<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1997
---------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
----------------------- --------------------
Commission file number 0-______
INTERNATIONAL WIRELESS
COMMUNICATIONS HOLDINGS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 94-3248701
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
400 South El Camino Real, Suite 1275
San Mateo, California 94402
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(Address of principal executive offices)
(415) 548-0808
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(Registrant's telephone number, including area code)
Indicate by check X whether the registrant (1) has filed all reports
required to be filed by Sections 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
(1) Yes X No
----- -----
(2) Yes X No
----- -----
As of March 31, 1997, there were 636,720 shares of the Registrant's common
stock, par value $0.01 per share ("Common Stock") outstanding and 16,906,400
shares of the Registrant's preferred stock, par value $0.01 per share
("Preferred Stock") outstanding. Each such share of Preferred Stock is currently
convertible into one share of Common Stock.
This document (excluding Exhibits) contains 32 pages.
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- --------------------------------------------------------------------------------
1.
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC.
FORM 10-Q
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . .3
Consolidated Balance Sheets as of December 31, 1996 (audited) and
March 31, 1997 (unaudited). . . . . . . . . . . . . . . . . . . . . .4
Consolidated Statements of Operations for the three months ended
March 31, 1996 and 1997 (unaudited) . . . . . . . . . . . . . . . . .5
Consolidated Statements of Cash Flows for the three months ended
March 31, 1996 and 1997 (unaudited) . . . . . . . . . . . . . . . . .6
Notes to Consolidated Financial Statements. . . . . . . . . . . . . .7
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . 15
PART II. OTHER INFORMATION
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . 30
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . . 30
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
EXHIBIT INDEX. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
3.
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND SHARE DATA)
<TABLE>
<CAPTION>
ASSETS DECEMBER 31, MARCH 31,
1996 1997
------------ -----------
(AUDITED) (UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . $ 41,657 $ 23,971
Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . -- 3,287
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . 348 576
Notes receivable from affiliates . . . . . . . . . . . . . . . . . . . 813 4,316
Notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,431 1,976
Advance to affiliate . . . . . . . . . . . . . . . . . . . . . . . . . 99 99
License deposit. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,255 5,255
Investment in affiliate held for sale. . . . . . . . . . . . . . . . . 2,062 2,062
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . 2,743 4,055
--------- ---------
Total current assets. . . . . . . . . . . . . . . . . . . . . . . 54,408 45,597
Property and equipment, net. . . . . . . . . . . . . . . . . . . . . . . . 18,426 20,436
Investments in affiliates. . . . . . . . . . . . . . . . . . . . . . . . . 68,394 65,884
Telecommunication licenses and other intangibles, net. . . . . . . . . . . 18,484 18,146
License deposit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,042 3,042
Debt issuance costs, net . . . . . . . . . . . . . . . . . . . . . . . . . 6,431 6,179
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173 140
--------- ---------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 169,358 $ 159,424
--------- ---------
--------- ---------
LIABILITIES, MINORITY INTERESTS, REDEEMABLE CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses. . . . . . . . . . . . . . . . . $ 7,313 $ 8,369
--------- ---------
Total current liabilities . . . . . . . . . . . . . . . . . . . . 7,313 8,369
Long-term debt, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,466 79,449
--------- ---------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 82,779 87,818
Minority interests in consolidated subsidiaries. . . . . . . . . . . . . . 5,685 5,533
Redeemable convertible Preferred Stock, $.01 par value per share;
21,541,480 shares designated; 15,973,200 shares
issued and outstanding in 1996 and 1997, respectively; net of
note receivable from stockholder of $26 in 1996 and 1997;
liquidation and minimum redemption value of $107,399 . . . . . . . . . 103,021 103,556
Commitments and contingencies (Note 8)
Stockholders' deficit:
Convertible Preferred Stock, $.01 par value per share;
1,200,000 shares designated; 933,200 shares issued
and outstanding in 1996 and 1997, respectively;
liquidation value of $793 . . . . . . . . . . . . . . . . . . . . . 9 9
Common Stock, $.01 par value per share; 26,000,000
shares authorized; 636,720 shares
issued and outstanding in 1996 and 1997, respectively . . . . . . . 6 6
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . 31,060 31,060
Note receivable from stockholder . . . . . . . . . . . . . . . . . . . (152) (152)
Unrealized gain (loss) on investments. . . . . . . . . . . . . . . . . 68 (5)
Cumulative translation adjustment. . . . . . . . . . . . . . . . . . . 271 2
Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . . . . (53,389) (68,403)
--------- ---------
Total stockholders' deficit . . . . . . . . . . . . . . . . . . . (22,127) (37,483)
--------- ---------
Total liabilities, minority interests, redeemable
convertible Preferred Stock and stockholders' deficit . . . . . . $ 169,358 $ 159,424
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to Consolidated Financial Statements.
4.
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three months ended
March 31,
------------------------------
1996 1997
(Unaudited) (Unaudited)
--------------- --------------
<S> <C> <C>
Operating revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ -- $ 519
Cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 589
--------- ----------
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (70)
Operating expenses:
Selling, general and administrative expenses . . . . . . . . . . . . . 2,259 6,254
Equity in losses of affiliates . . . . . . . . . . . . . . . . . . . . 1,419 4,672
Minority interest in losses of consolidated subsidiaries . . . . . . . -- (219)
--------- ----------
Loss from operations . . . . . . . . . . . . . . . . . . . . . . . (3,678) (10,777)
Other income (expense):
Interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . 242 527
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . (119) (4,236)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (25) 7
--------- ----------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (3,580) $ (14,479)
--------- ----------
--------- ----------
</TABLE>
See accompanying notes to Consolidated Financial Statements.
5.
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
1996 1997
-------- --------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (3,580) $(14,479)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 222
Amortization of telecommunication licenses and other intangibles . . . . . . . . . 161 338
Amortization of debt issuance costs. . . . . . . . . . . . . . . . . . . . . . . . -- 252
Amortization of long-term debt discount. . . . . . . . . . . . . . . . . . . . . . -- 3,983
Equity in losses of affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . 1,419 4,672
Minority interest in losses of consolidated subsidiaries . . . . . . . . . . . . . -- (152)
Unrealized loss on investments . . . . . . . . . . . . . . . . . . . . . . . . . . -- (73)
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (228)
Other current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (161) (1,312)
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . (4,261) 1,056
--------- --------
Net cash used in operating activities . . . . . . . . . . . . . . . . . . (6,410) (5,721)
--------- --------
Cash flows from investing activities:
Issuance of notes receivable from affiliates . . . . . . . . . . . . . . . . . . . -- (3,503)
Issuance of notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,092) (545)
Advances to affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,096) --
Purchases of property and equipment. . . . . . . . . . . . . . . . . . . . . . . . (126) (2,232)
Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (3,287)
Investments in affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (72) (2,162)
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 33
--------- --------
Net cash used in investing activities . . . . . . . . . . . . . . . . . . (3,349) (11,696)
--------- --------
Effect of foreign currency exchange rates on cash and cash equivalents . . . . . . . -- (269)
--------- --------
Net decrease in cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . (9,759) (17,686)
Cash and cash equivalents at beginning of period.. . . . . . . . . . . . . . . . . . 25,398 41,657
--------- --------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . $ 15,639 $ 23,971
--------- --------
--------- --------
Supplemental cash flow information:
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ -- $ --
--------- --------
--------- --------
</TABLE>
See accompanying notes to Consolidated Financial Statements.
6.
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
International Wireless Communications Holdings, Inc. ("IWC Holdings") was
incorporated in Delaware in July 1996 as a holding company whose primary
assets are all of the issued and outstanding capital stock of International
Wireless Communications, Inc. ("IWC") and a note receivable from IWC in a
principal amount equal to the net proceeds from the Debt Offering (as
defined below). IWC was incorporated in Delaware in January 1992 and
develops, owns and operates wireless communications companies in emerging
markets in Asia and Latin America. These local wireless businesses
("LWBs") provide a variety of communication services, including cellular,
wireless local loop ("WLL"), enhanced capacity trunked radio ("ECTR") and
paging. Together with its strategic partners, IWC has interests in Brazil,
China, India, Indonesia, Malaysia, Mexico, New Zealand, Pakistan, Peru, and
the Philippines.
The Company's investments to date have principally been in the early
stage development of LWBs. In addition, the Company intends to pursue
additional investment opportunities. The Company believes that its
existing cash balance is sufficient to meet its operating and
contractual obligations through fiscal 1997. It is not sufficient,
however, to meet the Company's business objective of participation in
additional equity rounds to finance the infrastructure buildout of its
operating and nonoperating LWBs. The ability of the Company to make
additional investments is dependent on the availability of external
financing. In the event the Company is unable to obtain external
financing it may ultimately be unable to either maintain its existing
ownership interests or fully realize the underlying potential value of
the LWBs.
In August 1996, the Company issued and sold 196,720 units, each consisting
of a $1,000 principal amount 14% Senior Discount Note due 2001 (an
"Original Note," and, collectively, the "Original Notes") and one warrant
to purchase 11.638 shares of Common Stock (a "Warrant," and, collectively,
the "Warrants"), for total gross proceeds of $100 million (the "Debt
Offering"). In November 1996, pursuant to the indenture agreement that
governs the Original Notes (the "Indenture"), the Company exchanged new 14%
Senior Secured Discount Notes due 2001 (the "Exchange Notes") which were
registered under the Securities Act of 1933, as amended (the "1933 Act"),
for the Original Notes. The terms of the Exchange Notes are substantially
identical (including principal amount, interest rate, maturity, security
and ranking) to the terms of the Original Notes. (The Exchange Notes and
the Original Notes are referred to collectively herein as the "Notes.")
In connection with the Debt Offering, IWC Holdings and IWC completed a
reorganization in which IWC became a wholly owned subsidiary of IWC
Holdings through the conversion of each share of the then outstanding
capital stock of IWC into forty shares of the corresponding class and
series of stock of IWC Holdings (the "Stock Conversion"). All data related
to shares and per share amounts for all periods presented have been
adjusted to reflect the effect of the reorganization and the Stock
Conversion.
In the opinion of management, the accompanying unaudited financial
statements of IWC Holdings and its subsidiary, IWC (together, the
"Company"), reflect all adjustments (consisting only of normal recurring
adjustments) considered necessary for a fair presentation of the Company's
financial condition, results of operation and cash flows for the periods
presented. These financial statements should be read in conjunction with
the Company's audited consolidated financial statements as of December 31,
1995 and 1996, and for each of the years in the three-year period ended
December 31, 1996, including the notes thereto. The results of operations
for the three months ended March 31, 1997 are not necessarily indicative of
results that may be expected for the year ended December 31, 1997.
BASIS OF CONSOLIDATION
The accompanying consolidated financial statements of the Company include
the accounts of IWC, its wholly owned subsidiaries, SRC Servicos de Radio
Comunicacoes Ltda. ("SRC"), TeamTalk Limited ("TeamTalk"), New Zealand
Wireless Limited ("New Zealand Wireless"), International Wireless
Communications Asia Holdings, B.V. ("IWC Asia B.V."), International
Wireless Communications Latin America Holdings, Limited
7.
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
("IWC Latin America") and International Wireless Communications Asia Holding
N.V. ("IWC Asia N.V.") and four majority-owned subsidiaries, M/S Mobilcom
(Pte) Ltd. ("Mobilcom Pakistan"), PeruTel S.A. ("PeruTel"), Star Telecom
Overseas (Cayman Islands) Limited ("STOL"), and Promociones Telefonicas S.A.
("Protelsa"). Wireless Data Services, Ltd. ("WDS"), although 50% owned by
the Company, has also been consolidated in the accompanying consolidated
financial statements as the Company has the ability to exercise control
over WDS. All significant intercompany accounts and transactions have been
eliminated in consolidation.
(2) BALANCE SHEET COMPONENTS
Balance sheet components are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------- -----------
<S> <C> <C>
Other current assets
Employee receivables . . . . . . . . . . . . . . . . . . . . . $ 179 $ 498
Taxes receivable . . . . . . . . . . . . . . . . . . . . . . . 820 --
Other receivables. . . . . . . . . . . . . . . . . . . . . . . 1,373 2,461
Prepaid expenses and other . . . . . . . . . . . . . . . . . . 371 1,096
-------- -------
$ 2,743 $ 4,055
-------- -------
-------- -------
Property and equipment
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . $ 320 $ 414
Computer and office equipment. . . . . . . . . . . . . . . . . 935 1,202
Automobiles. . . . . . . . . . . . . . . . . . . . . . . . . . 197 197
Leasehold improvements . . . . . . . . . . . . . . . . . . . . 276 346
Telecommunication equipment. . . . . . . . . . . . . . . . . . 9,930 6,681
Construction in process. . . . . . . . . . . . . . . . . . . . 7,620 12,670
-------- -------
19,278 21,510
Less accumulated depreciation. . . . . . . . . . . . . . . . . 852 1,074
-------- -------
Property and equipment, net. . . . . . . . . . . . . . . . . $ 18,426 $20,436
-------- -------
-------- -------
Telecommunication licenses and other intangibles
SRC/Via 1 project. . . . . . . . . . . . . . . . . . . . . . . $ 6,680 $ 6,680
Mobilcom Pakistan. . . . . . . . . . . . . . . . . . . . . . . 5,439 5,439
TeamTalk . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,760 1,760
STOL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,965 3,965
Protelsa . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,557 1,557
WDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221 221
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200 200
-------- -------
19,822 19,822
Less accumulated amortization. . . . . . . . . . . . . . . . . 1,338 1,676
-------- -------
Telecommunication licenses and other intangibles, net. . . . $ 18,484 $18,146
-------- -------
-------- -------
Accounts payable and accrued expenses
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . $ 5,163 $ 2,217
Professional services. . . . . . . . . . . . . . . . . . . . . 718 899
Employee compensation and benefits . . . . . . . . . . . . . . 619 488
Equipment purchases. . . . . . . . . . . . . . . . . . . . . . 27 4,517
Remaining TeamTalk purchase price. . . . . . . . . . . . . . . 156 37
Share subscription payable to UTS. . . . . . . . . . . . . . . 178 --
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 452 211
-------- -------
$ 7,313 $ 8,369
-------- -------
-------- -------
</TABLE>
8.
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(3) CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
As of March 31, 1997, available-for-sale securities consisted of the following
(in thousands):
<TABLE>
<CAPTION>
Unrealized Estimated
Cost losses fair value
--------- ----------- -----------
<S> <C> <C> <C>
U.S government securities. . . . . . . . $ 1,076 $ (2) $ 1,074
Corporate debt securities. . . . . . . . 13,148 (3) 13,145
--------- ----- ---------
$ 14,224 $ (5) $ 14,219
--------- ----- ---------
--------- ----- ---------
</TABLE>
As of March 31, 1997, cash and available-for-sale securities were
classified as follows (in thousands):
Cash . . . . . . . . . . . . . . . . . . $ 13,039
Cash equivalents . . . . . . . . . . . . 10,932
Short-term investments . . . . . . . . . 3,287
---------
$ 27,258
---------
---------
(4) INVESTMENTS IN AFFILIATES
The Company's investments in affiliates represent interests in various LWBs
in several developing countries. These investments are accounted for under
the equity or cost methods of accounting.
EQUITY INVESTMENTS
For those investments in companies in which the Company's voting interest
is 20% to 50%, or for investments in companies in which the Company exerts
significant influence through board representation and management authority
even if its ownership is less than 20%, the equity method of accounting is
used. Under this method, the investment, originally recorded at cost, is
adjusted to recognize the Company's share in losses of affiliates, limited
to the extent of the Company's investment in and advances to affiliates,
including any debt guarantees or other contractual funding commitments. All
affiliated companies have fiscal years ended December 31. Investments in
affiliated companies are as follows as of December 31, 1996 and March 31,
1997 (in thousands):
9.
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
INVESTMENTS
PERCENTAGE IN AFFILIATED
AFFILIATED OF COMPANIES ADDITIONAL EQUITY IN LOSSES OF AFFILIATES
COUNTRY COMPANY OWNERSHIP 1995 INVESTMENT ------------------------------
AMORTIZATION LOSSES (GAINS)
- ------- ----------------- ---------- -------------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Malaysia Syarikat Telefon
Wireless ("STW").... 30% $ 20,241 $ 1,201 $ 969 $ 3,563
PT Rajasa Hazanah
Indonesia Perkasa ("RHP")..... 28% 24,220 8,556 1,278 3,468
Star Digitel Limited
China ("SDL")............. 40% - 20,000 347 1,000
Universal
Telecommunications
Philippines Service, Inc. ("UTS"). 19% - 1,906 51 (20)
New Zealand TeamTalk............ 100% 2,338 (1,736) - 602
--------- --------- -------- --------
$ 47,246 $ 30,005 $ 3,170 $ 8,613
--------- --------- -------- --------
--------- --------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
PORTION OF
INVESTMENT
EXCEEDING THE
COMPANY'S SHARE
INVESTMENTS OF THE UNDERLYING
IN AFFILIATED HISTORICAL
AFFILIATED COMPANIES NET ASSETS
COUNTRY COMPANY 1996 1996
- ------- -------------- ------------- ----------------
<S> <C> <C> <C>
Malaysia STW $ 16,910 $ 15,852
Indonesia RHP 28,030 28,030
China SDL 18,653 10,653
Philippines UTS 1,875 882
New Zealand TeamTalk - -
--------- ---------
$ 65,468 $ 55,417
--------- ---------
--------- ---------
</TABLE>
<TABLE>
<CAPTION>
INVESTMENTS
PERCENTAGE IN AFFILIATED
AFFILIATED OF COMPANIES ADDITIONAL EQUITY IN LOSSES OF AFFILIATES
COUNTRY COMPANY OWNERSHIP 1996 INVESTMENT ------------------------------
AMORTIZATION LOSSES
- ------- ----------------- ---------- -------------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Malaysia STW. . . . . . 30% $ 16,910 $ - $ 221 $ 708
Indonesia RHP. . . . . . 28% 28,030 - 419 1,316
China SDL. . . . . . 40% 18,653 - 191 1,708
Philippines UTS. . . . . . 19% 1,875 - 12 97
--------- ---- ------ --------
$ 65,468 $ - $ 843 $ 3,829
--------- ---- ------ --------
--------- ---- ------ --------
</TABLE>
<TABLE>
<CAPTION>
PORTION OF
INVESTMENT
EXCEEDING THE
COMPANY'S SHARE
INVESTMENTS OF THE UNDERLYING
IN AFFILIATED HISTORICAL
AFFILIATED COMPANIES NET ASSETS
COUNTRY COMPANY 1997 1997
- ------- ------------- ------------- ----------------
<S> <C> <C> <C>
Malaysia STW $ 15,981 $ 15,631
Indonesia RHP 26,295 26,295
China SDL 16,754 10,462
Philippines UTS 1,766 870
--------- ---------
$ 60,796 $ 53,258
--------- ---------
--------- ---------
</TABLE>
10.
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Financial information for significant affiliated companies accounted for by
the equity method is as follows (in thousands):
<TABLE>
<CAPTION>
AS OF AND FOR THE YEAR ENDED
DECEMBER 31, 1996
-----------------
STW RHP SDL
--- --- ---
<S> <C> <C> <C>
Current assets . . . . . . . . . . $ 820 $ 13,354 $ 11,215
Noncurrent assets. . . . . . . . . 41,686 64,556 55,617
Current liabilities. . . . . . . . 6,909 23,341 12,460
Noncurrent liabilities . . . . . . 33,526 63,834 47,817
Net revenues . . . . . . . . . . . 1,858 10,268 436
Net loss . . . . . . . . . . . . . (11,873) (12,072) (2,618)
</TABLE>
<TABLE>
<CAPTION>
AS OF AND FOR THE THREE MONTHS ENDED
MARCH 31, 1997
-----------------
STW RHP SDL
--- --- ---
(Unaudited) (Unaudited) (Unaudited)
----------- ----------- -----------
<S> <C> <C> <C>
Current assets . . . . . . . . . . $ 8,250 $ 20,872 $ 9,618
Noncurrent assets. . . . . . . . . 33,903 48,944 80,791
Current liabilities. . . . . . . . 5,243 29,654 20,238
Noncurrent liabilities . . . . . . 36,672 60,456 41,707
Net revenues . . . . . . . . . . . 405 1,444 273
Net loss . . . . . . . . . . . . . (2,360) (4,669) (4,269)
</TABLE>
COST INVESTMENTS
The Company uses the cost method of accounting for three other investments
as of March 31, 1997. These are PT Mobilkom Telekomindo ("Mobilkom"), RPG
Paging Services Limited ("RPSL"), and Telecomunicaciones Globales, S.A. de
C.V. ("Global Telecom"). The Company owns its holding in RPSL indirectly
through its interest in STOL. STOL purchased an additional 9% of RPSL in
January 1997 for $2,100,000 which increased the Company's indirect interest
from 7% to 13.3%. The Company acquired its interest in Global Telecom, a
Mexican long distance company in January 1997 for $62,000. As of March 31,
1997, the Company's ownership interests in these entities were 15%, 13.3%
and 1.56%, respectively
The following represents the Company's carrying value of these cost
investments:
DECEMBER 31, MARCH 31,
1996 1997
------------ ---------
Mobilkom . . . . . . . . . . . . . $ 1,500 $ 1,500
RPSL . . . . . . . . . . . . . . . 1,426 3,526
Global Telecom . . . . . . . . . . -- 62
------- -------
$ 2,926 $ 5,088
------- -------
------- -------
11.
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PRO FORMA SUMMARY
The following unaudited pro forma summary combines the consolidated results
of operations of the Company as if (i) TeamTalk had been a wholly owned
consolidated subsidiary since January 1, 1996, (ii) ownership in RHP had
been 28.3% since January 1, 1996, (iii) the acquisition of STOL had
occurred on January 1, 1996, (iv) the acquisition of SDL had occurred at
January 1, 1996 and (v) the acquisition of Protelsa had occurred at January
1, 1996. This pro forma summary does not necessarily reflect the results
of operations as they would have been if the Company had acquired the
entities as of January 1, 1996.
Unaudited pro forma consolidated results of operations for the various
acquisitions as described above are as follows (in thousands):
THREE MONTHS ENDED
MARCH 31,
------------------------
1996 1997
-------- --------
Revenues . . . . . . . . . . . . . $ 290 $ 519
Net loss . . . . . . . . . . . . . (6,344) (14,479)
(5) NOTES RECEIVABLE FROM AFFILIATES
In March 1997, the Company lent $3,500,000 to SDL. The loan, which is
evidenced by a promissory note, accrues interest at 9% per annum and is due
upon written demand by the Company.
(6) NOTES RECEIVABLE
In March 1997, the Company loaned $500,000 to an unrelated third party. The
loan, which has a one-year term, accrues interest at the rate of 15% per
annum and is guaranteed by another unrelated third party. At the sole
discretion of the Company, the loan may be converted at any time during its
one-year term into 51% of the outstanding capital stock of Clasbeep S.A.,
an Ecuadorian paging corporation wholly owned by the borrower.
(7) STOCK OPTION/STOCK ISSUANCE PLAN
On January 12, 1997 the Board of Directors granted options to purchase an
aggregate of 127,095 shares of Common Stock at an exercise price of $9.375
per share under the 1996 Stock Option/Stock Issuance Plan ("1996 SO/SIP").
On February 1, 1997 the Board of Directors granted an option to purchase
20,000 shares of Common Stock at an exercise price of $9.375 per share
under the 1996 SO/SIP. Further, on February 3, 1997 the Board of Directors
granted options to purchase an aggregate of 206,187 shares of Common Stock
at an exercise price of $9.375 per share under the 1996 SO/SIP.
On February 28, 1997, the Board of Directors approved an amendment and
restatement of the 1996 SO/SIP increasing the aggregate number of shares of
Common Stock available for issuance over the term of the 1996 SO/SIP by
411,526 shares to a total of 2,811,526 shares. Such amendment and
restatement was approved by the stockholders of the Company on May 5, 1997.
12.
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(8) COMMITMENTS AND CONTINGENCIES
CAPITAL CONTRIBUTIONS
In order to protect IWC's investments in affiliates from ownership
dilution, IWC anticipates making additional capital contributions to the
LWBs as needed.
GUARANTEE OF DEBT OF EQUITY INVESTEE
In connection with a Malaysian Ringgit 91,000,000 (approximately
$36,694,000 as translated using effective exchange rates at March 31, 1997)
senior credit facility through a syndicate of Malaysian banks obtained by
the Company's 30% equity investee, STW, the Company along with other STW
shareholders, executed a financial "keep well" covenant pursuant to which
they have agreed (i) to ensure that STW will remain solvent and be able to
meet its financial liabilities when due and (ii) to ensure that the project
is completed in a timely manner and to make additional debt and equity
investments in STW to meet cost overruns. The loan is repayable by STW in
eleven semi-annual installments beginning October 8, 1997. The Company and
other STW shareholders have separately executed an agreement, whereby each
shareholder has agreed to share in the liability on a pro rata basis in
relation to their interest in STW. In the event that the bank were to seek
repayment from the STW shareholders and the other shareholders were unable
to honor their pro rata share in the liability, the Company might be liable
for the full amount of the outstanding amount of the loan. As of March 31,
1997, this credit facility was fully drawn down.
The Company does not believe it is practicable to estimate the fair value
of the guarantee and does not believe exposure to loss is likely.
Accordingly, no provision has been made in the accompanying consolidated
financial statements.
The Company, indirectly through its affiliate, New Zealand Wireless
Limited, owns 15% of Mobilkom. Mobilkom expects to fund the continued
buildout of its network and the acquisition of subscriber terminals
primarily through a seven-year $50 million revolving/reducing credit
facility which it has obtained from a syndicate of Thai banks. Borrowings
under the credit facility bear interest at a floating rate based on LIBOR
and are secured by substantially all of Mobilkom's assets and a pledge of
all the capital stock held by the Company and Mobilkom's other
shareholders. Another Mobilkom shareholder has guaranteed borrowings of up
to $25 million under the credit facility. As of March 31, 1997, borrowings
of approximately $21,637,000 were outstanding under this facility.
The Company indirectly owns a 19.8% equity interest in PT Mobile Selular
Indonesia ("Mobisel"), a provider of cellular services in Indonesia through
its 28.3% ownership in RHP. Mobisel has obtained a six-year $60 million
credit facility from Nissho Iwai International (Singapore) Pte. Ltd.
("Nissho Iwai") to finance the construction of its network. Borrowings
under the credit facility bear interest at a floating rate based on LIBOR
and are secured by all of Mobisel's assets and a pledge of all the capital
stock held by RHP and Mobisel's other shareholders. RHP has also guaranteed
the credit facility. As of March 31, 1997, this credit facility was fully
drawn down.
(9) SUBSEQUENT EVENTS
On May 5, 1997, the Board of Directors granted options to purchase an
aggregate of 342,000 shares of Common Stock at an exercise price of $9.375
per share to certain service providers of the Company.
On May 5, 1997, the Company entered into an agreement with Vanguard
Cellular Financial Corp. (together with its wholly owned subsidiary,
Vanguard Cellular Operating Corp., "Vanguard"), pursuant to which Vanguard
surrendered then outstanding warrants to purchase 323,880 shares of Series
C Preferred Stock, 416,720 shares of Series D Preferred Stock and 64,120
shares of Series F Preferred Stock in exchange for the issuance by the
Company of a warrant to acquire 249,970 shares of Common Stock at a
purchase price of $0.25 per share and a second warrant to purchase 554,750
shares of Common Stock at an exercise price of $9.375 per share, which
second warrant was subsequently surrendered by Vanguard in exchange for the
issuance to certain officers and employees of Vanguard of an option to
purchase 53,330 shares of Common Stock at an exercise price of $9.375
13.
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
per share under the 1996 SO/SIP and options to purchase an aggregate of
501,420 shares of Common Stock at a purchase price of $9.375 per share
outside the 1996 SO/SIP. Such transaction and the issuance of such options
and warrants by the Company were approved by the Board of Directors of the
Company on February 28, 1997, and by the stockholders of the Company on May
5, 1997.
On or prior to May 6, holders of warrants to purchase an aggregate of
28,520 shares of Series D Preferred Stock exercised such warrants pursuant
to the "net-exercise" provisions thereof. Upon such exercises, such
warrantholders received an aggregate of 8,552 shares of Series D Preferred
Stock.
The holders of the Warrants issued in connection with the Debt Offering
are entitled to purchase 11.638 shares of Common Stock per Warrant,
representing in the aggregate approximately 10.0% of the outstanding stock
of the Company on a fully-diluted basis as of August 15, 1996. In the
event that a qualified initial public offering of Common Stock in which the
Company raises at least $50 million in net cash proceeds does not occur on
or prior to May 15, 1997, each unexercised Warrant will entitle the holder
thereof to purchase an additional 2.645 shares of Common Stock. The
Company does not expect to complete such an offering on or prior to May 15,
1997.
14.
<PAGE>
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
THE DISCUSSION IN THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE DISCUSSED HEREIN. FACTORS THAT COULD CAUSE OR
CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE
DISCUSSED IN "RISK FACTORS THAT MAY AFFECT FUTURE RESULTS" AS WELL AS THOSE
DISCUSSED IN THIS SECTION AND ELSEWHERE IN THIS REPORT, AND THE RISKS
DISCUSSED IN THE "RISK FACTORS" SECTION INCLUDED IN THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996, FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION ON APRIL 15, 1997.
RESULTS OF OPERATIONS
The Company's net loss increased from $3.6 million for the three month
period ended March 31, 1996 to $14.5 million for the corresponding period in
1997, an increase of 304%. These increases were due primarily to higher
selling, general and administrative expenses, increases in equity in losses
of affiliates and an increase in interest expense, as more fully described
below.
The Company recorded no operating revenues and cost of revenues for the
three month period ended March 31, 1996 compared to $519,000 in operating
revenues, offset by $589,000 in cost of revenues, for the corresponding
period in 1997. The operating revenues and cost of revenues for the three
month period ended March 31, 1997 resulted from the acquisition, effective
April 30, 1996, of the remaining 50% of TeamTalk, which increased the
Company's equity interest in TeamTalk to 100% and resulted in the
consolidation of TeamTalk's operations in the Company's financial statements.
The Company's selling, general and administrative expenses increased
from $2.3 million for the three month period ended March 31, 1996 to $6.3
million for the corresponding period in 1997, an increase of 177%. This
increase was due primarily to continued growth both in the Company's own
general and administrative expenses, including salaries and benefits expense,
professional fees and all other general and administrative expenses, and in
the selling, general and administrative expenses of its consolidated
subsidiaries that have commenced operations, primarily TeamTalk and SRC. The
Company's selling, general and administrative expenses for such period also
reflected the consolidated results of four other subsidiaries whose
operations are currently in the developmental stage, all of which contributed
to the overall increase in the selling, general and administrative expenses
from the three month period ended March 31, 1996 as compared to the
corresponding period in 1997.
The primary components of the Company's selling, general and
administrative expenses include (i) overall growth in the Company's own
general and administrative expenses, including an increase in salaries and
benefits from $819,000 for the three month period ended March 31, 1996 to
$1.2 million for the corresponding period in 1997, an increase in
professional fees from $565,000 for the three month period ended March 31,
1996 to $638,000 for the corresponding period in 1997 and an increase in all
other general and administrative expenses from $481,000 for the three month
period ended March 31, 1996 to $849,000 for the corresponding period in 1997;
and (ii) selling, general and administrative expenses of $617,000 and $2.0
million for the three month period ended March 31, 1997 associated with the
consolidation of the operations of TeamTalk and SRC, respectively, in the
Company's consolidated financial statements as compared to $229,000 of
selling, general and administrative expenses associated with the
consolidation of the operations of SRC for the corresponding period in 1996.
In addition, the Company reflected selling, general and administrative
expenses of four other subsidiaries whose operations are currently in the
developmental stage for the three month period ended March 31, 1997 with a
resultant increase of $751,000 as compared to the corresponding period in
1996.
