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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED)
For the fiscal year ended December 31, 1996
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OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (NO FEE REQUIRED)
For the transition period from ______________ to ______________
Commission file number 0-23228
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PORTACOM WIRELESS, INC.
(Exact Name of Registrant as Specified In Its Charter)
Delaware 33-0650673
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
8055 W. Manchester Avenue, Suite 730
Playa del Rey, California 90293
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(Address of principal (Zip Code)
executive offices)
(310) 448-4140
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(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
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(Title of Class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
(1) X YES ____ NO
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(2) X YES ____ NO
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Except where otherwise specified, all dollar amounts referenced in this
document are denominated in United States dollars.
As of January 31, 1997, the aggregate market value of the Registrant's
Common Stock held by non-affiliates was $42,843,950 based upon the last sales
price of C$5.00 (US$3.70) on the Vancouver Stock Exchange. The shares of Common
Stock are also traded on the NASD Electronic Bulletin Board. See "ITEM 5.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS."
As of January 31, 1997, there were 13,090,368 shares of the Registrant's
Common Stock issued and outstanding.
Transitional Small Business Disclosure Format (check one):
(1) ____ YES X NO
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DOCUMENTS INCORPORATED BY REFERENCE: NONE
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PART I
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ITEM 1. BUSINESS
BACKGROUND
PortaCom Wireless, Inc. (formerly known as "Extreme Technologies, Inc." and
"International PCBX Systems, Inc." herein referred to alternatively as the
"Company" or the "Registrant") was formed as a British Columbia, Canada
corporation in 1989. On December 23, 1996, the Company reincorporated from
British Columbia to Wyoming pursuant to a procedure known as a "continuance",
and on December 24, 1996, the Company merged with its wholly owned Delaware
subsidiary and thereby reincorporated into Delaware. The Delaware subsidiary
had been formed in 1994 for the purpose of the merger, which had been postponed
for business reasons. See "Delaware Reincorporation." The Company presently
conducts business operations both directly and through one wholly owned U.S.
subsidiary, PortaCom International, Ltd. ("PIL"). The Company also has three
other wholly owned U.S. subsidiaries which are not presently operating: Extreme
Telecom, Inc. ("Telecom"), PCBX Systems, Inc. ("PCBX"), and Extreme
Laboratories, Inc., formerly known as Spheric Audio Laboratories, Inc.
("Laboratories").
Since 1994, both directly and through its PIL subsidiary, the Company has
engaged in initial stage efforts to evaluate the feasibility of, and attempt to
secure, licensing opportunities and joint venture arrangements for the operation
of wireless telephone networks as well as other state-of-the-art mobile radio
communication systems and new telephone technologies. Although the
establishment and operation of wireless telephone networks and other advanced
communications systems will be investigated by the Company wherever strategic
opportunities arise, its principal efforts are presently focused (as of the date
of this report) upon certain Eastern European and Asian emerging markets,
including Cambodia and Vietnam.
The Company, in December 1996, entered into a joint venture agreement as
the managing partner of a limited liability company which holds a twenty-five
(25) year renewable licence to develop a mobile wireless system in the Kingdom
of Cambodia. The Company also holds an ownership position in Metromedia Asia
Corporation ("MAC"), which is involved in the build-out of telecommunications
projects in China. The activities of the Company's PIL subsidiary to date have
produced no licences or joint venture opportunities, and management does not
believe that revenues will be realized by PIL in 1997. See below under the
sections "Business of PortaCom Wireless, Inc." and "Business of PortaCom
International, Ltd." for additional information.
PCBX Systems developed and marketed a personal computer branch exchange
("PCBX") which permitted the operation of a full-featured telephone network
control system from a centrally located personal computer. The PCBX systems
offered by the Company featured the Company's proprietary integrated circuit
board which fit into a personal computer and allowed a number of fundamental and
advanced features to be programmed into a telephone system. The principal
advantages of the Company's PCBX systems over competing systems were believed by
management to include low cost per feature, significant flexibility and
mobility, and relative ease of programming, upgrading and maintenance.
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Telecom entered into an agreement with Nitsuko America Corporation
("Nitsuko America") to distribute telecommunications products manufactured by
Nitsuko America which were not then being distributed otherwise in the United
States.
Laboratories developed and marketed a line of high quality audio speakers,
as well as a proprietary audio recording and playback technology known as
"SphericSound"(TM). "SphericSound" represented a form of audio recording and
playback that featured multi-dimensional imaging that created the realistic
sensation of directional sound movement emanating from stationary speakers.
Because of substantial losses, the associated costs of continued
development, the lack of profitability by competitors and the uncertainty of
marketing costs associated with commercializing both proprietary technologies
and other manufacturers' products, management decided in 1995 to discontinue the
development and marketing activities of PCBX, Telecom and Laboratories.
Funding of the Company's operations since inception has been provided by:
(i) revenues from the sale of PCBX products, and, to a significantly lesser
extent, the products of Telecom and Laboratories; (ii) proceeds from the sale of
securities undertaken in a series of private placement transactions; (iii)
completion of an initial public offering on the Vancouver Stock Exchange during
October 1992; and (iv) revenues generated as a result of the recent AAT
transaction. (See "Metromedia Asia Corporation.")
DELAWARE REINCORPORATION
At an Extraordinary and Special Meeting of the Shareholders of the Company
held on December 23, 1996, the Company's shareholders, by an affirmative vote of
least 51% of the outstanding shares and at least 75% of the shares represented
at the meeting, approved a proposal by the Company's Board of Directors to
change the Company's domicile briefly to Wyoming by way of a continuation
pursuant to the Wyoming Business Corporation Act and, following confirmation of
such continuation, to change its domicile from Wyoming to Delaware by way of a
merger of the Company with and into its wholly owned Delaware subsidiary
("PortaCom Delaware"). Upon completion of the merger, (i) the Wyoming
corporation ceased to exist, (ii) the stockholders of the Wyoming corporation
became stockholders of the Delaware corporation, (iii) the stockholders' rights
became governed by Delaware law, the Restated Certificate of Incorporation of
PortaCom Delaware and PortaCom Delaware's Bylaws rather than by British
Columbia or Wyoming law and the Company's former British Columbia and Wyoming
governing documents, (iv) all options and rights to purchase shares of the
Company's common stock were automatically converted into options or rights to
acquire an equal number of equivalent shares in PortaCom Delaware, (v) no change
occurred in the name, physical location, business, management, assets,
liabilities or net worth of the Company and (vi) the incumbent directors and
officers of the Company continued to serve in their respective capacities as
directors and officers of PortaCom Delaware. See "Item 4: Submission of Matters
to a Vote of Security Holders."
INDUSTRY OVERVIEW
Demand For Communications Services in Developing Countries.
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Many developing countries, including those in Southeast Asia and Eastern
Europe, are experiencing rapid economic growth. Often, the telecommunications
services presently available in these countries are inadequate to support
current demand let alone such growth. To address the latent demand for
communications services and to promote economic growth, governments in many
developing countries have begun deregulating their telecommunications industries
and encouraging the formation of private communications service providers. As a
result, the Company believes there is a substantial opportunity for privately
owned companies to provide wire line and wireless communications services in
these countries.
While the Company believes that the cellular telephony industry is well
established in the developed world, the industry in the developing world is
still in its infancy. The Company believes that wireless cellular telephony has
the potential to grow rapidly in developing countries because of the poor
quality of the existing wireline service, the unsatisfied demand for basic
telephone service and the increasing requirements of users who want the
convenience of cellular telephones. In some countries the cellular telephone
network provides significantly improved access, in terms of call quality and
service establishment time, to the local and international wireline network
compared with the existing wireline service. In addition, developing countries
are expected to benefit both from better technology and lower equipment costs
than those experienced at comparable stages of market development in developed
countries.
Wireline networks involve extensive outside infrastructure in the form of
buried or overhead cable networks, while cellular telephone systems do not
require the same level of construction activities. For developing countries,
cellular telephone systems can represent a faster and more cost-effective method
of expanding telecommunications infrastructure than deployment of traditional
wireline networks.
Role of Wireless Technologies.
A number of wireless technologies provide voice and data services that
address the communications needs of developing countries. These services include
cellular telephony, wireless local loop ("WLL") and paging. The Company believes
that existing and emerging wireless technologies generally compare favorably to
land-line technologies in terms of functions and service, yet provide lower
system deployment costs and the potential for more rapid deployment.
Cellular Telephony (Mobile Telephony).
Cellular telephony systems are capable of providing high quality voice and
data communications to and from vehicle-mounted and hand-held radio terminals
(cell phones) and are capable of handling a great number of calls at any one
time. Cellular telephony technology is based upon spatial diversity, the
division of a given geographical area into a number of overlapping cells and the
simultaneous re-use of radio channels in non-contiguous cells within the system.
Each cell contains a low power transmitter-receiver as part of a base station
that communicates by radio signal with cellular terminals in that cell. Each
cell is interconnected by wire lines or microwave to a central switching
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point or Mobile Switching Center ("MSC") that controls the routing of calls and
which, in turn, is connected to the public switched telephone network. It is the
MSC that allows cellular telephone users to move freely from cell to cell while
continuing their calls.
Cellular telephone systems generally offer subscribers the features offered
by the most up-to-date wireline telephone services. Most cellular telephone
systems are interconnected with the wireline telephone network. Cellular
telephone system operators therefore require an interconnect arrangement with
the local wireline telephone companies and the terms of such arrangements are
material to the economic viability of the system.
Currently, most cellular systems use analog technologies such as AMPS (U.S.
standard), TACS (UK/European standard) or NMT ( a European standard). In some
high density markets analog systems are reaching their capacity limits and are
being supplemented with new digital technologies that offer greater capacity
than analog systems.
Several digital cellular technologies have been developed in the last three
to five years. D-AMPS has been introduced as a digital upgrade for operators of
existing AMPS systems. In Europe, the digital Global System for Mobile
Communication ("GSM") standard has been developed and is widely available
throughout Europe and Asia. GSM provides approximately two to three times the
capacity of analog systems and has the additional benefit of enabling
international roaming due to its broad availability, system compatibility, and
universal terminal compatibility.
Another new digital technology, Code Division Multiple Access ("CDMA"), is
being introduced in the U.S. and several other major countries. CDMA provides
the highest capacity of any digital cellular technology at this point, with six
to ten times analog system capacity in a mobile environment. Its first
commercial deployment in Hong Kong has been successful, and has been deployed in
Personal Communications Services ("PCS") networks in the United States and
elsewhere. The Company's license in Cambodia requires CDMA-based technology.
CDMA digital wireless technology provides a universal technology platform
for a wide range of services and applications, including digital cellular, PCS,
wireless local loop, mobile satellite systems, and other types of networks.
Because of its spread spectrum RF characteristic, CDMA is able to provide a mix
of higher data rates simultaneously with lower data rates than certain other
wireless technologies. CDMA also offers superior call and voice quality than
other wireless technologies.
The cellular telephone industry is typically characterized by high fixed
costs and low variable costs. Until technological limitations on total capacity
are approached, additional cellular system capacity can normally be added in
increments that closely match demand and at less than the proportionate cost of
the initial capacity. The industry has also seen declining equipment prices in
real terms. Once revenues exceed fixed costs, incremental revenues are expected
to yield a high incremental operating profit, giving cellular telephone system
operators an incentive to stimulate and satisfy demand for service in the
market. The amount of profit, if any, under such circumstances is
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dependent on, among other things, prices and variable marketing costs, which, in
turn, are affected by the amount and extent of competition.
Wireless Local Loop.
WLL refers to a group of technologies designed to provide customer access
to the public switched telephone network using wireless radio technologies
rather than traditional wire or fiber optic lines. A WLL system typically
consists of a number of radio base stations (similar to cell sites used for
cellular telephone) covering the target market area, a switching center, and
fixed subscriber terminals on the subscriber's premises. On the fixed subscriber
terminal a standard telephone jack allows connection to standard telephone
equipment. In some systems portable handsets are available, providing the added
value of wide-area cordless telephone service to the subscriber.
The Company believes that WLL is an attractive technology for the rapid
expansion of telephone facilities in developing countries. The coverage in terms
of service area provided by a single base station can compare favorably with the
coverage of a single cellular base station. The use of digital technology
provides substantially greater capacity than analog alternatives which the
Company believes results in WLL being a cost-effective communications solution.
Several types of technology can be used to provide WLL, including CDMA
technology.
WLL networks provide subscribers with access to the standard land-line
telephone network through wireless transmission from land-line switch to the
telephone site in the home or business rather than through conventional land
lines. This is accomplished by placing small transceivers at the telephone site.
Functionally, WLL operates in the same way as a regular telephone, with the
added possibility of wide area "cordless telephone" use. WLL networks are
generally quicker to install and less expensive than deploying new land-line
systems.
Paging Technology
Paging is a method of wireless communication that uses an assigned radio
frequency to contact a subscriber virtually anywhere within a designated service
area. A subscriber carries a pager that receives messages by the broadcast of a
one-way radio signal. To send a message to a subscriber, a caller first dials an
access code and the subscribers designated pager number. The call is routed to
an electronic paging terminal which generates a signal that is sent to radio
transmitters in the services area. Depending upon the topography of the service
area, the operation radius of a radio transmitter typically ranges from 30 to 50
kilometers. The transmitters broadcast a signal that is received by the pager,
which alerts the subscriber by a tone, vibration or flash that there is a
message.
There are three basic types of paging services: numeric (digital display);
alphanumeric display and tone-only. Numeric paging services enable a caller,
using a touchtone telephone, to transmit to a subscriber a numeric message
consisting of a telephone number, an account number of coded information.
Numeric pagers have memory capability to store several numeric messages which
can be recalled by a subscriber when desired. Alphanumeric paging services
allow subscribers to receive and store messages consisting of both letters and
numbers. Alphanumeric pagers have sufficient memory to store between 500 and
5,000 characters. Advanced alphanumeric systems also permit the receiving
page, by using a low-power transmitter installed in the pager to send a brief
reply back to the sending pager. Tone-only paging service notifies the
subscriber that a call has been received by making a beeping sound or producing
a vibration, but does not display numbers or messages.
BUSINESS STRATEGY
The Company intends to become a pre-eminent provider of wireless
communications services in selected developing countries, typically either
through a joint venture with a local partner or as a significant participant in
a corporate local venture. In some cases the Company's local partners may have
previously been granted telecommunications licenses.
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The Company typically, although not exclusively, will play an active role in the
development and management of its operating companies and developmental stage
projects, and the Company will attempt to negotiate shareholder agreements that
provide the Company with the right to approve key decisions at the operating
company or developmental stage project level.
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The Company intends to operate mainly in developing markets, which it believes
offer long-term growth characteristics superior to those in more developed
markets. The economic growth in these markets is characterized by an expanding
need for telecommunications services.
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BUSINESS OF PORTACOM WIRELESS, INC.
Metromedia Asia Corporation
On May 28, 1996, the Company announced an agreement to acquire, in exchange
for shares of common stock of the Company, all of the outstanding shares of
Asian American Telecommunications Corporation ("AAT"), a Cayman Islands
telecommunications services developer which has focused its business activities
on developing PSTN and wireless telecommunications services in China. On July
18, 1996, the Company announced that the terms of the acquisition had been
adjusted to take into account a $25,000,000 financing by AAT. As management
continued to review the proposed transaction, including analysis and discussion
with legal, tax and financial advisors, it was recognized that the proposed
transaction required further modification in order to avoid potentially adverse
tax consequences to both the Company and its shareholders. On September 18,
1996, the Company announced that, due to significant tax and regulatory
considerations, it had elected to receive a direct ownership position in AAT
consisting of 2,000,000 common shares and warrants to acquire 4,000,000 common
shares of AAT at a price of $4.00 per share, plus an immediate payment of
$1,000,000 in cash from AAT to the Company. The 2,000,000 common shares of AAT
are to be held in escrow until January 1, 1999 in the event of any claims
arising out of the original proposed acquisition or the modification and
subsequent termination of that agreement, although as of the date of this
report, management is not aware of any claims or potential claims.
On December 23, 1996 AAT agreed to enter into a Business Combination
Agreement with Metromedia Asia Corporation ("MAC") and Metromedia International
Telecommunications, Inc. ("MITI"). In connection with the Business Combination
Agreement, MAC consummated, on February 28, 1997 an exchange offer for all of
the outstanding shares and warrants of AAT (the "Exchange Offer"). The Company
agreed to exchange all of its shares and warrants pursuant to the
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terms of the Exchange Offer. Under the terms of the Exchange Offer, each share
of AAT common stock was exchanged for one share of MAC regular common stock, and
each warrant to acquire AAT common stock at $4.00 per share was exchanged for a
warrant to acquire MAC common stock at $4.00 per share. In addition, immediately
prior to the Exchange Offer, MITI purchased additional shares of Class A common
stock, carrying three votes per share, plus warrants. Accordingly, based on
information supplied by AAT and MAC the Company owned 3.43% (9.16% on a fully
diluted basis assuming exercise of all of its warrants) of MAC immediately
following the consummation of the Exchange Offer. The 2,000,000 common shares of
MAC will be held in escrow under the same terms and conditions as were
applicable to the AAT shares which were tendered in the Exchange Offer.
The following information regarding MAC and AAT and their respective
operations is based on information announced by MAC. MAC is a subsidiary of
Metromedia International Group, Inc., a global communications media and
entertainment company ("MIG"). MAC was established to pursue the development and
exploitation of telecommunications systems in China and other countries in the
Pacific Rim. To further such objectives, MAC, through a joint venture contract
with Golden Cellular Communication Co. Ltd. of China, is licensed to supply
wireless telecommunications equipment, systems technology and software services
and maintenance to public and private telephone networks throughout China.
Moreover, MIG has entered into an agreement with DSC Communications Corporation
for exclusive rights to introduce a new generation of wireless local loop
telephony systems.
AAT, though a joint venture agreement, has a contract with China United
Telecommunications Corporation ("China Unicom") to develop wireless and wireline
telecommunications services in Sichuan Province, China. Separately, through a
joint venture with Ningbo United Telecommunications Investment Co. Ltd., AAT has
entered into a contract with China Unicom to construct and operate a GSM
telecommunications system within the city of Ningbo, located in China's Zhejiang
Province.
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American Cambodian Telecommunications, Ltd.
The Company, on December 26, 1996 entered into a joint venture agreement
(the "Cambodian JVA") as the 86% managing partner of American Cambodian
Telecommunications Ltd. ("ACT"), a limited liability company which holds a
twenty-five (25) year renewable licence to develop a mobile wireless system in
the Kingdom of Cambodia. After December 26, 1997 ACT has agreed to buy back all
of the outstanding shares of its 14% joint venture partner, Khmer Sameky
Telecom, Ltd. Also after December 26, 1997, the capital structure of ACT will
change such that the Company will retain a 75% interest in ACT and the Ministry
of Posts and Telecommunications of Cambodia will hold a 25% interest in ACT and
will retain the right to purchase any new ACT shares issued in order to
maintain a 25% interest.
Specifically, ACT has been issued a license (the "Cambodian Licence")for
the provision and operation of a CDMA based telecommunications system which
includes the rights to install and operate base stations, cellular switch
exchanges and any other facilities and equipment directly involved in the
provision, development and operation of a PCS 1900 based mobile cellular system
and to sell any and all types of terminals, devices and handsets for use with
the CDMA PCS 1900 system. Further rights under the Cambodian Licence include
certain frequency allocations, telephone number allocations and network
interconnection rights for local and international telephone services with the
existing PSTN and other telecommunications operator networks and other
authorized international gateways. Although the Cambodian License covers the
entire territory of the Kingdom of Cambodia, initial coverage is intended to be
provided to Siem Reap, Phnom Penh, Kampong Som, and the highway connecting the
aforementioned areas/cities. The Company estimates that the total population
under licence is approximately 10,400,000.
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There are currently four cellular telephone competitors using GSM, D-AMPS,
and NMT technology on a limited basis in the city of Phnom Penh, Cambodia.
Furthermore, additional cellular telephone licences may be awarded. The Company
expects to compete on the basis of operating a wireless telecommunication system
that employs the state-of-the-art CDMA system which it believes provides
significant advantages over the technology currently being employed in Cambodia.
The Company will require substantial additional capital investment to
pursue the development of its planned network in Cambodia which is expected to
require approximately $15 million in start-up costs for the first full year of
operations. The Company would also require substantial additional capital
investment should an operating license be issued by any of the countries in
which the Company is presently pursuing approvals or investments. Failure to
generate sufficient funds from the issuance of additional debt or equity on
favorable terms and conditions would have a material adverse effect on the
financial condition of the Company.
Terminated Acquisitions
On October 20, 1995, the Company announced that it had agreed to acquire
PortaCom Wireless Communications, Inc., a Delaware corporation ("PWC"), which
had been developing new business opportunities in wireless telecommunications
services in China, Burma, Laos, Bulgaria, Macedonia and certain other countries.
The acquisition was approved by the shareholders on November 20, 1995 and
remained subject to the approval of the Vancouver Stock Exchange ("VSE") and the
receipt of an acceptable valuation of PWC. Upon closing, the Company was
obligated to issue a total of 1,568,600 shares of common stock to the PWC
shareholders. On July 18, 1996, the Company announced that it had terminated
the acquisition as it had not yet received regulatory approval. The Company has
determined, however, that it will issue shares of its common stock to Messrs.
MacLellan and Stephens and to PJL, in the same amounts as previously provided in
the PWC Agreement, in the event it is permissible to do so without receiving
approval of the VSE.
BUSINESS OF PORTACOM INTERNATIONAL, LTD.
PIL was formed in 1994 to evaluate the feasibility of, and attempt to
secure, licensing and joint venture arrangements for the operation of wireless
telephone networks, and other communication systems and technologies. As of
December 31, 1996, the operations of PIL had produced no revenues or definitive
licensing arrangements and management believed these operations would likely
continue to remain limited in scope until certain valuable licensing
arrangements or joint venture participation could be secured. Since March 1994,
PIL has made efforts to acquire telecommunications concessions, primarily in
developing countries including Vietnam, China, and Honduras. In December 1994,
PIL entered into an agreement with certain
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parties to form an entity of which PIL would own 40% of the authorized and
outstanding shares. This entity was incorporated in the State of Nevada on
January 10, 1995 under the name Telecommunications American International
("TAI"). In December 1994, under the name U.S. Telecommunications Consortium
("USA Telecom"), TAI entered into a Memorandum of Agreement with Saigon Postel
Corporation ("PTS"), a Vietnamese joint stock company. TAI and PTS have agreed
to form venture companies to effect different telecommunications business
operations in Vietnam.
As of December 31, 1996, TAI and PTS were negotiating Business Cooperation
Contracts in which TAI would have interests in both a mobile cellular services
venture and a PSTN services venture. Under the proposed agreements with PTS,
TAI would own 50% and PTS would own 50% of each venture, which arrangements
would remain in effect for up to 20 years. Although TAI and PTS are currently
seeking to complete the operating license issuance process, management believes
that the likelihood of an operating licence being issued has diminished
substantially due to prolonged delays and apparent lack of progress.
Furthermore, because of the uncertainty of operating costs associated with
continuing to pursue an operating licence in cooperation with PTS, management
has decided to discontinue funding of the development activities of TAI until
significant further progress is evident. Accordingly, due to TAI's substantially
exhausted financial resources, there is considerable doubt that a licence will
be obtained in the near term unless TAI is successful in obtaining additional
sources of capital.
As of October 31, 1995, the Company had entered into a stock purchase
agreement with certain stockholders of TAI which provided for the acquisition of
an additional 13.1% of the outstanding shares of TAI. This acquisition, which
was subject to the receipt of a professional valuation and the approval of the
VSE, would have resulted in the Company owning a majority interest of 53.1% of
TAI. In the interim, the agreements provided irrevocable proxies allowing the
Company to vote all of the shares subject to each agreement. On July 18, 1996,
however the Company terminated the acquisition as it had not yet received
regulatory approval.
SPECIAL CONSIDERATIONS
Early Stage of Development of Wireless Projects. The Company's wireless
projects are in the early stages of development. The successful development and
commercialization of the Company's projects will depend on a number of
significant financial, logistical, technical, marketing, legal and other
factors, the outcome of which cannot be predicted. The Company's projects will
require significant amounts of 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. 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.
Negative Operating Cash Flow; Dependence on Additional Financing; No Commitments
For Additional Financing. The Company has incurred net losses since its
inception and had an accumulated deficit of approximately $9.78 million as of
December 31, 1996. The Company
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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. The Company used cash in operations and
investing activities of approximately $2.05 million in the year ended December
31, 1996, 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
addition, the Company intends to pursue aggressively additional opportunities
for wireless projects and anticipates that it will require additional sources of
financing in order to pursue those projects. However, the Company has no
commitments or 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 Company or at all. If adequate
sources of additional financing are not available, the Company will be forced to
delay, scale back or eliminate its projects or to liquidate its investments.
Joint Venture and Investment Arrangements. The Company intends to conduct its
business operations through joint ventures with local strategic partners and
through investments in local companies that have previously been granted
licenses . Its participation in each joint venture and investment will differ
from market to market and the Company may not have majority ownership interests
in some such joint ventures or investments. Even when the Company does have a
majority ownership interest, the Company's ability to withdraw funds, including
dividends, from its participation in, and to exercise management control over,
joint ventures and investments therein, will be dependent in some cases on
receiving the consent of the other participants, over which the Company may have
no control. While the precise terms of the arrangements will vary, the
Company's joint venture interests or investments may be adversely affected in
the event that disagreements develop with joint venture partners or majority
shareholders in a particular project.
Risks Inherent in Growth Strategy. The Company hopes to grow rapidly, subject
to the availability of additional financing, and is actively seeking and
evaluating new investment opportunities in foreign countries. 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.
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Technological Risk; Risk of Obsolescence. The Company's operating companies and
developmental stage projects generally use new and emerging technologies. For
example, the Company's Cambodian project will use CDMA, a cellular technology
that is not widely deployed on a commercial basis at the present time. Although
many of the technologies currently in use and to be used in the future by the
Company have been developed by large international telecommunications companies,
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 its existing telecommunications license and to renew it when
it expires, and to obtain new licenses in the future, is 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 Company than the original license terms, any of which could
have a material adverse effect on the Company. Likewise, there can be no
assurance that the Company's operating companies and developmental stage
projects will obtain all of the licenses necessary for their proposed
operations.
<PAGE>
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 is often 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 will 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 licenses.
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. In particular, the Company faces competition presently
in the Cambodian market from Millicom International Cellular, S.A., which is
already operational in that market along with other companies. A number of
large American, Japanese and European companies, including U.S.-based regional
Bell operating companies 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. (See "Competition.")
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
<PAGE>
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. Such regulations can encompass 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.
Inflation; Currency Devaluations and Fluctuations. 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 will be affected by the currency exchange
rate between the U.S. dollar and the applicable local currency. In general, 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.
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.
Possible Changes in Regulatory Agencies and Political Structure; Political
Instability. The Company intends to acquire interests in wireless telephone
licenses around the world, and will likely be subject to government regulation
in each market it enters. The governments of these countries are likely to
differ widely with respect to structure, constitution and stability, and some of
such countries may lack mature legal and regulatory systems. To the extent the
Company's operations depend on governmental approval and regulatory decisions,
the operations may be adversely affected by changes in the political structure
or government representatives in each of the markets in which the Company will
operate. No assurance can be given that factors such as these will not have a
material adverse effect on the Company's operations in particular countries.
<PAGE>
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. 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.
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 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.
COMPETITION
Because the implementation of wireless technologies is at a early stage of
development in many developing countries, the Company believes there are
significant opportunities to form, develop and operate companies that deploy
these technologies. The Company believes its business will become increasingly
competitive, particularly as businesses and foreign governments realize the
market potential of wireless technologies. A number of large American, Japanese
and European companies, including regional Bell operating companies and major
international carriers, are actively engaged in programs to develop and
commercialize wireless technologies in developing countries. Most of these
companies have substantially greater financial and other resources, research and
development staffs and technical and marketing capabilities than the Company.
The Company's operating companies and developmental stage projects will
frequently compete against traditional land-line companies (i.e. local telephone
companies), cellular telephone companies and direct competitors using the same
wireless technologies as the operating companies. The Company's competitive
strategy depends on the service offered and the competitor. For example, the
Company's strategy is for its CDMA operating companies to compete against
cellular telephone service providers by offering greater functionality at lower
cost, particularly for business users, to compete against traditional land-line
carriers by offering better service, faster deployment and lower construction
costs and to compete against direct competitors, including those formed by large
American, Japanese and European companies, by relying on local partners to
obtain operating licenses and provide access to existing telecommunications
asset bases. There will, however, be increasing competition for licenses; and
there will be increased competition once licenses are obtained from both other
wireless operators and, in some cases, from government-owned telephone
<PAGE>
companies. Although the Company intends to employ new technologies, there will
be a continuing competitive threat that even newer technologies will render the
wireless systems employed by certain operating companies obsolete. There is no
assurance that any of the Company's operating companies or developmental stage
projects will compete successfully in the marketplace.
