except as otherwise provided in the United States Arbitration Act. Judgment upon the award of the arbitrator may be entered in any court having jurisdiction thereof. The arbitration shall take place at a time noticed by the American Arbitration Association regardless of whether one of the parties fails or refuses to participate. The arbitrator shall have no authority to award punitive damages, but will otherwise have the authority to award any remedy or relief that a court of competent jurisdiction could order or grant, including, without limitation, specific performance of any obligation created under this Agreement, the issuance of an injunction or other provisional relief, or the imposition of sanctions for abuse or frustration of the arbitration process. The parties shall be entitled to engage in reasonable discovery, including a request for the production of relevant documents. Depositions may be ordered by the arbitrator upon a showing of need. The foregoing provisions shall not preclude the Company from bringing an action in any court of competent jurisdiction for injunctive or other provisional relief as the 9 Company may determine is necessary or appropriate. [To be initialed below by Employee and Company] -------- ------- ---- Employee Company Date 26. NOTICES. Any notice or other communications under this Agreement shall be in writing, signed by the party making the same, and shall be delivered personally or sent by certified or registered mail, postage prepaid, addressed as follows: If to Employee: Martin Dempsey If to the Company: o2wireless Solutions, Inc. 440 Interstate North Pkwy. Atlanta, Georgia 30339 Attention: Chairman of the Board or Corporate Secretary or to such other address as may hereafter be designated by either party hereto. All such notices shall be deemed given on the date received. IN WITNESS WHEREOF, the parties hereto have hereunto affixed their hands as of the date first above written. THE COMPANY: O2WIRELESS SOLUTIONS, INC. By: /s/ Andrew D. Roscoe ---------------------------------------- Andrew D. Roscoe Chairman, President and Chief Executive Officer EMPLOYEE: /s/ Martin Dempsey L.S. -------------------------------------- Martin Dempsey 10 EXHIBIT "A" List of Company Office Locations Corporate - 440 Interstate North Parkway, Atlanta, GA 30339 o2wireless Deployment - Southeast Region - 2355 Industrial Park Blvd., Cumming, GA 30041 SE Field Office - 425 Feaster Road, Greenville, SC 29615 o2wireless Deployment - Central Region - 309 Spangler Drive, Suite D, Richmond, KY 40475 Central Field Office - 6240A Enterprise Drive, Knoxville, TN 37909 o2wireless Deployment - Northeast Region - 15 Just Road, Fairfield, NJ 07004 NE Field Office - 4640 Wedgewood Blvd., Frederick, MD 21703 o2wireless Deployment - Southwest Region - 10430 Rodgers Road, Houston, TX 77070 o2wireless Deployment - Midwest Region - 900 Oakmont Lane, Suite 310, Westmont, IL 60559 o2wireless Systems Group, Inc. - 900 Oakmont Lane, Suite 310, Westmont, IL 60559 Product Services - 6900-B North Park Blvd., Charlotte, NC 28216 Product Services Field Office - 5036 N. 54th Avenue, Suite 10, Glendale, AZ 85301 EX-99.1 6 g77987exv99w1.txt CERTIFICATION PURSUANT TO SECTION 906 EXHIBIT 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACTS OF 2002 In connection with the Quarterly Report of o2wireless Solutions, Inc. (the "Company") on Form 10-Q for the quarterly period ended June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Andrew D. Roscoe, Chairman and co-Chief Executive Officer of the Company, William J. Loughman, President and co-Chief Executive Officer of the Company, and Martin J. Dempsey, Vice President of Finance of the Company, do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge: (1) The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. By: /s/ Andrew D. Roscoe --------------------------------------------------- Andrew D. Roscoe Chairman and co-Chief Executive Officer August 19, 2002 /s/ William J. Loughman --------------------------------------------------- William J. Loughman President and co-Chief Executive Officer August 19, 2002 /s/ Martin J. Dempsey --------------------------------------------------- Martin J. Dempsey Vice President of Finance August 19, 2002 -35- -----END PRIVACY-ENHANCED MESSAGE-----

	•		the effective time of the merger,
	•		90 days following a notice of termination sent by the Company to Baran,
	•		six months from the date of the agreement,
	•		10 days after the Company notifies Baran of termination for cause, as defined below, which Baran fails to cure,
	•		10 days after Baran gives notice to the Company of breach of the agreement, which the Company fails to cure, and
	•		the date of termination of the merger agreement due to the Company accepting an acquisition that is more favorable to the Company than the proposed merger.

	•		No later than the date the Company files its Form 10-Q for the quarter ended June 30, 2002 or August 15, 2002, the lesser of (x) $3,000,000 or (y) the amount of the Company’s loss (as defined below) for the quarter ended June 30, 2002; and
	•		If the loan agreement is in effect as of the later of the date the Company files its Form 10-Q for the quarter ended September 30, 2002 or November 15, 2002, at its discretion, an amount equal to the Company’s loss for the quarter ended September 30, 2002.

	•		general economic conditions,
	•		competition in the wireless services industry,
	•		demand for outsourced wireless network services,
	•		the Company’s ability to manage its operations effectively,
	•		the Company’s ability to maintain and increase revenues while controlling costs,
	•		the Company’s ability to retain its customers and attract new business,
	•		fluctuations in quarterly operating results, and
	•		other uncertainties detailed from time to time in the Company’s Securities and Exchange Commission filings.

(b)		Reports on Form 8-K

		The Company filed a Current Report on Form 8-K on June 12, 2002 in connection with the execution of the merger agreement with Baran Group Ltd. In connection with the filing of the Form 8-K, the Company filed the following exhibits:

	•		The Agreement and Plan of Merger with Baran Group Ltd.,
	•		The Working Capital Loan Agreement with Baran Acquisitions Sub, Inc. and
	•		The Management Consulting Agreement with Baran Group Ltd.