The Company's equity in losses of affiliates increased from $1.4 million
for the three month period ended March 31, 1996 to $4.7 million for the
corresponding period in 1997, an increase of 229%. For the three month
period ended March 31, 1996, the equity in losses of affiliates was
attributable to $899,000 of operating losses and
15.
<PAGE>
$520,000 of expense relating to the amortization of telecommunication
licenses. For the corresponding period in 1997, equity in losses of
affiliates consisted of $3.8 million of operating losses and $843,000 of
expense relating to amortization of telecommunication licenses. The increase
in the equity in losses of affiliates is attributable primarily to the
increase in the underlying operating losses of RHP, SDL and STW.
The Company's equity in losses of affiliate attributable to RHP
increased from $78,000 for the three month period ended March 31, 1996 to
$1.3 million for the corresponding period in 1997 as RHP's 70% owned
consolidated subsidiary, Mobisel, continued to expand its operations and
roll-out its nationwide telecommunication network. During this expansion
phase, Mobisel's gross profit declined due primarily to greater pulse sharing
and airtime costs and an increase in depreciation expense due to the
build-out of Mobisel's telecommunication network. In addition, as part of
its expansion effort, Mobisel experienced growth in its selling, general and
administrative expense base in order to meet the anticipated growth in its
operations. The Company's amortization of telecommunication license
attributable to RHP increased from $296,000 for the three month period ended
March 31, 1996 to $419,000 for the corresponding period in 1997, an increase
of 42%, due to the Company's additional investment of $8.6 million in RHP
during October 1996.
The Company's equity in losses of affiliates attributable to its 40%
interest in SDL, which the Company acquired in November 1996, was $1.7
million for the three month period ended March 31, 1997; and the Company's
amortization of telecommunication license attributable to SDL was $191,000
for the three month period ended March 31, 1997. SDL operating losses are
anticipated to increase throughout the foreseeable future as SDL continues to
expand its operations within the Peoples Republic of China.
The Company's equity in losses of affiliate attributable to STW
increased from $546,000 for the three month period ended March 31, 1996 to
$708,000 for the corresponding period in 1997, an increase of 30%, and the
Company's amortization of telecommunication license attributable to STW
increased from $218,000 for the three month period ended March 31, 1996 to
$221,000 for the corresponding period in 1997.
The Company's interest income increased from $242,000 for the three
month period ended March 31, 1996 to $527,000 for the corresponding period in
1997, an increase of 118%. This increase was due primarily to interest
earned on the proceeds from the Debt Offering in August 1996, which were
invested in short-term interest-bearing securities.
The Company's interest expense increased from $119,000 for the three
month period ended March 31, 1996 to $4.2 million for the corresponding
period in 1997. The increase in interest expense was primarily due to
interest expense associated with the Debt Offering.
IMPACT OF INFLATION AND CURRENCY FLUCTUATION
Many developing countries have experienced substantial, and in some
periods extremely high, rates of inflation and resulting high interest rates
for many years. Inflation and rapid fluctuations in inflation rates have had
and may continue to have negative effects on the economies and securities
markets of certain developing countries and could have an adverse effect on
the operating companies and developmental stage projects in those countries,
including an adverse effect on their ability to obtain financing.
The value of the Company's investment in an operating company or
developmental stage project is partially a function of the currency exchange
rate between the dollar and the applicable local currency. In addition, the
operating companies will report their results of operations in the local
currency and, accordingly, the Company's results of operations will be
affected by changes in currency exchange rates between those currencies and
U.S. dollars. The Company does not hedge against foreign currency exchange
rate risks. As a result, the Company may experience economic loss with
respect to its investments and fluctuations in its results of operations
solely as a result of currency exchange rate fluctuations. For example, the
Company experienced a significant decline in the value of its investment in
Mobilcom Mexico, its ECTR operating company in Mexico, as a result of the
1994 devaluation of the Mexican peso and the resulting economic instability
in Mexico. Many of the currencies of developing countries have experienced
steady devaluations relative to the U.S. dollar, and major adjustments have
been made in the past and may again occur in the future, any of which could
have a material adverse effect on the Company.
16.
<PAGE>
To the extent that the operating companies commence or have commenced
commercial operations, any revenues they generate will generally be paid to
the operating companies in the local currency. By contrast, many significant
liabilities of the operating companies (such as liabilities for the financing
of telecommunications equipment) may be payable in U.S. dollars or in
currencies other than the local currency. As a result, any devaluation in
the local currency relative to the currencies in which such liabilities are
payable could have a material adverse effect on the Company.
LIQUIDITY AND CAPITAL RESOURCES
To date, the Company has funded its cash requirements primarily through
the use of the net proceeds of a series of Preferred Stock private
placements, bridge loans and the Debt Offering. The bridge loans have
generally been converted into Preferred Stock. The proceeds from these
financings were mainly used to fund the Company's investments in operating
companies and developmental stage projects, to provide working capital and
for general corporate purposes, including the expenses incurred in seeking
and evaluating new investment opportunities. As of March 31, 1996 and March
31, 1997, the Company had cash and cash equivalents and short-term investment
balances of $15.6 million and $27.3 million, respectively.
The Company has generated negative cash flow from operations since
inception, and its operating companies and developmental stage projects are
not expected to provide any cash to the Company in the foreseeable future. As
a result, the Company is and will remain dependent upon raising funds from
outside sources to fund its working capital needs, investments in operating
companies and developmental stage projects, other cash requirements and to
repay the Notes and any other indebtedness it may incur when it becomes due
and payable.
The Company believes its existing cash balance is sufficient to meet its
minimum operating and contractual obligations through the end of fiscal 1997.
However, the Company will require additional financing prior to December 31,
1997, to meet its business objective of participating in additional equity
rounds of financing on the operating company and developmental stage project
level in order to finance the expansion of the operations of such operating
companies and developmental stage projects. The Company has neither received
commitments nor completed arrangements for additional financing, and there
can be no assurance that additional financing will be available to the
Company on acceptable terms when required by the Company or at all. The
Company's inability to obtain such additional financing on acceptable terms
would have a material adverse effect on the Company. In addition, the Company
intends to pursue additional investment opportunities for wireless
communications projects and will require additional sources of financing in
order to pursue those investments. However, there can be no assurance that
such additional financing will be available on favorable terms or at all. See
"--Additional Factors That May Affect Future Results--Company Level
Risks--Negative Operating Cash Flow; Dependence on Additional Financing; No
Commitments for Additional Financing."
At the project level, IWC and its partners typically fund initial
project investments using capital contributions either in the form of equity
or shareholder loans. When projects become operational, IWC seeks to fund
ongoing development of the project using third-party financing, preferably on
a non-recourse basis to the Company.
Mobilkom, IWC's national ECTR operating company in Indonesia, arranged a
$50.0 million credit facility through a syndicate of Thai banks. This
facility is secured by all of the assets and capital stock of Mobilkom, and
$25.0 million of the facility has been guaranteed by Jasmine International
Public Company Limited ("Jasmine"), a 56.25% owner of Mobilkom. As of March
31, 1997, approximately $21.6 million was outstanding under this facility.
The Company anticipates that the current $50.0 million facility will be
sufficient for Mobilkom to meet all of its currently anticipated expenditures
through 1997. Borrowings outstanding under this credit facility must be
repaid in 16 quarterly installments commencing in 2000.
Mobisel, IWC's national cellular operating company in Indonesia, in
which the Company held an indirect 19.8% interest as of March 31, 1997
through IWC's investment in RHP, has obtained a $60.0 million credit facility
from Nissho Iwai. This facility is secured by all of Mobisel's assets and a
pledge of all of the capital stock of Mobisel held by RHP, which has also
guaranteed the credit facility. The use of borrowings under the credit
facility with Nissho Iwai is limited to expenditures necessary for the
implementation and construction of Mobisel's network. Mobisel will require
substantial additional financing to complete its planned capital expenditures
through 1997 and
17.
<PAGE>
for other purposes. Accordingly, Mobisel has commenced discussions with a
number of potential financing sources in order to obtain additional
financing. Borrowings outstanding under this credit facility must be repaid
in six equal semi-annual installments beginning in late 1998.
STW, IWC's national WLL operating company in Malaysia, has arranged a
Malaysian Ringgit 91.0 million (approximately $36.7 million as of March 31,
1997) credit facility through a syndicate of Malaysian banks. This facility
is secured by substantially all of STW's assets and a pledge of all of the
capital stock of STW held by IWC and STW's other shareholders, and has been
guaranteed by Shubila Holding Sdn Bhd, the 60% owner of STW, and certain
officers of STW (including a former officer of IWC). In addition, STW has
agreed to assign to and deposit with the banks all of its cash, including
revenues, loan drawings and shareholder advances. In addition to pledging
their capital stock in STW, IWC and the other STW shareholders have entered
into a "keep well" covenant pursuant to which they have agreed (i) to insure
that STW remains solvent and able to meet its financial liabilities when due,
and (ii) to insure the timely completion of its WLL project and to make
additional debt or equity investments in STW necessary to meet any cost
overruns. The Company and other STW shareholders have also separately
executed an agreement, whereby each shareholder has agreed to share in the
liability on a pro rata basis in relation to their interest in STW. In the
event that the banks were to seek repayment from the STW shareholders and the
other shareholders were unable to honor their pro rata share of the
liability, the Company might be liable for the full amount of the outstanding
amount of the loan. Borrowings outstanding under this credit facility must be
repaid in eleven semi-annual installments beginning October 8, 1997.
ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS
THE COMPANY OPERATES IN A RAPIDLY CHANGING ENVIRONMENT THAT INVOLVES A
NUMBER OF RISKS, SOME OF WHICH ARE BEYOND THE COMPANY'S CONTROL. THE
FOLLOWING DISCUSSION HIGHLIGHTS SOME OF THESE RISKS. THESE RISKS SHOULD BE
READ IN CONJUNCTION WITH THE "RISK FACTORS" SECTION INCLUDED IN THE COMPANY'S
REGISTRATION STATEMENT ON FORM S-1 AS FILED WITH THE COMMISSION ON FEBRUARY
12, 1997, AS SUBSEQUENTLY AMENDED (REG. NO. 333-21687).
COMPANY LEVEL RISKS
CONTINUING LOSSES; LIMITED OPERATING HISTORY
The Company has incurred net losses since its inception and had an accumulated
stockholders' deficit of approximately $68.4 million as of March 31, 1997. The
Company anticipates that its net losses will increase significantly in the
foreseeable future, and there can be no assurance as to whether or when the
Company's operations will become profitable. See "--Results of Operations." The
Company has a limited operating history. Since its inception in January 1992,
the Company's activities have been concentrated primarily in the early stage
development of its wireless projects, including the selection of local partners,
the formation of operating companies and the pursuit of operating licenses.
NEGATIVE OPERATING CASH FLOW; DEPENDENCE ON ADDITIONAL FINANCING; NO COMMITMENTS
FOR ADDITIONAL FINANCING
The Company used cash in operations and investing activities of $73.2
million for the year ended December 31, 1996, and $17.4 million for the
three-months ended March 31, 1997, and expects such negative cash flows to
continue and likely increase in the foreseeable future. Because of such
negative cash flow and negative working capital and the capital intensive
nature of the Company's business, the Company will require continuing sources
of outside debt and equity financing to fund its working capital needs,
investments and other cash requirements.
In particular, the Company will require additional financing prior to
December 31, 1997, to meet currently anticipated requirements for working
capital and investments in its operating companies and developmental stage
projects. In addition, the Company intends to pursue additional investment
opportunities for wireless projects and anticipates that it will require
additional sources of financing in order to fund those investments. However,
the Company has neither received commitments nor completed arrangements for
additional financing, and there can be no assurance that any additional debt
or equity financing will be available to the Company on acceptable terms when
required by the
18.
<PAGE>
Company or at all. If adequate sources of additional financing are not
available, the Company may be forced (i) to delay, scale back or eliminate
one or more of its projects, (ii) to suffer a significant dilution of its
equity interest or loss of value in one or more of its investments, or (iii)
to liquidate one or more of its investments. In addition, the Company may be
unable to repay its liabilities (including the Notes) as they become due, and
may be unable to meet its working capital and other cash requirements. The
Indenture contains certain restrictions on the ability of the Company to make
investments in, or guarantee the indebtedness of, the operating companies and
developmental stage projects. Accordingly, the Company's inability to obtain
such additional financing would have a material adverse effect on the Company
and could result in its insolvency or liquidation.
SUBSTANTIAL LEVERAGE
The Company is highly leveraged and has indebtedness that is substantial
in relation to its stockholders' equity, including its redeemable convertible
Preferred Stock. As of March 31, 1997, the Company's long term debt was $79.4
million, and its stockholders' deficit and redeemable convertible Preferred
Stock was $66.1 million. The high level of the Company's indebtedness will
have important consequences, including (i) limitations on the Company's
ability to obtain additional debt financing in the future and (ii)
limitations on the Company's flexibility in reacting to changes in the
industry and economic conditions generally. In addition, most of the
existing operating companies and developmental stage projects will not be
subject to any limitations restricting the incurrence of additional
indebtedness, and, to the extent that the Company is successful in its
strategy of obtaining additional financing at the operating company or
developmental stage project level, the amount of such indebtedness could
increase substantially, which may have consequences similar to those
described in clauses (i) and (ii) above with respect to the Company.
RISK OF INABILITY TO REPAY NOTES AT MATURITY
The Company has had net losses and has generated negative cash flow from
operations since inception. Further, as discussed below under "}-Holding
Company Structure; Limitations on Access to Cash Flow of Operating
Companies," the Company does not expect that it will generate positive cash
flow through dividends or other distributions from its operating companies
for the foreseeable future. Accordingly, the Company's ability to repay the
Notes and any other indebtedness which it may incur from time to time at
maturity will be dependent on developing one or more sources of financing
prior to the maturity of such indebtedness. The Company may, among other
things, (i) seek to refinance all or a portion of such indebtedness at
maturity through sales of additional debt or equity securities of the Company
or other borrowings, (ii) seek to sell all or a portion of its interests in
one or more of its operating companies or developmental stage projects
(subject to the restrictions described below under "--Company Level
Risks--Restrictions on Transfer of Ownership Interests") or (iii) negotiate
with its financial and strategic partners to permit the cash, if any,
produced by the operating companies to be distributed to equity holders.
There can be no assurance that (i) the Company will be able to obtain debt or
equity refinancing on acceptable terms, or at all, in the future, (ii) the
Company will be able to sell assets in a timely manner or on commercially
acceptable terms or in an amount that will be sufficient to repay its
indebtedness when due, (iii) the Company will be able to obtain the consents
and approvals required in order to sell its interests in, or to receive
dividends from, its operating companies or developmental stage projects or
(iv) that the operating companies or developmental stage projects will in
fact generate positive cash flow or that any such cash flow will be
distributed to equity holders (particularly since the Company expects that
its operating companies will generally reinvest all of their cash flow in
development opportunities for the foreseeable future). In addition, a default
under the Notes or such other indebtedness as the Company may incur in the
future, for example, could in turn permit lenders under STW's Malaysian
Ringgit 91 million (approximately $36,694,000 as translated using effective
exchange rates at March 31, 1997) senior credit facility, and possibly under
other debt instruments of the operating companies, to declare borrowings
outstanding thereunder to be due and payable pursuant to cross-default
clauses, permitting the lenders under such debt instruments to proceed
against any collateral pledged as security therefor. Any failure by the
Company to repay the Notes when due would have a material adverse effect on
the Company.
RISK OF GOVERNMENTAL ACTIONS RESULTING IN VIOLATION OF INDENTURE
The Indenture pursuant to which the Notes were issued, contains
covenants that impose certain requirements with respect to sales or other
dispositions of assets with a fair market value in excess of $500,000
(including capital stock in operating companies and in developmental stage
projects) by the Company and certain subsidiaries of the Company ("Asset
Sales"). Among other things, the Indenture requires that at least 85% of the
consideration for an Asset
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Sale be in cash and that the Company receive consideration equal to the fair
market value of the assets in question. However, if an Asset Sale occurs
because of governmental action (for example, by expropriation or
confiscation), or in certain other circumstances including, among other
things, a sale of the Company's investment in certain operating companies
compelled by other stockholders of such operating company or pursuant to
rights granted to certain bank lenders of certain operating companies, the
requirement that the Company receive fair market value for the assets shall
be deemed to have been satisfied to the extent that the difference between
the fair market value of such assets and the actual consideration received in
such Asset Sale (and all other Asset Sales subject to this exception) is less
than 10% of the "total market value of equity" of the Company. However, if an
Asset Sale is compelled by governmental action, the Indenture still requires
that at least 85% of the consideration be in cash.
In certain of the countries in which the Company has made investments,
there is a risk that the Company's investments may be confiscated or
expropriated by governmental authorities. In particular, in early 1996, the
Malaysian government initiated efforts to consolidate the Malaysian
telecommunications industry, which, if completed would have forced a sale or
merger of STW, the Company's Malaysian operating company, to or with one of a
limited number of surviving telecommunications companies. There can be no
assurance that the Malaysian government will not seek to take similar actions
in the future. Likewise, other countries may seek to expropriate or
confiscate assets of the Company. To the extent that the consideration, if
any, received by the Company in connection with these expropriations or
confiscations failed to satisfy the covenants under the Indenture, such a
violation will be deemed an event of default under the Indenture entitling
the holders of the Notes to demand immediate repayment thereof and to proceed
against their collateral, which would have a material adverse effect on the
Company. See "--Project Level Risks--Risks Inherent in Foreign Investment."
HOLDING COMPANY STRUCTURE; LIMITATIONS ON ACCESS TO CASH FLOW OF OPERATING
COMPANIES
The Company is a holding company with no business operations of its own.
All of the operations of the Company are conducted through its wholly owned
subsidiary, IWC, and its affiliated companies, which are separate and
distinct legal entities and have no obligation, contingent or otherwise to
make any funds available to the Company to enable it to make investments in
operating companies or developmental stage projects, meet working capital
needs or other liabilities of the Company (including liabilities under the
Notes), or for any other reason. In addition, most of the operating companies
have generated negative cash flow from operations, and the Company expects
that most operating companies will continue to generate negative cash flow
from operations for the foreseeable future. Further, to the extent that any
of the operating companies generates positive cash flow, the Company may be
unable to access such cash flow because (i) it owns 50% or less of the equity
of most of such entities and, therefore, does not have the requisite control
to cause such entities to pay dividends to their equity holders; (ii) certain
of such entities are currently or may become parties to credit or other
borrowing agreements that restrict or prohibit the payment of dividends, and
such entities are likely to continue to be subject to such restrictions and
prohibitions for the foreseeable future; (iii) the Company expects that its
operating companies will generally reinvest all of their cash flow in
development opportunities for the foreseeable future; and/or (iv) some of the
countries in which such entities conduct business, tax the payment and
repatriation of dividends or otherwise restrict the repatriation of funds. As
a result, the Company does not expect that it will be able to generate any
significant cash flow through dividends or other distributions from the
operating companies in the foreseeable future, and there can be no assurance
that the Company will be able to generate any significant cash flow from the
operating companies at any time in the future.
RESTRICTIONS ON TRANSFER OF OWNERSHIP INTERESTS
The Company's ability to sell or transfer its ownership interests in its
operating companies and developmental stage projects is generally subject to (i)
limitations contained in the agreements between the Company and its local
partners including, in certain cases, complete prohibitions on sales or
transfers for a period of years, co-sale rights and/or rights of first refusal
and (ii) provisions in local operating licenses and local governmental
regulations that, in certain cases, prohibit or restrict the transfer of the
Company's ownership interests in such operating companies and developmental
stage projects. Moreover, the Company and its local partners have in the past
been required to pledge their capital stock in certain operating companies to
secure credit facilities obtained by those operating companies, and the Company
may be prohibited from transferring or otherwise disposing of such capital stock
so long as it is pledged as collateral for those credit facilities. In addition,
none of the operating companies or developmental stage projects currently has
any publicly traded securities and there can be no assurance that in the future
there will be either a public
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or private market for the securities of the Company's operating companies or
developmental stage projects. As a result, the Company's ability to liquidate
any or all of its investments may be substantially limited and there can be
no assurance that the Company will be able to do so in a timely manner, or at
all in the event that the Company is required to do so in order to satisfy
its cash needs, including providing funds for investments and repayment of
indebtedness. Moreover, even if any sales are completed, the prices realized
on those sales could be less than the Company's investment, and there may be
substantial local taxes imposed on the Company in the case of any such sales
and, in any event, there can be no assurance that there will not be
substantial taxes or other restrictions on the ability of the Company to
repatriate any amounts realized upon the sale of any such investments. In
addition, certain of the operating companies and developmental stage projects
are or may be parties to credit agreements that restrict their ability to pay
dividends or make other distributions to their equity investors, and the
Company's local partners, by virtue of their majority ownership interest in
the operating companies and developmental stage projects, generally have the
right to determine the timing and amount of any such dividends or
distributions.
LACK OF CONTROL OF OPERATING COMPANIES AND DEVELOPMENTAL STAGE PROJECTS
The Company anticipates that it will often have a minority interest in
its operating companies and developmental stage projects, in part because
applicable laws often limit foreign investors to minority equity positions.
Although the Company is actively involved in the management of most of the
operating companies and developmental stage projects in which it has an
ownership interest and intends to invest in the future in operating companies
and developmental stage projects in which it can participate in management,
its minority voting positions may preclude it from controlling such entities
and implementing strategies that it favors, including strategies involving
the expansion or development of projects or the pursuit of certain financing
alternatives. Moreover, even where the Company has majority control of a
project, the exercise of such control may be subject to contractual,
regulatory or other restrictions. In addition, the Company may be unable to
access the cash flow, if any, of its operating companies. See "--Company
Level Risks--Holding Company Structure; Limitations on Access to Cash Flow of
Operating Companies."
RISKS INHERENT IN GROWTH STRATEGY
The Company has grown rapidly since inception, and as of March 31, 1997,
had operating companies or developmental stage projects in 13 foreign
countries. Subject to the availability of additional financing, the Company
anticipates that it will make additional investments in wireless projects in
other foreign countries and is actively seeking and evaluating new investment
opportunities in foreign countries where it currently has operating companies
or developmental stage projects. This strategy presents the risks inherent in
assessing the value, strengths and weaknesses of development opportunities,
in evaluating the costs and uncertain returns of building and expanding the
facilities for operating systems and in integrating and managing the
operations of additional operating systems. The Company's growth strategy
will place significant demands on the Company's operational, financial and
marketing resources and on its management. Any failure to manage the Company
effectively could have a material adverse effect on the Company.
RISK OF REGISTRATION UNDER INVESTMENT COMPANY ACT OF 1940
Because the Company often acquires minority ownership positions in
operating companies and development stage projects, there is a risk that
these ownership positions could be deemed to be investment securities and
that the Company could be characterized as an investment company under the
Investment Company Act of 1940 (the "Investment Company Act"). Due to the
Company's active role in developing and managing the operating companies and
its contractual rights as an equity holder, the Company believes that a
substantial majority of its interests in the operating companies are the
equivalent of joint venture interests rather than investment securities.
Therefore, the Company believes that it is not an investment company and
intends to continue its business and conduct its operations so as not to
become subject to the Investment Company Act. If the Commission or its staff
were to take the position, or if it were otherwise asserted, that the Company
is an investment company, the Company could be required either (i) to
liquidate its investments in one or more operating companies or developmental
stage projects and change the manner in which it conducts its operations to
avoid being required to register as an investment company or (ii) to register
as an investment company. If the Company were required to register under the
Investment Company Act, it would be subject to substantive regulations with
respect to capital structure, operations, transactions with affiliates and
other matters. In addition, a determination that the Company is subject to
the Investment Company Act would constitute an event of default under the
Indenture and permit acceleration of the Notes. If the Company were found to
be an investment
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company but was not registered under the Investment Company Act, the Company
would be prohibited from, among other things, conducting public offerings in
the U.S. or engaging in interstate commerce in the U.S., the Company would be
subject to monetary penalties and injunctive relief in an action brought by
the Commission, and certain contracts to which the Company is a party
(including the Indenture and the Notes) might be rendered unenforceable or
subject to rescission by any party thereto. As a result, any determination
that the Company is an investment company would have a material adverse
effect on the Company and would likely require that the Company cease
operations.
CONTROL OF THE COMPANY
At March 31, 1997, Vanguard beneficially owned approximately 39% of the
Company's equity, without giving effect to the warrant and option exchange
transaction described in Note 9 of the Notes to Consolidated Financial
Statements above. Vanguard has provided and continues to provide a number of
services to the Company relating to the formation, development and operation
of wireless communications services, including identification and evaluation
of wireless communications opportunities, review of business and technical
plans and assistance in training operating company personnel. Vanguard has
the right to elect three directors to the Company's Board of Directors and
currently has three representatives on such Board, including Haynes G.
Griffin, Chairman of the Board of Directors. As a result, Vanguard may have
the ability to effectively control the Company and direct its business and
affairs.
CONFLICTS OF INTEREST
Vanguard is not precluded from competing with the Company by itself or
through affiliates by developing, owning and/or operating international
wireless communications businesses, including businesses that use the same or
similar technologies or provide the same services as the Company's existing
and future operating companies. This is true even though the Company acquired
substantially all of Vanguard's interests in certain of its international
wireless projects in December 1995. Further, although many of the agreements
governing the relationship between the Company and its local partners contain
preemptive rights, rights of first refusal and/or rights of co-sale with
respect to the sale of shares in the Company's joint ventures, Vanguard is
not precluded from co-investing with the Company in such joint ventures. For
example, in April 1997, Vanguard purchased a 7% equity interest in SDL
directly from STHL, the Company's local partner in SDL. Although the
directors designated by Vanguard may abstain from voting on matters in which
the interests of the Company and Vanguard are in conflict, they are not
obligated to do so, and the Company has not adopted any formal policies or
procedures designed to prevent actual conflicts of interest from occurring.
As a result, the presence of potential or actual conflicts could affect the
process or outcome of Board deliberations. There can be no assurance that
such conflicts of interest will not materially adversely affect the Company.
INFORMATION RELATING TO DEMOGRAPHIC, ECONOMIC, MARKET AND RELATED INFORMATION
The information contained herein includes certain demographic and
economic information, as well as information regarding cellular service,
installation and penetration in the countries in which the Company has
operating companies or developmental stage projects. This information was
obtained from a number of sources and the Company has not independently
verified any such information and there can be no assurance as to its
accuracy. In addition, much of the information related to POPs are estimates
and reflect data that may be incorrect or imprecise and such estimates and
data have been obtained from a number of sources and the Company has not
independently verified any such information.
DEPENDENCE ON KEY PERSONNEL
The success of the Company and its growth strategy depends in large part
on the ability of the Company to attract and retain key management, marketing
and operating personnel at each of the Company, operating company and
developmental stage project levels. There can be no assurance the Company
will be able to attract and retain the qualified personnel needed for its
business, particularly because of the amount of international travel required
of the Company's managers and because experienced local managers are often
unavailable. In addition, the loss of the services of one or more members of
its senior management team, particularly John D. Lockton or Hugh B. L.
McClung, could have a material adverse effect on the Company.
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CLASSIFICATION OF NOTES AS DEBT; ORIGINAL ISSUE DISCOUNT
Although the Company intends to treat the Notes as debt for all
purposes, there can be no assurance that the Internal Revenue Service will
agree that the Notes qualify as debt for federal income tax purposes. If the
Notes are not respected as debt for such purposes, they would likely be
recharacterized as an equity interest in the Company and the interest that
accretes on the Notes would not be deductible by the Company when accrued or
paid. Loss of such interest deductions would increase income taxes ultimately
payable by the Company, and thus, reduce cash flow otherwise available to
repay the Notes, which would have a material adverse effect on the Company.
Recharacterization of the Notes as equity could also adversely affect
non-corporate holders as well as non-United States holders of the Notes.
Assuming the Notes are respected as debt for federal income tax
purposes, they will be subject to the original issue discount provisions of
the Code because they will have been issued at a non-de minimis discount from
their principal amount. Consequently, the holders of the Notes generally will
be required to include amounts in gross income for federal income tax
purposes in advance of receipt of the cash payments to which the income is
attributable.
If a bankruptcy case is commenced by or against the Company under the
United States Bankruptcy Code after the issuance of the Notes, the claim of a
holder of any of the Notes with respect to the principal amount thereof may
be limited to an amount equal to the sum of (i) the initial offering price
allocable to the Notes and (ii) that portion of the original issued discount
which is not deemed to constitute "unmatured interest" for purposes of the
Bankruptcy Code. Any original issued discount that was not amortized as of
any such bankruptcy filing would constitute "unmatured interest."
REPORTING STANDARDS; FINANCIAL STATEMENTS OF OPERATING COMPANIES; TIMELY
COMPLIANCE WITH INFORMATIONAL AND FILING REQUIREMENTS
Companies in developing countries are subject to accounting, auditing
and financial standards and requirements that differ, in some cases
significantly, from those applicable to U.S. companies. In addition, there
may be substantially less publicly available information about companies in a
developing country than there is about U.S. companies. The Company's ability
to comply with the informational and filing requirements of the Indenture and
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), to
which it is or will be subject will depend on the timely receipt of accurate
and complete financial and other information from the Company's operating
companies and developmental stage projects. The failure to receive such
information on a timely basis could have a material adverse effect on the
Company, including preventing it from satisfying the informational and filing
requirements of the Indenture and the Exchange Act.
RISK OF INABILITY TO FINANCE A CHANGE OF CONTROL OFFER
Upon the occurrence of a Change of Control (as defined in the Indenture
to include (i) a sale or transfer by the Company or a Restricted Subsidiary
(as defined in the Indenture) of all or substantially all of its assets; (ii)
the adoption of a plan of liquidation; (iii) the acquisition of greater than
50% of the voting power by an entity other than Vanguard or (iv) upon the
change of a majority of the Board of Directors), the Company will be required
to make an offer to purchase all of the outstanding Notes at the price set
forth in the Indenture. The Company's failure to purchase the Notes would
result in a default under the Indenture. In the event of a Change of Control,
there can be no assurance that the Company would have sufficient assets to
satisfy all of its obligations under the Indenture. Future debt of the
Company may also contain prohibitions of certain events or transactions which
would constitute a Change of Control or require the obligations thereunder to
be retired upon a Change of Control.
NO CASH DIVIDENDS ON COMMON STOCK
The Company is prohibited under the terms of the Indenture from paying
dividends or making other distributions with respect to the Company's capital
stock, including the Common Stock while the Notes are outstanding. The
Company anticipates that all earnings, if any, will be retained for the
operation and expansion of the Company's business.
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PROJECT LEVEL RISKS
OPERATING LOSSES AND NEGATIVE CASH FLOW; DEPENDENCE ON ADDITIONAL
FINANCING/CAPITAL
Most of the operating companies have generated operating losses and
negative cash flow from operations, and the Company expects that most of its
operating companies will continue to generate operating losses and negative
cash flow from operations for the foreseeable future. The business of the
operating companies and developmental stage projects, particularly WLL
projects, is capital intensive and, in light of such anticipated negative
cash flow from operations, will require continuing sources of outside
financing to fund working capital needs, capital expenditures and other cash
requirements. The Company's strategy is to seek such additional financing at
the operating companies primarily from third parties and not from the Company
or its partners. However, there can be no assurance that the operating
companies and developmental stage projects will be able to obtain the
financing required to make planned capital expenditures, provide working
capital or meet other cash needs. Failure to obtain such financing could have
a material adverse effect on the Company and, among other things, could
result in the loss or revocation of licenses held by the operating companies
or developmental stage projects or require that certain planned projects be
delayed or abandoned. In particular, at March 31, 1997 a significant portion
of the Company's investments had been made in three operating companies
(namely STW, which is developing a national WLL system in Malaysia; Mobisel,
which is developing a national cellular system in Indonesia; and SDL, which
is developing various regional cellular systems in China), and each of these
operating companies will be required to obtain substantial additional
financing in order to complete planned capital expenditures.