PATENTS AND PROPRIETARY TECHNOLOGY
The Company has applied for, and subsequently elected to abandon
applications for, copyrights and patents on several of its products, and trade
names and trade marks related to discontinued lines of business which are no
longer material to the operations of the Company. The Company does not have or
use patents, trademarks, or proprietary technology in its current or projected
business operations.
EMPLOYEES
As of December 31, 1996, the Company employed six persons, including its
executive officers and administrative personnel. The Company's business strategy
entails employing substantially all personnel required for the Company's various
operations through its operating joint ventures.
The Company also engages a number of consultants and consulting firms in a
variety of management, administrative, engineering, legal and public relations
capacities. For example, substantially all engineering services are provided by
JMS North America, Inc. ("JMS"), an international engineering services
consulting firm with U.S. offices in the Washington, DC area and Texas, and
foreign offices in Amsterdam, Brussels, Dusseldorf, Madrid, New Delhi and
Singapore. JMS presently employs 145 persons worldwide on a full time basis, and
at least 100 persons on an independent contractor basis. As of the date of this
report, at least 10 employees from JMS are engaged in full time work on the
Company's projects.
ITEM 2. DESCRIPTION OF PROPERTY
The Registrant's executive offices and the offices of its PIL subsidiary
are located at 8055 W. Manchester Ave. Suite #730, Playa del Rey, CA. These
facilities, which consist of the rental of an office, are occupied on a month to
month arrangement at a rental expense of less than $2,000 per month.
The Registrant's Canadian administrative offices are located at 1155
Melville Street, Suite #11, Vancouver, British Columbia. These facilities,
which consist of the rental of an office and shared use of a conference room,
are occupied on a month to month arrangement at a rental expense of less than
$1,000 per month.
All of the Registrant's properties were, in the opinion of management as at
December 31, 1996, adequately covered by insurance.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
As of December 31, 1996, neither the Registrant nor any of its subsidiaries
was a party to any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held an Extraordinary and Special General Meeting of
Stockholders on December 23, 1996 in Playa del Rey, California. Five proposals
were submitted as described in the Company's Proxy Statement dated November 20,
1996. Proposal 1 was a Special Resolution and, accordingly, was required to be
voted upon and approved by an affirmative vote of greater than 75% of shares
present and eligible to vote in accordance with British Columbia law. Following
the tabulation of votes with respect to Proposal 1, the meeting was briefly
suspended to permit the filing of documentation in Wyoming to give effect to the
proposal, whereupon the meeting was reconvened for the purpose of voting upon
Proposals 2-5. Proposals 2-5 were voted upon and approved by a majority of the
outstanding shares entitled to vote.
1. Changing the jurisdiction of incorporation of the Company from British
Columbia, Canada to Wyoming, U.S.A., by way of a continuation under the
Wyoming Business Corporation Act and the adoption by the Company of By-
laws under Wyoming corporate legislation in substitution of the
Company's current Memorandum;
2. Changing the domicile of the Company from Wyoming to Delaware to be
accomplished by the merger of the Company with and into a wholly owned
Delaware corporation formed solely for the purpose of completing the
merger;
3. The authorization of 5,000,000 shares of $.001 par value preferred
stock;
4. The elimination of the personal liability of directors to the fullest
extent allowed under Delaware law; and
5. Providing officers, directors, employees and agents of the Company
certain indemnification rights in addition to those currently provided.
<PAGE>
The following table indicates the number of votes cast for, against, or
withheld, as well as the number of abstentions and broker non-votes, for each of
the proposals.
<TABLE>
<CAPTION>
Proposal For Against Abstentions Broker
Non-
Votes
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Change Jurisdiction 6,390,777 10,250 17,551 2,207,393
- -------------------------------------------------------------------------------
2. Change Domicile 6,392,877 10,150 1,800 2,221,144
- -------------------------------------------------------------------------------
3. Issued Preferred Stock 6,010,222 340,205 54,400 2,216,144
- -------------------------------------------------------------------------------
4. Eliminate Liability 7,876,564 554,775 193,632 1,000
- -------------------------------------------------------------------------------
5. Indemnification Rights 7,883,409 541,230 200,332 1,000
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
PART II
-------
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
A. MARKET INFORMATION
------------------
The Registrant's common stock is currently listed on the Vancouver Stock
Exchange under the symbol "PCW". The Registrant's securities became publicly
traded by virtue of an initial public offering of 1,000,000 shares on the
Vancouver Stock Exchange completed on October 1, 1992. On October 5, 1993, the
Registrant commenced trading of its Common Stock within the United States by
virtue of an exemption to the Securities Exchange Act of 1934 (the "Act") under
Rule 12 g 3-2(b) under the Act on the over the counter market on the NASD
Electronic Bulletin Board ("EBB") under the symbol "IPCBF". The Company
subsequently waived its exemption and registered under the Act. For the period
of July 30, 1996 to December 31, 1996, the trading symbol on the NASD Electronic
Bulletin Board was "PCWIF", and since December 31, 1996 has been "PCWR". The
following tables set forth the high and low sales prices of the Registrant's
common stock as reported by the Vancouver Stock Exchange daily trading summary
for the Registrant's last two fiscal years for the period ended December 31,
1996, the high and low bid prices as reported by the EBB for each quarterly
period in 1995, and the high and low sales prices as reported by the EBB for
each quarterly period in 1996. High and low bid prices for 1996 were not
available from the EBB. The high and low bid prices for the common stock for
each quarterly period in 1995 as reported by the EBB reflect inter-dealer
prices, without retail mark-up, mark-down or commission, and may not represent
actual transactions.
Vancouver Stock Exchange
------------------------
(Expressed in Canadian Dollars)
<TABLE>
<CAPTION>
Calendar Quarter High Low
- ----------------------- ------ ------
<S> <C> <C>
First Quarter, 1995 $5.50 $1.90
Second Quarter, 1995 $4.00 $1.50
Third Quarter, 1995 $2.70 $1.45
Fourth Quarter, 1995 $2.30 $1.65
First Quarter, 1996 $4.00 $1.30
Second Quarter, 1996 $8.40 $3.20
Third Quarter, 1996 $6.25 $3.80
Fourth Quarter, 1996 $4.25 $2.75
</TABLE>
<PAGE>
United States Electronic Bulletin Board(1)
---------------------------------------
(Expressed in United States Dollars)
<TABLE>
<CAPTION>
Calendar Quarter High Low
- ---------------- ---- ---
<S> <C> <C>
First Quarter, 1995 $ 3.625 $ 1.5
Second Quarter, 1995 $ 2.375 $ 1.25
Third Quarter, 1995 $ 1.875 $ 1.875
Fourth Quarter, 1995 $ 1.25 $ 1.25
First Quarter, 1996 $ 2.95 $ 1.0
Second Quarter, 1996 $ 7.45 $ 2.42
Third Quarter, 1996 $ 4.5 $ 2.75
Fourth Quarter, 1996 $ 3.32 $ 2.34
</TABLE>
(1) The table sets forth the high and low bid prices as reported by the NASD
Electronic Bulletin Board for each quarterly period in 1995, and the high
and low sales prices as reported by the NASD Electronic Bulletin Board for
each quarterly period in 1996.
B. Holders
-------
The number of record holders of the Common Stock as of December 31, 1996
was 102. The Registrant believes it has over 2,000 beneficial holders of its
Common Stock.
C. Dividends
---------
The Registrant has not paid any cash dividends on its Common Stock to
date, and does not anticipate or contemplate paying cash dividends in the
foreseeable future. It is the present intention of management to utilize all
available funds for the development of the Registrant's business.
D. Recent Sales of Unregistered Securities
---------------------------------------
The Registrant has sold the following securities during 1996:
On March 11, 1996, 96,560 shares of Common Stock were issued to Maroon
Bells Capital Corporation in consideration for settlement of debt at a deemed
price of $1.25 per share.
On April 3, 1996, options to acquire an aggregate of 361,649 shares of
Common Stock were granted to six individuals who were directors and/or officers
at exercise prices of $3.00 per share and with expiration dates of April 2,
2001.
On April 12, 1996, 97,500 common shares at a price of $1.11 per share were
issued to two accredited investors, Warren Zee and Profektin AB, pursuant to
private placement subscriptions made in 1995.
On May 24, 1996, 1,256,561 common shares at a deemed price of $2.00 per
share were issued to various creditors in consideration for settlement of debt
aggregating $2,513,121 pursuant to debt settlement agreements.
On June 28, 1996, options to acquire 90,000 shares of common stock were
granted to R. Keith Alexander, a director, at an exercise price of $3.80 and
with an expiration date of June 28, 2001.
On September 27, 1996, 14,500 common shares were issued to Ronald Tupper,
an individual, in consideration for loans which had been made to the Company.
On December 19, 1996, an aggregate of 11,333 common shares were issued to
Rozell Holdings Ltd and to Mario Romano in consideration for loans which had
been made to the Company.
On December 30, 1996, options to acquire an aggregate of 290,000 shares of
Common Stock were granted to Douglas MacLellan and Stephen Leahy (who were
directors and/or officers) at exercise prices of $2.68 per share and with
expiration dates of December 30, 2001.
Between December 19, 1995 and December 11, 1996, the Company arranged the
private placements of convertible promissory notes to accredited investors
having an aggregate principal amount of $2,417,000. Of this amount, $1,817,000
was received subsequent to, and $600,000 was received prior to, December 31,
1995. The promissory notes were due and payable after two years which ranged to
December 1998, or after six months upon demand of the holder, and bore interest
at 10% per annum with interest payable upon maturity or conversion. The
promissory notes were convertible at the holders' option into shares of common
stock of the Company at conversion prices ranging from $1.49 to $3.25 per share.
Pursuant to the debt subscription agreements, the Company also agreed to issue
to the investors non-transferable warrants to purchase up to an aggregate of
461,203 shares of common stock of the Company for a period of two years at a
price equal to the conversion price of the notes. The conversion and warrant
exercise prices were based on the market price of the Company's common stock at
the date of the offering.
On December 31, 1996, convertible promissory notes aggregating $2,267,000
had been converted to 1,097,163 shares of common stock which were then issued as
consideration for the conversion of the convertible promissory notes.
The issuance of all such securities was exempt from registration under the
Securities Act of 1933 pursuant to Section 4(2) thereof and Regulation D
promulgated thereunder.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following selected historical financial information of the Company is
qualified by reference to and should be read in conjunction with the financial
statements and notes thereto included elsewhere herein. The selected financial
information set forth below for the fiscal year ended December 31, 1996, the
fiscal transition period ended December 31, 1995, and the fiscal year ended
March 31, 1995 is derived from the financial statements of the Company audited
by KPMG, independent public accountants, which are included elsewhere herein.
The selected financial information set forth below for the fiscal years ended
March 31, 1994 and 1993 is derived from the financial statements of the Company
audited by KPMG, independent public accountants, which are not included in this
report.
<TABLE>
<CAPTION>
DECEMBER DECEMBER MARCH 31, MARCH 31, MARCH 31,
31, 1996 (1) 31, 1995 (2) 1995 1994 1993
--------------------------------------------------------------------
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AND WEIGHTED AVERAGE DATA)
<S> <C> <C> <C> <C> <C>
Net sales or operating 9,014 56 (212) 375 161
revenues
Income (loss) from 4,732 (1,880) (7,145) (3,205) (1,887)
continuing operations
Income (loss) from 0.38 (0.20) (0.90) (0.48) (0.42)
continuing operations per
share of common stock
Weighted average common 12,622 9,000 7,975 6,742 4,511
shares and equivalents (3)
Total assets 8,226 988 337 2,331 1,723
Long term obligations -- -- -- 1,037 87
</TABLE>
(1) Results for 1996 were significantly affected by the acquisition of cash and
common stock of MAC. See "Item 1.: Business; Business of PortaCom Wireless,
Inc."
(2) Nine month fiscal transition period ending December 31, 1995.
(3) Expressed in thousands of common shares.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
In 1995 the Company changed its fiscal year end from March 31 to December
31. Accordingly, the discussion set forth below includes a comparison of the
fiscal year ended December 31, 1996 to the nine month transition period ended
December 31, 1995 (the "Transition Period") and a comparison of the Transition
Period to the fiscal year ended March 31, 1995. Because the Company discontinued
its previous business in 1995, the Company does not believe such presentation is
meaningful and, in addition, the Company believes that historical results are
not indicative of future results.
RESULTS OF OPERATIONS
- ---------------------
Fiscal Year Ended December 31, 1996 Compared with the Nine Month Fiscal
- -----------------------------------------------------------------------
Transition Period Ended December 31, 1995 (the "Transition Period")
- -------------------------------------------------------------------
For the fiscal year ended December 31, 1996, the Company reported net
income of $5,139,662 with sales of $10,000 and other income of $9,003,943
compared to a loss in the Transition Period of $1,334,480 on sales of $143,652
and other income of nil. Expressed in terms of earnings (loss) per share of
common stock, results from operations for 1996 as compared with those for the
Transition Period were $0.41 per share and ($0.14) per share, respectively.
Other income is directly and solely attributable to an agreement between
the Company and AAT pursuant to which the Company received $1,000,000 in cash,
common stock (presently held in escrow) valued at $8,000,000 and 4,000,000
warrants to purchase common stock at $4.00 per share. Although the possibility
exists that the Company could enter into one or more similar transactions in
1997, no assurances can be given to this effect. Accordingly, the improvement in
the Company's financial condition resulting from the AAT transaction may not be,
and should not be construed to be, indicative of future results.
The reported decrease in net sales was due to the fact that the Company's
revenue-producing subsidiaries (which were also generating significant net
losses) were discontinued in 1995 and remained inactive throughout 1996.
Additionally, the Company's revenue-producing activities from ongoing
operations, with the exception of those directly related to the AAT agreement,
have remained limited in scope throughout 1996. Sales are expected to remain at
substantially the same level for the current year and the Company's operations
are not expected to generate revenues until 1998.
All of the 1996 sales were attributable to consulting activities of the
Company, whereas substantially all of the sales in the Transition Period were
attributable to the Company's PCBX systems and related products, with Telecom
and Laboratories accounting for a nominal portion of Transition Period Sales.
Cost of sales fell in 1996 to nil from $87,391 in the Transition Period.
This decline in cost of sales was primarily due to the Company's current
business development activities not including the manufacture or resale of
equipment as was the case in the Transition Period. Furthermore, the cost of
sales for 1996 is not comparable to that of prior periods due to the closure of
the Company's revenue producing subsidiaries in August 1995.
Operating expenses increased in 1996 to $4,281,558 from $1,936,665 in the
Transition Period, an increase of $2,344,893. Of this increase, the most
significant factor was a write down of promissory notes receivable and
investment related to TAI and PWC. See "Item 1. Business".
<PAGE>
The increases in operating expenses were primarily related to the increase
in activities of the Company with respect to the acquisitions and proposed
acquisitions of wireless telecommunications interests in China, Cambodia, and
Vietnam as compared with a general reduction in these expense categories
throughout the Transition Period as a direct result of downsizing related to the
closure of the Company's revenue producing subsidiaries in August 1995.
During the fiscal year ended December 31, 1996, interest and bank charges
rose to $627,234 from $73,394 recorded in the Transition Period. This increase
was primarily related to interest accrued on the $2,417,000 in convertible
promissory notes.
Additional factors included increases in interest, legal and accounting,
consulting fees, general and administrative, and travel expenses. Legal and
accounting expenses increased to $727,882 from $273,665. Consulting expenses
increased to $619,292 from $327,132. General and administrative expenses
increased to $306,950 from $114,526. These increases were partially offset by
decreases in depreciation, bad debt, rent, wages and benefits, advertising and
promotion, and research and development expenses. The Company's operating
expenses as a percentage of sales in 1996 are not comparable to the prior period
due to the closure of the Company's revenue-producing subsidiaries in August
1995.
As at December 31, 1996, management does not believe that revenues will
likely be realized by the Company for the near term; however, the Company
expects that it will need to expend significant funds in order to develop the
Cambodian Licence and to obtain additional licenses and to form additional joint
ventures necessary for the Company or PIL to provide wireless communications
services in other markets where such opportunities are being sought, although
the Company would not generate any revenues until such licenses were obtained
and such joint ventures were operational. These activities would likely
necessitate a material increase in general office overhead and other general and
administrative costs.
The preceding paragraph contains certain forward looking statements that
are subject to inherent uncertainties. Among the factors resulting in such
uncertainties are those described in "Item 1: Business; Certain Considerations."
Transition Period Compared with Fiscal 1995
- -------------------------------------------
Sales in the nine month fiscal transition period ended December 31, 1995
were $143,652, a decrease of approximately 82% from the $780,839 reported for
the prior fiscal year ending March 31, 1995 ("Fiscal 1995"). Substantially all
of the Fiscal 1995 sales and most of the Transition Period sales were
attributable to the Company's PCBX Systems and related products, with Telecom
and Laboratories accounting for a nominal portion of Transition Period sales.
The Company incurred a loss of $1,334,480 in the Transition Period,
compared with a loss of $7,144,581 in Fiscal 1995, or $0.14 per share versus
$0.90 per share, respectively.
<PAGE>
Cost of sales fell in the Transition Period to $87,391 from $992,807 in
Fiscal 1995, or 61% and 127% of sales, respectively. This decrease in cost of
sales, both in absolute terms and as a percentage of sales, was primarily due to
a combination of reduced component costs for the PCBX line of products, an
increase in the sale of software (PCBX's highest margin product).
Operating expenses fell in the Transition Period to $1,936,665 from
$6,932,613 in Fiscal 1995, a decrease of $4,995,948, or 72%. Of this decrease,
the most significant factors were (i) a decrease in consulting fees to $327,132
from $1,470,000, (predominantly paid to related parties; See Item 12: "Certain
Relationships and Related Transactions") related to downsizing, (ii) a decrease
in general and administrative costs to $114,526 from $499,165, related to
downsizing, (iii) a decrease in wages and benefits to $513,325 from $1,658,765,
and (iv) a decrease in bad debt expenses to $80,628 from $571,003, due primarily
to a drastic decrease in sales on account in favor of cash sales.
Fiscal 1995 Compared with Fiscal 1994
- -------------------------------------
Sales in the fiscal year ended March 31, 1995 ("Fiscal 1995") were
$780,839, a decrease of approximately 5.9% from the $829,844 reported for the
prior fiscal year ("Fiscal 1994"). Revenues were expected to decline throughout
the next fiscal year, if the Company was unable to obtain additional market
acceptance for its products. All of the Fiscal 1994 sales and substantially all
of the Fiscal 1995 sales were attributable to the Company's PCBX systems and
related products, with Telecom and Laboratories accounting for a nominal portion
of Fiscal 1995 sales.
The Company incurred a loss of $7,144,581 in Fiscal 1995, compared with a
loss of $3,205,237 in Fiscal 1994, or $0.90 per share versus $0.48 per share,
respectively.
Cost of sales rose in Fiscal 1995 to $992,807 from $454,383 in Fiscal 1994,
or 127% and 55% of sales, respectively. This increase in cost of sales, both in
absolute terms and as a percentage of sales, was primarily due to manufacturing
and product quality problems, which resulted in the Company having to
manufacture substantially more units in order to satisfy delivery requirements,
although part of the increase was attributable to product enhancements which
increased unit costs. The Company also experienced a substantial increase in
product returns.
Operating expenses rose in Fiscal 1995 to $6,932,613 from $3,580,698 in
Fiscal 1994, an increase of $3,351,915, or 93.6%. Of this increase, the most
significant factors were (i) an increase in consulting fees to $1,470,000 from
$380,433, (predominately paid to related parties; See Item 12: "Certain
Relationships and Related Transactions") (ii) an increase in general and
administrative costs to $499,165 from $261,422, (iii) an increase in wages and
benefits to $1,658,765 from $1,033,526, and (iv) an increase in bad debt
expenses to $571,003 from $86,129, due in each case primarily to the Company's
plans to launch its line of audio products, which did not occur as scheduled
(although bad debt expense increased primarily because of difficulty in
collecting accounts receivable due to customer dissatisfaction with the
Company's products). Legal and accounting costs increased principally as a
result of legal costs associated with organizational matters and other costs.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
During 1996, the Company's cash and cash equivalents decreased by $51,390.
Although the Company generated $4,870,145 from financing activities, the
Company's operations utilized a net of $1,911,481. The Company also used cash
of $2,871,000 in repayment of short-term debt and $139,054 in investments in
office equipment and in TAI and ACT. These activities contributed to a net
working capital position as of December 31, 1996 of ($685,858), which is up
$1,219,810 from ($1,905,668) at December 31, 1995. Working capital levels have
only been able to increase by virtue of the Company's continued offerings of
securities, its ability to secure short term loans, and the receipt of cash and
securities pursuant to its agreement with AAT.
The Company has incurred cumulative losses from inception through December
31, 1996 of $9,780,227 and has not achieved revenues sufficient to offset
direct expenses and corporate overhead.
Since inception, a substantial portion of the Company's operating capital
has been provided through financing activities which have included an initial
public offering and a series of private placements of common shares. During
1996, the Company sold 1,517,984 shares of common stock and 558,702 common stock
purchase warrants in private placement transactions and upon the exercise
outstanding stock options and warrants. The Company anticipates that it will
seek additional financing through the private placement of equity or debt
securities, although no assurances can be given as to the success of any future
offerings of securities.
Between December 19, 1995 and December 11, 1996, the Company arranged,
subject to regulatory approval, private placements of convertible promissory
notes having an aggregate principal amount of $2,417,000. Of this amount
$1,817,000 was received subsequent to, and $600,000 was received prior to,
December 31, 1995. The promissory notes were due and payable after two years
which ranged to December 1998, or after six months upon demand of the holder,
and bore interest at 10% per annum, with interest payable upon maturity or
conversion. The promissory notes were convertible into shares of common stock
of the Company at conversion prices ranging from $1.49 to $3.25 per share.
Pursuant to the debt subscription agreements, the Company also agreed to issue
to the investors non-transferable warrants to purchase an aggregate of up to
461,203 shares of common stock of the Company for a period of two years at a
price equal to the conversion price of the notes. The conversion and warrant
exercise prices were based on the market price of the Company's common shares at
the date of their offering. On December 16, 1996, regulatory approval was
received for the issuance of convertible promissory notes aggregating $2,417,000
and 461,203 warrants which were then issued by the Company. As of December
31, 1996, convertible notes aggregating $2,267,000 were converted to common
stock. As of the date of this report, the remaining convertible notes
aggregating $150,000 had also been converted to common stock. As of December
31, 1996 accrued interest on the convertible promissory notes aggregating
approximately $180,000 was payable by the Company.
As of December 31, 1996, the Company had 1,136,183 options and 725,703
warrants outstanding which, upon exercise, would yield to the Company additional
proceeds in excess of
<PAGE>
$3.8 million. The exercise of existing options or warrants is impossible to
predict with any certainty. Accordingly, management can render no assurances
that any material funds will be realized upon the exercise of such options or
warrants, or whether such will be exercised at all.
Rental expense accounts for approximately $3,000 of fixed expenses on a
monthly basis. Personnel costs, which are expected to increase somewhat
throughout the year, are likely to account for between $75,000 and $100,000 of
fixed expenses on a monthly basis. Additional variable expenses, such as
consulting fees, legal and accounting, travel and entertainment, utilities and
miscellaneous equipment purchases (or rentals) are expected to account for
between approximately $50,000 and $75,000 per month.
In addition to fixed rental and certain personnel expenses, as of December
31, 1996, the Company anticipates capital expenditures of approximately $15
million during 1997 in connection with the establishment and expansion of ACT's
operations. The Company may also elect to exercise some or all of its MAC share
purchase warrants in 1997, the purchase price for which would be $16 million
assuming the exercise of all of its warrants.
Management does not believe that in the near term the Company's operations
will generate sufficient cash flow to finance its working capital and any
capital expenditure requirements. The Company's operations will remain
dependent on the Company's ability to obtain additional debt and equity
financing (including from the exercise of existing warrants). The Company has
been able to secure financing in the past through loans from certain
stockholders, although management has no reason to believe that similar
arrangements will be available in the future. While the Company will continue
to seek both debt and equity financing, there can be no assurance that any such
financing will be available on terms acceptable to the Company or at all.
Without such additional sources of financing, the Company will not be able to
continue as a going concern.
The political systems of the countries in which the Company has or may seek
to establish joint venture operations are in many cases emerging from legacies
of totalitarianism or civil unrest. In addition, many of the economies are weak,
volatile and reliant on foreign assistance. Free market reforms undertaken by
some of these countries face uncertain success and may lead to further economic
instability. These factors may adversely affect the Company's business
activities and results of operations. The laws, rules and regulations
applicable to the Company's activities in developing countries are generally
new, subject to change and incomplete. There can be no assurance that local
laws, rules and regulations will become stable or complete in the future, or
that changes thereto will not materially adversely affect the operations of the
Company. All of the Company's joint venture operations are and are expected to
be outside the United States. As a result, such operations are exposed to
currency fluctuations and the need to comply with a variety of foreign laws,
including laws that control currency exchanges and currency repatriation. The
Company does not hedge its foreign currency risks. There can be no assurance
that the Company's operations will not be adversely affected by such factors.
The preceding paragraphs contain certain forward looking statements that
are subject to inherent uncertainties. Among the factors resulting in such
uncertainties are those described in "Item 1: Business; Special Considerations."
<PAGE>
Investment in TAI
Although the Company holds approximately a 41% interest in TAI, at year end
it was determined that this investment had experienced an other than temporary
decline in value and a significantly decreased likelihood that the $581,710 in
loans would be repaid. Accordingly, the investment and advances were written
down to their estimated fair value of $nil.
Debt Settlements
In October 1995, the Company began to enter into written agreements to
settle indebtedness in the aggregate amount of approximately $2,809,000 for cash
or share consideration. These agreements were subject to regulatory approval.
In May 1996, the Company received regulatory approval and completed the
settlement of $2,513,121 of such debt through the issuance of a total of
1,256,561 shares of common stock. As of January 31, 1997, 53,675 shares
continue to be reserved for issuance when allowable. In December 1995, the
Company agreed to the restructuring and settlement of claims of two parties
related to each other. The amount of the settlement was subsequently reduced
and fully paid by the Company in 1996. As of December 31, 1996, the outstanding
accounts payable of the Company's closed subsidiaries accounts for
approximately $90,000 of total accounts payable. The Company is continuing to
attempt to settle the outstanding debt on terms favorable to the Company,
although no assurances about such settlement terms can be given.
Cancellation of Performance Shares
In October 1995, certain shareholders agreed to surrender their 5,950,000
performance shares which were then held under an escrow arrangement. In
consideration therefor, the Company agreed to issue 314,762 common shares at a
deemed price of $2.00 per share. Although the performance shares have been
irrevocably canceled by the Company, as of the date of this filing, the issuance
of the 314,762 shares continues to be subject to the removal of the Company from
the jurisdiction of both the Vancouver Stock Exchange and the British Columbia
Securities Commission.
Bonus Shares and Warrants
In connection with the issuance of certain short-term debt by the Company
in January 1995 and May 1996, the Company has agreed to issue, subject to
regulatory approval, 85,590 "bonus" shares of common stock and 166,667 share
purchase warrants, exercisable at $3.30, expiring on May 31, 1997. During 1996,
regulatory approval was received for the issuance of 25,833 of these shares
which were then issued by the Company. As of December 31, 1996, the issuance of
the remaining 59,757 shares and 166,667 warrants continued to be subject to
regulatory approval.
<PAGE>
EFFECTS OF INFLATION
- --------------------
The Company does not expect inflation to materially affect its results of
operations. However, it is expected that operating costs and the cost of capital
equipment to be acquired in the future may be subject to general economic and
inflationary pressures.
ITEM 8. FINANCIAL STATEMENTS
The consolidated financial statements and schedules required to be filed
under this item are presented on the following pages. The Company does not
believe that issued, but not yet effective, accounting standards will materially
impact its financial position or results of operations upon adoption.
<PAGE>
Consolidated Financial Statements of
PORTACOM WIRELESS, INC.