In most cases, under agreements with its local partners, the Company and
its partners may be required to make additional equity investments in
operating companies or developmental stage projects, and the Company's or
such partners' inability or unwillingness to do so could result in the
dilution of such party's equity interest or a significant impairment or loss
of the value of the Company's investment. Moreover, the Company and its other
strategic partners have in the past been required, and in the future likely
will be required, to guarantee and/or pledge their respective equity
interests to secure certain indebtedness of the operating companies and
developmental stage projects and otherwise to provide certain assurances to
lenders. See "--Liquidity and Capital Resources." The Indenture contains
certain restrictions on the ability of the Company to make investments in, or
guarantee the indebtedness of, the operating companies and developmental
stage projects.
In addition, there can be no assurance that the operating companies or
developmental stage projects will be able to pay their indebtedness or other
liabilities when due. Any failure to pay such indebtedness or other
liabilities when due could have a material adverse effect on the Company. See
"--Company Level Risks--Negative Operating Cash Flow; Dependence on
Additional Financing; No Commitments For Additional Financing" below.
To date, most of the debt financing obtained by the operating companies
has been secured by assets of the respective operating companies, and it is
likely that any debt financing the operating companies or developmental stage
projects obtain in the foreseeable future will also be similarly secured. The
pledge of assets to secure debt financing may limit the operations of the
operating companies and make it substantially more difficult to obtain
additional financing from other sources.
EARLY STAGE OF DEVELOPMENT OF WIRELESS PROJECTS
Most of the Company's wireless projects are in the early stages of
development. Only the nine operating companies, Via 1, SDL, RPSL, Mobisel,
Mobilkom, STW, Mobilcom Mexico, TeamTalk and UTS, currently provide wireless
communications services on a commercial basis, and many of these operating
companies have only recently initiated such commercial service and have a
limited number of subscribers. Although MOUs have been signed with local
partners in the operating companies and developmental stage projects, in many
cases definitive joint venture and shareholder agreements have not been
prepared or signed, definitive legal entities have not been formed and/or
required equity and debt financing has not been secured. Even where an MOU or
definitive joint venture or shareholder agreement has been signed, there can
be no assurance that the terms of the Company's participation in an operating
company or developmental stage project will not be modified in a manner that
is materially adverse to the Company, particularly because the Company
usually holds a minority interest. The successful development and
commercialization of these projects will depend on a number of significant
financial, logistical, technical, marketing, legal and other
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factors, the outcome of which cannot be predicted. Virtually all of the
operating companies are, and in the future will be, newly-formed entities
that have a limited operating history and that operate at a loss for a
substantial period of time. These operating companies will require
significant amounts of additional financing to fund capital expenditures,
working capital requirements and other cash needs, including the costs of
obtaining additional licenses. In addition, there can be no assurance that
these projects will not encounter engineering, design or other operational
problems. For example, STW, the Company's Malaysian WLL operating company,
has experienced significant delays in network deployment and its marketing
plans primarily as a result of adverse effects on STW of an attempt during
the first half of 1996 by the Malaysian government to consolidate the
Malaysian telecommunications industry. See "--Risks Inherent in Foreign
Investment." As a result, in late 1996, IWC and its principal strategic
partner in STW extensively reviewed and revised STW's business plan and
strategy. There can be no assurance that the Company can successfully develop
any of its existing or planned developmental stage projects or that any of
these projects or any of its operating companies will achieve commercial
success. Further, the Company's current and anticipated ownership interests
in the operating companies and developmental stage projects are subject to
modification and may even be eliminated completely due to the occurrence of
certain events such as the re-negotiation of existing MOUs and/or agreements,
changes in foreign laws or regulations affecting foreign ownership,
government expropriation, financing contingencies and other factors.
Likewise, the Company may voluntarily withdraw from one or more operating
companies and/or developmental stage projects.
RISKS INHERENT IN FOREIGN INVESTMENT
The Company has invested substantial resources outside of the United
States and plans to continue to do so in the future. Governments of many
developing countries have exercised and continue to exercise substantial
influence over many aspects of the private sector. For example, foreign
ownership of telecommunications ventures is prohibited in China. In addition,
in some cases, the government owns or controls (i) companies that are or may
in the future become competitors of the Company or (ii) companies (such as
national telephone companies) upon which the operating companies and
developmental stage projects may depend for required interconnections to
land-line telephone networks and other services. Similarly, government
actions in the future could have a significant adverse effect on economic
conditions in a developing country or may otherwise have a material adverse
effect on the Company and its operating companies and developmental stage
projects. Expropriation, confiscatory taxation, nationalization, political,
economic or social instability or other developments could materially
adversely affect the value of the Company's interests in operating companies
and developmental stage projects in particular developing countries.
For example, in early 1996 the Malaysian government announced a program
designed to consolidate the Malaysian telecommunications industry which, if
completed, would have forced the sale or merger of STW, the Company's
Malaysian operating company, to one of a limited number of surviving
telecommunications companies. Although the Malaysian government announced in
July 1996 that it did not intend to proceed with this program, the activities
of the Malaysian government in connection with such program resulted in
significant delays in STW's network deployment and marketing plans thereby
contributing to a 37% decrease in STW's subscribers during the quarter ended
September 30, 1996. There can be no assurance that the Malaysian government
will not initiate similar programs in the future. There can also be no
assurance that the Malaysian national telephone company will not otherwise
impose restrictions on STW, including restrictions on the ability of STW to
interconnect its wireless network with the national telephone company's
system, which could have a material adverse effect on the Company. Moreover,
there can be no assurance that other countries where the Company has
operating companies or developmental stage projects will not initiate similar
programs or impose other restrictions, which could have a material adverse
effect on the Company.
The Company also may be adversely affected by political or social unrest
or instability in foreign countries. Such unrest or instability resulting
from political, economic, social or other conditions in foreign countries
could have a material adverse effect on the Company. For example, in China,
because foreign ownership of telecommunications operators is prohibited, the
Company, through its ownership interest in SDL, has interests in China
telecommunications projects through certain "cooperative agreements" with
Chinese cellular operators. Pursuant to the terms of the cooperative
agreements, SDL provides equipment and technical and engineering services to
the cellular operators and, in return, is allocated a portion of the revenues
or profits from the cellular operations. There can be no assurance that the
Chinese government will not prohibit or otherwise impose restrictions on
these types of arrangements, which could have a material adverse effect on
the Company.
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The Company does not have political risk insurance in the countries in
which it currently conducts business. Moreover, applicable agreements
relating to the Company's interests in its operating companies are frequently
governed by foreign law. As a result, in the event of a dispute, it may be
difficult for the Company to enforce its rights. Accordingly, the Company may
have little or no recourse upon the occurrence of any of these developments
or if any of its partners seek to re-negotiate existing or future MOUs and/or
other agreements. To the extent that any of the operating companies seeks to
make a dividend or other distribution to the Company, or to the extent that
the Company seeks to liquidate its investment in an operating company or
developmental stage project and repatriate monies from a relevant country,
local taxes, foreign exchange controls or other restrictions may effectively
prevent the transfer of funds to the Company or the exchange of local
currency for U.S. dollars.
TECHNOLOGICAL RISK; RISK OF OBSOLESCENCE
The Company's operating companies and developmental stage projects
generally use new and emerging technologies. For example, SDL, the Company's
China Regional Cellular project, is required by the Chinese government to
migrate to CDMA, a cellular technology that is not widely deployed on a
commercial basis at the present time. Additionally, the MPT 1327 ECTR
technology selected by a number of the Company's ECTR operating companies is
currently operational in many countries but has had limited deployment for
public use in developing countries. Although many of the technologies
currently in use and to be used in the future by the Company have been
developed by international telecommunications companies such as Nokia,
Philips, Motorola, Ericsson, Lucent Technologies and Nortel, most are
generally advanced technologies which have only recently been developed and
commercially introduced. There can be no assurance that the operating
companies and developmental stage projects will not experience technical
problems in the commercial deployment of these technologies, particularly
because they are being introduced in developing countries. In addition, the
technology used in wireless communications is evolving rapidly and one or
more of the technologies currently utilized or planned by the Company to be
utilized may be unpopular with its customers or may become obsolete, which in
either case would likely have a material adverse effect on the Company. There
can be no assurance that the Company will be able to keep pace with ongoing
technological changes in the wireless telecommunications industry.
RISK OF MODIFICATION OR LOSS OF LICENSES; UNCERTAINTY AS TO THE AVAILABILITY,
COST AND TERMS OF LICENSES; RESTRICTIONS ON LICENSES
The Company's ability to retain and exploit the existing
telecommunications licenses held by its operating companies and developmental
stage projects, to renew such licenses when they expire, and to obtain new
licenses in the future, are essential to the Company's operations. However,
these licenses are typically granted by governmental agencies in developing
countries, and there can be no assurance that these governmental agencies
will not seek to unilaterally limit, revoke or otherwise adversely modify the
terms of these licenses in the future, any of which could have a material
adverse effect on the Company, and the Company may have limited or no legal
recourse if any of these events were to occur. In addition, there can be no
assurance that renewals to these licenses will be granted or, if renewed,
that the renewal terms will not be substantially less favorable to the
holders of the licenses than the original license terms, any of which could
have a material adverse effect on the Company. Likewise, many of the
Company's operating companies and developmental stage projects have not yet
obtained all of the licenses necessary for their proposed operations, and no
assurance can be given that any such licenses will be obtained. For example,
the Brazilian government has not approved the transfer to Via 1, the
Company's Brazilian ECTR operating company, of the licenses contributed or to
be contributed to it by its current and proposed shareholders, and there can
be no assurance that such approval will be obtained. The failure to obtain
such approval or to obtain other licenses would have a material adverse
effect on the Company.
The Company believes that the opportunity to acquire substantial new
wireless licenses in developing countries will exist only for a limited time.
Further, although the Company's operating companies and developmental stage
projects have, to date, obtained many of their operating licenses through
private negotiations without having to participate in competitive bidding
processes, the Company anticipates that governments of developing countries
will increasingly discover the value of new wireless technologies and may
require bidding for licenses, which would likely increase the cost of these
licenses, perhaps substantially. In addition, the operating companies and
developmental stage projects may be required to purchase licenses from other
license holders in certain circumstances, for example, to gain network
capacity or to increase geographic coverage. Furthermore, relevant
governmental authorities may grant
26.
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additional telecommunications licenses covering the same geographical areas
as the operating companies' and developmental stage projects' licenses or
otherwise grant licenses which allow other companies to compete directly with
such operating companies and developmental stage projects for wireless
subscribers. Although the inherent limitation on suitable frequency bands may
provide some protection against the issuance of competing licenses, there can
be no assurance that such competitive licenses will not be granted or, if
granted, that they will not have a material adverse effect on the Company. In
addition, licenses may be subject to significant operating restrictions or
conditions, including restrictions on interconnection to the public telephone
system or requirements that the operating companies or developmental stage
projects complete construction or commence commercial operation of the
networks by specified deadlines, which conditions, if not satisfied, may
result in loss or revocation of the license. Accordingly, even if an
operating company or developmental stage project is able to obtain a required
license, there can be no assurance that such operating requirements will be
satisfied and, as a result, there can be no assurance that such license will
not be lost or revoked or that the restrictions imposed upon such license
will prevent the commercial exploitation of such license, which could have a
material adverse effect on the Company.
DEPENDENCE ON OTHER TELECOMMUNICATIONS PROVIDERS
The success of the Company's wireless systems will in many cases depend
upon services provided by other telecommunications providers, some of which
are competitors of the Company, the operating companies and/or the
developmental stage projects. For example, the Company's operating companies
and developmental stage projects generally require interconnection agreements
with national or regional telephone companies in order for its wireless
systems to connect with land-line telephone systems, and may require the use
of microwave or fiber optic networks belonging to other parties to link its
wireless systems. Although a number of operating companies have entered into
required interconnection and/or linking agreements or have interconnection
and/or linking arrangements in place, the revocation, loss or modification of
any of these existing agreements or arrangements or the failure to obtain
necessary agreements and/or arrangements in the future could have a material
adverse effect on the Company. Specifically, STW, the Company's Malaysian WLL
project, has in the past had difficulties obtaining interconnect services
from its interconnect provider, which is a competitor of STW. In addition,
STW's interconnect agreement expires in August 1997. Any failure of STW to
obtain interconnect services pursuant to its interconnect agreement or to
obtain a successor agreement would have a material adverse effect on STW.
DEPENDENCE ON PARTNERS
The Company will generally continue to depend on its local partners to
obtain required licenses in all of its wireless projects. In addition, the
Company may become dependent on strategic partners with resources beyond
those of the Company to pursue larger scale projects, including certain WLL
projects. In WLL projects, the Company may require the participation of a
larger telecommunications company possessing the substantial capital and
operating resources required to finance and deploy a WLL system. The failure
of the Company to identify and enter into relationships with strong partners,
or the failure of those partners to provide these resources, may have a
material adverse effect on the Company.
CONSTRUCTION RISKS
The operating companies and developmental stage projects in which the
Company invests typically require substantial construction of new wireless
networks and additions to existing wireless networks. Construction activity
will require the operating companies and developmental stage projects to
obtain qualified subcontractors and necessary equipment on a timely basis,
the availability of which varies significantly from country to country.
Construction projects are subject to cost overruns and delays not within the
control of the operating company or the developmental stage project or its
subcontractors, such as those caused by acts of governmental entities,
financing delays and catastrophic occurrences. Delays also can arise from
design changes and material or equipment shortages or delays in delivery.
Accordingly, there can be no assurance that the operating companies or
developmental stage projects will be able to complete current or future
construction projects for the amount budgeted or within the time periods
projected, or at all. Failure to complete construction for the amount
budgeted or on a timely basis could jeopardize subscriber contracts,
franchises or licenses and could have a material adverse effect on the
Company. In particular, telecommunications licenses often are granted on the
condition that network construction be completed or commercial operations be
commenced by a specified date. Failure to comply with these deadlines could
result in the loss or revocation of the
27.
<PAGE>
licenses. In that regard, certain operating companies have failed to
meet such deadlines in the past. Specifically, UTS, which provides ECTR
services in the Visayas and Mindanao regions of the Philippines, failed
to comply with the service date requirement contained in its provisional
authority but subsequently cured such failure and expects to receive its
final operating authority from the Philippine government by the end of 1997.
Similarly, in the Via 1 Project, because the Company and its proposed
partners were unable to comply with operations commencement deadlines
with respect to their licenses, they had to apply for, and have
received, extensions of such deadlines. Although such failures have not
to date led to the loss of any licenses, there can be no assurance that
the relevant governmental authorities will not seek to revoke licenses
as a result of these past defaults or refuse to grant deadline
extensions to similar defaults occurring in the future, which could have
a material adverse effect on the Company.
SUBSTANTIAL LEVERAGE
As discussed above, the operating companies and developmental stage
projects will require continuing sources of additional financing. Certain of
the operating companies have substantial indebtedness and, to the extent that
additional debt financing is available, such operating companies may incur
additional indebtedness, and other operating companies or developmental stage
projects may in the future incur substantial indebtedness, in relation to
their respective base of equity capital. To the extent that any of the
operating companies or developmental stage projects now has or in the future
incurs a high level of indebtedness, such indebtedness will have important
consequences to the Company, including (i) a possible restriction on such
entity's ability to pay dividends or make other distributions to the Company,
(ii) a possible limitation on such entity's ability to obtain additional debt
financing and (iii) a possible impairment of such entity's ability to react
to changes in the industry and economic conditions generally.
COMPETITION
Although the implementation of advanced wireless technologies is in the
early stages of deployment in most developing countries, the Company believes
that its business will become increasingly competitive, particularly as
businesses and foreign governments realize the market potential of these
wireless technologies. A number of large American, Japanese and European
companies, including U.S.-based regional Bell operating companies ("RBOCs")
and large international telecommunications companies, are actively engaged in
programs to develop and commercialize wireless technologies in developing
counties. In many cases, the Company will also compete against local
land-line carriers, including government-owned telephone companies. Most of
these companies have substantially greater financial and other resources,
including research and development staffs and technical and marketing
capabilities than the Company. The Company anticipates that there will be
increasing competition for additional licenses and increased competition to
the extent such licenses are obtained by others. Although the Company intends
to employ relatively new technologies, there will be a continuing competitive
threat from even newer technologies which may render the technologies
employed by the Company obsolete.
REGULATION
The wireless services of the Company's operating companies and
developmental stage projects are subject to governmental regulation, which
may change from time to time. There can be no assurance that material and
adverse changes in the regulation of the Company's existing or future
operating companies or developmental stage projects will not occur in the
future. To date, certain operating companies and developmental stage projects
have been subject to foreign ownership restrictions, service requirements,
restrictions on interconnection of wireless systems to government-owned or
private telephone networks, subscriber rate-setting, technology and
construction requirements, among others. These regulations may be difficult
to comply with, particularly given demographic, geographic or other issues in
a particular market. Further, changes in the regulatory framework may limit
the ability to add subscribers to developing systems. An operating company's
or developmental stage project's failure to comply with applicable
governmental regulations or operating requirements could result in the loss
of licenses or otherwise could have a material adverse effect on the Company.
28.
<PAGE>
FOREIGN CORRUPT PRACTICES ACT
The Company is subject to the Foreign Corrupt Practices Act ("FCPA"),
which generally prohibits U.S. companies and their intermediaries from
bribing foreign officials for the purpose of obtaining or keeping business or
licenses or otherwise obtaining favorable treatment. Although the Company has
taken precautions to comply with the FCPA, there can be no assurance that
such precautions will protect the Company against liability under the FCPA,
particularly as a result of actions which may in the past have been taken or
which may be taken in the future by agents and other intermediaries for whose
actions the Company may be held liable under the FCPA. In particular, the
Company may be held responsible for actions taken by its strategic or local
partners even though such strategic or local partners are themselves
typically foreign companies which are not subject to the FCPA; and the
Company has no ability to control such strategic or local partners. Any
determination that the Company has violated the FCPA could have a material
adverse effect on the Company.
TAX RISKS
Distributions of earnings and other payments received from the Company's
operating subsidiaries and affiliates are likely to be subject to withholding
taxes imposed by the jurisdictions in which such entities are formed or
operating. In general, a U.S. corporation may claim a foreign tax credit
against its federal income tax expense for such foreign withholding taxes and
foreign taxes paid directly by corporate entities in which the Company owns
10% or more of the voting stock. The ability to claim such foreign tax
credits and to utilize net foreign losses is, however, subject to numerous
limitations, and the Company may incur incremental tax costs as a result of
these limitations or because the Company is not in a tax paying position in
the U.S.
Special U.S. tax rules apply to U.S. taxpayers that own stock in a
"passive foreign investment company" (a "PFIC") that could also increase the
Company's effective rate of taxation. In general, a non-U.S. corporation will
be treated as a PFIC if at least 75 percent of its income is "passive income"
or if at least 50 percent of its assets are held for the production of
"passive income." A non-U.S. corporation that owns 25 percent or more of the
stock of a non-U.S. subsidiary is treated as receiving a proportionate share
of the income of, and as owning a proportionate share of the assets of, such
subsidiary.
It is possible that certain operating companies in which the Company
owns an equity interest are PFICs. Generally, except to the extent the
Company makes an election to treat a PFIC in which it owns stock as a
"qualified electing fund" (a "QEF") in the first taxable year in which the
Company owns the PFIC's stock, (i) the Company would be required to allocate
gain recognized upon the disposition of stock in the PFIC and income
recognized upon receiving certain dividends ratably over the Company's
holding period for the stock in the PFIC, (ii) the amount allocated to each
year other than the year of the disposition or dividend payment would be
taxable at the highest U.S. tax rate applicable to corporations, and an
interest charge for the deemed deferral benefit would be imposed with respect
to the tax attributable to each year, and (iii) gain recognized upon
disposition of PFIC shares would be taxable as ordinary income.
If the Company were to make the QEF election, as described above, the
Company would be required in each year that the PFIC qualification tests are
met to include its pro rata share of the QEF's earnings as ordinary income
and its pro rata share of the QEF's net capital gain as long-term capital
gain, whether or not such amounts are actually distributed. The Company has
not made any QEF elections with respect to any non-U.S. corporation in which
it holds stock.
The Company may also be required to include in its income for U.S.
income tax purposes its proportionate share of the earnings of those foreign
corporate subsidiaries that are classified as "controlled" foreign
corporations without regard to whether distributions have been received from
such companies.
29.
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.
SALES OF UNREGISTERED SECURITIES DURING THE THREE-MONTHS ENDED MARCH 31, 1997
In January 1997, the Company issued options to purchase an aggregate of
127,095 shares of Common Stock at an exercise price of $9.375 per share to
certain service providers of the Company pursuant to the 1996 SO/SIP. In
addition, in February 1997, the Company issued options to purchase an
aggregate of 226,187 shares of Common Stock at an exercise price of $9.375
per share to certain service providers of the Company pursuant to the 1996
SO/SIP.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS.
EXHIBIT DESCRIPTION
NO.
- ------ -----------
10.9A International Wireless Communications Holdings, Inc. 1996 Stock
Option/Stock Issuance Plan, amended and restated as of February 3,
1997
10.16B Amended and Restated Shareholders' Agreement among Star Digitel
Limited, Star Telecom Holding Limited ("STHL"), International Wireless
Communications, Inc. ("IWC") and Vanguard China, Inc., dated April 4,
1997
10.16C Amended and Restated Noncompetition Agreement between STHL and IWC.,
dated April 4, 1997
10.26 Agreement between IWC and Vanguard Cellular Financial Corp., dated May
5, 1997, including:
Exhibit A Form of Warrant Agreement
Exhibit B Form of Warrant Agreement
Exhibit C Form of Incentive Stock Option
Exhibit D Form of Nonstatutory Option Agreement
Exhibit E Form of Guaranty
Exhibit F Form of Investment Representation Letter
Exhibit G Form of Vanguard Legal Opinion
Exhibit H Form of IWCH Legal Opinion
27.1 Financial Data Schedule
(b) REPORTS ON FORM 8-K
No Current Reports on Form 8-K were filed during the quarter ended March
31, 1997.
30.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 14, 1996 INTERNATIONAL WIRELESS
COMMUNICATIONS HOLDINGS, INC.
(Registrant)
By: /s/ Douglas S. Sinclair
---------------------------------
Douglas S. Sinclair
Vice President and Chief
Financial Officer
By: /s/ Keith D. Taylor
---------------------------------
Keith D. Taylor
Controller and Chief
Accounting Officer
31.
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE NO.
- ------- ----------- --------
<S> <C> <C>
10.9A International Wireless Communications Holdings, Inc. 1996 Stock 33
Option/Stock Issuance Plan, amended and restated as of February 3,
1997
10.16B Amended and Restated Shareholders' Agreement among Star Digitel 49
Limited, Star Telecom Holding Limited ("STHL"), International Wireless
Communications, Inc. ("IWC") and Vanguard China, Inc., dated April 4,
1997
10.16C Amended and Restated Noncompetition Agreement between STHL and IWC., 78
dated April 4, 1997
10.26 Agreement between IWC and Vanguard Cellular Financial Corp., dated May 88
5, 1997, including:
Exhibit A Form of Warrant Agreement
Exhibit B Form of Warrant Agreement
Exhibit C Form of Incentive Stock Option
Exhibit D Form of Nonstatutory Option Agreement
Exhibit E Form of Guaranty
Exhibit F Form of Investment Representation Letter
Exhibit G Form of Vanguard Legal Opinion
Exhibit H Form of IWCH Legal Opinion
27.1 Financial Data Schedule 124
</TABLE>
32.
<PAGE>
EXHIBIT 10.9A
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC.
1996 STOCK OPTION/STOCK ISSUANCE PLAN
(AS AMENDED AND RESTATED FEBRUARY 3, 1997)
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSES OF THE PLAN
This 1996 Stock Option/Stock Issuance Plan (the "Plan") was adopted by
International Wireless Communications Holdings, Inc., a Delaware corporation
(the "Corporation"), on August 8, 1996, the date upon which International
Wireless Communications, Inc. became a wholly-owned subsidiary of the
Corporation. The Plan is intended to promote the interests of the Corporation
by providing a method whereby eligible individuals who provide valuable services
to the Corporation (or any Parent or Subsidiary) may be offered incentives and
rewards which will encourage them to acquire a proprietary interest, or
otherwise increase their proprietary interest, in the Corporation and continue
to render services to the Corporation (or any Parent or Subsidiary).
II. DEFINITIONS
For the purposes of this Plan, the following definitions shall be in
effect:
A. BOARD shall mean the Corporation's Board of Directors.
B. CODE shall mean the Internal Revenue Code of 1986, as amended.
C. COMMITTEE shall mean a committee of two (2) or more Board members
appointed by the Board to exercise one or more administrative functions under
the Plan.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting power
of the Corporation's outstanding securities are transferred to a person or
persons different from those who held those securities immediately prior to
such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
<PAGE>
F. CORPORATION shall mean International Wireless Communications
Holdings, Inc., a Delaware corporation.
G. EMPLOYEE shall mean an individual who is in the employ of the
Corporation or any Parent or Subsidiary, subject to the control and direction of
the employer entity as to both the work to be performed and the manner and
method of performance.
H. EXCHANGE ACT shall mean the Securities Exchange Act of 1934, as
amended.
I. EXERCISE DATE shall mean the date on which the Corporation shall
have received written notice of the option exercise.
J. FAIR MARKET VALUE per share of Common Stock on any relevant date
under the Plan shall be the value determined in accordance with the following
provisions:
(i) If the Common Stock is not at the time listed or
admitted to trading on any Stock Exchange but is traded on the Nasdaq
National Market, the Fair Market Value shall be the closing price per share
of Common Stock on the date in question, as such price is reported by the
National Association of Securities Dealers on the Nasdaq National Market or
any successor system. If there is no closing price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing price
on the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed or admitted
to trading on any Stock Exchange, then the Fair Market Value shall be the
closing selling price per share of Common Stock on the date in question on
the Stock Exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no closing
selling price for the Common Stock on the date in question, then the Fair
Market Value shall be the closing selling price on the last preceding date
for which such quotation exists.
(iii) If the Common Stock is at the time neither listed nor
admitted to trading on any Stock Exchange nor traded on the NASDAQ National
Market System, then such Fair Market Value shall be determined by the Plan
Administrator after taking into account such factors as the Plan
Administrator shall deem appropriate.
K. INCENTIVE OPTION shall mean a stock option which satisfies the
requirements of Code Section 422.
L. NEWLY ISSUED SHARES shall mean shares of Common Stock drawn from
the Corporation's authorized but unissued shares of Common Stock.
M. NON-STATUTORY OPTION shall mean a stock option not intended to
meet the requirements of Code Section 422.
2
<PAGE>
N. OPTIONEE shall mean any person to whom an option is granted under
the Option Grant Program in effect under the Plan.
O. PARENT shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
P. PARTICIPANT shall mean any person who receives a direct issuance
of Common Stock under the Stock Issuance Program in effect under the Plan.
Q. PERMANENT DISABILITY shall have the meaning assigned to such term
in Code Section 22(e)(3).
R. PLAN shall mean the Corporation's 1996 Stock Option/Stock
Issuance Plan, as set forth in this document.
S. PLAN ADMINISTRATOR shall mean either the Board or the Committee,
to the extent the Committee is at the time responsible for the administration of
the Plan in accordance with Section IV of Article One.
T. PREDECESSOR PLAN shall mean the 1994 Stock Option/Stock Issuance
Plan of International Wireless Communications, Inc.
U. SERVICE shall mean the provision of services to the Corporation
or any Parent or Subsidiary by an individual in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
contractor.
V. STOCK EXCHANGE shall mean either the American Stock Exchange or
the New York Stock Exchange.
W. SUBSIDIARY shall mean each corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each such corporation (other than the last corporation) in
the unbroken chain owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
X. 10% STOCKHOLDER shall mean the owner of stock (as determined
under Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation.
Y. TREASURY SHARES shall mean shares of Common Stock reacquired by
the Corporation and held as treasury shares.
III. STRUCTURE OF THE PLAN
A. The Plan shall be divided into two (2) separate components:
the Option Grant Program specified in Article Two and the Stock Issuance
Program specified in Article
3
<PAGE>
Three. Under the Option Grant Program, eligible individuals may, at the
discretion of the Plan Administrator, be granted options to purchase shares
of Common Stock in accordance with the provisions of Article Two. Under the
Stock Issuance Program, eligible individuals may be issued shares of Common
Stock directly, either through the immediate purchase of such shares at a
price not less than eighty-five percent (85%) of the fair market value of the
shares at the time of issuance or as a bonus for services rendered the
Corporation without any cash payment required of the recipient.
B. The provisions of Articles One and Four of the Plan shall apply
to both the Option Grant Program and the Stock Issuance Program and shall
accordingly govern the interests of all individuals under the Plan.
IV. ADMINISTRATION OF THE PLAN
A. The Plan shall be administered by the Board. However, any or all
administrative functions otherwise exercisable by the Board may be delegated to
the Committee. Members of the Committee shall serve for such period of time as
the Board may determine and shall be subject to removal by the Board at any
time. The Board may also at any time terminate the functions of the Committee
and reassume all powers and authority previously delegated to the Committee.
B. The Plan Administrator shall have full power and authority
(subject to the provisions of the Plan) to establish such rules and regulations
as it may deem appropriate for proper administration of the Plan and to make
such determinations under, and issue such interpretations of, the Plan and any
outstanding options as it may deem necessary or advisable. Decisions of the Plan
Administrator shall be final and binding on all parties who have an interest in
the Plan or any outstanding option.
V. OPTION GRANTS AND SHARE ISSUANCES
A. The persons eligible to participate in the Option Grant Program
and the Stock Issuance Program shall be limited to the following:
(i) Employees,
(ii) non-employee members of the Board or the non-employee
members of the board of directors of any Parent or Subsidiary, and
(iii) consultants and other independent contractors who
provide valuable services to the Corporation (or any Parent or Subsidiary).
B. The Plan Administrator shall have full authority to determine,
(i) with respect to the option grants under the Plan, which eligible individuals
are to receive option grants, the number of shares to be covered by each such
grant, the status of the granted option as either an Incentive Option or a Non-
Statutory Option, the time or times at which each option is to become
exercisable and the maximum term for which the option is to remain outstanding,
and (ii) with respect to share issuances under the Stock Issuance Program, the
number of shares to be
4
<PAGE>
issued to each Participant, the vesting schedule (if any) to be applicable to
the issued shares and the consideration to be paid by the Participant for
such shares.
C. The Plan Administrator shall have the absolute discretion either
to grant options in accordance with Article Two or to effect share issuances in
accordance with Article Three.
VI. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of the
Corporation's authorized but unissued or reacquired Common Stock. The maximum
number of shares which may be issued over the term of the Plan shall not exceed
2,811,526 shares. Such authorized share reserve is comprised of the number of
shares which remained available for issuance, as of the Plan effective date,
under the Predecessor Plan, including the shares subject to the outstanding
options incorporated into the Plan and any other shares which would have been
available for future option grants under the Predecessor Plan and a share
increase of 411,526 shares approved by the Board on February 3, 1997, subject to
the approval of the Corporation's stockholders. Such authorized share reserve
is also subject to adjustment from time to time in accordance with Section VI.C
of this Article One.
B. Shares subject to outstanding options shall be available for
subsequent issuance under the Plan to the extent (i) the options (including any
options incorporated from the Predecessor Plan) expire or terminate for any
reason prior to exercise in full or (ii) the options are canceled in accordance
with the cancellation/regrant provisions of Section IV. of Article Two. All
shares issued under the Plan (including shares issued upon exercise of options
incorporated from the Predecessor Plan), whether or not those shares are
subsequently repurchased by the Corporation pursuant to its repurchase rights
under the Plan, shall reduce on a share-for-share basis the number of shares of
Common Stock available for issuance under the Plan.
C. In the event any change is made to the Common Stock issuable
under the Plan by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the maximum number
and/or class of securities under the Plan and (ii) the number and/or class of
securities and the exercise price per share in effect under each outstanding
option (including any option incorporated from the Predecessor Plan) in order to
prevent the dilution or enlargement of benefits thereunder. The adjustments
determined by the Plan Administrator shall be final, binding and conclusive. In
no event shall any adjustments be made for the conversion of one or more
outstanding series of the Corporation's preferred stock into shares of the
Common Stock.
5
<PAGE>
ARTICLE TWO
OPTION GRANT PROGRAM
I. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Plan shall be authorized by action of
the Plan Administrator and may, at the Plan Administrator's discretion, be
either Incentive Options or Non-Statutory Options. Each granted option shall be
evidenced by one or more instruments in the form approved by the Plan
Administrator, provided, however, that each such instrument shall comply with
the terms and conditions specified below. Each instrument evidencing an
Incentive Option shall, in addition, be subject to the applicable provisions of
Section II of this Article Two.
A. EXERCISE PRICE.
1. The exercise price per share shall be fixed by the Plan
Administrator. In no event, however, shall the exercise price per share be less
than eighty-five percent (85%) of the Fair Market Value per share of Common
Stock on the date of the option grant.
2. If the individual to whom the option is granted is a 10%
Stockholder, then the exercise price per share shall not be less than one
hundred ten percent (110%) of the Fair Market Value per share of Common Stock on
the grant date.
3. The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section I of
Article Four and the agreement evidencing the grant, be payable in cash or check
made payable to the Corporation. Should the Corporation's outstanding Common
Stock be registered under Section 12(g) of the Exchange Act at the time the
option is exercised, then the exercise price may also be paid as follows:
(i) in shares of Common Stock held by the Optionee for the
requisite period necessary to avoid a charge to the Corporation's earnings
for financial reporting purposes and valued at Fair Market Value on the
Exercise Date, or
(ii) through a special sale and remittance procedure
pursuant to which the Optionee shall concurrently provide irrevocable
written instructions (a) to a Corporation-designated brokerage firm to
effect the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate exercise price payable for the
purchased shares plus all applicable Federal, state and local income and
employment taxes required to be withheld by the Corporation by reason of
such purchase and (b) to the Corporation to deliver the certificates for
the purchased shares directly to such brokerage firm in order to complete
the sale transaction.
6
<PAGE>
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. TERM AND EXERCISE OF OPTIONS. Each option granted under the Plan
shall be exercisable at such time or times, during such period and for such
number of shares as shall be determined by the Plan Administrator and set forth
in the stock option agreement. However, no option shall have a term in excess of
ten (10) years measured from the grant date. The option shall be exercisable
during the Optionee's lifetime only by the Optionee and shall not be assignable
or transferable other than by will or by the laws of descent and distribution
following the Optionee's death or pursuant to a qualified domestic relations
order as defined by the Code.
C. EFFECT OF TERMINATION OF SERVICE.
1. Except to the extent otherwise provided pursuant to
subsection C.2 below, the following provisions shall govern the exercise period
applicable to any options held by the Optionee at the time of cessation of
Service or death:
(i) Should the Optionee cease to remain in Service for any
reason other than death or Permanent Disability, then the period during
which each outstanding option held by such Optionee is to remain
exercisable shall be limited to the three (3)-month period following the
date of such cessation of Service.
(ii) Should such Service terminate by reason of Permanent
Disability, then the period during which each outstanding option held by
the Optionee is to remain exercisable shall be limited to the twelve (12)-
month period following the date of such cessation of Service.
(iii) Should the Optionee die while holding one or more
outstanding options, then the period during which each such option is to
remain exercisable shall be limited to the twelve (12)-month period
following the date of the Optionee's death. During such limited period, the
option may be exercised by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred
pursuant to the Optionee's will or in accordance with the laws of descent
and distribution.
(iv) Under no circumstances, however, shall any such option
be exercisable after the specified expiration date of the option term.
(v) During the applicable post-Service exercise period,
the option may not be exercised in the aggregate for more than the number
of vested shares for which the option is exercisable on the date of the
Optionee's cessation of Service. Upon the expiration of the applicable
exercise period or (if earlier) upon the expiration of the option term, the
option shall terminate and cease to be exercisable for any vested shares
for which the option has not been exercised. However, the option shall,
immediately upon the Optionee's cessation of Service, terminate and cease
to be outstanding with respect to any option
7
<PAGE>
shares for which the option is not at that time exercisable or in which the
Optionee is not otherwise at that time vested.
2. The Plan Administrator shall have full power and authority
to extend the period of time for which the option is to remain exercisable
following the Optionee's cessation of Service or death from the limited period
in effect under subsection C.1 of this Article Two to such greater period of
time as the Plan Administrator shall deem appropriate; PROVIDED, that in no
event shall such option be exercisable after the specified expiration date of
the option term.
D. STOCKHOLDER RIGHTS. An Optionee shall have no stockholder rights
with respect to the shares subject to the option until such individual shall
have exercised the option and paid the exercise price.
E. UNVESTED SHARES. The Plan Administrator shall have the
discretion to authorize the issuance of unvested shares of Common Stock under
the Plan. Should the Optionee cease Service while holding such unvested shares,
the Corporation shall have the right to repurchase, at the exercise price paid
per share, all or (at the discretion of the Corporation and with the consent of
the Optionee) any of those unvested shares. The terms and conditions upon which
such repurchase right shall be exercisable (including the period and procedure
for exercise and the appropriate vesting schedule for the purchased shares)
shall be established by the Plan Administrator and set forth in the agreement
evidencing such repurchase right. All outstanding repurchase rights under the
Plan shall terminate automatically upon the occurrence of any Corporate
Transaction, except to the extent the repurchase rights are expressly assigned
to the successor corporation (or parent thereof) in connection with the
Corporate Transaction.
F. FIRST REFUSAL RIGHTS. Until such time as the Corporation's
outstanding shares of Common Stock are first registered under Section 12(g) of
the Exchange Act, the Corporation shall have the right of first refusal with
respect to any proposed sale or other disposition by the Optionee (or any
successor in interest by reason of purchase, gift or other transfer) of any
shares of Common Stock issued under the Plan. Such right of first refusal shall
be exercisable in accordance with the terms and conditions established by the
Plan Administrator and set forth in the agreement evidencing such right.
II. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable to all
Incentive Options granted under the Plan. Except as modified by the provisions
of this Section II, all the provisions of Articles One, Two and Four shall be
applicable to Incentive Options. Incentive Options may only be granted to
individuals who are Employees. Options which are specifically designated as
Non-Statutory shall NOT be subject to such terms and conditions.
A. EXERCISE PRICE. The exercise price per share of the Common Stock
subject to an Incentive Option shall in no event be less than one hundred
percent (100%) of the Fair Market Value per share of Common Stock on the date of
grant.
B. DOLLAR LIMITATION. The aggregate Fair Market Value of the Common
Stock (determined as of the respective date or dates of grant) for which one (1)
or more options
8
<PAGE>
granted to any Employee under this Plan (or any other option plan of the
Corporation or any Parent or Subsidiary) may for the first time become
exercisable as Incentive Options during any one (1) calendar year shall not
exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the
Employee holds two (2) or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted. Should the applicable
One Hundred Thousand Dollar ($100,000) limitation in fact be exceeded in any
calendar year, then the option shall nevertheless become exercisable for the
excess number of shares in such calendar year as a Non-Statutory Option.
C. 10% STOCKHOLDER. If any individual to whom an Incentive Option
is granted is a 10% Stockholder, then the option term shall not exceed five (5)
years measured from the grant date.
III. CORPORATE TRANSACTION
A. Upon the occurrence of a Corporate Transaction, each option at
the time outstanding under the Plan shall terminate and cease to be exercisable,
except to the extent assumed by the successor corporation or parent thereof.
B. Each outstanding option which is assumed in connection with a
Corporate Transaction or is otherwise to remain outstanding shall be
appropriately adjusted, immediately after such Corporate Transaction, to apply
and pertain to the number and class of securities which would have been issuable
to the Optionee in the consummation of such Corporate Transaction, had the
option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to (i) the class and number of
securities available for issuance under the Plan following the consummation of
such Corporate Transaction, and (ii) the exercise price payable per share,
PROVIDED the aggregate exercise price payable for such securities shall remain
the same.
C. The grant of options under this Plan shall in no way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options (including outstanding options
incorporated from the Predecessor Plan) under the Plan and to grant in
substitution therefor new options under the Plan covering the same or different
numbers of shares of Common Stock but with an exercise price per share not less
than (i) one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the new grant date in the case of a grant of an Incentive Option, (ii)
one hundred ten percent (110%) of such Fair Market Value in the case of an
option grant to a 10% Stockholder or (iii) eighty-five percent (85%) of such
Fair Market Value in the case of all other grants.
9
<PAGE>
ARTICLE THREE
STOCK ISSUANCE PROGRAM
I. TERMS AND CONDITIONS OF STOCK ISSUANCES
Shares may be issued under the Stock Issuance Program through direct
and immediate issuances without any intervening stock option grants. Each such
stock issuance shall be evidenced by a Restricted Stock Purchase Agreement
("Purchase Agreement") which complies with each of the terms and conditions of
this Article Three.
A. ISSUE PRICE
1. The purchase price per share shall be fixed by the Plan
Administrator, but in no event shall the purchase price per share of Newly
Issued Shares be less than eighty-five percent (85%) of the Fair Market Value
per share of Common Stock on the date of issuance.
2. If the individual to whom a share issuance is made is a 10%
Stockholder, then the purchase price per share shall not be less than one
hundred ten percent (110%) of the Fair Market Value per share of Common Stock on
the issuance date.
3. Newly Issued Shares shall be issued under the Plan for such
consideration as the Plan Administrator shall from time to time determine,
provided that, except as set forth in Section I of Article Four, in no event
shall shares be issued for consideration other than
(i) cash or check made payable to the Corporation, or
(ii) past services rendered to the Corporation or any
Parent or Subsidiary.
4. Treasury Shares may be issued under the Plan for such
consideration (including one or more of the items of consideration specified in
subparagraph 3 above) as the Plan Administrator may deem appropriate. Treasury
Shares may, in lieu of any cash consideration, be issued subject to such vesting
requirements tied to the Participant's period of future Service or the
Corporation's attainment of specified performance objectives as the Plan
Administrator may establish at the time of issuance.
B. VESTING PROVISIONS
1. Shares of Common Stock issued under the Stock Issuance
Program may, in the absolute discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service. The elements of the vesting schedule
applicable to any unvested shares of Common Stock issued under the Stock
Issuance Program, namely:
(i) the Service period to be completed by the Participant
or the performance objectives to be achieved by the Corporation,
10
<PAGE>
(ii) the number of installments in which the shares are to
vest,
(iii) the interval or intervals (if any) which are to lapse
between installments, and
(iv) the effect which death, Permanent Disability or other
event designated by the Plan Administrator is to have upon the vesting
schedule,
shall be determined by the Plan Administrator and incorporated into the Purchase
Agreement executed by the Corporation and the Participant at the time such
unvested shares are issued.
2. The Participant shall have full stockholder rights with
respect to any shares of Common Stock issued to him or her under the Plan,
whether or not his or her interest in those shares is vested. Accordingly, the
Participant shall have the right to vote such shares and to receive any regular
cash dividends paid on such shares. Any new, additional or different shares of
stock or other property (including money paid other than as a regular cash
dividend) which the Participant may have the right to receive with respect to
his unvested shares by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration or by reason of any Corporate Transaction shall be
issued subject to (i) the same vesting requirements applicable to the
Participant's unvested shares and (ii) such escrow arrangements as the Plan
Administrator shall deem appropriate.
3. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock under the Stock Issuance
Program, then those shares shall be immediately surrendered to the Corporation
for cancellation, and the Participant shall have no further stockholder rights
with respect to those shares. To the extent the surrendered shares were
previously issued to the Participant for consideration paid in cash or cash
equivalent (including the Participant's purchase-money promissory note), the
Corporation shall repay to the Participant the cash consideration paid for the
surrendered shares and shall cancel the unpaid principal balance of any
outstanding purchase-money note of the Participant attributable to such
surrendered shares. The surrendered shares may, at the Plan Administrator's
discretion, be retained by the Corporation as Treasury Shares or may be retired
to authorized but unissued share status.
4. The Plan Administrator may in its discretion elect to waive
the surrender and cancellation of one or more unvested shares of Common Stock
(or other assets attributable thereto) which would otherwise occur upon the non-
completion of the vesting schedule applicable to such shares. Such waiver shall
result in the immediate vesting of the Participant's interest in the shares of
Common Stock as to which the waiver applies. Such waiver may be effected at any
time, whether before or after the Participant's cessation of Service or the
attainment or non-attainment of the applicable performance objectives.
C. FIRST REFUSAL RIGHTS. Until such time as the Corporation's
outstanding shares of Common Stock are first registered under Section 12(g) of
the Exchange Act, the Corporation shall have a right of first refusal with
respect to any proposed disposition by the
11
<PAGE>
Participant (or any successor in interest by reason of purchase, gift or
other transfer) of any shares of Common Stock issued under the Plan. Such
right of first refusal shall be exercisable in accordance with the terms and
conditions established by the Plan Administrator and set forth in the
agreement evidencing such right.
II. SHARE ESCROW/TRANSFER RESTRICTIONS
A. SHARE ESCROW. Unvested shares may, in the Plan Administrator's
discretion, be held in escrow by the Corporation until the Participant's
interest in such shares vests or may be issued directly to the Participant with
restrictive legends on the certificates evidencing such unvested shares. To the
extent an escrow arrangement is utilized, the unvested shares and any securities
or other assets issued with respect to such shares (other than regular cash
dividends) shall be delivered in escrow to the Corporation to be held until the
Participant's interest in such shares (or other securities or assets) vests.
Alternatively, if the unvested shares are issued directly to the Participant,
the restrictive legend on the certificates for such shares shall read
substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE UNVESTED AND ARE
ACCORDINGLY SUBJECT TO (I) CERTAIN TRANSFER RESTRICTIONS AND (II)
CANCELLATION OR REPURCHASE IN THE EVENT THE REGISTERED HOLDER (OR
HIS/HER PREDECESSOR IN INTEREST) CEASES TO REMAIN IN THE
CORPORATION'S SERVICE. SUCH TRANSFER RESTRICTIONS AND THE TERMS
AND CONDITIONS OF SUCH CANCELLATION OR REPURCHASE ARE SET FORTH
IN A STOCK PURCHASE AGREEMENT BETWEEN THE CORPORATION AND THE
REGISTERED HOLDER (OR HIS/HER PREDECESSOR IN INTEREST) DATED
__________, 199__ A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
OFFICE OF THE CORPORATION."
B. TRANSFER RESTRICTIONS. The Participant shall have no right to
transfer any unvested shares of Common Stock issued to him or her under the
Stock Issuance Program. For purposes of this restriction, the term "transfer"
shall include (without limitation) any sale, pledge, assignment, encumbrance,
gift, or other disposition of such shares, whether voluntary or involuntary.
Upon any such attempted transfer, the unvested shares shall immediately be
cancelled in accordance with substantially the same procedure in effect under
Section I.B.3 of this Article Three, and neither the Participant nor the
proposed transferee shall have any rights with respect to such cancelled shares.
However, the Participant shall have the right to make a gift of unvested shares
acquired under the Stock Purchase Program to his or her spouse or issue,
including adopted children, or to a trust established for such spouse or issue,
provided the donee of such shares delivers to the Corporation a written
agreement to be bound by all the provisions of the Stock Issuance Program and
the Purchase Agreement applicable to the gifted shares.
III. CORPORATE TRANSACTION
All of the Corporation's outstanding repurchase rights under this
Article Three shall automatically terminate upon the occurrence of a Corporate
Transaction, except to the
12
<PAGE>
extent the Corporation's outstanding repurchase rights are to be assigned to
the successor corporation (or parent thereof) in connection with the
Corporate Transaction.
13
<PAGE>
ARTICLE FOUR
MISCELLANEOUS
I. LOANS
A. The Plan Administrator may assist any Optionee or Participant,
other than a non-employee Board member, in the exercise of one or more options
granted to the Optionee under Article Two or the purchase of one or more shares
issued to the Participant under Article Three by:
(i) authorizing the extension of a loan from the
Corporation to the Optionee or Participant, or
(ii) permitting the Optionee or Participant to pay the
exercise price or purchase price in installments over a period of years.
B. The terms of any loan or installment method of payment (including
the interest rate and terms of repayment) shall be established by the Plan
Administrator in its sole discretion. Loans or installment payments may be
authorized with or without security or collateral. In all events, the maximum
credit available to each Optionee or Participant may not exceed the SUM of (i)
the aggregate exercise price or purchase price payable for the purchased shares
(less the par value of such shares) plus (ii) any Federal, state and local
income and employment tax liability incurred by the Optionee or Participant in
connection with such exercise or purchase.
C. The Plan Administrator may, in its absolute discretion, determine
that one or more loans extended under this Section I shall be subject to
forgiveness by the Corporation in whole or in part upon such terms and
conditions as the Plan Administrator may in its discretion deem appropriate.
II. NO EMPLOYMENT OR SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the Participant
any right to continue in Service for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary) or of the Optionee or the Participant, which
rights are hereby expressly reserved by each, to terminate the Service of the
Optionee or Participant at any time for any reason, with or without cause.
III. AMENDMENT OF THE PLAN AND AWARDS
A. The Board shall have complete and exclusive power and authority
to amend or modify the Plan in any or all respects whatsoever. However, no such
amendment or modification shall adversely affect the rights and obligations of
an Optionee with respect to options at the time outstanding under the Plan, nor
adversely affect the rights of any Participant with respect to Common Stock
issued under the Plan prior to such action, unless the Optionee or Participant
consents to such amendment. In addition, the Board shall not, without the
approval of the Corporation's stockholders, (i) increase the maximum number of
shares issuable under the
14
<PAGE>
Plan, except for permissible adjustments under Section VI.C of Article One,
(ii) materially modify the eligibility requirements for participation in the
Plan or (iii) otherwise materially increase the benefits accruing to
individuals who participate in the Plan.
B. The Plan was restated on February 3, 1997 to increase by 411,526
the number of shares of the Corporation's Common Stock reserved for issuance
under the Plan from 2,400,000 shares to 2,811,526 shares. Options to purchase
shares of Common Stock may be granted under Article Two and shares of Common
Stock may be issued under Article Three that are in both instances in excess of
the number of shares then available for issuance under the Plan, PROVIDED any
excess shares actually issued are held in escrow until there is obtained
stockholder approval of an amendment sufficiently increasing the number of
shares of Common Stock available for issuance under the Plan. If such
stockholder approval is not obtained within twelve (12) months after the date
the initial excess issuances are made, whether as stock option grants or direct
stock issuances, then (i) any unexercised options representing such excess shall
terminate and cease to be exercisable and (ii) the Corporation shall promptly
refund to the Optionees and Participants the exercise or purchase price paid for
any excess shares issued under the Plan and held in escrow, together with
interest (at the applicable Short-Term Federal Rate) for the period the shares
were held in escrow, and such shares shall thereupon be automatically cancelled
and cease to be outstanding.
IV. EFFECTIVE DATE AND TERM OF PLAN
A. The Plan shall become effective when adopted by the Board, but no
option granted under the Plan may be exercised until the Plan is approved by the
Corporation's stockholders. If such stockholder approval is not obtained within
twelve (12) months after the date of the Board's adoption of the Plan, then all
options previously granted under the Plan shall terminate and cease to be
outstanding, and no further options shall be granted. Subject to such
limitation, the Plan Administrator may grant options under the Plan at any time
after the effective date of the Plan and before the date fixed herein for
termination of the Plan.
B. The Plan shall serve as the successor to the Predecessor Plan,
and no further option grants shall be made under the Predecessor Plan after the
Plan effective date. All options outstanding under the Predecessor Plan as of
such date shall, immediately upon approval of the Plan by the Corporation's
stockholders, be incorporated into the Plan and treated as outstanding options
under the Plan. However, each outstanding option so incorporated shall continue
to be governed solely by the terms of the documents evidencing such option, and
no provision of the Plan shall be deemed to affect or otherwise modify the
rights or obligations of the holders of such incorporated options with respect
to their acquisition of shares of Common Stock.
C. The Plan shall terminate upon the EARLIEST of (i) the expiration
of the ten (10)-year period measured from the date the Plan is adopted by the
Board, (ii) the date on which all shares available for issuance under the Plan
shall have been issued or (iii) the termination of all outstanding options under
Section III of Article Two. Each option and unvested share issuance outstanding
under the Plan at such time shall continue to have full force and effect in
accordance with the provisions of the agreements evidencing that option or share
issuance.
15
<PAGE>
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
of Common Stock under the Plan shall be used for general corporate purposes.
VI. WITHHOLDING
The Corporation's obligation to deliver shares upon the exercise of
any options granted under Article Two or upon the purchase of any shares issued
under Article Three shall be subject to the satisfaction of all applicable
Federal, state and local income and employment tax withholding requirements.
VII. REGULATORY APPROVALS
The implementation of the Plan, the granting of any options under
Article Two and the issuance of Common Stock upon (i) the exercise of any option
or (ii) a direct issuance under Article Three shall be subject to the
Corporation's procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the options granted under it and
the Common Stock issued pursuant to it.
VIII. FINANCIAL REPORTS
The Corporation shall deliver at least annually to each Optionee
holding an outstanding option under the Plan and to each Participant holding a
right to purchase stock under the Plan the same financial information furnished
to holders of the Common Stock unless the Optionee or Participant is a key
employee whose duties in connection with the Corporation assure such individual
access to equivalent information.
16
<PAGE>
EXHIBIT 10.16B
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
AMENDED AND RESTATED SHAREHOLDERS' AGREEMENT
among
STAR DIGITEL LIMITED
and
STAR TELECOM HOLDING LIMITED
and
INTERNATIONAL WIRELESS COMMUNICATIONS, INC.
and
VANGUARD CHINA, INC.
Dated as of April 4, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE/SECTION PAGE
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.1 Certain Definitions. . . . . . . . . . . . . . . . . . . . . .2
1.2 Principles of Interpretation . . . . . . . . . . . . . . . . .4
1.3 Termination of the Original Shareholders' Agreement. . . . . .4
2. Business of the Company . . . . . . . . . . . . . . . . . . . . . . .4
3. Restrictions on Transfer of Shares. . . . . . . . . . . . . . . . . .4
3.1 Limitation on Transfer . . . . . . . . . . . . . . . . . . . .4
3.2 Transfers in Compliance with Law . . . . . . . . . . . . . . .5
3.3 Affiliate Transfers. . . . . . . . . . . . . . . . . . . . . .5
3.4 Right of First Refusal and Right of Co-Sale. . . . . . . . . .6
3.5 Veto Rights. . . . . . . . . . . . . . . . . . . . . . . . . .8
3.6 IWC Right of Free Sale . . . . . . . . . . . . . . . . . . . .8
3.7 STHL Right of Free Sale. . . . . . . . . . . . . . . . . . . .8
3.8 Vanguard Right of Free Sale. . . . . . . . . . . . . . . . . .9
4. Right of First Offer. . . . . . . . . . . . . . . . . . . . . . . . .9
5. Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.2 Shareholder Votes. . . . . . . . . . . . . . . . . . . . . . 11
5.3 Board of Directors . . . . . . . . . . . . . . . . . . . . . 12
5.4 Board Meetings.. . . . . . . . . . . . . . . . . . . . . . . 13
5.5 Matters Requiring Unanimous Approval . . . . . . . . . . . . 14
5.6 Chief Executive Officer and Other Officers . . . . . . . . . 15
5.7 Company Projects . . . . . . . . . . . . . . . . . . . . . . 15
5.8 Directors' Access. . . . . . . . . . . . . . . . . . . . . . 15
6. Financial Reports and Auditing. . . . . . . . . . . . . . . . . . . 15
6.1 Right of Inspection. . . . . . . . . . . . . . . . . . . . . 15
6.2 Books and Records. . . . . . . . . . . . . . . . . . . . . . 16
6.3 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.4 Budgets and Business Plans . . . . . . . . . . . . . . . . . 16
6.5 Bank Accounts. . . . . . . . . . . . . . . . . . . . . . . . 17
7. Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.1 Additional Capital Contributions . . . . . . . . . . . . . . 17
7.2 Failure to Make Capital Contribution . . . . . . . . . . . . 17
7.3 Making up the Amounts of Default . . . . . . . . . . . . . . 17
<PAGE>
7.4 Shareholders' Equity Interests . . . . . . . . . . . . . . . 18
7.5 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . 18
8. Management Options. . . . . . . . . . . . . . . . . . . . . . . . . 18
9. Memorandum and Articles of Association. . . . . . . . . . . . . . . 18
10. Representations and Warranties. . . . . . . . . . . . . . . . . . . 19
11. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 19
12. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . 19
12.1 General Obligation . . . . . . . . . . . . . . . . . . . . . 19
12.2 Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . 20
12.3 Disclosure to Third Parties. . . . . . . . . . . . . . . . . 20
13. Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14. Foreign Corrupt Practices Act . . . . . . . . . . . . . . . . . . . 21
15. U.S. Investment Company Act of 1940 . . . . . . . . . . . . . . . . 21
16. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
16.1 Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
16.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
16.3 Discrepancies. . . . . . . . . . . . . . . . . . . . . . . . 23
16.4 Severability . . . . . . . . . . . . . . . . . . . . . . . . 23
16.5 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . 23
16.6 Term of Agreement. . . . . . . . . . . . . . . . . . . . . . 24
16.7 Amendment and Waiver . . . . . . . . . . . . . . . . . . . . 24
16.8 Consent to Specific Performance. . . . . . . . . . . . . . . 24
16.9 Assignment; Binding on Transferee. . . . . . . . . . . . . . 24
16.10 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . 24
16.11 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . 24
16.12 Shareholder Obligations; Further Assurances. . . . . . . . . 25
16.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 26
EXHIBITS
Exhibit A: Form of Deed of Adherence
<PAGE>
1
AMENDED AND RESTATED SHAREHOLDERS' AGREEMENT, dated as of April 4,
1997 (this "Agreement"), among STAR DIGITEL LIMITED, a Hong Kong corporation
with its registered offices at 6th Floor, Star Telecom Tower, 414 Kwun Tong
Road, Kwun Tong, Kowloon, Hong Kong (the "Company"), STAR TELECOM HOLDING
LIMITED, a Hong Kong corporation with its registered offices at 6th Floor, Star
Telecom Tower, 414 Kwun Tong Road, Kwun Tong, Kowloon, Hong Kong ("STHL"),
INTERNATIONAL WIRELESS COMMUNICATIONS, INC., a Delaware corporation with its
principal offices at 400 South El Camino Real, San Mateo, CA 94402, U.S.A.
("IWC") and VANGUARD CHINA, INC., a Delaware corporation with its principal
offices at 2002 Pisgah Church Road, Greensboro, North Carolina 27455
("Vanguard"), which amends and restates the Shareholders Agreement among the
Company, STHL and IWC, dated as of November 7, 1996 (the "Original Shareholders'
Agreement").
As of the date of this Agreement, the authorized share capital of the
Company is HK$579,750,000, comprised of 579,750,000 ordinary shares, nominal
value HK$1.00 each ("Shares").
Pursuant to a Subscription Agreement among the Company, STHL, IWC and
Star Telecom International Holding Limited ("STIHL"), dated as of September 23,
1996 (the "Subscription Agreement"), at the "First Closing" (as such term is
defined in the Subscription Agreement), the Company issued and allotted to IWC,
and IWC subscribed for, 85,030,000 Shares, and the Company issued and allotted
to STHL, and STHL subscribed for, 122,545,000 Shares (the "First STHL Shares"),
in each case, upon the terms and subject to the conditions of the Subscription
Agreement. Pursuant to the Subscription Agreement, at the "Second Closing" (as
such term is defined in the Subscription Agreement), the Company proposes to
issue and allot to IWC, and IWC proposes to subscribe for, an additional
146,870,000 Shares, and the Company proposes to issue and allot to STHL, and
STHL proposes to subscribe for, an additional 220,305,000 Shares (the "Second
STHL Shares").
Pursuant to the Subscription Agreement, the Company, STHL and IWC have
entered into the Original Shareholders' Agreement, which provided for certain
matters relating to the transfer of Shares and the management and operation of
the Company and its existing and future subsidiaries.
Pursuant to a Stock Purchase Agreement (the "Stock Purchase
Agreement") among STHL, Vanguard and the Company, dated as of February 25, 1997,
STHL proposes to sell, and Vanguard proposes to purchase, 14,880,250 of the
First STHL Shares (the "First Vanguard Shares") for an aggregate consideration
of US$3,500,000, and STHL proposes to sell, and Vanguard proposes to purchase,
25,702,250 of the Second STHL Shares (the "Second Vanguard Shares") for an
aggregate consideration of US$3,325,000, in each case, upon the terms and
subject to the conditions of the Stock Purchase Agreement.
As a condition precedent to the purchase of the First Vanguard Shares
and the Second Vanguard Shares by Vanguard under the Stock Purchase Agreement,
the parties have agreed to enter into this Amended and Restated Shareholders'
Agreement, providing for certain
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2
matters relating to the transfer of Shares and the management and operation
of the Company and its existing and future subsidiaries, which shall
supersede and replace the Original Shareholders' Agreement from the date
hereof.
In consideration of the foregoing and of the mutual covenants
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree to amend
and restate the Original Shareholders' Agreement in its entirety so that, as
amended and restated, it reads in its entirety as follows:
1. DEFINITIONS.
1.1 CERTAIN DEFINITIONS. The following capitalized terms shall
have the following meanings for purposes of this Agreement:
"AFFILIATE" means, in relation to any Shareholder, a Person
controlling, controlled by or under common control with such Shareholder. For
purposes of this Agreement, "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"BANK" means Dao Heng Bank Limited.
"BANK LOAN AGREEMENT" means the Overdraft Agreement and related
documents entered into as of the date hereof by the Company and the Bank.
"BASIC DOCUMENTS" means this Agreement, the Charter Documents,
the Subscription Agreement, the Stock Purchase Agreement, the STHL Management
Services Agreement, the IWC Management Services Agreement, the Noncompetition
Agreement, the Loan Agreement and the Bank Loan Agreement.
"BOARD" means the board of directors of the Company.
"CHARTER DOCUMENTS" means, collectively, the Memorandum of
Association and the Articles of Association of the Company.
"COMPANY PROJECTS" means (i) the projects listed in Schedule 4.1
to the Subscription Agreement, (ii) the projects in connection with the "Mobile
Telephone Business" in the "PRC" (as such terms are defined in the Subscription
Agreement) listed in Schedule 5.4 of the Subscription Agreement, and (iii) any
other projects approved by the Board as provided in Section 5.5 of this
Agreement.
"DIRECTOR" means a director of the Company (including any duly
appointed alternate director).
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3
"FINANCIAL YEAR" means the financial year of the Company, which
shall end on December 31.
"HONG KONG DOLLARS" OR "HK$" means Hong Kong dollars, the lawful
currency of Hong Kong.
IWC MANAGEMENT SERVICES AGREEMENT" means the Management Services
Agreement between the Company and IWC, dated as of November 7, 1996.
"LOAN AGREEMENT" means the Loan Agreement entered into as of
November 7, 1996 by the Company and STHL.
"NONCOMPETITION AGREEMENT" means the Amended and Restated
Noncompetition Agreement entered into as of the date hereof between STHL and
IWC, amending and restating the Noncompetition Agreement between STHL and IWC,
dated as of November 7, 1996.
"PERSON" means any natural person, corporation, partnership,
firm, joint venture, association, joint stock company, trust, unincorporated
association, governmental authority or other legal entity.
"SECURITIES" means shares in the share capital of the Company and
any options, warrants or other securities that are directly or indirectly
convertible into, or exercisable or exchangeable for, such share capital.
"SHAREHOLDER" means (i) each of IWC, STHL and Vanguard, for so
long as such Shareholder remains a shareholder of the Company, and (ii) any
other Person who becomes a shareholder of the Company in accordance with the
terms of this Agreement and executes a Deed of Adherence substantially in the
form attached hereto as Exhibit A, for so long as such Person remains a
shareholder of the Company.
"STHL MANAGEMENT SERVICES AGREEMENT" means the Management
Services Agreement between the Company and STHL, dated as of November 7, 1996.