(expressed in U.S. dollars)
Year ended December 31, 1996
Nine month period ended December 31, 1995
Year ended March 31, 1995
F-1
<PAGE>
AUDITORS' REPORT TO THE SHAREHOLDERS
We have audited the consolidated balance sheets of PortaCom Wireless, Inc. as at
December 31, 1996 and 1995 and the consolidated statements of operations,
stockholders' equity (deficiency) and cash flows for the year ended December 31,
1996, the nine month period ended December 31, 1995 and the year ended March 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in Canada. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 1996
and 1995 and the results of their operations and the changes in their cash flows
for the year ended December 31, 1996, the nine month period ended December 31,
1995 and the year ended March 31, 1995 in accordance with generally accepted
accounting principles in the United States.
/s/ KPMG
Chartered Accountants
Vancouver, Canada
January 15, 1997
COMMENTS BY AUDITOR FOR U.S. READERS ON CANADA-U.S. REPORTING DIFFERENCE
In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by conditions and events that cast substantial doubt on
the Company's ability to continue as a going concern, such as those described in
note 1 to the consolidated financial statements. Our report to the shareholders
dated January 15, 1997 is expressed in accordance with Canadian reporting
standards which do not permit a reference to such events and conditions in the
auditors' report when these are adequately disclosed in the financial
statements.
/s/ KPMG
Chartered Accountants
Vancouver, Canada
January 15, 1997
F-2
<PAGE>
PORTACOM WIRELESS, INC.
Consolidated Balance Sheets
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
December 31, December 31,
1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 114,275 $ 165,665
Accounts receivable - 7,093
-----------------------------------------------------------------------------------
114,275 172,758
Promissory notes receivable (note 4) - 815,400
Investments (note 5) 8,099,500 -
Equipment, net 12,427 -
- ------------------------------------------------------------------------------------
$8,226,202 $ 988,158
- ------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity (Deficiency)
Current liabilities:
Accounts payable and accrued liabilities (note 6) $ 650,133 $ 1,107,426
Loans payable (note 7) 150,000 971,000
-----------------------------------------------------------------------------------
800,133 2,078,426
Stockholders' equity (deficiency):
Share capital (note 8):
Issued:
Common stock (1996 - 13,118,181;
1995 - 17,496,522) 13,118 17,496
Other paid-in capital 17,193,178 13,812,125
Deficit (9,780,227) (14,919,889)
-----------------------------------------------------------------------------------
7,426,069 (1,090,268)
Future operations (note 1)
Contingent liabilities (notes 5(a) and 9)
- ------------------------------------------------------------------------------------
$8,226,202 $ 988,158
- ------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
On behalf of the Board:
/s/ Stephen Leahy Director
- ------------------------
/s/ Douglas MacLellan Director
- ------------------------
F-3
<PAGE>
PORTACOM WIRELESS, INC.
Consolidated Statements of Operations
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Nine months
Year ended ended Year ended
December 31, December 31, March 31,
1996 1995 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income:
Sales, net $ 10,000 $ 143,652 $ 780,839
Cost of sales - 87,391 992,807
-----------------------------------------------------------------------------------------
10,000 56,261 (211,968)
Other income (note 5(a)) 9,003,943 - -
- ------------------------------------------------------------------------------------------
9,013,943 56,261 (211,968)
Expenses:
Advertising and promotion 3,545 60,820 281,649
Bad debts 2,513 80,628 571,003
Consulting fees (note 10) 619,292 327,132 1,470,000
Depreciation 2,127 143,786 210,052
General and administrative 306,950 114,526 499,165
Interest, bank charges and financing
charges (note 7) 627,234 73,394 134,198
Legal and accounting 727,882 273,665 469,922
Management fees (note 10) 86,013 49,436 360,505
Placement fees 106,000 - -
Rent 40,371 141,568 267,165
Research and development 4,530 60,437 570,441
Travel 273,726 97,948 439,748
Wages and benefits 434,665 513,325 1,658,765
Write-down of promissory notes receivable
and investment ( note 10(f) ) 1,046,710 - -
-----------------------------------------------------------------------------------------
4,281,558 1,936,665 6,932,613
- ------------------------------------------------------------------------------------------
Income (loss) before extraordinary item 4,732,385 (1,880,404) (7,144,581)
Gain on settlement of debt 407,277 545,924 -
- ------------------------------------------------------------------------------------------
Net income (loss) for the period $ 5,139,662 $(1,334,480) $(7,144,581)
- ------------------------------------------------------------------------------------------
Net income (loss) per share (note 3(g)) $ 0.41 $ (0.14) $ (0.90)
- ------------------------------------------------------------------------------------------
Weighted average number of common
stock outstanding (note 3(g)) 12,621,945 8,999,863 7,974,845
- ------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
PORTACOM WIRELESS, INC.
Consolidated Statement of Stockholders' Equity (Deficiency)
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Common Other Paid-in
stock capital Deficit
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, March 31, 1994 after giving
retroactive effect to change in authorized
common stock (note 8(b)) $13,835 $ 6,962,626 $ (6,440,828)
Year ended March 31, 1995:
Common stock issued for cash 1,380 3,107,829 -
Net loss for the year - - (7,144,581)
- ---------------------------------------------------------------------------------------
Balance, March 31, 1995 15,215 10,070,455 (13,585,409)
Nine months ended December 31, 1995:
Common stock issued:
For cash 1,025 1,229,806 -
On settlement of debt 1,256 2,511,864 -
Net loss for the period - - (1,334,480)
- ---------------------------------------------------------------------------------------
Balance, December 31, 1995 17,496 13,812,125 (14,919,889)
Year ended December 31, 1996:
Common stock issued:
For cash 299 552,847 -
On settlement of liabilities 176 306,353 -
On conversion of promissory notes 1,097 2,265,903 -
Common stock cancelled (5,950) 5,950 -
Value ascribed to warrants (note 7(b)) - 250,000 -
Net income for the year - - 5,139,662
- ---------------------------------------------------------------------------------------
Balance, December 31, 1996 $13,118 $17,193,178 $ (9,780,227)
- ---------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
PORTACOM WIRELESS, INC.
Consolidated Statements of Cash Flows
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Nine months
Year ended ended Year ended
December 31, December 31, March 31,
1996 1995 1995
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash provided by (used in):
Cash flows from operating activities:
Net income (loss) for the period $ 5,139,662 $(1,334,480) $(7,144,581)
Items not involving cash
Depreciation 2,127 143,786 210,052
Fair value of investments received
on settlement (note 5(a)) (8,000,000) - -
Write-down of promissory notes
receivable and investment 1,046,710 - -
Share capital issuable in settlement
of financing charges 328,399 - -
Changes in operating assets and liabilities:
Accounts and promissory notes
receivable (199,527) (782,060) 24,314
Inventory - 58,852 327,995
Prepaid expenses - 6,680 62,260
Employee loans (note 10(c)) - - 147,209
Accounts payable and accrued
liabilities (228,852) 1,405,889 1,657,069
- --------------------------------------------------------------------------------------------------------
Net cash used by operating activities (1,911,481) (501,333) (4,715,682)
Cash flows from financing activities:
Issue of and to be issued for common
stock for cash 553,145 1,230,830 3,109,209
Bridge Financing 2,500,000 - -
Repayment of Bridge Financing (2,500,000) - -
Convertible promissory notes 1,817,000 600,000 -
Repayment of note payable - - (150,000)
Repayment of promissory note payable - (37,500) (50,000)
Loans payable (371,000) (1,213,508) 584,508
- --------------------------------------------------------------------------------------------------------
Net cash generated by financing activities 1,999,145 579,822 3,493,717
Cash flows from investing activities:
Equipment, net (14,554) 13,792 (92,379)
Patents, trademarks and other assets - - (80,855)
Investments (note 5) (124,500) - -
- --------------------------------------------------------------------------------------------------------
Net cash generated (used) by investing activities (139,054) 13,792 (173,234)
- --------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and
cash equivalents (51,390) 92,281 (1,395,199)
Cash and cash equivalents,
beginning of period 165,665 73,384 1,468,583
- --------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 114,275 $ 165,665 $ 73,384
- --------------------------------------------------------------------------------------------------------
Supplementary information:
Interest paid $ 25,000 $ - $ -
Income taxes paid - - -
Non-cash transactions (note 11)
- --------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
PORTACOM WIRELESS, INC.
Notes to Consolidated Financial Statements
(expressed in U.S. dollars)
- --------------------------------------------------------------------------------
1. FUTURE OPERATIONS:
PortaCom Wireless Inc. (the "Company") was incorporated on July 7, 1989
under the Company Act (British Columbia) and was inactive until April 1990.
Effective December 24, 1996, the Company emigrated its corporate charter
from British Columbia to Delaware. This resulted in the restatement of the
Company's authorized common and preferred stock (note 8).
The Company is currently pursuing business ventures as a developer,
financier and operator of companies providing cellular, wireless and PSTN
telecommunications services in selected developing world markets. The
Company intends to make investments primarily in wireless, cellular, PSTN
and long distance networks in order to provide coverage and high-quality
service in selected emerging markets. The Company's principal interests are
focused on these technologies in Cambodia and other emerging markets which
represents a single industry segment.
The Company entered into a joint venture on December 26, 1996 as the
managing partner of American Cambodian Telecom Ltd. ( "ACT" ) a limited
liability company which holds a twenty-five year renewable license to
develop a mobile wireless system in the Kingdom of Cambodia. The Company
also holds a 3.43% interest in Metromedia Asia Corporation ( "MAC" ), which
is active in the build-out of telecommunications in China.
At December 31, 1996 the Company had a working capital deficiency of
$685,858. At the date of these consolidated financial statements, the
Company has not generated cash flow from recurring operating activities and
it is uncertain when it will commence to generate such a cash flow. In
addition, the Company's largest recorded asset is restricted until January
1, 1999 (note 5(a)). Accordingly, there can be considered to be doubt as to
the nature and extent of the Company's future operations.
The accompanying consolidated financial statements have been prepared
assuming the Company will continue to operate as a going concern which
requires the realization of assets and settlement of liabilities in the
ordinary course of business. The Company's viability as a going concern is
dependent upon the continued restructuring of its asset base, the financial
support of shareholders and creditors and, ultimately, the generation of
profitable operations. Although it is management's intention to pursue these
options, there can be no assurance that these events will or can occur. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
2. CHANGE IN FISCAL YEAR:
In 1995, the Company changed the date on which its fiscal year ends from
March 31 to December 31, 1995. Accordingly, results of operations and cash
flows for the transition period which ended December 31, 1995 cover a nine-
month period.
F-7
<PAGE>
PORTACOM WIRELESS, INC.
Notes to Consolidated Financial Statements, page 2
(expressed in U.S. dollars)
- --------------------------------------------------------------------------------
3. SIGNIFICANT ACCOUNTING POLICIES:
(a) Basis of presentation:
These consolidated financial statements are prepared in accordance with
generally accepted accounting principles in the United States. In prior
years, as a company incorporated in Canada, it reported to its
shareholders based on Canadian accounting principles. Due to the
emigration to Delaware, the Company is now required to file regulatory
reports under United States accounting principles. The change from
Canadian to United States generally accepted accounting principles did
not impact reported amounts for total assets, stockholders' equity
(deficiency) or net income (loss) for either the 1996 or prior
reporting periods. Under Canadian accounting principles earnings (loss)
per share would be calculated including escrowed shares as indicated in
note 3(g).
(b) Basis of consolidation:
These consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, PortaCom International,
Ltd., PCBX Systems, Inc., Extreme Laboratories, Inc. and Extreme
TeleCom, Inc. The Company's interest in ACT (note 5(b)) is accounted
for by the equity method. All material intercompany accounts and
transactions have been eliminated.
Other investments are accounted for at cost.
(c) Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues
and expenses during the reporting period. With respect to the Company's
operations, these estimates primarily relate to the underlying value of
investments which will only be determinable based upon future events.
Management has applied its judgment to the information available to the
date of the issuance of these consolidated financial statements in
making such judgment.
Actual results could differ from estimates made in preparing these
consolidated financial statements.
(d) Cash and cash equivalents:
Cash equivalents are highly liquid investments, such as term deposits,
having original maturities of three months or less, that are readily
convertible to contracted amounts of cash.
(e) Equipment:
Equipment is recorded at cost. Depreciation is provided at rates which
are calculated to amortize the cost of these assets over their
estimated useful lives.
F-8
<PAGE>
PORTACOM WIRELESS, INC.
Notes to Consolidated Financial Statements, page 3
(expressed in U.S. dollars)
- --------------------------------------------------------------------------------
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(f) Income taxes:
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
("Statement 109"). Under Statement 109, deferred tax assets and
liabilities are recognized based on the estimated future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled. Under Statement
109, the effect of deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the
enactment date.
(g) Net income (loss) per share:
Net income (loss) per share is computed based on the weighted average
number of shares outstanding during the year, which number of shares
excludes escrowed shares that are contingently returnable to the
Company's treasury. If the escrowed shares had been included, net
income (loss) per share would have been $0.39 (December 31, 1995 -
$(0.09); March 31, 1995 - $(0.49)). If the escrowed shares become
issuable, net income (loss) per share will be retroactively restated.
Fully diluted net income (loss) per share has not been presented as the
effect is either not materially dilutive or are anti-dilutive.
(h) Currency:
As the majority of the Company's activities are in U.S. dollars, these
consolidated financial statements are stated in U.S. dollars, except
where otherwise indicated. Translation of Canadian dollar transactions
has taken place at the exchange rate in effect at the transaction date.
There have been no material foreign exchange gains or losses through
the date of these consolidated financial statements.
(i) Fair value of financial instruments:
Financial instruments include cash, investments, accounts payable and
accrued liabilities and loans payable. In all cases, management's best
estimate of their fair value is not materially different from carrying
value.
(j) Stock options:
As described in note 8(d), from time-to-time the Company issues stock
options to directors, officers and employees. These options are granted
having exercise prices based on the market price of the Company's
common shares at the date of grant. Stock options are accounted for in
accordance with SFAS No. 123. As allowed under SFAS No. 123, the
Company recognizes stock options granted in accordance with APB Opinion
No. 25.
(k) Revenue recognition:
The Company recognizes revenue when the customer accepts delivery of
the product and there is reasonable assurance as to the collectibility
of any receivables.
F-9
<PAGE>
PORTACOM WIRELESS, INC.
Notes to Consolidated Financial Statements, page 4
(expressed in U.S. dollars)
- --------------------------------------------------------------------------------
4. PROMISSORY NOTES RECEIVABLE:
At December 31, 1995, promissory notes receivable bore interest at 10% per
annum, were unsecured and without specific dates for repayment. The
promissory notes receivable were due from entities which are related to the
Company through common directors and management. All amounts have been
written off in the current year as they were determined to be uncollectible.
5. INVESTMENTS:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
December 31, December 31,
1996 1995
- -------------------------------------------------------------------------------------
<S> <C> <C>
Asian American Telecommunications Corporation,
17% interest $8,000,000 $ -
American Cambodian Telecom Ltd., a joint venture,
86% interest 99,500
Telecommunications American International,
41% interest - -
- -------------------------------------------------------------------------------------
$8,099,500 $ -
- -------------------------------------------------------------------------------------
</TABLE>
(a) On May 28, 1996, the Company announced that it had entered into a
contract to acquire all of the outstanding shares of Asian American
Telecommunications Corporation ("AAT"), an unrelated Los Angeles-based
telecommunications services developer. By an agreement made as of
September 11, 1996, AAT and the Company agreed to terminate all rights
and obligations of either party under the proposed business combination.
As consideration for this termination, AAT issued to the Company
2,000,000 restricted common shares, and issued to the Company warrants to
acquire 4,000,000 common shares of AAT for a period of three years at a
price of $4.00 per share. The Company paid no cash consideration for
these shares or warrants. The Company's investment is recorded at the
estimated fair value of the assets received in excess of the
consideration payable to exercise the warrants. This fair value was
established by reference to capital stock issuances made by AAT for cash
consideration. In addition, AAT paid the Company non-refundable cash
consideration of $1,000,000 as part of this termination agreement.
The 2,000,000 common shares have been pledged by the Company to AAT until
January 1, 1999 pursuant to the Company's indemnification obligations
under the termination agreement. These indemnification obligations
provide that the Company grants to AAT a first priority lien on the
common shares against any costs or losses arising to AAT, or specified
related parties, arising from certain claims or potential claims related
to the original proposed acquisition or the termination agreement. At the
date of these consolidated financial statements, no claims under this
indemnification agreement have arisen and the likelihood is considered to
be remote.
The receipt of cash and common stock pursuant to the termination
agreement has been recorded as income in the consolidated statement of
operations.
On December 23, 1996, AAT entered into a business combination agreement
with MAC. In connection with the Agreement, MAC offered to exchange all
outstanding shares of AAT capital stock and all warrants to purchase
shares of AAT capital stock for shares and warrants of MAC.
F-10
<PAGE>
PORTACOM WIRELESS, INC.
Notes to Consolidated Financial Statements, page 5
(expressed in U.S. dollars)
- --------------------------------------------------------------------------------
5. INVESTMENTS (CONTINUED):
Subsequent to year end, the Company agreed to exchange these shares and
warrants of AAT for equivalent shares and warrants of MAC. Based on
representations by MAC, these shares gave the Company a 3.43% interest
in MAC immediately following the consummation of the exchange offer
(9.16% interest calculated on a fully diluted basis if the Company
exercises all warrants and no other outstanding warrants are exercised).
(b) On December 26, 1996, the Company acquired an 86% non-controlling
ownership interest in American Cambodian Telecom Ltd. ("ACT"), a newly
formed Joint Venture agreement with another party under the consent of
the Ministry of Posts and Telecommunications in Cambodia. ACT has been
inactive to December 31, 1996.
Under the Joint Venture agreement, the Company is required to contribute
capital to ACT of at least 50 million Cambodian Riel (approximately
$20,000). In addition, the Company is required to provide a refundable
deposit of $200,000 within 45 business days of December 31, 1996. As of
December 31, 1996 no capital or deposit had been contributed.
(c) On August 5, 1996, the Company agreed to purchase 250 shares of the
common stock of Telecommunications American International ("TAI") from a
shareholder for the sum of $25,000. In addition, the Company had
advanced an aggregate of $ 556,710 to TAI. In the year ended December
31, 1996, it was determined that the investment and advances had
experienced an other than temporary decline in value and therefore they
have been written down to their estimated fair value of $nil. This write
down is included in the consolidated statement of operations.
(d) The Company reviews the underlying value of all investments on an
ongoing basis and provides for declines in value that are other than
temporary as they are identified. Any impairments are charged to
earnings and a new cost basis for the security is established. At
December 31, 1996, no such impairments have been identified in the
investments in AAT and ACT.
6. ACCRUED LIABILITIES:
Management fees due to a director (formerly an officer) of the Company
previously included in accrued liabilities ceased to accrue as at October
31, 1995. This liability was settled for common stock in the nine month
period ended December 31, 1995.
7. LOANS PAYABLE:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
December 31, December 31,
1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Convertible promissory notes (a) $150,000 $ 600,000
Note payable to former officer due December 31, 1996 - 200,000
Note payable to former services vendor, due as to $100,000 on or before April 5, 1996 (paid) and
$71,000 on or before June 28, 1996 (paid) - 171,000
- ----------------------------------------------------------------------------------------------------------------------------
$150,000 $ 971,000
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-11
<PAGE>
PORTACOM WIRELESS, INC.
Notes to Consolidated Financial Statements, page 6
(expressed in U.S. dollars)
- --------------------------------------------------------------------------------
7. LOANS PAYABLE (CONTINUED):
(a) Convertible promissory notes:
Between December 19, 1995 and December 11, 1996, the Company arranged,
private placements of convertible promissory notes having an aggregate
principal amount of $2,417,000. Of this amount, $1,817,000 was received
subsequent to, and $600,000 was received prior to, December 31, 1995.
The promissory notes are due and payable after two years which range to
December 1998, or after six months upon demand of the holder, and bear
interest at 10% per annum with interest payable upon maturity or
conversion. The promissory notes are convertible at the holders' option
into shares of common stock of the Company at conversion prices ranging
from $1.49 to $3.25 per share. Pursuant to the debt subscription
agreements, the Company also agreed to issue to the investors non-
transferable warrants to purchase up to an aggregate of 461,203 shares
of common stock of the Company for a period of two years at a price
equal to the conversion price of the notes. The conversion and warrant
exercise prices are based on the market price of the Company's common
stock at the date of the offering.
To December 31, 1996, convertible notes aggregating $2,267,000 were
converted to common stock (note 8(b)).
(b) Bridge Financing:
During 1996, the Company completed a Bridge Financing to raise
$2,500,000 to provide interim financing pending the completion of a
private placement of the convertible promissory notes described in (a).
The Bridge Financing was due on demand after 30 days and bore interest
at 12% per annum. In addition, 166,667 warrants were issuable to the
lenders (notes 8(e) and (g)).
For accounting purposes, the warrants have been recorded at their
estimated fair value of $250,000 with a corresponding reduction in the
recorded value of the Notes. This resulted in deemed interest expense
of $250,000 in the year ended December 31, 1996 as all of the Notes
were repaid. This deemed interest is included in interest expense in
the consolidated statement of operations.
8. SHARE CAPITAL:
(a) Authorized:
Authorized share capital is as follows:
100,000,000 shares of common stock with a par value of $0.001 per
share
5,000,000 shares of preferred stock with a par value of $0.001 per
share
F-12
<PAGE>
PORTACOM WIRELESS, INC.
Notes to Consolidated Financial Statements, page 7
(expressed in U.S. dollars)
- ------------------------------------------------------------------------------
8. SHARE CAPITAL (CONTINUED):
(b) Issued common stock:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Number Per share Total
of shares consideration consideration
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, March 31, 1994 13,834,872 $6,976,461
Issued for cash:
Free-trading shares, net of share
issuance costs paid of $354,047 (f) 656,457 3.38 2,220,353
On exercise of stock options 266,000 1.61 427,325
On exercise of warrants 373,747 1.23 461,531
Issued as a finders fee in connection
with issuance of the free trading
common stock 83,742 - -
- ---------------------------------------------------------------------------------------------------
Balance, March 31, 1995 15,214,818 10,085,670
Issued for cash:
Free-trading shares 204,878 1.36 277,490
On exercise of stock options 820,267 1.16 953,340
Issued on settlement of debt (f) 1,256,559 2.00 2,513,121
- ---------------------------------------------------------------------------------------------------
Balance, December 31, 1995 17,496,522 13,829,621
Cancelled (c) (5,950,000) -
Issued for cash:
Free-trading shares 97,500 1.11 108,225
On exercise of warrants 97,878 2.98 291,500
On exercise of stock options 103,050 1.49 153,420
Issued as consideration for:
Loans payable (g) 25,833 3.03 78,400
Settlement of debt 96,560 1.25 120,780
Convertible Promissory Notes 1,097,163 2.07 2,267,000
Fair value of warrants issuable in consideration
for Bridge Financing (e) - 250,000
To be issued on settlement of debt (f) 53,675 2.00 107,350
- ---------------------------------------------------------------------------------------------------
Balance, December 31, 1996 13,118,181 $17,206,296
- ---------------------------------------------------------------------------------------------------
</TABLE>
Upon emigration to Delaware (note 1), the Company's authorized common stock
was changed from 94,050,000 common shares without par value to 100,000,000
shares of capital stock with a par value of $0.001 per share.
F-13
<PAGE>
PORTACOM WIRELESS, INC.
Notes to Consolidated Financial Statements, page 8
(expressed in U.S. dollars)
- --------------------------------------------------------------------------------
8. SHARE CAPITAL (CONTINUED):
(b) Issued common stock (continued):
After giving effect to this adjustment to the authorized share capital
on a retroactive basis, the total consideration at December 31, 1996 and
1995 is allocated as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------
1996 1995
- --------------------------------------------------------
<S> <C> <C>
Common stock $ 13,118 $ 17,496
Contributed surplus 17,193,178 13,812,125
- --------------------------------------------------------
$17,206,296 $13,829,621
- --------------------------------------------------------
</TABLE>
(c) Performance shares:
Included in the issued and outstanding common stock are 600,000
shares which are subject to an escrow agreement. These shares are
releasable from escrow on satisfaction of certain predetermined tests
set out by regulatory authorities related to the generation of positive
cash flow from operations. Shares not released from escrow by September
9, 2002 will be cancelled. Pursuant to the escrow agreement, holders of
the shares may exercise all voting rights attached thereto except on a
resolution to cancel any of the shares, and have waived their rights to
receive dividends or to participate in the assets and property of the
Company on a winding-up or dissolution of the Company. Upon release of
the shares from escrow, compensation expense will be recorded.
In October 1995, certain shareholders agreed to surrender their
5,950,000 escrowed shares which were then held under the escrow
arrangement. In consideration therefor, the Company agreed to issue
314,762 shares of common stock at a deemed price of $2.00 per share.
Although the escrowed shares have been irrevocably cancelled by the
Company during 1996, the issuance of the 314,762 shares continues to be
subject to the removal of the Company from the jurisdiction of both the
Vancouver Stock Exchange and the British Columbia Securities
Commission.
F-14
<PAGE>
PORTACOM WIRELESS, INC.
Notes to Consolidated Financial Statements, page 9
(expressed in U.S. dollars)
- --------------------------------------------------------------------------------
8. SHARE CAPITAL (CONTINUED):
(d) Stock options:
Option changes for the period April 1, 1994 to December 31, 1996 were as
follows:
<TABLE>
<CAPTION>
<S> <C>
Outstanding and exercisable as at March 31, 1994... 1,235,200
Granted at C$5.68 per share 274,800
Exercised at C$4.45 per share (80,000)
Exercised at C$1.25 per share (186,000)
---------------------------------------------------------------
Outstanding and exercisable as at March 31, 1995 1,244,000
Granted at C$1.90 per share 75,000
Granted at C$2.09 per share 400,000
Granted at C$2.41 per share 150,000
Exercised at C$1.25 per share (461,767)
Exercised at C$2.09 per share (358,500)
Cancelled (431,300)
---------------------------------------------------------------
Outstanding and exercisable as at December 31,
1995 617,433
Granted at U$3.80 90,000
Granted at U$3.00 472,899
Granted at U$2.68 290,000
Exercised at C$1.25 (16,800)
Exercised at C$1.90 (75,000)
Exercised at U$3.00 (11,250)
Cancelled (231,099)
---------------------------------------------------------------
Outstanding and exercisable at December 31, 1996 1,136,183
---------------------------------------------------------------
</TABLE>
Stock options are issued at the average market price per share for the ten
trading days prior to the date of issuance. Accordingly, no compensation
cost has been recognized for options granted. Had compensation cost for the
Company's stock options for 1996 and 1995 grants been determined consistent
with FASB No. 123, the Company's net income (loss) and loss per share would
have been adjusted to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
Nine months
Year ended ended
December 31, December 31,
1996 1995
- ------------------------------------------------------------------
<S> <C> <C>
Net income (loss):
As reported $5,139,662 $(1,334,480)
Pro forma 4,289,482 (1,659,480)
Net income (loss) per share:
As reported $ 0.41 $ (0.14)
Pro forma 0.34 (0.18)
</TABLE>
F-15
<PAGE>
PORTACOM WIRELESS, INC.
Notes to Consolidated Financial Statements, page 10
(expressed in U.S. dollars)
- --------------------------------------------------------------------------------
8. SHARE CAPITAL (CONTINUED):
(e) Warrants:
During the year ended March 31, 1995, the Company, in connection with
private placements of common stock, issued warrants to purchase 483,457
shares of common stock at U$3.50 per share if exercised by October 1995
and at U$4.03 per share if exercised thereafter to October 1996. Of
these warrants, 60,000 were exercised during 1996 and the balance
expired.
During the nine months ended December 31, 1995, the Company, in
connection with a private placement, issued warrants to purchase
211,500 shares of common stock at U$5.10 per share if exercised by June
1995 and U$5.87 if exercised thereafter to June 1996. These warrants
expired during the year. In addition, the Company, in connection with a
number of private placements of common stock, issued warrants to
purchase up to 204,878 shares of common stock at prices of between
U$1.28 and U$1.47 per share if exercised by August 1996 and U$1.47 and
U$1.69 if exercised thereafter to August 1997. Of these warrants,
37,878 were exercised during 1996 and 167,000 remain outstanding.
During the year ended December 31, 1996, the Company, issued warrants
to purchase 97,500 shares of common stock at U$1.11 per share if
exercised by November 1996 and U$1.28 if exercised thereafter to
November 1997. In addition, the Company issued 461,203 warrants
attached to convertible promissory notes at prices ranging from U$1.49
to U$3.25 per share if exercised by dates ranging from December 19,
1997 to May, 7 1998. None of these warrants had been exercised at
December 31, 1996; subsequent to year end, 20,134 of these warrants
were exercised at $1.49 per share.