"SUBSIDIARY" means any corporation, partnership or other entity
in which the Company directly or indirectly holds a majority interest in the
form of shares, membership, partnership interests or otherwise.
"US DOLLARS" OR "US$" means United States dollars, the lawful
currency of the United States of America.
1.2 PRINCIPLES OF INTERPRETATION.
(a) Any reference herein to any Article, Section, Exhibit
or Schedule shall refer to such Article or Section of, or Exhibit or Schedule
to, this Agreement.
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4
The words "herein," "hereof" and "hereunder," and words of like import, shall
refer to this Agreement as a whole and not to any particular provision hereof.
(b) All pronouns and any variations thereof shall be deemed
to refer to the masculine, feminine or neuter, singular or plural, as the
identity of the antecedent Person or Persons may require.
(c) The headings in this Agreement are intended solely for
convenience of reference and shall be given no effect in the interpretation of
this Agreement.
1.3 TERMINATION OF THE ORIGINAL SHAREHOLDERS' AGREEMENT. The
parties to the Original Shareholders' Agreement agree that the Original
Shareholders' Agreement is hereby terminated and is replaced in its entirety by
this Agreement. The Original Shareholders' Agreement shall be of no further
force or effect. The parties hereto agree, however, that the termination of the
Original Shareholders' Agreement shall be without prejudice to any causes of
action that arose prior to the date hereof under the Original Shareholders'
Agreement.
2. BUSINESS OF THE COMPANY. The business of the Company shall be to
engage in mobile telephone and related businesses, directly or indirectly
through the Subsidiaries.
3. RESTRICTIONS ON TRANSFER OF SHARES.
3.1 LIMITATION ON TRANSFER. No Shareholder shall sell, give,
transfer, assign, charge, mortgage, hypothecate, pledge, encumber, grant a
security interest in or otherwise dispose of (whether by operation of law or
otherwise) (each, a "Transfer") any Securities, or any right, title or interest
therein or thereto, except as expressly permitted by this Article 3. Any
attempt to Transfer any Securities or any rights therein or thereto in violation
of this Article 3 shall be null and void AB INITIO, and the Company shall not
register any such Transfer.
3.2 TRANSFERS IN COMPLIANCE WITH LAW. Notwithstanding any other
provision of this Agreement, no Transfer may be made pursuant to this Article 3
unless (a) the transferee has agreed in writing to be bound by the terms and
conditions of this Agreement pursuant to a Deed of Adherence substantially in
the form attached hereto as Exhibit A, (b) the Transfer complies in all respects
with the applicable provisions of this Agreement and (c) the Transfer complies
in all respects with applicable securities laws. If requested by the Company in
its reasonable discretion, an opinion of counsel to such transferring
Shareholder shall be supplied to the Company, at such transferring Shareholder's
expense, to the effect that such Transfer complies with applicable securities
laws.
3.3 AFFILIATE TRANSFERS.
3.3.1 PERMITTED TRANSFEREES. Any Shareholder may Transfer
some or all of the Securities held by such Shareholder to an Affiliate of such
Shareholder without
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5
compliance with the provisions of Section 3.4. The parties agree that IWC
(or IWC's Affiliates) and Vanguard (or Vanguard's Affiliates) shall have the
right to transfer some or all of the Securities held by them to each other or
to an Affiliate established by IWC or Vanguard without compliance with the
provisions of Section 3.4.
3.3.2 CHANGE IN STATUS. If Securities are Transferred by a
Shareholder to an Affiliate of such Shareholder and such transferee shall at any
time cease to be an Affiliate of such Shareholder, such Shareholder shall notify
the other Shareholders of such an event within five business days after the
occurrence of such an event, and such Securities shall be transferred (i) back
to the original Shareholder or (ii) to another Affiliate of that Shareholder
without compliance with the provisions of Section 3.4.
3.3.3 COMBINED HOLDINGS. The Securities held by a
Shareholder and such Shareholder's Affiliates shall for all purposes of this
Agreement be treated as Securities held by a single Shareholder; provided,
however, that for the avoidance of doubt, Vanguard (or Vanguard's Affiliates)
shall not be deemed to be an Affiliate of IWC (or IWC's Affiliates) for the
purposes of this sentence.
In the case of a Transfer to an Affiliate, (i) the
Shareholder shall remain liable for any and all of its obligations under this
Agreement; (ii) STHL and IWC shall remain liable for any and all of their
respective obligations under the Subscription Agreement; and (iii) Vanguard and
STHL shall remain liable for any and all of their respective obligations under
the Stock Purchase Agreement; provided, however that the foregoing shall not
apply to Transfers to IWC or IWC's Affiliates by Vanguard or Vanguard's
Affiliates or to Vanguard or Vanguard's Affiliates by IWC or IWC's Affiliates,
in each case made pursuant to Section 3.3.1 with respect to the Shares so
Transferred.
3.4 RIGHT OF FIRST REFUSAL AND RIGHT OF CO-SALE. Each
Shareholder (each, a "Transferor") who proposes to Transfer Securities to a
third party (a "Third Party Purchaser") other than pursuant to Sections 3.3,
3.6, 3.7 or 3.8, grants to each other Shareholder (a "Section 3.4 Rightholder")
a right of first refusal ("Right of First Refusal") to purchase such Section 3.4
Rightholder's pro-rata share of the Transferor's Securities and a pro-rata right
of co-sale to participate in such Transfer ("Right of Co-Sale") exercisable at
the option of each Section 3.4 Rightholder in accordance with Section 3.4(b).
(a) Each Transferor shall furnish to each Section 3.4
Rightholder written notice (the "Transferor Notice") of the intended
disposition, including the identity of the Third Party Purchaser, the number of
Securities to be Transferred (the "Offered Securities"), the price at which the
Securities are proposed to be Transferred and the general terms upon which such
Transfer is proposed to be made.
(b) Subject to Sections 3.4(c) and 3.4(d), each Section 3.4
Rightholder shall have 21 calendar days (the "Notice Period") after the receipt
of the Transferor Notice (i) to agree irrevocably to purchase up to its pro-rata
share of the Offered Securities for the price and upon the general terms
specified in the Transferor Notice by giving written notice
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6
to the Transferor and stating therein the quantity of the Offered Securities
to be purchased (each such Section 3.4 Rightholder exercising such right
being referred to herein as a "Section 3.4 Purchaser") or (ii) to agree
irrevocably to participate in the Transfer at the price and upon the general
terms specified in the notice by giving written notice to the Transferor and
stating therein the number of the Section 3.4 Rightholder's Securities to be
sold (each such Section 3.4 Rightholder exercising such right being referred
to herein as a "Section 3.4 Seller"). Failure by a Section 3.4 Rightholder
to respond within such Notice Period shall be regarded as a waiver of its
Right of First Refusal and its Right of Co-Sale with respect to the Transfer
of the Offered Securities. A Section 3.4 Rightholder may exercise either its
Right of First Refusal or its Right of Co-Sale pursuant to this Section 3.4,
but may not exercise both such rights with respect to any single proposed
Transfer of Offered Securities.
(c) Each Transferor shall, promptly after the end of the
Notice Period, give written notice (the "Last-Chance Notice") to all Section 3.4
Rightholders stating whether the Offered Securities have been fully subscribed
for by the Section 3.4 Purchasers, and, if not, the number of Offered Securities
not so subscribed-for (the "Remaining Offered Securities"), together with
information describing any exercise of Rights of Co-Sale by any Shareholders.
Subject to Section 3.4(d), each Section 3.4 Purchaser shall have the right, but
not the obligation, to purchase all, but not less than all, of the Remaining
Offered Securities. The right of each Section 3.4 Purchaser to purchase the
Remaining Offered Securities shall be exercisable irrevocably by written notice
delivered to each Transferor, with a copy to the Company, given within ten
calendar days (the "Last Chance Period") after receipt of the Last-Chance
Notice. If more than one Section 3.4 Purchaser timely elects to exercise its
right to purchase the Remaining Offered Securities, the right to purchase the
Remaining Offered Securities shall be allocated pro rata among those Section 3.4
Purchasers electing to purchase the Remaining Offered Securities, based on the
proportion that the number of Securities owned by such Section 3.4 Purchaser
bears to the total number of Securities owned by all Section 3.4 Purchasers that
elect to purchase the Remaining Offered Securities. A failure of any Section
3.4 Purchaser to exercise such right within the Last Chance Period shall be
regarded as a waiver of its right to purchase such Remaining Offered Securities
as provided herein.
(d) Notwithstanding anything in this Article 3 to the
contrary, the right of the Section 3.4 Purchasers to purchase any of the Offered
Securities pursuant to this Article 3 shall be exercisable if and only if the
Section 3.4 Purchasers collectively have exercised their rights to purchase all,
but not less than all, of the Offered Securities pursuant to this Section 3.4.
Any exercise by any Shareholder of a Right of First Refusal or Right of Co-Sale
pursuant to this Section 3.4 shall be final and irrevocable.
(e) For purposes of this Section 3.4, the maximum number of
Securities each Section 3.4 Seller may sell to the Third Party Purchaser (or the
Section 3.4 Purchasers, as the case may be) shall be equal to the product of the
total number of Offered Securities multiplied by a fraction, the numerator of
which shall be the total number of Securities owned by such Section 3.4 Seller
and the denominator of which shall be the total number of Securities owned by
the Transferor and all of the Section 3.4 Sellers.
<PAGE>
7
(f) If the Section 3.4 Purchasers collectively have
exercised their Rights of First Refusal with respect to all of the Offered
Securities, then the closing of such sale and purchase shall take place promptly
after the final allocation with respect to such Offered Securities has been
determined, at the principal offices of the Company or such other place and time
as the relevant parties may agree. If the Section 3.4 Purchasers collectively
have not exercised their Rights of First Refusal with respect to all of the
Offered Securities, then the Transferor and the Section 3.4 Sellers shall have
120 calendar days after the end of the Last Chance Period to make the Transfer
of the Offered Securities to the Third Party Purchaser at the price and upon the
terms specified in the Transferor Notice. The total number of Securities
permitted to be Transferred to the Third Party Purchaser by the Transferor
hereunder shall be equal to the total number of Offered Securities less that
number of Securities offered to the Third Party Purchaser by the Section 3.4
Sellers pursuant to this Section 3.4. In the event the Transferor and the
Section 3.4 Sellers do not Transfer such Securities to the Third Party Purchaser
within such 120-day period, the Transferor shall not thereafter make a Transfer
of such Offered Securities without again complying with the Right of First Offer
and Right of Co-Sale provisions in this Section 3.4.
(g) The exercise or non-exercise of the Right of First
Refusal and the Right of Co-Sale by a Section 3.4 Rightholder with respect to a
Transfer of Securities by a Transferor shall not affect such Section 3.4
Rightholder's Right of First Refusal or Right of Co-Sale with respect to
subsequent Transfers of Securities.
(h) A change in the beneficial ownership of any Shareholder
or any Person that controls a Shareholder shall not constitute a Transfer of
Securities that causes the Right of First Refusal and the Right of Co-Sale to
arise hereunder so long as such Shareholder's ownership interest in the Company
does not constitute the primary asset of such Shareholder or other Person in
respect of which such change in beneficial ownership occurs.
(i) Any Section 3.4 Rightholder may assign its Right of
First Refusal or Right of Co-Sale hereunder to (i) any other Section 3.4
Rightholder, (ii) any Affiliate of such Section 3.4 Rightholder or (iii) a
nominee of such Section 3.4 Rightholder, insofar as such Section 3.4 Rightholder
is unable to reap the benefit of this Section 3.4 because the Transfer of
Securities to such Section 3.4 Rightholder as provided herein is not permitted
by any governmental authority or is not possible for any other reason.
3.5 VETO RIGHTS. If a Shareholder proposes to Transfer
Securities to a Third Party Purchaser that is engaged in a business directly
competing with that of the Company at the time of the proposed Transfer, non-
Transferring Shareholders holding in the aggregate at least 25% of the issued
Shares shall each have the right to prohibit such Transfer, notwithstanding
compliance by the Transferor with Section 3.4. For the avoidance of doubt, this
provision shall not apply to Transfers made pursuant to Section 3.3.1.
3.6 IWC RIGHT OF FREE SALE. Notwithstanding anything to the
contrary contained herein and in addition to its rights under Section 3.3, IWC
shall have the right, exercisable once at any time prior to November 7, 1997, to
Transfer any or all of its Securities to
<PAGE>
8
any Person and such Transfer shall not be subject to the Right of First
Refusal or Right of Co-Sale hereunder.
3.7 STHL RIGHT OF FREE SALE. Notwithstanding anything to the
contrary contained herein, STHL shall have the right, exercisable once at any
time after the date of this Agreement, to Transfer up to an aggregate of 5%
(determined as of the date of the exercise) of its Securities to any Person and
such Transfer shall not be subject to the Right of First Refusal or Right of Co-
Sale hereunder.
3.8 VANGUARD RIGHT OF FREE SALE. Notwithstanding anything to
the contrary contained herein and in addition to its rights under Section 3.3,
Vanguard shall have the right, exercisable once at any time prior to November 7,
1997, to Transfer any or all of its Securities to any Person and such Transfer
shall not be subject to the Right of First Refusal or Right of Co-Sale
hereunder.
4. RIGHT OF FIRST OFFER. The Company hereby grants to each
Shareholder a right of first offer ("Right of First Offer") to subscribe for
such Shareholder's pro-rata share of any New Securities (as defined in Section
4(e) below) that the Company may from time to time propose to issue, and the
provisions of this Article 4 shall apply to such issuances other than issuances
pursuant to Article 7.
(a) In the event that the Company proposes to undertake an
issuance of New Securities, the Company shall give written notice (the "Company
Notice") of its intention to so issue such New Securities to each Shareholder.
The Company Notice shall include the type and number of such New Securities, the
price and the general terms upon which such New Securities are proposed to be
issued, the number of such New Securities for which each Shareholder is entitled
to subscribe pursuant to this Article 4 and the identity of the Person(s) to
whom such New Securities are proposed to be issued (the "Proposed Acquirers").
(b) Each Shareholder shall have 21 calendar days after the
receipt of the Company Notice to agree irrevocably to subscribe for up to its
pro-rata share of such New Securities for the price and upon the general terms
specified in the Company Notice by giving written notice to the Company and
stating therein the number of New Securities for which such Shareholder shall
subscribe. If any Shareholder fails to exercise or waives its Right of First
Offer hereunder (a "Non-Exercising Shareholder"), the Company shall give notice
to all Shareholders who do exercise their Right of First Offer (the "Exercising
Shareholders") of such failure or waiver.
(c) Each Exercising Shareholder shall have a right of over
allotment to subscribe for up to its pro-rata portion of any New Securities not
subscribed for by a Non-Exercising Shareholder hereunder. Each Exercising
Shareholder may exercise irrevocably such right of over allotment by giving
written notice to the Company within seven calendar days of receipt of the
notice of non-exercise or waiver from the Company described in clause (b) above
and stating therein the number of New Securities for which such Exercising
Shareholder shall subscribe. Upon exercises of the Right of First Offer
hereunder in connection with any proposed
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9
issuance of New Securities, the Company shall simultaneously issue such New
Securities pursuant to such exercises at such time and place as the Company
shall determine. Any exercise by any Shareholder of a right of subscription
pursuant to this Article 4 shall be final and irrevocable.
(d) In the event the Shareholders waive or fail to exercise in
full the Right of First Offer set forth in clauses (b) and (c) of this Article 4
with respect to all of the New Securities within the above-mentioned time
periods, then the Company shall have 120 calendar days thereafter to sell any
New Securities with respect to which the Shareholders did not exercise their
Right of First Offer at a price and upon general terms no more favorable to the
Proposed Acquirers than those specified in the Company Notice. In the event the
Company does not sell the New Securities within such 120-day period, the Company
shall not thereafter issue or sell such New Securities without first offering
such New Securities to the Shareholders in accordance with this Article 4.
(e) For the purposes of this Article 4, the term "New
Securities" shall mean any Securities, whether now authorized or authorized in
the future, that are offered for subscription or sale by the Company.
(f) The exercise or non-exercise of the Right of First Offer by
a Shareholder hereunder with respect to an issuance of New Securities shall not
affect such Shareholder's Right of First Offer with respect to subsequent
issuances of New Securities.
(g) Any Proposed Acquirer to whom New Securities are issued
pursuant to this Article 4 shall become a party to and shall be bound by the
restrictions on Transfer and the other restrictions and obligations set forth in
this Agreement to the same extent and with the same force and effect as if such
person were an original signatory hereto. Each Proposed Acquirer shall, as a
condition to subscribing for such New Securities, execute a Deed of Adherence
substantially in the form of Exhibit A upon or before the consummation of the
issuance of such New Securities.
5. MANAGEMENT.
5.1 GENERAL. From and after the date hereof, each Shareholder
shall vote its Shares at any ordinary general meeting or extraordinary general
meeting of Shareholders (a "Shareholders' Meeting") or in any written resolution
executed in lieu of such a meeting of Shareholders (a "Written Resolution"), and
shall take all other actions necessary, to give effect to the provisions of this
Agreement (including, without limitation, Section 5.3.2) and to ensure that the
Charter Documents do not, at any time hereafter, conflict in any respect with
the provisions of this Agreement. In addition, each Shareholder shall vote its
Shares at any Shareholders' Meeting, or act by Written Resolution with respect
to such Shares, upon any matter submitted for action by the Shareholders or with
respect to which such Shareholder may vote or act by Written Resolution, in
conformity with the specific terms and provisions of this Agreement and the
Charter Documents.
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10
5.2 SHAREHOLDER VOTES. The following matters in relation to the
Company shall require the consent of Shareholders holding an aggregate of at
least 75% of the issued and outstanding Shares in a Written Resolution or the
consent of representatives of Shareholders holding an aggregate of at least 75%
of the issued and outstanding Shares present at a duly convened Shareholders'
Meeting:
(a) any amendment, modification or waiver of the Charter
Documents;
(b) any change to the scope of business of the Company or
any Subsidiary;
(c) any sale or other disposition of all or substantially
all of the assets of the Company or any Subsidiary;
(d) the liquidation, winding up or dissolution of the
Company, the making or entry into by the Company of any general assignment,
arrangement or composition with or for the benefit of its creditors, or the
cessation by the Company to carry on its business or any material part of its
business;
(e) settlement, waiver or discontinuance of any litigation
or arbitration proceedings involving a claim exceeding the equivalent of
US$500,000 per claim and US$1,000,000 in the aggregate in any financial year and
initiating any litigation or arbitration proceedings involving a claim exceeding
the equivalent of US$500,000;
(f) any merger, amalgamation or consolidation of the
Company or any Subsidiary with any other entity;
(g) issuance of any Securities of the Company or any
Subsidiary;
(h) the acquisition or disposition of any business or
company by the Company or any Subsidiary; and
(i) the acquisition or disposition of any material assets
by the Company or any Subsidiary other than in the ordinary course of business.
Notwithstanding the provisions of Section 5.2(e), where
litigation or arbitration proceedings are or are proposed to be brought by or
against the Company against or by any Shareholder or any Affiliate of any
Shareholder, irrespective of the amount involved, such Shareholder, and the
Directors appointed by such Shareholder to the Board, shall have no vote in
determining whether such litigation or arbitration proceedings shall be
initiated, settled or discontinued or how the same shall be conducted.
5.3 BOARD OF DIRECTORS.
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11
5.3.1 AUTHORITY OF BOARD. Subject only to the provisions
of this Agreement and the Charter Documents, the Board shall have ultimate
responsibility for management and control of the Company.
5.3.2 NUMBER AND COMPOSITION. The number of members
constituting the entire Board shall be ten. Each Shareholder shall vote its
Shares at any Shareholders' Meeting called for the purpose of filling the
positions on the Board or in any Written Resolution executed for such purpose to
elect, and shall take all other actions necessary to ensure the election to the
Board of, (i) five nominees of IWC and (ii) five nominees of STHL. The parties
hereto agree that if IWC no longer has the right to nominate any Director on the
Board, for so long as Vanguard remains a holder of at least 5.00% of the issued
and outstanding share capital of the Company, Vanguard shall have the right to
nominate one Director to the Board (provided that, in such event, the total
number of members constituting the entire Board shall be six, comprised of five
nominees of STHL and one nominee of Vanguard), and each Shareholder shall vote
its Shares at any Shareholders' Meeting called for the purpose of filling the
positions on the Board or in any Written Resolution executed for such purpose to
elect, and shall take all other actions necessary to ensure the election to the
Board of any such Director so nominated by Vanguard. Each Shareholder who has a
right to nominate a director (a "Nomination Right") pursuant to this Section
5.3.2 shall not be permitted to transfer its Nomination Right in connection with
any Transfer of its Securities without the prior written consent of all other
Shareholders who have Nomination Rights at the time of such Transfer.
5.3.3 REMOVAL AND REPLACEMENT OF DIRECTORS.
(a) A Director shall be removed from the Board, with
or without cause, upon, and only upon, the affirmative vote of the Shareholders
in accordance with this Section 5.3.3. Each Shareholder shall vote its Shares
for the removal of a Director upon the request of the Shareholder that nominated
such Director. Otherwise, no Shareholder shall vote for the removal of a
Director.
(b) In the event any Director resigns or is removed in
accordance with Section 5.3.3(a), the Shareholders shall, before the transaction
of any other business by the Shareholders or the Board, elect a successor or
replacement nominated by the Shareholder that nominated such Director. Such
successor or replacement Director shall be elected on or as soon as possible
after the date of such resignation or removal.
5.3.4 CHAIRMAN AND VICE CHAIRMAN OF THE BOARD. The
Chairman of the Board shall be nominated by STHL. The Chairman of the Board
shall have no casting vote. The Vice Chairman of the Board shall be nominated
by IWC.
5.3.5 ALTERNATE DIRECTORS. A Director may at any time
appoint another person (including another Director) to be his alternate
Director, and may at any time terminate such appointment. Any person so
appointed shall be entitled to receive notices of and to attend and vote at
meetings of the Board and count towards a quorum and shall automatically
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12
vacate his office on the expiration of the term for, or the happening of the
event, until which he is by the terms of his appointment to hold office or if
the appointor in writing terminates the appointment or if the appointor
himself ceases for any reason to hold office as a Director. An appointment
of an alternate Director shall not prejudice the right of the appointor to
receive notices of and to attend and vote at meetings of the Board, and the
powers of the alternate Director shall automatically be suspended during such
time as the Director appointing him is himself present in person at a meeting
of the Board.
5.4 BOARD MEETINGS.
5.4.1 NOTICE. Meetings of the Board may be called by the
Chairman of the Board or any two Directors. Not less than 14-days' notice of
any Board meeting shall be given to all Directors; PROVIDED, HOWEVER, that such
notice period may be reduced if approved by all of the Directors in writing.
The venue for Board meetings shall be the principal offices of the Company
unless otherwise approved by the Board.
5.4.2 QUORUM. All meetings of the Board shall require a
quorum consisting of at least six Directors, including at least one Director
nominated by IWC and at least one Director nominated by STHL. Notwithstanding
the foregoing, if such a quorum is not present within one hour from the time
appointed for the meeting, the meeting shall adjourn to such place and time
(which is at least 14 days later) as those Directors who did attend shall decide
or, if no such decision is reached, at the same place and time 14 days later, at
which time any six Directors present shall constitute a quorum; PROVIDED that
not less than seven days' notice of such adjourned meeting of the Board shall be
given to all the Directors.
5.4.3 PROXIES. Any Director may, by written notice to the
Company Secretary, authorize another Director to attend and vote by proxy for
such Director at any Board meeting.
5.4.4 TELEPHONIC MEETINGS. Directors may participate in a
meeting of the Board by means of conference telephone or similar communications
equipment whereby all persons participating in the meeting can hear each other
at the same time.
5.4.5 VOTING. Except as set forth in Section 5.4.6 or
Section 5.5, the adoption of any resolution of the Board shall require the
affirmative vote of Directors holding a majority of the votes held by Directors
present at a duly constituted meeting of the Board at which a quorum is present.
5.4.6 WRITTEN RESOLUTION. By notice and copy to all
Directors, resolutions may be adopted in writing by (i) in the case of matters
other than those specified in Section 5.5 and, to the extent permitted by Hong
Kong law, a majority of Directors, including at least one Director nominated by
IWC and one Director nominated by STHL or (ii) in the case of matters specified
in Section 5.5, all Directors.
<PAGE>
13
5.5 MATTERS REQUIRING UNANIMOUS APPROVAL. The following matters
shall require the affirmative vote or written consent of all Directors except in
the event that Vanguard has the right to nominate one director pursuant to the
third sentence of Section 5.3.2, in which case the following matters shall only
require the affirmative vote or written consent of at least 75% of all
Directors:
(a) any increase or decrease in the size of the Board;
(b) annual business plans of the Company and the Company
Projects and any material changes thereto;
(c) any decision to make an investment in or pursue any
joint ventures or projects, or any decision to make any additional investment in
any of the Company Projects;
(d) hiring of a chief executive officer, chief financial
officer, chief operating officer and technical director of the Company;
(e) any merger, reorganization or other transaction that
results in a change in control of the Company or any of the Company Projects or
any sale of all or substantially all of the Company or its assets or of any of
the Company Projects or such Company Project assets;
(f) termination of the Company's operations or the
operations of any of the Company Projects;
(g) any decision to raise additional equity or debt
financing, incur any guarantees or grant any security interests by the Company
or by any of the Company Projects;
(h) any contracts between or among (i) the Company and any
of the Company Projects, (ii) the Company and any Shareholder of the Company or
Affiliate of any Shareholder or (iii) any of the Company Projects and any
Shareholder or Affiliate of any Shareholder;
(i) any changes in the principal activities or any
amendment to the charter documents of any of the Company Projects;
(j) any amendments to the Noncompetition Agreement, the
Loan Agreement, the IWC Management Services Agreement, the STHL Management
Services Agreement, the Bank Loan Agreement or any service agreement between the
Company and any entity in respect of any Company Project;
(k) issuance and allocation of the Management Options as
referred to in Article 8; and
<PAGE>
14
(l) any decision to appoint or change the outside auditors
of the Company.
5.6 CHIEF EXECUTIVE OFFICER AND OTHER OFFICERS. The appointment
of the Chief Executive Officer, the Vice President-Engineering and the Chief
Financial Officer of the Company shall each be an individual nominated by IWC.
The appointment of any such nominees shall be subject to the consent of STHL,
which consent shall not be unreasonably withheld.
5.7 COMPANY PROJECTS. Notwithstanding anything to the contrary
contained herein, the parties agree that IWC shall have the right to cause the
Company to engage counsel selected by IWC to direct and lead the structuring or
restructuring of any or all of the Company Projects in the People's Republic of
China, whether now or hereafter existing.
5.8 DIRECTORS' ACCESS. Each Director shall be entitled to
examine the books and accounts of the Company. The Company shall provide to each
Director, within 30 days after the end of each month, a monthly operating report
of the Company and each Subsidiary containing such information as may be
specified by the Board and such information relating to the business affairs and
financial position of the Company as such Director may require. Any Director
may provide such information to a Shareholder.
6. FINANCIAL REPORTS AND AUDITING.
6.9 RIGHT OF INSPECTION. The Company shall allow the
Shareholders and their authorized representatives the right during normal
business hours to inspect its books and accounting records and those of the
Subsidiaries, to make extracts and copies therefrom at their own expense and to
have full access to all of the Company's and each of the Subsidiaries' property
and assets. Notwithstanding the foregoing in this Section 6.1, the Company
shall not be obligated to provide any information to any Shareholder or
Shareholder's representative or to any competitor of the Company pursuant to
this Section 6.1 that the Company considers to be a trade secret or similar
confidential information unless such Shareholder and such Shareholder's
representative agrees not to use such information and to keep such information
confidential. The foregoing rights of visitation and inspection shall be in
addition to any other similar rights the Shareholders may have under the laws of
Hong Kong.
6.10 BOOKS AND RECORDS. The Company and the Subsidiaries shall
keep proper, complete and accurate books of account in Hong Kong and US dollars
in accordance with international accounting standards and shall have their
accounts audited annually in accordance with such standards by a reputable firm
of international accountants appointed by the Board, which firm initially shall
be selected by IWC. The audited financial statements shall be prepared in Hong
Kong and US dollars and reconciled according to the United States generally
accepted accounting principles.
<PAGE>
15
6.11 REPORTS. The Company shall provide to each Shareholder (i)
within 60 days after the end of each Financial Year, the annual audited
consolidated financial statements of the Company for such Financial Year, (ii)
within 15 days after the end of each month, monthly unaudited consolidated
financial statements of the Company for such month, (iii) within 30 days after
the end of each quarter, quarterly unaudited consolidated financial statements
of the Company for such quarter which have been reconciled according to the
United States generally accepted accounting principles, (iv) monthly operating
reports in a format approved by the Board and (v) such other reports as the
Board may determine. The Company shall furnish to the Shareholders and their
auditors such financial and other information relating to the business of the
Company and its Subsidiaries as any of them may reasonably require.
6.12 BUDGETS AND BUSINESS PLANS.
(a) The Company shall prepare proposed annual operating and
capital budgets and business plans for the Company and each Subsidiary, which
shall be submitted to all Directors not less than 60 days prior to the
commencement of each Financial Year. The Board shall adopt budgets and business
plans for the Company and each Subsidiary within one month after the
commencement of the relevant Financial Year.
(b) The Company shall prepare semi-annual operating plans
for the Company and each Subsidiary, which shall be submitted to all Directors
not less than 60 days prior to the commencement of the six-month period in
question.
6.13 BANK ACCOUNTS. The parties shall procure that the bank
account or bank accounts opened in the name of the Company with The Hongkong and
Shanghai Banking Corporation Limited, or such other bank or banks as may be
determined by the Board, are maintained. Such account or accounts shall be
operated as the Board shall resolve from time to time. All payments to or by
the Company shall be paid into or withdrawn from such account or accounts.
7. FUNDING.
7.14 ADDITIONAL CAPITAL CONTRIBUTIONS. The Shareholders shall
make capital contributions to the Company as contemplated by any business plan
approved by the Board in accordance with Section 5.5. Such capital
contributions shall be made in proportion to each Shareholder's then equity
interest in the Company and according to a schedule determined by the Board and
shall be in the form of additional equity capital contributions or shareholder
loans. For the purposes of this Article 7, as of the date hereof; (i) STHL
shall be deemed to have contributed US$14,575,000; (ii) IWC shall be deemed to
have contributed US$11,000,000; and (iii) Vanguard shall be deemed to have
contributed US$1,925,000, in each case, to the capital of the Company.
7.15 FAILURE TO MAKE CAPITAL CONTRIBUTION. If the Board shall
require that the Shareholders make capital contributions to the Company (a
"Capital Call") in the form of equity capital contributions and if any
Shareholder fails to contribute in full the capital
<PAGE>
16
required to be contributed by such Shareholder pursuant to such Capital Call
(each, a "Required Contribution") within the time specified by the Board (the
"Capital Deadline"), then the percentage equity ownership interest of such
defaulting Shareholder (a "Defaulting Shareholder") in the Company shall be
reduced as provided in this Article 7, and the percentage equity ownership
interests of each Shareholder who contributes at least its Required
Contribution (each, a "Non-defaulting Shareholder") shall be increased as
provided in this Article 7. If the Board shall make a Capital Call from the
Shareholders in the form of shareholder loans, and if any Shareholder fails
to contribute in full its Required Contribution pursuant to such Capital
Call, then such Capital Call shall automatically be converted into a Capital
Call for equity capital contributions, and the percentage equity ownership
interest of such Defaulting Shareholder in the Company shall be reduced as
provided in this Article 7, and the percentage equity ownership interests of
each Non-defaulting Shareholder shall be increased as provided in this
Article 7.
7.16 MAKING UP THE AMOUNTS OF DEFAULT. For each Capital Call,
each Non-defaulting Shareholder shall have the right to contribute additional
capital to the Company to make up for the aggregate of all of the Defaulting
Shareholders' "Amounts of Default" (as defined in Section 7.5 below). Each Non-
defaulting Shareholder that elects to exercise such right (each, a
"Participating Shareholder") shall be permitted to contribute additional capital
in an amount up to its pro-rata share of the aggregate of all of the Defaulting
Shareholders' Amounts of Default, which pro-rata share shall be based upon the
proportion (calculated as of immediately prior to the Capital Call) such
Participating Shareholder's equity interest in the Company bears to the
aggregate equity interest in the Company of all Participating Shareholders. For
the purposes of this Article 7, any amounts contributed pursuant to this Section
7.3 shall be deemed to have been contributed prior to the Capital Deadline.
7.17 SHAREHOLDERS' EQUITY INTERESTS. Each Shareholder's equity
interest in the Company shall be increased or decreased (as applicable) to the
percentage equal to such Shareholder's Capital Percentage.
7.18 DEFINITIONS.
(a) "Capital Percentage" shall mean, for a Shareholder,
after any Capital Call, the product of 100% times a fraction, the numerator of
which shall be the total of all amounts contributed as capital to the Company
(including any amounts deemed contributed pursuant to Section 7.3) by such
Shareholder (less any such amounts returned by the Company to such Shareholder)
as of immediately after the Capital Deadline, and the denominator of which shall
be the total of all amounts contributed as capital to the Company (including
any amounts deemed contributed pursuant to Section 7.3) by all Shareholders
(less any amounts returned by the Company to all Shareholders) as of
immediately after the Capital Deadline.
(b) "Amount of Default" shall mean, for a Defaulting
Shareholder, such Defaulting Shareholder's Required Contribution LESS the amount
of capital
<PAGE>
17
actually contributed to the Company by such Defaulting Shareholder prior to
the Capital Deadline pursuant to the Capital Call requiring such Required
Contribution.
8. MANAGEMENT OPTIONS. The parties agree that options to purchase
up to an aggregate number of Shares that equals 5% of the authorized share
capital of the Company immediately after the "First Closing" under the
Subscription Agreement (taking into account the amendments to the Memorandum and
Articles of Association of the Company contemplated by the Subscription
Agreement) at a price per Share to be agreed to by the Board may be issued upon
the unanimous decision of the Board to members of senior management of the
Company pursuant to a management stock option plan to be adopted by the Board
(the "Management Options").
9. MEMORANDUM AND ARTICLES OF ASSOCIATION. The parties agree,
promptly after the date hereof, to take all necessary actions and execute all
documents and instruments necessary to amend the Charter Documents to conform to
the terms of this Agreement.
10. REPRESENTATIONS AND WARRANTIES. Each party hereto represents
with respect to itself, severally and not jointly, to the other parties hereto
that:
(a) such party has the full power and authority to enter into,
execute and deliver this Agreement and to perform the transactions contemplated
hereby and such party is duly organized and existing under the laws of the
jurisdiction of its organization and that the execution and delivery by such
party of this Agreement and the performance by such party of the transactions
contemplated hereby have been duly authorized by all necessary corporate or
other action of such party;
(b) assuming the due authorization, execution and delivery
hereof by the other parties, this Agreement constitutes the legal, valid and
binding obligation of such party, enforceable against such party in accordance
with its terms; and
(c) the execution, delivery and performance of this Agreement by
such party and the consummation of the transactions contemplated hereby will not
(i) violate any provision of the Memorandum or Articles of Association or By-
laws (or comparable instruments) of such party; (ii) require such party to
obtain any consent, approval or action of, or make any filing with or give any
notice to, any governmental authority in such party's country of organization or
any other person pursuant to any instrument, contract or other agreement to
which such party is a party or by which such party is bound other than such
filings as may be required under applicable securities laws and such notices and
copies of documents as it may be required to provide its or its Affiliates'
lenders; (iii) conflict with or result in any material breach or violation of
any of the terms and conditions of, or constitute (or with notice or lapse of
time or both constitute) a default under, any instrument, contract or other
agreement to which such party is a party or by which such party is bound; (iv)
violate any order, judgment or decree against, or binding upon, such party or
upon its respective securities, properties or businesses; or (v) violate any law
or regulation of such party's country of organization or any other country in
which it maintains its principal office.
<PAGE>
18
11. FEES AND EXPENSES. Except as otherwise specifically provided in
this Agreement or in any of the Basic Documents, each of the parties hereto
shall bear its respective fees and expenses incurred in connection with the
preparation, execution and performance of this Agreement and the other Basic
Documents and the transactions contemplated hereby and thereby, including,
without limitation, all fees and expenses of agents, representatives, counsel
and accountants.
12. CONFIDENTIALITY.
12.19 GENERAL OBLIGATION. Each party undertakes that it shall
not reveal, and shall cause its directors, officers and employees not to reveal,
to any third party any information acquired by it or them in connection with
this Agreement or confidential or proprietary information concerning the
organization, business, technology, finance, transactions or affairs of the
Company, the Subsidiaries or the Company Projects or any other party hereto
without the prior written consent of the other parties.
12.20 EXCEPTIONS. The provisions of Section 12.1 shall not apply
to:
(a) information that is publicly available (except by
virtue of a breach of this Agreement);
(b) a disclosure to legal, financial or professional
advisors or bankers of any party;
(c) a disclosure, after giving prior notice to the other
parties to the extent practicable under the circumstances and subject to any
practicable arrangements to protect confidentiality, to the extent required
under the rules of any stock exchange or by applicable laws or governmental
regulations or judicial or regulatory process or in connection with any judicial
process regarding any legal action, suit or proceeding arising out of or
relating to this Agreement;
(d) a disclosure by the Company reasonably necessary in the
ordinary course of business or otherwise in connection with transactions or
proposed transactions of the Company; or
(e) a disclosure required by the lenders of any Shareholder
or of any Shareholder's Affiliates.
12.21 DISCLOSURE TO THIRD PARTIES. Upon any Shareholder entering
into negotiations with any Person with a view to selling any Shares to such
Person, information in respect of the Company or any Subsidiary that is
reasonably necessary to permit such Person to evaluate the business of the
Company or such Subsidiary may be provided to such Person, provided that such
Person has executed a binding confidentiality letter in a form approved by the
Board; PROVIDED that where such Person is involved in a business directly
competing with that of
<PAGE>
19
the Company, the Board may prohibit the disclosure of any such confidential
information as the Board may reasonably determine.
13. PUBLICITY. Except for a publicity release or public announcement
(after giving prior notice to and consulting with the other parties to the
extent practicable under the circumstances), to the extent required under the
rules of any stock exchange or by applicable laws or governmental regulations or
judicial or regulatory process, and except for disclosures permitted by Article
12, no publicity release or public announcement concerning the Company, any
Subsidiary or any Company Project or the relationship or involvement of the
parties shall be made by any party without advance approval thereof by the
Board; PROVIDED that no disclosure of a party's identity may be made without the
prior approval of such party, except as permitted by Article 12.
14. FOREIGN CORRUPT PRACTICES ACT. Each of the parties hereto, and
each of such party's shareholders, agents, representatives and Affiliates, shall
at all times comply with the terms and provisions of the U.S. Foreign Corrupt
Practices Act, and shall also cause the Company and each of its agents,
representatives and Affiliates to so comply, in connection with the operation of
the Company and the transactions contemplated hereby.
15. U.S. INVESTMENT COMPANY ACT OF 1940. Each of the parties hereto
agrees that the Company and the Subsidiaries shall conduct their business at all
times such that the Company or any present or future Subsidiary is not deemed to
be an "investment company" under the U.S. Investment Company Act of 1940.
16. MISCELLANEOUS.
16.22 LEGEND. Each certificate for any Shares now held or
hereafter acquired by any Shareholder shall, for as long as this Agreement is
effective, bear a legend as follows:
"Star Digitel Limited (the "Company") is a company organized under the laws
of Hong Kong, and the shares represented by this certificate may not be
sold, assigned, transferred, exchanged, mortgaged, pledged or otherwise
disposed of or encumbered without compliance with the provisions of that
certain Amended and Restated Shareholders' Agreement, dated as of April 4,
1997, among the Company and the shareholders of the Company named therein.
A copy of such Amended and Restated Shareholders' Agreement is on file at
the registered offices of the Company. The Company will not register the
transfer of such shares on the register of members of the Company unless
and until the transfer has been made in compliance with the terms of such
Amended and Restated Shareholders' Agreement."
16.23 NOTICES. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally or
sent by registered mail or international courier service, in either case postage
prepaid, or delivered by telecopy, telex, facsimile or similar
telecommunications equipment. Any such notice shall be deemed given
<PAGE>
20
when so delivered personally or, if sent by registered mail, five days after
the date of deposit in the mails or, if sent by international courier
service, three days after the date of deposit with the courier service or, if
delivered by telecopy, telex, facsimile or similar telecommunications
equipment, at the time of receipt thereof, as follows:
(a) if to the Company, to:
Star Digitel Limited
12/F Sun Hung Kai Centre
30 Harbour Road
Wanchai
Hong Kong
Attention: Mr. Wei Yuan
Facsimile No.: 852-2531-0620
(b) if to IWC, to:
International Wireless Communications, Inc.
400 South El Camino Real
San Mateo, California 94402
United States of America
Attention: Mr. Doug Sinclair
Facsimile No.: 1-415-548-1842
(c) if to STHL, to:
Star Telecom Holding Limited
414 Kwun Tong Road
6/F, Star Telecom Tower
Kwun Tong
Kowloon, Hong Kong
Attention: Company Secretary
Facsimile No.: 852-2771-7421
(d) if to Vanguard, to:
Vanguard China, Inc.
1419 Forest Drive, Suite 205
Annapolis, Maryland 21403
U.S.A.
Attention: Mr. Van Snowdon
Facsimile No.: 1-410-268-8143
<PAGE>
21
with a copy to:
Vanguard Cellular Systems, Inc.
2002 Pisgah Church Road, Suite 300
Greensboro, NC 27455
U.S.A.
Attention: General Counsel
Facsimile No.: 1-910-545-2219
Any party may, by notice to the other parties, designate
another address or person for receipt of notices hereunder.
16.24 DISCREPANCIES. If there is any discrepancy between any of
the provisions of the Charter Documents or documents analogous to the Charter
Documents of any of the Subsidiaries and this Agreement, the provisions of this
Agreement shall prevail, and the parties shall thereupon procure that the
Charter Documents or relevant analogous documents, as the case may be, are
promptly amended, to the extent permitted by applicable law, in order to conform
with this Agreement.
16.25 SEVERABILITY. In the event any provision hereof is held
void or unenforceable by any court, such provision shall be severable and shall
not affect the remaining provisions hereof.
16.26 ENTIRE AGREEMENT. This Agreement, together with the other
agreements referred to herein, reflects the entire agreement among the parties
and supersedes all prior agreements and communications, either oral or in
writing, among the parties hereto with respect to the subject matter hereof.
16.27 TERM OF AGREEMENT. This Agreement shall become effective
upon the execution hereof by all of the parties hereto and shall continue in
effect until the earlier to occur of (a) the date on which at least 30% of the
Shares in issue on a fully diluted basis are publicly traded on an
internationally recognized stock exchange and (b) any date agreed upon in
writing by all of the Shareholders.
16.28 AMENDMENT AND WAIVER. This Agreement may be amended,
superseded, canceled, renewed or extended, and the terms hereof may be waived,
only by a written instrument signed by all of the parties hereto or, in the case
of a waiver, by the party waiving compliance. No delay on the part of any party
in exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any such right, power
or privilege, nor any single or partial exercise of any such right, power or
privilege, preclude any further exercise thereof or the exercise of any other
such right, power or privilege. The rights and remedies herein provided are
cumulative and are not exclusive of any rights or remedies that any party may
otherwise have at law or in equity.
<PAGE>
22
16.29 CONSENT TO SPECIFIC PERFORMANCE. The parties hereto
declare that it is impossible to measure in money the damages that would be
suffered by a party by reason of the failure by any other party to perform any
of the obligations hereunder. Therefore, if any party shall institute any
action or proceeding to enforce the provisions hereof, any party against whom
such action or proceeding is brought hereby waives any claim or defense therein
that the other party has an adequate remedy at law.
16.30 ASSIGNMENT; BINDING ON TRANSFEREE. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted transferees from and after the
effective date hereof.
16.31 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF ENGLAND AND WALES.
16.32 ARBITRATION.
(a) Any dispute or claim arising out of or relating to this
Agreement, or the breach, termination or invalidity hereof, shall be finally
settled by arbitration under the Rules of Conciliation and Arbitration of the
International Chamber of Commerce (the "Rules") as are currently in force and as
may be amended by the rest of this Section 16.11. For the purpose of such
arbitration, there shall be one or more arbitrators appointed in accordance with
the Rules (such single arbitrator or board of arbitrators, as the case may be,
are referred to below as the "Arbitration Board"). The place of arbitration
shall be Hong Kong. All arbitration proceedings shall be conducted in the
English language. The arbitrators shall decide any such dispute or claim
strictly in accordance with the governing law specified in Section 16.10 of this
Agreement. Judgment upon any arbitral award rendered hereunder may be entered
in any court having jurisdiction, or application may be made to such court for a
judicial acceptance of the award and an order of enforcement, as the case may
be.
(b) Each party shall cooperate in good faith to expedite
(to the maximum extent practicable) the conduct of any arbitral proceedings
commenced under this Agreement.
(c) The costs and expenses of the arbitration, including,
without limitation, the fees of the Arbitration Board, shall be borne equally by
each party to the dispute or claim, and each party shall pay its own fees,
disbursement and other charges of its counsel.
(d) Any award made by the Arbitration Board shall be final
and binding on the parties hereto. The parties expressly agree to waive the
applicability of any laws and regulations that would otherwise give the right to
appeal the decisions of the Arbitration Board so that there shall be no appeal
to any court of law for the award of the Arbitration Board, and a party shall
not challenge or resist the enforcement action taken by another party in whose
favor the award of the Arbitration Board was given.
<PAGE>
23
16.33 SHAREHOLDER OBLIGATIONS; FURTHER ASSURANCES. The parties
hereto shall comply with the provisions of this Agreement in relation to their
investment in the Company and in transacting business with the Company and shall
exercise their respective rights and powers in accordance with and so as to give
effect to this Agreement. Each of the parties shall execute such documents and
other papers and take such further actions as may be reasonably required or
desirable to carry out the provisions hereof and the transactions contemplated
hereby.
16.34 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE>
24
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
STAR DIGITEL LIMITED
By: /s/ Wei Yuan
-----------------------------------
Name: Mr. Wei Yuan
Title: President and Chief Executive Officer
INTERNATIONAL WIRELESS
COMMUNICATIONS, INC.
By: /s/ Hugh B. L. McClung
-----------------------------------
Name: Mr. Hugh B. L. McClung
Title: Vice Chairman and
Managing Director, Asia
STAR TELECOM HOLDING LIMITED
By: /s/ Mico Chung
-----------------------------------
Name: Mr. Mico Chung
Title:
VANGUARD CHINA, INC.
By: /s/ Van E. Snowdon
-----------------------------------
Name: Mr. Van E. Snowdon
Title: Vice President
<PAGE>
EXHIBIT A
DEED OF ADHERENCE
THIS DEED OF ADHERENCE is made the day of 199
BETWEEN:
(1) Star Digitel Limited, company incorporated in Hong Kong (the "Company");
and
(2) [Name of New Shareholder] (the "New Shareholder").
WHEREAS:
(A) On the 4th day of April 1997, the Company and its shareholders entered into
an Amended and Restated Shareholders' Agreement (the "Shareholders'
Agreement") to which a form of this Deed is attached as Exhibit A.
(B) The New Shareholder wishes to [be allotted/have transferred to him/her/it]
[ ] shares (the "Shares") in the share capital of the Company from [
] (the "Old Shareholder") and in accordance with the Shareholders'
Agreement has agreed to enter into this Deed.
(C) The Company enters this Deed on behalf of itself and as agent for all the
existing Shareholders of the Company.
NOW THIS DEED WITNESSES as follows:
1. INTERPRETATION.
In this Deed, except as the context may otherwise require, all words and
expressions defined in the Shareholders' Agreement shall have the same
meanings when used herein.
2. COVENANT.
The New Shareholder hereby covenants to the Company as trustee for all
other persons who are at present or who may hereafter become bound by the
Shareholders' Agreement, and to the Company itself to adhere to and be
bound by all the duties, burdens and obligations of a shareholder holding
the same class of share capital as the Shares imposed pursuant to the
provisions of the Shareholders' Agreement and all documents expressed in
writing to be supplemental or ancillary thereto as if the New Shareholder
had been an original party to the Shareholders' Agreement since the date
thereof.
<PAGE>
3. ENFORCEABILITY.
Each existing shareholder and the Company shall be entitled to enforce the
Shareholders' Agreement against the New Shareholder, and the New
Shareholder shall be entitled to all rights and benefits of the Old
Shareholder (other than those that are non-assignable) under the
Shareholders' Agreement in each case as if the New Shareholder had been an
original party to the Shareholders' Agreement since the date thereof.
4. GOVERNING LAW.
THIS DEED OF ADHERENCE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF ENGLAND AND WALES.
IN WITNESS WHEREOF, this Deed of Adherence has been executed as a deed
on the date first above written.
STAR DIGITEL LIMITED
By:______________________________
Name:
Title:
[NAME OF NEW SHAREHOLDER]
By:______________________________
Name:
Title:
<PAGE>
EXHIBIT 10.16C
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
NONCOMPETITION AGREEMENT
between
INTERNATIONAL WIRELESS COMMUNICATIONS, INC.
and
STAR TELECOM HOLDING LIMITED
Dated as of April 4, 1997
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TABLE OF CONTENTS
ARTICLE/SECTION PAGE
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Noncompetition. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. Corporate Opportunities . . . . . . . . . . . . . . . . . . . . . . . 3
4. Term and Termination. . . . . . . . . . . . . . . . . . . . . . . . . 3
5. Rights and Remedies Upon Breach . . . . . . . . . . . . . . . . . . . 3
6. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
7. Enforceability in Jurisdictions . . . . . . . . . . . . . . . . . . . 4
8. Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
10. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
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1
AMENDED AND RESTATED NONCOMPETITION AGREEMENT
This AMENDED AND RESTATED NONCOMPETITION AGREEMENT (this "Agreement")
is entered into this 4th day of April 1997 by and between International Wireless
Communications, Inc., a Delaware corporation with offices at 400 South El Camino
Real, San Mateo, California, 94402, United States of America ("IWC") and Star
Telecom Holding Limited, a Hong Kong company with offices at 6/F, Star Telecom
Tower, 414 Kwun Tong Road, Kwun Tong, Kowloon, Hong Kong ("STHL"), amending and
restating the Noncompetition Agreement between STHL and IWC, dated as of
November 7, 1996 (the "Original Noncompetition Agreement").
WHEREAS, STHL, IWC and Star Digitel Limited ("SDL") have entered into
a Subscription Agreement (the "Subscription Agreement") whereby, among other
things, STHL and IWC subscribed for shares of SDL.
WHEREAS, Vanguard China, Inc. ("Vanguard"), STHL and SDL have entered
into a Stock Purchase Agreement (the "Stock Purchase Agreement") dated as of
February 25, 1997 for the purchase by Vanguard of SDL shares from STHL.
WHEREAS, IWC, STHL, SDL and Vanguard intend to enter into an Amended
and Restated Shareholders' Agreement (the "Shareholders' Agreement") dated as of
the date hereof, amending and restating the Shareholders' Agreement entered into
by SDL, STHL and IWC on November 7, 1996, to regulate certain matters relating
to SDL.
WHEREAS, the parties hereto wish to amend and restate the Original
Noncompetition Agreement to be consistent with the Shareholders' Agreement.
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants contained herein and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree to amend and restate the Original Noncompetition Agreement in its entirety
so that, as amended and restated, it reads in its entirety as follows:
1. DEFINITIONS. For purposes of this Agreement, the following
capitalized terms have the following meanings:
(a) "Affiliate" of a party means any Person controlling,
controlled by or under common control with such party, PROVIDED, HOWEVER, that,
for the avoidance of doubt, China Strategic Holdings Limited, Vanguard Cellular
Systems, Inc., or any of their respective direct or indirect subsidiaries (as
defined in the Hong Kong Companies Ordinance, Chapter 32) shall not be regarded
as an "Affiliate" of any party for purposes of this Agreement. "Control" for
this purpose means the possession, directly or indirectly, of the
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power to direct or cause the direction of the management and policies of a
Person, by the ownership of voting securities, or by contract or otherwise.
(b) "IWC Restricted Parties" means, collectively, IWC and each
Affiliate of IWC.
(c) "Person" means any natural person, corporation, partnership,
firm, joint venture, association, joint stock company, trust, unincorporated
association, governmental authority or other legal entity.
(d) "Restricted Business" means the provision of mobile
telephone services, or the provision of technical or other services or the
licensing of technology or intellectual property (including, without limitation,
proprietary information, trademarks or patents) in support of mobile telephone
services, but excluding (A) the manufacturing, trading, distribution and
servicing of any telecommunications product or equipment, and (B) the provision
of mobile telephone roaming services that may be carried out by P Plus
Communications Limited, (i) for a Restricted Party's own account, (ii) by
rendering services to any Person engaged in the provision of mobile telephone
services, or the provision of technical or other services or the licensing of
technology or intellectual property (including, without limitation, proprietary
information, trademarks or patents) in support of mobile telephone services, but
excluding (A) the manufacturing, trading, distribution or servicing of any
telecommunications product or equipment and (B) the provision of mobile
telephone roaming services that may be carried out by P Plus Communications
Limited, or (iii) by becoming interested in any capacity, including as a
partner, shareholder, principal, agent, trustee or consultant, in any Person
engaged in the provision of mobile telephone services, or the provision of
technical or other services or the licensing of technology or intellectual
property (including, without limitation, proprietary information, trademarks or
patents) in support of mobile telephone services, but excluding (A) the
manufacturing, trading, distribution or servicing of any telecommunications
product or equipment and (B) the provision of mobile telephone roaming services
that may be carried out by P Plus Communications Limited, in the Territory.
(e) "Restricted Parties" means, collectively, the STHL
Restricted Parties and the IWC Restricted Parties.
(f) "STHL Restricted Parties" means, collectively, STHL and each
Affiliate of STHL.
(g) "Territory" means only the following seven provinces of the
People's Republic of China: Gansu Province, Guangdong Province, Hebei Province,
Hainan Province, Shandong Province, Sichuan Province and Yunnan Province.
2. NONCOMPETITION. Subject to the provisions of Section 3, (i) none
of the STHL Restricted Parties shall, without the written consent of IWC (which
may be withheld by IWC in its sole discretion), directly or indirectly engage in
a Restricted Business which is in
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direct competition with any Restricted Business engaged in or operated by SDL
and (ii) none of the IWC Restricted Parties shall, without the written
consent of STHL (which may be withheld by STHL in its sole discretion),
directly or indirectly engage in a Restricted Business which is in direct
competition with any business engaged in or operated by SDL. Each of STHL
and IWC shall take all measures necessary to ensure that its respective
Affiliates comply with the terms of this Agreement and shall, upon the
request of the other party, cause its Affiliates to execute a deed of
adherence to this Agreement in such form as the other party may reasonably
request.
3. CORPORATE OPPORTUNITIES. If a Restricted Party offers to the
shareholders of SDL and the board of directors of SDL (the "SDL Board") for
consideration the opportunity for SDL to make an investment in a Restricted
Business that is not in direct competition with any business theretofore engaged
in or operated by SDL, but the shareholders of SDL and the SDL Board fail to
adopt a resolution approving and authorizing SDL's investment in such Restricted
Business or fail to respond to the Restricted Party within 14 days after the
Restricted Party has notified the shareholders of SDL and the SDL Board of this
investment opportunity, then, (i) in the case of an opportunity brought to SDL
by IWC, notwithstanding that IWC and its permitted transferees in their capacity
as shareholders of SDL or that the nominees of IWC and its permitted transferees
on the SDL Board, shall in each case have voted in favor of SDL's investment in
such opportunity, IWC, as the Restricted Party, shall have the right to invest
directly or indirectly in such Restricted Business, and (ii) in the case of an
opportunity brought to SDL by STHL, notwithstanding that STHL and its permitted
transferees in their capacity as shareholders of SDL or that the nominees of
STHL and its permitted transferees on the SDL Board, shall in each case have
voted in favor of SDL's investment in such opportunity, STHL as the Restricted
Party, shall have the right to invest directly or indirectly in such Restricted
Business.
4. TERM AND TERMINATION. This Agreement shall remain in effect
until the earliest of (i) the date that is 10 years after the date hereof, (ii)
the date STHL or IWC ceases to hold shares in SDL, (iii) the dissolution or
winding up of SDL, (iv) the termination or expiration of the Shareholders'
Agreement and (v) the insolvency of SDL, the commission of any act of bankruptcy
by SDL, or the commencement of proceedings with respect to SDL for relief under
bankruptcy or insolvency laws or laws relating to the relief of debtors,
reorganizations, arrangements, compositions or extensions.
5. RIGHTS AND REMEDIES UPON BREACH. If any Restricted Party
breaches, or threatens to commit a breach of, any of the provisions of Section 2
(the "Restrictive Covenant"), each non-defaulting Restricted Party shall have
the following rights and remedies, each of which rights and remedies shall be
independent of the others and severally enforceable and each of which is in
addition to, and not in lieu of, any other rights and remedies available to such
non-defaulting Restricted Party under law or in equity:
(a) SPECIFIC PERFORMANCE. The right and remedy to have the
Restrictive Covenant specifically enforced by any court of competent
jurisdiction, it being agreed that any breach or threatened breach of the
Restrictive Covenant would cause
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irreparable injury to such non-defaulting Restricted Party and that money
damages would not provide an adequate remedy to such non-defaulting
Restricted Party. In seeking such injunctive relief, a non-defaulting
Restricted Party shall not be obligated to secure any bond or other security.
(b) ACCOUNTING. The right and remedy to require the Restricted
Party to account for and pay over to the non-defaulting Restricted Parties, all
compensation, profits, monies, accruals, increments or other benefits derived or
received by such Restricted Party as the result of any transactions by such
Restricted Party constituting a breach of the Restrictive Covenant.
6. SEVERABILITY. The Restricted Parties acknowledge and agree that
the Restrictive Covenant is reasonable and valid in geographical and temporal
scope and in all other respects. If any court determines that the Restrictive
Covenant, or any part thereof, is invalid or unenforceable, the remainder of the
Restrictive Covenant shall not thereby be affected and shall be given full
effect without regard to the invalid portions. If any court determines that the
Restrictive Covenant, or any part thereof, is unenforceable because of the
duration or geographic scope of such provision, such court shall have the power
to reduce the duration or scope of such provision, as the case may be, and, in
its reduced form, such provision shall then be enforceable.
7. ENFORCEABILITY IN JURISDICTIONS. The Restricted Parties intend
to and hereby confer jurisdiction to enforce the Restrictive Covenant upon the
courts of any jurisdiction within the geographical scope of the Restrictive
Covenant. If the courts of any one or more of such jurisdictions hold the
Restrictive Covenant unenforceable by reason of the breadth of such scope or
otherwise, it is the intention of the Restricted Parties that such determination
shall not bar or in any way affect a non-defaulting Restricted Party's right to
the relief provided above in the courts of any other jurisdiction within the
geographical scope of the Restrictive Covenant, as to breaches of the
Restrictive Covenant in such other respective jurisdictions, the Restrictive
Covenant as it relates to each jurisdiction being, for this purpose, severable
into diverse and independent covenants.
8. WAIVER. The failure of a non-defaulting Restricted Party to
insist in any one or more instances upon performance of any of the provisions of
this Agreement or to take advantage of any such non-defaulting Restricted
Party's rights hereunder shall not be construed as a waiver of any such
provisions or the relinquishment of any such rights, and the same shall continue
and remain in full force and effect. No single or partial exercise by any party
of any right or remedy shall preclude other or future exercise thereof or the
exercise of any other right or remedy. Waiver by any party of any breach of any
provision of this Agreement shall not constitute or be construed as a continuing
waiver or as a waiver of any other breach of any other provision of this
Agreement.
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9. MISCELLANEOUS.
(a) NOTICES. Any notice or other communications contemplated or
required by this Agreement by any party hereto shall be given in writing and
shall be delivered either by (a) personal delivery or (b) facsimile (with a copy
sent by overnight courier or certified airmail) addressed to the recipient at
the address specified below or at such other address as the intended recipient
previously shall have designated by written notice to the other party hereto.
All notices and other communications contemplated or required by this Agreement
delivered in person or sent by facsimile shall be deemed to have been delivered
to and received by the recipient and shall be effective on the date of personal
delivery or the date sent, respectively. Notice not given in writing shall be
effective only if acknowledged in writing by a duly authorized representative of
the party to whom it was given.
(i) If to IWC to:
International Wireless Communications, Inc.
400 South El Camino Real
San Mateo, California 94402
U.S.A.
Attention: Douglas Sloan Sinclair
Facsimile No.: 1 (415) 548-1842
(ii) If to STHL, to:
Star Telecom Holding Limited
414 Kwun Tong Road,
Kwun Tong
Kowloon, Hong Kong
Attention: Company Secretary
Facsimile No.: (852)
Either party may change the address to which notices and other
communications are to be directed by giving notice of such change to the other
party in the manner provided in this Subsection.
(b) GOVERNING LAW. THE INTERPRETATION AND ENFORCEMENT OF THIS
AGREEMENT SHALL BE GOVERNED BY THE LAWS OF ENGLAND AND WALES.
(c) DISPUTE RESOLUTION.
(i) Any dispute or claim arising out of or relating to
this Agreement, or the breach, termination or invalidity hereof, shall be
finally settled by
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arbitration under the Rules of Conciliation and Arbitration of the
International Chamber of Commerce (the "Rules") as are currently in force
and as may be amended by the rest of this Section 9(c). For the purpose of
such arbitration, there shall be one or more arbitrators appointed in
accordance with the Rules (such single arbitrator or board of arbitrators,
as the case may be, are referred to below as the "Arbitration Board").
The place of arbitration shall be Hong Kong. All arbitration proceedings
shall be conducted in the English language. The arbitrators shall decide
any such dispute or claim strictly in accordance with the governing law
specified in Section 9(b) of this Agreement. Judgment upon any arbitral
award rendered hereunder may be entered in any court having jurisdiction,
or application may be made to such court for a judicial acceptance of the
award and an order of enforcement, as the case may be.
(ii) Each party shall cooperate in good faith to expedite
(to the maximum extent practicable) the conduct of any arbitral proceedings
commenced under this Agreement.
(iii) The costs and expenses of the arbitration,
including, without limitation, the fees of the Arbitration Board, shall be
borne equally by each party to the dispute or claim, and each party shall
pay its own fees, disbursement and other charges of its counsel.
(iv) Any award made by the Arbitration Board shall be
final and binding on the parties hereto. The parties expressly agree to
waive the applicability of any laws and regulations that would otherwise
give the right to appeal the decisions of the Arbitration Board so that
there shall be no appeal to any court of law for the award of the
Arbitration Board, and a party shall not challenge or resist the
enforcement action taken by another party in whose favor the award of the
Arbitration Board was given.
(d) ASSIGNMENT AND SUCCESSION. STHL may not assign this
Agreement or its rights or obligations hereunder without the prior written
consent of IWC. IWC may assign this Agreement and its rights and obligations
hereunder to any entity that controls, is controlled by or is under common
control with IWC without the prior consent of STHL. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns.
(e) ENTIRE AGREEMENT; AMENDMENTS. The terms and conditions
contained in this Agreement and the other agreements and instruments expressly
referred to herein constitute the entire agreement between the parties hereto
regarding the subject matter hereof and shall supersede all previous
communications, either oral or written, between the parties hereto with respect
to the subject matter hereof including the Original Noncompetition Agreement.
The parties hereto agree that the Original Noncompetition Agreement is hereby
terminated and is replaced in its entirety by this Agreement. The Original
Noncompetition Agreement shall be of no further force or effect. The parties
hereto agree, however, that the termination of the Original Noncompetition
Agreement shall be without prejudice to any
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7
causes of action that arose prior to the date hereof under the Original
Noncompetition Agreement. This Agreement may only be amended by a written
agreement duly executed by the parties hereto.