In addition, pursuant to the Bridge Financing (note 7), 166,667 share
purchase warrants exercisable at U $3.30 per share to May 31, 1997 are
issuable. The warrants have been recorded at their estimated fair value
of $250,000. At December 31, 1996, no warrants have been exercised.
(f) Shares issued on settlement of debt:
During the period ended December 31, 1995, the Company entered into
agreements to issue 1,256,561 shares of common stock at their estimated
fair value of $2.00 per share to settle outstanding liabilities
aggregating $2,513,121. As the agreements were entered into prior to
December 31, 1995, these settlements have been recorded in that period.
The Company has further agreed to issue an additional 53,675 shares of
common stock at their estimated fair value of $2.00 per share to settle
additional outstanding liabilities aggregating $107,350. These
issuances are subject to regulatory approval.
F-16
<PAGE>
PORTACOM WIRELESS, INC.
Notes to Consolidated Financial Statements, page 11
(expressed in U.S. dollars)
- --------------------------------------------------------------------------------
8. SHARE CAPITAL (CONTINUED):
(g) Shares to be issued for loans:
In connection with the issuance of certain short-term debt by the
Company in January 1995 and May 1996, the Company agreed to issue,
subject to regulatory approval, 85,590 shares of common stock and
166,667 share purchase warrants, exercisable at $3.30 per share until
May 31, 1997. During the current period, regulatory approval was
received for the issuance of 25,833 of these shares which were then
issued by the Company. At December 31, 1996, the issuance of the
remaining 59,757 shares and 166,667 warrants continued to be subject to
receipt of regulatory approval. Subsequent to December 31, 1996,
regulatory approval was received for the issuance of 42,757 shares
which were then issued by the Company. The fair value of the shares
issuable are recognized as the Company becomes liable to meet the
obligations.
9. CONTINGENT LIABILITY:
During the year ended December 31, 1996, the Company emigrated from Canada
as discussed in note 1. Subject to final determination by the income tax
authorities in Canada, no tax liability arose on the emigration, and no
income tax liability is currently outstanding in Canada.
The Company has loss carry forwards in the United States of approximately
$9,000,000 available to 2011. The potential benefit of these losses of
approximately $3,600,000 has been fully offset by a valuation reserve.
Accordingly, the accompanying consolidated financial statements reflect no
provision for income taxes.
10. RELATED PARTY TRANSACTIONS:
Related party transactions not disclosed elsewhere in these consolidated
financial statements include:
(a) Included in accounts payable at December 31, 1996 is approximately
$24,000 (December 31, 1995 - $25,000) owing to related parties.
(b) Management and consulting fees have predominantly been charged by
related parties.
(c) Included in bad debts expense for the year ended December 31, 1996 is
$nil (period ended December 31, 1995 - $21,386; year ended March 31,
1995 -$227,000) recorded as provisions against employee loans.
(d) The Company has reimbursed expenses incurred by directors and officers
on its behalf during the periods presented.
(e) In addition to amounts included in consulting paid to a director,
expenses of approximately $50,000 are included in various other accounts
for the year ended December 31, 1996 (nine months ended December 31,
1995 and year ended March 31, 1995 - $nil).
(f) The write-down of promissory notes receivable and investment for the
year ended December 31, 1996 of $1,046,710, represents a write-down of
notes receivable and investment in TAI aggregating $ 581,710 (note 5(c))
and a write-down of other promissory notes receivable from a related
party aggregating $ 465,000.
F-17
<PAGE>
PORTACOM WIRELESS, INC.
Notes to Consolidated Financial Statements, page 12
(expressed in U.S. dollars)
- --------------------------------------------------------------------------------
11. CONSOLIDATED STATEMENTS OF CASH FLOWS:
During the periods presented the Company has entered into non-cash
financing and investing transactions which are not disclosed in the
consolidated statements of cash flows. For each of the periods presented
these are as follows:
(a) in the year ended December 31, 1996, the Company issued common stock as
consideration for financing costs on loans payable, in settlement of
debt and on conversion of promissory notes, all in the amounts as set
out in note 8(b);
(b) in the nine months ended December 31, 1995, the Company issued 1,256,559
common stock having an assigned value of $2,513,121 in settlement of
indebtedness in an equivalent amount; and
(c) in the year ended March 31, 1995, the Company issued common stock as a
finder's fee related to the issuance of free-trading shares for cash
consideration.
12. CONCENTRATIONS OF CREDIT RISK:
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist primarily of cash equivalents. The
Company maintains cash equivalents with various financial institutions.
These financial institutions are located in Canada and the United States.
The Company's policy is to limit the exposure at any one financial
institution and to invest solely in highly liquid investments that are
readily convertible to contracted amounts of cash.
F-18
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
<PAGE>
PART III
--------
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS
- --------------------------------------------------
The following table identifies all of the current directors and executive
officers of the Registrant and its subsidiaries. Directors serve until the next
annual meeting or until their successors are elected and qualified. Officers
serve at the discretion of the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Douglas C. MacLellan 41 President, Chief Executive Officer and
Director of the Registrant
Stephen M. Leahy 40 Secretary and Director of the Registrant
Morris J. Magid 64 Treasurer of the Registrant; Director and
Secretary of PCBX, Telecom and
Laboratories
Michael A. Richard 28 Vice President, Accounting of the
Registrant, and Secretary, Treasurer and a
Director of PIL
R. Keith Alexander 66 Director
Robert G. Flitton 34 Director
Howard B. Frantom 62 Director
Keith A.J. Hay 59 Director
Stephen O. Stephens 66 Director
Paul Robert Carr 53 Vice President, Asia-Pacific
Thomas P. Scichili 37 Vice President, General Counsel
Thomas P. Madden 39 Vice President, Investor Relations
</TABLE>
<PAGE>
DOUGLAS C. MACLELLAN
--------------------
Mr. MacLellan has been President, Chief Executive Officer and Director of
the Registrant since November 1995. Mr. MacLellan expends a majority of his
professional time on behalf of the Registrant. Mr. MacLellan is a founder of
PWC (see "Item 13. Certain Relationships and Related Transactions"), and has
been President of PWC since July, 1995. From 1992 to the present Mr. MacLellan
has been President of The MacLellan Group, Inc., a consulting firm providing a
broad range of financial and management advisory services. From 1993 to 1995,
Mr. MacLellan was a principal and co-founder of Maroon Bells Capital Partners,
Inc., a merchant banking firm which specializes in providing corporate finance
services to companies in the international and domestic telecommunications and
media industries. From 1989 to 1992 Mr. MacLellan was Vice President (1989 to
1990) and President (1991 to 1992) of American Business Ventures, Inc., a
venture capital, management consulting, and mergers and acquisition firm.
Mr. MacLellan currently is a member of the board of directors and co-
founder of InterAmericas Communications Corporation, a public reporting
international telecommunications company which operates a competitive access
fiber and satellite network in Latin America, and serves as a director of AMDL,
Inc., a publicly held development stage biotechnology firm. Mr. MacLellan was
educated at the University of Southern California in economics and finance, with
advanced training in classical economic theory.
PAUL ROBERT CARR
----------------
Mr. Carr has been Vice President, Asia-Pacific of the Registrant since
April, 1996 and has served in a business development position since June, 1995.
Mr. Carr is also managing director of ACT. From April, 1992 to 1995, Mr. Carr
was a self employed consultant in the real estate industry. From 1988 to 1992,
Mr. Carr was Senior Real Estate Coordinator and Civil Manager for Los Angeles
Cellular Telephone Company. Mr. Carr holds a JD degree from Oakland State
College, Flint, Michigan.
STEPHEN M. LEAHY
----------------
Mr. Leahy is the Secretary of the Registrant, and has been a director since
September 1991. Mr. Leahy has been President and a director of Delpet Resources,
Ltd. since May, 1985 and is presently its Chairman. He has also been President
and a director of North American Tungsten Corporation since June, 1995, of
First Silver Reserve, Ltd. since June, 1988 and of United Sartis Enterprises,
Inc. since January, 1993.
THOMAS P. MADDEN
----------------
Mr. Madden has been Vice President-Investor Relations of the Registrant
since September 1995. Since February, 1992, Mr. Madden has been an Investor
Relations Consultant as President of Madden Consulting.
MORRIS J. MAGID
---------------
<PAGE>
Mr. Magid has been Treasurer of the Registrant since November 1995 and is
also a director of PCBX Systems, Telecom, and Laboratories. Mr. Magid is an
active investor and real estate developer with extensive experience in the
pharmaceutical industry.
MICHAEL A. RICHARD
------------------
Mr. Richard has been the Vice President, Accounting of the Registrant
since October 1996 and has been with the Company since 1991, serving as its
Controller (1995 to 1996) and as an Accounting Manager for PCBX, Telecom and PIL
(1991 to 1995). He has also served as Treasurer (1994 to present), Secretary
(1996 to present) and as a Director of PIL (1996 to present).
THOMAS P. SCICHILI
------------------
Mr. Scichili was appointed Vice President, General Counsel of the
Registrant in March, 1997. Mr. Scichili has been an attorney in private practice
since 1990 emphasizing business and corporate law and financial planning. From
1987 to 1990, Mr. Scichili held various positions at REFCO, Inc. and REFCO, S.A.
R. KEITH ALEXANDER
------------------
Mr. Alexander has been a Director of the Registrant since June, 1996. From
1992 to 1996 he was an independent financial consultant. From 1984 to 1992 he
was a Vice President of RBC Dominion Securities Ltd. He was a director of the
Investment Dealers Association of Alberta from 1977-1985 and Governor of the
Alberta Stock Exchange from 1980-1981.
ROBERT G. FLITTON
-----------------
Mr. Flitton has been a Director of the Registrant since February, 1996.
Mr. Flitton has been a partner in Flitton Industries since July, 1992, where he
specializes in acquisitions, financing arrangements, development approvals and
troubleshooting for large residential and commercial projects in British
Columbia, Washington and Colorado.
HOWARD B. FRANTOM
-----------------
Mr. Frantom has been a director of the Company since June, 1996 and served
as its Chief Technical Officer from June, 1996 to November, 1996. He was the
Company's Chairman of the
<PAGE>
Board and Chief Operating Officer from November, 1995 until June, 1996 and the
Chief Executive Officer from June, 1995 to November, 1995. Mr. Frantom was
President and Chief Executive Officer of PIL from March, 1994 to November, 1996.
From 1992 to 1994, Mr. Frantom was President and CEO of PCBX. From 1990 to 1992,
Mr. Frantom was President of Worldwide Cellular & Telecommunications Company,
which contracted for the engineering and operations of a cellular system in
Mexico. From 1988 to 1990, Mr. Frantom served as acting President and Vice
President of Engineering and Operations (chief engineer) of Los Angeles Cellular
Telephone Company.
KEITH A.J. HAY
--------------
Mr. Hay has been a Director of the Registrant since November, 1995. Since
1978 Mr. Hay has been President of Econolynx International Ltd. of Ottawa,
Ontario, a consulting firm. He has been a Professor of Economics at Carleton
University, Ottawa, since 1975, and a consultant to several Canadian government
departments, multinational corporations and banks. Presently, Mr. Hay is
advisor to the World Bank on economic reform in Guyana and to the Canadian
International Development Agency on development policy in Southern Africa. He
is also the principal consultant to the Canadian Association of Power Systems
Exporters on export marketing of hydro electric power machinery and equipment.
STEPHEN O. STEPHENS
-------------------
Mr. Stephens has been a Director of the Registrant since August, 1995.
Since 1969 Mr. Stephens has been President of Stephens International, Ltd., a
diversified investment company. From 1993 to 1995 Mr. Stephens served as
assistant to the Chairman of the Board of Stephens Group, from 1986 to 1995 he
served as director of corporate communications for Stephens Inc. and from 1993
to 1995 he served as President of Stephens Entertainment, Inc.
SECTION 16(A) REPORTS
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and any persons who own more than 10% of a
registered class of the Company's equity securities to file with the Securities
and Exchange Commission reports of ownership and changes in ownership of Common
Stock and other equity securities of the Company. Officers, directors and
greater than 10% shareholders are required by Securities and Exchange Commission
regulation to furnish the Company with copies of all Section 16(a) forms they
file. Based on the fact that the Company has not received any such filings, the
Company believes that, during the period covered by this report, none of the
filing requirements applicable to its officers, directors and greater than 10%
beneficial owners were complied with. The Company intends to implement a
program to enhance compliance by directors and officers with future 16(a)
reporting obligations, which will be under the supervision of the Company's Vice
President, Accounting.
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The following table discloses, for the fiscal years ended December 31,
1996, 1995 and 1994, individual compensation information relating to the
Company's Chief Executive Officers serving during the period. No other
executive officers earned more than $100,000.
Summary Compensation Table
<TABLE>
<CAPTION>
==================================================================================================================================
Annual Compensation Long-Term Compensation
------------------- -----------------------------------
Awards Payouts
- ----------------------------------------------------------------------------------------------------------------------------------
All Other
Name and Other Securities Compen-
Principal Annual Restricted Underlying sation ($)
Position of Fiscal Compen- Stock Options/ LTIP
Executive Year or Salary Bonus sation Awards SARS Payouts
Officer Transition ($) ($) ($) ($) (#) ($)
Period
Ending
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Howard B. (1) Frantom, Past Dec 31,
Chief Operating Officer of 1996 138,306 nil nil nil nil nil nil
the Registrant, Past
President of PIL, Past Dec. 31,
Chief Executive Officer of 1995 115,200 nil nil nil nil nil nil
the Registrant, Director of
the Registrant March 31,
1995 120,000 nil nil nil nil nil nil
March 31,
1994 120,000 nil nil nil nil nil nil
March 31,
1993 120,000 nil nil nil nil nil nil
Douglas C. MacLellan, Dec 31,
President and CEO of the 1996 168,000 nil 30,000 nil 200,000 nil nil
Registrant (2)
Dec 31,
1995 28,000 nil nil nil nil nil nil
==================================================================================================================================
</TABLE>
(1) Mr. Frantom served as Chief Executive Officer from June 1995 to
November 1995.
(2) Mr. MacLellan has served as Chief Executive Officer from November 1995.
<PAGE>
The terms and conditions of the employment contracts or arrangements with the
above mentioned executive officers are as follows:
No LTIP has been instituted by the Company and none are proposed at this
time. Accordingly, there is no LTIP Awards Table set out in this Annual Report.
No pension plans or retirement benefit plans have been instituted by the
Company and none are proposed at this time. Accordingly, there is no Pension
Plan Table set out in this Annual Report.
The Company currently has a Compensation Committee comprised of Messrs.
Hay, Leahy and Stephens. The directors of the Company and its Compensation
Committee do not have any specific policies for determining compensation of
executive officers. Rather, the Company has historically determined executive
compensation based on salaries paid to comparable executives in similar
companies. The Compensation Committee met once in the fiscal year ended
December 31, 1996 to consider and recommend stock option grants to Messrs. Leahy
and MacLellan. It is expected that the Company's Compensation Committee will
meet in Fiscal 1997 to formulate more detailed policies with respect to officer
compensation.
Although the Company has no contractual bonus arrangements, bonuses are
granted at the discretion of management.
On June 19, 1992, PCBX Systems entered into an employment agreement (the
"Employment Agreement") with Howard B. Frantom, whereby he was to be employed as
its President and Chief Executive Officer for a term of five years. In addition
to his salary, Mr. Frantom received 250,000 "Performance Shares" of the
Registrant for $.01 per share (which were subsequently canceled), and stock
options to purchase 250,000 additional shares of the Registrant at C$1.25 per
share. In April, 1994 the terms of the Agreement were incorporated into a new
Agreement whereby Mr. Frantom became employed by PIL, a subsidiary of the
Company. The term of employment was extended to 1999. Effective July 26, 1996,
Mr. Frantom's employment agreement was terminated by mutual agreement, although
Mr. Frantom continued to be employed by the Registrant and received a salary
until November 1996.
In January, 1997, the Registrant entered into an employment agreement with
Douglas C. MacLellan , whereby he is to be employed as its President and Chief
Executive Officer on a month to month basis, and, subject to the approval of the
Vancouver Stock Exchange, shall be paid a base salary of $192,000 per annum plus
reimbursement of expenses. Additionally, in the event it is permissible to do so
without receiving approval of the Vancouver Stock Exchange, Mr. MacLellan is to
be paid compensation equivalent to four month's salary in the event that his
employment is terminated by the Company. In November 1995, the Registrant had
entered into a verbal employment agreement with Mr. MacLellan whereby he was
employed under similar terms to those in the January, 1997 agreement except that
the base salary to be paid was $168,000 per annum and there was no provision for
additional compensation upon termination.
GRANTS OF STOCK OPTIONS
<PAGE>
The following table provides the specified information concerning grants of
options to purchase the Company's Common Stock made during the fiscal year ended
December 31, 1996 to the persons named in the Summary Compensation Table.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
FOR OPTION TERM
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Number of Percent of
Name securities total Exercise Expiration 5% ($) 10% ($)
underlying options/ or base date
Options/SARs SARs price ($/
granted (#) granted to Sh)
employees
in fiscal
year
- ----------------------------------------------------------------------------------------------
Douglas 200,000 23.00 2.68 12/30/01 $116,000 $286,000
MacLellan
- ----------------------------------------------------------------------------------------------
</TABLE>
(1) Stock options exercisable into 852,899 shares of the Company's common stock
were granted to certain directors, senior officers, and employees of the
Company during the fiscal year ended December 31, 1996.
(2) Pursuant to the policies of the Vancouver Stock Exchange, incentive stock
options were granted at the average market price per share of the Company's
common stock for the ten trading days prior to the date of issuance.
(3) The dollar amounts under the potential realizable values columns use the 5%
and 10% rates of appreciation permitted by the SEC, and are not intended to
forecast actual future appreciation in the stock price. Actual gains, if
any, on stock option exercises are dependent on the future performance of
the Company's common stock. There can be no assurance that the amounts
reflected in this table will be achieved. The assumed rates are compounded
annually to the full five-year term of the options.
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES TABLE
The following table shows information regarding the exercise of stock
options during the 1996 by the named executive officers and the number and value
of any unexercised stock options held by them as of December 31, 1996:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Number of
securities Value of
underlying unexercised in-
unexercised the- money
options/SARs options/SARs at
fiscal year end fiscal year end
(#) ($)
-------------------------------------------
Name
Shares Value Exercisable/ Exercisable/
acquired on Realized unexercisable unexercisable
exercise (#) ($)
(a)
(b) (c) (d) (e)
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Howard Frantom 0 0 250,000/0 $692,500(1)
- ---------------------------------------------------------------------------------------
Douglas MacLellan 0 0 200,000/0 $204,000(1)
- ---------------------------------------------------------------------------------------
</TABLE>
(1) The value of the options is calculated based upon the market price
of the Company's Common Stock as of December 31, 1995 of $3.70
(C$5.00) per share, as reported by the Vancouver Stock Exchange.
DIRECTORS FEES
The Company does not pay independent directors who attend a regularly
scheduled or special meeting of its Board of Directors. None of the directors
of the Company were compensated by the Company or its subsidiaries during the
most recently completed financial year for their services in their capacity as
directors. Messrs. Hay and Stephens were each paid consulting fees of $2,500
per month for their services as consultants or experts independent of their
attendance at meetings of the Company's Board of Directors. Furthermore, Mr.
Leahy owns 50% of Mustang Management Ltd., which received approximately $35,000
for management and administrative services during 1996.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
For the fiscal year ended December 31, 1996, Messrs. Hay, Leahy and
Stephens, all of whom are also directors of the Company, were the members of the
Company's compensation committee. Mr. Leahy is also the Secretary of the
Company.
<PAGE>
During the fiscal year ended December 31, 1996, Mr. Leahy was granted
90,000 incentive stock options at an exercise price of $2.68 and expiring
December 30, 2001. Mr. Leahy abstained from voting on the approval of such
options to himself.
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of January 31, 1997, information
with respect to the securities holdings of all persons which the Registrant has
reason to believe may be deemed the beneficial owners of more than 5% of the
Registrant's outstanding Common Stock. The following table indicates the
beneficial ownership of such individuals numerically calculated based upon the
total number of shares of Common Stock outstanding. Also set forth in the table
is the beneficial ownership of all shares of the Registrant's outstanding stock,
as of such date, of all directors and named executive officers, individually,
and all directors and executive officers as a group.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature % of
Beneficial Owner of Beneficial Ownership Ownership
- ----------------- ----------------------- ---------
<S> <C> <C>
R. Keith Alexander 90,100 (1) *
North Bolero Bend
Rio Verde, AZ 85263
Robert G. Flitton 45,000 (2) *
1 St. Andres Ct.
Pueblo, CO 81001
Howard Frantom 285,297 (3) 2.1%
31112 Allview Drive
Running Springs, CA 92382
Keith A.J. Hay 90,000 (4) *
7 Briggs Avenue
Nepean, ON K2E 6W2
Stephen Leahy 107,100 (5) *
1055 W. Hastings St., Ste. 1010
Vancouver, BC V6E 2E9
Douglas C. MacLellan 208,000 (6) 1.6%
224 Redlands St.
Playa del Rey, CA 90293
Morris J. Magid 1,046,028 (7) 8.0%
1054 N. Selby Avenue
Los Angeles, CA 90024
Michael Marcus 963,160 (8) 7.3%
300 South 4th. Street
Suite 1100
</TABLE>
<PAGE>
Las Vegas, NV 89101
Stephen O. Stephens 90,000 (9) *
700 East Ninth St., Suite 11-L
Little Rock, AR 72202
All Directors and Executive 2,233,025 (10) 15.6%
Officers as a group (11 persons)
_______________________
(1) Includes options to purchase 90,000 shares of common stock of the
Registrant, which are exercisable within sixty days.
(2) Includes options to purchase 33,750 shares of common stock of the
Registrant, which are exercisable within sixty days.
(3) Includes options to purchase 250,000 shares of common stock of the
Registrant, which are exercisable within sixty days.
(4) Comprised of options to purchase 90,000 shares of common stock of the
Registrant, which are exercisable within sixty days.
(5) Includes options to purchase 90,000 shares of common stock of the
Registrant, which are exercisable within sixty days.
(6) Includes options to purchase 200,000 shares of common stock of the
Registrant, which are exercisable within sixty days.
(7) Includes 384,928 shares held by 380144 B.C. Ltd., a British Columbia
corporation owned 60% by Morris Magid and 40% by Marvin Magid. Morris
and Marvin Magid are brothers. Includes options to purchase 67,433
shares of common stock of the Registrant, which are exercisable within
sixty days.
(8) Includes options to purchase 45,000 shares of common stock of the
Registrant, which are exercisable within sixty days. Includes warrants
to purchase 459,080 shares of common stock of the Registrant purchased
in private placement transactions.
(9) Comprised of options to purchase 90,000 shares of common stock of the
Registrant, which are exercisable within sixty days.
(10) Includes options or warrants to purchase 1,181,183 shares of common
stock of the Company, which are exercisable within sixty days.
* Less than 1%.
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
1. MAC Transaction
---------------
Douglas C. MacLellan owns 500,000 shares of MAC. See "Item 1:
Business; Business of PortaCom Wireless, Inc.; Metromedia Asia Corporation."
2. Acquisition of PWC
------------------
Pursuant to an agreement dated November 3, 1995 (the "PWC Agreement"),
the Registrant agreed to acquire PortaCom Wireless Communications, Inc., a
Delaware corporation, in exchange for shares of the Registrant's common stock.
Of the shareholders of PWC, Douglas C. MacLellan, the President and a director
of the Registrant, was to receive 682,000 shares, Stephen O. Stephens, a
director of the Registrant , was to receive 136,400 shares, J. Michael
Christianson, the former Chief Financial Officer of the Registrant, was to
receive 341,000, and PJL Communications, Inc., was to receive 409,200 shares. On
July 18, 1996, the Registrant terminated the acquisition of PWC as it had not
yet received regulatory approval. The Registrant has determined, however, that
it will issue shares of its common stock to Messrs. MacLellan and Stephens and
to PJL, in the same amounts as previously provided in the PWC Agreement, in the
event it is permissible to do so without receiving approval of the Vancouver
Stock Exchange.
3. PortaCom International, Ltd.
---------------------------
Asia Telecom, Inc., which owns 10% of TAI, is owned 100% by Howard
Frantom's spouse, Vera Frantom.
4. Funds Advanced and Repaid
-------------------------
On or about February 24, 1993, the Registrant repaid advances to
Morris Magid ($384,000) and Marvin Magid ($57,000), brothers of Robert Magid.
During 1993, the Registrant also used part of the net proceeds from the public
offering to repay a loan from Robert Alexander ($30,000 (Cdn)). Such advances
and loans were made to provide working capital to the Company until additional
equity capital was obtained. On or about July 28, Morris Magid provided a
$300,000 line of credit available to the Company for a sixty day period to be
used as a bridge loan until a private placement of Common Stock could be
completed. As of March 31, 1995, $140,000 remained outstanding under this line
of credit. On July 21, 1995, at Mr. Magid's request, the Company applied the
amount due, plus interest of approximately $10,000, towards the payment due to
the Company by Mr. Magid pursuant to the exercise of 168,000 options at C$1.25
per share. In January 1994, a company controlled by Mr. Magid pledged 1,128,415
shares of common stock to guarantee a loan for the benefit of the Company. In
connection with such advances and loans, the Company agreed, subject to
regulatory approval, to issue a total of 42,757 bonus shares to Mr. Magid. As
of the date of this report, regulatory approval for the issuance of 42,757
shares had been received and the Company had issued the shares.
<PAGE>
5. Compensatory shares pursuant to cancellation of performance shares
------------------------------------------------------------------
As compensation for the agreement by Messrs. Morris Magid, Robert
Alexander and Howard Frantom to surrender their 5,950,000 performance shares
which were held under an escrow agreement, the Registrant has agreed to issue,
at a deemed price of $2.00 per share, 43,516 common shares, 271,245 common
shares and 1 common share each to Mr. Magid, Mr. Alexander, and Mr. Frantom,
respectively. As of the date of this filing, none of the aforementioned shares
have been issued. The Registrant does not expect to issue any of the
compensatory shares while it remains subject to the jurisdiction of the
Vancouver Stock Exchange and the British Columbia Securities Commission.
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following Exhibits are filed as part of this Report:
<TABLE>
<CAPTION>
Exhibit Description
No.
<S> <C>
3.1 Certificate of Incorporation of the Registrant /(1)/
3.2 Amendment to Certificate of Incorporation dated May 1, 1990/(2)/
3.3 Amendment to Certificate of Incorporation dated September 10, 1991/
(3)/
3.4 Amendment to Certificate of Incorporation dated November 1, 1994/(4)/
3.5 Amendment to Certificate of Incorporation dated December 5, 1995/(5)/
3.6 Amended and Restated Certificate of Incorporation dated December 10,
1996*
3.7 By-Laws of the Registrant *
4.1 Specimen Stock Certificate *
4.2 Form of Escrow Agreement dated September 30, 1991 /(6)/
4.3 Form of Escrow Agreement dated June 30, 1992 /(7)/
10.1 Employment Agreement between PIL and Howard B. Frantom /(8)/
10.2 Acquisition Agreement and Plan of Reorganization between the Registrant
and Asian American Telecommunications Corporation ("AAT")/(9)/
10.3 Form of First Amendment to Acquisition Agreement and Plan of
Reorganization between the Registrant and Asian American
Telecommunications Corporation ("AAT")/(10)/
</TABLE>
<PAGE>
<TABLE>
<C> <S>
10.4 Second Amendment to Acquisition Agreement and Plan of Reorganization
between the Registrant and Asian American Telecommunications
Corporation ("AAT")/(11)/
10.5 Participation Agreement between Hoang Ly Huu, Sonny Luu, CMC
International, Inc., Asia Telecom, Inc., and the Registrant /(12)/
10.6 Stock Purchase Agreement between the Registrant, PortaCom
International, Ltd., and Asia Telecom, Inc., Franklin A. Vincent, Jr.,
and Donald E. Thompson and Victoria L. Thompson /(13)/
10.7 Form of Agreement For Cancellation of Stock Purchase Agreement between
the Registrant, PortaCom International, Ltd., and Asia Telecom, Inc.,
Franklin A. Vincent, Jr., and Donald E. Thompson and Victoria L.