10. HEADINGS. The headings contained in this Agreement are for
convenience of reference only and shall not affect the meaning or interpretation
of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
INTERNATIONAL WIRELESS
COMMUNICATIONS, INC.
By: /s/ Hugh B. L. McClung
-----------------------------------------------
Name: Mr. Hugh B. L. McClung
Title: Vice Chairman and
Managing Director, Asia
STAR TELECOM HOLDING LIMITED
By: /s/
-----------------------------------------------
Name:
Title:
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EXHIBIT 10.26
AGREEMENT
THIS AGREEMENT, made and entered into as of the 5th day of May, 1997
between Vanguard Cellular Financial Corp. ("Vanguard") and International
Wireless Communications Holdings, Inc. ("IWCH").
WHEREAS, Vanguard, through an indirect subsidiary, owns approximately
36.11% of the issued and outstanding common stock of IWCH on an as converted
basis and certain warrants to purchase additional shares; and
WHEREAS, the Chairman of the Board of Vanguard's parent company, Vanguard
Cellular Systems, Inc., also serves as Chairman of the Board of IWCH and has
been instrumental in the development of IWCH; and
WHEREAS, certain other employees of Vanguard have performed valuable
services for or on behalf of IWCH in its formative stages; and
WHEREAS, Vanguard and IWCH desire to reward the Vanguard employees for
their services to IWCH and to provide incentive for their continuing efforts
without causing dilution to other stockholders of IWCH;
NOW, THEREFORE, the parties agree as follows:
1. EXCHANGE OF WARRANTS. Vanguard, through its wholly owned subsidiary,
Vanguard Cellular Operating Corp. ("Operating Corp,"), owns certain Warrants to
purchase common stock of IWCH, which Warrants are listed on SCHEDULE I to this
Agreement. Vanguard agrees to cause Operating Corp. to surrender as of the date
hereof, such Warrants to IWCH for cancellation in exchange for two new Warrants
that will be issued to Operating Corp., one to acquire 554,750 shares of IWCH
common stock ("Common Stock") at a purchase price of $9.375 per share (the
"$9.375 Warrant") pursuant to Warrant Agreement, a form of which is attached
hereto as EXHIBIT A, and one for 249,970 shares at $0.25 per share (the "$0.25
Warrant") pursuant to a Warrant Agreement, a form of which is attached hereto as
EXHIBIT B. As of the date hereof, IWCH will grant to Haynes G. Griffin an
incentive stock option to purchase 53,330 shares of Common Stock, which option
shall be in the form attached hereto as EXHIBIT C, and will grant nonstatutory
options to purchase an aggregate of 501,420 shares of Common Stock to the
individuals and in the amounts set forth on SCHEDULE II hereto, each of which
shall be in the form attached hereto as EXHIBIT D. The options will be granted
subject any requisite approval or waiver of the holders of IWCH's capital stock
within one year of the date of grant ("Stockholder Approval").
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2. SURRENDER OF WARRANTS. Vanguard agrees to surrender to IWCH for
cancellation its $9.375 Warrant, subject to Stockholder Approval.
3. GUARANTY. The parties acknowledge that, as a result of the
transactions contemplated by this Agreement, IWCH is less likely to receive
funds upon exercise of Warrants than it otherwise would have, and, as a result,
its short-term cash flow will be adversely affected. Although IWCH plans to
alleviate its working capital shortage by arranging debt financing or effecting
an initial public offering of its common stock it may require interim financing
as a result of not receiving such funds. Therefore, Vanguard agrees to assist
IWCH in arranging such interim financing by guaranteeing up to an aggregate of
$3,200,000.00 of indebtedness incurred by IWCH or its wholly owned subsidiaries,
until such time as IWCH receives at least $3,200,000 in alternative debt
financing or consummates an initial public offering providing it with at least
$3,200,000 in net proceeds, but in no event shall such guaranty remain
outstanding later than February 3, 1999. The guaranty shall be in substantially
the form attached hereto as Exhibit E, or in such other form as shall be
reasonably requested by the lender and be reasonably satisfactory to Vanguard,
together with other customary terms and conditions as are reasonably
satisfactory to Vanguard and IWCH, and will be made available upon receipt of
Stockholder Approval and Bank Approval.
4. REPRESENTATIONS AND WARRANTIES.
4.1 IWCH represents and warrants to Vanguard that:
a. ORGANIZATION, GOOD STANDING, AND QUALIFICATION. IWCH
is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Delaware and has all requisite corporate
power and authority to carry on its business as now conducted and as
proposed to be conducted. IWCH is duly qualified to transact business
and is in good standing in each jurisdiction in which the failure so to
qualify would have a material adverse effect on its business or
properties.
b. AUTHORIZATION. All corporate action on the part of
IWCH, its officers, directors, and shareholders necessary for the
authorization, execution, and delivery of this Agreement and the
performance of all obligations of IWCH hereunder has been taken or will
be taken prior to the Closing.
c. COMPLIANCE WITH OTHER INSTRUMENTS. Neither the
execution and delivery by IWCH of this Agreement or any agreement or
instrument attached hereto, nor compliance by IWCH with the terms and
provisions hereof and thereof, including without limitation, the
consummation of the transactions contemplated hereby, will violate any
statute, regulation or ordinance of any governmental authority, or
conflict with or result in the breach of any term, condition, or
provision of the Certificate of Incorporation or the Bylaws of IWCH or
of any agreement, deed, contract, mortgage, indenture, writ, order,
decree, legal obligation (including but not limited to, the Series F.
Redeemable Convertible Preferred Stock Securities Purchase Agreement
dated as of De ember 18, 1995, the Fifth Amended and Restated Investor
Rights Agreement dated as of December
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18, 1995 and the Registration Rights Agreement dated as of December 6,
1995), or instrument to which IWCH is a party or by which it or any of
its assets are or may be bound, or constitute a default (or an event
which, with the lapse of time or the giving of notice, or both, would
constitute a default) thereunder, where such violation, conflict and/or
default could have a material adverse effect on (i) the consummation of
the transactions contemplated by this Agreement, or (ii) the results of
operations, financial condition or assets of IWCH.
d. CONSENTS AND APPROVALS. All consents, approvals,
permits, orders or authorizations of, and all qualifications,
registrations, designations, declarations or filings with, any federal
or Delaware corporate or California state governmental authority on the
part of IWCH required in connection with the execution and delivery of
the Agreements and consummation at the closing of the transactions
contemplated by the Agreements have been obtained, and are effective.
4.2 Vanguard represents and warrants to IWCH that:
a. ORGANIZATION, GOOD STANDING, AND QUALIFICATION.
Vanguard is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware and has all requisite
corporate power and authority to carry on its business as now conducted
and as proposed to be conducted. Vanguard is duly qualified to transact
business and is in good standing in each jurisdiction in which the
failure so to qualify would have a material adverse effect on its
business or properties.
b. AUTHORIZATION. All corporate action on the part of
Vanguard, its officers, directors, and shareholders necessary for the
authorization, execution, and delivery of this Agreement and the
performance of all obligations of Vanguard hereunder has been taken or
will be taken prior to Closing.
c. COMPLIANCE WITH OTHER INSTRUMENTS. Neither the
execution and delivery of this Agreement by Vanguard, nor compliance by
Vanguard with the terms and provisions hereof, including without
limitation, the consummation of the transactions contemplated hereby,
will violate any statute, regulation, or ordinance of any governmental
authority, or conflict with or result in the breach of any term,
condition, or provision of the Articles of Incorporation or the Bylaws
of Vanguard or of any agreement, deed, contract, mortgage, indenture,
writ, order, decree, legal obligation or instrument to which Vanguard is
a party or by which it or any of its assets are or may be bound, or
constitute a default (or an event which, with the lapse of time or the
giving of notice, or both, would constitute a default) thereunder, where
such violation, conflict and/or default could have a material adverse
effect on (i) the consummation of the transactions contemplated by this
Agreement, or (ii) the results of operations, financial condition or
assets of Vanguard.
d. CONSENTS AND APPROVALS. All consents, approvals,
permits, orders or authorizations of, and all qualifications,
registrations, designations, declarations or filings with, any federal
or Delaware corporate or California state governmental authority on the
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part of Vanguard required in connection with the execution and delivery
of the Agreements and consummation at the Closing of the transactions
contemplated by the Agreements have been obtained, and are effective.
e. PRIVATE PLACEMENT. Vanguard will cause each of the
individuals listed on Schedule II to deliver to IWCH a written
representation to the effect of Exhibit F hereof.
5. REGISTRATION RIGHTS.
a. Shares of Common Stock issued or issuable upon exercise
of options granted hereunder (collectively, "Options") to Haynes G.
Griffin, Van Snowdon and John Russell Dunn (collectively, "IWCH Service
Providers") shall be registered on an effective registration statement
on Form S-8 (or any successor form of registration statement primarily
relating to the sale of securities to employees of or consultants to the
Company pursuant to a stock option, stock purchase or similar plan)
under the Securities Act of 1933, as amended ("Act"), whenever a
registration statement of Form S-8 (or any such successor form) shall be
effective covering shares of Common Stock issued or issuable upon
exercise of options granted to the executive officer of IWCH.
b. If the Company shall receive at any time after the
first anniversary of the date upon which Options are granted to persons
other than IWCH Service Providers (the "Other Persons"), a written
request from holders of a majority of the shares of Common Stock or
other securities issued or issuable upon the exercise of such Options
(the "Registrable Securities"), that the Company file a registration
statement under the Act covering the registration of at least 25% of the
Registrable Securities, then the Company shall effect as soon as
practicable, and in any event within sixty (60) days of the receipt of
such request, the registration under the Act of all Registrable
Securities. The company shall maintain the effectiveness of any
registration statement filed and declared effective pursuant to Section
5(b) for a period of at least ninety (90) days. Notwithstanding the
foregoing, the Company shall not be obligated to effect, or take any
action to effect, any registration pursuant to this Section 5(b):
i. During any period in which the Registrable
Securities may be publicly resold pursuant to Rule 144 under the Act (or
any successor rule), regardless of whether such resale is subject to the
volume limitations of such Rule or is permitted only if the Registrable
Securities must be exercised on a net issue basis pursuant to Section 5
of the applicable Option. [Vanguard acknowledges that, pursuant to
Rule 144(d)(3)(ii) as currently in effect, Common Stock acquired upon
exercise of an Option on a net issue basis will be deemed to be acquired
at the time the option was acquired];
ii. More than once during any eighteen (18) month period; or
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iii. During any period when the Company is ineligible to
use a registration statement o Form S-3 (or any successor form with
comparable disclosure requirements) for resales of Registrable
Securities.
c. The Company shall take all customary and reasonable
actions necessary to effect the registration rights granted hereunder.
d. Notwithstanding this Section 5, no Registrable
Securities may be publicly resold during any period when an executive
officer of IWCH is prohibited from publicly reselling Common Stock under
applicable insider trading policies and procedures of IWCH.
e. All expenses (other than underwriting discounts and
commissions, if applicable) incurred in connection with effecting up to
two (2) registrations pursuant to Section 5(b) hereof shall be paid by
the Company (including fees and disbursements of a single counsel for
the selling stockholders, provided such counsel shall also be counsel
for the Company in connection with such registrations).
f. Each holder of an Option agrees for himself (and any
transferee of such Option) that, during the period of duration specified
by the Company following the effective date of a registration of the
Company filed under the Act, such person shall not, to the extent
requested by the Company, directly or indirectly sell, offer to sell,
contract to sell (including, without limitation, any short sale), grant
and any option to purchase or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any securities of IWCH
(or any interest therein) held by it by any time during such period,
except Common Stock included in such registration statement; provided,
however, that such agreement shall be applicable only if all officers
and directors of IWCH hereunto are bound by similar agreements of at
least the same period of duration.
6. OPINIONS OF COUNSEL. Vanguard will cause its legal counsel to
deliver to IWCH its opinion in substantially the form of EXHIBIT F
hereto, and IWCH will cause its counsel to deliver to Vanguard its
opinion in substantially the form of EXHIBIT G hereto, dated as of the
date hereof.
7. GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of
Delaware, without giving effect to any choice of law or conflict
provision or rule that would cause the laws of any other jurisdiction to
be applied.
8. SUCCESSORS AND ASSIGNS. This Agreement may not be assigned or
otherwise transferred by either party without the written consent of the
other. This Agreement shall be binding upon and inure to the benefit to
the parties hereto and their respective successors and assigns.
5
<PAGE>
9. AMENDMENTS. No amendment, modification or discharge of this
Agreement, and no waiver of any condition or the breach of any
provision, term, covenant, representation or warranty hereunder shall be
valid or binding unless set forth in writing and duly exercised by the
party against whom enforcement of the Agreement, modification, discharge
or waiver is sought.
10. ENTIRE AGREEMENT. This Agreement, together with the documents
contemplated hereby and attached hereto, constitutes the entire
agreement among the parties with respect to the subject matter hereof
and supersedes and cancels any and all prior agreements and
understandings, both written and oral, among them relating to the
subject matter hereof.
11. COUNTERPARTS. Counterparts of this Agreement may be executed in
several counterparts, each of which shall be deemed an original and all
of which shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day first above written.
VANGUARD CELLULAR FINANCIAL CORP.
By: /s/
---------------------------------------------
President
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC.
By: /s/
---------------------------------------------
President
6
<PAGE>
SCHEDULE I
----------
VANGUARD SCHEDULE OF WARRANTS
1) WD1-2 Warrant to purchase 17,640 shares of Series D Preferred Stock.
2) WD2-1 Warrant to purchase 5,960 shares of Series D Preferred Stock.
3) WF-13 Warrant to purchase 64,120 shares of Series F Preferred Stock.
4) WV-1 Warrant to purchase 50,400 shares of Series C Preferred Stock.
5) WV-2 Warrant to purchase 273,480 shares of Series C Preferred Stock.
6) WV-3 Warrant to purchase 393,120 shares of Series D Preferred Stock.
<PAGE>
SCHEDULE II
-----------
OPTIONS TO PURCHASE COMMON STOCK
OF
INTERNATIONAL WIRELESS COMMUNICATIONS, INC.
INCENTIVE OPTION
Haynes G. Griffin 53,330
NONQUALIFIED OPTIONS FOR DIRECTORS AND CONSULTANTS
Haynes G. Griffin 346,670
Van E. Snowdon 65,250
John Russell Dunn 2,000
OTHER NONQUALIFIED OPTIONS
L. Richardson Preyer, Jr. 10,000
Stuart S. Richardson 7,500
Stephen L. Holcombe 10,000
Richard C. Rowlenson 10,000
Timothy G. Biltz 10,000
Dennis B. Francis 10,000
S. Tony Gore, III 10,000
Arthur S. Whiting 5,000
Philip E. Smith 5,000
Anthony Dillon 5,000
Neva J. Reavis 5,000
<PAGE>
EXHIBIT A
---------
THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933,
OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT
TO RULE 144 UNDER SUCH ACT.
No. WC-__ Void after May 5, 2007
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC.
WARRANT TO PURCHASE COMMON STOCK
This Warrant is issued to Vanguard Cellular Operating Corp. (the
"Holder") by International Wireless Communications Holdings, Inc., a Delaware
corporation (the "Company"), pursuant to the Agreement dated as of May 5,
1997 between the Company and Vanguard Cellular Financial Corp. (the "Purchase
Agreement").
1. PURCHASE OF SHARES. Subject to the terms and conditions
hereinafter set forth and set forth in the Purchase Agreement, the Holder is
entitled, upon surrender of this Warrant at the principal office of the
Company (or at such other place as the Company shall notify the Holder hereof
in writing), to purchase 554,750 shares of the Company's Common Stock, par
value $0.01 per share (the "Equity Securities"), at a per share purchase
price of Nine Dollars Thirty-Seven and One-Half Cents ($9.375) per share.
The shares of Equity Securities issuable pursuant to this Section 1 (the
"Warrant Shares") shall be subject to adjustment pursuant to Section 7
hereof. The purchase price of the Warrant Shares as provided in this Section
1 (the "Exercise Price") shall be subject to adjustment pursuant to Section 7
hereof.
2. EXERCISE PERIOD. This Warrant is exercisable only until and
including May 5, 2007; PROVIDED, HOWEVER, that in the event of (a) the
closing of the issuance and sale of shares of Common Stock of the Company in
the Company's first underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, (b) the
sale of all or substantially all the assets of the Company, (c) the merger of
the Company with or into, or the consolidation of the Company with, any other
entity resulting in the transfer of outstanding equity securities
representing fifty percent (50%) or more of the Company's outstanding voting
power, or (d) any other transfer of outstanding equity securities of the
Company representing eighty percent (80%) or more of the Company's
outstanding voting power, this Warrant shall, on the date of such event, no
longer be exercisable and become null and void. In the event of a proposed
transaction of the kind described above, the Company shall notify the holder
of the Warrant at least twenty (20) days prior to the consummation of such
event or transaction.
1
<PAGE>
3. METHOD OF EXERCISE. While this Warrant remains outstanding
and exercisable in accordance with Section 2 above, the Holder may exercise,
in whole or in part, the purchase rights evidenced hereby. Such exercise
shall be effected by:
(a) the surrender of the Warrant, together with a duly
executed copy of the form of subscription attached hereto, to the Secretary
of the Company at its principal offices; and
(b) the payment to the Company of an amount equal to the
aggregate Exercise Price for the number of Warrant Shares being purchased.
4. Net Issue Exercise.
(a) In lieu of exercising this Warrant, Holder may elect to
receive shares equal to the value of this Warrant (or the portion thereof
being canceled) by surrender of this Warrant at the principal office of the
Company together with notice of such election in which event the Company
shall issue to Holder a number of shares of Equity Securities computed using
the following formula:
X = (Y)(A-B)
------------
A
Where X - The number of shares of Equity Securities to be issued
to Holder.
Y - The number of shares of Warrant Shares to be surrendered.
A - The fair market value of one share of the Equity Securities
to be issued upon exercise of this Warrant.
B - Exercise Price (as adjusted to the date of such
calculations).
(b) For purposes of this Section, the Board of Directors of
the Company shall determine the fair market value in its good faith.
5. CERTIFICATES FOR WARRANT SHARES. Upon the exercise of the
purchase rights evidenced by this Warrant, one or more certificates for the
number of Warrant Shares so purchased shall be issued as soon as practicable
thereafter, and in any event within thirty (30) days of the delivery of the
subscription notice.
6. RESERVATION OF WARRANT SHARES. The Company covenants that it
will at all times keep available such number of authorized shares of its
Equity Securities issuable upon exercise of this Warrant free from all
preemptive rights with respect thereto, which will be sufficient to permit
the exercise of this Warrant for the full number of Warrant Shares specified
herein. The Company further covenants that such Warrant Shares, when issued
pursuant to the exercise of this Warrant, will be duly and validly issued,
fully paid and nonassessable and free from all taxes, liens, and charges with
respect to the issuance thereof.
2
<PAGE>
7. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.
The number of and kind of securities purchasable upon exercise of this
Warrant and the Exercise Price shall be subject to adjustment from time to
time as follows:
(a) SUBDIVISIONS, COMBINATIONS AND OTHER ISSUANCES. If the
Company shall at any time prior to the expiration of this Warrant subdivide
its Equity Securities by split-up or otherwise, or combine its capital stock,
or issue additional securities as a dividend with respect to any shares of
its Equity Securities, the number of Warrant Shares issuable on the exercise
of this Warrant shall forthwith be proportionately increased in the case of a
subdivision or stock dividend, or proportionately decreased in the case of a
combination. Appropriate adjustments shall also be made to the Exercise Price
payable per share, but the aggregate purchase price payable for the total
number of Warrant Shares purchasable under this Warrant (as adjusted) shall
remain the same. Any adjustment under this Section 7(a) shall become
effective at the close of business on the date the subdivision or combination
becomes effective, or as of the record date of such dividend, or in the event
that no record date is fixed, upon the making of such dividend.
(b) RECLASSIFICATION, REORGANIZATION, AND CONSOLIDATION.
In case of any reclassification, capital reorganization, or change in the
capital stock of the Company (other than as a result of a subdivision,
combination, or stock dividend provided for in Section 7(a) above), then, as
a condition of such reclassification, reorganization, or change, lawful
provision shall be made, and duly executed documents evidencing the same from
the Company or its successor shall be delivered to the Holder, so that the
Holder shall have the right at any time prior to the expiration of this
Warrant to purchase, at a total price equal to that payable upon the exercise
of this Warrant, the kind and amount of shares of stock and other securities
and property receivable in connection with such reclassification,
reorganization, or change by a holder of the same number of shares of capital
stock as were purchasable by the Holder immediately prior to such
reclassification, reorganization, or change. In any such case appropriate
provisions shall be made with respect to the rights and interest of the
Holder so that the provisions hereof shall thereafter be applicable with
respect to any shares of stock or other securities and property deliverable
upon exercise hereof, and appropriate adjustments shall be made to the
Exercise Price per share payable hereunder, provided the aggregate purchase
price shall remain the same.
(c) NOTICE OF ADJUSTMENT. When any adjustment is required
to be made in the number or kind of shares purchasable upon exercise of the
Warrant, or in the Exercise Price, the Company shall promptly notify the
Holder of such event and of the number of shares, the adjusted Exercise Price
and the type of securities or property thereafter purchasable upon exercise
of the Warrant.
8. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant, but in lieu of such fractional shares the Company shall make a cash
payment therefor on the basis of the exercise price of the warrant then in
effect.
3
<PAGE>
9. NO STOCKHOLDER RIGHTS. Prior to exercise of this Warrant, the
Holder shall not be entitled to any rights of a stockholder with respect to
the Warrant Shares, including (without limitation) the right to vote such
Warrant Shares, receive dividends or other distributions thereon, exercise
preemptive rights or be notified of stockholder meetings, and such Holder
shall not be entitled to any notice or other communication concerning the
business or affairs of the Company.
10. SUCCESSORS AND ASSIGNS. The terms and provisions of this
Warrant shall inure to the benefit of, and be binding upon, the Company and
the Holders hereof and their respective successors and assigns.
A Holder may transfer in whole or in part the purchase rights
evidenced hereby to any third party to whom such rights may be transferred
without registration or qualification under federal or state securities laws,
provided: (a) the transferee or assignee receives a Warrant to purchase
twenty percent (20%) of the Warrant Shares; (b) the Company is, within a
reasonable time after such transfer or assignment, furnished with written
notice of the name and address of such transferee or assignee; (c) such
transferee or assignee agrees in writing to be bound by and subject to the
terms and conditions of this Warrant; and (d) the transferor shall have
delivered to the Company, if reasonably requested by counsel to the Company
an opinion of counsel substantially to the effect that the transfer or
assignment can be effected without registration or qualification under
applicable federal or state securities laws.
11. AMENDMENTS AND WAIVERS. Any term of this Warrant may be amended
and the observance of any term of this Warrant may be waived (either
generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company and the holders of a
majority of the Warrants issued pursuant to the Purchase Agreement that are
then outstanding. Any waiver or amendment effected in accordance with this
section shall be binding upon each holder of any Warrant Shares purchased
under this Warrant at the time outstanding, each future holder of all such
Warrant Shares, and the Company.
12. EFFECT OF AMENDMENT OR WAIVER. The Holder acknowledges that by
the operation of paragraph 11 hereof, the holders of a majority of the
Warrants issued pursuant to the Purchase Agreement that are then outstanding
will have the right and power to diminish or eliminate all rights of such
Holder under this Warrant or under the Purchase Agreement.
13. GOVERNING LAW. This Warrant shall be governed by the laws of
the State of Delaware as applied to agreements among California residents
made and to be performed entirely within the State of Delaware.
INTERNATIONAL WIRELESS
COMMUNICATIONS HOLDINGS, INC.
By:
--------------------------------------
Douglas S. Sinclair
Executive Vice President
4
<PAGE>
SUBSCRIPTION
International Wireless Communications Holdings, Inc.
Attention: Corporate Secretary
1. The undersigned hereby elects to purchase, pursuant to the
provisions of the Warrant to Purchase _______________ shares of
_________________ stock of International Wireless Communications Holdings,
Inc. and held by the undersigned, ____________ shares of ________ stock of
International Wireless Communications Holdings, Inc.
2. The undersigned hereby elects to receive shares equal to the
value of this Warrant in the manner specified in Section 4 of the Warrant.
[Strike paragraph above that does not apply.]
3. Payment of the exercise price per share required under such
Warrant accompanies this Subscription.
4. The undersigned hereby represents and warrants that the
undersigned is acquiring such shares for its own account for investment
purposes only, and not for resale or with a view to distribution of such
shares or any part thereof.
Date:
----------------------------------------
Signature:
------------------------------------
Address:
--------------------------------------
Name in which shares should be registered:
- ------------------------------------------
5
<PAGE>
EXHIBIT B
THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933,
OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT
TO RULE 144 UNDER SUCH ACT.
No. WC-__ Void after May 5, 2007
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC.
WARRANT TO PURCHASE COMMON STOCK
This Warrant is issued to Vanguard Cellular Operating Corp. (the
"Holder") by International Wireless Communications Holdings, Inc., a Delaware
corporation (the "Company"), pursuant to the Agreement dated as of May 5,
1997 between the Company and Vanguard Cellular Financial Corp. (the "Purchase
Agreement").
1. PURCHASE OF SHARES. Subject to the terms and conditions
hereinafter set forth and set forth in the Purchase Agreement, the Holder is
entitled, upon surrender of this Warrant at the principal office of the
Company (or at such other place as the Company shall notify the Holder hereof
in writing), to purchase 249,970 shares of the Company's Common Stock, par
value $0.01 per share (the "Equity Securities"), at a per share purchase
price of Twenty-Five Cents ($0.25) per share. The shares of Equity
Securities issuable pursuant to this Section 1 (the "Warrant Shares") shall
be subject to adjustment pursuant to Section 7 hereof. The purchase price of
the Warrant Shares as provided in this Section 1 (the "Exercise Price") shall
be subject to adjustment pursuant to Section 7 hereof.
2. EXERCISE PERIOD. This Warrant is exercisable only until and
including May 5, 2007; PROVIDED, HOWEVER, that in the event of (a) the
closing of the issuance and sale of shares of Common Stock of the Company in
the Company's first underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, (b) the
sale of all or substantially all the assets of the Company, (c) the merger of
the Company with or into, or the consolidation of the Company with, any other
entity resulting in the transfer of outstanding equity securities
representing fifty percent (50%) or more of the Company's outstanding voting
power, or (d) any other transfer of outstanding equity securities of the
Company representing eighty percent (80%) or more of the Company's
outstanding voting power, this Warrant shall, on the date of such event, no
longer be exercisable and become null and void. In the event of a proposed
transaction of the kind described above, the Company shall notify the holder
of the Warrant at least twenty (20) days prior to the consummation of such
event or transaction.
1
<PAGE>
3. METHOD OF EXERCISE. While this Warrant remains outstanding
and exercisable in accordance with Section 2 above, the Holder may exercise,
in whole or in part, the purchase rights evidenced hereby. Such exercise
shall be effected by:
(a) the surrender of the Warrant, together with a duly
executed copy of the form of subscription attached hereto, to the Secretary
of the Company at its principal offices; and
(b) the payment to the Company of an amount equal to the
aggregate Exercise Price for the number of Warrant Shares being purchased.
4. NET ISSUE EXERCISE.
(a) In lieu of exercising this Warrant, Holder may elect to
receive shares equal to the value of this Warrant (or the portion thereof
being canceled) by surrender of this Warrant at the principal office of the
Company together with notice of such election in which event the Company
shall issue to Holder a number of shares of Equity Securities computed using
the following formula:
X = (Y)(A-B)
------------
A
Where X - The number of shares of Equity Securities to be issued
to Holder.
Y - The number of shares of Warrant Shares to be surrendered.
A - The fair market value of one share of the Equity
Securities to be issued upon exercise of this Warrant.
B - Exercise Price (as adjusted to the date of such
calculations).
(b) For purposes of this Section, the Board of Directors of
the Company shall determine the fair market value in its good faith.
5. CERTIFICATES FOR WARRANT SHARES. Upon the exercise of the
purchase rights evidenced by this Warrant, one or more certificates for the
number of Warrant Shares so purchased shall be issued as soon as practicable
thereafter, and in any event within thirty (30) days of the delivery of the
subscription notice.
6. RESERVATION OF WARRANT SHARES. The Company covenants that it
will at all times keep available such number of authorized shares of its
Equity Securities issuable upon exercise of this Warrant free from all
preemptive rights with respect thereto, which will be sufficient to permit
the exercise of this Warrant for the full number of Warrant Shares specified
herein. The Company further covenants that such Warrant Shares, when issued
pursuant to the exercise of this Warrant, will be duly and validly issued,
fully paid and nonassessable and free from all taxes, liens, and charges with
respect to the issuance thereof.
2
<PAGE>
7. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.
The number of and kind of securities purchasable upon exercise of this
Warrant and the Exercise Price shall be subject to adjustment from time to
time as follows:
(a) SUBDIVISIONS, COMBINATIONS AND OTHER ISSUANCES. If the
Company shall at any time prior to the expiration of this Warrant subdivide
its Equity Securities by split-up or otherwise, or combine its capital stock,
or issue additional securities as a dividend with respect to any shares of
its Equity Securities, the number of Warrant Shares issuable on the exercise
of this Warrant shall forthwith be proportionately increased in the case of a
subdivision or stock dividend, or proportionately decreased in the case of a
combination. Appropriate adjustments shall also be made to the Exercise Price
payable per share, but the aggregate purchase price payable for the total
number of Warrant Shares purchasable under this Warrant (as adjusted) shall
remain the same. Any adjustment under this Section 7(a) shall become
effective at the close of business on the date the subdivision or combination
becomes effective, or as of the record date of such dividend, or in the event
that no record date is fixed, upon the making of such dividend.
(b) RECLASSIFICATION, REORGANIZATION, AND CONSOLIDATION. In
case of any reclassification, capital reorganization, or change in the
capital stock of the Company (other than as a result of a subdivision,
combination, or stock dividend provided for in Section 7(a) above), then, as
a condition of such reclassification, reorganization, or change, lawful
provision shall be made, and duly executed documents evidencing the same from
the Company or its successor shall be delivered to the Holder, so that the
Holder shall have the right at any time prior to the expiration of this
Warrant to purchase, at a total price equal to that payable upon the exercise
of this Warrant, the kind and amount of shares of stock and other securities
and property receivable in connection with such reclassification,
reorganization, or change by a holder of the same number of shares of capital
stock as were purchasable by the Holder immediately prior to such
reclassification, reorganization, or change. In any such case appropriate
provisions shall be made with respect to the rights and interest of the
Holder so that the provisions hereof shall thereafter be applicable with
respect to any shares of stock or other securities and property deliverable
upon exercise hereof, and appropriate adjustments shall be made to the
Exercise Price per share payable hereunder, provided the aggregate purchase
price shall remain the same.
(c) NOTICE OF ADJUSTMENT. When any adjustment is required
to be made in the number or kind of shares purchasable upon exercise of the
Warrant, or in the Exercise Price, the Company shall promptly notify the
Holder of such event and of the number of shares, the adjusted Exercise Price
and the type of securities or property thereafter purchasable upon exercise
of the Warrant.
8. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant, but in lieu of such fractional shares the Company shall make a cash
payment therefor on the basis of the exercise price of the warrant then in
effect.
3
<PAGE>
9. NO STOCKHOLDER RIGHTS. Prior to exercise of this Warrant, the
Holder shall not be entitled to any rights of a stockholder with respect to
the Warrant Shares, including (without limitation) the right to vote such
Warrant Shares, receive dividends or other distributions thereon, exercise
preemptive rights or be notified of stockholder meetings, and such Holder
shall not be entitled to any notice or other communication concerning the
business or affairs of the Company.
10. SUCCESSORS AND ASSIGNS. The terms and provisions of this
Warrant shall inure to the benefit of, and be binding upon, the Company and
the Holders hereof and their respective successors and assigns.