Thompson /(14)/
10.8 Agreement For Cancellation of Performance Shares between the Registrant
and Morris J. Magid, Robert B. Alexander, and Howard B. Frantom /(15)/
10.9 Form of Stock Purchase Agreement between the Registrant and Stephen O.
Stephens, Douglas C. MacLellan, J. Michael Christiansen, PJL
Communications, Inc., and PortaCom Wireless Communications, Inc./(16)/
10.10 Separation and Consulting Agreement between the Registrant and Francis
T. Phalen /(17)/
10.11 Letter of Agreement Regarding Employment between the Registrant and
Scott A. Mednick /(18)/
10.12 Restructuring and Settlement Agreement between the Registrant and Scott
A. Mednick and Associates, Inc. (dba The Mednick Group)/(19)/
10.13 Amendment to Restructuring and Settlement Agreement between the
Registrant and Scott A. Mednick and Associates, Inc. (dba The Mednick
Group)/(20)/
10.14 Restructuring and Settlement Agreement between the Registrant and Scott
A. Mednick /(21)/
10.15 Amendment to Restructuring and Settlement Agreement between the
Registrant and Scott A. Mednick /(22)/
10.16 Engagement Letter between the Registrant and Rozel International
Holdings Ltd./(23)/
10.17 Stock Option Agreement between the Registrant and Keith A.J. Hay /(24)/
10.18 Stock Option Agreement between the Registrant and Robert Flitton /(25)/
10.19 Stock Option Agreement between the Registrant and Stephen O. Stephens
/(26)/
</TABLE>
<PAGE>
<TABLE>
<C> <S>
10.20 Agreement between the Registrant and Howard B. Frantom acknowledging
cancellation of Employment Agreement/(27)/
10.21 Agreement between the Registrant, PIL, and certain shareholders of TAI
to cancel the Stock Purchase Agreement dated as of October 31,
1995/(28)/
10.22 Form of Second Amendment to Acquisition Agreement and Plan of
Reorganization between the Registrant and Asian American
Telecommunications Corporation./(29)/
10.23 Form of Termination Agreement between the Registrant and Asian American
Telecommunications Corporation/(30)/
10.24 Form of Employment Agreement between the Registrant and Douglas C.
MacLellan *
10.25 Form of Employment Agreement between the Registrant and Michael A.
Richard *
10.26 Joint Venture Agreement for the Establishment of a Joint Venture
Enterprise for a CDMA Based Telecommunications System in the Kingdom of
Cambodia *
10.27 License for the Provision and Operation of a CDMA Based
Telecommunications System Within the Kingdom of Cambodia *
10.28 Stock Option Agreement between the Registrant and R. Keith Alexander *
10.29 Stock Option Agreement between the Registrant and Douglas C. MacLellan
*
10.30 Stock Option Agreement between the Registrant and Stephen M. Leahy *
10.31 Employment Agreement between the Registrant and Thomas P. Scichili. A
verbal agreement was entered into between the Registrant and Thomas P.
Scichili whereby the Registrant agreed to pay Mr. Scichili a salary of
up to $8,000 per month on a month-to-month basis, plus reimbursement of
reasonable expenses, terminable mutually at will, to serve as the
Registrant's Vice President-General Counsel.
10.32 Employment Agreement between the Registrant and Paul Robert Carr. A
verbal agreement was entered into in March 1997 between the Registrant
and Paul Robert Carr whereby the Registrant agreed to pay Mr. Carr a
salary of $6,000 per month on a month-to-month basis, plus
reimbursement of reasonable expenses, terminable mutually at will, to
serve as the Registrant's Vice President-Asia Pacific.
10.33 Employment Agreement between the Registrant and Thomas P. Madden. A
verbal agreement was entered into in March 1997 between the Registrant
and Thomas P. Madden whereby the Registrant agreed to pay Mr. Madden a
salary of $6,000 per month on a month-to-month basis, plus
reimbursement of reasonable expenses, terminable mutually at will, to
serve as the Registrant's Vice President-Investor Relations.
21 Subsidiaries of the Registrant*
27 Financial Data Schedule*
</TABLE>
* Filed herewith
(1)Incorporated by reference to Exhibit 3.1 to Form 10-SB filed with the
Securities and Exchange Commission on January 18, 1994 (the "Form 10-SB").
(2)Incorporated by reference to Exhibit 3.3 to Amendment #1 to Form 10-SB filed
with the Securities and Exchange Commission on September 8, 1994 (the
"Amendment #1 to Form 10-SB").
(3)Incorporated by reference to Exhibit 3.4 to Amendment #1 to Form 10-
SB.
(4)Incorporated by reference to Exhibit 3.4 to Form 10-KSB for the
fiscal year ended March 31, 1995.
(5)Incorporated by reference to Exhibit 3.5 to Form 10-KSB for the
fiscal year ended March 31, 1995.
<PAGE>
(6)Incorporated by reference to Exhibit 4.5 to Form 10-SB.
(7)Incorporated by reference to Exhibit 4.6 to Form 10-SB.
(8)Incorporated by reference to Exhibit 10.3 to Amendment #1 to Form
10-SB.
(9)Incorporated by reference to Exhibit 10.2 to Form 10-KSB for the
fiscal year ended March 31, 1995.
(10)Incorporated by reference to Exhibit 10.3 to Form 10-KSB for the
fiscal year ended March 31, 1995.
(11)Incorporated by reference to Exhibit 10.4 to Form 10-KSB for the
fiscal year ended March 31, 1995.
(12)Incorporated by reference to Exhibit 10.5 to Form 10-KSB for the
fiscal year ended March 31, 1995.
(13)Incorporated by reference to Exhibit 10.6 to Form 10-KSB for the
fiscal year ended March 31, 1995.
(14)Incorporated by reference to Exhibit 10.7 to Form 10-KSB for the
fiscal year ended March 31, 1995.
(15)Incorporated by reference to Exhibit 10.8 to Form 10-KSB for the
fiscal year ended March 31, 1995.
(16)Incorporated by reference to Exhibit 10.9 to Form 10-KSB for the
fiscal year ended March 31, 1995.
(17)Incorporated by reference to Exhibit 10.10 to Form 10-KSB for the
fiscal year ended March 31, 1995.
(18)Incorporated by reference to Exhibit 10.11 to Form 10-KSB for the
fiscal year ended March 31, 1995.
(19)Incorporated by reference to Exhibit 10.12 to Form 10-KSB for the
fiscal year ended March 31, 1995.
(20)Incorporated by reference to Exhibit 10.13 to Form 10-KSB for the
fiscal year ended March 31, 1995.
(21)Incorporated by reference to Exhibit 10.14 to Form 10-KSB for the
fiscal year ended March 31, 1995.
(22)Incorporated by reference to Exhibit 10.15 to Form 10-KSB for the
fiscal year ended March 31, 1995.
(23)Incorporated by reference to Exhibit 10.16 to Form 10-KSB for the
fiscal year ended March 31, 1995.
(24)Incorporated by reference to Exhibit 10.17 to Form 10-KSB for the
fiscal year ended March 31, 1995.
(25)Incorporated by reference to Exhibit 10.18 to Form 10-KSB for the
fiscal year ended March 31, 1995.
(26)Incorporated by reference to Exhibit 10.19 to Form 10-KSB for the
fiscal year ended March 31, 1995.
(27)Incorporated by reference to Exhibit 10.20 to Form 10-KSB for the
fiscal year ended March 31, 1995.
(28)Incorporated by reference to Exhibit 10.21 to Form 10-KSB for the
fiscal year ended March 31, 1995.
(29)Incorporated by reference to Exhibit 10.01 to Form 10-QSB for the
quarter and nine months ended September 30, 1996.
<PAGE>
(30)Incorporated by reference to Exhibit 10.02 to Form 10-QSB for the
quarter and nine months ended September 30, 1996.
(b) Reports on Form 8-K:
The following reports on Form 8-K were filed during the last quarter
of the period covered by this Report:
<TABLE>
<CAPTION>
Date of Report Subject Matter
-------------- --------------
<S> <C>
5/21/96 $20 million private placement of special warrants
9/20/96 Change of name
9/20/96 Change of fiscal year end
9/20/96 Unaudited financial statements for the nine months ended
September 30, 1996
10/22/96 Unaudited financial statements for the nine months ended
September 30, 1996
10/24/96 Unaudited financial statements for the nine months ended
September 30, 1996, as corrected
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the Registrant has duly caused this report on Form 10-K for the
fiscal year ended December 31, 1996 to be signed on its behalf by the
undersigned, thereunto duly authorized, in Playa del Rey, California, on March
27, 1997.
PORTACOM WIRELESS, INC.
By: /s/ Douglas C. MacLellan
-------------------------------------
Douglas C. MacLellan
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report on Form 10-K for the fiscal year ended December 31, 1996 has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Douglas C. MacLellan Director, President and March 27, 1997
- --------------------------- Chief Executive Officer
Douglas C. MacLellan
/s/ Michael A. Richard Vice President, Accounting March 26, 1997
- --------------------------- (principal financial officer)
Michael A. Richard
/s/ R. Keith Alexander Director March 26, 1997
- ---------------------------
R. Keith Alexander
Director March , 1997
- --------------------------- --
Robert G. Flitton
Director March , 1997
- --------------------------- --
Howard B. Frantom
/s/ Keith A.J. Hay Director March 26, 1997
- ---------------------------
Keith A.J. Hay
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Stephen M. Leahy
- --------------------------- Secretary and Director March 26, 1997
Stephen M. Leahy
/s/ Stephen O. Stephens
- --------------------------- Director March 26, 1997
Stephen O. Stephens
</TABLE>
<PAGE>
EXHIBIT 3.6
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PORTACOM WIRELESS, INC.,
A DELAWARE CORPORATION
FIRST: The name of this corporation is PortaCom Wireless, Inc.
SECOND: Its Registered Office in the State of Delaware is to be located at
9 East Loockerman Street, in the City of Dover, County of Kent, 19901. The
Registered Agent in charge thereof is National Registered Agents, Inc.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of Delaware.
FOURTH: The aggregate number of shares which the Corporation shall have
authority to issue is One Hundred and Five Million (105,000,000), divided into
One Hundred Million (100,000,000) shares of common stock of the par value of
$.001 per share, and Five Million (5,000,000) shares of preferred stock of the
par value of $.001 per share.
FIFTH: The Board of Directors is authorized, subject to limitations
prescribed by law and the provisions of the Article FOURTH, to provide for the
issuance of the shares of Preferred Stock in series, and by filing a certificate
pursuant to the applicable law of the State of Delaware, to establish from time
to time the number of shares to be included in each such series, and to fix the
designation, powers, preferences and rights of the shares of each such series
and the qualifications, limitations or restrictions thereof.
The authority of the Board with respect to each series shall include, but
not be limited to, determination of the following:
a) The number of shares constituting that series and the distinctive
designation of that series;
b) The dividend rate on the shares of that series, whether dividends shall
be cumulative, and, if so, from which date or dates, and the relative rights of
priority, if any, of payment of dividends on shares of that series;
c) Whether that series shall have voting rights, in addition to the voting
rights provided by law, and, if so, the terms of such voting rights;
d) Whether that series shall have conversion privileges, and, if so, the
terms and conditions of such conversion, including provision for adjustment of
the conversion rate in such events as the Board of Directors shall determine;
<PAGE>
e) Whether that series shall have conversion privileges, and, if so, the
terms and conditions of such conversion, including provision for adjustment of
the conversion rate in such events as the Board of Directors shall determine;
f) Whether that series shall have a sinking fund for the redemption or
purchase of shares of that series, and, if so, the terms and amount of such
sinking fund;
g) The rights of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the corporation, and the
relative rights of priority, if any, of payment of shares of that series;
h) Any other relative rights, preferences and limitations of that series.
Dividends on outstanding shares of Preferred Stock shall be paid or declared and
set apart for payment on the common shares with respect to the same dividend
period.
If upon any voluntary or involuntary liquidation, dissolution or winding up
of the corporation, the assets available for distribution to holders of shares
of Preferred Stock of all series shall be insufficient to pay such holders the
full preferential amount to which they are entitled, then such assets shall be
distributed ratably among the shares of all series of Preferred Stock in
accordance with the respective preferential amounts (including unpaid cumulative
dividends, if any) payable with respect thereto.
SIXTH: The name and mailing address of the incorporator are as follows:
NAME MAILING ADDRESS
S. A. Morgan Irell & Manella
Suite 900
1800 Avenue of the Stars
Los Angeles, CA 90067
SEVENTH: The duration of the corporation shall be perpetual.
EIGHTH: When a compromise or arrangement is proposed between the corporation
and its creditors or any class of them or between the corporation and its
shareholders or any class of them, a court of equity jurisdiction within the
state, on application of the corporation or of a creditor or shareholder
thereof, or on application of a receiver appointed for the corporation pursuant
to provisions of Section 291 of Title 8 of the Delaware Code or on application
of trustees in dissolution or of any receiver or receivers appointed for the
corporation pursuant to provisions of Section 279 of Title 8 of the Delaware
Code order a meeting of the creditors or class of creditors or of the
shareholders or class of shareholders to be affected by the proposed compromise
or arrangement or reorganization, to be summoned in such manner as the court
directs. If a majority in number representing 3/4 in value of the creditors or
class of creditors, or of the shareholders or class of shareholders to be
affected by the proposed compromise or arrangement or a reorganization, agree to
a compromise or
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arrangement or a reorganization of the corporation as a consequence of the
compromise or arrangement or reorganization, the compromise or arrangement and
the reorganization, if sanctioned by the court to which the application has been
made, shall be binding on all the creditors or class of creditors, or on all the
shareholders or class of shareholders and also on the corporation.
NINTH: The personal liability of all of the directors of the corporation is
hereby eliminated to the fullest extent allowed as provided by the Delaware
General Corporation Law, as the same may be supplemented and amended.
TENTH: The corporation shall, to the fullest extent legally permissible under
the provisions of the Delaware General Corporation Law, as the same may be
amended and supplemented, shall indemnify and hold harmless any and all persons
whom it shall have power to indemnify under said provisions from and against any
and all liabilities (including expenses) imposed upon or reasonably incurred by
him in connection with any action, suit or other proceeding in which he may be
involved or with which he may be threatened, or other matters referred to in or
covered by said provisions both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has ceased to be a director or officer of the corporation. Such
indemnification provided shall not be deemed exclusive of any other rights to
which those indemnified may be entitled under any Bylaw, Agreement or Resolution
adopted by the shareholders entitled to vote thereon after notice.
ELEVENTH: The Board of Directors may adopt, amend or repeal the Bylaws of this
corporation.
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EXHIBIT 3.7
PORTACOM WIRELESS, INC.
(A DELAWARE CORPORATION)
BYLAWS
ARTICLE I
OFFICES
SECTION 1.01 Registered Office. The registered office of PortaCom Wireless,
-----------------
Inc. (hereinafter called the Corporation) in the State of Delaware shall be at
9 East Loockerman Street, in the City of Dover, County of Kent, and the name of
the registered agent in charge thereof shall be National Registered Agents, Inc.
SECTION 1.02 Other Offices. The Corporation may also have an office or offices
-------------
at such other place or places, either within or without the State of Delaware,
as the Board of Directors (hereinafter called the Board) may from time to time
determine or as the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 2.01 Annual Meetings. Annual meetings of the stockholders of the
---------------
Corporation for the purpose of electing directors and for the transaction of
such other proper business as may come before such meetings may be held at such
time, date and place as the Board shall determine by resolution.
SECTION 2.02 Special Meetings. A special meeting of the stockholders for the
----------------
transaction of any proper business may be called at any time by (i) the Board or
(ii) the Chairman of the Board or (iii) the President or (iv) stockholders
entitled to cast at least ten percent (10%) of the votes at such meeting.
SECTION 2.03 Place of Meetings. All meetings of the stockholders shall be held
-----------------
at such places, within or without the State of Delaware, as may from time to
time be designated by the person or persons calling the respective meeting and
specified in the respective notices or waivers of notice thereof.
SECTION 2.04 Notice of Meetings. Except as otherwise required by law, notice
------------------
of each meeting of the stockholders, whether annual or special, shall be given
not less than ten (10) nor more than sixty (60) days before the date of the
meeting to each stockholder of record entitled to vote at such meeting by
delivering a typewritten or printed notice thereof to him personally, or by
depositing such notice in the United States mail, in a postage prepaid envelope,
directed to him at his post office address furnished by him to the Secretary of
the Corporation for such purpose or, if he shall not have furnished to the
Secretary his address for such purpose, then at his post office address last
known to the Secretary, or by transmitting a notice thereof to him at such
address by telegraph, cable, or wireless. Except as otherwise expressly required
by law, no publication of any notice of a meeting of the stockholders shall be
required. Every notice of a meeting
<PAGE>
of the stockholders shall state the place, date and hour of the meeting, and, in
the case of a special meeting, shall also state the purpose or purposes for
which the meeting is called. Notice of any meeting of stockholders shall not be
required to be given to any stockholder who shall have waived such notice and
such notice shall be deemed waived by any stockholder who shall attend such
meeting in person or by proxy, except as a stockholder who shall attend such
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Except as otherwise expressly required by law, notice of any adjourned
meeting of the stockholders need not be given if the time and place thereof are
announced at the meeting at which the adjournment is taken.
SECTION 2.05 Quorum. Except in the case of any meeting for the election of
------
directors summarily ordered as provided by law, the holders of record of a
majority in voting interest of the shares of stock of the Corporation entitled
to be voted thereat, present in person or by proxy, shall constitute a quorum
for the transaction of business at any meeting of the stockholders of the
Corporation or any adjournment thereof. In the absence of a quorum at any
meeting or any adjournment thereof, a majority in voting interest of the
stockholders present in person or by proxy and entitled to vote thereat or, in
the absence therefrom of all the stockholders, any officer entitled to preside
at, or to act as secretary of, such meeting may adjourn such meeting from time
to time. At any such adjourned meeting at which a quorum is present any business
may be transacted which might have been transacted at the meeting as originally
called.
SECTION 2.06 Voting.
------
(a) Each stockholder shall, at each meeting of the stockholders, be
entitled to vote in person or by proxy each share or fractional share of the
stock of the Corporation having voting rights on the matter in question and
which shall have been held by him and registered in his name on the books of the
Corporation:
(i) on the date fixed pursuant to Section 6.05 of these Bylaws as the
record date for the determination of stockholders entitled to notice of and to
vote at such meeting, or
(ii) if no such record date shall have been so fixed, then (a) at the close
of business on the day next preceding the day on which notice of the meeting
shall be given or (b) if notice of the meeting shall be waived, at the close of
business on the day next preceding the day on which the meeting shall be held.
(b) Shares of its own stock belonging to the Corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
directors in such other corporation is held, directly or indirectly, by the
Corporation, shall neither be entitled to vote nor be counted for quorum
purposes. Persons holding stock of the Corporation in a fiduciary capacity shall
be entitled to vote such stock. Persons whose stock is pledged shall be entitled
to vote, unless in the transfer by the
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pledgor on the books of the Corporation he shall have expressly empowered the
pledgee to vote thereon, in which case only the pledgee, or his proxy, may
represent such stock and vote thereon. Stock having voting power standing of
record in the names of two or more persons, whether fiduciaries, members of a
partnership, joint tenants in common, tenants by entirety or otherwise, or with
respect to which two or more persons have the same fiduciary relationship, shall
be voted in accordance with the provisions of the General Corporation Law of the
State of Delaware.
(c) Any such voting rights may be exercised by the stockholder entitled
thereto in person or by his proxy appointed by an instrument in writing,
subscribed by such stockholder or by his attorney thereunto authorized and
delivered to the secretary of the meeting; provided, however, that no proxy
shall be voted or acted upon after three years from its date unless said proxy
shall provide for a longer period. The attendance at any meeting of a
stockholder who may theretofore have given a proxy shall not have the effect of
revoking the same unless he shall in writing so notify the secretary of the
meeting prior to the voting of the proxy. At any meeting of the stockholders all
matters, except as otherwise provided in the Certificate of Incorporation, in
these Bylaws or by law, shall be decided by the vote of a majority in voting
interest of the stockholders present in person or by proxy and entitled to vote
thereat and thereon, a quorum being present. The vote at any meeting of the
stockholders on any question need not be by ballot, unless so directed by the
chairman of the meeting. On a vote by ballot each ballot shall be signed by the
stockholder voting, or by his proxy, if there be such proxy, and it shall state
the number of shares voted.
SECTION 2.07 List of Stockholders. The Secretary of the Corporation shall
--------------------
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
SECTION 2.08 Judges. If at any meeting of the stockholders a vote by written
------
ballot shall be taken on any question, the chairman of such meeting may appoint
a judge or judges to act with respect to such vote. Each judge so appointed
shall first subscribe an oath faithfully to execute the duties of a judge at
such meeting with strict impartiality and according to the best of his ability.
Such judges shall decide upon the qualification of the voters and shall report
the number of shares represented at the meeting and entitled to vote on such
question, shall conduct and accept the votes, and, when the voting is completed,
shall ascertain and report the number of shares voted respectively for and
against the question. Reports of judges shall be in writing and subscribed and
delivered by them to the Secretary of the Corporation. The judges need not be
stockholders of the Corporation, and any officer of the Corporation may be a
judge on any question other than a vote for or against a proposal in which he
shall have a material interest.
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SECTION 2.09 Action Without Meeting. Any action required to be taken at any
----------------------
annual or special meeting of stockholders of the Corporation, or any action
which may be taken at any annual or special meeting of such stockholders, may be
taken without a meeting, without prior notice and without a vote, if a consent
in writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.01 General Powers. The property, business and affairs of the
--------------
Corporation shall be managed by the Board.
SECTION 3.02 Number and Term of Office. The number of directors shall be not
-------------------------
less than three (3) nor more than fifteen (15). The exact number of directors
shall be seven (7) until changed, within the limits specified above, by a bylaw
amending this Section 3.02, duly adopted by the Board of Directors or by the
stockholders. Directors need not be stockholders. Each of the directors of the
Corporation shall hold office until his successor shall have been duly elected
and shall qualify or until he shall resign or shall have been removed in the
manner hereinafter provided.
SECTION 3.03 Election of Directors. The directors shall be elected annually by
---------------------
the stockholders of the Corporation and the persons receiving the greatest
number of votes, up to the number of directors to be elected, shall be the
directors.
SECTION 3.04 Resignations. Any director of the Corporation may resign at any
------------
time by giving written notice to the Board or to the Secretary of the
Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time be not specified, it shall take effect immediately upon
its receipt; and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 3.05 Vacancies. Except as otherwise provided in the Certificate of
---------
Incorporation, any vacancy in the Board, whether because of death, resignation,
disqualification, an increase in the number of directors, or any other cause,
may be filled by vote of the majority of the remaining directors, although less
than a quorum. Each director so chosen to fill a vacancy shall hold office until
his successor shall have been elected and shall qualify or until he shall resign
or shall have been removed in the manner hereinafter provided.
SECTION 3.06 Place of Meeting, Etc. The Board may hold any of its meetings at
---------------------
such place or places within or without the State of Delaware as the Board may
from time to time by resolution designate or as shall be designated by the
person or persons calling the meeting or in the notice or a waiver of notice of
any such meeting. Directors may participate in any regular or special meeting
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of the Board by means of conference telephone or similar communications
equipment pursuant to which all persons participating in the meeting of the
Board can hear each other, and such participation shall constitute presence in
person at such meeting.
SECTION 3.07 First Meeting. The Board shall meet as soon as practicable after
-------------
each annual election of directors and notice of such first meeting shall not be
required.
SECTION 3.08 Regular Meetings. Regular meetings of the Board may be held at
----------------
such times as the Board shall from time to time by resolution determine. If any
day fixed for a regular meeting shall be a legal holiday at the place where the
meeting is to be held, then the meeting shall be held at the same hour and place
on the next succeeding business day not a legal holiday. Except as provided by
law, notice of regular meetings need not be given.
SECTION 3.09 Special Meetings. Special meetings of the Board shall be held
----------------
whenever called by the President or a majority of the authorized number of
directors. Except as otherwise provided by law or by these Bylaws, notice of the
time and place of each such special meeting shall be mailed to each director,
addressed to him at his residence or usual place of business, at least five (5)
days before the day on which the meeting is to be held, or shall be sent to him
at such place by telegraph or cable or facsimile or be delivered personally not
less than forty-eight (48) hours before the time at which the meeting is to be
held. Except where otherwise required by law or by these Bylaws, notice of the
purpose of a special meeting need not be given. Notice of any meeting of the
Board shall not be required to be given to any director who is present at such
meeting, except a director who shall attend such meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.
SECTION 3.10 Quorum and Manner of Acting. Except as otherwise provided in
---------------------------
these Bylaws or by law, the presence of a majority of the authorized number of
directors shall be required to constitute a quorum for the transaction of
business at any meeting of the Board, and all matters shall be decided at any
such meeting, a quorum being present, by the affirmative votes of a majority of
the directors present. In the absence of a quorum, a majority of directors
present at any meeting may adjourn the same from time to time until a quorum
shall be present. Notice of any adjourned meeting need not be given. The
directors shall act only as a Board, and the individual directors shall have no
power as such.
SECTION 3.11 Action by Consent. Any action required or permitted to be taken
-----------------
at any meeting of the Board or of any committee thereof may be taken without a
meeting if a written consent thereto is signed by all members of the Board or of
such committee, as the case may be, and such written consent is filed with the
minutes of proceedings of the Board or committee.
SECTION 3.12 Removal of Directors. Subject to the provisions of the
--------------------
Certificate of Incorporation, any director may be removed at any time, either
with or without cause, by the affirmative vote of the stockholders having a
majority of the voting power of the Corporation given at a special meeting of
the stockholders called for the purpose.
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SECTION 3.13 Compensation. The directors shall receive only such compensation
------------
for their services as directors as may be allowed by resolution of the Board.
The Board may also provide that the Corporation shall reimburse each such
director for any expense incurred by him on account of his attendance at any
meetings of the Board or Committees of the Board. Neither the payment of such
compensation nor the reimbursement of such expenses shall be construed to
preclude any director from serving the Corporation or its subsidiaries in any
other capacity and receiving compensation therefor.
SECTION 3.14 Committees. The Board may, by resolution passed by a majority of
----------
the whole Board, designate one or more committees, each committee to consist of
one or more of the directors of the Corporation. Any such committee, to the
extent provided in the resolution of the Board and except as otherwise limited
by law, shall have and may exercise all the powers and authority of the Board in
the management of the business and affairs of the Corporation, and may authorize
the seal of the Corporation to be affixed to all papers which may require it.
Any such committee shall keep written minutes of its meetings and report the
same to the Board at the next regular meeting of the Board. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board to
act at the meeting in the place of any such absent or disqualified member.
ARTICLE IV
OFFICERS
SECTION 4.01 Number. The officers of the Corporation shall be a President, one
------
or more Vice Presidents (the number thereof and their respective titles to be
determined by the Board), a Secretary and a Treasurer.
SECTION 4.02 Election, Term of Office and Qualifications. The officers of the
-------------------------------------------
Corporation, except such officers as may be appointed in accordance with Section
4.03, shall be elected annually by the Board at the first meeting thereof held
after the election thereof. Each officer shall hold office until his successor
shall have been duly chosen and shall qualify or until his resignation or
removal in the manner hereinafter provided.
SECTION 4.03 Assistants, Agents and Employees, Etc. In addition to the
-------------------------------------
officers specified in Section 4.01, the Board may appoint other assistants,
agents and employees as it may deem necessary or advisable, including one or
more Assistant Secretaries, and one or more Assistant Treasurers, each of whom
shall hold office for such period, have such authority, and perform such duties
as the Board may from time to time determine. The Board may delegate to any
officer of the Corporation or any committee of the Board the power to appoint,
remove and prescribe the duties of any such assistants, agents or employees.
SECTION 4.04 Removal. Any officer, assistant, agent or employee of the
-------
Corporation may be removed, with or without cause, at any time: (i) in the case
of an officer, assistant, agent or employee
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appointed by the Board, only by resolution of the Board; and (ii) in the case of
an officer, assistant, agent or employee, by any officer of the Corporation or
committee of the Board upon whom or which such power of removal may be conferred
by the Board.
SECTION 4.05 Resignations. Any officer or assistant may resign at any time by
------------
giving written notice of his resignation to the Board or the Secretary of the
Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time be not specified, upon receipt thereof by the Board or
the Secretary, as the case may be; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 4.06 Vacancies. A vacancy in any office because of death, resignation,
---------
removal, disqualification, or other cause, may be filled for the unexpired
portion of the term thereof in the manner prescribed in these Bylaws for regular
appointments or elections to such office.
SECTION 4.07 The Chairman of the Board. The Chairman of the Board, if such an
-------------------------
officer be elected, shall, if present, preside at all meetings of the board of
directors and exercise and perform such other powers and duties as may be from
time to time assigned to him by the Board or prescribed by the Bylaws. If there
is no President, the Chairman of the Board shall, in addition, be the Chief
Executive Officer of the Corporation and shall have the powers and duties
prescribed in Section 4.08 of this Article IV.
SECTION 4.08 The President. Subject to such supervisory powers, if any, as may
-------------
be given by the Board to the Chairman of the Board, if there be such an officer,
the President of the Corporation shall be the chief executive officer of the
Corporation and shall have, subject to the control of the Board, general and
active supervision and management over the business of the Corporation and over
its several officers, assistants, agents and employees.
SECTION 4.09 The Vice Presidents. Each Vice President shall have such powers
-------------------
and perform such duties as the Board may from time to time prescribe. At the
request of the President, or in case of the President's absence or inability to
act upon the request of the Board, a Vice President shall perform the duties of
the President and when so acting, shall have all the powers of, and be subject
to all the restrictions upon, the President.
SECTION 4.10 The Secretary. The Secretary shall, if present, record the
-------------
proceedings of all meetings of the Board, of the stockholders, and of all
committees of which a secretary shall not have been appointed in one or more
books provided for that purpose; he shall see that all notices are duly given in
accordance with these Bylaws and as required by law; he shall be custodian of
the seal of the Corporation and shall affix and attest the seal to all documents
to be executed on behalf of the Corporation under its seal; and, in general, he
shall perform all the duties incident to the office of Secretary and such other
duties as may from time to time be assigned to him by the Board.
SECTION 4.11 The Chief Financial Officer. The Chief Financial Officer shall
---------------------------
also be the Treasurer, and shall have the general care and custody of the funds
and securities of the Corporation,
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and shall deposit all such funds in the name of the Corporation in such banks,
trust companies or other depositories as shall be selected by the Board. He
shall receive, and give receipts for, moneys due and payable to the Corporation
from any source whatsoever. He shall exercise general supervision over
expenditures and disbursements made by officers, agents and employees of the
Corporation and the preparation of such records and reports in connection
therewith as may be necessary or desirable. He shall, in general, perform all
other duties incident to the office of Chief Financial Officer and such other
duties as from time to time may be assigned to him by the Board.
SECTION 4.12 Compensation. The compensation of the officers of the Corporation
------------
shall be fixed from time to time by the Board. None of such officers shall be
prevented from receiving such compensation by reason of the fact that he is also
a director of the Corporation. Nothing contained herein shall preclude any
officer from serving the Corporation, or any subsidiary corporation, in any
other capacity and receiving such compensation by reason of the fact that he is
also a director of the Corporation. Nothing contained herein shall preclude any
officer from serving the Corporation, or any subsidiary corporation, in any
other capacity and receiving proper compensation therefor.
ARTICLE V
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
SECTION 5.01 Execution of Contracts. The Board, except as in these Bylaws
----------------------
otherwise provided, may authorize any officer or officers, agent or agents, to
enter into any contract or execute any instrument in the name of and on behalf
of the Corporation, and such authority may be general or confined to specific
instances; and unless so authorized by the Board or by these Bylaws, no officer,
agent or employee shall have any power or authority to bind the Corporation by
any contract or engagement or to pledge its credit or to render it liable for
any purpose or in any amount.
SECTION 5.02 Checks, Drafts, Etc. All checks, drafts or other orders for
-------------------
payment of money, notes or other evidence of indebtedness, issued in the name of
or payable to the Corporation, shall be signed or endorsed by such person or
persons and in such manner as, from time to time, shall be determined by
resolution of the Board. Each such officer, assistant, agent or attorney shall
give such bond, if any, as the Board may require.
SECTION 5.03 Deposits. All funds of the Corporation not otherwise employed
--------
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositories as the Board may select, or as may
be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. For the purpose of deposit and for the purpose
of collection for the account of the Corporation, the President, any Vice
President or the Chief Financial Officer (or any other officer or officers,
assistant or assistants, agent or agents, or attorney or attorneys of the
Corporation who shall from time to time be determined by the Board) may endorse,
assign and deliver checks, drafts and other orders for the payment of money
which are payable to the order of the Corporation.
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SECTION 5.04 General and Special Bank Accounts. The Board may from time to
---------------------------------
time authorize the opening and keeping of general and special bank accounts with
such banks, trust companies or other depositories as the Board may select or as
may be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. The Board may make such special rules and
regulations with respect to such bank accounts, not inconsistent with the
provisions of these Bylaws, as it may deem expedient.
ARTICLE VI
SHARES AND THEIR TRANSFER
SECTION 6.01 Certificates for Stock. Every owner of stock of the Corporation
----------------------
shall be entitled to have a certificate or certificates, to be in such form as
the Board shall prescribe, certifying the number and class of shares of the
stock of the Corporation owned by him. The certificates representing shares of
such stock shall be numbered in the order in which they shall be issued and
shall be signed in the name of the Corporation by the President or a Vice
President, and by the Secretary or an Assistant Secretary or by the Chief
Financial Officer or an Assistant Chief Financial Officer. Any of or all of the
signatures on the certificates may be a facsimile. In case any officer, transfer
agent or registrar who has signed, or whose facsimile signature has been placed
upon, any such certificate, shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued, such certificate may
nevertheless be issued by the Corporation with the same effect as though the
person who signed such certificate, or whose facsimile signature shall have been
placed thereupon, were such officer, transfer agent or registrar at the date of
issue. A record shall be kept of the respective names of the persons, firms or
corporations owning the stock represented by such certificates, the number and
class of shares represented by such certificates, respectively, and the
respective dates thereof, and in case of cancellation, the respective dates of
cancellation. Every certificate surrendered to the Corporation for exchange or
transfer shall be canceled, and no new certificate or certificates shall be
issued in exchange for any existing certificate until such existing certificate
shall have been so canceled, except in cases provided for in Section 6.04.
SECTION 6.02 Transfers of Stock. Transfers of shares of stock of the
------------------
Corporation shall be made only on the books of the Corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary, or with a transfer clerk or a
transfer agent appointed as provided in Section 6.03, and upon surrender of the
certificate or certificates for such shares properly endorsed and the payment of
all taxes thereon. The person in whose name shares of stock stand on the books
of the Corporation shall be deemed the owner thereof for all purposes as regards
the Corporation. Whenever any transfer of shares shall be made for collateral
security, and not absolutely, such fact shall be so expressed in the entry of
transfer if, when the certificate or certificates shall be presented to the
Corporation for transfer, both the transferor and the transferee request the
Corporation to do so.
SECTION 6.03 Regulations. The Board may make such rules and regulations as it
-----------
may deem expedient, not inconsistent with these Bylaws, concerning the issue,
transfer and registration of certificates for shares of the stock of the
Corporation. It may appoint, or authorize any officer or
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officers to appoint, one or more transfer clerks or one or more transfer agents
and one or more registrars, and may require all certificates for stock to bear
the signature or signatures of any of them.
SECTION 6.04 Lost, Stolen, Destroyed, and Mutilated Certificates. In any case
---------------------------------------------------
of loss, theft, destruction, or mutilation of any certificate of stock, another
may be issued in its place upon proof of such loss, theft, destruction, or
mutilation and upon the giving of a bond of indemnity to the Corporation in such
form and in such sum as the Board may direct; provided, however, that a new
certificate may be issued without requiring any bond when, in the judgment of
the Board, it is proper so to do.
SECTION 6.05 Fixing Date for Determination of Stockholders of Record. In order
-------------------------------------------------------
that the Corporation may determine the stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, or to express
consent to corporate action in writing without a meeting, or entitled to receive
payment of any dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any other change, conversion or
exchange of stock or for the purpose of any other lawful action, the Board may
fix, in advance, a record date, which shall not be more than 60 nor less than 10
days before the date of such meeting, nor more than 60 days prior to any other
action. If in any case involving the determination of stockholders for any
purpose other than notice of or voting at a meeting of stockholders or
expressing consent to corporate action without a meeting the Board shall not fix
such a record date, the record date for determining stockholders for such
purpose shall be the close of business on the day on which the Board shall adopt
the resolution relating thereto. A determination of stockholders entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of such meeting; provided, however, that the Board may fix a new record date for
the adjourned meeting.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01 Action, Etc. Other Than by or in the Right of the Corporation.
-------------------------------------------------------------
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to
10
<PAGE>
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, that he had reasonable cause to believe that his conduct was
unlawful.
SECTION 7.02 Actions, Etc., by or in the Right of the Corporation. The
----------------------------------------------------
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
Corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
SECTION 7.03 Determination of Right of Indemnification. Any indemnification
-----------------------------------------
under Section 7.01 or 7.02 (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Section 7.01 and 7.02. Such determination shall be made (i) by the Board by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (ii) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (iii) by the stockholders.
SECTION 7.04 Indemnification Against Expenses of Successful Party.
----------------------------------------------------
Notwithstanding the other provisions of this Article, to the extent that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in Section 7.01 or 7.02, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
SECTION 7.05 Prepaid Expenses. Expenses incurred by an officer or director in
----------------
defending a civil or criminal action, suit or proceeding may be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding as authorized by the Board in the specific case upon receipt of an
undertaking by or on behalf of the director or officer to repay such amount
unless it shall ultimately be determined that he is entitled to be indemnified
by the Corporation as authorized in this Article. Such expenses incurred by
other employees and agents may be so paid upon such terms and conditions, if
any, as the Board deems appropriate.
11
<PAGE>
SECTION 7.06 Other Rights and Remedies. The indemnification provided by this
-------------------------
Article shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any Bylaws, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
SECTION 7.07 Insurance. Upon resolution passed by the Board, the Corporation
---------
may purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of this Article.
SECTION 7.08 Constituent Corporations. For the purposes of this Article,
------------------------
references to "the Corporation" include all constituent corporations absorbed in
a consolidation or merger as well as the resulting or surviving corporation, so
that any person who is or was a director, officer, employee or agent of such a
constituent corporation or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise shall stand in the same
position under the provisions of this Article with respect to the resulting or
surviving corporation as he would if he had served the resulting or surviving
corporation in the same capacity.
SECTION 7.09 Other Enterprises, Fines, and Serving at Corporation's Request.
--------------------------------------------------------------
For purposes of this Article, references to "other enterprises" shall include
employee benefit plans; references to "fines" shall include any excise taxes
assessed on a person with respect to any employee benefit plan; and references
to "serving at the request of the Corporation" shall include any service as a
director, officer, employee or agent of the corporation which imposes duties on,
or involves services by, such director, officer, employee, or agent with respect
to an employee benefit plan, its participants, or beneficiaries; and a person
who acted in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests of the
Corporation" as referred to in this Article.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 Seal. The Board shall provide a corporate seal, which shall be in
----
the form of a circle and shall bear the name of the Corporation and words and
figures showing that the Corporation was incorporated in the State of Delaware
and the year of incorporation.
SECTION 8.02 Waiver of Notices. Whenever notice is required to be given by
-----------------
these Bylaws or the Certificate of Incorporation or by law, the person entitled
to said notice may waive such notice in
12
<PAGE>
writing, either before or after the time stated therein, and such waiver shall
be deemed equivalent to notice.
SECTION 8.03 Amendments. These Bylaws, or any of them, may be altered, amended
----------
or repealed, and new Bylaws may be made, (i) by the Board, by vote of a majority
of the number of directors then in office as directors, acting at any meeting of
the Board, or (ii) by the stockholders, at any annual meeting of stockholders,
without previous notice, or at any special meeting of stockholders, provided
that notice of such proposed amendment, modification, repeal or adoption is
given in the notice of special meeting. Any Bylaws made or altered by the
stockholders may be altered or repealed by either the Board or the stockholders.
<PAGE>
EXHIBIT 4.1
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
NUMBER PORTACOM WIRELESS, INC. SHARES
-----------------
[CUSIP 735907 10 7]
-----------------
THIS CERTIFIES THAT
is the registered holder of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK WITH A PAR VALUE OF
U.S. $0.001 PER SHARE
in the Capital of the above named Corporation tranferable on the books of the
Corporation by the registered holder in person or by Attorney duly authorized in
writing upon surrender of this certificate properly endorsed. This certificate
and the shares represented hereby are subject to the laws of the State of
Delaware, and to the Certificate of Incorporation and Bylaws of the Corporation,
as now or hereafter amended.
This certificate is not valid unless countersigned by the Transfer Agent and
Registrar of the Corporation.
IN WITNESS WHEREOF the Corporation has caused this certificate to be signed on
its behalf by the facsimile signatures of its duly authorized officers.
DATED Dec 31, 1996
COUNTERSIGNED AND REGISTERED
PACIFIC CORPORATE SERVICES LTD. VANCOUVER
- ------------------------------ TRANSFER AGENT AND REGISTRAR
President
- ------------------------------ By--------------------------------
Secretary Authorized Officer
The Shares represented by this certificate are transferable at the offices
of Pacific Corporate Services Ltd., Vancouver, B.C.
<PAGE>
EXHIBIT 10.24
[LETTERHEAD OF PORTACOM WIRELESS. INC.]
EMPLOYMENT AGREEMENT
--------------------
FOR: DOUGLAS C. MACLELLAN
JANUARY 1, 1997
This Agreement is executed by and between Douglas C. MacLellan ("you", "your" or
"yourself") and PortaCom Wireless, Inc. (hereinafter referred to as "PortaCom"
or "We")
This Agreement, once signed by you, will serve to confirm our mutual
understanding and agreement regarding the provisions of an employment
relationship as described in any and all previous agreements, whether oral or
written.
1. Nature of Employment. You will be employed by PortaCom Wireless, Inc. as
--------------------
its Chairman, Chief Executive Officer, and President, and will perform such
duties and assume such additional assignments as may be assigned to you
from time to time by the Board of Directors of PortaCom. You agree to
devote reasonable business time, attentions and energies to performing your
duties for PortaCom and its affiliates faithfully and to the best of your
abilities.
2. Term of Employment. Your employment and compensation with PortaCom are "at
------------------
will" in that they can be terminated with or without cause, and with or
without notice, at any time, at the option of either PortaCom or yourself,
except as otherwise provided by law. The terms of this Agreement,
therefore, do not and are not intended to create either an express and/or
implied term of employment with PortaCom. No manager or representative of
PortaCom, other than the Board of Directors or the Compensation Committee,
acting together, has authority to enter into any agreement for employment
for any specified period of time or to make any agreement or contract to
the foregoing, and any promises to the contrary may only be relied upon by
you if they are in writing and signed by the Board of Directors or the
Compensation Committee of PortaCom. In the event this Agreement is
terminated by either of us, with or without cause, you shall be entitled
only to your salary compensation as provided in paragraph 3 through the
date of your termination. In the event of any termination of employment,
this Agreement shall terminate except that your obligations pursuant to
paragraph 4 shall continue to survive such termination and PortaCom's
obligations pursuant to paragraphs 3 and 4 shall survive such termination.
<PAGE>
Douglas C. MacLellan
January 1, 1997 Page 2 of 3
3. Compensation. You will be compensated with a monthly salary in the amount
------------
of US $16,000.00 to be paid in accordance with PortaCom's normal payroll
practices. You will continue to be entitled to such employee fringe
benefits as PortaCom, in its discretion, makes available generally from
time to time to its executives. Upon presentation of proper documentation
in accordance with PortaCom's practice and prevailing Internal Revenue
Service guidelines, other ordinary and reasonable out-of-pocket business
expenses will also be reimbursed. Should PortaCom cease, at any time
hereinafter, to be governed by and subject to the policies of the Vancouver
Stock Exchange, you will receive a lump sum payment of four month's salary
in the event you are terminated by the Company during the period of this
contract.
4. Arbitration. Because PortaCom is an early-stage company, we think it is
------------
wise to include a provision dealing with how we will resolve any dispute in
the unforeseen event that we should have one. We are reluctant even to
discuss this subject because we do not foresee the likelihood of any such
dispute. But, we believe prudence dictates that we think about this
matter. Accordingly, in the event there is any dispute between us which we
are unable to resolve ourselves, we both agree by entering into this
Agreement that the exclusive remedy for determining any such dispute,
regardless of its nature, will be by arbitration in Los Angeles County,
California, in accordance with the then most applicable rules of the
American Arbitration Association. In the event the parties are unable to
agree upon an arbitrator, the parties shall select a single arbitrator from
a list of seven arbitrators designated by the American Arbitration
Association; four shall be retired judges of the Superior or Appellate
Courts resident in Los Angeles County who are members of the "independent"
list of retired judges and three shall be members of the National Academy
of Arbitrators resident within Los Angeles County, California. This
agreement to resolve any disputes arising out of your employment or the
termination of your employment by binding arbitration shall extend to
claims against any officers, directors, employees, or agents of PortaCom or
any of the above and shall apply as well to claims arising out of state and
federal statutes and local ordinances as well as to claims arising under
the common law. In the event of any such arbitration, the prevailing party
shall be awarded reasonable attorney's fees as part of the arbitration
award.
5. General Provisions.
-------------------
a. This Agreement constitutes the parties' entire agreement with respect
to your employment, and supersedes all prior agreements and
representations whether oral or written.
b. This Agreement may not be amended except by a writing signed by both
parties. It may, however, be supplemented by written policies and
procedures established by PortaCom from time to time which policies
and procedures, whether set forth in an employee handbook or otherwise
are generally applicable to PortaCom's other
<PAGE>
Douglas C. MacLellan
January 1, 1997 Page 3 of 3
executive employees. In the event of a conflict between this Agreement
and any PortaCom policy or procedure, the provisions of this Agreement
shall prevail.
c. This Agreement is valid until December 31, 1997.
d. This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of California.
e. The Agreement is subject to the approval of the Vancouver Stock
Exchange.
Mr. MacLellan, if you agree with and accept the terms of employment as stated
herein, please sign and date below and return this Agreement to the Compensation
Committee. We are confident your employment with PortaCom will continue to prove
mutually beneficial.
Very truly yours,
PORTACOM WIRELESS, INC.
Compensation Committee:
__________________________ ___________________________
Keith A.J. Hay Stephen M. Leahy
__________________________
Stephen O. Stephens
--------------------------------------------------
I concur with the provisions of this Agreement:
_________________________________________
Douglas C. MacLellan
Dated:_____________________
--------------------------------------------------
<PAGE>
EXHIBIT 10.25
[LETTERHEAD OF PORTACOM WIRELESS, INC.]
EMPLOYMENT AGREEMENT
--------------------
FOR: MICHAEL A. RICHARD
JANUARY 1, 1997
This Agreement is executed by and between Michael A. Richard ("you", "your",
"yourself") and PortaCom Wireless, Inc. (hereinafter referred to as "PortaCom"
or "We")
This Agreement, once signed by you, will serve to confirm our mutual
understanding and agreement regarding the provisions of an employment
relationship as described in any and all previous agreements, whether oral or
written.
1. Nature of Employment. You will be employed by PortaCom Wireless, Inc. as
--------------------
its Vice President, Accounting, and will perform such duties and assume
such additional assignments as may be assigned to you from time to time by
the Board of Directors of PortaCom. You agree to devote reasonable
business time, attentions and energies to performing your duties for
PortaCom and its affiliates faithfully and to the best of your abilities.
2. Term of Employment. Your employment and compensation with PortaCom are "at
------------------
will" in that they can be terminated with or without cause, and with or
without notice, at any time, at the option of either PortaCom or yourself,
except as otherwise provided by law. The terms of this Agreement,
therefore, do not and are not intended to create either an express and/or
implied term of employment with PortaCom. No manager or representative of
PortaCom, other than the Board of Directors or the Compensation Committee,
acting together, has authority to enter into any agreement for employment
for any specified period of time or to make any agreement or contract to
the foregoing, and any promises to the contrary may only be relied upon by
you if they are in writing and signed by the Board of Directors or the
Compensation Committee of PortaCom. In the event this Agreement is
terminated by either of us, with or without cause, you shall be entitled
only to your salary compensation as provided in paragraph 3 through the
date of your termination. In the event of any termination of employment,
this Agreement shall terminate except that your obligations pursuant to
paragraph 4 shall continue to survive such terminations and PortaCom's
obligations pursuant to paragraphs 3 and 4 shall survive such termination.
<PAGE>
MICHEAL A. RICHARD
JANUARY 1, 1997 PAGE 2 OR 3
3. Compensation. You will be compensated with a monthly salary in the amount
------------
of US$6,500 to be paid in accordance with PortaCom's normal payroll
practices. You will continue to be entitled to such employee fringe
benefits as PortaCom, in its discretion, makes available generally from
time to time to its executives. Upon presentation of proper documentation
in accordance with PortaCom's practice and prevailing Internal Revenue
Service guidelines, other ordinary and reasonable out-of-pocket business
expenses will also be reimbursed. Should PortaCom cease, at any time
hereafter, to be governed by and subject to the policies of the Vancouver
Stock Exchange you will receive a lump sum payment of four month's salary
in the event you are terminated by the Company during the period of this
contract.
4. Arbitration. Because PortaCom is an early-stage company, we think it is
------------
wise to include a provision dealing with how we will resolve any dispute in
the unforeseen event that we should have one. We are reluctant even to
discuss this subject because we do not foresee the likelihood of any such
dispute. But, we believe prudence dictates that we think about this
matter. Accordingly, in the event there is any dispute between us which we
are unable to resolve ourselves, we both agree by entering into this
Agreement that the exclusive remedy for determining any such dispute,
regardless of its nature, will be by arbitration in Los Angeles County,
California, in accordance with the then most applicable rules of the
American Arbitration Association. In the event the parties are unable to
agree upon an arbitrator, the parties shall select a single arbitrator from
a list of seven arbitrators designated by the American Arbitration
Association; four shall be retired judges of the Superior or Appellate
Courts resident in Los Angeles County who are members of the "independent"
list of retired judges and three shall be members of the National Academy
of Arbitrators resident within Los Angeles County, California. This
agreement to resolve any disputes arising out of your employment or the
termination of your employment by binding arbitration shall extend to
claims against any officers, directors, employees, or agents of PortaCom or
any of the above and shall apply as well to claims arising out of state and
federal statutes and local ordinances as well as to claims arising under
the common law. In the event of any such arbitration, the prevailing party
shall be awarded reasonable attorney's fees as part of the arbitration
award.
5. General Provisions.
-------------------
a. This Agreement constitutes the parties' entire agreement with respect
to your employment, and supersedes all prior agreements and
representations whether oral or written.
b. This Agreement may not be amended except by a writing signed by both
parties. It may, however, be supplemented by written policies and
procedures established by PortaCom from time to time which policies
and procedures, whether set forth in an employee handbook or otherwise
are generally applicable to PortaCom's other
<PAGE>
MICHAEL A. RICHARD
JANUARY 1, 1997 PAGE 3 OF 3
executive employees. In the event of a conflict between this Agreement
and any PortaCom policy or procedure, the provisions of this Agreement
shall prevail.
c. This Agreement is valid until December 31, 1997.
d. This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of California.
e. This Agreement is subject to the approval of the Vancouver Stock
Exchange.
Mr. Richard, if you agree with and accept the terms of employment as stated
herein, please sign and date below and return this Agreement to the
Compensation Committee. We are confident your employment with PortaCom will
continue to prove mutually beneficial.
Very truly yours,
PORTACOM WIRELESS, INC.
Compensation Committee:
_____________________________ _______________________________
Keith A.J. Hay Stephen M. Leahy
_____________________________
Stephen O. Stephens
______________________________________________________
I concur with the provisions of this Agreement:
__________________________________________
Michael A. Richard
Dated:_____________________
______________________________________________________
<PAGE>
EXHIBIT 10.26
PortaCom Wireless
Kingdom of Cambodia
Telecommunications Project
October 1996
JOINT VENTURE AGREEMENT
- -----------------------
For the establishment of a joint enterprise for a CDMA based telecommunication
system in THE KINGDOM OF CAMBODIA between THE MINISTRY OF POSTS AND
TELECOMMUNICATIONS OF CAMBODIA (MPTC) and PORTACOM WIRELESS, INC.
JOINT VENTURE AGREEMENT
- -----------------------
In reference to:
I) Request for approval of an investment by PortaCom Wireless, Inc. for a CDMA
based Telecommunication System;
II) Letter No. 232/96 dated 16/02/96 from the Council for the Development of
Cambodia;
III) Letter No. 1052 SCN dated 17/09/96 and 1204 scn dated 29/10/96 from the
office of Prime Ministers.
THIS JOINT VENTURE AGREEMENT is made and entered into this 26/th/ December, 1996
by and between:
A. The Royal Government of Cambodia represented by the Ministry of Posts and
Telecommunications of Cambodia (hereinafter referred as "Party A") having its
principal office at the corner of Street 13/102, Wat Phnom Section, Daun Penh
District, Phnom Penh, Cambodia;
AND
<PAGE>
B. PORTACOM WIRELESS, INC. (hereinafter referred as PCW or as "Party B"),
represented herein by Mr. Douglas Mac Lellan, its President and Chief Executive
Officer, and Mr. Paul R. Carr, its Vice-President, having its principal office
at 8055 W. Manchester Avenue, Suite 730, Playa Del Rey, California 90293,
U.S.A., and Khmer Sameky Telecom Co., Ltd., a Cambodian Limited Liability
company, represented herein by Mr. Sarun Oeurn, its President and Chief
Executive Officer, having its principal office at No. 14, Street 327, Boeugkok
2, Toulkork, Phnom Penh, Cambodia.
WHEREAS, Party A experienced in telecommunications business ventures and
regulatory authorities in the Kingdom of Cambodia, its interested in con-
operating with PCW;
WHEREAS, Party B holds significant experience in the development, start up,
operation and ownership of wireless and territorial based telecommunications
networks and services in emerging market;
WHEREAS, Party A and Party B mutually desire to enter into this Agreement to
establish and operate a CDMA based telecommunications System in the Kingdom of
Cambodia.
NOW, therefore, the parties hereby agree as follows:
1. DEFINITIONS
"MPTC" means Ministry of Posts and Telecommunications of Cambodia as a
regulator.
"Company" means a to be formed Cambodian Limited Liability company "American
Cambodian Telecom, LTD."
"Cambodian Law" means any laws, treaties, statutes, regulations, decrees and
other legally binding promulgation of any national or local Cambodia
governmental authority (ies) or body (ies), which are authorized to make such
laws, statutes, regulations, degrees or promulgations now in existence or that
may in the future come into force in the Kingdom of Cambodia throughout the term
of this Agreement.
"Equipment" means the Mobile Telephone Exchange (MTX), Mobile Switching Centers
(MSC), Base Station Controllers (BSC), Base Transceiver Station (BTS), Radio
Base Station (RBS), transmission equipment and other network element which, when
connected/ interfaced together, constitutes a CDMA System described in the
attached License.
"CDMA" means Code Division Multiple Access telecommunications technology and or
other PCS equivalent technology operated on the 1900 MHZ frequency band.
<PAGE>
"CDMA Based Telecommunication System" and or "CDMA System" means the
installation and operation of base stations, cellular switch exchanges and any
other facilities and equipment directly involved in the provision, development
and operation of a PCS 1900 based mobile cellular system.
"License" means the License awarded to the Company by MPTC for the installation
and operation of a CDMA Based Telecommunications System in the Kingdom of
Cambodia. A copy of which is attached hereto and incorporated herein by
reference.
"Net Interconnect Charge" means the difference between the in payment and out
payment of interconnect charges with all other operations in Cambodia.
2. NAME
The name of the company is American Cambodian TeleCom, LTD. (Hereinafter
referred to as the "Company"). The registered office of the Company shall be at
No. 435E2, Preash Sisowath Quay, Phnom Penh, Kingdom of Cambodia or P.O. Box
2352, Phnom Penh, Kingdom of Cambodia.
3. OBJECTIVES
The Company shall, through its License, install and operate base stations,
cellular switch exchanges and any other facilities and equipment directly
involved in the provision, development and operation of a PCS 1900 CDMA based
mobile cellular system and a paging system (Annex "A".)
The Company shall obtain all necessary licenses, permits and authorizations
required under applicable law to install, operate and expand, as and when
necessary, the PCS 1900 CDMA based mobile cellular system throughout the Kingdom
of Cambodia excluding Wireless Local Loop.
The Company will also market and sell CDMA telecommunications services,
equipment, terminals, handsets to customers throughout the Kingdom of Cambodia.
4. DURATION
The duration of this agreement shall be the same as the duration of the License
for the provision and operation of CDMA based Telecommunications System within
the
<PAGE>
Kingdom of Cambodia awarded to PortaCom by MPTC.
This Agreement shall be reviewed every five (5) years by both parties if
requested by any party.
5. START OF CDMA SYSTEM COMMERCIAL SERVICE
PortaCom shall start the commercial service of CDMA system not later than 24
months after the signing of this Joint Venture Agreement. The license for CDMA
System for PortaCom shall become void if there is any deviation from the above
timing.