A Holder may transfer in whole or in part the purchase rights
evidenced hereby to any third party to whom such rights may be transferred
without registration or qualification under federal or state securities laws,
provided: (a) the transferee or assignee receives a Warrant to purchase
twenty percent (20%) of the Warrant Shares; (b) the Company is, within a
reasonable time after such transfer or assignment, furnished with written
notice of the name and address of such transferee or assignee; (c) such
transferee or assignee agrees in writing to be bound by and subject to the
terms and conditions of this Warrant; and (d) the transferor shall have
delivered to the Company, if reasonably requested by counsel to the Company
an opinion of counsel substantially to the effect that the transfer or
assignment can be effected without registration or qualification under
applicable federal or state securities laws.
11. AMENDMENTS AND WAIVERS. Any term of this Warrant may be amended
and the observance of any term of this Warrant may be waived (either
generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company and the holders of a
majority of the Warrants issued pursuant to the Purchase Agreement that are
then outstanding. Any waiver or amendment effected in accordance with this
section shall be binding upon each holder of any Warrant Shares purchased
under this Warrant at the time outstanding, each future holder of all such
Warrant Shares, and the Company.
12. Effect of Amendment or Waiver. The Holder acknowledges that by
the operation of paragraph 11 hereof, the holders of a majority of the
Warrants issued pursuant to the Purchase Agreement that are then outstanding
will have the right and power to diminish or eliminate all rights of such
Holder under this Warrant or under the Purchase Agreement.
13. Governing Law. This Warrant shall be governed by the laws of
the State of Delaware as applied to agreements among California residents
made and to be performed entirely within the State of Delaware.
INTERNATIONAL WIRELESS
COMMUNICATIONS HOLDINGS, INC.
By:
---------------------------------------------
Douglas S. Sinclair
Executive Vice President
4
<PAGE>
SUBSCRIPTION
International Wireless Communications Holdings, Inc.
Attention: Corporate Secretary
1. The undersigned hereby elects to purchase, pursuant to the
provisions of the Warrant to Purchase _______________ shares of
_________________ stock of International Wireless Communications Holdings,
Inc. and held by the undersigned, ____________ shares of ________ stock of
International Wireless Communications Holdings, Inc.
2. The undersigned hereby elects to receive shares equal to the
value of this Warrant in the manner specified in Section 4 of the Warrant.
[Strike paragraph above that does not apply.]
3. Payment of the exercise price per share required under such
Warrant accompanies this Subscription.
4. The undersigned hereby represents and warrants that the
undersigned is acquiring such shares for its own account for investment
purposes only, and not for resale or with a view to distribution of such
shares or any part thereof.
Date:
----------------------------------------
Signature:
------------------------------------
Address:
--------------------------------------
Name in which shares should be registered:
- ------------------------------------------
5
<PAGE>
EXHIBIT C
---------
INCENTIVE STOCK OPTION AGREEMENT
----------------------------------
THIS AGREEMENT, dated as of the 5th day of May, 1997 between
International Wireless Communications Holdings, Inc. a Delaware corporation
having its principal office at 400 South El Camino Real Road, Suite 1275, San
Mateo, California 94402 (hereinafter called the "Company"), and Haynes G.
Griffin, an employee of the Company (hereinafter called the "Option Holder").
WITNESSETH:
WHEREAS, the Company recognizes the value to it of the services of the
Option Holder as an officer and employee and is desirous of furnishing him
with added incentive and inducement to contribute to the success of the
Company; and
WHEREAS, the Board of Directors of the Company has adopted the Company's
1996 Stock Option/Stock Issuance Plan, a copy of which is attached hereto as
Exhibit A (hereinafter called the "Plan"); and
WHEREAS, on February 3, 1997, pursuant to the provisions of the Plan,
the Company's Board of Directors granted to the Option Holder, pursuant to
the Plan, an option in respect of the number of shares and fixed and
determined the option price and the other terms and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the mutual promises and
representations herein contained and other good and valuable consideration,
it is agreed by and between the parties hereto as follows:
1. Subject to the Plan, the terms and provisions of which are
incorporated herein by reference, the Company hereby grants to the Option
Holder an Incentive Stock Option to purchase, on the terms and subject to the
conditions hereinafter set forth, all or any part of an aggregate of 53,330
shares of the Common Stock ($0.01 par value) of the Company at the exercise
price of $9.375 per share (the "Option"), exercisable in the amounts and at
the times set forth in this paragraph l. Unless sooner terminated as
provided in this Agreement, the Option shall terminate, and all rights of the
Option Holder hereunder shall expire, on February 2, 2007.
The Option may be exercised in installments as follows:
(a) up to 10,666 shares (of the total shares subject to the
Option) on and at any time after August 3, 1997 and prior to termination
of the Option;
1
<PAGE>
(b) up to 21,332 shares, less any shares previously purchased
pursuant to the Option, on and at any time after February 3, 1998
and prior to termination of the Option;
(c) up to 31,998 shares, less any shares previously purchased
pursuant to the Option, on and at any time after February 3, 1999
and prior to termination of the Option;
(d) up to 42,664 shares, less any shares previously purchased
pursuant to the Option, on and at any time after February 3, 2000
and prior to termination of the Option;
(e) up to 53,330 shares, less any shares previously purchased
pursuant to the Option, on and at any time after February 3, 2001;
provided, however, that the Option shall become immediately exercisable as to
all of the shares upon the occurrence of any one of the following events:
(a) Upon the termination of the Option Holder's employment by the
Company other than for "cause" as hereinafter defined, or
(b) Upon the Option Holder's terminating his employment with the
Company following a "change of control," as hereinafter defined, upon the
occurrence of the following events (a "Triggering Event"): (i) his
authority and/or responsibility are substantially reduced, without his
consent below that in effect as of the date hereof, (ii) the Option
Holder is required to change his residence or principal place of business
from Greensboro, North Carolina, or (iii) the travel obligations of the
Option Holder are, without his consent, increased materially above those
in effect as of the date hereof, or (iv) he is not reelected to the
Company' Board of Directors, or
(c) Upon the death of the Option Holder while employed by the
Company, or
(d) Upon the Option Holder's becoming disabled within the meaning
of Section 22(e)(3) of the Internal Revenue Code of 1986 while employed by
the Company (other than by reason of chronic alcoholism or addiction to
narcotics or an intentionally self-inflicted injury).
For purposes of this paragraph 1, "cause" shall mean termination due to
(i) continued intentional refusal to perform the duties for which employed 30
days following receipt by the Option Holder of one or more written warnings
from the Board of Directors of the Company specifying in detail the Option
Holder's misconduct, (ii) fraud or embezzlement committed against the
Company, or (iii) the Option Holder's conviction for a felony.
For purposes of this paragraph 1, a "change of control" shall be deemed
to have occurred upon the occurrence of any of the following events:
(i) Any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") but excluding any
2
<PAGE>
employee benefit plan of the Company) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 50% or more of the
combined voting power of the Company's outstanding securities then
entitled ordinarily (and apart from rights accruing under special
circumstances) to vote for the election of directors; or
(ii) Individuals who are "Continuing Directors" (as hereinafter
defined) cease for any reason to constitute at least a majority of
the Board of Directors; or
(iii) The Board of Directors shall approve a sale of all or
substantially all of the assets of the Company; or
(iv) The Board of Directors shall approve any merger,
consolidation, or like business combination or reorganization of
the Company the consummation of which would result in the occurrence
of any event described in clause (i) or (ii) above.
For purposes of the foregoing, "Continuing Directors" shall mean (i) the
directors of the Company in office on the date hereof and (ii) any successor
to any such director (and any additional director) who after the date hereof
(y) was nominated or selected by a majority of the Continuing Directors in
office at the time of his nomination or selection and (z) who is not an
"affiliate" or "associate" (as defined in Regulation 12B under the Exchange
Act) of any person who is the beneficial owner, directly or indirectly, of
securities representing 50% or more of the combined voting power of the
Company's outstanding securities then entitled ordinarily to vote for the
election of directors.
2. The Option or any part thereof may, to the extent that it is
exercisable, be exercised in the manner and payment of the aggregate exercise
price for the number of shares purchased shall be made in the manner provided
in Section I.A of Article Two of the Plan, including by payment consisting in
full or in part of shares of Common Stock.
3. The Option or any part thereof may be exercised during the lifetime
of the Option Holder only by the Option Holder and, except as provided in
paragraph 4 hereinbelow, may be exercised only while the Option Holder is an
employee of the Company, its parent or any of its subsidiaries.
4. If the Option Holder ceases to be an employee of the Company, its
parent, or any of its subsidiaries for any reason (other than his death or
permanent and total disability), the Option, to the extent it is exercisable
immediately prior to such termination, may be exercised at any time within
three months after the date of termination of his employment but in no event
after the Option has expired. If the Option Holder ceases to be an employee
by reason of his death or permanent and total disability, the Option may be
exercised, at any time within one year after such termination but in no event
after the Option has expired, by the Optionee or the person or persons to
whom the Option Holder's rights under the Option shall pass by will or by the
laws of descent and distribution.
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<PAGE>
5. Except as provided above with respect to transfers upon the death
of the Option Holder, the Option shall not be transferred, assigned, pledged
or hypothecated in any way, whether by operation of law or otherwise. Upon
any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of
the Option or any right or privilege confirmed hereby contrary to the
provisions hereof, the Option and the rights and privileges confirmed hereby
shall immediately become null and void.
6. If the shares of Common Stock of the Company are increased,
decreased, changed into, or exchanged for a different number or kind of
shares or securities through merger, consolidation, combination, exchange of
shares, other reorganization, recapitalization, reclassification, stock
dividend, stock split or reverse stock split in which the Company is the
surviving entity, an appropriate and proportionate adjustment shall be made,
as provided in Section VI.C of Article One of the Plan, in the number or kind
of shares allocated to any unexercised part of the Option. In the event the
Company's Board of Directors approves a consolidation or a merger in which
the Company is not the surviving corporation, or any other merger, or share
exchange in which the stockholders of the Company exchange their stock for
stock of another corporation, or in the event of complete liquidation of the
Company, or in the case of a tender offer for 50% or more of the combined
voting power of the Company's outstanding securities, the Option shall
thereupon become immediately exercisable (to the extent it is not already so
exercisable). In the event the consideration to be received for Common Stock
in any such transaction is cash, the Option Holder shall be entitled to
receive from the Company at the time the transaction is consummated cash in
an amount equal to the difference between the exercise price of aggregate
number of shares then subject to the Option and not yet purchased by the
Option Holder and the price to be paid for such number of shares of Common
Stock of the Company in the consolidation, merger, liquidation, or tender
offer. In the event such transaction is for consideration other than cash,
the Option Holder shall be entitled to receive a replacement option on the
same terms and conditions as the Option except that there shall be
substituted for the Common Stock the consideration that would have been
received by the Option Holder as a result of such transaction had the Option
been exercised immediately prior to consummation of such transaction.
7. The Option Holder recognizes that any registration of the Option
and the shares of Common Stock issuable upon its exercise under the
Securities Act of 1933 or under the securities laws of any state shall be at
the option of the Company. The Option Holder acknowledges that, absent
registration, under present federal securities regulations, he will be
required to hold any shares purchased pursuant to exercise of the Option for
a period of not less than one year following full payment for said shares and
that thereafter the shares may be sold only in compliance with Rule l44 of
the Securities and Exchange Commission. The Option Holder further
acknowledges that, notwithstanding registration, if, at the time of exercise
of the Option, he is deemed an "affiliate" of the Company as defined in said
Rule l44, any shares purchased thereunder will nevertheless be subject to
sale only in compliance with Rule l44 (but without any holding period), and
that the Company may take such action as is necessary to assure such
compliance, including placing restrictive legends on certificates evidencing
such shares and delivering stop transfer instructions to the Company's
transfer agent.
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<PAGE>
8. Any notice to be given to the Company shall be addressed to the
Secretary of the Company at the principal office of the Company.
9. Nothing herein contained shall affect the right of the Company,
subject to the terms of any existing contractual arrangement to the contrary,
to terminate the Option Holder's employment at any time for any reason
whatsoever.
10. This Agreement shall be binding upon and inure to the benefit of
the Option Holder, his personal representatives, heirs and legatees, but
neither this Agreement nor any rights hereunder shall be assignable or
otherwise transferable by the Option Holder except as expressly set forth in
this Agreement or in the Plan.
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC.
By
--------------------------------------------
President
--------------------------------------------
Option Holder
5
<PAGE>
EXHIBIT D
THIS OPTION AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933, OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD
PURSUANT TO RULE 144 UNDER SUCH ACT.
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, dated as of May 5, 1997 between International
Wireless Communications Holdings, Inc., a Delaware corporation having
its principal office at 400 South El Camino Road, Suite 1275, San Mateo,
California 94402 (hereinafter called the "Company"), and
________________, [an employee of] [a consultant to] [the Company]
(hereinafter called the "Option Holder").
WITNESSETH:
WHEREAS, the Company recognizes the value to it of the services of
the Option Holder and is desirous of furnishing him with added incentive and
inducement to contribute to the success of the Company; and
WHEREAS, the Company's Board of Directors granted to the Option
Holder an option in respect of the number of shares and fixed and determined
the option price and the other terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises and
representations herein contained and other good and valuable consideration,
it is agreed by and between the parties hereto as follows:
1. The Company hereby grants to the Option Holder a Nonqualified
Stock Option to purchase, on the terms and subject to the conditions
hereinafter set forth, all or any part of an aggregate of __________ shares
of the Common Stock ($.01 par value) of the Company at the exercise price of
$9.375 per share (the "Exercise Price"), exercisable in the amounts and at
the times set forth in Section 2. Unless sooner terminated as provided in
this Agreement, the Option shall terminate, and all rights of the Option
Holder hereunder shall expire, on February 2, 2007.
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<PAGE>
2. The Option may be exercised in installments as follows:
(a) up to one-fifth (1/5) of the shares (of the total shares
subject to the Option) on and at any time after August 3, 1997 and prior to
termination of the Option;
(b) up to two-fifths (2/5) of the shares, less any shares
previously purchased pursuant to the Option, on and at any time after
February 3, 1998 and prior to termination of the Option;
(c) up to three-fifths (3/5) of the shares, less any shares
previously purchased pursuant to the Option, on and at any time after
February 3, 1999 and prior to termination of the Option;
(d) up to four-fifths (4/5) of the shares, less any shares
previously purchased pursuant to the Option, on and at any time after
February 3, 2000 and prior to termination of the Option;
(e) up to all of the shares, less any shares previously
purchased pursuant to the Option, on and at any time after February 3, 2001;
provided, however, that the Option shall become fully vested and immediately
exercisable as to all of the Option shares upon the occurrence of any one of
the following events:
(a) [Upon the termination by the Company of the Option
Holder as a director of the Company for any reason] [Upon the Company's
terminating the Option Holder as a consultant to the Company] [Upon
termination of the Option Holder's employment with Vanguard Cellular
Financial Corp. or any subsidiary thereof ("Vanguard")], or
(b) Upon the occurrence of a "change of control" of the
Company as hereinafter defined.
For purposes of this Section 2, a "change of control" shall be
deemed to have occurred upon the occurrence of any of the following events:
(i) Any "person" (as such term is used in Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") but excluding any employee benefit plan of the
Company) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing 50% or more of the combined voting power of the
Company's outstanding securities then entitled ordinarily (and apart
from rights accruing under special circumstances) to vote for the
election of directors; or
(ii) Individuals who are "Continuing Directors" (as
hereinafter defined) cease for any reason to constitute at least a majority
of the Board of Directors of the Company; or
2
<PAGE>
(iii) The Board of Directors of the Company shall approve a
sale of all or substantially all of the assets of the Company; or
(iv) The Board of Directors of the Company shall approve
any merger, consolidation, or like business combination or reorganization of
the Company the consummation of which would result in the occurrence of any
event described in clause (i) or (ii) above.
For purposes of the foregoing, "Continuing Directors" shall mean
(i) the directors of the Company in office on the date hereof and (ii) any
successor to any such director (and any additional director) who after the
date hereof (y) was nominated or selected by a majority of the Continuing
Directors in office at the time of his nomination or selection and (z) who is
not an "affiliate" or "associate" (as defined in Regulation 12B under the
Exchange Act) of any person who is the beneficial owner, directly or
indirectly, of securities representing 50% or more of the combined voting
power of the Company's outstanding securities then entitled ordinarily to
vote for the election of directors.
3. While this Option remains outstanding and exercisable in
accordance with the terms hereof, the Option Holder may exercise, in whole or
in part, the Option by:
(a) surrendering the Option, together with a duly executed
copy of the form of exercise notice attached hereto, to the Secretary of the
Company at its principal offices; and
(b) making payment to the Company of an amount of cash equal
to the aggregate Exercise Price for the number of Option Shares being
purchased.
4. If the Option Holder ceases to be [a director of the
Company] [a consultant to the Company] [an employee of Vanguard] for any
reason (other than his death or permanent and total disability), the
Option, to the extent it is exercisable immediately prior to such
termination, may be exercised at any time within three months after the
date of termination of his employment but in no event after the Option
has expired. If the Option Holder ceases to be [a director of the
Company] [a consultant to the Company] [an employee of Vanguard] by
reason of his death or permanent and total disability, the Option may be
exercised, at any time within one year after such termination but in no
event after the Option has expired, by the Optionee or the person or
persons to whom the Option Holders' rights under the Option shall pass
by will or by the laws of descent and distribution.
5. Except as provided in paragraph 4 above, the Option shall not
be transferred, assigned, pledged or hypothecated in any way, whether by
operation of law or otherwise. Upon any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of the Option or any right or privilege
confirmed hereby contrary to the provisions hereof, the Option and the rights
and privileges confirmed hereby shall immediately become null and void.
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<PAGE>
6. (a) In lieu of exercising this Option, Option Holder may
elect to receive shares equal to the value of this Option (or the portion
thereof being canceled) by surrender of this Option at the principal office
of the Company together with notice of such election in which event the
Company shall issue to Option Holder a number of shares of Equity Securities
computed using the following formula:
X = (Y)(A-B)
------------
A
Where X - The number of shares of Common Stock to be issued
to Option Holder.
Y - The number of Option shares to be surrendered.
A - The fair market value of one share of the Common Stock
to be issued upon exercise of this Option.
B - Exercise Price (as adjusted to the date of
such calculations).
(b) For purposes of this Section, the Board of Directors
of the Company shall determine the fair market value in its good faith.
Notwithstanding the foregoing, Option Holder may surrender only that portion
of the Option which is exercisable pursuant to Section 1 hereof.
7. Upon the exercise of the purchase rights evidenced by this
Option, one or more certificates for the number of Option shares so purchased
shall be issued as soon as practicable thereafter, and in any event within
thirty (30) days of the delivery of the subscription notice.
8. The Company covenants that it will at all times keep available
such number of authorized shares of its Common Stock that may be issuable
upon exercise of this Option free from all preemptive rights with respect
thereto, which will be sufficient to permit the exercise of this Option for
the full number of Option shares specified herein. The Company further
covenants that such Option shares, when issued pursuant to the exercise of
this Option, will be duly and validly issued, fully paid and nonassessable.
9. The number of and kind of securities purchasable upon exercise
of this Option and the Exercise Price shall be subject to adjustment from
time to time as follows:
(a) If the Company shall at any time prior to the expiration
of this Option subdivide its Common Stock by split-up or otherwise, or
combine its capital stock, or issue additional securities as a dividend with
respect to any shares of its Common Stock, the number of Option shares
issuable upon the exercise of this Option shall forthwith be proportionately
increased in the case of a subdivision or stock dividend, or proportionately
decreased in the case of a combination. Appropriate adjustments shall also
be made to the Exercise Price payable per share, but the aggregate Exercise
Price payable for the total number of Option shares purchasable under this
Option (as adjusted) shall remain the same. Any
4
<PAGE>
adjustment under this Section 9(a) shall become effective at the close of
business on the date the subdivision or combination becomes effective, or as
of the record date of such dividend, or in the event that no record date is
fixed, upon the making of such dividend.
(b) In the event of any reclassification, capital
reorganization, or change in the capital stock of the Company (other than as
a result of a subdivision, combination, or stock dividend provided for in
Section 9(a) above), then, as a condition of such reclassification,
reorganization, or change, lawful provision shall be made, and duly executed
documents evidencing the same from the Company or its successor shall be
delivered to the Option Holder, so that the Option Holder shall have the
right at any time prior to the expiration of this Option to purchase, at a
total price equal to that payable upon the exercise of this Option, the kind
and amount of shares of stock and other securities and property receivable in
connection with such reclassification, reorganization, or change by a holder
of the same number of shares of capital stock as were purchasable by the
Option Holder immediately prior to such reclassification, reorganization, or
change. In any such case appropriate provisions shall be made with respect
to the rights and interest of the Option Holder so that the provisions hereof
shall thereafter be applicable with respect to any shares of stock or other
securities and property deliverable upon exercise hereof, and appropriate
adjustments shall be made to the Exercise Price per share payable hereunder,
provided the aggregate Exercise Price shall remain the same.
(c) When any adjustment is required to be made in the number
or kind of shares purchasable upon exercise of the Option, or in the Exercise
Price, the Company shall promptly notify the Option Holder of such event and
of the number of shares, the adjusted Exercise Price and the type of
securities or property thereafter purchasable upon exercise of the Option.
10. No fractional shares shall be issued upon the exercise of this
Option, but in lieu of such fractional shares the Company shall make a cash
payment equal to the fair market value of such fractional shares on the
exercise date of the Option with respect to the fractional shares.
11. The Option Holder recognizes that any registration of the
Option and the shares of Common Stock issuable upon its exercise under the
Securities Act of 1933 or under the securities laws of any state shall be at
the option of the Company. The Option Holder acknowledges that, absent
registration, under present federal securities regulations, he will be
required to hold any shares purchased pursuant to exercise of the Option for
a period of not less than one year following full payment for said shares and
that thereafter the shares may be sold only in compliance with Rule 144 of
the Securities and Exchange Commission. The Option Holder further
acknowledges that, notwithstanding registration, if, and at the time of
exercise of the Option, he is deemed an "affiliate" of the Company as defined
in said Rule 144, any shares purchased thereunder will nevertheless be
subject to sale only in compliance with Rule 144 (but without any holding
period), and that the Company may take such action as is necessary to assure
such compliance, including placing restrictive legends on certificates
evidencing such shares and delivering stop transfer instructions to the
Company's transfer agent.
5
<PAGE>
12. Any notice to be given to the Company shall be addressed to
the Secretary of the Company at the principal office of the Company.
13. This Agreement shall be binding upon and inure to the benefit
of the Option Holder, his personal representatives, heirs and legatees, but
neither this Agreement nor any rights hereunder shall be assignable or
otherwise transferable by the Option Holder except as expressly set forth in
this Agreement.
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC.
By:
-------------------------------------------
Title:
----------------------------------------
----------------------------------------------
Option Holder
6
<PAGE>
EXHIBIT E
---------
Guarantor shall absolutely, unconditionally and irrevocably guarantee to
lender the due and punctual payment, performance and discharge (whether upon
acceleration or otherwise in accordance with the terms thereof) of all
obligations relating to the indebtedness covered by the guarantee
("Obligations"). The guaranty of the Obligations shall include in all cases
all such obligations which arise after the commencement of an insolvency or
similar proceeding with respect to a borrower and all such Obligations which
would become due but for the operation of the laws governing such proceedings
including, but not limited to, interest accruing after the commencement of
such proceeding, whether or not allowed or allowable as a claim in the
proceeding. The guaranty shall be a guaranty of prompt and punctual payment
of the Obligations, whether at stated maturity, by acceleration or otherwise,
and is not merely a guaranty of collection.
<PAGE>
EXHIBIT F
---------
International Wireless Communications, Inc.
400 South El Camino Real Road, Suite 1275
San Mateo, California 94402
Gentlemen:
I am simultaneously with the execution of this letter, acquiring from
International Wireless Communications Holdings, Inc. ("IWCH") a nonstatutory
option to purchase _____ shares of Common Stock of IWCH (the "Common Stock")
at a purchase price of $9.375 per share. As an inducement to IWCH to issue
such option to me, I hereby represent to and agree with IWCH as follows:
1. The Option is being acquired, and the Common Stock issuable upon
exercise of the Option will be acquired, for investment for my own account,
and not as nominee or agent, and not with the view to the resale or
distribution in any part thereof, and I have no present intention of selling,
granting any participation in, or otherwise distributing the same.
2. I do not have any contract, undertaking, agreement or arrangement
with any person to sell, transfer or grant participations to such person or
to any third person, with respect to any of the Securities.
3. I have received all information I consider necessary or appropriate
for deciding whether to receive an Option and have had an opportunity to ask
questions and receive answers from IWCH regarding the terms and conditions of
the offering of the Options and the business properties, prospects and
financial condition of IWCH. I am an investor in securities of companies in
the development stage and acknowledges that I am able to fend for myself, can
bear the economic risk of my investment, and have such knowledge and
experience in financial or business matters that I am capable of evaluating
the merits and risks of the investment in the Options.
4. I understand that the securities I am purchasing are characterized
as "restricted securities" under the federal securities laws inasmuch as they
are being acquired from IWCH in a transaction not involving a public offering
and that under such laws and applicable regulations such securities may be
resold without registration under the Act only in certain limited
circumstances.
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<PAGE>
5. I understand that a restriction will be placed on my Option and on
the Common Stock issuable upon exercise thereof as follows:
This Option [the Common Stock represented by this Certificate] has
not been registered under the Securities Act of 1933, as amended,
may not be sold, offered for sale, pledged, hypothecated, or
otherwise transferred except pursuant to an effective registration
statement under the Securities Act of 1933 or an opinion of counsel
satisfactory to the Company that registration is not required under
such Act or unless sold pursuant to Rule 144 under such Act.
Sincerely,
-------------------------------------------
2
<PAGE>
EXHIBIT G
---------
May __, 1997
International Wireless Communications Holdings, Inc.
Ladies and Gentlemen:
We have acted as counsel to Vanguard Cellular Financial Corp., a North
Carolina corporation (the "Company"), in connection with that Agreement of
even date herewith between the Company and International Wireless
Communications Holdings, Inc. (the "Agreement"). Unless otherwise defined
herein, capitalized terms used herein and defined in the Agreement are used
herein as therein defined. This opinion is furnished to you pursuant to
Section 4 of the Agreement.
DOCUMENTS EXAMINED
------------------
In connection with the preparation of this opinion, we have reviewed the
following:
(a) The Agreement;
(b) Certified copies of the incorporation documents and bylaws of
the Company as in effect on the date hereof;
(c) Certified copies of resolutions adopted by the Board of
Directors of the Company relating to the Agreement;
(d) Certificate of Existence of the Company as certified by the
Secretary of State of North Carolina on March 11, 1997 (the "Certificate
of Existence"); and
(e) Such other documents as we consider necessary or appropriate
for purposes of rendering the opinions set forth below.
In all such examinations, we have assumed the authenticity and
completeness of all documents submitted to us as originals and the conformity
to originals and the completeness of all documents submitted to us as
photostatic, notarial or certified copies. We have also assumed the legal
capacity of all persons executing documents examined by us and the due
authorization, execution and delivery of all documents to be delivered by
parties other than the Company.
1
<PAGE>
Whenever our opinion herein as "to the best of our knowledge," such opinion
is limited to and based upon the actual knowledge of attorneys in this firm
who have devoted substantive attention to the transactions contemplated by
the Agreement or who regularly represent the Company.
Except for our review of the documents and records listed above, we have
made no independent factual investigation in connection with the preparation
of this opinion. To the extent that matters of fact may be deemed material
to this opinion, we have relied (without independent verification) on the
representations and warranties of the Company in the Agreement.
We have investigated such questions of North Carolina law as we have
deemed necessary for the purpose of rendering this opinion. In that regard,
we call your attention to the fact that the Agreement states that it is to be
construed in accordance with and governed by the laws of the State of
Delaware. Please be advised that we are members of the bar of the State of
North Carolina and do not purport to be experts in the laws of any
jurisdiction other than the State of North Carolina. Accordingly, this
opinion is limited in all respects to the laws of the State of North Carolina
and is furnished as if the Agreement was governed by North Carolina law,
notwithstanding the choice of law provisions therein.
OPINIONS
--------
Based solely on the foregoing, and subject to the assumptions,
limitations and qualifications set forth herein, we are of the opinion that:
1. The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of North Carolina.
2. The Company has the corporate power and authority to enter into and
perform all of its obligations under the Agreement.
3. The execution, delivery and performance by the Company of the
Agreement is duly authorized by all requisite corporate action and do not and
will not (a) violate any provision of (i) the certificate of incorporation or
the bylaws of the Company, or (ii) any North Carolina law or, to the best of
our knowledge, any order, writ, judgment, injunction, decree, determination
or award of any court, arbitrator or government, commission, board, bureau,
agency or other instrumentality applicable to or binding upon the Company, or
(b) to the best of our knowledge of or constitute a default under any
material indenture or loan or credit agreement or any other agreement, lease
or instrument to which the Company is party or by which the Company or the
Company's properties may be bound or affected.
4. The Agreement constitutes a legal, valid and binding obligation of
the Company, enforceable against it in accordance with its terms.
2
<PAGE>
LIMITATIONS AND QUALIFICATIONS
------------------------------
The opinions expressed above are subject to the following qualifications
and limitations:
(a) Enforceability of the Agreement may be limited by bankruptcy,
reorganization, fraudulent conveyance (including, without limitation,
Section 548 of the Bankruptcy Code (11 U.S.C. Section 548) and similar
provisions of state law), insolvency or similar laws affecting the
enforcement of creditors' rights generally or by general principles of
equity (regardless whether enforceability is considered in a proceeding
in equity or at law).
(b) Insofar as our opinion relates to the existence of the
Company, we have relied upon the Certificate of Existence, no further
investigation having been performed by us.
The opinions contained herein are rendered solely for the benefit of
International Wireless Communications Holdings, Inc. and may not be used or
relied upon by any other person or entity or in connection with any other
transaction without our prior written consent. The opinions expressed herein
are given only as of the date hereof and we assume no responsibility to
update our opinions for events occurring after the date of this letter.
Very truly yours,
SCHELL BRAY AYCOCK ABEL & LIVINGSTON P.L.L.C.
3
<PAGE>
EXHIBIT H
---------
IWCH LEGAL OPINION
------------------
Legal Counsel to IWCH shall express opinions as to the following:
1. IWCH is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and IWCH has the
requisite corporate power and authority to own its properties, to
conduct its business as presently conducted and to execute, deliver and
perform the Agreements.
2. Each of the Agreements has been duly and validly authorized by IWCH, duly
executed and delivered by an authorized officer of IWCH and constitutes a
legally valid and binding obligation of IWCH, enforceable against IWCH
according to its terms.
3. The execution, delivery, performance and compliance with the terms of
the Agreements do not violate any provision of any applicable federal or
California law, rule or regulation or any provision of the Amended and
Restated Certificate or Bylaws and do not conflict with or constitute a
default under the provisions of any material judgment, writ, decree,
order or the material provisions of any agreement to which IWCH is a
party or by which it is bound.
4. All consents, approvals, permits, orders or authorizations or, and all
qualifications, registrations, designations, declarations or filings
with, any federal or California state governmental authority on the part
of IWCH required in connection with the execution and delivery of the
Agreements and the consummation at the Closing of the transactions
contemplated by the Agreements have been obtained, and are effective.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS OF
INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY
FOUND ELSEWHERE IN THIS QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 23,971
<SECURITIES> 3,287
<RECEIVABLES> 576
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 45,597
<PP&E> 21,510
<DEPRECIATION> 1,074
<TOTAL-ASSETS> 159,424
<CURRENT-LIABILITIES> 8,369
<BONDS> 79,449
103,556
9
<COMMON> 6
<OTHER-SE> (37,498)
<TOTAL-LIABILITY-AND-EQUITY> 159,424
<SALES> 519
<TOTAL-REVENUES> 519
<CGS> 589
<TOTAL-COSTS> 589
<OTHER-EXPENSES> 10,707
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,236
<INCOME-PRETAX> (14,479)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,479)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