6. CAPITAL AND SHARES
A. For the first year after signing this Agreement, the initial share capital
of the Company shall be 50,000,000.00 Cambodian Riel, or the monetary equivalent
in US Dollars, which shall initially be contributed and owned entirely by PCW
and Khmer Sameky Telecom Co., Ltd. according to the following schedule:
I) PCW shall own 84% of the share capital and shall contribute US $ 15,925.92
or the monetary equivalent in Cambodian Riel; and
II) Khmer Sameky TeleCom Co., LTD. shall own 14% of the share capital and shall
contribute US $ 2,592.59 or the monetary equivalent in Cambodian Riel.
B. The share capital of the Company can be increased by creating new shares in
cash or by any other means that the Board of Directors and/or shareholders
approve of, provided that it is in compliance with the statutes of the Company
and Cambodian Law. Any debt financing approved by the Board of Directors shall
be negotiated and secured by the Company on commercial terms. Such loans shall
only be guaranteed by the Company and/or PCW when, and if necessary. Under no
circumstances shall the MPTC or any other government agency or ministry
guarantee the debt of the Company unless their prior written consent is
obtained.
At the end of the first year after signing this agreement, PCW agrees to buy out
Khmer Sameky TeleCom Co., Ltd.
C. After one year, the initial share Capital of the Joint Enterprise is USD
5,000,00.00 (US Dollars Five Million and zero/100) of which the share capital of
Party A is 25% (twenty five percent) and 75% (seventy five percent) the share of
Party B.
D. The total contribution 100% (one hundred percent) for the share capital
shall be
<PAGE>
made by Party B.
E. At the end of the Agreement and License period, or any extension, or the
early termination of the Agreement, MPTC shall be entitled to 100% (one hundred
percent) of the fixed asset of the Company.
F. The capital of the Joint Enterprise may be increased by the issuance of new
shares or by other means as the Board of Directors and/or shareholders deem
appropriate in accordance with the articles of Association and the applicable
law of the Kingdom of Cambodia. In such case, the share holding ratio mentioned
above shall be maintained by Party A on a twenty five (25%) percent of the first
Capital Joint Enterprise of US $5,000,000.00 of American Cambodian TeleCom, LTD.
Party A has the right to purchase any new share to maintain the share holding
ratio.
7. OBLIGATION OF PARTY A
Party A shall be responsible, but not exclusively, for the following:
1. Providing appropriate space, if available, in MPTC building and on MPTC land
for the installation of Company equipment;
2. Assisting the Company in processing all customs and importation clearances
for equipment entering the Kingdom of Cambodia;
3. Assisting expatriate personnel to obtain entry visa and work permits and
processing all related documentation;
4. Keep the contents of this Contract in full confidence and refrain from
disclosing the contents hereof to a third party, except as required by
5. Assisting for the Company, pursuant to the Company's application with the
Council for the Development of Cambodia (CDC) and or any application to the
Cambodian Investment Boards (CIB), the most favorable income and importation tax
incentives, and any other investment incentives, available under current, or
future Cambodian Law.
8. OBLIGATION OF PARTY B
Party B shall be responsible, but not exclusively, for the following:
<PAGE>
1. Assisting in the provision of expertise in the establishment of the network;
2. Ensuring to bring to the Kingdom of Cambodia the modern technologies for the
improvement of telecommunication network;
3. Assisting in the recruitment of expatriate personnel;
4. Assisting in the provision of ongoing management expertise of the business;
5. Responsible for economic analysis pertaining to the business and the
expenses incurred therefrom, upon request;
6. Assisting in the training of Cambodian technical personnel, management,
sales and marketing personnel;
7. Arranging for the import of material and technical equipment with the
agreement in principle of Party A and at prices based on International Market;
8. Keep the contents of this contract in full confidence and refrain from
disclosing the contents hereof to a third party, except as required by law or
with the prior written consent of MPTC;
9. The Company shall deposit USD 200,000.00 (two hundred thousand and zero/100
US Dollars) within 45 working days after signing this Agreement. Failure to do
so, this Agreement shall be void. If the Company has deposit in a full required
amount, the Company shall have a right to withdraw the full deposit amount after
commencing the commercial business.
9. OBLIGATIONS OF THE PARTIES
Each Party shall:
1. Use its best efforts to assist the other Party in Performing such other
Party's obligations, hereunder and to ensure the success of the Company;
2. Use its best efforts to maximize publicity and increase market awareness of
the Company and its products and/or services throughout the Kingdom of Cambodia
and internationally.
10. MANAGEMENT OF THE JOINT ENTERPRISE
1. The Board of Directors shall determine the policies of the Company and
direct its
<PAGE>
overall management, decide all major issues concerning the Joint
Venture Company in according with this document, the Articles of Association and
the applicable laws of the Kingdom of Cambodia.
2. The Board of Directors shall consist of five (5) members, appointed as
follows:
Party A two (2) members
Party B three (3) members
- The Chairmen of the Board of Directors shall be appointed by Party B.
- The Vice Chairman shall be appointed by Party A.
3. The Chairman of the Board of Directors shall be the Chairman of the Board
Meeting and shall have the power and duty to call a meeting, to take initiative
and to give advice in respect of policies of the Joint Enterprise;
4. The Joint Enterprise shall be managed by the General Manager;
5. The General Manager and the Secretary of the Board of Directors shall be
appointed by B;
6. The Deputy General Manager shall be appointed by Party A;
7. The General Manager and the Deputy General Manager shall be directors of the
Board;
8. The General Manager shall be responsible directly to the Board of Directors
for the daily business operations and affairs of the Joint Venture Company and
shall supervise the activities of all other personnel.
In case of absence of General Manager, the Deputy General Manager shall act on
his behalf having the same authority as conferred to him.
11. ANNUAL GENERAL MEETING (SHAREHOLDERS MEETING)
The annual general meeting of the Joint Enterprise Company shall be convened for
the election of directors, approval of the audited financial statements and the
transaction of other business not less than once a year, in accordance with the
Articles of Association and the laws of the Kingdom of Cambodia.
12. EXTRAORDINARY GENERAL MEETING
<PAGE>
The extraordinary general meeting of the Company shall be convened in accordance
with the provisions of the Articles of Association and the laws of the Kingdom
of Cambodia.
13. BOARD OF DIRECTORS MEETING
At every Board of Directors meeting, the Chairman of the Board shall preside
over as the Chairman of the meeting. In the absence of the Chairman of the
Board, the Vice Chairman shall preside over the meeting. In the case where both
the Chairman and Vice Chairman of the Board are absent, the Board shall appoint
on Director to chair the meeting. The investment and the expansion of the
business and the operations of the Joint Enterprise can be performed only when
the Board of Directors deem appropriate, provided that the said investment and
expansion shall be limited to the field of telecommunications only.
The powers and duties, the proceeding, the vote of Directors and the quorum of
Directors meeting shall be defined in accordance with the provisions of the
Articles of Association and the applicable laws of the Kingdom of Cambodia.
14. LIMITATION OF LIABILITY
The debts, obligations and liabilities of the Company, whether arising from or
in connection with any contract, tort or otherwise, shall be the sole
responsibility of the Company, and no Director, Officer, Manager or Attorney of
the Company shall be personally liable for any such debt, obligation or other
liability of the Company solely by reason of being a Director, Officer, Manager
or Attorney of the Company.
15. INDEMNIFICATION OF DIRECTORS, OFFICERS, MANAGERS, EMPLOYEES AND ATTORNEYS
A. Each person who was or is made a party, or is threatened to be made a party
to, or is otherwise involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding") by reason
of the fact that he or she is or was a Director, Officer, Manager, Employee or
Attorney of the Company, whether the basis of such proceeding is alleged action
in an official capacity or otherwise, shall be indemnified and held harmless by
the Company to the fullest extent authorized by Cambodian Law (including
indemnification for negligence or gross negligence but excluding indemnification
(I) for acts or omissions involving actual fraud or willful misconduct or (II)
with respect to any transaction from which the indemnitee derived improper
personal benefit), against all expense, liability and loss
<PAGE>
(including attorney's fee, judgments, fines, exercise tax or penalties and
amounts paid in settlement) reasonably incurred or suffered by such indemnified
person in connection therewith.
B. The right to indemnification conferred in Clause A of this section 15 shall
include the right to be paid by the Company the expenses (including attorney's
fee) incurred in defending any proceeding in advance of its final disposition
(hereinafter an advancement of expenses"). The rights to indemnification and to
advancement of expenses shall be contract rights and such rights shall survive
as to an indemnified person who has ceased to be a Director, Manager, Officer,
Employee or Attorney and shall inure to the benefit of the indemnified person's
heirs, executors and administrators.
C. The rights to indemnification and to the advancement of expenses shall be
inclusive of any other right that any other person or entity may have or
hereinafter acquire under any statute, agreement, vote or otherwise.
D. The Company may maintain insurance, at its expense, to protect itself and
any Director, Manager, Officer, Employee or Attorney of the Company against any
expense, liability or loss, irrespective of whether or not the Company would
have the power or indemnify such person(s) against expense, liability or loss
under Cambodian Law.
E. The Company may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification and to advancement of expenses to any
other agent of the Company to the fullest extent of the provisions of this
section with respect to the indemnification and advancement of expenses of
Directors, Officers and Attorneys of the Company.
16. SHARING OF REVENUES
MPTC shall be paid the following percentages of gross revenue, which are derived
from the following charges:
- - Connection fee
- - Monthly rental
- - Local charges
- - Long Distance charges
- - Surcharge on international calls
- - Net interconnect settlement charge
- - Profit of the sales of handsets, equipments, terminals and others of the CDMA
PCS 1900 System
- - All other service charge
<PAGE>
- - 7% gross revenue per annum for the first three (3) years of commercial
operation of CDMA System;
- - 12% gross revenue per annum for the second three (3) years of commercial
operation;
- - 15% gross revenue per annum for the rest of the contract duration.
17. DISTRIBUTIONS
Within ninety (90) days following the completion of the yearly audit, the
General Manager shall prepare a proposal based on the results of the yearly
audit regarding the distribution of net profits and submit it to the Board of
Directors for examination and approval notwithstanding the equity interests in
clause 6 above, the parties agree that any dividend shall be in the proportion:
- - Party A 20% (twenty percent)
- - Party B 80% (eighty percent)
18. FINANCIAL STATEMENTS, ACCOUNTING AND BALANCE SHEETS
1. The fiscal year of the Company shall commence on January 1/st/ and end on
December 31/st/ of each year. For the first year of operations, the fiscal year
shall start from the commencement of commercial operations and end on December
31/st/ of that year;
2. The internal quarterly financial statements of the Joint Enterprise shall be
carried out in accordance with the International Accounting Standard (IAS) and
recognized by the Ministry of Finances of the Kingdom of Cambodia;
3. The account of the Joint Enterprise shall be audited by two (2) independent
external auditors, one each to be appointed by each party;
4. Within sixty (60) days after the end of each fiscal year, the General
Manager shall present to the Board of Directors at the Annual General Meeting a
report on the operations, accounting and financial statements as at the end of
the previous year;
5. Statistic report, as requested by the MPTC to all operators shall be
submitted to the MPTC.
19. ARBITRATION
<PAGE>
A. Both parties agree that all issues pertaining to this Agreement shall be
settled expediently and amicably through discussions and negotiations.
B. Failing a negotiated agreement regarding any disputes or differences
pertaining to this agreement, including any question regarding its existence,
validity or termination, the dispute shall be referred to Arbitration in
accordance with the Rules of Arbitration and Conciliation of the International
Chamber of Commerce. The award of such an Arbitration shall be final and binding
upon parties.
C. Any Arbitration pursuant to this Article 19 shall take place at a location
to be agreed by both parties, or in Singapore if there is no agreement regarding
the location, and shall be conducted in English language.
20. FORCE MAJEURE
Neither party shall be liable for any breach of this Agreement caused by act of
God, insurrection or civil disorder, war or military operations, national or
local emergency, compliance with any statutory obligation, industrial disputes
of any kind, fire, lighting, explosion, flood, subsistence, weather of
exceptional severity or omissions of persons for whom neither Party to the
Agreement is responsible or any other cause outside its reasonable control.
21. MISCELLANEOUS
This Agreement has been prepared in English and translated into a version in
Khmer. In the event of any dispute and/or arbitration concerning this Agreement,
including any question regarding its existence, interpretation, validity or
termination, solely the English version shall control.
22. FINAL PROVISION
This Agreement has been prepared in both Khmer and English languages. This
agreement may be executed in any number of counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be fully
executed on the date first written above.
MINISTRY OF POST AND TELECOMMUNICATIONS
KINGDOM OF CAMBODIA
By: /s/ H. E. So Khun
-----------------------------------------------------------
Name: H. E. So Khun
Title: Secretary of States, MPTC
PORTACOM WIRELESS, INC
By: /s/ Paul R. Carr
-----------------------------
Name: Paul R. Carr
Title: Vice President
KHMER SAMEKY TELECOM CO., LTD
By: /s/ Sarun Oeurn
-----------------------------
Name: Sarun Oeurn
Title: President & CEO
WITNESS
By: /s/ Koy Kim Sea By: /s/ Quyen Nguyen
--------------- ----------------
Name: Koy Kim Sea Name: Quyen Nguyen
<PAGE>
EXHIBIT 10.27
KINGDOM OF CAMBODIA
-------------------
NATION RELIGION KING
--------------------
MINISTRY OF POSTS
AND TELECOMMUNICATIONS
LICENSE
-------
FOR THE
PROVISION AND OPERATION OF
A CDMA BASED TELECOMMUNICATIONS
SYSTEM
WITHIN
THE KINGDOM OF CAMBODIA
ISSUED AND GRANTED
BY
THE MINISTRY OF POSTS AND TELECOMMUNICATIONS (MPTC)
TO
AMERICAN CAMBODIAN TELECOM, LTD.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
1. CDMA SYSTEM 2
2. ALLOCATION OF RADIO SPECTRUM 2
3. SYSTEM LINKS 3
4. INTERNATIONAL TRAFFIC 4
5. COMPLEMENTARY AND VALUE ADDED SERVICES 4
6. COVERAGE 4
7. INTERNATIONAL STANDARDS 5
8. TERMINAL EQUIPMENT 5
9. INTERCONNECTION 6
10 ALLOCATION OF NUMBER 6
11. DIRECTORY INFORMATION 6
12. EMERGENCY SERVICES 7
13. PERFORMANCE GUARANTEES 7
14. SECURITY ASPECTS 8
15. RELATIONS WITH CUSTOMERS 8
16. TARIFF AND BILLING 9
17. ACCOUNTING SETTLEMENTS 9
18. PROVISION OF INFORMATION 10
19. FISCAL AND ADMINISTRATIVE MATTERS 11
20. LICENSE TERMS 11
21. CONFIDENTIALITY 12
22. APPLICABLE LEGISLATION 13
23. GENERAL 13
</TABLE>
<PAGE>
LICENSE
-------
FOR THE PROVISION AND OPERATION OF
A CODE DIVISION MULTIPLE ACCESS (CDMA) BASED
TELECOMMUNICATIONS SYSTEM (HEREINAFTER
"CDMA SYSTEM" WITHIN
THE KINGDOM OF CAMBODIA
THIS LICENSE IS GRANTED ON THE 26TH DECEMBER, 1996, WHEREBY:
THE MINISTRY OF POSTS AND TELECOMMUNICATIONS OF THE KINGDOM OF CAMBODIA (MPTC)
HEREBY GRANTS A LICENSE TO PROVIDE AND OPERATE A CDMA BASED TELECOMMUNICATIONS
SYSTEM (HEREINAFTER "LICENSE") WITHIN THE KINGDOM OF CAMBODIA TO:
AMERICAN CAMBODIAN TELECOM, LTD., (HEREINAFTER "PORTACOM"), A TO BE FORMED
CAMBODIAN LIMITED LIABILITY COMPANY INCORPORATED UNDER THE LAWS OF THE KINGDOM
OF CAMBODIA, WHOSE PRINCIPAL SHAREHOLDERS ARE:
PORTACOM WIRELESS, INC. AND
KHMER SAMEKY TELECOM CO., LTD; AND
MINISTRY OF POSTS AND TELECOMMUNICATIONS (MPTC)
THE LICENSE IS GRANTED SUBJECT TO THE FOLLOWING TERMS AND CONDITIONS:
1. THE CDMA SYSTEM
THE CDMA SYSTEM IS DESCRIBED HEREIN AS:
A. CDMA TECHNOLOGY IS DEFINED AS CODE DIVISION MULTIPLE ACCESS
TELECOMMUNICATIONS TECHNOLOGY AND OR OTHER PCS EQUIVALENT ADVANCED
TECHNOLOGY OPERATED ON THE 1900 MHZ FREQUENCY BAND;
B. IN THE DEVELOPMENT OF THIS CDMA SYSTEM, PORTACOM SHALL HAVE THE RIGHT TO
INSTALL AND OPERATE BASE STATIONS, CELLULAR SWITCH EXCHANGES AND ANY OTHER
FACILITIES AND EQUIPMENT DIRECTLY INVOLVED IN THE PROVISION DEVELOPMENT AND
OPERATION OF A PCS 1900 BASED MOBILE CELLULAR SYSTEM, NOT INCLUDING THE
WIRELESS LOCAL LOOP (WLL) SYSTEM;
<PAGE>
C. THE LICENSE COVERS THE ENTIRE TERRITORY OF THE KINGDOM OF CAMBODIA.
2. ALLOCATION OF RADIO SPECTRUM
A. PORTACOM WILL HAVE USE, DURING THE VALIDITY OF THE LICENSE, AND ANY
EXTENSION THEREOF, OF FREQUENCIES WITHIN THE BANDS 1900 MHZ TO OPERATE THE
CDMA SYSTEM. MPTC UNDERTAKES THAT THERE WILL BE NO INTERFERENCE WITHIN THESE
BANDS 1870 - 1879.8 MHZ AND 1950- 1959.8 MHZ OR A MINIMUM WORKABLE FREQUENCY
FOR CDMA SYSTEM WITH PCS 1900 ASSIGNED TO PORTACOM;
B. THE FOLLOWING ARE THE INITIAL NON-EXCLUSIVE MICROWAVE FREQUENCY ALLOCATIONS
AND ASSIGNMENTS OF THE LICENSE:
I. LONG HAUL: THE 7 OR 8 GHZ BAND AND THE 2 GHZ BAND.
II. SHORT HAUL: 15 GHZ BAND (14400-15350 MHZ).
THE FREQUENCY ASSIGNMENT SHALL BE MADE ON A CASE BASIS AND SUCH APPROVAL
WOULD NOT BE UNREASONABLY WITHHELD.
C. ADDITIONAL BANDWITH FOUND TO BE NEEDED TO EXPAND AND ENHANCE THE CDMA SYSTEM
WILL NOT BE UNREASONABLY WITHHELD BY THE MPTC.
D. PORTACOM WILL RECEIVE ADDITIONAL BANDS AS REQUIRED FOR CAPACITY REASONS,
AND/OR TO PROVIDE NEW CDMA SYSTEM RELATED SERVICES THAT MAY BE DEVELOPED
THROUGH NEW TECHNOLOGY, IF THE FREQUENCIES ARE AVAILABLE;
E. PORTACOM SHALL PAY FOR THE FREQUENCY AS CONTAINED IN THE GENERAL TARIFF OF
MPTC.
F. FOR THE ALLOCATION OF ADDITIONAL MICROWAVE FREQUENCIES, APPROVED BY MPTC,
PORTACOM SHALL NOTIFY THE MPTC, NOT LATER THAN THREE (3) MONTHS PRIOR TO THE
START OF INSTALLATION OF THE SYSTEM EQUIPMENT, OF THE APPLICABLE OPERATING
PARAMETERS (E.G. PREFERRED FREQUENCIES, TRANSMISSION POWER, ANTENNA SITES AS
WELL AS TYPES, HEIGHT AND OTHER PERTINENT INFORMATION) NECESSARY FOR CO-
ORDINATION OF FREQUENCY ALLOCATIONS. THE MPTC WILL RESPOND WITHIN THIRTY
(30) DAYS, TO SUCH REQUEST.
3. SYSTEM LINKS
A. PROVIDED THAT THE MPTC HAS SUITABLE EXCESS TRANSMISSION CAPACITY EXISTING
BETWEEN TWO LOCATIONS, PORTACOM SHALL HAVE THE RIGHT TO LEASE SUCH CAPACITY
WHEN PORTACOM EXPANDS THE CDMA SYSTEM COVERAGE. WITHIN AN APPROPRIATE PERIOD
OF TIME, (NOT TO EXCEED 90 DAYS AFTER PORTACOM'S FORMAL REQUEST TO THE MPTC)
PORTACOM HAS THE RIGHT TO INSTALL AND OPERATE ANY TRANSMISSION
INFRASTRUCTURES THAT IT MAY REQUIRE FOR USE SOLELY WITHIN ITS OWN SYSTEM.
THE TRANSMISSION INFRASTRUCTURE MAY CONSIST OF MICROWAVE, SATELLITE, OR
CABLE SYSTEMS OR ANY OTHER APPROPRIATE TECHNOLOGY CONSISTENT WITH ITU
STANDARDS, OR SUCH STANDARDS THAT MIGHT BECOME AVAILABLE WITH TECHNOLOGICAL
DEVELOPMENTS.
<PAGE>
C. PORTACOM HAS THE ADDITIONAL RIGHT TO LEASE THE TRANSMISSION CAPACITY OF
OTHER PUBLIC NETWORK OPERATORS TO UNDERTAKE THESE CONNECTIONS.
4. INTERNATIONAL TRAFFIC
PORTACOM SHALL HAVE THE RIGHT TO PROVIDE INTERNATIONAL TELEPHONE SERVICE TO
ITS CUSTOMERS BY MEANS OF INTERCONNECTION TO THE PUBLIC SWITCHED TELEPHONE
NETWORK (PSTN) AND/OR OTHER AUTHORIZED INTERNATIONAL GATEWAYS (ISC).
5. COMPLEMENTARY AND VALUE ADDED SERVICES
PORTACOM WILL OFFER A STANDARD RANGE OF BASIC CELLULAR SERVICES TO ITS
CUSTOMERS, WHICH WILL INCLUDE VOICE, DATA ( FOR CDMA PCS 1900 SYSTEM), AND
FACSIMILE (SERVICE). PORTACOM MAY ALSO, AND SUBJECT TO MPTC APPROVAL, OFFER
ADDITIONAL VALUE ADDED SERVICES AS DEVELOPED OVER TIME.
6. COVERAGE
A. PORTACOM WILL SUBMIT A ROLL OUT SCHEDULE DEFINING COVERAGE TARGETS TO MPTC
FOR ITS INFORMATION AND COMMENT.
B. PORTACOM SHALL PREPARE AND SUBMIT TO MPTC BEFORE THE END OF EACH CALENDER
YEAR ITS CURRENT FIVE-YEAR BUSINESS AND DEVELOPMENT PLAN.
7. INTERNATIONAL STANDARDS
PORTACOM SHALL APPLY ACCEPTED INTERNATIONAL STANDARDS, INCLUDING BUT NOT
LIMITED TO THOSE OF THE ITU, FOR THE CONSTRUCTION AND OPERATION OF THE CDMA
SYSTEM. IN THE ABSENCE OF SUCH STANDARDS, PORTACOM SHALL, TO THE EXTENT
PRACTICAL, FOLLOW PREVAILING AND ACCEPTED INTERNATIONAL PRACTICES. PORTACOM,
AND SUBJECT TO MPTC APPROVAL, MAY SUBSTITUTE OR COMPLEMENT EXISTING
TECHNOLOGY WITH SUCH TECHNOLOGY THAT MIGHT BE DEVELOPED AND BECOME AVAILABLE
LATER DURING THE VALIDITY OF THIS LICENSE.
8. TERMINAL EQUIPMENT
A. PORTACOM SHALL ENSURE THAT ONLY TERMINAL EQUIPMENT WHICH COMPLIES WITH CDMA
SYSTEM STANDARDS, IS CONNECTED TO THE SYSTEM.
<PAGE>
B. PORTACOM MAY REFUSE TO TRANSMIT CALLS OR OTHER COMMUNICATIONS ON ITS CDMA
SYSTEM WHERE TERMINAL OR OTHER EQUIPMENT MAY CAUSE DAMAGE OR INTERFERENCE.
C. PORTACOM SHALL BE OBLIGED TO CONNECT TERMINAL EQUIPMENT THAT MEETS THE CDMA
SYSTEM STANDARDS, COMPLY WITH PORTACOM'S REGISTRATION REGULATION AND IS
LEGALLY IMPORTED INTO CAMBODIA UNDER PROPER CUSTOMS FORMALITY AND WHICH IS
NOT NECESSARILY PROCURED THROUGH PORTACOM.
D. PORTACOM SHALL HAVE THE RIGHT TO SELL TO CUSTOMERS ANY AND ALL TYPES OF
TERMINALS, DEVICES AND HANDSETS FOR USE THE CDMA PCS 1900 SYSTEM.
9. INTERCONNECTION
A. PORTACOM SHALL BE ENTITLED TO INTERCONNECT THE CDMA SYSTEM WITH THE PSTN AND
OTHER TELECOMMUNICATION OPERATOR NETWORKS AS CONTAINED IN THE MPTC
INTERCONNECT REGULATION AND/OR, IF NECESSARY, A SEPARATE INTERCONNECT
AGREEMENT WITHIN THREE MONTHS OF THE GRANTING OF THE LICENSE.
B. MPTC WILL PROVIDE SUFFICIENT CAPACITY FOR PORTACOM'S CDMA SYSTEM'S
REQUIREMENTS AT THE LOCAL TRUNK AND INTERNATIONAL LEVEL AT ALL TIMES.
10. ALLOCATION OF NUMBER
A. PORTACOM SHALL BE ASSIGNED A UNIQUE AND EXCLUSIVE ACCESS CODE FOR THE
OPERATION OF ITS CDMA SYSTEM WITHIN THE FRAMEWORK OF THE MPTC'S NATIONAL
NUMBERING PLAN.
B. PORTACOM SHALL APPLY FOR AND BE GRANTED SUFFICIENT TELEPHONE NUMBERS BY MPTC
TO FULFILL ITS REQUIREMENTS FOR THE DURATION OF LICENSE.
11. DIRECTORY INFORMATION
A. PORTACOM SHALL USE ITS BEST ENDEAVORS TO ENSURE THAT ITS CUSTOMERS HAVE
ACCESS TO THE DIRECTORY ASSISTANCE SERVICES OF OTHER CAMBODIAN
TELECOMMUNICATIONS PROVIDERS.
B. PORTACOM SHALL FURNISH ALL APPROPRIATE INFORMATION CONCERNING ITS CUSTOMERS
TO MPTC FOR PUBLICATION IN THE NATIONAL TELEPHONE DIRECTORY EXCEPT WHERE
PORTACOM'S CUSTOMERS HAVE REQUESTED THAT SUCH INFORMATION REMAIN
CONFIDENTIAL.
12. EMERGENCY SERVICES
<PAGE>
A. PORTACOM WILL PROVIDE ITS CUSTOMERS ACCESS TO THE NATIONAL EMERGENCY
SERVICES IN CAMBODIA FREE OF CHARGE VIA INTERCONNECTION WITH THE PSTN.
B. AS ALLOWED BY THE CUSTOMER'S EQUIPMENT, ALL EMERGENCY CALLS ORIGINATING ON
THE CDMA SYSTEM WILL BE ACCEPTED.
13. PERFORMANCE GUARANTEES
A. PORTACOM AGREES TO ESTABLISH A RELIABLE CONTROL AND QUALITY MEASUREMENT
SYSTEM FOR ITS SERVICES TO ENSURE COMPLIANCE WITH ITU AND OTHER ESTABLISHED
STANDARDS AND PRACTICES, OR DEVELOPING TECHNOLOGY THAT BECOMES COMMERCIALLY
AVAILABLE AND REASONABLY SATISFACTORY TO THE MPTC.
B. PORTACOM SHALL DEMONSTRATE ITS ABILITY TO COMPLY WITH THE FOLLOWING
REQUIREMENTS:
I) THE CDMA MOBILE CELLULAR OPERATION MUST BE DESIGNED TO PROVIDE SERVICE
ON A CONTINUOUS BASIS 24 HOURS A DAY, 365 DAYS A YEAR;
II) PORTACOM WILL HAVE AN OBLIGATION TO ENSURE THAT ALL NETWORK FAILURES
WILL BE RECTIFIED AND SERVICE RESTORED WITHOUT UNDUE DELAY.
III) THE GENERAL SERVICE QUALITY SHALL BE ACCEPTABLE IN ACCORDANCE WITH ETSI
(EUROPEAN TECHNICAL STANDARD INSTITUTE) OR EQUIVALENT AMERICAN
INSTITUTE FOR CDMA STANDARDS.
IV) PORTACOM WILL USE ITS BEST ENDEAVORS TO MINIMIZE DOWN-TIME FOR
ESSENTIAL MAINTENANCE AND SYSTEM DEVELOPMENT.
14. SECURITY ASPECTS
A. IN ACCORDANCE WITH CAMBODIAN LAW, AND DULY REQUESTED BY THE RELEVANT
AUTHORITY(IES), PORTACOM SHALL PROVIDE THE FACILITIES TO MONITOR THE
COMMUNICATIONS, THE COST FOR THIS IS TO BE BORN BY THE RESPECTIVE
AUTHORITY(IES).
B. IN THE EVENT OF A BONA FIDE NATIONAL SECURITY CRISIS, AND AT THE REQUEST OF
THE RELEVANT AUTHORITY(IES) AND IN COMPLIANCE WITH CAMBODIA LAW, THE CDMA
SYSTEM SERVICES AND CAPACITIES SHALL BE PUT AT THEIR DISPOSAL TO THE EXTENT
NECESSARY. HOWEVER, THE INCOME DERIVED FROM NORMAL COMMERCIAL COMMUNICATIONS
DURING ANY SUCH PERIOD OF CRISIS SHALL NEVERTHELESS BE COLLECTED AND SHALL
CONSTITUTE PORTACOM REVENUE
15. RELATIONS WITH CUSTOMERS
A. PORTACOM SHALL MAKE ITS SERVICES AVAILABLE TO THE GENERAL PUBLIC ON FAIR
REASONABLE BASIS AND TERMS; PORTACOM SHALL ALSO PROVIDE ITS SERVICES ON A
NON-DISCRIMINATORY BASIS.
<PAGE>
B. PORTACOM SHALL OFFER A SERVICE AGREEMENT TO ALL OF ITS CUSTOMER ESTABLISHING
TERMS AND CONDITIONS OF SERVICE IN ACCORDANCE WITH THE LICENSE.
16. TARIFF AND BILLING
A. TARIFFS FOR SERVICES PROVIDED IN THE CDMA SYSTEM WILL BE DETERMINED BY
PORTACOM WITHIN THE REGULATION SET BY MPTC.
B. PORTACOM SHALL PUBLISH THE TARIFFS TERMS AND CONDITIONS FOR ITS STANDARD
AND SERVICE AT LEAST ONCE A YEAR AND SHALL KEEP ITS CUSTOMERS CONTINUALLY
INFORMED OF ANY CHANGES THEREOF.
C. THE PORTACOM BILLING SYSTEM SHALL COMPILE DATA ABOUT ITS CUSTOMER'S USE OF
THE CDMA SYSTEM'S SERVICES INCLUDING THE CALLING AND CALLED NUMBERS AND THE
DATE, TIME AND DURATION OF CALLS AS WELL AS ANY OTHER INFORMATION CONSIDERED
OF VALUE. SUCH INFORMATION SHALL BE AVAILABLE TO THE CUSTOMERS CONCERNED,
INCLUDING THE INTERCONNECTED OPERATORS/NETWORKS.
D. PORTACOM IS AUTHORIZED TO DIRECTLY INVOICE AND COLLECT FOR ALL SERVICES
PROVIDED TO ITS CUSTOMERS.
E. PORTACOM MUST SUBMIT THE UNAUDITED BALANCE SHEET OF THE COMPANY TO MPTC
EVERY THREE (3) MONTHS.
17. ACCOUNT SETTLEMENTS
A. PORTACOM SHALL MAKE PAYMENTS FOR ITS USE OF THE MPTC NETWORK AND FACILITIES
INCLUDING INTERNATIONAL TRAFFIC WITHIN TWO (2) MONTHS AFTER THE INVOICE
DATE.
B. PORTACOM SHALL MAKE PAYMENTS TO MPTC FOR THE REVENUE AND PROFIT SHARING
WITHIN THREE (3) MONTHS AFTER THE FINAL AUDIT OF THE FINANCIAL STATEMENTS IS
COMPLETED.
C. PENALTY PAYMENTS SHALL BE MADE BY PORTACOM FOR LATE PAYMENT AS DETERMINED BY
THE MINISTRY OF FINANCES GUIDELINES.
D. IF PAYMENTS ARE NOT MADE WITHIN SIX (6) MONTHS FROM THE DUE DATE WITHOUT
REASONABLE CAUSE THE MPTC MAY, AT ITS OWN DISCRETION, SUSPEND PORTACOM
OPERATIONS.
18. PROVISION OF INFORMATION
<PAGE>
A. PORTACOM WILL PROVIDE TO MPTC WITH TECHNICAL, ADMINISTRATIVE AND FINANCIAL
INFORMATION REASONABLY REQUIRED FOR THE CONTROL OF AND COMPLIANCE WITH THE
TERMS OF THE LICENSE.
B. PORTACOM SHALL PRODUCE A YEARLY AUDITED REPORT IN ACCORDANCE WITH
ESTABLISHED INTERNATIONAL ACCOUNTING PRACTICES THAT MEET THE REQUIREMENTS OF
THE CONCERNED CAMBODIA FISCAL AND FINANCIAL AUTHORITIES, AND SHALL SUBMIT
THE SAME TO MPTC.
C. ALL INFORMATION THAT MPTC OBTAINS, REGARDING PORTACOM, ITS OPERATIONS AND/OR
THE CDMA SYSTEM, IS PRIVILEGED AND CONFIDENTIAL AND SHALL BE TREATED AS SUCH
AND KEPT CONFIDENTIAL WITH THE EXCEPTION OF SUCH INFORMATION THAT MUST BE
DISCLOSED ACCORDING TO CAMBODIAN LAW.
19. FISCAL AND ADMINISTRATIVE MATTERS
TO THE EXTENT ALLOWED BY CAMBODIAN LAWS, RULES AND REGULATIONS, MPTC
UNDERTAKES TO ASSIST IN OBTAINING APPROVALS FOR THE FOLLOWING:
I) WORKING PERMITS FOR NON-CAMBODIAN STAFF AS REQUIRED BY PORTACOM;
II) DUTY-FREE IMPORT OF NECESSARY TELECOMMUNICATIONS EQUIPMENT;
III) ASSIST WHERE POSSIBLE, WITH THE RECRUITING OF VARIOUS CATEGORIES OF
QUALIFIED CAMBODIAN MANAGEMENT AND WORKING PERSONNEL.
20. LICENSE TERMS
20.1 DURATION
THE LICENSE SHALL BE VALID FOR A TOTAL OF TWENTY FIVE (25) YEARS FROM THE
ORIGINAL CONTRACT DATE, WHICH IS 26TH DECEMBER, 1996.
20.2 EXTENSION
PRIOR TO THE END OF TWENTY FIVE (25) YEARS LICENSE PERIOD, PORTACOM MAY
WRITE TO MPTC FOR AN EXTENSION OF THE LICENSE, IF IT SO DESIRES.
20.3 ASSIGNMENT OF RIGHTS
A. PORTACOM MAY NOT ASSIGN, TRANSFER OR DISPOSE OF THE LICENSE OR THE
RIGHTS DERIVED THEREFROM IN FAVOR OF THE THIRD PARTIES WITHOUT THE PRIOR
APPROVAL OF MPTC.
B. SUBJECT TO THE APPROVAL OF MPTC, PORTACOM MAY SUBCONTRACT TO OTHER
PARTIES FOR THE PROVISION OF SERVICES AND/OR EQUIPMENT WITH MAY BE
PROVIDED BY PORTACOM UNDER THE TERMS OF THIS LICENSE.
20.4 CDMA SYSTEM OWNERSHIP
<PAGE>
UPON THE EXPIRATION OF THE LICENSE, OR ANY EXTENSION, OR IN THE EVENT OF
EARLY TERMINATION OF THE CONTRACT THEREOF, PORTACOM SHALL TRANSFER TITLE TO
AND OWNERSHIP OF ALL OF ITS ASSETS TO THE MPTC AT NO COST.
21. CONFIDENTIALITY
A. PORTACOM SHALL ASSURE CONFIDENTIALITY OF INFORMATION RECEIVED FROM OR
CONCERNING ITS CUSTOMERS AS WELL AS ANY THIRD PARTIES, AND SHALL NOT
DISCLOSE ANY SUCH INFORMATION WITHOUT THE EXPRESS WRITTEN AGREEMENT OF THOSE
CONCERNED.
B. CONFIDENTIAL INFORMATION SHALL BE USED EXCLUSIVELY FOR THE PURPOSE FOR WHICH
IT WAS DISCLOSED.
C. IN THE EVENT THAT ANY CONFIDENTIAL INFORMATION, AS MENTIONED ABOVE, IS
REQUIRED IN ACCORDANCE WITH CAMBODIAN LAW, THIS WILL BE DISCLOSED TO THE
RELEVANT AUTHORITY(IES) FOLLOWING DUE FORMAL PROCEDURE.
22. APPLICABLE LEGISLATION
A. PORTACOM'S ACTIVITIES DETERMINED BY THE CONDITIONS OF THIS LICENSE ARE
GOVERNED BY CAMBODIAN LEGISLATION AND BY THE TERMS OF THIS LICENSE, AS WELL
AS BY ANY PACT, AGREEMENTS AND TREATIES SUBSCRIBED AND RATIFIED BY THE ROYAL
GOVERNMENT OF THE KINGDOM OF CAMBODIA.
B. IN THE EVENT OF NEW LAWS OR CHANGES OF INTERPRETATION OF EXISTING LAWS IN
ANY ADVERSE WAY AFFECT THE COMMERCIAL OR OPERATING CONDITIONS UNDER THIS
LICENSE, THE MPTC AGREES TO MAKE THE NECESSARY ADJUSTMENT TO ENABLE A
CONTINUATION OF THE OPERATION OF THE CDMA SYSTEM AND SERVICES UNDER
UNCHANGED COMMERCIAL AND OPERATIONAL CONDITIONS.
23. GENERAL
THIS AGREEMENT HAS BEEN PREPARED IN ENGLISH AND TRANSLATED INTO AVERSION IN
KHMER. IN THE EVENT OF ANY DISPUTE AND/OR ARBITRATION CONCERNING THE
LICENSE, INCLUDING ANY QUESTION REGARDING ITS EXISTENCE, INTERPRETATION,
VALIDITY OR TERMINATION, THE ENGLISH VERSION SHALL CONTROL.
ISSUED BY: SECRETARY OF STATE
MINISTRY OF POSTS AND TELECOMMUNICATIONS OF CAMBODIA (MPTC)
BY: /s/ H. E. SO KHUN
-----------------------------------
NAME: H. E. SO KHUN
TITLE: SECRETARY OF STATE
<PAGE>
ACCEPTED BY LICENSEE: PORTACOM, LTD.
BY: /s/ PAUL R. CARR
--------------------------------
AUTHORIZED SIGNATURE OF PAUL R. CARR
VICE PRESIDENT AND MANAGING DIRECTOR
KHMER SAMEKY TELECOM CO., LTD
BY: /s/ SARUN OEURN
---------------------------------
AUTHORIZED SIGNATURE OF SARUN OEURN
PRESIDENT & CEO
<PAGE>
KINGDOM OF CAMBODIA
-------------------
NATION-RELIGION-KING
--------------------
MINISTRY OF POSTS
AND TELECOMMUNICATIONS
PHNOM PENH
TEL. 426 820
APPENDIX 1
----------
(ATTACHED TO THE JOINT VENTURE AGREEMENT FOR
THE PROVISION OF OPERATION OF CDMA BASED
TELECOMMUNICATIONS SYSTEM BETWEEN MPTC AND
PORTACOM WIRELESS INC.)
THE MINISTRY OF POSTS AND TELECOMMUNICATIONS UNDERTAKES TO GRANT A LICENSE TO
PORTACOM FOR THE PROVISION AND OPERATION OF PAGING SERVICE WITHIN THE KINGDOM OF
CAMBODIA.
PORTACOM SHALL PAY THE LICENSE FEES AS DETERMINED BY THE MINISTRY OF POSTS AND
TELECOMMUNICATIONS.
DATED 26 DECEMBER 1996
THE SECRETARY OF STATE
/s/ SO KHUN
-----------------------
SO KHUN
<PAGE>
EXHIBIT 10.28
STOCK OPTION AGREEMENT
----------------------
THIS AGREEMENT is made as of the 28th day of June, 1996
BETWEEN:
PORTACOM WIRELESS, INC.,
-----------------------
Suite 730, 8055 W. Manchester Avenue,
Playa del Rey, California
90293 USA
(the "Company")
OF THE FIRST PART
AND:
ROBERT KEITH ALEXANDER,
----------------------
#228 - 20 Midpark Crescent S.E.
Calgary, AB
T2X 1P3
(the "Optionee")
OF THE SECOND PART
WHEREAS:
A. The Optionee is a director or senior officer of the Company or its
wholly-owned subsidiary, as the case may be;
B. The Company wishes to grant the Optionee an option to purchase common
shares in the capital of the Company;
C. The Company's shares are listed and posted for trading on the
Vancouver Stock Exchange;
NOW THEREFORE THIS AGREEMENT WITNESSES THAT in consideration of the sum of $1.00
given by the Optionee to the Company (the receipt of which is hereby
acknowledged by the Company) the parties hereto agree as follows:
1. The Company hereby grants the Optionee as an incentive and not in lieu
of salary or any other compensation for services, an option to purchase a total
of 90,000 common shares in its capital (the "Option") at a price of US$3.80 per
share exercisable on or before June 28, 2001 (the "Expiry Date").
<PAGE>
2
2. In order to exercise the Option, the Optionee shall, before 5:00 p.m.
on the Expiry Date, give notice to the Company of the Optionee's intention to
exercise the Option in whole or in part, such notice to be accompanied by cash,
bank draft, money order or certified cheque, payable to the Company, in the
appropriate amount.
3. If the Optionee:
(a) dies prior to the expiration of the Option, the Optionee's legal
representatives may, within one year from the Optionee's death and
prior to the expiry of the Option, exercise that portion of the Option
which remains outstanding after which time the Option shall terminate;
or
(b) ceases to act as a director or senior officer of the Company or its
wholly-owned subsidiary for any reason other than the Optionee's
death, the Option shall terminate 30 days after the date of such
cessation.
4. If the issued and outstanding common shares in the capital of the
Company are at any time changed by subdivision, consolidation, re-division,
reduction in capital, reclassification or recapitalization (such changes are
herein called collectively "Capital Alterations"), not including any issuance of
additional shares for consideration, the Option shall be adjusted as follows:
(a) the number and class of shares in respect of which the Option is
granted shall be adjusted in such a manner as to parallel the change
created by the Capital Alterations in the class and total number of
the issued and outstanding common shares; and
(b) the exercise price of each share in respect of which the Option shall
operate shall be increased or decreased proportionately, as the case
may require, so that upon exercising the Option the same proportionate
shareholdings at the same aggregate purchase price shall be acquired
after such Capital Alterations as would have been acquired before the
Capital Alterations.
5. The Option granted is personal to the Optionee and may not be assigned
or transferred in whole or in part.
6. This Agreement constitutes and expresses the whole agreement of the
parties with reference to the appointment of the Optionee and with reference to
any of the matters or things herein discussed or mentioned with reference to
such appointment, all promises, representations and understandings relative
thereto being merged herein.
7. Any amendment to this Agreement shall be subject to the approval of
the shareholders of the Company if the Optionee was an insider of the Company,
as that term
<PAGE>
3
is used in the Securities Act (British Columbia), at the time of granting the
--------------
Option or is an insider of the Company at the time of the amendment.
8. This Agreement shall be construed and enforced in accordance with the
laws of British Columbia.
9. This Agreement shall be subject to the approval of all securities
regulatory authorities having jurisdiction.
10. If the Optionee is an insider of the Company, as that term is defined
in the Securities Act (British Columbia), the Optionee shall not exercise the
--------------
Option prior to the approval of the Option by the shareholders of the Company.
For the purposes of this paragraph, approval of the shareholders may be granted
in advance of the Option, by way of blanket or omnibus resolution authorizing
the Company's Board of Directors to grant options or alternatively by approving
a stock option plan adopted by the Company. In the event the Company has
adopted a stock option plan, then notwithstanding anything to the contrary
contained herein, the Option and the Agreement shall be governed under the terms
of such stock option plan, and in the event of any inconsistencies between this
Agreement and the stock option plan, the terms of the stock option plan shall
prevail. If the shareholders do not approve the Option and this Agreement, then
the Option and this Agreement shall be void ab initio.
<PAGE>
4
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the day
and year first above written.
THE COMMON SEAL OF )
PORTACOM WIRELESS, INC. was )
hereunto affixed in the presence of: )
)
) c/s
_____________________________ )
)
)
_____________________________ )
SIGNED, SEALED AND DELIVERED )
by ROBERT KEITH ALEXANDER in the )
presence of: )
)
)
_____________________________ )
Signature )
)
_____________________________ ) ______________________________
Name ) ROBERT KEITH ALEXANDER
)
_____________________________ )
Address )
)
<PAGE>
EXHIBIT 10.29
THIS DIRECTOR INCENTIVE OPTION AGREEMENT dated for reference as at the 30th day
of December, 1996.
BETWEEN:
PORTACOM WIRELESS, INC., a company duly incorporated under
the laws of the State of Delaware, with an office at #11 -
1155 Melville Street, in the City of Vancouver, in the
Province of British Columbia, V6Z 4G4.
(the "Company")
OF THE FIRST PART
AND:
DOUGLAS MACLELLAN
224 Redlands Street
Playa del Rey, California
90293
(the "Director ")
OF THE SECOND PART
WHEREAS:
A. The Director is a director of the Company.
B. It is advantageous for the Company to grant to the Director stock
options to purchase the Company's shares as an incentive for services to be
rendered to the Company by the Director.
IN CONSIDERATION OF THESE PREMISES, AND THE COVENANTS AND AGREEMENTS HEREIN
CONTAINED IN THIS AGREEMENT, THE PARTIES COVENANT AND AGREE AS FOLLOWS:
<PAGE>
1. Grant of Options. The Company grants to the Director, irrevocable
----------------
within the time limited by this Agreement, options (the "Options") to purchase
free and clear of all liens, charges and encumbrances, in aggregate, 200,000
common shares of the Company (the "Option Shares") at the price per Option Share
set out in paragraph 2.
2. Term and Price. Subject as hereinafter provided, the Options may be
--------------
exercised by the Director during the period December 30, 1996 to December 30,
2001 inclusive (the "Option Term"), at a price of $2.68 (U.S.) per share, or
such other price as may be approved by the Vancouver Stock Exchange.
3. Exercise of Options. The Director may exercise the Options either
-------------------
wholly or in part any time and from time to time within the Option Term by
transmitting notice in writing to the Company setting out the number of shares
to be purchased, together with payment for those shares by certified cheque,
bank draft or wire order.
4. Continuing to Act in Designated Capacity. The Options are subject to
----------------------------------------
the Director continuing to act as a director of the Company during the Option
Term. If the Director should cease to continue to act as a director of the
Company during the Option Term for any reason except by reason of death, then
the Options allocated to such Director pursuant to paragraph 1 shall be
terminated without further action of the Company and become null and void within
thirty (30) days of the Director so ceasing to act.
5. Corporate Authority. Prior to the issuance of any of the Option
-------------------
Shares the Company will take or cause to be taken all necessary steps to validly
and effectively approve or authorize the allotment and issuance by the Company
of the Option Shares.
6. Death of Optionee. In the event of the death of the Director, the
-----------------
Options allocated to the Director may be exercised by the Director's estate or
legal representative for a period of six (6) months from the date of death.
7. Options Personal. The Options granted are personal to the Director
----------------
and shall not be assigned or transferred. It is acknowledged and agreed that
the Director has not been induced to exercise any of the Options or to purchase
any of the Option Shares pursuant to this Agreement by expectation of employment
or, if applicable, continued employment with the Company.
8. Regulatory and Shareholder Approvals. This Agreement and any
------------------------------------
amendments hereto and the Options provided for herein are subject to the
approval of the Vancouver Stock Exchange, and are further subject to the
approval of the shareholders of the Company in a general meeting prior to any
<PAGE>
exercise of the Options as a result of the Director being considered to be an
"insider" of the Company as that term is defined in the Securities Act (British
Columbia). In addition, the Director acknowledges that there may be resale
restrictions and reporting requirements imposed upon any or all of the Option
Shares. The Director agrees to abide by any resale restrictions as may be
imposed and any and all reporting requirements as prescribed by the Securities
Act (British Columbia) and the rules and regulations pursuant thereto, and, if
the Director is not a resident of British Columbia, further agrees to abide by
all applicable securities laws (including, but not limited to such hold periods
as may be applicable in respect of any resale of the Option Shares as a result
of such securities laws) in the jurisdiction in which the Director is resident.
9. Adjustment of Terms on Capital Alterations. If, during the Option
------------------------------------------
Term, there is a subdivision, consolidation, redivision, or reclassification of
the issued common shares of the Company, the class, number and price of the
balance of the Option Shares to be issued in respect of any of the Options
thereafter will be adjusted proportionately.
10. Notice of Exercise. Notice of exercise of the Options shall be deemed
------------------
to be well and sufficiently given if sent by prepaid registered mail or
delivered to the Company at the address set forth above together with the
appropriate exercise payment.
11. Counterparts. This Agreement may be executed in several parts in the
------------
same form and such parts as so executed shall together form one original
agreement, and such parts if more than one shall be read together and construed
as if all the signing parties had executed one copy of this Agreement.
12. Enurement. This Agreement shall enure to the benefit of and be
---------
binding upon the parties to this Agreement and their respective heirs,
executors, administrators and successors.
13. Headings. The paragraph headings that appear at the beginning of each
--------
paragraph of this Agreement are not intended to form a part of this Agreement,
but are inserted for convenience of reference only.
14. Time of the Essence. Time shall be of the essence.
-------------------
15. Governing Law. This Agreement shall be governed and construed in
-------------
accordance with the laws of the Province of British Columbia.
THE PARTIES have executed this Agreement as at the day first above written.
<PAGE>
THE CORPORATE SEAL OF PORTACOM )
WIRELESS, INC. was hereunto affixed in the )
presence of: )
)
)
)
______________________________________ )
Authorized Signatory ) C/S
)
)
)
)
SIGNED, SEALED AND DELIVERED by )
DOUGLAS MACLELLAN, in the )
presence of: )
)
)
)
_________________________________ )
WITNESS _________________________
DOUGLAS MACLELLAN
<PAGE>
EXHIBIT 10.30
DIRECTOR INCENTIVE OPTION AGREEMENT dated for reference as at the 30th day of
December, 1996.
BETWEEN:
PORTACOM WIRELESS, INC., a company duly incorporated
under the laws of the State of Delaware, with an office
at #11 -1155 Melville Street, in the City of Vancouver,
in the Province of British Columbia, V6Z 4G4.
(the "Company")
OF THE FIRST PART
AND:
STEPHEN LEAHY
3995 Hillcrest Avenue
North Vancouver, B.C.
V7R 4B7
(the "Director ")
OF THE SECOND PART
WHEREAS:
A. The Director is a director of the Company.
B. It is advantageous for the Company to grant to the Director stock
options to purchase the Company's shares as an incentive for services to be
rendered to the Company by the Director.
IN CONSIDERATION OF THESE PREMISES, AND THE COVENANTS AND AGREEMENTS HEREIN
CONTAINED IN THIS AGREEMENT, THE PARTIES COVENANT AND AGREE AS FOLLOWS:
1. Grant of Options. The Company grants to the Director, irrevocable
----------------
within the time limited by this Agreement, options (the "Options") to purchase
free and clear of all liens, charges and encumbrances, in aggregate, 90,000
common shares of the Company (the "Option Shares") at the price per Option Share
set out in paragraph 2.
<PAGE>
2. Term and Price. Subject as hereinafter provided, the Options may be
--------------
exercised by the Director during the period December 30, 1996 to December 30,
2001 inclusive (the "Option Term"), at a price of $2.68 (U.S.) per share, or
such other price as may be approved by the Vancouver Stock Exchange.
3. Exercise of Options. The Director may exercise the Options either
-------------------
wholly or in part any time and from time to time within the Option Term by
transmitting notice in writing to the Company setting out the number of shares
to be purchased, together with payment for those shares by certified cheque,
bank draft or wire order.
4. Continuing to Act in Designated Capacity. The Options are subject to
----------------------------------------
the Director continuing to act as a director of the Company during the Option
Term. If the Director should cease to continue to act as a director of the
Company during the Option Term for any reason except by reason of death, then
the Options allocated to such Director pursuant to paragraph 1 shall be
terminated without further action of the Company and become null and void within
thirty (30) days of the Director so ceasing to act.
5. Corporate Authority. Prior to the issuance of any of the Option
-------------------
Shares the Company will take or cause to be taken all necessary steps to validly
and effectively approve or authorize the allotment and issuance by the Company
of the Option Shares.
6. Death of Optionee. In the event of the death of the Director, the
-----------------
Options allocated to the Director may be exercised by the Director's estate or
legal representative for a period of six (6) months from the date of death.
7. Options Personal. The Options granted are personal to the Director
----------------
and shall not be assigned or transferred. It is acknowledged and agreed that
the Director has not been induced to exercise any of the Options or to purchase
any of the Option Shares pursuant to this Agreement by expectation of employment
or, if applicable, continued employment with the Company.
8. Regulatory and Shareholder Approvals. This Agreement and any
------------------------------------
amendments hereto and the Options provided for herein are subject to the
approval of the Vancouver Stock Exchange, and are further subject to the
approval of the shareholders of the Company in a general meeting prior to any
exercise of the Options as a result of the Director being considered to be an
"insider" of the Company as that term is defined in the Securities Act (British
Columbia). In addition, the Director acknowledges that there may be resale
restrictions and reporting requirements imposed upon any or all of the Option
Shares. The Director agrees to abide by any resale restrictions as may be
imposed and any and all reporting requirements as prescribed by the Securities
Act (British Columbia) and the rules and regulations pursuant thereto, and, if
the Director is not a resident of British Columbia, further agrees to abide by
all applicable securities laws (including, but not limited to such hold periods
as may be applicable in respect of any resale of the Option Shares as a result
of such securities laws) in the jurisdiction in which the Director is resident.
<PAGE>
9. Adjustment of Terms on Capital Alterations. If, during the Option
------------------------------------------
Term, there is a subdivision, consolidation, redivision, or reclassification of
the issued common shares of the Company, the class, number and price of the
balance of the Option Shares to be issued in respect of any of the Options
thereafter will be adjusted proportionately.
10. Notice of Exercise. Notice of exercise of the Options shall be deemed
------------------
to be well and sufficiently given if sent by prepaid registered mail or
delivered to the Company at the address set forth above together with the
appropriate exercise payment.
11. Counterparts. This Agreement may be executed in several parts in the
------------
same form and such parts as so executed shall together form one original
agreement, and such parts if more than one shall be read together and construed
as if all the signing parties had executed one copy of this Agreement.
12. Enurement. This Agreement shall enure to the benefit of and be
---------
binding upon the parties to this Agreement and their respective heirs,
executors, administrators and successors.
13. Headings. The paragraph headings that appear at the beginning of each
--------
paragraph of this Agreement are not intended to form a part of this Agreement,
but are inserted for convenience of reference only.
14. Time of the Essence. Time shall be of the essence.
-------------------
15. Governing Law. This Agreement shall be governed and construed in
-------------
accordance with the laws of the Province of British Columbia.
<PAGE>
THE PARTIES have executed this Agreement as at the day first above written.
THE CORPORATE SEAL OF PORTACOM )
WIRELESS, INC. was hereunto affixed in )
the presence of: )
)
)
)
Authorized Signatory )
) C/S
)
Authorized Signatory )
)
SIGNED, SEALED AND DELIVERED by )
STEPHEN LEAHY, in the presence of: )
)
)
)
__________________________________ )
WITNESS ) ______________________
STEPHEN LEAHY
<PAGE>
EXHIBIT 21
Subsidiaries of PortaCom Wireless, Inc.
Name
----
PortaCom International, Ltd.
Extreme Telecom, Inc.
PCBX Systems, Inc.
Extreme Laboratories, Inc.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF THE COMPANY, AUDITED BY KPMG, FOR THE YEAR ENDED
DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 114,275
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 114,275
<PP&E> 8,111,927
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,226,202
<CURRENT-LIABILITIES> 800,133
<BONDS> 0
0
0
<COMMON> 13,118
<OTHER-SE> 17,193,178
<TOTAL-LIABILITY-AND-EQUITY> 8,226,202
<SALES> 10,000
<TOTAL-REVENUES> 9,013,943
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,654,324
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 627,234
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 407,277
<CHANGES> 0
<NET-INCOME> 5,139,662
<EPS-PRIMARY> 0.41
<EPS-DILUTED> 0
</TABLE>
